TAIWAN: Economic overview, business opportunities and drivers

The state commonly referred to as Taiwan, officially named the Republic of China (ROC), represents a cluster of islands in the South China Sea, of which the island Taiwan is the largest one. In 2015, the state of Taiwan performed well on international scales of competitiveness, ease of doing business, having a (low-risk) investment-friendly climate, and economic stability. Forbes ranks Taiwan as the 21st best “Country for Business”.

Part I: An overview

However, the economy also suffered substantial contractions from declining exports since 2009 and the industry must revamp itself to sustain its momentum.

The cross-Strait relations, i.e. the relationship between mainland China and Taiwan, have progressed positively politically since the signing of the Economic Cooperation Framework Agreement (ECFA) in 2010. Economically the advantages for Taiwan, though initially positive, have been waning recently. This is due to lesser demand internationally for their key success products, and due to greater competition presented by China and other suppliers stemming from industrialized East-Asian economies.

Into the future

As international demand picks up again, so should the export value and volume of Taiwan’s products.

Furthermore, Taiwan is planning to revitalize its industry to serve even more as a knowledge-based economy, investing in enhancing its service sector, and continuously seeking to adapt to market forces to ensure its economic stability and growth. Large government investments into R&D are made annually, to upgrade technology, and to pursue participation from knowledge centers.

The cross-Strait situation remains geopolitically sensitive, and some countries may be apprehensive to engage in individual trade agreements with Taiwan in the near future. A lack of clear national status, and a lack of international and regional trade agreements could potentially inhibit its growth in the near future.

Crucially, a new government was elected to power in Taiwan in January 2016, with a charter that fends for the sovereign independence of Taiwan. Simultaneously, Taiwan in practice is already run independently, so many believe Taiwan will merely adhere to the status quo and no great changes must necessarily ensue.

Taiwan has an excellent high-end technological infrastructural industry, and interesting tax incentives that aim to create –and will provide- an attractive business climate in the coming years. It is yet to see how the political developments will affect the economic success, and whether export demand will pick up again substantially in line with new strategical approaches and other international market forces.

Part II: Market drivers

Interestingly enough, Taiwan is highly dependent on foreign imports of high-end medical devices, yet simultaneously it also enjoys a respected reputation for its specification productions of the components used in many medical high-end electrical equipment.

Taiwan’s most prominent opportunities accordingly are:

  • its reliance and need to trade with importers of high-end tech medical devices
  • its skilled domestic capacity for OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) manufacturing.

Businesses seeking a partner for their supply chain goods, will find many potential and capable manufacturing partners in Taiwan.

Taiwan as export base, and or stepping stone into China

The Chinese market is often seen as challenging to enter due to bureaucratic and trade barriers, and cultural differences between East and West, along with other intricacies related to its sheer size, volumes and organization. Taiwan, its neighbor and free trade partner, is seen as a potential stepping stone to accessing the Chinese market. Taiwan, whilst closely affiliated with China, simultaneously also offers more Westernized business characteristics; its registration and licensing procedures are more similar to those in Europe and the USA, in comparison to those in China.

  • Recall that Taiwan benefits from free export tariffs into China through the ECFA, meaning a company set up in Taiwan can take advantage of this trade agreement.

Taiwan, though not the biggest medtech player amongst Asian states, is seen as an effective market entry point to launch from into other Asian markets.

Taiwan as investment opportunity

Taiwan offers a low-taxation investment climate and substantial R&D incentives, which counter –to some extent- negative repercussions from the National Health Insurance (NHI) pricing issue, when thinking specifically of the pharma sector.

Here are some of the reasons why it is investment opportune:

  • It has experienced and successful exporters of medical supplies
  • Has industrial clusters for orthopedic and dentistry technology development
  • Gives state incentives for industrial development
  • Amongst the world’s top producers of homecare furniture and medical devices, walking aids, and other medical electronic components
  • Specialized capacities to make-to-order parts

Ageing population and demands respectively

Taiwan is an ageing nation, indicating that there will be a demand for equipment related to nursing, home care, geriatric products care, diagnostics and treatment of chronic ailments, orthopedics, and any other solutions applicable to handling the demands of such a demographic.

Private sector cosmetics and preventative healthcare growth

The Taiwanese National Health Insurance fund does not cover many procedures common in the medical cosmetics sector and those of preventative healthcare examinations, seen as cornerstone provisions of medical tourism. Patients will pay these services privately, offering a high potential revenue income for businesses providing these services/and related products.

For further quantitative and qualitative information on the Taiwanese healthcare system and the macroeconomic climate, or that of other national healthcare systems, please look into our Business intelligence platform or order the TforG Deep Dive report containing volumes of 984 surgical procedures in 13 specialisms.