In support of President Chen Shui-bian's (
Members of the Legislative Yuan seriously question whether this will be helpful in boosting the domestic economy and even whether it will entice even more capital away from Taiwan.
In reality, President Chen's idea is to make use of Taiwan's position as an intermediary to attract even more foreign investment to Taiwan and use investment as a tool to strengthen Taiwan's international standing. The success of this policy is dependent on how favorably Taiwan compares to other countries in terms of infrastructure and costs, and its ability to deliver valuable investment mainland success. The government should place an emphasis on how to create an environment favorable for attracting foreign investment and business on both sides of the strait.
The flexibility of Taiwan's manufacturers and the global network of Taiwanese companies are the main reasons foreigners will choose to direct their mainland investments through firms here. The wide presence of Taiwanese companies on the mainland makes it an even more important and advantageous market in which the government can promote strategic alliances between foreign capital and Taiwanese businesses.
For foreigners, the experience of Taiwanese companies on the mainland will surely provide an attractive basis for cooperation. In particular, the mainland's market economy and its legal framework are not yet mature, and are the source of myriad troubles for the uninitiated. Apart from daily operational problems, investors also have to meet with authorities such as the police, tax officials, the Bureau of Commodity Inspection and Quarantine, and industrial and commercial management authorities, making the language and social skills of Taiwanese partners all the more crucial.
In reality, cooperation with European and American multinational companies is the only way for Taiwanese companies to enter the mainland's financial, insurance, telecommunications, trade, wholesale and retail markets. After the mainland joins the WTO, these markets will be opened selectively and progressively over time. The opening will be managed according to preset rules, focusing in the opening stages on European and American companies.
The capitalization of fully foreign-owned banks and financial institutions during the first year, for example, may not be lower than US$10 billion and foreign companies applying to establish joint venture retail businesses must have a minimum average turnover of US$2 billion for the first three years. Capital investments during the year prior to application must exceed US$200 million and foreign companies should have a wide international distribution network.
Such high thresholds show that the mainland will focus on European and American multinationals during the early stages of market opening.
Taiwanese companies can only enter this market by using their understanding of the business and social habits of mainlanders, and thereby only in cooperation with European and American multinationals. Particularly when the effects of Chinese legislation aimed to protect Taiwanese business investments and its detailed implementation remain uncertain as the two sides have yet to sign an investment protection agreement, the only way for Taiwanese companies guarantee their investments on the mainland is to cooperate with businesses from countries that have already signed such agreements.
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