MOTC approves establishment of free port zone in Kaohsiung Port. Kaohsiung Harbor Intercontinental Container Center

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1 MOTC approves establishment of free port zone in Kaohsiung Port On Nov.25, 2003 the Ministry of Transportation and Communications (MOTC) approved a "Proposal for the Establishment of a Free Port Zone for Kaohsiung Port", which is now under consideration by the Executive Yuan. Kaohsiung Port is the marine transit hub for East Asia and Taiwan. It covers 2,683 hectares, with a natural harbor and two access channels to the sea of 11 and 16 meters draft respectively. Kaoport's 118 berths include 26 container berths capable of handling the 6000-TEU post-panama container ships. As a major world port, Kaoport has worldwide shipping links, with 372 shipping routes extending to 367 ports in 102 countries on five continents. Its business potential is enormous. The Port of Kaohsiung enjoys two tremendous advantages. Firstly, it is currently the only port in Taiwan that has direct shipping links with Mainland China. Its Offshore Shipping Center provides a great deal of business opportunities for cross-strait shipping. Secondly, KaoPort's surrounding land is available to shipping companies that have sufficient economies of scale for further expansion. Furthermore, in line with the establishment of a Free Port Zone, an international logistics center will be developed land to the rear of the third container terminal and Berth No. 122, and also the land adjacent to the fourth container terminal's major road interchange. Kaohsiung Harbor Intercontinental Container Center In order to deal with the fierce competition from other East Asian ports, it is necessary for Kaoport to be able to handle the ever-larger container ships expected to serve the Asian market in the future. The Central Government has decided therefore to establish the Kaohsiung Harbor Intercontinental Container Center as one of its ten major infrastructure construction projects. The first phase of this project is to develop four container berths, this new area will have 1,500 meters of quay line with 75 hectares of land from the sea and a draft of 16 meters in depth. This project - which is currently the subject of a feasibility study will be carried out on a BOT basis between 2002 and It is estimated the new berths will be able to accommodate 8,000~10,000 TEU containers and its cargo handling will deal with up to 2 million TEU annually. To date, the emergence of the project has attracted the interest of several container developer. Construction of Phase Two is scheduled to entail the construction of five 400 m berths of 16.5 m depth and an area of 183 hectares. The terminal will be equipped with the largest ship-to-shore gantry cranes capable of handling vessels up to 15,000 TEU and annual capacity of 2.5 million TEU in container volume. In addition, the eight new( 14 m deep and 2,260 m long) 42,000DWT Petrochemical berths and their storage yard will be capable of handling 16 million tones of petrochemical products. Of the total expected budget of NT$ 92.5 billion, NT$ 49 billion will be provided through joint venture agreements with private businesses. The advantages that should follow the completion of the Continental Container Center include:

2 1. Integration of the outer port areas; the best use of limited water space in the outer port areas; and effective utilization of limited resource development in the overall KaoPort development plans. 2. The additional port facilities will meet the demands of KaoPort's growing business development. 3. In light of the trend toward larger container ships, the brand-new container facilities in Intercontinental Container Center will be able to accommodate 15,000 TEU vessels, and boost KaoPort's competitiveness as an intercontinental shipping center. 4. It will make KaoPort the storage base for all energy resources,- minerals, oil, and petrochemicalsfor the south of Taiwan. Furthermore, by moving all petrochemical operations offshore, it will permit alternative uses for the old petrochemical storage area located in the harbor area close to downtown Kaohsiung, thus stimulating development of both port and city. KHB completes initial outline of ISPS The International Maritime Organization (IMO) adopted Chapter XI -2's "Special measures to enhance maritime safety" of the IMO's International Convention for the Safety of Life at Sea (SOLAS) and the International Ship and Port Facility Security Code. (ISPS Code A), which will come into effect on July 1, Port Facility Security Assessments in accordance with the ISPS Code are, in principle, to determine the threat or risk to key facilities involved in Ship/ Port operations. Following on-the-spot observations, an assessment will be made of security control, manpower, electronic measures, and security procedures. Upon completion of the assessment, a Port Facilities Security Plan will be initiated stipulating all security measures to be carried out at each security level covering: access; restricted areas; handling of cargo; delivery of ships' stores; handling unaccompanied baggage; and monitoring the security of the port facility. To pave the way for ISPS, KHB has, in addition to holding lectures for shipping companies, organized a "Security committee" in conjunction with relevant departments and berth-leasing shipping companies. Based on the regulations of the ISPS Code, and Port Facility Security Assessments were submitted to the MOTC by Nov Once approved by the relevant Taiwan authorities, compliance with the ISPS Code will be reported to the IMO by the Taiwan Government, demonstrating its continuing commitment to international security standards. YML and Vopak will continue their investment in the Kaohsiung Logistics Center At the 2003 Taiwan Business Alliance Conference held in Taipei, Yang Ming Group and Vopak Logistics Taiwan Ltd signed a Letter of Intent with KHB, indicating their continued enthusiasm for investment in the Kaohsiung Logistics Center. Yang Ming Group is currently the leaseholder of Berth No. 70 and No In addition, YML and KHB jointly constructed the Kaohsiung International Logistics Center, which commenced operations in July The Center has successfully integrated all aspects of marine shipping, container yards, 2

3 warehousing and distribution. Vopak, a well-known company around the world, was the first firm to set up logistics warehouses in the Kaohsiung Logistics Center, and has put NT$150 million into its logistics facilities. With YML's additional investment of more than NT$100 million, the Kaohsiung Logistics Center will continue to generate a great deal of new business. KaoPort's VTS site submitted to World VTS Guide Kaohsiung Port has officially registered its VTS site to the World VTS Guide Site. The World VTS Guide will list diagrammatic and written information regarding the VTS of Kaohsiung Port for other users' publication. The World VTS Guide is an online guide to the vessel traffic services in ports throughout the world. It is produced through the collaboration of the International Maritime Pilots Association, the International Association of Lighthouse Authorities, and the International Association of Ports and Harbors. The World VTS Guide is an international vessel publication, providing all the users in the world concise maritime diagrams, and as such is an indispensable guide for all international vessels. Kaoport's VTS has been in operation since Dec Taiwan received permission to be included in the World VTS Guide in 2002, when KHB signed the "Canada-Taiwan Memorandum of Maritime Cooperation" with Canada, The information contained in the World VTS Guide includes: VHF procedures, harbor working channel, call sign, inbound and outbound procedures, calling in point, reports, traffic separation scheme, anchorage area, VTS services, telephone, fax, pilotage compulsory, etc. The guide reserves one page exclusively for information on Taiwan i.e. Kaohsiung Port and Keelung Port, Kaohsiung Port's VTS Web site is as below: // /menupages/ Taiwan/ Kaohsiung. Html Five Japanese corporations express their intent to invest in Kaohsiung Five Japanese firms - including Kajima Corporation, Penta Ocean Construction Co., Ltd, - expressed interest in Kaohsiung Port's Terminal No.6's development plan by signing a Letter of Intent. Their investment is estimated at up to NT $9,7billion. In order to cope with the growing volume of container traffic, KHB has been actively promoting construction of Terminal No.6, whose BOT model has attracted foreign companies' investment. Due to the outstanding geographic location of Kaohsiung Port, its excellent port facilities, and full assistance from the Taiwan government, these five Japanese companies have demonstrated their preference for KaoPort. Revolution in transshipment escort system In order to shorten a vehicle's entrance/exit time through harbor control stations and improve manpower procedures in customs, KHB will adopt high-tech measures (Optical Character Recognition System) to handle container escort in lieu of manpower. Earlier this year the Council for Economic 3

4 Planning and Development (CEPD) under the Executive Yuan had discussions with the Ministry of Transportation & Communication as well as the Ministry of Finance and concluded that transshipment cargoes stipulated to have an escort could choose to be under escort by manpower or the new high-tech measures. These new measures include: exclusively recognizable passive seals on containers; VCUs (Vehicle Communication Units) to be used by trailers; and IC cards to be used by drivers. All the relevant systems will be tested and regulations enacted prior to the end of 2003, then trialed at the third and fifth container terminals, and finally applied to the whole port area from late In order to accelerate this new system, KHB, in conjunction with the Kaohsiung Customs Office, Trade-Van Information Services Corp, and ChungHwa Telecom, will integrate an "image recognition system" in KaoPort's control stations and "TMCT System", set up by the Directorate General of Customs to improve information circulation. Through the use of this new system, anti-smuggling measures will be improved greatly and Taiwan's international image will be enhanced. Upon completion of all trials, the new system will be introduced in all Taiwan ports. Seminar on"how to break the bottleneck of Kaohsiung Port's Container development" KaoPort is the largest international commercial port in Taiwan, accounting for 57 percent of all Taiwan's import and export trade as well as 73 percent of Taiwan's container volume. Nevertheless, in recent years, owing to changes in domestic industries and the growing exodus of traditional industry, Kaoport's container volume has grown slowly in a highly competitive business environment. It is expected Kaohsiung Port's competitiveness in its container business will be improved by the valuable information and suggestions offered by the wide array of participants that took part in the seminar on " How to break the bottleneck of Kaohsiung Port's container development" held on Dec.11, KHB's 58th anniversary celebration KHB's 58th anniversary celebration, presided over by KHB Deputy Director General Teng, was held on Dec.1, Invited guests included Kaohsiung Vice mayor Lin and other guests from the shipping industry. Mr. Teng expressed his gratitude, in the ceremony, to shipping companies for their longstanding support, which have contributed to the stable growth of KaoPort. In addition, several remarkable companies received awards, such as Evergreen Lines, Taiwan Maersk Sealand and APL, whose container operations are in excess of a million TEU. In Mr. Ten's speech, he pointed out that in the future, KHB will continue to develop Kaoport as well as complete the construction of the sixth Terminal and implement a Port Security Plan in compliance with the ISPS Code to better protect Port operations. Most shipping companies leasing berths in KaoPort reached economies of scale According to research conducted by the Institute of Transportation, MOTC, most shipping companies leasing berths in Kaohsiung Port have reached economies of scale. This analysis is based on a comparison of operational costs, berth rental charges, and core operations. 4

5 In 2002, the volume of container traffic was 8.49 million TEUs, ranking Kaoport as the fifth largest container port in the world. in 2003, the 8.84 million TEUs throughput recorded by port was 5% higher than previous year. At present there are five container terminals and twenty-six container berths. Twenty-three berths have been leased to international shipping companies or stevedoring corporations, including Lien Hai, Wanhai, OOCL, APL, YML, Hyundai, Maersk Sealand, EMC, NYK, and Hanjin. KHB receives "Service Quality Award" KHB receives " Silver Ax Award" KHB's Port Development International Logistics Working Circle, representing the MOTC, was awarded the " Silver Ax Award" A prestigious award given for streamlining bureaucratic procedures and cutting 'red tape'. Deputy Director General Teng on behalf of KHB accepted the award on Dec.4, SuperStar Capricorn's arrival at KaoPort The Evaluation of the fifth "Service Quality Award ", conducted by the Executive Yuan, was launched at the end of March government agencies have received awards, out of 1,206 agencies that participated. After an in-depth assessment by the Research, Development and Evaluation Commission (RDEC), KHB and six other agencies were selected for recommendations and received awards. This honor should be credited to KHB staff 's outstanding performances under Director General Huang and its good relationships with its customers. Star Cruises' SuperStar Capricorn arrived at Berth No. 2 of Kaohsiung Port on Oct.9, Following its return from a two-night holiday, carrying around seven hundred passengers, SuperStar Capricorn was opened to the public at Kaohsiung Port. SuperStar Capricorn is registered in Panama and is represented by Barwil Agencies Ltd. It mainly services the northeast of China and Korea. It is believed that SuperStar Capricorn's visit to KaoPort will give a boost to Kaohsiung's tourist industry. The President of the Democratic Republic of Sao Tome, Mr. Menezes, visited Kaoport. The President of the Democratic Republic of Sao Tome, Mr. Menezes, visited Kaoport on January 5. President Menezes was accompanined by Mateus Meira Rita, Minister of Foreign Relations, and other special delegates of the Republic of Sao Tome. Director Huang arranged a tour for President Minizes 5

6 and briefed on board a KHB boat and each presented the other a memento of the visit Container Arts Festival The 2003 Kaohsiung International Container Arts Festival - from Berth No. 17 to Berth No.20 took place between Dec.12 and Jan. 11. KHB held a series of activities in conjunction with the Kaohsiung City government and shipping companies. The arts performances and works of art were organized into sixty-eight shipping containers. Through use of these containers, visitors can experience three-dimensional spatial concepts Sea water quality in Kaohsiung Port improves After the Kaohsiung City government made improvements in downtown sewerage and household sewage disposal, the quality of sea water in the Kaohsiung Port area has improved enormously. In addition, KHB has enforced measures to reduce sea water pollution, such as banning ships from draining sewage. Happily, the result is a scene of rare ecological beauty: numerous and diverse bird habitats and even the return of regular dolphin visits. 6

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