Compared with the Act for the Establishment and Management of Free Trade Zones (自由貿易港區設置管理條例), gaps and omissions in the draft regulations for free economic pilot zones give the authorities concerned free rein to do as they please.
Also, clauses that would safeguard the rights of workers have inexplicably been omitted altogether.
It is quite clear that the draft is intended as a way to open the door to China and it is likely to distort the nature of the pilot zones.
Just like the free trade zones, the pilot zones would also provide perks such as tax breaks or exemptions.
However, the draft regulations say that when a foreign-owned company establishes or commissions a business to warehouse or carry out simple processing for it in one of the pilot zones, the international firm will benefit from an exemption in the profit-seeking enterprise income tax if its goods are to be sold on the global market.
If such goods are then sold on the domestic market, it will enjoy a 10 percent tax exemption on its annual sales value.
Moreover, when businesses import materials from China to the pilot zones, such importation will not be restricted by Article 35 of the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (台灣地區與大陸地區人民關係條例).
This law concerns products or items listed in the government’s “prohibited category” and is based on considerations of national security and industrial development.
That means the 2,186 prohibited Chinese products, including 830 kinds of raw materials for agricultural products, will be allowed to enter Taiwan at that point.
The draft regulations also propose to loosen the restrictions on Chinese professionals working in the nation, and this clause is a potential threat.
The act for free trade zones already has regulations on the opening up the market to foreign goods and talent, and therefore Taiwan will not become an “isolated country” at all.
As the draft regulations for the pilot zones further erode restrictions, the government is opening the door to China by promoting “deregulation.”
In terms of the free trade zones, they refer to “controlled districts” at six international seaports and one international airport, their neighboring areas and certain other areas where the tracking of goods via technology is available.
The application for the establishment of a business in the free trade zones is regulated by the act.
However, the pilot zones can be established not only in various science and industrial parks, but also in areas designated by the authorities of state-run enterprises or local government heads.
From urban renewal plans to land use changes and even environmental impact assessments, policy implementation is under a “one grade, one review” system that makes the establishment of pilot zones much more convenient, and certain areas can even be designated as virtual pilot zones.
No wonder some are saying that “there will be pilot zones within the pilot zones,” that “there are pilot zones everywhere in Taiwan” and even that “Taiwan is just one big pilot zone.”
Such complete opening up of the domestic market without the necessary caution will distort the nature of the pilot zones and it might be an obstacle to the nation’s international negotiations in the future.
The government should change its method of “covering the bads and praising the goods” and stop claiming that there will be more gains than losses.
Rather, it should face society’s doubts squarely and review the impact of its policies from the point of view of public interest, regional balance and industrial development.
Then it should honestly report the gains and losses in detail to the public. The scope of the pilot zones should not exceed that of the free trade zones.
Shieh Jyh-cherng is a retired National Taiwan University professor. Frida Tsai is an assistant professor at Shih Hsin University’s Graduate Institute for Social Transformation Studies.
Translated by Eddy Chang
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