Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Taiwan acceded to the World Trade Organization’s (WTO) Government Procurement Agreement (GPA) in July 2009. According to Taiwan’s GPA Agreement, U.S. firms will compete on equal terms with domestic firms when government tenders for entities covered under the agreement meet or exceed the following threshold values:
- Public contracts valued at over US$ 194,000 for goods and services and approximately US$ 7.45 million for construction services.
- Metropolitan government contracts valued at over US$ 296,000 for goods and services and US$ 7.45 million for construction services.
- Government-controlled entities such as utilities and universities/colleges with contracts for goods and services valued at US$ 593,000 and construction services valued at US$ 7.45 million.
According to Taiwan’s Public Construction Commission, in 2020, foreign firms won 885 contracts under GPA worth a total of US$ 4.31 (20.82%) billion. U.S. firms won contracts with a total value of US$2.344 billion. Most of the procuring entities were public agencies and state-owned enterprises, hospitals, and universities. Advanced laboratory instrumentation & testing devices, equipment for power generation & environmental controls, specialty chemicals such as additives and catalysts, equipment for aviation controls, equipment for atmospheric monitoring, and advanced medical devices can be considered best prospect areas for U.S. firms that are interested in selling to Taiwan.
In response to foreign companies’ concerns about maintaining fairness in contractual obligations, Taiwan’s Public Construction Commission has prepared a model contract template as a reference for government procuring entities. The conditions in this model contract are the same for all bidders, domestic or foreign.
In Taiwan, there are three forms of military procurement: Foreign Military Sales (FMS), Direct Commercial Sales (DCS), and domestic tenders.
All recent FMS transactions have been between the U.S. government and the Taiwan authorities; consequently, the export process is managed by the U.S. Department of Defense. Taiwan’s Legislative Yuan must be notified of FMS tenders exceeding $50 million in total value or $14 million for major defense equipment. Under the Taiwan Relations Act, the United States evaluates Taiwan’s defense needs on a continuous basis to assist Taiwan in identifying capabilities that are mobile, durable, and effective. In 2020, the U.S. Executive Branch notified Congress of more than $5.86 billion in FMS transactions with Taiwan.
For DCS transfers, the Taiwan authorities deal with U.S. military suppliers directly, with the permission of the U.S. government. Both DCS and domestic tenders must comply with pertinent provisions of the Government Procurement Law (GPL) and the Procurement Regulation for Military Entities by offering open tenders, selective tenders, or limited tenders.
Military organizations may purchase imported items without Ministry of National Defense (MND) tenders. However, all equipment and supplies with a purchase amount exceeding the designated audit ceiling of NT$30 million ($966,825) for domestic purchases, and NT$18.5 million ($600,000) for overseas purchases, must be purchased through the MND.
On May 31, 2019, the Legislative Yuan passed the National Defense Industry Development Act to support the development of Taiwan’s domestic defense industry and to reduce its dependence on military imports. The act stipulates that Taiwan companies or organizations seeking to become military suppliers must apply to MND to be evaluated and ranked in three tiers based on technological capability criteria; size of operations; experience in research, development, manufacturing, and maintaining military equipment; and collaboration with academia, businesses, or foreign companies.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves AIT or U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult the Advocacy Center for Foreign Government Contracts for additional information.
Financing of Projects
Taiwan does not rely on funding from multilateral institutions to facilitate investment projects. In the public sector, the Taiwan authorities rely heavily on bond issues to cover outlays on major public works. Some public projects are open to private investment on a build-operate-transfer (BOT) basis. Private investment projects can easily be financed through banks in Taiwan. Taiwan investors, especially large companies, employ financial instruments (including corporate bonds) to raise funds in capital markets, both at home and abroad.