Taiwan and China are currently negotiating an investment pact that is likely to be signed at the end of this year.

For Taiwan, the goal of signing the agreement should be to obtain greater protection for China-based Taiwanese businesses than that provided under China's existing investment protection law. Issues that need to be addressed urgently include compensation for land acquisition, strengthening the protection of investors' physical safety, setting up an arbitration mechanism between investors and the government, and expanding the protection to cover investments in the contract, franchise and intellectual property rights sectors.

For China, its main objective is probably pushing for further liberalization of existing restrictions on Chinese investment in Taiwan. Although Taiwan is obviously reluctant to link the issue with the investment protection pact, it needs to prepare properly to deal with the situation.

At present, there is not a law in Taiwan that governs the government's obligations to implement investment protection agreements. It is equally urgent for the country to set up a related system.

www.focustaiwan.tw