Taiwans Economic and Political Outlook Challenging Start to

Taiwan's Economic and Political Outlook: Challenging Start to 2018 Presented by Ross Darrell Feingold to the Taiwan Business Leaders Forum 18 January 2018

Macro Environment Developments • Perhaps Tsai should claim credit for Taiex: 2

Macro Environment Developments • 2018 GDP forecast good not spectacular: 3

Personnel & Policy Developments • President Tsai support falls again: 4

Personnel & Policy Developments • Falling support for Lai cabinet performance: 5

Personnel & Policy Developments • Weaker support to revise Labor Law. 6

Personnel & Policy Developments November Developments: • Recent focus on new cabinet, labor law and other economic issues has limited previous focus on transitional justice issues. • Transitional justice issues will return: • Military pension, judicial reform, constitution amendments, referendum law. • Ching Fu scandal has resulted in a round of finger pointing and firings. • Proposed corporate tax rate increase. • Foreign investment continues to fall. 7

Personnel & Policy Developments • Transitional justice issues will return: • Act on Promoting Transitional Justice, Referendum Act, KMT assets, Control Yuan nominations, Chen Shui-bian pardon. • National defense white paper modest public reaction amid Ching Fu scandal. • Business environment: Proposed corporate tax rate increase, labor law revisions, regulatory sandbox. • 2018 elections: DPP infighting, Taipei City. 8

Cross Straits Relations • Post party congress new normal. • MH 503 air corridor, with air & sea exercises pressures Taiwan’s security apparatus. • Multiple simultaneous pressure points: • Taiwan companies operating in China. • Taiwan entertainers performing in China. • Multinational companies (websites). • Deportations of accused Taiwan criminals. 9

Taiwan – U. S. Relations • Possible outcomes for Taiwan are both negative and positive for Taiwan. • Positive: Shriver approved, House passes H. R. 535 (Taiwan Travel Act) & H. R. 3320 (directs State to develop WHO observer status strategy for Taiwan), currency appreciation, LNG purchase. • Negative: Royce retirement, trade investigations, US$15. 5 bn trade surplus (end-Nov), up from US$12. 5 bn. 10

Taiwan – Japan Relations • November’s Japan-Taiwan Economic and Trade Conference outcomes: MOUs on customs assistance, cultural exchanges. • December’s maritime talks: MOU on search -and-rescue, agree to further talks on Okinitori islet fishing access. • China reaction risk for Japan. • Newly published Kojien dictionary defined Taiwan as PRC province, TECRO ignored. • Tokyo Olympics. 11

Taiwan – Foreign Relations • United Kingdom trade talks: • Modest outcomes: Sector “dialogues” in ag and energy, medicines agreement, “build on UK’s £ 176 mn financial services exports”, China Airlines’ flights resume. • Same week: Annual UK-China ministerial meetings, £ 750 m UK-China investment initiative chaired by former PM Cameron. 12

Taiwan – Foreign Relations • Canada parliamentarians Jan 2018 visit: • President Tsai asks Canada to back Taiwan in Comprehensive & Progressive Agreement for Trans-Pacific Partnership. • 89% of Canadians say it’s unacceptable for parliamentarians to accept free trips from foreign governments; Taiwan and Israel are most travelled-to destinations. • China Communications Construction purchase of Aecon for C$1. 5 bn. 13

Taiwan – Foreign Relations • Indo Pacific: Taiwan seeks role. • Asean: Singapore chairs in 2018. • “Southbound Policy will have little political impact on SE Asia itself, and will have to be modified to focus on economic objectives to be successful. The shifting away of Taiwanese investment from mainland will not hurt at all as Taiwanese investment accounts for a low percentage of total foreign investment there. ” 14

Key Political Figures Tsai Ing-wen Lai Ching-te Xi Jinping Donald Trump Shinzo Abe Lee Hsien-loong 15

Key Political Figures Freddy Lim Su Chia-chyuan Wellington Koo Feng Shih-kuan Wu Den-yih Ko Wen-je 16

Ross Darrell Feingold +886 916 363 269 rfeingold@dciadvisory. com 17