We have entered the fifth year of the 21st century, and the past four turbulent years have seen the fading of the Internet bubble, corporate scandals of unprecedented size, the September 11 attack on America, the war in Iraq, and the SARS epidemic. Fortunately, the world's strong demand for raw materials and components has underscored the extraordinary resilience of the global economic system. The world economy gradually overcame recession and reached a new summit in 2004. Taiwan likewise overcame the sluggish economic conditions of the previous four years and maintained a 5.71% growth during the year. The world's economic revival, however, has been shadowed by a number of uncertainties, among which petroleum-driven hikes in prices of raw materials and components are the most significant and far-reaching.

The soaring price of petroleum and other raw materials has caused global commodity prices to gradually rise. OECD data indicate that the average world CPI has climbed from 1.8% at the beginning of 2004 to 2.6% by March 2005, raising fears of reoccurring of the "stagflation" of the 1970’s. On the other hand, the world's leading countries have remained vigilant and taken necessary preventive measures. For instance, America's Federal Reserve increased the prime rate to 3.0% in eight consecutive increments starting in June 2004, and central banks in Europe, Asia, and Australia, etc. have gradually followed suit. Business managers now face a difficult operating environment in which demand is slipping and cheap funds and raw materials are a thing of the past.

Furthermore, the US dollar's steady fall against other world currencies has injected another variable in the world economic equation and put intense pressure on export-dependent countries. While Taiwan has been partially insulated from the dollar's fluctuations by the Chinese RMB's exchange rate policy, America's insistence that the RMB be allowed to appreciate has exposed Taiwan to the likelihood that the RMB may also increasingly fluctuate.

Apart from the foregoing economic uncertainties, the threat of international terrorism, geopolitical instability, China's macroeconomic control policy, the establishment of regional economic blocs, global conflict, and the sudden emergence of the underdeveloped giants Brazil, Russia, India, and China have also had a major impact on the world's economic developments. Taiwan is a tightly integrated part of the global economy and cannot stand aloof from world trends. While the development of cross-straits trade with China will safeguard Taiwan's future economic welfare, the government and private sector unfortunately have widely different views of the pace and strategy of cross-straits developments. Statistics show that bilateral trade between Taiwan and China (including Hong Kong) reached US$82.6 billion in 2004, Taiwanese travelers visited China 3.2 million person-times, and Chinese travelers visited Taiwan 130,000 person-times. But while burgeoning trade and private contact have easily surmounted the barrier of the Taiwan Straits, official relations seem to be stuck in reverse. In particular, China's enactment of the Anti-Secession Law on March 14 of this year has intensified mutual distrust and affected cross-straits trade ties. China's implementation of its Macroeconomic Control policy has had a major impact on cross-straits trade and the global economy. Are Taiwan's government and private sector ready to cope with the implications and challenges of the economic course changes of China – Taiwan's largest and fastest-growing trading partner?

Many foreign friends congratulated us when Taiwan and China both joined the WTO, and reminded us that we were part of an immense internal market of 1.3 billion consumers. The Far Eastern Group quickly adopted appropriate measures to take advantage of this situation. For example, Far Eastern's Textile & Synthetic Fiber Business – which is based on Far Eastern Industries (Shanghai) Ltd. – has completed the up- and downstream vertical integration of its assets in Shanghai, Suzhou, and Wuxi; Far Eastern's Cement and Building Material Business has used Yadong Cement Ltd. in Jiangxi and Ya Dong Cement Co. in Wuhan to build a base along the middle and upper Yangtze River and embark on a T-shaped development campaign throughout the hinterland delineated by the Yangtze's tributaries; Far Eastern's Retailing Business has relied on Pacific SOGO Department Store's solid base in China and the Far Eastern Department Store's close to 40 years of retailing know-how to actively advance a dual-brand strategy. Beyond the Far Eastern Group's completed China deployment in the three core areas of textiles, cement, and retailing, the Group is also vigorously planning involvement in such areas as petrochemicals, telecommunications, and finance. There is absolutely no question that the Far Eastern Group is poised to make its mark in the Chinese market in the 21st century. However, to rise above its competitors and maintain its leading position, the Group must possess strategic insight, an international outlook, and execution ability, and it must also remain in tune with the market and make the best use of technology to provide added value to its customers.

Japan's "Mr. Strategy" – Dr. Kenichi Ohmae – proposed the concept of the 《Invisible Continent》 at the beginning of the 21st century in an effort to show how the interactions of the "Visible Dimension," "Borderless Dimension," "Cyber Dimension," and "Dimension of High Multiples" can shed light on how to quickly achieve international competitiveness in the knowledge economy age and strike an appropriate balance between the old economy and new economy.

In this opaque and chaotic new age, cross-straits relations are likewise unclear and unpredictable. There is nevertheless no way to escape the reality of this new continent. Facing a future full of opportunities and variables, businesses must "seize opportunities immediately, boldly accept challenges, and constantly change" so as to survive and grow sustainably in today's highly competitive global environment. Intel CEO Andy Grove once said, "Sooner or later, something fundamental in your business will change." The Far Eastern Group's development over almost six decades has amply illustrated the wisdom of this assertion.

The Far Eastern Group started out in textile manufacturing in 1945, and moved to Taiwan in 1949. After more than half a century, the Group has established business operations in the ten major industries of petrochemicals and power, textiles, cement, department stores, sea/land transportation, construction, hotels, finance, communications and Internet, and social responsibilities. The Group has accumulated total assets surpassing NT$1,072.1 billion (US$32.6 billion), while successfully making the leap from conventional manufacturing to high-tech telecommunications and other service industries. The Group's nine listed companies including Far Eastern Textile, Asia Cement, Far Eastern Department Stores, Far Eastern International Bank, U-Ming Marine Transport, Oriental Union Chemical, Everest Textile and Far EasTone Telecommunications.

The Far Eastern Group has focused on developing various operations both at home and abroad over the past decades as its globalization strategy. While the Group has completed cross-straits and Southeast Asian regional operations frameworks and management mechanisms in the areas of textiles, cement, department stores, and sea/land transportation businesses among the ten major industries, it continues to invest in Taiwan. Among the Group's investments in Taiwan are new production lines at the Hsinpu and Kuanyin synthetic fiber plants, construction of the fourth kiln at Hualien cement plant, investment in SOGO, merger with KGT, the development of a telecom park, the launch of 3G services, investment in electronic toll collection, and major investments in social welfare including medical care, higher education, as well as technological innovation.

As for the Group's future blueprint, it will take "technology R&D" and "business model innovation" as its major objectives. The Group is committed to further developing its operations in Taiwan, China, Asia, and the rest of the world, in that order. Taking advantage of the R&D manpower and resources of the Group’s Yuan Ze University, Far Eastern Memorial Hospital, and Oriental Institute of Technology, coupled with the "Far Eastern R&D Center", Far Eastern Group aims to further enhance its technology innovation, research and development. In conjunction with its assets development plan, the Group will move into the areas of telecommunications and digital technology, biotechnology, fiber optics materials, and medicine and health care for the elderly. With regard to "business model innovation," the Group will integrate its internal resources to achieve greater synergy, while also continuing to strengthen its regional division of labor, expand market size, and move closer towards vertical integration via technological cooperation and acquisitions. In order to achieve its diversified strategic goals, the Far Eastern Group will make flexible use of its assets and maximize its overall value, while continuing to upgrade its affiliated companies and transform them into top performers. The Far Eastern Group will uphold its founding spirit of "Sincerity, Diligence, Thrift, and Prudence" into the 21st century, create maximum value for its customers and shareholders, and continue to fulfill its social responsibilities as a good corporate citizen in Taiwan.