When an enterprise wants to make an investment, to carefully choose the right field is a must. For American enterprises like Microsoft, Google, etc., the most important thing will be a safe, secure environment to build a soft and hardware factory. The ground cost, tax incentives, waste and sewage treatment, electricity supply, etc. are just basic conditions; the key is the soft factor, the protection a legal system provides to the investors. It doesn’t mean the controls by an authoritarian government like public order and stability maintenance, but the rules legislated by a parliament elected by people under a democratic system, so that foreign investors can eliminate the uncertainties of the rule of man and operate their business in a predictable environment with a peace of mind.

A deeper meaning within the soft/hardware investment conditions is, what the American enterprises need from the country’s national security, information security and core technology development is a sense of trust. At the moment, the biggest worry of American business when working with Chinese enterprises is the infiltration of commercial espionage. Without any related law to punish individuals or companies conducting commercial espionage, if the core technology has been stolen, the company will be severely damaged. Hong Kong did have a legal environment different from China and related specifications to suit investments, but since the implementation of Hong Kong national security law (NSL) and its Article 43 quickly taking effect, multinational technology companies and financial groups have questioned whether Hong Kong can still play the role of a financial information center that is different from China. To counteract the harm the NSL does to human rights, the U.S. Congress has passed the “Hong Kong Autonomy Act” in order to sanction those who violated Sino-British Declaration and the Basic Law, including Chinese officials dealing with Hong Kong affairs, financial institutions and corporate organizations. Foreign investors based in Hong Kong may gradually withdraw, and the Separate Customs Territory and Linked Exchange Rate signed with many countries may be broken off in the unforeseeable future.

Compared to the extremely high degree of uncertainties in Hong Kong under the control of China, the investment environment of Taiwan with both soft and hardware infrastructure being taken care of, has been more favored by multinational enterprises. Guided by important technology policies such as digital transformation, data economy, and AI talent education, Taiwan has already been chosen by Microsoft and has set up an AI research and development hub back in January 2018 to work with the Taiwanese government on AI front-end scientific research and promote AI industrial integration. In 2013 and 2019, Google has also set up two data centers in Changhua and Tainan respectively, and will be setting up the third in Yunlin. In April this year, the U.S. Federal Communications Commission (FCC) has allowed Google to operate an undersea internet cable connecting the U.S. and Taiwan, but disallowed the one connected the U.S. and Hong Kong. Such a decision from the U.S. official has undoubtedly shown that its sense of trust in Taiwan’s ability of information security has greatly increased. In contrast, it has shown a high degree of doubt on Hong Kong’s position after the NSL has taken effect. The action from the U.S. has not only lifted Taiwan’s national security at Indo-Pacific strategic position, at the same time it has minimized the risk of the cable being controlled by China or hacked into due to the U.S.-China hostility.

Google’s relocating its investment to Taiwan is only the first step of Hong Kong being replaced by other important Asian cities as a financial and information center. While the relationship between the U.S. and China has been tense with no sign of easing off in the near future, national security has of course a higher priority of consideration than pure commercial investment gain or specific industrial development. We can tell by the frequent interactions between Taiwan and the U.S. in their economic, political and diplomatic relationships that, both parties have a high degree of trust in each other. The core technology that involves national security, especially semiconductor, cloud platform and the subsequent development of digital transformation and data economy industrial development, are impossible to be detached from the national security issue, therefore the degree of trust in an investment environment is more important than investment incentives. After all, damage done by the infiltration of Chinese commercial espionage is hard to be repaired. If there is no trustworthy rule of law to rely on, any investment measures such as tax and other incentives would be like sugar-coated poison, which may lead to core technology theft of the big company which will suffer huge damage.

The sense of trust and interaction between Taiwan and the U.S. are also mutual. On May 14, Taiwan Semiconductor Manufacturing Co. (TSMC) announced as of 2012, it will invest US$12 billion to build a 5-nanometer transistor chip factory in Arizona. It will also use advanced technology to promote high-tech industry development within the U.S. and stimulate economic growth. The core technology of semiconductor research and development possessed by TSMC is the target of Chinese enterprises and commercial espionage. If it wasn’t for the high level of trust towards the investment environment of the U.S., Taiwan officials might not agree for the technology to be exported, never mind investing and setting up a factory in the U.S.

Another example is the developing of the Wuhan virus vaccine and anti-pandemic medical material and equipment, whether it is the technical cooperation during the research and development stage, or the investment on factories building for production, international society always has a high level of trust on Taiwan’s investment environment and creates more cooperation opportunities, plus it has expanded the possibility of development for Taiwan Biotechnology and Pharmaceutical Industry. To conclude, you cannot build a sense of trust on technology cooperation and investment environment overnight, and to nurture the foundation of trust, a country cannot rely on its wealth and its impressive factory buildings, but a sound democratic system. Without a free economy and market order constructed by democracy and the rule of law, it will be hard to attract foreign businesses to invest and establish a trusted investment field.

(Peng Jui-Jen, legal researcher at the Science & Technology Law Institute and Adjunct Assistant Professor at the Department of Political Science, Soochow University.)

Click here for Chinese version

---------------------------------

Apple Daily’s all-new English Edition is now available on the mobile app: bit.ly/2yMMfQE

To download the latest version,

iOS: bit.ly/AD_iOS

Android: bit.ly/AD_android

Or search Appledaily in App Store or Google Play