Presented for “The 12th Taiwan-Peru Joint Business Councils Meeting” Organized by Chinese International Economic Cooperation Association (CIECA) Date: November 12, 2014 (Wednesday) 09:00 Venue: 2F, Conference Room #5, TWTC Exhibition Hall (No.5, Hsin-Yi Rd., Sec 5, Taipei, Taiwan) Presented by Dr. Darson Chiu Director General of Chinese Taipei Pacific Economic Cooperation Committee (CTPECC) & Deputy Director, Macroeconomic Forecasting Center, Taiwan Institute of Economic Research (TIER)

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+ Size of economy (GDP): US$ billion. + Income per capita: US$ 21, Income per capita: US$ 41,885 (PPP basis). + Inflation rate: 0.72% (September, 2014). + Unemployment: 3.96% (September, 2014). + Foreign exchange reserve: US$ billion as of September Government GDP growth forecasts: 3.4% (2014, very likely to be adjusted upward later) and 3.5% (2015).

+ Exports commodities: electronics, flat panels, machinery; metals; textiles, plastics, chemicals; optical, photographic, measuring, and medical instruments. + Major export destinations: China 26.2%, ASEAN 18.8%, Hong Kong 13.3%, US 11%, Europe 9.3%, Japan 6.4%. + Imports commodities: electronics, machinery, crude petroleum, precision instruments, organic chemicals, metals. + Major import origins: China 17.2%, Japan 15.1%, ASEAN 12.3%, Europe 11.1%, US 9.7%, 0.6%. – data as of January-September, 2014.

%/GDP Private consumption Government consumption Gross fixed investment Exports of Goods & Services Imports of Goods & Services Degree of reliance on trade Taiwan59.7%11.9%19.1%72.9%63.6%136.5 Peru63.0%10.6%27.6%23.1%24.3% The economy of Taiwan is more trade oriented. + By comparison, the economy of Peru is more internal demand oriented.

+ Of its supply value chains, Taiwan has been challenged by the down streams by adopting “supply chains localization” policy. + Taiwan is a trade oriented economy, but does not own sufficient free trade agreement coverage. Therefore, it is crucial to join mega REI such as TPP. And Peru is a founding member of TPP. + Growth of investment has been slow. ChinaKoreaJapanTaiwan Degree of reliance on trade 64%98%30%136.5% FTA coverage 29.79%36.81%18.93%9.69%

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+ Higher wage: Labor cost in Taiwan on average is relatively higher than neighboring economies such as mainland China and Southeast Asia, as Taiwan’s annual income per capita stands at US$ 21,598 at nominal term or US$ 41,885 at PPP basis. + Outsourcing: More than 50% of Taiwan’s exporting items have been produced overseas, ex: 90.59% of information & communication products, 67.71% of electrical products have been produced overseas from Q1 to Q3 of Smaller domestic market: Taiwan’s domestic demand is relatively lower than neighboring economies, and Taiwan’s market potential is limited with a population of 23 millions. + However,……………..

+ According to the "2014 Index of Economic Freedom”, Taiwan was ranked 17th among the 185 countries. + The index comprises categories including property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom and financial freedom. Source: Department of Investment Services, Ministry of Economic Affairs, R.O.C.

+ The ratio of government tax revenue to gross national product is lower than 14%, which is lower than Japan, Korea, and even most of the developed countries. + In recent years, Taiwan has launched the taxation reforms to lower tax rate and simplify the taxation system. + Beginning from 2010, the tax rate for profit-seeking enterprise income tax has been reduced to 17% from 20%. + Taiwan has signed with many countries the agreements for avoidance of double taxation such as comprehensive income tax treaties with 25 countries, and 14 treaties on international transportation income tax agreements. Source: Department of Investment Services, Ministry of Economic Affairs, R.O.C.

+ Low inflation rate: 0.72% in September, Actually, Taiwan’s inflation rate has hardly gone beyond 2.0%. + Steady exchange rate: The CBC has been keen on stabilizing exchange rate to minimize impacts on exports and imports. With sufficient foreign exchange reserve, CBC has no problem meeting its objective. + There are many more. Visit Invest in Taiwan website for further details. Source: Department of Investment Services, Ministry of Economic Affairs, R.O.C.