A friend is translating some of the Hsieh campaign's economic and trade policy ideas, along with their rebuttals of KMT claims. Here's one on the KMT nonsense that the declining volume of the port of Kaohsiung is a result of DPP mismanagement. As the excerpt points out, the decline began under Veep candidate Siew....++++++++++++++
The Port Fallacy
The Kuomintang (KMT) have been persistent in leveling an accusatory finger at the Democratic Progressive Party (DPP) for Taiwan’s worsening economic environment since the DPP’s ascent to power in 2000. However, the reality is that Taiwan’s economic growth has been slowing since the late 1980s, when it averaged around 8 per cent. From 1991 to 1994, growth averaged 7.1 per cent, dropping to 6.5 per cent in the period 1995-1997, and dropping again to 5.6 per cent in 1998-2000. The same trend applies to the unemployment rate, which for most of the 1990s hovered at around 1.8 per cent, before breaking through the 2 per cent barrier in 1997. In the same period, the Vincent Siew’s KMT cabinet presided over a gradual decline of Kaohsiung’s global importance as a port. By the time the KMT were ushered out of power in 2000, Kaohsiung had dropped from No 3 to No 4 in the world in terms of shipping volume.
In this context, it is interesting that the Ma Ying-jeou-Vincent Siew presidential team not only continues to press the DPP on general economic issues, but that it also continues to point to Kaohsiung’s status as a global shipping hub as evidence that Taiwan is in decline. For the Ma-Siew team, the fact that Kaohsiung has slipped to seventh or eighth place in the global shipping ranking is evidence of a failure to make the port city an Asia Pacific Operations Centre. Furthermore, they maintain that the reason this is the case is that the so-called Three Links with China have not been implemented. However, if we look at the facts, this is, at best, a debateable claim.
Shipping volumes are not a reliable indicator of economic vitality. For a start, as a nation industrializes, the result is not necessarily increased exports. The trend is for modern products such as computers and mobile phones to gradually replace home appliances, and while this results in increased profits, it also means lower volumes of shipments at ports. This is evidenced by the global situation. In 2007, global rankings in terms of shipping volumes put Singapore at the lead, followed by Shanghai, Hong Kong, Shenzhen, Busan, Kaohsiung, Rotterdam, Dubai, Hamburg, and Los Angeles. If we take the World Federation of Exchanges economic competitiveness rankings, then only six of the world’s top 10 most economically competitive nations have a port that ranks among the leading top 10. The world’s most competitive nation, the US, for example, has just one of the world’s busiest ports.
For this reason, Taiwan’s gradual slide in the world’s shipping rankings is something of an inevitability. What Taiwan needs to do is to expand its industries, not work at its rankings in terms of shipping volumes. The models for making Taiwan an Asia Pacific Operations Centre should be Singapore or Hong Kong, because, simply put, these are cities that provide examples of success. They prove that it is possible to move from basic manufacturing to a reliance on trade and services, while still maintaining steady growth.
The KMT can criticize the DPP for its economic policies all it likes, but the fact remains that the premise of its arguments is strategically flawed. Furthermore applying an economic policy of this kind – and it remains a platform in the Ma-Siew economic blueprint for Taiwan – will be a strategic disaster.
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Enjoy.
[Taiwan]
FYI, Hong Kong is falling in ratings, and will for quite some time. It has to do with the fact that Chinese port infrastructure has improved significantly, meaning manufacturers no longer have to rely on Hong Kong as a port, and pay the higher costs of sending a container to Hong Kong.
ReplyDeleteThere is indeed a current of thought that bemoans Hong Kong's falling throughput. However, it should be said that there is little Hong Kong could do to stop it, except cultivate more transshipment cargo. However, who among us would say Hong Kong's economy is currently bad? Hong Kong is doing quite well, thank you.
The point is that, when it comes to port throughputs, many factors are at play. One cannot look at port throughput as a barometer of the overall economy of any country.
Kaoshiung will continue to fall in ratings no matter who is in charge in Taipei. Other ports in the world are growing faster because of conditions unique to their countries. Since Taiwan does not have a rapidly expanding manufacturing sector, and this is to be expected due to the fact that Taiwan has a developed economy, it can't maintain Kaoshiung's rating forever. This does not mean that the port is headed for a huge decline.
This said, improved relations with China might free the way for more transshipment business to come to Kaoshiung, but this won't stop the inevitable relative lowering in the rankings. I am afraid Kaoshiung is "doomed" to be a prosperous port in the medium and long term. And Taiwanese will have to get used to the fact that top ratings do not always matter.
This said, improved relations with China might free the way for more transshipment business to come to Kaoshiung, but this won't stop the inevitable relative lowering in the rankings.
ReplyDeleteA quick question, so why does Kaoshiung cannot be the Far East transshipment center i.e. make is a free-port like Hong Kong or the current leader Singapore. Taiwan is in the better geological location than any of these two. Btw, Singapore is developed, too, and it ranks number 1!?
As far as L.A. ranking #7, that's because US ports on the coasts (especially the west) are diluted partly due to our railroad and highway systems. Also, it is cheaper to go down even south into Mexico because of the NAFTA if you are shipping to the lower United States. Confused? Here is a link to lighten you up:
http://tinyurl.com/ysomln
Pay attention to the S. California truck traffic map and you will see that the dark red line is just outside of the US. It is just south of Tijuana where the Japanese cars are imported.
Just wanted to say *awesome* blog - it's so great to see an English-language publication standing up for Taiwanese democracy!
ReplyDeleteI'd like to make a few points:
ReplyDelete1) First, Kaohsiung port has dropped from fourth to eighth in ranking (that's four places) from 2000 to 2008, the years the DPP has been in power. Perhaps the major reason why Kaohsiung has fallen in rankings is the lack of foresight in port infrastructure needs.
Kaohsiung handled 10.26 million twenty foot equivalent units (TEU) in 2007, and actually reached its full capacity. For perspective, Singapore's port can handle more than twice that amount. Because Kaohsiung port has reached its full capacity, by definition, there is no room for growth in container volume in Kaohsiung. Kaohsiung's deputy harbor master cites this fact as what will drop Kaohsiung down to eighth place in 2008.
It's true that under both the DPP city (Kaohsiung) and central administrations, Kaohsiung port is in the process of being expanded. But Kaohsiung will take five years to add another 2 million TEU of capacity (20% of current capacity), whereas Singapore will also take five years to add another 14 million TEU of capacity (over 50% of current capacity). The difference in scope and in the two governments' plans is truly mind-boggling. The DPP's incompetence in this respect is pitiful.
How does the DPP believe Taiwan can succeed as an Asia Pacific Operations Center if it lacks the proper logistics facilities while facing competitors like Singapore? How can Taiwan be able to increasingly "rely on trade" if it lacks the infrastructure to move goods in and out of the country?
2) Shipping volumes may arguably not be a direct indicator of economic well-being for the whole of Taiwan, but it is definitely an indicator of economic well-being for Kaohsiung. The government's failure to invest in Kaohsiung's port has likely cost the city thousands in jobs and millions in wealth. This has at least indirectly hindered Taiwan's economic growth.
The DPP should indeed learn from HK's and Singapore's models by properly forecasting growth and investing in port infrastructure. Most Singaporeans will agree that their economy cannot be successful without the logistics capabilities of their port.
3) The DPP's method of justifying Taiwan's slide in port rankings by comparing port rankings to economic competitiveness is, for lack of a better word, slimy and flawed.
The economic competitiveness index the DPP cites is from the World Federation of Exchanges, specifically securities exchanges. Its stated purpose is to "facilitate the representation, development of organized and regulated markets, and to meet the needs of evolving capital markets in the best interest of their users." How does being economically competitive from a capital markets standpoint inevitably lead to a decline in a port's competitiveness? There is no logical connection.
These kinds of tactics only further tarnishes the DPP's already tainted reputation, undermines their already bad credibility, and worsens their already poor record of governance.
Eric, the current plans are more complex than "Kaohsiung or no Kaohsiung". The reason for the smaller size of growth at Kaohsiung is that the expansion is taking place elsewhere -- in the designated satellite port at Anping, and also in the massive new port at Taipei, which will also hit Kaohsiung's ability to expland. Even if we opened to China, which, as everyone knows, will make us all instantly rich, beautiful, and young again, Kaohsiung still won't get that big a kick, because Taiwan is developing other ports in Taichung and Taipei that will expand the island's total port capacity, and because shippers will continue to go past the island directly to China.
ReplyDeleteMichael
To continue, the real issue is the continued inability of Taiwanese to quit asking "What? We're not number 1?" and instead start asking "What is all this development for?" Taiwanese are obsessed with such rankings. It's high time we all grew on past that.
ReplyDeleteMichael
The real question is WHY does the KMT think Taiwan can ever be an Asian Operations center in the first place?
ReplyDeleteDoes it make sense for Taiwan, an island with no links to a vast hinterland (like say... Hong Kong, Singapore, Shanghai/Pudong, Korea with its future rail link to Europe via Russia...) to be trying to become some kind of shipment center? What could the advantages possibly be for shipping to Taiwan, then rerouting again to China? What the hell is the point of not going to China directly?
Taiwan should focus on electronics/computers, biotech, precision machinery, branded businesses, organic/high value-added farming, digital content (esp Mandarin), research and development, not on empty, risky propositions to be a logistics center whose value can fluctuate widely with any small movement by China.
Great blog, Michael. I was directed to your blog by a friend, and I'm enjoying all your entries. Keep up the good work and keep on blogging!
ReplyDeleteHmm... I see that somehow my comment did not get recorded. I must have pressed the wrong button. If you see the other comment, Michael, just ignore or remove it. This one better responds to everyone in this thread and not just one person in it.
ReplyDeleteAnyways, I was going to say, in response to the seemingly logical question of "Why doesn't Taiwan simply develop Kaoshiung into a transshipment supercentre" that Taiwan is not as central on world trade routes as some may think.
Consider Singapore's location. It is right at a nexus of all of the trade routes -- between Asia, Europe, Africa, the Middle East and even Australia. Singapore is close to them all. It is therefore in an ideal position to be a transshipment centre.
Now consider Taiwan's position. Remember that transpacific trade does not travel in a straight line across the Pacific. It generally follows routes where there are a lot of ports -- up the coast of the US and Canada, past Alaska, over to Russia passing Vladivostok, down past Japan and Korea, past China, then to Taiwan and so on.
To be a huge transshipment centre, you need to be in a position that is close to other feeder routes. Sure having friendlier relations with China would improve Kaoshiung's position as a transshipment port. But we're not talking a huge difference here. That's because the only big markets that Kaoshiung is really close to that might have feeder routes are China and Japan, and those two countries both have well-developed ports that are in more convenient positions on the trade routes.
Now think of this. The Port of Singapore, the world's largest port in terms of throughput handled 28 million TEU last year. This is in country that has only one major port and is in a position that is on all of the major trade routes except for transpacific, and that MUST favor trade above all else because if it didn't, it would cease to exist. In case you haven't realised, Singapore has little going for its economy besides trade. All the same, Singapore does tap into a large hinterland. Don't forget that it is right at Malaysia's doorstep.
Now consider this. Freeport, is one of the largest transshipment ports in the Carribean (2nd behind Kingston). They are super close to the US market and easy to get to. They are also right at the centre of a major trade axis from Europe to South America. They are also in spitting distance of every major US port from Texas to Georgia. Many on the US coast are not. This gives it a unique selling point. Its position is not AS favourable as Singapore, but still not shabby. Yet Freeport handles 2 million TEU yearly.
Finally, consider this. Kaoshiung's influence as a port was built on days of low-cost manufacturing. It is a fact that as countries move up the supply chain, their exports slow. So naturally, the number of TEU that Kaoshiung is handling is declining.
Increased trade with China would naturally benefit Kaoshiung. However, the difference is not something that you can really criticise the DPP for because Kaoshiung would not be maintaining its rankings regardless of who was in power. They are just not in such a fantastic position as to be able to capture that much trade.
The low-cost manufacturing has all moved to China. What Taiwan exports now are high-end components (this would improve with better ties). But the volumes are simply not as great as the China ports. AND, as Michael rightly commented, Taiwan has three main ports for the same hinterland. The port of Taipei is not big into containers now, but that will change in the next few years. Competition within Taiwan is ALSO increasing.
Why do you think Shenzhen has grown from nothing to 20 million TEU in 15 years? Why do you think Shanghai has grown to 26 million in the same period? Good port facilities. Locations right on trade routes. Serving vast hinterlands with low-cost manufacturing.
Kaoshiung CANT compete with that. But this is natural. So yes, better ties with the mainland would help Kaoshiung stave off decline. But don't make dumb comments based on Pan-Blue propaganda.
Thomas --
ReplyDeleteI'm losing comments from time to time because the blogger system sometimes returns an error message when I hit accept. Dunno why, that's just the way it is. Very annoying.
Sorry about the inconvenience, and thanks for all the wonderful comments.
Hello, I read on your blog awhile back that KMT campaigners dressed up as DPP supporters and tried to convince your wife to support the KMT. A friend asked me about it, and I was trying to find the post through Google, but no luck. If you remember the post, would you be kind enough to provide a link?
ReplyDeleteMichael & Thomas, I agree that Taiwanese are too obsessed with rankings and should learn to look beyond it. But a diverse set of relevant rankings does provide a good picture of a country's standing, especially economically. It's just too bad that politicians manipulate rankings to serve their own purposes, just as the DPP has demonstrated in your post.
ReplyDeleteThe Taipei port and Keelung port will together be able to handle over 4 million TEUs by 2014. They allow companies to avoid the high costs of moving containers south to north by land, and so primarily handle goods going into and out of northern Taiwan. These ports are small potatoes compared to Kaohsiung, which, as I mentioned in my previous post, will be able to handle 12 million TEUs by 2013. Taiwan's place in international shipping still flows through Kaohsiung.
Thomas, your analysis is flawed. First, there's no doubt that Singapore is in a great location, probably the world's best location for international trade, right at the Strait of Malacca. But Kaohsiung is in the same trade routes as Singapore, Hong Kong, Shanghai, and Busan. It is the main outlet for all the high-tech goods that Taiwan produces for the world. Its location is not as much a hinderance as its relatively poor infrastructure.
Second, the TEUs Kaohsiung is handling is not declining. As I mentioned in my previous post, the port actually reached its peak capacity in 2007 and will continue to do so for the next few years.
Yet Kaohsiung port will be unable to see growth for another five to six years. Kaohsiung port can't grow not because of poor location but because of a lack of infrastructure investment. Kaohsiung's ranking has declined because it has stood still while ports from Korea, China, and Singapore have been adding capacity (Singapore will be able to handle over 50 million TEUs by 2013) in anticipation of greater volumes. This is very sad for a city whose identity and economy is, to a large extent, defined by its port.
Third, what successful country, especially export-oriented countries like Taiwan, does not favor trade above all else? Trade has propelled Singapore to eight in GDP per capita ($48,900) while Taiwan is at 42nd ($29,800). That's a ranking everyone cares about.
Any political party that caused growth to flat-line due to poor planning and lack of competence should be rightfully kicked out. In this case it's the DPP.
Kaohsiung CAN compete. It doesn't just take a decent location, but also an industrial base, favorable policies, high productivity, modern technology, and, of course, infrastructure investment. The people of Kaohsiung and Taiwan can compete on all these levels. They only need a competent government that fulfills their needs.
Anon, the encounter is Fun with Campaign Volunteers.
ReplyDeleteEric, great response. But you can't wholly blame the DPP for that. Two political parties run the island. Sure, the DPP ran the mayoralty, but the KMT controlled the city council -- which was completely and utterly corrupt (see Chu An-hsiung case). Similarly, the central government was DPP, but the national legislature was KMT. If the KMT felt the port was underdeveloped, all that had to be done was introduce a bill.
And another thing. Despite the promises of growth, after the BOT was tendered a year went by before any business got involved. Why? Because nobody was forecasting the kind of growth you think will occur. So no one -- not the DPP, not the KMT, not the local businesses -- saw that need for more capacity at Kaohsiung, especially with more capacity going in elsewhere.
Also, to kick out a political party because of delays in developing a port, when it is busily developing ports elsewhere, and when the alternative is completely corrupt party that has rendered the nation's agricultural coops, irrigation systems, city councils, temple associations, and other public associations totally corrupt, forged links between organized crime and government, and prevented punishment of those who ran the security state and killed on its behalf -- is completely absurd. Instead of replacing what you see as incompetence with proven incompetence and evil, work to reform the DPP.
But if incompetence in port administration is your marker for whether to switch parties, why don't you condemn the KMT for letting the situation deteriorate throughout the 1990s? And for going for the Free Port legislation in 2003, which the legislature took a year to pass, and which all sides supported, but did not appear to provide the necessary stimulus? That was another example of "cargo cult" thinking.
BTW, the plans for the further harbor expansion were completed in 2003 as well. The long delays in making and implementing policy are not unreasonable for a policy process involving many many actors with differing views and goals.
Michael
"But Kaohsiung is in the same trade routes as Singapore, Hong Kong, Shanghai, and Busan."
ReplyDeleteReread what I said. I did not say Kaoshiung was not on a trade route. Remember my point about trans-pacific routes going from Cali to Canada to Russia to Japan and Korea to China to Taiwan? What I said was that KSS was not at a nexus of trade. Singapore is where the routes all intersect. This makes it a natural place for transshipment. Trade routes do not intersect at Taiwan.
Secondly, what I meant to say was that the rate of growth was declining. My brain is still trapped in the figures of two years ago when port DID experience negative growth (by 2.5 percent in 2005). They only rose by 3 percent a year later. How about 2007? They reached 10 million TEU on December 24th (Taipei Times). This is up from 9.77 million in the preceeding year. That is far less than even 3 percent. We're talking negligeable growth here, if not totally negative.
My point is therefore still valid. Most transshipment growth that or other growth that Kaoshiung could tap into has already been tapped into. Improving relations with China could help a bit, but Kaoshiung is not going to be experiencing any huge spurts in the future. They don't have the manufacturing base, and they're not in the most ideal position. They're also faced with competition, as you admitted, whether large or small, from Taipei and Keelung. Oh and another. Since we're talking transshipment, don't forget the port of Xiamen right across the water. They now handle around 9 million TEU per year and were not a factor 10 years ago. They are a competitor for transshipment cargo.
So lighten up on the DPP. You make it sound as if Kaoshiung would be booming if only for better management. But you have not yet really made a convincing case for how Kaoshiung could be expanding at a rapid rate.