Taiwanese Firms Look to Cash In on China’s Strained Relations with Burma

By William Boot 12 September 2014

Tiny Taiwan is bidding to upstage its giant neighbor by investing heavily in Burma while the Southeast Asian nation’s relations with China remain cool.

After a series of recent small-scale Taiwanese investments, the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA) has announced plans to spend nearly half a billion dollars developing an industrial park in the Irrawaddy Delta.

TEEMA said it wants to invest US$468 million to provide a base for possibly dozens of Taiwanese electrical-component makers. If it goes ahead the project would create hundreds of semi-skilled jobs.

“According to industry insiders, TEEMA has already signed a letter of intent with its Myanmar counterpart to solicit 1,400 hectares (3,458 acres) of land from the government there,” said the China Economic News Service (CENS).

“The association has also commissioned the Taiwan-based Sinotech Engineering Consultants, a corporate consultant, to assess the feasibility of the project.”

The industrial park plan comes as Taiwan, the breakaway Chinese island, seeks to diversify its investments away from both mainland China and Vietnam where it has previously established numerous factories.

“Myanmar can be a good alternative to investment in China and Vietnam, given that labor shortages and the recent anti-China rioting [in Vietnam] have aroused concerns among overseas Taiwanese firms operating in those countries,” the chairman of TEEMA, Guo Tai-chiang, was quoted by CENS as saying.

Taiwan has stepped up its interest and investment in Burma over the past year.

The Taiwan External Trade Development Council opened an office in Rangoon last November to “help Taiwanese companies explore business opportunities.”

In June, Taiwan’s Financial Supervisory Commission gave the green light for three Taiwanese banks to pursue the establishment of representative offices with a view to opening branches in Rangoon, said the state-run Central News Agency (CNA) in Taipei.

“Worrying about a recurrence of Vietnam’s recent anti-Chinese riots, which caused serious damage to hundreds of Taiwanese enterprises, the island’s banks are planning to switch their development focus to other areas of Southeast Asia. Underdeveloped Myanmar and Laos are the favored countries,” said CENS.
The Taiwan External Trade Development Council hosted a four-day auto parts trade fair in Rangoon during July.

Taiwan’s level of investment in Burma to date remains modest compared with mainland China and other countries such as Thailand, Singapore and even Vietnam. However, input is growing. Bilateral trade in 2013 grew by more than 15 percent over the previous year.

“Myanmar has abundant natural resources and cheap labor but many structural problems remain,” CNA quoted an unnamed Taiwan council official saying.

Taiwan’s Pou Chen Group, one of the world’s largest contract manufacturers of footwear, announced in June it would invest $100 million in a production factory in Rangoon.

The factory is scheduled to be ready to begin operating by the end of 2015 and is initially targeting production of 300,000 pairs of shoes per month, rising to 800,000 pairs per month by 2019, said CENS quoting company chief executive Patty Tsai.

“With gradually higher wages in China, and the recent violent anti-China protests in Vietnam, Tsai pointed out that Pou Chen is eagerly trying to set up production in other countries, besides China, Vietnam and Indonesia, as part of its strategy to expand overseas output and hedge risks of concentrating production in a single place,” CENS reported.

TEEMA’s Guo said Taiwan is keen to focus more on Burma to help give it more access to Asean, which is set to launch a tariff-free trading bloc among its 10 member countries from the end of 2015.

“Once the planned industrial park is in operation, a thorough supply chain will likely be built up making it easier for Taiwanese firms it to explore the Myanmar market,” CENS said.

“This is especially significant given Taiwan’s lack of membership in the Association of Southeast Asian Nations and the stalemate over the signing of a cross-strait agreement on trade in goods and services with China.”

The location of the proposed industrial park in Irrawaddy Division has still to be finalized, but it would include its own power plant to provide the necessary electricity, said Guo.

Taiwan’s Ministry of Economic Affairs is assisting TEEMA by liaising with the Naypyidaw government, said CNA.