TAIPEI--Japan and Taiwan are set to sign a bilateral investment agreement on Sept. 22, a development that both sides hope will pave the way for an economic partnership agreement at some point.
As Japan and Taiwan have no formal diplomatic relations, the Interchange Association Japan and Taiwan's Association of East Asian Relations are acting as contact organizations.
A signing ceremony is expected to be held when IAJ chairman Mitsuo Ohashi visits Taiwan this week. It will be his first visit to Taiwan since he took office.
The agreement, which is intended to promote mutual corporate investment, is not limited to investment protection, which envisions responses to disputes over investment. It also advocates the promotion and liberalization of investment.
It features provisions on "national treatment," under which Japanese enterprises that have branches in Taiwan are exempted from regulations on foreign affiliates and are entitled to the same treatment as local enterprises--and vice versa for Taiwanese enterprises that have branches in Japan.
Japan was the largest exporter ($51.9 billion) and the largest provider of direct investment ($400 million) to Taiwan in 2010, according to Taipei's statistics.
By the same token, Taiwanese enterprises use high-quality raw material and core parts provided by Japanese enterprises.
The Japanese Chamber of Commerce and Industry Taipei, an association of Japanese enterprises in Taiwan, had pushed for early conclusion of an investment agreement, saying it would give companies more freedom in deciding where to set up production bases.
The administration of President Ma Ying-jeou has concentrated its efforts on improving relations with mainland China.
It has already concluded an Economic Cooperation Framework Agreement with Beijing, which ignited opposition criticism that the administration was too focused on China.
In that context, the agreement reached with Japan could be touted as a significant diplomatic achievement and may help the ruling party in the presidential election next January.
The Ma administration hopes to add tariff reduction provisions to the bilateral investment agreement. This would allow it to be expanded into an economic partnership agreement or a free trade agreement in the future.
For some time, China and Taiwan have been holding negotiations on an investment protection agreement. Both the Japanese and Taiwanese sides initially opted to postpone the signing of a Japan-Taiwan agreement out of consideration for China.
Instead, it is going ahead because the negotiations with China have become bogged down.
On Sept. 22, Japan and Taiwan also plan to sign an aviation agreement, which will relax restrictions on opening new flight routes.
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