Chairman’s Message (Annual Report 2017)

Adding knowledge and discovering strengths across the industry

At the beginning of 2017, we spoke up against uncompetitive behaviour to safeguard shippers’ interests after the Competition Commission launched a 3-month public consultation for a proposed block exemption order for certain liner shipping agreements on September 14, 2016.

It proposed to grant a conditional block exemption order for certain liners’ Vessel Sharing Agreements (VSAs) and no exemption order for liners’ Voluntary Discussion Agreements (VDAs). I extended my full support for the Commission’s proposal of not granting any block exemption order for VDAs, as they encourage actions that are entirely uncompetitive in nature. This exemption is especially important for a small economy like Hong Kong, which has no statutory body in place to monitor liners’ behaviours and their market situation.

But while I recognised that VSAs may generate some economic efficiencies like lower operating costs, I also stressed that VSAs could potentially drive out small non-alliance carriers. Therefore, the harm of VSAs to competition should not be understated. All of these were considered against the backdrop of Hanjin Shipping’s bankruptcy, whose VSA arrangements caused exponential damage. Not only did Hanjin’s clients suffer, but so did clients with other alliance member lines.

In March, we discussed a win-win approach to consignor validation. Since the events of 9/11, there have been two main schools of thought regarding cargo security. One idea advocates 100% scanning to ensure safety, while the other considers that since lawbreakers account for only a very small percentage of shippers, a risk profiling approach is far more efficient.

For Hong Kong, I believe it is appropriate to take on a dual approach, so I urged the government to provide financial help, as well as assistance on operational guidelines, updated information, available technologies and so on.

From May to June of 2017, we saw some truly impressive results. In the first three months, China’s exports grew 14.8% and Hong Kong grew 10.3% in value terms. The Port of Hong Kong’s container throughput increased 12.6% and its air cargo throughput increased 11.4%.

In Hong Kong, there were a lot of discussions about “Belt and Road”. I felt excited when Premier Li Keqiang declared in March 2017 that the Guangdong-Hong Kong-Macau Greater Bay Area concept would be formally incorporated into policy level.

The main worry of the Greater Bay Area concept is whether it will reduce Hong Kong’s autonomy and its unique advantages; I believe there is no need for such worries. The “One Country – Two Systems” policy has provided the most prominent cornerstone for Hong Kong. Furthermore, Hong Kong has and will continue to benefit from the current systems as the “Belt and Road” Initiatives and the “Going-out” strategy of China continue to develop.

July and August gave us a chance to ride the changing tide of digitisation. With increased use of robotic technologies in areas of agriculture, manufacturing, packaging, logistics and delivery, professional services, household, marketing and retailing, all aspects of life are likely to undergo digitised changes.

I expressed my worries regarding our stagnant status as far as technology development and adoption, as well as R&D are concerned. I have little doubt that Hong Kong’s future depends on whether it can ride the coming tides of change, and so I asked The Hong Kong Shippers’ Council to take on a more active role in introducing the latest technology to the trading and logistics sector. This also includes greater government initiation, involvement and co-ordination in this aspect as well as urging different bureaus to have their technology policy clearly stated with well-defined blueprint of implementation.

As I stated in September-October, it has always remained my priority to push the government for strong sustainable logistics policy as our trading and logistics industries continue to face challenges. In a submission to the Chief Executive, we highlighted a few areas that the new administration should tackle immediately.

This included providing more land, especially for new logistics centres; setting up a well-defined information and technology policy for trade and logistics; upholding a competitive freight market; implementing a new air cargo security regime and fostering Hong Kong’s participation in Belt & Road initiatives.

Finally, at the close of 2017, I raised a curious question on “Why do we need Logistics 4.0?” The idea came after I visited several institutes in Fraunhofer, Germany, a place known as the birthplace of Industry 4.0.

The initiative is about digital transformation of the industry in a holistic way. In short, the adoption of Logistics 4.0 is essentially a matter of maintaining competitiveness – or survival – in the near future.

As far as adoption of Logistics 4.0 in Hong Kong is concerned, many questions come to mind for the local logistics industry to get ready for these changes. The government must be urged to take an active role in constructing the necessary ecosystems, introducing the right technologies, removing cross-border trade obstacles and inefficiencies, and so on.

In summary, it was another eventful year in 2017 as we managed to utilise our knowledge and strengths from across the industry to overcome countless hurdles, to further equip ourselves to do better and meet future challenges. We need to uphold the same spirit and pull together our strengths again for the sake of our logistics sector and its future.