Market Forces Push Taiwanese Exporters to Emerging Markets

While some Taiwanese manufacturers, forced by gradually rising costs in mainland China, have migrated from places as Shenzhen to Vietnam, larger operators as Hon Hai and other Taiwan-invested ITC businesses in China have chosen to move inland to tap lower costs. And with mainland China's unquenchable appetite for consumer goods, luxuries and raw materials being a magnet to suppliers of all kinds worldwide, Taiwanese exporters, besides trying to tap other emerging markets such as India, continue to rely on the mainland as its major export outlet.

Some 28% of Taiwan's exports in 2010 or US$77 billion went to mainland China, or as much as 40% if including Hong Kong. China also accounted for the majority of Taiwan's trade surplus, totaling US$41.4 billion, or as much as US$77 billion if including Hong, 3.3 times Taiwan's overall trade surplus.

ECFA
Taiwanese exporters' fate was given a lift on Jan. 1 this year, when the Economic Cooperation Framework Agreement (ECFA) between the island and the mainland took effect. The ECFA helps Taiwanese exporters to better compete against ASEAN (Association of Southeast Asian Nations) rivals, whose ASEAN+1 (China) free trade agreement with China became effective this year, as well as South Korean and Japanese rivals, who have been reportedly developing business in mainland China for years.

The ECFA allows for some 800 products on the “fast-gainers list,” 539 of which specified by Taiwan, to be traded between Taiwan and mainland China at reduced duties. The agreement helps Taiwanese exporters safeguard their shares in the Chinese market; while both sides across the Taiwan Straits agree to further negotiate to eventually do away with all duties under the ECFA, literally setting up free trade between the two sides.

Official Help
Taiwan's Ministry of Economic Affairs (MOEA) has been helping local exporters in their effort to increase shares in emerging markets, with the major targets this year being China, Vietnam, Indonesia, Brazil, Russia, Turkey, South Africa, and the Middle East. Such effort is backed by the semi-official Taiwan External Trade Development Council's (TAITRA) program to help local exporters tap emerging markets.

Wang Chih-kang, TAITRA chairman, explains TAITRA's aptly-termed “pushing and pulling” program, the former of which involves inviting foreign buyers to Taiwan and the latter organizing exporters on delegations overseas to promote their products and services.

Encouraging Figures
The figures speak for themselves: Chinese procurement missions to Taiwan placed orders totaling some US$20 billion in 2010.

The annual “Sourcing Taiwan” event was held in Taipei in late March this year, during which some 541 buyers, mainly from emerging markets, talked with 2,000 suppliers about procurement plans, with on-site orders estimated at US$4 billion. Heavyweight buyers included Saigon Co-op, a supermarket chain, with annual sales of US$630 million, and Sportmaster of Russia, the leading sporting goods store chain in Central and Eastern Europe; while a special ECFA zone was set up for buyers from China, from where hypermarket chains and other leading retailer groups attended.

In addition, TAITRA invited 12 procurement missions to visit the island in 2010, who placed orders totaling US$360 million.

Taiwan Product Exhibitions
Following the debut in Nanjing last year, TAITRA held five Taiwan product exhibitions in Nanjing, Dongguan, Tianjin, Jinan, and Chongqing in 2010. The Nanjing exhibition saw 800 exhibitors in 2,100 booths, compared with 700 and 1,800 respectively in the 2009 edition, attracting 8,000 buyers to double that in the previous year.

Other TAITRA efforts include, for instance, setting up a representative office in Singapore, aiming to tap the ASEAN and Indian markets to take advantage of the close links between the Merlion State and the two markets. Singapore apparently has insider's view of India, whose people account for 10% of its population. TAITRA has also established a representative office in Nanning, Guangxi, the gateway from China to the ASAEAN market.

Promoting Trade

Plying its skills, TAITRA has organized trade promotion missions to take Taiwanese exporters overseas, to Central and Eastern Europe for instance. Wu Wen-ya, TAITRA vice chairman, led a group of 57 small and medium-sized enterprises in the fields of ICT (information/communications technology), machinery, auto parts, and home appliances to Russia, Turkey, Hungary, and Belarus in the first half of April this year, marking the largest such mission to the region in five years.

Some 23 Taiwanese firms, led by TAITRA, attended the Indian Metal-Cutting Machine Tool Exhibition in Bangalore in Jan. and landed ample orders. C.C. Wang, president of the Taiwan Association of Machinery Industry (TAMI), says the achievement was the best for Taiwanese exhibitors at the show since 1998, with many Taiwanese exhibitors expecting to double sales in India this year.

Targeting Indonesia and Brazil
The attraction of emerging markets is the same for the ITC sector in Taiwan. With strong competition amid tablet PC suppliers, ASUS, a leading notebook PC maker in Taiwan, is focusing instead on Indonesia and Brazil to promote its netbook PC, dubbed EeePC. An ASUS manager says that, impacted by tablet PCs, the global market scale of netbook PCs will range 30-35 million units this year, compared with 35 million units in 2010. Netbooks are still very popular in many emerging markets for convenience of input via keyboard and low prices, and ASUS expects to ship 6-7 million EeePCs this year, compared with 6 million in 2010.

ASUS
Brazil and India will also be major targets for ASUS's notebook PCs this year. Market researchers, for instance, predict that the scale of the notebook PC market in Brazil will hit 20 million units by 2014, up from 6-8 million units in 2010. In fact, ASUS has been relying on emerging markets for its notebook PC business, being the second largest notebook PC brand in China and the largest in Russia.

Taiwan's ITC suppliers have been shipping ample products to emerging markets to post strong upturn in sales in 2010, which jumped 35% to US$275 billion.

During 2010, shipment to China leapt 42% to US$76.9 billion, with that of electrical machinery and home appliances rising 37% to US$22.3 billion, the largest item, followed by optical products and precision equipment with US$17.7 billion, up 48%; plastics with US$7.8 billion, up 38%;organic chemicals with US$7.4 billion, up 38%;; machinery with US$7 billion, up 78%; copper products with US$2 billion, up 52.7%; and iron and steel with US$1.9 billion, up 2.7%.

Shipment to Vietnam advanced 26% to US$7.5 billion, with that of mineral fuels increasing 25% to US$1.4 million, the largest item, followed by plastic products with US$719 million, up 42%; iron and steel with US$630 million, down 6.7%; machinery with US$605 million, up 30%;; man-made filaments with US$465 million, up 22.8%; electric machinery and home appliances with US$358.8 million, up 81%.

Aggressive investments in Vietnam have helped to drive business for Taiwanese suppliers, who have been filling orders for Taiwanese operators in the nation. Taiwanese investments in Vietnam have recovered again in 2010 after the downturn in 2008-2009 amid the global financial tsunami, in response to rising labor costs in China. Over 2,000 Taiwanese firms have investments in Vietnam totaling US$20 billion.

Exports to India
Taiwan's exports to India rose 43.4% to US$3.6 billion in 2010, with that of machinery soaring 58.4% to US$630 million, the largest item, followed by electrical machinery with US$600 million, up 44.8%; plastics with US$592 million, up 28.9%; organic chemicals with US$467.2 million, up 69%; natural or cultured pearls and other jewelries with US$313.5 million, up 560%; and iron and steel with US$172 million, up 53%.

Such promising figures help Taiwanese firms align their sights on the Indian market, whose 1.1 billion population, half of whom younger than 25, enjoy rising disposable income after years of rapid economic development.

Exports to Brazil
Taiwan's shipment to Brazil advanced 35.7% to US$1.4 billion in 2010, with that of machinery skyrocketing 84.8% to US$407 million, the largest item, followed by electrical machinery and home appliances with US$403 million, up 4.4%; plastics with US$217.9 million, up 14.5%; iron and steel with US$162 million, up 152%; mineral fuels with US$153 million, down 14.3%; man-made filaments with US$120 million, up 29.2%; articles of iron and steel with US$80 million, up 68%; rubber products with US$62.9 million, up 96%; and auto parts with US$36.6 million, up 60%.

Exports to Mexico
Shipment to Mexico rose 37.8% to US$1.1 billion, with that of electric machinery and home appliances advancing 33,.5% to US$574 million, the largest item, followed by iron and steel with US$138 million, up 104.3%; machinery with US$124.7 million, up 2.8%; mineral fuel with US$87.5 million, up 256%; auto parts with US$80 million, up 44%; plastics with US$79.5 million, up 5.5%; man-made filaments with US$74 million, up 28.9%.

Exports to Russia
Shipment to Russia soared 85.7% to US$1.1 billion, with that of electric machinery and home appliances skyrocketing 116% to US$443 million, the largest item, followed by machinery with US$187 million, up 58%; plastics with US$89.8 million, up 61%; iron and steel with US$72.7 million, up 170%; auto parts with US$53 million, up 37.5%; articles of iron and steel with US$46 million, up 65%; and tools, implements, and cutlery with US$40.5 million, up 134%.

Exports to Saudi Arabia
Shipment to Saudi Arabia rose 48.6% to US$1 billion, with that of auto parts soaring 228% to US$186.5 million, the largest item, followed by mineral fuel with US$126 million, up 173%; iron and steel with US$115 million, up 51%; plastics with US$112.7 million, up 23.3%; machinery with US$111.6 million, down 0.8%; electric machinery and home appliances with US$73 million, up 14.6%.

Exports to Turkey
Shipment to Turkey rose 31.2% to US$1.44 billion, with that of electric machinery and home appliances advancing 3.2% to US$391 million, the largest item, followed by machinery with US$326 million, up 106%; iron and steel with US$161 million, up 34.7%; plastics with US$133 million, up 0.3%; optical and precision equipment with US$70 million, up 218%; and man-made staple fiber with US$45 million, up 20.4%.

Exports to Iran
Shipment to Iran grew by 41.7% to US$810 million, with that of plastics leaping 67% to US$199 million, the largest item, followed by machinery with US$124.6 million, up 38%; iron and steel with US$81.2 million, up 97%; organic chemicals with US$78 million, up 97.3%; electric machinery and home appliances with US$68.4 million, up 42.5%.; man-made staple fiber with US$58.6 million, down 17%.

Exports to Poland
Shipment to Poland leapt 44.5% to US$900 million, with that of electric machinery and home appliances soaring 62% to US$484 million, the largest item, followed by machinery with US$123.6 million, up 15.3%; articles of iron and steel with US$46 million, up 43.5%; auto parts with US$43.6 million, up 5.7%; and iron and steel with US$37 million, up 45%.

Taiwanese Exports to Major Emerging Markets (2010) Unit: US$1

Countries & Places	Ranking	Export figure		Share (%)
CHINA	1	76,935,377,032	28.016
HONG KONG	2	37,809,053,606	13.768
UNITED STATES	3	31,467,906,580	11.459
JAPAN	4	18,005,283,617	6.557
SINGAPORE	5	12,096,176,139	4.405
KOREA,REPUBLIC OF	6	10,681,848,263	3.89
VIET NAM	7	7,533,309,306	2.743
GERMANY,FEDERAL REPUBLIC OF	8	6,510,953,017	2.371
PHILIPPINES	9	5,983,611,219	2.179
MALAYSIA	10	5,948,274,661	2.166
THAILAND	11	5,289,181,630	1.926
NETHERLANDS	12	5,261,012,792	1.916
INDONESIA	13	4,509,517,515	1.642
INDIA	14	3,629,218,087	1.322
UNITED KINGDOM	15	3,621,280,687	1.319
AUSTRALIA	16	3,131,971,995	1.141
ITALY	17	2,447,120,021	0.891
CANADA	18	1,948,870,041	0.71
BRAZIL	19	1,908,564,169	0.695
FRANCE	20	1,697,317,778	0.618
MEXICO	21	1,512,243,751	0.551
UNITED ARAB EMIRATES	22	1,489,340,684	0.542
TURKEY	23	1,441,015,498	0.525
SPAIN	24	1,371,397,974	0.499
RUSSIA	25	1,081,043,059	0.394
SAUDI ARABIA	26	1,001,954,020	0.365
BELGIUM	27	976,355,120	0.356
POLAND	28	900,336,036	0.328
IRAN(ISLAMIC REPUBLIC OF)	29	809,744,083	0.295
SOUTH AFRICA	30	788,436,209	0.287

Source: Customs