Abstract
With Taiwan's export-focused economy reeling from a collapse in global demand the authorities are
investing heavily in infrastructure projects as a way of boosting consumption. In July 2009, the Council
for Economic Planning and Development has approved TWD313.2bn (US$9.6bn) for major public works
projects, which will create an estimated 167,000 jobs. The funding will predominately be used to
construct transport infrastructure such as roads and railways. However, BMI does not believe that the
benefits of this investment will kick in until 2010 at the earliest. As a result in our Q409 Taiwan
Infrastructure Report, we are maintaining our forecast of a 15.33% y-o-y contraction in the real
construction industry value in 2009, to reach a nominal value of TWD228bn (US$6.95bn).
Meanwhile, in July 2009, as reported by the Taiwan Economic News, the Taiwanese cabinet announced a
budget of TWD42bn (US$1.28bn) for six emerging industries for 2010. The industries in question are
green energy, tourism, healthcare, biotechnology, creative culture and agriculture. Green energy will
receive the largest tranche of TWD9.471bn (US$288.8mn). This funding will be used for 181 subprojects
divided into a further seven segments wind-power, solar energy, LED lighting, hydrogen-based
energy, biofuel, electric vehicles and energy resource information. Solar energy will get the lion's share
of investment with 50 projects receiving a total of TWD4.192bn (US$127.8mn).
Taiwan is keen to develop its renewable energy sector, and in May 2009 Taiwan Power Co. (Taipower)
said that it will build the country's largest solar power plant. The state utility said the proposed facility
would begin commercial operation at the end of 2010. The company' s announcement came after Minister
of Economic Affairs Yiin Chii-ming said the government planned to implement several measures to help
reduce power consumption and carbon dioxide emissions in the nation. Apart from Taipower, stateowned
oil refiner CPC said it was also interested in diversifying into the solar photovoltaic industry.
Meanwhile, in July 2009 Taiwan inaugurated two more direct flight routes to China, a signal of closer
economic and political ties between the countries. Of the new routes, the first links Taiwan with the
Chinese province of Guangdong while the other runs between Taiwan and Northern China. Taiwan only
began direct charter flights to China in July 2009, due to a thawing in the political tensions. Considering
the potential for air travel between the two countries, both for passengers and freight, BMI believes that
improving bilateral relations could result in an expansion in airport infrastructure in Taiwan. China and
Taiwan ended their 50-year trade ban in 2000. Taiwan is now keen to agree a cross-Straight trade accord
with China which could add up to 1.7% to the island nations GDP.
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