FOREIGN investors will be able to directly buy shares on Taiwan's stock exchange for the first time today. But the new policies have not gone far enough. This landmark initiative from Taiwan's Securities and Exchange Commission is somewhat tethered by bureaucratic and administrative checks. Unlike Hong Kong, where no restrictions exist on foreign investment in listed companies, Taiwan has traditionally imposed fairly draconian curbs on foreign investment in stocks. Previously, exposure could only be achieved through buying units in government-authorised funds. Lifting this ban is part of Taiwan's drive to enter the World Trade Organisation. The Government has the stated intention of turning Taipei into a regional financial hub, like Hong Kong. The announcement might also give Taiwan stocks a much needed fillip amid the economic downturn and political tension caused by China's threatening stance towards the island should it decide on a policy of sovereign independence. Under the terms of the lifting of the foreign ownership ban, restrictions on the amount an individual can hold and the upper limit of foreign ownership in any given stock are laid down. These should be further relaxed. The new set of administrative obstacles will do nothing to encourage foreign investors at the present juncture in relations between China and Taiwan. Taiwan's traditionally protective policies towards its stock market have probably not helped it in the row with China. If mainlanders and Chinese firms were permitted to participate in Taiwan's stock market, it might have provided the island with a more powerful body of interest in the outcome of Beijing's sabre-rattling. In China the benefits of allowing direct foreign participation in the economy were seen in creating the powerful business lobby in the United States in favour of the preferential trading status offered the mainland. Open cross-border economic relations, including trade and investment, have long benefitted Hong Kong. Encouraging such ties, whether multilateral or bilateral, promotes understanding and accommodation rather than confrontation between the parties involved. Taiwan should consider allowing Chinese companies to invest in its stock market.
