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December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

Taiwan: Vietnam: Taiwan's 2nd Largest Export Base

     
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Reference ID: 06TAIPEI2467
Created: 2006-07-21 09:05
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED
Origin: American Institute Taiwan, Taipei

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E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT:  Vietnam: Taiwan's 2nd Largest Export Base
 
REF: HANOI 01824
 
SUMMARY
-------
 
1.  Vietnam has become an important export base for Taiwan companies
including a growing number of manufacturers of labor-intensive
industries that have relocated from China.  Taiwan has become the
Vietnam's largest source of foreign direct investment and the
largest source of its trade deficit.  Taiwan firms have become
Vietnam's major exporters and foreign exchange earners.  END
SUMMARY.
 
Mission Organized by Opposition Legislator
------------------------------------------
 
2.  A Taiwan trade mission organized by Legislator Christina Liu
(PFP) visited Vietnam May 18 - 21.  In addition to business leaders,
the mission included 14 legislators, including seven from the ruling
DPP Party.  According to Legislator Liu, the mission was warmly
received by Vietnam officials.
 
Taiwan Firm First to List in Vietnam
------------------------------------
 
3.  Although the PFP that she represents in the Legislative Yuan
(LY) has been a major advocate of Taiwan investment in China and
direct cross-Strait navigation, Legislator Liu has urged Taiwan
business firms to switch their attention from the United States and
the PRC to Vietnam.  She has publicly reminded business groups that
the share price of Taiwan's Tai Ya Electrical Wire and Cable has
surged over 70% since the company became the first foreign firm to
list on Vietnam's stock market in March 2006.
 
Investment in Vietnam Is Insignificant to Taiwan
--------------------------------------------- ---
 
4.  According to Taiwan's Foreign Investment Commission, Taiwan
firms' cumulative investment in Vietnam by the end of 2005 reached
USD 1.2 billion, however, this is only 1.3% of Taiwan's total
foreign investment, much less than the 51.5% of foreign investment
sent to China, 18.4% sent to the tax havens of the Caribbean, and
9.2% sent to the United States.
 
But Significant to Vietnam
--------------------------
 
5.  In 2005, Taiwan replaced Singapore as Vietnam's largest source
of foreign investment, with cumulative direct investment from Taiwan
totaling USD 7.9 billion, according to Vietnam's official
statistics.  Taiwan investment is estimated at over USD 10 billion
if funds going through the Cayman and Virgin Islands are included.
(Note: The difference between Vietnam's official figure of USD 7.9
billion and Taiwan's number of USD 1.2 billion is because many
Taiwan investors fail to register with Taiwan authorities.  End
Note.)
 
Bilateral Trade Favors Taiwan
-----------------------------
 
6.  Taiwan enjoyed a trade surplus with Vietnam in 2005 of USD 3.4
billion, 21% of Taiwan's total trade surplus and 73% of Vietnam's
total trade deficit, although exports to Vietnam constituted only
two percent of Taiwan's total exports.  Imports from Vietnam
accounted for only 0.4% of Taiwan's total imports.
 
 
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7.  Taiwan is Vietnam's fifth largest trading partner, third largest
source of imports, and ninth largest export market.  Vietnam's
imports from Taiwan in 2005 totaled USD 4.3 billion equivalent to
12% of Vietnam's total imports.
 
Accommodating Plants Struggling with Higher Costs in PRC
--------------------------------------------- --------
 
8.  Taiwan began in 1991 to build production bases in Vietnam where
labor and land costs as well as environmental requirements are lower
than in China.  Relocating to Vietnam has permitted Taiwan firms to
regain competitive advantages through tax and other incentives no
longer available in China.  Vietnam has granted Taiwan firms capital
remittance privileges that were never available in China, according
to Legislator Christina Liu.
 
Vietnam's Foreign Exchange Earners
----------------------------------
 
9.  Most Taiwan manufacturing in Vietnam is export-oriented
textiles, plastics, footwear, furniture, paper, cement, motorcycles,
and bicycles.  Taiwan firms have advantages in capital, technology,
and management know-how, but many of them still rely heavily on OEM
(original equipment manufacturing) arrangements under which they
rely on famous brand companies for marketing.  The production inputs
come mainly from Taiwan and China.  The finished products go to
markets in the United States, EU nations, and Japan.
 
10.  Three major Taiwan footwear suppliers for such famous brands as
NIKE and ADIDAS have relocated production facilities from other
ASEAN nations and China to Vietnam.  Several Taiwan bicycle
companies have moved assembly lines to Vietnam to avoid European
anti-dumping duties against China.
 
11.  Uni-President, one of Taiwan's largest animal feed makers and
chain-store operators, has constructed animal feed plants in Vietnam
which are critical for developing a livestock industry there.  San
Yang, the top motorcycle maker in Taiwan, dominates the motorbike
market in Vietnam.  Formosa Plastic, one of the top ten business
conglomerates in Taiwan, has become the largest single foreign
investor in Vietnam and an important supplier of plastic and
petrochemical inputs required by textile, apparel, and footwear
makers.  Formosa Plastic now operates one power plant and is
building several others to meet growing power demands due to
industrial expansion in Vietnam.
 
Taiwan Banks and Insurance Firms in Vietnam
-------------------------------------------
 
12.  To service Taiwan businesses and the about 30,000 Taiwan
business people in Vietnam, Taiwan banks have set up 18 offices in
Vietnam.  With total assets of USD 800 million, Taiwan's banks in
Vietnam reported after-tax profits of USD 1.3 billion in 2005.
 
13.  In its WTO accession agreement with Taiwan signed in September
2005, Vietnam opened its insurance markets.  Since then, two life
and two non-life insurance companies from Taiwan have set up
branches and brokerage firms there.
 
Young

 
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