Taiwan country brief

Overview

About half the size of Tasmania, Taiwan is home to a population of around 23 million, similar to that of Australia, making it one of the most densely populated areas in the world. Situated on the Pacific "ring of fire", Taiwan is seismically active, and the central and western parts of the island are ruggedly mountainous, reducing the area available for agriculture or habitation. In addition to the main island, Taiwan administers a number of smaller islands and archipelagos including the Penghu Islands in the Taiwan Strait, and Matsu and Kinmen Islands close to the shore of China's Fujian Province.

China's Nationalist government withdrew to Taiwan following its defeat by Mao Zedong's Communists in 1949. Despite losing control of the mainland, the Nationalist government maintained it was the legitimate government of the whole of China, through the Constitution of the Republic of China adopted in 1946, and established its capital in Taipei in the north of Taiwan. Subsequent constitutional amendments have distinguished between the “mainland area” and the “free area” under control of the authorities in Taiwan, but the Republic of China still claims to be the legitimate government of the whole of China.

The Australian Government recognised the People's Republic of China (PRC) as the sole legal government of China through the Joint Communiqué with the PRC of 21 December 1972. As a consequence, Australia does not recognise that the authorities in Taiwan, who claim to be the government of the Republic of China, have the status of a national government. This is the basis of Australia's one-China policy. All Australian governments since 1972 have adhered to this policy.

Although Australia and Taiwan do not have official diplomatic relations, the Australian Government strongly supports the development, on an unofficial basis, of two-way economic and cultural contacts. Australia supports Taiwan's participation in international organisations and conferences where appropriate and where a consensus on such participation can be achieved. The Government encourages Australian business to pursue trade and investment opportunities involving Taiwan and supports the development of people-to-people contacts.

Political overview

System of government

Since the end of martial law in 1987, Taiwan has transformed itself into a vibrant democracy. The first democratic elections for the Legislative Yuan (parliament) were held in 1992, with democratic elections for the Presidency following in 1996. Presidents and members of the Legislative Yuan are elected for terms of four years; presidents are limited to a maximum of two terms. The central government consists of the Office of the President and five branches – the Executive Yuan, Legislative Yuan, Judicial Yuan, Examination Yuan and Control Yuan. The President, as Head of State, has command of the armed forces and the authority to promulgate laws under the Constitution of the Republic of China.

The Executive Yuan, Taiwan's Cabinet, is the main policymaking arm of government, and consists of the Premier, Vice Premier, Ministry and Commission Chairs, and Ministers without Portfolio. Its members are presidential appointees rather than elected representatives. Currently, there are 12 ministries and 20 other agencies under the Executive Yuan.

The Legislative Yuan is Taiwan's law-making body, or parliament. It comprises 113 legislators from a mixture of single-member electorates and proportional representation seats. In addition to making laws, the Legislative Yuan's functions include questioning government officials and ministers on policies; reviewing budgetary bills and audit reports, and confirming presidential nominations to top government posts. It also has the power to impeach the president or vice president.

Political developments

There are two main political parties in Taiwan. The modern Kuomintang (KMT) evolved from the former military government Nationalist Party. The KMT's support base is in northern Taiwan, where the Nationalist government and its supporters from the mainland established their new capital, Taipei. The KMT generally supports a conservative free-market agenda, although it maintains support for some state intervention in important sectors of the economy through a number of large state-owned enterprises that had been established under its leadership.

The pro-democracy movement of the 1970s and 80s gave rise to the Democratic Progressive Party (DPP). The DPP's support base is in southern Taiwan, particularly among the "Taiwanese" communities established prior to the arrival of the "mainlanders" in 1949. As a result, some elements within the DPP support Taiwan's de jure independence from China. The DPP held power from 2000 to 2008 under President Chen Shui-bian, whose leanings towards independence heightened tensions with China. The DPP's broader policy agenda is generally socially progressive, focusing on issues such as social inequality and the environment.

Ma Ying-jeou of the KMT was elected president in 2008 and re-elected in 2012 on a platform of building closer economic ties with the mainland, while leaving more controversial political matters aside. A number of cross-Strait agreements were signed during Ma’s term, including the overarching Economic Cooperation Framework Agreement (ECFA). Direct transport links were established and Taiwan opened to mainland tourists. Negotiation of a trade in services agreement proved controversial, with many, particularly younger, voters apprehensive that Taiwan was becoming too economically dependent on the mainland. In March 2014, students and NGOs led large street demonstrations, dubbed the Sunflower Movement, and occupied the chamber of the Legislative Yuan for 23 days. The social activism inspired by the Sunflower Movement led to the establishment of a number of new political parties, such as the New Power Party.

Parliamentary (Legislative Yuan) and presidential elections were held together on 16 January 2016. Dr Tsai Ing-wen of the DPP, was elected Taiwan’s first woman president and the DPP secured a majority in the Legislative Yuan for the first time. Tsai’s policy platform looks to build stronger economic relations in the region to reduce Taiwan’s economic dependence on China, while at the same time having a positive relationship with China. She has committed to maintaining the status quo in cross-Strait relations, in line with public opinion in Taiwan.

Cross-Strait relations

Hostilities between the Nationalists and Communists never formally ended, and so relations between the two sides of the Taiwan Strait have never been established on an official basis. Nevertheless, strong economic connections across the Strait have gradually been forged. Taiwan business investment played an important role in China’s opening up, and direct transport and tourism have opened.

Relations across the Strait are principally managed via semi-official agencies: Taiwan's Straits Exchange Foundation (SEF) and China's Association for Relations across the Taiwan Strait (ARATS). In November 1992, a working-level meeting between SEF and ARATS was held in Hong Kong, in preparation for a meeting of the agencies’ heads which took place in Singapore in April 1993. To accommodate China’s insistence that engagement could only occur under the acceptance of “one China”, the 1992 meeting took place on the understanding that each side could verbally state its opinion of “one China”. For Taiwan, this meant the Republic of China. This understanding was later referred to as the “1992 Consensus”. SEF and ARATS have subsequently concluded 23 agreements designed to ease economic restrictions including the Economic Cooperation Framework Agreement (ECFA), which came into effect in September 2010. In February 2014 the PRC and Taiwan held the first official meeting between authorities across the Strait since 1949. Taiwan’s Mainland Affairs Council (MAC) Minister Wang Yu-chi met with China’s Taiwan Affairs Office (TAO) Minister Zhang Zhijun in Nanjing. In November 2015, China’s President Xi Jinping met Taiwan’s President Ma Ying-jeou in Singapore, although neither referred to the other by their title.

International recognition

Most governments and the United Nations recognise the PRC as the sole legal government of China. Currently 22 states recognise Taiwan as the Republic of China (ROC): Belize, Burkina Faso, Dominican Republic, El Salvador, Guatemala, Haiti, Holy See, Honduras, Kiribati, Marshall Islands, Nauru, Nicaragua, Palau, Panama, Paraguay, Sao Tome and Principe, Solomon Islands, St Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Swaziland and Tuvalu.

Taiwan maintains extensive unofficial ties with countries that do not recognise the Republic of China, focusing on trade, investment, culture and cooperation in non-political areas. Taiwan has more than 100 representative offices in over 70 countries, including four offices in Australia (Canberra, Brisbane, Melbourne and Sydney), which have the title "Taipei Economic and Cultural Office" (TECO).

Since 1971, when the PRC replaced the ROC in the United Nations, Taiwan has not been a member of any UN bodies, for which statehood is a requirement. Since 2009, Taiwan has been invited to attend the World Health Assembly as an observer.

Taiwan acceded to the World Trade Organization (WTO) as the "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" with effect from 1 January 2002.  As “Chinese Taipei”, Taiwan has been a member economy of the Asia Pacific Economic Cooperation (APEC) since November 1991 (China and Hong Kong were also admitted at the 1991 APEC meeting).

In September 2013, Taiwan was invited to participate in the 38th assembly of the International Civil Aviation Organisation (ICAO) held in Montreal, Canada as a “special guest” under the title “Chinese Taipei”. This was the first time the ICAO had invited Taiwan to take part in its activities.

Economic overview

Until the mid-1960s Taiwan's economy was dominated by agriculture, especially rice and sugar production. One of Asia's “Four Tigers”, the development of export-oriented manufacturing transformed Taiwan's economy and labour force into one defined by urban and industrial production. By the 1980s Taiwan began relocating its low-technology manufacturing offshore, especially to China. More recently there has been a trend for some of Taiwan's more advanced, high-tech industries to follow suit. Today Taiwan is also increasingly a tertiary economy, with services accounting for over 60 per cent of GDP. Taiwan's GDP for 2015 was estimated at US$519 billion, with a population of 23.4 million.

According to Taiwan government statistics, GDP grew 2.18 per cent in the fourth quarter of 2015, ending two consecutive quarters of contraction. But GDP had decreased by 0.52 per cent compared to the same quarter of the previous year due to a continuing slump in exports. For the whole of 2015, the economic growth rate was 0.75 per cent, the lowest growth since the financial crisis. GDP is projected to grow by 1.47 per cent in 2016 with the weak global economy restraining exports, coupled with fragile domestic demand.

Agriculture receives government assistance including import protection and domestic support. Import protection involves high tariff rates, tariff-rate quotas and special safeguard measures. Taiwan’s average tariff on agricultural products is 22.1 per cent, as defined by WTO. Domestic support in Taiwan includes price stabilisation measures, subsidised loans and inputs, and income support for senior farmers. Government intervention continues to focus on rice.

Taiwan is relatively open to foreign investment. Foreign Direct Investment (FDI) in Taiwan totalled US$69 billion in 2015. The largest foreign investors in Taiwan are territories in the Caribbean, the United States, the Netherlands and Japan. Taiwan has relatively few restrictions, although foreign businesses periodically raise concerns about red tape and the slow progress of deregulation in a number of sectors, including telecommunications and financial services. For the most part, foreign investment application and approval processes are straight-forward. (Taiwan ranked 11th out of 189 economies in the World Bank's Ease of Doing Business Index as at June 2015).

Trade and Investment

Taiwan was Australia's eighth-largest merchandise export market and 14th-largest source of merchandise imports in 2014-15. Australia's merchandise exports to Taiwan in 2014-15 were worth A$6.9 billion. Major exports were coal, iron ore, aluminium and beef. Australia continued as a major exporter of agricultural products to Taiwan, the most important items being beef, wheat and dairy. Australian food and lifestyle products are increasingly popular with health-conscious consumers in Taiwan, with health supplements, food and beverages performing well. Imports from Taiwan were worth A$4.9 billion in 2014-15. Key imports include refined petroleum, telecommunications equipment and computers. Australia's prominence in the supply of resources and primary products to Taiwan, and the significant value of Taiwan's high-technology exports to Australia, underpin the complementary nature of the trading relationship between the two economies.

Two-way services trade totalled A$1.1billion in the 2014-2015 financial year (A$869 million in Australian exports to Taiwan and A$239 million in imports from Taiwan). Taiwan is a major tourism and education market for Australia and Taiwan and Australia have a mutual working holiday maker (WHM) arrangement (Taiwan is a large source country for WHM with over 26,000 visas issued in 2014-15).

Two-way foreign investment is showing signs of growth, albeit from a low base. Taiwan investment in Australia was A$6.5 billion in 2014. There have been a number of recent announcements of Taiwanese investments, including in Australian resources projects. In 2012, Taiwan’s CPC Corporation announced it would take a 5 per cent equity stake in Shell’s Prelude floating LNG project in the Browse Basin, with the deal finalised in February 2013. Taiwan’s largest private company, Formosa Plastics Groups, is also a significant investor in Australia’s resource sector, having committed to invest A$1.26 billion into the Pilbara region with Fortescue Metals Group in August 2013. Australian investment in Taiwan in 2014 stood at A$6.7 billion. The largest Australian investors are ANZ and the Macquarie Group.

Australia holds annual Bilateral Economic Consultations with Taiwan. The consultations cover a wide range of issues, including market access, investment and agriculture. Both sides also hold Joint Energy and Minerals, Trade and Investment Cooperation Consultations (JEMTIC) and an Agricultural Working Group meeting to support trade and investment in these sectors. The Australian Government supports the work of the Australia-Taiwan Business Council and encourages trade and investment in Taiwan. Arrangements with Taiwan to facilitate trade cover issues such as quarantine and double taxation.

Information on doing business and opportunities in Taiwan

Last Updated: 19 February 2016