May 12, 2001	atimes.com

China Taiwan eases foreign equity investment rules TAIPEI - Taiwan's Minister of Finance Yen Ching-chang has announced a new set of stock market opening measures he predicts will stimulate US$20 billion in foreign investments in the local financial market by the end of the second quarter of next year. Yen announced that the registration procedure for a Qualified Foreign Institutional Investor (QFII) will be simplified and the entry-level requirements will be lowered. Under the new standards, the limitation that a QFII must be listed as a top 1,000 investment firm in the world will be scrapped, and the amount of initial investment will be lowered from $1 billion to $200 million. The amount of time between investment and actual capital inflow will be extended from one year to two years, and the amount of asset management experience required will be lowered from three years to one year. Yen said that his ministry has already discussed the measures with the Central Bank, and that the changes will be put into effect next week at the earliest. The finance ministry also plans to team up with local securities firms, the Taiwan Stock Exchange, the Over-the-Counter Securities Exchange as well as foreign banks and brokerage houses on the island to conduct a series of overseas briefings on Taiwan's equity market. The briefings are to take places in London, Paris, Frankfurt, New York, Boston, Los Angeles, Tokyo and Singapore. The ministry will also step up its communications with the leading providers of global market indexes, including Morgan Stanley Capital International and FTSE, to give them a better understanding of Taiwan's policies regarding foreign equity investments. Since Taiwan opened its stock market to foreign investment in 1990, net inflows of foreign equity funds have reached $33.48 billion at the end of April, according to official data. Yen and the deputy governor of the Central Bank, Chen Shih-meng, will travel to Washington and New York next week at the invitation of the US-Taiwan Business Council. Yen will be the first Taiwan minister to visit Washington since the Bush administration was inaugurated in January. He is scheduled to speak on the Taiwan economy and the current situation of the island's financial development at the spring meeting of the directors of the US-Taiwan Business Council in Washington on Monday. Yen will also call on the acting deputy finance secretary, Kenneth Dam; chairman of the American Institute in Taiwan, Richard Bush; and the head of the New York Office of the Federal Reserve Board, William McDonald. As arranged by the US-Taiwan Business Council, Yen will also call on Robert Rubin, former finance secretary during the Clinton administration, as well as exchange views with financial leaders on Wall Street. The US-Taiwan Business Council, established in 1976, has become a major private communication channel between Washington and Taipei since the two sides severed diplomatic ties in 1979. The current chairman of the council, Frank Carlucci, was the defense secretary during the Reagan administration. The council's president, Rupert J Hammond-Chambers, has devoted himself to the promotion of trade exchanges and cooperation between Washington and Taipei since he assumed the office last year. Other developments Australia mission: The recently-concluded economic cooperation conference between Australia and Taiwan was a fruitful meeting, with delegates from the two countries reaching several agreements, says Taiwan's Vice Minister of Economic Affairs Chen Ruey-long. Chen, who returned from Canberra on Thursday after attending the Sixth Taiwan-Australia Economic Consultation Conference, said that the two-day meeting focused on topics related to boosting of bilateral, multilateral and regional cooperation in the fields of environmental protection, tourism, as well as trade and investment. During the annual conference, the Australian side promised to firmly support Taiwan's early accession into the World Trade Organization, Chen said, adding that both sides also agreed to push for the signing of a memorandum of understanding on environmental protection, trade and investment. Chen, who presided over the meeting jointly with Australian Vice Foreign and Trade Minister David Spencer, disclosed that a Taiwan-Australia accord on young vacationers' part-time jobs is expected to come into force this year. The vice economics minister also took advantage of the trip to attend a business symposium held in Sydney, aimed at luring major Australian high-technology companies to conduct investments in Taiwan. Many entrepreneurs from Australia showed great interest in participating in Taiwan's waste water and residuals disposal projects, he said. Banks cleared for mainland offices: The Taiwanese government has allowed the top 10 banks with sufficient equity and assets to set up offices on the mainland. Currently, nine banks qualify, including the Bank of Taiwan, the Land Bank of Taiwan, The First Bank, the Taiwan Cooperative Bank, the Bank of Overseas Chinese, the Chang Hwa Commercial Bank, the United World Chinese Commercial Bank, the International Commercial Bank of China and the Chinatrust Commercial Bank. The government has allowed the move under a ruling called the Amendment of Permitted Ways in Conducting Cross-Strait Financial Transactions compiled by Taiwan's Mainland Affairs Council and the Ministry of Finance. Bank branches also will be allowed to directly conduct international financial business with overseas branches of mainland banks. It is expected that the proposed offices on the mainland will be allowed to conduct business in three fields, including financial-related market research, financial-related information collection and other coordinating business. Curb on foreign workers: Seeking to increase job opportunities for Taiwan's moribund construction sector, labor officials said on Thursday they planned to begin banning the further use of additional foreign labor from major construction projects beginning next week. The cabinet-level Council of Labor Affairs said, "Further employment of foreign workers in major construction projects will be stopped due to high unemployment in the construction sector. The number of unemployed local construction workers is sufficient to meet labor demand for new major projects," it said. Unemployment in the construction sector reached 7.98 percent as of the end of February with 67,530 people unable to find work. The total workforce available for the sector was 845,530 that month, it said. At the end of March 327,529 foreign workers were employed in construction in Taiwan. Response to AmCham: On Friday, the Council of Economic Planning & Development (CEPD) stated that in order to assist the foreign business community in Taiwan to better understand the direction of the government's administrative policies, the CEPD will in future increase its efforts to communicate with the foreign business community, and reduce any potential cognitive gaps. In response to an American Chamber of Commerce in Taipei (AmCham) White Paper on Taiwan, the CEPD offered the following: (1) In terms of the comprehensiveness of Taiwan's economic policy, the government has already completed studies for a blueprint to develop Taiwan as a "Green Silicon Island". In addition to continuing to insist on the principles of greater freedom, internationalization, and systematization, they have already introduced three major planning concepts - of focusing on the knowledge-based economy, ensuring the perpetuity of economic policies, and public openness. These policies aim to develop Taiwan's knowledge industry, concretely improve the investment climate, and promote cross-strait exchanges. (2) In terms of improving governmental effectiveness, mechanisms to exchange perspectives on governmental effectiveness "from the bottom up" and "from the outside in" have already been established. In terms of "bottom to top" measures, in its plan to reorganize the legal infrastructure, the administration has already established a "work circle" mechanism. "Work circles" have been established in every related agency, and will be able on their own to initiate changes to unsuitable regulations. The CEPD has also already established mechanisms functioning "from the outside in". It has created the "consultative committee on reorganization of the legal infrastructure". Eighteen representatives from business, the government and academia have been invited to serve as members, and will work together with administrative departments to amend inappropriate financial regulations and systems. And to increase the efficiency of processing individual investment cases and provide an environment that allows manufacturers to invest in Taiwan more easily, the government has decided to strengthen efforts to facilitate foreign investment at two separate levels, by actively recruiting investors and by removing investment barriers. (3) In terms of improving basic infrastructure, the government will invest NT$810 billion (about US$27 billion) in new public works, including establishing a high-speed information network. In terms of power supply, Taiwan will assist private investors to build more generating facilities, in order to ensure an ample supply of electricity, and to improve Taiwan's power transmission and distribution system as quickly as possible. (4) To improve the financial system, the legislature has already passed upon third reading revisions to the Banking Law as well as the Financial Institutions Merger Law, and is actively deliberating the rough drafts of a law governing financial holding companies and the organic law for the Financial Supervision and Control Commission. This will enable to the government to more quickly resolve bad debts and restructure bankrupt organizations, and effectively reorganize policies and supervisory procedures governing the financial industry, and build a fully supported financial market. (5) In terms of eradicating corruption, the government is already actively promoting a law governing lobbying practices, and is engaged in revisions to the Local Governmental Systems Law, as well as the Public Officials Election and Recall Law, to prohibit organized crime from becoming involved in elections. By the year-end elections for Legislative Yuan members and county and municipal executives, Taiwanese politics can be expected to have eliminated corruption to a significant degree. (6) With regard to cross-strait relations, the government has already implemented direct trade, transportation and communications ties between mainland China and the outlying islands of Kinmen and Matsu (the "mini links"), to serve as the foundation for future implementation of the "three links". Also, to ensure a system of risk management, Taiwan hopes to actively develop means to adjust the "no haste, be patient" policy, and insist on active deregulation and effective management. The government is also actively promoting the development of Taiwan's knowledge-based economy, relaxing restrictions on the establishment of new enterprises. It is exploring the possibility of hedges for the creation of new businesses, and developing a system for trading stocks in companies not yet listed on the bourse or the island's over-the-counter market, to provide capital resources for enterprises oriented toward the knowledge-based economy. The government is also exploring the possibility of relaxing regulations on allowing technical personnel from mainland China to work in Taiwan. (Asia Times Online/Asia Pulse) ((c)2001 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

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