The title of the 2005-2006 Position Papers of the European Chamber of Commerce Taipei (ECCT) is 'Keep Taiwan dynamic and relevant and reflects the view that, although Taiwan is still an outstanding place to do business, the government must liberalise the economy quickly. The growing allure of other markets in Asia, particularly China, means that Taiwan is at risk of being by-passed in favour of more attractive destinations by global corporations for investment and as a regional operations centre. The slowing rate of growth of Taiwan's economy and foreign direct investment highlight the need for immediate action by the government if Taiwan is to remain competitive. Taiwan's advantage over its neighbours is dwindling.
Guy Wittich, ECCT's CEO: 'It is essential for Taiwan to make the transition from a manufacturing to a service-based economy and to allow the free flow of goods and people. The business community appreciates the government's efforts to improve the regulatory environment with a view towards creating clarity, stability and predictability; but the increasing tendancy toward overregulation is stifling Taiwan’s economic development.'
Taiwan's share in some global markets of high-tech products is still very impressive: 75% of motherboard production; 61% of notebook PC's and the same figure for LCD monitors; 51% for CDT monitors and 45% for digital still cameras. Taiwan is without any doubt a leader in high-tech manufacturing. One can look at for instance the success story of Taiwan's TFT-LCD surpassing Korean manufacturers.
After Japan, Taiwan is the richest country in Asia. 'But,' Wittich says, 'the GDP growth rate of 3% is among the lowest in Asia, only Japan is doing worse. Other Asian markets are becoming much more attractive for investors and business. Inflation and interest rates are still low in Taiwan and the unemployment figures are the envy of many developed economies. But quite simply, that is not sufficient.'
Wittich; 'The question is, does the Taiwanese government do enough to improve the situation in the short run. The Ministry of Economic Affairs has a long term vision, but over the next years the macro forecasts are cautious'.
Taiwan's interdependency with China
The interdependency of Taiwan's economy with China is evident. 47% of Taiwanese high tech companies' products are offshore-manufactured in China, worth US$ 23 billion. That proves Taiwan’s position as the second largest investor on the mainland with US$ 7billion investment in 2002. Beyond this 2 million Taiwanese are managing over 70.000 firms in China, mainly in high tech and manufacturing. These firms dominate key industries in China, like '3C', metal products and chemicals.
The shift of Taiwanese manufacturing to China continues - a necessity to stay competitive on the global market. However, lifting remaining restrictions for direct cross-Strait travel and cargo between Taiwan and the Mainland China is one of the most important conditions for full integration into regional economic development.
Besides eliminating over-regulation as one of the major obstacles to Taiwan's development into a regional service centre, acceleration of efforts to normalise cross-Straits business operations is a key issue for the ECCT. In its 2005-2006 Position Papers the Chamber points to the importance of this governmental 'normalization' operation for the expansion of European trade and investments on both sides of the Strait.
For instance, Taiwan still maintains a list of around 2.400 importable items from Mainland China that are either banned or subject to inappropriate restrictions, such as the requirement of prior approval from domestic industry groups producing similar items. From a commercial standpoint, these bans and restrictions prevent European multinationals from effectively and efficiently using Taiwan as a key part of regional operations.
Taiwan - EU relations
Taiwan, discovered in the 17th century by the Dutch and later named 'Ilha Formosa' (the beautiful island) by the Portuguese, is now officially called Republic of China (ROC). Although the EU and its member states, like the most other countries in the world, follow a 'One China' policy and thus have no diplomatic relations with Taiwan, there are solid relations with Taiwan.
In 2003 the European Commission established a permanent presence in Taipei through the opening of its 'European Economic and Trade Office' that contributed to the strengthening of communications with the Taiwanese authorities and co-operates with the Taiwan-offices of sixteen EU member states and the ECCT. Beside this the European Parliament-Taiwan Friendship group is active to keep up the relations.
In 19 EU member states the Republic of China has a representation as well as in Brussels for the relations with the EU institutions. This mutual strong representation between Europe and Taiwan shows the importance of the relationship. Europe is the biggest foreign investor in Taiwan and the fourth trade partner after China, Taiwan and the US.
The total trade volume EU – Taiwan raise in 2004 with 20% to almost € 40 billion. The expectations are, that with an increasing growth the EU can become the third or may be even the second biggest trade partner of Taiwan.
Taiwan's presence in the European Union is remarkable. For instance Germany has emerged as one of Taiwan’s most important trading partners. There are already 250 Taiwanese subsidiaries established in the country. The German province of North Rhine Westphalia (NRW) has attracted the lion’s share of it with 81 in total. After Japan, Taiwan is now the second most important Asian investor in NRW. An important perspective for NRW is the fact that almost half of the Taiwanese companies established in this province plan to keep investing in the area during the period leading up to 2008.
Taiwan's economic challenges
'Taiwan faces many of the same challenges of countries around the world, especially when it comes to globalisation, the change in world production patterns and the emergence of mainland China as the world's manufacturing factory', explains Ho Mei-yueh, Taiwan's minister of Economic Affairs. 'If we maintain our own distinct position, we will not be marginalized. In the 1990s, many people worried that Taiwan was facing a hollowing out, as factories moved to South-East Asia and then to China. But what happened, was structural adjustment, and the fast growth of the digital economy, the personal computer and notebook computer industries'.
'Of course China's existence and development potential is a major factor in our external environment, but we should stick to our own definition of what our position is. The experience of the European Union is a good example. We can see, that small countries remain vibrant and viable, as evident in the cases of Finland, Sweden and Ireland. All of these are small compared with Germany and France, but are still huge in economic terms. Small countries can have advantages but need to carefully choose the right position', according to Minister Ho Mei-yueh.
