I. The Rise of Taiwan Sugar Industry
In the spring of 1899, four years after Japanese occupation of Taiwan, Ki Yamada, a young employee of the Colonial Government, seeing the future possibilities for a modern sugar industry on the island, presented his proposal directly to the Governor-General after a completely negative response from the group of experts with whom he was then working. This proposal unexpectedly aroused the Governor-General’s interest and thus resulted in the establishment of the first mechanized sugar mill in Chiaotzetao in 1901. Although he resigned from the Colonial Government rather unhappily and Dr. Mitobe Tozo was given credit for the sugar plan, Ki Yamada could take satisfaction from the development of the Taiwan sugar industry as he had proposed. Sugar mills multiplied rapidly in the following years. In 1942, the “Big Four” owned and operated 42 mills with a total grinding capacity of 65,000 tons of sugar-cane per day and about 4,000 kilometers (2,400 miles) of railroads extending all over the sugar-cane growing areas with connections to the main railway to the sea ports. According to the estimate of 1937, about Y. 324,000,000 (US$100,000,000) had been invested in the industry. The acreage of the sugar-cane plantations once reached 167,000 hectares (410,000 acres) and averaged 140,000 Ha. annually with a peak sugar production over 1,400,000 metric tons (m. t.) in the crop year 1938-9 and an average production of 1,000,000 m. t. in 10 consecutive years up to 1944. Among world cane sugar producers, Taiwan ranked fourth. India, the largest sugar consumer, ranked first; Cuba, the largest sugar exporter, second; and Java, the chief competitor of the Taiwan sugar industry in the Far East, was third.
II. War Damage and Rehabilitation
The last stage of World War II brought a sharp decline in the Taiwan sugar industry. Destruction from air bombardment was devastating. Of the 42 sugar mills only a few were not bombed by the U. S. Air Force. The others all suffered more or less severe damage and some of the largest mills were totally demolished. The loss to the railroads alone was estimated at Y 5,000,000. The acreage of the sugar-cane plantations, having already been reduced as more and more land had to be converted to rice field to meet the pressing food requirements of expanding military operations, was further decreased as a result of the destruction of the sugar mills and the dim outlook of the sugar market. Consequently, the once most prosperous industry on the island was reduced to an insignificant position towards the end of the War. The following figures illustrate the drastic change that had taken place.
PEAK YEAR IMMEDIATELY AFTER THE WAR (1945-46)
(1938-39) (1945-46)
Sugar mills in operation 49 17
Cane plantations (ha.) 167,000 33,705
Sugar productions (m. t.) 1,418,730 86,073
The situation was critical when the Japanese companies were merged into the newly formed Taiwan Sugar Corporation (TSC) by the Chinese Government. It was a transitional period. General economic dislocation made the work of rehabilitation particularly difficult. The shortage of materials and fertilizers was acute. Furthermore, insistence by the U. S. that all Japanese must be repatriated also caused a serious problem of personnel replacement - the more serious because the Japanese administration, as a rule, had not permitted local employees to hold top-level jobs. For these reasons, the rehabilitation of the sugar industry on this island seemed an almost impossible task.
The sugar industry, however, is of such importance to the Chinese economy, that it could not be neglected. Despite overwhelming difficulties, the Taiwan Sugar Corporation finally succeeded in rehabilitating this vast industry through the strenuous effort of its entire staff. In the winter of 1947, the 42 sugar mills were merged into 36 mills. All were put back into operation except one, which was not economical to operate. The wrecked railroads were repaired to a similar pace. The acreage of the sugar cane plantations also was expanded rapidly to match the progress in the rehabilitation of the sugar mills - from 33,705 Ha. in 1945-46 to 85,000 Ha. in 1947-48 and 120,000 Ha. in 1948-49. Consequently, sugar production rose from 86,073 m. t. to 260,000 m. t. and 630,000 m. t. in the respective crop years.
III. Sugar-Cane Plantations
Geographically, the island is divided into two separate parts by the central mountain range running from north to south. The sugar cane plantations spread over the west coast, particularly in the south where semi-tropical climate prevails. Those on the east coast are of minor importance.
Though suitable for sugar-cane cultivation, the natural conditions on the island compare rather unfavorably with those of many other cane sugar producing countries. First, the soil is chiefly of weathered sandstone and shale. It needs a big amount of fertilizers and an abundant supply of water to keep up its fertility. Secondly, one crop of sugar-cane takes as long as 18 months whereas in many other countries only about 12. Thirdly, most part of the arable land is just as good or even better for other crops as for sugar-cane. Therefore; the supply of sugar-cane depends entirely upon its competitivity in price with other crops.
Various measures had been introduced by the Japanese to overcome these natural limitations. The “Big Four” had striven to own land to expand the plantations under their own cultivation to ensure a reliable supply of raw material. They held altogether 117,721 Ha. of which less than 50% was retained by TSC and the rest has been leased out, either on easy terms of rent or on cooperative basis under the aggressive program of land reform by the government. The sugar mills have had to rely more upon the independent contracted plantations. As aforementioned, the total acreage had once expanded to 120,000 Ha. in 1948-49. Since 1949-50, as a war measure to ensure self-sufficiency in rice, the Government has limited the cane acreage to 100,000 Ha. In the meantime, unfavorable sugar prices discouraged the farmers from cane planting. The acreage was reduced to 78,813 Ha. in 1950-51. It is expected to recover to around 95,000 Ha. for 1951-52 and to 100,000 Ha, for 1952-53.
The methods of payment to the farmers have long been the center of debate. Under Japanese occupation, all payment was made in cash. This had been found rather unsatisfactory towards the end of the World War II when inflation was going on at an alarming rate. After the war, the sugar-sharing method was introduced, the ratio being at first fixed at 48 for the contracted farmers to 52 for the sugar mills and then revised to a 50- 50 basis. This was an important step aimed at expanding the cane acreage and proved to be quite successful. This method alone, however, does not very effectively protect the farmers’ interests. After all, what the farmers are interested in is not how much sugar they can share but how much money their share can bring in and how it compares with income from other competitive crops. To protect cane farmers, the Government set in 1950, a “floor price” of sugar in terms of rice at 1:1. It is provided that however low the world sugar price might be the price of 1 lb. of sugar should be at least equal to that of 1 lb. of rice. This year the Taiwan Sugar Corporation has maintained the sugar price 50% above the parity to further encourage the expansion of cane planting.
As the growing period for cane is about 18 months in Taiwan, most cane growers are unable to make disbursements for seedlings, fertilizers, rents and other farming expenses before harvesting. Credit at low interest rate and fertilizer loans in kind have therefore to be extended to the sugar-cane growers from the mills. The tight money policy to arrest inflation have made the amount of credit insufficient. This year, with ECA help, TSC is planning to increase the agricultural credit to 50% of the estimated crop value for 1952-53.
To raise the productivity of the plantations, strenuous efforts have been directed on increasing the supply of fertilizers, promoting tractor farming, improving sugar-cane varieties, preventing diseases, using of insecticide. The average yield of sugar-cane per Ha. was doubled within four years. The setback in 1949-50 also caused a decline in cane yield per unit area. A closer examination reveals that the cane yield on the sugar mills’ plantation only dropped a little in 1949-50 and has shown an increase in 1950-51 while that on the contracted farmers’ plantations has decreased a lot. (Table I)
Table I — Cane Yield per Hectare
Total Cane Yield per Hectare (Kg.)
Acreage Average Mill’s Farmer’s
(Ha.) Plantations Plantations
1945-46 33,705 27,169 17,057 30,689
1946-47 29,905 29,065 21,416 37,674
1947-48 85,055 40,420 35,669 42,251
1948-49 120,088 55,503 55,343 55,533
1949-50 118,452 51,618 54,368 51,151
1950-51 78,813 49,039 59,568 44,248
This shows the lack of interest on the part of the contracted farmers not only leads to the reduction of the planting acreage but also results in their inadequate care for the cultivation. Despite all that had been done, the Japanese neglected the tapping of underground water. The TSC has started a long-range program of deep well drilling to improve the irrigation. Already 120 wells have been completed and will irrigate around 8,000 Ha. of cane field.
IV. Sugar Mills
All the sugar mills are scattered along the west coast, especially in the South, except two mills on the east coast: one in Hwalien and another in Taitung. Most of their obsolete equipment has been gradually replaced, although the modernization plan has been deplorably hampered due to financial difficulties. The total grinding capacity is 63,000 m. t. of cane per day.
Under the Chinese management, a great stride has been made in the processing technique. Although sugar yield has only attained the Japanese level, the consumption of fuel and lubricants has shown a reduction of 62% and 28% respectively. The introduction of the Middle Juice Carbonatation Process goes a long way towards cutting down production cost. Compared with the ordinary carbonatation process, this process saves 43.39% of limestone and coke, and 71.43% of soda ash; on the other hand, it raises 2.22% of sugar yield and 19.03% of non-sugar removal and reduces 15% of final molasses. (Table II)
Table II — Sugar Yield (%)
1945-46 9.71
1946-47 10.52
1947-48 11.30
1948-49 11.81
1949-50 11.31
1950-51 12.43
With technical improvement in sugar manufacturing, by-products have also been efficiently developed by making use of bagasse and molasses. Bagasse is used as fuel in the mills. Besides, it is utilized for pulp and wall board making. Molasses are used to produce alcohol and yeast. There are now 15 alcohol plants with 12 in operation, which produced 28,000,000 liters in 1950.
V. Transportation
Of the 3,906 kilometers of railroads taken over from the “Big Four,” 2,564 kilometers are locomotive lines, 815 kilometers push car lines and 527 kilometers removable lines centering around the sugar mills. The tracks are of 762mm. gauge for locomotives and of 495mm. gauge for push cars. Besides, there are 18 kilometers of 1,067mm. gauge and 45 kilometers of three rail tracks of both 762 mm. and 1,067 mm. gauges for intercommunication with the Taiwan Railway Administration.
Being used mainly for the handling of sugar cane from the widely spread plantations to the sugar mills, these lines do not quite constitute a unified system. The latest military development makes it imperative to unify these railroads. After this re-organization, a more economical and efficient service is to be expected.
VI. Production and Export
The development of the sugar industry in Taiwan by the Japanese was primarily to make Japan self-sufficient in her sugar supply. All sugar produced, excepting the share left for local consumption, was exported to Japan. Custom tariffs as well as subsidies to the sugar industry provided protection against foreign competition. The sugar industry was, therefore, assured of a steady market without competition. The China mainland readily absorbed any surplus production.
With the restoration of the island to China, followed closely by its isolation from the mainland, this situation has been completely reversed. Now Taiwan’s sugar must compete on the world market. (Table III)
Table III — Exports of Taiwan Sugar
Total Local Shipment to
Crop Year Production Consumption Mainland Export
(m. t.) (m. t.) (m. t.) (m. t.)
1945-46 86,073 330.00 5,715.16 —
1946-47 30,882 15,971.54 10,286.93 1,350.00
1947-48 262,272 32,372.60 129,580.02 70,871.00
1948-49 631,346 27,694.37 25,529.76 308,124.37
1049-50 612,332 13,326.71 — 580,391.93
1950-51 350,761 — — 280,000.00
Japan is still the principal market for Taiwan sugar. Out of the total sugar export of 959,387 m. t. during 1948-50, Japan alone bought 457,562 m. t. chiefly on a barter basis. Egypt, Hongkong and Malaya follow in that order. Approximately 370,000 m. t. of sugar was shipped to these countries during 1947-50. Other customers are Greece, Ireland, Burma, Thailand, South America, Italy, Holland, Syria and the Red Sea countries. Foreign exchange is essential to the island economy of Taiwan as it depends upon imports to a large degree. The export of sugar has helped it substantially to balance its international payments (Table IV).
Table IV — Foreign Exchange by Sugar Export
Sugar Export (US) Ratio to Total Export
1947 407,320.00 —
1948 11,571,375.84 —
1949 32,879,904.24 97%
1950 74,436,981.42 82%
1951 47,196,275.63 69% (Jan-Aug)
In the absence of an export subsidy, the cost of production and the world market price determine the volume of sugar produced and exported. A comparison of the current cost with the world sugar price shows a narrow profit margin. However, if market instead of official exchange rate were used in the conversion, the cost of production would be decreased by 30%, showing a bigger margin of profit.
The contract farmers’ share of sugar is a complicated factor. As mentioned above, the TSC has introduced the sugar sharing system. Farmers may dispose of their portion at their own discretion. The TSC, however, is obligated to purchase whatever amount they turn in so as to centralize sugar export. It has been pointed out that the purchase price is now fixed at a sugar-rice ratio of 1½. This ratio is fixed in terms of the open market exchange rate whereas the export price of sugar is converted at the lower official rate. Thus the Corporation takes a loss on every ton of farmers’ sugar it buys and exports. This policy should not be looked upon as deliberate negligence of the welfare of the TSC on the part of the Government, particularly as the Corporation is itself a government agency. The Government has the responsibility to consider the economy of Taiwan as a whole; and, as a remedial measure, the Government now subsidizes the TSC to offset the said loss.
VII. The Importance of Sugar in Taiwan
Rice and sugar are the two key crops in Taiwan. Both were important export commodities before the war. Under the Chinese rule, due to the immigration of 2.5 million people to the island, comparatively little rice is available for export. Sugar remains as the principal source of foreign exchange. It is also a main source of government revenue. Taxes, surtaxes, levies and contributions paid by the TSC in 1950 amounted to the equivalent of US$13,800,000. Another amount of US$6,000,000 was paid as dividends on the government’s investment in the Corporation.
Secondly, sugar comprises about half of the value of all indigenously manufactured goods. One fifth of the population is directly engaged in sugar production. Another 200,000 farming households in the rural districts depend upon the sugar mills and their plantations for non-agricultural income. As the biggest consumers of domestic products, such as fertilizer, coal, cement, gunny bags, etc., the sugar industry contributes substantially to the prosperity of the island as a whole.
In addition, the industry’s railway network and the byproducts of the sugar-mills may be of strategic importance also. Yeast is now used as a supplementary food for the soldiers. Military requirements for alcohol are rapidly increasing. Producing at full capacity, the TSC would be able to supply annually several thousands tons of yeast and millions of gallons of alcohol from molasses.
VIII. Conclusion
From the long-range point of view, once the mainland is recovered, the Taiwan sugar industry will play as important a role in national economy as on this island. In prewar years, China spent millions of dollars on sugar imports. Total consumption was estimated at an average of about 1,000,000 tons a year. The per capita consumption was about two kilograms in contrast to 10 kilograms in Japan and 50 kilograms in the USA. These figures indicate that a future market is assured. For the present, the annual export of some 600,000 tons to Japan is expected. In view of its proximity to Japan, a major portion of the sugar imported into Japan will naturally come from Taiwan. One, however, should not be misled by these simple facts and become over optimistic. The export of Taiwan sugar to the China mainland in the future and continued export to Japan will depend largely on the cost of production. The writer is aware that capacity production will lower the unit cost a great deal, nevertheless, there are other important factors which should also be considered. Sugar mills operating with obsolete and inefficient equipment should be abandoned. Plantations in regions with very unfavorable environment to sugar-cane growth should be gradually converted to the cultivation of other crops. Also, Taiwan sugar may find competition on the mainland, as the climate and soil in some areas of China proper, such as Kwangtung and Hainan Island are more favorable to sugar-cane cultivation than in Taiwan. In stepping up production and cutting down costs of Taiwan sugar, the emphasis should be on increase of yield per unit area, rather than on expansion of cane acreage. It appears that the sugar industry, at this juncture would benefit more from agricultural improvements than further industrial rehabilitation.
The writer also believes that good public relations with the farmers are essential, as the success of the Corporation depends on the whole-hearted support of the cane growers. This calls for a thorough study and understanding of the farmers’ psychology.
The TSC’s plantations should devote themselves more to the scientific application of agriculture. They should not consider the acquisition of more land as the only means to produce more cane for their Corporation.
The Taiwan Sugar Corporation deserves full credit for the rehabilitation of the sugar industry. It has revived the industry within a much shorter time and with less expenditure than was anticipated in a survey made by experienced foreign engineers just after the war. Further improvements are needed, however, in the field of agriculture, production and management. The Corporation is overstaffed compared to Western standards and ways and means to reduce this staff should be studied.
As to the government policy of limitation of cane acreage, such a measure is justified in view of the violent fluctuations in sugar price and the steadier rice price on the world market in recent years. Rice and sugar are the principal crop competitors for land in Taiwan. The government decision to curtail sugar acreage may cause dissatisfaction in certain quarters; however, the interests of one industry should be subordinated to an unbiased over-all policy. Only in this way, can the defense of this island fortress of democracy, which beams in the eyes of mainland Chinese a ray of hope, be ensured.