Transcript Mr. Anthony Lau, Chairman and Chief Executive of BALtrans/Jardine

Impact of CEPA on
Logistics Industry
Presented by
Anthony Lau
Chairman & Chief Executive
BALtrans/Jardine Logistics Group
12 December 2003
1
Definition of Logistics
Logistics is that part of Supply
Chain Management that plans,
implements, and controls the
efficient, effective forward and
reverse flow and storage of goods,
services, and related information
between the point of origin and
the point of consumption in order
to meet customers' requirements.
Council of Logistics Management
2
Drivers of Logistics Industry

Globalization / global
sourcing
 Need for Supply Chain
Management
 Increasing logistics
outsourcing
 Bottom line and competitive
pressure
3
Hong Kong Logistics Industry

4.8% of GDP.
 Total number of logistics related
establishments are over 12,000.
 Total number of employees in
logistics industry are some 80,000.
 A world class airport linking with 130
points around the world by over 70
international airlines and handling
2.5 million tonnes in 2002.
 The world’s busiest container port
with record throughput of 19.1 million
TEU’s in 2002.
4
Hong Kong Logistics Industry
(cont’d)




The best airport and seaport in
PRD.
Over 1,000 professional and
experienced freight forwarding
agents operating in a well
established international network.
Well developed financial and legal
services.
One of the four pillar industries
supported by government.
5
China Logistics Industry

The world factory which triggers
 A growth market for logistics


Transportation and logistics
expenditures were US$230 billion in
2001, or approx. 20% of GDP, double
the level of the US.
An average annual growth of 25%
between 2000 and 2005 is expected.
 Exponential 3PL growth


3PL penetration rate is estimated to
be 2%, much lower than the US (8%)
and Europe (10%).
Forecasting 16% to 25% annualized
growth for 3PLs for the next 10 years.
6
Opportunities Created by
CEPA

Asset based logistics industry






Airlines, including integrators and couriers
Shipping lines
Warehouse operators
Trucking companies
Cargo terminal operators
Non-asset based logistics industry
 Forwarding agents
 Third party logistics service providers
(3PLs)
 Fourth party logistics service providers
(4PLs/ Lead logistics service providers)
7
Comparison of WTO with CEPA
Sector
WTO
CEPA
Logistics
Services
 Not committed under WTO to allow wholly foreign owned
logistics companies
 Currently wholly foreign owned logistics companies allowed
to provide services only in bonded zones.
 Minimum registered capital requirement is US$1,000,000.
 Allow wholly owned from 1 Jan 2004 (approx 1
year ahead WTO commitment).
 Minimum registered capital requirement to be
determined.
Freight
Forwarding
Agency
Services
 Currently foreign majority ownership in JV allowed up to 75%.
 JVs are restricted to international freight forwarding business
only.
 Minimum registered capital requirement:
- Currently US$1,000,000.
- Committed to reduce by 11 Dec 2005.
 Allow wholly foreign owned by 11 Dec 2005
 Allow wholly owned from 1 Jan 2004 (approx 2
years ahead WTO).
 Not explicitly restrict to international freight
forwarding.
 Minimum registered capital requirement is RMB
2,000,000 (approx US$242,000).
Storage and
Warehousing
Services
 Currently wholly foreign owned enterprise allowed to provide
services only in FTZ’s.
 Minimum registered capital requirement is from US$200,000
to US$1,000,000 depending on location and business scope.
 Allow wholly foreign owned by 11 Dec 2004
 Allow wholly owned from 1 Jan 2004 (approx 1
year ahead WTO)
 Minimum registered capital requirement is RMB
2,000,000 (approx US$242,000).
Transport
Services
 Currently foreign majority ownership in JV allowed up to 75%.
 Allow wholly foreign owned by 11 Dec 2004
 Allow wholly owned from 1 Jan 2004 (approx 1
year ahead WTO commitment).
 Minimum registered capital requirement to be
determined.
8
Supplementary Arrangement

Government should help
expedite the processing of
license application procedures
 Extending the zero tariff to
more products
 Simplifying and shortening
customs clearance
procedures and time
 Open air freight market
9
10