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The Port of Kaohsiung : Competing to Be the Global Logistics Hub Port in the Far East

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The Port of Kaohsiung : Competing to Be the Global Logistics Hub Port in the Far East This document is downloaded from DR‑NTU (https://dr.ntu.edu.sg) Nanyang Technological University, Singapore. The port of Kaohsiung : competing to be the global logistics hub port in the Far East Chen, Shaoxiang; Tan, Shirley 2003 Chen, S., & Tan, S. (2003). The port of Kaohsiung : competing to be the global logistics hub port in the Far East. Singapore: The Asian Business Case Centre, Nanyang Technological University. https://hdl.handle.net/10356/99873 © 2003 Nanyang Technological University, Singapore. Downloaded on 05 Oct 2021 16:39:02 SGT AsiaCase.com the Asian Business Case Centre THE PORT OF KAOHSIUNG: Publication No: ABCC-2003-001 COMPETING TO BE THE GLOBAL LOGISTICS HUB Print copy version: 28 Feb 2003 PORT IN THE FAR EAST Chen Shao Xiang and Shirley Tan China is rapidly emerging as the new economic world power and a huge hinterland for its neighbouring ports in the Far East. This case deals with how the management of port of Kaohsiung, Taiwan, should respond strategically to opportunities created in China and the future challenges resulting from the migration of global manufacturers to the lower cost neighbour. The management reviewed the recent events and considered some fundamental questions that were critical in formulating port strategy. The case is set in the year 2001, when container volumes passing through Kaohsiung Port, the largest international harbour of Taiwan, registered decreasing growth rate for the past two consecutive years, due in part to the worsening shipping recession. Research Associate Shirley Tan prepared this case under the supervision of Associate Professor Chen Shao Xiang. The case is based on both public and internal company sources and interviews with key personnel from Kaohsiung Harbor Bureau. The authors would like to acknowledge the support of Kaohsiung Harbour Bureau. The author would like to acknowledge the contributions of Nanyang MBA students Leong Kim Hock, Jimmy Sim, Goh Yew Leng and Paul Wong for their assistance in data collection. As the case is not intended to illustrate either effective or ineffective practices or policies, the information presented reflects the authors' interpretation of events and serves merely to provide opportunities for class discussion. COPYRIGHT © 2003 Nanyang Technological University, Singapore. All rights reserved. Not to be reproduced, stored, transmitted or altered in any way without the written consent of Nanyang Technological University. For copies, please write to The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798 Phone: +65-6790-4864/6790-5706, Fax: +65-6791-6207, E-mail: [email protected] Page 2 AsiaCase.com ABCC-2003-001 the Asian Business Case Centre Taiwan is situated right in the middle of If the Shanghai port caught up fast enough, the next the Asia-Pacific region, at the central year would see the Kaohsiung Port slithering below axis of Northeast Asia, Southeast Asia its current number four in world ranking. and coastal mainland China. This pivotal position gives Taiwan the shortest The port's poor performance was due in part to the average sailing time to the five major world's gloomy economic outlook. The terrorists' regional harbours1 - just 53 hours, attack on the United States triggered the worst compared with 64 for Hong Kong, 78 shipping recession in the past decade. As world trade for Shanghai, and 124 for Singapore. declined, the total container volume growth rate for (See Exhibit 1.) the year was announced to be an all-time low, between 3.5 to 4 percent, the lowest in the history Executive Yuan, Chairman, of containerised transport. To make matters worse, The Council for Economic Planning the global trade decline had had little dampening and Development 2 effect on the rising ports along the eastern coastal areas of mainland China. Increasing import volumes, coupled with the rapid migration of global SITUATION SUMMARY production giants to the fast growing, lower-cost hinterland had been creating unprecedented growth In December 2001, Huang Ching-Tern, the newly opportunities for ports in the Far East. According to appointed Director of Kaohsiung Harbour Bureau, port experts in mainland China3 , the rise of coastal chaired a meeting to review and to formulate ports in mainland China over the last decade had strategies in developing the port. In assuming been unmatched anywhere else in the world. In the leadership in the harbour bureau since about five year after mainland China's accession to WTO, the months ago, Huang's mandate was to advance port top ten ports of mainland China had achieved record management, and to move the port into its next growth rates, which averaged around 20 percent. phase of growth. Although Huang was new to this (See Exhibit 2.) port, he had held the top position in three other harbour bureaus in Taiwan, including Keelung, Ever since its re-emergence, mainland China had Hualing and Taichung port. Under his direction, been attracting increasing exports and investments these ports had grown phenomenally - for example, from Taiwan4 to become Taiwan’s second largest container volumes in Taichung Port, increased from export destination behind the United States. Exhibit 49.11 percent in 1995 to 111.95 percent in 1998. 3 and Exhibit 4 present Taiwan's import and export statistics with mainland China and other major Huang was confronted with an increasing uphill task. trading partners. While the Taiwanese ruling party - The growth rates of the port of Kaohsiung for 2000 Democratic Progressive Party - remained steadfast and 2001 were lackluster, at 6 percent and 2 percent in pursuing independence, the mainland Chinese respectively, compared to those of mainland China's government continued to claim Taiwan as its ports. The task had a vital impact on Taiwan’s territory, but one with separate customs regulations economy, because more than half of the coastal on importing and exporting goods. Taiwan, from residents living in the city of Kaoshiung were directly mainland China's perspective, was not a country in or indirectly dependent on the port for their its own right. livelihood. Port competition in the Fast East had also accelerated following the mainland China's port Trading exchanges between mainland China and policy shift towards privatisation. Two nearby Asian Taiwan had increased after 1988, but the Taiwanese port operators - Port of Singapore Authority (PSA) ports were not able to benefit from them, because and Hong Kong's Hutchison Port Holdings (HPH) - the direct transport link between them was severed and several others had pursued the globalisation almost half a century ago and had yet to be restored. strategy since 1990, and advanced aggressively to Ship cargo that either originated from or had to enter develop joint ventures with mainland China's ports. Taiwan was, by mainland China's regulations, not 1 The five harbours are Hong Kong, Shanghai, Kobe, Manila, and Singapore. 2 Centre for Economic Deregulation and Innovation (2000). Global Logistics Development Plan in Taiwan. Taipei: CEDI Services. 3 Zhong Zi, Northern Ports, CNC, 2002, July 8. 4 The Taiwanese government began releasing permissions for Taiwanese businesses to invest in China in 1992. See The Republic of China Yearbook (2000), The Economy: Economic Ties with the Chinese Mainland, website: http://www.gio.gov.tw AsiaCase.com Page 3 the Asian Business Case Centre ABCC-2003-001 permitted to sail into mainland China's port directly. shipping lines from different parts of the world The cargo had to be transshipped via a third party, calling at the port in 2001.)6 Exhibit 5 presents a in particular, Hong Kong. Direct cross-strait shipping historical account of the Port of Kaohsiung. was limited to transshipment via Kaoshiung to Fuzhou and Xiamen ports in 2001. Shipping lines Kaohsiung Harbour Bureau, the formal authority were apparently disappointed over the Taiwan governing the port, functioned under the Ministry of government's prolonged delay in opening the link; Transport and Communication. (See Exhibit 6A for international negotiations had yet to revive the the organization chart of the ministry and Exhibit estranged cross-strait relation that had severely 6B for that of the Kaohsiung Harbour Bureau.) impaired the economic development plans of Taiwan. Industry analysts also believed in an The port had a total of 122 berths, out of which 25 exodus of manufacturing bases from Taiwan to berths of four container terminals were dedicated mainland China for the coming years. Thus, cargo to container vessels. The completion of the newly volumes were likely to reduce further. developed fifth container terminal boosted the overall annual capacity to 10 million TEUs at the Despite the relatively mediocre performance, Teng current efficiency level; in comparison, the figure Yu-I, Deputy Director of Kaohsiung Harbour Bureau, for the Port of Singapore Authority (PSA) was 30 was nevertheless positive about the port's future million TEUs. There were 24 mooring buoys, 76 potential. He explained his optimism: warehouses and sheltered buildings with a total storage volume of 69,240 tonnes, and 18 open-air Kaohsiung is located at the pivoting storage places that could handle up to 69,240 centre of five leading container harbours tonnes. Other port servicing and supporting in Asia Pacific. We have an excellent facilities in place included 126 harbour-duty working geographical advantage, far more vessels, more than 2,000 sets of loading and superior than the rest of Asian ports to unloading equipments of various types and 57 gantry be the central hub connecting all the cranes. ports in Asia. BECOMING A TRANSSHIPMENT PORT THE FOURTH LARGEST PORT IN THE WORLD IN 2001 Containerisation The Port of Kaohsiung, the largest international After the 1960s, containerisation became a major harbour in Taiwan, is strategically situated along force in waterborne transportation in the world, and the southwestern coast of Taiwan, at the the world's major ports were confronted with the intersection of the Taiwan Strait and the Bashi challenges of adapting to this shipping revolution.
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