Cabinet OKs plan to spur investment

This article was published by the Taiwan Headlines on October 5, 2006. It reports that the government recently approved a new package of plans to promote Taiwan's industrial development through 2015. The plans also aim to improve Taiwan's investment climate with measures to ease access to land, labor and finance, and to streamline approval of environment impact assessments.

The industrial development package and an implementation plan for "The Creation of an Excellent Investment Environment" were issued, after the government approved related plans for social welfare and financial development under the framework of the "Economic Development Vision for 2015". According to government officials, the realization of these plans will require all-out cooperation from every ministry and agency.

According to government officials, the new plans are built on the foundations of previous programs such as the "Challenge 2008" six-year national development plan, which was issued in 2002. Indeed, the new plans incorporate the development of industries that had not yet emerged in 2002, such as wireless broadband Internet equipment and services. More importantly, "Challenge 2008" focused mostly on "hardware" programs and targets, while the new plans include "many programs that are entirely institutional, such as new systems to help companies acquire land, labor, finance and other supply systems".

For example, the government's new plan to improve Taiwan's investment environment has gone into immediate effect. It contains five major components to boost investment and promote industrial upgrading, covering the core factors of land, labor, finance, administrative efficiency and investment promotion mechanisms.

In terms of land, the new plan offers easier access to state-owned land for major investments or expansions in order to help local governments attract new capital. The plan also offers a 10-year tax holiday and reduction package. Specifically, the government plans to extend its "006688" program for rent reduction of factory space in industrial zones. The program offers "zero" rents for the first two years, 60 percent of the set rate for the second two years, and 80 percent for the third and fourth year, through December 2008. All these measures should open 350 hectares and help attract 500 factories with investments of NT$175 billion, which will in turn create an annual industrial output of NT$210 billion and generate 35,000 jobs.

Furthermore, according to officials, the government "will help firms secure more workers, first by cooperating with the Council of Labor Affairs to assist companies in improving their working environment and enhancing safety and sanitation, in order to increase the employment interest of domestic workers".

The government will also "review" the foreign labor policy to set up a "dynamic foreign labor management system", and allow companies to apply for a larger imported labor quota for physically-trying labor or 24-hour shifts.

Thirdly, the government will expand capital raising channels for businesses by raising the small-business loan-guarantee fund to NT$1 trillion. This will help small and medium companies gain access to up to NT$1.6 trillion in financing. The government will also allocate NT$20 billion from the National Development Fund for up to 20 percent matching investment in traditional industries not listed as "strategic" or "rising" industries, and therefore generate NT$100 billion in new investments.

Fourthly, the government will bolster "policy environmental impact assessment" to help ministries and other official agencies engage in advance dialogue with citizens on major policies, in order to reduce misunderstandings and possible disputes and to reduce the "unpredictability" of environment impact assessments (EIA). Moreover, the Environmental Protection Administration will be responsible for streamlining and enhancing the professionalism of the EIA review process.

Finally, the government will establish various effective mechanisms for central and local governments to attract investors and deal with problems more efficiently, especially those problems faced by "major investment projects". Under the government's new plan, the Ministry of Economic Affairs will set up reporting mechanisms for the promotion of investment. The mechanisms will be convened by a deputy economic minister, together with the deputy mayors of Taiwan's city and county governments. These new channels will help local governments draft their industrial development goals and strategies, create a favorable environment to attract investment, and provide comprehensive "one-window" problem-solving service to investors.

According to government officials, all the aforementioned new plans to "create a new vista for industry" will feature wide-ranging efforts to promote "new emerging industries", spur the "industrial upgrading and transformation" of agriculture, manufacturing and services, and promote "industrial balanced development", by assisting the upgrading of "disadvantaged" sectors and small businesses.

Specifically, the plans will promote the development of a new set of "emerging industries". These include wireless Internet broadband equipment and related services; "digital life" industries and services such as "digital home" intelligent equipment; health care services such as senior citizen care systems and medical equipment and services; and "green" industries such as renewable energies, solar photovoltaics, clean production, and energy conservation equipment and services.

The new plans will also specify a range of measures to promote upgrading of agriculture, by promoting more effective marketing, encouraging young entrepreneurs to return to rural areas, and promoting a shift in emphasis from "the farm" to "the dinner table" through promoting the production and supply of higher quality "safe and sound" agricultural products.

According to the new plans, agricultural, forestry, fishery and husbandry output will rise from NT$382.4 billion in 2005 to NT$413.9 billion in 2009; agricultural employment will decline from 591,000 to 555,000, and agricultural labor productivity will rise from NT$64,700 per person to NT$74,200 per person. The nominal agricultural gross domestic product will rise from NT$189.8 billion to NT$213.6 billion by 2009.

More importantly, upgrading efforts in manufacturing will promote a shift in priorities from "cutting costs" to stressing the enhancement of "value chains". There will be a shift from outsourcing or "original equipment manufacturing" to the provision of brand-name high-quality goods and production equipment and integrated value added creation. There will also be a shift from "supply oriented" service to "user oriented" integrated service or "total solution provider" business models, as well as the provision of energy-saving techniques and products.

According to the new plans, Taiwan's manufacturing output value will rise from NT$11.7 trillion in 2005 to NT$14.0 trillion by 2009; and manufacturing productivity will rise from NT$980,000 per worker to NT$1.24 million per worker. Nominal manufacturing GDP will rise from NT$2.4 trillion to NT$3.0 trillion by 2009.

Similarly, efforts to upgrade value added, higher quality and employment creation in services will contribute to the lifting of the nominal GDP value of the service sector from NT$8.2 trillion in 2005 to NT$10.3 trillion in 2009. Service employment will be expanded from 5.79 million to 6.33 million, and service labor productivity will be boosted from NT$1.41 million to NT$1.63 million by 2009.