TAIPEI - For the past two
decades many Taiwanese business people have chosen
to invest in mainland China, often having to
overlook political interference and harsh taxation
demands. More recently, Taiwan's factory owners,
especially in the well-developed Pearl River
Delta, have had to face rising costs of doing
business
and
shortages of labor, water, electricity and raw
materials.
Now more and more of them are
looking to put their money in other places with
lower production costs and are gradually diverting
their investment to set up production bases in
Southeast Asia, finally taking to heart the
long-neglected "Go South" policy officially
advocated by Taiwan's government since
1994.
Many countries in Southeast Asia are
happy to encourage the trend. Shortly before the
Vietnam's 61st National Day, its representative
office in Taipei held an investment-promotion
conference to attract more capital from Taiwan.
The introduction, which focused on the development
of southwestern Vietnam's Phuquoc Island, did not
proceed as smoothly as intended, but this didn't
stop some 30 Taiwanese who attended the function
avidly taking notes.
According to Hoang
Nhu Ly, head of the Vietnam Economic and Cultural
Office in Taipei, some 100 delegations from
Vietnam's central and local governments visit
Taiwan annually to attract investments. And there
are about 100 Taiwanese investors who visit the
economic office monthly for information about
investing in Vietnam.
"Compared with other
ASEAN [Association of Southeast Asian Nations]
nations, our political environment is stable,
investment regulations are considerably fairer,
and our new leadership is ambitious about
developing the economy," Hoang said.
Taya
Electronic Wire and Cable became the first foreign
company to launch its initial public offering in
Vietnam last February. Sanyang Motorcycle and
Vedan MSG have also played crucial roles in
Vietnam's local market. According to Hoang,
Vietnam will continue to welcome labor-intensive
manufacturing investments.
Arthur Ting,
chairman of the Central Trading and Development
Corp, which has invested in Vietnam for 17 years,
emphasized that the advantage of Vietnam is "the
quality of its people".
"China is a good
market, but Vietnam is good for business
expansion," he noted, adding that production costs
in Vietnam are lower than in Shanghai.
Ku
Ying-hua, researcher of Taiwan's Chung Hua
Institution for Economic Research, said: "With the
realization of the ASEAN Free Trade Area [AFTA],
it is a now a good time to invest in the auto
industry in Thailand, the electronics industry in
Malaysia, the biotech and financial-services
industries in Singapore and the more
labor-intensive ones in Vietnam."
As of
March, Southeast Asia had attracted 7,464
individual Taiwan investments worth US$47.4
billion, with the top three recipients being
Indonesia ($13.84 billion), Thailand ($11.68
billion) and Malaysia ($9.65 billion). Taiwanese
investment in Vietnam had reached $7.9 billion,
with about 3,000 companies creating 1.4 million
jobs mainly in the manufacturing and construction
industries.
Among the other ASEAN
countries, Indonesia used to be the hottest spot
for Taiwanese investors, and has received the most
capital. Taiwan ranked as the fifth-largest
foreign investor in the sprawling island nation
with $13.5 billion in investment by value in 1,067
projects from 1967 to 2004. But the perception of
unstable politics and relatively poor
infrastructure have cast doubts on Taiwanese
investors, checking their willingness to put money
into Indonesia.
Located in the geographic
center of the ASEAN members, Thailand is
inevitably a magnet for investment, and officials
from its Board of Investment (BOI) visit Taiwan
six times a year to promote business. Taiwan has
pumped US$11.68 billion into 1,830 projects in
Thailand. More than 10 Taiwanese companies have
been listed on Thailand's stock market.
"Investments from Taiwan increased 20%
last year, and I am optimistic more and more will
be coming to Thailand in the next two to three
years," said Vittaya Praisuwan, executive
investment adviser of the BOI.
In more
developed Southeast Asian nations, such as
Singapore and Malaysia, the high-tech, biotech and
machinery industries hope that Taiwan's know-how
can assist them in upgrading their industries.
Taiwanese are in the top fifth of foreign
investors in Malaysia. Some 2,000 companies have
turned to Malaysia, with 21 of them currently
listed on the Kuala Lumpur stock market.
By the end of 2004, Taiwan had also pumped
US$2.6 billion into Singapore. The quality of its
workforce led Singapore to be the only nation in
the area to have secured the attention of Taiwan's
two leading semiconductor foundries, TSMC and UMC.
To stand out from the intensive
competition, Victor Hoo Ah Teng, director of
Malaysian Friendship and Trade Center's investment
division, said his office mails out an average of
30 promotion letters monthly to Taiwanese
companies. He began to see results this year as
some companies went to his office to find out more
and complained of China's increased production
costs.
With AFTA scheduled to come into
being in 2008, Hoo said Malaysia would be the
logical gateway for Taiwan to enter both the
600-million-population market and the more distant
Middle East. But he said Taiwan must first
position itself quickly in Southeast Asia or face
marginalization.
Even though Taiwan does
not have diplomatic ties with the area's nations,
it has signed investment guarantee agreements with
Singapore, Vietnam, Indonesia, Malaysia and
Thailand in the past decade.
Since 1994,
Taiwan's government has sought to discourage
Taiwanese from investing in mainland China through
its "Go South" policy, which encourages them to
consider trading with Southeast Asia, Australia
and New Zealand. It has organized delegations to
investigate these nations and provide formal
evaluations. The Asian financial crisis in 1997-98
and unstable political crises in the region,
however, saw investors reluctant to turn to the
region.
Luo Huai-jia, executive director
of the Taiwan Electrical and Electronics, argues
that the government's policy may have
unnecessarily obstructed Taiwan's investment in
mainland China, putting them at a disadvantage
while the whole world is panting to get into the
Chinese market.
Yet the new emphasis seems
to be paying off. The ratio of Taiwanese
investment in mainland China in the first half of
this year dropped from 70% to 66% of the island's
total outbound investment. This does not
necessarily mean Taiwanese businesses have slashed
their investments in China, but rather that they
have increased their investment elsewhere.
Having the same language and similar
cultures, some mainland-based Taiwanese investors
still find China the most attractive arena,
particularly since the earlier failure of the
government's "Go South" policy still cast shadows
on their minds.
"After an evaluation, we
concluded China's market is still the best for
us," said Kuo Shan-huei, chairman of the Taiwan
Chamber of Commerce in Dongguan, Guangdong province, and
chief of the leading wooden-furniture
manufacturer, Samson Holdings. He said this even
though more and more Dongguan-based Taiwanese
furniture manufacturers are planning to invest in
Vietnam to avoid anti-dumping taxes from the US.
The Council for Economic Planning and
Development noted in a statement: "Going south and
west [to mainland China] has developed into
compatible choices. For some enterprises, [both
going south and going west] are creating a
'win-win' situation, as people can take advantage
of China's abundant human resources to compensate
for the shortages in the Southeast Asian
countries."
Ting-I Tsai is a
freelance journalist based in Taipei.
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