Our comprehensive assessment of Taiwan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Taiwan, as well as the latest industry developments that could impact Taiwan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Taiwan before your competitors.

Country Risk

Taiwan Country Risk

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Core Views

  • Taiwan's economy slowed in Q114 likely on the back of a moderating expansion in private consumption and exports. While we remain fairly constructive on Taiwan's trade prospects in the near term, we do not believe that recovering demand in the US and Europe will be able to overcome the drag from China's slowing economy, which will inadvertently weigh on the island's economy given its heavy reliance on the mainland. We therefore are happy to maintain our below-consensus (3.2%) real GDP growth forecast of 3.0%.

  • From a political perspective, the recent student protests against the trade pact with mainland China may catalyse a widening divide within the ruling Kuomintang (KMT) party, which would inadvertently lead to some instability within the political environment. In the event that the trade pact is rescinded, Taiwan could suffer longer-term economic implications...

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Taiwan Operational Risk Coverage (9)

Taiwan Operational Risk

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Energía Argentina Sociedad Anónima (Enarsa)

Enarsa is a state-managed power company, which focuses on the exploitation of petroleum and natural gas, along with the electricity market. Following the adoption of the national renewables target, Enarsa began to expand on its renewable portfolio ? establishing the GENREN programme, and the subsidiaries ENERGÍA EÓLICA and ENERGÍA SOLAR.

As part of GENREN, Enarsa was obliged to award contracts of at least 1GW of renewable capacity, to be sold into the grid at fixed rates for a period of 15 years. The company is looking specifically at wind, solar, biomass/biofuel and wave power as opportunities for growth.


IMPSA is one of the largest Argentine companies providing integrated solutions for power generation from renewable resources....

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Taiwan Crime & Security

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SWOT Analysis
   

Strengths

  • The company's focus on two sectors gives it a comparative advantage in its main markets.

Weaknesses

  • The present downturn in the UK economy and the consequent weakness of sterling is threatening future revenue streams at Sembcorp's UK operations.

Opportunities

  • Rising demand in Asia for utilities services, with water a key growth sector, could boost Sembcorp's penetration of the market, especially in China where the company is developing a strong portfolio.

  • Acquisition of Cascal strengthens position in China utilities sector and...

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Taiwan Labour Market

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Taiwan has a large, skilled and urban labour force, with very good levels of secondary and tertiary education, particularly in science and technology. Investors can therefore expect a highly skilled labour force and good labour availability. Moreover, in the long term we expect the government's education reforms - which will see compulsory education extend from nine to 12 years - to broaden the skill set of the country's labour pool. The country also benefits from a flexible workforce, with a long statutory working week and a low statutory requirement for annual leave, posing minimal disruption to businesses. Taiwan therefore scores 65.0 for Labour Market Risks, in the BMI Operational Risk Index placing it in seventh position out of 30 countries in Asia, between South Korea and Malaysia.

Taiwan has a very high quality education system in both regional and global terms, with a particular strength in the fields of...

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Taiwan Logistics

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News:  Workers at UK-based BG Group's USD20.4bn Queensland Curtis liquefied natural gas project (QCLNG) in Australia are planning to launch a strike on August 7. The Construction, Forestry, Mining and Energy Union, one of four unions representing workers at the facility, informed the company about the action, which is reportedly over rosters. Around 148 workers are expected to participate in the strike. The QCLNG, which aims to turn gas from coal seams into LNG, has not adjusted its expectation for first production to occur in Q414. BG has stated that it is unaware of the scope of the planned strike or how long it will last.

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Taiwan Trade & Investment

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Trade and investment risks are low in Taiwan owing to the country's open economy, relatively low fiscal and trade barriers and minimal red tape plaguing its bureaucracy. As a result, despite a dip during the global financial crisis, foreign investment outflow is recovering, a trend we expect to continue in the foreseeable future. That said, the country's heavily state-owned banking system reduces international competitiveness, though it is gradually privatising. For these reasons, the country receives an overall score of 68.8 out of 100 for Trade And Investment Risk, putting it in 6th position out of 29 countries in Asia.

Foreign trade has driven Taiwan's rapid economic growth over the past 40 years, and Foreign Direct Investment (FDI) accounts for 12.5% of GDP. However, following the beginning of the global financial crisis in 2008 FDI did fall in Taiwan, though there are strong signs that it is recovering to pre-crisis levels: exports rose...

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Taiwan Industry Coverage (20)

Autos

Taiwan Autos

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The Taiwan Transportation Vehicle Manufacturers Association (TTVMA) has reported that July domestic auto sales rose 9.5% year-on-year (y-o-y) extending their strong performance over the past five months, representing 10.3% y-o-y growth on a year-to-date (YTD) basis to 178,111 units. Continued strength in the sector was mainly due to the passenger car segment, which recorded y-o-y sales growth of 12.2% for 7M14 while commercial vehicle (CV) sales on the contrary, have declined 0.4% y-o-y over the same period.

The passenger car segment has seen consistent growth over 7M14, with the segment growing 15.2% y-o-y in July, taking the YTD growth to 12.2% y-o-y. The outlook for the segment remains positive, buoyed by more buyers looking to replace their old cars as the segment gradually moves toward its 10-year replacement peak. As such, we have raised our sales growth forecast up from 8.5% to 16.0% in 2014.

While the passenger...

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Commercial Banking

Taiwan Commercial Banking

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...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Taiwan Consumer Electronics

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BMI View:   T he maturity of   Taiwan's consumer electronics market , with   high penetration rates for all core consumer electronics devices, means growth rates will underperform emerging markets in the APAC. However, in the context of other developed markets we have a positive outlook for Taiwan's consumer electronics market. We forecast grow th of 3. 3 % in 2014, with market value expected to reach USD 6.9...

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Defence & Security

Taiwan Defence & Security

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BMI View: Taiwan's defence capabilities continue to fall behind those of Beijing, despite a steadily increasing budget. This has pushed the Ma administration towards a domestically controversial approach of diplomacy and engagement towards China. Moves to disband conscription and establish an all-volunteer force have been delayed and will ultimately be difficult to implement.  

On the one hand, Taiwan's decision to scale back its armed forces in combination with a significant decline in defence imports may point to closer integration with China. Indeed, in Q114 China and Taiwan held the first government-to-government talks in 65 years, a highly symbolic development that builds on the earlier successes of Ma's government, despite the generally negative reaction domestically. On the other hand, these cutbacks may signify an increased reliance on a US counterbalance to China...

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Food & Drink

Taiwan Food & Drink

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BMI View : In terms of the growth prospects for the Taiwanese economy looking into 2014, we expect supportive pressure from the tech sector and Chinese demand to wane as the year progresses. Additionally, we highlight two factors - the structural rebalancing of China's economy and increasing incidence of political deadlock in Taiwan - which we believe will hurt its economy in the long term. We have consequently downgraded our 2013 and 2014 real GDP projections from 3.0% and 4.0% to 2.1% and 3.0% respectively. Therefore, we remain relatively pessimistic about the performance of Taiwan's food and drink market in the short- to medium term, although we caution that select individual (premium) sectors are likely to outperform the overall market.

Headline Industry Data (local currency)

? 2013 per capita...

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Freight Transport

Taiwan Freight Transport

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Despite Taiwan's better than expected Q2 2014 GDP growth figures on the back of strong export orders and increased domestic investment, we maintain our 2014 GDP forecast at 3.1%. We expect growth to pick up to 4.1% in 2015, but note that structural headwinds will continue to hold the economy back.  

Taiwanese real GDP growth came in at 3.8% in Q2 2014, with growth being fuelled by both rising exports and domestic demand. Despite the recent surge, we maintain our forecast for Taiwan's GDP to grow 3.1% in 2014, as we believe that renewed weakness in Chinese economic activity in H2 2014 will weigh on Taiwanese growth. Meanwhile, domestically, waning credit growth may be signalling an impending slowdown in domestic demand.

Recent indicators show that the growth momentum has picked up in the last six months. Industrial production grew 8.6% year-on-year (y-o-y) in June 2014, led by electronics and...

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Infrastructure

Taiwan Infrastructure

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BMI View: Taiwan's construction and infrastructure recovery is accelerating at the modest pace we've predicted for 2014 and 2015, despite a slow start to the first half of 2014. Our positive outlook is due to a relatively conducive monetary environment for construction, changes in the country's energy policy and the government's desire to improve transport links.

Key Trends And Developments

  • The Ministry of Transportation and Communications reported an H214 increase in airport arrivals of 12.9% to 26.3mn, the highest in 15 years. This should put pressure on the runway renovation project of Taiwan Taoyuan International Airport. The renovation, scheduled for completion by end-2015, has been delayed by issues concerning construction methods.

  • Meanwhile, Taipei enacted further policies to cool property...

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Insurance

Taiwan Insurance

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BMI View: Taiwan's life insurance sector is among the largest in the world by any measurement, with 2014 premiums totalling USD81.4bn, and will continue to grow, passing USD100bn by 2017. Non-life business is far smaller at USD16bn in 2014, the majority of which is written by life insurers through health and personal accident insurance. In both sectors, the same three insurers, Cathay, Fubon and Nan Shan, control around 50% of gross premiums.  

The life insurance sector, as one of the largest and most mature in the world, dominates the Taiwanese insurance industry. Density reached USD3,500 in 2014, a figure that we forecast to rise to around USD4,800 by 2018 as the industry continues to innovate and benefit from a population that is ageing and exhibiting a growing propensity to save. Nan Shan Life has emerged in 2012 and...

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Medical Devices

Taiwan Medical Devices

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BMI Industry View:   The ongoing conflict of interest between the multinational industry and the government is understandable; despite constraints and barriers to market entry, Taiwan remains a lucrative market, among the top 25 in the world in value terms, and over 75% of the market is still supplied by imports. The USA holds a significant share of imports with just over a third of the total in 201 3 , followed by Japan and other suppliers from the EU.

Headline Industry Forecasts

  • In US$ dollar terms, the market is expected to rise by a CAGR of 8.6% during the 2013-2018 period, with performance ranging from 5.4% for diagnostic imaging to 11.1% for orthopaedics & prosthetics. Overall, this will see the market rise from...

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Metals

Taiwan Metals

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BMI View: Taiwan's steel producers are facing into increasing headwinds in 2015 as global supply levels tick upwards as a result of a cooling Chinese economy. Chinese exporters are increasingly targeting the Taiwan market, forcing local producers to reduce prices. Meanwhile, Taiwan's own steel export sector finds itself battling against the increasingly protectionist stances of governments in Europe and North America.

While production levels have trended upwards over the past few years, having contracted in 2012, the rate of growth appears to be slowing as local producers come under increasing supply pressure as Chinese steelmakers ramp up exports in an effort to counteract slowing domestic demand. Chinese steel exports to Taiwan were estimated to have increased by more than 400% y-o-y in September 2014, according to analysis from Bloomberg....

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Oil & Gas

Taiwan Oil & Gas

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BMI View:   Taiwan is almost entirely dependent on imports to meet energy demand and is likely to stay in this state for the foreseeable future. A growing appetite for imported gas has created a need for fresh liquef ied natural gas (LNG) supplies, though a dramatic increase in LNG demand will be capped by limited LNG import capacity.

Headline Forecasts (Taiwan 2012-2018)
  2012e 2013e 2014f 2015f ...

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Petrochemicals

Taiwan Petrochemicals

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BMI's latest Taiwan Petrochemicals Report foresees a worrying trend for Taiwanese petrochemicals producers to move investment in basic chemicals to mainland China and South East Asia. Unless Taiwan can diversify and specialise to add value to the olefins production it currently possesses, the industry is likely to fall behind and lose its competitive edge.

The domestic petrochemicals market was depressed in 2013 and was set for another year of poor market dynamics, with broader economic trends remaining unsupportive. In the first 11 months of 2013, the chemicals products index grew 2.4% y-o-y, but rubber declined 2.5% and plastic fell 1.1%. The trend reflected the poor state of manufacturing, particularly in motor vehicles and parts (down 3.6%), which represent a significant part of the petrochemicals market.

There was nevertheless some expansion in 2013, with CPC bringing...

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Pharmaceuticals & Healthcare

Taiwan Pharmaceuticals & Healthcare

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BMI View:   Taiwan is one of the most attractive and stable prospects in the region for pharmaceutical and healthcare investment, but i s not without flaws. Weaknesses in the country's regulatory regime and drug pricing concerns will continue to deter multinational interest over our forecast period. While our forecasts going into 2015 are unchanged from the previous quarter, BMI believes that Taiwan's export market is poised to benefit greatly from its advantageous position in API manufacturing, and the high regard for Taiwanese   private healthcare services in the region.

Headline Expenditure Projections

  • ...

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Power

Taiwan Power

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BMI View: Heavily dependent on imports, Taiwan's power market is dominated by thermal sources, with coal, gas, and to a lesser extent, oil-fired power stations generating the majority of energy used. While Taiwan's fourth nuclear plant is almost operationally ready, growing public distrust threatens to stall the start up of this facility even as the first two nuclear plants age and need to undergo maintenance. Moreover, political and economic pressures have restricted Taipowe r, the state utility from raising tariffs, leaving the company stuck in the red. Despite the Taiwan government's ambitious renewable energy goals to 2025, slow progress suggests that renewables are unlikely to reach the target of a 16% ...

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Real Estate

Taiwan Real Estate

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BMI View:  Growth in Taiwan ' s commercial real estate sector is being undermined by the economic slowdown in China and its subsequent impact on trade volumes and domestic growth. That said, the sector offers significant long-term opportunities in terms of a liberali s ing investment climate, improving Sino-Taiwan relations and a diversifying export market.

Taiwan boasts a well developed commercial real estate sector with the island's status as a regional trade and financial hub supporting continued demand from international business and investors. A wealthy local demographic and growing visitor numbers are also providing increased opportunities for retail developers across the country as foreign brands flock...

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Renewables

Taiwan Renewables

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BMI View : We are currently maintaining our forecasts for limited growth of around 4% per year in Taiwan's renewable energy sector, as a lack of progress on major projects and limited legislative development is hindering the realisation of ambitious go vernment green energy targets. Nuclear and thermal energy are expect ed to continue to dominate Taiwan's energy mix , while biomass and wind power will lead the way in terms of renewables.  

Biomass and waste generation accounts for around 75% of total non-hydropower renewable energy generation, making it the most well-established green energy source in Taiwan. This percentage will decrease throughout our forecast period to 2023, as biomass reaches capacity...

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Shipping

Taiwan Shipping

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Subdued Recovery Still On Track

Our outlook for Taiwan's economy has not changed substantially since our last quarterly report. Then, on the back of slightly stronger fourth-quarter 2013 data, we edged up our growth forecast for 2014 from 3.0% to 3.1%. Now, on the back of slightly weaker first-quarter 2014 data, we are dropping back again to a 3.0% forecast for the year as a whole. Essentially, we believe private consumption and exports are easing back a little while investors remain frustrated by difficulties in securing land and labour, which have led to the stalling of a number of projects. The recovery in the US and Europe remains a clear positive for the outward-looking island economy, but this is somewhat offset by the slowdown in its main trade partner, mainland China. We expect GDP growth to accelerate to 4.1% in 2015. Trend growth over the medium term to 2018 will be 3.9% per annum.

...

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Telecommunications

Taiwan Telecommunications

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BMI View : The Taiwanese telecom market is among the most mature in the region, with a mobile penetration of 126.8% in 2013 and with postpaid making up 84.7% of the market. The Taiwanese mobile market looks exciting in 2014 as six operators have obtained their 4G licences and 4G services have been introduced . However, operators face a short-term ARPU squeeze from the regulators , who have imposed compulsory cuts to mobile termination rates and requirements to provide free peering between 2013 and 2016. That said, the...

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Tourism

Taiwan Tourism

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BMI View: The Taiwan tourism report examines a range of key indicators in this substantial Asia Pacific market. Benefiting from proximity to key regional markets including mainland China, Hong Kong and Japan, Taiwan is expected to see healthy increases in inbound tourism throughout our forecast period. At the same time , domestic economic growth will provide a boost to the outbound travel market. As inbound and outbound travel increases , we expect industry value and tourism- related expenditure to see substantial increases.

Taiwan is a popular and well-established shopping tourism destination in the Asia Pacific region and receives a substantial volume of visitors from mainland China, which is the country's biggest source of tourism arrivals. Over the...

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Water

Taiwan Water

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BMI View:   While consumption is set to remain close to stagnant over the medium term, per capita consumption of water in Taiwan remains higher than most regional and global peers. Taiwanese citizens consume about 265 litres of water per person per day, higher than the United States and most European countries. There are also continuing concerns about water purity. This high per capita consumption places an inordinate amount of pressure on Taiwan's household supply infrastructure.

Taiwan is beginning to develop its own water sector expertise, and is expanding both its domestic water infrastructure sector, and water management and utilities industry. However, in spite of the strong growth in domestic companies, we believe that there is still a great deal of opportunity for outside companies and investors in both the infrastructure and management areas. Evidence...

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