US embassy cable - 05TAIPEI4305

UNCLAS SECTION 01 OF 02 TAIPEI 004305 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PASS AIT/W, USTR, AND FMC 
DEPT FOR EAP/RSP/TC AND EB/TRA 
USDOC FOR 4330/ITA/MAC 
 
FROM AIT KAOHSIUNG BRANCH OFFICE 
 
E.O. 12958:N/A 
TAGS: EWWT, ETRD, ECON, TW 
SUBJECT: Port of Kaohsiung Sixth Container Terminal Faces 
New Obstacles 
 
Ref:  Ref A) Taipei 3393 B) Taipei 03793 C) Taipei 03856 D) 
 
Taipei 03196 E) Taipei 03197 F) Taipei 03525 
 
1. (U) Summary.  The planned development of Kaohsiung's 
Sixth Container Terminal (Ref A) is facing major obstacles 
due to weak investor interest in the Build-Operate-Transfer 
(BOT) project.  Additionally, in the wake of the Kaohsiung 
Rapid Transit corruption scandal (Ref B-F) and the financial 
problems and delays of the Taiwan High Speed Rail project, 
Taiwan's Legislature is taking steps to implement a 
moratorium on BOT projects, including the Sixth Container 
Terminal.  End Summary. 
 
2. (U) Attempting to move forward on the Sixth Container 
Terminal project, Kaohsiung Harbor authorities recently held 
two seminars to inform prospective bidders about the project 
and to solicit bids.  All major shippers currently operating 
in Kaohsiung attended the seminars.  According to the Harbor 
Bureau Director, interest in the project was high.  He 
expressed particular hope that Maersk-Sealand would bid on 
the project.  Kaohsiung Harbor, which handled 9.71 million 
TEU containers in 2004, is expected to be at full capacity 
of 9.9 million TEUS by the end of 2005.  Development of the 
new project is necessary for any expansion of capacity. 
 
3. (SBU) Despite the optimism of the Harbor Director, 
officials at Evergreen said they were unsure if they would 
bid.  They said they had already committed to a major 
investment in the development of Taipei's new deep-water 
port, as well as the mainland's Ningbo Harbor, and would 
have trouble doing bothmore. They said they may consider 
shifting some of their investment from Taipei to Kaohsiung, 
but the issue is still being evaluated.  American President 
Line said they have no plans to bid on the project.  While 
Maersk declined to comment to AIT, freight forwarders who 
work closely with Maersk said that Maersk is focusing all of 
its development in the area on the port of Xiamen.  This 
leaves Yang Ming Lines as the major bidder.  While Yang Ming 
is interested in the project, they do not have the financial 
resources to accomplish the project alone and would need to 
induce Maersk, Evergreen or APL to join with Yang Ming to 
move the venture forward.  Yang Ming's interest may be due 
in part to heavier government influence on the firm.  Yang 
Ming is 35 percent government owned with five of seven board 
members appointed by the government. 
 
4. (U)  Adding to the difficulties facing Kaohsiung Harbor, 
the Taiwan Legislature's Transportation Committee announced 
on October 17th that the committee was moving for a 
moratorium on all 11 of the Ministry of Transportation's BOT 
projects.  BOT projects have come under increasing scrutiny 
after Taiwan's High Speed Rail project announced that it 
would miss its scheduled October 2005 completion date by at 
least a year and state-owned enterprises were compelled to 
invest NTD 7.5 billion to rescue the project financially. 
Adding to the complexity, Kaohsiung's Mass Rapid Transit 
project is under investigation for corruption and improper 
construction. 
 
5. (SBU) Comment.  As previously reported (Ref A), the Sixth 
Container Terminal will not be completed any earlier than 
2010.  Even that date is likely to be delayed in light of 
current events.  Given that the Port of Kaohsiung is 
currently at full capacity, it is likely that the port will 
be further marginalized as mainland ports Shanghai, Xiamen 
and Ningbo continue their rapid expansions.  Kaohsiung is 
also facing competition for resources from the planned 
Taipei port, which will be better positioned in terms of 
proximity to Taiwan's shippers.  With the high cost of 
domestic transportation, manufacturers in northern Taiwan 
will opt to ship via Taipei once the port comes online.  It 
is likely that the Port of Kaohsiung, once the world's third 
busiest port, will slide out of the top ten long before any 
new capacity can be added.  End Comment 
 
 
 
Thiele 
 
Keegan