Mon, Feb 24, 2003 page10

• Orchid grower learns tough lesson

  CROSS-STRAIT EXPERIENCE Parker Wu found out that the strings attached to a government subsidy would soon become the rope that would hang the venture

  • By Patrick Kearns / STAFF REPORTER
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  Parker Wu's (吳明坤) US$3.6 million orchid business in China wasn't destroyed by weather, disease or even bad management. Instead, it was toppled by a more deadly force, communist bureaucrats.

  In 1991, when Wu planted the first seeds of his 300-hectare orchid farm in Kunming, the capital Yunnan Province, China, the communists appeared to be Wu's best friend.

  

  Parker Wu inspects new varieties of phalaenopsis orchids at Orchis Floriculturing in Tainan.

  PHOTO: ORCHIS FLORICULTURING

  Premier Zhu Rongji (朱鎔基) -- at that time vice-premier of the State Council -- rolled out the red carpet for Wu's "agricultural biotechnology," awarding the project a US$2 million subsidy.

  But the state-sponsored handout didn't come without strings attached. Not long after Wu got the rural farm up and running, government officials showed up to inspect the facilities with dollar signs in their eyes.

  They insisted on providing management assistance in the form of ex-bureaucrats to serve in the company.

  "They didn't ask for these people to be put in as floor sweepers -- they wanted them to serve as deputy general managers," Wu said.

  The hybrid mix of local and Taiwanese talent might work if the retired leaders of state-run companies brought in orders or contacts useful to the company.

  But in a few short months the opposite became painfully obvious: "They had no skills that were useful to the organization."

  In fact, Wu said, "We rarely saw them."

  The forced employment didn't come cheap, with most demanding 2,000 yuan per month, twice the rate paid in their former government jobs.

  Over the years Wu was required to employ a total of 15 former-bureaucrats.

  The dead weight on the company's payroll ultimately resulted in its demise.

  "The project failed because [China's] government became too involved in the management by putting in their own people," Wu said. "They brought us a lot of hardships."

  But lazy bureaucrats weren't Wu's only headache in China.

  "Trust with local customers was a problem." he said. "We'd sign contracts, ship off the flowers and they would come back to us with a few crates of bad ones and say we owed them money."

  Others saw the farm's 300-hectare facility as a stepping stone to entrepreneurship.

  "The facility was too large to build fences around so plants were constantly disappearing."

  After retreating to Taiwan in 1999, Wu set his sights on the US market, eyeing Taiwan's scattered pool of some 30,000 orchid farms.

  But before diving in he set about uniting 200 of Taiwan's most prolific orchid growers into a force to be reckoned with.

  By 2001, he established Orchis Floriculturing Inc (長潁農業開發), the largest orchid-grower's alliance in Taiwan.

  Based in Tainan County's Shan-Shang Township, Orchis collects plants from agricultural cooperatives or flower distribution and production associations and sells them to international importers and wholesalers. But getting the live plants to finicky international buyers quickly is no simple feat. A perishable product, orchids are transported almost entirely by air and are usually accommodated in refrigerated storage.

  Keeping floricultural products fresh in transit often requires an investment in technology: a pre-cooling system and refrigerated storage before and after customs are also necessary.

  Orchis shipped 25 million plants abroad last year with an export value of nearly NT$80 million. Taiwan's orchid exports hit NT$3.65 billion in 2001, a 24 percent increase over the previous year at NT$2.95 billion, according to the latest Directorate General of Customs' figures.

  The majority of those were the classic phalaenopsis or butterfly orchid, and cattleya orchids. Nearly 30 percent of all Orchis exports went to the US, while Japan snatched up nearly 25 percent.

  The US consumes 100 million orchids per year, with nearly 20 percent of those plants coming from Taiwanese greenhouses.

  Wu's recent success has not come cheap. Promoting his alliances' prized flowers means traveling to the top 30 orchid shows held around the world each year.

  Moving flowers and staff to one show costs Orchis a whopping NT$800,000. In 1999, that investment paid off at the World Orchid Conference in Vancouver, Canada. The company won the show's top prize -- Grand Champion -- for a pure yellow cattelya. After the show, sales off the rare color plants took off. Wholesale prices topped US$60 per plant and upwards of US$700 apiece by the time they reach consumers in the US and Japan.

  While competition from growers in China and Indonesia is picking up, Wu has been able to stay ahead of the competition by using new technology. Orchis has three home-based labs that do nothing but cloning, keeping costs down.

  "We stay ahead of the competition by breeding more speciality flowers which helps secure our long-term success," Wu said.

  If profit margins become too thin at home, Wu says he can shift farms to Indonesia or China while keeping the company's headquarters in Taiwan.

  And despite the millions of dollars he lost in China, Wu said he doesn't rule out giving China a second chance.

  "In the future, we would be willing to do business again in China with the private sector or the government, but there would have to be certain guarantees in place to reduce the risk," Wu said. "China was a great learning experience."
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