Taiwan sets to manage Korean risks

To cushion the blow of possible Korean Peninsula fallout on its economy and trade, Taiwan’s Ministry of Economic Affairs (MOEA) has readied a package of countermeasures, according to an MOEA report to be delivered at the Legislative Yuan on Apr 15.

The Foreign Affairs and National Defense Committees of the Legislative Yuan held a joint session to hear reports by Director General Tsai Der-sheng of the National Security Bureau, Foreign Affairs Minister David Lin, Economics Minister Chang Chia-chu and National Defense Minister Kao Hua-chu on “the impact of Korean Peninsula situations on Taiwan’s economy and security,” The China Post reports.

In a report sent to the Legislative Yuan, the MOEA noted that Taiwan’s trade with South Korea amounted to US$27 billion in 2012, but its trade with North Korea was quite small comparatively.

As of 2012, Taiwan’s aggregate investments in South Korea amounted to US$550 million, while South Korea’s investments in Taiwan came to US$990 million. By contrast, there was no bilateral investment between Taiwan and North Korea, according to the MOEA report.

The report said Taiwan’s production of some information technology and telecommunications (ITC) products, as well as consumer electronics will suffer the greatest impact if peace on the Korean Peninsula deteriorates, due mainly to the upstream-downstream linkage in the supply chains. By contrast, metal processing, machinery, daily necessities and chemical industries will see a limited effect.

In the case of negative impacts, the MOEA vowed to help local manufacturers seek alternative sources of key parts and components originally supplied by Korean makers for the production of ITC products. For instance, the ministry will help local makers secure supply of DRAM (dynamic random access memory) chips from Micron Technology Inc. of the US, NAND Flash chips from Micron again or Japan’s Toshiba Corp., and mobile DRAM from Japan’s Elpida Memory Inc.

In addition, the MOEA will help local makers closely monitor market changes, settle trade disputes, and enhance assistance to both Taiwanese manufacturers and employees working in South Korea.

The MOEA stressed that, as a small and open economic entity, Taiwan’s economy can hardly remain unaffected by international market changes and political or economic uncertainties in foreign countries. Accordingly, the government will continue to closely monitor developments on the peninsula and provide timely and effective countermeasures.

An escalation of tension on the Korean Peninsula, the MOEA also noted, would spell long-term regional uncertainty, which, in turn, would undermine the overall investment climate in Asia.