Taiwan achieves very low overall compliance with international standards and codes, with a score of 15.83 out of 100 in our Standards Compliance Index. Taiwan is not a member of the United Nations system, and hence the International Monetary Fund and the World Bank do not assess Taiwan's compliance with any of the 12 Key Standards, preventing an accurate assessment of its standing with respect to most of them. Taiwan could fill these gaps by conducting and publishing credible self-assessments. Where there are assessments, such as in macroeconomic transparency, Taiwan fares fairly well. Although it cannot subscribe to the IMF's Data Dissemination Standard, it voluntarily follows it. Further, the Taiwanese Financial Accounting Standards Committee is planning to revise or replace existing standards in accordance with the revised International Financial Reporting Standards. However, regarding its framework for anti-money laundering and combating the financing of terrorism, a 2007 mutual evaluation of Taiwan's compliance with the Financial Action Task Force's recommendations found it to have serious deficiencies in both laws and procedures.

Macroeconomic Policy and Data Transparency

Taiwan is not a member of the International Monetary Fund (IMF) and hence does not subscribe to the IMF's Special Data Dissemination Standard (SDDS), nor does it participate in the IMF's less prescriptive General Data Dissemination Standards System. However, per Oxford Analytica's (OA) 2006 report on Taiwan's monetary transparency, Taiwan's central bank broadly complies with the requirements of the IMF's SDDS for the release of financial and external sector statistics. Fiscal data also, per OA's 2006 report on Taiwan's fiscal transparency, largely meet international standards in terms of coverage, periodicity, and timeliness. More »

OA's 2006 report on monetary transparency accorded Taiwan a rating of "compliance in progress." The Central Bank of China (CBC) is an independent body with the sole authority to formulate monetary policy for the country. It maintains a website on which it disseminates a wide range of information relating to monetary policy, its formulation, and its implementation in both regular and occasional publications and statistical form. Internal audits are conducted by the CBC's Board of Supervisors, while external audits are carried out by the Board of Audits. Taiwan does not use independent auditors from the private sector and has no immediate plans to do so. Reforms to the Central Bank of China Act have been stalled due to political considerations. The CBC broadly conforms to the dissemination practices required by the IMF's SDDS. More »

In its 2006 report on fiscal transparency, OA states that, overall, Taiwan has "enacted" this standard and had made progress over the previous year. Taiwan complies with the SDDS requirements for the coverage, timeliness, and periodicity of its fiscal data and for publishing advance release calendars. Political contentiousness between the executive and legislative branches has stalled some reform attempts, and has left the Control Yuan without members, which has had a negative impact on transparency. On the other hand, OA reports that the recently appointed finance minister, who has expertise in tax reform, strikes a positive note with regard to fiscal policy reform. More »

Institutional and market infrastructure

Taiwan's insolvency regime has been called "archaic," but Lawrence Liu, writing for the Forum on Asian Insolvency Reform has reported that the need to remain globally competitive has inspired the authorities to revamp the system. The law is fragmented, with reorganization covered under the Company Act and liquidation and composition covered under the Bankruptcy Act. Insolvency of failed banks and insurance companies are regulated by the Banking Act and Insurance Act, respectively. Amendments to the laws in 2000 and 2001 have not yet addressed all the weaknesses in the regime. The Bankruptcy Act does not adequately address cross-border issues, but there are draft amendments, proposed in 2004, that deal with some cross-border rules. In 2005, the U.S. Department of Commerce had little to say on Taiwan's insolvency regime other than to note that creditors have the right to share proportionally in a debtor's assets. Nonetheless, there is no further publicly available information regarding Taiwan's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

Accounting standards in Taiwan are set by the Financial Accounting Standards Committee (FASC) of the Accounting Research and Development Foundation (ARDF). In 1999, in its ongoing efforts to achieve convergence with International Financial Reporting Standards (IFRSs), the FASC initiated a three-year "comparability project" to review differences between IFRSs and the Taiwanese Statements of Financial Accounting Standards. In October 2006, Dr. Rong-Ruey Duh, the chairman of the ARDF, noted that the results of this comparison served as the basis for revising then-current national standards and issuing new standards more aligned with IFRSs. As stated in the ARDF's "Project Plan Concerning the Convergence with IFRSs," as of October 2007 many IFRSs had been incorporated in the national requirements. However, to achieve full convergence, the FASC is planning to revise or replace existing standards in accordance with the international standards, and to issue newly adopted IFRSs. The FASC believes that continuous adoption of IFRSs is better suited for the business environment in Taiwan. More »

Following the Asian financial crisis of 1997, Taiwan initiated an overall reform of its financial sector. According to the 2006 conference report "Corporate Governance and Taiwan's Capital Markets," these initial reforms were later accompanied by improvements in corporate governance starting in 2002, which focused on greater independence for the board of directors, audit committees, and supervisory commissions. The report identified weaknesses in three areas relating to financial reporting, share-based compensations, and - more generally - the mechanisms for corporate control. Some of these issues have since been resolved, particularly with the amendments in Company Law and the Securities and Exchange Act. A 2007 Securities and Futures Institute (SFI) report "Corporate Governance" noted that to enhance corporate governance for listed companies, the Taiwan Stock Exchange (TSE) and the SFI have issued Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies. Moreover, the SFI report claims that Taiwan is fulfilling the requirements of the Organization for Economic Cooperation and Development (OECD) principles of corporate governance through various regulations stipulated in the Company Law and the Securities and Exchange Act. However, this information is not verifiable, as the remaining publicly available information does not directly address Taiwan's compliance with the OECD principles. More »

Listed and non-listed companies are required to comply with the Taiwanese Statements of Auditing Standards developed by the Auditing Standards Committee (ASC) of the ARDF. A 2007 National Federation of Certified Public Accountants Associations (NFCPAA) self-assessment explained that the law requires the use of national standards with no reference to the International Auditing and Assurance Board (IAASB) pronouncements. The self-assessment, however, noted that the NFCPAA works together with the ASC to help incorporate IAASB pronouncements into Taiwanese requirements and holds seminars to disseminate information on the significance of international standards. Nevertheless, there is insufficient further information publicly available as to Taiwan's compliance with the International Standards on Auditing promulgated by the IAASB. More »

Taiwan is not a member of many of the major international organizations such as the United Nations, the IMF, and the World Bank. Ergo the country is at a disadvantage since it cannot be a party to international conventions relating to anti-money laundering (AML) and combating the financing of terrorism (CFT). Taiwan, however, is a founding member of the Asia/Pacific Group on Money Laundering, which released its second mutual evaluation of Taiwan compliance with the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations on AML/CFT in 2007. Per the findings of the 2007 mutual evaluation, although Taiwan has some elements of a functioning AML/CFT regime, it still lacks significant laws and procedures that will allow it to fully comply with the international standards. For example, Taiwan does not have a law criminalizing the financing of terrorism; it does not have proper rules to regulate Designated non-Financial Business and Professions from being used as conduits for money laundering and terrorist financing activities; and it does not have effective laws and procedures to confiscate and freeze terrorist funds or assets. According to a 2008 report by the U.S. Department of State, a Counter-Terrorism Action Law has been in the works since 2003. If passed, it would explicitly designate the financing of terrorism as a major crime. This proposed law is expected to allow relevant law enforcement authorities to seize terrorist assets even without a criminal case in Taiwan. More »

Taiwan has four payments systems: the Check Clearing House System, the Interbank Remittance System, the CBC Interbank Fund-transfers Settlement System (CIFS), and the Central Government Securities Settlement System. Neither on its website nor in its latest (2006) annual report, does the CBC identify any of these payment systems as systemically important. Further, only CIFS operates on a real-time gross settlement basis. Apart from scant information on the CBC website, there is little noteworthy information publicly available addressing Taiwan's compliance with the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems. More »

Financial Regulation and Supervision

Taiwan is characterized by a tightly regulated banking system, with state-owned banks still controlling half of the market assets, as stated in the 2008 U.S. Department of Commerce Country Commercial Guide report. Although Taiwan is not a member of the Bank for International Settlements, all domestic banks were required to implement Basel II from 2007, according to the 2006 Annual Report of the Financial Supervisory Commission (FSC). However, there is insufficient information publicly available clearly identifying Taiwan's compliance with the Basel Core Principles for Effective Banking Supervision. Effective July 1, 2004, the FSC was created as an integrated financial supervisor and regulator for the banking, securities and insurance sectors to resolve the problem of overlapping authorities. As reported on the FSC's website, as the financial services and activities become more sophisticated and diversified, both the regulatory and examination responsibilities will need to be further modified and consolidated to enhance the effectiveness and efficiency of financial supervision. The legal framework for banking supervision is mainly comprised of the 2005 Banking Act and the 2005 Financial Holding Company Act. The FSC, according to its 2006 Annual Report, was drafting a Financial Services Act and preparing draft amendments to the Banking Act and the Financial Holding Company Act. In September 2006, the Executive Yuan adopted the "Financial Market Package Project," prepared jointly by the FSC and the Ministry of Finance, in order to establish a diversified, internationalized, and stable financial system in Taiwan. More »

Access to securities markets in Taiwan by foreign institutional investors has been liberalized and broadened, as stated in the 2008 U.S. Department of Commerce Country Commercial Guide. The FSC, according to its 2006 Annual Report, is planning to incorporate the Taiwan Stock Exchange, the Taiwan Futures Exchange, the GreTai Securities Market, and the Taiwan Depository and Clearing Corporation into a holding company as a subsidiary of the FSC, in order to enhance the international competitiveness of Taiwan's capital markets. The Securities and Futures Bureau of the FSC, formerly known as the Securities and Futures Commission, is responsible for the supervision of the securities markets. While the FSC is an ordinary member of the International Organization of Securities Commissions (IOSCO), there is no publicly available assessment of its compliance with the IOSCO Objectives and Principles of Securities Regulation. More »

As noted in the 2008 U.S. Department of Commerce Country Commercial Guide, the insurance industry has been liberalized and opened to foreign investment. The FSC, according to its 2006 Annual Report, participates actively in the subcommittees of the International Association of Insurance Supervisors (IAIS). However, there is insufficient publicly available information as to Taiwan's observance of the Insurance Core Principles promulgated by the IAIS. The Insurance Bureau of the FSC, formerly known as the Department of Insurance, is responsible for the supervision of the insurance industry. The legal framework for insurance supervision in Taiwan is mainly comprised of the Insurance Act, which was last amended in July 2007. More »

Legend:

Credit Ratings

Moody's Aa3/Stable

Fitch A+/Stable

Standard & Poor's AA-/Stable

Macroeconomic Data

2007 GDP (Current Prices): 383.3 billion USD (IMF)

2007 GDP (Per Capita): 16,606 USD (IMF)

2008 GDP (Growth Forecast): N/A% (IMF)

2008 Inflation (CPI): N/A% (IMF)

2007 Unemployment: 3.9% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 7.4 billion USD (UNCTAD)

FDI (Outward): 7.4 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)