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Home lures Taiwan businesses as China costs soar

US likely to help Taiwan upgrade F-16s: premier
Taipei (AFP) March 29, 2011 - Taiwan Premier Wu Den-yih confirmed Tuesday that the United States is likely to help the island upgrade its F-16 A/B fighters as it is reluctant to arm Taipei with more advanced jets. Taiwan has been pressing for the more powerful F-16 C/Ds, saying it badly needs the weaponry as a bargaining chip against its former bitter rival China. But the fate of a proposed arms deal remains uncertain, Wu said, amid speculation that it could jeopardise Washington's ties with Beijing.

"My understanding is that Washington does not say 'yes' or 'no'. The deal is still under Washington's evaluation," Wu said during a press conference in Taipei. Wu said that "upgrading the F-16A/Bs is the more likely direction". The US Congress in 1979 passed the Taiwan Relations Act requiring the United States to provide the island with defensive weapons. A sale of F-16 C/Ds to Taiwan would be certain to ignite the anger of Beijing, which reacted furiously when the Barack Obama administration in January 2010 announced a 6.4-billion-dollar arms package for the self-governing island.

The package included Patriot missiles, Black Hawk helicopters, and equipment for Taiwan's F-16 fleet, but no submarines or new fighter jets. A furious Beijing suspended military exchanges with Washington in response. The backbone of Taiwan's air force consists of some 60 ageing F-5s, 126 Indigenous Defense Fighters (IDFs), 146 US-made F-16A/Bs and 56 French-made Mirage 2000-5s. Ties with China have improved markedly since Beijing-friendly Ma Ying-jeou became Taiwan's president in 2008, but China still refuses to renounce the possibility of using force should the island declare independence.
by Staff Writers
Taipei (AFP) March 29, 2011
Taiwan enterprises have struggled for years to enter China, but now, just when access to the mainland market is becoming easier than ever, many are paradoxically heading back to their home island.

One of them is Taipei-based restaurant giant Namchow Group, which was a relative late-comer in China but is an early bird in the reverse drive back across the Taiwan Straits, which separates the island from the mainland.

"Taiwan people's income is higher," said Alfred Chen, chairman of the group, which derived about half of last year's Tw$9.6 billion ($325 million) in revenues from the island.

"Besides, local consumers provide us with valuable experience regarding emerging consumption habits," added Chen, whose company is maintaining its mainland operations while boosting those at home.

Chen is building a culinary empire on Taiwan centred around a German and a Chinese restaurant chain, plus he is planning to modernise his edible oil and fats plants on the island at a cost of Tw$500 million.

Cheng Shin Rubber Industries, a tyre maker with plants in China, Vietnam and Thailand, invested Tw$10 billion at home last year to boost its local capacity and plans to spend another Tw$20 billion over the next two years.

"The investments are aimed to boost the manufacturing capacity of our high-price items," company spokesman Wu Hsuan-miao said.

This appears to be the beginning of a broader trend. Taiwanese companies with a majority of their business on the Chinese mainland invested Tw$40.9 billion at home last year, a tripling of the figure since 2007.

"There are signs that such investments are on the rise," said Tristan Lu of the Taiwan Institute of Economic Research, a private think-tank based in Taipei.

It is somewhat ironic that this should happen now, at a juncture in history when China and Taiwan are getting friendlier than ever and have started removing many of the remaining obstacles to business.

When Taiwanese companies started funnelling funds out of the island in the 1980s, they were attracted by the mainland's cheap labour and land prices, but they acted without government permission.

Since then, however, they have got the official stamp of approval, and a China-friendly administration that took over in Taipei in 2008 is promoting economic exchanges more actively than ever.

Last year China and Taiwan signed the Economic Cooperation Framework Agreement, the most sweeping cross-strait pact in six decades, and an investment protection agreement is likely to follow soon.

China does still attract large Taiwanese funds, with enterprises from the island investing $6.7 billion on the mainland last year, according to the Chinese Ministry of Commerce.

But at the same time, China's investment climate has changed dramatically, investors say, as skyrocketing labour costs, a new business income tax and a more cumbersome labour contract law combine to sour the outlook.

"Lots of Taiwan-invested companies have been forced to close their plants there," said Ling Chia-yu, the head of the Taiwanese economic ministry's Department of Investment.

But Taiwan-invested companies which are getting less enthusiastic about China may find that returning home is not a solution to their woes, analysts said.

"Those companies, mostly small ones without competitiveness, won't be able to survive in Taiwan even if they come back," said Tung Chen-yuan, an expert on China-Taiwan economic ties at Taipei's National Chengchi University.

"Their only chance is if they can upgrade their industrial technologies, but that might be very hard considering their modest scale," he said.

So most of them have either moved to Southeast Asia or provinces in western China where labour cost is cheaper, he said.

Other investment barriers are the decades-old restrictions that have barred Taiwan from further liberalisation and internationalisation, Tung said.

"Poor," Namchow's Chen quipped when asked to comment on the island's investment environment. "There is much the government needs to do."

This was disputed by government officials, who argued the government has provided a full range of benefits to potential investors coming back from the mainland. They include tax reductions, loans, and assistance in the acquisition of land, the officials said.

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Home lures Taiwan businesses as China costs soar
Taipei (AFP) March 27, 2011
Taiwan enterprises have struggled for years to enter China, but now, just when access to the mainland market is becoming easier than ever, many are paradoxically heading back to their home island. One of them is Taipei-based restaurant giant Namchow Group, which was a relative late-comer in China but is an early bird in the reverse drive back across the Taiwan Straits, which separates the is ... read more

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