Overdevelopment and Industrial Zone Bubbles
September 23, 2010
Phases III and IV of the Taichung Science Park and the acquisition of land in Dapu, Miaoli County have provoked protests by farmers. Problems with excessive industrial park development and with "too many chefs spoiling the broth" have resurfaced. Bureau of Audit statistics indicate that industrial parks island-wide include over 2000 hectares of idle land. Several years ago the Bureau of industry halted the development of new industrial zones. But local officials were eager to pad their resumes. They relentlessly acquired agricultural land and developed new industrial zones. The absence of overall management and control has led to an industrial zone bubble on Taiwan. This bubble will lead to inestimable waste and destruction.
Have industrial zones been overdeveloped? A walk through the zones tells all. Most northern industrial zones are full. Central and southern industrial zones are idle. Their plight is worse than the official statistics suggest. The main reason is that some manufacturers purchase the land during the early stages of development, but do not actually build any plants. Some vendors rent the land. Because the rents are ultra low, the plants are left idle. Plant construction never even began.
Take the Changhua Coastal Industrial Park for example, the largest in the nation. It has been in development for 30 years, but most of the land remains idle. Much of it is overgrown with weeds and crumbling structures. The underlying cause is insufficient planning. Some people harbored unrealistic dreams of a Yunlin Offshore Industrial Zone. Three industrial zones in addition to Formosa Plastics in Mailiao have been forced to shut down. Over 1000 hectares of new industrial zones involved the investment of tens of billions in land reclamation. All have been forced to suspend development.
In 1996, the Bureau of Industrial Development developed the Tainan Technology Industrial Park. Later, the National Science Council developed the Tainan Science-Based Industrial Park. The two entities worked against each other. The result was below expectation industry investment. This was a perfect example of how central government ministries each go their own way. What was even more absurd, land in Tainan was much cheaper than land in Taipei. But a less than ideal long-term financing and unit sales situation inflated development costs. Land at the Tainan Technology Industrial Park went for seven million NT per ping, making it the island's most expensive industrial zone. Even after the price was lowered to four million NT per ping, it remained higher than for any other industrial zone.
For years, everyone from the central government level to the local level, from the Ministry of Economic Affairs to the National Science Council, from the Council of Agriculture to the Environmental Protection Agency, rushed to develop industrial zones. Together, they created the industrial zone bubble. In addition, local governments in financial distress became ever more aggressive in acquiring and developing land.
Closer examination reveals that behind county and municipal government development of industrial zones, was wholesale collusion between political and business interests. Superficially, industrial zones promote economic development and create jobs. But even more importantly, eminent domain rezones agricultural land for industrial, residential, or commercial use. This brings with it immense development advantages. Conglomerates with advance information can jockey for position. Builders can often maximize their profits. Local governments can rezone the land, sell it, and inject the profits into the local economy. So many birds, all killed with a single stone. So why not?
But not everyone benefits from the land acquisition and development game. In 1986, the Chiayi County Government set up the "Chung Yang Chi Industrial Zone." At the time martial law was still in effect. Many farmers who protested were charged with obstruction of official business. Eight landlords insisted on recovery of ancestral lands and refused government compensation. The case dragged on for over a decade, and the courts ruled their compensation forfeited. This tragedy underscores the many problems behind the use of eminent domain to acquire land for industrial zones.
First of all, was the land acquisition legitimate? Was it consistent with the public interest? The farmers lived off the land for over a century. If the government ends up with large tracts of idle land, was it really justified driving farmers off the land in the name of new industrial zones?
Secondly, the publicly announced acquistion price is often far lower than the current market price. This is unfair to those forced to sell. The government invokes eminent domain to acquire agricultural land on the cheap. It rezones the land for industrial, commercial, or residential use. After which the price of the land skyrockets, often increasing by several hundred percent. The farmers may be allotted a tiny plot of land, but only enough to build a toilet or a bedroom. Is such a system of eminent domain reasonable?
Third, the industrial zone development system has too many chefs. They have already created industrial zone bubbles all over the island, leading to idle land and wasted resources. Science park operating funds have accumulated a liability amounting to 120 billion NT. In the end, this will be borne by the taxpayers. The Bureau of Industrial Development has put its foot on the brake. It has imposed a moratorium on the development of new industrial zones. But it continues to allow county and municipal governments to develop new industrial zones. Is this responsible?
The development of industrial zones began in the 1960s. Rapid industrial development enabled Taiwan's economy to take-off. But the public as a whole has paid a heavy price. In recent years, total industrial output as percentage of GDP has fallen below 30 percent. Industrial zone development policy has reached the stage where it requires comprehensive review and adjustment. Land and water resources on Taiwan are limited, The world is moving toward a knowledge economy. Does the government really intend to continue developing industrial zones without end? Who will assume responsibility for the waste and destruction caused by over-exploitation?