Ma Ying-jeou pitches Taiwan to
EU By Duncan Freeman
BRUSSELS - A delegation from Taiwan led by Ma
Ying-jeou, mayor of Taipei and chairman of the
Kuomintang (KMT), and considered a likely
contender to be Taiwan's next president, has just
concluded a five-nation European tour intended to
promote the island as an ideal economic partner
for European companies.
On its face, the
visit highlighted an already strong economic
relationship between Taiwan and Europe, but at the
same time
revealed
some of the difficulties, both economic and
political, that the island faces in promoting
itself.
During the 13-day trip to Europe,
which included Turin, Geneva, Dublin, London and
Brussels, Ma, in his position as mayor of Taipei,
was keen to focus on that city as a site for
investment, especially in the technology sector,
promoting it as the New Silicon Valley of the
Asia-Pacific region. In addition to several
technology and software parks, Taipei claims the
highest percentage of wireless Internet coverage
of any major city in the world.
The
information and communications technology (ICT)
sector is key in the Taiwan economy, and one where
it is a major player in the world market. Over the
years Taiwan's industries have been restructured
several times and the government is promoting the
ICT sector as a part of this process of
restructuring. Apart from existing strengths in
manufacturing, it is seeking to boost research and
development (R&D) in computer hardware,
semiconductors and optoelectronics. It is also
looking to services and sectors such as
biotechnology and pharmaceuticals, energy recovery
and efficiency, and auto parts for future growth.
It is not only in the technology sector
that the delegation was trying to sell Taiwan. The
island's domestic market of 24 million people had
a per capita income of US$14,059 in 2005, one of
the highest in Asia. Taiwan also has a huge
program of infrastructure investment. In 2003 the
executive yuan launched a five-year plan to invest
$15 billion in 10 major projects designed to raise
Taiwan's competitiveness.
Taiwan has been
seeking to increase overseas participation in its
infrastructure projects; since entering the World
Trade Organization in 2001, it has relaxed
restrictions on participation in its public
construction tenders by foreign companies. The
business group was also eager to sell the idea of
European participation in environmental-protection
and pollution-control projects.
Taiwan is
already one of the European Union's biggest
trading partners. In 2004 Taiwan was the EU's
19th-largest export market, but its ninth-largest
source of imports. This ranking, however, hid a
trend that many in Taiwan would consider highly
worrying, as bilateral trade in both directions
has tended to decline in recent years.
In
2000 EU exports to Taiwan were 15.1 billion euros
(US$18 billion), but fell in the following years
to 11 billion euros in 2003, before recovering to
12.8 billion euros in 2004. In this period,
Taiwan's share of EU exports fell from 1.8% to
1.3%. More important, Taiwan's exports to the EU
followed exactly the same pattern, falling from
28.3 billion euros in 2000 to 22.4 billion euros
in 2003, before recovering slightly to 23.6
billion euros in 2004. Taiwan's share of EU
imports fell from 2.8% in 2000 to 2.3% in 2004.
In the first three quarters of 2005, EU
exports to Taiwan were 9.4 billion euros, a slight
increase of 0.7% over the same period for the
previous year. But the improvement in exports to
the EU during 2004 appears to have reversed the
following year. In the first three quarters of
2005 they were 16.6 billion euros, a fall of 2.2%
from the same period in 2004.
Investment
flowing into Taiwan from Europe has followed a
similar pattern. According to statistics from
Taiwan, investment from Europe fell from a peak of
US$1.2 billion in 2000 to $609 million in 2002,
although by 2004 it had recovered to $963 million.
Investment from Europe has followed the overall
pattern of flows into Taiwan over the past few
years. Total investment inflows fell from $7.5
billion in 2000 to $3.2 billion in 2002, before
climbing again to $3.9 billion by 2004. Investment
from the United States, once the largest source,
has fallen continuously from $1.3 billion in 2000
to only $353 million in 2004.
Of course,
the primary reason for this pattern is not
difficult to identify: mainland China. Similar
fluctuations have been mirrored in virtually every
other economy in East Asia, from Japan down to
Singapore, as China has rapidly evolved into the
main point of assembly for goods sourced from
around the region.
Businesses from Taiwan
have invested huge amounts in manufacturing
facilities in the mainland. According to Taiwanese
statistics, by last September a total of $41.9
billion had been directly invested in the
mainland, although if indirect investment through
third countries is counted, the real figure is
estimated to be well over $100 billion. The growth
in investment has led to huge increases in trade
flows between Taiwan and the mainland, although
the exact figures for this are a matter for
informed guesses at best, since much of it is
carried out through intermediaries such as Hong Kong.
Even
if companies from Taiwan, and arguably the
Taiwanese economy in general, have benefited from
these developments, which have helped them
maintain their competitiveness, there are clearly
concerns in Taiwan that it is losing out in both
trade and investment and that key industries are
being hollowed out by the shift to the mainland.
Although other economies in Asia have faced
similar shifts in trade and investment over recent
years, largely as a result of the emergence of the
mainland, the situation of Taiwan is certainly
more delicate than most. Political and security
factors are an essential element of Taiwan's
debate over how it should respond to these
economic shifts.
It is difficult to avoid
politics in discussions of Taiwan's economy.
During Ma's trip, official contacts with him were
limited. But the fact that Ma was leading a
business delegation is no coincidence, and no
doubt reflects a real concern to help the economy
overcome the difficulties it faces. Still, the
emphasis on the economy cannot be divorced from
domestic political rivalry in Taiwan.
Playing down the unification issue and
stressing economics and the need for stability in
relations with the mainland is a way of
emphasizing the difference between the KMT and its
main rival, the governing Democratic Progressive
Party. Ma, by implication, is also able to point
to the fact that rather than simply attempting to
lessen the negative effects of the shift to the
mainland by Taiwan companies, he is trying to do
something practical about it by seeking new
investment from overseas. By doing so, he also
gains support from businessmen in Taiwan who see
their future linked with the mainland.
Even without the political dimension,
Taiwan has long seen the need to promote itself,
although the results have been mixed at best, as
the recent declines in investment inflows show.
During the visit of Ma's delegation, both he and
the business leaders who accompanied him were
eager to play up Taiwan's role as a bridge between
the mainland and the rest of the world.
In
a number of sectors, especially computers,
Taiwanese companies are the dominant players in
the mainland, both in terms of manufacturing
investment and trade. They are therefore arguably
ideally placed to partner with European companies
in doing business in the mainland. Still, it
remains to be seen whether selling Taiwan as a
business location will be successful in a business
world that continues to be bedazzled by mainland
China, and wants to get there by the most direct
route possible.
Duncan Freeman
is a writer and consultant based in Brussels. He
can be contacted atduncanfreeman@skynet.be.
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