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.

Taiwan Country Risk

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Core Views

  • We are downgrading Taiwan's 2016 real GDP forecast slightly to 0.7% from 0.9% previously as continued export headwinds due to the slowdown in China and a host of other domestic factors continue to weigh. However, accommodative monetary policy will lend a degree of support, limiting downside potential.

  • Taiwan's rejection of the Permanent Court of Arbitration's July 12 ruling on the Spratlys is a step back in the island's efforts to increase engagement with the international community by abiding by international rules. The many similarities in Taiwan's South China Sea position and that of the mainland could also further complicate already challenging cross-Strait ties while potentially undermining Taiwan's Southbound policy as its refusal to comply with the ruling leads to strained relations with Southeast Asia.


Taiwan Operational Risk Coverage (9)

Taiwan Operational Risk

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BMI View: Trade and investment risks are low in Taiwan owing to the country's open economy, relatively few fiscal and trade barriers and minimal red tape. While investment inflows recovered after the financial crisis and are expected to continue growing in the longer term, the DPP's victory in the January 2016 elections will hamper investor confidence in the short term. In addition, the country's dependence on China increases risks for businesses. For these reasons, the country receives an overall score of 74.2 out of 100 for Trade and Investment Risk, putting it in fourth position out of 35 countries in Asia.

Few Fiscal Barriers And Red Tape Attracts Investors
Taiwan & Regional Average - Trade & Investment...

Taiwan Crime & Security

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BMI View: Taiwan's secure operating environment, in which workers and businesses enjoy a low risk of being targeted by violent criminal activity or terrorism, is a major draw for foreign investors. Already low crime rates are continuing to fall and the lack of any marginalised minority groups, combined with Taiwan's limited appeal to international extremist organisations, means that terrorism is almost non-existent. While improving bilateral relations with China do not prohibit military invasion, the threat is mitigated by economic integration and military protection offered by the US. Businesses and investors should take note of T...

Taiwan Labour Market

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BMI View: Taiwan boasts a large, highly skilled and urbanised labour force which is generally suitable for meeting the recruitment needs of businesses. Investors can expect a labour pool comprising a diverse range of highly skilled workers, and will benefit from flexible labour regulations, competitive employment costs and minimal unionisation. Nevertheless, Taiwan is facing a wholesale demographic shift which is resulting in a shrinking labour force and greater upward pressure on wages - factors which will reduce the county's appeal over the longer term. At present, Taiwan's attractive...

Taiwan Logistics

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BMI View: Overall, there are very few risks posed by Taiwan's transport network to potential investors, making the country an attractive investment destination. Well-located on key east-to-west trading routes, Taiwan has an extensive road and rail system, ensuring access to all parts of the island, as well as extensive shipping and air freight capacity, ensuring imports and exports are quick and cost-effective. Driven by particularly high scores for costs, connectivity and quality of transport, Taiwan has a BMI Logistics Risk...

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...

Taiwan Industry Coverage (19)

Taiwan Autos

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BMI View: A slowdown in growth in the domestic economy coupled with a decline in Taiwan exports due to a slowing demand from China will drag on total vehicle sales in 2016. The ageing population will put downward pressure of passenger vehicle sales in 2016 keeping vehicle sales below its peak level of 446,345 units.

Slwoing Internal And External Demand Dragging On Vehicle Sales
Total Vehicle Sales (Units & % chg y-o-y)
f = BMI forecast. Source:TTVMA, BMI

Key Views...

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

Taiwan Consumer Electronics

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BMI View: The era of booming consumer electronics sales has passed in Taiwan, where high penetration rates across the spectrum of devices means that market performance is set to rely on replacement sales throughout the medium term. However, we expect an improvement over the contraction in 2014-15, as the market returns to growth in 2016 and accelerates slightly throughout the medium term. A stronger economic environment is a positive sign for consumer sentiment and purchasing power, while device trends are also expected to be less hostile after key product categories were affected by a dip in volumes in 2014-15, derived from a...

Taiwan Defence & Security

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BMI View: With President-elect Tsai Ing-wen's independence-leaning administration taking office in May 2016, relations with mainland China have cooled. In comparison to China's People's Liberation Army, Taiwan's military is small in size, and lacks technologically advanced equipment. Compounded by our view that the US is increasingly unlikely to come to Taiwan's aid in the event of military conflict with the mainland, domestic demand for modern equipment is significant and rising, particularly for products such as advanced multi-role combat aircraft, submarines and air defence systems. Taiwan's armed forces are being restructured and professionalised, which eventually will mean that a greater share of the defence budget can be directed towards R&D and new procurement, rather than personnel costs. The...

Taiwan Food & Drink

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BMI View: We forecast positive growth for Taiwan's food and drink industry in 2016, primarily led by the MGR and drink industry. The strong competiveness in the country's MGR sector will boost sales as hypermarkets as well as convenience stores benefit from increased consumer spending. Taiwan's whiskey industry will boast from increased growth in 2016 as demand increases due to rising western culture. The food industry will grow modestly in the same period as food regulator FDA looks to tighten food standards on imported products.

Headline Industry Data

  • Food consumption (local currency) growth (y-o-y) in 2015: 2.2% compound annual growth rate (CAGR) 2014 to 2019 (local currency): +2.8%.

  • Per capita food consumption (local currency) growth (y-o-y) in 2015: 2.0...

Taiwan Freight Transport

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BMI View: Taiwan's freight transport sector will continue to be affected by the slowdown in the Chinese economy in 2016. Taiwanese exports will feel the headwinds from China as well as the relative strength of the TWD compared to the KRW. Air freight will continue its growth on a more moderate level over the short term, before picking up slightly in 2017/2018, while road and rail will both grow at a faster rate over the medium term.

Taiwan's economy contracted by 1.0% in Q315 compared to the 0.5% expansion registered in the previous quarter. Ongoing weakness in the Chinese economy amid increasing uncertainty in the domestic political situation will continue to weight on Taiwan's economic growth. As such, we have downgraded our 2015 and 2016 real GDP forecasts to 1.0% and 1.9% respectively. GDP growth for 2016 was previously...

Taiwan Infrastructure

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BMI View: Taiwan's construction sector is unlikely to see a significant pick up despite the decline in house prices, which should be positive for sales. Instead, still-high prices will continue to weigh on the sector's outlook. However, expansionary government policies, particularly in the transport sector, will lend a degree of support.

Latest Updates & Industry Developments

  • We maintain our forecast for Taiwan's construction industry to grow by 1.8% y-o-y in 2016 as the lifting of housing restrictions by the central bank has a gradual impact on house prices.

  • However, housing transaction volumes are unlikely to pick up significantly despite the lower prices as the economy continues to feel the impact of the ongoing economic slowdown in China while prices remain considerably elevated....

Taiwan Insurance

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BMI View : We forecast further expansion in Taiwan's broad and well-developed insurance market over the next few years as rising household incomes and life expectancies continue to drive demand for life insurance and other lines. In the non-life market we see the health insurance sector continuing to grow at a fast pace, owing in large part to government efforts to promote investment in private health insurance. This trajectory should provide significant opportunities for investors and we note an increase in merger and acquisition activity in recent months. However, we also caution that a slowing Chinese economy poses a long-term threat to demand across the industry.

Headline Insurance Forecasts (Taiwan 2013-2020)

Taiwan Medical Devices

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BMI View: With a growing elderly population and one of Asia's best developed healthcare systems, Taiwan remains a lucrative market despite barriers to market entry, ranking among the top 25 in the world in value terms. The market will see moderate growth over the next five years and will remain primarily dependent on imports. Pricing pressures for manufacturers will increase due to cost containment measures including expansion of the country's diagnosis-related group payment system.

Projected Medical Device Market, 2015-2020
Total (USDmn) Per Capita (USD) Total (Local...

Taiwan Oil & Gas

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BMI View: Despite a lower oil price environment, rising energy efficiency and import constraints will prevent weaker prices from increasing oil and gas consumption. We also note Taiwan's shares in the regional refined fuels exports market will come under growing competition from refining capacity expansions in the region's emerging economies, which will moderate their need for imports in the medium to long term.

Headline Forecasts (Taiwan 2013-2019)
2013 2014e ...

Taiwan Petrochemicals

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There is 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 Taiwanese petrochemicals industry's recovery in 2015 began to tail off as the industry was affected by the slowdown in China. In the first 10 months of 2015, the chemicals products index grew 0.4% y-o-y and rubber grew 0.6%, but plastic declined 3.7% with the sector reversing the gains it made in the previous year. The trend reflected a 0.6% decline in manufacturing, caused by falling orders from mainland China as well as the effects of water restrictions for producers in response to the drought situation.

Taiwan's reliance on naphtha streams, derived from refining imported crude, puts it...

Taiwan Pharmaceuticals & Healthcare

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BMI View: The potential the Taiwanese pharmaceutical sector holds for overall economic growth will see continued investment by the government to support local drugmakers. This will gain in importance as commercial opportunities in China's healthcare sector remain less affected by the overall slowdown in the economy. In addition, Taiwan's biomedical institutes and partnerships with multinational pharmaceutical firms will support domestic drugmakers in moving outward and up the value chain.

Headline Expenditure Projections

  • Pharmaceuticals: TWD167.7bn (USD5.5bn) in 2014 to TWD175.1bn (USD5.5bn) in 2015; +4.4% in local currency terms and -0.1% in US dollar terms.

  • ...

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 Taipower, 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 renewables are unlikely to reach the target ...

Taiwan Real Estate

BMI View:

BMI View: The brief Taiwan recession - ending in Q216 and resulting in a trade volumes slump for the export-orientated nation - sent shockwaves through the economy, affecting foreign direct investment flows and seeing domestic demand dwindle. As a result, the commercial real estate industry has been rather dormant over the course of 2016, with only eight transactions recorded in the last six months. A return to growth for Taiwan will bode well for the commercial real estate in the long term; however, prices are expected to fall over the remainder of 2016 and pose risks to the industry in the short term.

The recent slowdown in Chinese economic growth has had a significant influence on Taiwan's export-driven economy, considering that China is Taiwan's largest export market, accounting for approximately 40% of total exports. A decline in demand from China saw Taiwanese exports...

Taiwan Renewables

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BMI View: Taiwan's commitment to phase out nuclear energy bodes well for non-hydro renewables sector, which is set to become an attractive alternative, helping to plug power supply gaps, mitigate the rise in expensive fossil fuels imports, as well as ensure greater energy security. Frequent changes to renewables policy and low liberalisation levels in the power industry have dampened investor interest in Taiwan's non-hydro renewables sector over the recent years. These issues will remain key to realising the sector's...

Taiwan Shipping

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BMI View: We anticipate Taiwan's main ports to register steady year-on-year (y-o-y) growth in 2016 with the port of Keelung leading the way in annual growth terms (3.1% and 3.5% for tonnage and container gains). We have downgraded our 2015 and 2016 real GDP forecasts to 1.0% and 1.9% (respectively) from 1.7% and 2.5% previously, to reflect the impact of the decline in export growth, as well as increased political uncertainty in the country.

Taiwan's economy contracted by 1.0% y-o-y in Q3 2015 compared to the 0.5% expansion registered in the previous quarter. In seasonally adjusted annualised quarter-on-quarter (q-o-q) terms, the...

Taiwan Telecommunications

BMI View:

BMI View : As aggressive bidding for spare 4G spectrum gathered momentum in late 2015, it became clear that there is a surfeit of competition in Taiwan's saturated mobile market. Pressure for operators to consolidate will intensify in 2016, but regulatory resistance is expected; this would be damaging to an industry that needs to address mounting debt ahead of the adoption of 5G early in the next decade and growing demand for 'everything everywhere' services and solutions.

4G Supplanting 2G And 3G Networks
Taiwan Mobile Forecasts

Taiwan Tourism

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BMI View: Taiwan's tourism market is growing rapidly, bolstered by growing arrivals from major market China and increasing regional and global air travel connections. The domestic tourism market is well-established and along with growing numbers of international visitors this supports healthy occupancy rates and significant levels of tourism related spending. As the investment environment continues to improve, we expect to see further development in the hotel sector, particularly in terms of the quality mid-range and luxury hotel sectors.

Key Forecasts (Taiwan 2012-2019)
Indicator 2012e ...

Taiwan Water

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BMI View: Given that the government will be a key driver of infrastructure project implementation as well as financing over the coming years, the uncertain political outlook for Taiwan in light of the presidential elections coming up in 2016 is a key risk to our outlook for the current infrastructure improvements in the pipeline for the water sector. Moreover, neither the ruling Kuomintang party nor the opposition Democratic Progressive Party has a concrete China policy which poses particularly significant risks with regards to potential China water imports. Although agreements have now been signed, any change to pro-China political sentiment could result in the delay or even cancellation of the proposed pipeline, and this is a significant downside risk to our water consumption outlook.

Water Forecast Highlights

Latest Taiwan Articles

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  • The increasingly important economic relationship between Asia and Sub-...

  • As China endeavours to revamp its industrial structure, it will become...


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