1. 1 Global Logistics -- A New Way of Doing Business in Taiwan Chi Schive President Taiwan Academy of Banking and Finance Advisor Council for Economic Planning and Development Global Entrepreneurship for the New Millennium Syracuse University August 21, 2000

2. 2 Global Logistics -- A New Way of Doing Business in Taiwan Outline I. Introduction II.Factors behind global logistics (GL) III.The emergence of GL in Taiwan: a brief review IV.Taiwan’s two-way investment flows V.Production fragmentation by Taiwan firm: an integrator VI.GL and information industry VII.Infrastructure for GL VIII. A new way of doing business in the region

3. 3 Behind the Emergence of Global Logistics Production fragmentation - Classic trade theory To push cost down, vertically integrated production processes are taking place across country borders. New phenomenon Shortening product cycle is generating inventory pressure. New phenomenon ICT reduces the cost of information transmission and goods transportation.

4. 4 Operation Characteristics in Taiwan: from OEM to GL Before the mid- 1980s In the late 1980s and early 1990s After the mid- 1990s : Local operations

5. 5 Japan Taiwan U.S. I:Investment M:Materials/Intermediates Q:Finished product/commodity S:Strategic alliance Before the mid-1980s Late 1980s and early 1990s After the mid-1990s ASEAN I&M M Q Q S Q Q Taiwan’s International Division of Labor from Triangle to Diamond China I&M Q S

6. 6 Investment in Southeast Asia and China According to Host Country Statistics US$ million Sources: Board of Investment, Thailand; Malaysian Industrial Development Authority, Malaysia; Board of Investment, the Philippines; Investment Coordinating Board, Indonesia; State Commission for Cooperation and Investment, Vietnam; Ministry of Foreign Trade and Economic Cooperation, mainland China.

7. 7 Production Fragmentation by Taiwan Firms, 1998 % Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities,July 1999.

8. 8 Foreign Production of Taiwan Firms, 1998 % Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities,July 1999.

9. 9 Geographic Distribution of Sales of Domestic Production, 1998 Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities, July 1999. In Chinese %

10. 10 Sources of Materials/Intermediates of Taiwan Domestic Firms, 1998 Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities, July 1999. In Chinese %

11. 11 Production Sharing of Taiwan’s Information Industry % * Estimates. Source: Market Intelligence Center, Institute for Information Industry.

12. 12 Exports to Mainland China % Source: Board of Foreign Trade, ROC.

13. 13 Imports from Mainland China % Source: Board of Foreign Trade.

14. 14 Shipment Distribution of Taiwan-based Companies by Countries of Major Investment Source: Ministry of Economic Affairs,. Survey on Foreign Investment by the Manufacturing Industry, 2000. Taipei, Taiwan. %

15. 15 Central Geographic Position The average flight time between Taipei and other Western Pacific cities is the shortest.

16. 16 High-Tech Share of Taiwan’s Exports % 52.1 26.0 Manufacturing Strength

17. 17 UPS 66 Unscheduled flights Unit: flights/week FedEx Source: UPS, FedEx No flight prior to the establishment of transit hubs 63 70 Achievements - Air Transportation Flights by foreign couriers up 42% in 4 years.

18. 18 Source ： ACI (Airports Council International). CKS Airport was the only Asian airport that maintained a positive growth of air cargo in 1998. Hong Kong Tokyo SeoulSingapore Taipei Bangkok Kuala Lumpur Manila Performance of Asian Airports after the Crisis

19. 19 Unit: 1,000 tons Dec. 1995 Express Handling Unit established Source: Civil Aeronautics Administration, MOTC Oct. 1996 UPS transit hub established Aug. 1997 FedEx transit hub established Mar. 1998 Combined clearance system implemented Achievements - Air Transportation Air cargo volume increased 41% from 1955 to 1999.

20. 20 Source: Institute for Information Industry, TAS homepage, OFTA homepage Unit ：％ Achievements - Telecommunications Popularization of Internet use

21. 21 1. DELL sends a request to Taiwan upon a Singaporean client order 2. The U.S. firm sends CPU to Taiwan 3. China sends cases and power supplies to Taiwan 4. China sends semi-assembled parts to Taiwan 5. Malaysia sends PCB to Taiwan 6. Taiwan sends DRAM mainboard and semi-asembled parts to Singapore 7.China send monitors to Singapore 8. Singapore assembles and sends the finished PC to the client 9. DELL sends the payment to Taiwan Singapore China U.S. DELL 5 PCB 6 1 2 4 Order CPU MONITOR 9 DRAM main- board 8 PC 7 Source: Prepared by CEPD. 3 Taiwan as a Global Logistics Center Taiwan Malaysia Steps 1 to 8 take 2 to 5 days to complete

22. 22 A New Way of Doing Business in the Region Intra-regional Trade as a percent of Total Trade