2014 EU-Taiwan Service Industry Seminar

Presentations ∙ 簡報下載
Event Photos ∙ 活動集影

Taipei, 6 November2014 台歐服務業研討會

The seminar was hosted by the European Business Regulatory Cooperation (EBRC) programme in conjunction with the European Economic and Trade Office (EETO), the Bureau of Foreign Trade (BoFT), and the Taiwan External Trade Development Council (TAITRA). The event began with opening speeches by guests of honour, followed by two keynote speeches on the overall status of EU-Taiwan trade in services. This was followed by three sessions featuring a field of distinguished service industry experts, who provided insights on three service industry areas: Finance, ICT - Smart Cities, and Distribution. Speakers shared information on international trends in the industry and explored opportunities and challenges accompanying the steady rise in trade in services between the EU and Taiwan. Each session was concluded by a panel discussion and Q&A session. The seminar provided a forum for all stakeholders to increase their understanding of regulatory and trade issues, facilitate EU-Taiwan cooperation in service industries and enhance the development of Taiwan’s service industry.

_____________________________________

Opening remarks

Cho Shih-Chao (卓士昭), Deputy Minister, Ministry of Economic Affairs (MoEA)

In his opening remarks Deputy Minister Cho noted that the seminar was an important event endorsed by both government and business given that the services sector accounted for 68.3% of Taiwan’s GDP in 2013. The three major service industries are wholesale and retail trade, transportation and storage, and accommodation and food services, which together account for 24.46% of GDP. This shows that the service industry has become an important driver of Taiwan’s economic growth. Cho noted that the EU and Taiwan are two of the 23 members of the World Trade Organisation (WTO) that are currently participating in Trade in Services Agreement (TiSA). Given that the 23 members account for 70% of the world’s trade in services, the TiSA talks are seen as having significant potential to boost trade in services. Cho noted that there are significant investment opportunities in Taiwan in many sectors and the government continues to introduce reforms to boost service industry development. In addition, the government is promoting eight primary service industries for support and has targeted another seven emerging sectors such as cloud computing. The government has drafted a blue print for service industry development, which targets compound annual growth of 5% for the services industry. Cho concluded that continuous collaboration and bilateral dialogue on the service industry between EU and Taiwan authorities would continue and that he hoped that the seminar would help to open up vast opportunities for cooperation between the EU and Taiwan in developing the service industry.

Frédéric Laplanche, Head, European Economic and Trade Office (EETO)

In his remarks Mr Laplanche stated that trade in services is an increasingly important sector for the economy both in Taiwan and the EU and this is reflected in EU-Taiwan bilateral trade figures. Services account for 70% of GDP and 60% of jobs. In 2012, total trade in services between the EU and Taiwan increased by 8.9% year on year to €7.95 billion, while figures for trade in goods have not risen much in recent years. While EU and Taiwan authorities have a well-structured and comprehensive dialogue, he noted that this was the first time that the EU and Taiwan had co-hosted a seminar of this kind dedicated to the services industry. While the value of EU-Taiwan trade in services is still only about 20% of the level of trade in goods, given its growth momentum and rising proportion of overall trade, it is important to start focusing more on trade in services and the aim of the services seminar is to start addressing this by looking at the challenges and opportunities, identify and resolve problems to help make trade smoother. The EU accounts for a quarter of the world’s trade in services. Mr Laplanche also referred to the WTO TiSA talks and expressed the hope that the EU and Taiwan would use this trilateral avenue in addition to ongoing bilateral dialogue to further facilitate EU-Taiwan trade and investment.

Walter Yeh (葉明水), Executive Vice President, Taiwan External Trade Development Council

In his remarks Mr Yeh declared that the major contributors to Taiwan’s service exports are tourism, transportation and logistics and financial services. He added that the MICE industry is also an area where Taiwan and the EU are both doing quite well. According to the UFI (Global Association of the Exhibition Industry), Taiwan hosted 89 major exhibition events in 2013, and was ranked sixth in Asia. As the EU is a world leader in the MICE industry, he said that this is an area where Taiwan can learn much from the EU.

_____________________________________

Keynote speeches

Topic: Introduction to EU Trade in Services

Speaker: Laurent Bardon, Policy Officer, Directorate-General for Trade (DG-TRADE), European Commission

In his speech Bardon referred the European Chamber of Commerce Taiwan’s (ECCT) 2012 publication of a follow-up to its original 2008 study on the potential impact of a free trade deal (which the ECCT refers to as a Trade Enhancement Measures agreement or TEM) between the EU and Taiwan. That report concluded that the potential benefits from EU-Taiwan trade enhancement measures are much stronger now than they were in 2008, when the benefits were first assessed. Moreover, the study highlighted that services would be the one sector that would benefit most from enhanced trade liberalisation between the EU and Taiwan.

Services represent 24% of world trade and 60% of FDI but statistics underestimate the real importance of services because up to two thirds of trade in services is not reflected in "usual" statistics (balance of payment based statistics). These statistics underestimate services because cross border trade, commercial presence abroad (branches or subsidiaries) are not counted in the statistics. Moreover many services are "hidden" within goods, that is, if goods are sent to another country for special processing, this is not reflected in services statistics but in goods statistics.

The EU is by far largest importer and exporter of commercial services globally. In 2012, the EU exported €654 billion and imported €504 worth of services, levels much higher than the United States. Taiwan is the EU’s 20th largest trading partner. The bulk of this trade (80%) is in goods, but trade in services is rising fast and has doubled over the past 10 years.

Services are a key priority of the EU's trade policy. A global supply chain cannot exist without the support of services. Services represent 70% of world output but only about 20% of the world trade. Thus it is an area with great potential for growth.  It is often forgotten that improved conditions for trade in services also have a positive spill-over effect on trade in goods. In other words, if the right services are not available, it will have an impact on trade in goods.

The EU is very open to trade, especially in terms of services, and is working together with 21 other parties in the WTO on an ambitious multilateral Trade in Services Agreement (TiSA) to improve trade in services even further. The EU’s initial TiSA offer is the most ambitious initial offer ever tabled by the EU in a negotiation (and tabled very early on, in late 2012). It corresponds by and large to the “best FTA” approach and demonstrates a level which has only been conceded to EU’s partners at the end of a negotiation. The EU’s TiSA offer adds a further step towards harmonizing its commitments and regulations across many sectors. Regarding the digital economy, the EU is offering full commitment to cross-border trade and commercial presence. It also supports the global value chain in postal and courier services, transport, management consulting, construction, distribution and financial services.

The EU already has a fairly open trade regime. For example, it is very easy for financial companies to set up business in the EU. Once companies are established in one member state, they can freely set up operations anywhere in the EU. In terms of investments, the EU has few restrictions. It does not limit the number of players or set investment caps. There are only a few restrictions in selected areas such as national security, arms, pharmaceuticals, alcohol and tobacco. In ICT and telecom, there is a common set of regulations for the industry across the EU. One of the main aims is to stimulate competition. For example, there is a single body that oversees regulators.

The EU is fully committed to multilateralising the TiSA and the agreement is crafted so that it can be multilateralised at a later stage. The EU and Taiwan have cooperated well until now but there are a few areas where the EU sees a need for acceleration of negotiations. These include the area of government procurement. The EU has proposed a simple article, prescribing national treatment for established companies, whereby all companies will be treated as equal to domestic companies. The EU also hopes for further opening of the telecoms market in Taiwan.


Topic: The future of Taiwan-EU services trade and collaboration

Speaker: Dr Roy Lee (Chun), Deputy Director, Taiwan WTO and RTA Center, Chung-Hwa Institution for Economic Research (CIER)

Taiwan has the world’s 52nd largest population but is ranked 20th in trade value according to statistics for direct exports. 80% of Taiwan’s high value products are made in China but most of the value comes back to Taiwan. If this value were to be calculated in the statistics, Taiwan would probably be ranked 10th or 11th in trade value. This highlights the importance of Taiwan in regional and global trade.

One of the reasons why Taiwan has such low salary growth is because service sector salaries are very low compared to manufacturing. This is why there is a need for more development of services to create better and more dynamic jobs.

Taiwan is fairly competitive according to various surveys but it is still not attracting much FDI. This implies there is not enough impetus and investment driving services industry development. Taiwan should be an attractive investment target given its many advantages including geographical location and transportation links to the region, including numerous flights to China. Taiwan’s share of EU trade has declined in recent years but trade in services have bucked the trend and risen. Services therefore represent an area of continuous growth and potential for further growth in future.

According to Lee, the EU’s investments in the services sector are still lower than its investments in manufacturing in 2013. Wholesale and retail trade was the dominant sector of EU’s investments in Taiwan followed by professional, scientific and technical services, financial and insurance, accommodation and food and arts, entertainment and recreation. (Although this last sector is small, the EU’s investments in it are higher than any other region/country.)

According to Lee, TiSA talks are about market access but what is more important is regulatory harmonization and he believes that TiSA will not have much impact on regulatory harmonization. He said that Taiwan needs a strong binding push for regulatory reform, especially in areas such as telecom services, postal services, accounting, broadcasting and the movement of professionals. In distribution services, Taiwan is already quite competitive.

Lee said that policy priorities for next two years should be: Liberalization and regulatory reform in preparation for Trans Pacific Partnership (TPP) agreement membership, moving forward in cross-Strait economic relations, the introduction of Free Economic Pilot Zones (FEPZ) and encouraging investment.

Taiwan’s plan to create FEPZs is a promising development given many expected advantages of doing business in the zones such as streamlined regulatory processes, tax incentives and the ease of hiring foreign talent.

Structural reforms are needed in postal services and State-Owned Enterprises (SOEs) In particular, SoEs need to keep competitive neutrality when doing business with private enterprises.

Lee concluded by saying that an EU-Taiwan TEM is possible and important given the potential to boost trade in services and that a Bilateral Investment Agreement (BIA) could be an interim step. He added that soft power exchanges (in terms of culture art, religious and creative industries) are also very important and there is much scope to increase cooperation and trade in these areas.  

_____________________________________

Session I: Financial services

Moderator: Cheng Cheng-Mount (鄭貞茂), President, Taiwan Academy of Banking and Finance (TABF)

Topic: Cultivate your business growth by listing on the Taiwan Stock Exchange

Speaker: Chien Lih-chung, Senior Executive Vice President, Taiwan Stock Exchange Corporation

Chien gave an overview of the process and advantages of listing on the Taiwan Stock Exchange. According to Chien, Taiwan offers outstanding IPO synergy, helping companies to attract investors and talent as well as raise cash. Listing in Taiwan makes it easier to facilitate funding from private investors and issue overseas bonds. It also helps companies to increase visibility and improve competitiveness.

Chien gave two successful examples of foreign companies that have listed in Taiwan. In one case, a company in the food and beverage industry in 2010 with operations in Taiwan, China and the United States, the pre-listing book value of the company rose over 800% and its share price rose another 53% after the IPO. As of September this year, the company had raised US$80 million in funds, which it used to open more branches. Another example he cited was a firm engaged in financial leasing, which delisted in Singapore and listed in Taiwan instead. Its pre-lising book value increased 34% at IPO and since the IPO, the share price has risen 312% given the company’s good business in China.

Being listed in Taiwan has a number of benefits including a large source of funding options, abundant industrial clustering (from the petrochemical, steel machinery, automotive, fertilizer, paper to financial services and high tech sectors) and good global capital market rankings. In addition, Taiwan’s capital market is characterized by a fairly good average price-to-earnings (PE) ratio (17.1 in August this year), price-to-book (PB) ratio of 1.81 (both fairly good compared to other markets in Asia) and a share turnover rate of 75% annually, which is much higher than Hong Kong and Singapore. The average dividend yield of Taiwan stocks of 3.09% is also comparable to other markets. Taiwan is an ideal market for SMEs to list. Taiwan is ranked 19th globally in in terms of market capitalization, 14th in trading value 14th and 9th in turnover ratio. This shows that the TWSE is competitive. Since 2009, when Taiwan opened its market to foreign firms, 39 foreign companies have listed. (Since then, two of these were merged so there are currently 37.) Most of these firms are owned by Taiwanese shareholders although most of their business is overseas.

Taiwan has a very efficient application process. Once a lead underwriter, CPA and legal representatives have been found, the counseling period is usually about six months, the TWSE review takes about two to three months and, after passing the application review, just one to two months are needed to complete the process (an average of six months in total). There are very clear and transparent review points which emphasise the protection of shareholders.


Topic: Opening up of the financial Industry

Speaker: Godwin Chang, Group Country Head, Societe Generale Taipei Branch & Vice Chairman, European Chamber of Commerce Taiwan

Taiwan has stable sovereign ratings (S&P: AA- and Moodys Aa3) and high foreign exchange reserves, which is a strong sign of stability and security. In addition, the very high savings rate of 33% and high level of insurance penetration (an average of five policies per person) are signs that investors are sophisticated. That said, there is a lot of room for growth in Taiwan’s financial services industry because it accounted for about 6.5% of Taiwan’s total GDP in 2013 compared to 12% in Singapore and 16% in Hong Kong.

Taiwan is overbanked, according to Chang, with 30 domestic banks and 30 foreign banks (either branches or subsidiaries) with total bank assets of US$1,367 billion. Taiwan’s life insurance sector is also large with US$550 billion in assets.

According to Chang, Taiwan is on the right track towards deregulation. This has sent the right signal to investors but more could be done allow financial companies to do more. The dilemma for regulators is striking the right balance between protecting investors and offering more choices but accurate information is more important than regulation, according to Chang.

The current ultra-low yield environment, while good for consumers, is tough for financial firms. They need more options and flexibility to be able to earn returns for investors. Taiwan has very strong liquidity, which was an important factor during the financial crisis, but returns are also low.

Recent deregulations have included the following:

  • International bond investments (Formosa bonds) are no longer included in insurance companies’ foreign investment calculations (since June 2014)
  • Insurance companies can invest in higher risk investments.
  • Offshore Banking Units (OBU) can now offer more products to their clients.

To increase returns, investors need more overseas options. Through Formosa bonds they get foreign returns and these investments are not capped because they are issued in Taiwan. This is very positive for life insurance firms, securities brokers and banks.

Taiwan is a good environment for issuing bonds given Taiwan’s experience in terms of regulation and market system, together with a sound secondary market environment, abundant liquidity from major life insurance companies since investment deregulation, low issuing costs and a faster process than few years ago.

Total international bond issuance is US$17.5 billion, of which CNY bonds account for 23% and US dollar bonds account for 75%. Formosa Bonds have tenures of 15-20 years.

The financial services industry is looking forward to more reforms to allow OBUs to issue CNY life policies, further deregulation of derivative products, to allow domestic banks to launch derivative products and the lowering of capital adequacy ratios for securities companies from 200 to 150. According to Chang, it is in everyone’s interests for the environment to be open and transparent.

Chang concluded that there are great opportunities for growth given market conditions. More liberalization would increase these opportunities, increase economic growth and create jobs. Allowing greater local product selection will be a key to success. Finally, further consolidation is needed in the banking sector and more of Taiwan’s banks should become regional banks.


Topic: Business is Great Britain

Speaker: Mandeep Singh Gill, Head, Prosperity Section, British Trade & Culture Office Taiwan

Singh gave a perspective on services from an EU member state. The financial services sector is a key sector for the UK and one of its most successful. The UK is a leading exporter of financial services across the world with a trade surplus of US$71 billion in 2013. Over 500 foreign companies are listed in London. UK assets under management totaled £5.4 trillion in 2012, roughly double the size of the UK’s annual GDP. The UK accounts for 41% of all global foreign exchange trading while the UK’s insurance industry is the largest in Europe and the third largest globally. The financial services sector plays a vital role in the growth and prosperity of the wider UK economy as it accounts for 8% of UK GDP (based on 2013 figures), 12% of tax revenue, half of the UK’s trade surplus in services and one million jobs, two thirds of which are outside of London. London is already the world’s leading foreign exchange centre and payments hub.

Looking at future developments, the UK is working to develop Islamic finance and RMB clearing.

The rise of the RMB is viewed by UK regulators as a significant development in international finance and they intend to put London at the heart of this development. In this regard:

  • The UK was the first G7 country to agree to a swap line (RMB200bn) with China (in June 2013)
  • The UK was the first non-Chinese location with an RQFII quota (in October 2013)
  • The UK had the first RMB clearing bank outside of Asia (in June 2014)
  • China Development Bank issued the first Chinese quasi-sovereign RMB bond in London (in September 2014)
  • The UK issued the first non-Chinese sovereign RMB bond in September 2014.

Singh said that the UK and Taiwan are natural partners and its relationship is complimentary and growing steadily. He said that Taiwan has the potential to become a significant Asian financial centre given a massive pool of assets and because it is a rising player in RMB. He noted that 90% of all UK investment in Taiwan in the last five years has been in financial services. UK Banks and Asset Management firms are all very active locally while several Taiwanese banks now have a presence in London. The current scale is large but there is potential for much more.


Topic: The UK on financial services: Private sector experience

Speaker: Cosmos Lu, CEO, Barclays

Taiwan is rich in capital and talented people that can be trained to be successful in the financial sector. These are the two most important factors needed to make Taiwan more prominent and successful in financial services.

Barclays works with the Taiwan British Business Council, specifically the Financial and Professional Services Sector. The council made a number of recommendations at the conclusion of a joint meeting held earlier this year. These included encouraging Taiwanese financial institutions’ headquarters and their overseas operations to increase their offshore RMB activities, increase market deregulation, forge deeper cooperation in securities and financial business and to explore opportunities to utilize ample liquidity to support green/social financing projects.   

On social financing, in 2012 Barclays launched a £25m Social Innovation Facility (SIF) to support and accelerate the development of new products and services that deliver a sustainable commercial return and an ongoing social impact. Project highlights include helping to increase accessibility to and affordability of essential medicines in resource-scarce African healthcare systems.

One of the bank’s major initiatives is the Banking and Environment Initiative, supported by 50 CEOs of the largest retail and manufacturing companies in the world and aimed at taking deforestation out of their supply chains by 2020. The BEI is a CEO-led group of 10 global banking institutions convened by the University of Cambridge and chaired by the CEO of Barclays. Its mission is to lead the banking industry in collectively directing capital towards environmentally and socially-sustainable economic development. It has launched a partnership with the retailers and manufacturers of the Consumer Goods Forum (CGF) - a group of over 650 companies from 70 countries, accounting for over US$3 trillion in revenues, which look into how to reduce deforestation and increase sustainability.

_____________________________________

Session II – ICT Services – Smart Cities

Moderator: Stanley Wang (王志翔), Deputy Director General, International Division, Institute for Information Industry (III)

Topic: IoT applications in smart cities

Speaker: CH Wu, Vice President, Intelligence Service Group, Advantech

Advantech’s brand mission is “enabling an intelligent planet” to empower innovative technologies and solutions. It is a good example of a company that has evolved from a manufacturer of devices (mainly personal computers) into a provider of devices plus software and towards a further blurring of the distinction and convergence between goods and services.

In 2012 the company started focusing on how to create smart cities driven by technology convergence and urbanization. Crucial technology that is driving change and the development of smart cities is advances in wireless, chipset, MEMS and video codec technologies.

Based on current trends, 70% of people will live in cities by 2050. This will create a lot of problems including overcrowding, traffic congestion, air and water pollution, public security and safety problems.

Solutions from the internet of things can be harnessed to solve these problems to make manufacturing, agriculture, transportation, logistics, retail, buildings and energy distribution and usage smarter. 

Taiwan’s electronic toll collection system, which integrates cameras, machines to recognize them, linked to cloud and banking services is an example of a smart IoT system. Hospitals can use new technology for information enquiries, registration, queuing, outpatient check-in and even diagnosis, with all information stored and accessible from a cloud.

Advantech’s Intelligent Service Group produces hardware and offers services for logistics and fleet management, retail and hospitality and healthcare. The company’s fleet management system for trucks provides real-time driver behavior management (to monitor if the driver is awake), proactive vehicle diagnostics monitoring (such as a tyre pressure monitoring and an automatic notification when to change the tyre), round-the-clock fleet security monitoring, real-time communications and information delivered to the driver and the central office.

The company’s e-bus system provides in-vehicle surveillance, real-time rear view monitoring, tyre pressure monitoring, real-time billing and invoicing and in-vehicle signage displays. The systems offer hardware and cloud-based application ready platforms and remote device management. For the retail sector, the company offers smart chain store and shopping mall management solutions. In healthcare, the firm offers a variety of solutions for hospitals, including operating rooms, nursing care and patient infotainment, which provides information on medical data as well as entertainment for patients.


ICT and other services: Key elements in global value chains

Pascal Kerneis, Managing Director, European Services Forum

Business services encompass many fields. Professional services are embedded in manufacturing while construction services should also be classified as services. People tend to associate retailers with goods but they should be seen as providing services.

Annual global trade is worth about US$19 trillion and services account for about 20% of this according to a balance of payments calculation but this measure is not satisfactory. The WTO has introduced a new way of measuring services trade - trade in value-added (TiVA). By this indicator, the share of services is 45% of the total world trade because it takes into account all the processes involved. To take a simple example, only 10% of the value of a car is its material parts. 90% of a car’s value is from service (such as the cost of R&D, design, manufacturing, transport, logistics finance and so on).

This should change the way people view the importance of services. It also shows how important services are to Europe. EU countries account for 24% of the world’s services exports. Taking into account both EU countries and other countries in Europe, EU exports of services represent 42% of global services exports. This is why a global Trade in Services Agreement (TiSA) is crucial.

While the high value of the EU’s travel (and tourism) sector is not surprising, the “other business services category” of miscellaneous business services is actually the largest portion of EU services. Embodied services used by firms to produce goods are not counted in services figures. Companies are not so much selling goods but a service around a product. In recent years, the application of enabling services such as telecommunications and IT Services has driven deeper segmentation of goods supply chains into production units which can be dispersed geographically, and yet be connected. Embodied services are involved throughout the processing and manufacturing steps in the goods supply chain and all traded goods embody services, on average around 25%. Embodied services represent a higher share (50% +) of value-added of high tech goods. Manufacturing industries now sell more and more services as an integral part of their activities. Companies increasingly make money from services around manufacturing not manufacturing itself. For example, when a train manufacturer sells a train, it will normally give a discount on the price in the hope that it will make money on a 20-year maintenance contract.

All services need computers and the transfer of data and smart cities are about the transfer and use of data. Value added attribution is in services. For example, to produce a product first requires innovation, R&D and design (all of which are services). Then, in the manufacturing and assembly, while materials are used, a large part of the process is a service. Then, after production, logistics, marketing, brand and advertising and customer services are all services. This illustrates that a huge part of the value added is in services.

For example, only 3.8% of the value of an Apple iPod is added in the manufacturing process in China. If it is designed in Taiwan, the Taiwanese service supplier will get a larger part of the value added while the main value will go to Apple, for innovation, design and brand.

There are many types of data used by companies but there are barriers to cross-border data flows and the implications have not yet been fully thought through. For example, is seemingly anonymous data really anonymous? Can people really protect their personal data? Can it be sold or used without permission? These questions have to be resolved first in order to legitimately unleash the use of data. Forced localization of data is an increasing trend, such as cloud restrictions in Taiwan and forcing banks to keep the data of local clients in Taiwan. This is a significant problem given that around 30% of all bank costs are related to IT and if they are unable to rationalize data centres regionally, costs could be crippling. These types of barriers are slowing down the digital economy, affecting innovation and business consolidation.

Taiwan maintains restrictions in a number of sectors such as telecoms. This is why further trade policy measures are needed to increase market access. The TiSA negotiations provide a good opportunity for participating countries to remove existing barriers, so as to facilitate the full potential of the IT Services and other services for the development of the global value chain.

 _____________________________________

Session III – Distribution Services

Moderator: Chou Ting-Jui (周庭), Director General, Marketing and Consumer Behavior Research Division, Commerce Development Research Institute (CDRI)

Topic: Globalisation and the development of Taiwan distribution services

Speaker: Tony Ho, Chairman, Test Rite Group

Test Rite started as a trading company and has expanded to 10 countries. It is involved in home improvement companies, B&Q and Hola and Décor house.

Ho noted that revenues are declining in many bricks and mortars stores while e-commerce continues to increase. Traditional retailers are responding by also offering online platforms. Test Rite stores have responded to a decline in traffic by offering higher value-added products and trying to increase average sales volume per customer.

Business models used to survive decades but now require constant innovation. Nevertheless some retailers are thriving. COSTCO, for example continues to thrive because its customers believe it provides value for money.

Doing business in China’s retail sector is not easy. Many global retailers failed in China because they did not localize their business models enough or because they did not find the right partners. For example, KFC in China has added milk and congee to its product line up to appeal to local customers (not necessarily the same in every part of China – regional tastes must be taken into account). This has clearly paid off since KFC’s China operations account for 50% of its global profits.

While home improvement stores are popular in the west, the idea did not at first take off in Taiwan because people prefer to call service people rather than fix things themselves. The situation is even more pronounced in China given that labour costs are very low and it is much cheaper to hire someone to fix things. Moreover, the home improvement store concept led to a number of copycat competitors, which has made it difficult to make money in that country.

 

Topic: Distribution services trends – Today and tomorrow in the greater China area

Speaker: Tony Y Chen (陳耀東), Vice President, Public Policy – North East Asia & Greater China & Managing Director, DHL Consumer Dialog & Delivery (Beijing), Deutsche Post – DHL

Taiwan is trying to promote itself as regional distribution centre. The right conditions are in place. Taiwan has an ideal location, a well-developed infrastructure (convenient ports and harbours) and a lot of transport capacity (such as numerous direct flights to China), an efficient customs clearance system and strong manufacturing supply chains. Taiwan’s current free trade zones are impressive, according to Chen and the prospect of new Free Economic Pilot Zones (FEPZs) promise to make logistics business even easier.

The rising growth in online sales is a boon for transport and logistics companies and is dramatically changing logistics. China’s e-commerce sector is already the largest in the world and continues to grow 20% a year. Logistics in China is an extremely competitive business, especially last-mile delivery. There is more money to be made in intra-city delivery while foreign players concentrate on regional and global logistics. Chinese logistics players have shown ambition to expand beyond China but doing so would require a substantial upgrade of their systems and networks, which are far less sophisticated than global logistics leaders.

 

Topic: Trends in logistics (Europe)

Speaker: Jean-Marie Guérin, Managing Director, ID Logistics China

The company provides detailed picking and automation, warehousing and transportation. The company employs an R&D team that is permanently looking for new solutions for its customers.

Guérin gave an introduction to some of the recent developments in the industry. On the issue of automation, it is possible to automate more and more processes nowadays such as sorting and shipping the exact amount of goods from the warehouse to each specific store so that they don’t need to carry any stock on their premises.

Guérin showed a video of one of his company’s systems at a warehouse which can dismantle pallets of products layer by layer and sort them automatically. When packing for reshipment, the system can even determine the most optimal method to place packages of different weights and sizes onto same pallet, placing heavy items on the bottom layers and filling in even the smallest spaces with packages of the optimal size. This technology is impressive but only a few privately-owned companies have switched to full automation. Not only is it expensive (return on investment of more than 12 years) but there is opposition from labour groups and government (because it will eliminate jobs). Moreover, not all goods (such as fragile goods, pet food or large appliances) can go through automated sorters. 

Another industry development is collaboration and consolidation centres managed by retailers. For example, some retailers are now pooling their warehousing and transport facilities to save on costs, optimize transport and cut carbon emissions. 

Another development is surveillance robots, fitted with wheels and night vision cameras that have been installed to patrol warehouses instead of security guards. When the robot detects a person, an alarm is triggered.

Guérin conclude that while there a number of developments in the logistics industry in Europe, there are no clear common EU-wide or global trends.

_____________________________________