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Reference ID: 05TAIPEI2026
Created: 2005-05-05 01:06
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: American Institute Taiwan, Taipei
This record is a partial extract of the original cable. The full text of the original cable is not available.
050106Z May 05
UNCLAS SECTION 01 OF 03 TAIPEI 002026
SIPDIS
SENSITIVE
STATE PLEASE PASS AIT/W AND USTR
STATE FOR EAP/RSP/TC, EAP/EP AND EB/IFD/OIA
USTR FOR SCOTT KI
USDOC FOR 4420/USFCS/OCEA/EAP/LDROKER
USDOC FOR 3132/USFCS/OIO/EAP/ADAVENPORT
TREASURY FOR OASIA/ZELIKOW AND WISNER
TREASURY PLEASE PASS TO OCC/AMCMAHON
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Economic Briefing for April 2005
Introduction and Summary
------------------------
1. (U) This cable summarizes selected recent economic
events in Taiwan in April 2005:
--Taiwan Stock Market Up on KMT Trip to China
--New Insurance Director General
--Changhwa Bank Privatization on Hold
--More Funds for High Speed Rail
-- Taiwan Flat Panel Production
--A Flurry of IPR Raids
END INTRODUCTION AND SUMMARY.
Taiwan Market Reacts Favorably to KMT Chairman's China Trip
--------------------------------------------- --------------
2. (U) KMT Chairman Lien Chan's April 25-May 3 "journey of
peace" to Mainland China and his meeting with PRC President
Hu Jintao gave a small boost to Taiwan business sentiment
and stock valuations. Taiwan's TAIEX stock market index
increased by about 60 points, or about 1.5 percent, during
the visit. Stock prices of Taiwan's leading listed
companies with major investment in China increased by 2.7-
7.9 percent, indicating slightly increased optimism on cross-
straits economic relations. Taiwan's agricultural and
tourism sectors generally welcomed potential business
opportunities that could result from the PRC's offer to
liberalize controls on tourism to Taiwan and eliminate
import tariffs on 12 Taiwan's fruit exports to the PRC.
Financial Supervisory Commission Insurance Bureau
--------------------------------------------- ----
3. (U) Secretary General of the Financial Supervisory
Commission (FSC) (Thomas) Huang Tien-mu was promoted to
Director General of the FSC Insurance Bureau (IB). Dr.
Huang replaced Mark Wei, who will join a private financial
firm. Huang met with AIT on April 18 to discuss his views
on Taiwan's insurance industry (septel). His educational
background includes a doctorate in public administration
from the University of Southern California.
Changhwa Bank Privatization on Hold
-----------------------------------
4. (U) On April 29, the Ministry of Finance (MOF) instructed
the board of directors of state-owned Changhwa Commercial
Bank (CCB) to delay announcement of the winning bid and
bidder for a controlling stake in the company. The sole
remaining bidder, an investment consortium headed by Japan's
Shinsei Bank, reportedly offered NT$13 per share for the CCB
global depository receipts (GDRs), about 40 percent under
the average share price in the three months preceding the
auction. Taiwan's MOF wants to negotiate further with the
Shinsei consortium over the price and other arrangements.
The consortium led by ING Bank gave up its bid in early
April.
5. (U) CCB was slated to become the first Taiwan state-
owned bank sold to foreign investors. The CCB planned to
award 1.4 billion Global Depository Receipt (GDR) shares,
equivalent to 22% of equity, to the high bidder. The GDR
bid winner would then be permitted to purchase another 18%
ownership stake in CCB directly from the government. This
would enable the winning bidder to have effective control
with a 40% equity stake. The sale of CCB would meet the
publicized financial reform goal of selling at least one
state-owned bank to foreign investors before the end of
2005.
A Ray of Hope on High-Speed Rail Finance
----------------------------------------
6. (SBU) On April 28 the Taiwan High-speed Rail Company
(THSRC) successfully raised NT$6.0 billion (USD 190 million)
additional capital by issuing preferred shares, as called
for in its eleventh financial plan. The investors included
China Steel Corporation with NT$ 3 billion, Fubon Group with
NT$ 900 million, Evergreen Group with NT$ 500 million, and
Continental Engineering Corporation with NT$ 400 million.
With this capital THSRC can continue to borrow funds from
its bank consortium to finance construction of the railway.
However, THSRC's plan calls for it to raise another NT$ 7.5
billion (about USD 240 million) by the end of May through
preferred stock issuances. Chairman Earle Ho of Chinese
National Federation of Industry, who is also a board
director of THSRC, publicly promised the project would earn
money in the future. THSRC and the Ministry of
Transportation and Communications still indicate the high-
speed rail will open on time on October 31, 2005, but many
observers are skeptical. An engineer on the project told
AIT/T that THSRC might begin limited special service on
time, but that full operations were not likely to begin
before February 2006.
Taiwan Fails to Surpass South Korea in TFT-LCDs
--------------------------------------------- ---
7. (U) The Taiwan government has set the goal of surpassing
South Korea in TFT-LCD production. However, Taiwan
producers failed to take the top spot in 2004 as some had
predicted. According to Taiwan's Photonics Industry and
Technology Development Association, Taiwan produced USD 14.4
billion worth of TFT-LCDs, giving it a 44-percent share of
the global market last year. In comparison South Korea took
46 percent of the market with production valued at USD 16.8
billion. Market research firm iSuppli predicts the race
will be tight in 2005. Taiwan may have the capacity to
produce more than South Korea, but component shortages may
prevent Taiwan firms from producing at capacity. iSuppli
predicts Taiwan could overtake South Korea in 2006.
8. (U) Taiwan is building the capacity to stay competitive.
Taiwan's AU Optronics Company, the island's largest TFT-LCD
producer, in April announced plans to invest NT$35 billion
to build a "7.5-generation" plant. The plant would focus on
production of 42- and 47-inch LCD products. Following AU
Optronics, Chi Mei Optoelectronics Company announced it
would build a 7.5-generation and a 5.0-generation TFT-LCD
flat panel plant. Output of Chi Mei's 7.5-generation plant
will be mainly used in televisions while output of the 5.0-
generation plant will focus on the computer market. By the
end of 2005, Taiwan will have 24 TFT-LCD factories to
Korea's 19.
A Flurry of IPR Raids
---------------------
9. (U) In mid-April, Taiwan's Intellectual Property Office
(TIPO) announced that the reward for information leading to
the arrest or indictment of counterfeiters had been raised
to NT$500,000 from NT$200,000. Working on a tip from
Microsoft, Taiwan's Criminal Investigation Bureau (CIB)
raided a firm and an office near Taipei City and arrested
four suspects who had allegedly imported bogus Microsoft
certificates of authentication from Mainland China and then
sold them to local and foreign buyers. Taiwan police and
Ministry of Justice Investigation Bureau (MJIB) conducted
numerous other raids during April seizing counterfeit Nike,
Puma, Adidas, Louis Vutton, Chanel and other products with a
market value of over NT$200 million.
PAAL
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