Expanding domestic investment to revitalize the economy

  • Date: 2016-09-07

I. Background

Lackluster exports and declining investment activity are the main reasons that Taiwan’s economic growth has slowed in recent years. Premier Lin Chuan has pointed out that while export performance depends on global economic factors that Taiwan cannot control, attracting investments—whether by the public sector, state-operated enterprises or private companies—can stimulate the domestic economy. So when the economy stagnates, the government must take the lead in promoting investment activity.

Toward that end, the National Development Council on August 25, 2016 proposed an array of investment expansion programs based on investment environment recommendations made by business groups, specific measures developed by the Ministry of Economic Affairs and Ministry of Science and Technology, and new investment projects proposed by state-operated and semi-privatized enterprises.

 

II. Policy focus and promotional measures

A. Improve the investment environment

1. Optimize land use in industrial zones and science parks:
For industrial zones, make land available for lease rather than sale, provide rent concessions to qualified companies, and take measures to stabilize land prices. For science parks, lower land leasing prices.

2. Ensure stable electric power supplies:
Accelerate the installation of smart electric meters, promote solar power stations and offshore wind farms. Increase flexibility for the purchase of power supplies produced by cogeneration (simultaneous production of heat and power).

3. Maintain stable water supply:
Reduce water leakage by expanding use of the “district metering area” method and replacing aging water pipelines. Encourage the private sector to invest in water reclamation systems.

B. Spur private investment

1. Revise regulations regarding the useful life of fixed assets:
Update the Income Tax Act’s fixed asset service life table to match emerging industry trends, and encourage businesses to invest in new facilities such as equipment for the internet of things (IoT), artificial intelligence, and energy saving and conservation.

2. Promote innovative industries
Grant subsidies for innovative industries (intelligent machinery, smart city, green technology, an “Asian Silicon Valley,” biomedicine, national defense and new agriculture) to establish experimental platforms and tap into the high-end applications market. Provide them with domestic field-test sites.

3. Develop lifestyle industries:
Ease tourism industry regulations such as the Regulations for the Management of Home Stay Facilities, and expand visa-free entry to Taiwan. Promote cultural and creative industries by expanding the National Development Fund’s investment in the film and television industry in the short term, and establishing a professional intermediary organization and circulating funds in the medium to long term.

4. Leverage government funds to spur private investment:
Stimulate domestic investment by setting up an industrial innovation and transformation fund and a national-level investment company.

C. Boost investment by state-owned and semi-privatized enterprises

State-owned enterprises and semi-privatized businesses have proposed investment projects in basic infrastructure and emerging industries worth a total of NT$340 billion (US$10.77 billion).

1. Ensure the sustainability of energy supplies:
Expand and upgrade combined cycle gas turbine generation plants, and invest in a cogeneration power plant and a petrochemical storage center.

2. Increase investment in transportation infrastructure:
Renovate and relocate Port of Keelung facilities, including the military pier, the west bank container terminal, yard facilities, and a logistics warehouse. Upgrade all facilities in the Taiwan Taoyuan International Airport’s airside area.

3. Strengthen investment in green energy and emerging industries:
Implement the second and third phases of the government’s solar power promotion plan, as well as the fifth phase of the wind power project. Invest in cloud and internet data centers, IoT technology, information security and fifth-generation telecommunications technology.
 
4. Improve the manufacturing environment and raise service quality:
Develop zero effluent discharge technologies and applications. Enhance the overall environment and service quality of post offices.

D. Strengthen digital innovation

1. Improve the digital infrastructure:
Upgrade broadband and wireless networks in schools, and expand internet infrastructure in remote areas. Promote digital governance by implementing an e-government cloud infrastructure program.

2. Speed up digital transformation of enterprises:
Promote public procurement of innovative products and services, help Taiwanese industries participate in the establishment of international IoT standards, and build an information service ecosystem. Set up a “fintech office” as a one-stop service platform to drive innovation in financial technology.

 

III. Conclusion

The government is implementing a raft of investment expansion programs to fuel Taiwan’s economic growth and drive the transformation and upgrading of local industries. These programs are expected to stimulate the economy over the short term while building next-generation industries and strengthening their growth potential over the medium and long term.