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EDITORIAL:
Cross-strait pact not a guarantee
Taiwan and China signed a bilateral investment protection agreement in August
last year, but the latest dispute between a Taiwanese investor and its Chinese
landlord over a department store in Chengdu, Sichuan Province, has cast doubt on
the effectiveness of this agreement. The issue has also weighed on the
cross-strait service trade agreement which Taipei and Beijing signed last month
and is pending legislative review and approval.
According to a statement issued by the Far Eastern Group on Tuesday, the Pacific
Department Storeˇ¦s Chunxi branch in Chengdu was seized and shut down by its
Chinese partner and building owner Chengshang Group on Monday. Although the
Taiwanese conglomerate is scheduled to close the store by the end of this year
after failing to renew a lease agreement, Chengshang Groupˇ¦s move caught many by
surprise. Moreover, the Chinese firm has reportedly informed the department
storeˇ¦s tenants of its intention to operate the store after kicking out the
Taiwanese investor.
Far Eastern Group has reported the dispute to Taiwanese and Chinese authorities
to help resolve the issue, but the lockout continues. The Ministry of Economic
Affairs and the Straits Exchange Foundation said they have sought assistance
from Chinaˇ¦s Taiwan Affairs Office and the Association for Relations Across the
Taiwan Straits to help safeguard the interests of the Far Eastern Group, but the
fate of the store falls under the jurisdiction of the local government in
Chengdu.
The Far Eastern Group also has a dispute with its Chinese landlord in another
store in Dalian, Liaoning Province. These incidents bring to mind the management
dispute between Taiwanˇ¦s Shin Kong Mitsukoshi Department Store and its Chinese
partner, Beijing Hualian Group, over their Beijing joint venture in 2007, when
the storeˇ¦s Taiwanese staff were suddenly removed from their positions, with
some even being detained by the Chinese partner for allegedly taking bribes.
Last year, Shin Kong sold its 50 percent stake and pulled out of the joint
venture.
Disappointment understandably prevails in some quarters in Taiwan at the thought
of the investment protection agreement, as it has fallen short of government
claims that it would provide stronger institutionalized protection for Taiwanese
businessesˇ¦ property rights, management rights and personal safety in China. Not
surprisingly, anger and suspicion have greeted the cross-strait service trade
pact, with many concerned that the opening of various service sectors would only
result in investment losses to Taiwanese firms.
According to a survey conducted in May by a local association, nearly 50 percent
of those polled said they were not satisfied with the effectiveness of the
investment protection agreement, while about 60 percent said they felt the
government was not well prepared to deal with commercial disputes in China. None
of the business disputes have been dealt with under the cross-strait dispute
settlement mechanism since the investment protection agreement took effect in
February.
Business disputes per se are not what people should fear, since conducting
business in a foreign country always carries risks. What they should be afraid
of is if authorities on both sides of the Taiwan Strait decide to deal with the
Far Eastern Groupˇ¦s dispute outside the institutionalized mechanism because of
political pressure, as the case involves a well-known Taiwanese conglomerate and
the issue has attracted wide public attention. What will happen if the next
dispute involves smaller Taiwanese businesses that are less well-known to the
public and are unlikely to gain media attention? What should these companies do
if they do not have strong personal connections in China?
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