Smoother sailing across the strait

Despite some domestic concerns over heavier economic reliance on China, Taiwan is making an all-out effort to strike a landmark economic pact with the mainland to ensure the island's future as an investment hub for businesses seeking a presence in China.

The fourth round of talks on the Economic Co-operation Framework Agreement (ECFA) are scheduled for next month in central Taiwan's Taichung City. They are expected to finalise details of an agreement based on a promise made by President Hu Jinta to Lien Chan, the head of Taiwan's delegation to Apec, at the Singapore summit last weekend.

Four agreements are expected to be signed in Taichung, according to David Lin, Taiwan's vice-foreign minister:

Ffishing crew co-operation;

Ffarm produce quarantine inspection;

Favoidance of double taxation, and

Findustrial product standards, inspection and certification.

To prevent adverse impact on Taiwan's economy, the pact would not allow 830 agricultural items or workers from China to enter the island republic, said Mr Lin.

He echoed President Ma Ying-jeou's confidence that the ECFA would pave the way for economic normalisation between the two countries and serve as a stepping stone for Taiwan to strengthen economic co-operation with other partners, especially in Asean and Apec.

According to Kuang Yeh, political deputy minister of Transport and Communications, the ECFA would be Taiwan's gateway to China, creating a strategic hub for foreign investors into the mainland. "Currently, Hong Kong and Singapore are also key bases for foreign companies into China, but within a decade Taiwan's upgrading of aviation, rail links and port facilities will put us in a better position than the two countries," said Mr Yeh.

With the same cultural background and long experience in doing business in the mainland, Taiwanese people understood the psyche of Chinese businessmen and policymakers better than most, he said..

"Taiwan is an R&D centre and a legally and physically convenient place for foreign expatriates to live and work. Another advantage is its proximity to China: within two-hour reach by air from Taipei to Shanghai and 3.5 hours to Beijing," he said.

Warmer cross-straits relations have led to more active air traffic between the two sides - 2,260 flights between August and November containing 703,908 passengers, and 111 cargo flights carrying 16,676 tons, according to the transport ministry. "In the era of globalisation, cluster development and the effective supply chains are important and Taiwan has remained at the top in any world tables," said Mr Yeh.

Industries in Taiwan are also moving from being original equipment manufacturers (OEM) to original design manufacturers (ODM) in several sectors including computer hardware and software, noted Chin-Chin Tsai, R&D deputy division director of the renowned Industrial Technology Research Institute.

Kuo-hsin Liang, vice-minister of economic affairs, conceded that there was still a lingering debate within Taiwanese society over too much reliance on China due to the ECFA and its impact on employment.

"China is the world's factory and the biggest consumer as well, so it's natural that 80% of Taiwan's exports are to the mainland. But we are also undertaking economic structural adjustment while regional integration is under way - by gearing toward the service sector (financial, transport, retail, wholesale) and not neglecting ICT and semiconductor support and the agricultural sector," said Mr Liang.

The Taiwanese government has already approved a visionary eight-year "I-Taiwan" national master plan worth NT$3.99 trillion (four trillion baht) involving collaboration among 12 agencies, he said.

The I Taiwan projects include strengthening of the nationwide transport network; Kaohsiung Port regeneration; a new high-tech industrial cluster programme in the central region; Taoyuan International Air City; creating intelligent and creative manpower; industrial innovation corridors; urban and industrial park regeneration; farm village regeneration; coastal rehabilitation; green afforestation; flood prevention and water management; and sewer construction.

The country of 23 million also remains proud of its other high rankings in the global chart including transparency and a healthy investment climate.

Taiwan was ranked 37th among 180 countries surveyed in the 2009 Transparency International Corruption Perceptions Index (CPI) with a score of 5.6, up from 39th in 2008.

The World Economic Forum's Global Competitiveness Report this year also put Taiwan in 12th place, an advance of five places over the previous report. In the World Bank's Doing Business 2010 report, Taiwan's position rose 15 places to 46th, confirming that Taiwan's determination and effort to internationalise its economic environment are paying dividends.

But ECFA will not be the only answer and Taiwan knows this. Therefore, it is striving to resume the pending Trade and Investment Framework Agreement talks with the US.

Ming-sun Yang, vice-president of the Cross-Strait Interflow Prospect Foundation, conceded that Taiwan was buying time in balancing strategy and so far it was playing the two cards very well.

"We have not much choice and we need to do it well. While banking on economic integration with China, the US has remains a key strategic security alliance with Taiwan. In the longer term, even China wants an FTA with us more than now, for its own political reasons," said Mr Yang.

Relate Search: Economic Co-operation Framework Agreement, Taiwan's Taichung City, President Hu Jinta to Lien Chan