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Telecoms Law won't have impact soon, analysts say

Industry analysts yesterday downplayed the effect of the legis-lature's passage on Friday of the amended Telecommunications Law, which allows foreign investors to buy controlling interests in local telecommunications companies.

The market watchers felt that the law's passage was unlikely to have an immediate effect, since the scheduling of its implementation was still to be decided by the Executive Yaun.

"This particular provision will not be brought into effect immediately, as the amendment also says that the timing of the implementation will be decided by the Executive Yuan," an industry insider said.

"The government has made no secrets of using the timing of the implementation [of the amended law] as leverage in Taiwan's bid to enter the World Trade Organization [WTO]. Since hopes of Taiwan entering the WTO this year are fading fast, the chances of the law being put into effect have become slim."

The amended law passed Friday increases the amount of equity a foreign company can invest in a domestic telecoms company from 20 percent to 60 percent.

However, the amendment also states that the Executive Yuan has the right to decide on the scope of the businesses involved, the timing of implementation, and the number of foreign companies to be allowed into the market.

In addition, foreign investors need report to the Directorate General of Telecommunications (1q信總局), whenever there is a change in their share holdings.

The decision was made as part of Taiwan's efforts to enter the WTO; Taiwan agreed to raise the foreign investment limit in bilateral talks with the US and Canada last year.

While the enactment of the law at first appeared exciting to foreign companies and their local partners preparing to bid for fixed network telecommunications (FNT) services, the limitations on implementation of the law has dampened ardor.

FNT services are local, long distance, and international phone services using landlines and cable; such services are currently under the monopoly control of Taiwan's state-run Chung-hwa Telecom (??華1q信). Interested bidders can file their bidding applications from July to December.

"The old regulations that limit the amount of foreign equity to just 20 percent will still be in effect until the Executive Yuan introduces the new law. Before that, I don't see the enactment as having any substantial effect in helping us lure foreign investors here," an official from one of the companies interested in bidding said.

Due to such an uncertainty, many foreign companies interested in the FNT market are still hesitant about signing a contract with their local partners, as a 20 percent stake in a market the size of Taiwan is just not significant enough to interest most global players.

Meanwhile, views about the when the amended law might actually be implemented are mixed.

Believing the implementation will not soon be forthcoming, some analysts say that the reason legislators wanted to leave the final decision up to the Executive Yuan is because they were afraid that even if the foreign investment cap was raised, Taiwan will still not be admitted into the WTO.

Pundits said that although no one has publicly ruled out Taiwan's chance of gaining entry this year, hopes are fading fast.

Optimists, however, argued that legislators' speedy passing of the amended law suggests there is a tacit agreement between the legislative and executive branches to implement the law before Taiwan actually enters the WTO. They said the Executive Yuan has to raise the cap soon or it would give foreign negotiators a perfect excuse not to support Taiwan's entry into the WTO.

"We have to understand who wants to enter the WTO. It's not the US or other foreign countries. It's Taiwan. If Taiwan raises the ceiling but still cannot be admitted to the WTO, that would make the US or other foreign countries seems untrustworthy.

"But, if Taiwan doesn't [implement the law after its passage], Taiwan's foreign WTO counterparts would take advantage of this as an excuse to not support Taiwan's entry the WTO," said the telecoms company official.

Despite disparities, insiders all agreed that further developments will continue to be influenced by lobbying from business consortia eyeing FNT licenses, as well as American and other foreign countries who have telecoms giants eager to enter the Taiwan market.
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