HONG KONG — “The world is here because Hong Kong is Asia’s most connected city.”
Those were the confident words of Hong Kong’s chief executive, Carrie Lam, as she welcomed the 2,000 delegates to this year’s Asian Logistics and Maritime Conference, held here at the Hong Kong Convention and Exhibition Centre.
It is not an empty claim. Hong Kong’s airport is the world’s busiest in terms of cargo. Hong Kong’s seaport used to be the world’s busiest until it was surpassed by Shanghai, also in terms of cargo. The logistics sector generates 22% of the city’s gross domestic product. It’s no wonder investment in infrastructure, both physical and digital, continues to pick up, as proved by the recent opening of the Hong Kong-Zhuhai-Macao Bridge and a new high-speed rail line linking the city with Shenzen just north of its border. In addition, the newly-signed free trade agreement between Hong Kong and the ASEAN is set to take effect at the beginning of 2019, promising more opportunities for the city’s logistics sector, and for its economy at large, as it fulfills its role of a “superconnector” city, to quote Lam’s predecessor, C.Y. Leung.
Hong Kong also has boosted support for developing and training new talent in sea and air transport. In 2014, the government approved the Maritime and Aviation Training Fund, committing HKD 100 million over five years to introduce new scheme, and expand existing ones, aiming to develop a competitive pool of professionals in the maritime and aviation sectors. Just last month, Lam announced the extension of the scheme, with an additional HKD 200 million poured in. This is on top of tax schemes to encourage the growth of the ship leasing and maritime insurance sectors in the city.
What can the Philippines learn from Hong Kong as it aims to also boost the supply chain sector and become a more competitive player in the region?
We cannot, of course, do the exact things Hong Kong does. The circumstances are different. This city has a long history of being the center of trade, going back hundreds of years, to when it was first used as a trading post by Portuguese merchants. The logistics sector also evolved with the needs of consumers here—and these consumers are time-starved and looking to squeeze more value out of what they have. No wonder the cashless economy is thriving here: in a city where you have to finish your lunch in 15 minutes, tapping a card on a terminal rather than fumbling for loose bills is definitely preferred.
However, the Philippines has unique conditions that should allow the logistics sector to thrive and innovate. Every supply chain manager in the archipelago, for one, has to deal with multiple connections across land, sea and air. There is constant demand for new warehouses across the country to enable manufacturers and retailers to serve their customers better. Congestion in urban areas has also provided an opening for innovative transport solutions, ingratiating themselves into the mix of any supply chain manager looking to optimize his network. All that as our economy continues to grow, spurred on by increased domestic consumption, as consumers look to take advantage of new brands and products from across the world entering the market. This forces supply chain stakeholders to find ways to better serve their customers considering the limitations.
And yet, while there are some innovations in these fronts, supply chain in the country isn’t as competitive as it ought to be. Land connections are crowded and limited. Our maritime sector is struggling in the face of a lack of economies of scale. Infrastructure serving land, sea and air continue to buckle under the weight of either high demand or low attention. As supply chain moves towards increased transparency, security and visibility, our digital infrastructure is not able to keep up.
Every time we ask supply chain stakeholders what their most important need is, we get the same answer: infrastructure. And, yes, the government is working on it, trying hard to catch up to current demand before anticipating future ones. But even here we can have a limited view. It’s one thing to have more roads (and rail) to further facilitate transport of goods. It’s another to have the infrastructure needed to support the whole supply chain process. Last week’s truck holiday is down in part to bring attention to difficulties in returning empty containers, leading to loss of income for truckers. During our General Membership Meeting two weeks ago nobody could agree on who should take the charge in building new empty container yards. Should it be port operators? Should it be shipping lines? What about real estate developers? But then, building new condominiums (and, along with it, homogenous retail options and increased congestion in urban areas) bring in more profit.
I have often been asked about investment opportunities in the supply chain sector. My answer is also the same: infrastructure—but not just roads and seaports and airports. We ought to build warehouses and container yards and distribution hubs, and we ought to be smart about where to build them and how to link them, and how they factor in with today’s economy as well as tomorrow’s. And maybe we can also invest in people, because hiring both technical personnel and professionals is a problem for everyone in supply chain today.
What can the Philippines learn from Hong Kong as it aims to also boost the supply chain sector and become a more competitive player in the region? For one, look at the entirety of its supply chain, rather than just its parts—and invest in it, greatly.
Mystical Christmas: Join us for our Christmas fellowship on December 6 at the Makati Sports Club. Apart from revealing our Board of Directors for 2019, we also kick off our 30th anniversary celebrations. Visit scmap.org to learn more.
Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.