Commentary
After our call, it seemed as if this summary would be unusually brief. South Korea and Taiwan are both prosperous, business friendly, economies with strong currencies. There are no official exchange controls, and most, if not all, international banks are well established, and can provide most services. So – what complications can there be?
On one level, the answer is everything is fine. Foreign owned businesses can, and do, operate successfully in both markets. Imports can be paid for, and profits repatriated, albeit with a withholding tax penalty. Intercompany loans are permitted, with some bureaucracy.
But it turns out both markets present challenges. These typically result in solutions which are less than optimal. However, things work, and, as these markets, while important, are significantly smaller than the regional giants of the PRC and Japan, peers often decide to leave well alone. There is a list of items peers would like to address – but none is top priority.
This situation is due, in part, to the history of both markets. Both are on the periphery of China and have, over the centuries, been under varying degrees of Chinese control. Today, Korea is well established as a separate state: as we all know, this is still very much an issue between China and Taiwan. Both markets were Japanese colonies between 1895 and 1945: unlike Korea, Taiwan has a largely positive memory of this experience. In both cases, the Japanese laid the foundations of today’s economies. Finally, both emerged in 1945 in poverty: the subsequent industrialisation and economic development relied, in part, on protective measures and exchange controls. While these restrictions have greatly eased, many of the frustrations encountered by our peers are the legacy of this system.
So, what does the landscape look like?
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