Acting Secretary for Financial Services & the Treasury Julia Leung told the Legislative Council today the prevailing Government procurement system puts emphasis on both the price and quality of products, including their usage track record.

New products tend to cost more due to various reasons, for example when mass production may not yet be feasible to reduce unit cost.

“In relation to the usage track record, they do not usually fair well. For these reasons it is difficult for new local research and development products to win in an open tender,” she said.

Before early 2011, the Innovation & Technology Fund provided financial support only for the completion of the R&D work culminating in the submission of a report. Any follow-up would not be funded.

Under the new arrangement, in addition to R&D work, the fund also covers the production of tools, prototypes and samples, and conducting trial schemes in the public sector.

The funding ceiling for the additional work is capped at 30% of the original R&D project cost. The Commissioner for Innovation & Technology can exercise discretion for additional spending under exceptional circumstances.

Ms Leung said the Government has been pro-actively seeking flexible measures over the past two years through consultation with various stakeholders, with the objective of nurturing indigenous innovation and technology.

You can find details here.

• By arranging cargo transport, the freight forwarding industry has contributed fundamentally to Hong Kong’s success as the 10^th largest merchandise trading entity and one of the most trade-oriented economies in the world.
• Most of the larger freight forwarders have a wide network of overseas branches, and act as agents for international air and ocean liners.
• The industry is responding to customers’ needs by providing more value-added services such as warehousing, packing, sorting, distribution and total logistics solutions.
• The industry has benefited from Hong Kong’s leading freight infrastructure. Hong Kong’s international air cargo throughput ranks first in the world, and Hong Kong is the world’s third busiest container port.

Industry Data

Total (Inward + Outward) Freight Movements (million tonnes)

Source: Summary Statistics on Port Traffic of Hong Kong, Hong Kong Port Development Council
*The Mass Transit Railway Corporation Limited terminated the railway cross-boundary cargo transportation services from 16 June 2010.

Source: Quarterly report of Employment and Vacancies Statistics, Hong Kong Census and Statistics Department

(US$ million)

Source: Report on Hong Kong Trade in Service Statistics, Report on Annual Survey of Transport and Related Services, Key Statistics on Business Performance and Operating Characteristics of the Transportation, Storage and Courier Services Sector, Hong Kong Census and Statistics Department

Range of Services

The core business of a freight forwarder is to move a shipper’s consignment to the consignee within the stipulated time, in perfect order and at the most competitive price. Responding to changing customer demands, many freight forwarders also provide more value-added services such as warehousing, distribution and total logistics solutions.

The services offered by the industry vary according to the sophistication of the freight forwarder. The larger and more comprehensive freight forwarders offer a full range of transportation and logistics services including warehousing, consolidation, air express, trucking, distribution and customs clearance, tracking and monitoring of freight being transported, and applying electronics data interchange (EDI) technology to facilitate just-in-time based supply chain management. Their customers, particularly those in the time-sensitive manufacturing, trading and retail sectors, can thus concentrate on their core competency and reduce their business cycle time.

In general, the smaller freight forwarders provide more basic and economical services. Related services involved in the import/export process, such as the preparation of shipping documents, customs clearance and logistics, may be undertaken by the import and export traders or their agents. The smaller firms do provide more flexibility and more personalised services. In addition, they have lower overheads as they “piggyback” on the fixed capacities of the larger companies, and therefore can often provide lower rates.

Hong Kong’s freight movement showed solid growth in the past two years. After growing 10.4% in 2010, total freight movement achieved a growth of 2.3% in 2011 despite the global economic downturn in 2011.

Service Providers

The Hong Kong Association of Freight Forwarding Agents (HAFFA) was formed in 1966 to represent the interests of the freight forwarding industry. It has been renamed as Hong Kong Association of Freight Forwarding and Logistics Ltd to reflect the sophisticated nature of the business.

The larger sea freight forwarders tend to target big companies for exclusive deals. They provide value-added services and invest in information technology to ensure that they meet the expanding needs of the customer’s changing markets. They can also set up individual logistics subsidiaries to provide tailor-made and specialised services in order to work as a service partner for their customers. Generally speaking, larger companies’ well-established brands and far-reaching logistics networks have enhanced their significant market shares in the global export market. The smaller regional players, however, have better understanding of the business culture, better knowledge of their markets and have established networks in the region.

As reliable and speedy delivery is the key to successful freight forwarding services, Hong Kong’s forwarders’ understanding of the international practices and their networks can help them to secure the confidence of international customers.

Exports

The destinations of freight forwarding services mirror the trade routes. The main markets for international freight forwarders in 2010 were Asia (34.1% of total share), North America (33.7%) and Western Europe (27.0%).The Chinese mainland is the most important source of cargo for Hong Kong’s freight forwarders. In 2011, 61.6% of Hong Kong’s re-exports were originated from the Chinese mainland.

The larger freight forwarders often follow their big international customers to new markets. In some instances transport service providers set up business in the new markets before recommending their customers to follow suit. They expand overseas usually by setting up subsidiaries, joint ventures or appointing agents to render global services.

Major Export Markets of Cargo Forwarding Services 2008-2010 (US$ million)

Sources: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department

Industry Development and Market Outlook

Outsourcing Logistics Services

A number of global trends are affecting the freight forwarding industry, including the globalisation of the supply chain, mass customisation, shortening of product cycles, low inventory, and quick response requirements. In the face of these trends, an increasing number of businesses feel the need to optimise their supply chains via external experts, i.e. third-party logistics (3PL) and fourth-party logistics (4PL).

3PL refers to an outsourced provider that manages all or a significant part of a business’ logistics requirements and performs transportation, locating and sometimes product consolidation activities. In contrast, 4PL refers to an outsourced provider which completely integrates its client’s supply chain – managing the resources, capability and technology of all parties, including the 3PLs, to deliver a comprehensive supply chain solution.

Freight Forwarding Market in China

• In response to the financial tsunami, the impact of which became highly visible in the fourth quarter of 2008, the Chinese government announced measures to re-invigorate ten industries to sustain economic growth, with the logistics industry being one of the ten. Stimulus policies included:
  • Enlarging demand for logistics services, as well as enhancing interaction between logistics companies, manufacturers and commercial enterprises with an aim to raise the professional standard of the industry.
  • Promoting growth of the 3PL industry through encouraging manufacturers and commercial enterprises to outsource logistics activities
  • Speeding up mergers and acquisitions (M&A) in order to breed a batch of large logistics companies that have high quality of service and are able to compete internationally.
  • Pushing forward the development of energy, mining, automobile, agriculture, and medicine logistics and to speed up development of international logistics and bonded-area logistics.
  • Constructing logistics facilities and to promote standardisation and computerisation of logistics service.
  • Nine major projects to develop the logistics industry, namely: (1) constructing inter-modal facilities; (2) building logistic parks; (3) developing urban distribution; (4) developing large scale merchandise and rural logistics; (5) enhancing interaction between manufacturers and logistics companies; (6) promoting standardisation and use of technology; (7) developing a common platform for shared information; (8) developing logistic technology and (9) developing emergency logistics.
• Global trade recovery in the past two years, however, has boosted growth of the logistics sector on the mainland. In 2011, total logistics cost increased by 18.5% to over US$1.1 trillion, equivalent to 17.8% of China’s GDP.
• In 2011, value-added of the mainland’s logistics industry was US$0.5 trillion, up 13.9% compared with 2010. The industry’s share of China’s GDP and value-added of all services industries was 6.8% and 15.7% respectively.
• Logistics cost as a portion to GDP has been falling. In 2011, it was 17.8%, down from 19.4% as in 2000. This indicates that the mainland’s logistics sector has become more efficient. Nevertheless, it is estimated that logistics cost as a percentage to GDP is still about double of those in developed countries. For instance, US logistics costs represented 8.3% of its GDP in 2010.
• To raise industry standard of freight forwarding, MOFCOM joined hands with CIFA to launch guidelines for international freight forwarding operations in 2008.
• Since 11 December 2005, the mainland government has allowed the access of wholly foreign-owned forwarders to the industry as part of China’s WTO accession terms.

The Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

Freight Forwarding

Since the promulgation of the Administrative Measures on Foreign-invested International Freight Forwarding Agency(Decree of the Ministry of Commerce No. 19 – Dec 2005), foreign companies enjoy more or less the same benefits as the Hong Kong service suppliers (HKSS). Both are allowed to set up wholly owned freight forwarding agencies on the mainland to provide the following services:

(1)  Booking (leasing of ships, and chartering of airplanes and shipping space), consignment, warehouse storage and packing

(2)  Supervising loading and unloading, container grouping and unpacking, allocating goods, providing transit as well as related short-distance transport services

(3)  Arranging customs declarations, customs examination and inspection, and insurance

(4)    Filling out of relevant documents, payment of transportation fees, settlement of accounts and miscellaneous freight charges

(5)  Agency business of international exhibits, personal items and transportation of transit cargoes

(6)  Arranging international multimodal transportation and container transport (including the packing of containers)

(7)  International express delivery (excluding personal mail and postal services for official documents of provincial or higher branches of the party, government or military)

(8)  Consultancy and other international forwarding agency business.

The minimum registered capital requirements for overseas companies engaged in international freight forwarding companies remains at US 1 million. However, the minimum registered capital requirements for HKSS are the same as their mainland counterparts:

a) International freight forwarding, sea transportation: RMB 5 million

b) International freight forwarding, air Transportation: RMB 3 million

c) International freight forwarding, land transportation: RMB 2 million

If the forwarder operates more than one type of freight forwarding mode, the highest amount of the minimum registered capital should follow.

For other services, HKSS has certain WTO-plus privileges over other foreign invested enterprises.

Maritime Transport Services

Compared with the conditions applying to other foreign companies, CEPA allows Hong Kong service providers to have greater flexibility in providing many types of maritime services, as they are allowed to form wholly owned units.

China’s Regulations on the Administration of Foreign Investment in International Marine Transportation stipulate that only minority-owned foreign joint ventures are allowed to provide services that include the following: international shipping agency; international ship management; international shipping; maritime cargo-handling services; customs clearance services for maritime transport; container station and depot services; international marine shipping, freight loading and unloading, and international marine shipping container terminal and yard business.

Under CEPA, HKSS can form wholly owned units in providing maritime services such as international ship management services, container station and depot services, non-vessel operating common carrying services, port cargo loading and unloading services, tug services between Hong Kong and mainland ports, ship maintenance and repair services, international ocean container leasing, buying and selling as well as trading of container parts, and ship survey services for ships registered in Hong Kong.

Because of Supplement V and Supplement VI provisions, the business scope is further expanded for Hong Kong service providers, as they are now allowed to set up wholly owned enterprises and branches in Guangdong on a pilot basis to provide shipping agency services to vessel operators for routes between Guangdong Province and Hong Kong and Macau. Hong Kong service providers can also set up wholly owned shipping companies to provide regular business services such as shipping undertaking, issuance of bills of lading, settlement of freight rates, signing of service contracts, etc. for the shipping transport between Hong Kong and the Class B ports in Guangdong operated by the HKSS using chartered mainland vessels.

Road transport Services

CEPA currently allows HKSS to establish wholly owned enterprises in the provision of road freight transport and related services like road freight transportation station and motor vehicle repair services. Approval for such services is generally undertaken by the Ministry of Transport.

CEPA provision on road transport services also states that Guangdong is delegated the authority to approve the provision of road freight transport services by Hong Kong-invested production enterprises in Guangdong. Applications for providing transport-related services in Guangdong, such as road freight transport stations, repair and driver training enterprises are handled by the Guangdong authorities. These new arrangements are expected to hasten the approval process and facilitate HKSS in their business expansion into Guangdong.

In addition, under Supplement VIII released in 2011, Hong Kong drivers who are going to take the Mainland driving license examinations will be provided with examination papers in traditional Chinese characters, and there will be an examination venue in Shenzhen for them to take the examination.

Quoted from HKTDC

• Endowed with a deep-water, silt-free natural harbour strategically located along a major sea route and with the Chinese mainland providing a huge cargo base, Hong Kong has become a sea transport hub in Asia.
• Advanced port facilities and efficient port services are complemented by excellent trade, financial and other services which underpin Hong Kong’s status as the 10th largest trading entity in the world. In 2011, 24.4% of Hong Kong total exports (by value) were transported by ocean.
• Hong Kong Port was the world’s third busiest container port in 2011, having handled 24.4 million TEUs, following Shanghai (31.7 million TEUs) and Singapore (29.4 million TEUs). In the first 2 months of 2012, Hong Kong’s seacargo throughput decreased 0.3% year-on-year (YoY) to 3.6 million TEUs.
• Hong Kong’s port is renowned for its efficiency. All container terminals are privately owned and operated. Productivity enhancement through new cargo management techniques has raised their handling efficiency.

• South China ports have been developing quickly in the past years. As at 2011, Shenzhen was the world’s fourth busiest port, handling 22.6 million TEUs (up 0.3%), whilst Guangzhou remained to be the seventh, handling 14.4 million TEUs in 2011 (up 14.7%). Shanghai was the busiest seaport on the Chinese mainland in 2011, handling 31.7 million TEUs.
• On 15 December 2008, “Three links” (meaning direct transportation, postal, and trade links between the Chinese mainland and Taiwan) was officially restored after almost 60 years. The mainland has opened 63 seaports, including Tianjin, Shanghai, Guangzhou, Shekou (Shenzhen), Yantian (Shenzhen), and Taiwan opened 11, such as Taichung, Kaohsiung, and Keelung for direct transportation.
• The Hong Kong-Zhuhai-Macau Bridge (HKZMB), a large-scale cross-border infrastructure linking the three places, is expected to be completed in 2016. Cargo movement between Hong Kong and western Pearl River Delta will be further enhanced.
• In order to enhance land connectivity with the mainland, several measures have been adopted, including simplifying cross-border procedures, providing “one-stop” kiosks for immigration and customs clearance and expanding capacity at border-crossing points.
• In view of long-term trade growth within the region, the Hong Kong government is now conducting a feasibility study to build a container terminal 10 in southwestern Tsing Yi, with the decision expected by the end of 2012.
• Under the “Green Lane” scheme, which came into effect in May of 2006, licensed carriers can load up goods from the shippers and drive to a nearby “freight village” or “duty-free depot” to carry out the customs clearance process. The goods needed not be re-opened or rechecked in Hong Kong.
• According to the Framework Agreement on Hong Kong/Guangdong Co-operation signed on April 2010, Hong Kong is positioned as an international shipping centre while Shenzhen and Guangzhou will remain as a hub within the region.
• 17 Hong Kong major freight liners have signed up the Fair Wind Charters (FWC), a voluntary commitment to switch from high-sulphur bunker oil to 0.5% sulphur diesel when berthing in Hong Kong, with an aim to cut emissions of air pollutants near the port areas. FWC is the first of its kind in Asia.

• Maritime cargo-handling services
• Customs clearance services for maritime transport
• Container station and depot services
• International shipping
• International shipping agency
• International ship management
• International marine shipping freight loading and unloading
• International marine shipping container terminal and yard business

Copenhagen, May 2, 2012, 8:30 CET – Maersk Line shares its new sustainability progress report, Route 2, in which it seeks answers to probing questions such as how to:

Minimise environmental impacts whilst facilitating global trade?
Create environmental transparency across the industry?
Enable an informed and frank discussion on needed changes?

Telling it like it is
“Global shipping accounts for 3-4% of global CO₂ emissions. However, there continues to be an eminent lack of transparency and understanding of the impacts of shipping. The shipping industry is in general not very open about its performance – perhaps for good reasons. This undermines the credibility of the entire industry,” says Lucas Vos, Chief Commercial Officer, Maersk Line.

Maersk Line is committing to help do something about that. It puts the various impacts of activities on the table, as well as Maersk Line’s own 2011 performance.

“We need to chart an alternative path or route. With Route 2 we hope to help our customers, regulators, NGOs and even consumers ask better questions. This should add positive pressure on the shipping community,” continues Vos. “Many of our customers are already engaged – we can see this in the report – but more is needed to drive a real change.”

In focus: The implications of trade
The Maersk Line report begins by looking at shipping as a facilitator of Global trade and the implications of this, both negative and positive.

“This is an important discussion and Maersk Line, as a global shipping line, must contribute. We don’t have all the answers but we aim to support our views with evidence, case studies and numbers. We try to make our impact tangible so that it is clear what we bring to the table and where we need to improve,” says Soren Stig Nielsen, Head of Sustainability, Maersk Line.

Download the report on maersklineroute2.com and let us know your feedback.

The long-term goal is to build a sustainable foundation for trade and shipping, both in terms of ensuring profitability and responsible business practices. Maersk Line therefore openly discusses issues such as corruption and facilitation payments, the need to combat illegal trade and the options for reducing environmental impacts.

Good business sense
In 2012, as part of efforts to restore profitability, Maersk Line is further intensifying its focus on environmental sustainability, in particular fuel efficiency and CO₂ reductions to reduce cost.

“Route 2 outlines the path we’ve chosen to integrate responsible business practices and sustainability. It’s a central component of becoming a stronger and more profitable company,” says Stig Nielsen. “It helps us consider our role in society, challenge ourselves and the industry.”

“We have progressively closed the gap which opened up during 2011, when we experienced a fall to as much as 12 per cent below the previous year’s strong performance in May 2011,” said Hactl executive director Lilian Chan.

March saw exports up 0.4 per cent on the previous year at 137,598 tonnes, the best performance in 16 months. Meanwhile, transhipments were up 7.7 per cent to 58,543 tonnes, also the best showing on 2012. But imports were down 10 per cent on 2011 figures to 57,630 tonnes.

For the first quarter, Europe was the top export market, absorbing 27.9 per cent of the total. And south east Asia led in import market with a total share of 40.4 per cent, which also dominated transhipment traffic with 42.5 per cent of the total.

Said Ms Chan: “The anomaly created by the different dates of the Chinese New Year in 2011 and 2012 has now worked its way through, so comparisons are more meaningful again. But what is not yet clear is whether the rest of 2012 will track the trends of 2011 again, or whether our first quarter recovery is a sign that we are now gradually returning to 2010 traffic levels, and underlying growth.”

Looking ahead, she said the outlook is hopeful but cautious. “Important markets in Europe and the US are still unsettled. We continue to support our customer carriers with heavy investment and rigorous quality controls, and we hope these are factors in the improved market shares shown by some. But global trade is bigger than all of us defies accurate prediction,” Ms Chan said.

Quoted from Shipping Gazette

Secretary for Transport & Housing Eva Cheng told the media today the Airport Authority can proceed with an environmental impact assessment, and plan design details and financial arrangements.

The Government has asked the authority to conduct the environmental study in a strict and professional manner, looking at marine ecology, noise and air quality. The assessment is expected to take two years.

The Government wants the authority to complete the assessment, design and financial options by the end of 2014, so the runway can be built by 2023.

The forecast cost of the development is $136 billion.

A high-level steering committee will be set up to work with the authority on the project, along with a dedicated team led by the associated policy bureau.

Ms Cheng emphasised the need for long-term planning for the airport, as air traffic last year already reached the forecast demand for 2013, as stated in the Master Plan 2030.

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The Chartered Institute of Logistics and Transport in Hong Kong (CILTHK) membership day was held on 22 Oct 2011.

Our managing director, Mr Lawrence Yip, was honored to be one of the speakers on this event.

Welcome to leave some comments or request for the presentation material by sending us email at PGHL@prorsumgroup.com