With bilateral trade reaching US$130 billion a year and the country's investments on the mainland well exceeding US$3 billion, Taiwan will save at least US$151 million a year in transportation costs alone, according to estimates provided by shipping and airfreight industries.
Thanks to the new policy, same-day traveling between the two sides of the strait has finally become a reality after years in the making. For some, this is a belated present. "For the past 10 years, I have had to spend half a day to fly back to Taipei every month," explained Chang Tung-lung, who runs a hardware factory in Shenzhen, a city north of Hong Kong. "But now, home is only two hours away," he said. Based on estimates by the Straits Exchange Foundation, more than 1 million Taiwanese reside in the mainland for business purposes.
Not only does the direct link save precious time for frequent travelers, their expenses are expected to decrease as well. According to Transportation and Communications Minister Mao Chi-kuo, Taiwan's travelers and airfreight carriers anticipate to save as much as US$91 million every year. China Airlines Chairman Philip Wei said the company would review its current pricing structure to reflect the estimated 20 percent in costs it would save, thanks to the direct service. Eva Air, the country's other major carrier, agrees there is room for negotiation on airfreight.
Local tourist agencies embraced direct transportation with open arms and see it as a major boost to their business. With a total of 108 direct flights every week between 25 major cities on the two sides of the strait, Taiwan's travel companies are running at full steam to arrange getaway packages to meet the expanded market. Lai Seh-jen, director-general of the Tourism Bureau under MOTC, expects to see the number of mainland Chinese tourists visiting the island double to 20,000 a month in the near future.
Taiwan's manufacturing sector is another major beneficiary. In order to reduce costs, the country's manufacturers of thin-film-transistor liquid crystal display panels, for example, currently ship semi-finished products to their mainland facilities for final assembly. Not only will the direct shipping link cut their logistics expenses by 5 percent to 10 percent, it will also reduce their inventory days which will ultimately translate into cost savings.
The new policy is also set to open huge markets for the island's fresh produce and live fish. Whereas it took eight days to sail from the island to Shanghai, it now takes only half that time. According to the Council of Agriculture under the Executive Yuan, not only will shipping costs diminish by as much as 30 percent, damage rates during transportation will also decrease from 15 percent to 5 percent. Based on COA statistics, Taiwan's agricultural exports to mainland China totaled US$427 million in 2007.
The direct links will lower businesses' operation charges and increase the efficiency of personnel and merchandise flows, raising Taiwan's potential to become a regional operation center for multinational corporations, said MOEA's Deputy Minister Shih Yen-hsiang. The ministry hopes to see 200 enterprises set up their regional headquarters on the island in 2009 as statistics showed that foreign investments in the first 11 months of 2008 reached only US$7.68 billion, a 46-percent decline from the previous year.
Kerry Logistics Network Ltd. has already taken action. The company, a major logistics service provider based in Hong Kong with operations in 22 countries, bought an 18-percent stake in T-Join Transportation Co. Ltd., a leading shipping service provider in Taiwan. "Kerry Logistics understands that Taiwan's new policies have created an indispensable opportunity for further expanding into the Asian markets," according to Kerry Logistics' press release. The company is now T-Join's single largest shareholder.
But not everyone is thrilled about this historical development. For example, more people from Taiwan may choose to vacation in the mainland instead of traveling to local destinations, while the number of mainlanders setting foot on the island may fall short of expectations, adversely affecting local tourism. And if the island cannot improve its investment environment, more capital might be invested across the strait and more talents might migrate to the mainland in search of better opportunities, particularly now that traveling back and forth across the strait has become so convenient.
As a result, the government should take complementary measures to minimize any possible negative impact on businesses, urged Chang Wu-ueh, director of the Graduate Institute of China Studies at Tamkang University, in Taipei County. Chang pointed out that while short-term effects are easy to understand and measure, the long-term effects will depend on how Taiwan, now with mainland China as part of its global layout strategy, can further leverage its advantage in division of labor to strengthen the country's position in the world economy.
Write to Meg Chang at meg.chang@mail.gio.gov.tw