Monday, 12 Dec 2011
Exchanging business contracts
Overseas Business Risk - Taiwan
Political and Economic
The People's Republic of China (PRC) claims sovereignty over Taiwan and regards Taiwan as a province of China. The United Kingdom acknowledges the position of the Chinese Government that Taiwan is a province of China and recognises the Chinese Government as the sole legal government of China. The UK does not recognise Taiwan as a state and does not have diplomatic relations with Taiwan. Nonetheless, the UK enjoys a flourishing relationship with Taiwan based on strong trade, investment, financial, educational and cultural exchanges.
Despite significant restrictions on its independent engagement with international organisations, Taiwan is a member of the WTO (joined in 2002 under the name of "The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu"), as well as other bodies such as the Asian Development Bank (ADB).
Taiwan's economic success was initially based on the manufacture of low technology goods. Over time these labour-intensive industries have increasingly re-located to lower cost bases, primarily in Mainland China.
Over the last three decades, Taiwan has averaged around 8% annual GDP growth. In the process it has turned itself into a dynamic capitalist economy. Taiwan has successfully moved into higher value-added manufacturing and exports, mainly in electronics and computers, which have continued to drive growth. Having historically enjoyed substantial trade surpluses, Taiwan's foreign reserves are the fourth largest in the world. Taiwan is a major regional investor, particularly in Mainland China. Hong Kong and Mainland China now represent Taiwan's main export markets, ahead of the US, despite a number of restrictions on trade and investment links with the Mainland.
Taiwan is a thriving democracy, with a free press and an independent judiciary. It enjoys a low crime rate.
British businesses are highly visible in the Taiwanese domestic market, and trade links with Europe continue to grow. There is a substantial market for infrastructure consultancy and products, financial services, high-value manufacturer supply chain, and chemicals, and a growing demand for green technology. This is a sophisticated market for consumer goods, particularly for international designer labels. Taiwan is one of the world’s five largest markets for Scotch Whisky, with a strong demand for premium single malt brands. Membership of the WTO has increased exports and improved market access to Taiwan for foreign firms which have been drawn by the success of this 'Asian Tiger' and favourable business environment. Although annual growth has diminished from its heights in the 1990s, Taiwan remains an active market for UKTI.
Although annual growth has diminished from its heights in the 1990s the Taiwanese economy is recovering quickly, with exports reaching a record US$274bn in 2010, led primarily by ICT, chemical products and electronics goods, The economy grew by 10.8% year on year in 2010, the strongest annual growth since 1987. 2011’s growth is predicted to be around 4-5%. Total foreign trade reached US$526bn with total UK exports to Taiwan exceeding £1.7bn.
The lifting of foreign exchange controls and foreign access to the Taipei Stock Exchange, as well as plans for an offshore international stock exchange, make Taiwan an attractive location for investment. It also offers a potential platform for foreign businesses seeking to break into the complex Chinese domestic market, as Taiwanese companies have a great deal of experience of China.
Ma Ying-jeou, elected as President in March 2008, has moved to liberalise cross-Straits economic links. Since 2009, there have been regular direct flights to the Mainland and have now expanded to over 550 direct flights a week. The number of Chinese tourist visitors to Taiwan has exceeded expectations, with 1.5 million visiting in 2010.
Since negotiations began in 2008 between the Straits Exchange Foundation (SEF – Taiwan) and the Association for Relations across the Straits (ARATS – PRC), a number of Cross-Strait agreements have been signed between Taiwan and PRC which include direct air, shipping & postal links; financial cooperation; and joint standards and inspections.
Taiwan and PRC signed the Economic Cooperation Framework Agreement (ECFA) on 29 June 2010. ECFA aims to reduce tariffs and promote closer cross-Strait investments. The “early harvest list” of tariff concessions covers 539 Taiwanese products and 267 mainland Chinese goods. Mainland China will also open markets in 11 service sectors such as banking, securities, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in nine areas including financial services, creative industries and media. The agreement took effect on 1 January 2011.
More information on political risk, including political demonstrations, is available in FCO Travel Advice.
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2010, Taiwan was ranked 33rd of 178 countries in the World Transparency International Corruption index, up four places compared to 2009.
There have been high-profile cases of corruption involving major contacts in Taiwan, but the large majority of business transactions take place without corruption.
Read the information provided on our Bribery and corruption page.
Terrorism Threat
The threat from terrorism is low. But you should be aware of the global risk of indiscriminate attacks, which could be against civilian targets, including places frequented by foreigners.
Read the information provided on our Terrorism threat page
Protective Security Advice
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses
Small-scale petty crime affecting foreign nationals is not commonplace but exists.
If your passport is lost or stolen contact the British Trade and Cultural Office.
Read the information provided on our Protective security advice page
Intellectual Property
Meeting in the British Embassy
IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets.
Intellectual Property Rights continues to be a subject near the top of many company’s agendas when they consider entering the Taiwanese market. In the past it was seen that little or no protection was given. The Taiwanese authorities recognised that this was not only damaging to its reputation but also deterring investment in its economy.
Since 2008 a number of positive steps have been taken to strengthen IP protection, a process that is still ongoing. The establishment of a dedicated IP Court in 2008 was widely welcomed by the business community, and seen as a step in the right direction.
Recent developments include:
Taiwan remained off the US Special 301 Watch List in 2010
In 2009 the Legislative Yuan amended legislation to oblige internet service providers to protect online IPR.
The Taiwan Intellectual Property Office (TIPO) is implementing a three year IPR Plan (2010-12) and is working with the Bureau of Foreign Trade to strengthen the monitoring and inspection on transportation of counterfeit goods.
Trademark and IP registration is being looked at with the aim of reducing the time it takes from 36.8 months to 24 months by 2013, although this is still longer than other regional counterparts.
A formal notice was issued to all local authorities in March 2010 that commercial operations with names bearing similarity to the Chinese translations of brand names, but not consistent with that companies business, are strictly forbidden to be registered.
Following the continued rapprochement in relations between Taiwan and China, a Cross-Straits IPR Agreement was signed and enacted on 29 June 2010. This is the same day that the Economic Cooperation Framework Agreement (ECFA) was signed.
Read the information provided on our Intellectual Property page.
Organised Crime
Read the information provided on our Organised crime page.
More information is available on overseas business risk in a range of markets.