2023-01-13
Business Environment Risk Intelligence (BERI) in the United States published its 3rd report in 2022, in which Taiwan ranked as the 14th-best destination for investment. The Ministry of Economic Affairs (MOEA) pointed out that Taiwan still ranked 5th in the Operations Risk Index and 3rd in the Remittance & Repatriation Factor, both were the highest in Asia. However, Taiwan ranked 42nd in the Political Risk Index due to geopolitical risk, such as China’s military exercises last year. Hence, Taiwan’s overall ranking dropped 8 places compared with the previous report. The MOEA explained that the results were due to short-term factors. The investments and expansion by TSMC and industries in the semiconductor supply chain show that short-term political risks have not affected the willingness of domestic and foreign companies to increase investment in Taiwan.
The MOEA pointed out that major domestic and foreign companies continuing to invest in Taiwan shows the key position of Taiwan in global supply chains. In particular, the extraordinary performance of semiconductor foundries combined with a complete supply chain of over 1,000 companies, as well as Taiwan’s technological leadership and continued expansion of production capacity, has driven continued investment. For example, continued investment by TSMC, which held a mass production and fab expansion ceremony in the Southern Taiwan Science Park a few days ago, will drive even more investment into the semiconductor supply chain. The joint investment of NT$21 billion recently made by Linde Lienhwa Industrial Gases Co., Ltd. and United Industrial Gases Co., Ltd. is an important example.
With regard to foreign investment, statistics of the MOEA Investment Commission show that foreign direct investments (FDI) in January to November 2022 increased substantially by 84.71% compared with the same period last year (2021). The American company Applied Materials established a manufacturing and R&D center in the Southern Taiwan Science Park, the Dutch EUV machine manufacturer ASML increased its investment to build a new plant in New Taipei City Linkou Gong 1 Industrial Park, the German company Merck will invest US$600 million in Taiwan over the next 5-7 years, and the Dutch company Heineken acquired Pingtung Longquan Brewery to establish a local production line. Furthermore, purchase orders from the United States, Europe, and ASEAN in January to November 2022 continued to grow by 6.7%, 2.8%, and 19.9%, respectively, showing that foreign investors remain optimistic about Taiwan’s industries and excellent investment environment, despite the COVID-19 pandemic and weak demand.
Contents of the 3rd BERI Report in 2022 are summarized below:
I.Profit Opportunity Recommendation: 14th in the world and 5th in Asia
Taiwan ranked 14th in the world (6th in the 2nd BERI Report in 2022) in Profit Opportunity Recommendation (POR) with a total score of 53 points (58 points in the 2nd BERI Report in 2022). Among the 50 countries rated, Taiwan was behind Switzerland, Norway, Canada, Denmark, China, the Netherlands, Australia, South Korea, Finland, Singapore, Austria, Indonesia, and Germany. (see Table 1 and Table 2).
II.Operations Risk Index (ORI): 5th in the world and 1st in Asia
Taiwan ranked 5th in the world with a score of 59 points (previously ranked 3rd with 62 points) in the ORI, only behind the United States (1st worldwide with 66 points), Australia (2nd worldwide with 64 points), Canada and Switzerland (tied at 3rd worldwide with 61 points), and tied with Vietnam and Indonesia. Taiwan ranked 1st in Asia, higher than other Asian countries, such as South Korea (8th worldwide with 58 points), China (17th worldwide with 49 points), Singapore (20th worldwide with 47 points), and Japan (31st worldwide with 43 points).
Taiwan ranked in the top 5 in 7 of the 15 sub-indices under the ORI in this report: monetary inflation (4th), economic growth (3rd), currency convertibility (3rd), enforceability of contracts (3rd), labor cost and productivity (2nd), professional services and contractors (2nd), and communications and transportation (2nd), and also ranked in the top 10 in balance of payments (10th), administrative efficiency (6th), and local management and partners (6th).
III.Political Risk Index (PRI): 42nd in the world and 10th in Asia
Taiwan ranked 42nd worldwide with a score of 34 points (previously ranked 36th with 36 points) in the PRI. Taiwan ranked 10th in Asia, behind China (3rd worldwide with 61 points), Singapore (5th worldwide with 57 points), and Japan (6th worldwide with 56 points).
BERI indicated that this was mainly due rising tension across the Taiwan Strait, which peaked with the large scale military exercise around Taiwan in 2022 Q3 to protest U.S. House of Representatives Speaker Nancy Pelosi's visit to Taiwan.
IV.Remittance and Repatriation Factor (R-Factor): 3rd in the world and 1st in Asia
Taiwan ranked 3rd worldwide with a score of 73 points (2nd with a score of 76 points in the previous report), higher than other Asian countries, such as South Korea (8th worldwide with 66 points), China (10th worldwide with 65 points), Singapore (11th worldwide with 64 points), and Japan (17th worldwide with 58 points).
Among the 4 sub-indices under the R-Factor announced in the report, Taiwan ranked 5th in legal framework, 2nd in accumulated international reserves, and 3rd in foreign exchange generation and foreign debt assessment.
The MOEA stressed that foreign investors increasing investment in Taiwan shows that they are still optimistic about the technical capabilities and superior manufacturing of Taiwan’s industries, as well as the stable investment environment. Their continued investment is proof of their recognition of Taiwan’s investment environment. The MOEA also stressed that BERI mainly survey’s multi-national corporations and references the economic data of each country. The survey is provided as reference when assessing the profit opportunity and risks of companies that do business overseas. Companies must carefully assess and pay attention to risk management when making investments.
Source： Department of Investment Services, MOEA
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