The concept of logistics originates from military logistics and traditional transport industries. It connects individual activities such as purchasing, warehousing, transportation and delivery among goods suppliers and buyers to form a supply chain of goods. The logistics industry has a wide scope of services, including sea, air and land transport, goods storage, information flow, use of capital, safety and security, etc. Seamless cooperation among organizations in public and private sectors within the supply chain brings about quality logistics services.

The Logistics industry emerged in the 1980s. Following the technological advancement, the traditional mode of transport has transformed into modern logistics operation. Nowadays, the efficiency and standard of service have become key indicators to assess the competitiveness of a country or area. Being a cosmopolis, Hong Kong has changed from a traditional transport centre to a large-scale modern logistics hub. In 2007, there were more than 210,000 employees in the logistics industry, which accounted for 6.2% of total workforce in Hong Kong. The logistics industry is one of the four mainstays of Hong Kong, contributing about 5.0% to the Hong Kong economy. With advantages like a unique geographic location as an international transport hub, a sound system for business operation, a sophisticated infrastructure and a global network of trading partners and clients, Hong Kong has become the major international trading centre in Asia. The advantages have also hastened the development of Hong Kong into a logistics hub to provide quality logistics services for large-scale international trading activities.

At present, more than 80 shipping companies from overseas and Mainland China provide sea freight services in Hong Kong, with about 450 shipping services per week, connecting to 500 ports worldwide. There are almost 1,000 high quality shipping service enterprises operating in Hong Kong, engaged in business ranging from maritime insurance, maritime law, ship broking, ship management, etc.. As at December, 2007, Hong Kong has been ranked one of the top five places with the most registered vessels: there were more than 1,300 vessels on the Hong Kong Shipping Register, with gross registered tonnage over 38 million. Hong Kong ship owners also have a huge fleet of vessels. Figures from the Hong Kong Shipowners’ Association showed that as at the end of 2007, the total tonnage of vessels owned or managed by its members was close to 60 million tonnes, placing Hong Kong among one of the top 10 shipping centres in the world. As for port facilities, container handling facilities provide key infrastructure for modern logistics industry. Currently, Hong Kong has 9 container terminals and a total of 24 deep water berths, handling containers over 20 million TEUs. With high efficiency in container haulage, Hong Kong has earned herself the reputation of being one of the most efficient container ports in the world. Apart from the container port facilities, there are other relevant facilities in Hong Kong such as mid-stream operation, river trade terminal, public cargo haulage and harbour anchorage, etc., handling containers and other kinds of goods.

Today, Hong Kong is an important international sea freight logistics hub in the region. Apart from its favourable geographical location and perfect infrastructure, there are other contributing factors such as its free trade policy, easy customs clearance procedures, well-established legal and financial systems and the excellent logistics personnel. Many international enterprises choose Hong Kong as their ideal base for the storage, management and transportation of their products while at the same time getting value-added services. Moreover, when providing logistics services to a large number of manufacturers in the Peal River Delta Region, Hong Kong helps these manufacturers import high-end materials, parts and finished products. The international distributors can also make Hong Kong the pivotal centre of their sales network and cargo storage, thus enjoying the benefits of the supply chain management service offered to them here in Hong Kong.

Container transport is of utmost importance not only to Hong Kong but also to South China, which has become one of the fastest growing industrial areas in the world. Currently, over 80% of the container transports are connected with South China. As more and more container terminals in the Peal River Delta Region have started operation, the sea transport industry in Hong Kong will face new challenges. Although some of the transhipments of ocean going liners have been re-routed to other areas, competition with new ports in South China will be inevitable. However, in view of the continuous economic growth in the Mainland, and the closer trade links between Peal River Delta Region and Hong Kong, it is expected that the sea transport industry of Hong Kong will benefit in the long run.

The sea transport logistics industry is very important to the economy of Hong Kong. For more than 10 years, Hong Kong has been one of the busiest container ports in the world. In 2007, the port’s throughput was 245 million tonnes, of which about 70% were transported by ocean going liners and the rest were by river trade cargo vessels. In 2007, the port of Hong Kong handled about 24 million TEUs, of which 17.32 million or 72% of total throughput were handled through container terminals at Kwai Chung, with the rest or 28% through mid-stream operation, river trade terminal, public cargo working areas and other cargo terminals. In addition to containers, the Hong Kong port also handles a great variety of goods through mid-stream operation and various special terminals, including petroleum and petroleum products, coal and its relevant products, steel, aggregate, sand, resin, plastic materials, machinery and metals, etc., totaling over 55 million tonnes, which accounts for almost one fifth of the throughput of Hong Kong port.

As a projection for the future, if the strategy stated in the “Study on Hong Kong Port - Master Plan 2020” can be successfully implemented, the throughput in 2010 and 2020 is expected to exceed 27 million TEUs and 40 million TEUs respectively. Published in 2004 by the HKSAR government, the study pointed out that Hong Kong would adopt a strategy to capture the market share of import/export cargo in South China first, and then the international transhipment.

Although Hong Kong is endowed with many advantages like its unique location, advanced facilities and other associated services, its sea transport industry is facing ever-increasing competition. The South China and Pearl River Delta Region have been the major source of goods to Hong Kong. However, in view of the continuous development and expansion of transport facilities in these areas, plus the rapid development in their port facilities and infrastructure, the sea transport logistics industry of Hong Kong, with higher container freight rate than that in the Mainland, must remain flexible so as to thrive in face of competitions from all fronts, particularly those from South China.

To cope with the present economic condition, Hong Kong has strived to lower the logistics costs in order to narrow the gap in sea transport cost with neighbouring regions. To boost the competitiveness, the industry has tried to address the issue from various aspects such as retaining and attracting new customers, offering effective and practical logistics solutions, looking for new forms of services, exploring ways to upgrade technologies and developing high value-added services. To further strengthen its competitiveness, the industry has also employed information technologies and professional scientific management to help. Through these attempts, the sea transport enterprises are expected to offer services of better quality and higher efficiency and with greater variety, which in turn will attract more customers to use Hong Kong’s sea transport logistics services, hence developing Hong Kong into a modern sea transport logistics centre.

Apart from external competitions, the development of the sea transport logistics industry in Hong Kong has to face many challenges from within, such as the transformation of some traditional transport enterprises into modern logistics enterprises, the further enhancement of the current electronic logistics systems and the reduction of operational cost. In the industry itself, issues which have to be addressed include: the internal road network in Hong Kong, the layout of the port facilities at Hong Kong port and the connection among various kinds of transport facilities and their associated services. Obviously, there are favourable factors for Hong Kong to develop its modern logistics industry, but the industry is facing highly competitive and harsh business environment while the traditional transport enterprises are still in the transition of changing their modes of operation. To achieve sustainable development of the logistics industry of Hong Kong, both the Hong Kong government and the industry must try their very effort to work against all odds by implementing suitable measures.

As cargo handling services are gradually diverted to Shenzhen and the neighbouring ports, the sea transport industry in Hong Kong is standing at a turning point. The expansion of the port in the Pearl Delta Region will greatly push up the cargo handling capacity there and the offering of other value-added services will result in a transfer of investment and job opportunities from Hong Kong to these regions. Being an international sea transport hub, Hong Kong has to maintain its status by enhancing its supply chain management and providing high quality and cost-effective services while adopting a forward looking and an up-to-date logistics solution.

In response to the competitive business environment, sea transport operators invest in improving information system to provide instant cargo tracking information service and enhance service quality. They also form alliances or merge with other transport service providers to develop door-to-door multi-modal services. In face of the fierce competition, many liners form alliances among themselves to enhance efficiency and lower cost. Through space sharing, services provided to customers are more flexible in terms of expanded coverage, increased sail frequency and more choice of routes.

In order to secure Hong Kong’s position as an international shipping centre, Hong Kong government has strengthened communication with the industry by restructuring the present consultation mechanism and setting up organizations such as Hong Kong Maritime Industry Council and Hong Kong Port Development Council. To seek opinions from the industry as the basis for formulating future policy, Hong Kong Logistics Development Council was set up in December, 2007, serving as the platform for negotiation and coordination among stakeholders on issues regarding future development of the logistics industry. To further enhance the competitiveness of the industry in the international market, the government has introduced a number of measures such as reducing Hong Kong merchant ship registration fee and annual tonnage charges, simplifying the vessel survey requirements and port clearance procedures, computerizing ship registration procedures, negotiating agreements with major trading partners to avoid double taxation and reducing the tax burden on Hong Kong shipping companies, etc. Besides, other measures have been adopted to help ease the flow of cargo transport across the border. These measures include: 24-hour custom clearance service at all check-points, diversion of passenger transport and cargo transport, application of unified electronic voucher, introduction of ‘Green Lane’etc. Following the completion of Shenzhen Western Corridor, the cross border facilities between Hong Kong and the Mainland has been greatly improved, thus strengthening the connectivity between the two places. As the logistics bottle neck is eased, more cargo transports is expected, which will stimulate the growth of the sea transport industry.

The rapid development of the economy in Mainland China has brought about robust growth in the foreign trade. A steady growth of the transhipment in Hong Kong is thus expected. According to the study by the United Nations Economic and Social Commission for Asia and the Pacific, Mainland China will become the biggest sea transport market in 2011. Therefore, it is important for Hong Kong to maintain close connection with neighbouring provinces on the Mainland by encouraging mobility of both goods and people so as to achieve a sustainable sea transport industry. Since 2005, with the implementation of Closer Economic Partnership Agreement (CEPA), Hong Kong enterprises are allowed to form wholly-owned units in the Mainland to provide various types of maritime services, such as vessel management services, container yard and depot services, non-vessel owning common carrier (NVOCC), port cargo loading and unloading services. Under CEPA, Hong Kong service providers are allowed to operate barges between Hong Kong and mainland ports. They can also provide business services such as issuance of bills of lading, settlement of freight rates and signing of service contracts, etc. These provisions allow Hong Kong service providers more flexibility to access the market on the Mainland, promoting mutual cooperation between service providers from Hong Kong and the Mainland, which will in turn help push up Hong Kong’s competitiveness.

The strategies laid down in the 11th Five-Year Plan are closely related with the development of Hong Kong’s sea transport logistics industry. In the 11th Five-year Plan, the Central Government urges each province, municipality, autonomous region and the SARs to improve the connection of all kinds of transportation means, thus maximizing the efficiency and overall benefits. To achieve this, they have to start working on the reasonable deployment of the logistics network from a macro perspective. In this policy document, the Central Government has affirmed Hong Kong’s status as an international logistics centre. In this regard, Hong Kong government and the logistics industry should work together to play their parts in the development of our nation. In the report on the economic summit on “China’s 11th Five-year Plan and the Development of Hong Kong” and its action plan, the industry has made a number of practical recommendations on issues regarding logistics and basic infrastructure. Aiming to strengthen the logistics market and enhancing Hong Kong’s position as the international sea transport and logistics centre, these recommendations include: optimizing cross border network, coordinating the development works of neighbouring regions, lowering operational cost, enhancing logistics technology and strengthening the training of manpower, etc.

The sea transport industry of Hong Kong is mainly comprised of sectors including ocean-going shipping lines, freight forwarders, container terminals, midstream operators, shipping agents, etc. Statistics from Hong Kong government indicated that in 2007 there were about 85,000 employees in the sea transport industry of Hong Kong, among which over 22,000 employees were freight forwarders or shipping agents. Their jobs are mainly divided into administration and management, sales and marketing, cargo handling, documentation handling, technical and professional support, etc. When it is defined by ranking structure, there are managerial, supervisory, operative and clerical levels. In conclusion, the training and development of workforce for the industry must cope with the development of our society which is becoming more knowledge-based, emphasizing on high added value and globalization. In face of the fierce competition, the logistics industry of Hong Kong needs highly skilled workforce to help enhance the competitiveness of the industry in terms of quality and flexibility of the services offered. In this connection, the workers in the industry must be highly skilled, able to communicate effectively, be creative and possess a worldwide perspective. Only when the above qualities are integrated with other factors that Hong Kong can be turned into an international sea transport centre.