The central bank yesterday said slight growth in foreign direct investment (FDI) flows to Taiwan last year was mainly due to transfer of stock ownerships from major financial groups to domestic subsidiaries, rather than due to a less-favorable investment climate as reported by an overseas publication.
The bank’s statement came after the Economist Intelligence Unit (EIU), The Economist’s analysis Web site, said in a report on Monday last week that Taiwan’s inbound FDI stock rose by only US$6 billion to US$56.2 billion last year, from from US$50.2 billion in 2006.
FDI stock refers to cumulative foreign direct investment for a given period.
The EIU’s “In search of foreign investors” report said the slight increase in the inbound FDI stock represented a sharp contrast with the nation’s outward investment stock, which witnessed a sharp rise of US$92 billion from US$122.7 billion in 2006 to US$213.1 billion last year, casting doubt on the policies implemented by the administration of President Ma Ying-jeou (馬英九) to attract foreign investment.
In response to the article, the central bank said in a statement yesterday that it is a common phenomenon for countries that have a current-account surplus, such as Taiwan, China, Japan and South Korea, to post net outflows of FDI.
The current account indicates the nation’s merchandise and services trade. In the third quarter of the year, Taiwan registered a surplus of US$11.64 billion, up 13.5 percent from a year earlier, according to central bank data.
The central bank said the bigger increase in inbound FDC stock than that of outward FDI stock between 2006 and last year was because Taiwan’s inbound FDI deceased last year from a year earlier.
Both the central bank and the Ministry of Economic Affairs attributed last year’s decline in inbound FDI mostly to American International Group (AIG) Inc, the Carlyle Group, Metropolitan Life Insurance Co and Cathay Financial Holding Co (國泰金控) transferring share ownership to domestic subsidiaries.
The central bank added that AIG transferred ownership of shares to Nan Shan Life Insurance Co (南山人壽) in order to pay back debt owed to the US government.
Excluding the four cases of share ownership transfers, the nation’s net inflow of FDI last year would have increased to US$3.17 billion rather than a net outflow of US$1.96 billion.
The central bank said Taiwan’s position in the World Bank’s latest “Ease of Doing Business” rankings had jumped from 25th place last year to 16th this year, indicating that foreign investors remain confident in the nation’s investment environment.
In the first three quarters of this year, Taiwan’s FDI registered a net inflow of US$2.93 billion, the central bank’s latest Balance of Payments (BOP) statistics showed.
The central bank clarified that if Taiwanese companies invest in Taiwan in the name of their parent company, the investment is not counted as FDI, adding that generalized FDI in Taiwan is greater than that reported in the BOP statistics.