Serving as the global manufacturing base, the Asia-Pacific region is developing rapidly in its manufacturing capabilities, as well as logistics activities. A recent study by the global consulting company Capgemini has identified 37 logistics hotspots within 14 different countries in Asia-Pacific. Besides an overview of each logistics hotspot with major industries, the study also pointed a number of interesting logistics developments, namely the establishment of the free trade zones, the project Asia highway network, and the expansion plans of international logistics service providers.

Geographically, most of the hotspots are located along the coast, taking the advantage of having sea/river harbors and international airports. Due to the growth of container trade on Asia-Europe routes, the development of harbor facilities is considered as one of the strategic plans by those cities. For instance, Shanghai is expanding its Yangshan Port area, which will be the largest port in the world with annual container throughput of 25 million TEUs by 2010. Port of Tanjung Pelepas will steadily increase the container capacity to be competitive to Singapore in the Southeast Asia. Another manufacturing center Vietnam will inject 4.5 billion USD to their ports development in the next five years.

As the study revealed, the capital of each country is the ideal center for the domestic distribution except for China and India. Those capital cities are sitting as the central hubs in highways and railways networks; also the national capital and purchase power is concentrated within those regions. However, with its increasing popularity, the rental price and labor cost will steadily grow by more than 10% - 30% in the near future.

Free trade zones: Moreover, many cities established the Free Trade Zones (FTZ), or bonded areas, to stimulate the trade volume and minimize the customs barriers. They are commonly located at the entry of the customs / ports. Besides the traditional function of the FTZ, some countries also provide other advantages, like reduction in enterprise income tax for companies located within the zone, unlimited time period for the goods storage, moving production outside of the zone, etc. Usually, those zones demonstrate the best performance at the national level in terms of the services and infrastructure. Additionally, China established 8 Bonded Logistic Parks (BLP), which have more advantages than the FTZ. The BLP adjoins to the port and the goods transported from the port to the BLP are through special channels. It is organized with the support of digitalized operations and processes. Also, the goods entering and exchanging in the BLP have less customs duty and more tax benefits supported by the government. By 2007, the yearly trade value in the BLP's has doubled or tripled, and in total reached over 53 billion USD. In the coming 5-10 years, the BLP will still be the most attractive location for foreign investment and enterprises.

Asia highway network: Initiated by the United Nations Economic and Social Commission for Asia and the Pacific in 2003, an intergovernmental agreement has been adopted to establish cross-Asia highway network. In contradiction with the webbed highway network in Western Europe, the highways are much cluttered between each Asian country. The aim of this project is to connect all the Asian countries and improve the trade linkage to Europe via Russia. There are 32 countries involved in this project, and 55 routes counting for a total length of 141,000 kilometers. By Nov.2007, 16 countries have met the requirements. The major route will pass through Japan, Korea, China and India. The project will upgrade the road quality and connectivity, especially new roads will be built into more remote areas.

On the other hand, the high tolls and unbalanced quality bring considerable impact on inter-Asia transportation. In China, the highways are under regional governmental control and toll rates vary from province to province. The length of toll highways takes up to 55% of the total road-miles. While in India, the highways program is slowed due to the government lethargy in recent 3 years. Therefore, for large inter-land distance, the limitation of the road will boost the air freight, which currently is small compared with other transportation modes.

Expansion of 3PL: Third party logistics providers (3PL) play a vital role in enhancing the overall logistics capabilities in Asia Pacific. To cooperate with a 3PL is also the common approach for companies who are newly entering this market. Most international 3PL's are presented in all the major cities in the Asia-Pacific region, such as UPS, TNT, DHL, usually by using joint-ventures with local logistics companies. They provide regional warehousing, distribution and business solutions for both local and international companies. The industrial real estate company ProLogis has built more than 100 modern distribution facilities with 5 million m2 in Korea, Japan, China and Singapore. In general, the 3PLs have built up a complete coverage across the major cities, and the current challenge is how to expand its service further in secondary cities. By purchasing local logistics service providers, they have guaranteed representatives in many cities, but can expect a quality drop-off in logistics infrastructure, supply chain operation and management sophistication. Therefore, a good recognition of the local culture and logistics channels will bring a lower distribution cost than that of first tier cities.
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