Foreign Trade Increase
Taiwan's foreign trade will continue to increase in 1967 but with exports growing faster than imports. K. H. King, vice chairman of the Foreign Exchange and Trade Commission, made these predictions in reviewing 1966 foreign trade, which topped the US$1 billion mark for the second straight year. King said the international price of sugar, usually Taiwan's biggest exchange earner, is expected to rise this year or next. Another optimistic note is resumption of trade with Indonesia, which has a population of more than 100 million. According to the U.S. Department of Agriculture, world sugar production increased by 8 million short tons in 1965-66 but by only 4 million short tons in 1966-67. Stocks in various countries have decreased but consumption has risen. This situation is expected to lead to a price rise in 1967, possibly to be followed by a drastic increase in 1968. Taiwan received orders for US$18 million worth of cotton textiles from Indonesia last year. Other products may be sold there this year. King said the only discouraging prospect for exports is in iron and steel. U.S. aid procurement of iron and steel products for Vietnam has been restricted to the United States. Unless the order is relaxed, Taiwan will lose a US$25 million market. King predicted sharp increases in export of sea products, plastic goods, and rubber manufactures. Sea products — including frozen shrimp and lobsters, frozen fish, and fresh fish sold at foreign fishing bases — earned US$2 million in 1965 and US$8 million in 1966. A further increase is expected this year as processing facilities are expanded. Taiwan has been exporting PVC sheeting, slippers, window shapes, flowers, bags, and rope. Export volume topped US$8 million in 1965 and US$10 million in 1966. Additional plastic raw materials are being made in Taiwan. This will lead to expanded exports. Taiwan has been exporting such rubber products as boots, shoes, tires, tubes, raincoats, belts, and mattresses. The 1965 export record was US$4 million and the 1966 figure US$5 million. Production is still increasing. Taiwan's major exports are textiles, sugar, plywood, bananas, iron and steel manufactures, chemicals, rice, canned mushrooms, canned pineapple, and cement, all exceeding US$20 million annually. Other leaders are canned asparagus, paper, fresh and preserved fruits, and vegetables. King said that in the next three to five years, the Philippines, Iran, Australia, and Holland may emerge as bigger buyers of Taiwan exports. Leading customers now are Japan, the United States, Vietnam, West Germany, and Hongkong. As exports continue to rise, so will imports, King said, because equipment, machinery, and raw materials are needed. Largest import increases are expected in timber, cotton, ores, metals, raw chemicals, synthetic fibers, plastic raw materials, rubber, machinery, equipment, wheat, and beans. King said several factors have contributed to the expansion of Taiwan trade. They include a stable unitary foreign exchange rate and relaxation of trade controls. The exchange rate has been NT$40 to US$1 since September of 1963. Relaxation of trade controls has included cancellation of export floor prices, permission for imports on credit, and the moving of a number of commodities to the permissible import list. King said the rising living standard in many countries also has contributed to the expansion of Taiwan exports, as has the Vietnamese war. To promote trade, King said, the Chinese government will continue to carry out these policies: —Maintenance of a unitary foreign exchange rate. —Further relaxation of trade controls. —Improved tax rebate procedures for exports. —Expansion of export production capability. —Manufacture of high quality products for export. —Strict export inspection. —Planned production and joint export of processed agricultural products. —Diversification of exports. —Opening of new foreign markets. —Promotion of sales abroad, including foreign exhibition of Taiwan products, more trade visits and publicity, and collection of additional trade information.
Sales of Citronella
The United States and Japan bought more than 80 per cent of Taiwan's citronella oil in 1966 and this amount will remain unchanged in 1967, according to B. H. Wu, chairman of the Taiwan Regional Association of Vegetable and Essential Oil Exporters. Wu said citronella oil exports have increased in the last decade. But because of lower prices, foreign exchange earnings have decreased. He said that in 1963 Taiwan earned US$6,931,000 from the export of 2,436 tons at average price of US$0.95 per pound. In 1965, exports increased to 3,679 tons but earnings were down to US$5,318,000 because the price declined to US$0.70 per pound. Citronella oil is extracted from citronella grass, which contains geraniol and citronellal. Wu said the Chinese national standard stipulates that for export, citronella oil must contain geraniol of 85 per cent purity and citronellal of 35 per cent purity. Taiwan supplies about 70 per cent of the world requirement. Most of the rest comes from Guatemala. The oil is used in making perfumes and synthetic menthol.
Corn Change Sought
Local feed producers last month urged that corn imports be handled by all traders to assure an adequate supply. Imports now are handled only by the Central Trust of China, a government trading agency. Feed producers said corn is a major material in preparing feeds for hogs and chickens. They said Taiwan slaughtered 264,100 tons of hogs and 37,800,000 head of poultry in 1966. Thirty per cent of the feed for hogs and 68 per cent of the feed for poultry came from corn. According to statistics of the Foreign Exchange and Trade Commission, Taiwan produces 40,000 to 60,000 tons of corn annually. About 100,000 tons must be imported. Government also is studying the pros and cons of further control over the import of powdered milk. Dr. Robert Lee, animal industry chief of the Joint Commission on Rural Reconstruction, said last month that further controls are desirable. However, he said the controls should be imposed gradually to permit local producers more time to develop their products. Dr. Lee advocated additional milk processing plants in Taiwan with imported powdered milk purchased in bulk as the raw material. He said this will save money. As for establishment of additional plants, Dr. Lee said investors should be obliged to buy fresh milk locally so as to develop the Taiwan dairy industry. He praised importers for giving funds for dairy development. A tax on powdered milk imports is earmarked for assistance to dairy farmers. The Foreign Exchange and Trade Commission has not yet decided on further milk powder import controls. It said it will respect the opinions of experts and of the public.
Salt Exports Slashed
Increasing domestic demand has cut salt exports drastically. Chu Chiu-yin, director of the government-operated General Salt Administration, said 1966 exports totaled only 136,000 tons, compared with the record of 300,000 tons. The domestic demand came mostly from the chemical industry. Taiwan salt has been sold to Japan, the Ryukyus, Singapore, Australia, Hongkong, and Malaysia. Chu said some 15,000 persons are engaged in salt production, mostly in the southern part of the island. Some work for wages, some under contract. The living standard of salt workers has been much improved, Chu said. A few years ago workers did not have sufficient fresh water and diet was almost exclusively seafood. Now they have pork, vegetables, and milk. Education and public health also have reached salt villages. The government has built schools and clinics exclusively for the salt workers, Chu said.
Bananas for Italy
Taiwan airshipped 200 pounds of bananas, packed in six cartons, to Italy in January as a trial sale in a new market. The shipment was handled by the Foreign Exchange and Trade Commission. It had received reports that Italy might buy large quantities of bananas. FETC said it also has received information that Kuwait, a Middle Eastern nation, wants to buy Taiwan bananas. An importer there has asked for quotations. The trade authority reported that for 1966 Taiwan exported 7.7 million baskets of bananas, earning about US$57 million in foreign exchange. The average price was US$7.2 per basket. Of 1966 foreign sales, FETC said, nearly 95 per cent, or 7.5 million baskets, went to Japan. Other buyers were Korea, the Ryukyus, and Hongkong. As Taiwan banana production is increasing, the government has encouraged the opening of new markets. Food processors have been asked to prepare frozen bananas and banana powder for export.
Flavor Enhancer Price Up
Trade circles reported last month that the international price of monosodium glutamate is moving up after the slump of last year. In January the price went up from US$0.39 to US$0.42 per pound. Taiwan manufacturers are receiving orders from Southeast Asia and such European countries as Holland, Switzerland, and Germany. The Taiwan Provincial Farmers' Association announced in January that for 1967 onion exports will be limited to 550,000 cases (20 kilograms), 500,000 of them to Japan. The minimum price for onions to Japan is US$2 per case, C&F Yokohama, and that for other areas US$1.60 per case, FOB Keelung. The association said it will distribute orders to member farmer associations. The Foreign Exchange and Trade Commission said in January that Canada is ready to buy canned oranges and tomatoes from Taiwan. Suppliers interested should provide quotations immediately. FETC reported that for the contract year ended September, 1966, Taiwan sold 55,700,000 square yards of cotton textiles to the United States, representing 97.8 per cent of the quota of 56,900,000 square yards. The U.S. quota system has been in effect since 1962.
Paper and Pulp Sales
For the first time in history, the value of Taiwan paper and pulp exports exceeded US$10 million in 1966. The China Paper Trading Company said the goal was only US$5 million. About half of the total went to Vietnam, which increased U.S. aid procurements last summer. The prospect for this year is just as good. In cooperation with the Honshyu Paper Kabushiki Kaisha of Japan, Taiwan soon will build a large kraft pulp plant at Hualien in eastern Taiwan. Three forest areas have been assigned by the Taiwan Provincial Government to supply logs solely for this pulp plant. Volume will be 230,000 cubic meters annually. The plant will be built in two years and produce 150 tons of pulp daily. Capitalization is estimated at NT$280 million, or US$7 million.
Electronics Manufacturing
In a few years Taiwan may be the second largest electronic manufacturing center in the Far East, ahead of Hongkong and behind only Japan. This is the forecast of S. Y. Dao, secretary-general of the Council for International Economic Cooperation and Development. Dao reported that as of the end of 1966, 16 foreign-capitalized electronic plants were in operation. They were giving employment to 4,000 persons. Applications for additional plants now under government consideration total more than 40. Foreign investment in electronic manufacturing involves technical and management know-how as well as capital, Dao said. In screening applications, the government will give priority to plants that will provide the most employment, earn the most foreign exchange, and promote the development of other industries. In January, K. P. Hu, a Chinese radio and electronic expert, analyzed foreign investment in Taiwan electronics. He said low labor cost is the major attraction, followed by cheap power, reasonable costs for factory buildings, and tax exemptions. Hu was told by U.S. managers of Taiwan factories that the efficiency of Taiwan female workers is very high. On the average it takes Taiwan girls a third less time to learn an operation than their American counterparts and they do a better job. But their wage is only US$20 per month as against US$300 in the United States. This wage rate is a third that of Japan and half that of Hongkong, Hu said. An American company can save US$2 million yearly by shifting the work of 1,000 girls from the United States to Taiwan. Additionally, Taiwan has no labor-management conflict. Hu said that except for a few Sino-Japanese or Chinese-owned factories which are making small quantities of radio and TV sets, nearly all of the Taiwan electronic plants are making components, parts or sets exclusively for the export market. No duty is levied on raw materials or parts for products to be exported. Components and parts manufactured in Taiwan fall into these categories: —Coils, resistors, capacitors, transformers, TV tuners, yokes, radio-phone pickups, and record changer heads. —Semi-conductors, magnetic cores and matrix, and integrated circuits. —Components and parts for microwave communications, appliances, and industrial automation control equipment. —Transistorized and tube radio receivers and TV sets. Hu said investors may choose among these forms of organization: (1) wholly owned subsidiary, (2) joint venture with a Chinese investor with the foreign manufacturer holding the majority interest, (3) joint venture with the Chinese investor holding the majority interest, (4) joint venture with 50-50 interest, (5) long-term processing contractual arrangements providing for the supply of raw materials and purchase of all or part of the output. Hu said most U.S. firms in Taiwan have adopted the first or the fifth arrangement. They include the General Instrument Corporation, Philco Corporation, and TRW Inc.