Taiwan's ambitions to become a regional air hub finally look set to take off with approval for a mega "aerotropolis" to cash in on improving ties with China and the rise of budget airlines in the region.

The ambitious plan to transform the main Taoyuan International Airport into a regional aviation centre is tipped to attract more than $16 billion in investment for the island's biggest infrastructure project in more than three decades.

Covering nearly 7,000 hectares (17,000 acres), the "aerotropolis" will include a free trade zone, a third terminal at the airport and an industrial park to house goods-distribution and aviation-related industries.

First mooted in the booming 1990s by the then Kuomintang government, the project stalled after elections in 2000 when the Democratic Progressive Party ended the KMT's 51-year grip on power.

With the KMT now back in power and the economy faltering, President Ma Ying-jeou revived the project during his 2008 re-election campaign.

Since then, government agencies have been working out the details of the mammoth undertaking which could generate more than 200,000 jobs.

The project is now set to take off from the drawing board after the interior ministry recently gave the nod to its urban development plans.

"The approval of the urban development plans marks a major step forward in the development of the Taoyuan aerotropolis project," Wu Chih-yang, the head of the Taoyuan county government told a recent news conference in Taipei.

"From now on, the project will get off from the paperwork stage," he said.

Wu estimated that within the next 15 years the government and private sector could pour up to Tw$500 billion ($16.5 billion) into the project, the island's biggest national infrastructure plan since the late 1970s.

Up to 260,000 jobs would be created by the project which he said "if properly carried out, could help the economy get up and running again".

Critics and the opposition say the project is intended to help sway voters for mayoral elections in November and the faltering economy has been the biggest source of mounting complaints against Ma's administration.

Once one of Asia's most dynamic economies, Taiwan grew just 1.48 percent in 2011, 2.11 percent in 2012 and is predicted to rise 2.82 percent this year.

- Third terminal -

Despite the economic gloom, Taiwan has enjoyed a dramatic rise in tourist arrivals, thanks largely to improving ties with former bitter rival China over the past few years.

Taoyuan International Airport, west of Taipei, had its original terminal renovated last year after three decades in operation as it could not cope with the increased passenger traffic, much of it from China.

A third runway is scheduled for completion by 2020, 10 years earlier than originally scheduled.

The airport is predicted to see its annual cargo handling capacity nearly triple to 4.5 million tonnes by 2030, up from 1.7 million tonnes last year, and passenger capacity double to 60 million visits from now.

"The airport's passenger load has seen double-digit growth in the past two years. This definitely had something to do with the improvement of cross-strait ties and direct flight links," said Wen Yung-sung, spokesman for the Taoyuan Airport Corp, the firm in charge of the airport's management and development.

The rise of budget airlines in the region has also contributed to the massive influx of tourists, helping to bring in lots of young travellers from Hong Kong, Singapore, Malaysia, the Philippines, and Japan, he said.

Foreign tourists made more than eight million visits to Taiwan last year, up from 3.84 million visits in 2008, according to figures from the tourism bureau.

A record 2.85 million Chinese nationals visited the island in 2013, up 10 percent from 2012, four years after a decades-old ban on Chinese tourists was lifted. Taiwan also started allowing Chinese solo tourists in mid-2011.

Despite the rosy picture painted by the authorities, opponents have cast a shadow over the project, which requires the compulsory purchase of more than 3,000 hectares of land for infrastructure and other urban design purposes.

"We doubt the local government has the ability to execute the biggest ever zone expropriation plan in Taiwan," Hsu Po-ren of the Taiwan Rural Front told AFP as many of the residents to be affected have pledged to stop the plans.

Around 8,000 households or 30,000 people would be displaced, he said.

But officials say they are handling the problem and that Taiwan's bold aviation plan will go ahead.

"We've increased staff to handle the thorny zone expropriation issues and stepped up communication with the opponents," said Huang Sui-peng from the county government.

"We believe the (opposition) noise can be reduced and we're optimistic about the progress of the project."