The Cabinet today approved a draft of the special act governing free economic pilot zones (FEPZ), which emphasizes deregulation and market opening in such areas as manufacturing and service industries, land management, personnel movement and customs services. The bill even covers innovative education ventures and professional services, which would take the concept of liberalization to another level, said Premier Jiang Yi-huah.
"Establishing the zones will help the country's bid to sign more international trade agreements, promote industrial transformation, drive economic growth, and speed Taiwan on its way to becoming a free economic island."
The second stage of the FEPZ program cannot be implemented until the bill passes the Legislative Yuan, Jiang said. Hence, the Council for Economic Planning and Development (CEPD), which drafted the bill, and the Ministry of Economic Affairs, which will oversee the zones, must work hard to convince legislators on all sides to have the bill ratified. He also asked the Ministry of Finance, Ministry of Health and Welfare, Council of Agriculture, Ministry of Education, Ministry of Transportation and Communications, and Mainland Affairs Council to lend their full support and make a compelling case to the lawmakers.
Because these liberalization measures will likely involve a broad range of business and social interests, the special law must have support from all sectors, Jiang said. He has already requested the CEPD to organize government-wide seminars so that ministries and commissions can have the accurate knowledge to build consensus on the major policies. All agencies should proactively publicize the new measures; all department directors and above must have a full understanding of the FEPZ plan and be able to communicate and defend the policies on any given occasion so as to convey to the public a sense of the program's importance.
The draft act may be summarized as follows:
Chapter 1: General principles specifying the competent and managing agencies of the FEPZs, and the scope of their authority; operation funds; the two categories of pilot businesses; and main and auxiliary businesses inside the zones. (Articles 1 to 12)
Chapter 2: Regulations on applications and administrative procedures, including applications to set up the zones, screening procedures, land acquisition, rental use, and the abolition of pilot zones. (Articles 13 to 28)
Chapter 3: Special rules for foreigners and mainland Chinese, including easing visa procedures for foreigners visiting Taiwan, and relaxing residence regulations for businesspeople from mainland China. (Articles 29 to 30)
Chapter 4: Tax incentives, including tax exemption on overseas dividends or profits introduced into FEPZs for investment. Foreign professionals will not have to pay alternative minimum tax on income earned outside Taiwan, and during their first three years in Taiwan they will enjoy income tax exemption on half of their local earnings. Foreign companies will be granted business income tax exemption on 100 percent of export and 10 percent of import sales of products stored or roughly processed in FEPZs. (Articles 31 to 34)
Chapter 5: Regulations on untaxed goods and labor, including customs clearance of commodities; electronic bookkeeping and remote auditing; imposition and exemption of taxes; annual inventory taking; on-site inspection; and management of the different business categories. (Articles 35 to 46)
Chapter 6: Regulations on industrial development, including rules on satellite farms of agricultural processing businesses; rules on board directors of medical institutions; limitation on hours worked by part-time domestic physicians; exclusion of international medical institutions from coverage by Taiwan's national health insurance system; and license fees charged to international medical institutions. (Articles 47 to 53)
Chapter 7: Regulations on education businesses and professional services, including cooperation between domestic and foreign universities, and setting up experimental branch campuses, colleges, degree programs or professional courses. Attorneys, accountants and architects will be able to set up firms and provide professional services inside the zones, and foreign certified professionals will be allowed to invest in or enter into partnerships with these firms. (Articles 54 to 61)
Chapter 8: Punitive regulations. (Articles 62 to 72)
Chapter 9: Supplementary provisions, including implementation date for this act. (Article 73)