‘War­ring States Pe­riod’ poses a threat to the sus­tain­abil­ity of this Tai­wanese suc­cess story

The China Post - - BUSI­NESS -

In 2004, a first batch of 18 met­ric tons of ate­moyas was shipped by air to Sin­ga­pore, but de­mand there was limited, forc­ing Tai­wan to look else­where.

Ja­pan and South Korea were other mar­kets high on the list of po­ten­tial tar­gets, but quar­an­tine is­sues could not be over­come.

Hong Kong, Malaysia and In­done­sia even­tu­ally emerged as the main tar­get mar­kets, but to­tal ex­ports still only amounted to 100 to 200 met­ric tons per year.

The key to the ex­plo­sion in ex­ports from 18 met­ric tons ini­tially to the nearly 10,000 tons a year at present came in 2005.

That year, the Na­tional Peo­ple’s Congress rat­i­fied the “Anti-se­ces­sion Law,” putting into law the Peo­ple’s Repub­lic of China’s right to use “non-peace­ful means” if Tai­wan were to for­mally de­clare in­de­pen­dence. main­land China leader Hu Jin­tao and KMT Chair­man Lien Chan met in Bei­jing, and after the meet­ing the main­land an­nounced that 12 cat­e­gories of Tai­wanese fruit ex­ports to China would be tar­iff­free, open­ing its doors wider to trade with Tai­wan.

Later that year, main­land China’s Min­istry of Com­merce is­sued a list of 18 types of fruit that could be ex­ported to China, with 15 types, in­clud­ing ate­moyas, ex­empt from im­port du­ties.

Sud­denly, car­ton after car­ton of fruit was shipped to main­land China to fill “po­lit­i­cal or­ders” meant as a sign of Bei­jing’s good will, forg­ing an un­prece­dented mile­stone for Tai­wan’s agri­cul­tural ex­ports.

For most fruit, how­ever, the suc­cess was short-lived. Only ate­moyas and pineap­ples ex­pe­ri­enced sub­stan­tial growth (Ta­ble 2) after the first batch of tar­iff-free fruit was ex­ported to main­land China in 2006, ac­cord­ing to Coun­cil of Agri­cul­ture sta­tis­tics. By 2014, ate­moya ex­ports were more than dou­ble pineap­ple ex­ports.

A Com­plete Sup­ply Chain

Over 98 per­cent of the ate­moyas Tai­wan ex­ports go to the main­land, but it took a few years for the fruit to gain trac­tion in the Chi­nese mar­ket be­fore tak­ing off in 2009.

That was when Tai­wan truly built a com­plete value chain for ex­port­ing the fruit across the Tai­wan Strait that de­liver the prod­uct to con­sumers’ hands in a timely way.

Pro­duc­ers and ex­porters have 14 days in which to com­plete the process, start­ing with de­cid­ing when to har­vest it to pro­cess­ing it in con­trolled tem­per­a­tures and then stor­ing and trans­port­ing it and get­ting it on store shelves. The process must be com­pleted within 14 days be­cause that’s about how long it takes for ate­moyas to ripen after they’ve been har­vested.

North­ern China is the main mar­ket for ate­moyas, and get­ting the fruit from a ware­house there to the end user takes four to five days. The re­gion’s win­ter cold also in­creases the num­ber of days needed for the fruit to nat­u­rally ripen, cre­at­ing a chal­lenge for ex­porters.

“We have to get it into the hands of the con­sumer at just the right time,” Lu says with pride at hav­ing suc­ceeded in the task.

By mas­ter­ing the 14-day win­dow, Tai­wan has been able to sell ate­moyas to places as far away as Xin­jiang in China’s far west.

The com­bi­na­tion of cli­matic, tech­no­log­i­cal and man­age­ment ad­van­tages have made it pos­si­ble for Tai­wan’s ate­moyas to de­velop a dom­i­nant po­si­tion in China’s mar­ket and fetch the rel­a­tively high price of NT$250 per piece.

But trav­el­ing this fa­vored ex­port path has been any­thing but smooth sail­ing.

The Temp­ta­tion of Pes­ti­cides

“Please. Ab­so­lutely, ab­so­lutely do not abuse pes­ti­cides. I beg you, please pay at­ten­tion to this,” a sweat­ing Chuang im­plores the 35-mem­bers of his ate­moya mar­ket­ing group at a noon meet­ing.

Aside from the in­tense heat, there was also a pal­pa­ble anx­i­ety and ag­i­ta­tion at the reg­u­larly sched­uled meet­ing be­cause of the high stakes in­volved. At the be­gin­ning of this year, Tai­wanese man­goes and pineap­ples were found by Chi­nese au­thor­i­ties to have ex­ces­sive lev­els of pes­ti­cides, re­sult­ing in the sus­pen­sion of mango and pineap­ple ex­ports to China and huge losses for Tai­wanese farm­ers.

To Chuang, ate­moya farm­ers could not, and had no rea­son to, re­peat the mis­take made by pineap­ple and mango farm­ers.

The for­mer group head, Tsai Hui-tun, stressed that, “the use of pes­ti­cides should be truly con­trolled. Every farmer should use a se­rial num­ber (for their pro­duce) to give them the nec­es­sary pro­tec­tion.”

Beyond the mis­use of pes­ti­cides, there was an­other con­cern among the farm­ers at the meet­ing that was not brought up.

The Scourge of Chaos

The high ex­port quan­ti­ties and at­trac­tive prices have earned Tai­wan the rep­u­ta­tion as the world’s top ate­moya coun­try but also trig­gered a “War­ring States Pe­riod” among 10 to 20 trad­ing com­pa­nies fiercely com­pet­ing against each other. Their pri­mary con­cern has not been price but whether they can get their hands on the goods.

To en­sure sup­ply, the trad­ing com­pa­nies have paid cash on de­liv­ery of the fruit, a de­par­ture from their more typ­i­cal prac­tice of pay­ing farm­ers only after col­lect­ing pay­ment from the over­seas buyer. To en­sure the best price, farm­ers opt for early or late har­vests to have fruit to sell when sup­ply in the mar­ket is limited.

After pay­ing a high price for the fruit, how­ever, the trad­ing com­pa­nies en­gage in fierce pric­ing com­pe­ti­tion when try­ing to sell ate­moyas in China.

‘Tai­wanese Killing Tai­wanese’

Lin Chih-chung, the chair­man of one of Tai­wan’s three big­gest ate­moya ex­porters, Charng Ch­ern Co. Ltd., ob­serves that lo­cal trad­ing com­pa­nies drive up prices to buy as much prod­uct as they can and then bat­tle each other again by driv­ing down the price to sell the fruit in China.

“Every­body fights to the death. With Tai­wanese killing Tai­wanese, the Chi­nese see us as id­iots,” says a frus­trated Lin.

Sheu Fuu, a pro­fes­sor in Na­tional Tai­wan Univer­sity’s De­part­ment of Hor­ti­cul­ture and Land­scape Ar­chi­tec­ture, wor­ries that if traders are al­lowed to con­tinue this sense­less com­pe­ti­tion, Tai­wan’s ate­moya em­pire could quickly de­cline.

“Chi­nese cus­tomers com­plain about 20 to 30 per­cent of the ate­moyas Tai­wan sells in China. Once a trad­ing com­pany is hit by com­plaints, it tries to sell its fruit in an­other prov­ince. China is a big place so they mess around, but the brand is still Tai­wan,”Sheu says.

Out of 10 trad­ing com­pa­nies that did the busi­ness last year, nine lost money, which could lead to plum­met­ing prices in the fu­ture that could de­stroy the Tai­wan brand, Sheu ob­serves.

Sheu also notes that the vol­ume and value of ate­moya ex­ports over the past two years have re­mained rel­a­tively flat, in­di­cat­ing that new mar­kets are not be­ing de­vel­oped. If trad­ing com­pa­nies re­main short­sighted and go their own way, the ate­moya “blue ocean” — or un­con­tested mar­ket space — will quickly trans­form into a “red ocean.”

Of par­tic­u­lar con­cern is that Chi­nese cap­i­tal may be be­hind the in­fight­ing among Tai­wanese traders.

Lin Chih-chung, who has ex­ported ate­moyas for a decade, dis­cov­ered that after the open­ing of the mini three links in the early 2000s, China be­gan in­vest­ing in Tai­wanese trad­ing com­pa­nies.

“They de­lib­er­ately used Chi­nese cap­i­tal and with no more than NT$200 mil­lion a year they can com­pletely screw up your agri­cul­tural sys­tem,” he says in­dig­nantly, ac­cus­ing Chi­nese cap­i­tal of be­ing the cul­prit be­hind the driv­ing up of prices at the farm. Even a NT$3 in­crease in price can cre­ate volatil­ity and “elec­tro­cute you to death,” Lin says.

This over-re­liance on China and cut­throat com­pe­ti­tion among do­mes­tic trad­ing com­pa­nies could im­peril the ate­moya’s reign as Tai­wan’s most im­por­tant fruit ex­port.

As trad­ing com­pa­nies en­gage in mind­less blood­let­ting, turn­ing a blue ocean into a red ocean, farm­ers and schol­ars both feel “in­te­gra­tion” has be­come a must.

Tai­wan may now be the world’s big­gest ex­porter of ate­moyas, but for this ad­van­tage to be par­layed into fur­ther ex­port growth amid glob­al­ized com­pe­ti­tion, peo­ple will have to come to­gether.

The key will be the in­te­gra­tion of trad­ing com­pa­nies once the fruit has been har­vested and de­vel­op­ing en­duse mar­ket­ing chan­nels. Oth­er­wise, the dark clouds shad­ow­ing th­ese boun­ti­ful crops will never dis­si­pate. Trans­lated from the Chi­nese by Luke Sa­batier. Ad­di­tional read­ing se­lec­tions can be found at http://english.cw.com. tw

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