MOEA Will Push Third Import Substitution

Taipei, Aug. 6, 2012 (CENS)--In order to bolster economic growth, the Ministry of Economic Affairs (MOEA) has decided to push “third import substitution,” encouraging domestic enterprises to switch their procurements to domestic suppliers, especially in the fields of machinery and material equipment, high value-added petrochemical, energy-saving, and even services.

Shih Yien-shiang, economics minister, has listed “third import substitution” as one of the medium- and long-term strategies for vitalizing economy and export and is discussing with think tanks for formulating concrete implementation measures. An economics official noted that the MOEA will integrate existing assisting tools for industrial upgrading and may offer subsidies, to induce private enterprises undertaking technological upgrading or procuring domestically made manufacturing equipment.

Industrial Development Bureau (IDB), under the MOEA, will contact major equipment importers, such as TSMC and HTC, to discuss the feasibility of switching their procurement of equipment and components and parts from domestic sources. An official in charge explained that Holland and the U.S. are the only two countries in the world capable of producing precision semiconductor equipment, which is very difficult to be replaced by domestic products. However, import substitution can be applied for semiconductor material equipment and panel machinery equipment.

Meanwhile, the IDB has been pushing a number of projects, such as the petrochemical industries with high added value and machine tool A+ project, with the aim of enhancing local content rate and developing independent technologies, a move which also has the effect of import substitution. Amid economic downturn and export decline, the pushing of import substitution can enhance domestic technologies and provide the domestic market as the testing ground for domestic technologies, in preparation for next round of export expansion.

The MOEA will first pinpoint industries suitable for import substitution and then roll out effective policy assisting measures. The ministry has initially zeroed in on machine tool and machinery equipment, material equipment, high value-added petrochemical industry, and energy-saving industry. Some service industries, such as logistics, will also be included.

Taiwan Institute for Economic Research reported that in 2011, Taiwan imported US$281.4 billion worth of products, with trade surplus reaching US$26.8 billion. If import substitution rate reaches 1%, it will result in 11% growth in trade surplus and if the rate amounts to 5%, trade surplus will jump over 50%.