The government has steps in place to advance Korean logistics firms into global top 10 companies by 2020. In this regard, the Ministry of Land, Transport and Maritime Affairs (MLTM) has designated six companies °™Pantos Logistics, CJ GLS, Sinokor Merchant Marine Co., Hanjin, Hyundai Glovis, and Hyundai Logistics °™  as the first would-be world-class logistics company candidates.

The following are excerpts of an interview between NewsWorld and Park Jong-heum, director general for logistics policy at the MLTM, in which he touched on the current status and prospects of the Korean logistics industry and government policies, including ones designed to develop the domestic logistics industry. 

Question: Co-prosperity between third party logistics providers and customers of outsourced logistics services is emerging as an essential issue in consideration of the recent changes in the situation. Will you introduce to our readers the policies on shared growth between both sides that the MLTM is proactively implementing?

Answer: Of late, shared growth is becoming a management buzzword sweeping all industrial segments. In particular, the survival of the logistics industry hinges on the cargoes of customers of outsourced logistics services such as manufacturing and distribution companies, which requires co-prosperity between both sides. 

The industry, which has so far focused on only short-term cost reductions and efficiency, has somewhat neglected co-existence of the whole of the industry, including customers of outsourced logistics services. It has lacked room for co-prosperity due to practices such as their vertical relationships, not horizontal ones. 

In this regard, both sides have inaugurated a consultative committee for promoting co-prosperity among clients of outsourced logistics services and logistics firms. Korea Chamber of Commerce and Industry Chairman Sohn Kyung-shik, concurrently chairman of the consultative committee, presided over the first committee meeting this past July 27.

The consultative committee is charged with exploring and implementing diverse action tasks to ramp up strategic partnerships between both sides and spread an environment of co-prosperity in the logistics market. 

Q: The ministry is implementing policies to nurture Korean logistics firms into global top 10 companies by 2020. Can you tell us more about these policies?

A: We’ ve worked out a plan for the designation and development of world-class logistics firms as part of efforts to facilitate Korean logistics firms’ entry into foreign markets and to foster global top 10 logistics service providers around the end of last year. This past June, the government designated six companies °™ Pantos Logistics, CJ GLS, Sinokor Merchant Marine Co., Hanjin, Hyundai Glovis, and Hyundai Logistics °™  as the first would-be world-class logistics company candidates. 

According to the six designated companies’business plans, the firms aim to raise their combined annual overseas sales from the current 4.2 trillion won to 13.3 trillion won by investing 29 trillion won abroad in the next five years. They also plan to increase the number of global centers from the current 106 to 260. We bet that Korean logistics firms will rise to be among the global top five companies within the next five years. 

The ministry plans to continuously explore and designate additional Korean logistics companies with their determination to make inroads into foreign markets and their high potential as candidates for fostering world-class logistics firms.

The government plans to continuously expand support to Korean logistics companies wanting to make inroads into foreign countries by lending an ear to their grievances and difficulties they face while going abroad. 

Such logistics firms are offered loans from the Export-Import Bank of Korea and support for nurturing logistics experts. The government is seeking to expand its support to Korean logistics firms’ M&A activities abroad through M&A funds. 

Q:  What steps is your ministry taking to fend off a general strike by the truck drivers’ labor union?

A:  The government is considering introducing a standard cargo fare system in which cargo fares are determined on the basis of transportation costs and crude oil prices, a move to readjust truck drivers/owners’ transportation fares within the principles of the market economy.

Starting next year, the government plans to introduce steps to overhaul the current driver-owner system and multi-layer structure of the truck cargo transportation market. Violators will be punished starting 2015 to ramp up their effectiveness. 

First, truck cargo companies will be required to report their records of transporting cargo and relay achievements by building a cargo transportation transaction management system. Truck cargo business proprietors are required to raise the portion of transactions under transportation contracts to 20 percent of their annual sales starting 2016 as part of the government’s efforts to help truck driver-owner companies exit from the market.

Truck cargo companies are required to use their own vehicles in transporting more than 50 percent of cargoes they have struck deals to transport with their client companies while a certification system through a cargo information network will be introduced to overhaul the multi-layer structure. 

The government has set aside 4.5 billion won for a project to promote the welfare of truck drivers and their families. 

Q:  Will you comment on the issue of augmenting delivery service vehicles?

A:  Delivery service vehicles are in short supply, so privately owned vehicles are operated clandestinely.

The move is designed not only to allow delivery service drivers to do business overtly by ensuring a stable supply of delivery service vehicles, but also to enhance public conveniences.  

Q:  Will you elaborate on the direction of a policy to introduce a system for registering the logistical warehousing industry?

Q:  The registration of the logistical warehousing industry was put in place this past February in accordance with the Nov. 8, 2011 amendment to the Act on the Development and Operation of Logistics Facilities, a move to prevent an upsurge of warehousing businesses with insufficient facilities and clumsy services. According to figures compiled by local governments and regional maritime affairs & port offices, a total of 3, 612 warehousing firms have signed up on the register of the logistical warehousing industry as of the of August. 

Starting later this year, companies with excellent services and facilities will be selected and certified among those on the register. Certified companies will be given incentives such as preferential treatment in relocating themselves to logistics complexes, and the government is seeking to offer additional incentives, including a property tax benefit and the application of cheaper electricity rates. 

Warehousing businesses will be allowed to be registered on the website of the National Logistics Information Center next year so as to improve their convenience. A project to build a logistical warehousing registration and management system will be carried out at a cost of 1.38 billion won during the four-month period between July and November 2012. 

Q:  Will you tell us about the direction of policies to develop the Korean logistics industry?

A:   Domestically, it is essential to advance the backward operational practices of the Korean cargo transportation market, such as multi-level arrangements, to the standards of advanced countries and to invigorate the third party logistics industry to ensure shared growth among logistics firms and their client companies. 

We strive to implement policies for advancing the Korean cargo transportation market to the standards of advanced countries without a hitch by making it obligatory for logistics firms to transport cargoes on their own and report their transportation achievements while doing our utmost to boost third party logistics by offering tax incentives.

Externally, Korea needs to aggressively develop Korean logistics firms into world-class ones. The government provides support to logistics companies and their client companies’joint inroads into foreign markets and spares no efforts to offer diverse support to logistics companies’entry into overseas markets. 

The government is seeking to revise implementation decrees of the Act on Freight Vehicle Transportation and related notifications which would allow delivery service vehicle drivers in charge of cargo collection and distribution to be issued separate driving licenses. The amendment proposal is now at a stage of screening related restrictions and new driving licenses will be issued within this year.