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Building Taiwan: Asia Gold Rush On : Industry: Foreign companies clamor to get parts of its six-year, $300-billion infrastructure plan.

May 14, 1994|KARL SCHOENBERGER | TIMES STAFF WRITER

TAIPEI — It's a burning issue in Taiwan, pitting the United States and Europe against Japan in a global competition that speaks volumes about business in the high-stakes political minefields of Asia.

The question: Who will have the privilege of burning garbage in this cash-rich island state?

The Japanese got off to a head start three years ago, claiming they were uniquely qualified for the job because they share with Taiwan a basic garbage culture.

Asian garbage is "wet" compared to Western trash, the argument went, and that supposedly made Japan's incinerator technology the kind best suited to the task.

Nonsense, said Americans trying to wrest away a few good public-works contracts from the Japanese, who so far have dominated Taiwan's growing market for municipal incinerators. Garbage viscosity is a lame excuse, they said, for keeping a chokehold on the lucrative contracts.

At stake is far more than the $1 billion worth of waste incinerator contracts Taiwan will award this year alone. Foreign contractors are also competing here for power plants, telecommunications gear and mass-transit projects--all parts of Taiwan's $300-billion, six-year plan to develop a modern infrastructure.

The total budget has been scaled back somewhat since this ambitious building bonanza was announced, with considerable hoopla, in 1991. And, since a series of snafus involving land speculation and corruption, it appears that very little work will have been completed by year six of the plan.

But Taipei is still Fat City in an Asian infrastructure gold rush that extends from Hong Kong to Hanoi.

After about a third of the infrastructure budget goes to land acquisition and another third is paid to local contractors, Taiwan's market will yield some $60 billion to $80 billion in contracts to international bidders, according to U.S. officials.

U.S. Treasury Secretary Lloyd Bentsen estimates that Asian countries will spend $1 trillion on infrastructure in the next decade. That figure doesn't count Japan's market, until recently closed to foreigners.

"That's 18 Santa Monica Freeway projects every day," Bentsen said in Los Angeles last month. "If I were 30 years younger, I know what market I'd want to be in."

But it's not all easy money. Taiwan's trash scene, for one, illustrates the convoluted reality of doing business in the trenches of Asia's public-works sector.

"This incinerator thing has been one big frustration," said Gregory Stevens, an American environmental business consultant based in Taipei. "It's a mess."

On the face of things, Taiwan's central government couldn't be more accommodating to European and U.S. firms.

Taipei's dusty streets are torn up now for a sprawling light-rail project that has been parceled off in so many segments to so many foreign joint ventures that local wags call it "the United Nations subway system."

Cynical observers say the government, bucking its diplomatic pariah status as pretender to China's throne, is trying to buy some respect on the international stage with its public-works program. Others allege that civilian contracts in some cases have been used as bait for foreign arms deals.

Clearly, one of Taipei's most audacious strategies is its official policy of discrimination against Japan in awarding the contracts.

Taipei, distressed by a $15-billion bilateral trade deficit with Japan, has retaliated by raising import barriers and nominally banning Japanese companies from bidding for public-works projects.

Still, the official ban hasn't stopped Japanese-controlled firms from grabbing a piece of the pie. They've bidden through overseas subsidiaries or local joint ventures.

On a section of the Taipei subway where Boise, Ida.-based Morrison Knudsen has a contract, price-competitive Komatsu backhoes are ripping up the asphalt. The roads are clogged with supposedly verboten Japanese autos--assembled in local screwdriver plants or imported from the United States to circumvent high tariffs.

Even the Fords popular in this former Japanese colony are made by Mazda, lamented Ying Price, chief of the commercial section for the American Institute in Taiwan, the unofficial embassy. "Taiwan was occupied by Japan for 50 years," she said. "Maybe the troops left, but Japan's business practices are still deeply rooted."

In the world of incinerators, as in other sectors, the Japanese competitive grip begins with the "specs," or engineering specifications. Typically, whoever drafts the specs for an international tender has a decisive advantage in the competitive bidding. It's smart business. And in Taiwan, Japanese consultants initially set the specs for Taiwan's incinerators--thereby perpetrating that myth that their technology was "designed to treat Asian garbage," Price said.

Some observers say the Japanese construction industry's time-honored practice of dango , or bid rigging, has traveled to Taiwan.

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