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10-29-2014 1 1
AEC 2015:
Taiwan Industry Response
Kristy Hsu
Program Director, Taiwan ASEAN Studies Center,
Chung Hua Institution for Economic Research
October 29, 2014
10-29-2014 2 2
Outlines
I. ASEAN Economic Community 2015 in
Shaping
II. Taiwanese Outward FDI Activities:
Recent Trends in China and Southeast
Asia
III. The Way Forward
ASEAN-Centric Economic Integration -1
• The 1997 ASEAN Vision 2020 was adopted by ASEAN Leaders
during the Asian financial crisis to create an ASEAN Economic
Community(AEC); the goal was then advanced to 2015.
• The ASEAN-China FTA in 2001 catalysed the series of ASEAN
+ 1 FTAs, initially with China (ACFTA) in 2004, Korea
(AKFTA) in 2006, Japan (AJCEP) in 2008, Australia and New
Zealand (AANZFTA) and India (AIFTA) in 2009.
• ASEAN and Hong Kong kicked off the first round of
negotiations of an ASEAN-Hong Kong FTA in July 2014.
• Based on the EAFTA(ASEAN+3) and the CEPEA(ASEAN+6)
proposals, ASEAN in 2012 announced to negotiate a Regional
Comprehensive Economic Partnership (RCEP) with its 6 FTA
Partners.
• .
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One Vision, One Identity, One Community
4
5
2015 ASEAN Economic Community
Production base
Platform for greater regional
integration
Single market
1. Towards a single market and production base
2. Towards a highly competitive region
3. Towards a region of equitable economic development
4. Towards full integration into the global economy
ASEAN-Centric Economic Integration-2
• Based on ASEAN Centrality, RCEP aims to achieve a modern,
comprehensive, high-quality and mutually beneficial economic
partnership agreement with its FTA partners, and aims to
conclude by end of 2015, same as the goal of AEC realization.
• The initiative encompasses a population of 3.5 billion(48% of
the world’s population), a combined GDP of US$ 32 trillion
(28.4% of global GDP).
• With an open accession clause to enable new members (FTA
Partner and Economic Partner), RCEP will continue to expand
and transform the region into an integrated market.
• ASEAN Leaders in 2013 committed to creating a Post-2015
Vision to further lower trade and investment barriers, enhance
connectivity and build infrastructure and legal frameworks in the
region. 10-29-2014 6
Strong Business Interests in AEC
• ASEAN will be both Asia Factory and Asia Market, so different
strategy is needed according to interests of different sectors.
• A growing number of ASEAN businesses (ASEAN and non-
ASEAN) now have an “ASEAN strategy” in mind.
• The US Chamber of Commerce in a recent survey found that
54% of American companies have an ASEAN strategy in place
and looked forward to the full implementation of the AEC; 84%
of executives surveyed expected profits to increase in 2014 as
integration continued.
• For example, education services can be a huge market. Ex.
6,500 higher education institutions and 12 million students in
the ten Member States.
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GDP Growth 1986-1990 1991-1995 1996-2000 2001-2005 2006-2011
Brunei -1.65 3.17 1.35 2.08 0.94 Cambodia 8.49 6.46 7.18 9.36 6.80 Indonesia 6.93 7.83 1.06 4.71 5.86 Lao PDR 4.47 6.19 6.17 6.33 7.99 Malaysia 6.70 9.47 4.99 4.76 4.57 Myanmar -1.98 5.90 8.35 12.87 10.30 Philippines 4.74 2.19 3.59 4.60 4.75 Singapore 8.69 8.57 5.84 4.83 6.33 Thailand 10.34 8.50 0.87 5.45 3.09 Vietnam 4.16 8.21 6.96 7.51 6.83 ASEAN (Aggregate) 7.02 7.48 2.82 5.09 5.14
GDP Per Capita Growth 1986-1990 1991-1995 1996-2000 2001-2005 2006-2011
Brunei -4.37 0.35 -1.08 -0.03 -1.26 Cambodia 4.54 3.14 4.89 7.83 5.59 Indonesia 4.98 6.15 -0.29 3.40 4.73 Lao PDR 1.60 3.38 4.00 4.67 6.40 Malaysia 3.66 6.68 2.46 2.51 2.84 Myanmar -3.60 4.42 6.96 12.20 9.52 Philippines 2.03 -0.17 1.33 2.50 2.96 Singapore 6.38 5.50 3.37 3.06 2.93 Thailand 8.44 7.55 -0.27 4.30 2.38
Vietnam 1.96 6.11 5.64 6.35 5.67
ASEAN (Aggregate) 4.84 5.63 1.28 3.74 3.94 10-29-2014
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Average CEPT Rates in ASEAN
Average Tariffs in ASEAN (2000~2013)
Implementation of ASEAN Trade in Goods Agreement
(ATIGA) and Common Effective Preferential Tariffs (CEPT)
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ASEAN Trade with FTA Partner Countries
2003~2012 ASEAN export to 6 partner countries 2003~2012 ASEAN import from 6 partner countries
Unit: million USD
Top 10 Sources of FDI inflows in
ASEAN (2011~2013)
Source: ASEAN Secretariat. 11
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Outlines
I. ASEAN Economic Community 2015 in
Shaping
II. Taiwanese Outward FDI Activities:
Recent Trends in China and Southeast
Asia
III. The Way Forward
TW Outward FDI: Destinations
TW Outward FDI: Industry
16
Taiwan FDI in China/Southeast Asia
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Taiwanese outward FDI activities
period Destinations Investors Consideration Industry
1980s~1990 ASEAN
China
-SME
-SME
Labour cost Labour
intensive
mfg
1990s~2000 ASEAN
China
-SME,SOE
-Financial
-Mid-large
Labour cost Tech mfg
Contract
mfg (ODM)
2000s~2010
China
ASEAN
India
-Listed co Domestic
market
Mfg.
Services
2010~
ASEAN
China
Taiwan
-Listed co
-Brand
owners
Regional
hub
Mfg.
Services
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2014 TEEM Survey on China
• 2014 Taiwan Electrical and Electronic Manufacturers’
Association (TEEMA) Survey on Chinese Investment Climate
Outlook of Chinese economy
Chinese investment climate
More inward looking strategy in China
China + I (China + ASEAN) investment model
• Suggestions:
Enhance cross-strait industrial cooperation to promote better
cooperation
Mechanisms to help companies to “return home”
Measures to help companies to “exit” from Chinese market
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2014 TEEM Survey on China
2011 2012 2013 2014
Commercial/
investment disputes 119.91% 127.63% 140.63%
Satisfactory
settlement 69.38% 62.93% 58.48% 57.16%
Profitability
(-10%~50%) 5.11%
16.54% 25.02% 24.90%
Expectation for
next 3 years
35.10%
29.09%
23.60%
Plan for expansion
in next 5 years 53.02%
(2010) 40.28%
Return Taiwan for
listing 254%
2.92% 4.08% 6.29%
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Taiwan FDI in ASEAN-6 Countries
New Trends of TW Outward FDIs
• FDI in China: average scale continues to grow (USD 3.47 million
in 2004 to USD 24 million in 2012)； but total FDI amount
continues to decline since 2010.
• FDI in ASEAN countries: “Taiwanese businesses return to
Southeast Asia”, mainly focusing in emerging economies (CLMV
countries) + Indonesia + the Philippines.
• Reasons for going to ASEAN: AEC, changing investment
environment in China, Vietnam joining the TPP, etc.
• Services follow manufacturing industry to invest in China and
ASEAN; new partnership with Japan (Philippines, Myanmar);
regional manufacturing/operational hub; more indirect investment,
M&A and franchizing activities; development of TW Industrial
Parks/Zones (Vietnam, Indonesia, India, Cambodia, Myanmar), etc.
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Outlines
I. ASEAN Economic Community 2015 in
Shaping
II. Taiwanese Outward FDI Activities:
Recent Trends in China and Southeast
Asia
III. The Way Forward
Import from ASEAN: Taiwan,
China, Japan and Korea
Export to ASEAN: Taiwan, China, Japan
and Korea
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Challenges for Taiwan
• Over concentration in trade structure: around 40% of export in electronic/IT products and parts, ex. HTC; 30% of export to ASEAN in oil related products, etc.
• Growing dependence on specific markets: China + ASEAN around 60% of exports and more than 70% of FDI outflows.
• Emerging issues in investment protection, regulatory risks and FDI restrictions in ASEAN
• Rise of Red Supply Chains and some ASEAN countries climbing up the global value chains (GVCs)
• Weak FTA networks: tariffs, NTMs and investment “discrimination” compared with competitors, such as Korea, China.
• China factor or cross-strait relations
Recommendations
For Government:
• To develop bilateral FTA/ECA, enhanced version of BIA with
ASEAN countries
• To promote industrial and human resource development
cooperation with ASEAN countries
• To consider ASEAN Investment Fund for SMEs.
For Industry:
• To establish ASEAN-Taiwan Business Council/Businesses
Coalition
• To think of ASEAN as a whole and develop an ASEAN strategy
• To consider country-specific, sector-specific strategy in different
groupings of ASEAN countries
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