An Ideal Location for Investment

Taiwan has, in fact, long been a leading destination for foreign investment. In the earlier stages of the island's economic development, much of this investment resulted from low labor costs that attracted multinationals and from attractive array of incentives, with the most important foreign investors including the US, Japan, Singapore, Hong Kong, the Netherlands, and the United Kingdom. Later, emphasis shifted to high-tech and service industries. Such capital-intensive, knowledge-based industries have not only enabled Taiwan to upgrade its overall level of technology, but also to become a major player in the development of the entire Asia-Pacific region.

Approved Foreign Investment in Taiwan by Country (1952-2002)

A High-tech Economy

The emergence of the island as a high-tech leader and supplier of advanced goods and services to countries throughout the area has, of course, only served to make Taiwan an even more promising to foreign investors interested in a long-term presence in Asia. Key industries such as semiconductors, optoelectronics, information technology, and telecommunications are highly competitive in markets everywhere, This ensures continuing momentum in the direction of high valued-added development, an ample supply of skilled manufacturing, management, and research personnel, and the support necessary for the development of new industries in the years ahead.


Cooperation and Flexibility in Taiwan Industry

Another of Taiwan's great strengths is its highly integrated and flexible system of upstream and down stream industries. This system and the cooperation that exists among different industries and different upstream and down stream enterprises in the same industry reinforces the island's competitiveness and continually generates lucrative new opportunities for both Taiwan companies and investors from abroad.


Approved Overseas Chinese and Foreign Investment in Taiwan by Industry(1952-2002)

Government Assistance

Taiwan's industries also benefit from the comprehensive R&D and industrial development policies that the government promotes. The "Industrial Innovation Research Center promotion Program" launched in 2002 by the Ministry of Economic Affairs focuses, for instance, on select core technology industry areas, including electronics and information technology, optoelectronic communications, machinery, textiles, biotechnology, and microelectronics. These areas receive various advantages with respect to research and development, as well as incentives designed to help move the economy and the industries in question from a production-oriented focus to an innovation-oriented one. The government provides incentive programs for specific industries and establishes industrial promotion teams and special industry project offices as well. These are intended to help upgrade the industries and make them more competitive.
Close cooperation in R&D between the public and private sectors has, in fact, been a very important element in Taiwan's economic success. Public funding for advanced technology research has helped create a strong knowledge base and provided the trained manpower necessary for new industries too develop and prosper. Over the years, this model has been adopted for use in many promising industries and for many new products. Two widely cited examples are the microelectronics and personal computer industries.
In an increasing number of such projects the government has been working as a partner with major research institutions and private companies, rather than playing the leading role as it did in the past. Research funding from the Ministry of Economic Affairs, which was previously offered only to non-profit research institutions, is now available to both private companies and academic institutions. The ministry even has a special program to assist small- and medium-scale enterprises with R&D. Funding support is also given to support international cooperation efforts.
An examination of the cutting-edge products currently being turned out in various industries underscores the on-going success of such efforts and the great potential offered to foreign investors. The following list provides just a few striking examples of what is being done:


Semiconductors

SIPs, MOEMs, SiGe semiconductors, EDA technology, and SoC design and R&D

Optoelectronics

TFT-LCD glass substrate, color filters, CD-RW optical pick-up heads, LCOS optica engine projection displays, DSC lens modules, mold-fabricated polymer optical fiber communication components and color and multi-functional jet printers



Machinery

wafer probe cards, LIGA processing technology and applications, assembly equipment for optical communication components, control systems



Information and Communications

embedded hardware, gigabit ethernets, baseband chipsets, WLAN baseband processors and communication protocols, RF modules, network gateways, high-speed optical transponders, UMTS UTRAN communication software CDMA2000, UMTS UTRAN communication protocols



Chemical materials

Nozzle plates, active component VCSELS, GaN LEDs, thin-film chip resistors and inductors, transparent conductive coating wet processing, low-temperature polysilicon LCD materials, optical electronic substrate materials, TFT-LCD chemicals, environmental protection packaging and substrate materials, photoresist materials



Electrical items

Polymer lithium batteries, fuel cells



Aviation and Automotive

Aviation standard multifunction displays, electric wheelchairs and electric scooters, motorcycle EMS



Biotechnology

Biomedical materials, bio-pharmaceuticals, processed Chinese herbal medicines, other new pharmaceuticals



Environmental Systems and Products

Water pollution control and prevention innovations, air pollution control and prevention innovations, refuse treatment and resource reclamation processes



Low-interest Loans

In addition to encouragement and assistance in the areas of research and new product development, Taiwan has a package of low-interest loans intended to help a wide range of industries upgrade their operations and become more competitive in the international arena. These include preferential interest rate loans for the purchase of automation equipment by state-owned enterprises, loans to assist small- and medium scale enterprises in upgrading, and preferential loans for the purchase of energy conservation equipment by both public- and private-sector businesses.
Low interest loans are also available to private sector businesses for the purchase of pollution control equipment and preferential interest rate loans to Taiwan's traditional industries to enable them to improve their domestic and international performance. Finally, medium- to long-term loans are offered by the government's Council for Economic Planning and Development to help facilitate major government infrastructure projects, including those in both public and private sectors. For further information about the low interest loans noted above see investintaiwan.nat.gov.tw



Special Opportunities

Foreign investors should also be aware that there are a number of industries in which foreign investment is currently receiving special government attention and encouragement. These industries are not only ones that are deemed to be of great importance for Taiwan's future development, but also ones that offer particularly outstanding opportunities to investors from abroad. Among the high-tech industries that the government is focusing on are semiconductors and microelectronics, display and optoelectronics, precision machinery, biomedical and health care, materials and fine chemicals, communications, and technical and engineering services. More traditional fields that the government is emphasizing include headquarters and business services; finance and insurance; trade, commerce and logistics; transportation and public construction; and tourism and recreation.



Semiconductors and Microelectronics

Taiwan already ranks as the 4th largest IC maker globally, with revenues in 2002 reaching some US$8 billion. At the same time, Taiwan's foundry industry commands a 73% share of the world market, and the island is the global leader in mask ROMs, IC packaging, and IC testing. In addition, the island's ID-design industry is second only to that of the US, and its DRAM production is third in the world. Taiwan is also a major IC market itself, accounting for 25.7% of the total market in Asia and 8.1% of the world market in 2002. The government's National Si-Soft Project, which was implemented in 2003, offers foreign investors a very easy and attractive way to benefit from the expertise and talent found in Taiwan's integrated and highly efficient IC industry. Aimed at transforming the island's IC industry from a contract-manufacturing one into one based on R&D and innovation, the project is focuses on developing and SoC infrastructure. It includes such benefits as providing available IP sources and more simplified transaction flow for the IC design industry, helping companies improve their competitiveness in SoC, cultivating leading vendors in the IP industry, generating more customers by emphasizing value-added products, and encouraging greater cooperation among different lines in the industry in order to enhance technological expertise.



Display and Optoelectronics

In 2002 overall production value in Taiwan's FPD industry doubled over the previous year, surging to US$7.39 billion. Some 83.4% of this total came from the production of large-sized TFT-LCDs. Increased shipments of TFT-LCD units during 2002 enabled Taiwan to capture 34.7% of the global market, making the island the world's second largest producer. Over 30% of key FPD components, including polarizers, backlight modules, color filter and driver ICs, are currently sourced domestically.

As the demand for these and other components is very substantial in Taiwan, the government is encouraging foreign suppliers of materials and equipment to establish manufacturing operations in Taiwan. The government is also offering investors color-imaging specials tax reductions at other investment incentives.



Precision Machinery

Products value in Taiwan's machinery industry has been running at around US$14 billion in the last several years, making the island the world's 12th largest supplier. Leading products include machine tools, plastics and rugbbery machinery, and woodworking and textile machinery. Major Markets are mainland china and the U.S.
Currently, machinery industry manufacturers in Taiwan are emphasizing the development of high value-added products that feature wide use of semiconductors, FPD process equipment and micro/nanometer technology. Needless to say, this approach, together with the island's key manufacturing position in the Asia-Pacific, provides ample opportunities for those interesting in either investing in such areas or in producing advanced machinery for the world marketplace.



Biomedical and Health Care

In recent years both the government and venture capitalists in Taiwan have dramatically stepped up investment in the biomedical and health care areas. In particular, biomedical and health care have received assistance from the government through the Two Trillion and Twin Star Project and the Challenging 2008 National Development Plan. In addition, as a result of this surge in interest and support, a substantial number of Taiwan scholars in the field have returned to establish biotech companies.

The island has all of the resources necessary to develop the industry, including scholars with the ability to carry out cutting-edge research and well-established pharmaceutical manufactures. With such advantages, as well as an ample supply of specialist in such areas as organic chemistry, photo-electronics, IC development, and automated systems, Taiwan has the potential to become a hub or logistics operations center for R&D and biotech and pharmaceutical manufacturing that will serve as a springboard to other Asian markets.



Materials and Fine Chemicals

Taiwan is already a major player in the materials and fine chemicals industry, with sales averaging US$44.38 billion annually. Major products include petrochemical materials, polymers, electrical materials, and fine chemicals. The island is currently the world's largest producer of ABS , the second-ranking supplier of PTA and ranks fourth in PVCs. Its materials and fine chemicals manufactures have also been focusing on semiconductor products, plane display materials, printed circuit boards, nano materials, and a host of other advanced products.

With a vast pool of scientific and engineering talent and extensive experience in international cooperation in the industry, Taiwan is the ideal location for multinational enterprises seeking to globalize their operations and/or expand their presence in the Asia-Pacific. Strong supporting industries that turn out products such as semiconductors, TFT-LCDs, and printed circuit boards make the island an even more attractive base for companies from abroad.



Communications

Production in the Taiwan telecommunications industry reached US$5.41 billion in 2002. This total ranked the island as the 17th largest producer in the world. Exports amounted to US$4.74 billion and imports to US$0.65 billion. Thanks to strong PC and PC-related IC design and manufacturing technologies, Taiwan has become a key global supplier of a host of items, including everything from analog modems, wired and wireless networking cards to telephone handsets, cable modems, and ADSL modems. A substantial number of manufacturers on the island are also involved in xDSL, DLC, SDHH, DWDM, and cellphone R&D. If such R&D is combined with the telecommunications capabilities of foreign companies, particularly in the field of content services, exception opportunities to penetrate newly developing markets can be generated.

There are exciting opportunities for foreign companies in the Taiwan market as well. In line with efforts to establish a "broadband communications technology island," the government has designated telecommunications as a strategic industry making it possible for those in the field to benefit from an impressive series of investment and tax advantages. In addition, the government's Related-Industries Promotion Plan should help expedite the establishment of communication-oriented ScO IC design facilities, fiber-optic components and assemblies, and software and telecommunication industry innovation.

As part of the government's efforts to liberalize the telecommunications industry and meet national infrastructure requirements, Taiwan has also opened and expanded the 3G and wired network markets. It is estimated that in 2005 equipment purchase orders will reach US$50 billion and telecommunication service industry revenues will amount to US$20 billion, totals that make the Taiwan market one that foreign equipment manufacturers and content service providers cannot afford to overlook.



Technical and Engineering Services

Taiwan's technical and engineering services industry is one that has great potential. In recent years the Taiwan environmental industry has been generating an average of US$3.1 billion annually. It should also be noted that in 2002 Taiwan's market for environmental equipment amounted to US$122 million, with exports worth US$27 million. Safety-related products and services such as explosion-proof deices, anti-static systems, lightening earthing systems, fire prevention systems, fire resistance materials, safety monitoring and control systems, personal protective equipment, emergency response devices, and consultant service rank among the more important items turned out by the industry.
Taiwan's IT service industry has a strong global position, particularly in mainland China, owing to cultural and linguistic affinities and geographical proximity. In addition, there are comparatively modest wage rates for professionals and high-level consultants and technicians in Taiwan, making the industry extremely competitive and very attractive to foreign companies seeking to set up operations on the island.

An added advantage is that many companies in the industry are small and medium scale, making them eligible for tax reductions and government R&D funding.

Great opportunities are being generated for foreign investors and many Taiwan companies in the industry shift from pure manufacturing to an IT-based service model. Equally important, the government has designated the industry as a major emerging industry, with all of the incentives and assistance such a designation entails.



Headquarters and Business Services

Owing to its strategic position in the Asia-Pacific, Taiwan is an ideal location for international businesses seeking a strong presence in mainland China, Northeast Asia, and Southeast Asia. A business-friendly environment also makes it easy for enterprises from abroad to integrate their resources with domestic capital and to benefit from the island's superior technologies and skilled personnel. Together, these advantages make Taiwan an unmatched location for multinationals to set up regional operation centers.

In addition, it should be noted that the government actively encourages Taiwan's many small- and medium-scale enterprises to establish close ties with overseas firms and enter into strategic alliances in areas ranging from R&D to marketing. Such arrangements enable firms from abroad to benefit from the linguistic and cultural ties that the Taiwan companies have throughout the region.



Finance and Insurance

Taiwan's financial assets amounted to US$885 billion in 2002, up 128% over the US$416 billion recorded a decade ago. As a result of the strength of the island's economy and the government's internationalization and liberalization of financial services, total trade value of derivative financials surged to US$609 billion, with foreign banks distributing US$450 billion of this total, and indication of the opportunities open to foreign institutions.

In view of the expansion of many global industries in the Asia-Pacific, international finance and insurance firms have much to gain by establishing a base in Taiwan. In doing so, they will also be able to benefit from the many advantages offered by the government. Steps taken include expanding the depth and breadth of the foreign currency market, eliminating constraints on OBUs, instituting an ongoing liberalization of capital markets for foreign investors, opening the insurance market to foreign investors, and increasing the liquidity of financial capital in the stock market. In addition, foreign invested banks in Taiwan are allowed to compete equally with domestic institutions and can obtain full licenses and operate as full-function branches. Foreign financial groups are also permitted merge with domestic financial institutions.

Overall, the environment in Taiwan for foreign financial and insurance firms is one characterized by openness, flexibility, enormous domestic financial resources, and a growing international orientation. These factors help to make the island the perfect location for the establishment of regional operations centers in finance and insurance, as well as in related financial service areas.



Trade, Commerce and Logistics

Situated in the center of the Asia-Pacific, Taiwan is well on its way to becoming a key global logistics center, Shipping to countries throughout the region is fast, economical, and convenient. In addition, the island has a well developed infrastructure and an ample supply of skilled personnel in such areas as international trade and sourcing. It also has close culture and linguistic ties with mainland China and other countries in area, giving it the potential to become a major Asian procurement center. Thanks to these advantages and the government's ambitious Global Logistics Development Plan, revenues in Taiwan's logistics industry surged to US$38.23 billion in 2001, a figure that amounted to 13.82% of the island's GDP.

Taiwan already offers sophisticated logistics operation and management as a result of streamlined customs procedures, reduced telecommunication charges, and advanced information application techniques. The government is currently striving to encourage even more development in the sector and to spur foreign investment. It has, for instance, implemented Regulations for Encouraging Foreign Profit-seeking Enterprises to Establish International Logistics and Distribution Centers in Tiawan. Among other things, this measure is designed to help logistics providers, shopping malls, retailers and wholesalers copes with problems related to land use, obtain low-interest loan, and gain eligibility for business income tax exemption. The government is encouraging Taiwan business people to establish strategic alliance with international logistics providers as well.



Transportation and Public Construction

Taiwan has a large number of ongoing engineering projects that provide opportunities for foreign engineering and construction firms. Among the many current projects are the Hi-Speed Railway from Taipei to Kaohsiung and Kaohsiung's MRT, as well as the Taipei MRT's Nei-Hou line, for which outlays for engineering amounted to US$1.7 billion this year.

As a result of Taiwan's entry into the WTO and the overall liberalization and internationalization of the economy, foreign construction firms are now able to bid on large-scale engineering projects with or without cooperating with Taiwan companies. This increased market opening has caused many large internationally noted construction companies to focus more on the island's market, particularly in view of the many projects that are in the offing.

These projects encompass construction and operation of a freeway electronic toll collection system., highway and freeway construction, electrical and mechanical engineering for a tunnel on the new Taipei-llan Expressway, and railroad development, including the construction of new high-speed rail and MRT systems. There are also several harbor-related construction projects likely to be of interest to foreign firms. Among them are a bulk and general cargo terminal, a chemical whart and cargo tank investment plan, and an intercontinental container terminal project. Plans are under consideration for an air cargo park development program as well. Finally, foreign firms will find potentially lucrative opportunities in the tourism sector, where several BOT projects have been planned.



Tourism, Recreation and Entertainment

Both the private and public sectors see tourism as an important element in Taiwan's future economic development. In line with this emphasis on tourism, the government's Executive Yuan has the number of tourists in Taiwan. This plan calls for investment totaling over NT$75 billion. The government has also declared 2005 as Taiwan Tourism year. It also plan to organize a Taiwan Exposition in 2008.

These and other initiatives are intended to transform Taiwan into an "island of tourism" by promoting and developing its many cultural and natural attractions, including unmatched Chinese cuisine, beautiful scenery, artistic achievements, and exceptionally friendly people. The government and those in tourism and entertainment sector are striving to capitalize on Taiwan's convenient transportation system, superior hotels, and outstanding cuisine to encourage more foreign and domestic tourists to enjoy these and other attractions, which include everything from traditional cultural festivals, museums, and classical Chinese architecture to national parks, rugged mountains, breathtaking coastline, and countless hot springs.

This focus on tourism and entertainment provides countless opportunities for foreign investors in a variety of areas. Although most foreign direct investment has been in hotels, investment in other areas such as cinemas and gaming software is growing in importance. Investors can be confident that with the support and assistance of the government, opportunities for overseas investors can only increase in the years ahead.