Thursday, 04 Oct 2012
Exchanging business contracts
Overseas Business Risk - Taiwan
Political and Economic
The UK enjoys a flourishing relationship with Taiwan based on strong trade, investment, financial, educational and cultural exchanges.
(However, the UK does not have formal diplomatic relations with Taiwan. It should be noted that 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.)
Despite significant restrictions on its independent engagement with international organisations, Taiwan is a full 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 is a thriving democracy, with a free press and an independent judiciary. It enjoys a low crime rate.
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. Higher value-added manufacturing and exports, mainly in electronics and computers, continue to drive growth. High-tech products account for about 35% of Taiwan's exports (up from 18% in 1991), a higher proportion than its competitors (Japan is 20% and South Korea 29%). Taiwan has 21 ICT items whose production value/volume occupies first place worldwide (2010 figures); 14 ICT items take second and third places.
As a small open economy, Taiwan, along with other economies in the region suffered a significant downturn in production starting from late 2008. However, it recovered well from the global financial crisis, with 2010 GDP growth at 10.7% YoY (the strongest annual growth since 1987).
The European debt crisis and global manufacturing output led to a slowing down in the pace of economic growth in the second half of 2011; the growth rate for 2011 was just over 4%. With closer economic ties with China and a gradually stabilizing external demand from developed countries and emerging markets, the economy is expected to grow 3.85% in 2012.
Taiwan has received more patents per capita than any other country in the world, consistently for over a decade. In absolute terms, third in the world for design patents, after US and Japan, every year since 1997; and since 2001, behind only Japan, US, Germany and sometimes South Korea for utility patents (“patents for invention”) (United States Patent and Trademark Office). Taiwan has been rated the sixth most innovative economy in the world, second in Asia after Japan ( 2009-2013); and the tenth best business environment (EIU, business environment outlook for 2010-2014).
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.
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 creative industries and green technology and services. 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. Taiwan remains an active market for UKTI.
In 2011, UK’s exports of goods to Taiwan were a record £1.3bn, up 24% on 2010. This puts Taiwan at number 36 on the UK’s list of top export markets for goods, and the UK’s ninth largest market in Asia. Taiwan is an even more important market once services exports are factored in. UK services exports in 2010 (last year available) were £1.15 billion, up 73% on 2009. Taiwan is now the 29th largest market for UK services exports. Total UK exports (goods and services) to Taiwan in 2010 were around £2.26bn, more than UK’s exports to Indonesia, Vietnam and Philippines combined.
Taiwan as a gateway to 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.
Taiwan was second only to Hong Kong as China’s largest source of FDI in 2010 (7.6% of China’s total FDI), and China is Taiwan’s largest overseas investment destination (87% of Taiwan’s overseas investment in 2010). Taiwanese cumulative investments in China are unofficially estimated well in excess of US$150 bn. There are around 80,000 Taiwanese companies located in China, accounting for 70% of China’s electronics manufacturing. One company alone – Foxconn (Hon Hai) – employs around 1 million mainland workers (making it the tenth largest employer in the world). The China market is a major profit source: in 2010, 995 Taiwanese listed companies reported a profit of US$ 6.7bn from the Mainland market, up by 30% from 2009.
Taiwan is a potential platform for foreign businesses seeking to break into the complex Chinese domestic market, using Taiwanese companies’ experience. UK companies have benefited in China from their relationship with Taiwan partners. For example, an infrastructure firm formed a joint venture with a Taiwanese rail company to win consultancy contracts on Chinese high-speed rail projects. A British architecture firm is working with Taiwanese investors on commercial/residential developments in China. British retailers are also selling into the China market through Taiwanese distributors.
Investment in Taiwan
Taiwan was rated the third lowest risk investment location in 2011 by Business Environmental Risk Intelligence (BERI). 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 a more attractive investment location. There are around 300 British companies operating in Taiwan with investments amounting to US$885.2m in 2009. They include HSBC, Standard Chartered Bank, Diageo, BP, Mott Macdonald and Barclays Capital.
Taiwan is a multiparty democracy with constitutional protections for civil rights and legal protection for equality. The constitution protects the right to unionize; the right to strike is provided by law but is highly regulated. The Labor Standards Law (LSL) provides for minimum employment standards including minimum working age and standards for working conditions and health and safety. Taiwanese law provides for gender equality with regard to salaries, promotions, and assignments. For more information on labour regulations, please see or contact .
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.
There have been high-profile cases of corruption involving major contacts in Taiwan, but the large majority of business transactions take place without corruption.
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.
Protective Security Advice
Small-scale petty crime affecting foreign nationals is not commonplace but exists.
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.