Taiwan gives RP another look

Taiwan gives RP another look

By Rita Raagas

MANILA (UPI): Taiwan's investments in the Philippines are loose change compared with the money it puts into other Southeast Asian nations, but its neighbor is now getting a second look.

Propelled largely by tax breaks, but also by changing politics, Taiwanese investors poured US$1.3 billion into a special economic zone in the northern Philippines in 1995 alone.

That compares with a grand total of $735 million in the 36- year span from 1959 to 1994, according to the Taipei Economic and Cultural Office in Manila. During that same period, Taiwan invested $7 billion in Malaysia, $6.8 billion in Indonesia and $5 billion in Thailand.

Virtually all the recent money has gone into the former U.S. naval base at Subic Bay, now turned into a Hong Kong-style free port.

The 45,000-acre (18,000 hectare) property offers exemptions in customs and import duties, national internal revenue taxes and income taxes. In lieu of paying the regular taxes, companies are required to pay only a tax of 5 percent of their gross revenues.

In one 750-acre (300 hectare) corner of the new free port, Taiwanese investors have built an industrial park that is home to the mammoth Acer group, which has earmarked $35 million for manufacturing plants for Pc motherboards, Cd-Roms and other components.

"We expect the full operations of these Taiwanese locators at the park to create a major economic impact in the Philippine economy and may even surpass in five years the amount of Taiwanese investments in the country from 1981 to 1995," said Cheng Hsien-Jone, corporate president of the Subic Bay Development and Management Corp., which built the park.

Cheng said economic reforms and improved law and order have lured Taiwanese investors, but the tax incentive offered by Subic was the magnet that finally pulled them in.

"The come-ons were hard to resist," Cheng said. "Because of these come-ons, Taiwanese investments are in Subic. Eventually, there will be investments outside Subic because now that we are here, we cannot help but notice the rest of the country."

Analysts say other factors are also at play. Most significantly, the ouster in 1986 of the strictly pro-China Ferdinand Marcos, the dictator who ruled the country for two decades.

There are only about 744 miles (1,200 km) separating Taipei and Manila. The difference between the northern part of the Philippines and the southern tip of Taiwan is only a 30-minute plane ride.

But until Marcos' ouster, Taiwanese investments in the Philippines were a pittance. It was barely $51 million in nearly three decades from 1960 to 1986.

Marcos' strict compliance to the one-China policy was largely blamed for the Taiwanese apathy. Manila forged exclusive diplomatic relations with Beijing in June 1975. The move was cemented in a joint communique signed by Marcos and Chinese Premier Zhou Enlai.

A year after Marcos was ousted, Taiwanese investments in the Philippines jumped $7.3 million from only $282,000 in 1986. In 1988, it surged more than 1,000 percent to a whopping $91 million. The figure has been on the rise ever since.

Liu Po-lun, former Taiwanese representative to Manila, said trade and investments were minuscule from the late 1970s to the early 1980s because businessmen and even tourists were discouraged from visiting the Philippines.

"The screening for visa applications of Taiwanese was very strict," he said. "Most were denied visas."

These days, Taiwan is no longer a diplomatic outcast in the Philippines and in most parts of Asia.

Although Taipei was ousted from the United Nations in 1991 in favor of Beijing, it was accepted as a member of the Asia Pacific Economic Cooperation group of 18 countries, including China.

The Philippines has actively courted Taiwanese investments while giving lip service to the one-China policy. President Fidel Ramos, whose father was a former Philippine representative to Taiwan, has actively lured its business. Beijing has made known its consternation over rising Taiwanese investments in the Philippines, but Manila has repeatedly stressed that politics and business are two different things.

In 1994, Taiwanese President Lee Teng-hui unofficially visited the Philippines to see for himself the investment opportunities in the country, particularly in Subic Bay.

Subic Bay Metropolitan Authority Chairman Richard Gordon has particularly catered to the Taiwanese business community, clearing away bureaucratic hassles and assigning special representatives to deal with investors from Taiwan. A total of 209 companies have invested close to $3 billion in Subic as of March 1996.

While Subic is becoming an engine of growth, the overall Philippine economy is on the rise. After years of stagnation, the economy grew by 1 percent in 1992, the year Ramos became president. In 1995, the economy expanded 5.7 percent and higher growth is expected this year.

With a goal for the country to achieve a newly industrialized status by the year 2000, Ramos deregulated long protected industries such as telecommunications, aviation and banking.

In the last three years, the government has opened the country's doors to 10 new foreign banks, broken the former monopoly of the Philippine Long Distance Telephone Co. and allowed new carriers to compete freely with Philippine Airlines.

Chan Hsien-ching, Taiwanese representative to Manila, said his government is convinced the Philippines is a smart choice for the overseas operations of their businessmen.

"As the Government of the Republic of China has started its southbound policy aimed to further promote trade and investment in the Southeast Asian region, the Philippines is one of the target countries because of its exceptional geographical proximity, friendly people and abundant natural resources," Chan said.