COVID-19 BRINGS LOGISTICS RETHINK IN HONG KONG

Around 7 pm one evening in early March, David Cheng, 64, left a two-story dormitory built from stacked shipping containers in Lok Ma Chau, Hong Kong.

He drove an empty truck across the border to Shenzhen, Guangdong province, before returning to Hong Kong at around 4 am, with the vehicle fully loaded with daily necessities and medical supplies that were in short supply.

The COVID-19 pandemic has forced many people to change their lifestyles by switching to operating from home, extending their working hours and conducting business through video conferencing.

To avoid traffic congestion caused by COVID control procedures, Cheng, an experienced cross-border truck driver, had to switch to working in the small hours, from later in the morning.

The round trip from Lok Ma Chau to Shenzhen used to take three to four hours, but in early March, the journey time extended to around nine hours, and to 12 hours in the middle of that month.

The longer journeys came after the Shenzhen authorities required truck drivers from Hong Kong to remain in designated areas while mainland counterparts took over disinfected trucks to pick up goods, in order to avoid cross-infection.

Drivers such as Cheng also had to take at least three COVID tests－two rapid antigen tests and combined nasal and throat swabs－keeping them waiting at the border for one to two hours until they received the results.

The prolonged working procedures resulted in long lines of trucks forming at border crossing points in the day, so Cheng's company decided to operate at night.

Cheng was one of the few drivers still available for work in early March, as about 20 recruits hired by the company he works for tested positive for the Omicron variant of COVID-19. The positive tests were recorded just after Hong Kong faced its most severe wave of the pandemic to date ahead of Lunar New Year.

By March 23, positive tests had been returned by more than 500 cross-border truck drivers tested by the Shenzhen authorities since Feb 4.

In early March, Hong Kong recorded its highest single-day total of COVID-19 infections－more than 70,000. Panic quickly gripped the city, with the shelves of stores emptying.

Drivers quit

The supply of fresh food and other necessities in Hong Kong relies heavily on workers such as Cheng. According to the local government, about 94 percent of the city's fresh pork and 92 percent of vegetables are imported from the Chinese mainland, with most supplies arriving by truck.

Chan Dik-sau, chairman of the Container Transportation Employees General Union, told Hong Kong China News Agency that before the pandemic emerged, some 13,000 truckers drove between the mainland and Hong Kong every day with supplies of fresh food. The drivers usually completed two or three border crossings a day.

Stanley Chiang Chi-wai, chairman of the Hong Kong Land Transport Council, said that after the pandemic hit the city in 2020, the number of truck drivers crossing the border fell to about 8,000.

Many drivers left the industry due to the strict anti-pandemic requirements, which included them being prohibited from getting out of their vehicles on the mainland due to a closed-loop management system.

In March, the number of such truck drivers fell further, to less than 6,500, Chan told Beijing Youth Daily.

The impact was quickly felt, with the value of goods transported to Hong Kong by land falling by 12.7 percent in February from a year earlier, according to the Hong Kong government

Truck drivers' income was also drastically affected. For example, Cheng used to complete two or three cross-border trips a day, earning about HK$600 ($76) per journey. At the beginning of March, he was only able to make one trip a day, with his income falling by about 50 percent.

Chiang said a round trip can now take about 20 hours, adding that costs have also doubled, as the wages of mainland relay drivers are usually borne by Hong Kong cross-border transportation companies.

In March, a relatively small outbreak of COVID-19 was reported in Shenzhen, Guangdong province, across the border from Hong Kong, but many parts of the mainland city were shut down to prevent the virus spreading.

In the middle of March, the number of trucks allowed to cross the border was limited to 500 a day by the Shenzhen authorities, a drastic fall from the pre-Omicron level of 18,000. Some cross-border freight companies had to stop operating, including Cheng's employer.

According to a survey conducted by the CTEGU in late March, only one in 10 cross-border drivers were working in the middle of that month, when Shenzhen limited the number of trucks making the crossing and required drivers to hand their vehicles over to mainland counterparts to pick up goods.

The value of goods imported from the mainland by land in March fell by nearly 60 percent year-on-year, according to the Hong Kong Census and Statistics Department.

The reduced land transportation links also affected Hong Kong's standing as an international logistics hub connecting mainland and overseas markets.

With its well-developed outbound transportation network, professional logistics services and free trade policies, Hong Kong acts as an entrepot for China's trade. Many mainland manufacturers import raw materials and export products via the city, making it an integral part of supply chains.

Busy flights

Since February, shippers and freight forwarders in the Guangdong-Hong Kong-Macao Greater Bay Area have been concerned about COVID-19 disruptions to cross-border land transportation and the possible impact on supply chains.

The pandemic limited the flow of people, but increased the movement of goods at Hong Kong International Airport, or HKIA, one of the world's busiest in terms of cargo transportation.

According to statistics from the airport, in 2019, a total of 4.81 million metric tons of cargo was handled at the facility. The number fell slightly to 4.47 million tons in 2020, before rising to about 5.03 million tons last year.

William Chan Kit, director of government and public affairs at Hong Kong Air Cargo, said global demand for cargo transportation has not ceased during the pandemic. As passenger flights were reduced, cargo planes became busier at the airport, he said.

But air cargo has been hit by reduced land transportation services. HKIA data show that in March, the airport handled 352,000 tons of cargo, down from 397,000 tons in March last year, and from 432,000 tons in March 2019.

Michael Wong Pang, who runs a logistics company in Shenzhen that exports electronic products made on the mainland to clients in Western Europe and Southeast Asia via Hong Kong airport, said, "The situation was terrible."

He added that many cross-border truck drivers were unable to work due to the Omicron outbreak and tightened anti-pandemic measures, leaving his cargo stranded in Shenzhen.

To ensure supplies of medical items and other daily necessities－including fresh food－to Hong Kong, the city and Guangdong authorities opened express marine transportation services at the end of February to reduce the pressure on land routes.

This special arrangement meant that Wong was able to ship a small number of goods to Hong Kong by barge.

He said these goods had to wait two to three days to be shipped, adding that more time is being spent on loading and unloading because ports lack sufficient facilities and manpower to handle goods.

In addition, goods still need to be trucked in and out of ports, further raising transportation costs, he said.

Frankie Tam Kai-wa, general manager for the South China region at a logistics company that transports mainland products to customers in Central and South America, said more than 10 percent of goods destined for export through Hong Kong had been diverted to mainland airports in recent months.

He added that some clients are also considering exporting 20 percent to 30 percent of goods via airports in Guangzhou and Shenzhen in the next few years in response to vulnerable mainland-Hong Kong land transportation services.

New solution

Collin Wong Wai-hung, associate professor in the department of supply chain and information management at Hang Seng University, believes that synergy with mainland cities in the Greater Bay Area may offer alternatives for the flow of goods in this area, lifting Hong Kong out of its logistics crisis.

In February, the Hong Kong government announced the establishment of a logistics park in Dongguan, a manufacturing hub in Guangdong. The park will enable mainland cargo to receive security screening in advance, before goods are directly transported to Hong Kong International Airport by water and then flown to overseas destinations. Cargo can also be imported to the mainland under this system.

Collin Wong said the park will offer a new solution for logistics operators, adding that it is also an example of how Hong Kong and mainland cities complement each other.

Labor costs are high in Hong Kong, and there is limited availability of land, she said. If work requiring intensive manpower and large areas of land can be relocated to the mainland, Hong Kong could give full play to its strengths in traffic networks and fast customs clearance.

The Hong Kong-Zhuhai-Macao Bridge could play a bigger role in cross-border transportation, she said. If more trucks are allowed to use the bridge and tolls are reduced, additional goods from the west bank of the Pearl River estuary will benefit from this, she said, adding that this will further enhance Hong Kong's role as a regional logistics hub.

An aging workforce poses another potential threat to cross-border transportation. Official statistics show that in 2017, over 80 percent of Hong Kong's cross-border container drivers were older than 50.

Andrew Yuen Chi-lok, a senior lecturer at the Chinese University of Hong Kong's Business School, suggested that to reduce reliance on manpower, the city could promote robots and transportation automation technologies.

Citing Hong Kong airport as an example, he said it used to rely on large numbers of people to transfer passengers' luggage, but this process is now largely automated, requiring just a few operators.

Wong, the associate professor, said the development of driverless technology could provide a solution for cross-border freight companies, who also need to think about ways to upgrade their operations with technologies such as smartphone apps.

The taxi industry uses ride-hailing apps to improve drivers' efficiency, and technology companies could also develop apps to help truck drivers, she added.

On the other hand, she said small and medium-size companies may not be able to afford to upgrade technology, so the authorities need to help them meet future challenges－not only by providing financial support, but also assisting them to draw up tailor-made upgrading plans.

Although road transportation is vulnerable to drivers being unable to work after they become infected, and to other anti-pandemic restrictions, Wong said Hong Kong's dependence on such transportation is unlikely to change in the short term.

She added that it is optimistic to expect the crisis to ease gradually, as Hong Kong's vaccination rate is increasing and the authorities are becoming more experienced in organizing cargo transportation amid the pandemic.