Fu Yuning says the finer points of the scheme should be quickly ironed out if its benefits are to be felt soon One of China's top logistics experts has joined the industry chorus urging the government to iron out the details of the closer economic partnership arrangement (Cepa) so that local companies can capitalise on first-mover access to the mainland's trade transportation market. Fu Yuning, president of the China Merchants Group, said Cepa had the potential to widely impact south China's logistics industry but to what extent would depend on the agreement's finer details, which were still being worked out. 'Cepa will attract more businesses to set up in Hong Kong and it will also create some local business and employment opportunities which will come to light in the next six months,' Mr Fu said. 'The best thing the Hong Kong government can do is speed up that process.' The government last week promised more details by October, leaving the industry two months to put the pieces in place before the agreement became effective in January. Mr Fu, speaking on Wednesday at a leadership forum sponsored by the American Chamber of Commerce, said Cepa would be another step towards integrating Hong Kong's economy with that of the Pearl River Delta, and the mainland as a whole. 'Cepa has the potential to help Hong Kong restructure its economy and that in the future, more products bearing the 'Made in Hong Kong' label will become leading brand names in China,' he said. Cepa was launched last month amid much fanfare, but logistics industry executives, in particular, had been quick to ask for more details before assessing its worth, a task they had for the most part left to the government and investment banks. According to Cepa: Gateway for Hong Kong Integration, a report released last week by Deutsche Bank, the elimination of tariffs on Hong Kong-produced goods alone will swell annual gross domestic product growth by 0.4 per cent; annual trade volume, it says, may increase by US$1billion. But the report warns: 'Most of that volume will be realised in 2004, but the policy's ability to generate additional growth in the following years will gradually diminish.' Cepa-granted concessions to Hong Kong companies from January will be available to the world by 2006. Victor Mok, chairman of the Hongkong Freight Forwarding and Logistics Association (Haffa), last week had requests for a quick denouement to Cepa. 'Haffa believes the key to the success of Cepa in relation to the freight forwarding and logistics industries will be to speed up and streamline the processes,' Mr Mok said. 'This will allow more [Hong Kong-based] organisations to take advantage of Cepa quickly.' China Merchants Holdings (International), the group's Hong Kong-listed flagship, is one of south China's dominant foreign terminal operators with interests in Chiwan, Shekou and Zhanzhou, in Fujian province. The only one of the group's four subsidiaries not listed is China Merchants Logistics, seen as the leader in China's fledgling third-party logistics (3PL) industry through its joint venture, ST Anda. The group's unlisted logistics arm generated sales of about 900 million yuan (HK$843.48 million) last year and a profit margin of '10 to 20 per cent', Mr Fu said. ST Anda is possibly the only mainland 3PL which follows an 'asset-light' model, focusing on providing supply-chain strategies, which help clients limit having to stockpile goods, for instance. But, despite its comparatively healthy margins for an emerging industry in China, Mr Fu said the model might have run its course. 'Being asset-light has really helped us to get high returns on investment. But that model has its limits because sometimes you need assets to expand a market,' he said. 'We have adopted a policy that we should build some assets.' He said reports of a glut of warehouse space in China - some accounts put capacity utilisation at 50 per cent - were misleading because they included old facilities, obsolete in today's logistics sector. In major areas of trading such as Shanghai, modern warehouse space remained at a premium, Mr Fu said, adding that the long-term goal was to list China Merchants Logistics. 'Compared with our other three businesses [ports, real estate and financial services], logistics is still the baby brother in terms of size, revenue and profits,' he said. 'However, as we are optimistic for the growth of China's logistics market, I feel quite confident that our logistics business will become the fastest-growing division.'