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TAIWAN


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 406,000      
         
GNI per capita
 US $ 18,000
Ranking is given out of 208 nations - (data from the World Bank)

Books on Taiwan

REPUBLICAN REFERENCE

Area (sq.km) 
35,980 

Population 
22,603,001

Capital 
Taipei

Currency 
New Taiwan dollar (TWD)

President 
Chen shui-bian

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Background:
Taiwan today is one of Asia's powerhouses and a centre for high-tech exports. The economic crisis that engulfed much of Asia in the late 1990's scarcely caused a ripple in the boardrooms of Taipei. The Taiwanese people enjoy one of Asia's highest living standards. Taiwan is a net exporter of capital to the region and Taiwanese companies are themselves seen with increasing frequency on the regional and global business stage. Taiwan's foreign exchange reserves are the third highest of any country in the world.
In the last ten years Taiwan has embraced both a democratic multiparty government system and an outward looking economy that meets WTO standards of transparency and competition. Taiwan has entered the new millennium with well-deserved confidence. Yet, Taiwan has not yet come of age entirely. Diplomatically Taipei remains isolated and is recognised by fewer than 30 countries. While judged by objective criteria Taiwan would not only qualify for membership of the United Nations but would be one of its major regional players, the world is not yet a rational place and, like it or not, the looming presence of mainland China is sufficient to guarantee that this will not happen, any time soon. 

Taiwan's History - The "Other China"
The original inhabitants of Taiwan (or "Formosa as it was known to Europeans), its aboriginal people, are of Malay descent although how and when they arrived in Taiwan is unknown. They have much in common with the people of the Northern Philippines. It was these aboriginals that the early Portuguese and Dutch traders seeking to establish a base on the China coast had to contend with and not the Chinese. However Chinese seafaring merchants had the advantage of proximity and they were the ones who first sought to establish permanent settlements along the Formosan coast. In the fifteenth and sixteenth centuries the Chinese came in increasing numbers forcing the natives from the narrow fertile plain that runs the length of the western seaboard and into the harsh mountainous areas of the interior.
In 1682, the Island of Formosa was formally incorporated into the Chinese Empire as part of Fujien province and it was not until 1885 that Taiwan became a separate province of China. The truth of the matter was that Chinese sovereignty in Taiwan was never absolute and extended only to those areas of population under Chinese control. Taiwan was, in the words of one contemporary writer, "a crude and lawless place". Control over the aboriginal tribes was non-existent and acts of savagery against Japanese traders (and others) provided the pretext for Japan to seek to incorporate Taiwan into the Japanese Empire.
At the dawn of the 20th century Taiwan was a colony of Japan having been ceded by China in 1895 during the final days of the Manchu regime. Yet, Taiwan prospered. The early trade in camphor which had been an economic mainstay of the island during the 19th century had already withered because of over-harvesting although trade in tea and sugar flourished and formed the basis of Taiwan's early industrial development. Railway lines were built or extended and new harbour facilities established. Importantly, whereas traditionally the centre of power and wealth under the Chinese had been in the south of Taiwan, during the Japanese colonial period the focus shifted irrevocably to the north of the island. Taipei developed as a city and capital of the island and Keelung became the major port for trade with Japan - the port of Tamshui which had traditionally carried the trade in the 19th century had already silted up and could not accommodate the larger draught vessels of the time.
In the closing days of the Second World War, the allied powers agreed at their Cairo meeting that Taiwan would be returned to China with the defeat of Japan. However, China at the time, while one of the allied powers, was locked in a bitter civil war. Unsure as to whom Taiwan should be ceded, it became for a while a UN Trust Territory.
General Chiang Kai-shek, the Nationalist leader eventually accepted Taiwan back from Japan to be administered on behalf of the allies pending a final settlement. From 1945-1949, Chiang paid little attention to the Island province as increasingly the nationalist armies fighting on the mainland were being overwhelmed by the Communist forces.
However, in 1949 the war on the mainland was coming to its conclusion with the Peoples Liberation Army triumphing over its Nationalist counterpart. Chiang, his army and his administration fled to Taiwan.
On the Chinese mainland, a new "Mandate of Heaven" prevailed. The old Republic of China was replaced by the Peoples Republic of China. On the island of Taiwan however it was a different story. Taipei at once, became the temporary capital of the "Republic of China" established by Sun Yat-sen in 1911 and Taiwan became the "unsinkable aircraft carrier" To the Nationalists that came with Chiang, Taiwan was no more than a temporary base from which to regroup, rearm and retake the mainland. Things did not work out that way.
To the local Taiwanese, the arrival of the Mandarin-speaking mainlanders and a large army amounted to a new invasion and new colonisation especially as Taiwan was immediately placed under a harsh martial law regime that existed well into the nineteen-eighties. Rebellion and dissent were brutally repressed in the early years in what came to be known locally as the period of "white terror".
Had it not been for the outbreak of the Korean War, Taiwan's story of the past fifty years may have been differently written. Korea bought valuable time for the Nationalists and shifted Beijing's focus to its northern border rather than to the far south. The Nationalist (Kuomintang or "KMT") administration may have been inept at fighting a war but they proved highly effective in restoring and then transforming Taiwan's economy. Taiwan was the first of the Asian tigers to develop on the basis of an export led path to economic prosperity.

A success story
As the economy prospered, the military-backed dictatorship became more benign. Land reform brought with it economic emancipation and the beginnings of industrialization based on family-owned companies. Martial law was lifted in the mid-nineteen eighties and dissident political groups that had been around for some time were transformed into genuine political parties. Restrictions on press freedom were lifted and censorship largely abolished. Democracy has flourished on Taiwan.
The last decade has been one of dynamic and at times frenetic change both economically and politically. A government program of industrial restructuring and incentives has been largely successful in shifting Taiwan from being a low-cost manufacturing centre to that of a regional centre for high-tech manufactured goods.
Divisions between "mainlanders" and "Taiwanese" have largely been healed - certainly for the younger generation and the Government has done much to atone and set to rest some of the worst excesses of the martial law period. Nowadays it is more fashionable to be called one of the "New Taiwanese" rather than a "mainlander". 

Taiwan and the PRC
Taiwan, or to give it its full title "The Republic of China" is a fully independent country. Its population enjoys universal suffrage; it maintains a free press and a democratic electoral system. The President of the country is elected directly by the people. Yet as noted already Taiwan is a country that is isolated diplomatically.
The anomalous position in which Taiwan finds itself is yet one more consequence of the Chinese Civil War. Taiwan, long ago gave away any claim to the mainland of China and has recognised the PRC as the legitimate government of the Chinese mainland. The gesture has not been reciprocated. Instead China maintains steadfast to a policy that Taiwan must be reunited with the Chinese mainland. Ominously, China claims the right, if necessary, to use force to "liberate Taiwan". In Beijing's eyes, Taiwan's only option is to negotiate the terms of its surrender.
The Chinese claim rests on tenuous grounds. Throughout its history Taiwan was only a province of China for a mere ten years during the nineteenth century and even then Chinese administrative control did not extend throughout the Island. While China has advocated the "one country - two systems" formula applied to Hong Kong and Macao as the basis for reunification; commentators are quick to point out that the situation in Taiwan is entirely different. There is no colonial administration present in Taiwan that could hand sovereignty back to China, nor can the government here negotiate a surrender of sovereignty not sanctioned by the people of Taiwan. These are points that many Taiwanese - "new" and "old" alike feel are not understood in Beijing. Certainly popular sentiment in favour of reunification of Taiwan with the Chinese mainland at the present time is close to zero. Nevertheless, it did not stop the emergence of one candidate in the Year 2000 Presidential election running on the platform of reunification under the Deng Xiaoping formula. He scored less than 1% of the vote.
Talks between Taipei and Beijing have been going on for almost a decade now without any real sign of progress on the substantive political question. Two fundamental issues divide the two sides. While China seeks to negotiate the return of Taiwan to China on the basis of treating Taipei as the seat of a renegade provincial government, Taiwan insists that the two sides negotiate as equals. Taiwan also sees any reunification question as being a matter for the distant future and after China has itself democratised. For the time being, Taiwan wants confidence building measures at the top of the agenda.
Despite conciliatory statements by the incoming government of Taiwan, China has refused to adopt a more conciliatory position and has remained hostile to Chen and the DPP. This has led in turn to a more robust assertion of Taiwan's intention to take its own course and not to toe a PRC dictated line.
All of this means little for foreign business. Despite the grandstanding that takes place on the political stage, international companies are free to do business on either side of the Taiwan Strait without hindrance. Taiwan is collectively itself one of the largest investors in the mainland. 

Present Political Environment
The presidential election of March 2000 saw a shift of power from the Nationalist Kuomintang (KMT) Party that had ruled Taiwan for almost fifty years to that of the Opposition Democratic Progressive Party (DPP). A human rights lawyer who had been imprisoned in the nineteen-eighties for his political activism, Chen Shui-bian, became President although within Taiwan's unicameral legislature, the KMT has still maintained a majority of seats. 
Chen's own administration has been helped by the fact that following its defeat at the presidential polls, the KMT fractured. One faction (the Taiwan Solidarity Union) led by former (KMT) president Lee Teng-hui aligned itself with the DPP while another faction led by former Taiwan Governor, James Sung, formed a breakaway right-wing splinter group known as the "People First Party" (PFP). 
Despite the political realignments of the past few years, Taiwan maintains to all intents and purposes a bi-party political system. Both the KMT and the PFP have formed the "Pan Blue Alliance" and will run with a common slate at the 2004 presidential polls. By contrast the combination of the DPP and the TSU is commonly referred to as the "Pan Green Faction."
On economic policy both major parties are centrist and there is little to chose between them. Rather it is on the issue of the relationship with China where opinions divide. On other issues, the most defining issue for the present government is its commitment to human rights (with women's issues and those related to other minorities being prioritised) and to democratic reform. Of course, there is a political edge to this too in that it seeks to differentiate its own track record with the historic record of the KMT which for many years was solely a party of authoritarianism.
The Opposition KMT and PFP are dominated - at least in leadership positions - by people who can trace their recent inheritance back to the mainland of China and those families who came over to Taiwan with Chiang Kai-shek at the closure of the Chinese Civil War. These people are still inclined to see the relationship with Beijing as a familial squabble and that, in the fullness of time will allow Taiwan and the Chinese mainland to reunite (although not under a Communist government). 
By contrast the Democratic Progress Party and the Taiwan Solidarity Union are dominated by ethnic Taiwanese (85% of the population) who while acknowledging their Chinese ancestry have no kinfolk on the mainland of China and have no desire to reunite Taiwan with it.
With presidential elections approaching again in March 2004, President Chen Shui-bian is again standing for re-election with his outspoken Vice-President Annette Lu again as his running mate. The opposition alliance has KMT Chair Lien Chan as its standard bearer with the PFP's James Soong eying the vice presidential slot. 

Political Outlook
Between now and the elections of March 2004 both major political groups will be seeking to play the "China card" in their attempts to garner support of the voters. The DPP often presents the Pan Blue alliance as the group that would sell-out Taiwan's interests to Beijing, while the Pan Blue camp seeks to portray Chen as a dangerous pro-independence advocate and one who is heading a party whose stance might provoke Chinese military action against the Island.
In fact the two groupings are not so far apart and it is unlikely that either side would take extreme measures to destabilize the situation across the Taiwan Straits. Nevertheless the DPP is keen to show the world that the present impasse is caused by a belligerent and recalcitrant China that not only refuses to renounce force to reunite Taiwan with the "Motherland" but also has more than 400 armed missiles pointed at the Island.
In fact whichever party assumes office following the election, the situation is unlikely to change dramatically. Both major groupings are committed to the democratic process (and indeed it was the KMT that introduced and fostered democratic reforms) and both see the unofficial alliance with the United States (as stated in the US-Taiwan Relations Act) as the cornerstone of Taiwan's foreign policy.
While the people of Taiwan overwhelmingly reject reunification with China this presumption has never been tested directly at the polls, which is why the DPP wants a referendum on the issue (and why Beijing for its part remains adamantly opposed). No matter the outcome, neither group really intends to change the status quo. What they are seeking to do is to demonstrate the absurdity of the Chinese hegemonistic position.
For the most part, Taiwan will continue to evolve much as it has done in recent years but with a DPP government there will be less of an international perspective both to its decision-making and in the manner in which it internationalizes its own economy. Under the DPP the hire of foreign labor is being discouraged, there is much less emphasis on English as a second language in government and in business (although the teaching of English in schools is widely fostered) and a much greater fostering of "Taiwanese nationalism." The KMT by contrast is generally credited with a better weltanschauung. 
Both groups accept that there is a need for constitutional reform although the manner in which this is to be introduced differs between them. The DPP want to scrap the present constitution (which really has served Taiwan remarkably well) and replace it with a new one that de-emphasizes the "Republic of China" as Taiwan is officially called. By contrast the Pan Blue alliance see a need to amend the constitution without seeking to throw it away entirely. This issue is likely one that will be given greater prominence in the months to come.

Economic Outlook
Taiwan has made great strides over the past ten years to open its domestic economy to international competition. For both commercial and strategic reasons, Taiwan has sought a role for itself as a regional hub and an alternative centre to Hong Kong and Shanghai from which to develop the China market. Lack of direct transportation links with the Chinese mainland continue to hamper efforts so far in this direction but progress has been rapid in other areas that are not dependent on direct links with the PRC.
Although not yet succeeding as a regional centre - Singapore and Hong Kong remain the favourites of international business - Taiwan is an important market in its own right although not one for the faint hearted. Taiwan's industry is becoming increasingly dependent on the export of higher value-added products and they are major purchasers of industrial plant and equipment. Major infrastructure projects underway in the telecommunications, energy and transportation sectors provide major opportunities for foreign engineering and technology-based companies. An affluent population of 22 million, fashion conscious and with a high propensity to spend provides a consumer market ready to try new trends and fashions. Increasingly the younger generation takes its cue from Japan rather than the United States. In recent times the DPP led government has placed less emphasis on the broad regional centre approach to one that is more focused on building Taiwan as a high-tech manufacturing hub.

GDP Growth and Forecasts
Taiwan's economy is driven by trade and especially exports to the markets of the United States, Japan and Europe. These are major markets for Taiwan's rapidly growing high-tech sector. For the past decade, the drivers of growth have been the semiconductor and related electronics industries although there is now a new emphasis on the emerging "sunrise opportunities" in the biosciences and in such areas as nanotechnology. Much of the required technology comes from overseas in various ways. Like Japan before it, the Taiwanese are good "adaptors" but less good at "innovation" and "research."
In 2003 the domestic economy was hard hit by the outbreak of severe acute respiratory syndrome (SARS) and the U.S.-led war in Iraq. However in the second half of 2003 it caught the wave of the worldwide economic recovery and this is expected to reap even better results for Taiwan in the next year. It is now obvious that Taiwan's growth rate needs to be compared to those achieved by other OECD economies and not the norms of the developing world. 

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Update No: 004 - (04/05/04)

The month of April has been dominated by the stand-off between the DPP controlled "pan-green alliance and the opposition pan-blues over the controversial election result whereby President Chen Shui-bian was returned to office in late March with a margin of less than 30,000 votes and in a ballot where some 300,000 votes were considered invalid. Nevertheless once the current turmoil subsides, Taiwan is expected to see a return to an environment in which the economy is improving, trade is booming and unemployment is falling. 
Opposition supporters took to the streets to protest the outcome of the presidential vote and to demand an entirely new poll. That will not happen but the government has agreed to a recount ahead of the May 20 inauguration. Some of the demonstrations turned violent with opposition supporters seeking to storm the presidential office. Demonstrations have become a regular part of the Taipei scene each weekend since the poll was announced.
The opposition believes that the election result was unduly influenced by a sympathy vote following the election eve shooting of President Chen Shui-bian and Vice-President Annette Lu. Mr. Chen was only slightly wounded in the attack. Forensic experts called in from the United States have said that the shooting was genuine but no motive for the attack has been given and no suspects have been apprehended. Mr. Lien Chan, the defeated opposition candidate, believes the circumstances of the shooting are suspicious and he is calling for an independent investigation into the shooting and has called for a new poll.
The Democratic Progressive Party has agreed to a total recount of the vote. Earlier the Opposition had suggested that only those ballots cast for President Chen should be scrutinized but it subsequently backtracked on that suggestion. 
With matters being resolved in Taiwan's High Court, both the pan-blue and pan-green alliances have agreed that the voter recount from the March presidential election will go ahead on May 10. There will be a full nationwide recount of all ballots. Earlier the KMT had proposed that only the DPP votes be subjected to scrutiny. However despite subsequent agreement that there will be a total recount ahead of the inauguration, the two sides are still arguing before the Taipei High Court as to how the recount will be conducted and what rules will be used to identify an invalid ballot. At issue is whether the procedures set out in the Presidential Election and Recall Law as amended in September 2003 should be followed or not.
The argument of the DPP and presented before the Court is that prior to the March election the two sides agreed and approved the rules on invalid ballots and that these were distributed to each polling station. Lawyers of the DPP argued that the KMT was now seeking to amend these rules post facto, an argument that appeared to be accepted by the Court.
The pan-blue camp had also requested that it be given a full name list of all voters in the election - another issue opposed by the pan-greens on the grounds that it amounted to an invasion of voter privacy. Lawyers for the DPP insisted that the voter list for a constituency should only be duplicated and given to the pan-blue camp's legal representatives if a dispute occurs in that constituency during the recount process. They argued that maintaining a voter's rights to privacy was paramount. Again the justices sided with the DPP attorneys in deciding the matter.
As of the time of writing the arguments of both sides are still being heard although the recount appears to be going ahead as scheduled.

Vote to Amend Spending Limits Postponed
A key proposal of the DPP platform is to boost the economy with the infusion of a capital works program designated as the "10 New Major Construction Projects." However the capital requirements are sufficiently great that the government will need to resort to a special borrowing program that would see the level of public debt exceeding that allowed under law. A special statute has been introduced onto the floor of the legislature designed to relax government spending limits so that the new program can proceed.
Voting on a proposed statute was supposed to have taken place at the end of April but has been deferred after the pan-green and pan-blue camps agreed to defer the vote for a week to negotiate proposed amendments put forward by the opposition. The Democratic Progressive Party (DPP) originally wanted to hold a vote on the statute by month's end. However the opposition has put forward another version that places both the statute and the budget plan within the context of the regulations on debt set out in the Public Debt Law. The opposition also wants to shorten the effective period of the statute from five years to three and is asking that the government identify all the projects it wants to work on within the three-year period and allow the legislature to review the projects one by one."

Trade hits record high
Both exports from Taiwan as well as imports into Taiwan surged to record levels in March 2004. Last month exports increased by 17.2 percent from the level of March 2003 and reached NT$486.61 billion (US$14.78 billion). Imports rose by 29.2 percent to NT$464.22 billion (US$14.10 billion). Strongest demand for Taiwan-made goods has been reported from Hong Kong, China, Southeast Asia and Europe according to the Ministry of Finance.
The previous monthly export record was set in July 2000 at NT$443.1 billion. For exports the prior record was NT$461.2 billion set in December 2003.
Over 1Q04 total exports expanded by 22.5 percent from last year to NT$1.3 trillion. Imports increased by 31.3 percent to NT$1.2 trillion. The trade surplus for the quarter amounted to NT$65.4 billion (US$2 billion). According to the official statistics China and Hong Kong together account for around 36 percent of Taiwan's exports.

Rising consumer prices
Consumer prices in March rose for the third successive month after showing a deflationary trend over the second half of 2003. The March inflation rate rose 0.90 percent year on year. This was chiefly on account of rising prices of food and clothing. Nevertheless, the March figure was down by 0.06 percent from February mainly due to reductions in the cost of vegetables and clothes on a monthly basis.
The CPI figure for March 2004 rose by 0.65 percent from a year earlier. March wholesale prices rose 2.5 percent from a year earlier and were up by a seasonally adjusted 0.62 percent month on month according to the DGBAS figures.

Asian Development Bank reports "promising prospects" for Taiwan
The Asian Development Bank, in its latest Asian Development Outlook published during the last week of April, believes that Taiwan's prospects for the immediate future are promising due to a continued rise in exports to which can be now added a pickup in domestic demand. The report notes that while unemployment has been high in recent years - due largely to the effects of a weak economy, the relocation of a number of firms and industries to China and moves away from labour-intensive industries - labour market conditions are now stabilizing. In order to sustain growth the government will need to address growing income inequalities in the market as well as the vulnerability of the economy to swings in global information technology demand.


Major Economic Indicators, Taiwan, 2001-2005

Item

2001

2002

2003

2004

2005

GDP Growth

-2.2%

3.6%

3.2%

5.4%

4.7%

Gross Domestic Investment/GDP

17.7%

16.9%

17.2%

17.8%

18.5%

Inflation Rate (CPI)

0.0%

-0.2%

-0.3%

0.8%

1.2%

Money Supply (M2) Growth

4.4%

2.6%

5.9%

5.5%

5.0%

Fiscal Balance/GDP

-1.5%

-2.5%

-3.1%

-3.0%

-2.9%

Merchandise Export Growth

-17.3%

6.4%

10.5%

8.0%

7.4%

Merchandise Import Growth

-23.7%

3.4%

12.1%

8.7%

7.6%

Current Account Balance/GDP

6.4%

9.1%

10.0%

6.9%

6.0%

Source" Asian Development Outlook 2004 quoting various sources



In its outlook for the economy for the next two years, the ADB expects GDP growth to strengthen to 5.4 percent this year on the back of surging exports, continued rise in domestic demand and the structural changes taking place in the economy. However after a surge this year, growth in 2005 is expected to slow to around 4.7 percent. Higher levels of exports and of capacity utilization have prompted a number of companies to increase their capital spending and bank loans to the private sector are increasing in order to meet demand. Investment is expected to surge by 8.5 percent this year and by a further 7.5 percent in 2005. It is hoped that this new investment will further stimulate the job market which in turn will bolster private consumption expenditure.

Inflation is expected to remain low.
While strong growth and consequent revenue expansion will narrow the budget deficit, public debt is forecast to rise because of a new round of public borrowings to finance further infrastructure development. 
The report notes that because of its export dependence and increasing integration into the regional and global economy, the ADB assessment depends on the performance of key trading partners and of global recovery generally. As reported elsewhere, global recovery is expected to strengthen this year, especially in the key markets of the United States and Japan.
The new government faces a number of challenges of which three are of particular importance: The first of these is the rising income inequality as between the income of the highest and lowest groups. The development of high value-added industries has over the past decade transformed Taiwan from that of a labour-intensive economy to one in which skilled workers are in greatest demand and who can command high salaries. By contrast the income of unskilled workers has in some cases actually declined.
The balance between deepening economic integration with China in the face of ongoing political uncertainties in the relationship is the second challenge that the government will have to deal with. China is now Taiwan's largest export market and investment destination. An increase in the level of uncertainty in the political relationship could harm both countries.
The third issue is the dependence of the economy on the IT sector and the shock to the economy that could result from any bursting of the IT bubble. Taiwan is particularly vulnerable to any weakening in global demand for IT products and there is a challenge to develop economic and industry policies that take such market volatility into consideration.

Non Performing Loans - A crisis in the making?
The Development Outlook report notes that a high share of NPLs in the economy can cause systemic risk and possible fiscal liabilities. Countries that have had the most serious problems and leading to a banking sector crisis in the aftermath of the 1997-8 Asian financial turmoil included Indonesia, Korea, Malaysia, the Philippines and Thailand.
Of particular interest is the mention of a second group of counties - India, Pakistan and Taiwan - which are described as three countries that have not yet experienced a full-blown banking crisis as have those mentioned above but which could still face such a crisis unless the regulatory authorities act to forestall such a crisis using preemptive financial reforms. The common thread in all three countries is the pressure of globalisation and ensuing liberalization which have brought into focus the inadequacies of their financial systems. The report notes that in the case of Taiwan the situation is not dissimilar from that in the five crisis-affected economies - as well as Japan - where an open capital market creates pressures on the banking system.
Both the Minister of Finance Lin Chuan and the central bank flatly denied that Taiwan and appeared to be at risk of a financial crisis. The NPL ratio of the banking sector had been reduced already from around 8 percent two years ago to around half that amount today. As of last month, the bad-loan ratio had dropped to 4.14 percent - the lowest in six years. However, if loans under observation are included in accordance with international accounting standards, the NPL ratio levelled at 6.08 percent at the end of last year. But that is still a decline from 11.26 percent at the end of 2001 according to a central bank statement.

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AVIATION

Eva, Boeing agree US$3bn aircraft deal

Eva Airways, Taiwan's second-largest airline, will acquire 15 aircraft for a total of nearly US$3bn from Boeing, The financial Times reported on April 14th. 
Taiwan's second largest airline took the unusual step of revealing the price it had paid, rather than routine practice of quoting the catalogue value, suggesting that it had received a discount of about 14%.
"They are to replace some of the Boeing 747-400s we plan to retire, although how many we retire has not yet been decided," Nieh Kuowei, the company's spokesman, said. "That will depend on the market and our fleet."
The company said it had closed a deal to buy eight Boeing 777-300 passenger aircraft for a total of US$1.49bn. Separately, it has already signed a contract in 2000 to buy seven Boeing 777-200s. The board had cleared both deals, he said.
The purchases will strengthen Eva's passenger operations and could push the company ahead of China Airlines, its larger, state-owned competitor. Most Asian airlines are expected to recover this year as the global economy improves and after one of the worst years on record due to a sharp drop in tourism and business travel after the outbreak of severe acute respiratory syndrome (Sars).
Eva, founded in 1989, is part of the Evergreen Group, one of Taiwan's largest private conglomerates. It operates a fleet of 47 aircraft, compared with China Airlines' 59. But 16 of Eva's aircraft are freighters and another nine are so-called combi aircraft - planes with reduced passenger capacity to make room for cargo transport.
The 777-300 ER, which stands for extended range, is the US company's latest large passenger aircraft model, so far only used by Air France. The 777-200 LR, or long-range airliner, is not in production yet. The number of aircraft to be acquired from each of the two types could be adjusted, Mr Nieh said.
Eva Air will announce details of the timeframe of delivery and funding for the purchase at a joint press conference with Boeing, he said. In a statement filed to the Taiwan Stock Exchange, the company said 35% of the price for the eight extended range aircraft was to be paid in advance.
To lower costs and improve its financial structure, Eva said it had concluded a lease-after-sale deal with Gecas Aircraft Leasing Netherlands for three of the eight aircraft, for a combined US$560m. Separately, it signed lease-after-sale contracts with the Dutch company for six Boeing 747 jets for US$382m. 

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