Taiwan rebuilds its infrastructure

Nation's Business, Oct, 1992

The unprecedented effort under way to clean up Taiwan's environment and modernize its infrastructure and industrial base represents an extraordinary business opportunity for U.S. companies.

ICF International Inc., an environmental and professional services company based in Fairfax, Va., is an excellent case in point. The firm's ICF Kaiser Engineers subsidiary, based in Oakland, Calif, and two joint-venture partners have received a $20.2 million contract for work on a rapid-transit system being constructed in Taiwan's capital city of Taipei.

Moreover, the firm has been selected to engineer one industrial-waste treatment facility and to design, construct, and oversee the start of another. ICF Kaiser's contracts for the projects, located in an industrial park near the southern city of Kaohsiung, total about $13.6 million.

Says Douglas W. McMinn, executive vice president Of ICF International: "We have been active in Taiwan for some time, and our experience obviously has been a good one. Without any question, there are large opportunities there."

ICF's contracts and countless others yet to be awarded there through 1997 and probably beyond are components of the Taiwan government's gigantic development effort. At the heart of this effort is a $303 billion program that may take the rest of the decade to complete.

The program is so comprehensive that even its general outline fills more than 150 single-spaced, typewritten pages detailing more than 775 projects involving everything from public works to higher education.

More than $100 billion of spending under what originally was intended as a six-year plan will be for big-ticket infrastructure construction or refurbishment projects. These projects include transportation facilities such as at least 10 major highways and the high-speed railroad that will reduce the travel time between Taipei and Kaohsiung from five hours to under two hours; several telecommunications systems; a number of energy-production facilities; about two dozen colleges and universities; and countless housing units.

The program earmarks almost $40 billion for about 70 environmental clean-up projects such as solid-waste and waste-water treatment plants, incinerators, and landfills.

Foreign firms will be allowed to compete for $45 billion to $50 billion of this work, according to several estimates. And McMinn speculates that "there will be a preference for American companies" because Taiwan is anxious to reduce its trade surplus with the U.S., which was almost $9 billion last year and $11 billion in 1990.

Although reducing the trade imbalance would be politically desirable for Taiwan officials, they have a second motive for enlisting U.S. participation: gaining access to advanced U.S. technologies to upgrade their low-end manufacturing businesses and make them high-technology producers.

The Taiwan government is focusing on 10 manufacturing sectors, including telecommunications, information processing, semiconductors, aerospace, advanced materials, and chemicals and pharmaceuticals. Although it appears that there will be no shortage of opportunities in Taiwan for American firms seeking them, there could be a shortage of U.S. business interest.

Shou-Jou Lee, Taiwan's vice minister of economics, is among those expressing frustration with the lack of response to date by U.S. firms. "U.S. companies should move aggressively," he recently told a group of business people in Seattle. It's not easy to do business anywhere. There are procedures; there is competition. That's the reality of business life.... But if Europeans and Japanese can do it, why can't Americans?"

Echoing these sentiments is Natale H. Bellocchi chairman of the American Institute in Taiwan (AIT): Taiwan's development efforts have "rightly attracted great interest from around the world, with trade and technical missions from the four corners of the globe visiting [Taipei] on a daily basis. Yet American companies--competing on price and technical competence--are doing very well. If only more American companies would enter this market, firms offering topnotch products and services, the result would be better" for the U.S. economy,

The AIT, which is based in Arlington, Va., has represented U.S. commercial interests in Taiwan since the U.S. severed formal diplomatic relations with officials there in 1979.

To Lee, Bellocchi and other experts, entering the Taiwan market usually means forming a strategic alliance with a local firm, opening a local office, or both. ICF Kaiser opened an office in Taipei last year and staffed it with two Taiwanese trained in the environmental business who, says ICF Internationals McMinn,"have some understanding of the system and know also good local partners." To succeed in Taiwan it is "essential to really understand the territory and have a long-term commitment," he adds.

Just maintaining an office in Taiwan represents a substantial commitment, notes Elaine Hodge, manager of human relations for CH2M Hill International Ltd., an international engineering firm based in Englewood, Colo.