Why Does the Government Forbid Foreigners to Buy Taipei 101 Shares?
China Times Editorial (Taipei, Taiwan, ROC)
January 23, 2015
Executive Summary: Over the past year the government has interacted with the Chamber of Commerce and listened to advice from foreigners. We think every business should use the AmCham sentiment survey and white paper as a policy reference, and demand that the National Development Council and Ministry of Economic Affairs respond affirmatively. Regulations must be relaxed. That is a priority. That will create an environment more favorable to investment. Only then can we inject new vitality into the economy. Only then can we end Taiwan's economic stagnation.
Full Text Below:
Taiwan's economy this year may be slightly better than it was last year. The American Chamber of Commerce recently released its "2015 Business Climate Survey". American businessmen are optimistic about Taiwan's economy. The survey revealed that 70% of respondents believe this year will be as profitable as last year. Respondents were willing to increase investments and personnel recruitment in Taiwan. But American businessmen also hoped the government would loosen its regulations and change its politics as soon as possible, in order to reduce uncertainty. This survey gives us much to contemplate.
First of all we must point out that Taiwan's economic fundamentals are not bad. Taiwan has clearly been in recession for nearly 10 years. But its foundations have not been eroded. Certain structural problems however must be addressed before prosperity can be restored. The American Chamber of Commerce business sentiment survey is published every January. Last year's survey complained that regulations on Taiwan were stifling growth. They were tantamount to trade barriers. It feared this would affect Taiwan's participation in regional economic integration. Premier Jiang Yi Hua tried to reconcile domestic legislation with international requirements. Laws affecting trade must undergo regulatory impact assessments. Complaints have been lodged regarding nearly 300 regulations. These must be relaxed.
In June, the American Chamber of Commerce issued its White Paper. It affirmed the various ministries' efforts at self-examination. It cited a number of important developments. It praised regulatory reform. But this year it complained that over the past five years, interpretations of the regulations have been inconsistent, administrative efficiency has been low, and regulations remain outdated. These problems continue to plague foreign investors, in particular inconsistent regulations. As many as 60% of the companies complained about "serious impacts on business operations." Members also hoped that the government would reduce political unrest, clarify its policy toward the Mainland, narrow differences between local and international regulations and standards, and increase transparency in rulemaking. These would mitigate the negative impact of other factors.
According to the United Nations Conference on Trade and Development (UNCTAD), in 2011 Taiwan absorbed direct investment (FDI) amounting to a negative $ 1.96 billion, placing it next to last in the world. This year shows slight improvement. But it remains ranked near the bottom. Once upon a time, Taiwan was a model for attracting foreign investment. Today, it has been reduced to this.
The 2014 World Bank publication "Doing Business 2015 Global Report" was issued on October 29. Among the 189 economies surveyed for ease of doing business, Taiwan ranked 19th, one place lower than before, and well behind Korea's 5th place showing. Our worst showing was in the execution of contracts, scoring only 57.75 points and ranking 93rd, bringing up the rear. This is a very serious and embarrassing phenomenon, one that we must attach great importance to and confront.
The market economy is a kind of exchange system. In Adam Smith's "The Wealth of Nations" he focused on the "invisible hand" and how it successfully operated in the marketplace. In 1991, Nobel Prize winner Ronald Coase argued for clear definitions of property ownership, to reduce transaction costs, enable market participants to engage in trade, and achieve economic efficiency.
Coase's theorem is rooted in legal autonomy, consultations, and economic freedom. In 1993 Nobel Prize winner Douglass North reminded us that copyright laws protect the interests of inventors, encourage people to invest, and result in more inventions and innovation.
Institutional innovation for long-term economic growth is even more important than technical invention. In 2009 Nobel Prize Oliver Williamson used transaction costs to explain corporate governance and development. He underscored the importance of property rights and the rule of law in modern economy and society.
As we can see, Taiwan must pay attention to the rule of law and to appropriate regulations. Consider another example that recent foreign investors consider outrageous. The Ting Hsin Group decided to sell its stake in the Taipei 101 Building to the Malaysian based 101 Corporation. But the Ministry of Finance, the Central Bank, and the FSC unanimously opposed the sale. Finance Minister Chang Sheng-ho argued that the IOI Group invested 25.1 billion NT, of which 24.4 billion NT was debt. He said this would weaken Taipei 101's capital. The IOI Group completed additional documents addressing government concerns. But Minister Chang reiterated his opposition anyway. The Treasury was at a loss for words. It repeated its "Taiwan's Gateway must belong to us” rhetoric.
In order to express opposition to Wei Chuan, Taiwan has moved toward populism. We must ask: Why can't Taipei 101 be sold to foreign investors? What excuse is the government offering for its intervention? The government says it is safeguarding the public interest. It says public perceptions and public expectations oppose selling Taipei 101 to foreigners. But these are the same reasons for rejecting foreign investments by KKR years ago. The spectre of KKR has returned. The government wants to buy Taipei 101. But it wants to pay lower than market prices. Meanwhile, the Malaysian IOI purchase price is twice the market price.
The Ministry of Finance even declared that before Wei Chuan sells, it must first provide notice. But as long as a transaction is legal, it is supposed to be confidential. The Ministry of Finance is currently the second largest shareholder. It cannot be both a player and referee. If Taiwan is to move towards the rule of law, everything must be handled according to law.
Taiwan has a shallow dish economy. Openness is crucial. The government must be committed to improving the investment environment and removing investment barriers. Over the past year the government has interacted with the Chamber of Commerce and listened to advice from foreigners. We think every business should use the AmCham sentiment survey and white paper as a policy reference, and demand that the National Development Council and Ministry of Economic Affairs respond affirmatively. Regulations must be relaxed. That is a priority. That will create an environment more favorable to investment. Only then can we inject new vitality into the economy. Only then can we end Taiwan's economic stagnation.
而制度創新對經濟的長期成長，甚至比技術發明還重要。2009年得諾貝爾獎的威廉森（Oliver Williamson） 把交易成本說，深入應用來解釋公司治理及發展。由此可見產權與法治在現代經濟社會的重要性。