TAIWAN
INVESTMENT SCRAMBLE PART 1: Bring back
the money By Ting-I Tsai
TAIPEI - Bothhand Enterprise Inc, a
manufacturer of electronic components for
telecommunications and computers, invested some
US$5.3 million to set up a
research-and-development center in Taiwan in 2003, after it
had invested in three factories in mainland
China's Guangdong and Jiangsu provinces.
In recent years the Taiwanese government
has often cited Bothhand as an example of its
policy to lure mainland-based Taiwanese businesses
to invest more at home. Taipei has been eager to
see a decrease of Taiwanese investment in mainland
China for fear the island will become increasingly
dependent on the arch-rival economically. It wants
mainland-bound Taiwanese
investors to return like
"salmon swimming back home".
However, most
big fish are business people who prefer staying
where they can make maximum profits to swimming
home after spawning their investments in China.
Without direct cross-strait transportation links
and proper investment opportunities in Taiwan,
they say, any preferential treatment offered by
the Taiwanese government to lure them back means
little. Furthermore, they say, it is time for the
Taiwanese government to give up the
planned-economy mindset and consider commercial
ties with the mainland as a gateway to regional
and world markets.
By the end of June,
Taiwanese investment in mainland China totaled
US$50.8 billion, accounting for about 70% of
Taiwan's total out-bound investment. China's
official statistics show that 70,256 Taiwanese
companies have invested on the mainland, and the
figure does not include those Taiwanese businesses
that have invested in China via a third entities,
such as Hong Kong, the Virgin
Islands or Singapore.
Frustrated as it
watched investors shifting out of the island, the
government initiated the "invest in Taiwan" policy
in 2003, introducing numerous types of
preferential treatments, including discounted land
prices, tax breaks, and financial and R&D
subsidies. In May the government further provided
some US$7 billion in low-interest loans designated
to Taiwanese investors.
There is, however,
no figure to reflect what the policy has
accomplished over the past three years. In the
2003 proposal, the government created a channel to
provide the overseas Taiwanese investors an easy
way to cut through the red tape of applications
and certificates. An official at the Ministry of
Economic Affairs (MOEA) in charge of the channel,
though, noted that there is no figure on how many
investors took advantage of it.
But
according to a survey conducted by the MOEA's
Industrial Development Bureau, of the 748
companies enjoying the preferential land
treatment, only 48 had invested in mainland China.
Another figure indicated 82 companies had followed
the government policy to set up their R&D
centers in Taiwan from 2002 to 2004. The MOEA's
Department of Investment Services now plans to
initiate a survey among Taiwanese investors to
comprehend better their demands and intentions on
investment.
Based on the latest report,
spokesman Cheng Wen-tsan for the Executive Yuan,
Taiwan's cabinet, announced that it would again
initiate a "big investment" policy with lower
prices for land-leases beginning next month to
encourage mainland-based Taiwanese investors to
put money back in Taiwan.
"All of the
ASEAN [Association of Southeast Asian Nations]
member countries are in competition for soliciting
foreign investments by offering preferential
treatment," said Tsai Horng-ming, executive of the
Chinese National Federation of Industries in
Taiwan, "and Taiwanese investors apparently found
China to be the most convenient place for their
investments. The government needs to provide more
inducements, such as new investment opportunities,
to attract China-based Taiwanese investors."
According to the MOEA, Taiwan received 795
investment projects worth US$20 billion, including
$6.9 billion from overseas, from January to July.
Japanese TFT-LCD (thin film transistor-liquid
crystal display) component manufacturers have
reportedly put $161 million into central and
southern Taiwan in the first five months of this
year. The occupancy of the first air-cargo
free-trade zone in Taoyuan, which was officially
founded at the end of last year, is expected to
reach 70% in the coming month.
Kuo
Shan-huei, chairman of the Taiwanese Chamber of
Commerce in Guangdong's Dongguan city and boss of
a leading furniture manufacturer, Samson Holdings,
noted that investors will pour their capital
wherever there are favorable investing
opportunities and proper investing environments,
citing the example of more and more Taiwanese
investors investing in local real estate. However,
he pointed out that the government should have
introduced more sophisticated preferential
treatment for small and medium-sized enterprises
to establish R&D centers in Taiwan.
In
2002, the MOEA initiated the "Two Trillion and
Twin Star" program, a four-year project to drive
the production value of Taiwan's semiconductor and
flat-panel display (TFT-LCD in particular)
industries to NT$1 trillion (US$29.6 billion) each
and to build the digital content and biotechnology
sectors into star industries, all by 2006. The
MOEA estimated the production value of TFT-LCD
would reach NT$1.37 trillion. But analysts are now
concerned about the government's failure to
cultivate new industries.
"What about the
other industries? The plan of developing a
biotechnology industry hasn't accomplished
anything significant," said Yin Chi-ming, a former
vice minister of economic affairs and incumbent
consultant to the cabinet.
The
pro-independence Democratic Progressive Party
(DPP) administration held an economic conference
last month to find ways to develop Taiwan as a
"green value-added island" by building global
bridges, using global brains, building global
brands and creating global benefits. The
conference didn't appear to accomplish much,
however, since solutions for properly interacting
with China, such as how to create direct
transportation links with the mainland, were not
reached.
For the Bothhand enterprise,
investing in Taiwan is just part of the company's
expansion plans, as its fourth factory in China is
under construction in the southwestern province of
Sichuan.
For
foreign investors, direct transportation links
with the mainland is crucial. Despite the American
and European chambers of commerce in Taiwan urging
the government to establish such links, the DPP
administration has simply been unresponsive.
"Without the direct links, more and more investors
would rather establish their R&D centers in
China," said Tony Cheng, chairman of the Taiwan
Merchants Association in Shenzhen.
According to the latest forecasts from the
International Monetary Fund and Project-link,
Taiwan's economic growth this year will be the
lowest among the four so-called "small dragons" in
Asia (the other three being Hong Kong, Singapore
and South Korea).
"This is not what I
expect from Taiwan," said Yin Chi-ming, who has
noted that Taiwan's economy would suffer even more
without the promised direct-transportation links
with the mainland by 2008. By then Taiwan might
find itself isolated from China's economic
development and from the several new free-trade
zones among the East Asian nations. "The direct
transportation links would not be a solution for
everything, but at least would put Taiwan in the
same competitive position with Hong Kong and
Korea," Yin added.
For US investors,
Taiwan's highly political-oriented policies are
not only creating frustrations, but might be
hurting the island itself.
"What made
Taiwan secure in the last 50 years?" asked Richard
Vuylsteke, executive director of the American
Chamber of Commerce in Taipei. "It is the power of
its economy. You have to take it seriously. And
now, to spend six or seven years not even talking
about the economy is probably the biggest threat
to Taiwan's security."
Part 2:
Anywhere but China
Ting-I
Tsai is a freelance journalist based in
Taipei.
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