HOW HONG KONG'S INNOVATIVE SUPPLY CHAINS KEEP ASIA CONNECTED - The inside story of how Hong Kong became Asia's global supply chain hub - The Economist
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HOW HONG KONG’S INNOVATIVE SUPPLY CHAINS KEEP ASIA CONNECTED The inside story of how Hong Kong became Asia’s global supply chain hub
2
CONTENTS
3 Executive summary
4 Complex supply chains, new challenges
5 Natural selection
6 Institutional advantages
7 Connecting East and West
8 Asia’s aviation and maritime hubs
10 The Asian opportunities
11 Hong Kong invested in smart opportunities
12 Sustainable supply chains
13 Hong Kong, beyond boundaries
2
EXECUTIVE SUMMARY
The world is demanding better supply chains in the midst of Hong Kong’s government is reinforcing its existing strengths—a
COVID-19, a US-China trade war, growing economic nationalism dependable legal system, attractive tax regime, business-friendly
and the rise of e-commerce. In these uncertain times, businesses environment and regulatory frameworks, and an existing ecosystem
and governments alike look for safe, resilient partners that can of service providers—with a series of policy initiatives designed to
offer speed, stability and efficiency. strengthen the logistics and maritime sectors. It has introduced a
tax concession bill to attract ship leasing businesses and is the first
This paper aims to explore how Hong Kong can help meet this offshore jurisdiction empowered to apply to Mainland Chinese
demand for fast, efficient and sustainable supply chains. The city courts for interim measures relating to institutional arbitration.
has the geo-strategic location and institutional advantages to add The city is also building on its geographic location, infrastructural
value throughout the supply chain. Already, Hong Kong’s airport connections and trade links by forming maritime and aviation pacts
is the world’s busiest air cargo handler, its port ranks within the with Mainland China and Macao to boost ties with the Guangdong-
top 10 globally, and Hong Kong is a regional base for some of the Hong Kong-Macao Greater Bay Area.
world’s biggest logistics firms.
Supply chains will continue to evolve as they respond to both
To ensure it maintains its position as Asia’s premier logistics, macro forces and consumer demand. Hong Kong will evolve too.
aviation and maritime hub, Hong Kong is investing in innovation, Investing in its people, infrastructure and innovation to create
infrastructure and partnerships. Supply chain and logistics digital-first, sustainable supply chains will help ensure Hong Kong
startups have been given a funding boost from the government retains its status as Asia’s leading logistics hub.
in the latest budget round, the financial sector is growing trade
financing, and a dedicated logistics and supply chain research
centre is developing technological innovations to facilitate more
and faster trade between Hong Kong and Mainland China. The
city’s airport authority is working with partners to get the latest
accreditations for speciality goods and expanding its capacity in
partnership with the world’s biggest logistics and delivery firms.
3
4
COMPLEX SUPPLY CHAINS,
NEW CHALLENGES
COVID-19 DISRUPTS SUPPLY CHAINS MOVING ONLINE
The COVID-19 pandemic is the biggest shock to the global Businesses also need to take into account new demographics and
economy since the Second World War. Nations around the world means of doing business. In Asia, brands must contend with the
closed borders and locked down cities to contain the outbreak. rise of new customer bases and rapidly evolving e-commerce.
Factories halted operations and airlines stopped flying. The According to a 2019 McKinsey report, young consumers in China’s
World Trade Organization (WTO) predicted world merchandise lower-tier cities have been driving spending growth in the country.
trade would fall 9.2% in 2020. Meanwhile a 2020 Bain and Facebook study across six Southeast
Asian countries showed 30% of 8,600 digital consumers surveyed
The pandemic and fallout in trade hit supply chains hard. increased their online spending over the past six months.
Today’s supply chains are complex, just-in-time systems
designed to cost-effectively meet consumer demands. But “E-commerce accounts for only 14% of total retail sales
this optimisation makes them vulnerable to disruption. Both worldwide, which shows there is still huge potential for
natural events, like floods and extreme weather, and risks, such e-commerce as a future growth driver for the industry,” says Chee
as cyber-security threats, geopolitical instability and trade Choong Ng, managing director of DHL Express HK and Macao.
wars, can lead to disruptions that raise costs, jeopardise global This is echoed by Alibaba’s logistics arm Cainiao Network, which
operations and affect the supply of goods. “The problems in reported revenue of US$1.2 billion the quarter ending September
the supply chain were already there, but [COVID-19’s] level of 2020—up 73% compared to the same quarter in 2019. Cainiao’s
disruption highlighted them,” says Jan Nicholas, partner at 80,000 “Cainiao Post” stations, located in local communities
PricewaterhouseCoopers Consulting Hong Kong. across China, recorded over 100% year-over-year growth in
average daily package volume. “Driven by e-commerce and new
CHALLENGE TO GLOBALISATION retail, the whole logistics industry has been growing rapidly,” says
The global pandemic has also exacerbated a shift towards Wan Lin, chief executive officer of Cainiao Network.
economic nationalism and protectionism. In the US-China
trade war that began in 2018, America slapped tariffs on DEMAND BETTER SUPPLY CHAINS
Chinese imports, which led to a sizeable reduction in trade It is too soon to tell what the long-term impacts of COVID-19,
between the two countries in 2019. More uncertainty was geopolitical tensions or the growing importance of young, digital-
added to the global trading system when the US blocked the first consumers will be. But the world is demanding better supply
nomination of judges to the WTO appeals board, affecting its chains, as efficiencies generated by specialisation and time-
ability to adjudicate trade disputes. sensitive resupply are measured against the chain’s weakest links.
Businesses now have to consider distant disruptions to their There is a pressing need for secure, connected and efficient
supply chains and the risks from economic nationalism. Hong logistics and supply chain management hubs. In Asia, Hong Kong
Kong’s Secretary for Commerce and Economic Development, plays that clustering role. It offers a strategic location, excellent
Edward Yau, said that in recent years, the rise of protectionist connectivity, state-of-the-art infrastructure, a sound legal system,
measures and the failure of the multilateral trading system have high-quality service providers, simple tax regime, and a reputable
posed unprecedented challenges to free and unimpeded trade. status as an international business and financial centre.
4
NATURAL SELECTION
The dynamics of global trade may be evolving, but Hong Hong Kong’s natural advantages extend well beyond the
Kong’s natural advantages as a connected hub for Asia remain. GBA—its geographical location at the heart of Asia connects
The city has a long history as a trading entrepôt between businesses to customers across the region. One of the world’s
East and West; is a key player in the Guangdong-Hong Kong- busiest and most efficient ports, its sheltered harbour and
Macao Greater Bay Area (GBA), with its combined GDP of deep-water draft means “Hong Kong is able to stay in the game
around US$1.6 trillion and more than 70 million people ; and as vessels upsize” says Andrew Hoad, Asia-Pacific managing
sits across a nexus of routes—connecting sea, river, road, director at multinational logistics company DP World.
air and rail links. “In Asia there is almost no better location,”
says Wolfgang Lechmacher, a supply chain and technology Hong Kong’s position on China’s south-eastern flank also
strategist. And this location has made the city a first mover in means it is within five hours flying time of half of the world’s
logistics and supply chains for China and the world. population. Even today, trading and logistics is the biggest of
the city’s four economic pillars—surpassing even finance—
accounting for 21% of the city’s GDP in 2018.
HONG KONG: CONNECTING THE WORLD
EUROPE ASIA NORTH,
30 destinations 142 destinations
CENTRAL AND
AFRICA AUSTRALASIA/ SOUTH AMERICA
5 destinations
PACIFIC ISLANDS 30 destinations
12 destinations
HONG KONG
AIRLINES: ~120
DESTINATIONS: ~220
5
INSTITUTIONAL
ADVANTAGES
Along with its natural advantages, Hong Kong also boasts “The intersection of the physical supply chain and the financial
institutional advantages. It is a financial hub and free-market institutions puts it in a natural position to be a leader,” says
economy with limited tariffs or taxes and has an extensive talent Mr Nicholas. “There are few places in the world that have that
pool to draw on from the dynamic supply chain management ability to do it.”
and logistics ecosystem. This makes Hong Kong attractive to
companies wanting to either do business in Mainland China or
use the city for their regional headquarters. “Hong Kong’s free HONG KONG’S TOTAL
port status is the most significant unique selling point—exports (INWARD AND OUTWARD) FREIGHT MOVEMENTS
and imports are not held up at customs,” says Mr Hoad. “This is
Million
very appealing for shipping lines and shippers to ‘catch up’ on (tonnes) 2015 2016 2017 2018 2019
their schedule and to ship their just-in-time cargos.”
Seaborne 168.6 164.1 176.9 164.6 161.3
River 88.0 92.6 104.7 94 102.0
Hong Kong-based businesses add value along the whole
supply chain. Their strength in financial and advisory services Road 22.8 21.9 22.3 21.6 20.4
means they can focus on the high-value end of the chain, both Air* 4.4 4.5 4.9 5.0 4.7
within Hong Kong and beyond. In 2020, the Fraser Institute Total 283.8 283.1 308.8 285.2 288.4
and the Heritage Foundation ranked Hong Kong as the world’s
Note: *The amount of freight excludes air mail
freest and second freest economy respectively. The city’s Source: Summary Statistics on Port Traffic of Hong Kong, Transport and
infrastructure is highly developed, and its legal and compliance Housing Bureau
systems are highly regarded.
6
CONNECTING
EAST AND WEST
The unique combination of supply chain expertise and optimise the business environment for maritime companies.
geographic proximity enables Hong Kong to act as a repository This followed on from the GBA Airspace Collaborative
of institutional knowledge and conduit to and from Mainland Development pact signed last year between aviation officials
China. The city’s proximity to Mainland China means Hong from Mainland China, Macao and Hong Kong to promote
Kong business leaders, entrepreneurs and logistics experts technical expertise, collaborate on training and introduce new
have had decades of working with Mainland manufacturers and technologies between them. “The strategy is to build and use
suppliers, says Mr Nicholas. This has built up a logistics skill-set and leverage the facilities next door,” says Nicholas Kwan,
that connects the Chinese market to the West. Businesses are director of research at the Hong Kong Trade Development
also able to make use of new infrastructure, such as the Hong Council. “That’s why the GBA is important.”
Kong-Zhuhai-Macao Bridge that connects the GBA’s eastern
and western banks. Businesses are also able to use Hong Kong to expand their
operations beyond China, to the Asia-Pacific region and
Flagship initiatives like the GBA and the Belt and Road Initiative further afield. Hong Kong companies now run some of the
(BRI) also allow Hong Kong-based businesses to deliver high- largest supply chain and logistics firms in the world. “They
quality logistics services. In 2020, the Ministry of Transport either own the factory directly or handle the distribution of
of the People’s Republic of China signed an agreement with those products, the branding, distribution, marketing, design,
Hong Kong and Macao’s maritime authorities to establish logistics support,” said Mr Kwan. For example, Hutchison Ports
a collaborative mechanism and jointly maintain water is a home-grown Hong Kong business that is now the world’s
transportation safety in the GBA, promote green shipping and leading port investor, operating 52 ports in 26 countries.
3.1% OF GDP
In 2018, the logistics industry contributed
3.1% of Hong Kong’s GDP and 176,900 jobs
7
ASIA’S AVIATION
AND MARITIME HUBS
In 2019, Hong Kong managed around 4.8 million tonnes of air cargo and over 18 million twenty-
foot-equivalent units (TEUs) of ocean freight. Building on its core competencies as a world-class
transhipment hub, a pipeline of logistics talent, a centre for supply chain management and its
development of smart supply chains and e-logistics, Hong Kong continues to strengthen its position
as a global logistics hub in the aviation and maritime sectors.
ASIA’S AVIATION HUB Another organisation that has made Hong Kong a key gateway into
Connected, efficient and with unparalleled cargo-handling the region is DHL, which has set up its Central Asia hub in the city.
capacity, Hong Kong International Airport (HKIA) has been the Hong Kong already handles more than 40% of DHL’s volume in the
world’s top cargo handler for 10 years since 2010. To maintain Asia-Pacific area. As one of three global hubs for DHL, its Central
its position, HKIA is embracing new technologies, including Asia Hub connects with more than 70 DHL Express gateways in the
autonomous vehicles, robotic-serving devices, facial recognition region and its expansion will support the growth anticipated when
technology and an in-airport 5G network. This is supplemented the three-runway system is operational. “Hong Kong is an ideal
by infrastructural projects, such as the three-runway system that sourcing hub and distribution centre for businesses in the region,
is scheduled to be completed in 2024. especially for high-value goods including fashion and consumer
electronics that need to minimise inventory and catch product
As Asia’s aviation hub, Hong Kong focuses on high-value air trends,” says Mr Ng.
cargo and logistics services. To support this, the airport works
with their air cargo community, including some of the world’s SMART AIRPORT FOR A SMART CITY
largest logistics and delivery firms, to stay agile and respond New digital initiatives are radically changing the airport’s supply chain
to changes in global trade. For example, Cainiao Network, the processes. Over the past 12 months Hong Kong Air Cargo Terminals
logistics arm of Alibaba Group, is leading a consortium to build Limited (Hactl)—HKIA’s largest independent cargo handler—has
a smart logistics hub at HKIA. The digital logistics centre will launched “Smart Cargo Locating”. This home-grown system uses
feature automated temperature controls and cutting-edge radio frequencies and barcodes to help assemble goods faster for
robotics. To cut costs and delivery times, many goods will be flights, as well as e-loading for stacking pallets onto freighters and
“agglomerated” from the Alibaba economy in South China and providing real-time updates. Hactl also uses artificial intelligence (AI)
flown twice daily from Hong Kong to Cainiao’s eHub in Liege, to spot any defects in their equipment before they cause breakdowns
Belgium and then on to the European market. or disrupt operations, says Wilson Kwong, chief executive of Hactl.
120 AIRLINES,
220 DESTINATIONS
Connected to Asia and the world,
about 120 airlines fly to some
220 destinations from HKIA
4.8 MILLION TONNES
Volume of total cargo throughput
HKIA handled in 2019
8
There is market demand for high-end, temperature-controlled Maritime businesses like Mr Chao’s are reinventing themselves
shipping in aviation. Agricultural produce and pharmaceutical by diversifying their base. Wah Kwong is adding asset
products alike need to be delivered in a secure, speedy manner management to its ship-owning activities, creating value out of
and with the right accreditation. To meet this need, Hactl was their expertise and reputation. They have doubled the number
certified as a Center of Excellence for Independent Validators of ships they manage within two years, adding 10 this year,
(CEIV) Fresh by the International Air Transport Association. and are seeking to grow their fleet to 80 ships by the end of
Hactl is one of the first two cargo handling agents in the world 2022. They are also building partnerships to educate the next
to receive this CEIV Fresh accreditation. It was awarded after generation of seafarers, with a training centre in Weihai and a
an assessment of Hactl’s training, technology and processes, link with Shandong Jiaotong University.
including a fast-track “Fresh Lane” that minimises the amount
of time perishable goods are being unloaded or transferred. This These kinds of partnerships build on the Maritime and Aviation
follows on from Hactl’s “Golden Route” for expedited handling of Training Fund (MATF), which was set up in 2014 by the Transport
pharmaceuticals in 2013. HKIA also set up an airport-to-airport and Housing Bureau to address the longer-term needs of
pharma corridor with Brussels Airport in 2019. the industry and to nurture and attract talent. Last year, the
government injected US$25.8 million into the MATF to nurture
a competitive pool of technical and professional personnel.
ASIA’S MARITIME HUB A “Talent List” for fast-track immigration, which includes
Hong Kong is already a leading centre for shipping and marine engineers, ship superintendents and marine insurance
commercial contract formation and arbitration. New government professionals, was also established in 2018.
initiatives, most recently the Inland Revenue (Amendment) Ship
Leasing Tax Concessions Bill 2020—intended to attract ship SAFE HARBOUR, SMART PORTS
leasing businesses to the city—should reinforce this position. The city’s ports have always been attractive due to their free port
status and world-class customs clearance. To further increase
Hong Kong was also recently designated by the Baltic and efficiencies and save costs, four operators at Kwai Tsing Container
International Maritime Council (BIMCO) as an arbitration centre, Terminals joined forces in 2019 to form the Hong Kong Seaport
alongside London, New York and Singapore. And, as the first Alliance. Here, operators pool their resources, including 23 berths
offshore jurisdiction empowered to apply to Mainland Chinese and other yard facilities, to boost operational flexibility. “We have
courts for interim measures relating to institutional arbitration, reduced inter-terminal trucking by close to 50%, which helps
Hong Kong has become more attractive to Chinese shippers as a improve efficiency, cut costs and reduce carbon emissions,” says
centre for arbitration. Horace Lo, group managing director of Modern Terminals Limited.
The alliance now has twice the capacity of electrical power points
“These measures are important ways to capitalise and build on called “reefer points” to serve refrigerated containers than any
Hong Kong’s core strengths and will serve to enhance our overall other terminal in South China, he adds.
competitiveness and position as an international maritime hub,”
says Hing Chao, chairman of Wah Kwong Maritime Transport. As part of the government’s drive to digitise all aspects of Hong
Kong’s supply chain, the city’s ports are also becoming smarter
The port and shipping industries have needed to adapt to the and faster. “Increasingly, those who manage freight for cargo
challenges of COVID-19 and the increased costs of changing owners offer an integrated digital platform that allows truck
crews amid travel restrictions, says Mr Chao. An uncertain global moves, barge moves, terminal handling and ocean legs to be
economic outlook has added a further element of risk to the viewed and managed with a combination of track and trace,
already volatile shipping industry, he adds. documentation and financial services,” says Mr Hoad.
THE SIZE OF HONG KONG’S LOGISTICS INDUSTRY: EXPORTS
2015 2016 2017 2018
Sea transport services HK$115.3bn HK$107.3bn $HK117.2bn $HK127.3bn
(US$14.8bn)* (US$13.8bn) (US$15bn) (US$16.2bn)
Air transport services $HK93.0bn $HK88.8bn $HK95.6bn $HK106.1bn
(US$11.9bn) (US$11.4bn) (US$12.2bn) (US$13.5bn)
Cargo forwarding services $HK14.5bn $HK14bn $HK15.2bn $HK15.4bn
(US$1.8bn) (US$1.8bn) (US$1.9bn) (US$1.9bn)
Postal and courier services** $HK3.94bn $HK4.47bn $HK5.2bn $HK5.2bn
(US$508.2m) (US$575.8m) (US$667.3m) (US$663.4m)
Total transport services exports $HK230.9bn $HK218.7bn $HK237.4bn $HK258.8bn
(US$29.7bn) (US$28.1bn) (US$30.4bn) (US$33bn)
* All US$ conversions are based on historic exchange rates
** Service exports by Hong Kong Post not included
Sources: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department
9
THE ASIAN OPPORTUNITIES
The global economy is predicted to remain in a recession Hong Kong is ideally positioned to take advantage of the Mainland
into 2021, but there are signs of a China-led Asian recovery. China supply chain opportunity. Within the GBA, each major city is
According to government data, the Chinese economy grew 4.9% identified as having different specialities. For example, while Hong
between July and September 2020, and China’s trade jumped Kong itself has limited space for warehousing, it can leverage Grade
in September with exports up 9.9% from the year before and A warehouse space in the logistics hubs of Foshan, Guangzhou
imports rising 13.2%—potentially making it the first major and Dongguan. “We can hardly live without Shenzhen these days,
economy to recover from the COVID-19 fallout. and the same for them, because our factories are in Shenzhen
and the communications and marketing arms are here,” says Mr
Some companies may be mitigating their overreliance on Kwan. Transport and logistics are identified as a key policy area for
China—a 2020 Gartner survey found that 33% of supply Hong Kong under the GBA plan, with a focus on the city as a global
chain leaders had moved, or plan to move, sourcing aviation hub, global maritime centre and regional logistics hub.
and manufacturing activities out of China by 2023 —but
reconfiguring global supply chains is time-consuming and Asia too is becoming more important as it moves from being
expensive. “The global supply chain is a big ship to turn and the factory of the world, to being the marketplace instead. Fund
it turns pretty slowly,” says Mr Nicholas. Most products are manager Fidelity International identifies a growing middle
made up of parts from all over the world and attempts to move class in Asia who are buying more consumer goods, growing
production back home could lead to a rise in cost or a drop the market and providing the region with a source of resilience.
in quality, adds Mr Lechmacher. A 2020 survey by the Asia “While Hong Kong has benefited in the past as the gateway
Business Council also showed that most CEOs were optimistic to China, we’ve been seeing growth in intra-Asia trade,” says
about China, with 72% saying they had not considered shifting Mr Lo. “Hong Kong will continue to adjust and capture growth
production or reducing reliance on China. opportunities in intra-Asia.”
HONG KONG ALWAYS DELIVERS
During COVID-19 lockdowns, customers around the world quickly offered appropriate support. For example, the increase
turned to online shopping. Companies needed to fulfil these in e-commerce led to a surge in cargo demand that meant
orders, but many faced issues with delivery. For example, airlines needed to arrange extra cargo flights. In response, the
a large number of passenger flights, which carried around CAD re-deployed extra manpower to process flight applications
40% of all cargo in and out of HKIA in 2019, were temporarily and expedite airlines’ applications for the operation of cargo
suspended due to travel restrictions imposed by governments flights to and from the airport. Between February and August
of various countries and places. 2020, the CAD handled applications for nearly 12,000 extra-
section and charter all-cargo flights. As a result, from February
Hong Kong Civil Aviation Department (CAD) closely monitored to August 2020, express cargo shipments jumped more than
the air cargo demand and operational needs of the airlines and 20% over the same period last year.
10HONG KONG INVESTED
IN SMART OPPORTUNITIES
Amid shifting market demands, Hong Kong sees the logistics than HK$697.6 million (USD$90 million) in funding from the
sector as a priority for the city’s ongoing development and Innovation and Technology Fund. Several supply chain-related
provides top-down support and investment. In late September, technologies have been developed by LSCM. These include an
Financial Secretary Paul Chan said Hong Kong needed to e-lock to monitor and safeguard the security of cargo by both
“maintain Hong Kong’s key—even leading—position in the Hong Kong and Mainland China customs authorities under the
global supply chain, capital flow and technology race.” The “Across the Boundary with One Single E-Lock under Separate
government allocated HK$345 million (US$44.5 million) in the Monitoring” principle. Meanwhile a one-stop e-platform uses AI
2020 budget to boost technology in the logistics industry. to analyse data and translate languages for international trade.
Across the supply chain sector, companies are utilising “Logistics and the supply chain practitioners must upgrade their
predictive intelligence and data analytics to make faster capability so that they can work with the e-market platforms, as
decisions, increase speed to consumer, improve productivity well as e-logistics, so that everything will become frictionless;
and reduce supply and demand volatility. Moving into this field as smooth as possible, as fast as possible and as technical as
will be crucial for Hong Kong to keep thriving. “Hong Kong can possible to give the best service to the customers,” says LSCM’s
still grow its pie—the airport can still grow, the port can still chief executive officer, Simon Wong.
grow, the trucking industry can still grow—but it has to find new
layers of activity,” says Mr Lechmacher. “Because the world is Hong Kong also has a vibrant ecosystem of shippers and logistics
going digital, Hong Kong needs to see how to fit in.” providers, logistics-related tech startups and entrepreneurs, and
dedicated governmental support and resources. According to the
To deliver this digital future, Hong Kong has public-private- government’s StartmeupHK scheme, there were 342 startups in
academic support in research and development (R&D) and e-commerce, supply chain management and logistics technology
supply chain digitisation through the Logistics and Supply Chain in 2019. Logistics companies like Cainiao are also investing time
MultiTech R&D Centre (LSCM). One of five R&D centres set up and money to help Hong Kong digitise its supply chains. “[Cainiao
by the Hong Kong SAR Government, LSCM has conducted more aims to] become an engine for digital transformation of the
than 160 projects, supported by industry, academia and the industry by leveraging cutting-edge technologies to reinvent every
public sector. These projects have also benefited from more component along the value chain,” says Mr Wan.
HOW HONG KONG FINANCES TRADE
With so much trade flowing through its ports and airports, trade finance processes. To facilitate cross-border
Hong Kong is investing in new technologies to provide more, trades, eTradeConnect is now connected to the People’s
better and faster trade finance products. Bank of China Trade Finance Platform, allowing importers
and exporters in the global supply chain to obtain more
The city’s monetary authority has facilitated the creation convenient trade finance services through banks in
of eTradeConnect, a blockchain-based trade finance both places.
platform developed by a consortium of twelve major
banks in Hong Kong. The platform aims to improve “By providing the financial infrastructure to support the
trade efficiency, build trust among trade participants, supply chain participants, they are furthering Hong Kong as
reduce risks and facilitate trade counterparties to obtain a trade and supply chain hub, and helping grow the flow of
financing by digitising trade documents and automating goods through Hong Kong,” says Mr Nicholas.
11SUSTAINABILE SUPPLY CHAINS
Sustainability is an ever increasing consideration for supply chains executive director, commercial at the Airport Authority Hong Kong.
and logistics businesses. The transporting of goods within the supply As part of its “green terminal” campaign, Hactl has erected 516 solar
chain is one of the biggest carbon emitters, Mr Lechmacher says. panels on 1,600 square metres of rooftop, making enough electricity
to power 32,000 5W lightbulbs at the same time. By managing its
As part of its “Greening Hong Kong” initiative, the government energy, Hactl saved US$950,000 in 2019, says Mr Kwong, and reduced
has pledged to balance economic, environmental and social carbon emissions by an amount that would take 280,000 trees a
considerations in development. For example, by pooling 23 berths year to absorb. This comes on top of other initiatives that include
to serve its shipping line customers, the Hong Kong Seaport Alliance switching to LED lights, using electric vehicles and phasing out single-
has cut 1,000 hours of vessel waiting time, saving 37,000 tonnes of use plastics.
marine fuel each year, according to Mr Lo. This drop in waiting time
along with a decrease in inter-terminal trucking has also allowed the Taking the environment into account is a big opportunity for business
alliance to cut 130,600 tonnes of carbon emissions per year. and for Hong Kong. “It’s a job creator, an innovation and image
driver,” says Mr Lechmacher.
Meanwhile, Hong Kong’s airport has a goal to be one of the world’s
greenest airports. One of its green initiatives is to replace its fuel-
powered fleets of cars with electric vehicles, says Cissy Chan,
90% IMPACT
According to McKinsey, 90% of a typical
consumer company’s impact on the environment
comes from its supply chains
12HONG KONG,
BEYOND BOUNDARIES
Hong Kong has natural and structural advantages that make it
one of the leaders in global supply chains. The city of 7.5 million
people is able to add value to the logistics and supply chains far
beyond its boundaries, with its business connections reaching
deep into Mainland Chinese cities and beyond. “Hong Kong’s
integrated business services, its ability to become accessible to
different systems and markets, its international reach, its user-
friendly operating environment and flexibility to change are its
biggest competitive edge,” says Mr Kwan.
Both the government and private sector are looking at
technology to make the city more competitive and sustainable.
If Hong Kong is to retain a leading position in the global supply
chain, it must continue to adapt, innovate and educate. In this
way, it can continue to add value up and down the chain as
Asia’s supply chain hub.
13Produced by This paper is produced on behalf of Hong Kong Information Services Department by (E) BrandConnect, a commercial arm of The Economist Group. (E) BrandConnect operates separately from the editorial staffs of The Economist and The Economist Intelligence Unit. While every effort has been taken to verify the accuracy of this information, neither (E) BrandConnect or Hong Kong Information Services Department can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.
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