Taiwan’s limitations on Chinese visitors curbing tourism growth

Taiwan will not replace Hong Kong as the favorite destination for Chinese tourists in the next few years unless it loosens quota restrictions and invests more in hardware and infrastructure, Bank of America Merrill Lynch said in a recent report.

According to the National Immigration Agency, the number of Chinese visitors to Taiwan exceeded 50,000 during this year’s Chinese “Golden Week” holiday from Oct. 1 to Oct. 7 — the second since Taiwan’s introduction of the Chinese Free Independent Traveler scheme in June last year.

The figure represents a 149 percent annual increase compared with the 21,611 Chinese tourists who visited during last year’s Golden Week, statistics showed.

Of the total number of Chinese tourists, 39,143 were part of group tours, while 14,732 visited as individuals, a rise of 103 percent and 517 percent respectively from a year ago.

“This big leap in independent tourist numbers resembles the situation in Hong Kong in 2003, when the individual visit scheme was introduced there,” said Marcella Chow, a Hong Kong-based economist at Merrill Lynch.

“However, as the quota system is still in place and the hardware [such as hotels and other related infrastructure] in Taiwan needs to catch up, we believe Hong Kong’s leading position will go unchallenged for a while longer,” Chow wrote in the report.

The scheme in Hong Kong does not set a quota limit and triggered an immediate surge in the number of visitors traveling to Hong Kong from China, the report added.

From July 28 to Nov. 4 in 2003, more than 600,000 individuals from China applied to visit Hong Kong and 450,000 visas were issued, the report said. The number of visitors under the scheme reached 2 million in May 2004.

By contrast, a maximum of just 500 Chinese per day were allowed to enter Taiwan for two-week visits when Taiwan launched the Free Independent Traveler scheme lastyear in June, the report said.

With a further relaxation in restrictions on cross-strait tourism, Taiwan has increased the daily quota to 1,000, while allowing up to 4,000 to enter as part of tour groups.

“Given the quota system, the number of Chinese tourists coming to Taiwan is capped and remains too small to contribute significantly to growth,” Chow said

One reason behind the government’s reluctance to relax quota restrictions during the Golden Week holiday was to prevent tourism resources from being overstretched, thereby bringing down the quality of the tours, Chow noted.

However, investment in travel and tourism is essential for Taiwan to maintain and expand its capacity, the economist said.

Last year, Taiwan invested US$5.2 billion in travel and tourism, or about 1.1 percent of the country’s GDP, Chow said.

The ratio was significantly lower than other countries that are traditionally more reliant on tourism, such as Singapore (5 percent of GDP) and Hong Kong (2 percent of GDP), Chow said, adding: “In our view, Taiwan’s service industry has not yet reached its full potential.”