Taiwan and the mainland are to sign a crucial agreement tomorrow to protect the investments of mainland-based Taiwanese businessmen.
The cross-strait investment-protection pact, long-sought by Taiwanese business people, will likely be inked during the eighth round of high-level talks set to begin in Taipei on Wednesday.
Chiang Pin-kung, chairman of the Straits Exchange Foundation (SEF), and his mainland counterpart Chen Yunlin of the Association for Relations Across the Taiwan Strait (Arats), will represent the two sides in signing the agreement - one of two expected to be penned in the latest round of talks, which have been held about every six months, since June 2008.
The two organisations are the leading bodies representing their respective governments in the talks and other dealings.
Senior officials plan to finalise terms of the investment-protection pact and the customs co-operation pact on Wednesday, followed by their signings the next day, according to SEF.
The investment protection pact - applicable to businesspeople, their dependents and Taiwanese colleagues on the mainland - is considered the most important accord since the two sides signed the Economic Co-operation Framework Agreement (ECFA) in June 2010. The ECFA is a trade pact that reduces tariffs and increases market access. Taiwanese businesspeople are estimated to have poured an estimated US$300 billion in investment into the mainland in the past 20 years.
Chiang and Chen were originally set to meet in June for the talks, but that round had to be postponed until now, as the two sides failed to sort out differences over investment disputes between Taiwanese businesspeople and their mainland counterparts.
Taiwan started negotiating the investment pact with the mainland six months after the ECFA took effect in September 2010, in a bid to ensure the rights of Taiwanese businesspeople. But the two sides have failed to reach any such agreement in the last two rounds of talks.
This pact would not only provide a system to promote and protect investments by businesspeople from the two sides, it will also provide a better investment environment and rights protection to mainland-based Taiwanese businesspeople.
Taiwanese firms have long complained about the lack of a formal mechanism to settle business disputes on the mainland.
Although the mainland has a law helping protect the rights of Taiwanese businesspeople, the law is often not adequate enough to address issues, including business disputes leading to the seizure of either shares or the properties of an invested operation by the mainland partner of the Taiwanese firm.
A number of high-profile Taiwanese firms recently became involved in disputes with their mainland partners - the latest case involving the Far Eastern Group, which operates the Pacific Sogo Department Store in Taiwan and on the mainland.
During a news conference in Taipei last month, Far Eastern blasted its mainland partners in department store ventures in the cities of Chengdu and Dalian for 'interrupting operations by cutting off electricity and arbitrarily multiplying the rent five-fold. And it said that when it sought help from local governments, they refused to interfere.
'As there is no law in China that protects Taiwanese business interests, businesses frequently fall prey to Chinese partners who violate the spirit of the contract, taking what they want by force,' Pacific Sogo chairwoman Sophia Huang said in Taipei.
In a separate incident also last month, Shin Kong Mitsukoshi - a joint venture set up by Taiwan's Shin Kong Group and Japan's Isetan Mitsukoshi Holdings - sold most of its shares in a half-owned joint investment in Beijing - Shin Kong Place - to its mainland partner, Beijing Hualian Group. A serious business dispute between the Taiwanese firm and its mainland partner in 2007 was seen as the major catalyst behind Shin Kong Group trying to sever its management ties in the investment.
Wu Shin-da, general manager of Shin Kong Mitsukoshi's Beijing operations, was detained by mainland police in late August that year for 'economic crimes' that also implicated his Taiwanese staff.
Police nabbed him as he was about to board a plane to return to Taiwan. According to Taiwanese media, Beijing Hualian fired more than 10 Taiwanese executives of Shin Kong Place, alleging that they had accepted bribes and had a conflict of interest because of a separate construction project.
After the detention was reported, and upon the intervention of the Taiwan Affairs Office of the mainland's State Council, Wu was released and went back to Taiwan early the next month.
On September 12 that year, Shin Kong Mitsukoshi and Beijing Hualian jointly issued a statement saying the dispute stemmed from differences in operating and management principles, and Beijing Hualian reckoned the incident was caused by a misunderstanding and apologised.
'Doing business in China is risky, as not only do some mainland partners attempt to swallow up the mainland operations, but some local authorities are also backing those partners,' said William Kao, president of the Victims of Investment in China Association.
On Friday, Lai Shin-yuan, chairwoman of the Mainland Affairs Council of Taiwan, which charts Taiwan's policy towards the mainland, said that with the investment protection pact, Taiwanese businesspeople would be able to enjoy greater legal protection and rights in their investment operations on the mainland, particularly those who have been vulnerable in disputes with mainland firms and governing authorities, and who could seek arbitration only in line with the mainland's judicial procedures.
With the pact, she said, Taiwan businesspeople will be able to seek arbitration in either Taiwan or a third country agreed upon at the time the contract is signed.
'These include person-to-person disputes, between private Taiwanese and mainland firms,' she said, adding that, in discussing the agreement, the Taiwanese side specifically called for the inclusion of the person-to-person clause, as 65 per cent of business disputes between Taiwan and the mainland fall into this category.
Also included in the agreement for dispute settlements were commercial disputes between private businesses and governments, and government-to-government disputes, Lai said. She said the new terms also included notifying family members within 24 hours of the whereabouts of any Taiwanese businesspeople who are arrested because of business disputes.
However, in a news conference in Taipei yesterday, the SEF's Chiang said the pact 'is not a wonder drug that can settle all commercial disputes'. He advised those who plan to invest on the mainland to be cautious in choosing their mainland partners and to fully understand investment regulations and conditions on the mainland.
Taiwanese Vice-Economics Minister Bill Cho said the pact was expected to take effect by year's end, after being ratified in the legislature.
But Cho pointed out that the agreement would not open Taiwan up to more mainland-based investments, as those investments were tightly controlled by the Taiwanese government.
Despite the rapid growth of economic and business exchanges since the mainland-friendly Ma Ying-jeou became president in 2008 and adopted a policy of engaging Beijing, Taiwan still controls the pace of mainland investments on the island, based on competition and security concerns.
There have been concerns in Taiwan that the pact will lead to a large influx of mainland investments that could seriously impact local businesses, but Cho said the government will maintain tight control and will assess the impact of mainland investments on the local economy, industries and society before allowing in more such investments.
'With Taiwanese firms able to invest in almost all businesses on the mainland, the mainland side has repeatedly complained that it is unfair to them for the Taiwanese government to restrict mainland investments on the island,' said one of the Taiwanese negotiators working on the new pact.
The official, who declined to be identified, added that this was among the major reasons why the pact signing had been delayed.
Doing business in China is risky... some mainland partners attempt to swallow up the operations William Kao, Taiwanese victims group
The amount, in US dollars, it is estimated the Taiwanese business community invested on the mainland in the past 20 years, as of 2010