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Taiwan as an international logistics and distribution center: Where your business opportunities begin …. Jennifer Fang-Yu Huang Council for Economic Planning and Development The Executive Yuan, Taiwan, ROC April 28, 2004. Outline. The Global Economic and Trade Environment
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Taiwan as an international logistics and distribution center:Where your business opportunities begin … Jennifer Fang-Yu Huang Council for Economic Planning and Development The Executive Yuan, Taiwan, ROC April 28, 2004
Outline • The Global Economic and Trade Environment • Taiwan’s Competitive Advantages • Taiwan’s Global Logistics Development Plan • Policy Measures and Implementation Results • Global Logistics Trends and Business Opportunities • Conclusions
The GlobalEconomicandTradeEnvironment Globalization Technological advances in networking, telecommunication, & information The importance of international trade Globalization Globalization Economic liberalization The importance of port economics Capital market formation Globalization The role of multinational corporations Globalization Globalization of world economy bolsters the increasing importance of international trade and the roles of ports and MNCs.
The GlobalEconomicandTradeEnvironment The increasing importance of air-/ sea- ports and MNCs Economic Liberalization Internationalization Logistics centers Distribution centers Transport centers Airports/Seaports Networking & Informationalization
The Global Economic and Trade Environment 1. China has increasingly become the big growth engine for global Logistics. • A huge consumer market • Manufacturing in China • Global sourcing of consumer goods from China raw materials goods
Year 1990 Year 2002 East Asia GDP 4.24 trillion USD East Asia GDP 6.73 trillion USD Taiwan 0.27(4.0%) Taiwan 0.16(3.8%) South Korea 0.42(6.2%) South Korea 0.25(5.9%) Japan 4.17 (62%) Singapore 0.09(1.3%) Japan 3.05 (71.9%) Singapore 0.04(0.9%) Hong Kong 0.16 (2.4%) Hong Kong 0.08 (1.9%) Mainland China 1.16(17.2%) Mainland China 0.39(9.2%) 5 countries of ASEAN 0.27(6.4%) 5 countries of ASEAN 0.46(6.9%) in trillion USD in trillion USD The Global Economic and Trade Environment 2. The rapid growth of Mainland China in terms of GDP w.r.t. Asia area Note: East Asia includes 11 countries: Japan, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Philippine, Indonesia, Thailand, Vietnam, and Mainland China. Source: International Affairs Weekly (Mar. 27, 2003).
The Global Economic and Trade Environment Year 1990 Year 2002 East Asia trade volume 1.65 trillion USD East Asia trade volume 3.17 trillion USD Taiwan0.24(7.7%) South Korea 0.31(9.9%) Japan 0.52 (31.5%) Taiwan 0.12(7.3%) Singapore 0.24(7.7%) Japan 0.70 (22.1%) South Korea 0.13(7.9%) Hong Kong 0.41(13.1%) Singapore 0.11(6.7%) Hong Kong 0.16 (9.7%) Mainland China 0.12(7.3%) Mainland China 0.62(19.9%) 5 ASEAN countries and others 0.65 (20.8%) 5 ASEAN countries and others 0.49 (29.7%) 3. The rapid growth of Mainland China in terms of trade volume w.r.t. Asia area Note: East Asia includes 11 countries: Japan, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Philippine, Indonesia, Thailand, Vietnam, and Mainland China.
The Global Economic and Trade Environment Year 1992 Year 2002 Total volume: 11.01 billion USD Total volume: 52.74 billion USD Korea 0.12, 1% Singapore Year 1995 0.12, 1% others Hong Kong 0.9, 8% Hong Kong 17.86, 34% 7.51, 68% Germany Total volume: 37.52 billion USD Taiwan others 0.09, 1% 9.2, 17% 3.97, 8% Korea Japan 2.72,5% 0.71, 6% others 4.83,13% Singapore USA USA Korea Hong Kong 2.33, 4% Taiwan 0.51,5% 5.42, 10% 1.04,3% 20.06, 54% Virgin Islands 1.05, 10% Japan Germany 6.12, 12% Singapore 4.19, 8% 0.93,2% 1.85, 5% Germany 0.39, 1% Japan in billion USD 3.11, 8% Taiwan USA 3.16, 8% 3.08, 8% 4. Major countries’ (/regions’) direct investments in Mainland China Source: http://stats.unctad.org/fdi/
The Global Economic and Trade Environment M TEU Q4GR: 16.5% YGR: 11% YGR:11% 11 211 525 10 399 171 8 543 249 7 227 298 9 565 274 4083303 3895503 3710745 3523874 3312648 Note: NE Asia: China, Hong Kong, Japan, South Korea and Taiwan North America: Canada and US Source: April 2004 Containerisation International 5. North America and NE Asia Trade in TEU
The Global Economic and Trade Environment M TEU 7 204 797 6 328 765 7 650 789 6 763 996 5 426 027 3 358 136 3 193 600 3 035 458 2 822 471 2 880 222 6. Europe and Eastern Asia Trade in TEU Q4GR:17% Q4GR: 12% YGR:6% Note: Eastern Asia = North East Asia (China, Hong Kong, Japan, South Korea and Taiwan) + South East Asia (Singapore, Malaysia, Philippines, Indonesia, Thailand and Vietnam) Source: April 2004 Containerisation International
Taiwan’s Competitive Advantages • Taiwan’s excellent geographical position as an international • transportation and commerce hub Source: MOTC, ROC (Apr. 2001)
Taiwan’s Competitive Advantages LHR JFK Seoul Tokyo Shanghai TAIPEI HongKong hour Manila 124 Singapore 4:55 110 4:15 4:00 3:30 3:25 78 3:05 2:55 68 64 53 hour Sidney Singapore Tokyo Seoul Manila Shanghai Hong Kong Taipei Singapore Tokyo Shanghai Manila Hong Kong Kaohsuing 2. Transportation advantage 6:15 Comparison of the average ship traveling time among 5 major harbors of the Asia-Pacific Region Comparison of the average flying time among 8 major airports of the Asia-Pacific Region
Taiwan’s Competitive Advantages 3. Taiwan’s niches - Global logistics management overseas Operation modevalue-added per container Whole container transshippingUSD 1,625 Simple processingUSD 4,750 High value-added transshippingUSD 18,500 Taiwan’s niche overseas Source: Research Reports of the MOTC
Taiwan’s Competitive Advantages Enterprise Operation Headquarter (186) Manufacturing (169) Service Industry (17) ME EIT CE TS TW FI WR 33 4 4 4 5 98 38 ME: Metal & Electrical machine, EIT: Electronics & IT, CE: Chemical Engineering, TS: Technological services, WR: Wholesale & Retail, FI: Finance & Insurance, TW: Transportation & Warehousing. 4. Enterprise operation headquarters in Taiwan SmartLink Ltd. Taiwan Branch (Israel) Keelung(2) Taipei (58) Applied Materials’ Taiwan, Intel Microelectronics Asia Ltd., IBM,Hitachi China Ltd., Fujitsu Microelectronics Asia Taipei County (43) Taoyuan (23) ShinChu (20) MiaoLi (2) TaiChung County (12) NanTo (1) ChiangHua (7) YunLin (1) TaiNan (9) PingTung (1) Kaohsuing (3) Kaohsuing County (4) Switzerland Samancor AG, Singapore Bayer Source: IDB, MOEA (Apr. 1, 2004)
Taiwan’sGlobalLogisticsDevelopmentPlan Challenge 2008 – The 6-year National Development Plan Goals To make Taiwan become the best location for regional operation headquarter for Taiwanese Businesses and MNCs Constructing infrastructure Formulating institutions • Constructing joint air-/sea- port • Barrier-free customs clearance • Global E-logistics • Planning free ports • Providing incentives for enterprise operation headquarters
Taiwan’sGlobalLogisticsDevelopmentPlan Free Ports Planning single-window administration for free ports Enterprise Operation Headquarters Providing favorable measures for taxation and land Joint Air-/Sea Port Strengthening infrastructure and integrating multi-modal transportation linkage Barrier-free Customs Clearance Providing digital single-window trade platform to simplify trade procedures and documents Establishing global e-supply chain system to enhance competitiveness Global E-Logistics
Customs territory, bonded zone Free port Business Service center In-Depth value-added processing area Area for simple processing, warehousing, and transshipping Ship or airplane arrival Movement of imported or exported goods Movement of people PolicyMeasuresandImplementationResults TheplanningofTaiwan’sfreeports breaks through the existing administrative and operational restrictions. The breakthroughs: 1.Exemption from customs clearance 2.Tax exemption 3.Granting selective landing visa for foreign business personnel 4.Autonomous management 資料來源:經建會法協中心整理 Source: CEDI, CEPD, the Executive Yuan
Policy Measures and Implementation Results The incentives for attracting businesses to free ports Facilitating business activities (streamlining procedures for granting entry and issuing landing visas to business personnel; providing exhibition facilities and services) Allowing in-depth value-added processing (e.g. assembling, packaging, manufacturing) Free Ports Ease of financial operations (permitting setup of holding companies for offshore investment, and allowing OBUs to handle foreign-currency transactions) Relaxing hiring ratio for foreign workers Rooting deeply in Taiwan while deploying globally Duty & tax exemption (exempted from customs duties, commodity tax, sales tax, tobacco and wine excise tax) Within national territory, but outside the customs territory (autonomous management; exempted from customs checking and inspection, as well as cargo tracking and escort) Source: CEDI, CEPD, Executive Yuan
Policy Measures and Implementation Results Taxation measures for Free ports Tax exempted Tax exemption for transshipping goods and facilities used by the businesses In compliance with regulations for bonded goods Other free ports Gate Bonded zones, EPZs, Science parks Free Port Area Free Port enterprise Free Port enterprise 0 Sales Tax In compliance with regulations for exported goods Exempted taxes: Customs duties, commodity tax, sales tax, tobacco and wine excise tax, public health and welfare dues on tobacco products, trade promotion service fees, and harbor service dues Customs territory 1. In compliance with regulations for imported goods 2. Special regulations for goods processed within FP and transported back to FP Gate
Policy Measures and Implementation Results Streamlining procedures for granting entry and issuing landing visas to business personnel(§32 I) Foreign business personnel Visa-free (21countries) Landing visa (24 countries) Visa (stay、residing) Selective landing visa (not restricted to countries without embassy or counselor) off board Documents check Customs inspection Luggage claims Notifying Foreign Airline company Arrival (3 workdays) FP access via specified locations MOFA Urgent cases approved and submitted via FP management agency Free Port Source: CEDI, CEPD, Executive Yuan
Port of Keelung (approved) Port of Taipei Taoyuan Air Cargo Park Port of Taichung 2 Changbing Industrial District Port of Hualieng Port of Mailiao Southern Free Port (Tainan County) An-Ping Free Port (Tainan City) 3 Port of Kaohsuing (approved) Economic Processing Zones (being under review) Nan-Shin Free Port (Kaohsuing City) Policy Measures and Implementation Results Source: CEDI, CEPD, Executive Yuan
The Port of Keelung West 29 to 33 Wharf West Container Warehouse West 11 to 15 Wharf East14 to 22 Wharf East Container Warehouse East 6 & 7 Wharf • The development area: East 6 to 22 Wharf and West 11 to 33 Wharf • Being approved by the FPC on Mar. 8, 2004. • Formal operation to be launched on Sep. 1, 2004.
The Port of Kaohsuing • The development area: the 1st to the 5th container centers. • Being approved by the FPC on Mar. 8, 2004. • Formal operation to be launched on Jan. 1, 2005.
Taoyuan Air Cargo Park Far Glory Air Cargo Park CKS International Airport Port of Taipei Port of Keelung Taipei Keelung Taoyuan ChungLi ShingChu Highway Taipei County HSR MRT Express way Railway
Logistics Center Operation Center Taipei Data Backup Center Park backbone Outbound connection Dedicated data lines Taoyuan Air Cargo Park Value-added Park Cargo Transport Station Warehouse Data Center Internet
The total selling prices of cargos distributed or released by such center in a year >= 200 Million NTD The total selling prices of exported cargos >= 10% of the aggregate selling prices of the cargos The total selling prices of exported cargos > 100 Million NTD Policy Measures and Implementation Results Tax Incentives for Facilitating the Establishment of International Logistics and Distribution Center in Taiwan: • Statute for Upgrading Industries (Article 14-1) • 2. Regulations for Encouraging Foreign Profit-Seeking Enterprises to Establish International Logistics and Distribution Center in Taiwan (Article 3) Foreign enterprise International logistics & distribution center/ Bonded warehouse
Policy Measures and Implementation Results The following enterprises are qualified to enjoy the aforementioned tax benefits: Source: Bureau of Industrial Development, MOEA (March 2004)
Global Logistics Trends and Business Opportunities Traditional paradigm - Outsourcing SC in order to lower cost New paradigm - Outsourcing SC for strategic & competitive advantage customer customer Global Integrated logistics Logistics providers carrier carrier carrier Order management Manufacturing Warehousing Compliance Transportation Distribution Source: Council of Logistics Management (March 2004)
Global Logistics Trends and Business Opportunities • Global integrated logistics • Complete visibility • End-to-end solutions • Customized & flexible Global integrated logistics Optimization Solutions for integrated information & visibility ERP system aligned supply chain networked supply chain Individual supply chain integrated supply chain extended supply chain The 5 stages of supply chain evolution and the tools to enable its excellence • Global integrated logistics High Supply Chain Value Source: Council of Logistics Management (March 2004) Low Trading Partner Integration High
Global Logistics Trends and Business Opportunities The Global Market Share of Taiwan’s Major IT Hardware Products % Source: MIC IT IS Project (Nov. 2002)
Global Logistics Trends and Business Opportunities % LAN Output Ratio WAN Output Ratio Others 8% Others 1% xDSL Modem 39% SOHO Router 24% NIC 10% Analog Modem 34% WLAN 27% Switch 28% Hub 3% Cable Modem 26% The Global Market Share of Taiwan’s Major Computer Networking Products Source: MIC IT IS Project (Nov. 2002)
Global Logistics Trends and Business Opportunities Taiwan’s Mobil Phone Sales Prediction: 1999-2007 Million % Source: MIC IT IS Project (Nov. 2002)
Global Logistics Trends and Business Opportunities The Global Market Share of Taiwan’s Major IA Products % Source: MIC (Dec. 2002)
Global Logistics Trends and Business Opportunities Market revenue ($M USD) year Global SCM Market Scale Prediction (Year 2000-2005) YGR: 32% Source: AMR Research & Survey Institute (2001)
Global Logistics Trends and Business Opportunities Worldwide SCM Market Grow Rate Prediction(%) Growth rate Region 2.68 B USD Source: AMR Research & Survey Institute (2001)
Global Logistics Trends and Business Opportunities Taiwan’s ERP,SCM,CRM Market Revenue Prediction Year 2001-2003 Billion NTD Source: MIC (2001)
Global Logistics Trends and Business Opportunities Taiwan’s SCM Market Value Estimation Year 2001-2003 68% Billion NTD 7 68% 1.4 Year 2001 2003 Source: Supply Chain Management: Insight & Cases (ARC Consultants Ltd.)
Conclusions Global Logistics Center High-Tech Island GLC Knowledge-based Services IR&DC High Value-added Manufacturing Center Traditional Industries The Smiling Curve of Taiwan’s Industrial Development High Added-value Low Substitution Added Value Industry Value Chain Market Survey Brand R & D Finance Marketing Design Services Logistics Assembly Manufacturer Innovation
Conclusions Supply-Chain Management Management of the whole supply chain • Taiwan’s niche services and local network plus international • 3PL and 4 PL providers E-Business Management of all parties of the supply chain + e-Business 5PL 4PL 3PL Forwarding/Contract Logistics Traditional transport & warehouse management 2PL Producers’ own operation of logistics 1PL Source: Revised from APL Logistics (2004).
Conclusions raw material supplier Logistics provider customer manufacturer distributor retailer Customer Relationships Management Suppler Relationships Management Supply Chain Management Goods flows (reverse goods flows) Information flows Money flows 2. Dynamic Value Chain Management Source: Supply Chain Management: Insight & Cases (ARC Consultants Ltd. + i2 Technologies)
Conclusions 3.Possible areas of cooperation between Taiwan and Singapore – The Twin Hub System for the Asia-Pacific Region • Training & Development • Professional networking • Information exchange • Logistics portal linkage
Welcome to Taiwan Thank You Very Much Council for Economic Planning and Development The Executive Yuan, Taiwan, ROC