*************

The following is the full text of a speech by the Secretary for Economic Services, Ms Sandra Lee, at the opening of the Terminal Operations Conference Asia 2001 today (February 20): (English only)

Minister Dato' Seri Dr Ling Liong Sik, Mr Harris,

distinguished speakers, ladies and gentlemen,

It gives me great pleasure to welcome the Terminal Operations Conference (TOC) Asia 2001 to Hong Kong. We are excited that the Informa Group has chosen Hong Kong to hold this great event in the international transportation and logistics calendar. On behalf of the Hong Kong Special Administrative Region Government, I welcome you all to Hong Kong. Just half an hour ago, I delivered an opening address for the World Mail and Express Asia 2001 Conference and Exhibition on the other side of the harbour. It is indeed a great delight to see so many conference organisers choosing Hong Kong as the venue for their international events. The well respected U.S. magazine Travel and Leisure named Hong Kong as Asia's Best City and Asiaweek named the Hong Kong International Airport as the best in Asia. I hope delegates will find Hong Kong an inspiring place for your high-level discussion on the forces shaping global terminal operations in the 21st century. As the Secretary who is also responsible for the tourism portfolio, I would urge you to leave behind lots of tourist spending dollars whilst enjoying your stay in Hong Kong!

Hong Kong: A Leading Sea Transport Hub

Today Hong Kong operates the world's busiest container port. I am very pleased to announce that the final throughput count for the port of Hong Kong in 2000 is 18.1 million Twenty-foot Equivalent Units (TEU), representing a growth of 11.7 per cent over 1999. These containers are carried by some 380-liner services per week to over 500 destinations in the world. In terms of total shipping, over 216 000 ships visited our port in 2000.

That Hong Kong can achieve this performance does not arise from sheer coincidence. It is largely due to the enterprising people who run our services and facilities as well as entrepreneurial investors and the efficient workforce which enable the port of Hong Kong to gain the reputation of being the "can do port". It is also the result of a unique blend of public and private sector co-operation which sees Government concentrating on strategic planning while leaving the private sector to invest in and operate the terminal facilities, and of course to make their profit.

In the presence of such a distinguished group of port and logistics professionals in this conference, I would like to take the opportunity to share with you and to update you on how the authorities in the Hong Kong Special Administrative Region are preparing ourselves to face the challenges in the 21st Century.

Port Cargo Forecast

To ensure that our economic infrastructure can meet the needs of the industry, our Port and Maritime Board undertakes a major review of the Port Cargo Forecasts once every two to three years. This is to ensure that these forecasts, which cover a span of 20 years ahead, are as accurate and up to date as possible.

We have just completed an update of our Port Cargo Forecasts (PCF) (last carried out in 1997). Key indications from the forecasts show that:-

(a) our total throughput over the last five years has sustained an annual growth of 6.6 per cent;

(b) cargo demand for the Hong Kong container port in the next fifteen years will grow at an annual rate of 5 per cent, which is faster than the forecasts in the previous study in 1997 (4.6 per cent); and

(c) the cargo pie for the Pearl River Delta is expected to continue to grow at a high rate fuelled by an expected general increase in world trade and increase in foreign direct investment through China's accession to the World Trade Organisation (WTO), leading to increased imports to and exports from China, especially for the Guangdong province. Hong Kong is expected to benefit from the continuing growth in Southern China.

Although the development and expansion of the Northern Mainland ports and increasing competition from the Shenzhen ports will divert some of the cargoes that might otherwise flow through the port of Hong Kong, the Forecasts Study has concluded that cargo from Southern China will grow sufficiently fast to support the planned expansion of ports in the region, including Hong Kong and Shenzhen. The port throughput of Hong Kong is expected to grow from the base figure of 18 million TEU (for 2000) to 30 million TEU in 2010 and over 40 million TEU in 2020.

Port Development Strategy Review

To cope with the expected growth in demand in the coming decade, we commenced the construction of Container Terminal Nine (CT9) in the summer of 2000. This will add another six berths or almost 2000 metres of quay length to the existing eighteen-berth Kwai Chung Port. But CT9 development will not only provide increased berthing space. The total area is 150 hectares, 120 hectares of which are formed by reclamation. The terminal itself will occupy 70 hectares and the remainder will be used for port back up, logistics and other adjacent port facilities. It has its own bridge connection to CT1 in the north of Tsing Yi and will also have a second bridge connection to CT8 in the south.

The Port and Maritime Board is undertaking an exercise to update the Port Development Strategy Review (PDSR) in the light of findings of the new PCF. The review will translate PCF findings into demand for cargo handling facilities. We will complete the review by mid-2001. Based on the findings of the review, a Port Facilities Development Strategy will be formulated for the years ahead.

To ensure that the port can function effectively, my Government is committed to enhancing inter-modal links to the port. A study is being conducted to examine the feasibility of a Container Port Rail Line to support the long-haul freight transport needs between Hong Kong and our hinterland.

Hong Kong - A Leading Air Transport Hub

Apart from being a busy port, Hong Kong is Asia's leading and most dynamic air cargo hub. In the twelve month period ending January 2001, the Hong Kong International Airport served 32.6 million passengers and handled some 2.22 million tonnes of cargo, representing a growth of 11.6 per cent and 10.8 per cent respectively over the corresponding period one year earlier. Hong Kong has developed excellent air links with the rest of the world and is the centre of international and regional aviation. Currently, some 65 airlines operate over 3 300 scheduled flights per week linking Hong Kong with nearly 130 cities.

Like the port, our airport has benefited greatly from the rapid growth in the Pearl River Delta hinterland region, which has developed a very close and comfortable economic tie with Hong Kong. We are determined to maintain our position as a dynamic air cargo and passenger hub. As a policy maker, I want to assure you that we will continue to implement a liberal air services policy. We will also, in partnership with the Airport Authority, seek to provide the best services expected of a world class airport. To provide inter-modal cargo handling at the airport, the Airport Authority has just awarded a tender for the development of a marine cargo terminal. This terminal will help to reduce the time and cost needed for the transfer of air cargo between the Hong Kong International Airport and the Pearl River Delta. To promote the development of the logistics industry, the Airport Authority has also invited tenders for the operation of a logistics centre on the Airport Island.

The Hong Kong International Airport can handle up to 45 million passengers and 3 million tonne cargo per annum. There is ample room for expansion. Upon full development, the airport will be able to handle up to 87 million passengers and 9 million tonnes of cargo per annum. To map out the development strategy for the airport, the Strategic Overview of Major Airport Developments Study (SOMAD) is being undertaken. It is scheduled for completion in mid-2001.

Hong Kong As An International and Regional Transportation and Logistics Hub

Geography has been very kind to Hong Kong. In addition to having one of the finest natural harbours in the world, Hong Kong is located right at the heart of a rapidly expanding Asia and the entrance to the Pearl River Delta, which has been and will continue to be one of the most dynamic economic growth region. The imminent accession of China into the WTO will bring new impetus to this growth. The revolutionary developments in E-commerce and Supply Chain Management will also bring about new opportunities in the logistics industry. My Government is committed to providing a favourable business environment and the necessary infrastructure to facilitate the development of Hong Kong as a transportation and logistics hub. My colleague, the Secretary of the Port and Maritime Board will be making a presentation on this subject later on in the Conference and so I will not labour on this subject now.

Before closing, I just want to mention that the opening up of services auxiliary to distribution as a result of the Mainland's accession to WTO will provide new opportunities for logistics services providers. Our logistics services providers in Hong Kong have a strong client base in the Mainland, the expected escalation in trade volume and the liberalisation of the distribution and logistics sector will enable them to provide an even better supply chain management services to their clients. The number of Hong Kong freight forwarders and logistics services providers operating in the Mainland has increased rapidly in recent years. It is estimated that about 100 out of the 400-plus foreign invested freight forwarders in the Mainland are from Hong Kong. At present, most Hong Kong freight forwarders conduct international freight forwarding business in the Mainland. Once the Mainland's market for domestic distribution is opened, Hong Kong operators are well placed to provide both domestic and international freight forwarding services. As in other business activities to set up joint ventures, Hong Kong operators have the competitive edge as they have already accumulated substantial market knowledge and investment in the Mainland.

Over the past 160 years, Hong Kong has been taking full advantage of its favourable location and well-developed infrastructure to serve the transportation and logistics needs in the world supply chain. We have every reason to build on our strength to continue to do so in the years ahead.

My best wishes to you all for a successful conference and a rewarding experience in Hong Kong.

End/Tuesday, February 20, 2001

NNNN