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Tough players in a tough market

by Erik Bøgh Christensen

Mr. Erik Bøh Christensen is Managing Director of Modern Terminals Ltd. hHe joined The East Asiatic Co Ltd (EAC) in Denmark in 1965. He spent eight years in China between 1970 and 1990, and 12 years in Hong Kong-from 1983 as Managing Director and CEO for the EAC's Group in China and Hong Kong. He returned to Copenhagen in 1990 and in 1995 became member of the EAC Group Management Board. After 32 years with EAC, Mr. Christensen returned to Hong Kong to take up his present post on October 1, 1997.

2001 turned out to be a much tougher year than predicted. Reducing trade figures, practically flat cargo volumes, combined with delivery of new modern container vessels set the stage for an industry "melt down" where winners were few and far between. The outlook for 2002 is expected by most to be more of the same, causing practically all logistics players and their customers to continue to tighten their belts.

Fortunately, the economy in Mainland China continues to develop positively, attracting high levels of foreign direct investments into its manufacturing industries. At the same time, the Mainland domestic market continues to grow rapidly.

These are opportunities, but the difficulties and challenges are many. Operating efficiencies must be taken to new heights and companies must become even more innovative. Economies of scale are likely to become increasingly important in order to create competitive advantages. Positive developments in China are, unfortunately, not able to fully make up for the impact of the negative global market situation and some further industry consolidation is likely to take place.

The level of initiatives, commitment and resources being committed are very significant and in this process a good balance is being struck between private businesses and the SAR Government. A powerful logistics Vision for Hong Kong has been formulated and huge efforts are being made to drive an efficient and successful implementation.

The key to realizing this Vision of creating the world's leading transport and logistics hub is to build on and take advantage of our existing strengths, which is exactly how logistics industry has arrived to where it's at today. The thousands of small local as well as large international logistics companies combined with our world class physical facilities is an excellent platform from where to take on the new challenges.

Significant efficiency improvements must be introduced to the entire value chain, including a seamless integration between our frontline logistics shop in Hong Kong and our backyard manufacturing in the Pearl River Delta. This integration will include hard infrastructure as well as soft info-structure both of which require very large new investments.

The rapid rise of ecommerce some 30 months ago and its rapid decline about a year ago gave industry players a good insight into the opportunities for improving the operating efficiencies of our "old economy" businesses. The pressure to invest in these new tools has temporarily eased, but players with foresight and sufficient financial strength continue to charge ahead introducing many new requirements into the logistics business. This development will gain significant momentum in the next few years.

We are in a tough place and a tough market. To succeed, a lot of hard work, innovation and entrepreneurship will be required, but this is fortunately one of the many things Hong Kong people are very good at.