The newly amended plan for the free economic pilot zones (FEPZ) announces the nation's determination to promote economic openness and participate in international economic and trade organizations, Premier Jiang Yi-huah stated today.
"This program will accelerate the drive to make Taiwan a free economic island," he said.
To move forward on the plan, a draft FEPZ special act is scheduled to be passed by the Executive Yuan by the end of December and then sent to the Legislative Yuan for deliberation.
The premier made these remarks after leading a delegation of financial and economic agency heads to report to President Ma Ying-jeou on proposed changes to the plan. The president approved and praised the modifications and urged the officials to expedite the program's implementation in order to lay a solid foundation for Taiwan's economic liberalization.
The original FEPZ plan was approved by the Executive Yuan in April this year, and its first-phase plan was activated in August. In response to the development of international economic and trade accords such as the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP), the Executive Yuan took reference from other free trade agreements and decided to expand the area for economic liberalization in the FEPZs.
During the past month, with Premier Jiang personally presiding over seven meetings to have intensive discussions with relevant agencies, several new measures have been proposed to not only incorporate such professional services as the legal sector into the area of liberalization but also add educational innovation to industries prioritized for development in the pilot zones to pioneer systemic reforms and deregulation.
According to the Executive Yuan, the amended plan seeks to significantly relax restrictions on talent, goods and money flows, including regulations on foreign professionals working in and passing in and out of the areas, outside contracting for goods passing through the ports, and land control and audit procedures.
To bring domestic systems in line with international standards, the establishment of firms with the status of legal persons which provide professional services involving lawyers, accountants or architects will also be allowed in the FEPZs, and certified foreign professionals will also be allowed to invest in or enter into partnership with these services. These newly opened professional services can only provide service for businesses in the FEPZs, emphasized the Executive Yuan.
Under the amended plan, the FEPZs will focus on intelligent logistics, international health care, value-added agriculture, financial services and educational innovation. The main points are as follows:
Intelligent logistics: Innovative customs procedures and cloud computing platforms will be integrated to provide optimal shipping management and services. In addition, enterprises inside the FEPZs are able to outsource manufacturing to factories outside the zones to connect neighboring manufacturing sites and increase the flow and value of products. (This is the "store in the front, factory in the back" model.)
International health care: An industrial park will be established to house international medical institutions and biotechnology research and development centers to spur progress in medical treatment (including intensive treatment), biotech products, medicine, rehabilitation, health preservation and other services.
Value-added agriculture: Plans are afoot to capitalize on Taiwan's agricultural technologies, develop more product innovation and added value, enhance global marketing of the "Made in Taiwan" brand, and turn agricultural products into a viable value chain.
Financial services: Efforts are being made to expand financial institutions' operational scope through business classification and differentiation management and develop wealth and asset management services.
Innovative education: Due to the restrictiveness of current regulations, Taiwanese higher education lacks flexibility in management, recruitment, curriculum, personnel finance and international exchange. Relevant regulations will be loosened at FEPZ trial sites with the objective of bolstering the quality of Taiwan's education, nurturing more talents and benefiting the economy.
Internationally competitive taxation: For foreign businesses that store or manufacture goods within the FEPZs, tariffs are completely waived for all products sold abroad and up to 10 percent of products for sale in the Taiwan market. Foreign professionals are not taxed on their overseas incomes and enjoy a 50 percent payroll tax reduction for their salaries earned in Taiwan over their first three years there. Overseas Taiwanese companies transferring dividends or profits earned abroad back to the FEPZs for real investments are exempted from business income taxes on these funds.
Industrial cooperation, which was originally listed as one of the focal development activities, will be re-defined as a promotional strategy, as can be applied to various industries.
The FEPZ sites include six ports, Taoyuan Aerotropolis, and the Pingtung Agricultural Biotechnology Park, and are projected to attract private investment of NT$21 billion (US$707 million), raise domestic production value by NT$30 billion (US$1.0 billion) and create 13,000 jobs in 2014. Trade value from the FEPZs is expected to surpass NT$1 trillion (US$33.7 billion) in 2015. Banks and equity firms are anticipated to see respective increases in operating revenues of NT$30 billion (US$1.0 billion) and NT$40 billion (US$1.3 billion) over the next five years.
"As neighboring countries will be joining free trade agreements like the TPP, RCEP and China-Japan-South Korea Free Trade Agreement in the next few years, Taiwan must stay proactive," the premier reiterated. "The revised FEPZ initiatives demonstrate the nation's determination to liberalize, participate in international trade agreements and organizations and transform itself into a 'free economic island.'"