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Taiwan is geographically located at the Asia-Pacific transportation hub connecting Northeast and Southeast Asia. Convenient travel from its world-class international airports makes it possible to fly in an average of just 2.55 hours from Taipei to six major cities in the western Pacific: Tokyo, Seoul, Beijing, Shanghai, Hong Kong and Singapore. Convenient transport from its world-class harbors makes it possible to ship goods in an average of just 56 hours from the Port of Kaohsiung to ﬁve major ports in the region: Manila, Singapore, Hong Kong, Shanghai and Tokyo. Taiwan serves not only as an important bridge connecting Europe, America and Japan to emerging Asia-Paciﬁc markets but also as a preferred location for multinationals to establish Asia-Paciﬁc headquarters.
Neighboring Taiwan to the west is the engine of global economic growth and the world's second-largest economy, Mainland China. To the north is the world's third-largest economy, Japan, and to the east is the world's largest economy, the United States. To the south are the 10 states of the Association of Southeast Asian Nations. Taiwan's excellent location places it in an ideal position to compete economically in Asia.
As the center of the global economy gradually moves from west to east, attention is shifting from mature to emerging markets. Whether in terms of language, geography or culture, Taiwan's proximity to the Mainland China market is indispensible. Other advantages, such as the ability to innovate, manufacturing strength, and the integration of Taiwanese businesses into Asian industrial chains, lead international enterprises to choose Taiwan as their base for entering Mainland China and the emerging markets of Asia. They then use Taiwan as a platform to expand worldwide.
Taiwan's investment environment scores highly in numerous international rankings. In the “Global Competitiveness Report 2016-2017,” issued by the World Economic Forum, Taiwan ranks 14th out of 138 economies and fourth in the Asia-Paciﬁc. The Economist Intelligence Unit forecasts Taiwan's business environment to be 14th best in the world during the 2014 – 2018 period.
In the second “Business Environment Risk Intelligence” report of 2016, Taiwan ranks as the world's third best investment destination, trailing only Switzerland and Singapore. In the World Bank's “Doing Business 2017” report, Taiwan ﬁnished 11th out of 190 economies for ease of doing business.
The distribution of industrial clusters in Taiwan can generally be broken down into electronics and technology in the north, precision machinery in central regions, and petrochemicals and heavy industry in the south (key industry distribution is further described in the attachments at the end of the book). The World Economic Forum's “Global Competitiveness Report 2016” names Taiwan's “State of Cluster Development” ﬁfth best in the world. From upstream to midstream to downstream, Taiwan offers sound industrial supply chains that can meet client needs, offer fast responses and quickly provide customized components. In terms of quality and quantity, the competitive nature of Taiwanese products is a major reason why foreign investors choose the island as an investment destination.
The highly developed nature of its industrial clusters has helped Taiwan to become the world's second-largest information hardware producer, its semiconductor foundry industry and semiconductor packaging and testing industry to become tops in the world, its IC design industry to become second in the world and its PC products industry to become third. Another success story is the bicycle industry. In 2003, leading bicycle brands Giant and Merida recruited 18 component manufacturers to form what is known as the A-Team. Close cooperation and division of labor allow the A-Team to better meet customer needs by researching, developing and manufacturing products that satisfy leisure and professional needs. A-Team members work together to produce high-quality, high-cost, high-proﬁt bicycles that are popular in international markets.
Taiwan's excellent labor force is boosted by its universal education system, which each year adds more than 300,000 new graduates at the junior college and university level or above. In 2015, 5.45 million employed persons, or 48.63% of the labor force, had at least a college degree.
In the World Economic Forum's “Global Competitiveness Report 2015 – 2016,” Taiwan's ranking for labor market efficiency rose 10 places to number 22 out of 140 economies. The jump was attributed to a tax system that encourages people to work and an increase in the labor participation rate among women. The government continues to promote world-class universities and research centers that will turn Taiwan into an East Asian center for higher education and a major exporter of Chinese-language education. By drawing on these resources, multinational enterprises can satisfy the manpower needs associated with entering the Asia-Paciﬁc market.
Taiwan has a dense, comprehensive transportation network. External links include highly developed sea and air transport systems that connect via seven international harbors and 17 airports. Internal links include railways and highways, such as the island-wide conventional rail and highway systems, the west coast high-speed rail line, a national freeway system and several east-west expressways that link the north-south freeways. Taipei and Kaohsiung also have metro systems. These convenient transportation networks make it possible to travel anywhere in Taiwan in just one day while allowing for cost-effective, fast and efﬁcient shipment and storage of commercial goods.
Other advantages include relatively inexpensive water, electricity and telecommunications utilities that approach 100% penetration. In 2015, the World Economic Forum's “Network Readiness Index” placed Taiwan 18th in the world, in part due to the widespread availability of network applications. Taiwan's e-government services are among the best in the world, and its advanced digital technology is another strong attraction for foreign commercial enterprises.
Taiwan's Constitution stipulates that issues concerning human rights and contractual obligations and duties should be clearly prescribed by law; therefore, businesses find that regulations relating to taxes and fees are transparent and clear. Taiwan enjoys a healthy and independent legal system, with the average Taiwanese citizen having a high sense of awareness and respect for the law. Predictability and stability in business operations, therefore, are high. At the same time, commercial regulations are quickly adjusted in line with changing international norms and foreign investors enjoy substantial protection under the Statute for Investment by Foreign Nationals.
Taiwan's intellectual property laws adhere to international treaties and norms. It has established an Intellectual Property Court and a police unit that specializes in investigating and seizing counterfeit and pirated goods. International high-tech firms and rights organizations praise the comprehensive, friendly approach to protecting intellectual property.
In 2010, Taiwan and Mainland China signed the “Cross-Strait Agreement on Intellectual Property Rights Protection and Cooperation,” which provides an ofﬁcial channel for Taiwanese to apply for and claim patents, trademarks and plant variety rights. An ofﬁcial working group and platform ensure adherence and help Taiwanese businesses protect their intellectual property rights in Mainland China.
Taiwan actively helps businesses to protect corporate secrets so it can build a fair competitive environment. A 2013 amendment to the Trade Secrets Act added criminal responsibility. Supplementary amendments and training of those who carry out the law further strengthen trade secret protection.
Intellectual property policy and laws are open and transparent in Taiwan. The main competent authority, the Intellectual Property Office, maintains close ties with international institutes in Taiwan, chambers of commerce and rights organizations. The office is receptive to new ideas and constructive criticism as it works toward building an environment that is friendly to intellectual property. Its support of corporate R&D and innovation boosts business opportunity and economic development.
Abundant capital, stable exchange rates, and relatively low interest rates and capital costs make Taiwan a friendly environment for fundraising and financing. Policies to attract foreign investment include relaxing restrictions on foreign enterprises that seek to raise capital and simplifying fundraising administrative procedures.
In terms of direct financing, the cost of listing on an exchange or over the counter is lower in Taiwan than in
Hong Kong or China. The price-earnings ratio and priceto-book ratio of shares are reasonable and liquidity is good. There are currently 47 foreign companies with a primary listing in Taiwan and 26 foreign companies with a primary OTC listing on the island. Opening of the Go Incubation Board for Startup and Acceleration Firms (GISA) and an exchange-based crowd funding program has further diversiﬁed Taiwan's fundraising channels.
In terms of indirect ﬁnancing, Taiwan's high savings rate is a source of abundant capital and its low interest rates reduce the cost of ﬁnancing. Incentives offered to banks that provide loans to SMEs and innovative industries further spread bank ﬁnancing services to businesses of all types and sizes.
Taiwan boasts a thriving R&D sector. Innovative elements bring worldwide popularity to its high-tech consumer electronic products, chain store services, bicycles, pearl milk tea and Chinese-language music.
Global organizations recognize Taiwan for its innovation and R&D capabilities. For the period from 2009 to 2013, the Economist Intelligence Unit ranked Taiwan sixth globally in innovation, trailing only Japan, Switzerland, Finland, Germany and the United States. The World Economic Forum named Taiwan as an innovation-driven economy in its “Global Competitiveness Report.” According to the Global Entrepreneurship and Development Index, Taiwan ranked first in terms of entrepreneurship aspirations and product innovation, second in high-growth enterprises and third in process innovation, demonstrating the remarkable global advantages Taiwan enjoys in the areas of innovation and R&D. Taiwan is home to more than 10 industrial R&D institutions, including the Industrial Technology Research Institute and the Institute for Information Industry. These not only advance technology industry development but also cultivate technological innovators and researchers. Such personnel are the best partners for foreign enterprises that plan to enter the Asia-Paciﬁc market and expand globally.
Department of Investment Services, Ministry of Economic Affairs, R.O.C.