Government Extends Rental Discounts for Industrial Land

The government's program for subsidized rental of industrial land has proven so successful that it will be extended-with a switch in emphasis, however, to the traditional industries that have long been plagued by insufficient investment.

The original program runs to the end of 2006, upon which the extension will continue for two to five more years. With new funding in the amount of NT$30 billion (US$910 million at NT$33:US$1), it is expected to help 305 companies lease 214 hectares of industrial land, on which they will invest a projected total of NT$107 billion (US$3.25 billion). The extension is a major part of the "New Revitalization Program for Traditional Industries" which was recently approved by the Executive Yuan (Cabinet).

The original program, proposed by the Industrial Development Bureau (IDB) of the Ministry of Economic Affairs as a means of stimulating investment activity, is dubbed "006688." It offers investors free rental of land for the first two years, a 40% discount for the second two years, and a 20% discount for the third two years. After that, the normal rental fee will be collected. After the expiration of the 6-year period of discounted rental, renters may, if they wish, purchase the leased land after receiving approval from the IDB. In this case, the rental fees paid during the lease period can be used to offset part of the purchase cost.

The program has achieved outstanding results since it was implemented in May 2002, with the response being so enthusiastic that the initial NT$30 billion subsidy fund was quickly used up and the government had to refresh it twice, leading to a total funding of NT$90 billion (US$2.7 billion). A total of 708 companies have taken advantage of the program so far, leasing 432.8 hectares of industrial land and pouring NT$275.4 billion into their investment projects. Those projects are expected to generate NT$410 billion (US$8.3 billion) in annual production value and create 49,700 jobs, and to add NT$6.9 billion (US$209 million) in tax revenue to the national coffers every year.

This investment has contributed to the creation of industrial clusters throughout Taiwan. The Nankang Software Industrial Park on the outskirts of Taipei, for example, has developed into an industrial cluster for IC design, digital content, and biotechnology. Foreign companies account for 30% of the total investment there.

The Tainan Sci-tech Industrial Zone has developed a cluster of optoelectronics and auto parts firms, and the Changhua Coastal Industrial Zone has a cluster of companies engaged in metal products, metal surface processing, glass processing, and resources recovery. The Yunlin Sci-tech Industrial Zone boasts clusters for machinery, glass substrate, and footwear design and R&D. A cluster at the Kangshan Penchou Industrial Zone focuses on basic metals and metal products, as well as the production of nuts and bolts.

The formation of these clusters, among others, has greatly enhanced the competitiveness of the industries involved, and given a strong boost to their development. It has also helped balance regional development, since 523 of the companies in the rental subsidy program (74% of the total) have invested in industrial zones in central and southern Taiwan.

In addition, the program has attracted 47 overseas Taiwanese businesses, mostly small and medium-sized enterprises engaged in the fields of basic metals and metal products, to return and invest in the island. In total, they are expected to invest an estimated NT$26 billion (US$780 million).

The overall 006688 program, with accumulated funding of NT$120 billion (US$3.6 billion), is expected to attract a total of 1,226 companies to lease 794 hectares of land and pour in investment capital totaling NT$458.6 billion (US$13.9 billion), generating an annual production value of NT$624.6 billion (US$18.9 billion) and providing 86,000 jobs.