2011 Investment Climate Statement - Taiwan

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011

Openness to Foreign Investment

Strategically located in the center of the East Asian market, Taiwan continues to attract significant foreign direct investment. Expanded cross-Strait trade through the Economic Cooperation Framework Agreement (ECFA) signed with mainland China on June 30, 2010 will likely contribute to the robust investment climate in the years to come. Streamlined procedures offered by the island’s science-based industrial parks, export processing zones, and free trade zones continue to increase Taiwan's appeal to foreign investors. The World Bank ranked Taiwan 33rd out of 183 economies for "Ease of Doing Business" in its Doing Business 2011 report.




World Bank Doing Business



TI Corruption Index



Heritage Economic Freedom



Legatum Prosperity Index



WEF Global Competitiveness Report



As part of its efforts to improve the investment climate, Taiwan no longer has a list of permitted investments, but maintains a "negative" list of industries closed to foreign investment for security and environmental protection reasons. Liberalization has reduced that list to less than one percent of manufacturing categories and less than five percent of service industries. Railway transport, freight transport by small trucks, pesticide manufacture, real estate development, brokerage, leasing, and trading are all open to foreign investment.

While most foreign ownership limits have been removed, the foreign ownership limit on wireless and fixed line telecommunications firms is 60%, including a direct foreign investment limit of 49%. For state-owned Chunghwa Telecom Co., which controls 97% of the fixed line telecom market, the limit on direct and indirect foreign investment is 55%, including a direct foreign investment limit of 49%. There is a 20% limit on foreign direct investment on cable television broadcast services, but foreign ownership of up to 60% is allowed through indirect investment via a Taiwan entity. Foreign investors now control two of the five largest cable TV networks in Taiwan. In addition, there is a foreign ownership limit of 49.99% for satellite television broadcasting services and piped distribution of natural gas, and 49% for high-speed railways. The foreign ownership cap on ground-handling firms, air-catering companies, aviation transportation businesses (airlines), and general aviation business (commercial helicopters and business jet planes) is less than 50%, with a separate limit of 25% for any single foreign investor. For Taiwan-flagged merchant ships, foreign investment is limited to 50% for Taiwan shipping companies operating international routes.

Regulations governing foreign direct investment principally derive from the Statute for Investment by Foreign Nationals (SIFN) and the Statute for Investment by Overseas Chinese (SIOC). These two laws permit foreign investors to use either foreign currencies or NT dollars. In 2006, Taiwan authorities started permitting NT dollar loans obtained from local banks to serve as sources of foreign direct investment. Both the SIFN and the SIOC specify that foreign-invested enterprises must receive the same regulatory treatment accorded local firms. Foreign companies may invest in state-owned firms undergoing privatization and are eligible to participate in publicly-financed research and development programs.

Taiwan has been gradually relaxing restrictions on investments from mainland China. In 2009, Taiwan launched the first phase of opening up to Chinese investment. Under the new policy, Taiwan opened 64 sectors in manufacturing, 117 in services, and 11 in public construction. Under the “Regulations Governing Permission for People from the mainland Area to Invest in Taiwan,” mainland entities and foreign companies in which mainland entities have over 30% shares must first obtain permission from the Ministry of Economic Affairs (MOEA) before establishing a presence in Taiwan or to hold shares in a Taiwan company. The Taiwan authorities may also prohibit or restrict investment from mainland Chinese enterprises that have military shareholders or have a military purpose, that would be of a monopolistic nature, that would influence national security, or that would "do harm to domestic economic development." As of November 2010, Taiwan approved 99 investment applications from mainland China totaling US$131 million. As for the banking industry, two Chinese banks established representative offices in Taiwan in October 2010, and one more bank has been approved by Taiwan's financial regulator to do so. The two mainland banks are limited to only conducting non-profit business activities before receiving permission to apply to establish branches.

MOEA's Investment Commission (IC) screens applications for investment, acquisitions, and mergers. For projects that are not on the negative list, 95% will generally obtain approval within 3 working days. Specifically, approval of projects with an investment value less than NT$500 million (US$16.8 million at an exchange rate of NT$29.7 per US$) is generally granted within two working days at the IC division chief level. For investments between NT$500 million (US$16.8 million) and NT$1 billion (US$33.7 million) that are not on the negative list, approval authority rests with the IC Executive Secretary and normally is also granted within three working days. Approval of investments above NT$1 billion or on the negative list requires three weeks, as these investments must be referred to the relevant supervisory ministries and require approval of the IC Chairman or IC Executive Secretary. Investments involving mergers and acquisitions require screening at the monthly meeting of an inter-ministerial commission.

Conversion and Transfer Policies

There are relatively few restrictions on converting or transferring direct investment funds. Foreign investors with approved investments can readily obtain foreign exchange from a large number of designated banks. The remittance of capital invested in Taiwan must be reported in advance to the IC, but IC approval is not required. Declared earnings, capital gains, dividends, royalties, management fees, and other returns on investments can be repatriated at any time. For large transactions requiring the exchange of NT dollars into foreign currency which could potentially disrupt Taiwan's foreign exchange market, the Central Bank may require the transaction to be scheduled over several days. There is no written guideline on the size of such transactions, but amounts in excess of US$100 million may be affected. Capital movements arising from trade in merchandise and services, as well as from debt servicing, are not restricted. No prior approval is required for movement of foreign currency funds not requiring exchange between NT dollars and the foreign currency. No prior approval is required if the cumulative amount of inward or outward remittances does not exceed the annual limit of US$5 million for an individual or US$50 million for a corporate entity.

Total outbound investment may not exceed 40% of the investing company's net worth or paid-in capital (whichever is less), unless it is a professional investment company, the company charter waived the 40% limit, or such investment is approved by shareholders. A local company is not required to obtain prior approval for overseas investments, except to mainland China. However, if the amount of investment exceeds USD $50 million, the company has to file an application with MOEA's Investment Commission.

Taiwan has significantly relaxed restrictions on direct investment in China. Taiwan entities are no longer required to go through a third jurisdiction to make their investments on the mainland. In 2008, authorities raised the annual ceiling on an individual's investment in China from US$2.5 million to US$5 million. The ceiling on small and medium enterprise investment in China is either US$2.5 million or 60% of the investing firm's net worth, whichever is higher. For large enterprises, total investment in China is capped at 60% of net worth. This cap, however, does not apply to foreign subsidiaries in Taiwan. For investments below US$1 million, approval is not required, but investors must report the investment to the IC within six months. For investments between US$1 million and US$50 million, approval can be granted in two weeks. Taiwan authorities require an investor to submit a quarterly financial report if the cumulative investment in a project exceeds US$50 million.

Taiwan authorities have actively encouraged investment in Southeast Asia and India. Investments are also encouraged in a number of countries with which Taiwan has diplomatic relations, mainly in Central America. Incentives include loans and/or overseas investment insurance from Taiwan's Export-Import Bank.

Expropriation and Compensation

No foreign-invested firm has ever been nationalized or expropriated in Taiwan. There are no reports of "creeping expropriation" or official actions tantamount to expropriation. Under Taiwan law, no venture with 45% or more foreign investment can be nationalized, as long as the 45% capital contribution ratio remains unchanged for a period of 20 years after the establishment of the foreign business. Expropriation can be justified only for national defense needs, in which case "reasonable" compensation must be provided.

Dispute Settlement

Taiwan is not a member of the International Center for the Settlement of Investment Disputes, established by the World Bank to provide arbitration and conciliation services for governments and foreign investors. Foreign investment disputes with the Taiwan authorities are not common. Normally, Taiwan resolves disputes according to domestic laws and regulations, and based on national treatment or investment guaranty agreements. Taiwan has implemented investment guaranty agreements with 28 other nations, and is in the process of negotiating one with China.

Taiwan has comprehensive commercial laws, including the Company Law, Commercial Registration Law, Business Registration Law, and Commercial Accounting Law, as well as laws governing specific industries. Taiwan's Bankruptcy Law guarantees that all creditors have the right to share the assets of a bankrupt debtor on a proportional basis. Secured interests in property are recognized and enforced through a registration system.

Taiwan's court system is generally viewed as independent and free from overt interference by the other official branches. Judges often bear a significant workload. As a result, special courts have been set up to resolve minor cases expeditiously. The judgments of foreign courts with jurisdictional authority are enforced in Taiwan by local courts on a reciprocal basis.

The latest version of Taiwan's Arbitration Law sought to bring its arbitration regime more in-line with international practices and was implemented in 1998. Many provisions in the Arbitration Law are influenced by the Model Law promulgated by the United Nations Commission on International Trade Law (“UNCITRAL Model Law”). The Chinese Arbitration Association, Taipei (the Association) is a nonprofit organization established by the Ministry of Interior. The Association has 21 cooperative agreements with other arbitration institutions across the globe. The Association has managed disputes ranging from construction, maritime, securities, international trade, intellectual property rights, insurance, cross-strait disputes, information technology etc. By agreement, disputants in a case can determine the governing law of the dispute, rules of procedures, language used in proceedings, authority of the arbitrators, place and location of the arbitration, time of the hearing, and extension of the time limit to render the arbitral award, among other factors.

Performance Requirements and Incentives

Taiwan’s performance requirements were discontinued in 2002 following Taiwan's WTO accession. Taiwan does not require foreign firms to transfer technology, locate in specified areas, or hire a minimum number of local employees as a prerequisite to investment.

Manufacturing firms located in export-processing zones and science-based industrial parks are required to export all of their output in order to obtain tariff-free treatment of production inputs. However, these firms may sell on the domestic market upon payment of relevant import duties.

Under the WTO, Taiwan agreed it would phase out industrial offset requirements (IOR) for non-military public procurement when it acceded to the Agreement on Government Procurement (GPA) in July 2009. Taiwan initially applied the IOR only to military procurements, following the practice of most GPA members. It began reducing, however, the IOR coverage of non-military procurements in 2004. Currently, the only non-military procurements that require an offset are rail locomotives and passenger coaches. Recently, an offset obligation of at least 20% is being written into most contracts that do not have a designated contract threshold. For military procurements, the threshold is US$5 million with a minimum offset of 40%. As a result of legislative pressure, the offset ratio has reached 70% in some military cases.

Since 1988, Taiwan has signed industrial offset contracts (IOCs) with 110 suppliers from 12 countries. The commitment value of these contracts totals US$9.4 billion, and realized contracts amount to US$6.0 billion. Forty-nine percent of the total realized value was directed to transfer of technologies, 16% to foreign direct investment in Taiwan, 22% to procurement from Taiwan, 5% to trade promotion, 5% to personnel training, 2% to assessment certification, and 1% to R&D. Taiwan has published industrial offset rules in both Chinese and English, and has made them accessible to the public online.

The United States remains concerned, however, that terms and conditions for model public procurement projects determined by the Taiwan authorities impose large indirect and unforeseeable liabilities on contractors and thereby prevent U.S. firms from bidding on projects.

Right to Private Ownership and Establishment

Private investors have the right to establish and own business enterprises, except in a limited number of industries involving national security and environmental protection. Private entities can freely acquire and dispose of interests in business enterprises. Private firms have the same access as state-owned companies to markets, credit, licenses, and supplies. Taiwan authorities have eliminated most state-owned monopolies, with the exception of some companies in the health insurance, financial, and power and water utility sectors.

Protection of Property Rights

Reflecting Taiwan's IPR legal regime and enforcement advances, the Office of the U.S. Trade Representative (USTR) removed Taiwan from the Special 301 Watch List in January 2009. The United States, however, continues to be concerned about a number of IPR issues in Taiwan, including the availability of counterfeit pharmaceuticals, infringement of copyrighted material on the Internet, illegal copying of textbooks, and the level of protection for the packaging, configuration, and outward appearance of products (trade dress). The importation and transshipment of counterfeit products from China is also a problem, as well as the collusion of some Taiwan companies in supplying components to mainland factories producing "Shanzhai" counterfeits (e.g., mobile phones, netbooks, and other electronic devices). The United States is actively working with the Taiwan authorities to address these issues.

The Pharmaceutical Law, as amended in 2004 and 2007, stiffened penalties for the production, distribution and sale of counterfeit medicines. A 2005 amendment to the Law authorized pharmaceutical data exclusivity for five years to prevent unfair commercial data use, the same exclusivity period as in the United States. In addition, in 2009, the Executive Yuan submitted an amendment to the Patent Law that would extend the protection period on patented medicine up to five years if the granting of the license to produce and sell the product in Taiwan is delayed. The amendment draft of the law is under review by the Economic Committee of the Legislative Yuan and is expected to be passed by the LY in 2011. However, foreign pharmaceutical manufacturers charge that Taiwan authorities unfairly allow generic pharmaceutical companies to apply for licenses and for Bureau of National Health Insurance (BNHI) reimbursement prices before the original drugs' data-exclusivity period has expired.

The Ministry of Economic Affairs' Intellectual Property Office (TIPO) and other relevant agencies have adopted programs to crack down on Internet and physical piracy. To streamline and improve the quality of judicial procedures in IP cases, the Judicial Yuan inaugurated in 2008 an Intellectual Property Court authorized to handle all new civil and administrative IP litigation, as well as appeals on criminal cases. To combat Internet-related IPR violations, Taiwan has strengthened cooperation with foreign enforcement agencies, including signing an IP cooperation and protection agreement with China in June 2010. Taiwan's Copyright Law subjects illegal file sharing to a maximum jail term of two years and requires Internet service providers (ISP) to undertake specific and effective notice-and-takedown actions against online infringers, or else ISPs would be liable for their network users' IPR infringements.

Additionally, the Ministry of Education (MOE) continues to implement and strengthen a three-year IPR action plan to combat unauthorized textbook copying and illegal downloads on academic computer networks.

Transparency of Regulatory System

Taiwan has a set of comprehensive laws and regulations regarding taxes, labor, health and safety. In addition to tax incentives, Taiwan’s science-based industrial parks and export processing zones have simple and transparent bureaucratic procedures for the investment application process. Outside of these areas, the Department of Investment Services (DOIS) of the Ministry of Economic Affairs functions as the coordinator between investors and all agencies involved in the investment process. The Investment Commission of the MOEA is charged with reviewing and approving inbound and outbound investments.

Taiwan has simplified work-permit procedures for foreign white-collar employees. The Council of Labor Affairs (CLA) has a single window to issue work permits for all white-collar workers. As of August 2010, employers can apply on-line for working permits for their foreign employees. Work permits are typically issued within 7 to 10 days and may be extended indefinitely as long as the employer considers the employment necessary.

Taiwan has removed the job experience requirement for the employment of foreign management professionals by global operational headquarters and R&D centers, as well as for firms in designated industries. White-collar workers with a master’s degree or above are not subject to any job experience requirement. Those with lower education levels are required to have job experience if they don't conduct professional or technical job. Foreign white collar workers have the right to obtain permanent residence status after they have legally stayed in Taiwan for seven consecutive years, with a minimum time of residence of 180 days per year. The seven-year requirement is waived for high-tech personnel and those who have made "significant contributions" to Taiwan. Blue collar workers have no such rights to obtain permanent residence status automatically after seven years' legal residence.

The entry-visa issuance procedures for foreign white-collar workers who work for foreign companies have been simplified. A foreign executive who enters Taiwan with a tourist visa is no longer required to leave the island in order to convert the tourist visa to an employment visa. Similarly, a foreign executive whose employment visa expires is not required to leave in order to renew the visa.

Efficient Capital Markets and Portfolio Investment

Taiwan's capital market is mature and active. According to the most recent available data, as of November 2010, 747 companies were listed on the Taiwan Stock Exchange (TAIEX). The ratio of the market value of listed companies to GDP was 162.9%. The market value of the listed companies in Taiwan was at US$ 734 billion. The transaction volume of Taiwan's securities and stock exchange market reached US$ 990 billion, and the turnover rate of the transaction volume was 178.3% in 2010. A wide variety of credit instruments, all allocated on market terms, are available to both domestic- and foreign-invested firms. Legal accounting systems are largely transparent and consistent with international standards. The regulatory system is generally fair though it tends to be conservative at times by Western standards. Foreign portfolio investors are not subject to foreign ownership limits except in a limited number of industries.

In recent years, Taiwan authorities have taken a number of steps to encourage a more efficient flow of financial resources and credit. The limit on NT dollar deposits that a branch of a foreign bank may take has been lifted. Non-residents are permitted to open NT dollar bank accounts, though they are subject to capital-flow controls which limit each remittance to US$100,000. There are no restrictions on residents opening bank accounts overseas. A freeze on new bank branches, designed to encourage consolidation in the banking industry, was removed in 2007, although both foreign and domestic banks still need case-by-case approval to open new branches. Restrictions on capital flows relating to portfolio investment have also been removed. The banking, insurance and securities industries have been liberalized and opened to foreign investment, except investments from mainland China, which are subject to separate rules.

Currently foreign institutional investors are allowed to enter Taiwan’s market without restrictions. There is no minimum asset requirement. On-shore foreign investors are subject to annual capital flow limits of US$5 million for an individual foreign investor and US$50 million for an unregistered foreign company.

Taiwan has removed all legal limits on foreign ownership, except for investors from mainland China, in nearly all companies listed on the TAIEX. Exceptions include public utilities, power distribution, natural gas, postal service, telecommunications, mass media firms, and air and sea transportation. There have been no reports of private or official efforts to restrict the participation of foreign-invested firms in industry standards-setting consortia or organizations.

Taiwan has a tightly-regulated banking system. Since the mid-1980s, however, the financial sector as a whole has been steadily opening to private investment. The market share held by foreign banks was relatively small until five foreign banks and three foreign private equity funds completed their acquisitions of Taiwan banks in 2007 and 2008. Over the past decade, nine state-owned banks have been privatized. The only Taiwan-based reinsurance company was privatized in 2002. Banks that have some form of state ownership or control, including the three remaining banks wholly owned by the state, still dominate the banking sector, however, and hold a market share of nearly 60% (see next section).

Competition from State Owned Enterprises

Taiwan launched privatization programs in 1989 and has succeeded in turning over most of its state-owned enterprises (SOEs) to private industries. As of December 2010, Taiwan authorities still control twenty SOEs, including official agencies such as the Central Bank, the Bureau of National Health Insurance, and the Export-Import Bank of the ROC, which have no private-sector competitors.

Progress toward privatizing some of the remaining SOEs has been stalled since 2007, largely due to opposition from SOE employees. In addition, the rising fiscal deficit has made the authorities reluctant to part with their profit-making SOEs for fear of worsening their financial situation. Currently, there is no timetable for privatizing existing SOEs except for the Taiwan Tobacco & Liquor Co., which is scheduled to be privatized in March 2011.

While limited in number, some of Taiwan's SOEs are large in scale and exert significant influence in their industries. Examples include monopolies such as Taiwan Power Company (Taipower) and Taiwan Water Co., as well as the island's only aerospace product manufacturer, Aerospace Industrial Development Co. (AIDC), and industry giants Chinese Petroleum Co. (CPC), Taiwan Tobacco & Liquor Co., Chunghwa Post Company, Taiwan Sugar Co., Taiwan Railways Administration, Taiwan Financial Holdings, and the Taiwan Land Bank. The CPC controls over 70% of Taiwan’s gasoline retail market. Bank of Taiwan, one of Taiwan Financial Holdings' companies, is the island's largest bank in terms of assets. As of September 2010, Bank of Taiwan and the Land Bank account for 18% of domestic banks' total assets. With the exception of the state monopolies, the SOEs compete directly with private companies.

SOEs typically have an independent board of directors, and senior management is not required to report directly to a line minister. The authorities can appoint officials to serve in a certain number of board member positions. SOEs are not obligated, however, to consult with government officials before making business decisions, except in very rare cases.

It is worth noting that in some former SOEs, despite having been privatized, the Taiwan authorities continue to hold minority shares and still exert some control over them, including through managing appointments to the board of directors. These enterprises include Chunghwa Telecom, China Steel, Taiwan Fertilizer Co., Taiyen (Taiwan Salt), China Shipbuilding Co., Yang Ming Marine Transportation Co., as well as some financial institutions.

In the banking industry in particular, the state plays a dominant role. Taiwan's ten banks with minority state shares, in addition to the state-owned Bank of Taiwan and the Land Bank, jointly account for nearly 60% of the overall domestic banking assets. Most of these state-affiliated banks are large in scale compared to the purely private financial institutions. Not all of the banks, however, make full use of economies of scale, and some have been underperforming. In the third quarter of 2010, for example, the return on assets (ROA) for Bank of Taiwan was 0.17% -- lower than the domestic banks' average ROA of 0.55%, according to statistics from the Central Bank.

Taiwan has neither a sovereign wealth fund nor an asset management bureau.

Corporate Social Responsibility

The Taiwan authorities actively promote corporate social responsibility, which continues to be a growing concept in Taiwan. The Ministry of Economic Affairs (MOEA) and the Financial Supervisory Commission in particular have issued guidelines on ethical standards and internal control mechanisms in order to help businesses embrace responsibility for the impact of their activities on the environment, consumers, employees, and communities. MOEA also maintains an online newsletter to publicize best practices and raise awareness of the latest CSR-related developments in Taiwan and abroad.

At the corporate level, foreign and local enterprises generally make an effort to follow accepted CSR principles such as the OECD Guidelines for Multinational Enterprises. Publishing regular CSR reports is an increasing trend among businesses, especially high-tech electronics companies. Global Views Magazine, one of Taiwan's most influential magazines, has conducted an annual CSR survey since 2005, and has established an annual CSR award to highlight companies that follow internationally-accepted CSR standards and adopt transparent, environmentally conscious, and socially responsible practices. IBM Taiwan, Citibank, Ford, and Intel have been among the 2010 winners.

Political Violence

Taiwan is a relatively young and vibrant multi-party democracy. President Ma Ying-jeou's election in 2008 marked the second peaceful, democratic transfer of power in Taiwan. There have been no reports of politically motivated damage to foreign investment. Both local and foreign companies have, however, been subject to generally peaceful protests and demonstrations relating to labor disputes and environmental issues.


Taiwan has implemented laws, regulations, and penalties to combat corruption. The Corruption Punishment Statute and the Criminal Code contain specific penalties for corrupt activities, including maximum jail sentences of life in prison and a maximum fine of up to NT$100 million (US$3.3 million). In April 2009, the Legislative Yuan amended the Act for the Punishment of Corruption to bring criminal charges against civil servants who fail to account for abnormal increases in their assets.

We are not aware of cases where bribes have been solicited for foreign investment approval.

Taiwan formally became a member of the WTO Agreement on Government Procurement (GPA) in 2009. The Public Construction Commission (PCC) publishes all major state procurement projects that require open bidding, in accordance with WTO transparency requirements. In 2008, the PCC submitted to the legislature a bill which would make key changes to the government procurement process which would abolish the current minimum three-bidder requirement for procurement projects, replace the 'minimum bid price' with a 'qualified bid price' to ensure the quality of procurement, and authorize contractors to seek arbitration if the government procurement mediation procedure is not completed within six months due to the fault of the procuring agency. The amendment is still pending in the Legislative Yuan.

The Legislative Yuan on January 10, 2011 passed the following additional GPA amendments: (1) Procurements of technology, information, and professional services can be based on quality (i.e. the most advantageous bids), rather than price; (2) A GP data bank containing a list of awarded tenders exceeding NT$10 million (US$350,000) will be established, and; (3) Procurement agencies are required to use model contracts provided by PCC in order to reduce potential disputes.

The PCC organizes inspection teams to monitor all public procurement projects both at the central and local levels, and publishes the bidding and inspection results. A task force comprised of PCC staff and independent experts investigates complaints.

The authorities generally investigate allegations of corruption and take action to penalize corrupt officials. From January to November 2010, prosecutors indicted 1,123 persons on various corruption charges, including 68 senior officials (department director level and above) and 33 elected officials. In September 2010, the Taiwan High Court found 2 incumbent legislators and 6 former legislators guilty of accepting bribes from herbal medicine merchants to push legislation in their favor. In September 2008, former Taiwan president Chen Shui-bian and his wife were convicted on corruption and money laundering charges and sentenced to life in prison. After losing an appeal to the Supreme Court, Chen began serving his 17-year jail term at the Taipei Prison in December 2010.

Attempting to bribe, or accepting a bribe from, Taiwan officials constitutes a criminal offense, punishable under the Corruption Punishment Statute and the Criminal Code. The Corruption Punishment Statute also treats payment of a bribe to a foreign official as a crime and makes such a bribe subject to criminal prosecution. The maximum penalty for a public official receiving a bribe is life imprisonment or a maximum fine of NT$100 million (US$3.5 million). For those attempting to bribe officials, the maximum penalty is seven years in prison and a fine of NT$3 million (US$105,000). In addition, the offender will be barred from holding public office. The assets obtained from acts of corruption are seized and turned over to either the injured parties or the Treasury.

Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, should seek the advice of legal counsel.

The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.

U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/docs/dojdocb.html.

Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. Taiwan is not a party to these instruments, but prohibits the bribery and solicitation of its public officials.

OECD Antibribery Convention: The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. Taiwan is not a party to the OECD Convention.

UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and there are 148 parties to it as of January 2011 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Taiwan is not a party to the UN Convention.

OAS Convention: In 1996, the Member States of the Organization of American States (OAS) adopted the first international anticorruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption, provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of January 2011, the OAS Convention has 33 parties (see http://www.oas.org/juridico/english/Sigs/b-58.html). Taiwan is not a party to the OAS Convention.

Council of Europe Criminal Law and Civil Law Conventions: Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption standards. Currently, GRECO comprises 48 member States (47 European countries and the United States). As of December 2009, the Criminal Law Convention has 42 parties and the Civil Law Convention has 34 (see http://www.coe.int/greco) Taiwan is not a party to the Council of Europe Conventions.

Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: http://www.ustr.gov/trade-agreements/free-trade-agreements. Taiwan does not have a FTA with the United States.

Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating Taiwan's legal system and obtaining a list of local legal counsel.

Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at http://www.trade.gov/cs.

The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including at the American Institute in Taiwan (AIT) and through the Department of Commerce Trade Compliance Center “Report A Trade Barrier” Website at http://tcc.export.gov/Report_a_Barrier/index.asp.

Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at http://www.justice.go/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.

Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.

Anti-Corruption Resources

Some useful resources for individuals and companies regarding combating corruption in global markets include the following:

Information about the U.S. Foreign Corrupt Practices Act (FCPA), including a “Lay-Person’s Guide to the FCPA” is available at the U.S. Department of Justice’s Website at: http://www.justice.gov/criminal/fraud/fcpa.

Information about the OECD Anti-bribery Convention including links to national implementing legislation and country monitoring reports is available at: http://www.oecd.org/department/0,3355,en_2649_34859_1_1_1_1_1,00.html. See also new Antibribery Recommendation and Good Practice Guidance Annex for companies: http://www.oecd.org/dataoecd/11/40/44176910.pdf.

General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website: http://www.ogc.doc.gov/trans_anti_bribery.html.

Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009. TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools. See http://www.transparency.org/publications/gcr.

The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See http://info.worldbank.org/governance/wgi/sc_country.asp. The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at: http://go.worldbank.org/RQQXYJ6210.

The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See http://www.weforum.org/en/initiatives/gcp/GlobalEnablingTradeReport/index.html.

Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at //2009-2017.state.gov/j/drl/rls/hrrpt.

Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at: http://www.report.globalintegrity.org.

Bilateral Investment Agreements

Taiwan has concluded bilateral investment agreements with the following 29 countries: Argentina, Belize, Burkina Faso, Costa Rica, Dominica, El Salvador, Gambia, Guatemala, Honduras, India, Indonesia, Liberia, Malaysia, Macedonia, Malawi, the Marshall Islands, Nicaragua, Nigeria, Panama, Paraguay, the Philippines, Saudi Arabia, Senegal, Singapore, St. Vincent, Swaziland, Thailand, the United States, and Vietnam.

The terms of the 1948 Friendship, Commerce, and Navigation Treaty between the Republic of China and the United States are still in force. Under its terms, U.S. investors are generally accorded national treatment and are provided with a number of protections, including protection against expropriation. Taiwan and the United States also have an agreement pertaining to investment guarantees that serve as the basis for the U.S. Overseas Private Investment Corporation (OPIC) program in Taiwan. The agreement, signed in 1952, is called the Agreement Dealing with Guaranty of American Investment of Private Capital in Taiwan.

Representatives of the United States and Taiwan signed a bilateral Trade and Investment Framework Agreement (TIFA) in 1994 to serve as the basis for consultations on trade and investment issues. The TIFA talks are ongoing, with the next round expected to occur in early 2011.

OPIC and Other Investment Insurance Programs

OPIC programs are available to U.S. investors, though U.S. investors have never filed an OPIC insurance claim for an investment in Taiwan. Taiwan is not a member of the Multilateral Investment Guaranty Agency.


Benefiting from the recovery following the global financial crisis in 2008 and 2009, Taiwan's unemployment rate dropped to 4.73% in late 2010, down from 5.85% in 2009. In the industrial sector, the number of blue-collar foreign workers increased from 176,000 in 2009 to 189,000 by October 2010.

There are no special hiring practices in Taiwan. Employees are typically paid at least a one-month bonus at the end of the year. Benefits often include meals, transportation, and dormitory housing or related allowances. Dividend-sharing is common in high-tech industries. A standard labor insurance program is mandatory. The program provides paid maternity leave, a lump-sum or annuity retirement plan, and other benefits. A new retirement system implemented in 2005 replaced a voluntary retirement scheme that still covers roughly 30% of the total labor force and permits retirement at age 55 with 15 years of service. Employees hired after July 2005 must join the new system, which sets mandatory retirement at age 65. The new system also requires the employer to contribute six percent of an employee's monthly wage to accounts at designated banking institutions. The accounts follow the employees as they move from one employer to another. A universal national health insurance system, to which employers must contribute, covers all Taiwan residents.

Taiwan provides unemployment relief based on the Employment Insurance Law enacted in 2002. Alternatives for unemployment pay include a vocational training allowance for jobless persons and employment subsidies to encourage the hiring of jobless persons. The Labor Standards Law (LSL) sets a standard eight-hour workday and a biweekly maximum of 84 hours. The public sector and most private firms have a five-day workweek. The LSL restricts child labor and requires employers to provide overtime pay, severance pay, and retirement benefits. The LSL covers both manufacturing and service sectors. Violators are liable to criminal penalties (jail terms) and administrative punishments (fines).

Beginning January 1, 2011, Taiwan's minimum monthly salary increased NT$600 to NT$17,880 (US$615), and the minimum hourly wage rose NT$3 to NT$98 (US$3.37). Monthly manufacturing sector wages in the first nine months of 2010 averaged NT$ 43,428 (US$ 1.424) including overtime, allowances, and bonuses. This was 10% higher than monthly wages for the same period in 2009, and reflects Taiwan's gradual recovery from the global recession, during which time many Taiwan businesses implemented leave without pay for employees.

Labor unions have become more active and independent since Taiwan’s martial law was lifted in 1987. Privatization, mergers and acquisitions (M&A), the new retirement system, and the recent economic slowdown contributed to an increase in labor disputes over the past four years. Taiwan is not a member of the International Labor Organization (ILO) but adheres to the ILO conventions in the protection of workers’ rights.

Foreign-Trade Zones/Free Ports

The first free trade/free port zone began operation at Keelung, Taiwan’s northern port, in 2004. Another four were established in 2005 at Taoyuan International Airport and the international harbors in Kaohsiung, Taichung, and Taipei. In May 2010, the Executive Yuan approved the establishment of a free-trade zone at the Suao port in northeast Taiwan, making a total of six free trade zones in Taiwan. The Taiwan authorities have relaxed restrictions on the movement of merchandise, capital, and personnel into and out of these zones. Foreign investors located in these areas are accorded national treatment.

Foreign Direct Investment Statistics

Statistics on foreign direct investment in Taiwan are available from two official sources: the Investment Commission (IC), and the Central Bank of the ROC (Taiwan) (CBT). The IC publishes monthly and yearly foreign investment approval statistics by industry and by country. While these statistics do not correspond exactly to actual commitments of investment funds, AIT believes these data serve as a good proxy. The CBT publishes foreign direct investment arrivals on a quarterly and yearly basis. CBT data contained in balance-of-payments (BOP) statistics are neither further classified by industry nor country.

As of the end of 2009, Taiwan's total stock of foreign direct investment stood at US$107 billion valued at historical cost. This represents about 28.4% of Taiwan's 2009 GDP. Total FDI inflows for 2009, based on approvals, stood at US$4.8 billion, or about 1.3% of 2009 GDP.

As of December 2010, Taiwan's foreign exchange reserves amounted to US$382 billion, the fourth-largest in the world.

After experiencing a negative growth of 1.9% in 2009, Taiwan's GDP expanded rapidly in the first three quarters of 2010. Overall GDP in 2010 is expected to grow by 9.98%, according to official forecasts. Inbound foreign direct investment approved from January to November of 2010 dropped 20% year-on-year.

In recent years, foreign direct investment has shifted from capital-intensive high-tech industries to investments in the financial service sector. Approved direct investment in electronics industries (including electronic parts and components, computers, communications, semiconductor, TFT-LCD and other optical electronic products), which peaked at 47% as a percentage of total FDI in 2006, declined steadily to 20% as of November 2010. Meanwhile, the percentage share for investment in financial services increased to 27% as of November 2010. Nearly 80% of approved inbound direct investment in Taiwan’s electronics industries came from the United States, Europe and Japan. More than 70% of approved inbound direct investment in the banking and insurance sector came from the United States, Europe, and British territories in North America.

According to official Taiwan statistics, approvals for U.S. investment from 1952 to 2009 totaled US$21.3 billion (US$19.5 billion according to official U.S. figures), or 20% of total foreign investment. These aggregate figures of investment stock are valued at historical cost. Thirty percent of U.S. total investments was directed toward the electronics and electrical industries, and 50% toward the service sector. Approvals for Japanese investment from 1952 to 2009 amounted to US$16.4 billion, or 15% of total foreign investment, of which 33% was in electronics and electrical industries and another 33% in the service sector.

As the tables below indicate, significant FDI now comes from the tax havens of British Territories in America (BTA), which harbor a growing number of multinational corporations, including those with Taiwan roots. One quarter of the investment from the BTA was directed towards financial services and another quarter to the electronic and electrical industries.

As a relatively open and liberal economy, Taiwan not only benefits from substantial foreign investment but also has significant investments overseas. According to balance-of-payments statistics compiled by the Central Bank, outbound direct investment has exceeded inbound direct investment every year since 1988. According to IC statistics, by 2009, cumulative approvals for outbound investments totaled US$145.5 billion. The main recipient has been the PRC, which has received over half of Taiwan’s outbound investment. Approved investments to China decreased by 30% in 2009 compared to the previous year, when 57% of Taiwan's new overseas investment went to the PRC. It is estimated that Taiwan firms hold investments in excess of US$100 billion on the mainland.

Taiwan business firms have been relocating their production bases to China since the late 1980s. The WTO accessions of the PRC and Taiwan in 2002 prompted Taiwan business firms to accelerate this relocation to sharpen their competitive edge in exports. Taiwan factories based in China use the lower labor and land costs to process Taiwan-made production inputs into finished goods for exports to such industrial markets as the United States, Japan and Europe, and also for final sale in China. Recently however, rising labor and land costs on the mainland have prompted some Taiwan firms to move from China to nations in South and Southeast Asia, including Vietnam. Many Taiwan firms have also shifted to producing higher value-added goods and higher-tech products in China.

Taiwan's annual registered direct investment across the Taiwan Strait grew from US$1.25 billion in 1999 to US $6.1 billion in 2009. As a result of this trend, Taiwan factories in China produced slightly over 50% of export orders received by Taiwan companies’ headquarters by November 2010, up from 11.5% in early 2000. The ratio is closer to 85% for information technology (IT) firms. China, including Hong Kong, replaced the United States as Taiwan's largest export market in 2001, and its share of Taiwan's exports in 2009 averaged 41%, compared to 12% for the United States and 11% for the European Union.

Table 1: Inward Foreign Investment Approvals by Year and by Area (1952-2009)
(Unit: US$ million)






Hong Kong



















































































































































































Source: Investment Commission
* British Territories in America

Table 2: Inward Foreign Investment Approvals by Industries (1952-2009)


Million of US dollars


Banking and Insurance



Electronic Parts and Components



Wholesale and Retail Trade



Financial Holding Industry



Computers, Electronic & Optical Products



Electricity Equipments



Information and Communications



Table 3: Outbound Investment Approvals by Year and by Area (1952-2009)
(Unit: US$ million)


































































































































































Source: Investment Commission
Note: "ASEAN" here includes six of ASEAN countries: Singapore, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

Table 4: Outbound Investment Approvals by Industries (1952-2009)



Million of US dollars


Banking and Insurance



Financial Holding Industry



Electronic Parts and Components



Wholesale and Retail Trade



Computers, Electronic & Optical Products






Information and Communications



Source: Investment Commission

Table 5: Major U.S. Investors in Taiwan

U.S. Investor/Local Investment

Major Products

Amkor Technology Ltd./Amkor Technology Taiwan

Integrated circuit packaging and testing

AIG/Yageo Corp.

Far East Air Transport Corp.

Nan Shan Life Insurance Co.

Electronic components



Hewlett-Packard Taiwan Ltd.

Servers and personal computers

Corning Inc./Corning Glass Taiwan Co., Ltd.

Substrate glass for TFT/LCD

GTE-Verizon/Taiwan Fixed Network Telecom

Taiwan Cellular Corp.

Fixed-line and mobile phone service

Carlyle Group/Eastern Technology

Ta Chong Commercial Bank


Ensite Limited (Ford Motor)/Ford Lio Ho Motor Co.


Texas Instruments Inc./Texas Instruments Taiwan Ltd.


E.I. Dupont De Nemours/Dupont Taiwan Ltd.

Industrial, electronic, agricultural goods

IBM Corp./IBM Taiwan Ltd.

Computers: sales & service

AETNA Life Insurance Co. Taiwan Branch


View Sonic Co./Taiwan PCS Network Inc.

Mobile phone service

UPS International/UPS, Taiwan Branch

Worldwide express service

Intel Inc./Intex. Co.

ADSL chipset

Applied Materials Ltd./Applied Materials Taiwan Ltd.

Semiconductor manufacturing equipment

General Motors Co./Yulon GM Motor Co.

Auto assembly & sales

GE Consumer Finance/Cosmos Bank


Jabil Circuit Inc./Taiwan Green Point Enterprise Co.

Telecom components

Citibank/Citibank (Taiwan)

Bank of Overseas Chinese


Oaktree Capital Management Co./Fu Sheng Industrial Co.

Golf club head and compressor

Fairchild Semiconductor Co./System General Corp.

Power management products

AIU Insurance Co./Central Insurance Co.


Web Resources:

Commerce Department of the Ministry of Economic Affairs (MOEA): http://www.moea.gov.tw

Bureau of Foreign Trade, MOEA: http://www.trade.gov.tw

Department of Investment Services, MOEA: http://www.dois.moea.gov.tw

Investment Commission, MOEA: http://www.moeaic.gov.tw

Taiwan Intellectual Property Office, MOEA: http://www.tipo.gov.tw

Council of Labor Affairs, Executive Yuan: http://www.cla.gov.tw