Thu, Jul 27, 2006 page1

• Economic meeting stifles China angle

  DEEP DIVISIONS A much-touted two-day summit on the nation's economy starts today, but two controversial cross-strait liberalization measures aren't on the agenda

  • By Jimmy Chuang, Jackie Lin and Chang Yun-ping / STAFF REPORTER
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  The two-day Conference on Sustaining Taiwan's Economic Development is scheduled to open today amid sharp disagreements, after a preliminary meeting yesterday decided that the conference would not discuss two key cross-strait economic liberalization measures.

  The Mainland Affairs Council, which presided over yesterday's meeting, said that a further loosening of restrictions on cross-strait direct cargo and passenger charter flights and a relaxation of the 40 percent China-bound investment cap for Taiwanese businesses would not be on the conference's agenda.

  Those measures are supported by business groups, the pan-blue camp and some Democratic Progressive Party (DPP) moderates, but opposed by others in the pan-green camp.

  "Opinions on what to do about the 40 percent China-bound investment cap were too divided ... and [the conference] would not have been able to reach a unanimous conclusion on the issue," the council said in a press statement explaining the decision.

  The decision came after vehement opposition to the two measures from Taiwan Solidarity Union legislators and a number of academics and former presidential aides.

  flexibility

  But later yesterday, a Cabinet spokesman indicated that there might be some flexibility on whether the two issues would be discussed.

  "We respect the decision [made at yesterday's meeting]. But, it does not mean that these two issues will definitely not be discussed during the conference, if members of the conference feel there is a need to do so," Cabinet Spokesman Cheng Wen-tsang (鄭文燦) said.

  Cheng made the remarks at a press conference following yesterday's weekly Cabinet meeting.

  The two issues have become a focus ahead of the conference, because the majority of local business have been expecting that Premier Su Tseng-chang (蘇貞昌) will move to further liberalize cross-strait economic ties, by increasing charter flights and relaxing investment restrictions.

  "Those decisions or agreements which will be made through the conference will become important references for the government to make and carry out its policies in the future," Cheng said. "However, we, as the government, cannot decide what to discuss and what to skip in the conference."

  tuning out

  Meanwhile, a recent survey shows that the public has been paying scant attention to the run-up to the conference and expects it to have little impact on their lives.

  According to a survey conducted for the Taiwan Advocates think tank, 75 percent of respondents were unaware of the conference, while 61 percent thought that the event would be unlikely to revive the economy or enhance the nation's well-being. The survey polled 1,148 people in phone interviews on July 18 and July 19.

  In addition to the cross-strait economic issues, tax issues relating to how the Statute for Upgrading Industries (促進產業升級條例) will be amended are also set to be a point of heated debate during the two-day conference.

  The Ministry of Finance has been standing firm against business groups' request for tax reductions, but some other controversial topics have been left unresolved pending the outcome of the conference.

  tax incentives

  One key issue is the finance ministry's demand that tax incentives granted to firms investing in automated equipment should also be overhauled if restrictions on taxing companies' undistributed surplus earnings are to be relaxed, as requested by business circles and the Ministry of Economic Affairs.

  Minister of Finance Ho Chih-chin (何志欽) said earlier that his ministry could allow companies to reserve their undistributed surplus earnings for a maximum of two years, from the current one year, before a 10 percent business income tax is levied.

  But at the same time, the ministry plans to make the tax incentives for automated equipment investments only applicable to key investment projects and small and medium-sized enterprises (SMEs) to avoid tax abuses, he said.

  The finance ministry also urged revoking or restricting the five-year tax-exempt treatment granted to emerging, strategic industries. The economic affairs ministry has planned to slash two-thirds of the 305 tax-free items in exchange for the finance ministry's support, according to an Economic Daily News report yesterday.

  The limited application is expected to affect semiconductor and flat-panel sectors.

  Conference delegates are also expected to discuss the management of enterprises in which the government owns shares, how to effectively dispose of national assets, the privatization of state-run institutions, and how to boost usage efficiencies of state-owned land.
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