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Executive Summary

Introduction
Amid the global COVID-19 pandemic, the logistics industry has demonstrated its importance to Hong Kong’s society and economy.
It is instrumental not only in maintaining the flow of essential goods such as food and household supplies, but also in supporting
the paradigm shift in retailing, which is the process of migrating purchasing activities from offline to online. This is a trend that has
emerged in recent decades, with the growth of e-commerce serving as the catalyst.
Globalisation of supply chains and changing consumer behaviours have made logistics an increasingly crucial link throughout the
value chains. On the one hand, product manufacturing is taking collective efforts across different countries to make product parts
and perform final assembly, with logistics smoothing the process. On the other hand, consumers are increasingly making their
purchases online instead of going out to brick-and-mortar stores, with logistics performing last-mile deliveries to people’s doorsteps.
All these changes have prompted the logistics industry worldwide to continuously evolve and grow its operations and services.

With intensifying geopolitical tensions worldwide, however, accompanying deglobalisation moves could hurt international trade and
pose additional challenges to the logistics industry. In this context, a reconfiguration of the global supply chain is inevitable. As the
rest of the world is moving swiftly to adjust to the shifts in global trading practices, Hong Kong, a premier trading and logistics hub,
must also take forward-looking measures to keep pace with its peers and competitors.

Challenges faced by the logistics industry in Hong Kong

Although Hong Kong as a logistics hub benefitted from many geographical and inherent advantages, including strategic location,
excellent connectivity, efficient customs operations and its free port status, the logstics industry’s edge is diminishing. This is due to
rising labour costs, inadequate government support and especially a continual shortage of land supply. These constraints are a direct
consequence of the Government’s lack of a strategic economic and industrial blueprint.

Take the maritime and port industry for example: Hong Kong Port (HKP) used to be the busiest port in the world, but 2019 saw its
global ranking drop to eighth place. A comparative analysis shows that HKP has the smallest yard area as a proportion of throughput
among the world’s top ten ports. This is particularly problematic considering HKP’s expanded role as a transhipment hub, which
requires a large container yard area to park transhipment containers that wait for the next vessel bound for their final destination. To
make matters worse, our proprietary analysis indicates that over 40% of the land designated for port back-up uses near Kwai Tsing
Container Terminals (KTCTs) is at present under-utilised.

By contrast, Hong Kong’s airfreight sector is performing strongly, and Hong Kong International Airport (HKIA) is still ranked as the
world’s busiest cargo airport. But HKIA is also facing potential space constraints, with one of the lowest ratios of airport logistics
space to air cargo tonnage handled among the world’s top ten airports.
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