20121125 Policies aimed at wrong investment: ‘Economist’

Policies aimed at wrong investment: ‘Economist’

By Jake Chung / Staff writer

An article carried by the Economist Intelligence Unit, the Economist’s analysis Web site, on policies pushed by President Ma Ying-jeou’s (馬英九) administration cast doubt on whether the policies would attract the right sort of investment to the country.

In an attempt to attract more foreign direct investment (FDI), the Ma administration last month began cutting tariffs on imported machinery and equipment, offering bridge loans for foreign investment and real-estate acquisition, and simplifying bureaucratic procedures, the article said.

According to the article, Taiwan’s FDI has plateaued in recent years, with inbound FDI rising only US$200 million from the FDI levels of 2006, a sharp contrast with the nation’s outbound foreign investment, which witnessed a sharp rise of US$120 billion from five years earlier.

The Ma administration is also mulling exempting foreign investments under US$1 million from official screening, relaxing immigration control and excluding workers in the free economic demonstration zones, the first of which would open in Greater Kaohsiung next year, from minimum wage legislation.

The government is considering allowing corporations to source up to 40 percent of their workers from overseas, a 15 percent increase from current levels, while waiving the requirement for foreigners to live in the nation for at least 183 days in order to retain their Alien Residence Certificate (ARC), the article wrote.

While the government said it sought to draw back Taiwanese companies who had set up factories in China to benefit from cheaper labor, the companies attracted back may not be beneficial for the nation’s long-term economic stability and development, the article wrote.

Recent policies by the Ma administration to encourage Taiwanese companies to return — the Ministry of Economic Affairs (MOEA) of Taiwan records returning companies having grown from a total value of NT$5 billion (US$170 million) in 2006 to NT$45 billion last year — would “appeal to labor-intensive industries, rather than innovative, capital-intensive manufacturers of high-value products,” it said.

According to the MOEA, the firms that have returned to Taiwan from China in recent years operate primarily in sectors such as textiles and electronics, which is hardly an encouraging sign of restructuring, the article said, adding that the government’s efforts may not bring the right sort of foreign investment into the nation.

Taiwan’s position on the World Bank’s latest Ease of Doing Business Index has risen to 16, up from 25 a year earlier, showing sufficient assets to attract investors without offering additional incentives in the area of cost, the article said.

An FDI strategy focusing on “industrial upgrading and investment in the transport and communications infrastructure would be likely to prove more compelling,” and the gradual opening of sectors in which FDI is not currently encouraged, such as healthcare, education and telecommunications, would also help invigorate interest for foreign investment in the nation, the article said.