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Chairman’s Message (Annual Report 2022)
From darkest time to reconnect with world, shippers empowered to pave path to growth
It would not be an exaggeration to say 2022 was a perfect storm for shippers. The COVID-19 pandemic challenged shippers whilst shipping lines and chartered flight operators made record profits.
The container market was crippled by delays, bottlenecks and exorbitant rates, severely affecting those shippers who depend on sea transport.
Bluntly put, the market favoured carriers whilst penalising shippers.
Unsurprisingly, 2022 got off to a rough start. Images of ships queuing at Long Beach port, in Los Angeles and many major ports, led the news. There, vessels queued, clocking up average waiting times of over 7 days for regular large lines.
As a result, the Global Schedule Reliability Index declined to 33.6%.
Shippers suffered from operations disruptions, service deterioration, and freight rate increases in long haul trades of 5 – 10 times (and over 10 times for many intra-Asia trades).
The general public felt the pressure, too, with empty shelves in supermarkets and stores becoming common around the world, and prompting “relief assistance” measures by some governments.
In the second quarter of 2022, as COVID-19 continued to disrupt Mainland-Hong Kong cross-boundary land transportation, the future of the city as a major logistics hub came under serious threat. Accordingly, the Council expressed to the SAR Government and Competition Commission that a statutory body should be established to oversee the region’s logistics development and operations.
The traditional arrangement, of trucks driving north to factories in the Pearl River Delta (PRD) to load cargoes and then return to Hong Kong, was halted due to an upsurge in confirmed COVID cases amongst drivers. There were also instances of Hong Kong drivers violating quarantine measures.
To combat this, both mainland and Hong Kong governments started mainland trucking-barging from PRD ports, and Hong Kong domestic trucking and rail freight services from Dongguan, as well as swapping truck drivers at some dedicated border crossings.
However, such convoluted processes were not only costly and inefficient, but unsustainable. Transit times lengthened, traffic shrank, and extra costs were endured by exporters as shipping lines adjusted their schedules amid capacity crunches and equipment shortages.
Could “COVID” – not the virus, but COnnectedness, Visibility, Investment and Digitalisation – be the answer?
Firstly, Hong Kong, as a small, open island economy, survives and thrives through connectivity with the mainland and rest of the world.
Next, we need to increase our visibility on the world stage, for example, by attending all major global trade fairs.
We need to increase investments in technology, international relationships, human resources, and image building, and more.
Finally, we must realise that digitalisation is the future.
Q3 of 2022 was a momentous time for Hong Kong as the 6th Chief Executive of Hong Kong, John Lee, was sworn in by President Xi Jinping on July 1, and the SAR marked the 25th anniversary of its return to China.
I warned, at the time, that despite a slight relaxation in quarantine measures, the revisions would not be enough to restore international confidence in the city. The rules remained a bane for travellers and international businesses, affecting Hong Kong’s dual status as both global financial hub and gateway to mainland China.
Instead of simply waiting for business to return, we should be proactive in attracting business back to our shores. Public and private sectors need to work together to increase Hong Kong’s brand visibility on the world stage.
I also proposed investing our efforts in developing economies, especially those in Asia, as increasing our interaction with markets across the region will help grow our own local enterprises.
Diversification of manufacturing activities from mainland China to Southeast Asia are forecast to accelerate in the coming years. It is imperative we “get in on the ground floor” and make the most of these opportunities.
Greater cooperation between Hong Kong’s public and private sectors is essential, given the turbulence of the previous two years for the SAR and impact of COVID-19, if we are to stand any chance of reconnecting with the world.
From October to December, I looked back at what the Council had achieved in 2022 – and in years past – noting the Council’s advocacy for Hong Kong’s advancement as an international trading and finance hub, and in pushing Hong Kong to establish a stronger presence in the ASEAN region.
Not overlooking the importance of internal circulation with the motherland, Hong Kong has long been China’s “bridge to the world”. Local companies need to focus more than ever on this role, as well as to strengthen their relationships with our ASEAN neighbours.
Between late August and early September 2022, the Council secretariat and I visited prominent associations in the industry to learn of their needs, views about the future, and of their expectations. The results of our survey – which we dubbed the “Voice of the Industry” – allowed us to devise a road map for the Council to address common pain points, and identify areas for growth.
The solution for the SAR, we feel, is to gain a greater foothold in its networks – in both the private and public sector – and create a thorough, in-depth approach to facilitate expansion.
I called on the SAR Government to help local businesses set up companies in the region through direct financial assistance. From the “Voice of the Industry” exercise, we also learnt that a news and information portal would be of significant help to shippers. In light of this, I asked the Council’s secretariat to create this information portal with the help of our regional counterparts.
2022 was no doubt a very challenging year with inevitable transformations and increased complexities for the industry. This year, we hope to see increased collaboration across the sector. I am confident the industry is capable of overcoming existing and emerging issues if all parties commit to working together. I wish you all smooth sailing in 2023.