Two key pieces hold up logistics development strategy

PUBLISHED : Tuesday, 27 August, 2002, 12:00am
UPDATED : Tuesday, 27 August, 2002, 12:00am

As the Logistics Development Council nears its first anniversary, there are two initiatives pending which, while not directly under its purview, will greatly influence Hong Kong's emerging maritime trade strategy.

The Bush administration's Container Security Initiative (CSI), like it or not, will dictate acceptable practices for cargo handling, transport, loading and consolidation in Hong Kong.

Sold by Washington as a 'voluntary' initiative, rejecting the CSI - and by extension competitive access to the world's most affluent consumer market - would be financial suicide.

Especially if your raison d'etre is that of an entrepot economy.

The US Customs Service last week signalled its intention to amend regulations to require the submission of all cargo manifests 'and additional information' 24 hours before boxes are loaded on to a US-bound vessel.

The new regulations will include monetary penalties for non-compliance and will give US Customs the authority to refuse unloading permits stateside until the documentation met approval.

The industry has until September 9 to register its concerns.

CSI and the amendments will change many of the distribution systems Hong Kong has in place. It will change how, when and where containers are packed, and it will complicate listing.

The added security is needed, especially in the US, but it will complicate shipping procedures from factory to retail outlet in an industry where all initiatives are aimed at streamlining, lowering supply chain expenses and being first to market.

Moreover, it will add costs for every company that moves goods through Hong Kong.

There are already plans, in a bill winding its way through the US Congress, to impose a US$15 to US$20 per container user fee on shippers to pay for security costs at American ports.

The user fee is expected to generate US$650 million a year to supplement US security costs. Shippers, US or not, are expected to pay for it.

Little is known about how much the CSI will change the way business is done at the port, and that is just the point.

CSI-driven procedural changes have yet to reach the light of day so how can the council develop the systems needed to secure the SAR's status as premier hub until the CSI is a known quantity?

Below Deck would like to think both governments have kept only the media in the dark about the CSI for the past two months. But, judging by the logistics pedigrees of those who are also scrambling for information, this appears doubtful.

Another project whose details are jealously guarded is OnePort, the Hutchison and Wharf joint initiative which will electronically manage about 90 per cent of the boxes which cross the docks at Kwai Chung.

The long-awaited OnePort has had more false starts than the New Economy. Hutchison and Wharf shareholders are now apparently reluctant to lay out about HK$150 million on an e-commerce project with the crash of the dot.coms still ringing in their ears.

Its benefits are said to be largely communal; in other words 'we don't expect it to be huge money-spinner', one executive said.

OnePort will be a key spoke in the e-hub that John Hammond and the members of the e-logistics project team under the council are trying to put together. 'OnePort with Tradelink could bring the kind of neutrality we are looking for,' he told Below Deck last week. However, as with the CSI, it remains an industry enigma.

Whatever strategies arise will be tied, at least in the maritime sector, to the needs of the CSI and OnePort.

It was always the intent of the council to spend the first year developing project strategies which would lead to funding proposals for this year's budget.

When that budget is unveiled in March a large chunk will be set aside for approved projects.

Logistics is, after all, 'one of the four pillars on Hong Kong's economy'.

But as the budget's benefactors need to be decided months in advance, a lack of concrete logistics industry initiatives appears to have influenced Chief Executive Tung Chee-hwa's decision to delay his policy speech until January.

Mr Tung is buying time, partly because strategies have yet to emerge, at least not ones the government likes.

The way forward for many project teams under the council will depend on what OnePort and the CSI will require: how can the marketing team sell the benefits of a trade management system still on the drawing board? How can the human resources team assess what training will be required, or how can small- and medium-sized businesses be ready themselves for an amorphous electronic age?

Presumably, by year end, OnePort, the CSI and other pieces will be in place. Then we will have leapt the 'what' and 'how' hurdles of our critical logistics drive on the way to answering another key question: when?