Foreign investment on pace to hit 15-year high

Top players:

  1. Orsted
  2. Hai Long (Netherlands)
  3. Copenhagen Infrastructure Partners
  4. Costco
Summary

THOMPSON CHAU, Contributing writerJuly 22, 2022 17:00 JST

TAIPEI – Foreign direct investment (FDI) into Taiwan in the first half of the year rose 275% from a year earlier, hitting more than $8 billion and paving the way for 2022’s FDI to reach a 15-year high.

Taiwan’s Economic Affair Ministry’s Investment Commission attributed the spike in investment to power projects, notably those led by Danish energy company Orsted, Hai Long of the Netherlands and Danish developer Copenhagen Infrastructure Partners.

Costco Wholesale is also among the big investors. Last month, the American retail giant announced that it had bought the remaining 45% stake in its Taiwan joint venture for $1.05 billion, becoming the sole owner of the Costco warehouse club in Taiwan.

The unprecedented FDI approvals and impressive economic growth throughout the pandemic are set to provide a favorable commercial climate for President Tsai Ing-wen’s government as voters across Taiwan cast ballots in the local and mayoral elections this November. The vote is widely seen as a litmus test for the ruling Democratic Progressive Party ahead of the 2024 presidential poll.

According to data published by the commission on Wednesday, 1,116 foreign direct investment projects – excluding those from China – totaling $8.78 billion were approved from January to June.

In particular, inbound wind energy investments “show that the government has been promoting green energy and offshore wind power policies, which have attracted a large amount of foreign investment. This is expected to drive this year’s amount of FDI [ex-China] to a new high in the past 15 years,” the commission said in a statement.

“We haven’t seen a wave of FDI like this since the 1990s, when Taiwan opened many previously closed sectors such as telecoms, cable TV and banking to foreign investment,” said Michael Fahey, an American lawyer based in Taipei.

Foreign investments tend to create good jobs in new industries and contribute to the broader economy because Taiwan traditionally learns quickly and can soon replace the foreign companies with homegrown competitors, he told Nikkei Asia.

“For example, Taiwan once needed FDI and foreign expertise to build its MRT [Mass Rapid Transit] system. Now Taiwanese contractors can do it themselves,” Fahey said. “Another example is hypermarkets. Carrefour pioneered these in the 1990s. Now UniPresident has bought them out. Same thing happened in insurance.”

Despite the positive figures, the foreign business and diplomatic community in Taipei warns that Taiwan must up its game if it is to remain a leader in wind power.

“They were smart enough to move into offshore wind when South Korea and Japan hadn’t,” a European diplomat in Taipei said, but Tsai’s administration has made the regulatory environment for foreign developers in the wind power industry “more complicated” and less appealing.

U.S.-China trade tensions have also spurred some industries to move back to Taiwan, but industries require stable power supply and there isn’t sufficient energy security at present, the diplomat said. “The [electricity] system is overstretched… Taiwan isn’t doing itself any favors” regarding its policies toward foreign energy companies, he told Nikkei Asia.

Meanwhile, investments from China into Taiwan between January and June fell 36.4% compared to the same period of 2021, according to the Investment Commission.

China’s draconian lockdowns have pushed foreign investors to think about their risk exposure to the region, particularly in terms of sudden disruption to production and transportation networks, said Nick Marro, an analyst at the Economist Intelligence Unit.

“Diversification has been one way to mitigate this risk, and Taiwan is an attractive option for some companies thinking about just that,” he told Nikkei Asia. “That said, FDI decisions normally reflect months of planning, and so the shutdowns we saw in China probably aren’t the sole factor underpinning this story. These dynamics could nevertheless play to Taiwan’s benefit in the coming quarters.”

Marro warned that Taiwan’s longer-term outlook is “more cloudy owing to the fraught security situation across the Taiwan Strait.”

Taiwan’s economic outlook remains positive despite being affected by the pandemic and the economic fallout from Russia’s invasion of Ukraine. On July 19, Taipei-based think tank Chung-Hua Institution for Economic Research lowered its forecast for Taiwan’s 2022 GDP growth to 3.56%, citing inflation concerns and the economic impact of COVID.

Someone posted a link that showed that one of the reasons Taiwan doesn’t receive a lot of foreign investment because it doesn’t have any natural resources? Well, wind is now a natural resource.

In particular, inbound wind energy investments “show that the government has been promoting green energy and offshore wind power policies, which have attracted a large amount of foreign investment. This is expected to drive this year’s amount of FDI [ex-China] to a new high in the past 15 years,” the commission said in a statement.

Still yet to come:

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I heard somewhere that Costco in Taiwan is the most profitable from all their shops around the world.

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Probably because of huge mark ups.

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Taiwanese love Costco!

Now I heard it somewhere too, thanks!

JERA acquired an equity interest in the Formosa 2 offshore wind power project

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I was told a few years back by someone who supplies Costco that the Neihu branch has the highest turnover of any Costco in the world.

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Yep, Taichung’s.

Turnover in inventory, right? Not turnover in staff.

Inventory, yes.