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Building ties with Taiwan.

Building Ties With Taiwan

THROUGHOUT THE LAST half of 1989, the world gasped at one miraculous European development after another. In the streets of eastern bloc capitals, human aspirations for political and economic freedom finally began to overcome the crumbling confines of totalitarian rule.

A world away, and directly linked to Alaska's economic future, similar and equally important developments have been occurring in Taiwan for the last two years. This island nation, no bigger than tiny Netherlands but packed with 20 million people, has performed some economic miracles of its own.

Taiwan is a country in social ferment, awash in cash (an estimated $76 billion in cash reserves), with a voracious appetite for natural resources. Increasingly, Alaskan businesses are trying to satisfy that appetite with shipments of oil, coal, fish and timber, making Taiwan Alaska's third largest trading partner after Japan and Korea.

In 1988, the Alaska-Taiwan relationship was recognized as coming of age with a significant sister-state agreement. In 1989, Alaska opened its first Taiwanese trade office. Located in Taipei, the trade assistance and promotion office is headed by Li Chen, a Chinese-born trade specialist who has been doing business in Alaska.

According to Bob Poe, director of the Governor's Office of International Trade, phenomenal growth in Taiwan trade, fueled for the last three years by the sale of Cook Inlet royalty oil and Native-owned timber, is likely to continue.

Former Gov. Bill Sheffield, now a consultant for Arctic Slope Regional Corp., is involved in trying to sell Western Arctic coal to the Taiwanese. He was instrumental in formation of the Alaska Taiwan Business Association more than a year ago. The organization of more than 30 members works to promote trade and cultural contracts between residents of Alaska and Taiwan.

Sheffield says, "We've had lots of Taiwanese people come through here. It's our hope that we can take a delegation to Taiwan and encourage them to start their own association. ... There are lots of little things going on between the two countries we don't know much about."

In 1988, Alaska sold almost $100 million in products to Taiwan. Between 1986 and 1988, sales of fish products increased from $330,000 to nearly $6 million. By the end of the third quarter of 1989, fish product exports to Taiwan hit $9.4 million.

Alaska's timber sales to Taiwan grew from $10 million in 1986 to a whopping $41.7 million in 1988 and were tallied at $33.7 million as of the third quarter of 1989. The value of petroleum exports jumped from $4.3 million in 1986 to nearly $33 million in 1988, but likely will have slipped when year-end totals are complete for 1989; third quarter 1989 figures indicate $18.8 million in sales to Taiwan.

Overall, Alaska's exports to Taiwan increased 171 percent from 1986 to 1987 and 138 percent from 1987 to 1988, when sales totalled $99.6 million. Alaska's exports to Taiwan as of the third quarter of 1989 were valued at $74.3 million.

There is agreement in Alaska's public and private sectors that opportunities for future trade growth with Taiwan are expanding, but that much work building relations and markets remains to be done. Relationships with Taiwan inevitably will be influenced by a shifting social and economic backdrop, rooted in the country's peculiar history.

Taiwan's relationship with the United States and the rest of the world underwent considerable change during the 1970s as mainland China emerged into the limelight of international legitimacy. In the process of diplomatic rearrangements, Taiwan essentially lost its status as a nation, although for practical purposes it continues to function independently and has a special relationship, particularly with the United States, its largest trading partner.

Poe believes this situation explains the great importance the Chinese islanders place on the new sister-state agreement forged with Alaska. "It makes a difference to them, it's a formal recognition of Taiwan. And when you do that, they're very sincere about working with you to develop trade," he says.

Although Taiwan's adoption of the western model of economic development from the country's inception in the 1940s and a land reform program in the 1950s ultimately made the nation an Asian success story, political restraints hindered growth in many ways.

According to the Far Eastern Economic Review, "Taiwan in 1988 suffered from all the withdrawal pangs of a country emerging from long authoritarian rule. Recurring social and political upheavals hit despite - or maybe as a result of - changes introduced in the previous year. In the broad picture of political development, however, the turbulence represented growth pains rather than retreat."

One major factor accompanying recent changes is the new permission the Taiwanese have to spend their personal funds abroad. But Taiwan's affluence has brought problems as well. The magazine Far East Business notes business people are complaining that an easy money mentality is making people unwilling to work long hours. "So much idle cash is floating around that an easy money mentality has developed, making Taiwan an island of speculators scrambling for the fast buck," the publication reported in its October 1989 issue.

To a certain extent, however, these developments are linked to changes occurring throughout the Pacific region. The export growth model pioneered by Japan, then copied by Taiwan and others, is now being duplicated in Malaysia, Thailand and other countries.

As wages rise among the first generation of Asian exporters, the labor-intensive industries move to less-developed countries nearby where wage scales are lower. Meanwhile, the economies of Japan, Taiwan and their ilk shift into more sophisticated, capital intensive manufacturing.

As Asia responds to its problems and potentials, it hungers for food, fuel, products manufactured from foreign raw materials and the good things in life - like a trip abroad. Alaskans are finding opportunities in filling the needs and growing consumer desires of Taiwan and its neighbors.

The 49th state's exports to Taiwan got their first dramatic shot in the arm when Taiwan successfully bid to buy Cook Inlet royalty oil. That Pacific Rim nation has been the high bidder for three years running, and could well continue to be, according to the Office of International Trade's Poe. Taiwan is also a potential market for Alaska's natural gas.

Koncor Forest Products Co. of Anchorage, under the leadership of former state forester John Sturgeon, pioneered sales of Native-owned timber to Taiwan. The firm also has turned a profit securing hardwoods from the Lower 48 to export to Taiwan.

Surgeon told a seminar on Taiwan trade last year. "We're picking up more customers every day, but it just takes time. We're getting a better price for our logs than the Japanese will pay, and they are buying the product the Japanese really don't want that much. In addition, they're getting a bargain price. We're more or less splitting the profits with them. They're happy, we're happy, and hopefully we can continue that."

Sheffield, an advocate of coal sales to Taiwan, says, "The prospects look good. We've got coal samples from the Western Artic being tested in Japan and Taiwan. We're looking for their investment capital, which opens up a lot of new possibilities. Where coal is exciting is that not only is there a lot of it and it's good quality, but once you've got it moving, the price stays stable. It doesn't move around."

According to Poe, Taiwanese planners had pinned their hopes for future energy needs on nuclear power, a notion increasingly unacceptable to the citizenry. Poe says the country is gagging on air that makes Los Angeles look good.

Alaska's low-sulfur coal is meeting resistance, however, Poe adds. "It's different coal than what is normally thought of as steam coal on the international market. One of the jobs we have to do is to get utility customers to adapt to our type of coal," he explains.

Poe points out that in the near future Alaska may succeed in marketing minerals to Taiwan. In particular, lead, silver and zinc are used by the Taiwanese in manufacturing.

Despite the heated controversy with Taiwan over high-seas interception of Alaskan-born salmon, Poe anticipates growth in seafood exports. A new fisheries enforcement agreement, coupled with opening of the Alaska office in Taipei, should help to open more doors to Taiwan's fish market.

Poe says cod, pollock and snapper are among the more popular fish in Taiwan and that the Taiwanese prefer to buy live fish. "If we can find a way to provide some of our fish products live to Taiwan, that would be very attractive," he adds. Poe says he knows of Alaskans who are working to shape such a venture and may enter the market with yellow rockfish, the red snapper.

Another area in which the state is attempting to encourage business with Taiwan is tourism. But tourism consultant Dale Fox, who accompanied an academic mission to Taiwan, sees numerous obstacles. He notes Taiwanese travelers are spreading their wings in the other parts of Asia and says various factors, including the complexities of negotiating charters and landing rights, tarnish prospects for increasing tourism soon.

Poe identifies two other niches he believes are especially hot prospects for near-term trade with Taiwan. One, which builds on an existing Alaskan industry, is the sale of specialty food gift packs. He says baskets or decorated boxes of Alaskan fish, sausage, jerky and jams and jellies would bring a high yield during Taiwan's two spend-happy gift-giving seasons.

The other potential for solid growth is related to Federal Express' construction of a $11 million parcel-sorting center in Anchorage. "Federal Express has just announced that Taipei will be its Asian cargo hub. When you combine the good relationship we have in Taiwan already, with having the Federal Express world hub here in Anchorage, there may be some excellent added cargo opportunities," says Poe.

He notes it makes great strategic for Federal Express, because Taipe is more central to a burgeoning, blossoming Asia than Japan. Besides, Taipei has an open sky policy toward the United States and much less congestion.

"One of the things Anchorage can offer is just-in-time inventory systems. That means you could store a lesser inventory in Alaska and still be able to supply all your dealers on a next-day or day-after basis using the incredible cargo lift you have out of Anchorage. I think you'll see some jointly-developed products, and I think you could see warehousing and distribution systems here that help companies in Taiwan," Poe explains.

Poe is not alone in his optimism about the future of trade with Taiwan. The consensus among those who are currently active in trading relationships is that Taiwan has appetites for natural resources similar to its Asian neighbors. This, coupled with its strong economic position, means that Alaskans are likely to find a ready market for a number of commodities and products that can be cost effectively produced in the state.

Though some of the foundation for Taiwan trade is still being poured, experts expect it to set up fast and provide a strong basis for building sound contributions to several sectors of the Alaska economy. [Tabular Data Omitted]
COPYRIGHT 1990 Alaska Business Publishing Company, Inc.
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Title Annotation:Alaska-Taiwan trade potential, includes related article with tips on trading with Taiwan.
Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Date:Feb 1, 1990
Previous Article:Everybody loves a wookie.
Next Article:Oil field foils.

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