Given trends toward global trade liberalization and regional economic integration, it is essential that the COA map out strategies for Taiwan’s agricultural sector to cope with new competition, and turn the threat of competition into an opportunity to transform this entire sector. The goal is to transform agriculture from a simple “production” sector into a link in a “new value chain.” One approach being tried out is to promote value-added agriculture through the government’s newly created Free Economic Pilot Zones (FEPZs). Through innovative value- added, we hope to redraw the map of markets for Taiwan’s agro-products.

The first phase of the FEPZ plan was launched on August 16, 2013. The COA has mapped out value-adding strategies, which aim to link abundant foreign raw materials with Taiwan’s competitive advantages (including safe high-quality raw materials produced under contract, critical production techniques and technologies, and agricultural R&D capabilities) to promote comprehensive value-added development in this sector. We are giving priority to selected industries with international market potential—including ornamental fish and peripheral products; agricultural biotechnology (such as animal vaccines), and industrial processing of farm, fisheries, and animal husbandry products. In the following paragraphs we introduce the basic FEPZ concept and discuss the main areas of FEPZ-related work by the COA in 2013.

Operations model and functions of FEPZs

The purpose of promoting “value-added agriculture” is to increase demand for primary agro-products by encouraging the development of industries that add value to those agro- products. The plan for the FEPZs is to “liberalize links between the international economy and the FEPZs” while “keeping the customs wall between the FEPZs and the domestic market.” The operations model is “shop in front, factory behind.” Producers will be able to move into the FEPZs, and simple processing will be allowed in the zones themselves, while more elaborate processing can be contracted out to factories in Taiwan but outside the FEPZs. The FEPZs will also host logistics firms to provide warehousing and shipment services.

The basic FEPZ plan

For the first phase of the plan, FEPZs are being established in existing “Free Trade Zones” (six at harbors, plus one at Taoyuan International Airport), with an additional FEPZ to be set up in the Pingtung Agricultural Biotechnology Park (PABP). At the initial stage, the COA is giving priority to locating the ornamental fish and animal vaccine industries in the PABP. As these industries develop, we will assist firms to locate in other suitable FEPZs as well.

Projected beneficiaries

1. Domestic farmers: Value-added-agriculture firms operating in the FEPZs will sign contracts with domestic farmers to supply the firms with agro-products, thereby driving demand for domestically produced raw materials, which will help stabilize farmers’ incomes.

2. Operators of value-added-agriculture firms: Firms that add value to agro-products in FEPZs will be able to conduct their business in an environment of simplified customs procedures and high-speed administrative efficiency, speeding development of the value-added-agriculture industry and adding vitality to the national economy as a whole.

3. Exporters and logistics firms: The “shop in front, factory behind” operating model can encourage firms that set up in FEPZs to cooperate with non-FEPZ processing factories (“factory behind”) as well as with logistics firms that also set up in the FEPZs (“shop in front”), which will create more commercial opportunities for exporters and logistics operators.

Anticipated benefits

1. Expansion of production value in the agricultural sector: The policy of supporting value-added agriculture in the FEPZs is aimed at “expanding the existing economic pie” and “creating new pies.” It is expected to drive new demand for agro-products, to extend industrial value chains, and to increase the production value of the agricultural sector.

2. Creation of jobs, increases in rural incomes: By attracting both domestic and foreign firms into the FEPZs, the FEPZ policy will (a) encourage increased scale of production plus technical progress, (b) increase incentives for young people to remain in farming (or take up farming), and (c) create jobs. The government will guide firms that set up in FEPZs to sign contracts or establish stable relationships with domestic farmers to supply the firms with raw materials, thereby raising farmers’ incomes.

3. Preparation for Taiwan agro-products to compete in the global market: The experimentation with market liberalization and deregulation in the FEPZs will help domestic agriculture to get up to speed with the global marketplace, as cooperation with international corporations drives local farmers to come up to international standards. Also, through the international sales channels of these corporations, Taiwan agro-products will gain an enhanced reputation and it will be easier to market the Taiwan brand name to the global market.

Accomplishments in 2013

Between July and December of 2013, a total of 14 firms received approval to invest in the Pingtung Agricultural Biotechnology Park, with total capital investment of about NT$1.75 billion.