With the rise of nearby ports and airports on the mainland, Taiwan has lost ground to regional rivals. Now however the island is preparing to fight back. US$10bn is being spent upgrading the airport in Taipei while the ports have been freed of their government regulatory shackles to act in a more market-orientated way.
The government in Taipei has indicated that logistics is one of the most important industries to the economy and capital must be spent on infrastructure to remain competitive.
Meanwhile, the island’s airlines and shipping carriers are adding ever greater exposure to mainland markets. China Airlines, for instance, Taiwan’s biggest airline, announced November 3 it will add 18 flights to five Chinese cities by the end of 2011.
Elsewhere, important free trade agreements, such as the one recently inked with Singapore, promise to boost trade.
Jao Chih Ping, chief of the international logistics section at the Ministry of Transportation and Communications answers our questions on logistics development on the island.
it appears Taiwan is gearing up to be far more competitive on the regional logistics stage - the upgrading of Taipei airport, the change in harbour bureau mandates, etc. Would you agree that the government is now viewing logistics as an important industry that needs attention?
The Council for Economic Planning and Development has made a plan for International Logistics Service in October 2010. The aim of the plan is to promote the logistics development strategy in the next four years - 2010-2013 - and strengthen Taiwan’s competitiveness in the international logistics industry, through the combination of Customs at the Ministry of Finance, Ports at the Department of Transportation, Trade at the Ministry of Economic Affairs and specific measures like improving customs clearance efficiency and port infrastructure, strengthening logistics services and promoting cross-border cooperation and development.
In President Ma’s recently announced Golden Ten Years program, the Ministry of Transportation and Communications proposed to promote the transformation of Taiwan’s industry through the competitiveness of the international sea and air gateways, that is, by using sea transport and air transport gateways to make serious connections between the development and restructuring of the domestic industries, the use of a “front shop” strategy which sees the seaports and airports as the so-called stores, and science parks, export processing zones and tax free zones as factories.
Taiwan’s port industry will transform into corporate entities in March 2012, aiming at increasing the competitiveness of work flexibility and customised service. Taiwan has high quality manufacturing capabilities, if the added value of the product after processing is more than 35%, we can export them using Taiwanese brands - Made in Taiwan - to increase operating revenues.
What more can the government do to make sure Taiwan is not left behind by other regional logistics powerhouses such as Shanghai, Busan, incheon and Hong Kong. What we are doing now is improving the international logistics operating environment and customs clearance efficiency and we will also keep doing it in the future. In the air transport sector, we are building infrastructures like the third runway, third terminal and airport subway in Taoyuan International Airport. In the sea transport sector, port companies will be set up and co-operate with each other. Free Trade Zones in Keelung Port, Taipei Port, Taichung Port, Kaohsiung Port, Su-ao Port will be used to promote the development of Taiwan’s international logistics chain. We are making all these efforts to make sure Taiwan won’t be left behind by other Asian countries and regions.
What percentage of GDP is spent on logistics? is this figure coming down? Our estimation is approximately 11%. Currently there is a slight drop in the figure but it’s not obvious. We should be able to further reduce the percentage after the already mentioned efficiency and reform and development.
What incentives are on offer for supply chain firms to set up in Taiwan? The operations in Taiwan’s Free Trade Zone industry include trade, warehousing, logistics, container distribution, re-export, transhipment, forwarding, customs clearance, assembling, sorting, packaging, repair, assembly, processing, manufacturing, testing, technical services and exhibitions and so on.
Specific tax incentives are stipulated in section 21-34 of the Free Trade Port Management Regulations. For example, Article 21 states that goods and equipment for personal use are free from tariffs, excise taxes and sales tax; Article 29 states that foreign profit-seeking enterprises’ commissioned storage and simple processing are free from income tax, and the proportion of foreign employment of workers is up to 40%.