Roger, distinguished guests, ladies and gentlemen,

I am delighted to be here joining this Gala Dinner of the World Ports Summit. Hong Kong is honoured to host this prestigious gathering of many port authorities to discuss issues of global and industry-wide concern. To anyone who has an idea about the number of TEUs handled by the participants in this Summit, the significance of this gathering is unmistakable. Any decisions or even the mere exchange of views would likely affect about 28% of the world throughput, which was represented by about 123 million TEUs handled at our respective ports in 2006.

Port efficient operation is top on our agenda. Safety, security, and environmental protection would need to be deliberated in the context of port efficiency and cost effectiveness. A safe, secure and green port is an indisputable goal. The challenge is how to achieve this without stifling the efficient cargo flow along the supply chain as volume of cargo is increasing at an unprecedented rate, with globalization of trade.

Within the four years from 2002 to 2006, world throughput has increased by about 60% from 277 million TEUs to 440 million TEUs. Ports stay to benefit and respond by expanding. As we strive to enhance our efficiency, however also become victims of our own success. Improvement in supply chain management and facilitation in customs clearance mean that cargoes are now more footloose than ever. Proximity to cargo source is no guarantee for throughput. Competition amongst ports in terms cost, efficiency, and degree of convenience has intensified. I think Hong Kong in that regard can claim to be an expert in port competition due to the rapid expansion in other South China ports.

With advancement in navigational technology, shipping time has been shortened. Modern supply chain management with emphasis on just-in-time delivery, and zero inventory also means that any delay in port operations would have serious consequences in terms of missing the season for sale, disruption in production process, or total write off for products with short life span. Claims on shipping companies and ports can be heavy.

Also, there are growing public expectation of the social responsibility of ports. Port authorities are asked not only to ensure smooth flow of cargoes, we are also tasked to be a gate-keeper for global security, and a key player in combating pollution. Security enhancement proposals like ISPS Code, 100% scanning of containers, environmental measures like cleaner fuel for ships and hinterland transport, and shore base power supply, are no doubt well meaning measures worthy of support. The difficulties, as you all know, is how to implement these at the ports without undermining port competitiveness and efficiency. A more fundamental question is who should foot the bill ultimately?

The subjects discussed at today's summit therefore are not easy. For this reason, the Summit which offers a forum for us to share experience, facilitate co-operation and build consensus is instrumental to the sustained development of our ports.

I have to confess that Hong Kong port has been the envy of many of our counterparts worldwide. Nearly all our port and shipping operations in Hong Kong are commercially run by very efficient and highly competitive service providers. The government mainly plays a facilitator's role in providing the necessary infrastructure and an enabling environment for our business to flournish. With a free port status, clear and transparent customs rules, well-established legal framework, clean government and low tax, our port has benefited from the growth in world trade especially with the opening up of China. For many years, we have been "the Port" in South China which supports the huge export from Pearl River Delta Region. Our port and related sector make significant economic contribution to Hong Kong. In 2006, our port accounts for 2.5% of our GDP, providing 110,000 jobs. But in face of competition and a rapidly changing economic environment, where are we going from here? How should we re-position ourselves?

Last week at an industry function jointly organized by the Hong Kong Shipowners Association and our Marine Department, I made a personal note about the uncertainty surrounding not only the maritime, shipping and logistics sector but also the wider global economy. High oil prices, slowdown in the US economy, rising inflation, and particularly important to Hong Kong, appreciation of RMB put us on a crossroad in economic development.

When the pie is getting bigger and bigger, there would be more to share among us. As the world economies slow down, with new port capacity still coming on stream, competition will become keener. Also the leverage of a mature port in terms of industry know-how and efficiency is wearing thin. Nowadays, management model, and operational system can be duplicated overnight, especially with cross ownership of neighboring ports. All these mean that Hong Kong has to find new competitive edge and to provide more high value-added services. But how and what value added services to provide remain to be unexplored by our very competitive and innovative port operators. These are not easy questions to answer, especially for the Government who has no role to play in commercial port operations.

Due to my previous responsibility as the Permanent Secretary looking after IT and innovation, I do believe that high technology offers some hope. Electronic navigational charts would save paper, providing more efficient information update for ships. Electronic port clearance to be introduced in April by our Marine Department will streamline port formalities and enhance efficiency. A government sponsored pilot on an intelligent trucking information system will help the fleet management, the track and trace of cargoes and, ultimately, lower the trucking cost. Provision of land to attract investment in logistics centres will anchor major service providers in Hong Kong. All these are what the Hong Kong Government has been doing to hone the competitiveness of our port and logistics sector.

On the other hand, I do not mean to say that these measures are the "solutions" which will ensure our survival in the heated competition in the region. These are but small and piecemeal efforts that we as a facilitator to the industry can offer in assistance. Hong Kong has thrived as a free market economy with little government intervention. I hope I am not giving the misconception of shirking my responsibility by saying that ultimately under a free market system like ours, we have to rely on the ingenuity, resourcefulness, entrepreneurial spirit and, most important of all, profit-making incentives of our logistics and port operators to lead Hong Kong to a new direction and scale new height. We of course will standby them and make the best effort to support them.

To this end, I think the Summit and the many discussion inside and outside the conference room, are important for Hong Kong and our fellow port authorities, to promote exchange of views and cooperation in many issues of concern to all of us. In a global supply chain, we are all connected directly and indirectly. The Gala Dinner tonight presents an invaluable opportunities chance for us, perhaps over a few glasses of wine or beer, to put our heads together to come up with new ideas for our port development.

In closing, I would like to thank Roger and his colleagues for organizing this meaningful event, and wish all of you best of health and success in your future endeavours.