Hong Kong may have the world's busiest container port and largest airport, but the logistics infrastructure feeding these two facilities fail to match their world-class status, Professor Zheng Tianxiang, from Zhongshan University, told the business community at the PRD Conference.

For Hong Kong's container port, he believes costs could be reduced substantially if it were linked by rail. Presently, many of the containers coming out of the PRD travel by rail before being unloaded onto container lorries to be trucked down to Hong Kong, which adds to the cost of moving each container, he said.

Prof Zheng suggests that the seemingly poor railway planning stems from the backwardness of the PRD just two decades ago. Now the situation is very different, but the importance of building an integrated logistics network with the PRD is lost on many, he said.

"Why are production costs in Hong Kong so high? People may say because of the bubble economy. But very few people point out the inefficient linkages that add to production costs," he said. "Hong Kong has ... reduced the competitiveness of its infrastructure by not linking up with China."

Prof Zheng said Hong Kong is now starting to put in the missing pieces of the puzzle, and he urged planners to integrate the HKSAR's infrastructure and logistics network with those in the PRD. "Hong Kong should not just be considered a border town of the PRD. Hong Kong should consider itself as an inner China city and gateway to Southern China and South Asia."

He also warns against falling into the trap of believing the western Hong Kong-Shenzhen corridor will be the answer to many of the current congestion problems.

"Apart from the western corridor, we should also be focusing on linking Hong Kong and the rest of the PRD with a high-speed railway," he said. "In other words, we should be moving into the railway transportation mode so that we can link up the 62 cities in the PRD by railway instead of roadways."

Ang Keng-lam, chairman, Kerry Logistics Network, echoed Prof Zheng's comments: "The competitive advantage of the PRD's lower land and labour costs may well be eroded by inefficiencies in the logistics process."

For a container picked up in Sheung Shui and transported to Dongguan the 100 km journey takes eight hours. "Logistics has become a failure in China," he said.

Extending the border crossing to 24 hours, minimising documentation, improving the overall infrastructure and regional network would help improve the problem, but he warns these efforts will be wasted if logistics companies cannot get the talent to drive the industry forward.

An oversupply of companies entering the logistics business overnight are compounding problems. Moreover, although widely regarded as one region, the PRD is very fragmented, composed of multiple municipalities, with each developing its own industries and logistics industries, airports and seaports, he said. For example, the PRD has five international airports -- Hong Kong, Guangzhou, Shenzhen, Zhuhai, Macau. It also has three clusters of seaports -- Hong Kong, Guangzhou (Huangpu & Nansha), and Shenzhen (Chiwan, Mawan, Shekou & Yantian).

A substantial proportion of the PRD's exports come out of Dongguan and Shenzhen, but businesses are gradually starting to move to the western part of the delta in search of cheaper land and labour. Mr Ang says this trend should not be ignored and governments should be looking into how the whole region can be linked up instead of just focusing on a narrow area.

Liang Xian, senior advisor, China Int'l Marine Containers Group, also said plans to develop logistic networks should cover the whole area. "We need to look at overall planning and not just look at certain aspects," he said. "We must also have better co-ordination and the channels that we already have should be further tuned to avoid duplicating and wasting efforts."

Dr Victor Fung, chairman, Hong Kong Airport Authority (HKIA), believes Hong Kong can become a dominant air hub for the region, given the fact that almost 30 per cent of Hong Kong's external trade value is by air.

The airport handles over 2 million tonnes of air cargo a year and that tonnage is projected to grow at a rate of 6 per cent per year over the next 20 years. Much of that cargo arrives by truck, but with the opening of its new of bonded truck services operated by two air cargo terminals to Guangdong, a certain amount of goods can now be shipped with one-stop customs clearance, he said.

Moreover, with the opening last March of the on-airport Marine Cargo Terminal, HKIA is now directly connected to some 21 ports in the PRD via daily river vessel shuttle services.

Currently, over 160 coaches leave the airport every day carrying 1.6 million passengers a year to various destinations in the PRD. To ease the cross-border checkpoint crunch, the airport is planning to have a cross-border coach departure hall in the planned SkyPlaza.

To encourage more Mainland passengers to use the airport, Phase 1 of the airport's ferry service will get underway early next year, linking HKIA to seven ports in the PRD. The service will allow passengers to transfer from ferries to aircraft without the need for border control formalities. Phase 2 of the service with a modern ferry terminal will be ready by 2005.