Taiwan firms eye Southeast Asia as Chinese costs rise

Taiwan firms are increasingly attracted by the incentives and cheap labour on offer in Southeast Asia as costs rise in China, their preferred destination, and Beijing tries to dampen an investment frenzy.
This year alone, Taiwan's Hon Hai, the world's largest electronics parts maker, and Compal, the second-biggest contract laptop manufacturer, have announced a combined $5.5 billion in investments in production facilities in Vietnam.
"While there have been fewer China incentives, there have been some sweeteners from countries such as Vietnam," said Emile Chang, deputy executive secretary at the Economics Ministry's investment commission.
"Besides, there were some changes in China as well, especially in its tax incentives and export rebates policy. Also, with all the overheating worries in China, the government has been trying to discourage investments in some industries."
China has scrapped value-added tax rebates on certain export lines and introduced measures to discourage low-end export-processing trade - the practice of assembling imported components into finished goods for re-export.
Vietnam has seized the opportunity, offering generous tax breaks and rent-free land to selected foreign investors.
Thailand and Cambodia are trying to muscle in on the act, seeking to divert some of the money that might previously have flowed to China, before the authorities began to get worried by signs the economy was overheating.
Taiwan is now the third-largest foreign investor in Vietnam, with cumulative investment of US $9.1 billion through July, according to Vietnamese data.
Taiwan government data showed that investments it approved in Thailand more than tripled in the first half of the year, compared with just a 2.5 percent gain for China.
Cultural similarities mean that China is still Taiwan's favourite investment choice, but dollars are starting to speak louder than a common culture. It is hard for companies to resist cheaper land, or labour costs in parts of Vietnam and Thailand that are half of those along China's coastal provinces. For Hon Hai, Vietnam was an obvious choice for expansion.