Taiwan Today

Ensuring ample supplies of strategic goods and materials is a key component of the government’s plans for sustainable development.

ACME Filter Mask Inc., a New Taipei City-based manufacturer of medical-grade masks, is one of the many unsung heroes in Taiwan’s successful management of the COVID-19 pandemic. Like others around the world, the company had little idea of the danger to come when a new coronavirus was first detected in the Chinese city of Wuhan in late 2019. But within the span of a few months, ACME had tripled its production lines to a total of 15 as Taiwan sought to secure domestic production of vital personal protective equipment (PPE).

This scaling up of mask-making capacity was part of a quasi-nationalization of the industry overseen by the Ministry of Economic Affairs (MOEA). In all, 92 new production lines were set up countrywide last spring funded by the central government; in return, manufacturers sold their products to the state for a fair price. By May 2020 Taiwan had boosted daily medical mask production to 20 million per day, up from 1.8 million before the pandemic. “In our 38-year history, we’ve never been so busy. Now we’re an integral part of keeping the country safe,” ACME General Manager Lu Kun-zhong (呂坤忠‬) said. 

Plentiful supplies of masks turned out to be one of the foundational pieces of what is now known as the Taiwan Model, a comprehensive set of measures that have kept the country relatively free of COVID-19. “Few countries were really aware of the importance of having sufficient mask manufacturing capacity when dealing with a highly infectious respiratory disease,” said Wu Shou-mei (吳秀梅), director general of the Food and Drug Administration (FDA) under the Ministry of Health and Welfare (MOHW). “Relying on overseas suppliers in a global emergency is risky—you have no control over them.” 

The observation is echoed by Wu Ming-huei (吳明蕙‬), director of the Department of Economic Development under the Cabinet-level National Development Council (NDC). “We saw how a global health crisis not only led to shortages of PPE but also disrupted supply chains for many other critical goods due to lockdowns and suspensions of business activity around the world,” she said. “It underscores the importance of establishing self-sufficiency and the necessity of including the strategic stockpile industries [SSI] in the six core strategic industries set out by President Tsai Ing-wen (蔡英文) last year.”

Designated Essentials

Identified by the MOEA, MOHW and Cabinet-level Council of Agriculture (COA), materials targeted under the SSI range from basic foodstuffs and medical provisions to crude oil, sand and gravel used in construction, as well as goods critical to Taiwan’s economy, namely high-tech batteries such as those powering electric vehicles (EV) and materials and equipment used in semiconductor manufacturing. “By developing the SSI, the government is making plans to ensure the country is well prepared for any sudden shortages caused by unexpected events,” Wu said. 

The NDC is collating action plans from government agencies tasked with ensuring steady provision of critical goods. According to Wu, strategies include improving storage capacity, such as a plan drawn up by the MOEA’s Bureau of Energy (BOE) to increase new liquefied natural gas (LNG) receiving and storage terminals from two to five by 2027. This will increase strategic reserves of the crucial energy source to 14 days, up from 11.2 days last year. 

The COA is also doing its part by launching a four-year NT$8.4 billion (US$295 million) project starting this year for upgrading and completing Taiwan’s cold chain infrastructure in order to ensure the quality of agricultural produce, whether imported or locally harvested, during transportation and in storage. “This will help Taiwan stockpile food items, enhancing our ability to address food shortages and stabilize the prices of produce caused by sudden changes in supply and demand,” COA Deputy Minister Chen Junne-Jih (陳駿季) said. 

Top of the agenda in terms of potential threats to food security is climate change. “Extreme weather events are increasingly common worldwide, and Taiwan is no exception,” Chen said. “We’ve invested in numerous well-equipped, low-temperature storage facilities that can hold enough reserves to see the country through events like droughts and floods.”

Any plan for addressing Taiwan food supplies must include a strategy for protecting the agricultural industries. This begins with rice farming, which is the main crop and staple of local diets. The COA estimates the amount of domestically grown rice will reach 756,000 tons in the first half of 2021, outstripping consumption of 600,000 tons. A sizeable amount can therefore be set aside for a later date—the COA currently stockpiles nearly 900,000 tons of rice purchased from local farmers.

Although rice supplies are secure, 94 percent of Taiwan’s non-rice crops used as food or fodder—mainly soybean, wheat and corn—are shipped from abroad. The COA is therefore guiding farmers to try their hands at growing these commonly imported items in fallow and low-yielding rice fields. “While imports will still play a necessary market role, we’re hoping to reduce the overall percentage and provide local farmers with new agricultural know-how,” Chen said. 

Diversification Strategy

Broadening suppliers for imports is also high on the government agenda. “Emergency situations like pandemics and military conflicts could shut down ports in specific regions, so we should explore multiple options and avoid relying on a single source,” NDC’s Wu said.

To that end, Taiwan now imports crude oil from 14 countries, including the U.S., Australia and Indonesia as well as Middle Eastern nations. The BOE is also committed to signing long-term contracts that keep prices stable and ensure a steady stream of black gold, a task of great importance given the almost total lack of domestic production. 

Another example of diversification can be seen in purchases of active pharmaceutical ingredients (API). China and India are the world’s leading suppliers of API to drugmakers, accounting for 40 percent of all such imports to Taiwan. Last year, however, demonstrated the potential danger, as both countries experienced severe outbreaks of COVID-19 that threatened production capacity. Consequently, Taiwan’s FDA has since encouraged local pharmaceutical companies to explore more import sources, Wu said, while applications for new purchasing agreements are being fast-tracked. 

Beyond looking for different and varied suppliers, the FDA is also undertaking assessments of Taiwan’s capacity to produce more API domestically. Working closely alongside the MOEA, the agency is encouraging investment in the area, offering legal counsel to interested companies and creating a rapid review process for new products. 

Supporting Industry

The information and communication technology sector remains one of the primary drivers of Taiwan’s economic growth. This is especially clear in the semiconductor industry led by Hsinchu City-headquartered Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker. To keep this engine of the economy fully fueled, the MOEA is incentivizing international providers of goods used in chip fabrication to launch or increase their production in Taiwan by taking advantage of the country’s high-quality infrastructure and tech talent. “This should help ensure the sector’s robust and continued growth, strengthening one major pillar of the economy,” NDC’s Wu said.

Furthermore, state-backed Industrial Technology Research Institute based in the northern county of Hsinchu is working alongside the MOEA to develop batteries for use in EV, especially electric buses. To hit its emissions targets, Taiwan aims to see all city buses going electric by 2030, with the major components produced domestically. 

By improving self-sufficiency, diversifying import sources and upgrading storage facilities, the country is well set on the path of sustainable development no matter what the future holds. “The government’s determination to develop SSI as one of its major policies is truly forward looking,” Wu said. “In an increasingly interconnected world, Taiwan is more likely to face crises out of its control. But we’re fully aware of the need to prepare for all eventualities.” 

Write to Oscar Chung at mhchung@mofa.gov.tw