TALKING POINTS FOR FOREIGN INVESTMENT - FILM TEXTILE INDUTRY I. Investment Niche A 、 Taiwan textile productivity dominates the top position in the world with technical supremacy. Taiwan has always been the PVC production kingdom, reputed for its first position in the fiber glass production world widely for the lower cost and technical superiority. There leaves much room for production of fine fiber glass while combining with. The development effort rendered by the upstream and downstream, it is able to develop the PVC/fiber glass film fabric with high performance and low cost, the key point for the foreign investment in Taiwan. B 、 The film textile promises a new application market. Among the textile product, the film textile appears to have a variety of brand new application, in recent year; it is used as the building material, becoming “the sixth building material” besides stone, brick, concrete and steel rebar and promising a huge potential market pends for exploration. C 、 Taiwan is the nearest gateway to China giant market. As a whole, Taiwan owns an integrated upstream, midstream and downstream in the film textile industry and its manpower and technology are good enough to produce high value production, plus it closes to the china mainland, the utilization of low cost labor in china will result certainly the low cost merchandise. When the technical breakthrough achieves in the film textile, there is sure a 1
Transcript
TALKING POINTS FOR FOREIGN INVESTMENT -FILM TEXTILE INDUTRY
I. Investment Niche
A、Taiwan textile productivity dominates the top position in the world
with technical supremacy.Taiwan has always been the PVC production kingdom, reputed for its first position in the fiber glass production world widely for the lower cost and technical superiority. There leaves much room for production of fine fiber glass while combining with. The development effort rendered by the upstream and downstream, it is able to develop the PVC/fiber glass film fabric with high performance and low cost, the key point for the foreign investment in Taiwan.
B、The film textile promises a new application market.Among the textile product, the film textile appears to have a variety of brand new application, in recent year; it is used as the building material, becoming “the sixth building material” besides stone, brick, concrete and steel rebar and promising a huge potential market pends for exploration.
C、Taiwan is the nearest gateway to China giant market.As a whole, Taiwan owns an integrated upstream, midstream and downstream in the film textile industry and its manpower and technology are good enough to produce high value production, plus it closes to the china mainland, the utilization of low cost labor in china will result certainly the low cost merchandise. When the technical breakthrough achieves in the film textile, there is sure a golden opportunity to success.
Fig. 1 The industrial structure of film textile used as building material
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Building fi lm fabric
fabric fabricUpstream/Base textile Midstream/Coating process
Downstream/Installation
and construction
Polym
er
Fiber glass
PVC
PE, ETPE
Silicon
PV
C
II. Market Analysis
A、Analysis of Market status and Scale
a. Global market scaleThe annual consumption of building film fabric in Taiwan amounts to 25,000 square meters and the annual global consumption, 500,000 square meters as shown in fig. 2 below. The total installation cost is about NT$15,000/per square. For Taiwan alone, the market demand totals NT$3.75 million and the global market, NT$7.5 billion.
Fig. 2 Taiwan global market share in film fabric
Source: Textile Institute, ITIS, 2005.11
b.The major film fabrics used as the building material are PTFE and PVC in which the base fabrics are fiber glass and polymer. The former presents better strength and weather resistance, but higher production cost. The latter is weaker in strength and weather resistance, but lower production cost, however receives broader application.
Table 1 Installation cost for film fabric
Unit installation cost/1000㎡ including material, engineering, adjustment and installationMaterial Film fabric/Euro Film +Steel/EuroPVC-coated PET 80 – 100 200 – 900PTFE – coated fiber glass 200 – 700 300 – 1200
Source: www.skyspan.co; Textile Institute, IT IS 2005.11
Table 2 Comparison of physical composition of film fabricPolymeric fabric Fiber glass fabric
Bend ability Very good General Good Bad GeneralSource: Textile Institute, IT IS 2005,11.
B、Present and Future Marketable Opportunity
a.Technical bottleneck for film fabricThe coating and laminating of PVC are a matured technology for Taiwan manufacturers, but it is very hard for PYFE. PTFE has high performance in moist resistance, water proofing and high air permeability. PTFE is UV resistant, hard in reprocessing. It is a new challenge to the film fabric industry.
b.The size of Taiwan is small and the local demand is limited. When Taiwan manufacturers plan to develop a new product, in most cases, they are looking forward to the overseas market in which China mainland is the great market they desire. For 2008 Olympic Games, they have built two huge gyms decorated with film fabric; the next potential will be the gym in every university. For short term, the gym is an imminent demand and for long term, the film fabric will enter the house, used in landscaping. Taiwanese firms have close knowledge of China market, accessible at any time.
c.Timing for Taiwanese Firms to Enter the MarketThe starting point for Taiwanese firm to enter this market shall begin with precision product in good quality and low cost. Taking PVC as an example, Taiwan has been a PVC kingdom with low cost in material and high technology in processing. For this reason, Taiwanese firms have a strong willingness to develop the PVC film fabrics. The base fabric to be selected will be the fiber glass because Taiwan is number one country in the fiber glass production and the associated downstream firms have a matured technology. To meet the high quality and product variance, fiber glass shall be the best choice for new development. However, Taiwan is still short of technology to produce the fine filament of fiber glass. The trial production of film fabric will start with the course denial fiber glass, later on, the upstream and down stream shall concentrate the efforts to develop the high performance and low cost PVC/fiber glass film fabric.
III. Competition Analysis
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A、Major CompetitorsAt present time, almost about 1/3 of building film fabric consumed in China is imported from Ferrari, France; whose main product is PVC, a small portion (PTFE) is supplied by Chukoh Chemical. So Ferrari and Chukoh are our major rivals in China.
Table 3 List of building film fabric manufacturers Upstream Fiber glass filament PFG Fiber Glass, Taiwan Glass, Fulltech,
Fu Long, A Johnson Composites IncFiber glass fabric Formosa, Taiwan Glass, Taiwan Wire and
b. Advantage of Foreign Investment in Taiwan(a) For the fabric alone, Taiwan has the number one periodicity in fiber glass, high technical standard in process in the down stream. Nothing to say the top technical quality in PVC reprocessing.
(b) Taiwan cherishes sufficiency in fiber production, n\matured technology and workmanship in coating and laminating in which Formosa is one of the greatest five PVC manufacturers of the world.
(c) Now china is the world manufacturing center with rapid economic growth. If setting manufacturing plants on Taiwan, the skilled engineers and high productive technique will result high value product while the lost cost labor, it warrants the outcomes of high quality and low priced products.
IV. Production Cost
A、 Land rent Cost
a. Rents at the Hsinchu Science-based Industrial Park:
Table 4 Land rent at the Hsinchu Science-based Industrial Park:
Unit: NT$
Category Area (m2) Rent (per month)
Land Over 2,000 NT$ 49/ m2
Standard plant
First floor 531.3~1280.4 NT$ 122/ m2
Second floor 531.3~1227.6 NT$ 115/ m2
Third floor 662.97~1346.4 NT$ 106/ m2
Fourth floor 662.97~798.6 NT$ 99/ m2
Deluxe plant 1485 NT$ 204~325/ m2
Incubation center
80
160
240
NT$ 184/ m2
Dormitories
Single room 15~18 NT$2,250~2,950/unit
Double room 15~21 NT$1,850~3,300/unit
Family home 100~290 NT$10,550~33,300/unit
Note: The above rents are adjusted on the basis of announced rents for the current year.
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b. Rents in the Tainan Science-based Industrial Park:Land and plant buildings within the Tainan Science-based Industrial Park are leased, and will not be sold. The government will set and adjust rents on the basis of amortized cost at the time of development and subsequent yearly changes in real estate and land value taxes. Rents within the Tainan Science-based Industrial Park will consequently be lower than those outside the park. Land shall be leased for periods of 20 years, and plants leased for periods of one year. The following rents are currently charged:
Units: NT$
Category Term Rent (m2/month)
Land 20 years 12.9
Plants 1 year 103~120
Note: Land rents will be adjusted on the basis of announced land prices, public facility development
costs, and laws and regulations.
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B、Labor Cost
Table 5 Average monthly wages for workers in different industries in Taiwan
Source: Monthly Bulletin of Earnings and Productivity Statistics and Annual Report of Earnings and
Productivity Statistics published by the Directorate-General of Budget, Accounting and Statistics,
Executive Yuan, Jan. 2004
V. Taxation
Table 6 Individual Consolidated Income Tax Rates
Units: NT$
Net consolidated income Tax rate Progressive differential Tax payable
0—370,000 × 6% – 0 =
370,001—990,000 × 13% – 25,900 =
990,001—1,980,000 × 21% – 105,100 =
1,980,001—3,720,000 × 30% – 283,300 =
3,270,001–– × 40% – 655,300 =
Table 7 Profit–Seeking Enterprise Income Tax Rates
Taxable income(P) bracket
Tax rateProgressive differential
Quick formula
Less than NT$50,000 0 –
Less than NT$100,000 15% None 1. When P is less than NT$71,428: T= (P–50,000x1/2
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2. When P is greater than NT$71,428: T=Px0.15
Over NT$100,000 25% 10,000 T=Px0.25–NT$10,000
Note: T is the amount of tax.
VI. Investment Incentives
A、 Preferential TaxesThe ROC Government enacted the Statute for Upgrading Industries in 1991 to develop a favorable environment for foreign and overseas Chinese investors in Taiwan and to encourage investment by foreign companies for the purpose of upgrading the ROC’s industrial base. On January 1, 2000, the statute was amended to extend preferential tax measures for another 10 years until December 31, 2009. These measures are detailed in the chart below:
Incentive Measure Nature of Incentive
Accelerated depreciation of equipment and facilities
Equipment and facilities used exclusively for R&D, experimentation, and quality control purposes, and equipment, machinery, and facilities that are utilized for energy conservation or that use new and clean energy, are eligible for an accelerated depreciation period of two years. If there is any residual post-depreciation service life remaining following the accelerated depreciation period, depreciation may be continued for one or several years within the service life of the assets as specified in the Income Tax Law until the assets are fully depreciated.
Investment in automation equipment or technology
Companies may deduct 5% to 20% of the amount of investment in these areas from their profit-seeking-enterprise income tax over a five-year period beginning with the year in which the investment is incurred.
Investment in recycling and pollution control equipment or
technology
Investment in equipment or technology for the use of new
and clean energy, energy conservation, and industrial
wastewater recycling
Investment in equipment or technology for reducing
greenhouse gas emissions and
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Incentive Measure Nature of Incentive
enhancing energy efficiency
Investment in the hardware, software and/or technology that
can promote an enterprise’s digital information efficiency,
such as the Internet and television functions, enterprise
resource planning, communication and
telecommunication products, electronics and/or audio visual equipment, and digital content
production
Research and development
Companies may deduct 35% of the amount of their investment in R&D or personnel training from their profit-seeking-enterprise income tax over a five-year period beginning with the year in which the investment is incurred.
Companies may deduct 50% of the amount of their investment in R&D or personnel training that exceeds the average annual amount of their investment in R&D or personnel training for the previous two years from their profit-seeking-enterprise income tax.
The total amount deducted from tax due per year under the previous two items may not exceed 50% of the company's profit-seeking-enterprise income tax due for that year. The amount deducted during the final year, however, is not subject to this limitation.
Personnel training
Investment in resource-poor or lesser-developed rural areas
Companies that invest a specific amount or employ a specific additional number of persons in resource-poor or lesser-developed rural areas may deduct 20% of the invested amount from their profit-seeking-enterprise income tax over a five-year period beginning with the current year.
Investment in emerging, important, and strategic
industries
The investor may choose one of the following:
Investment tax credits for shareholders:
A company or individual who subscribes to the registered stock issued by a company in an emerging, important, or strategic industry, and who holds the stock for at least three years, may claim a deduction from the profit-seeking-enterprise income tax or consolidated income tax due over a period of five years beginning with the current year:
A profit-seeking enterprise may deduct up to 20% of the cost of such stock from its profit-seeking-enterprise income tax for the current year.
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Incentive Measure Nature of Incentive
An individual may deduct up to 10% of the cost of such stock from the consolidated income tax for the current year, provided that the deductible amount within each year is not more than 50% of the consolidated income tax payable for that year; this limitation will not apply, however, to the amount deducted in the final year.
The rate of tax reduction provided above will be reduced by 1 percentage point every two years beginning on Jan. 1, 2000.
Five-year tax holiday for companies:
A company investing in an important, emerging, or strategic industry may, within two years from the date at which shareholders begin paying their stock price and with the approval of its shareholders’ meeting, select exemption from the profit-seeking-enterprise income tax and waive the right of shareholders to claim income tax deductions as set forth above. Once the selection is made, no change will be allowed. The following provisions must be met:
A newly incorporated company that meets these conditions will be exempted from the profit-seeking-enterprise income tax for a period of five consecutive years from the date on which it begins to sell its products or render its services.
A company that carries out an expansion project via a capital increase will be exempted from the profit-seeking-enterprise income tax on the increased income derived from the expansion for a period of five consecutive years from the date the newly added equipment begins to operate or the rendering of services begins. However, this provision is limited to the expanded construction of independent production or service units, or the expansion of primary production or service equipment, via capital increase.
A company that is eligible for a tax exemption as described above may, within two years of the date on which it starts to sell its products or render its services, choose to defer the commencement of the tax-exemption period. The period of deferment may not be more than four years, and the date on which the exemption period begins following deferment must be the first day of a fiscal year.
A company that carries out a capital increase using undistributed profits may apply the three items above.
Reinvestment If for the purpose of adjusting its business operations, a company invests production or service equipment and the land on which such equipment is located in a another enterprise in which it holds at least a
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Incentive Measure Nature of Incentive
40% share, the land value increment tax on the reinvested land may, with prior government approval, be deferred based on the ratio of shares held and upon receipt of a proper guarantee from the company.
Investment by foreigners and overseas Chinese
When a non-resident individual or profit-seeking enterprise without a fixed place of business in the Republic of China receives a dividend distributed by a company or profit distributed by a partnership located in the Republic of China in which that individual or enterprise has invested under the Statute for Investment by Overseas Chinese or Statute for Investment by Foreign Nationals, 20% of the amount of payment will be withheld as stipulated in the Income Tax Law and the provisions of the Income Tax Law regarding tax filing will not apply.
When a non-resident director, supervisor, or manager of a company in the ROC who has invested in that companies under the Statute for Investment by Overseas Chinese or Statute for Investment by Foreign Nationals and who has resided in the ROC for more than 183 days within a tax year for the purpose of operating or managing the invested company receives a dividend from the invested company, 20% of the amount received will be withheld as stipulated in the Income Tax Law and the dividend income will not be included in the individual’s tax return for that year.
Salaries paid abroad to directors, managers, or technicians who are sent to the ROC temporarily by foreign profit-seeking enterprises that invest in the ROC under the Statute for Investment by Overseas Chinese or the Statute for Investment by Foreign Nationals to carry out investment, plant construction, or market surveys, and who do not stay in the ROC more than 183 days within a tax year, are not treated as income derived in the ROC and are thus exempt from the income tax.
Establishment of international logistics and distribution
centers
When foreign profit-seeking enterprises or branch companies which they have established within the Republic of China set up themselves, or commission domestic profit-seeking enterprises to set up logistics and distribution centers in Taiwan to engage in the warehousing and simple processing of goods from the said foreign profit-seeking enterprise which are then delivered to domestic customers, the income so derived is exempt from the profit-seeking-enterprise income tax.
Company mergers Merged companies are exempt from profit-seeking-enterprise income taxes and securities transaction taxes resulting from their merger, and may apply the provisions for the deduction of losses. In addition, the land increment tax due on land that is owned by a company and is transferred along with the merger of that company may be charged to
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Incentive Measure Nature of Incentive
the account of the surviving enterprise.
Establishment of operations headquarters
For companies that establish operations headquarters in Taiwan that reach a certain scale and that have a major economic effect, the income that they derive from the provision of management services or research and development to the related companies which they acquire in Taiwan, as well as royalty income, profit from investment, and gain from the disposition of properties, are exempt from the profit-seeking-enterprise income tax; in addition, such companies may procure publicly owned land at preferential prices.
Science-based industries
Effective Jan. 1, 2002, machinery and equipment that is imported for a company's own use and that is not yet manufactured domestically may, with the approval of the Ministry of Economic Affairs, be exempted from import tariffs and business taxes.
Import tariffs and business taxes will be levied on imported machinery or equipment that, within five years of its importation, is sold or its use is changed so that it no longer meets the conditions for tax exemption or conforms to its original use. Machinery or equipment that is sold to companies that operate within science-based industrial parks, economic processing zones, or other science-based industrial companies is not subject to this limitation.
Raw materials that are imported by bonded factories are exempt from import tariffs and business taxes. Import tariffs and business taxes will be levied on such raw materials, however, if they are shipped outside the bonded area.
B、 R&D Subsidies：Measures for encouraging the development of leading
new products
C、 ContentsIn order to encourage new product development by private manufacturers with R&D potential, and to share some of the burden of risk, the government may provide a subsidy of up to 40% of the cost of development.
D、 Scope of Eligible Products
a. Products of emerging important strategic industries.
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b. Products employing key technologies that surpass current
standards of industrial technology in Taiwan.
c. Products that have a strong linking effect and good market
potential, and that can stimulate the development of related
industries.
d Intellectual property rights revert to the developing company.
E、Low-interest LoansTo accelerate industrial development and economic growth, a special fund has been set aside by the Development Fund of the Executive Yuan for cooperation with banks in providing various kinds of special low-interest loans. These include preferential loans for small and medium-sized enterprises (SMEs) to upgrade and purchase automation equipment, and loans to private enterprises for purchasing pollution control and pollution treatment equipment. In addition, the government has allocated NT$100 billion from new postal deposit funds for the “Medium-and Long-term Capital Loan Plan.” Private investors whose projects have a value of NT$ 100 billion or more may apply for loans under this plan.
F、Government Participation in Investmenta. Investors can ask the government to participate in their investment projects to a maximum of 49% of the total capitalization.The following government agencies represent the government in providing capital:
(a) The Sci-Tech Development Fund and other development funds
(b) Chiao Tung Bank
(c) Management Committee of the Executive Yuan Development Fund
b.Investment Focus
In the past, the focus was on important productive industries included in economic
construction plans, such as petrochemicals and semiconductors.
In recent years the focus has been on Ten Emerging Industries, including information,
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