TTRI urges ‘taishang’ to deposit LC payments

Huang made the call during an interview with The China Post yesterday before his current term expires.

Being an export-oriented market, Taiwan sells a wide variety of goods and products to overseas nations, with exporters using letters of credit, or LC, as a way of receiving payments.

Many overseas-based Taiwan businesspeople, however, put their LC payments in other places, such as Hong Kong and Singapore, where better tax incentives are offered. This has caused Taiwan’s foreign exchange reserves to decline, Huang said.

Taiwan’s foreign exchange reserves were registered at US$266.05 billion in June, falling to fourth place in the world, after China, Japan and Russia. Taiwan was No. 3 for many years.

“We’re strongly urging manufacturers to deposit their LC payments in Taiwan,” Huang said. “They can either deposit the money as foreign exchange in overseas banking units of Taiwan banks, or as New Taiwan dollars in banks’ domestic banking units. Either way the money will count towards Taiwan’s total exports. This will help increase our trade surplus and thus boost our economy.”

But to encourage Taiwan businesspeople to do so, the government needs to do its part, Huang said. Currently, Taiwan imposes a tax on global operations centers set up by overseas businesses, including taishang, for stock bonuses, royalties and undistributed incomes. The policy often turns investors away to places such as Hong Kong and Singapore, where such taxes are not imposed.

“We need to provide better tax incentives to lure capital from overseas businesses,” he said.

During the interview, Huang also called on the government to make more efforts to secure free trade agreements (FTAs) with other nations, in particular the United States, and to better promote “Made in Taiwan” products in overseas markets.

In Huang’s words, signing an FTA with the United States would benefit Taiwan businesses tremendously as Taiwan goods will no longer be subject to tariffs in the U.S.

“The U.S. is one of Taiwan’s largest export destinations. Without an FTA in place, Taiwan goods would lose competitiveness to those made in, say, South Korea, which recently signed an FTA with the U.S.,” he said. “Plus, signing a free trade agreement with the U.S. would set the stage for FTA negotiations with other countries in the world.”

Huang also had something to say about the government’s policy on promoting Taiwanese brands. Specifically, he said the government should focus less on branding and put more emphasis on promoting the concept of “Made in Taiwan.”

Citing a number of manufacturers such as Taiwan Semiconductor Manufacturing Co., United Microelectronics Corp. and Hon Hai, Huang said none of these companies are successful because of branding. Rather, they gained international recognition for the quality of products and time-to-market, he said.

“This is not to say branding is not important. But at this stage, it’s difficult for Taiwan to compete with established global brands,” Huang said. “But now is the perfect opportunity to promote made-in-Taiwan products as high-quality, high-performance goods and merchandise. This will help manufacturers achieve greater success and make more money in global markets.”

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