On retrocession of the Island to China in 1945, most industries were taken over as public enterprises owing to the fact that private capital was not available to carry out the necessary but expensive work of rehabilitation. But, different from the Japanese colonial economic policy, government ownership of all the important industries is not the economic policy of the Chinese Government. Consequently, in January 1953, the Government announced a set of regulations governing the transfer of public enterprises to private ownership, in coordination with the last phase of the Land-to-the-Tiller program, the implementation of which has already resulted in turning over four public enterprises into private ownership.
Among the enterprises now under public management and control, the tobacco and wine monopoly is the biggest single enterprise that produces the most revenue for the government in local currency. The production and sales of these consumption goods are administered by the Taiwan Tobacco and Wine Monopoly Bureau.
Organization
The head office of the Bureau is situated at Taipei. Beside the secretary, personnel accounts, inspection and research offices, it is composed of seven main Sections, whose duties are detailed as follows:
Section 1: sales and distribution
Section 2: production of raw materials for the manufacture of tobacco and wine and packing supplies.
Section 3: transportation and storage
Section 4: machinery and construction
Section 5: financing and purchases
Section 6: general affair
Section 7: tobacco-leaf production and roasting
Under the supervision of these seven sections, there are spread all over the Island 37 units of offices and factories composed of 11 branch offices, 2 agencies, 2 cigarette factories, 4 tobacco-leaf factories, 11 wine distilleries, 3 factories for manufacturing of bottles, containers, corks, etc., 1 printing press, 1 tobacco-leaf experimentation station, and 1 camphor works. The head office has a staff of 451 and 177 workmen and the sub-units have a total personnel of 10,397, including 1,866 regular staff, 7,577 workmen and 326 policemen.
Business Conditions
Production and sales of tobacco
The main tobacco product is cigarettes, followed in order by smoking tobacco and cigars. During recent years, consumption has been steadily increasing as a result of improvement in quality. At present the high quality cigarettes are branded "Prosperity Island" and "Shuang Shi"; the middle-class are branded "New Paradise", "Paradise"; and the popular class are branded "Banana", "Chia Ho", etc. Owing to the facts that much of the manufacturing equipment is outdated and procurement of materials from abroad is not as expedient and convenient as could be wished, the staff and workmen are having an uphill fight in their struggle for greater production to meet the ever increasing demand and it is to their credit that quantity has not been gained at the expense of quality.
According to latest records, monthly sales of cigarettes amount to about 900 million pieces. The statistics f or the last five years are as follows:
Year Production % of increase
Unit: 1 million over previous year
1951 6,062
1952 7,663 26.40
1953 8,382 9.40
1954 9,410 1.23
1955 10,551 1.22
Production and Sales of Wine
In quality the wine products are all up to hygienic standards, as both the raw materials used and the process of distillation are under strict scientific control and inspection. The quality is not only high but also uniform, and attention is always paid to proper conservation and mellowing processes. Through incessant improvement more high class wines are now being produced, such as Special Rice Wind Beer. etc., and such products as Shao Hsing Wine, Kao Liang Wine, Fruit Liquor, Gin, etc., are finding their way to foreign markets. Meanwhile, new packing and filling machines have replaced old ones, and the products are now more attractively decorated than before. The quantity of sales has increased steadily in the last few years as shown in the following table:
Year Quantity % of increase over
Unit: 1 HL previous year 1951
1951 409,305
1952 558,878 36
1953 661,574 18 61
1954 722,703 5 76
1955 808,048 12 87
The great concern of the Bureau is whether the improvements in quality and increase in quantity are conducive to greater profit, since the responsibility of monopoly is to cater to national treasury receipts. The monetary returns of yearly sales of tobacco and wine during the past four years are shown in the following table:
It should be noted that the percentage of increase in the production and sales of tobacco and wine - though continuously upward in annual aggregate during the past four years - actually declines year after year: and that, according to unpublished breakdowns, the increase occur mostly in high and middle-class products, not in the lower classes. In order to increase monopoly profits, it will be necessary for the Bureau not only to strengthen the preventive work but also to expand the manufacturing equipment for the production of better goods to attract buyers.
Sales Network
Few consumers, who find it so easy to buy a pack of cigarettes or a bottle of wine anywhere, realize the vast amount of work involved in the distribution of these products. At present there are throughout Taiwan about 18,000 private agencies, big or small, engaged in selling tobacco and wine. The big problems for the Bureau are to ensure that the sales prices are uniform, the supplies are regular, the transportation costs are economical, the agencies are given enough but not high profit, and payments by the agencies are made quickly. The present system relies largely on the voluntary cooperation of the sales agencies with the Bureau's branch offices, in which the Bureau bears all the distribution expenses but exercises close supervision.
Expansion of foreign exports is also a hard nut the Bureau has been trying to crack. The sales objectives are the large number of overseas Chinese, but the main obstacle is the high protective tariffs of most foreign countries on these products. Up to now cigarettes have been exported to Liuchiu Islands, and wine to Hong Kong. In the trade agreement with Japan wine is also included as one item. The Bureau's most effective advertisers abroad are the Chinese embassies and consulates, to which Taiwan cigarettes and wine are supplied for use at their numerous reception parties.
Procurement of Materials
The materials are procured locally as much as possible in order to reduce cost and save foreign exchange. The largest portion of tobacco-leaves are produced in Taiwan, and through cooperation with JCRR the quality has constantly been improved. In 1954-1955 the whole crop is estimated at 15,100,000 kg, for which the Bureau has to, pay about NT$200 million. The cultivation of tobacco leaves is under the guidance of the manufacturing and the experimentation stations of the Bureau.
Foreign procurements are made through the Taiwan Supplies Bureau and the Central Trust of China. For 1956 the total needs amount to about US$7.4 million, including such main articles as American tobacco-leaves, cigarette paper, aluminum foils, machinery, etc.
Financial Conditions
In 1954-55 the estimated receipt was NT$1,224.5 million but the actual receipt was NT$1,346.8 million. Revenue from profits paid into the Treasury was estimated at NT$750 million but actual payment was NT$894.9 million.
Compared with 1949 the increase in receipt is about 28 times, while the commodity index has increased only by 6 times.
For FY1955-56 the total receipts are estimated at NT$1,140.6 million and total contribution of profit to the Treasury is estimated at NT$920 million.
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* The Taiwan Cement Company, the Taiwan Pulp and Paper Cprporation, the Taiwan Agricultural and Forestry Development Corporation.