Transportation Minister Mao Chih-kuo
China, Taiwan Ports Enter Age of Great Rivalry
Taiwan's top transport official talks about the challenges and advantages of direct transport links with China, and how direct links can draw Taiwanese businesses back to Taiwan.
China, Taiwan Ports Enter Age of Great RivalryBy Fuyuan Hsiao, Benjamin Chiang, Elaine Huang, Shu-ren Koo
From CommonWealth Magazine (vol. 413 )
Minister of Transportation and Communications Mao Chih-kuo first got involved in the preparatory effort for the establishment of direct cross-strait transport links 13 years ago as deputy administrative minister of transportation and communications. In December of last year a cross-strait agreement was at last concluded fully opening direct transport links between Taiwan and China. In an exclusive interview with CommonWealth Magazine, Mao, a former business administration academic, boldly declared direct links with China an opportunity for Taiwan to open up a new value chain.
Following are highlights from the interview.
Q: How will the opening of direct links impact Taiwan?
A: This is a new ballgame. I still remember when Liu Chao-shiuann was transportation minister and he came back from the Cabinet meeting one day and told us we would open maritime links first, to be conducted as an offshore shipping center. Under the fundamental principles of the National Unification Guidelines, the idea was to first proceed with indirect shipping and worry about direct shipping later; similarly, first cargo, then passengers; first sea, then air. The port of Kaohsiung would be designated an offshore shipping facility with direct shipping links to ports in Guangzhou, Dalian, Shanghai, Qingdao and Tianjin on the opposite shore.
But the direct links would violate the principle of only indirect contacts in the guidelines, so we set some ground rules such as requiring the ships fly flags of convenience and that all cargo must be destined for third ports and not the import/export markets of Taiwan and China. At the time there were no deep-water port facilities in China from the Liaodong Peninsula to points south, save for Hong Kong. A fully loaded Panamanian freighter hauling 3,500 standard containers drew too much water to sail into or out of Shanghai at that time, so the moment presented a great opportunity for Kaohsiung.
A decade later, times and fortunes have shifted. Deep-water ports are cropping up along the opposite coast, and the competitive pressure is piling on Kaohsiung. But in a silver lining of sorts, during the past decade or so, there have been some fundamental shifts in the game. As Taiwanese businesses evolved in China, so did the dynamic of doing business there, which has led to a gradual but increasing folding of tents among Taiwanese businesses in China.
Inflow or Suction?
When we were discussing the offshore shipping centers, most of the multinational companies we were looking to attract were foreign companies. Now many of our target companies are Taiwanese companies. Whether it's the Port of Kaohsiung or Taoyuan Airport City, plenty of Taiwanese companies fit the description of target customer. This situation did not exist a decade or more ago.
While everyone's focusing on what the economic benefits will be, I believe the significance of the trends in the movement of people also must be considered. I directed the Civil Aviation Authority to take a poll of charter flight passengers after air links were established, asking the business-owners and investors among them whether they'd consider relocating across the Taiwan Strait if there were daily flights between the two sides. Among those Taiwanese businesses and investors that had already relocated to China, 46 percent said they would be willing to return to Taiwan in that event, while less than five percent of businesses headquartered in Taiwan would do the reverse.
Generally speaking, establishing efficient transport can produce two effects: the first is the suction effect, the second is the inflow effect. I believe that with the state of direct links today, we've reached the inflow effect. After all, all things considered, it's still better in Taiwan.
A Resurgence in Taiwan's 'Purity'
Q: Why do you believe there's an inflow rather than a further tipping of the scales in favor of the other side?
A: If we delay any further, it's hard to say, because the other side is constantly improving. A lot of folks seem to think that direct links with China will not be particularly beneficial to tourism, because Taiwan has little to offer tourists. These people clearly haven't traveled around Taiwan in a while.
The epitome of tourism is boundless exploration, and Taiwan offers an increasing number of such destinations. Taiwan's human side is also fascinating. The purity of a human society and culture is like making wine; if the wine has not fermented long enough, the purity will be lacking. Taiwan hasn't been slacking these past 50 years, its vintage is far different from that across the Strait and can stand up to the gourmet taste test. An opening now is not too late. I believe there will be a rush on the Taiwan vintage and people will elect to return to Taiwan.
Q: China has grown enormously in the past decade. With the opening of direct transport links, what advantages does Taiwan maintain?
A: Although circumstances will be different, we'll always be able to find some advantageous leverage. I think Taiwan needs to redefine itself over the next three to five years. We definitely need to re-energize the development our seaports and airports to realize their value potential in a mutually beneficial fashion.
Turning a Transfer Station into a Bazaar
The year we created the offshore shipping centers, we were looking at transshipment, essentially a transfer station. Now, with direct links, we need a logistical approach to create strategic hubs, developing the transfer station into a bazaar. Some Taiwanese companies have indicated an interest in making Taiwan their product shipping center. I've inquired among several harbor bureau directors around Taiwan how they intend to do business in light of the 63 river and sea ports China has opened. Where they were once accustomed to dealings with shipping companies, now they must consider their respective value chains, searching upstream for more shipping clients and downstream for other ports with which to collaborate.
In other words, new thinking needs to be brought to port management. No longer can they be content with managing piers and cranes and other hardware. Now they have to be systems integrators providing a "total solution."This is an innovation in the port management model, taking into account the overall role the port facility seeks to play as part of the greater surrounding region and what new value chains can be created as a result.
Ports on either side of the Strait will certainly be both competitors and collaborators. For example, say some Taiwanese companies in the Yangtze River Delta want to make Taiwan their product shipment center. Perhaps we open a few new routes, even as far upriver as Wuhan is no problem. Cargo comes into Taiwan, where it is assembled and shipped off to destinations throughout the world.
While teaching a course in strategic management, I often raised as an example the old adage on military preparation, "Shall we make do with what we have, or take whatever we can?"As a manager, which would you choose? The two are actually not in conflict. On strategic issues, it should be "take whatever you can."You're always preparing for the next war, so you need vision, mission and method. Once that war starts, it should shift to "make do with what you have,"making the most of the resources you have in hand to forge a new paradigm and create a new value chain.
The focus of Taiwan's ports right now should be squarely on the "take whatever you can" line of thought.
(Compiled by Fuyuan Hsiao)
Translated from the Chinese by Brian Kennedy
Chinese Version: 兩岸港口 進入大競合年代