To fully understand this Framework Agreement, we explore the challenges confronting Hong Kong as an international logistic hub and eventually acquire some benefits through the co-operation of Hong Kong and Guangdong. REVIEW THE DEVELOPMENT OF CO-OPERATION AGREEMENT BETWEEN PEARL RIVER DELTA AND HONG KONG The Mainland and Hong Kong Closer Economic Partnership Arrangement - CEPA (signed on June 2003) CEPA introduced liberalization measures for various “Hong Kong service suppliers”.
Logistics industry is one of the “Hong Kong service suppliers” and recognized to set up wholly-owned enterprises in mainland to provide logistics, international freight forwarding, storage, warehousing, road transport and shipping services. This arrangement not only provided opportunities to Hong Kong logistics companies to access mainland market but also liberated trade in goods and trade in services between mainland and Hong Kong.
Pan-Pearl River Delta Regional Co-operation Framework Agreement (signed on June 2004) The Pearl River Delta region(PRD), as known as "9+2", which includes Guangdong, Fujian, Jiangxi, Guangxi, Hainan, Hunan, Sichuan, Yunnan, Guizhou, Hong Kong and Macau. Under this agreement, the Pearl River Delta region cooperated closely and intensively in infrastructure, trade, industry, investment and other areas. Guangdong, Hong Kong and Macau have entered a new stage of economic integration. Pan-Pearl River Delta Logistics Development Co-operation Agreement (signed on July 2005) Logistics industry acts as an important role in economic development.
This agreement aimed to strengthen the coordination on logistics planning; logistics and transport system; logistics information system and human resources development and technological innovation. It was a remarkable stage of model logistics development in PRD. Framework Agreement on Hong Kong and Guangdong Co-operation (signed on July 2010) To continue the implementation of CEPA, the Framework Agreement on Hong Kong and Guangdong Co-operation clearly defined the social economic development between Hong Kong and Guangdong.
It enhanced Hong Kong’s position as an international financial centre and expedited the development of financial services industries in Guangdong; it also facilitated the flow of key factors such as people, goods, information and capital across the boundary to build an international aviation, shipping and logistics hub and a world-class modern economic circulation sphere. A series of environmental protection plans have been carried out to create a high quality living area among the PRD.
CO-OPERATION INITIATIVES ON CUSTOMS CLEARANCE OF GOODS The Framework Agreement on Hong Kong and Guangdong Co-operation has included infrastructure projects to enhance logistics development and communication and cross-boundary development. To achieve the facilitation of the flow of goods across the boundary, Hong Kong and Guangdong have put forward a number of specific policies and measures. Hong Kong Government advocated the standardization of the information and data required by the customs of the mainland.
Hong Kong first launched the electronic Road Cargo System (ROCARS) in May 2010 to enable seamless clearance of road cargoes. With this new electronic information platform and building on the foundation of mutual co-operation and benefit, Hong Kong and Mainland Customs are able to make further contribution to enhance customs clearance efficiency and facilitate cross-boundary movement of goods. Road Cargo System (ROCARS) The present customs clearance arrangement at land boundary control points (LBCP), a truck driver has to stop first at an Immigration kiosk and then a Customs kiosk.
He delivers a paper manifest which contains relevant cargo information at the latter to a Customs officer who determines on the spot whether physical inspection is necessary. It needs to wait for a moment until it is approved by the Customs. ROCARS allows Customs Officers to perform risk profiling before a truck arrives at LBCP. A shipper or agent needs to provide cargo data in eight fields to the Customs and Excise Department (C&ED) electronically before the cargo enters or exits Hong Kong by truck. Meanwhile, the shipper or agent receives a customs reference number for his consignment.
The driver of a laden truck needs to report to C&ED within 30 minutes before his truck arriving LBCP, together with the customs reference number of the consignment concerned received from the shipper and his vehicle registration number. If it is not selected by the Customs, no physical inspection is required. Benefits of ROCARS ROCARS allows the Customs officers conduct risk profiling on every cargo consignment in advance and determine whether a truck needs to be inspected. All cross-boundary trucks, except those are selected for inspection, they enjoy seamless customs clearance at the land boundary.
It increases the efficiency and shortens the time for customs clearance of road cargoes; it also ensures a smooth flow of land boundary traffic. For the transportation and logistics industry, many truck drivers deliver a loaded container from China factory via Hong Kong and the goods are to be transshipped overseas by liner vessel. ROCARS can enhance speedy and secure movement of cargoes between Hong Kong and China. As a result, cargoes can be delivered on time to liner vessel stably and reliable. It encourages the development of Hong Kong as an international logistics hub.
COLLABORATION ON THE DEVELOPMENT OF INNOVATION AND TECHNOLOGY To facilitate information flow and service integration towards Hong Kong and Mainland, Hong Kong started to develop and operate the Digital Trade and Transportation Network (DTTN) on 2005. The aim of DTTN is to lower the barriers for small and medium-sized enterprises (SMEs) to enjoy e-commerce; it provides Hong Kong and the PRD with an e-infrastructure to secure the region’s place as a leading international logistics hub. Digital Trade and Transportation Network (DTTN)
DTTN is an e-platform to connect the organizations in trading, logistics and financial industries and to enable them to exchange business documents electronically with their trading partners. It supports the whole supply chains, including Sellers and Buyers, Carriers, Freight Forwarders, Terminals, Government and Agencies, Inspection Agencies, Insurance Institutions and Banking Institutions; it provides a wide range of services on message routing and transformation, data inheritance, statistical and analytical reporting.
Over 80 major documents such as Purchase or Sales order, Packing list, Shipping order, House waybill, Customs clearance or Letter of Credit…etc can be supported by DTTN service which facilitates the information flow and service integration on trading, logistics, finance, import and export businesses. Benefits of DTTN DTTN enables new business opportunities for logistic service providers to provide value-add services; Hong Kong logistics industry can compete as premium service leader on high quality value-added services rather than merely competing on cost.
Logistics information flow is one of the key factors for the companies to achieve success. DTTN help to maximize the benefits of e-logistics by utilizing a cost effective infrastructure. It is a neutral, secure and reliable e-platform for trading and logistics communities which can smooth the whole international logistics operation and improve our competitiveness. It further promotes regional integration and enhances the supply-chain efficiency. IMPLEMENTATION OF INFRASTRUCTURE PROJECTS
With an excellent infrastructure and telecommunications facilities, a well established financial and legal system, a good international connections and a free market for trading. Hong Kong enjoys a number of competitive advantages in developing logistic industry. Facing the rapid growth of logistics development in Guangdong province, to strengthen Hong Kong’s position as an international logistic hub, HKSAR Government is urged to develop a closer corporation between Hong Kong and PRD.
The Framework Agreement on Hong Kong and Guangdong Co-operation which specified several policies on expediting the construction of cross-boundary highway, rail links and ancillary works; building a high class navigation network in PRD; improving the mechanism of the five major airports in the PDR; proactively seeking national support for enlarging the air space in the PDR; supporting the aviation status of each airport, building a network of short-haul helicopter services in the PRD. Hong Kong-Zhuhai-Macao Bridge (HZMB)
The HMZB project connects Hong Kong, Macau and the major cities in PRD, there will be a loop of high speed linkage among Zhuhai, Guangzhou, Dongguan, Guangxi, Hainan and other south western part of mainland. (Figure 1. ) [pic] Figure 1: Retrieved from Highway Department http://www. nzcchk. com/IBC%202009%2014%20-%20Hong%20Kong%20Zuhai%20Macau%20Bridge%20Project. pdf It consists of three sections (Figure 2). The western section is a link road within Zhuhai and the Zhuhai-Macao Boundary Crossing Facilities (ZMBCF). The
Zhuhai Link Road will connect ZMBCF to the inland area of Zhuhai. The middle section is the HZMB Main Bridge. [pic] Figure 2: Retrieved from Highway Department http://www. nzcchk. com/IBC%202009%2014%20-%20Hong%20Kong%20Zuhai%20Macau%20Bridge%20Project. pdf The eastern section is within Hong Kong, there will be a Hong Kong Link Road (HKLR) to connect the HZMB Main Bridge to the Hong Kong Boundary Crossing Facilities (HKBCF). Meanwhile, the tunnel of HKLR will also connect Hong Kong International Airport (HKIA) to the HKBCF.
HKBCF will serve as a strategic multi-model transportation hub, HKBCF will include construction cargo and passenger related facilities, public transport interchange, open road tolling system and some Government buildings will be set up in there. It is believed that the HMZB will bring more road haulage service between Hong Kong and mainland, in connection with the bridge, a highway is to be built to connect Tuen Mun and Chek Lap Lok( TMCLK Link and the Tuen Mun Western Bypass) in order to meet the traffic demand between Northwest New Territories (NWNT) and North Lantau via HKBCF. (Figure 3) [pic]
Figure 3: Retrieved from Highway Department http://www. nzcchk. com/IBC%202009%2014%20-%20Hong%20Kong%20Zuhai%20Macau%20Bridge%20Project. pdf Impacts of the HZMB The journey between Hong Kong and the Western PRD can be shortened to within three hours, it will take around 30mins from Zhuhai to Hong Kong International Airport which will significantly reduce the cost and time for passenger and good flow between Hong Kong and the Western PRD. In addition, the HZMB will bring tremendous benefit to Hong Kong, the Mainland and Macao in the areas of economic development, tourism, finance, logistics and ultural exchange. Hong Kong’s logistics industry will not only be able to get more business in the PRD but also extend their services into the inland area of the Mainland including the resource-rich Sichuan Province. Hence, it further enhances Hong Kong’s status as an international transportation and aviation hub. Hong Kong-Shenzhen Western Express Line (WEL) To promote the development of Qianhai and NWNT and enhance the co-operation between the two airports in Hong Kong and Shenzhen, there will be a cross boundary railway, WEL, to connect the western part of Hong Kong and Shenzhen, including the two airports.
From now the mainland destinations of HKIA mainly are the mainland cities far away from Hong Kong such as Shanghai and Beijing. Facing the rapid economic development in Mainland, the demand for domestic flights will continue to increase; there will be the same demand of international flights of international transit flight via Hong Kong. It is believed that WEL helps to connect the two airports between Hong Kong and Shenzhen, it will help the two cities in achieving a win-win situation by complementing each other and enhancing competitiveness. Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL)
To expedite the construction of various cross-boundary transport infrastructures between Hong Kong and Mainland, XRL will connect Hong Kong with the Mainland’s national high-speed railway network which will significantly reduce the journey time. XRL is an express rail to link up Hong Kong with Guangzhou via Futian and Longhua in Shenzhen and Humen in Dongguan. The terminus in Guangzhou will be located at Shibi, which is the centre of the Guangzhou-Foshan metropolitan area. The Mainland section of XRL will start from Shibi and enter Hong Kong via Huanggang. (figure 4) [pic] Figure 4: Retrieved from Legislative Council brief http://legco. gov. k/yr09-10/english/panels/tp/tp_rdp/papers/tp_rdp1022-thb200910a-e. pdf The Hong Kong Section is started from Huangguan, there will be an underground railway running from Huanggang to West Kowloon Terminus at the West Kowloon District, and between the Airport Express Kowloon Station and the West Rail Austin Station. [pic] Figure 5: Retrieved from Legislative Council brief http://legco. gov. hk/yr07-08/english/panels/tp/tp_rdp/papers/tp_rdp-thbtcr11658199-e. pdf Impacts of the XRL XRL is vitally important to Hong Kong. It will connect Hong Kong with the Mainland's national high-speed railway network and significantly reduce the journey time.
A trip between Hong Kong and Shibi on the XRL will only take 48 minutes, to Wuhan in five hours, and to Shanghai and Beijing in about eight and 10 hours respectively. The XRL will terminate at the New Guangzhou Passenger Terminus at Shibi in Guangzhou. Shibi, together with the stations at Beijing, Shanghai and Wuhan, are designated as the four major national railway passenger hubs of the Mainland. The Terminus is planned to become a mega transport hub. Hence, XRL will help reinforce Hong Kong’s status as a transport, financial and commercial hub of China.
It will support the sustained growth of our four traditional economic pillars - Financial services, tourism, logistics, business support and professional services. CONSOLIDATING HONG KONG’S DEVELOPMENT AS AN INTERNATIONAL SHIPPING AND LOGISTICS CENTRE Positioning of Hong Kong International Airport(HKIA) HKIA is the word’s busiest cargo airport, it has handled a record high of 4. 13 million tonnes of cargo in 2010. To meet the anticipated growth in demand, a new air cargo terminal is being constructed and is expected to commence operation in early 2013; the cargo-handling capacity will be increased.
In long term, building a third runway is necessary to meet the forecast growth of passenger and cargo handling up to 2030. It will maintain the competitive edge of Hong Kong as an international and regional aviation centre. In view of increasing aircraft movements in PRD region, air routes and airspace open for civil aviation are insufficient, flights on many air routes have to make an additional detour or fly to a certain flight level to ensure safety, it increased the flight time and flight delay in Mainland is always happened from time to time.
To meet the aviation development needs and strengthen the economies between Hong Kong and Mainland, HKSAR government has to formulate a development plan for future air spaces capacity of the HKIA as well as the positioning of HKIA in accordance with its function as mentioned in the Framework Agreement to avoid the traffic congestion in the airspace over the PRD region. Measures to enhance the maritime port’s competitiveness To reinforce Hong Kong's position as a renowned international maritime centre and it is believed that a well established international business and maritime network is necessary.
With regard to port expansion, HKSAR Government is looking for the right location for Container Terminal 10, which may be required as early as 2015. It will be other local transportation projects to shorten the travelling time of goods and commuters within the territory. The Hong Kong Shipping Register is the first-rate service offered by the Hong Kong maritime cluster. To maintain the reputation of the Hong Kong Shipping Register, the Hong Kong Marine Department will work closely with the industry to enhance the standards of Hong Kong ships and increase the competitiveness of the Register.
Such as providing e-services for expanding one-stop shop services for ship registration, strengthening pre-registration quality control and enhancing coordination with the relevant Mainland authorities to offer better protection for Hong Kong ships. Hong Kong can also provide higher value-added services like maritime insurance, ship financing, international arbitration and logistic management to form a stronger industrial cluster.
POSITIONING HONG KONG AND GUANGDONG AS A MODERN ECONIMIC CIRCULATION SPHERE To reinforce Hong Kong’s position as a logistics and maritime centre, Hong Kong needs to have first-class infrastructure facilities in parallel with hard infrastructure development. Banking and Bond Business The Framework Agreement deepens the Hong Kong’s RMB trade settlement and finance businesses at local level. It provides a best platform for Mainland authorities and Hong Kong Monetary Authority to jointly discuss and investigate how to expedite the application of RMB outside the China and continuously improve the RMB trade settlement services.
It also facilitates the bond services, the qualified Guangdong financial organizations and companies can issue RMB bonds in Hong Kong. This approach creates many different financial channels to both sides and supports the development of Hong Kong’s RMB bond services simultaneously. Securities Services For securities business, the Framework Agreement pushes forward connection and mutual co-operation in respect of talents, knowledge, products, and institutions between both sides.
In addition, more Guangdong financial organizations and companies are encouraged to raise funds in Hong Kong and to be Hong Kong listed companies. In order to strengthen the collaboration of securities services between Hong Kong and Guangdong, the supplement VI of Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was signed in 2009 which permitted securities organizations in Mainland and Hong Kong to establish securities investment consultancies in joint venture mode. Insurance Services
With the support of Framework Agreement, the qualified Hong Kong financial organizations can set up legal institutions with insurance services in Guangdong and this facilitates Hong Kong insurance organizations to develop business in Mainland by lowering the entry requirements of Mainland insurance market. The supplement IV of CEPA helps Hong Kong insurance agents to set up wholly-owned companies in Mainland. The collaboration of China Insurance Regulatory Commission and Office of the Commissioner of Insurance in Hong Kong can continuously be increased.
Developing international logistics hub in Hong Kong and PRD region The Framework Agreement helps the development of financial logistics service in Hong Kong by integrating supply, production and sales and formed the financial supply chain system. It was the revolution of third-party logistics services in Hong Kong. Financial logistics service has became gradually popular that combined with logistics and financial products. The ability of third-party logistics services and operating profit has been improved; logistic companies can expand financing channels, reduce financing costs and improve capital management efficiency.
The new third-party logistics service definitely drives toward the goal of win-win supply chain. Logistics companies can activate occupied costs of idle raw materials and finished products for optimizing companies’ resources. The provision of financial logistics service can enhance companies’ integrated logistics services and competitiveness; it further increases the business scale as well as the value-added services. The enhanced financial costing and broad financing channels reduce the capital utilization of raw materials and semi-finished products.
Moreover, the optimal capital allocation can reduce the procurement costs, expand sales volume and increase the companies’ sales profits. For further support, financial logistics services help companies to expand the size of loans for smoothing the cash flow, reduce credit risk and support the disposal of bad assets. The combination of logistics services and financial services which provides an integrated supply chain financial plan, it also increases the competitive advantage and profits.
Through the financial logistic services, the warehouse logistic companies can achieve multilateral success; enhance customers’ capital capability and responsiveness to market risk. It encourages customers to deal with the warehouse goods processing and facilitates the interactive information sharing of goods, large amount of goods storage and high goods turnover rate. The diversified payment methods can maximize customers’ capital settlement. Therefore, customers’ pressure on accounts receivable can be reduced.
With the connection of logistics and insurance industries, it provides a comprehensive logistics insurance service for all supply chain activities and items. It includes equipment damage, goods delivery, property and facilities, operation safety of trucks and other means of transport, and employee insurance, etc. Through the enhanced financial services, increased financial channels and the supports of Mainland banks and insurance companies, the logistics industry in Hong Kong obtains abundant resources to develop the financial logistics services, logistics routes and business in Mainland.
Foreign enterprises also can take Hong Kong and Guangdong as a platform to invest in mainland market, in returns, Hong Kong acts as a bridgehead for Mainland enterprises to “go global” and establishes their head office in Hong Kong and promotes their business to global markets. CONCLUSION Hong Kong is the gateway of China and positioned in the heart of Asia; we can reach all major Asian countries within four hours and half of the world's population within five hours by plane.
However, facing the changes of global economic structure and the worldwide trend of forming a regional economic co-operation and competition, it is difficult for an individual city to compete at its own. As such Hong Kong has to strengthen itself by co-operating with Mainland, particularly PRD region in Guangdong, to search for larger market hinterland so as to maintain its long term competitiveness. Under the outline of the Framework Agreement on Hong Kong Guangdong Co-operation, Hong Kong has to work towards betterment by consolidating innovation into its existing pillar industries, including finance, trading, shipping and logistics.
To enhance our competitiveness, Hong Kong has continued investing in key infrastructure projects to maintain an efficient multi-modal transport network which covering air, land and sea to meet the different needs. Major infrastructure projects like HZMB, XRL and WEL, which materialize the “one-hour intercity circle” for people in PRD region and enforce a sound regional system of marine, land and air transport integration within this region. To facilitate the logistic flow and customs procedures, ROCARS has been introduced on the customs clearance.
Some other recommendations on customs procedures can be considered in future, for instance, a mutual recognition of the examination results of cross-boundary vehicles, relaxation of the restrictions on Hong Kong trucks with valid licenses to travel in Mainland, as well as a centralized electronic communication platform on other control points to shorten the customs clearance time. In parallel with hard infrastructure development, Hong Kong should continue to develop the required software, particularly in the expansion of our aviation network, nurturing fresh talent and IT development.
Hong Kong should make use the advantage of legal system and professional service, an extensive shipping and aviation network so as to provide a high value-added logistic services like pick-and pack and inventory management services. We believe that maintaining a closely correlation between Hong Kong’s hard and soft infrastructure is one of the factors to sustain our economic growth and prosperity. To further reinforce Hong Kong’s position as an international logistic hub and a gateway for Asia to access global markets, we have to tie with the co-operation and development of mainland.
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