CEPA 'a boon' for overseas firms
By Hui Ching-hoo (China Daily)

For logistics firm Kuehne-Nagel, the Closer Economic Partnership Arrangement (CEPA) has been a very beneficial one.

The firm was among the first batch of overseas logistics service providers granted the status of Hong Kong service provider under the free-trade pact, thus gaining greater access to the fast-growing mainland market.

Kuehne-Nagel was granted a license in 2004 to operate a wholly-owned subsidiary in Shanghai.

Kuehne-Nagel (Asia Pacific) managing director Andy Weber told China Daily, CEPA had helped the company significantly expand its presence on the mainland.

The company began its mainland operations in 1979 with a representative office. In 2004, it became the first beneficiary among its peers to receive a Class A forwarder's license with the implementation of CEPA.

"The license has since enabled us to set up more wholly-owned subsidiaries on the mainland. It gives us a great deal of autonomy and flexibility to speed up our mainland expansion," he said.

With the help of CEPA, the company has opened branches on the mainland every two to three months. It now has 32 branches and plans to have 42 in the next 18 months.

In addition to its local business, the company also serves multinational companies, especially those it had already established connections with.

"Although our delivery points are not widely distributed as the local carriers, we can outperform them in respect of service quality and cost control."

Weber said the company had no plans at present to acquire mainland logistic companies.

"It is difficult to find appropriate targets because the market is too fragmented, though we don't rule out that possibility in the future. But for the time being we are still counting on organic growth," he said.

Contract logistics has become one of the key drivers of Kuehne-Nagel.

"The market has enormous room to explore. We expect it will grow 20 percent annually over the coming years," Weber said.

He stressed that the company had no intention of shifting its regional office from Hong Kong to the mainland regardless of how fast the mainland's business grows.

(China Daily 06/30/2007 page3)