RBI seeks clarity from govt on Taiwan's foreign direct investment status

The Reserve Bank of India (RBI) has sought clarity from the government on whether Taiwan ought to be included in the list of countries and regions that would require government approval for foreign direct investment (FDI), said people in the know.  

The political and legal status of Taiwan is a contentious issue, with China seeing Taiwan as a breakaway province that will eventually be part of the country again. Recent developments could muddy India’s decision-making process further.

Taiwan has reportedly beco-me a refuge for a small but growing number of pro-democracy protesters fleeing Hong Kong. A long-running series of opinion polls showed that fewer than 20 per cent of Taiwanese would consider unification with China even as a future option, a recent Financial Times article stated. Yet, given the recent developments in Hong Kong, China may not shy away from a forced unification in future.

 

Taiwan had also called for India’s support for its participation in the meet held by the WHO last month.

“We have received verbal assurances from various government quarters that Hong Kong will be included in the list of countries/regions that will require approval. However, there has been no word on Taiwan,” said a senior lawyer.

In April, a clutch of custodians had debated whether the new FDI rules should be applied to Hong Kong and Taiwan. The custodians had come to the conclusion that the former ought to be included, but remained undecided on the latter, and sought clarity from the RBI, said the sources.

“Considering investment opportunities from Taiwan, I would prefer Taiwan be included in the FDI automatic route list, but so far there is no clarity on its inclusion or exclusion. While Taiwan has locked horns with China politically, one has to be mindful of the fact that it is not a complete autonomous region,” said Atul Pandey, partner, Khaitan & Co.

Taiwan is ranked 38th for FDI flows into India, with a total investment of $360 million, or 0.08 per cent of the total flows, from April 2000 to March 2020. Flows from China and Hong Kong amounted to $2.4 billion and $4.4 billion, respectively, during the same period.