Taiwanese traders, investors to benefit from Taiwan-Panama FTA

Taipei, Dec. 12, 2003 (CENS)--The free trade agreement (FTA) between Taiwan and Panama is to be effective on January 1, 2004, which is expected to greatly help Taiwanese manufacturers tap the markets in Latin America, the Caribbean, and the United States as well.

Tong I-min, executive secretary of FTA Taskforce under the Bureau of Foreign Trade (BOFT) of the Ministry of Economic Affairs, said that Taiwan's FTA with Panama would be beneficial to the island's service industries including transportation, finance, and telecommunications. For instance, the pact will allow Taiwan's firms to invest in land transportation in Panama, which Taiwan's sea shipment can connect to reinforce the island's strength in global logistics.

To assess the market niches entailed by the pact, BOFT and the China External Trade Development (CETRA) recently held a seminar on the issue. Simon Hsing, director of Central America Trade Office under MOEA, indicated at the seminar that Panama would allow tariff-free imports of 4,181 products from Taiwan beginning next year, and Taiwan will allow duty-free imports of 6,187 products from Panama.

According to the FTA, the existing import duty on many other items will be gradually abolished within 10 years. Taiwan would then be allowed to export a total of 8,448 items to Panama free of tariff.

The final round of the U.S.-Central American Free Trade Agreement (CAFTA) talk will take place in March of 2004. If the talks fare smoothly, the five nations in the Central America, namely, Honduras, Nicaragua, Guatemala, Costa Rica, and El Salvador, will be permitted to sell 99.1% of their products to the U.S. free of duty. Panama is reportedly to sign CAFTA with the said five nations soon. With that, Taiwanese investors in Panama can export their products turned out there bot only to all the nations in Latin America but also to the U.S.

Hsing added that some free trade zones in Panama are suitable for Taiwan manufacturers to move in their production lines. Colon Free Trade Zone (CFTZ), with an area of 400 hectares, is one of them. The zone sees an average of some 250,000 visitors and buyers per year, and its annual import and transshipment value is estimated at US$10 billion. Moreover, some military bases left by the U.S. being or to be transformed into trade zones are also ideal places for investors.

Mario M.Y. Tsai, manager of CETRA's Exhibition Department and former deputy director at CETRA's office at San Pedro Sula of Honduras, pointed out that Panama's two-way trade reached US$3.78 billion last year. In the same year CFTZ registered transshipment value of US$9 billion, making Colon the second largest entrepot in the world, next only to Hong Kong.

Due to the lack of satellite plants and relatively high wages in Panama, Tsai suggested Taiwan manufacturers move the production lines of high-end or large-sized products to Panama. And such products generated there can be shipped through cheap transportation channels to other nations in Central and South Americas and to the U.S. as well. Tsai believed that Taiwanese manufacturers, adopting such a trading strategy, could avoid the competition from mainland China's low-end products there.

Currently there are 54 Taiwanese investors in Panama, with investment capital totaling US$252.36 million. Evergreen Marine Group takes a lion share of US$165.7 million of the total and the second stage of its pier in CFTZ will be completed and start to run in 2005. Other Taiwanese investors in Panama are mainly involved in such industries as bicycle, hardware, garment, auto parts timepieces, and footwear.

Last year Taiwan recorded a two-way of US$132.16 million with Panama. Of which, exports accounted for US$127.35 million and imports US$4.81 million. Taiwan's major export items included synthetic fiber, air compressors, and knitted garment; while the import items were mostly shell seafood, frozen beef, and metal materials for railway tracks.