The decade of the 1970s is a period of transition for the economy of the Republic of China. To the changes that will result, the Ten Major Development Projects have been an all-important contributing factor. The engineers of our country have had a major role in the colossal task of bringing about these changes. My assessment of the contributions of the Ten Projects is made from economic and technical points of view and is based on material that has come to my personal knowledge. Since my information is not necessarily complete, this is an overall sketch and cannot be considered a comprehensive review.
Economic benefits of the Ten Projects may be approached both collectively and individually. In the collective approach, the projects are, first, intended to promote modernization of the economy and raise its capabilities for further growth and development.
Second, they have enabled this country to tide over the world oil crisis. The vast investments made by the government in these projects have minimized the effects the crisis has had on us and have made possible the fast recovery of our economy.
Third and most importantly, the satisfactory progress made in implementation of the projects in the face of various difficulties has raised our courage and self-confidence and has given rise to a greater national solidarity.
The plan to complete these projects in a period of five years was announced in November, 1973, by Premier Chiang Ching-kuo. Realizing the importance of the removal of transportation bottlenecks and the upgrading of industry, Premier Chiang resolutely and confidently made the decision for implementation. To maintain the progress of the work as scheduled, all parties concerned have cooperated in a self-reliant spirit, successfully meeting challenges to our material, human and financial resources.
Up to 1965, the Republic of China had received U.S. economic aid in grants and loans totaling US$1.4 billion over a period of 14 years. Eight years after the termination of the U.S. aid program, we began spending US$5 billion for implementation of the Ten Projects, averaging US$1 billion a year. Domestic savings provided 60 per cent of the required funds and our highly rated creditworthiness enabled us to borrow the rest from abroad. All this is evidence of the fruitful results of the 19-Point Financial and Economic Reform Program inaugurated in 1960 to accelerate economic development through self-help.
While I shall not go into the details of the individual contributions, I do want to discuss the more important ones with a view to explaining away certain misgivings which have been voiced.
Let me start with the North Link Railway. Prior to the launching of this project, the Taiwan Railway Administration had a feasibility study made by some Japanese specialists which led to the conclusion that economic benefits would not be very high. The specialists' reasoning was: construction of the line, which must pass through very rugged terrain, would be extremely costly as a result of tunneling for more than one-third of the route. Moreover, forecasts predicted that the traffic volume would not be large. The benefit-cost ratio was estimated to be under 1.0.
However, in consideration of the welfare of East Taiwan's 700,000 inhabitants and with a view to promoting balanced interregional development, the government resolved to go ahead with the project notwithstanding the heavy investment. To construct a railroad reaching remote parts of the country in order to speed and spread economic progress was seen as the government's bounden duty.
Quite unexpectedly, construction of the line, even before its completion, is already producing beneficial effects on the development of East Taiwan. First to take advantage of the rail facilities was the Asia Cement Corporation, which is having a new plant built near the Hsincheng station in the southern section. Next was the Lucky Cement Company, which is setting up its plant at Tungao in the northern section. Meanwhile, the Taiwan Cement Corporation is planning to expand its Suao plant to make use of the limestone from Tungsheng quarry near the Hoping station in the middle section.
These three plants all depend on the new railroad for transportation of their raw materials and finished products, which will amount to 5 million tons annually. This traffic will increase further as the Asia Cement Corporation expands its Hsincheng plant with the installation of a second kiln of 1 million tons annual capacity.
When the feasibility study was first being made, projected traffic volume on the North Link Railway in 1980, shortly after the line is opened, was estimated at 600,000 tons, or only about one-tenth of the volume now foreseen. In making the study, the specialists failed to take into account the development potential of the cement industry in East Taiwan. (Limestone deposits in the western part of the island are mostly hidden under thick layers of soil, which means high mining costs; whereas in East Taiwan limestone occurs largely at ground level and therefore can be worked at very low cost.) According to estimates, the insufficiency of economically workable deposits in western Taiwan would not be felt until 1982, so that exploitation of the deposits along the North Link Railway was not seen as getting started until that year at the earliest. It is indeed beyond all these earlier expectations that the cement industry along the line is currently rapidly gaining ground in spite of the fact that the railroad has not yet been completed.
Today, if we were to make a reappraisal of the economic benefits of the railroad, I feel certain that, with the greatly increased freight traffic, we would arrive at a new benefit-cost ratio of more than 1.0.
Incidentally, the operation of the North Link Railway will have an impact on the Ilan Line. As revealed by a recent analysis, after the North Link Railway is opened to traffic, 20 additional trains will have to be operated daily on the Ilan Line. The traffic volume on the latter is 68 trains a day at present, but will increase to 88 trains by then, approaching the saturation point of the line's track capacity. The Taiwan Railway Administration has adopted a number of measures to cope with the situation and demands in the initial stage can most probably be met, although it is evident that double-tracking of the Ilan Line will, become necessary at a later stage.
From these ramifications we can observe that economic development involves endless work, and that after the completion of the Ten Major Projects, many additional projects will have to be undertaken. Engineers need not be troubled by the thought of being out of employment.
Next, I should like to say something about the Taoyuan International Airport. A number of people have voiced misgivings regarding the need of the new airport. However, their skepticism was based on a lack of knowledge of the actual situation, since they failed to realize that our Sungshan Airport currently has to discharge three functions: namely, simultaneously to serve international airlines, domestic airlines and military aircraft. Indeed, only 70 per cent of its capacity has been available for international civil aviation. What is more, our domestic air traffic has been growing as rapidly as our international air traffic.
For the construction of the Taoyuan Airport, a feasibility study was carried out in 1971. An estimate made then of the number of passengers entering and leaving Taiwan through the Sungshan Airport in the ensuing five years proved to be fairly accurate. However, were it not for the worldwide recession resulting from the oil crisis of 1973 which caused a period of zero growth in international air transportation, the Sungshan Airport's passenger traffic would necessarily have been heavier than that originally estimated.
Judging from the present trend, the projection that passengers entering and leaving Taiwan through the Sungshan Airport will come close to 3,000,000 in 1978 is a rather sensible one. By that time, the capacity of the Sungshan Airport will approach the saturation point. If the Taoyuan Airport is not ready to take over the load, tourism in Taiwan could not continue to grow. According to an analysis made recently by the Economic Planning Council, in the first five years (1979-83) after the saturation point of the Sungshan Airport is reached, Taiwan would be unable to accommodate a total of 1,880,000 projected additional tourists. That is to say, without the new Taoyuan Airport, Taiwan would stand to lose possible revenues from tourism amounting to US$850,000,000, based on an estimated spending of US$452 per tourist.
As tourist spending sets in motion a series of business or economic activities, it effectively stimulates the development of various other trades. The experience of some countries has revealed that the "multiplier effect" of tourist spending may result in an increase in national income of some 3.8 times the original spending itself. Accordingly, the revenue loss envisaged above would mean a decrease in national income by US$3.23 billion during the five-year period. The government would also lose NT$6 billion in tax revenue. Therefore, both economically and financially speaking, the benefits from the new Taoyuan Airport are substantial and obvious.
Turning to Taichung Harbor, we note that the first stage of this project was completed and opened to traffic on October 31, 1976. In the 11 months up to the end of September, 1977, the new harbor handled a total of only 1,200,000 tons of freight, leading some to question the benefit of the project.
Admittedly, the first year's traffic return at Taichung Harbor was rather disappointing. However, this was mainly due to the inertia of the trade flow and the difficulties of steamer lines in making changes in their sailing routes, and, therefore, is only a temporary phenomenon incidental to the opening of a new port.
The hinterland of Taichung Harbor includes Miaoli county, Yunlin county, Nantou county, Changhua county, Taichung county and Taichung City. Its area is not smaller than those of Keelung and Kaohsiung Harbors. Although industrial development in central Taiwan is lagging behind that in the Taipei and Kaohsiung areas, products exported from and imports shipped to central Taiwan nevertheless amounted to over 8 million tons a year according to a recent survey. Handling of these imports and exports will no doubt eventually be taken over by Taichung Harbor. Indeed, once the port's existence becomes better known to the outside world, its traffic volume will naturally grow apace. The harbor's growth potential has also been proven by these statistics: the number of ships calling at the harbor last September was five times that during November, 1976; and the tonnage of cargoes handled was 8½ times greater.
Another advantageous feature of Taichung Harbor is that there are close to it some 2,000 hectares of industrial land - ideal plant sites for prospective investors. The future of the harbor is very encouraging. Its growth, to be comparable to that being enjoyed by Kaohsiung Harbor, will bring accelerated economic development in central Taiwan with the result of a more balanced development in northern, central and southern parts of the island. We have reason to believe that the seaport's potential will come into greater play in two or three years.
In making an appraisal of the project, we do not have to look far into the future. Let us consider only the 1,200,000 tons of cargo handled by the new outlet in the 11 months after it was opened to traffic. The savings on overland transportation expenses and on the shipping companies' imputed cost resulting from traffic congestion had they used Keelung or Kaohsiung port would have added up to some NT$400 million, about 9 per cent of the money invested in the first stage construction of the new harbor. Moreover, the traffic load diverted from the railroads and highways during the 11-month period amounted to over 200 million ton-kilometers, or 3 per cent of the total overland traffic of Taiwan for the period. These are benefits not to be overlooked.
Next, let us take a look at the railroad electrification project, about which some people have also expressed misgivings. The feasibility study for the project was completed at the end of 1971. Its benefit-cost ratio was determined then to be 2.14. In the last few years, both the international and domestic economic situations have changed a great deal under the impact of the world oil crisis. The changed situation has been largely advantageous to the electrification project. Only one of the developments, namely, the worldwide price inflation which has entailed a tremendous increase in the cost of the project, has proved unfavorable. However, the following five factors will turn out to be favorable:
(a) With the abrupt rise in the world oil price, the cost of fuel for dieselized locomotion has by far exceeded the cost of electric traction.
(b) When the feasibility study was made in 1971, foreign exchange was still a relatively scarce resource. To the foreign exchange cost of the project 20 per cent was added in accordance with the shadow price concept. Now that our foreign exchange is plentiful with reserves in excess of US$4 billion, there is no more need to resort to the use of the shadow price.
(c) The estimate made of the growth in railroad traffic in the feasibility study was rather conservative. Actual traffic returns in 1976 showed that a total of 8.1 billion passenger kilometers was carried by the North-South Trunk Line during the year, whereas this figure was projected for as late as 1986 in the feasibility study.
(d) Since the procurement contract for the project was concluded in 1974, the value of the pound sterling has declined 30 per cent. Since the purchases are made in pounds sterling, a saving of NT$1.5 billion in the cost of the project has been effected.
(e) As a result of the island's fast economic progress in recent years, our per capita income has increased substantially. The figure for 1976 was 2.2 times that of 1971. Consequently, time value of the traveling public has also been greatly enhanced. Electrification of the railroad will mean higher train operation speed and therefore a saving in time for railroad trips, also a favorable development.
Based on the above reasoning, we firmly believe that although the electrification project has placed the Taiwan Railway Administration in some financial difficulty, the economic benefits to be derived from it will turn out even greater than envisaged in the 1971 feasibility study. Of course, this optimism must be balanced inasmuch as the railroad services will soon encounter strong competition from the freeway now under construction.
It is predictable that after being electrified, the railroad passenger services will continue to excel in a number of aspects. However, the railroad freight services have been and will continue to be in a disadvantageous position, particularly with respect to manufactured goods. Last year's railroad freight traffic showed a 9 per cent decline from 1976. Among the various reasons for this, competition from the highway is the most important. Less important reasons include the opening of Taichung Harbor and the lower quality of railroad transportation services while electrification work was in progress. A decline in traffic volume is, to be sure, a caution signal that the railroad's planners must not overlook.
Now, let us discuss the benefits of the North-South Freeway. This superhighway is being completed and opened to traffic section by section; the 30-kilometer stretch from Sanchung to Chungli has been open since July, 1974. During the period from August to December, 1974, the average daily traffic of this section was only a little over 7,000 vehicles, much smaller than the traffic volume of 26,000 vehicles a day envisaged in the feasibility study. This led some people to question whether the benefits of the superhighway were overestimated. The feasibility study was based on the assumption that there would be no difficulty in financing the project and that the entire Keelung-Hsinchu section of the freeway could be opened to traffic before the end of 1974. It was on these premises that the traffic volume for 1974 was estimated. However, the raising of funds for the project turned out to be not so simple and the engineering of this portion of the freeway involved a number of unexpected problems, with the result that the time schedule had to be revised. The Keelung-Hsinchu section was not completed until the end of last year, four years later than originally envisaged.
(File photo)
The primary purpose of the superhighway is to accommodate long distance traffic, and to attract a worthwhile traffic volume, it must have a considerable length. The Sanchung-Chungli section, with a length of only 30 kilometers, is by itself too short to fulfill the functions of a superhighway. That is why the 1974 survey revealed that only 20 per cent of the north-south motor traffic had been diverted from Highway No.1 (West Trunk Line) to the freeway. However, in 1975, with the extension of operational length following the opening of the Chungli-Yangmei section, the percentage of motor traffic diverted from Highway No.1 increased to 26 per cent.
This tendency was even more clearly reflected in the traffic returns of the freeway. The rate of growth in the freeway's traffic was only 13 per cent in 1975, although with the Chungli-Yangmei section opened to traffic toward the end of the year, a 44 per cent growth in the traffic on the Sanchung-Chungli section was registered in 1976. Again, the inauguration of the Tamshui Bridge between Taipei and Sanchung at the end of 1976 also led to a 40 per cent increase in the 1977 traffic on the Sanchung-Chungli section. From these statistics, we can see that, for a superhighway, traffic volume relates directly to the kilometrage opened to traffic. In other words, the greater the kilometrage, the greater will be its utility. We have no doubt that having reached Hsinchu, the superhighway will now show still faster growth, so that the volume for 1978 will come up to the level projected in the feasibility study.
There is no reason to fear that the relatively small volume of traffic will spell limited benefit for the superhighway. Rather, what concerns us is the possibility that, if the rate of growth in the superhighway's traffic cannot be cut back to under 15 per cent (the growth rate was projected at only 10 per cent in the feasibility study), the capacity of a number of sections will reach the point of saturation in another 10 years. Should that be the case, we would be facing a problem that would defy a workable solution because of our limited land resources. Therefore, I am of the opinion that our government should take appropriate measures to cope with the recent years' immoderate increase in small passenger cars while stepping up the promotion of mass transport facilities.
Saving of travel time is an important benefit of superhighways. Recent surveys on the sections of the freeway now open for traffic have revealed that the average driving speed was 82.22 kilometers per hour, more than twice the average speed of 39.64 kilometers per hour on the corresponding sections of Highway No.1. These findings are quite close to the estimates in the feasibility study.
The rate of investment return for the freeway was estimated at 20.9 per cent in 1972. A re-estimate based on newly obtained data shows that it has increased slightly to 21.9 per cent. In the meantime, because of the oil crisis, the investment cost of the project has increased substantially, although savings on traveling expenses have also increased greatly in monetary terms. Since these changes offset each other, we may say that there is little change in the expected overall investment return rate.
One more factor with regard to the freeway is the problem of the roads linking the interchanges and towns and cities. Interchanges of a superhighway are like the stations of a railroad; through them, trucks and passenger cars enter and leave the superhighway. The links between the interchanges and the towns and cities have mostly been unimportant suburban roads of relatively low construction standard, but these will greatly increase in importance after the freeway goes into service. To realize the greatest utility of the superhighway, these linking roads will have to be upgraded. Work on these improvements is now in progress but the results fall short of expectations. This is an area in which our highway engineers must redouble their efforts.
Finally, let us examine the last of the six transportation projects, namely, Suao Harbor. The only project that has not been first subject to a feasibility study, construction of Suao Harbor was decided upon as a measure primarily to fulfill certain other purposes rather to fulfill economic considerations. Since outlays for the building of breakwaters outside the harbor have been unavoidable, the government has found it expedient and profitable also to build a commercial port, making use of available space. This, then, is the background of the new harbor.
Agricultural dominance has been a marked feature of the economic structure of the Ilan area inland from Suao. With 34.4 per cent of its gross product accounted for by primary industries, this area may be considered to be a less-developed part of the island. The establishment of Suao's commercial port will most certain1y have a far-reaching effect on the economy of the adjacent area.
As a coordinate measure, a Working Group for Development of Industrial Districts in Ilan county was organized in 1976 by government agencies concerned. The Lungteh Industrial District, the first project promoted by the group, will have an area of 236 hectares. Separated from Suao Harbor by a small mountain, it will have direct access to the harbor waterfront after the completion of the Lanyang Tunnel. With development work started in April of 1977, the new industrial district will be ready for plant construction by the end of 1978. The district, being only 4.5 kilometers from the harbor, is ideal for export-import industries.
If opening the Lungteh Industrial District should prove to be a good start of industrial development in the Ilan area, the government could go on to develop six other industrial districts in Ilan county, thereby providing the county with altogether 637 hectares of planned industrial sites. These projects all aim at a common goal, namely, doing away with the polarity of industrial activities in the north and south and gradually achieving balanced economic development throughout the island.
The future of Suao Harbor depends mainly on the results of the industrialization endeavors being made. Upon completion of the harbor's first-stage construction work, it will have a 2.2 million-ton cargo handling capacity, which is quite adequate to meet the demands on it in the first phase of its development. The harbor's second-stage project will raise its capacity to 6 million tons. However, there seems to be no need to rush the job, which should be scheduled according to the progress in economic development in Ilan county. Certain items of foundation work, including construction of the seawalls and harbor railroads, should, nevertheless, be kept up uninterruptedly in order to gradually bring the harbor up to the standards of international ports.
Let us look at the contributions of the Ten Projects from the technical angle. Each of these projects has involved the introduction of new engineering technologies, but I will name just a few by way of illustration, first saying something about the projects' individual contributions and then coming to the collective contributions.
I will again begin with the North Link Railway. Considerable difficulty experienced in tunnel drilling along the line has caused much delay in the project, the completion of which is now expected at the end of 1979, one year behind the original schedule. This has also necessitated a re-budgeting of the project to provide for a 30 per cent increase in outlay. The reasons are twofold: First, the geological survey carried out in advance of the project was inadequate. Second, we needed more accurate knowledge of the capabilities of new construction machinery.
Miscalculations like these are likely to occur when a relatively less-developed country first attempts the mechanization of construction work. We must improve upon this experience and take the lesson to heart. Our experience can be a very meaningful contributing factor to our future endeavors if it teaches us to avoid repetition of similar blunders.
Now, I should like to say a few things about the railroad electrification project. In some 20 years, Taiwan's railway system has progressed from steam locomotion to dieselization and finally to electrification. Electric locomotion, while dating back several decades, is, nevertheless, something new to Taiwan. Its introduction is significant for two reasons: First, through diversification of fuels for electric power, the primary energy for railroad locomotion will also be diversified. Second, the technical experience we have acquired in railroad electrification will be of much practical use in construction of rapid transit facilities which are to eventually become a must for several of Taiwan's urban areas.
I have, in addition, something more in view. Up to date, railroad locomotives, whether steam, diesel or electric, have not been produced locally. Since construction of an electric locomotive is less complicated than that of a diesel locomotive, I hope that our mechanical engineers will presently enter upon studies to look into the possibility of local manufacturing of electric locomotives and even EMU cars.
Moreover, some of the innovations made in the process of railroad electrification are also worthy of mention. In cooperation with Tang Eng Iron Works Company, the Taiwan Railway Administration has begun manufacturing spring clip, which have hitherto been imported from Britain. This will mean a saving equivalent to NT$20 million in foreign exchange - and more importantly, no more need for the importation of rail clips. Moreover, the cushion pads for spring clips and the method of replacing wooden ties with pre-stressed concrete ties in long welded rail sections developed by railroad engineers have brought about savings in construction cost of over NT$100 million, increased tie stability, prolonged the life of the rails and improved train operation safety. These innovations have been patented for 10 years by the Central Bureau of Standards, and represent research and development efforts of a kind to be encouraged.
The North-South Freeway also has much to contribute in the way of engineering technology. The most noteworthy is improvement in the quality of Taiwan's highways. The smoothness and neatness of the roadways and the pleasant roadside views are appreciated by motorist. For the construction of the Tachih Overpass, prestressed steel girders were introduced, which is an indication that civil engineering in Taiwan has made a further stride forward since the introduction of prestressed concrete. The cantilever construction method used in the Yuanshan Overpass has progressed smoothly without interfering in the least with the busy traffic along Chungshan North Road under it. The new method of construction engineering used, therefore, represents an improved technology which our bridge engineers may well be proud of.
The use of four-span continuous beams for the Tamshui River Bridge on the superhighway has enabled a reduction in the bridge's construction cost. Meanwhile, the multi-span, continuous slabs and the approach gabs used for a number of other bridges have greatly improved the riding quality of the freeway.
The road construction across soft areas along the Keelung River has involved considerable difficulty. However, few outsiders are aware of this fact, and so I feel inclined to commend it to the public's attention.
On the other hand, there are quite a few things about the superhighway that have invited criticism. Examples are the landslide on the Keelung-Neihu section and the collision that recently occurred. Perhaps there are some aspects of the road design calling for a careful re-examination.
Other technical innovations deserving of approval include the substitution of floating dock for dry dock in the building of caissons for Suao Harbor, the study and prevention of drifting sand in Taichung Harbor, the design of the terminal building at Taoyuan International Airport and the installation of an automatic control and monitoring system at the new airport.
As to the introduction of nuclear power, it constitutes a means toward realization of our policy of energy diversification, bearing importantly on our future economic development and even on our national security.
The China Shipbuilding Corporation's successful completion of its 1 million ton dry dock has given Taiwan a capacity for building VLCC's. It permits materialization of our government policy of building all Chinese flag vessels in our own dockyards.
Of equally great significance are the two other major projects, the integrated steel mill and the petrochemical industry, inasmuch as they are important to our economic structural transformation. In implementing these all-important projects, there have been encountered myriads of technical problems, but the projects are being carried through successfully thanks to the dedicated efforts of our engineers in meeting the challenges.
Lastly, let us consider briefly from a technical point of view the collective contributions of the Ten Projects. Since many of the problems encountered in implementing the projects were entirely new to our engineers, engagement of the assistance and services of foreign experts was inevitable in the beginning. Yet our own engineers have accumulated much practical experience in the process and new crops of talent have, as a consequence, been fostered. Such gains are intangible assets for our country and are no less significant than the Ten Projects themselves. These assets are found not only in government agencies responsible for implementation of the various projects, but also in the three private companies engaged in their design and planning - namely, China Technical Consultants Inc., China Engineering Consultants Inc. and Sinotech Engineering Consultants Inc. - and two government contractors the Ret-Ser Engineering Agency, VACRS, and the BES Engineering Corporation. Optimum utilization of this talent is a task we should set ourselves.
In order that new engineering technologies may take root and undergo further development, the sustaining of momentum by more and more new projects will be necessary. Although there will be no end to the program of development for the national economy, the domestic engineering market is rather limited and chances are lulls will occur in it from time to time. Therefore, the export of technical consultative and construction services will have to be actively promoted to make up for the smallness of the domestic market.
There is one more thing I should like to mention. For some of the Ten Projects, implementation including design, contract awarding and work supervision has been totally entrusted to local engineering consultants. Among these was the Kaohsiung Shipyard of the China Shipbuilding Corporation, implementation of which turned out to be a great success. I think this is a good example to follow, inasmuch as doing so will permit specialization. China Shipbuilding Corporation's field of specialization is not building plants but building ships. For it to entrust the construction of its shipyard to Sinotech Engineering Consultants Inc. was, therefore, a very sensible measure.
Should the China Shipbuilding Corporation have undertaken the construction project all by itself, it would have encountered the problem of what to do with the construction personnel after the completion of the project. Even if it could have kept them on its staff, they would not have an opportunity to pursue their chosen specialized professions. Not only would they have been unable to turn their knowledge and experience to account but the chances are that they would have been compelled to spend their daily office hours in idleness.
Entrusting of construction projects to engineering consultants will help forward specialization of the engineering concerns. The fields of specialization of China Technical Consultants are mechanical engineering and chemical engineering and those of Sinotech Engineering Consultants include electric power and water conservation, while China Engineering Consultant's specialty is transportation and communications. Only by means of specialization is accumulation of knowledge and experience and long-range cultivation of professional talent made possible. Most advanced countries have made a practice of this for many years, and we would be well advised to follow suit. It is hoped that all government officers concerned, particularly those engaged in budget control and auditing, will maintain a clear conception of the significance of this practice and give the project implementation agencies authority to contract out their projects, so that further advancement of our engineering technologies may be expected.