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The following is a speech entitled "Hong Kong - Your Logistics Partner in Asia" delivered by the Secretary for Transport and Housing, Ms Eva Cheng, at a business luncheon in Los Angeles on September 8 (Los Angeles time) while leading a Hong Kong Logistics Development Council delegation on a visit to the United States:
Distinguished guests, ladies and gentlemen,
Good afternoon. It is an honour and a pleasure to visit the City of Angels and meet so many prominent members of the US logistics and trading industries. Thank you very much for taking time to join our programme. In the City of Angels, I have brought with me the "guardian angels" of our logistics industry as well - they are the Honourable Miriam Lau, Legislative Councillor representing the transport constituency; Mr C C Tung, Chairman and CEO of Orient Overseas (International) Limited; Mr Willy Lin, Chairman of the Hong Kong Shippers' Council; Ms Anna Lin, Chief Executive of GS1 Hong Kong; and Mr Leung Kong-yui, Senior Programme Director of School of Professional and Continuing Education, the University of Hong Kong. We hope that the seminar this morning has provided you with an update on Hong Kong's latest developments but, more importantly, valuable information on the services and opportunities that Hong Kong as the premier regional logistics hub can offer to your business.
Both the US and Hong Kong are staunch believers in free trade, and we have been close partners in the pursuit of mutual economic prosperity. The US is Hong Kong's second largest trading partner and our trade volume is expanding in tandem with sustained economic growth in Asia. The Port of Long Beach and the Port of Los Angeles together handle some 40 per cent of containerised cargoes from Hong Kong. Los Angeles is an important conduit for US-Hong Kong trade and economic activities and we are keen to renew ties and make new friends.
I can perfectly understand that business sentiment is anything but upbeat here -
* The Dow Jones Industrial Average Index survived the financial tsunami but is still 13 per cent down from the last peak in May 2008.
* The inbound container cargo handled at Port of Long Beach and Port of Los Angeles dropped by 1.2 per cent and 3.17 per cent year on year in July, reflecting the cautious sentiment of retailers and consumers.
* QE1 and 2 have been found to be wanting in effect and there are talks about QE3. I must say it is not a good sign for Hong Kong as our inflation has shot up 9.7 per cent since the introduction of QE1 in October 2008, being linked to the US dollar. Meantime, with continued high unemployment and rising cost of living, concern over stagflation looms, even though Federal Reserve Chairman Mr Ben Bernanke did not use the term once in his Jackson Hole speech.
* The eurozone sovereign debt problem worsened, causing concern over the global financial and banking systems. This would possibly delay the eurozone's recovery, imposing downside risk to the global outlook.
Despite all these, it is all the more important to get back to the basics of doing business during these times, to think about strategic partnerships and growth opportunities, so that you may, to paraphrase Jack Welsh, build companies that deliver record results in any foreseeable economic climate.
Hong Kong as a Logistics Hub to China and Asia
Institutional strengths
So why Asia and why Hong Kong? Why now? I need not rehearse the strengths about us being the freest economy, supported by a simple tax system and low tax rates, free flow of capital, people and information, a clean government and the rule of law. Or Hong Kong being a free port with efficient customs clearance and strong intellectual property protection giving the essential peace of mind to overseas businesses. You are probably quite familiar with our traditional institutional strengths.
One piece of information probably summarises neatly why a strategic partnership with Hong Kong is a wise choice. According to the United Nations, Hong Kong, a city of 7 million people and about one-tenth of LA county in size, ranked third in the world in terms of the largest Foreign Direct Investment received in 2010. Hong Kong, the gateway to China positioned at the heart of Asia, is clearly benefiting from the shift in economic interest to the East. The US is among the top five largest investors in Hong Kong. US companies have also topped our list of regional offices set up by foreign firms. Our economy is also doing well with a projected GDP growth in the range of 5 to 6 per cent for 2011.
Expertise in logistics and China business
For those with an eye on investment in logistics, or users of logistics service, recent strategic development of Hong Kong as a logistics hub also deserves special attention. The 12th Five-Year Plan for the National Economic and Social Development of the People's Republic of China, promulgated in March 2011, contains, for the first time, a chapter dedicated to Hong Kong, and elaborates on the significant role Hong Kong plays in the development strategy of our country. The chapter strongly supports Hong Kong's development as a high-value goods inventory management and regional distribution centre. That means the Central People's Government of China recognises Hong Kong's importance and achievements as a regional logistics hub in its further economic development of the country, serving the mutual interest of both China and the Hong Kong SAR. Reliable security, quality assurance and strong intellectual property protection have made Hong Kong the ideal place for the distribution of high-value goods, and enabled our efficient operators to move up the value chain, providing customised services and supply chain solutions to clients from around the world.
It is against this backdrop that international brands like H&M, Tiffany and Timberland decided to set up their regional base in Hong Kong to manage their supply chain operations in the whole of Asia. Marks and Spencer has also appointed Hong Kong-headquartered Kerry Logistics to be its logistics partner in Greater China having regard to Kerry's expertise in retail and cold chain logistics expertise. Other Hong Kong-based third-party logistics players like Li & Fung have been providing comprehensive services along the supply chain for retailers and brands worldwide. By next year, a new DHL multi-purpose facility is expected to commence operation in Hong Kong to meet the demand of customers, particularly in the technology sector. With the elimination of wine duties, DHL set up a wine distribution centre in Hong Kong in early 2010 to capture increasing demand for wine storage and distribution. As the wine business continues to grow, DHL has further expanded the facility earlier this year. And a little digression - after the wine tax has been eliminated, we have overtaken London as the largest and most important wine auction centre in the world.
The accumulation of experience and talents take time and to a certain extent is inimitable. What distinguishes Hong Kong from our Asian neighbours is our professional workforce who is unrivalled in their experience in China trade. Hong Kong has been China's window to the world when it opened its door to the world in late 1970s. Subsequently, through our free trade agreement with China, which is called the Closer Economic Partnership Agreement, our logistics operators have enjoyed advantages of early access to China's market. We have, therefore, a vast pool of supply chain experts who are well versed with the Chinese systems, regulations and culture. They have also established the networks which are essential to ensure that goods can be shipped to and from China efficiently and smoothly.
Today, Hong Kong, as ever, is an important gateway to China. About 70 per cent of the cargo handled in Hong Kong is related to the South China region, and around 90 per cent of our re-exports either come from or are destined for China. With the backing of the Chinese Government, Hong Kong will continue to play an important role in meeting the demand of niche markets involving high quality logistics services in China.
I know that those of you who move goods around are equally concerned about how money is circulated. Another strategic development that cannot be underestimated is the development of Hong Kong as an offshore Renminbi (RMB) centre. Over the past year, there has been significant progress in the development of offshore RMB business in Hong Kong, with rapid growth notably in RMB deposits, trade settlement, bond issuance and financing. When the Vice-Premier of the State Council, Mr Li Keqiang, visited Hong Kong last month, he announced a series of measures to support the further development of Hong Kong as the offshore RMB business centre. No doubt Hong Kong will continue to grow in importance as a major centre for trade settlement, financing and management of funds in RMB.
Advantages in serving the Asia Pacific region
In addition to being at the doorstep of China, Hong Kong has a strong natural advantage by being at the heart of Asia Pacific. We can reach all major Asian economies within four hours and half of the world's population within five hours by plane. To further enhance our competitiveness, we have continued investing in key infrastructure projects to improve our connectivity. Our objective is to maintain an efficient multi-modal transport network covering air, land and sea to offer the best transport options to meet the different needs of our clients.
On the aviation side, the Hong Kong International Airport handled a record high of 4.13 million tonnes of cargo in 2010, surpassing the Memphis International Airport for the first time, and became the world's busiest air cargo hub. To meet the anticipated growth in demand, a new air cargo terminal is being constructed and is expected to commence operation in early 2013. By then, our cargo-handling capacity will be increased by 50 per cent. In the longer term, we are looking into the development of a third runway to provide the necessary passenger and cargo handling capacity for the forecast growth in traffic up to 2030 and possibly beyond. A public consultation has just been completed and we are now reviewing the comments received with a view to deciding on the way forward.
Let's move from air to sea. On the maritime side, the Hong Kong Port was the third busiest container port globally in 2010 in terms of throughput. About 80 international shipping lines are providing some 400 container vessel sailings every week to 480 destinations worldwide. To cater for the anticipated growth of port throughput, we are now studying the feasibility of developing a new container terminal. We are also proceeding with a project to dredge the Kwai Chung Container Port and its approach to 17 metres so that we can accommodate the new generation ultra-large container vessels at all tides.
What about land connectivity? We pay no less effort in strengthening cross-boundary land transport infrastructure. To further enhance the connectivity between Hong Kong and the western side of Guangdong Province, a 29.6-km-long Hong Kong-Zhuhai-Macao Bridge is being constructed. On completion in 2016, the bridge will be the longest bridge-cum-tunnel dual-three-lane vehicular sea crossing in the world. The bridge will expand Hong Kong's cargo hinterland to the western side of the Pearl River Delta by reducing travelling time between Zhuhai and our airport and port. The four-hour trips would be cut down to about an hour only. This would no doubt help attract investment and offer new opportunities to our logistics operators. Separately, to cater for the provision of high value-added services and help anchor more third-party logistics operators in Hong Kong, we are releasing permanent sites with tailored terms for the development of modern logistics facilities in areas close to our port and airport.
Concluding Remarks
Ladies and gentlemen, I have updated you on the strategic developments in Hong Kong that hopefully will help shape some business decisions, especially those in the logistics field. My "guardian angels" and I will be pleased to follow up on ideas, suggestions and proposals that will benefit us mutually.
If you are interested to learn more about the logistics landscape of Hong Kong and the greater Asia region and to meet with potential business partners, you are most welcome to join the first Asian Logistics and Maritime Conference to be held in Hong Kong on November 25, 2011. Our Economic and Trade Office will help disseminate the information to you nearer the time. We are more than happy to see you there again.
Thank you.
Ends/Friday, September 9, 2011
Issued at HKT 13:02
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