Taipei Times: I understand that you are chairman of the Taipei International Procurement Management Association. Could you briefly describe what the general roles are of the International Procurement Office (IPO), and how much -- in monetary terms -- your office has procured over the last three years?
Max Fang (方國健): Generally speaking, the roles of international procurement offices are mainly sourcing products for the [head office], auditing and certifying suppliers, project management, supplier manufacturing process audit and improvement. Some of the work is done with the supplier headquarters, but some have to be done on the manufacturing site. Dell's IPO also carries out these functions, pretty much the same as any other global company. According to statistics from the Ministry of Economic Affairs, Dell purchased some US$4.5 billion from Taiwan-based information technology companies in the year 2000, following US$3.5 billion in the year 1999.
PHOTO: CHEN CHENG-CHANG, TAIPEI TIMES
TT: Why do you believe the direct links with China are so important for IPO representatives in Taiwan?
Fang: Taipei should be an Asia Pacific procurement center and with good reason: (A) Taipei is where most IT industries are headquartered; (B) There are many experienced and capable engineering, quality-control and procurement professionals working in Taipei; (C) Not just Dell, but most global companies appreciate the value of Taiwan-based professionals as the best links to China, both for their experience and their cultural background; (D) Taipei is conveniently located at the geographic center of Beijing, Shanghai, Xiamen and the Pearl River Delta (珠江三角洲) in China.
However, the inconvenience of traveling and the lack of visibility in resolving the situation have seriously discounted the advantages of Taipei. For example, under the current situation Taipei IPO managers can not effectively manage the suppliers located in China, such as Shanghai or Tienjing, which [results in] a lot of wasted of time and money. [Other hassles are the fact that mainland] Chinese employees cannot freely participate the meetings in Taipei and Chinese companies cannot participate in Taipei trade shows.
Indeed these facts have considerably hindered Taipei from developing itself into a regional center in Asia Pacific. Many global companies have their Taiwan IPO act as the procurement headquarters for the Asia Pacific region or the greater China region, but with all the difficulties, for Taiwan [to retain that] position is becoming very questionable.
TT: Did the Taiwan government's inaction on cross-strait policy spur Dell's decision in April to move its Asia-Pacific procurement headquarters to Hong Kong from Taipei?
Fang: Dell's decision was strictly based on business needs, the lack of direct links has certainly increased our operational costs and we just needed to respond to the situation.
TT: Your recent comments in the media have made it clear that if Taiwan continues to refuse to establish trade ties with China, it will be very bad for the country's economy. How bad and in what way?
Fang: In fact many global companies and international communities have made the same comments to the government -- for example the American Chamber of Commerce and the European Chamber of Commerce. It is clear that China is and will continue to be the most significant economy in the next decade, and you just have to be linked and tied to this market if you want to grow your own economy. If you limit industry participation in the China market you lose business opportunities and if you [forbid] your industries from utilizing China's low-cost manufacturing capability you will hurt your global competitiveness. A free economy is the only answer.
TT: Will Taiwan's impending entry to the World Trade Organization automatically entail the easing of bans on cross-strait trade and transport links?
Fang: It will automatically solve some of the problems. But I think our point is not waiting until it has to happen. The government should do something to solve our current problems as soon as possible. Actually, it's painful to wait.
TT: Does the relocation of your Asia Pacific procurement headquarters mean that Dell will outsource more from China and less from Taiwan?
Fang: We see no significant changes in our supplier base in the short term, but we need to stay competitive and will need our suppliers to stay competitive. With the globalization trend we really cannot predict whether [our suppliers will be] Taiwanese companies or Chinese companies, but the bottom line is that they need to be able to provide quality products at a competitive cost. Basically, we still perform many important functions in our Taipei office The change is not overnight and we haven't changed our Taipei office name yet. But the fact that the leadership position moves to Hong Kong is a significant message and trend.
TT: You are pushing hard for Taiwan to ease its direct-links policy. While it may be good for business, what about the nation's security?
Fang: I wouldn't characterize it as "pushing," we were just outlining the true commercial reality of the situation -- all global companies have to make business decisions that make the most sense. As Dell's IPO director, I will not comment on the political question, but I think Taiwan's authorities have the wisdom to deal with the dilemma.
TT: If Taiwan's political standoff with China continues and the cross-strait, direct-trade and shipping links stall, do you think many more local IPOs will move from Taiwan to China via Hong Kong?
Fang: Whether other IPOs in Taipei have a similar interest [like Dell's] in moving their offices to Hong Kong -- my answer is "I don't know." I think we are one step ahead of everybody. Dell is typically one step ahead of everybody in its business operations.
But if the situation remains, I believe not just the IPOs but also many foreign-invested operations and manufacturing will be forced to make the move, because all global companies must choose to operate at the optimized cost structure and in a politically stable and secure environment. This is the impression I got from the Taipei International Procurement Management Association.
TT: Has the government responded to the appeals achieved during the July 17 Taipei International Procurement Management Association meeting?
Fang: Yes, the government is responding to the IPO appeals. There have been some positive moves already by the government side. For example, a couple of days ago the government announced that people from both Hong Kong and Macao don't need a visa to visit Taiwan.
In addition, the government is also considering relaxing visa requirements for Chinese professionals to visit Taiwan -- also in response to our plea. We expect more positive moves from the government [following] our second Taipei International Procurement Management Association meeting on Aug. 20.
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