HONG KONG: The direct shipping, air and postal links between the mainland and Taiwan will protect the island's economy from becoming marginalized and enable it to race against Hong Kong as a strategic trade and logistic hub, economists said at a forum yesterday.

Slow economic growth for nearly a decade has increased worries that the island is limited to producing inexpensive computer chips and mobile-phone components.

"The implementation of the three-link policy has eased that worry," said Cheung Yuk-shing, an associate professor in the Department of Economics of Hong Kong Baptist University.

Taiwan companies control as much as 30 percent of the global electronics manufacturing market, according to data from the Taiwan Institute of Economic Research.

"The 30 percent sounds like a big figure, but the profitable part of the chain is in foreign companies' hands," said Kung Ming-hsin, vice president of the institute.

Taiwan can make the best of the direct transport links and serve as an intermediary facilitating trade and logistics between the mainland and the rest of the world, economists and experts said at a forum organized by the China Business Center of Hong Kong Polytechnic University.

Hong Kong used to be a preferred destination for global companies setting up regional-headquarter offices and logistic hubs, Taiwan can also take on that role now as a result of the three-link policy and more cross-Straits trading, Cheung said.

But some disagree, saying Taiwan "won't pose much of a threat to Hong Kong, because the competition among port cities including Shenzhen, Guangzhou and Shanghai has already been there for years," he said. "Taiwan is merely a new competitor."

It is estimated that a six-decade ban on direct shipping, air and postal links between the mainland and Taiwan has cost the two economies $125 billion each year just to divert routes.

Taiwan's shipping lines will cut costs by more than NT$1 billion ($30 million) a year following the start of direct links to the mainland, Frank Lu, chairman of Yang Ming Marine Transport Corp, said earlier.

In order to stave off the global recession, economists agreed that close cooperation in the greater-China region is needed. Taiwan-based technology companies should lend their know-how to the factories in the Pearl River Delta region to help facilitate their industrial upgrade, and Hong Kong's financial expertise could help factories in the region ease their financial troubles.

(HK Edition 02/11/2009 page16)