The 2009 Taiwan Business Alliance emphasized economic ties with China and Southeast Asia, and the risk of over-reliance on the ICT sector.

BY JANE RICKARDS

With additional reporting by Anita Chen and Don Shapiro.

Taiwan’s urgent need for greater economic integration with the rest of the Asia-Pacific region and for reduced reliance on electronics exports were major themes at the 2009 Taiwan Business Alliance Conference, an event exploring Taiwanese investment opportunities for foreign companies.

The Ministry of Economic Affairs (MOEA) has organized the conference every year since 2004 to help corporate executives, venture capitalists, and other business professionals from Taiwan and overseas learn more about the island’s investment potential. Despite the increased focus on Asia, Taiwan still offers plenty of opportunities for Western companies, said speakers at the event.

“Multinational enterprises can make good use of the intensive networks that Taiwanese enterprises have already established in China, Southeast Asia, and other areas, along with the other unique advantages that Taiwan enjoys,” said Deputy Minister of Economic Affairs Lin Sheng-chung in opening remarks. They “can work together with Taiwanese enterprises in the joint development of the Asia-Pacific market and the lucrative business opportunities it offers.”

In a shift in Taiwan’s perspective, the government is actively preparing for “the driving force of world economic growth shifting from West to East,” said Deputy Minister San Gee of the government’s Council for Economic Planning and Development. The worldwide financial crisis is accelerating this process, he said, and the Asia Pacific region is expected to lead global recovery. “By 2030, China will be the largest economy,” San said, citing data from Goldman Sachs. San also noted that the middle-class population in Asia Pacific emerging countries has rapidly expanded from 14 million in 1990 to 88 million in 2008.

Taiwan has various advantages in this scenario, San said, starting with its highly advantageous geographic position, an average of just two hours and 55 minutes by air to seven major regional cities. It also has a strong background in manufacturing and innovation, for example possessing 64.3% of the global market for semiconductor foundries and 65.2% for integrated circuit testing. Its R&D spending in 2007, at 2.58% of GDP, was comparable to the U.S figure of 2.62%. It ranked fourth in the world, behind the United States, Japan, and Germany in the number of U.S. utility patents granted.

San also noted that last year’s cross-Strait trade of US$132.5 billion was nearly triple the level of 2000. Taiwan has also sunk “massive” investments into China, he said.

“Taiwanese firms have already established a cross-Strait industrial division-of-labor, he added, citing the finding of a 2005 study that among the 200 largest enterprises in China, 33 were Taiwanese.

But Taiwan needs to diversify its export markets, San said, since if indirect trade is taken into account, 67.2% of its exports end up in North America and Europe.

Taiwan therefore urgently needs to be included in regional economic and trade groupings, and also needs to further normalize cross-Strait economic relations.

To help burnish Taiwan’s qualifications as a potential regional operations center, the government is pushing to sign an Economic Cooperation Framework Agreement  (ECFA) with China, in hopes of forging free trade agreements with other neighboring countries, San said. 

He also said that exports are too concentrated in information communications technology (ICT) products, which last year accounted for 53.2% of Taiwan’s exports. The government has pinpointed six budding industries as worthy of development: biotechnology, tourism, health care, green energy, cultural and creative industries, and high-end agriculture. In addition, San said, the government hopes to further develop service industries and to promote financial and economic deregulation.

In another presentation, the MOEA’s Lin encouraged foreign companies to work with Taiwan, saying that under newly passed legislation, a five-year tax holiday is available for new investments. “But to take advantage of this incentive, you have to apply before the end of this year,” he said.

During the afternoon, breakout sessions covered four high-potential industries that the government is seeking to promote.

Auto Electronics

Opportunities in China’s enormous market and Taiwan’s strengths in ICT were cited as key factors that could help further develop the Taiwanese auto electronics industry.

Information systems account for 63.7% of Taiwan’s automotive electronic output; safety systems and security systems are also important sectors. Among major ICT companies that have entered the field is Foxconn, which has acquired AnThai Electric, and Delta Electronics, which is involved with energy-saving technology for green vehicles. Telematics (the use of GPS technology integrated with computers and mobile communications technology, along with other wireless applications in cars), navigation systems, and LED lighting were all reported as under development and offering good potential.

China was seen as the most promising market. In a speech on the capability for development of Intelligent/Green Vehicles in Taiwan, Huang Lung-chou, president of the Automotive Research and Testing Center, noted that a proposed free trade pact between Taiwan and China would have a big impact in helping local car manufacturers and component suppliers penetrate the China market.

Green Energy

Taiwan’s competitive advantages in developing green energy industries were defined as is strong ICT industry base and skilled manufacturing process management, well-developed capacity in related conventional industries, and excellent talent pool in the semiconductor and TFT-LCD industries that are easily transferable to green energy industries. But development has been stalled by various bottlenecks; a breakthrough will depend on upgrading key technologies, obtaining critical investment, and gaining a pull from global market demand.

The sectors that Taiwan is targeting the most are the photovoltaic and LED lighting industries. Abakus Solar AG of Germany introduced its investment in Taiwan in BIPV (Building Integrated PV), and Delta Group of Taiwan introduced the renewable energy activities of its subsidiary Delsolar. Additional presentations by Future Lighting Solutions Asia and Lite-On Technology discussed Taiwan’s potential strengths as a center for LED lighting development.

Healthcare

Deputy Health Minister Chen Tzay-jinn cited the four strengths of the healthcare system in Taiwan: universal health insurance, affordable cost with good-quality care, widespread application of ICT technology, and the integration of medical and public-health services. Medical care costs are quite low by international standards.

Currently considerable investment is being made in developing intelligent medical care, including electronic data processing of medical records and telemedicine for community, home, and institutional care. Strong opportunities are also seen for cross-border medicine, particularly with China. A separate presentation introduced the numerous intelligent medicine projects undertaken at National Taiwan University Hospital.

Another theme was business opportunities in Taiwan’s fast-growing health security sector, particularly with regard to vaccines. Kuo Hsu-sung, director of the Centers for Disease Control, said “the Taiwan government is committed to provide incentives for whoever who can build capacity here in Taiwan” for vaccine production; although the Taiwan market is relatively small, it can be a good platform for exporting to China.

Novartis introduced its program of clinical trials in Taiwan for meningitis vaccine and the possibility of future co-research and development projects in Taiwan. Adimmune Corp., the only private human vaccine manufacturing company in Taiwan, discussed its fast-track project to produce H1N1 vaccine before the end of this year.

Tourism and Recreation

Tourism Bureau Deputy Director David Hsieh said the government’s “Best of Taiwan Tourism Development Plan” calls for NT$30 billion (nearly US$1 billion) of investment from now through 2012. He noted that among the 93 international and standard hotels in Taiwan, only 15 belong to international chains. In an effort to bring Taiwan’s hospitality industry to international quality standards, the government will launch a three-year subsidy program in 2010 to encourage four-star hotels to affiliate with international or domestic chains. To encourage private investment in hotel development, the government also offers tax deductions/exemptions, preferential loans, and subsidies. The government’s four-year plan aims to create a total of NT$550 billion (US$17 billion) in tourism revenues, create 400,000 tourism-related jobs, attract NT$200 billion in private investment, and bring at least 10 major international hotel chains into Taiwan.

Claire Chiang, founder and Senior Vice President of Banyan Tree Hotels & Resorts, noted that infrastructure, culture, and the environment are the top three factors for Banyan Tree when choosing a new site. She noted that Taiwan possesses basic strengths in all three, but there is a need to further upgrade infrastructure, enhance property planning, strengthen Taiwan’s international tourism marketing initiatives, increase government subsidies to the tourism industry, establish more hotel management schools, and nurture more bilingual talent. 

— With additional reporting by Anita Chen and Don Shapiro.