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Current Situation and Challenges of Taiwan’s Economy and The ECFA

Current Situation and Challenges of Taiwan’s Economy and The ECFA

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Current Situation and Challenges of Taiwan’s Economy and The ECFA

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  1. The 17th Annual Conference on PBFEAM and The 3rd International Conference on Business in Asia (ICBA)Bangkok, Thailand, July 1-2, 2009 Current Situation and Challenges of Taiwan’s Economy and The ECFA Ming-ming Wu Wei-kuang Chang 1

  2. Economic Growth Rate in Taiwan, first quarter 2008 - first quarter 2009 Unit:% Source:Directorate General of Budget, Accounting and Statistics, Executive Yuan, Taiwan. 2

  3. 2009 Economic Growth Rate Estimates in Taiwan Source:Council for Economic Planning and Development , Executive Yuan, Taiwan. 3

  4. Commodity Export Monthly Growth Rate in Taiwan, 2008.05 - 2009.05 Unit:% Source:Ministry of Finance , Executive Yuan, Taiwan. 4

  5. Manpower Monthly Unemployment Rate in Taiwan, 2008.05 - 2009.04 Unit:% Source: Directorate General of Budget, Accounting and Statistics, Executive Yuan, Taiwan. 5

  6. Stock Market Weighted Index in Taiwan, 2008.05.21 - 2009.06.12 Source: Taiwan Stock Exchange Corporation. , Executive Yuan, Taiwan. 6

  7. Foreign Exchange Rate, 2008.05.21 - 2009.06.12 Unit:NT$/US$ Source:Central Bank of the Republic of Taiwan. 7

  8. Ten Plans of Economic Vitalization in Taiwan, 2008.09.11 Looking after the Disadvantaged Encouraging Consumption Promoting Employment Preferential Housing Loans Strengthening Public Construction Promoting Private Investment Stabilizing Financial and Stock Markets Strengthening Financing to Small and Medium-Size Enterprises Expanding Exports Pursuing Tax Reform 8

  9. Tax Reform, 2009.03.10 - 2009.05.18 Inheritance tax and gift tax: reduce the highest tax rate to 10%, increase inheritance tax exemption to US$364,000, raise gift tax exemption to US$67,000 Cut down commodity tax of automobile and motorcycle: US$909.1 per automobile, US$121.2 per motorcycle Adjust the reduction amount of consolidated income tax and tax range: lift personal income standard reduction from US$1,393.9 to US$2,212.1, and US$2,787.9 to US$4,424.2 for whomever with spouse 9

  10. Shopping Voucher, 2009.01.18 Grant Object: All Native Each Native Receives Amount: US$109.1 Duration: January 2009 - September 2009 Total Budget: US$2.6 Billion Expected Benefit: 0.64% of GDP Contribution in 2009 10

  11. 2009 - 2012 Promoting Employment Plans, 2009.03.10 Increase co-op programs for students Provide trainee lessons for unemployed workers to improve their skills Updating job market information to businesses and job seekers as well as reducing frictional unemployment Providing subsidies for businesses to hire new employees Offering low-interest rate loans for self-employment or start-up businesses Provide short-term jobs for local people (expecting to assist 191,558 job seeks to land jobs. By the year of 2012, unemployment rate shall be reduced to 3.0%) 11

  12. Six new industries development plan,2009.06.04 Bio-technology Tourism Green energy Health care Refined agricultural products Cultural and creative industry (From 2012 to 2013, these new industries will contribute 41.12 billion U.S. dollar output value, and employing about 0.7 million workers) 12

  13. Major Agreements of Chiang-Chen Talks • First(2008.06.12): Mainland tourists visit Taiwan, Direct charter air flights • Second (2008.11.04): Direct air transportation, Food Safety, Direct Sea transportation, Cross-Strait Postal Service Agreement • Third (2009.04.26): Agreement on Joint Cross-Strait Crime-fighting and Mutual Judicial Assistance, Supplementary Agreement on Cross-Strait Air Transport, Cross-Strait Financial Cooperation Agreement • Forth (scheduled for the end of 2009 ): cross-strait fishery labor cooperation, cross-strait quarantine and inspection of agricultural products, cross-strait cooperation on standard inspection, measurement and certification, and avoidance of double taxation

  14. CEPA?CECA?ECFA? • CEPA (Closer Economic Partnership Arrangement) 2003.06.29 Signed between China and Hong Kong • CECA (Comprehensive Economic Cooperation Agreement) 2008.03.23Announcement • ECFA(Economic Cooperation Framework Agreement) 2009.02.23Announcement

  15. Major Connotation of CEPA between China and HK • The Relationship between “Inland” and “Special Administrative District” • Adhere “One Country Two System” Principle • Give up “ Anti-dumping” and “Anti-Subsidy” Measures • Reduce Tariff and Non-tariff Barriers • Open up Investment, Market Access

  16. ECFA • Aimed to strengthen cross-strait cooperation in economic, trade and investment aspects, and promoting liberalization of trade in both goods and services. In addition, accelerates transparency and liberalization of the overall investment environment • Key areas are: ◎ Substantial reduction of tariffs gradually ◎ Solve non-tariff trade barriers such as proof of origin, import license, food sanitation, quarantine and inspection etc. ◎ Promote liberalization of tourism and financial services flow ◎ Creat a more liberal and competitive investment environment ◎ Other: human resources, intellectual property rights, subsidies, export tax rebates, and special anti-dumping provisions as well as the special defense mechanism

  17. Advantages of Signing ECFA • In the short term, Taiwan’s business will benefit from the "Early Harvest Programme" (EHP) in alleviating the possible impact on Taiwan’s industries • In the long term, Taiwan’s enterprises can benefit by negotiating tariff reduction. At the same time, Taiwan gaining the rights to negotiate trading issues in goods and services. This ensures businesses and labour services can be treated fairly; therefore, sustaining its competitiveness

  18. Suspicions of Signing ECFA • Taiwan’s capital and key technologies will flow to China and as a result of that more and more businesses may migrate to mainland China, Taiwan’s labor wages, goods prices and estate prices are going to be lowered and closer to China’s standard of living • Currently there are restrictions on importing 2,309 Chinese products (831 of them are agriculture products). Once ECFA takes in effect, all these restrictions will be released. More and more low-priced Chinese products will be shipped to Taiwan • Taiwan’s economy will become imbalanced, depends heavily on China’s market in the future, A metaphor of this is like the earth (Taiwan) evolves around the sun (China). In the end, Taiwan will loose its independence economically

  19. Three Major Challenges of Taiwan’s Economy • To minimize the negative impacts on domestic enterprises and labor market in the midst of the global financial crisis? • To create the next wave of opportunity for the development of new industries? • To prevent Taiwan being marginalized due to the exclusion of the regional trade agreement such as (ASEAN)?

  20. Thank You Ming-ming Wu Wei-Kuang Chang O:886.3.431.2500 ext.7932 F:886.3.270.5738