Advancing Korean Logistics Industry

Busan ranks fifth in the world in terms of handling transshipment cargo

Busan Port has joined the top five cargo ports that have all surpassed 15 million TEUs following Hong Kong, Singapore, Shanghai, and Shenzhen.
“The government plans to implement diverse policies to develop Busan as a global transshipment hub port,” said Park Jong-hum, director general for logistics policy at the Ministry of Land, Transport and Maritime Affairs (MLTM).
He said his ministry strives to build a user-oriented service system by improving incentives for strengthening feeder networks and attracting transshipment cargo and ramping up support for transshipment cargo connections between North Port and New Port while focusing on continuously creating value-added cargo volumes by attracting prominent logistics and manufacturing firms in the port backwater zone. The following are excerpts of an interview between NewsWorld and Dir. Gen. Park in which he spoke of his ministry’s policies, including ones pertaining to the development of the Korean logistics industry and new growth engines.

Question: Will you tell our readers about the current status and prospects of the Korean logistics market?
Answer: Government statistics showed that the Korean logistics industry chalked up about 75 trillion won in sales in 2009, including those in maritime and aviation fields, with roughly 167,000 businesses with about 550,000 employees. The industry saw sales increase from 48 trillion won in 2003 to 57 trillion won in 2005, 68 trillion won in 2007, and 75 trillion won in 2009. It ranked ninth among the Korean industries with a 2.9 percent share in terms of combined sales, a 5 percent share in terms of the number of businesses, and a 3.3 percent share in terms of employees in 2009.
If the maritime and aviation fields are excluded, the logistics industry posted an estimated 38.2 trillion won in 2011 with an annual average growth rate of 4.8 percent during the period between 2007 and 2011, according to a report released by the ministry.
Economic forecasts by institutions in Korea and abroad indicated that despite the global economic slump, the world’s trading volumes will likely maintain stable growth this year. The World Bank projected a 5.2 percent growth in global trading volumes in 2012, compared to 6.6 percent growth in 2011. From a long-term perspective, the global logistics market is expected to target growth in Asia, which will have a favorable impact on growth of the Korean logistics industry. Frost & Sullivan predicted that the Korean logistics industry will be growing at an annual average rate of 6.3 percent by 2016, with the projection of 7.3 percent for that of 12 Asia-Pacific countries.
Q: What’s the significance of Busan Port’s handling more than 15 million TEUs (20-foot equivalent unit) in 2011, ranking it fifth in the world, and what development plans does the government have in place?
A: Despite unfavorable business conditions such as the economic recession caused by the eurozone debt crisis, global shipping companies such as Maersk have continuously cranked up their presence at Busan Port as a transshipment hub. Busan Port joined the top five ranks by surpassing 15 million TEUs following Hong Kong, which celebrated the feat in 2000, Singapore in 2001, Shanghai in 2005 and Shenzhen in 2005.
Korea’s remarkable achievement proves that Busan Port has a competitive edge in transshipment over its Chinese and Japanese rivals due to strengths such as route shipping course networks, reasonable port charges, and geographical advantages.
The government plans to implement diverse policies to develop Busan as a global transshipment hub port. It strives to build a user-oriented service system by improving incentives for strengthening feeder networks and attracting transshipment cargo and ramping up support for transshipment cargo connections between North Port and New Port while focusing on continuously creating value-added cargo volumes by attracting prominent logistics and manufacturing firms to the port backwater zone. As of March, the area attracted 46 companies, 26 of which are in operation, and it handled 507,000 TEUs last year.
It plans to make sure the expansion of infrastructure for berths, backwater complex, and the transportation network without a hitch so that seamless loading and unloading and timely processing of logistics services can be accomplished.
Thirteen more large-size container berths, in addition to the current 12 berths, will be built at Busan New Port by 2020, and six feeder berths will be secured on a gradual basis. The New Port will be developed as an international shipping logistics business cluster by transforming the whole New Port area covering 11.03 million sq. meters as a backwater logistics complex.
Q: Will you elaborate on the government’s revamping of an integrated logistics company certification and its action plans?
A: The integrated logistics company certification has been implemented since 2006 to nurture specialized logistics markets such as third-party logistics and ramp up competitiveness through efforts to make logistics firms specialized and bigger. Forty-nine companies belonging to 26 business groups which offer integrated logistics services have been issued an integrated logistics company certification °™ 10 firms receiving individual certifications and 39 others sharing 10 alliance certifications.
The certification has paid off? °™? integrated logistics company certification firms saw their sales surging from 11.4 trillion won in 2007 to an estimated 23.3 trillion won with an annual average growth rate of 19.6 percent, which is far higher than an annual average growth rate of 4.8 percent for all Korean logistics firms. Integrated logistics company certification firms chalked up an estimated 4.9 trillion won in overseas business revenues in 2011 up from 900 billion won in 2007 with an annual increase rate of 54 percent.
The government plans to further upgrade the integrated logistics company certification system to advance the Korean logistics industry to the levels of advanced countries and ramp up their competitiveness. To this end, it revamped the certification system last year, calling for integrated logistics company certification firms to raise the portion of third-party logistics sales from 30 percent to 40 percent or 400 trillion won.
Q: Will you introduce to our readers your green logistics projects and certification system?
A: The government has set the goal of reducing greenhouse gas emissions by 30 percent or 2.44 million tons of carbon dioxide by 2020, relative to the “business as usual” (BAU) rate. The logistics sector is supposed to cut 16.2 million tons of carbon dioxide emissions, 8.64 million of which is related to the MLTM.
To hit the target, the ministry has a voluntary agreement (VA) among logistics firms and shippers in place. Transportation firms with more than 100 trucks and large shippers have participated in the VA on a voluntary basis since 2010.
The ministry is seeking to introduce green logistic infrastructure projects such as green energy management systems and integrated terminals among VA participants.
It plans to develop business models to transform companies into green logistics ones as well as to expand financial support for replacing aged trucks.
The government plans to introduce a green logistics company certification as a means of prompting firms to become green logistics companies. To this end, it is seeking to revise the Basic Act on Logistics Policies.
Q: What are the pending issues and tasks surrounding the Korean shipping industry?
A: Korean shipping companies are grappling with financial woes, coupled with the global economic slump, shipping fare declines and crude oil hikes.
The government encourages shipping firms to undergo self-restructuring. During the period between 2009 and 2011, 54 companies were liquidated on a voluntary basis and 10 others are undergoing workout programs by disposing of worn-out ships and taking other steps. In order to cope with a shortage of private sector shipping financing, the government plans to come up with shipping support financing policies such as a 600 trillion won export-based insurance financing, a $300 million on-landing, and the $100 million green ship program. The ministry continues to consult with related government agencies to strengthen public financing guarantees and secure liquidity through state-financed institutions.
Q: Will you talk about specific strategies to make inroads into the global logistics market?
A: Of late, Korean integrated logistics firms have been strengthening their presence in foreign markets with robust growth in sales in overseas business, but they are still backward in terms of overseas operations and networks compared to global multinational logistics players such as DHL.
Korean logistics company CEOs have raised common difficulties and woes such as funding, local information, and specialized manpower shortages. The government has worked out plans to select and nurture global logistics players and it plans to provide support in securing loans via Korea Eximbank and by helping develop manpower.
The government plans to further fix hindrances standing in the way for Korean logistics firms to make inroads into foreign markets and expand its support.??
Q: Will you tell us about the government’s strategies to make the nation a global logistics power?
A: As part of efforts to ramp up the nation’s logistics competitiveness, the government strives to develop ports as strategic centers of national economic development by implementing specialized development strategies according to each port, readjust the functions of logistics centers in the top five spheres, and focus on connection among ports and inland logistics facilities. It continues to make efforts to expand the third-party logistics market via tax incentives, to make home delivery services value-added ones, and upgrade the land freight transportation market to the levels of advanced countries in order to further widen the industry’s growth foundation. The government also attaches priority on ensuring green logistics and the safety and security of the logistics industry.
The ministry continues to come up with steps to support the liquidity of the shipping industry, dogged with the recent global economic slump, crude oil price hikes, and shipping fare declines.
In order to nurture new growth engines in the logistics and port sectors, the ministry strives to expand berths in exclusive use of cruise ships, offer support for the development of cruise and marina industries, the offshore plant service industry and ship management industry while making its best efforts to make inroads into the global ballast water treatment market.

Park Jong-hum, director general for logistics policy at the Ministry of Land, Transport and Maritime Affairs