Taiwan, Japan Sign Investment Agreement

by Mary Swire, LawAndTax-News.com, Hong Kong

27 September 2011

An investment agreement, that, it is hoped, will greatly enhance their bilateral economic and trading relationship, has been signed in Taipei between Taiwan and Japan.

Because of the lack of an official diplomatic relationship between the two countries, the treaty “for the liberalization, promotion and protection of investment” was completed between Taiwan’s Association of East Asian Relations and Japan’s Interchange Association.

Under the agreement, Taiwanese investors will enjoy the same treatment in Japan as Japanese domestic investors, and vice versa, while the treaty will also provide for ‘most favoured nation’ status to protect each other’s investors, and for the settlement of disputes by international arbitration. In addition, a commission will be set up, after the agreement takes effect, to look at further liberalization possibilities.

Trade and investment levels between the two countries are already significant. Japan is Taiwan's second largest trading partner and Taiwan is Japan's fourth largest trading partner; while Japan’s investments in Taiwan are reported to total some USD16bn, and investments in the other direction have reached USD1.6bn. However, it is expected that the new pact will boost those levels even further, given that it will now provide mutual guidelines to safeguard investments.

The agreement, which is the first signed between Taiwan and one of its major trading partners, and could be the forerunner of a trade treaty between the two countries, will now be forwarded for the approval of the Legislative Yuan in Taiwan. It is expected to enter in force by the end of this year.

On the other hand, a bilateral ‘open skies’ aviation agreement between Japan and Taiwan, which was expected to be signed at the same time as the investment treaty, has been delayed. According to the Taiwanese government, its final details are still being negotiated.

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