ECFA cheers, but also worries, foreign investors
Focus Taiwan 2010/06/09
ECFA cheers, but also worries, foreign investors
Taipei, June 9 (CNA) — As Taiwan tries to improve ties with old-time foe China to attract more foreign investment, experts said Wednesday that the tactic works with some investors, but that others are worried about losing technologies to Chinese firms.
Taiwan is expected to have an edge over main rival South Korea in attracting foreign investors after Taiwan signs a pact for more liberalized trade with China later this month, the head of Taiwan’s top economic planning body said Tuesday.
Foreign investors can invest in the mainland through Taiwan and their investment in China will be protected under the economic cooperation framework agreement (ECFA), Christina Liu, chairwoman of the Council for Economic Planning and Development, told the Central News Agency.
Recent media reports have said China and South Korea will start talks on a free trade agreement later this year or early next year.
Liu said Taiwan already has advantages over South Korea.
"Taiwan has cut its corporate income tax to 17 percent, while South Korea’s stands at 22 percent," Liu said.
"Taiwan also better understands the mainland," she added.
As a result, Liu predicts the ECFA will prompt international companies with major manufacturing bases in China to choose Taiwanese companies as strategic partners.
Over the past two years, better relations between Taiwan and China have resulted in opening Taiwan to direct cross-strait flights, tourists and investment.
Polaris Research Institute President Liang Kuo-yuan told the CNA Wednesday that South Korea is closely monitoring progress on the Taiwan-China trade pact as it is aware the agreement will negatively affect South Korea.
But he also said that although the trade pact and a cultural background similar to China’s would give Taiwan advantages, it would be difficult for Taiwan to lure many of South Korea’s existing foreign partners because they have "long-established connections." Meanwhile, Liang said that international investors have yet to act as it is unclear what industries in Taiwan will first enjoy tariff reductions from the trade pact.
"They are still waiting to see what ’great benefits’ will come from the trade pact," he said.
Yang Chia-yen, a director at the Taiwan Institute for Economic Research, told the CNA Wednesday that the trade pact would appeal to foreign companies that want to enter the Chinese market by working with Taiwanese partners.
But there is another group of foreign companies who are concerned that Chinese companies might learn their technologies, he said.
"In the field of machinery, some foreign companies don’t want to work with Taiwanese companies because they are worried that their technologies might go to China," he said.
Although the Taiwan government said that the trade pact will include intellectual property rights protection, it is difficult to carry it out in reality, which triggers concerns, Yang said.
He said he learned about this from recently interviewing people who have contacts with companies in countries including Japan, Germany, Switzerland and the United States.
The director also said that foreign companies might relocate investments from Taiwan to China if some industries move their production there.
"For example, if a lot of flat panel manufacturers move to China, foreign companies, such as Corning Inc., will follow suit, " Yang said.
The Taiwan government recently eased restrictions on flat panel manufacturers investing in China, he noted.
Taiwan is an important overseas investment destination for the U.S.-based Corning as the country is a major flat panel maker, Yang said. (By Alex Jiang)
