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The bilateral trade between India and Taiwan in the last ten years grew by nearly six times to $6.47 billion in 2010 with Taiwan's exports to India being $3.60 billion. Though it is balanced trade between the two countries, there is a huge scope for improvement in business as global companies are looking at India to set up major manufacturing hub (due to cost escalation in China) and Taiwan can help in export of machinery and auto spare parts to India. While India's strength is in software, Taiwan's is in hardware.
Both countries can jointly form a strong force in the international market, feels Mr Francis Kuo-Hsin Liang, Vice-Minister, Ministry of Economic Affairs, Taiwan. This department has implemented various economic policies and measures to help industries reinforce their competitive advantage at different stages in Taiwan's economic development.
On his first visit to India, Mr Liang had meetings with various stakeholders in Delhi, Mumbai and Chennai. He took some time to speak to Business Line on various issues, including the Free Trade Agreement (FTA) and India's complex tax system, on the sidelines of the three-day Emma Expo India, which showcases Taiwan's electronic & ICT products, machinery, moulds and auto-parts to the Indian market.
Excerpts from the interview:
On your first visit, what is your assessment on the bilateral trade?
India has abundant natural resources. It is strategically located in the world trade map and has ample supply of human resources and importantly a large domestic market. In Taiwan, we do not have any of those but have a large educated workforce; advanced technology development and big in ICT (information, communication and technology), machinery, electronics and management. Both the countries can combined our respective strengths to form a strong force in the international market. I truly believe in this.
What's the status on the FTA?
It can be FTA or Economic Cooperation Agreement referring to preferential trade agreement. The Chung-Hua Institution for Economic Research in Taiwan and the Indian Council for Foreign Economic Relations in India are conducting feasibility study on the possible negotiations of ECA. They signed an agreement last January and are conducting their studies individually. In a couple of months they will start comparing results for a joint study. However, preliminary result from our institute says such an agreement would be beneficial to both countries in goods, service and technical cooperation. We are encouraged from the results and believe we should seriously look at the joint study. Both governments should think on how to negotiate FTA to help the business community.
How will FTA benefit?
It will open up new trade opportunities. For instance, India not only produces industrial goods but also agricultural products. With the elimination of tariff barriers, Taiwan can buy more from India. Taiwan imports most of our agricultural needs, and on the industrial products we can use the maximum potential of each other's strengths without the disturbance of tariffs. For instance, we can buy many of the light industrial products from India, and in return we can sell machinery and auto parts.
What has been Taiwan's investments in India?
Around 80 Taiwanese companies have invested in India totalling over $800 million. We realised that because of the distance and difference in cultural background, it is taking some time for Indian business going to Taiwan and our business coming to India. First we have to overcome the cultural barriers between us. We now know each other better and better. I am sure more investment will follow. In fact, recently China Synthetic Rubber said it is investing around $330 million in a new plant in Andhra Pradesh. China Steel has approved a $180-million investment project in India. Things are looking good.
How will the raising labour cost in China help both countries?
There are nearly 80,000 Taiwanese companies in China with a total investment of nearly $100 billion. There is the issue of rise wages; shortage of labour; more regulations and social conditions. Some of the companies are already looking for other possible manufacturing base outside China. Some moved to Indonesia, Vietnam and many of them might consider India if they realise the potential and what India can offer.
What's your assessment of India's investment climate?
I want to be straight forward yet diplomatic. In the international competitiveness, the IMD report from Switzerland three years ago ranked Taiwan at 15{+t}{+h} place. Two years ago we improved it by seven places to be ranked at 8{+t}{+h}. Last year, we were ranked at 6{+t}{+h} place. The report ranked each country based on the ease of operating business, transparency of law and local market conditions. I am mentioning this because India should also look at itself on how to increase its own competitiveness in the international market. Some of our investors have mentioned that the complex tax system in India both at the Central and State-level is confusing. Some mentioned that trade finance in India is sometimes difficult to get and they need to look to Taiwan for help. I believe that a transparent legal system and with encouragement from local government on foreign investment will assure foreign investors. We have a determination to come to this market but we hope that sometimes when our investors look for local support, it will be a lot easier to get.
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