Industrial Land Sits Idle Amidst Shortage in Taiwan

Run down brick buildings and an empty lot in downtown Sacramento, California.

Of the five shortages in Taiwan, land is perhaps the most obvious. Taiwan is only 36,000 square kilometers in area, two-thirds of it made up of steep mountains and hills where earthquakes and typhoons – and accompanying landslides – are relatively common, leaving them mostly undeveloped.

The western plain is therefore home to most of the 23 million Taiwanese, who share one-third of an island little bigger than Maryland with most of Taiwan’s industry and agriculture. Land would certainly seem to be in short supply.

Yet the specific land issue raised in the “Five Shortages” concerns large areas of idle lands sitting empty within Taiwan’s industrial and science parks – the legacy of the offshoring of much of Taiwan’s industry in the 1990s-2000s.

Science and industrial parks in Taiwan are limited to specific sectors. As production facilities in sectors such as petrochemicals have departed the island, none have replaced them and the land often remains idle. Given the low property taxes, owners can hold the land for years at little cost while waiting for the site to be rezoned from industrial to commercial, or to be changed from one sector to another, leading to much higher selling prices.

“We have seen such opportunistic approaches even in rural areas in industrial clusters where the owners could wait for an even higher price if there is a zoning change,” observes Stephen Su, General Director of the Industrial Economics & Knowledge Center at Taiwan’s public-private Industrial Technology Research Institute (ITRI).

Demand for industrial land has shifted away from heavy industries toward more technology-oriented and software firms, who are clamoring for space even as land in industrial parks languishes. The government has tallied the idle lands and set a target for returning them to productivity in the next few years.

Last November, Premier Lai Ching-te announced a series of measures the government will take to free up more industrial land, including releasing 1,442 hectares in industrial and science parks over the next five years to partially satisfy the demands of Taiwan’s industry. Lai told reporters that the government will initially release 806 hectares of public lands to the market, including 371 hectares for rent at preferential rates, by 2020.

The government will also deploy the recently amended Act for Industrial Innovation (AII) to deter land speculation and encourage private land-ownership sales. In addition, the government is looking to establish new industrial parks and restore unused factories.

“The initiative tries to be proactive in getting these idle lands back into productivity by mandating certain penalties on idle land,” says Su. Under the AII, landowners who fail to use land within three years of purchasing it from a government-owned industrial park can be fined or even forced to sell the property. Su describes the measure as “having more teeth than previous policies.”

Industrial development also must reflect local needs and priorities, say economists. While northern Taiwan faces a tight supply of industrial land, Wang Jiann-chyuan, vice president at the Chung-hua Institution for Economic Research (CIER), notes that in the south key to the issue sometimes is not the attitude of the property owners but rather that local priorities may differ from those of the central government.

Kaohsiung, for example, is shrugging off its burden as Taiwan’s center for heavy industry and instead is pushing greener sources of economic development, such as tourism. Leading up to local elections this autumn, throughout Taiwan air pollution has become a hotter topic than employment. That often puts industry at odds with local governments, which have direct say in any industrial project. While the central government warns about the loss of job opportunities, local politicians must reflect their constituents’ desire for clean air and a healthy environment, observes Wang.

Only 27% of Taiwan’s total landmass is considered flatland ideal for development and agriculture, while the 45% covered by mountains is primarily administered by the Forestry Bureau under the Council of Agriculture (COA) and the 27% with hills (defined as having a gradient of 5% or more, and rising 1,000 meters or less) is open to limited development, according to the COA. Of the 981,656 hectares of plains, 796,576 are used for agriculture, some 80% of the total.

The high proportion of total land given over to farming, and the location of so much of it in Taiwan’s sunniest zones in the south, puts the agriculture sector in the middle of Taiwan’s energy debate. So far Taiwan has relied on rooftop installations for solar PV development. To truly reap the benefits of scale, however, developers need to install ground mount systems, leading them to look to farmland as sites for solar power plants.

The COA is well aware that once agriculture land is used for other purposes, it rarely returns to farmland. Although agriculture generates only around 2% of total GDP, compared to more than 30% for industry, agriculture occupies a special place in every culture’s heart, as witnessed by the frequency of arguments over agricultural products in the World Trade Organization. Agriculture is also a strategic asset, particularly for Taiwan, an island facing a powerful and implacable rival across the Taiwan Strait. Taiwan already imports 70% of its food, but in the event of a blockade the domstic agricultural resources could spell the difference between starvation and survival.

The authorities are currently making efforts to integrate solar power and agriculture, but progress has been slow (see the accompanying story on energy in this section).

Chen Shin-hui, assistant research fellow at CIER’s Center for Economic Forecasting and Taiwan ASEAN Studies Center, faults the government for seeking to solve land-use problems without first doing a comprehensive study of all the issues and opportunities. “You need to define your priorities first,” she says.

Making a similar argument, Darson Chiu, an economist with the Taiwan Institute of Economic Research (TIER), questions the government’s plan to release more land to industry and create more industrial parks. Instead of necessarily accomodating industry’s requests, he says, it would be better to explore more sustainable businesses.

All of the economists interviewed for this report concur that Taiwan’s needs to be more strategic in selecting the industries that it wishes to focus on, and all agree that industrial automation, the Internet of Things, and Artificial Intelligence offer great potential. They would advise the government to lay out a vision for Taiwan’s future industry and economy, and then tailor land-use policy and practice to help realize this strategic vision.

More productive and efficient use of land would enable the country to continue to develop without excessive constraints. “It’s not an issue of not enough land, but in how you use it,” concludes ITRI’s Su.