An institution for logistics cooperation among China, Japan and South Korea has been proposed to smooth commodity flows in Northeast Asia.

Suh Young-ju, director-general of Trade Bureau of the South Korea Ministry of Commerce, Industry and Energy, said such an organization, to be participated in by governments, study groups, and industry associations, is necessary to improve logistics competitiveness in the region.

"The institution can hold regular meetings to exchange opinions between governments, help set up an inter-regional logistic network and streamline export-import procedures in the region," Suh said.

Luo Kaifu, president of the China International Freight Forwarders Association, says he agrees with the suggestion, saying a promotional body will help speed up cooperation among the three countries.

The body could address problems at every phase of logistics cooperation and find solutions, Luo said.

Closer cooperation in the logistics industry was initiated by the State leaders of the three countries, who signed a Trilateral Cooperation on Circulation of Commodities and Logistics in Indonesia in October 2003.

The three countries, boasting big trade volumes, show much potential for cooperation.

And good cooperation about commodity flows will also provide ground for a possible free trade zone being discussed at non-government level among the three countries.

Zhang Zhigang, Chinese Vice-minister of Commerce, said China was willing to deepen cooperation in the sector.

He said the ministry recently had proposed jointly publishing a white paper on logistics development by the three countries, which has been accepted by Japan and South Korea,

"We will send groups to the two countries to learn of their experience in the sector," he said.

However, despite a strong desire for cooperation, the three countries would find many challenges, for example, different development levels of the logistics industry and different pallet systems.

Japan has the most developed logistics industry in Asia, South Korea's logistics industry has grown very quickly in the past three decades, while the industry is still in its infancy in China despite its great potential.

Zhang Zhigang said China should first put more effort into building its modern logistics system.

According to figures, logistics related spending in China accounts for more than 20 percent of the GDP, around twice the figure of developed countries.

The government has recently stepped up efforts to improve the sector.

The State Council approved the Opinions Concerning the Promotion of China's Modern Logistics Industry in August this year.

Thirteen central government departments, led by the National Development and Reform Commission, are establishing an inter-ministerial mechanism on the working of national modern logistics.

"We will also set up a complete logistics statistics index system to provide enterprises with an up-to-date information service," Zhang said.

The vice-minister said that the government will focus on establishing a nationwide unified logistics market in the short term.

Local protection has been a big concern in developing a national logistics system in China, which has witnessed prospering logistics development since the 1990s.

China has consistently opened up the logistics industry according to its promises to the World Trade Organization. Many famous foreign companies have entered China, including DHL, FedEx, Maersk and Panalpina. And most limitations on shareholding will be lifted on December 11 this year.

But companies in the sector complain that there are many tariff barriers hindering foreign access to the market as there is no independent department governing the sector. Related administrative services are scattered among different government departments.

(China Daily November 8, 2004)