Approved foreign investment in Taiwan has posted a sharp annual decline of 45.9 percent, totaling US$2.051 billion over the past eight months, according to statistics released yesterday by the Invest-ment Commission under the Ministry of Economic Affairs.
"The slower-than-expected post-9/11 economic recovery has not only failed to attract foreign investors, but also held those who are already here back from raising capital to expand their business," said Chang Ming-pin (
The commission's statistics also showed that approved foreign investment in August dropped by a record 40 percent from the previous month.
According to the commission, the top five inbound investments were from British dependencies in Central America -- mainly the British Virgin Islands and the Cayman Islands -- at 27.9 percent, Japan at 18.34 percent, the US at 18.07 percent, The Netherlands at 8.03 percent and Singapore at 7.49 percent.
Chang said that the inbound investments from British dependencies are "most likely capital from Taiwan or Hong Kong."
He said that these investors registered their corporate headquarters in the tax havens to enjoy preferential tax treatment and to facilitate plans to list on US markets.
In response to the distressing figures, Richard Vuylsteke, executive director of the American Chamber of Commerce in Taipei (AmCham), said that the decline was no surprise.
Bad formula
"A lot of foreign investments have been put on hold. Taiwan needs to improve its investment environment by addressing its regulatory formulation," Vuylsteke said.
He said the government needs to increase its competitiveness with other Asian governments.
Referring to AmCham's White Paper, Vuylsteke said Taiwan still protects its markets from multinationals. International standards, for example, are not incorporated into many construction contracts, which discourages foreign investors, he said.
Vuylsteke said that if Taiwan can't persuade local investors to pump money into the economy, why would foreign firms be inspired to do so?
He said the government should respond by offering incentives to Taiwanese entrepreneurs to keep their headquarters in Taiwan. This would create a better synergy between local multinational players, Vuylsteke said.
Approved China-bound investment by Taiwanese companies increased by 34.8 percent, amounting to US$2.368 billion, before August, the commission's statistics showed.
Chang, however, dismissed concerns over Taiwan's deteriorating investment environment.
He said that the commission's statistics failed to include foreign capital inflow raised by Taiwanese high-technology companies via issuing global depositary receipts or American depositary receipts overseas.
"For the past five years, companies have employed various strategies to raise capital," he said.
According to the Securities and Future Commission (
Chu Yun-peng (
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