Minister of Economic Affairs Yiin Chii-ming contends that direct transport across the Taiwan Strait will save companies a lot of time and money, so this would be a good time for Taiwanese firms to rethink their cross-strait deployments. (Chuang Kung-ju)

Yiin Chii-ming, formerly director of the Industrial Development Bureau and vice-minister of economic affairs, has taken on the difficult job of minister of economic affairs in the new cabinet, which is making the economy a top priority. Since coming to office, he has run headlong into the most serious global financial crisis in half a century, making economic recovery much tougher. The following is an exclusive interview with Taiwan Panorama.

Q: Over the past year the operating environment in mainland China has become very tight, and many Taiwanese firms are saying that right now they are too busy thinking about just surviving, so it's not the right time to talk about coming back to Taiwan. What do you think?

A: I think that this is exactly the right time. Now that there is direct transport and travel between the two sides, firms are seeing a structural change in both money costs and time costs. Taiwanese firms can take this opportunity to rethink their deployments on the two sides of the Taiwan Strait.

Taking marine transport for example, with direct links the average shipment costs are reduced by 15-30%, and if you also consider what it used to cost to dock at a third location [under the indirect shipping system], there are savings of as much as NT$300,000 per transit. Or take air transport. Originally a cargo shipment from Taoyuan to Shanghai took 12-16 hours, but now takes only 1.3 hours. Direct transport creates regional competitive advantage, enabling Taiwan to be the gateway to East Asia, with a handle on the enormous internal demand of a consumer market of 3 billion people.

The change in time costs will not only affect cross-strait "point-to-point" journeys, but is related to the whole production chain and diverse business opportunities, including logistics, tourism, trade shows, etc.

Taking logistics for manufacturing as one example, now Taiwan can rapidly ship raw materials and parts acquired in a variety of places to the mainland, becoming an excellent logistics center. And changes in logistics will drive transformation of the whole model of manufacturing and services. Recently the sharp rise in oil prices led to an increase in transportation costs, and for this reason many US firms moved their overseas production bases back to the US. That's a case in point.

Looking at trade shows and tourism, after coming to Taiwan for a trade show, when it ends you can fly direct to the mainland to visit the factory. This will make overseas businesspeople more likely to attend trade shows in Taiwan.

Q: Right now observers are closely watching the proposal for the establishment of a "special economic and trade zone" for Taiwanese firms with overseas production facilities. Is the direction definite? What will the orientation be?

A: The basic concept is there, but the details have to be fleshed out. The policy background is that many Taiwanese firms are saying that the investment and operating environment in the mainland is changing, and they want to come back. According to a survey by the Taiwan Electrical and Electronic Manufacturers Association, the percentage of Taiwanese firms in the mainland who want to come back and invest in Taiwan rose to 9.88% in 2008 from only 2% the previous two years. Also taking account that since May 20 [when the new administration took office], cross-strait economic and trade relations have moved in a more harmonious direction and legal restrictions have been relaxed, we have started work on the planning. The project will be drawn up by the Ministry of Economic Affairs, but the Council for Economic Planning and Development will also be involved to do cross-ministry coordination.

Because Taiwan already has export processing zones (EPZs), science-based industrial parks, and free port zones, it seems there is no need to establish yet another type of zone of this nature [which would require separate legislation]. So the economic and trade zones will be set up within the framework of an EPZ, managed in the nature of "a zone within the zone" [having its own policies] and, though located in Taiwan, will have separate rules for connections with the outside world. In the short term there will be a trial run in the Taichung Harbor EPZ, and after that we will look for appropriate sites depending upon supply and demand.

As for the orientation of the special zones, it is to support Taiwanese firms with their deployments in the cross-strait division of labor, serve as an operational headquarters or as a logistics center, and so on. Downstream assembly operations and other labor-intensive industries shouldn't need to use the special zones.

Future complementary policies will include tax breaks, easier hiring of foreign labor, and "one-stop shop" unified services and administration. As for whether the wages of foreign workers will be allowed to depart from the minimum wage in Taiwan proper, this involves human rights and humanitarian issues, and needs to take into account the overall thinking in Taiwan; it is not something the MOEA can decide.

Q: Small and medium-sized enterprises (SMEs) have been badly hit by the recent wave of new mainland policies. What help can the ROC government provide?

A: The government can't really assist them over there. Right now some non-governmental organizations like the Productivity Center are doing surveys and diagnoses for companies on the other side of the strait. If the companies want to come back to Taiwan, the government can provide assistance in terms of land use, technology guidance, and capital. But there's not much we can do to help them over there, and the Legislative Yuan would certainly raise questions about the allocation of resources.

Q: The MOEA has recently proposed the "Global Net Project" aimed at attracting foreign and Taiwanese firms to invest in Taiwan. What are the specific targets and contents? Among the three sub-programs, what are the concrete elements of the cross-strait Bridge-Building Program"?

A: The first part of the Global Net Project is to promote specific very large investment projects. We will help interested businesses to clear obstacles in terms of water, power, transportation, land, and so on. The MOEA has already put forward amendments the Act for Upgrading Industries to broaden the types of industry to which the five-year tax holiday can be applied. It is estimated that in the next four years we can move forward more than NT$4 trillion in large investment projects.

The second part is to attract large international companies to Taiwan. Recently I and the vice-ministers have travelled frequently to the US and Japan to speak with businesspeople. We hope to attract transnational enterprises to take advantage of the relaxation of cross-strait policy and increase their investments in Taiwan.

The third part, the Bridge-Building Program, is to create a platform for enterprises on the two sides of the Taiwan Strait. We will hold forums and invite mainland firms to organize groups to participate, and will arrange "discussions" and "commercial visits" to create a platform for firms on both sides to explore possibilities for cooperation in R&D, production, marketing, joint ventures, and so on. For the first phase, we have selected traditional Chinese medicine, textiles, automobile electronics, and solar power. If results are good, then we will proceed with phase two.

The Bridge-Building Program will be profitable for Taiwanese firms. After all, there will be a lot of commercial opportunities from direct transport and travel, but firms on the two sides need to get to know each other. Taiwan has technology, logistics, and management skills, while the mainland has a comparative advantage in terms of costs and market. Taiwanese firms on either side should take advantage of the strengths of the other to increase competitiveness and expand overseas markets.