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Taoyuan’s Location Advantages: A New Indicator of Asian Logistics at the Time of the Russo-Ukrainian War

  • Release Unit:Investment Service Section
  • 資料提供單位:Department of Economic Development

Introduction: Impact of the Russo-Ukrainian War on Industrial Development and European Logistics

On top of the aforementioned congestion of food and energy exports, the Russo-Ukrainian War has also had a significant impact on global industrial logistics. According to “Global Business Impacts: Russia-Ukraine Crisis,” a report done by Dun & Bradstreet Holdings, Inc. NYSE (DNB), Russia and Ukraine have been providing important raw materials, e.g., oil, gas, metal products, car parts and semiconductor material, to nearly more than 600,000 businesses throughout the world. (*Note 1)


The war may also exacerbate the long-term supply chain management, even if we are talking about products not exported from these countries. For example, the storage cost will increase significantly if the supplier holds too much inventory. At the same time, processed products that go out of stock will cause plant shutdowns, a knock-on effect that will multiply the time cost and monetary cost of resuming operations.


While Ukraine plays an important role as a transport hub between Europe and Asia, the war also has an impact on Europe’s road freight and land logistics, increasing risks in railway transport. As many logistics are diverted to sea freight, this will increase the cargo-carrying capacity of the Suez Canal. This will have an impact on a great deal of the import/export supply chains as well as cause material shortages to the industry chain in Asia. However, the actual impact may not be as serious as it seems because international logistics in Asia has numerous alternative logistics routes and modes of transport. Still, it will inevitably cause the average cost of global logistics to rise. As one of its development goals is to become the logistics hub in Asia, it is necessary for Taoyuan to consider all possible events and issues and integrate these possibilities into its development strategies and future plans.


One crucial factor for the transitioning of the global logistics center will be the prominence of Taoyuan’s geographical location; for one thing, there are more than 800 weekly flights between Taiwan and China. Also, it is located between the United States and China. Its strategic importance lies in the fact that the United States is the world’s largest economy while China is the world’s second largest economy and the center of the world’s economic growth. Moreover, it faces Japan, the world’s third largest economy, in the north and the ten ASEAN Member States and India in the south. With such unique business conditions, Taoyuan has become the first choice for international logistics Entrepôt.




New Development Indicators for Taoyuan: Proactively Planning the Blue Ocean to Reintegrate the Logistics Supply Chain

It is in the face of the changing circumstance of the world that Taoyuan has become the new focus of Euro-Asian land and maritime transport. Located in the hub of the East Asia island arcs, Taiwan Taoyuan International Airport is able to work with Taipei Harbor and achieve high-performance transportation operations, integrating in high efficiency the energy of seaport and airport transportation. Combined with the warehousing capacity of Taipei Port and other location advantages, such as the free trade port area, Taoyuan can achieve vertical integration, both imports and exports, and land freight consolidation simultaneously. As it also provides options of international sea transport and domestic land transport, it is set to become the benchmark of logistics in Asia.


Let’s look at the development of the shipping industry in Taoyuan. As the top two airlines in Taiwan’s aviation industry, both China Airlines and EVA Air have set up their headquarters in Taoyuan after considering the locations and their future development. Starlux Airlines also plans to set up a new hangar in Taoyuan Aerotropolis. To sum up, the Taoyuan Aerotropolis Project seeks to enhance the airport’s operating energy and encourage investment in industries nearby.


As for the multifarious development of logistics, a large number of domestic and foreign manufacturers sought to reorganize their supply chains and set up logistics bases in Taoyuan. The aviation companies in the upstream logistics include China Airlines, EVA Air, and Starlux Airlines while in the midstream we have many logistics centers, e.g., companies like Farglory Logistics Co., Ltd., EVA Air, PChome Logistics Center, ID Logistics Taiwan (Carrefour/Far Eastern A-mart Co., Ltd.,) and Costco Wholesale Logistics. Many domestic and foreign freight delivery services are also included, for example, Evergreen International Storage and Transport Corporation, United Parcel Service Co., Taiwan Branch (U.S.A.), LF Logistics (Taiwan) Limited, SF Express (Taiwan), etc. Therefore, Taoyuan, under the circumstance of global logistics obstruction, still managed to become a first choice for international well-known manufacturers that are attracting investment. 


In 2019, Taoyuan Airport’s annual average traffic volume reached more than 40 million passengers while the cargo volume more than 2 million tonnes. Currently, the airport is undergoing the expansion project. Terminal 3 is expected to be completed in 2026 at the earliest while Runway 3 in 2030. It is estimated that Taoyuan Airport will handle 82.18 million passengers and 4.02 million tonnes of cargo volume in the future. The overall layout before the pandemic, the mobility plan and adaptability during the pandemic and the development trend of industry and commerce in the post-pandemic era all demonstrate the government’s determination and vision to incessantly upgrade Taoyuan so that it becomes an international logistics hub. This has consequently stimulated a multitude of international enterprises to initiate their development plans so as to enter the most sought-after area in Taoyuan. (*Note 2)

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Civil Air Transportation Statistics, 2011-2021 / Taoyuan Aerotropolis Global Air Cargo Traffic 

Source: Civil Aeronautics Administration, Ministry of Transportation and Communications 




Taoyuan Aerotropolis: Going Global, a Milestone in the Industry in Asia

Jointly promoted by the Taoyuan City Government and Civil Aeronautics Administration, Ministry of Transportation and Communications, “Taoyuan Aerotropolis” is the largest urban planning project in Taiwan. Taoyuan City Government introduces six core industries: cloud computing, smart automobile, international logistics and distribution, biotechnology, aviation support and green energy in priority. With resources of the existing industries and satellite cities/towns in the surrounding area, Taoyuan can achieve synergy of advantageous industries. Furthermore, making use of the surrounding area of Taoyuan International Airport, Taoyuan is committed to the development of supply chain in connected industries, aiming to achieve low pollution, low energy consumption, low water consumption and high added value (Three-Lows and One-High). As smart airport, smart city, and smart industry are the three major targets of its development goal, “Taoyuan Aerotropolis” aims to attract investment with the external benefits outside Taoyuan International Airport, to magnify its energy as Aerotropolis and to enhance the overall industrial development in Taoyuan so as to become the center of gravity of international logistics.




Conclusion

As the Russo-Ukrainian War is still ongoing, the geopolitical tension remains strong in the new international situation. The circumstance of international industries will continue to be unstable. Focusing on the global business design and resource allocation, Taoyuan City is bound to play a more crucial role as an industrial hub in the future. As a city of strategic importance that serves as a gate for Asia to enter the world, it will make use of the competitive advantages of its geographical location and land freight to timely expand the functions of logistics so that different modes of transport leverage diversity and flexibility, providing a more complete logistics, industry chain and supply chain as well as connecting Asian logistics and industry hubs with the world. To sum up, it aims to become the best place in Taiwan for international enterprises to settle down, a place for them to lay out and stabilize business in order to look in the global opportunities. 


Note 1: “The Ukraine-Russia War’s Impact On The Supply Chain: Why MRO Optimization Is A Top Priority,” by Paul J. Noble (Retrieved from Forbes on May 12, 2022). Source: https://www.forbes.com/sites/paulnoble/2022/05/12/the-ukraine-russia-wars-impact-on-the-supply-chain-why-mro-optimization-is-a-top-priority/?sh=c87b3616d2ef

Note 2: “Taoyuan Mayor Cheng Wen-tsan: Aerotropolis and the 8-year Great Leap Forward. A Reborn Taoyuan.” (Retrieved from “Real Estate World,” Liberty Times Net on September 10, 2022). Source:https://estate.ltn.com.tw/article/14715