Q: Given Taiwan's current state of economic development, what is the significance of establishing free ports?

A: As the "global village" effect has taken hold, international corporations have begun to deploy widely the "global logistics" model of operations. The world now has more than 600 free ports and free trade zones (FTZ). Governments in Europe and the Americas, as well as in nearby Singapore and Hong Kong, are using free ports as a means of offering commercial trade, industrial processing, technology development and logistical services all in one place. As Taiwanese firms have expanded overseas, they have been greatly impressed by the benefits that free ports offer and have developed a deep understanding of how advantageous such ports are to corporate operations.

In this globalizing environment, Taiwan's geographic position makes it an ideal location for free ports. Recognizing this, early in 2002 the Executive Yuan ordered the CEPD to begin actively planning free ports, which could be used to test the feasibility of the complete liberalization of trade in Taiwan. We hope that by simplifying procedures for the transshipment and processing of goods, in particular by reexamining related regulations, we can get Taiwanese firms and multinational corporations excited about using Taiwan as a base for their global logistical operations.

Q: Some people see free ports as a test case for direct cross-strait links. Do you agree with this view?

A: Everyone-legislators, scholars, experts-is concerned about this point. The free-ports plan was put together to meet the needs of corporations within the "global deployment, roots in Taiwan" framework. The plan is not specifically targeted at direct cross-strait links.

However, if these free ports can incorporate the functions of "offshore transshipment centers"-where transshipped goods do not clear customs or officially enter Taiwan-to facilitate the movement of goods from the mainland to some third destination or from some third location to the mainland, then we can achieve this by simply expanding the operations of the offshore transshipment center at Kaohsiung Harbor. If the two functions of free port and transshipment center can be successfully integrated, it can serve as a substantive test case for direct links.

Q: How will establishing free ports change the character of cross-strait trade?

A: Looking ahead, if free ports incorporate the functions of offshore transshipment centers and complement direct cross-strait links, they will certainly assist multinational corporations in deploying resources on both sides of the strait as part of their globalization efforts, by facilitating corporate activities such as exhibitions, meetings and the transport of the goods that firms most urgently need. We believe that regardless of whether we are speaking purely about transshipment, or about processing and repackaging goods, the ports must complement the cross-strait division of labor. And whether we are talking about sea freight transferred to another sea-going vessel, sea freight transferred to cargo planes, or airfreight transferred to ships, transshipments will improve the operating efficiency of Taiwan's airports and harbors, and provide great economic rewards.

Q: What should the business community expect from the government's free port plan?

A: The business community can look forward to all unnecessary government regulatory measures being eliminated. With the establishment of free ports, Taiwan will become a key East Asian base for Taiwanese and multinational firms. Taiwan will grow into a distribution center for East Asian capital, goods and personnel. This will greatly enhance Taiwan's position as a link between the mainland and the world, to the great benefit of Taiwanese firms that have put down roots and grown strong on Taiwan's soil.

In the future, firms operating in the free port will enjoy "one-stop service" and autonomous operations, which will allow them to freely move and process their products. The ports will also provide an environment that facilitates commercial activities and lets companies pounce on trade opportunities before they slip away. We forecast that by 2008, free ports will reduce trading costs by more than NT$200 billion, greatly enhancing the competitiveness of local firms.

Q: Do you think that establishing free ports will alleviate the problem of local firms moving overseas?

A: Of course. The free ports currently being planned will allow a high degree of freedom in the flow of goods and personnel. This kind of environment offers strong legal protections and gives firms greater autonomy. Taking a natural phenomenon as an analogy-if you provide a queen bee and her workers with a suitable environment, the bees bring back pollen from all over. That pollen is used to produce honey and the hive grows ever larger. If we can get these free ports established, similarly hard-working businesspeople will happily make Taiwan a base for their processing, marketing and logistical operations. Firms will be knocking down our doors to set up operations here, not heading for the exits.

Q: What will be competitive about our free ports versus those of our neighbors?

A: Taiwan's geographic location is incomparable. Taiwan is located at the heart of East Asia, a location that makes it very well suited to becoming an Asian distribution center for major American and European firms. A number of computer makers are already using Taiwan as this kind of base. If we take the correct course and promote more comprehensive policies and plans, we believe that we can cast Taiwan's unique advantages in sharper relief.

In addition, most of the neighboring nations with which we compete, such as Singapore, focus on transshipment services. Taiwan, however, has a diverse and closely-knit manufacturing base. Consequently, we hope that our free port plan will make it easier for local firms to offer comprehensive processing and R&D services. These kinds of advanced, high value-added services constitute Taiwan's particular competitive advantage.

A report commissioned by the Ministry of Transportation and Communications revealed that one transshipped container of cargo generates US$1,625 in added value. In comparison, a transshipped container of cargo that also undergoes rudimentary processing generates US$4,750 in added value. And a transshipped container of cargo that undergoes advanced processing creates US$18,500 in added value. On this basis, Taiwan should be putting its efforts into advanced processing. We must grasp this opportunity and make the best possible use of it.