A ground-breaking study says the SAR must develop a 'Hong Kong Ltd' culture of public and private sector co-operation in the transport and logistics industry or risk falling behind low-cost competitors in Shenzhen and Shanghai. Hong Kong's position as a leading global transshipment centre is anchored by the SAR's status as a leading business and financial centre, and formation of a comprehensive logistics strategy was part of Chief Executive Tung Chee-hwa's HK$15 billion economic stimulus package announced last month. But even the SAR's traditional economic strengths cannot hide its main handicap, the lack of an efficient way of getting goods back and forth between its main customer base in the Pearl River Delta, according to the Government-commissioned report, Study to Strengthen Hong Kong's Role as the Preferred International and Regional Transportation and Logistics Hub 2001. The Economic Services Bureau-funded study has not been released to the public. It was completed in September by McClier, an international transport and logistics consultancy, and Maunsell, a local engineering company, and is intended as a policy guide for senior government officials and industry leaders. According to the study, a comparison with two international logistics centres, Rotterdam/Schiphol, in the Netherlands, and Singapore found the SAR's key handicap was the lack of a so-called port inland distribution network (PIDN) to connect Hong Kong to its 'existing manufacturing and future distribution markets in the Pearl River Delta'. Despite Hong Kong's 'excellent international airport and seaport facilities', the existing network was 'weak, fragmented and expensive', the study said. 'The most serious problem is the weakness in the PIDN supporting the [air and sea ports].' It said road distances and costs from the eastern banks of the delta to the SAR were more expensive relative to Shenzhen, while Hong Kong's cost advantage for the western banks was negated by a weak river trade system. A second key issue was the lack of a published plan for the future development of the airport, the seaport or physical back-up facilities, such as logistics parks which support other regional hubs and gateways as part of an integrated plan. As a result, the study said, key sites close to existing facilities, or with access to critical facilities such as deep water, were in danger of being allocated to non-transport activities that could be located elsewhere. Partly in response to the study's criticisms, the Airport Authority on Monday unveiled its 'Master Plan 2020', which includes some measures to tackle issues raised in the study. The authority said it was developing plans to invest in a logistics facility at Nansha, at the northern tip of the Pearl River Delta, which would create a transport pipeline to extend the SAR's reach to customers north of Dongguan. But the study also makes clear the need to ensure that the public and private sectors work together to further the industry or risk falling behind competitors in China and elsewhere around the world. 'Hong Kong's . . . master plan is motivated by the understanding that alternative low-cost transportation options are being developed in mainland China including the Pearl River Delta,' the study states. For instance, Shenzhen may be able to improve levels of service customs efficiency faster than Hong Kong can, while holding down costs for customers. The study said the competitive nature of the transport industry in Hong Kong meant companies were more profit-oriented in their selection of investments, leading to an imbalance in infrastructure. 'Hong Kong may cherry pick . . . high-return projects and fail to implement lower-return projects which are critical to the overall synergies,' the study said. The transport and logistics industry accounted for about 20 per cent of SAR economic output last year.