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Taiwan’s Economic and Industrial Development and Investment Environment

Taiwan’s Economic and Industrial Development and Investment Environment. Department of Investment Services (DOIS) Berton B.C. Chiu, Director-general Sept. 17, 2007. Services and Functions of the Department of Investment Services.

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Taiwan’s Economic and Industrial Development and Investment Environment

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  1. Taiwan’s Economic and Industrial Development and Investment Environment Department of Investment Services (DOIS) Berton B.C. Chiu, Director-general Sept. 17, 2007

  2. Services and Functions of the Department of Investment Services • Promotion of domestic and overseas investment and technological cooperation. • Encouraging and assisting Taiwanese-owned firms operating overseas to invest in Taiwan. • Providing assistance and guidance on foreign investment matters. • Researching and compiling investment opportunities. • Implementation and tracking of investment projects; resolving investment-related issues. • Profiling the investment environment; publishing investment-related laws and regulations. • Promoting the recruitment of overseas personnel in scientific and technological disciplines. • Promotion of bilateral and multilateral investment-related matters and relevant liaison.

  3. Briefing Outline I Taiwan’s Economic Situation II Taiwan's Economic Development Policies III Status of Taiwan's Industries and Future Development IV Taiwan's Investment Environment V Co-Prosperity Projects

  4. I Taiwan’s Economic Situation 1. The Domestic Economy Note: *Estimate from the DGBAS (Directorate General of Budget, Accounting & Statistics) National Income Review Conference of Aug. 23, 2007. Source: Directorate General of Budget, Accounting & Statistics, Ministry of Finance, and Ministry of Economic Affairs.

  5. Foreign trade • Private consumption:. • Private consumption is expected to increase steadily and reach a projected growth rate of 3.0% as the domestic labor situation progressively improves and the credit card debt problem gradually eases. • Private investment: • The continued capacity expansion and technological upgrading of high-tech industries, plus the planned expansion of aerospace firms, is expected to enable private investment to maintain a 1.68% growth rate. • New and added investment cases under the MOEA's oversight will amount to more than NT$1.007 trillion. Domestic demand • Maintaining a stable situation: • Although the global economic expansion has eased somewhat, worldwide growth is still faster than the long-term average. This growth, plus continuing strong global demand for electronic products and the gradually formation of a regional division of labor, are anticipated to sustain Taiwan's export dynamism. • According to customs import/export trade statistics, the value of Taiwan's exported and imported goods were growing at annual rates of 8.9% and 17.4% respectively in July.

  6. Economic globalization • International outsourcing will continue to increase. • Reconfigure international value chains. Demographic changes • Demographic aging will become more significant throughout the world. • Help Labor change to meet new demands in the new demographic structure. • Emerging ICT technologies will develop rapidly, fostering interdisciplinary synergies; for instance, IT and biotech linkage is fueling the development of biochips. • Find the next engines of growth. Fast-developing ICT technology • Taiwan’s energy and resources are inadequate; environmental protection restrictions are increasingly strict. • Ensure that small resource inputs generate the greatest possible added value. Inadequate energy and resources 2. Factors Influencing Taiwan’s Economic Growth in the Next 10 Years 2.1 External factors

  7. 2.2 Internal factors Private investment momentum • Investment momentum is mainly focused on the semiconductor and LCD industries. It is expected that investment in these industries will peak after 2010, and new areas of investment must be identified to sustain future economic growth. Industrial upgrading and transformation • Past industrial development emphasized cutting production costs and improving process technology; the future will see increased efforts to improve quality and thereby create greater industrial profit margins. Development of new industries • R&D and innovation will spur the development of emerging industries. • The rapid development of the information/electronics industry has polarized industrial development. • Unemployment and the growing gap between rich and poor are gradually eroding social homogeneity. Balanced industrial development

  8. Manufacturing Manufacturing II Taiwan's Economic Development Policies 1. Economic Development Goals • Note: *Growth rates for 2015 are averages from 2005 to 2015.

  9. 2. Economic Development Policies Providing land on preferential terms 2.1 Increasing Investment to Build up Growth Momentum • Four years of rent-free and six years of half-rent on state-owned land. • Release of TaiSugar land for development. • Extended and expanded phase 2 of 006688 program. • Assistance for expanded investments utilizing adjacent non-urban land. • Assisting zoning changes in unregistered areas containing clusters of enterprises. • Strengthening industrial parks and infrastructure support for industry. Insuring a plentiful labor supply • Improving the work environment so as to increase willingness to work. • Review of foreign labor policies and import of labor. • Establishing forums for dialog. Providing funding assistance Enhancing EIA review efficiency • Strengthening credit guarantees for SMEs. • Using the National Development Fund to participate in investment in conventional industries. Instituting corporate investment promotion mechanisms • Strengthening policy EIAs. • Improving EIA case review. • Central and local government work together to promote investment • Instituting single-window service • Inter-agency coordination in resolving issues related to investment

  10. 2.2 Development of new major industries ◎ Improving quality standards ◎ Promoting innovative R&D ◎ Strengthening creative design ◎ Promoting brands ◎ Assisting marketing efforts ◎ Encouragement of upgrading and transformation Wireless broadband and related services, digital living, health care, and green industries 2.3 Assisting conventional industries to improve competitiveness 2.4 Focusing on industrial development in central and southern Taiwan ◎ Western Taiwan Precision Machinery Industry Corridor ◎ Southern Taiwan Innovative R&D Park ◎ Upgrading and transformation of conventional industry ◎ Southern Taiwan Optoelectronics Corridor ◎ Development of a green energy industry ◎ Giving the tourism landscape a new look

  11. 2.5 Nurturing SMEs Helping SMEs create new value; giving SMEs new energy: ◎ Participating in investment and providing credit guarantees ◎ Boosting R&D capabilities ◎ Promoting marketing and business opportunities ◎ Developing distinctive local industries ◎ Strengthening innovative incubators ◎ Assisting upgrading and transformation 2.6 Green energy for a Sustainable Taiwan Promoting development of green industries ◎ Photovoltaic industry－Value of output projected to rise from NT$21.2 billion in 2006  NT$60.8 billion in 2010. ◎ LED lighting industry－ Value of output projected to rise from NT$1.5 billion in 2006  NT$13.0 billion in 2010. ◎ Biofuel development－The development of green domestic energy will promote the mutual development of energy, agriculture, and green technology.

  12. III Status of Industries and Future Development 1. Emerging Industries • Four major emerging industries will have output valued in excess of NT$1.28 trillion in 2009, and will have a projected output value of over NT$5 trillion by 2015, at which time they will have become mainstays of Taiwan's economy. Projected output value of emerging industries Source: Institute for Information Industry Research, Sept. 2006.

  13. Flat panel displays • The world’s leading panel R&D and manufacturing center. • 2006 2009 Value NT$1.28 trillion NT$1.6 trillion 5-6th generation plants 1213 7.5th generation plants 13 8th generation plants 01 • Communications The world’s leading exporter of integrated wireless broadband solutions • 2006 2009 Value NT$324.9 billionNT$550.0 billion WiMAX becomes #1 in the world in equipment output value • Semiconductors • World’s lowest memory manufacturing costs. • World’s leading 45 nm process technology • 2006 2009 Value NT$1.39 trillion NT$2 trillion 12” wafer fabs 1218 • Biotechnology • Taiwan plays an important role in the international biotechnology R&D and commercialization process • A major medical equipment value-added operation and production center • 2006 2009 Sales NT$176.0 billionNT$224.3 billion Auto electronics The world’s most important auto electronics after-sales service provider. • An integral part of the international vehicle manufacture and grade-one supplier OEM supply chain system. • 2006 2009 Value NT$56 billionNT$85 billion • Machinery • The world’s leading supplier of wet-process and baking equipment for the flat panel display industry. • The world’s third most important producer of high-end machine tools and widely-used parts and components. • 2006 2009 Value NT$0.84 trillionNT$1.1 trillion Machine tools 5th in the world 4th in the world 2.1 Manufacturing 2. Traditional Industries • Six major manufacturing industries projected to generate output worth NT$5.38 trillion in 2009.

  14. 2.2 Services • Taiwan has set development targets for the finance, logistics, medicine, telecommunications, tourism, information, design, R&D, digital content, popular culture, environmental protection and engineering, and management consulting industries.

  15. IV Taiwan’s Investment Environment 1. Evaluation of Taiwan’s Investment Environment by Major Institutions BERI Investment Risk: No.6 in the world(2007) WEF Growth Competitiveness: No. 13in the world No.4 in Asia (2006-2007) EIU Innovation: No.6 in the world No.2in Asia(2006) IMD Technology Competitiveness: No.6in the world(2007) BrownUniversity World e-Government Evaluation: No.2in the World(2006)

  16. 2. Advantages of Taiwan’s Investment Environment 2.1 The Transportation Hub of Asia • The shortest flying time to 7 main cities of the Western Pacific: 2.55 hours • The shortest average sailing time to 5 major regional harbors: 53 hours Chinese Taipei 124 6:15 110 4:55 4:15 4:00 78 68 3:30 3:25 64 3:05 53 2:55 Sydney Singapore Tokyo Seoul Manila Shanghai HK Taipei Kaohsiung HK Manila Shanghai Tokyo Singapore

  17. 2.2 Manufacturing Industries With Solid Technology Integration Capabilities Industrial Development - Past, Present and Future Knowledge Industries Capital & Technology Intensive Industries Industrial Restructuring High-Tech Industries Rapid Growth of Light Industries Consumer Goods Industry Economic Reconstruction 1940s 1950s 1960s 1970s 1980s 1990s 2000s

  18. ﹡ Philippines and Singapore statistical data to the end of 2006 2.3 Rich Global Logistics and International Marketing Experience Taiwan Invest in Asia (June, 2007)

  19. 2.4 Abundant Capacity for Innovation and R&D Growth The number of U.S. Patents Granted from 2001 to 2005, were ranked No. 4

  20. 2.5 A Global High-tech Industry Stronghold ◎ Taiwan is one of the world’s top three producers of many types of high-tech products.

  21. 3. Overseas Chinese and Foreign National Investment Policies 3.1 Overseas Chinese and Foreign National Investment Laws • Statute for Investment by Overseas Chinese, Statute for Investment by Foreign Nationals, Negative List for Investment by Overseas Chinese and Foreign Nationsals • Prohibitions: Prohibited investments • Enterprises having a negative impact on national security, public order, good morals, or public health. • Enterprises in which investment is prohibited by law. • Restrictions: • The permission or approval of the competent authority in charge of the type of enterprise in question must be obtained prior to investment in enterprises in which investment is restricted by law or orders authorized by law.

  22. 3.2 Investment Safeguard Mechanisms • Shareholding safeguard • An investor can hold 100% of an enterprise’s shares (apart from certain concession industries, such as telecommunications and media, etc.). • Expropriation safeguards • When 45% of an enterprise’s shares are held by overseas Chinese or foreign nationals, the government pledges not to expropriate or purchase the enterprise within a twenty-year period. • The government shall provide reasonable compensation when it is necessary to expropriate or purchase any enterprises owned by overseas Chinese or foreign nations. • Remittance safeguards: Outward remittance of the following types of funds is freely permitted: • Yield or profit on investment • Approved investments allowed to be transferred, divested, or reduced. • Capital gains • Compensation to citizens: Same rights and duties as possessed by enterprises in the same domestic industries

  23. 3.3 Benefits for Overseas Chinese Investors • When 20% of distributed dividends or surplus is withheld in accordance with the payment amount or distributable amount, the filing requirements of the Income Tax Act shall not apply. • When an investor’s total period of residence does not exceed 183 days, salary income paid by the foreign profit seeking enterprise outside the territory of Taiwan shall not be considered income from Taiwan sources. 3.4 Investment Residence Permits • After a foreign investment in Taiwan has been approved, when paid-in equity investment in the enterprise in question has surpassed US$200,000, one person may apply for a residence permit. An additional person may apply for a residence permit for each extra investment of US$500,000, to a maximum of four additional residence permits.

  24. 4. Investment Incentives 4.1 Tax Incentives Incentives for emerging strategic industries • Either stockholder tax credits for investment or five years’ exemption from profit-seeking-enterprise income tax. • Investments in the areas of automated equipment or technology, recycling, or pollution control equipment or technology are eligible for a credit against profit-seeking-enterprise income tax when the amount of investment is within the range of 5%-20%. • 30% of spending on R&D and manpower training disbursements for general industries, and 35% of such spending in the case of biotechnology enterprises, are eligible for a credit against profit-seeking-enterprise income tax when such spending is 50% greater than the average for the two previous years. Investment tax credits • Royalties, investment profits, gains from disposal of assets, and income from provision of management services or R&D obtained from foreign affiliated environments is exempt from profit-seeking-enterprise income tax. Operating headquarters incentives

  25. ‧Income from the establishment of logistics and distribution centers performing storage, simple processing, and delivery to the enterprise’s goods to domestic customers shall be exempt from profit-seeking-enterprise income tax. International logistics centers Investment in resource-poor and underdeveloped areas ‧A credit against profit-seeking-enterprise income tax may be obtained for 10% or 15% of the invested amount.

  26. Assistance may be granted for up to 50% of total project cost. Assistance may not exceed NT$1.6 million during any one year, and may not exceed NT$3.2 million during any two years. http://www.citd.moeaidb.gov.tw Traditional Industry Technology Development Assistance Program Assistance may be granted for up to 40% of total project cost. There is no upper limit on the amount. http://innovation.tdp.org.tw Innovative Industrial Technology Development Program Assistance for early-stage research may be granted up to a maximum of NT$1 million. Assistance for R&D may be granted up to a maximum of NT$5 million during one year. Assistance may not exceed 50% of total project cost. http://www.sbir.org.tw SME Innovative R&D Promotion Program (SBIR) 4.2 R&D Assistance and Subsidies (ownership of IPR shall be granted to the applicant) Assistance may be granted for up to 40% of total project cost. The upper limit shall be 50%, however, when the enterprise seeks to market its brand on the international market. http: //soc.itnet.org.tw New Leading Product Development Program

  27. 4.3 Government Participation in Investment ◎Development Funds: • Scope of investment: Chiefly information, communications, aerospace, digital, biotechnology, cultural creativity, and digital content industries. • Upper limit on investment: Share of public stock equity may not exceed 49%. • Scope of investment: Domestic SMEs or domestic SMEs’ investment projects in Latin American ally nations. • Upper limit on investment: Share of public stock equity may not exceed 49%. ◎ Investment in SMEs:

  28. 4.4 Land Acquisition Extended and expanded phase 2 of 006688 program Exemption from rent during first and second years; payment of 60% of rent during third and fourth years; payment of 80% of rent during fifth and sixth years; payment of full assessed amount of rent during seventh year. Release of Taiwan Sugar Land Land belonging to the Taiwan Sugar Corp. may be provided for industrial use via leasing or establishment of superficies; the maximum guaranteed lease period shall be 50 years. Four years rent-free and six years half-rent on state-owned land All county and city governments may, in accordance with industrial needs, provide idle or underutilized land in their area of jurisdiction for industrial use with full exemption from rent during the first four years and payment of half-rent during the subsequent six years.

  29. Latin American Research Center  Investment Service Teams  Latin American Investment Project Office  Taiwan Park Assistance for companies investing abroad Investment Promotion Solving of financing problems Establishment of a Joint Investment Fund  Low-interest loans and integration of loan guarantees  Strengthened investment subsidies Funding Assisting allied countries to strengthen vocational training  Provision of diplomatic alternative national service personnel Provision of manpower support to companies Manpower Support Establishment of an industrial development consulting mechanism  Establishment of a mechanism to encourage local spin-offs by members of technical teams Helping allied countries to upgrade technology Technology Assistance Ⅴ Co-Prosperity Project 1. Introduce With the impending potential establishment of CAFTA and FTAA, the deployment of Taiwanese businesses in Latin America can not only give access to opportunities deriving from regional integration there, but can also help them to diversify investment risk. Goal Strategies Global Deployment Consolidation of Diplomatic Relations

  30. 2. Latin American Investment Project Office • Establishment of a Latin American Investment Project Office (LAIPO) by the MOEA. • Establishment of an Offshore Investment Window to promote investment and provide help for investment in Latin America. • Investment Assistance Services • Consultation • Special assistance • Follow-up analysis of investment projects • Investment Encouragement Activities • Organizing of investment missions • Holding of strategic alliance talks • Holding of seminars on marketing channels in target countries • Investment Assistance Toll-free Service Hotline: 0800-660-789

  31. DOIS provides the following services: • Assistance to foreign enterprises, overseas Chinese enterprises, and Taiwanese enterprises investing in Taiwan. • Assistance to enterprises investing overseas. • Recruiting of foreign technological personnel interested in working in Taiwan. Department of Investment Services, MOEA 8F, 71 Guancian Rd., Taipei, Taiwan Tel: 02-2389-2111 Email : dois@moea.gov.tw Website: http: //www.dois.moea.gov.tw http: //twbusiness.nat.gov.tw http://investintaiwan.nat.gov.tw http://hirecruit.moea.gov.tw

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