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Address to MBA Students in the Executive Development Series of the Chinese University of Hong Kong

6 April 2001


Public Policy Versus Business Decision Making:
Friends or Enemies?

Ladies and Gentlemen,

I am delighted to have the opportunity of meeting with you, our business leaders of tomorrow. You have had an impressive succession of speakers from the public and private sectors taking part in the Executive Development Series, and I am honoured, and, indeed, humbled, to have been invited here this afternoon. 

Facilitation

The traditional role of Customs as an enforcement agency has expanded considerably in recent years. We are emerging prominently as a business partner to industry players. Today I will focus specifically on that partnership in the cargo processing chain. We in the Hong Kong Customs are fully committed to building and maintaining this strategic partnership with the industry so that we will be able to reinforce Hong Kong's status as an international cargo hub and to maintain the competitive edge of the local industry. Having said that, we remain mindful of our traditional role as the law enforcement agency with a specific control responsibility. The integrity of our system relies on that control and that is something which we will not sacrifice at any cost. We need to find win-win solutions for both partners.

A good example of the successful application of the facilitation principle is clearly demonstrated at our new airport. With new facilities housed in a cluster of stunning architecture, the new airport has actualized to a fuller extent Hong Kong's potential as an international transportation hub than ever before in our history as an entrepot for the region. 

We are handling more than two million tonnes of international air cargo annually, and the figure is steadily on the rise. We are only 200,000 tonnes short of catching up with Memphis which is currently the world's largest handler of air cargo. Overtaking Memphis is our immediate target, and meeting our ultimate potential has been the principal driver for Customs to seek to enhance even further our partnership with the cargo operators. We have found our way through the application of information technology and implementation of business friendly legislation. 

Air Cargo Clearance System

We decided at the planning stage of the new airport before its opening in 1998 to develop a dedicated computer system with the dual purpose of enhancing enforcement and facilitating the clearance of air cargo at the new airport. This resulted in the creation of the Air Cargo Clearance System or the ACCS, the system that we are now using for the efficient clearance of the large volume of air cargo. 

The ACCS has brought a great deal of convenience to the cargo industry in Hong Kong. It is basically a computer system equipped with state of the art technology, specifically designed by our experts to shadow the movement of each piece of consignment coming into and going out of Hong Kong. The ACCS provides a direct system interface and electronic communication between Customs and the cargo operators in the airport for the exchange of cargo data and Customs clearance instructions. The capability of the system covers all types of cargo, including perishable goods, general merchandize, consolidation shipments, express consignments and even packages handled by on-board couriers.

All cargo operators based in our airport have joined ACCS which now has blanket coverage of all cargo coming through the airport. With the support of the cargo operators who provide us with the cargo information in the first instance, we have been able to achieve shortened clearance time and gain enhanced enforcement capability. This has worked to the advantage of both the business sector and us, the enforcement agency.

The arrangement has worked well so far but we are not complacent. Before we reach the capacity limit of the existing system, we are already studying how we can upgrade the system to deal with the anticipated exponential growth of express cargo in the next few years as well as the extension of the coverage of this system to other control points as greater flexibility in intermodal transportation is realized. We have spent some HK$180 million in developing the original system, and we are now planning to spend another HK$30 million in the next year or so in upgrading the system to enable us to stay ahead of the game. 

Extensions of the ACCS

One of the extensions of the ACCS includes the newly inaugurated Marine Cargo Terminal, a new operation which is located on the eastern end of the airport island. This is a cargo terminal where goods coming by sea from the Pearl River Delta region could have direct access to the airport for quick export by air to other parts of the world, taking full advantage of the sophisticated air connection network in our first-class international airport, eliminating delays on the increasingly cluttered roads in the sub-optimal land transport infrastructure in the region and widening the opportunity for more cargo to be transshipped through Hong Kong. 

Customs would undergo clearance checks on arrival of all in-coming cargo at the Marine Cargo Terminal which is equipped with all the necessary hi-tech hardware. The cargo information would be fed into the ACCS system for further examination by our officers at the airport control. Cargo would not normally need to be checked again when it enters the airport, thereby facilitating the movement of the cargo in reaching its destination on the next flight. Reversed movement of cargo the other way with the dissemination of goods from the airport to the Pearl River Delta region is also deemed to be full of great potential and that is being explored. Meanwhile, other operators have expressed interest in formulating similar arrangements using different modalities. We welcome these expressions of interest, and we would accommodate everyone who is willing to provide us with the necessary cargo information in exchange for our facilitation. 

We are also cognizant of the fact that the increasing use of logistics service and the growing popularity of e-commerce will pose unprecedented challenges to the air cargo industry. More and more cargo will be put on air transfers and the challenges will come from the increasing demand for a faster, more reliable and higher value-added transportation service. We are making full preparation now to meet these challenges head on.

We have labelled this facilitation concept our "bonded expressway" and we are seeking to expand it even further, while keeping to the principle of maintaining a secure monitoring system to ensure that transshipment cargo will not be illegally diverted during its passage from the point of entry to the point of exit. This concept, I believe, can be implemented successfully through the application of technology in both physical tracking and audit trail, resulting in the minimum need for Customs interference on the actual movement of cargo.

This is only the start. Our ultimate goal is to develop a one-stop Customs cargo clearance facility for all intermodal transshipment cargo. So far, we have not been able to include all the data into a single computer database, but that is something that we will be striving to achieve in the near future. 

Legislation

We have also been active on the legislative front in complementing our administrative measures in actualizing Hong Kong's potential as an international cargo hub. A good example of our commitment is the speedy enactment of the Air Cargo Transshipment (Facilitation) Ordinance 2000 to facilitate the movement of air transshipment cargo through Hong Kong. 

Before the enactment of the amendment, all transshipment cargo, regardless of nature, were subject to the same licensing control and customs clearance requirements as if they were actually imported into and then re-exported from Hong Kong. This means that import and export licences had to be obtained for all controlled items before the goods could be sent to Hong Kong for transshipment. The application process sometimes took as long as a few days to complete. These requirements were set in those days when transshipment cargo was not as popular as they are today, and cargo information was not readily available prior to the arrival of the shipment. 

With the new mode of operation and the advent of more user-friendly information technology, the situation has changed drastically over the last few years, laying the very foundation for transshipment cargo facilitation in Hong Kong. We removed the licensing requirements for transshipment by air of the commonly carried goods, including computer parts, pharmaceutical products and foodstuffs. The facilitation does not include, however, goods such as munitions, dangerous drugs, infectious materials and hazardous wastes which are sensitive items requiring higher level of control.

Following the enactment of the new law in May last year, we simplified correspondingly Customs clearance procedures at the airport to facilitate the movement of such air transshipment cargo. The new procedures have been well received by the industry and air transshipment cargo has seen a quantum jump in volume. We will continue to examine existing legal requirements and, where necessary, we will seek to enact legislation to bring our requirements up to date to meet the new business environment of today.

Public Policy

It is our practice that business facilitation should be included in every public policy consideration. As a small economy with no natural resources, the very fact that we remain in the roster of the top ten largest trading entities in the world is a clear testament on the effectiveness of our business friendly policy. We faithfully abide by the motto of "minimum intervention, maximum support" in guiding our decisions in building the necessary infrastructure to nurture a healthy business environment. 

Unlike our neighbour in Southeast Asia, we do not subsidize business intoxicating them with short-term elixir, but we are actually the true friend of the business sector. There is no place in the world where you can find such accessible officials at the highest level, such transparent governance, such wide-spread public involvement in key advisory bodies, such free flow of information and such conducive business environment than what you see here in Hong Kong. We have the rule of law, an independent judiciary and a clean and competent civil service. These factors and others help to engender an environment for healthy long-term development, and not the short-term gains that many governments pursue. 

We will be working closely with members of the industry in identifying the best possible solutions in achieving our long-term objectives. I believe the solution lies in the successful partnership between government and the industry. I trust you will agree with me that business decision making in Hong Kong is very much part of our public policy formulation, and the Hong Kong Government, in general, and Customs, in particular, is business' best friend.

Thank you.

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