Sat, Aug 05, 2006 - Page 8 News List

Complete opening for Taiwan is not feasible

By Paul Lin 林保華

The Conference on Sustaining Taiwan's Economic Development came to a close last week, and it remains difficult to reach a consensus on cross-strait economic and trade policy. Since the cross-strait relationship is a political issue, cross-strait investment and trade policy is unlikely to be separated from political considerations and focus solely on economic issues. Taiwan is a democracy with a free economy. It can open itself up to the world, but can never fully do so toward China.

China is responsible for this state of affairs because of its longstanding threats and the 800-odd ballistic missiles it has aimed at Taiwan.

Recently a Hong Kong media outlet said that 14 Chinese enterprises have been placed on a Japanese Ministry of Economy, Trade and Industry blacklist. Taiwan cannot ignore this fact.

If Taiwan refuses to relax trade and investment restrictions on China, it is sure to come under pressure from Taiwanese businesspeople and foreign investors. Businesspeople don't care about hatred between nations; they only want to make money.

When multinational corporations pressure their governments to open up to China, it is little wonder the latter don't feel sympathetic toward Taiwan. Firms in Japan and the US often complain that there are no direct cross-strait transportation links.

It is true that the lack of direct cross-strait transport causes some commercial inconvenience, but what has really prompted interest in direct links from Japan and the US is cheap operating costs in China.

Capital is indispensable to a nation's economic development. The reason China has grown faster than other communist nations is not because Beijing has a genius for pursuing economic development, but because it has the advantage of Taiwan and Hong Kong, which provide China with capital, technology and management know-how.

Taiwan's China-bound investment accounts for around a quarter of China's inbound foreign investment. Taiwan is losing so much to China that its development has been affected. This includes people of fugitive tycoon Chen Yu-hao's (陳由豪) ilk, who invest in China but leave their debts in Taiwan.

The most pressing issue facing Taiwan is that the government must implement the "active management" policy for China-bound investment while formulating a strategy to attract foreign investment. At the same time that Taiwan defends itself, it should also go on the attack.

Taiwan's financial sector still trails far behind Hong Kong's. With Hong Kong's freedom and legal system eroding following its return to China in 1997, Taiwan should take advantage of this by focusing on two issues.

First, it should further open its economy and get rid of unnecessary restrictions. The government should provide the best possible services to business travelers and attract investment, particularly from China's non-governmental sector.

Second, the government should revise regulations governing the financial sector. As it is difficult to check the operations of Taiwanese firms in China, the government should not consider allowing them to go public in Taiwan. However, since China is restricting foreign capital from investing in property, Taiwan should try to attract these foreign (including Chinese) investors.

The government should do all it can to improve the investment environment. For instance, it should try to reduce labor costs by placing restrictions on brokers for foreign labor.

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