December 15, 2008 / 6:03 AM / 9 years ago

China transport links to help spur Taiwan economy

TAIPEI, Dec 15 (Reuters) - Taiwan’s launch of direct cargo links with China on Monday will help it better compete with rival transport hubs Hong Kong and Singapore, while logistic firms are poised to triple contribution to economic growth, analysts say.

The launch of first-ever direct cargo flights and shipping routes between both sides marked a resumption of services after a six-decade gap dating back to the end of the Chinese civil war in 1949.

Taiwan’s Kaohsiung port was one of the world’s top ports as recently as the late 1990s, but its ranking has slipped steadily to No. 8 in 2007 as Chinese ports caught up due to China’s growing economic clout.

Taiwan ports have also lost business to fast expanding regional transportation hubs such as Hong Kong and Singapore.

“It’s never too late to implement these links,” President Ma Ying-jeou said at a ceremony in Kaohsiung, once the world’s third-largest port and launch point for the first ship taking the direct route to China under the new agreement.

Taiwan leaders say the links will spur Taiwan’s economy in years by luring more businesses to set up shop in the island due to its closeness with China.

Previously, goods from Taiwan had to be transported to a third destination, such as Hong Kong, before heading towards China. Direct links could save shippers about T$1.2 billion ($36 million) a year through shorter transit times and lower fuel costs and working hours, according to government estimates.

Ma’s China-friendly policies have been welcomed by Taiwanese businesses, which have long complained that they were losing competitiveness to Asian peers due to testy ties under former President Chen Shui-bian.

Transportation, logistics and communications contributed just 0.14 percentage point to Taiwan’s GDP growth of 5.7 percent in 2007. But analysts say the figure could at least triple under the new agreements and infrastructure improvements.

Taiwan’s transport firms, such Evergreen Marine (2603.TW), Wan Hai Lines (2615.TW) and Yang Ming Marine Transport Corp (2609.TW), hope Monday’s launch will mark a watershed, helping them to get a more competitive edge.

    Taiwan's transporatation sub-index .TTPI outperformed the market earlier in the day by rising as much as 5.7 percent before erasing some gains to end 2.6 percent higher, lagging the main index's .TWII 3.0 percent rise.

    “These links will put Taiwan’s shipping firms on a more level playing field in the region,” said Frank Lu, chairman of Yang Ming Marine, Taiwan’s second-largest cargo shipping firm. “We’ve been yearning for this for years.”

    But the island will need to seize the moment if it wants to reclaim a place alongside such logistics powerhouses as Hong Kong and Singapore, analysts said.

    “The current financial crisis is a good time for us to catch up with our rivals,” David Hong, president of Taiwan Institute of Economic Research, referring to Hong Kong and Singapore.

    “These deals will definitely help, but it will require a lot more other things to create a package to convince foreign investors that Taiwan has all it takes to become a key transportation hub in Asia,” Hong said.

    $1=T$33.2 Taiwan dollar For a related story, please click [ID:nTP350629] For a related factbox, please click [ID:nTP164553] Additional reporting by Lin Miao-jung, Christine Lu and Ben Tai, Editing by Jacqueline Wong

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