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Taiwan Ratifies Investment Agreement With Japan

by Mary Swire,, Hong Kong

25 November 2011

The investment agreement between Taiwan and Japan, which, it is hoped, will greatly enhance their bilateral economic and trading relationship, has been approved and ratified by Taiwan’s parliament, the Legislative Yuan.

Because of the lack of an official diplomatic relationship between the two countries, the treaty for the liberalization, promotion and protection of investment was signed on September 22 this year by 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. Furthermore, the difficulties caused by their country’s earthquake and tsunami earlier this year, and the signing of this investment agreement, are said to have led to some Japanese manufacturers to consider Taiwan as the location for a back-stop production centre.

The agreement, which is the first signed between Taiwan and one of its major trading partners, and should now enter into effect shortly, is also hoped by the Taiwanese government to be the forerunner of a trade treaty between the two countries.

TAGS: investment | foreign direct investment (FDI) | law | investment treaty | Taiwan | agreements | legislation | Japan

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