Taiwan businesses get arbitration
pact By Jens Kastner
TAIPEI - A long-stalled investment
protection pact aiming mainly at safeguarding the
well-being of Taiwanese businesspeople active in
mainland China has been signed in Taipei along
with a cross-strait customs cooperation agreement.
Negotiators elegantly circumvented the
bones of contention to the investment pact, such
as Taipei's demand for international arbitration
at the International Chamber of Commerce and the
guarantee that Taiwanese citizens cannot quietly
disappear in
Chinese jails. On the
Taiwanese side, there's more jubilation than
regret, nonetheless.
Around 800,000
Taiwanese businesspeople are believed to reside in
China. Although they are estimated to have poured
US$300 billion in investment into the mainland in
the past 20 years, these taishang, as they
are commonly called, have often made for easy prey
to their mainland business partners and corrupt
Chinese officials in the absence of
institutionalized cross-strait relations and the
resulting lack of a clear legal framework.
According to figures provided to Asia
Times Online by Tung Chen-yuan, a professor at
National Chengchi University and former deputy
head of Taiwan's Mainland Affairs Council's (MAC),
from 2008 to 2010 alone, 93 taishang met an
untimely end while working in China; 52 were
victims of looting, destruction of property or
extortion; 35 were abducted and illegally
detained; and 308 were detained by law enforcement
agencies following some gone-bad dispute.
Numerous Taiwanese firms have had their
shares in joint cross-strait enterprises or the
properties of an invested operation seized by the
mainland partner, according to the island's media
reports,
The new investment protection
agreement is meant to change conditions for the
better. That it hasn't been signed in the previous
rounds of talks between Taiwan's Straits Exchange
Foundation (SEF) and its mainland counterpart, the
Association for Relations Across the Taiwan Strait
(ARATS), had to do with the complex nature of
cross-strait relations.
In Beijing's eyes,
allowing international arbitration would amount to
a tactical recognition of Taiwanese statehood, and
as China has just amended its own criminal law,
which stipulates that authorities do not have to
inform family members of the arrest of suspects in
crimes against national security or terrorism,
negotiators were put to the test by Taipei's
demand that if a Taiwanese businessperson was
arrested in China, the authorities there would be
required to notify the individual’s family of his
or her whereabouts within 24 hours.
Obstacles to the pact on the Taiwanese
side mainly relate to strategic fears: if
investments from China are allowed in on a large
scale and in sensitive sectors, the island's
economy could be hijacked, paving the way to
backdoor unification.
After the new
agreement comes into effect, international
arbitration in disputes between private investors
and private investors on each side (P2P) is in
theory possible. The catch, however, is that it
will need the consent of both parties. Private
businesses-to-government (P2G) and
government-to-government disputes can in future be
handled also by Taiwanese arbitration associations
to be established in China, as opposed to only
Chinese ones, provided both sides agree. But the
question whether Beijing at the end of the day
will give its nod on a case-to-case basis to
something it has quite vehemently opposed all
along is not answered.
"If in P2P disputes
both sides agree, meditation can be done in a
third country; but the pact's wording in terms of
P2G is all blurry," said Hu Sheng-Cheng, an
economist at Academia Sinica, Taiwan's most
renowned research institution. "This leaves
significant wiggle room. Also, the rule that both
sides must consent gives the Chinese side a veto
power, which if applied makes the provisions
meaningless."
William Kao, president of
the Victims of Investment in China Association
(VICA), who once lost a fortune in China due to an
unholy alliance of business rivals and local
officials, ridiculed what SEF and ARATS have
thought up.
"Will Chinese authorities
agree to have disputes moved to places it can't
control?" Kao asked rhetorically. "Such a pact is
a joke, of course."
Also in terms of
personal protection, the agreement seems to leave
a lot to be desired: although a rough consensus
has been reached on ways to ensure the safety of
Taiwanese businessmen in China, it was not put
into the actual text of the investment protection
pact.
But other observers in Taipei are
cautiously upbeat, nonetheless.
"I think
Taipei has tried its best to get what she wants in
the investment agreement in terms of wording,"
said Professor Tung. "While Taipei got some
concessions from China in terms of P2G disputes
settlement mechanism and 24-hour notice of any
legal issues involving Taiwanese businesspeople,
China got some ambiguous promises from Taipei to
open and promote investment from China."
Tung added that the critical issue is that
to what degree the agreement will be effective and
actualized.
Ronald A Edwards, an expert on
China's political economy at Tamkang University,
also believes that both sides have essentially got
what they wanted. He agrees that the real issue is
how it is enforced in practice.
"We will
have to wait and see how this plays out; many of
these conflicts arise between different parties
with conflicting interests, including local and
Taiwan business interests as well as local and
regional governments [in China]," he said. Edwards
subsequently cautioned that the latter two "are
not always under the complete control of the
[Chinese] central authorities".
While the
protection of taishang in mainland China is
from the Taiwanese perspective arguably the pact's
most prominent aspect, the Chinese side has
originally also aimed at removing obstacles to
Chinese investment in Taiwan, which currently
amounts to only US$150 million.
Taiwanese
Vice-Economics Minister Bill Cho has pointed out
that Taipei would still firmly control the pace of
Chinese investment. A large and sudden inflow of
Chinese money is therefore not expected, meaning
that the new pact will not help improve the
island's dismal standing in global foreign direct
investment (FDI) statistics.
According to
the UN Conference on Trade and Development's 2012
World Investment Report (WIR), FDI inflows into
Taiwan amounted to only US$1.96 billion last year,
putting the island in the second-lowest place
worldwide, only ranking above Angola.
But
nonetheless, in a Taipei media briefing, Leong Wai
Ho, a Barclays Bank Singapore-based senior
regional economist, made clear that the pact,
apart from providing some protection for the
taishang, will be good in another
significant aspect:
"The agreement is not
a big deal in itself," Leong said. "But it will
make more sense for foreign investors, especially
from Japan, to use Taiwan as a base to expand in
China, as Taiwanese firms will receive more legal
protection than foreign firms there."
Jens Kastner is a Taipei-based
journalist.
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