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Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, at the Terminal Operations Conference 2003 Asia today (February 25) (English only):

Distinguished guests, Ladies and Gentlemen,

It is a great pleasure to welcome you all to Hong Kong for the TOC2003 Asia. We are delighted that Hong Kong has once again been chosen to host this world-class event for the port and maritime industry.

Events such as these help underline Hong Kong's position as Asia's world city - a centre for trade and investment in the Asia-Pacific region, and the premier international hub for doing business with, and in, the booming Mainland market; a progressive, free and stable economy where opportunities abound and high quality is our benchmark.

Before I begin I have some good news to share about Hong Kong's container throughput in 2002. I am very pleased to say that the Hong Kong port handled a world-record throughput of 19 million TEUs in 2002. This is somewhat higher than the provisional estimate of 18.6 million TEUs we have been quoting over the past couple of months, and it represents a 6.6% increase over 2001 throughput. We are delighted with the final out turn for the year, which also confirms Hong Kong's position as the world's busiest container port for nine of the past 10 years.

This achievement is not just due to robust growth in trade we have seen through our port over the past year, particularly the double-digit export growth in the last four months of the year. It also reflects the unique public and private sector model on which our port has thrived. And that is, we leave the private sector to finance, develop and operate the terminal facilities whilst we in government concentrate on providing the back-up infrastructure needed to service the port, as well as strategic planning for port development. This has allowed our terminal operators to extract maximum efficiency from their operations, which enables such huge volumes to be processed.

I know that the TOC actively discourages speakers from giving a sales pitch of any kind. But I know that you also look for speakers willing to share information that will contribute to an understanding of business performance and best practice. So today I will first of all seek your indulgence, because after all one of my major responsibilities is to promote the port of Hong Kong. With a room full of the leading lights of the port and logistics industry, this is just too good an opportunity to let pass. But I am also sure that what I have to say will interest you because, as usual, there is quite a lot happening in Hong Kong and I would like to let you know what we are doing to meet the challenges of the future.

Let me first talk about port development. By the middle of this year the first of six berths at the new Container Terminal Nine (CT-9) will come on line. When finished by 2005, total handling capacity of the container terminals will exceed 15 million TEUs a year. Coupled with continuous efficiency improvements, we will be able to cope with forecast cargo throughput of about 30 million TEUs by the end of this decade.

To ensure that our infrastructure meets the long-term needs of the industry, our Port and Maritime Board has commissioned a study - 'Hong Kong Port : Master Plan 2020' - to formulate a competitive strategy and master plan for port development over the next two decades and beyond. Apart from finalising the preferred location of new container port facilities, the study will focus on how to enhance competitiveness by identifying new improvement initiatives. The study should be finished by the end of the year.

Looking beyond our own sea lanes, Hong Kong, like the rest of the world, faces various challenges to maintain the smooth flow of containers around the global supply chain. Last year's labour dispute at US West Coast ports highlighted just how quickly global cargo flows can be adversely affected if there is problem in a major market.

Here in Hong Kong, where we send an average of 6,000 containers a day to the US, we adopted a couple of measures to alleviate the disruption. An Interdepartmental Group was formed to ensure that any cargo backlog could be quickly cleared once shipments to the US were back to normal. And we also sought the support of Mainland authorities to open additional Customs clearance lanes at boundary crossings to hasten the smooth flow of export containers from the Pearl River Delta to the container terminals. At the end of the day, the dispute did not have that much of an impact on us, except that we were short of empty containers for a couple of weeks. Nonetheless it underscored the importance of having in place proper contingency plans to cope with unexpected developments.

The US's Container Security Initiatives (CSI), and the 24-hour advance cargo information rule implemented by the US Customs have also had a profound impact on the global supply chain.

As the largest conduit of containers shipped into the US, Hong Kong's participation in the CSI is about more than assuring the smooth flow of cargo to the US from Hong Kong. It is also about playing an active and responsible role - as a major port and a member of the international community - to enhance the security of global maritime trade. Our government signed a Declaration of Principle to join the CSI last September. Since then, Hong Kong Customs and the US Customs have been working closely together to finalise the implementation of the CSI Pilot Scheme in Hong Kong.

The 24-hour advance clearance rule for inbound US containers has also added extra demands and pressure to the industry. It not only pushes forward the documentation process, it has also affected the just-in-time management of the entire supply chain. The impact in Hong Kong has been significant because we have around 2,000 small and medium sized freight forwarding companies that are used to finalising paper documentation after shipments have left for the US. But it is a mandatory requirement for trade with the US and our supply chain stakeholders have proved once again to be remarkably pragmatic and professional in meeting these new requirements. Our freight forwarders are coping quite well with this major change, and I expect that they will actually emerge more efficient and competitive as a result of this new business environment.

Looking further ahead, all of the key players in Hong Kong will continue to work hard to maintain our role as the most important international shipping centre in the Asia-Pacific Region. The government is committed to protecting the fundamental strengths that underpin our development as Asia's world city and as a hub for trade and logistics, shipping, information, tourism and services. These include a tried and trusted legal system, low taxes, a robust financial system, business-friendly policies, a clean and efficient civil service, a large pool of talent, a cosmopolitan, outward-looking and well-educated community, and some of the best transport and telecommunications infrastructure you'll find anywhere. I can tell you more about our strengths if you want!

We are also determined to make the most of the close links with our rapidly developing hinterland - the Pearl River Delta, or the PRD as we call it - which is the most dynamic economic region in Asia, if not the world. Hong Kong and the PRD have a hand-in-glove relationship - and we have both thrived as a result. Our entrepreneurs have been investing in adjoining Guangdong province, especially the PRD, for more than two decades. The extent of that investment is huge - about US$45 billion according to a recent report by the Hong Kong Federation of Industries. Hong Kong-linked enterprises in Guangdong - and again, many of them are in the PRD - employ an estimated 10 million people. That's about 3 million more than all of the people in Hong Kong, or about three times our total workforce.

But China's entry to the World Trade Organisation (WTO) has quickly changed the dynamics of what was almost an exclusive franchise in this economic powerhouse. So what we are doing now - and this vision was laid out by our Chief Executive Mr Tung in his annual Policy Address last month - is working even harder to boost the economic synergy between Hong Kong and our PRD partners. This will involve working more closely with the various governments in the region, as well as highlighting to international audiences such as yourselves the enormous potential of this area.

One key element will be to work with PRD governments to smooth the flow of people, goods, cargo and information.

At the moment, the HKSAR government is facilitating a study by the Central Government's State Development Planning Commission (SDPC) into the feasibility of a bridge linking Hong Kong to Macau and the western part of the PRD. If this project does proceed, it will obviously have a significant impact on the movement of goods and raw materials to and from PRD factories and ports. We have also jointly commissioned a study with the SDPC on how to boost cross-boundary logistics co-operation with the Mainland.

These initiatives will complement projects underway, which include new road and rail links to the Mainland through Shenzhen, improved Customs and Immigration facilities and streamlined procedures at boundary control points, and the 24-hour processing of passengers at the Lok Ma Chau crossing.

To further sharpen our competitive edge in the logistics sector, we will develop a Digital Trade and Transportation Network (DTTN) System. This will be an open and neutral e-platform to facilitate information flows within the trade and logistics industry. We have also identified a site at Tai Ho on the North Lantau Island - half way between the airport and the container port - for the private sector to develop a Value Added Logistics Park. These initiatives will enhance our integrated logistics capabilities, and reinforce our status as the preferred international logistics hub in Asia.

China's WTO entry, and the rapid opening up of that vast market, will no doubt fuel cargo volume growth in Hong Kong for many years to come. But we do not take this blessing for granted. As a government, we will continue to work with the industry to provide them with the most business-friendly environment in which to operate. At the same time, I know that our privately owned and operated port, and all of the other businesses involved in the operation of our port, will continue to look for ways to boost competitiveness and to provide the best service possible to their customers. It is, after all, a matter of survival. And if our past track record is anything to go by I am sure you can expect to see our port operators setting new standards of excellence, and scaling new heights, in the years ahead.

Ladies and gentlemen, looking at the conference programme I am sure you will find TOC2003 Asia a very rewarding and interesting experience. Some of you may not know, but my portfolio also covers responsibility for tourism, and of course conventions and conferences are a great source of visitors for us. International events like this also reinforce our positioning as Asia's world city, so thank you once again for choosing Hong Kong to host your conference. I hope you can find time to look around this great city of ours - and to spend a bit of money as well.

I wish you all the best in your deliberations over these next three days. And you are most welcome to come back any time for another TOC Asia conference and exhibition.

Thank you very much.

End/ Tuesday, February 25, 2003

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