Taiwan Goes Abroad in Search of Investments : Looks for Deals in U.S., Its Largest Trading Partner

The relaxation of foreign exchange controls and the rising Taiwan dollar is driving Taiwan to look for investments and technical cooperation abroad.

Taiwan is particularly interested in opportunities in the United States, its largest trading partner, said Samuel C. Shieh, chairman of the Bank of Communications, who was one of 12 Taiwanese bank executives to participate in a recent trade mission to the United States, including a stop in Los Angeles.

Many of the country’s traditional light-manufacturing businesses are moving production to Southeast Asia, and Taiwan wants to replace them with high-technology industries.

Shieh’s banking mission--the second of bankers this year--had two goals during its swing through Los Angeles, New Orleans and New York.

One was to study the possibility of setting up branches or organizing subsidiary offices. Currently, only one Taiwanese bank, International Commercial Bank of China, has U.S. offices in Chicago, New York and Los Angeles.

The second goal was to meet with leading U.S. bankers and companies, including First Interstate, Security Pacific, Bankers Trust, Salomon Bros. and American Express, “to get acquainted and see how we can help in trade financing, investment and correspondence banking,” Shieh said.

Financing U.S. Exports

He sees many opportunities in the United States because “many of our local industries are moving to the United States, so they have offices and we can help.” In addition, he says, U.S. high-tech companies are organizing joint ventures with firms in Taiwan.

Meanwhile, Taiwan has begun a program to finance sales of U.S. exports. Patrick P. Y. Pai, chairman of the Export-Import Bank of the Republic of China, says the 2-month-old program provides money to U.S. banks for loans to U.S. companies that sell capital goods to Taiwan. The program provides a 7% interest rate for two-year loans and 7.75% for two- to five-year loans.

Taiwan liberalized currency controls this summer because of pressure and criticism from the United States. Taiwan also has allowed its currency to rise almost 30% in value against the dollar during the past two years, which makes U.S. goods and investments less costly. The United States is running a $16-billion trade deficit with Taiwan, which also has accumulated $72 billion in foreign currency reserves.

Overseas investment has increased from last year’s total of $57 million, according to the official Investment Commission in Taiwan, to the $150 million expected this year.

On July 15, Taiwan lifted its old foreign currency rules, which required government approval for every dollar leaving Taiwan. Now overseas investments up to $5 million are allowed.

Most Investment in U.S.

The new rules, however, limit individual capital inflow to $50,000 a year. Previously, the amount had been unlimited, according to Yii Kuey Tsao, senior vice president and general manager of the international management department of the Bank of Taiwan.

About 80% of Taiwanese investment is in the United States, with the rest in South Africa and Southeast Asia, including Malaysia, Thailand and the Philippines.

Most Taiwanese investment was in plastics, electronics, machinery and chemical plants, and service industries, a commission spokesman said.

Shieh says bankers like himself are willing to find financing for projects that Taiwan needs and wants. “Money is nothing, we have that. We are looking for projects.”