Taiwan’s advanced research and development (R&D) capability and government incentives have attracted US and other foreign investment, according to the US government’s Investment Climate Statements report, which was released on Wednesday.
Taiwan “is an important market in regional and global trade and investment” and has played “a dominant role” in the global technology supply chain because the export-dependent economy has a highly skilled workforce that contributes to R&D, the report said.
Taiwanese authorities have provided incentives to attract foreign direct investment (FDI) from foreign companies and Taiwanese firms operating overseas, said the report, which was released by the US Department of State.
Favorable terms provided by Taiwan to boost inward FDI include tax incentives, tariff exemptions and low-interest loans, as well as a reshoring incentive program launched in 2019 to help Taiwanese companies with operations in China invest more at home, it said.
Under such circumstances, the nation’s finance, wholesale and retail sectors, as well as electronics sectors have been the main targets for overseas investors, the report said.
The US is Taiwan’s second-largest source of FDI, following the Netherlands, it said.
US-based FDI in Taiwan was US$17.3 billion in 2019, the report said, citing US Department of Commerce data.
US investors have focused on Taiwan’s advanced technology, digital, traditional manufacturing and services sectors, it said.
In addition, some Taiwanese and foreign investors consider the nation “a strategic relocation alternative to insulate themselves against potential supply chain disruptions resulting from regional trade frictions,” the report said.
However, there are some “structural impediments” in Taiwan’s investment environment, such as market influence exerted by domestic and state-owned enterprises in utilities, as well as the energy, postal, transportation, financial and real-estate sectors, it said.
The government has placed caps on FDI and foreign indirect investment in sectors it deems sensitive, the report said.
In addition, foreign investment in sensitive industries is “subject to heightened regulatory and political scrutiny,” it added.
Investments in media firms or advanced technology sectors, such as semiconductors, are closely scrutinized for reliance on Chinese capital for national security reasons, the report said.
“Taiwan’s National Security Bureau has participated in every People’s Republic of China-related investment review meeting regardless of the size of the investment,” it said, adding that “blocked deals in recent years have reflected the authorities’ increased focus on national security concerns.”
Taiwan approved 1,313 applications for overseas Taiwanese and foreign investment from January to last month, Investment Commission data showed.
Among the approved investments, 20 involved Chinese capital, a year-on-year decrease of 64.29 percent, the commission’s data showed.
The annual US report, which examines the business climate in more than 170 economies, is prepared by US economic officials in embassies and missions around the world, the State Department said.
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