March 23, 2017 10:00 am JST

Corporate Taiwan trying to wean itself off China

Formosa Plastic focusing on India, Indonesia; lender opens in Myanmar

YOKO YAMAMOTO, Nikkei staff writer

Taiwan's Keelung Harbor handles more than 12 million tons of cargo per month. Prickly relations with China have Taiwanese companies searching for prospects in Southeast Asia. © Getty Images

TOKYO -- The recent chill in relations between China and Taiwan is giving Taiwanese companies the impetus to rely less on their huge communist neighbor and search for opportunities in other Asian countries.

The shift gives Japanese companies a chance to carve out new markets in Asia with their Taiwanese counterparts.

James Huang Chih-fang, chairman of the Taipei-headquartered Taiwan External Trade Development Council, or Taitra, spoke with The Nikkei in Tokyo. "We will cultivate new markets in Asia where economies are growing rapidly," he said.

Set up by the Taiwanese government and industry associations, Taitra is a nonprofit organization aimed at promoting and supporting Taiwanese companies' overseas trade.

Taiwan's companies excel in fields such as electronics and semiconductors, and their technical expertise is highly likely to meet growing demand.

"Unlike our conventional purpose of entering a foreign country, which has cost reduction in mind, we will push for providing Taiwanese technologies and services and developing human resources there," Huang said.

Since her inauguration in 2016, President Tsai Ing-wen's administration has encouraged domestic companies to reinforce economic partnerships in South and Southeast Asia. The plan is known as the new southward policy, and it aspires to economic independence from China.

Coupled with skyrocketing labor costs in China, investment by Taiwanese companies in Asia, excluding China, in 2016 came to $7.1 billion, up 70% from the previous year.

Meanwhile, their investment in China last year declined 12% to $9.6 billion.

Taiwan's Formosa Plastics unveiled last October a policy of focusing on sales in countries including India and Indonesia. The aim is to reduce the company's reliance on China.

Major Taiwanese lender E.Sun Commercial Bank in the same month became the first Taiwanese bank to open a branch in Myanmar.

With regard to tapping into other parts of Asia by partnering with Japanese companies, Huang said, "We highly evaluate cutting-edge technologies and the spirit of craftsmanship in Japan. We will seek to make forays through cooperation."

With Japanese and Taiwanese companies complementing each other, Huang hopes that Taiwan's small and midsize businesses will step up their investments.

One plan being considered is to have Taitra and the Japan External Trade Organization, known as JETRO, jointly conduct research.

As for China, though, Taiwan must remain practical. About 40% of Taiwanese exports are still bound for that country. "China will always remain an important country to us," Huang said, and the deterioration of relations will have a negative impact on Taiwanese companies.

Asia300

Formosa Plastics Corp.

Taiwan

Market(Ticker): TAI(1301)
Sector:
Industry:
Process Industries
Chemicals: Specialty
Market cap(USD): 19,520.62M
Shares: 6,365.74M

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