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  • The Introduction of Taiwan’s Export Processing Zones (EPZs)

    I. Origin
    More than half a century ago, Taiwan was facing capital shortage, lack of techniques and labor excess. Therefore, the government of Taiwan, R.O.C. established the first Export Processing Zone (EPZ) in 1966 and also became Taiwan’s first special economic zone and the first EPZ in the world, combining the characteristics of free trade zone and industrial park.
    Forward-looking at age 50, Taiwan’s export processing zones have reached the four major goals such as expanding international trade, attracting industrial investments, bringing in latest technology and increase job vacancies. Taiwan’s EPZs excellently contributed in leading our country’s industrial development and created world famous “Taiwan’s Economic Miracle!”

    II. Development
    Taiwan’s EPZs were established over 50 years, their management modalities, major products and operational mechanisms were reformed every 10 to 20 years. The major development phases were elaborated as follows.
    1. Phase I:
    During 1966 to 1986, it was the stage of establishment of traditional industries, and the role of the EPZA was high control. At this stage, the products were low-end OEM products such as clothing (T-shirts), leather , handcrafts, plastics, and the operation model was processing.
    2. Phase II:
    During 1987 to 1996, it was the stage of industries adjustment, and the role of the EPZA was aggressive control. At this stage, the products were middle-end OEM products such as camera lenses, IC, clothing (dark suits), metal products (bolts, nuts, nails, etc.), and the operation model was manufacturing.
    3. Phase III:
    During 1997 to 2006, it was the stage of transform and expansions, and the role of the EPZA was reduction of red tapes. At this stage, the products were high-end OEM products such as high-end and intermediate-end IC, optics, LCD, digital cameras, information software services, and the operation models were R&D, design, and manufacturing logistics.
    4. Phase IV:
    During 2007 to 2016, it was the stage of industry clustering, and the role of the EPZA was innovative services. At this stage, the products were high value-added products such as high-end key IC, TFT-LCD, information software, digital contents, R&D, and the operation models were R&D, design, manufacturing, marketing, branding, logistics (multi-modality).
    5. Phase V:
    From 2017 until now, it was the stage of promote innovations, and the role of the EPZA was smartly value-added. At this stage, the products were system integrated products such as systematic 3D IC, AR/VR application products, cloud computing, cultural design, and the operation models were smart management and operations.

    III.Features of the EPZs
    1. Land: Land for rent only, to reduce enterprises’ costs.
    2. Administration: Provide single window and exclusive specialist (viz. account manager) to assist in ad hoc services for locators in the Zones.
    3. Facilities: Establish sound infrastructure and convenient working and living environment.
    4. Customs Services: Autonomy account management, speedy digital EDI customs clearance.
    5. Tax Incentives: Exemption from import duties (e.g. machinery, equipment and raw materials), commodity tax and business tax etc.

    IV.Current Operations & Location of Parks
    1.Location of EPZs
    (1)Taichung City:
    Chungkang EPZ (177.28 hectares), Taichung EPZ (26.12 hectares), and Taichung Software Park (4.96 hectares) are located in Taichung. The jurisdiction of Chungkang EPZ is Chungkang branch of the EPZA, and key industries are display panel-related industries. In addition, the jurisdiction of Taichung EPZ and Taichung Software Park is Taichung branch of the EPZA. The key industries in Taichung EPZ are optics and electronics; in Taichung Software Park are software and digital contents.
    (2) Kaohsiung City:
    Nanzih EPZ (92.33 hectares), Nanzih Second Park (8.49 hectares), Kaohsiung Software Park (7.92 hectares), Kaohsiung EPZ (72.38 hectares), Linkuang EPZ (8.96 hectares), and Cheng Kung Logistic Park (8.82 hectares) are located in Kaohsiung. The jurisdiction of Nanzih EPZ, Nanzih Second Park, Kaohsiung Software Park is Export Processing Zone Administration (EPZA, headquarters). And the jurisdiction of Kaohsiung EPZ, Linkuang EPZ, Cheng Kung Logistic Park is Kaohsiung branch of the EPZA. The key industries in Nanzih EPZ and Nanzih Second Park are semiconductor packaging and testing; in Kaohsiung Software Park are software and digital contents; in Kaohsiung EPZ and Linkuang EPZ are IC packaging and testing, LCD and Optoelectronic; in Cheng Kung Logistics Park are Logistics and Warehousing.
    (3) Pingtung County:
    Pingtung Park (123.04 hectares) is located in Pintung. The jurisdiction is Pintung branch of the EPZA, and key industries in Pintung Park are water treatment and motor-related industries.
    2.Important Statistics and Key Figures(in 2016)
    (1) Registration No. of Companies: 604
    (2) Investment Amount (NT$): 40.1 billion
    (3) Corporate Revenues (NT$): 377.6 billion
    (4) Exports Amount (NT$): 427.5 billion
    (5) Imports Amount (NT$): 262.9 billion
    (6) Total Employees: 81,904
    (7) Output Value Per Employee (NT$/PerCapita/yr): 4.7 million
    (8) Unit Area Value (NT$/ha/yr): 1.04 billion

    V. Substantial Contribution to Taiwan’s Economic Development
    1. Expand Foreign Trade
    Before 1960s, Taiwan was shortage in foreign exchange and run deficit in international trade. After the sep-up of Export Processing Zones (EPZs) in 1960s, the shortage of foreign exchange was gradually improved.
    For example in 1980, while Taiwan run 80 millions US dollars in trade surplus, however, EPZs created 670 millions US dollars surplus in the international trade. Thus we can tell that EPZs obviously had great contribution in expanding foreign trade.
    2. Attract industrial investment
    After the establishment of EPZs, Taiwan had successfully attracted Foreign Direct Investment (FDIs) and helped its national capital accumulation to further promote industrial development.
    3. Bring in latest technologies
    Taiwan’s EPZs were the original birthplace of its IC, Optics, Optoelectronics, LCD etc. Its domestic major key IC technologies were introduced and cultivated in EPZs. A few successful cases are elaborated as follows.
    (1) IC Industry: In 1967, Royal Dutch Philips Electronics (Taiwan) Ltd., Kaohsiung Hitachi Electronics Co. Ltd., Orient Semiconductor Electronics were set up one after another in order to attract and introduce IC-related manufacturing technologies.
    (2) Optics Industry: In 1970, Baso Precision Industries, Ltd. from Germany and Canon Inc., (Taiwan) from Japan were set up in Taichung EPZ. These two companies cultivated many talents and spilled-over companies in Optics industry.
    (3) LCD Industry: In 1967 Kaohsiung Hitachi Electronics Co., Ltd. was established in Kaohsiung EPZ. Later, Sharp from Japan was located in the EPZ, to introduce LCD related manufacturing technologies. It laid down the sound foundation for Taiwan, R.O.C.’s TFT-LCD Industry.
    4. Increase job vacancies
    Taiwan’s EPZs have already created more than 81,000 job vacancies, promoted national income and contributed in upgrading citizens’ living standards.
    5. Establish Paradigms
    Taiwan had established the first EPZ in Qianzhen District, Kaohsiung in 1966. It had also successfully led the development of Taiwan’s Economic Miracle. It laid down the learning Paradigms for later of Taiwan’s Science Parks, Free Trade Zones and Pingtung Argo-biotechnology Park etc. It also attracted more than 20 developing countries including South Korea, Czech Republic, Panama, Morocco, Paraguay, Vietnam and the Philippines to model after, such as providing preliminary evaluation, consultancy and on-site field studies.

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