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The functional role of ports in value-driven chains has been redefined due to the emergence of global logistics integration. This redefinition forces today's ports to adjust themselves to be more competitive to survive. While ports are vigorously setting up Free Trade Zones, however, little is known about what industries are most beneficial to a certain port. This study attempts to define core industries in Free Trade Zones and measure them through value-added analysis. The empirical study shows that "electrical machinery and equipment components", "toy, game, and sport requisites", "clocks and watches", and "inorganic chemicals" should be selected as the core industries in Taiwan's FTZs.
1. Introduction
The growth of global business has brought about more intense global competition. In order to face this challenge, firms are increasingly utilizing the value-driven global logistics management model. This model apportions raw material, technology development, warehousing, distribution and manufacturing between different countries while still maintaining close integration in order to obtain the cheapest and most efficient production and optimal resource allocation. When goods are distributed between different countries, ports become the major connection-nodes, and thus most transport hubs are set near ports. To enhance the function of ports, Free Trade Zones (FTZs) are frequently and strategically utilized by today's ports to shorten supply -chains and raise their added value, for example, Singapore, Yokohama (Japan), Busan (Korea). The concept of a FTZ is to develop the port as a logistics hub, while its proximity to a sea/air port is taken advantage to provide just-in-time services from the hinterland and shorten firm's logistics operation time.
The major research on FTZs has focused on trading gain (Facchini and Willmann, 1 999), location choice (Basu, 1996), key successful factors or willingness of entering FTZs (Chen, 2003; Lu and Yang, 2006; Pan, 2005; Yeng, 2006). However, little is known about what industries are most beneficial to a certain port or FTZ. The purpose of this study is to find the core industries for FTZs by examining the function and activities of ports and FTZs, and using a value-added transshipment model to achieve the competitiveness goal of FTZs. The remainder of this paper comprises five main sections. Section 2 discusses the new paradigm of port activities, the concept of a FTZ, and value-added...