VZCZCXRO2026
RR RUEHGH
DE RUEHIN #0965/01 1210543
ZNR UUUUU ZZH
R 010543Z MAY 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 5079
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUCPDOC/USDOC WASHDC
RUEHBK/AMEMBASSY BANGKOK 3669
RUEHBJ/AMEMBASSY BEIJING 6698
RUEHUL/AMEMBASSY SEOUL 8606
RUEHGP/AMEMBASSY SINGAPORE 6887
RUEHKO/AMEMBASSY TOKYO 8719
RUEHML/AMEMBASSY MANILA 0048
RUEHJA/AMEMBASSY JAKARTA 4073
RUEHKL/AMEMBASSY KUALA LUMPUR 3729
RUEHHI/AMEMBASSY HANOI 3307
RUEHBY/AMEMBASSY CANBERRA 4507
RUEHWL/AMEMBASSY WELLINGTON 1772
RUEHHK/AMCONSUL HONG KONG 7946
RUEHGH/AMCONSUL SHANGHAI 1029
RUEHGZ/AMCONSUL GUANGZHOU 0205

UNCLAS SECTION 01 OF 03 TAIPEI 000965 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS USTR 
STATE FOR EAP/RSP/TC, EAP/EP 
USTR FOR ALTBACH and Stratford 
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT 
TREASURY FOR OASIA/LMOGHTADER 
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF 
GOVERNORS, SAN FRANCISCO FRB/TERESA CURRAN, AND NEW YORK FRB MARI 
BOLIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taipei Economic Brief for April 2007 
 
 
¶1.  This cable summarizes selected April 2007 economic events in 
Taiwan: 
 
--Domestic Demand to Spur Economic Growth 
--Trade Surplus Doubles 
--Illegal Cross-Strait Remittance Operations Closed 
--ProMOS to Use 0.18-Micron Technology in China 
--Personal Bankruptcy Law Concerns Bankers 
--Medical Treatment Tourism 
--Select Service Partner to Enter Taiwan 
--Ambitious Wind Power Program 
 
Domestic Demand to Spur Economic Growth 
--------------------------------------- 
 
¶2.  On April 19, the Chunghua Institution for Economic Research 
(CIER) estimated Taiwan's 2007 real economic growth will slow to 
4.17% from 4.6% in 2006 due mainly to weakening global demand for 
Taiwan products.  The CIER said that the main force behind Taiwan's 
2007 economic growth will shift to domestic demand.  Expansion of 
domestic demand should contribute 57% of Taiwan's real GDP growth in 
2007, up from 25% in 2006.  The CIER predicted that private 
consumption growth in 2007 will increase to 2.8% from 1.5% in 2006. 
Meanwhile, domestic investment will reverse from a decline of 0.2% 
in 2006 to growth of 1.6% in 2007. 
 
¶3.  Prices remained stable with the consumer price index in Q1 
reporting a y-o-y 1% rise although import costs of grains and metals 
increased sharply.  The average unemployment rate in Q1 of 2007 
declined to 3.84% from 3.86% a year ago. 
 
Trade Surplus Doubles 
--------------------- 
 
¶4.  Taiwan's exports in Q1 grew 8.5% y-o-y to US$54.5 billion, while 
its imports rose 3% to US$48.2 billion, causing Taiwan's trade 
surplus in Q1 to surge to US$6.3 billion; double a year earlier. 
However, Taiwan's trade surplus with the United States in Q1 fell 
28% to US$1.6 billion.  A sharp rise in grain prices, inter alia, 
drove up Taiwan's imports from the United States by 13%, while 
increased offshore production of orders caused Taiwan's shipments to 
the United States to level off.  A decline in international oil 
prices from over US$70 per barrel in mid-2006 to US$50 in early 2007 
caused Taiwan's imports from Saudi Arabia and Kuwait to fall 11%. 
Keen competition from China's other production input suppliers 
slowed the growth in Taiwan's exports to China to 7% in Q1 from 16% 
a year ago.  Exports to Greater China (including Hong Kong) seem to 
be leveling off, and as a share of Taiwan's total exports slipped 
slightly from 39.4% to 38.9%.  Vietnam's accession to the WTO in 
November 2006 stimulated exports to Vietnam in Q1 to grow 28% and 
made Vietnam Taiwan's sixth largest export market, up from tenth a 
year earlier. 
 
Cross-Strait Remittance Operations Closed 
----------------------------------------- 
 
¶5.  Taiwan's Ministry of Justice Investigation Bureau (MJIB) raided 
eight underground cross-Strait remittance operations at 13 locations 
across the island.  MJIB arrested fourteen individuals who were 
charged with violating Taiwan's Banking Law and Anti-Money 
Laundering Law.  They are alleged to have remitted more than NT$2.1 
billion (US$63 million) to China through illegal channels.  Several 
were PRC nationals who had obtained residency in Taiwan through 
marriages or sponsorship by relatives.  One operation had an online 
service for cross-strait e-remittances.  Taiwan's underground 
cross-Strait remittance networks are reportedly very active because 
the island maintains tight regulations on direct remittance to 
 
TAIPEI 00000965  002 OF 003 
 
 
China.  MJIB has investigated 43 cases in the last five years, 
involving remittances valued at NT$136.2 billion (US$4.1 billion). 
 
ProMOS to Use 0.18-Micron Technology in China 
--------------------------------------------- 
 
¶6.  On April 19, 2007, ProMOS Technologies Inc. became the second 
Taiwan company to receive approval to produce semiconductor chips 
with feature size of 0.18 microns in China.  Taiwan's Investment 
Commission approved Taiwan Semiconductor Manufacturing Co. (TSMC) in 
March.  Previously, Taiwan firms were limited to using less advanced 
0.25-micron technology.  TSMC will upgrade its facility near 
Shanghai, which has been operational since late 2004.  ProMOS 
expects its new US$365 million facility near Chengdu will become 
operational in 2008. 
 
Personal Bankruptcy Law Concerns Bankers 
---------------------------------------- 
 
¶7.  In early April, the Legislative Yuan (LY) Judicial Committee 
passed the first reading of the draft "Consumer Debt Resolution 
Act."  Individuals with outstanding unsecured debt below NT$12 
million (US$363,600) may apply to the court for resolution and debt 
repayment.  The bill does not require any credit counseling prior to 
a resolution or bankruptcy process.  A repayment plan can be 
approved by the court without the creditor banks' agreement.  A 
debtor may apply to the court for resolution after repaying 20% of 
his debt.  Debtors may continue to own houses.  Local and foreign 
banks are concerned the law is overly beneficial to debtors.  In 
response, the Financial Supervisory Commission, the Ministry of 
Finance, and the ruling DPP Party have expressed opposition to the 
bill. 
 
Medical Treatment Tourism 
------------------------- 
 
¶8.  Following Thailand, Singapore, and South Korea, Taiwan has 
revised visa regulations to allow "medical treatment tourism" in 
Taiwan.  A medical treatment visa will allow visa-holders to extend 
their stay beyond the current six-month limit on a case-by-case 
basis.  The Council for Economic Planning and Development (CEPD) 
said Taiwan's medical care sector offers high-quality, inexpensive 
services.  Medical costs in Taiwan are 60-80% less than in the 
United States and Europe.  Local hospitals have responded 
positively, suggesting that the Ministry of Foreign Affairs allow 
longer stays so that patients can complete a full course of 
treatment and recovery.  The CEPD will urge major international 
insurance companies to market products that will permit foreign 
nationals to receive medical treatment in Taiwan.  The first group 
of 19 patients came from Singapore on April 16 for kidney dialysis. 
 
Select Service Partner to Enter Taiwan 
-------------------------------------- 
 
¶9.  Select Service Partner (SSP) (of Scandinavia) will organize a 
joint venture with Haoyun, a local food services vendor, to provide 
food and beverage services at airports and urban areas around 
Taiwan.  SSP is the largest catering vendor for transportation hubs 
in Europe.  The new venture, called SSP Taiwan, will invest NT$100 
million (US$3 million).  Each of the two partners will contribute 
50% of the capital.  SSP Taiwan currently operates a trial food and 
beverage operation called Salon de Taipei at the Taiwan World Trade 
Center, and plans to start operations at the Taoyuan International 
Airport.  SSP believes that influx of mainland Chinese tourists 
after Taiwan lifts the ban will bring huge trade opportunities in 
the catering sector. 
 
 
TAIPEI 00000965  003 OF 003 
 
 
Ambitious Wind Power Program 
---------------------------- 
 
¶10.  On Earth Day April 22, 2007, 23 wind power generators built by 
the state-owned Taiwan Power Company (TPC) in central Taiwan began 
commercial operation.  Taiwan now has 103 operating wind power 
generators whose combined annual electricity output is estimated at 
423 million kwh.  The TPC claimed that the 103 generators will 
prevent Taiwan from releasing 250,000 tons of carbon dioxide 
emissions a year because each kwh of power turned out by a generator 
burning fossil fuel produces 0.6 kg carbon dioxide.  Taiwan will 
increase the installed capacity of wind power generators from 
168,000 kw at present to 2.16 million kw by 2010.  Wind power will 
increase its contribution from 0.45% of Taiwan's total installed 
capacity to 4.2% over the next three years. 
 
YOUNG