BUSAN — Major shipping companies including HMM are relocating to Busan one after another, but their business dealings with local shipping and logistics firms remain minimal, a survey showed. Contrary to expectations that the relocation of large corporate headquarters would help concentrate the shipping industry in Busan, the base for transactions and cooperation that local firms can actually feel remains weak. Building an industrial ecosystem that ties core decision-making functions and partner networks to Busan — beyond a simple change of address — and links large companies with local firms through actual transactions has emerged as a challenge.
According to a survey of 201 local shipping and logistics firms on the relocation of major shipping companies such as HMM, released by the Busan Chamber of Commerce and Industry on the 30th, only four firms, or 2.0% of the total, currently do business with the large shipping companies. Large carriers are gathering in Busan in earnest — HMM's headquarters relocation was confirmed following SK Shipping and H-Line Shipping last year, and Heung-A Shipping also announced a move — but business ties with local firms are still at an early stage.
Potential demand for transactions, by contrast, was substantial. Some 71.7% of the surveyed firms said they intend to do business with the large shipping companies or will actively pursue new deals. Companies that view the relocation as a business opportunity accounted for 58.7%. The biggest effect they expect is "expanded opportunities for new transactions and orders," cited as the top benefit by 44.9% of firms that responded positively.
The problem is the gap in size between the large companies and local firms. Asked about the biggest obstacle to expanding transactions, 52.7% pointed to a "mismatch in transaction scale and terms." That was followed by a lack of partnership support policies at 19.9%, entrenched existing supply networks at 15.9%, and a lack of contact channels with the relevant departments and officials at 9.5%. That means small local firms are willing to do business with large carriers but lack the capacity to meet contract sizes and terms, and find it hard to break into established networks.
The gap between expectations and reality surrounding the relocation was also clear. While 58.7% expected a positive impact, 41.3% said there would be "no impact." Among firms that saw no impact, 49.4% said it was "because there are no substantive opportunities for links between the large shipping companies and local shipping and logistics firms." The point is that large companies have already been conducting operations through Busan offices and branches without building sufficient networks with local firms, so simply moving a headquarters address may produce little trickle-down effect.
What local firms hope for goes beyond a clustering of headquarters to a concentration of shipping industry functions centered on Busan. Asked in which area the relocation would contribute to Busan's shipping and port competitiveness, expansion of global shipping networks and routes was the top answer at 42.3%, followed by increased container volume at 25.3%. Expectations for a concentration of knowledge services such as maritime law, finance and insurance, and for the formation of a shipping cluster, came in at 18.5% and 11.3%, respectively.
Many respondents said this requires a "substantive relocation" by the large companies. Respondents who said core decision-making departments such as sales, finance and pricing need to actually move accounted for 23.4%, while 22.4% said affiliated partner companies need to relocate as well — a combined 45.8%. Their view is that networks with global shippers and overseas carriers can take root in Busan only when core decisions on freight rates, contracts and orders are made there and related partner firms are clustered nearby.
The key appears to lie in how the period after attracting the large companies is designed. The policy most often requested of the central and local governments was "partnership, cooperation and revitalizing transactions," at 32.1%. Respondents called for creating points of contact between large and local companies through partnership agreements and expanding opportunities for local firms to take part in procurement and ordering. Financial and funding support followed at 28.9%, reflecting a call to expand policy financing so local firms can invest in the facilities and equipment needed to do business with large companies and build up their capabilities, narrowing the gap in transaction scale and terms.
The survey results suggest that for Busan to move beyond being a gathering place for large shipping companies and become a Northeast Asian shipping and logistics hub, it must create a link between "corporate relocation" and "growth of local industry." They show that follow-up strategies bundling expanded transactions with local firms, concentration of core functions in Busan, an influx of partner companies and financial support into a single industrial policy — rather than the relocation itself — may determine the size of the effect.
An official at the Busan Chamber of Commerce and Industry's research team said, "For the effects of major shipping companies' relocation to Busan to spread to local firms and the shipping and logistics industry, it must be accompanied by building a shipping and logistics ecosystem in which local firms grow together." The official added, "Policy backing is needed, including a partnership and cooperation framework that promotes business links between large companies and local firms, as well as financial and funding support."
