Even if the nation’s economy is not weakened by a fragile global economic recovery, the economy will still quickly lose its competitive edge because of the government’s bureaucratic inertia, given intensifying competition in the fast-growing Asian region.
China on Sunday launched a new free-trade zone in Shanghai, one of its economic centers, just two months after the State Council gave the green light to the creation of a test ground primarily for Beijing’s financial reforms, such as full convertibility of the yuan and loosening restrictions on interest rates.
Despite the Chinese government not having given details outlining the operation of the 29km2 experimental zone, the Shanghai free-trade zone has attracted massive attention and 25 companies have already recieved approval to start operations, including 11 financial institutions such as Citibank, as well as US software giant Microsoft Corp. This popularity is despite the absence of significant tax breaks, or guarantees of Internet freedom.
Undoubtedly, the opening of the test zone in Shanghai heightened the already stiff competition in Asia, and across the world, in soliciting investments and trade, given the better policy coverage and wide access to the world’s second-largest economy.
Compared with Beijing’s swiftness and determination to carry out reform in the Shanghai free-trade zone, Taiwan’s plan to operate new “free economic pilot zones” is still plodding on.
In August, the Cabinet gave the go-ahead to start the first-stage pilot zones after the proposal was first approved by the Cabinet in 2011 and repeatedly revised following Cabinet reshuffles.
Based on the Council for Economic Planning and Development’s (CEPD) outline, companies in four targeted industries — including the medical and agriculture sectors — will be allowed to operate first in the test zones, which cover six ports, as well as the Taoyuan Aerotropolis and the Pingtung Agricultural Biotechnology Park.
However, the much-watched deregulation in financial and other service sectors is still in limbo. It still needs the backing of the Cabinet or legislators to loosen the rules on the trade of equities, commodities, gold and real-estate by foreign and Chinese fund managers and brokerage dealers.
CEPD Minister Kuan Chung-ming (管中閔), who is the mastermind behind the economic pilot zones project, is expected to submit his draft to the Cabinet for review by the end of this month and to push for its passage in the legislature before the end of this session on Dec. 31.
Financial Supervisory Commission Chairman William Tseng (曾銘宗) said the commission has submitted to the Cabinet its proposals to relax rules on foreign companies’ trading in securities, bonds and other financial tools via offshore banking units or offshore securities units.
Tseng said there is no need for legislative approval and he expects the new measures to come into force by the end of this year.
This may be just wishful thinking by Tseng and Kuan, as the stalemate between the legislature and the Cabinet will make it almost impossible for the government to push through any proposals.
The political impasse could dash the nation’s hope of becoming one of the world’s major offshore yuan trading centers, as the crucial cross-strait service trade agreement will need the legislature’s approval to open up yuan trading.
What is more, Hong Kong is currently the world’s biggest offshore yuan trading center and the region’s financial hub, but serious concerns were raised about the territory potentially being bypassed by foreign fund managers and investors for Shanghai. Taiwan is in a dire situation on the political and economic fronts. To avoid losing its economic competitiveness, Taiwan must immediately stop its political infighting and speed up the financial and trade liberalization.
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