fr8man@scmp.com While others talk endlessly about the need to integrate our logistics industry with its obvious cargo catchment area in the Pearl River Delta, Hongkong Air Cargo Terminals (Hactl) appears willing to lead with its wallet. It emerged last week that the world's No 1 international air freight handler had earmarked as much as HK$400 million to build a couple of upstream consolidation centres in Guangdong to funnel cargo through Chek Lap Kok. It is Hactl's bid to make sure the HK$700 billion in air cargo moved through Hong Kong annually from the delta continues to entertain trade transport providers south of the border. What has turned a few heads is that the operations are to be wholly-owned. Below Deck has wondered how the silver-tongued Hactl negotiators convinced mainland authorities to let them be the pilot project for the new era of logistics industry liberalisation in China. It is a safe bet south China's truckers, cargo terminal handlers and airlines were not consulted. The two initial centres - there will be more - will employ Hactl's SuperLink Direct's business model. Goods will be customs-cleared before leaving the building and transported in bonded and sealed trucks monitored for tampering and traced by global positioning satellites. Hactl management would like to have the facilities, slated for free-trade zones on the outskirts of Guangzhou and Shenzhen, up and running by year end. This is not surprising since Guangzhou's 20 billion yuan (about HK$18.75 billion) Baiyun International Airport will open the doors to its freight hangers shortly after. The airport's managers will be pulling out all the stops to fully utilise the facility's one million tonne annual freight-handling capacity. Granted, it will not be a threat to Chek Lap Kok's air cargo dominance from day one - Baiyun will need to develop a larger network of international destinations first. But one can safely assume its management will have closer ties than Hactl with local manufacturers, truckers and forwarders. Those relationships have bred time-honoured ways of doing business, not all of which would be ICAC approved. Hactl's SuperLink Direct service has been well received. But its northbound volumes would have gone through Chek Lap Kok anyway so, in essence, it drove efficiency and added value to an existing supply chain. Making the southbound service work will require convincing south China's forwarders to change the way they do business. Hactl for the past few months has had an unofficial pilot project for the southbound run out of a small established facility in Huangpu, local shippers say. The service has not been well received and shippers say there are two main reasons for that. The thousands of forwarders in Guangdong - the vast majority of which, as in Hong Kong, are small- and medium-sized firms - differentiate themselves by the guanxi, or 'relationships' they nurture with local consolidators and truckers. The forwarders with the best guanxi get goods to the market the fastest and the most cost-efficiently. They are not too concerned about from which port the goods leave the country as long as that criteria is met, which means their transportation strategies are flexible. Hactl is dedicated to moving freight through Chek Lap Kok. If Guangdong forwarders sign up to the Hactl service, they may no longer be able to differentiate themselves from the pack. There is also the matter of cost-efficiency, south China style. Granted, Hactl's new centres will help develop what is a pretty naive consolidation industry across the border. Most goods are still shipped to Hong Kong for consolidation at high cost, adding partially loaded trucks to the queues at the border. Combining those loads in Guangdong would ease that congestion and negate the cost of having to book a whole truck for half a load. But the forwarders are doubtful those savings will compensate for the kickbacks the truckers pay them to fill their vehicles. It is Guangdong guanxi they are unlikely to get from their squeaky clean brethren at Hactl. The shippers bet it will be hard to change that system, a wager Hactl evidently is willing to make.
