The overall volume of inward investment flows in Taiwan is roughly 3,331.5 million US dollars in 2010 including foreign investors and Taiwanese oversea nationals. Totally 1,842 applications has been approved. Compared with the figure in 2009, the overall volume of inward investment flows has decreased from 4,164.9 million US dollars to 3,331 dollars.
In 2010, the top 5 investing countries in Taiwan is respectively, British overseas territories, the United Kingdom, the Netherlands, Japan, and the United States, totally amounted to 76 per cents of the overall volume of inward investment flows in Taiwan.
The main investing sectors are financial services, electronic manufacture, and the whole sale services.
The overall volume of outward investment flows from Taiwan is around 2553.2 million US dollars in 2010. In addition, the total volume of outward investment flows in Mainland China is around 10166.8 million US dollars. Obviously, Mainland China is the biggest host economy for Taiwan regarding international investment.
The main investing sectors in Mainland China are electronic manufacture, which is the most important sector in Taiwan. Apart from Mainland China, in 2010, the top 5 host economies for Taiwan is respectively, British overseas territories, Vietnam, the United States, Malaysia, and Hong Kong China. The main investing sector is financial services.
In general, Taiwan has got rid of the status as a subservient or peripheral economy serving the interests of the developed economies. Most of the investing sectors in Taiwan are high-valued manufacture and service. However, due to the structure of industry cooperation between Mainland China and Taiwan, Taiwan is increasingly dependent on the Chinese economy.
Taiwan’s industrial strategy is to further develop biotech sectors, tourism, green energy, medical service, high-valued agriculture exports, and media service. Due to the recent several bilateral agreements attained between Mainland China and Taiwan, Taiwan has become the suitable place for the foreign investors to set up their Asian headquarters, in order to enjoy the preferential commercial treatments offered by the Chinese government as Taiwanese companies.
2. Important International and National Players in the Area of Investment in Taiwan
Apart from petrol and electronic power supplies, most of the state-owned companies had been privatized during the past two decades, including telecommunication and financial sectors.
In the post-ECFA age, Taiwan has successfully attracted more and more multinationals to set up their plants, research and development centers in the area of IT sectors in Taiwan. Also, more and more Taiwanese multinationals has removed their plants, research and development centers from Mainland China to back to Taiwan.
Other than the Member of the WTO, Taiwan recent joins the Public Procurement Agreement. Therefore, foreign investors are entitled to equally compete with local enterprises for the bids of public procurement. In particular, there are ongoing 12 main public construction plans including the reconstruction of Kaohsiung port and the construction of Taoyuan airport city.
Although international NGOs play a less role in Taiwan, recently, more and more environmental groups protested and opposed the new develop plans to set up high-polluted plants in their local town, including the eighth stage of national oil plants proposed by the government. Meanwhile, Taiwan’s government increasingly realizes the importance of protecting the low-skilled labor’s human rights coming from the ASEAN countries by setting up the human rights committee under the President.
3. Legal Regimes of Foreign Investment in Taiwan
According to Article 1 of Taiwan’s Foreign Investment Act (hereafter referred to as TFIA), the Ministry of Economic Affairs has the authority to enforce this act. Investment has been defined as follows:
The shares or capital possessed by the foreigners;
Setting up a branch, a sole business, or a partnership within the territory of Taiwan;
Offering a loan to the sectors it invests for over one year.
In particular, the investment has to be approved when he shares or capital possessed by the foreigners has been over one-third of the overall shares of the company or the total capital of the enterprise.
Two kinds of sectors prohibited to receive foreign investment as follows:
Those who has unfavorable effects on national security, public order or national health;
Those are prohibited by laws.
After complying the special procedure provided by the Supreme Administrative Authority, foreigners are exceptionally permitted to invest those sectors as follows:
Mineral sectors;
Maritime transportation service;
Civil Aircraft service.
4. Future Challenges and Opportunities
The first challenges for Taiwan is to reverse the huge gap of inward and outward investment flows between Mainland China and Taiwan. The outward investment flow from Taiwan to Mainland China is obviously much bigger than the flow from Mainland China to Taiwan. Nevertheless, due to the regional security concern, Taiwan still resist some investments in some important sectors including financial service or IT manufacture from Chinese Sovereign Wealth Funds.
The second challenge for Taiwan is to increase the technology cooperation between Taiwan and then other developed countries, in particular in the prospective sectors aforementioned. For Taiwan, setting up the joint ventures with multinationals to improve technology transfer is more important than financial supports. Also, it would be wise for Taiwan to change its industry structure which is traditionally concentrating on IT and oil related industries. This is also an opportunity for Taiwan to transform its economy into a more knowledge economy, instead of maintaining its high-polluted industry like the oil chemical sector.
The third challenge and opportunity for Taiwan is how to improve the bilateral relation with Mainland China. Despite the successful engagement of Economic Cooperation Framework Agreement (hereafter referred to as ECFA) between Mainland China and Taiwan, the concrete contents of agreements regarding trade for goods, trade for services, intellectual property rights, and bilateral investment are still negotiating. In general, whether the trade disputes arising from ECFA can be brought to the WTO dispute settlement mechanism, and in particular, whether the investment disputes between local governments and private investors can be settled by the neutral arbitrators, are both hot debates between both sides. Its outcome would inevitably influence the willingness of multinationals to invest in Taiwan, if the effectiveness and impartiality of the dispute settlement systems cannot be guaranteed.
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