MAPECT Investing in Taiwan 2011 [Final] by Kelvin Lee

台灣併購與私募股權協會 TAIWAN MERGERS & ACQUISITIONS A N D P R I VAT E E Q U I T Y C O U N C I L

INVESTING IN TAIWAN THE MAPECT REPORT 2011

CONTENTS 03

A MAPECT WELCOME

CHAPTER 1: AN INTRODUCTION TO TAIWAN AND ITS ECONOMY

CHAPTER 2: ECFA AND ITS IMPLICATIONS

CHAPTER 3: BUSINESS STRUCTURES IN TAIWAN

CHAPTER 4: TAIWAN’S CAPITAL MARKET

CHAPTER 5: M&A IN TAIWAN

CHAPTER 6: GENERAL INFORMATION

CHAPTER 7: ABOUT MAPECT

PUBLISHED BY

台灣併購與私募股權協會 TAIWAN MERGERS & ACQUISITIONS A N D P R I VAT E E Q U I T Y C O U N C I L

台北市松山區復興北路3 6 9 號4 樓之2 4F-2, 369 Fu-Hsin North Road, Taipei, Taiwan 105 TEL: (+886) 2.2717.6892 / www.mapect.com/en © 2011 Taiwan Mergers & Acquisitions and Private Equity Council. All rights reserved. Disclaimer: The information herein is published by Taiwan Mergers & Acquisitions and Private Equity Council (“MAPECT”). It is based on information believed to be reliable, but MAPECT does not make any representation as to its accuracy, completeness, or timeliness. The information is not to be taken in substitution for the exercise of judgment for addressee, who should obtain separate legal or financial advice. MAPECT, or any of its members, or any individuals connected with MAPECT accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein.

REPORT AND LAYOUT BY SAMUEL LEE CHAIRMAN: C.Y. Huang SECRETARY GENERAL & PUBLISHER: Teresa Yang Published June 2011.

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

A MAPECT WELCOME The past few years have been transformative for Taiwan. Even as the country recovers from the 2008 financial crisis, its thawing relationship with China has now opened up exciting new avenues for Chinese investments in specific Taiwanese industries. Moreover, Taiwanese businesses are now seriously strategizing to position themselves in the Chinese market to take advantage of China’s shift from the “World’s Factory” into the “World’s Market.” China’s economy has held strong despite the financial crisis, impressing everyone with its strong economic growtha. This has facilitated Chinese businesses to proactively expand via merger and acquisition activities. Moreover, both sides of the Taiwan Strait have finally signed the progressive Economic Cooperation Framework Agreement (ECFA). For Taiwan, ECFA is a milestone policy. Not only does it improve Cross-Strait relations, but it also once again places Taiwan on the global arena, allowing Taiwan to build new relations with countries and organizations around the world. Due to these factors, we decided to form the Taiwan Mergers & Acquisitions and Private Equity Council (MAPECT) to advocate Taiwan’s economic advantages and to bridge the gap between the public and the government. Aside from actively endorsing M&A and private equity deals in Taiwan, MAPECT also advises government authorities of potential policies, promoting broad economic cooperation with China and the rest of the world. This is our “Investing in Taiwan: The MAPECT Report 2011,” in which we delve into various topics that investors, whether foreign or domestic, ought to take into consideration. This report is divided into five main chapters: An Introduction to Taiwan and its Economy, ECFA and its Implications, Business Structures in Taiwan, Taiwan’s Capital Market, and M&A in Taiwan. We have worked hard to bring together a myriad of sources into one comprehensive report. Taiwan is increasingly becoming a investor-friendly environment with plenty of opportunities f o r g re a t e r d e v e l o p m e n t . A n d h o p e f u l l y, t h i s w i l l b e a g re a t f i r s t s t e p t o w a rd s n o t o n l y understanding Taiwan, but also bridging the island to the rest of the world.

C.Y. HUANG CHAIRMAN OF MAPECT

INTRODUCTION | MAPECT

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

THE MAPECT PERSPECTIVE Since the inauguration of MAPECT in 2009, we

be comprehensive reports complete with the Council’s

have been striving to establish awareness regarding

analysis and stance towards the issues listed by our

mergers and acquisitions (M&A), private equity (PE),

members.

and the Council itself with the Taiwanese government,

Second, MAPECT has started two training

i n d u s t r y p l a y e r s , a n d t h e g e n e r a l p u b l i c . F ro m t h e

programs to further promote knowledge of M&A, PE,

myriad events, such as the MAPECT Cross-Strait M&A

and the Taiwanese investment environment. The first

and PE Summit, the MAPECT M&A and PE Academic

program caters to Taiwanese professionals, while the

Symposium, and the 2010 Capital Forum held at

second program invites groups from China who are

the China Inter national Fair for Investment & Trade,

interested in Taiwan’s investment climate vis-à-vis the

MAPECT has promoted M&A and PE as beneficial tools

mainland’s. Both programs are taught and headlined

that can strengthen not only Cross-Strait relations, but

b y k ey i nd ust ry and gover nment i nd i viduals whose

also Taiwan’s standing within both the regional economy

experiences and background offer in-depth knowledge.

and the world’s economy.

Third, the Council will be hosting the 2011 MAPECT

D u r i n g i t s i n a u g u r a l y e a r, M A P E C T h a s b e e n

Taiwan M&A Awards, an event celebrating the year’s

fortunate to have received the invaluable help of its

best M&A and PE deals. Through this event, MAPECT

members without whom the Council would be unable

hopes to highlight important individuals, firms, and

to engage in its mission of promoting M&A and PE

deals that have demonstrated acumen, success, and

i n Ta i w a n . T h u s , a s M A P E C T c o n t i n u e s t o g ro w a s

ingenuity, thus showcasing the potential benefits that

an organization, we are incessantly building towards

arise from M&A and PE.

creating even closer relations with our members,

Along with these new projects and partnerships,

addressing their concerns, and providing not only new

MAPECT will also host our major annual events: the

research and publications, but also new networking and

M&A and Private Equity Summit and the Academic

business opportunities.

Symposium. Ultimately, the Council hopes to shape a

This year, the Council aims to further promote

stronger and better economic and investment climate

M&A and PE through three major projects: the MAPECT

in Taiwan for M&A and PE. With the 2010 signing of the

White Papers, the MAPECT training programs, and the

Economic Cooperation Framework Agreement (ECFA),

MAPECT M&A and Private Equity Awards. First, we

Taiwan stands in a favorable position in the Asia Pacific.

have been working closely with our members, looking

MAPECT aims to promote these opportunities and,

into issues that they find most pressing in Taiwan’s

hopefully, Taiwan can once again revive itself as an

current economic situation. Through this process, we

economic “tiger” in the increasingly integrated global

look to publish the MAPECT White Papers, which will

economy.

TERESA YANG SECRETARY GENERAL OF MAPECT

MAPECT | INVESTING IN TAIWAN

CHAPTER 1 An Introduction to Ta i w a n a n d i t s E c o n o m y

CHAPTER 1 | MAPECT

A Brief Overview Neighboring China, Japan, and Korea at the heart of the Asia-Pacific r e g i o n , Ta i w a n w a s o n e o f t h e f o u r A s i a n T i g e r s – a t i t l e g i v e n t o h i g h l y developed and industrialized Asian economies in the latter half of the t w e n t i e t h c e n t u r y. N o w w e l l i n t o t h e n e w m i l l e n n i u m , Ta i w a n c o n t i n u e s its economic and industrial growth, maintaining its status as one of the s t ro n g e s t t r a d i n g p o w e r h o u s e s i n n o t o n l y t h e A s i a n re g i o n a l e c o n o m y, b u t also within the global economy. A c c o rd i n g t o t h e I n t e r n a t i o n a l M o n e t a r y F u n d ( I M F ) , Ta i w a n i s c u r re n t l y the world’s 24 th largest economy, after Taiwan’s economic growth surpassed e x p e c t a t i o n s i n 2 0 1 0 re a c h i n g 1 0 . 8 p e rc e n t . T h e I M F p ro j e c t s a 5 . 4 p e rc e n t economic growth for 2011 and 4.9 percent economic growth in 2016. 1 Taiwan also frequently scores high on inter national rankings, particularly those pertaining to economic competitiveness and overall investment e n v i ro n m e n t . I n a r a n k i n g o f g l o b a l c o m p e t i t i v e n e s s b y t h e Wo r l d E c o n o m i c F o r u m , Ta i w a n p l a c e d 1 3 t h a m o n g 1 3 9 e c o n o m i e s i n 2 0 1 0 . 2 T h e B u s i n e s s E n v i r o n m e n t R i s k I n t e l l i g e n c e ( B E R I ) r a t e d Ta i w a n a s “ s u i t a b l e f o r i n v e s t m e n t , ” g i v i n g t h e i s l a n d a P ro f i t O p p o r t u n i t y R e c o m m e n d a t i o n ( P O R ) score of 71 and a fourth place ranking out of 50 countries surveyed. 3 F u r t h e r m o re , a c c o rd i n g t o t h e Wo r l d B a n k ’s D o i n g B u s i n e s s 2 0 1 1 d a t a , Taiwan ranked 33 rd out of 183 countries in the “Ease of Doing Business” rank, 2 4 th i n t h e “ S t a r t i n g a B u s i n e s s ” r a n k , a n d 1 0 th i n t h e “ C l o s i n g a B u s i n e s s ” rank. 4 Ta i w a n a l s o h o l d s t h e w o r l d ’s f o u r t h l a rg e s t s t o c k o f f o re i g n e x c h a n g e reserves, totaling US$ 380.5 billion as of 2010. 5 Chapter 1 provides an overall view of Taiwan's economic and investment e n v i ro n m e n t , i n c l u d i n g Ta i w a n ' s i n d u s t r i e s , i n t e r n a t i o n a l t i e s , f o re i g n t r a d e , f o re i g n i n v e s t m e n t s , a n d v a r i o u s g o v e r n m e n t a l p o l i c i e s a i m e d a t p ro m o t i n g greater inbound investments.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

Taiwan's industries W h i l e Ta i w a n w a s o n c e a n a g r a r i a n - b a s e d economy in the 1950s, the island has since transformed into an export-driven, industrial, and high-tech f o c u s e d e c o n o m y. C u r re n t l y, Ta i w a n i s o n e o f t h e w o r l d ’s l a rg e s t m a n u f a c t u re r s o f e l e c t ro n i c - b a s e d products and a central player in the global (information and communications technology) ICT industry. And Taiwan’s industrial sectors, including plastics, steel, petrochemicals, and textiles, continue to grow domestically and globally. Since the 1980s, rising production costs and the appreciation of the New Taiwan dollar (NTD) have forced

Taiwan’s geographical p o s it ion i n g a s a h u b for A s i a Pacific operations, coupled with the island’s strong high-tech and manufacturing industry chains, software and hardware infrastructure, and experience in product innovation and commercialization, makes Taiwan a suitable place for foreign investments

much of the manufacturing industry to China and other Southeast Asian countries. Despite this mass migration of Taiwanese industries to low labor-cost countries, parts of the electronics industry, including most of the

International Ties & Foreign Trade

research and development (R&D) facilities are in Taiwan. Taiwan’s economy is driven by foreign trade, as Today, services, industry, and agriculture make up

its economy is predominately export-focused. China is

the largest portions of Taiwan's economy, with services

currently Taiwan’s largest trade and export partner, with

and industry providing 68.7 percent and 29.8 percent of

the P.R.C. accounting for over 21 percent of Taiwan’s

the GDP in 2009, respectively. Industry comprises of

total trade and 28 percent of Taiwan’s total exports in

manufacturing (24.7 percent), construction (2.5 percent),

2010. 8 China is followed by Japan, the United States,

and electricity, gas, and water (2.1 percent). Services

and the European Union.

includes, but is not limited to trade (18.5 percent), finance, insurance and real estate (15.4 percent), and public administration & defense (7.6 percent).

Moreover, Taiwanese businesses have maintained strong foreign direct investments (FDI), particularly in neighboring Asian nations, such as China, Vietnam,

In April 2009, the government further implemented

Thailand, and Malaysia. According to the United

a series of policies aimed to push six emerging

Nations Conference on Trade and Development’s World

i n d u s t r i e s , i n c l u d i n g b i o t e c h n o l o g y, m e d i c i n e &

Investment Report 2010, 2009 FDI outflow and 2009 FDI

healthcare, culture & creation, tourism, green energy,

stock outflow amounted to US$ 5.87 billion and US$ 181

and high-end agriculture.

billion, respectively. 9 And between 1981 and 2009, total Taiwanese FDI outflow exceeded US$ 117.5 billion. 10 Furthermore, while Taiwan’s international status remains challenged and political tensions with China still

CHAPTER 1 | MAPECT

TAIWAN FACTS & FIGURES 23.0 million Population of Taiwan as of February 2009

PO L I T I CAL E S T AB L I S H M E N T TYPE:

Mutli-party democracy MAJOR CITIES

B RANCHES:

TA IP E I ( C A PI TA L) N E W TA IP E I CI TY HS IN C HU TA ICH UN G K A O HS IU N G

Executive, Legislative, Judicial Control, Examination MAJOR POLITICA L PARTIES :

CURRENCY

Kuomintang, Democratic Progressive Party, and several small parties

LANGUAGES & DIALECTS

M a j o r M a rket s

NE W TA IWA N D OLLAR (NTD )

MANDARIN CHINESE (OFFICIAL) TA IWA N E S E HAKKA

(as of 2009)

P.R.C. and Hong Kong: US$ 83.7 Billion

10.96 million

The United States: US$ 23.6 Billion

Work Force of Taiwan as of August 2009

Japan: US$ 14.5 Billion

KEY INDUSTRIES AGRICULTURE 1.6% of GDP

pork, rice, fruit & vegetables, sugarcane, p o u l t r y, s h r i m p , e e l

INDUSTRY

SERVICES

electronics, chemicals & p etro chemi cals, metals, machine r y, t e x t i l e s , p l a s t i c s

t ra d e , f i n a n c e , i n s u rance, real estate, public administration, defense

29.8% of GDP

68.6% of GDP

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

existing, Taiwan has nonetheless formed and maintained

the past decade. This culminated in a total investment

strong international economic ties, as demonstrated

decrease at a rate of 24.4 percent in 2009. 13

with its memberships in the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation forum

Thus, in an effort to link Taiwan’s economy back

(APEC), and the Asian Development Bank (ADB). Taiwan

to the global economy, the government has increased

is also an observer at the Organization for Economic

efforts to liberalize and promote Taiwan’s investment

Cooperation and Development (OECD).

and economic environment, as well as to attract foreign investors.

In addition, Taiwan recently signed the Economic Cooperation Framework Agreement (ECFA) with China – a monumental trade agreement signaling warming Cross-Strait relations and an increasingly integrated Asian economy. With ECFA coming into effect in September 2010, Taiwan's government looks towards building stronger economic and political ties with other nations and inter national organizations. Apart from engaging in

E C FA i s i m p r o v i n g C r o s s Strait relations and enhancing the attractiveness of Taiwan as an investment destination.

trade discussions with members of ASEAN, Taiwan aims to expand its presence through memberships in the World Health Organization (WHO), the UN Framework Convention on Climate Change (UNFCCC), and the International Civil Aviation Administration (ICAO).

The “Global Net Project,” for example, aims to implement a more liberal and streamlined system for Taiwanese capital, talent, product, and information. The initiative also creates a Cross-Strait industrial

Foreign Investment in Taiwan

cooperation platform to attract foreign investors who are interested in Cross-Strait projects. 14

Ta i w a n ’s g o v e r n m e n t h a s a l l o w e d f o r e i g n investments into most industries, with the exception

The government has also welcomed and promoted

of t ho s e re la t ing t o Ta i w a n 's n a t i o n a l s e c uri t y and

foreign companies to set up both R&D facilities and

environmental protection. The “Negative List for

operational headquarters in Taiwan. Since 2002, the

Investment by Overseas Chinese and Foreign Nationals”

“ M u l t i n a t i o n a l I n n o v a t i v e R & D C e n t e r s i n Ta i w a n ”

– a list of industries in which foreign investment

Program, for example, has facilitated the establishment

is prohibited – can be found on the Investment

of 43 R&D centers in Taiwan, including those of Intel,

Commission of the Ministry of Economic Affairs’

Microsoft, IBM, and Sony. 15

website. 12 F u r t h e r m o r e , Ta i w a n ' s g o v e r n m e n t h a s But while Taiwan has allowed foreign investments,

strengthened its effort to form ties with the international

stringent regulations, coupled with the recent financial

c o m m u n i t y. A p a r t f r o m s i g n i n g E C FA w i t h C h i n a ,

crisis, have resulted in total investments to decline over

Taiwan has also joined the Government Procurement

CHAPTER 1 | MAPECT

AN INTRODUCTION TO TAIWAN AND ITS ECONOMY

A g re e m e n t ( G PA ) – a p l u r i l a t e r a l a g re e m e n t u n d e r the WTO – in 2009. Through the GPA, Taiwan further o p e n e d i t s m a r k e t t o f o re i g n b u s i n e s s e s , a l l o w i n g

THE i-TAIWAN 12 PROJECTS

foreign capital into various government construction

with projected total investment value18

and infrastructure projects.

Specifically, the government has focused special attention on a set of nationwide projects – termed the i-Taiwan Twelve Projects – which officials hope to attract foreign investments through a series of incentives and benefits. The gover nment aims to attract NT$ 3.99 trillion over the next eight years, while creating 120,000 jobs per year. 17 Projects include construction work on nation-wide infrastructure, emphasis on the cultural a n d c re a t i v e i n d u s t r i e s , t h e c re a t i o n o f i n d u s t r i a l innovation corridors via industrial parks and clusters, and the reorganization and the revival of the agricultural

Transportation Network NT$ 1.22 trillion Kaohsiung Port-City Regeneration NT$ 38.8 billion Central Region New High-tech Industrial Cluster Program NT$ 323 billion Taoyuan International Airport City NT$ 293 billion

industry.

Intelligent Taiwan NT$ 775 billion PRC Investment in Taiwan Since 2009, investors from China have been

Industrial Innovation Corridors NT$ 147 bilion

able to invest directly into Taiwan. The guidelines and regulations are stipulated under the “Act Gover ning Relations Between Peoples of the Taiwan Area and t h e M a i n l a n d A re a ” a n d t h e “ M e a s u re s G o v e r n i n g Investment Permit to the People of Mainland Area.” The Mainland Affairs Council (MAC) of the E x e c u t i v e Yu a n i s t h e p r i n c i p a l r e g u l a t o r y b o d y responsible for handling Mainland-related affairs, while the Ministry of Economic Affairs (MOEA) is responsible for regulating direct investments from China. S p e c i f i c a l l y, P R C i n v e s t o r s m u s t re c e i v e a p p ro v a l from the Investment Commission under the Ministry of Economic Affairs (MOEAIC) in order to invest directly, whether holding shares issued by companies in Taiwan,

Farm Village Regeneration NT$ 208 billion Coastal Regeneration NT$ 39.4 Billion Green Forestation NT$ 39.4 Billion Flood Prevention and Water Management NT$ 273 Billion Sewer Construction NT$ 162 Billion

establishing a company or branch, or providing loans to Taiwanese enterprises. 19

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

In 2009, the Financial Supervisory Commission

of R&D expenditure against its income tax liability. 20

(FSC) approved the “Regulations Governing Securities

Other tax incentives are issued as personnel training

Investment and Futures Trading in Taiwan by Mainland

t a x c re d i t a n d c re d i t s f o r e s t a b l i s h i n g o p e r a t i o n a l

China Area Investors.” Now, Chinese Qualified Domestic

headquarters and logistics centers in Taiwan.

Institutional Investors (QDII), are allowed to invest in companies listed in Taiwan.

Tax incentives may also be claimed indirectly. These are offered if investments are associated with

While relations with China have improved

science parks, export proceeding zones, bonded

drastically since 2008, there are still strict limitations

factories and bonded warehouses, agricultural

for PRC investment in China. Specifically, Chinese

technology parks, and free trade zones. These indirect

investors are only allowed to invest in sectors that have

tax incentives include tax exemptions on the import of

been approved.

various materials, such as machinery and fuel supplies, and the export of produce and certain services. 21

Furthermore, Chinese QDIIs are not allowed to acquire significant control over listed Taiwanese

Non-tax related incentives involve various

companies - effectively preventing acquisition activities

initiatives and programs aimed to reduce operating

- or have members of the QDII serve on the board of

c o s t s . E x a m p l e s i n c l u d e t h e I n d u s t r i a l Te c h n o l o g y

the listed company.

Development Program, the 006688 Land Rental Discount Plan, and the Development Plan for Global Logistics of Manufacturing Sector. 21 The government

Investment Incentives

also provides loans and financing, with relatively low interest rates, to encourage small and medium-sized

Apart from the deregulation and liberalization of

enterprises and R&D activity. 23

the government’s economic policies, Taiwan continues to establish investment incentives, including tax breaks

Furthermore, Taiwan amended the Income Tax

that make Taiwan more foreign investor-friendly. The

Act in June 2010, reducing the business income tax

majority of tax benefits are stipulated in the Statute

rate from 25 percent to 17 percent. The government

for Industrial Innovation (SII), while other investment

hopes to attract foreign investments by creating an

incentives can be found under the Business Mergers

internationally competitive tax environment. The new

and Acquisitions Act, the Financial Institutions

business income tax is now comparable to those of

Merger Act, and the Statute for Investment by Foreign

Singapore (17 percent) and Hong Kong (16.5 percent),

Nationals/Overseas Chinese.

while significantly lower than those of South Korea (22 percent) and China (25 percent). 24

The government offers two main forms of i n v e s t m e n t i n c e n t i v e s : t a x - re l a t e d i n c e n t i v e s a n d n o n - t a x re l a t e d i n c e n t i v e s . Ta x re l a t e d i n c e n t i v e s

Repatriation of Profits

are stipulated under the SII, which is effective until December 31, 2019. Tax incentives specifically target

In general, there are few limitations applied to the

R&D based in Taiwan such that companies engaging

repatriation of profits by a Foreign Investment Approved

in R&D are entitled to a tax credit of up to 15 percent

( F I A ) c o m p a n y. O n e e x c e p t i o n i s s t i p u l a t e d b y t h e

CHAPTER 1 | MAPECT

AN INTRODUCTION TO TAIWAN AND ITS ECONOMY

Company Law, which states that a company is required to retain 10 percent of the current year’s profit to be used

ENDNOTES 1.

as a legal reserve – an amount which cannot be remitted as dividends. 25 Apart from this regulation, the repatriation

of profits is mainly subjected to various taxes. 3.

For non-residents of Taiwan, dividends given by a FIA company to a foreign shareholder are subjected to withholding tax of 20 percent. 26 Reductions are given to shareholders who are based in one of the tax treaty nations with which Taiwan has signed a comprehensive t a x a g re e m e n t . Ta i w a n h a s s i g n e d b i l a t e r a l d o u b l e taxation agreements with 17 countries, including the United Kingdom, Sweden, Australia, New Zealand, Singapore, the Netherlands, Belgium, Denmark, Indonesia, and various African nations. 27

5. 6.

7. 8. 9. 10.

11.

Furthermore, in certain cases, shareholders may apply for a 10 percent Profit Retention Tax to be credited against the dividend withholding tax. 28

12. 13.

14.

Taiwan's Overall Regulatory Environment While there has been greater push for deregulation and liberalization to attract foreign investments, the

15. 16. 17. 18. 19.

gover nment still remains relatively conservative with regards to foreign investments in certain industries. Especially with mergers, acquisitions, and private equity

20.

activities in the financial and ICT industries, both the

21. 22.

Investment Commission under the MOEA (MOEAIC) and

23.

the Financial Supervisory Commission (FSC) maintain

24.

strict regulations, particularly when involving Chinese capital. In general, the MOEAIC and the FSC focus o n p ro t e c t i n g n o t o n l y t h e i n t e re s t s o f t h e m i n o r i t y s h a k e h o l d e r s , b u t a l s o t h o s e o f Ta i w a n ' s d o m e s t i c industries as a whole.

25.

26. 27.

28.

“World Economic Outlook” (April 2011), International Monetary Fund, http://www.imf.org/external/pubs/ft/weo/2011/01/index. html. “The Global Competitiveness Report 2010-2011” (2010), World Economic Forum, http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf. “2010 Industrial Development in Taiwan, R.O.C.” (December 2010), Industrial Development Bureau, R.O.C., http://www. moeaidb.gov.tw/2009/view/en/publication/index.html. “Doing Business 2011” (November 2010), The World Bank, http://www.doingbusiness.org/reports/global-reports/doingbusiness-2011/. Bureau of East Asian and Pacific Affairs, U.S. State Department, http://www.state.gov/r/pa/ei/bgn/35855.htm. “Taiwan Statistical Data Book 2010,” Council for Economic Planning and Development, Executive Yuan, R.O.C., www.cepd.gov. tw/dn.aspx?uid=9326. Ibid. Directorate General of Customs, Ministry of Finance, ROC, http://cus93.trade.gov.tw/ENGLISH/FSCE/. “World Investment Report 2010,” United Nations Conference on Trade and Development, www.unctad.org/wir. “Economic Development R.O.C.” (2007), Council for Economic Planning and Development, Executive Yuan, www.cepd.gov.tw/ encontent/dn.aspx?uid=3971. Bureau of East Asian and Pacific Affairs, U.S. State Department, http://www.state.gov/r/pa/ei/bgn/35855.htm. Investment Commission, MOEA, R.O.C., http://www.moeaic.gov. tw/system_external/ctlr?PRO=LawsLoad&lang=1&id=32. “2010 Industrial Development in Taiwan, R.O.C.” (December 2010), Industrial Development Bureau, R.O.C., http://www. moeaidb.gov.tw/2009/view/en/publication/index.html. Invest in Taiwan, Department of Investment Services, R.O.C., http://investtaiwan.nat.gov.tw/. Ibid. Council for Economic Planning and Development, R.O.C., http://www.cepd.gov.tw. Invest in Taiwan, Department of Investment Services, R.O.C., http://investtaiwan.nat.gov.tw. Ibid. “Measures Governing Investment Permit to the People of Mainland Area,” Investment Commission, Ministry of Economic Affairs, R.O.C. Invest in Taiwan, Department of Investment Services, R.O.C., http://investtaiwan.nat.gov.tw. Ibid. Industrial Development Bureau, MOEA, R.O.C., www.moea.gov. tw. Invest in Taiwan, Department of Investment Services, R.O.C., http://investintaiwan.nat.gov.tw. “2010 Industrial Development in Taiwan, R.O.C.” (December 2010), Industrial Development Bureau, R.O.C., http://www. moeaidb.gov.tw/2009/view/en/publication/index.html. “Mergers & Acquisitions Asian Taxation Guide 2010” (May 2010), PriceWaterHouseCoopers, http://www.pwchk.com/home/ eng/m&a_asiantaxguide_2010.html. Ibid. “Taiwan Pocket Tax Book 2010” (March 2010), PriceWaterHouseCoopers, http://www.pwc.com/tw/en/publications/taiwanpocket-tax-book-2010.jhtml. “Mergers & Acquisitions Asian Taxation Guide 2010” (May 2010), PriceWaterHouseCoopers, http://www.pwchk.com/home/ eng/m&a_asiantaxguide_2010.html.

MAPECT | INVESTING IN TAIWAN

CHAPTER 2 ECFA and its Role in Ta i w a n ’s E c o n o m i c Environment 13

CHAPTER 2 | MAPECT

A Brief Overview O n J u n e 2 9 , 2 0 1 0 , Ta i w a n a n d C h i n a s i g n e d t h e E c o n o m i c C o o p e r a t i o n F r a m e w o r k A g r e e m e n t ( E C FA ) – a p r e f e r e n t i a l t r a d e a g r e e m e n t p o i s e d t o reduce not only trade and economic barriers, but also political tension a c r o s s t h e Ta i w a n S t r a i t . E C FA , w h i c h h a s b e e n n o t e d a s b e i n g t h e m o s t s i g n i f i c a n t b i l a t e r a l a g r e e m e n t b e t w e e n Ta i w a n a n d C h i n a s i n c e 1 9 4 9 , b r i n g s n e w e c o n o m i c o p p o r t u n i t i e s t o Ta i w a n a n d w i l l n a t u r a l l y c r e a t e a n e w e n v i ro n m e n t – w i t h n e w l a w s a n d re g u l a t i o n s – i n w h i c h b u s i n e s s a n d investments will be conducted. ECFA came into effect on September 12, 2010. The agreement is founded on three principal objectives. F i r s t , E C FA p o s e s t o s t re n g t h e n a n d a d v a n c e t h e e c o n o m i c , t r a d e , a n d i n v e s t m e n t c o o p e r a t i o n b e t w e e n Ta i w a n a n d C h i n a . S e c o n d , i n a n e f f o r t t o c re a t e g re a t e r t r a n s p a re n c y a n d f a i r n e s s , t h e a g re e m e n t w i l l e n g a g e i n g re a t e r l i b e r a l i z a t i o n o f t r a d e i n g o o d s a n d s e r v i c e s , a s w e l l a s i m p l e m e n t m e c h a n i s m s t h a t p ro m o t e a n d p ro t e c t i n v e s t m e n t s . A n d f i n a l l y, E C FA a i m s to expand the areas and the cooperation mechanisms involved in which economic cooperation could occur between Taiwan and China. 1

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A Q U I C K G L A N C E AT E C FA ECONOMIC cooperation framework AGREEMENT

267

number of Chinese items covered under ECFA

16.1%

percentage of total Taiwanese exports affected by ECFA

# OF ITEMS

number of Taiwanese items covered under ECFA

TAIWAN OPENS TO CHINA

CHINA OPENS TO TAIWAN

539

# OF ITEMS

Early Harvest for Trade in Goods

Agricultural

Petrochemical

Machinery

107

Transportation Equipment

Textiles

136

Others

140

117

Early Harvest for Trade in Services

number of sectors opened in China

number of sectors opened in Taiwan

Financial Services: Banking, Securities and Futures, Insurance

Financial Services: Banking

Non-Financial Services: Accounting & Auditing, Computer & Related Services, R&D, Design, Convention, Medical (hospital setup), Cultural (movie imports), Air Transport

Non-Financial Services: R&D, Design, Convention, Exhibition, Cultural (movie imports), Sporting & recreational services, Air Transport, Distribution (commission agentsâ&#x20AC;&#x2122; services)

CHAPTER 2 | MAPECT

ECFA AND ITS ROLE IN TAIWAN’S ECONOMIC ENVIRONMENT

Tariff Reductions on Export Goods

Protection and Safeguard

U n d e r t h e c u r re n t s t i p u l a t i o n s o f E C FA , b o t h

Under Article 11 of ECFA, the agreement stipulates

Taiwan and China have agreed to tariff concessions

the creation of a Cross-Strait Economic Cooperation

on hundreds of export goods. According to Article 7,

Committee (CSECC), which was officially established

“Early Harvest for Trade in Goods” under the “Early

in January 2011. Under the CSECC, the Straits

Harvest Program,” the agreement covers 539 Taiwanese

Exchange Foundation (SEF) operates in Taipei, while

products and 267 Chinese export goods. Based on

the Association for Relations Across the Taiwan Straits

figures from 2009, ECFA’s “Early Harvest Program” will

(ARATS) in Beijing.

affect over 16.1 percent of total Taiwanese export into China (amounting over US$ 13.8 billion). 3 Items listed on the “Early Harvest for Trade in Goods,” include various agricultural, petrochemical, transportation, mechanical, and textile products and equipments. However, Taiwan has currently included no agricultural products. ECFA stipulates that the Agreement Tariff Rate of the products under the Early Harvest Program will be reduced to zero within three progressive stages, over three years. 4 Essentially, tariffs rates will be reduced to

The Economic Cooperation Framework Agreement is mapped out according to the essence of the WTO, while reflecting on the very specific characteristics of Cross-Strait relations.

zero by the beginning of 2013.

The Opening of Industries

While indirect investments across the Taiwan Strait have been tremendous over the past two decades, there

According to Article 8, “Early Harvest for Trade

lacked an official structure through which protection

in Services” under the “Early Harvest Program,” ECFA

could be provided and disputes resolved. The CSECC

also permits investments in various industries in both

allows for continued implementation and interpretation

Taiwan and China. For instance, China will liberalize 11

of ECFA and ECFA-related issues, which includes the

domestic sectors, including Accounting and Auditing,

protection and safeguard of Cross-Strait investments

Computing, Data Services, Entertainment, Financial

and trade.

(Banking, Securities, and Insurance), and Healthcare to Taiwanese investments. Likewise, Taiwan has agreed to open nine sectors, including Banking, R&D Services,

Economic Implications

Design, Convention, Exhibition, Cultural (movie imports), Sporting & Recreational, Air Transport, and Distribution (commission agents’ services) to Chinese investment. 5

Prior to the signing of ECFA, Taiwan-China trade amounted to over US$ 105 billion in 2008. China, is therefore, Taiwan’s largest trading partner with nearly

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

20 percent of Taiwan’s total trade occurring with the

sectors. Currently, one of Taiwan’s largest sectors – the

Mainland. According to the MOEAIC, indirect Taiwanese

ICT industry – is caught between rising operation costs

investment in China reached US$ 76 billion between

and weakening price power, which creates a bottleneck

1988 and 2008, while unofficial estimates of Taiwanese

effect. By developing the services industry, in which

investments in China range between US$ 150 billion and

Taiwan still has a relative advantage, Taiwan’s economy

US$ 300 billion.

and its industries will be able to move up the value chain.

On the other hand, Chinese investment was prohibited in Taiwan, as the latter imposed a series of unilateral trade barriers restricting imports, investments, and visitors from China. This consequently created a tremendous trade disparity. While Taiwanese capital was flowing into China, Chinese capital could not directly enter Taiwan. ECFA, therefore, creates an official gateway through which greater economic ties can be established across the Taiwan Strait. By allowing Chinese investment into

E C FA a i m s t o re i n t e g ra t e Taiwan into the regional economy as Free Trade Agreements among neighboring Asian nations increasingly marginalize the island.

Taiwan, ECFA not only closes this disparity, but it also brings capital into Taiwanese industries. Regional Integration M o re o v e r, u n d e r t h e “ E a r l y H a r v e s t P ro g r a m ” Taiwan is projected to benefit economically. According

Perhaps, one of the biggest implications of ECFA

to a simulation report by the Chung-Hua Institution

is that Taiwan can integrate into the regional economy.

f o r E c o n o m i c R e s e a rc h ( C I E R ) , E C FA w i l l n o t o n l y

Prior to ECFA, Taiwan had only signed limited numbers

generate around 60,000 job opportunities, but it will

o f F TA s , m o s t o f w h i c h w e re w i t h t h e f e w C e n t r a l

also lead to a 0.4 percent increase in GDP. And from

A m e r i c a n a n d A f r i c a n n a t i o n s s t i l l re c o g n i z i n g t h e

w i t h t h e re d u c t i o n o f t a r i ff s , o u t l i n e d i n t h e “ E a r l y

R.O.C. government. On the other hand, FTAs signed

H a r v e s t fo r Tr a d e i n G o o d s ,” o v e r N T $ 2 9 .5 b i l l i on

among neighboring Asian countries were creating an

i n t a r i ff s w i l l b e s a v e d . F u r t h e r m o re , t h e P e t e r s o n

i n c re a s i n g l y i n t e g r a t e d re g i o n a l e c o n o m y i n w h i c h

Institute for International Economics projected that the

Taiwan could not participate. The creation of numerous

net economic effect of ECFA should be around a 5.3

free trade areas, such as the ASEAN-China Free Trade

percent improvement in Taiwan’s GDP by 2020. 8

A r e a ( A C F TA ) , t h e A S E A N - J a p a n C o m p r e h e n s i v e Economic Partnership (AJCEP), and the Closer Economic Partnership Arrangement (CEPA) between

The Diversification of Taiwanese Industries

China, Hong Kong, and Macau for example, further added pressure for Taiwan to engage in trade agreement

Through ECFA, Taiwan can diversify key industries, particularly allowing greater development in its services

CHAPTER 2 | MAPECT

discussions and avoid economic marginalization.

ECFA AND ITS ROLE IN TAIWAN’S ECONOMIC ENVIRONMENT

Prior to ECFA, only around one percent of Taiwan’s exports were subjected to reduced tariffs with other nations – a low percentage when compared with Taiwan’s major trade rivals, including South Korea (37.8 percent), ASEAN (31.7 percent), and Japan (16.3 percent). 9 With the successful signing of ECFA, the Taiwanese government hopes to use this landmark agreement as the first step towards signing more FTAs with other nations. Currently, Taiwan and Singapore have begun engaging in active discussion on economic cooperation, with the former looking for future FTAs with the United States, Japan, the ASEAN, and the European Union.

The Taiwanese Advantage ECFA essentially places Taiwan on par with, if not more favorably, than other nations – including ASEAN

ENDNOTES 1.

Ministry of Economic Affairs, R.O.C., http://www.moea.gov.tw/ Mns/populace/news/News.aspx?kind=1&menu_id=40&news_ id=19723. 2. Ibid. 3. “Economics & Market Research” in Emerging Asia Monthly (July 2010), ANZ, July 2010, http://www.anz.com/corporate/research/ international-economics/asia-economics-monthly/. 4. Ministry of Economic Affairs, R.O.C., http://www.moea.gov.tw/ Mns/populace/news/News.aspx?kind=1&menu_id=40&news_ id=19723. 5. “Taiwan-China: A Quick Look at the ECFA” (June 2010), DBS Group Research, https://www.dbsvresearch.com/research/DBS/ research.../tw_2010Jun29.pdf. 6. Bureau of East Asian and Pacific Affairs, U.S. State Department, http://www.state.gov/r/pa/ei/bgn/35855.htm. 7. “2010 Industrial Development in Taiwan, R.O.C.” (December 2010), Industrial Development Bureau, R.O.C., http://www. moeaidb.gov.tw/2009/view/en/publication/index.html. 8. Rosen, Daniel H. and Wang, Zhi, “Deepening China-Taiwan Relations through the Economic Cooperation Framework Agreement” in Policy Brief (June 2010), Peterson Institute for International Economics, http://iiea.iie.com/publications/interstitial. cfm?ResearchID=1601. 9. “Economics & Market Research” in Emerging Asia Monthly (July 2010), ANZ, July 2010, http://www.anz.com/corporate/research/ international-economics/asia-economics-monthly/. 10. “Taiwan-China: A Quick Look at the ECFA” (June 2010), DBS Group Research, https://www.dbsvresearch.com/research/DBS/ research.../tw_2010Jun29.pdf.

– in regards to trade with China. For instance, in the financial sector – one of the 11 sectors that China has opened to Taiwan – Taiwanese banks are now allowed easier market access, putting Taiwan on par with Hong Kong under CEPA and superior to other nations under WTO agreements. Specifically, Taiwanese banks are permitted to begin RMB business in China only after two years of operations with one year of profit. WTO nations are required to operate in China for three years with two years of profit before being permitted to conduct RMB business. 10 Furthermore, cultural and historical ties also place Taiwan at an advantage when compared to neighboring nations, such as Japan and South Korea. While there may be drastic political differences, Taiwan and China are linguistically and culturally parallel. These similarities, coupled with extensive Taiwanese business experience o p e r a t i n g a n d i n v e s t i n g i n C h i n a , g i v e Ta i w a n a n advantage.

MAPECT | INVESTING IN TAIWAN

CHAPTER 3 Business Structures i n Ta i w a n

CHAPTER 3 | MAPECT

A Brief Overview For foreigners, setting up businesses and offices in Taiwan can be done t h ro u g h s e v e r a l m e t h o d s . A p a r t f ro m d i re c t i n v e s t m e n t s a n d M & A , f o re i g n investors can set up several business structures, including a subsidiary company, a branch office, a representative office, or a firm. Chapter 3 briefly looks into the general business structures most frequently found in Taiwan.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

Establishing a Company

the MOEAIC it becomes a Foreign Investment Approved (FIA) company.

Under the Company Act, companies are defined u n d e r f o u r d i f f e r e n t c l a s s e s : U n l i m i t e d C o m p a n y,

The process of establishing a company in Taiwan

Limited Company, Unlimited Company with Limited

varies depending on the business type and the location

Liability Shareholders and Company Limited by Shares.

o f t h e o p e r a t i o n s . G e n e r a l l y, b u s i n e s s o p e r a t i o n locations include, but are not limited to, science parks,

Unlimited Company

export-processing zones, free trade zones, agricultural

An Unlimited Company is organized by two

biotechnology parks, and environmental protection

or more shareholders who bear unlimited joint and

parks. There is also a separate registration process for

several liabilities for discharge of the obligations of the

establishing a company in a general area. 1

company. Limited Company

Other Business Structures

A Limited Company is organized by one or more shareholders, each being liable for the company in an amount limited to the amount contributed by each individual.

Branch Office Rather than setting up a subsidiary company in Taiwan, a foreign business may wish to establish a branch office instead – a process that can be completed

Unlimited Company with Limited Liability Shareholders

t h ro u g h t h e M i n i s t r y o f E c o n o m i c A ff a i r s ( M O E A ) .

An Unlimited Company with Limited Liability

While there is no minimum working capital requirement

Shareholders is a company organized by one or more

attached to approval if operations of the branch office

shareholders of unlimited liability, who bears unlimited

re l a t e t o i n t e r n a t i o n a l t r a d e , t h e f o re i g n c o m p a n y

joint liability for the obligations of the company, and

i s re q u i re d t o n o t o n l y h a v e i t s p r i n c i p a l b u s i n e s s

one or more shareholders of limited liability, who bears

o p e r a t i o n s a n d i n c o r p o r a t i o n re g i s t e re d i n i t s o w n

the liability for the obligations of the company only in

country, but also have sufficient funds to run the branch

respect of the amount of capital contributed by the

office within Taiwan. Finally, a litigious, a non-litigious

individual.

representative, and a branch manager – all of whom could be either a Taiwan citizen or a foreign national –

Company Limited by Shares

must be employed at the branch office. 2

Company Limited by Shares is organized by either two or more shareholders, or one governmental

Representative Office

o r o n e c o r p o r a t e s h a re h o l d e r, w i t h t h e l i a b i l i t y o f

If a foreign business requires a representative in

t h e s h a re h o l d e r s l i m i t e d t o t h e a m o u n t o f c a p i t a l

Taiwan, but is without the need to conduct business,

contributed by the individual.

there is the option to establish a representative office. Similar to establishing a branch office, the process

Foreign investors need to receive approval from the

of setting up a representative office is done through

MOEAIC prior to setting up any of the four companies

the MOEA. Once approved, the representative office

listed above. Once a company has been approved from

becomes the avenue through which the company’s legal

CHAPTER 3 | MAPECT

BUSINESS STRUCTURES IN TAIWAN

agent engages its principal responsibilities. 3

ENDNOTES 1.

Foreign Investment Approved Companies During the process of forming a Foreign Investment Approved company in Taiwan, the principle statute is the Statute for Investment by Foreign Nationals (SIFN),

2. 3. 4. 5.

Company Act, Investment Commission, MOEA, R.O.C., http:// www.idic.gov.tw/html/elaw-4.htm “Doing Business in Taiwan” (April 2011), PriceWaterHouseCooper, http://www.pwc.com/tw/en/publications/doing-business-in-taiwan. jhtml. Ibid. “Statute for Investment by Foreign Nationals” (1997), Investment Commission, MOEA, http://www.moeaic.gov.tw/. “Guide to Mergers and Acquisitions: Taiwan” (June 2010), Baker & McKenzie, http://www.bakermckenzie.com/BKAPMAGuideTaiwanJun10/.

under the MOEAIC. Specifically, foreign investors must first apply with the MOEAIC prior to establishing a branch office, a proprietary business, or a partnership within Taiwan. Required information include a business operation plan, a shareholder list, an investment plan, etc. 4 Moreover, all financial institutions are regulated by the FSC, under which the Banking Bureau, the Futures a n d S e c u r i t i e s B u re a u , a n d t h e I n s u r a n c e B u r e a u oversee their respective sectors. T h e re a re i n c e n t i v e s o ff e re d t o i n v e s t o r s w h o establish FIA companies, which include but are n o t l i m i t e d t o , a w a i v e r o f n a t i o n a l i t y a n d re s i d e n t requirements, rights to loan investments, profits, interests and capital gains, as well as repatriation of equity, and a reduction of dividend withholding rate from 25 percent to 20 percent. 5

MAPECT | INVESTING IN TAIWAN

CHAPTER 4 Ta i w a n ’s C a p i t a l M a r k e t

CHAPTER 4 | MAPECT

A Brief Overview Ta i w a n h a s re c e n t l y p u s h e d t o l i b e r a l i z e a n d i n t e r n a t i o n a l i z e i t s c a p i t a l market in an attempt to emulate the neighboring Asian capital markets, i n c l u d i n g t h o s e o f H o n g K o n g , S i n g a p o r e , S h a n g h a i , a n d To k y o . I n 2 0 0 8 , Taiwan's gover nment relaxed several restrictions and increased transparency to encourage foreign businesses to list on either the Taiwan Stock Exchange (TWSE) or the over-the-counter GreTai Securities Market (GTSM). The TWSE is the primary equities market in Taiwan. Moreover, the Taiwan Futures Exchange (TAIFEX) is the main der ivatives m a r k e t i n Ta i w a n . W h i l e t h e Ta i w a n D e p o s i t o r y a n d C l e a r i n g C o r p o r a t i o n (TDCC) provides custodian and book-entry services. Chapter 4 provides an introduction to the different market infrastructures i n Ta i w a n , i n c l u d i n g t h e v a r i o u s p r o c e s s e s a n d r e g u l a t i o n s t h a t f o r e i g n companies have to follow prior to listing in Taiwan.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

T h e Ta i w a n e s e g o v e r n m e n t h a s i n c r e a s e d

issuer. Furthermore, the primary listing criteria differs

efforts to promote and attract foreign companies into

between TWSE and GTSM. Table 1 provides a general

Taiwan’s capital market. For instance, the Executive

set of rules regarding listing on either the TWSE or the

Yuan passed the “1-2-3 Plan” in 2008. Through the

GTSM for foreign issuers.

Plan, the gover nment hopes to not only streamline and synchronize foreign businesses with the needs of Taiwanese investors, but also internationalize and

Primary Listing Process

improve the competitiveness of Taiwan’s capital market. Furthermore, newly passed amendments have relaxed

The entire primary listing process takes

restrictions on the qualifications of investments from

approximately two months. First the issuer must submit

China and the process of fundraising. 1

a listing application to either the TWSE or the GTSM. Upon submission, the respective review committee will

In general, Taiwan’s capital market offers several

review the application, a process that may take up to

a d v a n t a g e s . A p a r t f ro m t h e i n c re a s i n g l y f a v o r a b l e

six weeks. Once either the TWSE or the GTSM review

policies and government efforts aimed to attract and

committee approves the application, the case is then

facilitate businesses to list, Taiwan’s capital market

submitted to the Financial Supervisory Commission

also offers low listing costs, relatively high P/E ratios

(FSC) for final approval. Once the FSC approve, the

for firms looking to fundraise, and the opportunity for

issuer may carry out public stock offerings with their

Chinese Qualified Domestic Institutional Investors (QDII)

stocks formally traded as listed shares. 2

to invest. Stronger Cross-Strait relations and continuing i n t e g r a t i o n i n t o t h e re g i o n a l e c o n o m y a l s o m a k e s Taiwan’s capital market increasingly favorable to foreign

Secondary Listings: Taiwan Depositary Receipts

companies. TDRs offer the option for companies to be listed Companies have two listing options. Primary listing

in another stock exchange or securities market with

involves offering an initial public offering (IPO), while

securities being traded, while also being listed in

secondary listing involves listing Taiwan Depositary

Taiwan. Principally, secondary listing allows public

Receipts (TDRs).

companies to enter not only Taiwan’s capital market, but also the increasingly interdependent regional economy.

Primary Listings: IPOs

While the process to list TDRs is fairly simple and fast, there are still requirements that companies must

Domestic and foreign companies that have not

meet prior to approval by either the TWSE or the Central

listed their shares on any other exchanges can apply to

Bank. Furthermore, the criteria are different between

offer IPOs and list their shares in Taiwan.

technology-focused companies and non-technology / “general” companies.

While the primary listing process has been streamlined and simplified over the years, numerous

To list TDRs, companies must first be listed, for not

criteria on company size, source of capital, profitability,

less than six months, on one of the stock exchanges or

distribution of shareholding, etc. must be met by the

securities markets that have already been approved by

CHAPTER 4 | MAPECT

TAIWAN’S CAPITAL MARKET

TABLE 1: GENERAL RULES FOR PRIMARY LISTING

TWSE

GTSM

W h i l e

Qualification & Source of Capital

a p p l i c a n t

F o re i g n i s s u e r s re g i s t e re d

qualifications for foreign issuers

in China cannot list in Taiwan,

restrict those that have Mainland

but funds raised in Taiwan by a

Chinese shareholders singly

foreign issuer may be used for

or jointly holding more than 30

investments in China without an

percent of the are no restrictions

upper limit.

on investments in China.

The issuer or any of its controlled companies must have a t l e a s t t h re e y e a r s o f t r a d i n g records.

Duration of Corporate Existence

The issuer must have at least two years of trading records.

And in instances where the

foreign issuer is an investment

holding company, the duration of

corporate existence can be based

on the duration of existence of its

subsidiaries.

Primary Listing Applicants must meet one of the following: • P a i d - i n

capital

shareholders’ equity of at least NT$ 600 million, or • Market Capitalization worth

Company Size

not less than NT$ 1.6

Shareholders’ equity must be at

billion.

least NT$ 100 million.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

TABLE 1: GENERAL RULES FOR PRIMARY LISTING (CONTINUED)

TWSE

GTSM Pre-tax income for the most recent fiscal year must be at l east N T$ 4 mi l l ion, without considerations of the effects of net minority interest income or loss. The ratio of pre-tax income to shareholders’ equity must also meet the following requirements: • A t least f our p ercent and

Pre-tax income for the

without an accumulated

most recent fiscal year must be

deficit for the most recent

NT$ 120 million or higher, with

fiscal year;

a cumulative pre-tax income of

• And at least three percent

at least NT$ 250 million over the

over the past two most

last three years.

recent fiscal years, with the

There can also be no

Profitability

cumulative losses.

Par Value

Distribution of Shareholding

CHAPTER 4 | MAPECT

ratio improving over the two year period.

NT$ 10 per share 6

NT$ 10 per share

The Primary Listing

Excluding company insiders

Applicant must have at least

and juristic persons, both of

1,000 shareholders, of whom

whom hold more than 50 percent

a t l e a s t 5 0 p e rc e n t m u s t h o l d

of the shares, applicants must

between 1,000 to 50,000 shares

have at least 300 shareholders

(accounting for more than 20

percent of total shares or at least

percent of the total shares or at

10 million).

least 10 million).

TAIWAN’S CAPITAL MARKET

TABLE 1: GENERAL RULES FOR PRIMARY LISTING (CONTINUED)

TWSE

GTSM A foreign issuer must: • H a v e a t l e a s t t h r e e independent directors,

Pre-tax income for the

accounting for at least 20

most recent fiscal year must be

percent of the total number

NT$ 120 million or higher, with

of director seats with at

a cumulative pre-tax income of

least one based in Taiwan

at least NT$ 250 million over the

Corporate Governance

last three years. There can also be no cumulative losses.

n.b.: GTSM-listed companies are not required to have independent supervisor(s).

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

TABLE 2: GENERAL RULES FOR LISTING TDRs on the TWSE 7

Qualification & Source of Capital

TECHNOLOGY BASED COMPANY

GENERAL COMPANY

While a foreign issuer incorporated in China may not seek the listing of TDRs in Taiwan, the capital raised by a foreign issuer in Taiwan may be used for direct or indirect investment in China

Apart from having no accumulated deficits, the foreign issuer must meet one of the following requirements: •

The ratio of pre-tax income to shareholders’ equity must be at least six percent for the latest fiscal year;

•

The ratio of pre-tax income to shareholders’ equity must be at least three percent for the m o s t re c e n t t w o f i s c a l years, or the average

The issuer must not have

ratio of the two fiscal

cumulative loss for the most

years must be at least

recent fiscal year, such that there

three percent with

is enough working capital to

improving profitability;

maintain operations.

Furthermore, at least 50

Profitability

CHAPTER 4 | MAPECT

•

The pre-tax income for

p e rc e n t o f t h e w o r k i n g c a p i t a l

the most recent two

n e e d s t o c o m e f ro m o p e r a t i n g

fiscal years must both

activities.

reach NT$ 250 million.

TAIWAN’S CAPITAL MARKET

TECHNOLOGY BASED COMPANY

TABLE 1: GENERAL RULES FOR PRIMARY LISTING (CONTINUED)

•

GENERAL COMPANY

Shareholders’ equity at least

•

NT$ 300 million; •

NT$ 600 million;

Units total 20 million or more;

•

and •

Company Size

Distribution of Shareholding

Shareholders’ equity at least Units total 20 million or more; and

Market capitalization of at

•

least NT$ 300 million.

Market capitalization of at least NT$ 300 million.

The number of registered shareholders must be at least 1,000 and the total number of shares held by those who are neither insiders nor juristic persons must be at least either 20 percent or 10 million shares.

•

Prior to listing, the stock prices of the company should not be subjected to irregular changes or undue movements three months prior to approval.

•

Domestic stockholders are allowed to sell the stock on foreign stock exchanges or securities markets.

Others

•

The rights and obligations allocated to stockholders are identical to same class stocks listed on other stock exchanges or securities market.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

the Taiwanese government.

China Area Investors,” effectively allowing Chinese QDIIs to invest in companies listed on either the TSWE

Furthermore similar to the regulations involved with

or the GTSM.

primary listing, there are also requirements for company si ze, profita bility, di st rib uti on of s hareh old ing, and source of capital.

H o w e v e r, t h e re a re s t i l l s e v e r a l re s t r i c t i o n s i n place. Specifically, Chinese QDIIs still cannot acquire significant control over listed companies – effectively

While TDRs have traditionally been listed on the TWSE, the first TDR on the GTSM began trading in

preventing acquisition activities – or have the QDII or its members serve on the board of the listed company.

February of 2011. 8

Secondary Listing Process on the TWSE From the initial application to the actual listing of TDR on the TWSE, the entire process takes approximately one and a half month. Once the

The List of Stock Exchanges or Stock Markets Authorized by the Financial Supervisory Commission10

“Application Form for TDR Listing” has been submitted to the TWSE, authorities from both the TWSE and the

The NYSE Euronext

Central Bank will review the application simultaneously.

The American Stock Exchange

During a 10 to 12 business days period, both agencies will look into whether the listing conditions stipulated in

The NASDAQ

Article 26 of the Criteria for Review of Securities Listings

The London Stock Exchange

are met. If the requirements are met, the Central Bank

Deutsche Borse AG

will issue an approval letter and the TWSE will submit a Listing Agreement that then needs to be approved by

The Italian Stock Exchange

the Competent Authority. There is then a seven days

The Toronto Stock Exchange

waiting period for effective registration.

The Australian Securities Exchanges

Once effective registration has been completed,

The Tokyo Stock Exchange

the issuer must then complete public issuance and

The Osaka Securities Exchange

submit the list of distribution of shareholdings before

The Stock Exchange of Singapore

the listing date can be set. 9

The Kuala Lumpur Stock Exchange The Stock Exchange of Thailand

PRC Investment

The Johannesburg Stock Exchange

approved the “Regulations Gover ning Securities

The Hong Kong Exchanges and Clearing Limited

Investment and Futures Trading in Taiwan by Mainland

Korea Exchange

In 2009, the Financial Supervisory Commission

CHAPTER 4 | MAPECT

TAIWAN’S CAPITAL MARKET

CONTACT INFORMATION

ENDNOTES 1.

Taiwan Stock Exchange Corporation 3F, 9-12F, No.7, Section 5, Xinyi Road Taipei 11049, Taiwan 886-2-81013101 / http://www.twse.com.tw/ GreTai Securities Market 15F, No.100, Section 2, Roosevelt Road, Taipei 10084, Taiwan 886-2-2369-9555 / http://www.otc.org.tw

“Prelude – Advantages of the Taiwan Capital Market,” Taiwan Stock Exchange Corporation, http://www.twse.com.tw/en/listed/ alien_business/welcome.php. 2. “Manual of Listing in Taiwan by Foreign Issuers,” Taiwan Stock Exchange Corporation, http://www.twse.com.tw/en/listed/alien_business/download/manual.pdf. 3. Ibid. 4. Controlled companies can have any of the following: one in which the issuer directly holds more than 50 percent of the issued voting shares, the issuer, indirectly through a subsidiary company, holds more than 50 percent of the issued voting shares, or the issuer directly, or indirectly, through a subsidiary company, holds more than 50 percent of the issued voting shares. A controlled company also has 50 percent or more of its capital contributed by the issuer. 5. “IPO in Taiwan” (2010), PriceWaterHouseCoopers, http://www. pwc.com/tw/en/ipo-in-tw/feature. 6. Ibid. 7. “Listing in Taiwan by Foreign Issuers: Issuance of Taiwan Depositary Receipts,” (June 2009), Taiwan Stock Exchange Corporation. 8. The TDR of Technics Oil & Gas, which was the first TDR listed on the GTSM (ticker symbol: 911613) began trading on February 25, 2011. Source: “The first GTSM-listed TDR of Technics Oil & Gas begins trading on February 25, 2011,” GreTai Securities Market, http://www.otc.org.tw/en/about/news/otc_news/otc_news_detail. php?doc_id=347&sid=4&total=8. 9. “Listing in Taiwan by Foreign Issuers: Issuance of Taiwan Depositary Receipts,” (June 2009), Taiwan Stock Exchange Corporation. 10. For a more up-to-date list, please refer to the TWSE website: www. http://www.twse.com.tw/en/. The List of foreign Stock Exchanges or Stock Markets Authorized by the Financial Supervisory Commision was obtained: “Listing in Taiwan by Foreign Issuers: Issuance of Taiwan Depositary Receipts,” (June 2009), Taiwan Stock Exchange Corporation.

MAPECT | INVESTING IN TAIWAN

CHAPTER 5 M & A i n Ta i w a n

CHAPTER 5 | MAPECT

A Brief Overview M e r g e r s a n d a c q u i s i t i o n s ( M & A ) a c t i v i t y i n Ta i w a n h a s i n c r e a s e d d r a s t i c a l l y o v e r t h e y e a r s . A n d w i t h E C FA a n d t h e v a r i o u s g o v e r n m e n t i n i t i a t i v e s t o p r o m o t e f o r e i g n i n v e s t m e n t s i n t o Ta i w a n , M & A a c t i v i t i e s â&#x20AC;&#x201C; particularly Cross-Strait M&A and cross-border M&A â&#x20AC;&#x201C; are projected to increase. I n 2 0 1 0 , t o t a l d e a l v a l u e o f M & A i n Ta i w a n w a s a p p ro x i m a t e l y U S $ 3 . 7 Billion, a six percent increase from 2009's deal value. Likewise, 2010's M&A deal volume increased as well from 67 in 2009 to 85 in 2010. 1 There are several reasons for the growth of M&A activity in Taiwan. Apart from the recovery of the global economy and the shift in economic f ocus to t h e C h i n e s e m a r k e t , Ta i w a n h a s a l s o w i t n e s s e d b o t h a n i n c re a s e i n p r i v a t e equity and a continued gover nment effort to restructure and consolidate the island's industries, particularly the financial sector. C h a p t e r 5 l o o k s i n t o Ta i w a n ' s M & A f r a m e w o r k , re g u l a t i o n s , a n d t re n d s , specifically focusing on key features that pertain to foreign investors interested in engaging in M&A activity with Taiwanese companies.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

Legislative M&A Framework in Taiwan

another company in exchange for shares, cash or other assets.

In Taiwan, the laws regulating the framework of M&A activities are found in numerous statutes, including

Tr a n s a c t i o n o f s h a r e s i s g e n e r a l l y t h e m o s t

the Business Mergers and Acquisitions Act (BMAA),

common method of obtaining control of a company. In

t h e C o m p a n y A c t , t h e F a i r Tr a d e A c t , t h e S t a t u t e

fact, share purchases, including the traditional share

f o r I n v e s t m e n t B y F o re i g n N a t i o n a l s , t h e F i n a n c i a l

purchase and the statutory 100 percent share swap,

I n s t i t u t i o n s M e rg e r A c t , a n d t h e F i n a n c i a l H o l d i n g

is usually preferred over asset purchases or statutory

Company Act.

mergers in Taiwan due to tax considerations. Share purchases are subjected to a securities transaction tax

The BMAA generally supersedes other laws r e g u l a t i n g M & A , w h i c h e n c o m p a s s e s m e r g e r,

of 0.3 percent, the Alternative Minimum Tax, and no capital gains tax on the sale of shares. 3

consolidation, acquisition, and division of a company. Asset purchases and statutory mergers are Ho we v e r, t h e F i n a n c i a l I n s t i t u t i o n s M erger A ct

traditionally subjected to significantly higher income

and the Financial Holding Company Act regulate M&A

taxes. However, the BMAA does offer tax exemptions

involving financial institutions. And both supersede

under certain instances. For example, in cases of a

the BMAA in certain instances involving financial

statutory acquisition of assets, the deed tax, stamp

institutions.

duty, the VAT, and the Land Value Increment Tax may be exempted if certain qualifications are met. Similar

The BMAA aims to not only streamline procedures

exemptions are offered to statutory spin-offs, statutory

and optimize efficacy, but also provide tax benefits. The

mergers, and simple statutory parent-subsidiary

BMAA also takes into account not only the interests

mergers. Otherwise, there is a 20 percent income tax

of both the employers and the employees in a given

on gains and premiums resulting from asset sales in a

company during an M&A transaction, but also the

traditional asset purchase. 4

minority shareholders. But Taiwanese law also allows for various means A c c o rd i n g t o t h e i n t e r p re t a t i o n s o f t h e B M A A ,

through which transactions of business and assets may

c o n s o l i d a t i o n a n d m e rg e r s a re d e f i n e d a s â&#x20AC;&#x153; a n a c t

occur. Transaction devices include: the traditional share

wherein any and all companies involved â&#x20AC;Ś are dissolved,

purchase on the market, a statutory 100 percent share

and a new company is incorporated (consolidation)

swap, tender offer, asset purchase, statutory acquisition

to generally assume all rights and obligations of the

of assets, statutory spin-offs, a statutory merger, and a

dissolved company; or by any company surviving the

simple statutory parent-subsidiary merger. 5

merger from all the companies involved (merger), with shares of the surviving or newly incorporated company

However, Taiwanese law stipulates that a company

or any other company, cash or other assets as the

must purchase shares of a public company through a

consideration."

public tender offer if the former is seeking more than 20 percent of the latterâ&#x20AC;&#x2122;s outstanding shares within a 50

On the other hand, an acquisition is defined as any company acquiring shares, business, or assets of

CHAPTER 5 | MAPECT

day period. 6

M&A IN TAIWAN

Foreign M&A in Taiwan

in Deutsche Far Eastern Asset Management Company Ltd. in 2008. 11

While ECFA has facilitated foreign M&A in Taiwan, the gover nment still imposes restrictions and limits

Private equity firms have also invested in

in various cases. Specifically, numerous industries –

Taiwanese banks, including the Carlyle Group’s US$

listed on the MOEAIC’s “Negative List for Investment by

656 million stake in Ta Chong Bank in 2007. 12 Ta Chong

Overseas Chinese and Foreign Nationals” – are either

Bank further acquired Second Credit Cooperative of

completely prohibited, in the case of those relating to

Kaohsiung in 2009. 13

military products, or limited by percentage, such as the telecommunications industry. 7

F o re i g n M & A a c t i v i t i e s h a v e s i m i l a r l y t a rg e t e d Ta i w a n ’s i n s u r a n c e c o m p a n i e s . F u b o n F i n a n c i a l

Review and approval by MOEAIC is required for

acquired ING Groep NV’s life insurance unit in 2008;

all M&A cases related to Taiwanese businesses. The

the deal was valued at US$ 600 million. 14 Mercuries

Financial Supervisory Commission (FSC) also plays a

& Associates Ltd. acquired MassMutual International

principal role in overseeing and regulating M&A activity

Holding MSC Inc.’s stake in MassMutual Mercuries

among financial institutions.

Life in 2010. 15 Furthermore, in early 2011, Ruen Chen Investment Holding Co. acquired Nan Shan from American International Group Inc., in a US$ 2.16 billion deal. 16

M&A Trends in Taiwan: The Financial Sector Taiwan has the third largest banking sector by 8

ECFA has opened the Mainland Chinese financial

total assets (US$ 750 billion) in Asia with around 65

market to Taiwan’s financial sector, making it easier

d o m e s t i c a n d f o re i g n c o m m e rc i a l b a n k s a n d o v e r

for the latter to enter. Particularly with the preferential

two-dozen smaller local credit co-operatives. As a

treatment given to Taiwan as stipulated under ECFA,

result, Taiwan has one of the most fragmented banking

two trends in M&A activities are potentially emerging.

sectors in Asia. The government has, therefore, been implementing various financial reform policies aimed to

First, foreign banks are looking to enter

streamline and consolidate the financial sector, as well

C h i n a t h ro u g h M & A a c t i v i t i e s w i t h t h e i r Ta i w a n e s e

as to divest state holdings. These policies as stipulated

counterparts. By entering the Chinese market through

by the Financial Institutions Mergers Act, coupled with

a Taiwanese company, foreign financial institutions can

increasingly relaxed regulations on foreign investments

receive, albeit indirectly, the same preferential treatment

in Taiwan, have created a wave of M&A activities among

given to Taiwanese companies.

financial institutions. Second, Taiwanese banks are engaging in CrossS t a n d a r d C h a r t e r e d ’s a c q u i s i t i o n o f H s i n c h u

Strait M&A with Chinese financial institutions. This

International Bank and Citigroup’s takeover of the Bank

is exemplified by Taiwan-based China Life Insurance

of Overseas Chinese, are some of the earlier examples

Co. and China-based China Construction Bank’s joint

of foreign companies engaging in M&A in Taiwan. Other

investment in Pacific-Antai Life Insurance Co., a move

examples include DBS Bank’s US$ 1.4 billion acquisition

to establish an insurance industry in China. While

of Bowa Bank,

and Deutsche Bank’s 60 percent stake

China Life Insurance only has a 19.9 percent stake in

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

this partnership, it now has access into the Chinese market.

Formosa Epitaxy Incorporation (FOREPI), acquiring 15

On the other hand, China Construction Bank

percent of FOREPI’s shares and becoming its largest

seeks the operational and management experience from

shareholder. Through this NT$ 2.7 billion transaction,

China Life Insurance.

Mitsui & Co. will be able to enter to LED market. 20 Chinese-based companies are also entering Taiwan

M&A Trends in Taiwan: The High-Technology Sectors

to engage in M&A. In 2010, BOE Technology Group successfully acquired the LCD TV business and OEM/

Ta i w a n h a s b e c o m e o n e o f t h e l a r g e s t

ODM assets of Taiwan’s JEAN Company, creating one

manufacturers of electronics, optical and precision

of the largest direct Chinese investments into Taiwan

instruments, and information and communications

since the signing of ECFA. The RMB 290 million deal

technology (ICT) products in the world, making Taiwan

also includes a 100 percent stake in K-Tronics (Suzhou)

a formidable and invaluable presence in the global

Technology Co. Ltd, a subsidiary fully-owned by JEAN. 21

high-technology (high-tech) industry. Not surprisingly, M&A transactions involving Taiwanese companies have focused on the high-tech sectors over the past few years.

Taiwanese companies engaging in Domestic M&A In 2010, Innolux Display Corporation merged with Chi Mei Optoelectronics Corporations and TPO Display Corporation to form Chimei Innolux Corporation in a NT$

While foreign companies have engaged in M&A

172 billion deal, replacing AU Optronics Corporation as

with Taiwanese high-tech companies, the latter have

Taiwan’s largest producer of LCD displays and creating

similarly pursued M&A. Particularly in Taiwan’s high-

a stronger global competitor against Korea’s Samsung

tech sectors, both domestic and outbound cross-border

Electrongs and LG Display. 22

M&A transactions have been extremely frequent. M&A has become a principal tool to move up the value chain,

Other examples include Taiwan Semiconductor

acquire new technology and operational mechanisms,

Manufacturing Co.’s (TSMC) acquisition of Xintec Inc

increase the market share, strengthen branding, and

i n 2 0 0 7 a n d C h i p b o n d Te c h n o l o g y ’s a c q u i s i t i o n o f

expand globally.

International Semiconductor Technology in 2010.

Foreign M&A in Taiwan

Taiwanese companies engaging in Cross-border M&A

In 2007, the German-based Bayer Material Science

Taiwan’s high-tech companies frequently engage

acquired Taiwan’s Ure-Tech Group, creating the world’s

in outbound cross-border M&A activity, utilizing these

largest supplier and solutions provider of thermoplastic

transactions to move up the value chain, strengthen

polyurethane (TPU) resins and films. 18 And in 2008, UK-

their branding, and expand globally.

based Elementis acquired Deuchem Co. in a NT$ 2,464 million deal. 19 In both instances, foreign companies

For instance, Hon Hai Precision Industry acquired

acquired their Taiwanese counterparts to expand into

a majority stake in a Hitachi Ltd. Display unit at the

the Asia Pacific region with particular focus on entering

end of 2010. Following the US$ 1.2 billion deal, Hon

the Mainland Chinese market.

Hai became the world’s largest maker of smaller liquid crystal display panels, with a market share of around

In early 2011, Mitsui & Co., Ltd agreed to invest in

CHAPTER 5 | MAPECT

17.3 percent. 23

M&A IN TAIWAN

L i k e w i s e , T S R C C o r p o r a t i o n re c e n t l y a c q u i re d

Financing M&A in Taiwan: Private Equity

U.S.-based Dexco Polymers in a US$ 168 million deal, w h i c h n o t o n l y e x p a n d e d T S R C C o r p . ’s c u s t o m e r

A p a r t f ro m d e b t f i n a n c i n g , a n o t h e r c h a n n e l i s

base throughout North America and Europe, but

through private equity (PE) and venture capital (VC). In

also established the company as one of the top five

fact for foreign companies, PE is one of the principal

producers of synthetic rubbers.

mechanisms to bring foreign capital into Taiwan to invest and finance M&A. And while Taiwan lacks large

Strategic alliances are similarly commonplace, as Taiwanese companies are looking abroad to expand

international PE funds prominent in most Asian financial centers, PE has become increasingly popular.

their brand. In 2010, Acer invested in China’s Founder Technology Group Corp – whose line of computers has

In the first half of 2010, there were 136 PE/VC firms

been ranked among the top in the Asia-Pacific region.

in Taiwan, with approximately US$ 6.57 billion under

Under this strategic alliance, Acer will have significant

management. This amounts to a 2.84 percent increase

access to China’s market, becoming the second largest

from 2009’s value of capital under management (US$

PC maker in Asia.

6.38 billion), and a 14.9 percent increase from 2008’s value (US$ 5.71 billion). 26

Taiwanese companies have particularly focused attention on their Chinese counterparts, as M&A

International PE funds are taking notice of

activities between Taiwanese and Chinese companies

Ta i w a n e s e c o m p a n i e s f o r n o t o n l y t h e i r s t r o n g

have increased particularly following the signing of

innovation and operational management abilities, but

ECFA. Taiwanese companies, including AU Optronics,

also their potential to expand globally.

Yulon Motors, and HTC have been engaging in M&A in China.

In fact, PE has driven numerous past M&A deals. For instance, the Carlyle Group has been a c t i v e l y p u r s u i n g M & A d e a l s i n Ta i w a n . A p a r t f ro m

Financing M&A in Taiwan: Debt Financing

their investment in Ta Chong Bank, the Carlyle Group has also invested in kbro Limited (formerly Easter n

For domestic and foreign companies, debt

M u l t i m e d i a C o m p a n y ) , w h i c h re c e n t l y m e rg e d w i t h

financing is one of the principal ways to finance M&A.

Ta i w a n M o b i l e ( T W M ) . T h e d e a l m a k e s t h e C a r l y l e

Particularly with the local companies, borrowing funds

Group the second largest shareholder of TWM, creating

from financial institutions is still very common. Not only

Taiwan’s leading cable TV services operator. 27 These

do Taiwanese banks offer significantly lower interest

examples illustrates how PE is playing an increasingly

rates than those from neighboring nations, but Taiwan’s

profound role in Taiwan’s M&A activity.

o v e r- b a n k i n g n a t u re a l s o f u e l s g re a t e r c o m p e t i t i o n among the financial institutions to offer better service and deals to investors. Thus, many local businesses

Taxes Applied to M&A

utilize corporate debt – both standard and convertible corporate bonds – as a fundraising method in Taiwan.

There are no taxes applied to capital gains. H owever, i n cases of securi t i es t ransf er, there is a 0 . 3 p e r c e n t S e c u r i t y Tr a n s a c t i o n Ta x . A p a r t f r o m

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

the Security Transaction Tax, relevant taxes include

Competition Law

Business taxes, including the Value Added Tax and the Non-Value Added Tax, Stamp duty, the Land Value Increment Tax, the Deed Tax, and the Income Tax.

Taiwan’s competition policy is regulated by the Fair Trade Law (FTL), promulgated by the Fair Trade Commission (FTC) under the Executive Yuan. The FTL’s purposes include “maintaining trading order, protecting

M&A Tax Incentives

consumers’ interests, ensuring fair competition, and p r o m o t i n g e c o n o m i c s t a b i l i t y, ” s u c h t h a t t h e F T L

In order to improve overall operational efficacy,

principally regulates monopolies, M&A, and concerted

the BMAA offers tax incentives aimed to encourage

efforts. The FTL regulates both domestic and foreign

business reorganizations via mergers, acquisitions, and

M&A cases. 29

consolidations. Various taxes – including, the Stamp Tax, the Deed Tax, and the Securities Transaction Tax –

According to the FTL, any mergers that fall within

may be exempted under specific cases, such as if the

the following circumstances must be filed, reviewed,

total acquired shares exceeds 65 percent of the value of

and approved by the FTC:

the acquired shares. • Furthermore, in cases of stock acquisitions, tax incentives include the continued validity of unused

possesses one-third of the market share; •

tax incentives – such as tax holidays and investment tax credits – after a company has been acquired by

When, as a result of the merger, the company When one of the companies within the merger possesses one-fourth of the market share; or

•

When sales for the preceding fiscal year of one

another. However, in cases of asset acquisitions, such

of the companies in the merger exceeds the

transferability of tax incentives only apply in certain

threshold amount publicly announced by the

situations where an asset deal meets all the criteria

FTC. The threshold amounts set by the FTC

stipulated under the BMAA.

are NT$ 10 billion for non-financial businesses and NT$20 billion for financial businesses.

Other tax incentives under the BMAA include: the amortization of M&A expenses over 10 years, exemption from corporate income tax for capital gains from the

The Effects of ECFA on M&A

transfer of business and assets, and the availability of group taxation.

With the passing of ECFA – and the subsequent opening of Taiwanese industries to foreign investment –

Tax related incentives are also stipulated under the Statute for Industrial Innovation (SII). Tax incentives are

M&A activity in Taiwan is expected to increase. This will occur through three means:

issued as R&D tax credit, personnel training tax credit, and credits for establishing operational headquarters and logistics centers in Taiwan.

China to Taiwan: As Chinese investments of any kind have been prohibited by the government prior to ECFA, investment into Taiwan via Cross-Strait M&A presents a new option for Chinese companies. With the nine sectors that

CHAPTER 5 | MAPECT

M&A IN TAIWAN

Taiwan has agreed to open, Chinese investors will be able to invest in Taiwan. Taiwan to China:

3. 4. 5. 6. 7.

Taiwanese businesses have traditionally invested – albeit indirectly – into China. ECFA will only further facilitate Taiwanese businesses entering the Chinese

8. 9.

market as more industries and investments incentives t h a t a re s p e c i f i c a l l y f a v o r a b l y t o w a rd s Ta i w a n a re

10.

presented.

11.

The World to China via Taiwan:

12.

O v e r t h e l a s t d e c a d e , C h i n a t r a n s f o r m e d f ro m

13.

the “World’s Factory” to the “World’s Market.” Such a change has prompted a global economic change in

14.

focus towards China. However, while foreign businesses a re i n c re a s i n g l y i n t e re s t e d i n e n t e r i n g t h e C h i n e s e market, several factors – whether cultural, political, or historical – make expansion into China a challenge.

15. 16.

Taiwan, with its established ties and experience with China, offers a safe medium for foreign companies.

17.

Thus, through M&A, foreign companies can enter China via Taiwanese businesses. China to The World via Taiwan And finally, Taiwan's experience in business on a global level and strength in business operational

18.

19. 20.

management, give Taiwanese companies an advantage over their Chinese counterparts. Thus, with the signing of ECFA and the opening of Taiwan to Chinese investors, Taiwan is now a suitable hub for Chinese companies

21. 22. 23.

looking to expand globally. Chinese investors can utilize Taiwan's branding and experience to conduct business globally.

24. 25. 26.

ENDNOTES 1. 2.

“Asia Pacific M&A Bulletin: The Asia story” (2010), PriceWaterHouseCoopers, http://www.pwccn.com/webmedia/doc/634185220537866383_ m&abulletin_ap_mid2010.pdf. “Business Mergers And Acquisitions Act” (May 2004), Laws and Regulations Database of the Republic of China, http://law.moj.gov.tw/Eng/ LawClass/LawContent.aspx?pcode=J0080041.

27. 28. 29.

“Asia Pacific Mergers & Acquisitions Guide - Taiwan” (June 2010), Baker & McKenzie, http://www.bakermckenzie.com/BKAPMAGuideTaiwanJun10/. Ibid. Ibid. Ibid. “Negative List for Investment by Overseas Chinese and ForeignNationals,” MOEAIC, R.O.C., http://run.moeaic.gov.tw/MOEAIC-WEB-SRC/ OfimDownloadE.aspx. “Entering the Financial Service Market in Taiwan” (2007), PriceWaterHouseCoopers, http://www.pwc.com/en_GX/gx/financial-services/pdf/ ma_taiwan.pdf. “Financial Statistics Monthly, Republic of China (Taiwan),” Central Bank of the Republic of China, http://www.cbc.gov.tw/ct.asp?xItem=32497& CtNode=943&mp=2. “Letter to Shareholders” (2010), DBS Group, http://www.dbs.com/ dbsgroup/annual2009/letter_to_shareholders.html. “Deutsche Bank Completes Taiwan Asset Management Acquisi- tion and Announces CEO for the New Venture,” Press Release (2008), Deutsche Bank AG, http://www.deutsche-bank.de/presse/ en/content/ press_releases_2008_3886.html. “Bank Profile,” TC Bank, http://www.tcbank.com.tw/en/about/intro/ index.html. Chan, Cathy, “Carlyle, Longreach May Seek Mergers for Taiwan Banks They Own,” Bloomberg, July 30, 2009, http://www.bloomberg.com/ apps/news?pid=newsarchive&sid=aj6O8MFku4kw. “ING verkoopt Taiwanese levensverzekering bedrijf aan Fubon Financial Holding (Engelse tekst),” Press Room (August 20, 2008), NG Groep N.V., http://www.ing.com/Ons-Bedrijf/Press-room/Persberichtenarchief/ING-verkoopt-Taiwanese-levensverzekering-bedrijf-aan-FubonFinancial-Holding-Engelse-tekst.htm. “Mercuries & Associates Ltd Acquires Equity Shares,” October 14, 2010, Thomson Reuters, http://www.reuters.com/finance/stocks/2905. TW/key-developments/article/1998118. Ong, Janet and Tim Culpan, “AIG to Sell Nan Shan in Taiwan to Ruen Chen for $2.16 Billion,” January 12, 2011, Bloomberg, http://www. businessweek.com/news/2011-01-12/aig-to-sell-nan-shan-in-taiwan-toruen-chen-for-2-16-billion.html. Jun, Luo, “Taiwan’s China Life to Invest in Insurance Venture With Construction Bank,” December 27, 2010, Bloomberg, http://www. bloomberg.com/news/2010-12-27/china-construction-bank-to-own51-of-pacific-antai-life-after-investment.html. “Bayer Material Science to acquire Taiwan’s Ure-Tech Group,” Press Release (2006), Bayer AG, http://www.bayermaterialsciencenafta. com/news/index.cfm?mode=detail&id=6742B79A-010F-50C9F34BD8FAEDE56CDC. Hanley, Steven J., “Taiwan,” in The Mergers & Acquisitions Review, Ed. 2, Editor: Simon Robinson (2008), http://www.winklerpartners. com/?p=1021. “Investment and Participation in LED Manufacturing Business,” News Release (December 27, 2010), Mitsui & Co., Ltd., http://www.mitsui. com/jp/en/release/2010/1191040_1357.html. “BOE Attempts LCD Integration with Purchase of JEAN,” News Center, BOE Co. Ltd., http://www.boe.com.cn/en/news/news.asp?id=22. Culpan, Tim, “Chi Mei, Innolux to Merger in $5.3 Billion Transaction,” November 14, 2008, Bloomberg, http://www.bloomberg.com/apps/new s?pid=newsarchive&sid=aiLbkApsTZgY. “Hon Hai to invest $1.2 billion in Hitachi LCD unit: report,” December 27, 2010, Thomson Reuters, http://www.reuters.com/article/2010/12/27/ us-hitachi-honhai-idUSTRE6BP1M720101227. “TSRC Completes Acquisition Dexco Polymers LP in the U.S.,” Press Release (April 2011), TSRC Corporation, http://www.tsrc. com.tw/ english/index.asp. “Acer and Founder to strengthen their cooperation,” Corporate News, August 4, 2010, Acer Inc, http://www.acer-group.com/public/News/ corporate_news.htm. AVCJ, 2011 Asian Private Equity 300, Ed. 22 (November 2010), AVCJ Group Ltd. Carew, Rick and Charmian Kok, “Carlyle Trades Kbro to Taiwan Mobile,” September 17, 2009, The Wall Street Journal, http://online.wsj. com/article/SB125307353737514911.html. “Oaktree-managed fund launches tender offer for Fu Sheng shares,” Press Release (May 9, 2007), Fu Sheng Group, http://www.fusheng. com/corporate/news/news_offer.htm. “Fair Trade Law of 2002,” Fair Trade Commission, Executive Yuan, R.O.C., http://www.ftc.gov.tw/internet/english/doc/docDetail. aspx?uid=655&docid=1697.

MAPECT | INVESTING IN TAIWAN

CHAPTER 6 General Information

CHAPTER 6 | MAPECT

A Brief Overview Ta i w a n ' s g o v e r n m e n t c o m p r i s e s o f f i v e p r i n c i p a l b r a n c h e s : t h e L e g i s l a t i v e Yu a n , t h e E x e c u t i v e Yu a n , t h e J u d i c i a l Yu a n , t h e E x a m i n a t i o n Yu a n , a n d t h e C o n t ro l Yu a n . W i t h re s p e c t t o i n v e s t i n g o r d o i n g b u s i n e s s i n Ta i w a n , t h e m o s t p e r t i n e n t g o v e r n m e n t a g e n c i e s f a l l u n d e r t h e E x e c u t i v e Yuan, also the highest administrative organ of the gover nment. Chapter 6 provides a brief introduction, along with the contact i n f o r m a t i o n , t o s o m e o f t h e g o v e r n m e n t a l a g e n c i e s t h a t a re i m p o r t a n t w h e n investing in Taiwan.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

Ministry of Economic Affairs (MOEA)

T h e M O E A I C a l s o re v i e w s o u t w a rd i n v e s t m e n t s b y

15 Fuzhou Street Taipei 10015, Taiwan

Taiwanese enterprises, along with indirect Taiwanese

886.2.2321.2200 / www.moea.gov.tw

investments into China.

The Ministry of Economic Affairs (MOEA) is responsible f o r i s s u i n g b u s i n e s s l a w s a n d re g u l a t i o n s . W i t h 1 4 administrative agencies, six national corporations, and 64 overseas commercial offices, MOEA aims to s t re n g t h e n t r a d e , i n v e s t m e n t , a n d d e v e l o p m e n t i n

Industrial Development Bureau (IDB) 41-3 Hsinyi Road, Section 3 Taipei 10675, Taiwan 886.2.2754.1255 / www.moeaidb.gov.tw

Taiwan. The three most important agencies for investors

In order to establish a better investment climate in

include: the Department of Commerce, the Investment

Taiwan, the Industrial Development Bureau (IDB) not

Commission, and the Industrial Development Bureau.

only works towards providing guidance and assistance for businesses to overcome investment obstacles, but also aims to enhance the development of new industries

Department of Commerce

and upgrade the conditions of existing industries. Key

15 Fuzhou Street Taipei 10015, Taiwan

strategies include, but are not limited to, encouraging

886.2.412.1166 / http://gcis.nat.gov.tw

foreign enterprises to establish R&D centers and

U n d e r t h e M O E A , t h e D e p a r t m e n t o f C o m m e rc e i s principally responsible for the formation of commercial policy and regulations, including their planning,

o p e r a t i o n a l h e a d q u a r t e r s i n Ta i w a n , f o s t e r i n g investments by removing certain investment obstacles, and promoting regional economic integration.

management, and supervision. For foreign companies entering Taiwan, the processes for company registration â&#x20AC;&#x201C; including the establishment of branch offices and subsidiaries of foreign-owned entities â&#x20AC;&#x201C; fall under the jurisdiction of the Department of Commerce.

Bureau of Foreign Trade 1 Hukou Street Taipei 10066, Taiwan 886.2.2351.0271 / www.trade.gov.tw As an agency under the MOEA, the Bureau of Foreign Tr a d e ( B O F T ) i s re s p o n s i b l e f o r i m p o r t a n d e x p o r t

Investment Commission (MOEAIC)

activities, tariffs, and commodity classification.

8F, 7 Roosevelt Road, Section 1 Taipei 10015, Taiwan 886.2.3343.5700 / www.moeaic.gov.tw The Investment Commission (MOEAIC), under the MOEA, is responsible for the review and screening of investment applications into Taiwan by overseas

Fair Trade Commission 12-14 F, No. 2-2 Jinan Rd., Sec. 1 Taipei 10051, Taiwan 886.2.2351.7588 / www.ftc.gov.tw

Chinese and foreign nationals. The MOEAIC also

T h e F a i r Tr a d e C o m m i s s i o n ( F T C ) i s c h a rg e d w i t h

screens applications for outward investments, technical

the responsibility of implementing policies and laws

cooperation, and those of mainland Chinese personnel

regarding competition and fair trade. The duties of

entering Taiwan for purposes of inspection, business

the FTC include, but are not limited to, drafting fair

visits, and resolutions of economic or trade disputes.

trade policies, laws, and regulations, along with the

CHAPTER 6 | MAPECT

GENERAL INFORMATION

investigation and handling of various activities that impede competition, specifically in areas of monopolies and mergers.

Financial Supervisory Commission 8F., No.7, Sec. 2, Xianmin Blvd. New Taipei City 22041, Taiwan 886.2.8968.0899 / www.fscey.gov.tw As an independent authority at the cabinet level, the Financial Supervisory Commission (FSC) was established to create a more consolidated supervision a n d e x a m i n a t i o n e n t i t y f o r t h e Ta i w a n e s e b a n k i n g , securities, and insurance system. The FSC is also the single regulator for all of these respective industries. T h e F S C i n c l u d e s f o u r b u re a u s : M o n e t a r y A ff a i r s , Securities and Futures, Insurance, and Examination.

Ministry of Finance 2 Aiguo West Road Taipei 10066, Taiwan 886.2.2322.8000 / www.mof.gov.tw The Ministry of Finance (MOF) serves four major f u n c t i o n s i n a r e a s o f n a t i o n a l t r e a s u r y, c u s t o m s , taxation, and the management of national property. Specifically, the MOF enforces national fiscal policies, oversees public treasury systems and the management of land use, enacts custom policies and tariff laws, and handles the collection of taxes and duties. Under the administration of the MOF, the Taxation Agency handles all taxation matters, including tax auditing.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

OTHER KEY GOVERNMENT

Bureau of Consular Affairs, MOFA

Council for Economic Planning

AGENCIES

3-5F, 2-2 Jinan Road, Section 1

and Development, Executive Yuan

Taipei 10051, Taiwan

3 Baoqing Road

Department of Investment

886.2.2343.2888

Taipei 10020, Taiwan

Services, MOEA

www.boca.gov.tw

886.2.2316.5300

8F, 71 Guanqian Road

www.cepd.gov.tw

Taipei 10047, Taiwan

Ministry of the Interior (MOI)

886.2.2389.2111

5 Xuzhou Road

Council of Labor Affairs (CLA),

www.dois.moea.gov.tw

Taipei 10055, Taiwan

Executive Yuan

886.2.2356.5000

9F, 83 Yanping North Road, Section 2

www.moi.gov.tw

Taipei 10346, Taiwan

Intellectual Property Office, MOEA

886.2.8590.2866

3F 185 Hsinhai Road, Section 2

National Immigration Agency, MOI

Taipei 10637, Taiwan

15 Guangzhou Street

886.2.2738.0007

Taipei 10066, Taiwan

Bureau of Employment and

www.tipo.gov.tw

886.2.2388.9393

Vocational Training, CLA

www.immigration.gov.tw

83 Yanping North Road, Section 2

Investment Commission, MOEA

www.cla.gov.tw

Taipei 10346, Taiwan

8F, 7 Roosevelt Road, Section 1

Ministry of Transportation and

886.2.8590.2567

Taipei 10092, Taiwan

Communications (MOTC)

www.evta.gov.tw

886.2.3343.5700

50 Renai Road, Section 1

www.moeaic.gov.tw

Taipei City 10052, Taiwan

Bureau of Labor Insurance, CLA

886.2.2349.2900

4 Roosevelt Road, Section 1

www.motc.gov.tw

Taipei 10013, Taiwan

Taxation Agency, MOF 2F, 2 Aiguo West Road

886.2.2396.1266

Taipei 10066, Taiwan

Tourism Bureau, MOTC

886.2.2322.8000

9F, 290 Zhongxiao East Road, Section 4

www.dot.gov.tw

Taipei 10694, Taiwan

Department of Health (DOH),

886.2.2349.1500

Executive Yuan

www.tbroc.gov.tw

36 Tacheng Street

Directorate General of Customs, MOF

www.bli.gov.tw

Taipei 10341, Taiwan

13 Tacheng Street

Central Bank of the Republic of

886.2.8590.6666

Taipei 10341, Taiwan

China (Taiwan)

www.doh.gov.tw

886.2.2550.5500

2 Roosevelt Road, Section 1

www.customs.gov.tw

Taipei 10066, Taiwan

Bureau of National Health

886.2.2393.6161

Insurance, DOH

www.cbc.gov.tw

140 Hsinyi Road, Section 3

Ministry of Foreign Affairs (MOFA) 2 Kaitakelan Boulevard

Taipei 10634, Taiwan

Taipei 10048, Taiwan

886.2.2706.5866

886.2.2348.2999

www.nhi.gov.tw

www.mofa.gov.tw

CHAPTER 6 | MAPECT

GENERAL INFORMATION

Food and Drug Administration,

Public Construction Commission,

European Chamber of Commerce

DOH

Executive Yuan

in Taipei

161-2 Kunyang Street

9F, 3 Songren Road

11F, 285 Zhongxiao East Road, Section 4

Taipei 11561, Taiwan

Taipei 11010, Taiwan

Taipei 10692, Taiwan

886.2.2653.1318

886.2.8789.7500

886.2.2740.0236

www.fda.gov.tw

www.pcc.gov.tw

www.ecct.com.tw

Directorate General of Budget

French Chamber of Commerce &

Accounting and Statistics,

FOREIGN TRADE OFFICES IN

Industry in Taiwan

Executive Yuan

TAIPEI

2F, 307 Dunhua North Road

1 Zhongxiao East Road, Section 1

Taipei 10583, Taiwan

Taipei 10058, Taiwan

American Chamber of Commerce

886.2.2514.7959

886.2.3356.6500

in Taipei

www.ccift.org.tw

www.dgbas.gov.tw

7F-6, 129 Minsheng East Road, Section 3 Taipei 10596, Taiwan

German Trade Office Taipei

Environmental Protection

886.2.2718.8226

19F-9, 333 Keelung Road, Section 1

Administration,

www.amcham.com.tw

Taipei 11012, Taiwan

Executive Yuan

886.2.8758.5800

83 Zhonghua Road, Section 1

Australian & New Zealand

Taipei 10042, Taiwan

Chamber of Commerce in Taipei

886.2.2311.7722

5F, 44 Zhongshan North Road, Section 2

Spanish Chamber of Commerce

www.epa.gov.tw

Taipei 10448, Taiwan

in Taiwan

886.2.7701.0818

10F-B1, 49 Minsheng East Road, Section 3

www.anzcham.org.tw

Taipei 10478, Taiwan

Mainland Affairs Council,

www.taiwan.ahk.de

Executive Yuan

886.2.2518.4905

15F, 2-2 Jinan Road, Section 1

British Chamber of Commerce in

Taipei 10051, Taiwan

Taipei

886.2.2397.5589

26F, 9-11 Songgao Road

Taipei Office, Interchange

www.mac.gov.tw

Taipei 11073, Taiwan

Association (Japan)

886.2.2720.1919

105 No. 28 Ching Cheng Road,

www.bcctaipei.com

Taipei, Taiwan

National Commission, Executive Yuan

http://taiwan.oficinascomerciales.es

886.2.2713.8000 / www.koruy.or.jp/taipei/

50 Renai Road, Section 1

Canadian Trade Office in Taipei

Taipei 10052, Taiwan

5F & 6F, Hua-Hsin Building, No. 1

886.2.1343.7377

SongZhi Road, Taipei 11047, Taiwan

www.ncc.gov.tw

886.2.8723.3000 / www.canada.org.tw

MAPECT | INVESTING IN TAIWAN

CHAPTER 7 ABOUT MAPECT

CHAPTER 7 | MAPECT

A Brief Overview China has emerged as a leading world market force after the 2008 f i n a n c i a l c r i s i s , a n d i n t u r n , Ta i w a n i s n o w i n a n e x c e l l e n t p o s i t i o n t o re a p significant economic benefits due to closer cross-strait relationships forged b y t h e re c e n t E C FA a n d M O U f i n a n c i a l a n d t r a d e a g re e m e n t s . We e x p e c t t h a t t h i s e x p a n d e d e c o n o m i c c o o p e r a t i o n b e t w e e n C h i n a a n d Ta i w a n w i l l lead to a significant increase in M&A and private equity investment activities in Taiwan. Ta i w a n i s u n i q u e l y p o s i t i o n e d t o b e c o m e A s i a â&#x20AC;&#x2122;s i n d u s t r i a l h u b a s t h e primary conduit into Mainland China, thereby offering unique M&A and p r i v a t e e q u i t y d e a l o p p o r t u n i t i e s . Ta i w a n i s t o u t e d t o b e o n e o f t h e b e s t investment ideas for the coming decade, offering strong technology and financial sectors, world class companies and workforces, growing access to t h e C h i n a m a r k e t , a n d re a s o n a b l y p r i c e d c o m p a n y v a l u a t i o n s . I n a d d i t i o n , t h e re i s a n u rg e n t n e e d f o r Ta i w a n t o re s t r u c t u re i t s i n d u s t r i e s ( i . e . D R A M s e c t o r ) , s t re n g t h e n i n t e g r a t i o n w i t h g l o b a l d i s t r i b u t i o n n e t w o r k s , m o v e u p the value chain, and achieve greater economies of scale. Ta i w a n M e r g e r s & A c q u i s i t i o n s a n d P r i v a t e E q u i t y C o u n c i l ( M A P E C T ) is here to help its membership and the M&A and PE industry unlock unprecedented opportunities as the acceleration of cross-strait economic i n t e g r a t i o n c o n t i n u e s t o s t i m u l a t e c o o p e r a t i v e i n v e s t m e n t s b e t w e e n Ta i w a n and China.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

ABOUT MAPECT Taiwan Mergers & Acquisitions and Private Equity C o u n c i l ( M A P E C T ) , a n o n - p ro f i t o rg a n i z a t i o n , w a s

Taiwan will lead to a significant increase in M&A and PE investment activities in Taiwan.

established in Taipei on September 29, 2009 by more than 90 industry professionals who recognized that

Taiwan is uniquely positioned to become Asia’s

Taiwan needed a dedicated organization solely devoted

industrial hub as the primary conduit into Mainland

towards promoting M&A and private equity (PE).

China, thereby offering unique M&A and private

MAPECT is an exclusive high-level advocacy platform

equity deal opportunities. Taiwan is touted to be one

dedicated towards promoting Cross-Strait investment

of the best investment ideas for the coming decade,

activities by enhancing better industry-gover nment

offering strong technology and financial sectors,

relations, building an optimized regulatory framework

world class companies and workforces, growing

for M&A and PE deal-making, and leveraging resources

access to the China market, and reasonably priced

p ro v ide d by ma j o r P E f i rm s i n Ta i w a n , H ong K ong,

company valuations. In addition, there is an urgent

and China. Our members include the Taiwan Stock

need for Taiwan to restructure its industries (i.e. DRAM

Exchange, the GreTai Securities Market, the Taiwan

sector), strengthen integration with global distribution

Insurance Institute, Credit Agricole, Citigroup, Deloitte

networks, move up the value chain, and achieve

& To u c h e , K K R a n d o t h e r m a n y h i g h l y r e s p e c t e d

greater economies of scale. MAPECT is here to help

financial and PE industry companies, as well as legal

its membership and the M&A and PE industry unlock

services and accounting firms.

unprecedented opportunities as the acceleration of cross-strait economic integration continues to stimulate

M A P E C T ’s m i s s i o n i s t o f a c i l i t a t e C ro s s - S t r a i t

cooperative investments between Taiwan and China.

M&A and PE activities and to offer its unique services to the global market. Our mandate to serve our clients

Every year MAPECT hosts a range of events

as an “official” go-between the industry, government,

aimed at promoting M&A and PE. Notable past events

and general public is why MAPECT is able to advance

include the 2010 MAPECT Cross-Strait M&A and

our membership’s interests as an effective advocacy

Private Equity Forum and the MAPECT Academic

platform.

Symposium. Furthermore, MAPECT continues to extend gl ob al l y wi t h p art nershi p s wi t h ot her organizations

C h i n a h a s e m e rg e d a s a l e a d i n g w o r l d m a r k e t

around Asia. In 2010, MAPECT signed a Memorandum

force after the 2008 financial crisis, and in tur n,

of Understanding with the Beijing Private Equity

Ta i w a n i s n o w i n a n e x c e l l e n t p o s i t i o n t o r e a p

Association. Moreover, in 2011, we continue to build

s i g n i f i c a n t e c o n o m i c b e n e f i t s d u e t o c l o s e r c ro s s -

greater relationships with other organizations, engaging

strait relationships forged by the recent ECFA and MOU

in event-planning, information sharing, and general

financial and trade agreements. We expect that this

cooperation all in the hopes of promoting the ideas of

expanded economic cooperation between China and

M&A and PE.

CHAPTER 7 | MAPECT

ABOUT MAPECT

The m ain objectives of the Council are:

MEMBER BENEFITS MEMBERS Members have many opportunities to network with and learn from fellow M&A and private equity players through MAPECT’s various events. Our MAPECT Salon, cross-strait M&A and PE forums, and cooperative events with international financial associations are examples of events exclusive to our members that promote and exchange of ideas and business opportunities.

To undertake public policy activities and maintain a continuous dialogue with policy institutions and regulatory bodies in Taiwan and Greater China To develop professional standards and best practices guidelines across the industry To hold regular networking events with leading practitioners and industry participants from Greater China

GOVERNMENT POLICY G o v e r n m e n t p o l i c y i s a n a re a w h e re M A P E C T s t r i v e s t o exert influence through active lobbying efforts. MAPECT acts as a delegate for the M&A and PE industry by raising ideas and p ro p o s i n g c h a n g e s t h a t p ro t e c t o u r m e m b e r s ’ l a w f u l r i g h t s . Through these efforts, MAPECT strives to put forth the best business standards for the industry through government rules and regulations. A CROSS-STRAIT PLATFORM A c r o s s - s t r a i t p l a t f o r m i s o n e o f M A P E C T ’s p r i m a r y objectives, achieved through our many channels and established relationships in Mainland China. MAPECT regularly arranges crossstrait meetings within the M&A and PE industry to foster a mutually beneficial and cooperative relationship.

To conduct industry research on M&A and PE activities

MARKETING

To promote and cultivate better cooperative relationships with the public

about our members through our website and other news outlets,

Marketing the M&A and PE industry in Taiwan through media channels is MAPECT’s way of building a positive relationship between our members and the general public. We publish coverage thus elevating MAPECT and our members’ reputations within the business community.

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

MAPECT EVENTS 2009 MAPECT CROSS-STRAIT FORUM | On November 4th, 2009, MAPECT and Beijing Private Equity Association (BPEA) jointly organized the MAPECT Cross-strait Forum. This event attracted more than 150 participants from China, Taiwan, and Hong Kong’s financial industries. BPEA Vice-president Xiong Yan – also Chairman of the China Beijing Equity Exchange – led a group of delegates to Taiwan to attend the forum. 2010 CIFIT CAPITAL FORUM | Between September 7th, 2010 and September 9th, 2010, MAPECT organized a trip to Xiamen, China for the 14th China International Fair for Investment and Trade (CIFIT). MAPECT was a co-organizer of the 8th annual Capital Forum 2010 in which seven MAPECT members were keynote speakers. This was the first time that a Taiwanese organization was invited to participate as a co-sponsor at this forum, highlighting the new emphasis that this event has placed on China-Taiwan relations following the signing of ECFA. The Capital Forum 2010, which featured the theme, “Focus on China, Enjoying Capital Growth,” was held on September 8th, 2010. 2010 MAPECT CROSS-STRAIT M&A AND PRIVATE EQUITY SUMMIT | On September 20th, 2010, MAPECT hosted the 2010 MAPECT Cross-strait M&A and Private Equity Summit held at the Shangri-La’s Far Eastern Plaza Hotel, Taipei. The day’s event which featured speeches from Sean C. Chen of the Executive Yuan, Economics Minister Dr. Yen-Shiang Shih, Liu Yi-Ju of the Council for Economic Planning and Development, and Chen Kuo-rong of Yulon Motors, focused on the topic of ECFA and its impact on Taiwan’s M&A and PE activities. 2010 MAPECT M&A AND PRIVATE EQUITY ACADEMIC SYMPOSIUM | On November 20th, 2010, MAPECT and the Department of Accounting at National Dong Hwa University co-sponsored the 2010 MAPECT M&A and Private Equity Academic Symposium. The Academic Symposium was hosted by National Dong Hwa University, located in Hualien, Taiwan. The Academic Symposium featured statements presented by the Dean of the College of Management Dr. Chung-Shu Wu, Vice-President of National Dong Hwa University Dr. Ruay-Shiung Chang, President of the Taiwan Accounting Association Dr. Fujiing Shiue, and MAPECT Chairman C.Y. Huang. Chairman of the GreTai Securities Market Gordon Shuh Chen also presented his keynote address, “The development and integration of Taiwan’s industries and capital market.” THE MAPECT SALON SERIES | MAPECT hosts an event specifically geared towards its members and their needs as part of the MAPECT Salon series. The MAPECT Salons are variegated in nature with some delving into specific issues with great detail and others being casual networking events for our members. Past MAPECT Salons have included a case study of Nan Shan Insurance, an analysis of China’s domestic goals and RMB funds, an analysis of Taiwan's cultural and design industries, and an informative session on China’s Twelfth Five-Year Plan.

CHAPTER 7 | MAPECT

ABOUT MAPECT

T H E M A P E C T F A M I LY GROUP MEMBERS F C C PA R T N E R S ( TA I P E I ) I N C C . Y. H u a n g , P r e s i d e n t a n d C E O P O L A R I S S E C U R I T Y T h o m a s M . F. Ye h , V i c e C h a i r man DELOIT TE & TOUCHE Ray Chang , Board Member; Philip Chen, Managing Partner INDUSTRIAL TECHNOLO G Y I N V E S T M E N T C O R P O R AT I O N L i l i a n C h e n , D i r e c t o r J O N E S D AY J a c k J . T. H u a n g , P a r t n e r L E E , T S A I & PA R TN E R S AT T O R N E Y S - AT- L A W J a c l y n Y. L . Ts a i , S e n i o r P a r t n e r L E E A N D L I , AT T O R N E Y S - AT- L A W A l e x J u i - L i n L i u , S e n i o r C o u n s e l o r ; S o p h i a H . H . Ye h , S e n i o r C o u n s e l o r ; J a m e s C h e n , P a r t n e r C O N C O R D S E C U R I T I E S C O , LT D D av i d C h e n g , V i c e C h a i r m a n T SA R & T SA I L AW F I R M R i c h a rd C h u a n g , C o u n s e l l o r ; J a m e s S . J. C h e n g , Pa r t n e r ; J a n i c e L i n , P a r t n e r TA I WA N I N S U R A N C E I N S T I T U T E M a r k C . C . L a i , C h a i r m a n G R E TA I S E C U R I T I E S M A R K E T G o r d o n S h u h C h e n , C h a i r m a n S E C U R I T I E S & F U T U R E S I N F O R M AT I O N C E N T E R ( TA I WA N ) B r u c e C h e n , C h a i r m a n J P M O R G A N C H A S E B A N K , N . A . , TA I P E I B R A N C H C a r l C h i e n , M a n a g i n g D i r e c t o r S C H R O D E R I N V E S T M E N T M A N A G E M E N T ( TA I WA N ) LT D F r a n c i n e W u , C E O C I T I B A N K ( TA I WA N ) LT D V i c t o r K u a n , C h a i r m a n C R E D I T A G R I C O L E C O R P O R AT E A N D I N V E S T M E N T B A N K ( C R E D I T A G R I C O L E C I B ) E r i c C h i e n , M a n a g i n g D i r e c t o r ; J e a n - P i e r r e Tr i nelle, Senior Country Officer; Bryan Ho, Managing Director and Head of Financial Institutions Group CHEN & L I N AT T O R N E Y S - AT- L A W C h e - H u n g C h e n , P a r t n e r ; J e n n i f e r W a n g , P a r t n e r ; Y i n g -Y i L e e , P a r t n e r S I N O PA C H O L D I N G S M i c h a e l C h a n g , C h i e f S t r a t e g y O f f i c e r TA I WA N S T O C K E X C H A N G E C O R P O R AT I O N M i c h a e l L i n , S e n i o r E x e c u t i v e V i c e P r e s i d e n t M A S T E R L I N K S E C U R I T I E S C O R P O R AT I O N J o e y C h e n , C h a i r m a n Y U A N TA V E N T U R E C A P I TA L C O , LT D F r a n k M . K u o , P r e s i d e n t C H I N A D E V E L O P M E N T F I N A N C I A L H O L D I N G C O R P O R AT I O N S i m o n C . D z e n g , P r e s i d e n t ; P a u l Ya n g , S e n i o r E x e c u t i v e V i c e P r e s i d e n t & C h i e f I n v e s t m e n t O f f i c e r C H U N G H WA I N V E S TM E N T J o s e p h C . P. S h i e h , C h a i r m a n P R I C E WAT E R H O U S E C O O P E R S F I N A N C I A L A D V I S O R Y S E R V I C E S C O M PA N Y, LT D H u i - E r h Yu a n , M a n a g i n g D i r e c t o r ; P e t e r Yu , M a n a g i n g D i r e c t o r E R N S T & Y O U N G M A N A G E M E N T C O N S U LTI N G I N C J a m e s W a n g , C h a i r m a n ; J e n n y C h e n , P a r t n e r KO H L B E R G K R AV I S R O B E R T S A S I A LT D J u l i a n J u u l Wo l h a r d t , D i r e c t o r U N I TA S C A P I TA L J i m Ts a o , M a n a g i n g D i r e c t o r T H E R O YA L B A N K O F S C O T L A N D P L C J o e X i a n g , M a n a g i n g D i r e c t o r C H I N AT R U S T C O M M E R C I A L B A N K C l i f f S h e n , E x e c u t i v e V i c e P r e s i d e n t TA I WA N F I N A N C I A L H O L D I N G S S u s a n S . C h a n g , C h a i r p e r s o n TA C H O N G B A N K

James Chiou, Senior Executive Vice President and

H e a d o f i n s t i t u t i o n a l B a n k i n g A PA X PA R T N E R S ( H K ) LT D R i c h a r d Z h a n g ,

Partners & Head of Greater China

T R I N I T Y I N V E S T M E N T C O R P P a t r i c k K u o , C E O A I F C A P I TA L LT D S t e p h e n L e e , M a n a g i n g D i r e c t o r W P G H O L D I N G S LT D S i m o n H u a n g , C h a i r m a n a n d P r e s i d e n t W I S T R O N C O R P O R AT I O N H e n r y L i n , C h i e f F i n a n c i a l O f f i c e r C A P I TA L I N T E R N AT I O N A L I N C J a m e s M . H o , P a r t n e r S A M S O N I N T E R N AT I O N A L E N T E R P R I S E S L I M I T E D K u o S h a n H u e i , P r e s i d e n t A M E R I C A N A P P R A I S A L TA I WA N LT D V i n c e n t Ts a n g , M a n a g i n g D i r e c t o r WA U Y U A N P R O P E R T Y APPRAISAL CO Sunny Chen, Vice President

MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

INDIVIDUAL MEMBERS PA U L WA N G M a n a g i n g G e n e r a l P a r t n e r , P a c i f i c Ve n t u r e P a r t n e r s J U N I T S U U C H I K ATA M a n a g i n g D i r e c t o r , J A F C O I n v e s t m e n t ( H o n g K o n g ) L t d Ta i w a n B r a n c h J I N Y E N J I A N G V i c e P r e s i d e n t , Yu e n F o o n g Yu I n v e s t m e n t Co,Ltd PIJAN WU Senior Counsel, LCS & Partners VICTOR CHANG Partner, LCS & Partners WU CHING-MAI Vice Chairman, Pojaa Information Co Gingdao WU SAN-CHI President, Herzu Development MICHAEL WONG Senior C o n s u l t a n t , B a k e r & M c K e n z i e S U N N Y W.T. C H O U C h a i r m a n & C h i e f E x e c t i v e O f f i c e r , Ta i p e i F o u n d a t i o n o f F i nance STEVEN LIN Chairman, Agenda international Investment Corporation LLC SHERRY S.L. LIN Senior Counselor, Lee and Li Attorneys-at-Law RONGJIN LIN General Manager, T TY Biopharm Company Ltd GARY CHANG M a n a g i n g P a r t n e r , A d v a n c e d C a p i t a l F i n a n c i a l A d v i s o r y L t d T Z E - K A I N G YA N G C h a i r m a n , Ya n g t z e A s s o c i a t e s N I C O L E T. I . C H A N A s s i s t a n t P r o f e s s o r , Ta i p e i N a t i o n a l U n i e r s i t y o f t h e A r t s S c h o o l o f F i l m a n d N e w M e d i a B E N L I U A t t o r n e y - a t - l a w , I n f o S h a r e Te c h L a w O f f i c e M A N N C . C . L I U A t t o r n e y - a t - l a w , I n f o S h a r e Te c h L a w O f f i c e F R A N K L I U C h a i r m a n , C h e l m s f o r d i n t e r n a t i o n a l L t d T E D C H A I P r e s i d e n t , K a o f u Ve n t u r e s & I n v e s t m e n t C o r p E R I C L I A O G e n e r a l M a n a g e r , O n t a r i o S e c u r i t i e s I n v e s t m e n t Tr u s t C o , L t d J I M H S I E H C E O , K + C a p i t a l , L L C L A W R E N C E J A O M a n a g i n g D i r e c t o r , P r i m a s i a F i a n c i a l S e r v i c e s E D WA R D T S A I B o a r d M e m b e r , K P M G A L L E N C H U C E O a n d F o u n d e r , M a r b o A s s e t M a n a g e m e n t G r o u p D U E N - C H I A N C H E N G P r e s i d e n t , U M C C A P I TA L L I N D A L I N C h a i r m a n , G o l d e n B r i d g e E l e c t e c h I n c P E G G Y L . L I N M a n a g i n g P a r t n e r , P C L Tr a n s a s i a L a w O f f i c e s H S U HSUN-PING President, Genome International Biomedical Co Ltd CHRISTINA M.H. CHAO Senior Counselor, Lee a n d L i A t t o r n e y s - a t - L a w J E V O N S S H I H - FA N G H U C h i e f E x e c u t i v e O f f i c e r , P i n e S t r e e t A s s e t M a n a g e m e n t C o r p H S I A O - C H I E N H U A N G C h i e f E x e c t i v e O f f i c e r L E O N S .Y. C H E N G E x e c u t i v e D i r e c t o r , C e n t r a l G i a n t C a p i t a l L t d J E R R Y H U A N G C h a i r p e r s o n , G r a n d F o r t u n e S e c u r i t i e s C o , L t d R E X Y. WA N G M a n a g i n g D i r e c t o r , D a i w a Q u a n t u m C a p i t a l J E F F R E Y H S U P r e s i d e n t , I n t e g r a c e I n v e s t m e n t C o r p o r a t i o n H S I N - M A O H U A N G M a n a g i n g D i r e c t o r, Breeze Capital Group DAPHNE HUANG Executive Vice President and Head of Corporate Finance Department , Far Eastern International Bank CHI ROBIN LAI-PING Managing Director, Shanghai Ticon Investment Managem e n t C o , L t d J I M WA N G C h a i r m a n , B E A W e a l t h M a n a g e m e n t S e r v i c e s ( Ta i w a n ) L t d

SCHOLAR MEMBERS M I N G C H U N G U N I V E R S I T Y, D E PA R T M E N T O F F I N A N C E C h a n g - C h ’ u n g C h e n g , A s s i s t a n t P r o f e s s o r N AT I O N A L TA I WA N U N I V E R S I T Y, D E PA R T M E N T O F E C O N O M I C S C h i e n - F u J e f f L i n , P r o f e s s o r N AT I O N A L TA I WA N U N I V E R S I T Y O F S C I E N C E A N D T E C H N O L O G Y, D E PA R T M E N T O F B U S I N E S S A D M I N I S T R AT I O N E d m o n d Ts a i , P r o f e s s o r T U N G H A I U N I V E R S I T Y, D E PA R T M E N T O F F I N A N C E K a i - L i W a n g , P r o f e s s o r

FOR THE COMPLETE MEMBER LIST, PLEASE REFER TO THE MAPECT WEBSITE: WWW.MAPECT.COM

CHAPTER 7 | MAPECT

T H E FA C E S B E H I N D

ABOUT MAPECT

THE COUNCIL THE MAPECT

BOARD OF DIRECTORS

CHAIRMAN C.Y. HUANG President & CEO FCC Partners (Taipei) Inc

V I C E CHAIRMEN SIMON C. DZENG

JACK J.T. HUANG

JIM WANG

TZE-KAING YANG

President China Development Financial Holding Corp

Partner Jones Day

Chairman BEA Wealth Management Services Ltd

Chairman Yangtze Associates

GORDON S. CHEN

CARL CHIEN

KUNG-WHA DING

EDWARD TSAI

Chairman GreTai Securities Market

Managing Director JPMorgan Chase Bank, N.A., Taipei Branch

Board of Director Taiwan Depository & Clearing Corp

Board Member KPMG

MARK C.C. LAI

JAMES WANG

PETER YU

Chairman Taiwan Insurance Institute

Chairman Ernst & Young Management Consulting

Managing Director PwC Financial Advisory Services Company

EXECUTIVE DIRECTORS

EXECUTIVE

SUPERVISORS

14 THE FACES BEHIND THE COUNCIL | MAPECT MAPECT | INVESTING IN TAIWAN

INVESTING IN TAIWAN: THE MAPECT REPORT 2011

JOINING MAPECT TYPES OF MEMBERSHIPS: INDIVIDUAL MEMBER | A person who participates or holds interest in the M&A or PE industry can join MAPECT as an Individual Member. Admission procedures include filing out an application form, receiving approval from the Board of Directors, and paying membership dues. CORPORATE GROUP MEMBER | An organization that actively sponsors and endorses MAPECTâ&#x20AC;&#x2122;s mission statement can join as a Group Member. Admission procedures include filing out an application form, receiving the approval from the Board of Directors, and paying membership dues. Annual membership dues depend on the number of included individual memberships (up to three). PERMANENT MEMBER | Permanent membership requires one of the following and approval from the Board of Directors. HONORARY MEMBER | An industry expert with remarkable achievements and contributions to the M&A or PE business can become an Honorary Member after nomination by the Chairman and approval by the Board of Directors. SPONSOR MEMBER | A person or an organization that provides funding or resources can become a Sponsor Member after the approval from the Board of Directors. SCHOLAR MEMBER | A professor who teaches full-time in an university and conducts research or shows interest in the M&A or PE industry. Admission procedures include filing out an application form, receiving approval from the Board of Directors, and paying membership dues.

MEMBERSHIP TYPE

INITIATION FEE

ANNUAL DUES

Individual Member

NT$ 10,000

NT$ 30,000

Corporate Group Member

NT$ 50,000

Scholar Member

n/a

NT$ 5,000

Permanent Member

NT$ 300,000

n/a

Permanent Group

NT$ 1,000,000

n/a

FOR MORE INFORMATION PLEASE CONTACT SUNNY PAN

CHAPTER 7 | MAPECT

1 Representative: 2 Representatives: 3 Representatives:

NT$ 50,000 NT$ 80,000 NT$100,000

Phone: +886 2 2717 6892 ext.13 E-mail: sunny@mapect.com

ABOUT MAPECT

MAPECT | INVESTING IN TAIWAN

台灣併購與私募股權協會 TAIWAN MERGERS & ACQUISITIONS A N D P R I VAT E E Q U I T Y C O U N C I L