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.