Taiwan – Background
Taiwan, officially known as the Republic of China, is a state in East Asia to the West of Japan based on the Island of Taiwan and including several smaller islands.
The country has a developed capitalist economy which is ranked as the 18th largest economy in the world by GDP. In keeping with its capitalist economy, the majority of its, previously government owned banks and firms have now been privatised and the country has been experiencing a steady economic growth in the region of 8% of GDP over the past thirty years.
Exports have provided much of the impetus for the county’s industrialisation and exports have been growing ever since the end of the Second World War. Today, inflation and unemployment remain low, the country has a substantial trade surplus and its foreign reserves are the world’s fourth largest. Over the years there has been a steady shift from agriculture to the services sector which now accounts for some 73% of the economy and the more traditional, labour intensive industries are in decline while technology and capital intensive industries are on the rise. Taiwan is famed for its electronics and personal computer industries and the country and is recognised as a vital part of the global technology industry.
Taiwan suffered little in the 1997 Asian economic crisis compared to many of its neighbours and its continuing conservative and stable financial policies have helped the economy develop to the extent that it is now a major investor itself in countries such as China, Thailand and Indonesia. Internally, small and medium domestic businesses form a significant element of the economy and the country has been classed as a newly developed industrialised country since the 1970’s.
The country is an Asian economic success story. Transformed from a dictatorship to a vibrant democracy, the country has seen growth in GDP has averaged at 4.5% since 1992 and the per capita income has increased by some USD 10,000 in the same period making Taiwan the 28th wealthiest country in the world and the 6th wealthiest in Asia.
The primary central business district (CBD) is the capital city of Taipei, which is located on the Tamsui River approximately 25 km from the port city of Keelung on the Pacific Ocean coast. The city itself has a population of around three million people and the combined metropolitan area of Taipei and Keelung has a total population of approximately seven million.
Taipei, considered a global city, is the cultural, political and economic centre of the country and part of a major industrial area. The city is served by good transport connections with two airports and all other areas of the island can be reached from Taipei by good high speed railways, highways and high speed rail connections.
The city is ranked thirteenth among world cities by GDP and, even with the Asian financial crises its economy has continued to expand at a rate of 5% per annum. The GDP per capita of the city is now estimated to be in the region of USD 48,400, the second highest in Asia behind only Tokyo.
Taiwan – Opportunities
Taiwan’s’ economic growth has been fuelled by international trade. At 1992, the countries international trade was valued at USD180 billion and by 2012 it had risen to a staggering USD650 billion making it the world’s 19th largest trader even though it only ranks as the 28th largest economy overall.
Taiwan has only a limited amount of arable land and agricultural goods represented only 1% of its total exports whilst manufactured goods accounted for the remaining 99%. Conversely, 77% of the country's imports are agricultural and raw materials. Consumer goods account for approximately 10% of imports. Taiwan’s economy now concentrates on producing components and parts which are incorporated into other products often sold by major corporations from Japan, Europe and the United States and over 70% of exports are of intermediate products rather than finished products.
More recently, the economy of Taiwan has become more and more dependent on that of China and the rest of East Asia and China is now the country’s most important trading and investment partner with total trade amounting to USD122 billion which represents over 21% of total trade. The growing trade reliance on China has reduced the importance of trade relations with other countries including the United States. The USA has now moved from being Taiwan’s 1st most important partner to become its third most important.
Opportunities exist in the country for foreign businesses in a number of areas. Tourism is a growing industry in the country and the government is actively promoting its growth. A number of major international hotel chains have already built or are planning to build new hotels in the country and the government is planning a major investment in the sector.
The government is also investing heavily in infrastructure projects which it sees as being essential to support continued growth. Developments include new port facilities and a free trade sector as well as an island wide rapid transport system and freeway network. The government is actively seeking international company’s input into such projects.
Another area of opportunity is in the growing banking and financial sectors and in Telecommunications. Many international banks are opening or have opened offices in Taipei to cater for the banking requirements of the ever growing affluent population and in telecoms the upgrading of systems and broadband across the country offers more opportunities in this sector.
Foreign investment is welcome in Taiwan and the increasingly wealthy population is providing opportunities for many different types of foreign business in the form of consumer goods and luxury products as well as the major government funded or sponsored projects already mentioned.
Taiwan – Setting Up in Business
There are a number of ways that a foreign business can have a presence in Taiwan.
A representative office may be opened in the country for the purposes of representing a foreign company, procuring and inspecting goods and the carrying on of marketing activities but it cannot trade in the country in its own right.
Taiwan recognises foreign companies and a branch office may be set up in the country. A branch office may trade and will be subject to local taxation but all of its post-tax profits may be remitted to the parent company. There are some statutory requirements to meet before a branch office can be opened including the need for the branch manager to have a Taiwanese domicile residence and a requirement for operating capital to be remitted to a local bank account before the branch is established.
A foreign investor may also set up a limited company in the country, the process of which is summarised in the steps below. The process is a relatively simple one and very much in line with the setting up of a company in a western country.
1. Registration of a limited company can be completed online at the government website where there is a one-stop-shop facility to search for the company name, apply for incorporation, register for taxation and apply for labour insurance, pension plans and national health insurance.
The completed registration will be subject to a review but this process only takes around two days to complete. On completion of the review, the documents can be collected from the Ministry of Economic Affairs or they will be mailed to the applicant directly.
2. Make a Company Seal
Although much of the process is now completed electronically, a company seal is still a requirement in Taiwan. A set of company seals should be prepared and used in company registration documents, deeds and any future amendments to such documents.
3. File a CPA audit report demonstrating that the capital invested will meet the establishment costs of the company.
A statement accompanied by an audit certificate from a certified public accountant must be submitted to the Ministry of Economic Affairs showing that the sufficient capital has been invested to cover the initial establishment costs of the company.
Setting up in business in Taiwan is a relatively simple affair and the growing, developed economy of the country makes it an attractive destination for foreign businesses. There is no minimum investment required, just the need to demonstrate that sufficient funds have been invested to cover the establishment costs. Much of the process can be completed on-line and from outside of the country but the company's legal representative will need to be physically present in the country at least once for the opening of a bank account.