Free Trade Zone Project Builds Competitiveness

      When a shipping container passes through Taiwan, the simple processing of its contents before transshipment increases its value to the island three-fold; and, if the contents undergo deep processing, the value skyrockets 11-fold. Taiwan is perfectly positioned to develop this kind of vale-added transshipment, since it is separated from seven major cities of the Western Pacific by an average flying time of just two hours and 55 minutes, and from five major Asia-Pacific harbors by an average sailing time of only 53 hours.

When the liberalization of the world economy led production and marketing to transcend national borders, mainland China , located just across the Strait from Taiwan , used its cheap labor and massive consumer market to develop into the world’s factory and a global market, striking a blow at the international deployment of low-cost manufacturing. In response the government of Taiwan decided, after careful evaluation, to promote the establishment of free trade zones that can bring together overseas low-level manufacturing with the island’s own development of key parts and components, thereby reinforcing the strategic planning power of domestic enterprises and creating new competitiveness for them in global operations.

Free trade zones take advantage of the “within physical territory, but outside the customs territory” concept to carry out the liberalization of trade administration and use logistics to power manufacturing via the simplification of customs procedures, the provision of tax incentives, and the convenient inward and outward flow of personnel and funds. The goal is to create a better operating environment and pursue greater trade opportunities for manufacturers.

With simplified customs procedures, goods must be reported but need not clear customs. This saves time and reduces the amount of inventory, eliminates the need for customs bonding and rebates, and provides greater flexibility in the use of funds. At the Port of Taipei, for example, the Tonglit Logistics Co. carries out deep processing that combines cheap parts and components from neighboring countries with high-quality parts and components from Taiwan and, using the convenience provided by the free trade zone, exports the resulting assembled automobiles immediately to markets all over the world. In addition to preserving opportunities for Taiwan ’s auto parts industry to develop, this also strengthens the global competitiveness of the island’s auto industry.

Other reasons for companies to move into free trade zones, in addition to convenient customs procedures, include flexible sources of goods and an alien-worker quota up to four times that outside the FTZs. Yet another attraction is that, with the exception of illegal and prohibited items, goods from mainland China may be brought into the zones freely and without tariff. If such goods are processed into products that may be imported into Taiwan , they can even be passed through customs and sold on the domestic market. This is what enticed appliance-maker Great Yen Electric Food Grinder Co., which had subcontracted production to mainland China because of cost considerations, and the I-Mei Foods Co., which had set up a factory in the mainland, to return to Taiwan.

FTZs can also serve as powerful market-development tools for international enterprises. The Taoyuan Air Cargo Park/Free Trade Zone has broken through the restrictions of the aviation control area, offering the convenient flow of personnel and funds as well as the advantage of streamlined procedures. This makes it the perfect choice for companies dealing in electronics and other high-value-added products, for which speed is of the essence, as well as for express parcel companies.

In the future, Taiwan’s industries will be transformed in the direction of R&D, logistics, and high value, and the government hopes that its FTZ plan will help facilitate this transformation by creating win-win opportunities for enterprises and the economy as they work together to create industry clusters and boost the island’s economy to new heights of achievement.

Back to News Page