Business dispute could shut down logistics center

The nation's first international logistics center in Kaohsiung will be shut down at the end of September because of a contract controversy between its owner and operator. More than 15 tenants in the center, including local branches of DHL, Federal Express and Sony, will be forced to leave their offices there at that time.

"We have no choice but to close it until our dispute with China President Logistics Inc (新系統物流) is solved," Kuan Tao-yi (管道一), director of logistics at the Taiwan Sugar Corp (Taisugar, 台糖), which owns the center, said yesterday.

The center, Taisugar Logistics Park (台糖高雄物流園區), was jointly built by Taisugar and China President Logistics under the build-transfer-operate (BTO) system. Under an 18-year contract, Taisugar provided a plot of 8.5 hectares to establish the park, while China President Logistics takes charge of the planning, investment and operation.

Located in the Kaohsiung Multi-Functional Commerce & Trade Park (高雄多功能經貿園區), the logistics center has a capacity for 68,100 pallets and 2,855 pings of office space.

However, as China President Logistics failed to reach the profit target stipulated in the contract ever since it started operation in January last year, Taisugar decided to terminate the contract with China President Logistics by the end of March, Kuan said.

China President Logistics, which initially invested NT$3 billion in the center and has incurred losses of NT$400 million so far, admitted its operation did not run as well as it expected, a company official told the Taipei Times yesterday.

"But we think Taisugar should also bear the responsibility for the business failure to some degree," said Hou Wen-ling (侯文齡), associate manager of China President Logistics. "We've been negotiating with Taisugar on how to run the business for two years, but as a state-owned company, Taisugar simply has little flexibility on this matter."

In addition to the management disagreement with Taisugar, Hou also attributed the center's failure to the slow economy. Taiwan saw its economy grow 3.59 percent in 2002, after witnessing a negative growth of 2.18 percent the previous year.

Hou said the passage of a new free-trade-zone law is expect to develop Kaohsiung port into a free trade port and so bring in a considerable amount of business to the center. The Legislature last month passed the Statute for Establishment and Management of Free Trade Ports (自由貿易港區設置及管理條例), which will be exempt from many import/export regulations and many taxes for certain value-added and transportation activities taking place in and around such areas.

"But we're sorry to see Taisugar made such a decision ? the business was actually starting to improve. Taisugar's decision drove off many prospective clients," Hou said.