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Government upbeat, industries disappointed at results

The two-day Conference on Sustaining Taiwan's Economic Development ended yesterday without major breakthroughs in cross-strait trade issues, and with mixed reactions from analysts, government officials and business representatives.

Several recommendations for facilitating cross-strait trade did not make it to the conference's "consensus" list -- measures which the government has vowed to push after the forum. Rather, they were put under the category of "other opinions," which means they will be put on hold until government agencies have the time to conduct further studies.

Analysts criticized the "other opinions" list as a stalling tactic that it has no intention of following through. One analyst disagreed, however.

"I am more optimistic about cross-strait relaxation occurring in the next one to two years after the meeting," said Alex Huang (黃國偉), assistant vice president at Mega Securities Corp (兆豐證券).

Huang said that the past two days showed the Cabinet's willigness to include the proposed liberalization measures into the conference's agenda, although those suggestions ended up in the "other opinions" category.

"That meant the Cabinet still wanted to achieve something in this area," Huang said.

The proposed relaxation measures, including direct transportation links and lifting the ceiling on China-bound investments, which is currently capped at 40 percent of listed company's net worth, had originally been removed from the agenda due to the Taiwan Solidarity Union's (TSU) boycott during the preparatory meetings. The removal, however, caused participating industry representatives to twice threaten to quit the conference.

Vice Premier Tsai Ing-wen (蔡英文), the Cabinet's main representative at the meeting, managed to pacify business and industry representatives by successfully maneuvering to revive cross-strait discussions and include the proposals on record.

Nevertheless, the much anticipated liberalization of the financial sector, including allowing banks to set up branches and subsidiaries across the Strait and investing in Chinese financial institutions, were moved from the "consensus" list to the "other opinions" category in the face of strong dissent from TSU members.

Huang said that he expected to see the local tourism market opened up to Chinese visitors before the end of the year and regular cross-strait charter flights early next year -- two issues which are already on the to do list.

The analyst, however, is less positive about the outlook for the easing on China-bound investment restrictions and financial institutions' expansion into China, since those issues are far more complicated and controversial.

"It would give investment confidence a big boost if the government were to lift those bans," Huang said.

The conference did pass an array of financial reform proposals, such as reopening licensing for new banks and financial holding firms coupled with a supporting exit mechanism, proposing requirements for financial transparency, reviewing fund sources and corporate governance in mergers and acquisitions activities.

These efforts were not deemed impressive enough, however, as they lack significant solutions to the sector's core issues, said Shirley Yang (楊慶祺), who manages NT$1.2 billion (US$37 million) in funds at Invesco Taiwan Ltd (景順投信).

As the lack of any relaxation on cross-strait regulations could deprive local banks of the opportunity to expand in the Chinese market, the conference did little to help enhance the financial sector's competitiveness, Yang said.

As for tax and land issues, business leaders expressed disappointment while government officials appeared upbeat about conclusions reached at the meeting.

One of the major setbacks for enterprises was their failure to make the Ministry of Finance defer, if not waive, the 10 percent business income tax on companies' undistributed surplus earnings.

Their recommendation, which was recognized in the preparatory meetings -- that undistributed surplus earnings can be reserved for two years, instead of the current one year before the tax is levied -- faced disapproval from delegates on Thursday.

This means that everything returns to the starting point, said finance minister Ho Chih-chin (何志欽), who has opposed the business circle's suggestion, citing its adverse impact on state coffers and surging taxation costs.

Ho said that the finance ministry would study the best possible solution by reviewing the unified tax system and the Statute for Upgrading Industries (促進產業升級條例) to pursue a more equitable taxation system.

Wang Ying-chieh (王應傑), a representative for the General Chamber of Commerce (商業總會), said he was disappointed at the outcome but hoped the Cabinet and the finance ministry could formulate policies based on public opinion and industry trends.

"Like five years ago during the Economic Development Advisory Conference, the proposal to halve the incremental land tax did not gain 100 percent support from the participants, but the government still implemented the policy afterwards," he said during a phone interview.

Timothy Ma (馬玉山), chairman of Kindom Construction Corp (冠德建設), said the two-day conference's failure to reach consensus on proposals about state-owned land management was not a good result.

“Parcels of large-sized land must be effectively developed to improve a city's landscape and residential environment. If you just reserve them, it does nothing good for the people,” he said.

Ma said that the government could set restrictions when offering state land for auction, such as the type of the building that could be constructed or social benefits that the developer could provide.

Su Wei-chen (蘇維成), deputy director-general of the National Property Bureau, said that the summit's conclusions would have little impact on how the bureau disposes of state land.

“We'll evaluate land development projects on a case-by-case basis. If the government authorities find it imperative to exploit state land, such as the tourism bureau's plan to establish more three-star hotels, we'll lease out land for private companies to develop,” he said.
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