Taiwan, the world’s 22nd largest economy, has an advanced high-tech industry and is the global leader in semiconductor production, earning it the moniker “Silicon Island”. It’s one of the economic powerhouses in Asia and plays a key role in global supply chains.
It is home to many world-class companies, including Taiwan Semiconductor Manufacturing Corporation, Foxconn and Far Eastern New Century (FENC), as well as strong financial institutions, such as CTBC Bank, Taipei Fubon Bank and E.SUN Commercial Bank.
Following the Democratic Progressive Party’s historic third consecutive presidential election victory in January 2024, President Lai Ching-te introduced strategies aimed at promoting key sectors: semiconductors, artificial intelligence (AI), military, security and surveillance, and next-generation communications.
In addition, the DPP-led government has focused on encouraging the return of Taiwanese companies abroad since 2019, through the provision of services for land, water and electricity, manpower, taxation and capital.
According to the International Institute for Management Development, Taiwan ranked eighth in economic competitiveness globally in 2024, receiving high scores in administration and business efficiency, and ninth in digital competitiveness.
Despite uncertainty caused by geopolitics and tariffs, Taiwan recorded a 4.3% year-on-year increase in gross domestic product (GDP) in 2024, which is the fastest growth rate since 2021. “Domestic demand was the primary driver of growth, and this was largely tied to very strong gross capital formation growth amid the semiconductor boom, with many companies investing heavily in machinery equipment, construction and intellectual property products,” according to ING.
For 2025, Taiwan’s economic growth is projected to rely on investment and consumer spending, with external demand once again driving growth. Think tank Taiwan Institute of Economic Research has revised up its 2025 GDP growth forecast to 3.42%, due to stronger-than-expected investment and export performance.
Global operations
FENC is a homegrown conglomerate that produces and finishes synthetic fibres and textiles, with operations in Taiwan, Japan, Mainland China, Vietnam, Malaysia, the Philippines and US, as well as other regions. The treasury set-up is designed to align with the strategic and operational requirements of the worldwide businesses, explains Jenny Ho, Senior Vice-President, Finance Department at FENC.
“It is a hybrid model, combining centralisation and decentralisation to maintain global consistency while addressing regional needs effectively,” Ho says.
In line with best practice, key elements of the treasury set-up include: a global policy framework; regional hubs that manage local cash and operations; localised decision-making; risk management; cash pooling; strong partnerships with global and local banks; and technology integration.
One of FENC treasury’s major challenges, according to Ho, is effectively managing liquidity across multiple regions and subsidiaries, while ensuring compliance with local regulations. “Our centralised treasury model and cash pooling structure help address this, but it can still be complex to balance the need for operational flexibility with the goal of optimising cash resources at a group level,” she says.
To be more effective, treasury is continuously refining its cash forecasting processes and leveraging technology to enhance visibility and control over cash positions. “Moreover, we focus on strengthening our risk management framework to mitigate currency and interest rate risks, which can be particularly challenging in an environment of fluctuating global markets,” adds Ho. FENC is also investing in training and resources to ensure the finance teams are equipped to handle these complexities efficiently.
Country-specific challenges
In general, there aren’t many Taiwan-specific challenges for corporate treasurers, according to Rupert Keenlyside, founder of CompleXCountries, as the major international banks operate in the country and the domestic banks are competent and keen to provide financing. Most companies have local bank accounts for customs, taxes and bank guarantees. “You can do most things, albeit with a local flavour,” he says.
However, there are historical issues originating in the remnants of currency controls, he reports. “Cross-border payments are more of a challenge if the volumes to be converted from New Taiwan Dollar (NTD) exceed US$50m per year, requiring specific permission from the central bank. This extra constraint also applies to intercompany loans,” explains Keenlyside. “In addition, local hedging requires a lot of documentation, so most companies hedge offshore via non-deliverable forwards, which works well without liquidity issues.”
According to CompleXCountries’ 2021 Taiwan report (based on a peer group discussion between multinational corporation treasurers), onshore hedging is possible – but it’s complicated once the NTD is involved. “Most peers tend to default to the offshore market, which is quite liquid and relatively easy, except for the inevitable internal measurement problems. One peer made a sizeable acquisition in Taiwan, and was obliged to execute the foreign exchange (FX) conversion over several days to avoid causing disruption in the onshore FX market,” the report stated.
In the past year, interest rate volatility has come out as a top risk for corporate treasurers in Taiwan, according to East & Partners research, well ahead of tech infrastructure upgrades, intermediary risk, trapped liquidity, payment execution risk, and fraud and money laundering.
“While inflation is steadily coming under control, interest expense has increased significantly in the past year, in many instances doubling or more, with few Taiwanese corporates reporting no change in interest expense,” says Martin Smith, Head of Markets Analysis at East & Partners.
Traditionally, the country’s corporates have been characterised by a generally lower use of interest rate swaps to hedge risk compared to Asia Pacific (APAC) peers. As such, they have been forced to adapt quickly, with the preferred response being to renegotiate terms with major lenders or incorporate more off-balance sheet financing.
As Ho highlighted, FX volatility is another challenge. A high proportion of APAC corporate treasurers have experienced a negative impact on their balance sheet in the last year as a result of FX losses, with Taiwan’s corporates highly exposed, according to Smith.
We are strengthening our risk management framework to mitigate currency and interest rate risks in a fluctuating global markets environment.
Jenny Ho, Senior Vice-President, Finance Department, FENC
“While nearly three out of four Asian treasurers suffered a negative liquidity balance sheet impact in the past month because of FX volatility – and of those, nearly one in four had a severe negative impact – the percentage was higher in Taiwan,” he says. “FX switched to an active responsibility for treasurers, who had varying degrees of success in managing it.”
Many banks are trying to help their clients address these pressing operational issues, with varying degrees of success, according to Smith. That is being reflected in how treasurers are behaving in terms of increasing intent to switch provider and level of panel banking.
“There are several different key performance indicators and performance metrics that we track for the banks that are flashing red on numerous instances, as many incumbent banks are finding it more difficult to retain business with their largest, most valuable clients,” he adds.
He reports witnessing a change post-pandemic, with treasurers more likely to shop around for better bank relationships than ever before.
Banking relationships
Customer expectations are rising rapidly, evidenced by increasing customer switching/churn intent each year, according to East & Partners research. One in four APAC corporates plan to switch cash and payments provider in the next six months, with some banks facing churn rates as high as four in ten primary customers actively considering a change in their service provider in the next six months.
The functionality that would most compel a corporate treasurer to switch their primary banking relationship is faster onboarding (24%), efficient anti-money laundering (AML)/know your customer (KYC) processes (19%) and enhanced transaction visibility (16%).
Proactivity, positioning the client front and centre, and specific industry expertise are critical for a best-of-breed corporate-banking relationship, according to Smith. “Despite the push towards digitisation, automation and enhanced application programming interface (API) functionality, old fashioned relationship management excellence is increasingly winning the hearts and minds of Asia’s chief financial officers (CFOs) and treasurers,” he says.
Despite moves by Citi and Standard Chartered to “right size” their operations and withdraw from underperforming markets, corporate treasurers continue to strongly value global representation, especially when it comes to trade and supply chain finance.
Ho advocates maintaining clear, open and regular communication with banking partners; using multiple banks to mitigate risks and ensure competitive terms; deploying tools like cash pooling to enhance visibility and reduce idle funds; regularly reviewing and renegotiating fees and rates for the best deals; staying abreast of regulatory changes; using online platforms and automation to streamline operations and improve efficiency; and periodically reviewing banking services to ensure they meet your needs and remain cost-effective.
Interestingly, corporate treasurers in Taiwan increasingly view compliance as the primary responsibility of banks (65%), as opposed to a combination of themselves and banks (18%), or themselves (14%), with only 3% unsure, according to East & Partners research.
In addition, banks are being tasked with stepping up and playing a greater role in fintech choices for Taiwan corporates, specifically application solutions (81%), cybersecurity protection (63%) and cloud infrastructure and engagement (43%).
“Digitisation advice and guidance is the new frontline in the intensifying battleground for corporate cash and payments relationships,” says Smith. “CFOs and treasurers are crying out for guidance and advice on AI, embedded finance capability, cloud infrastructure, APIs, smart contracts and especially cybersecurity, fraud and AML protection.”
Upping treasury’s game
To be more strategic for the business. Smith advises corporate treasurers to become increasingly ingrained in the decision-making process at a formulation stage, as opposed to just signing off or being kept at arm’s length.
“This is especially pertinent when implementing ‘China Plus One’ diversification plans – as the majority of Taiwan corporate treasuries are either currently or planning to shift supply chain activities outside of China to Vietnam, Thailand or other South-East Asian countries,” he adds.
While Ho believes that treasury has always been a vital function within a business, she also recognises that the role is evolving. She identifies several key areas where it can become more strategic for the overall business:
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Taking a more proactive role in cash management to support strategic decision-making, improve profitability and lower financing costs.
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Using hedging techniques to mitigate risks, as well as aligning them with the company’s broader strategy.
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Tapping into diverse funding sources to ensure the business has sufficient resources to pursue strategic initiatives.
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Playing a pivotal role in supporting merger and acquisition activity by assessing the financial health of target companies, structuring deals efficiently and managing post-merger integration from a financial standpoint.
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Adopting financial technologies and automation enables treasury to go beyond traditional cash management, for example using AI and machine learning to improve forecasting and enhance efficiency.
As treasury becomes more strategic, it should collaborate with IT, HR, legal and operations, suggests Ho. “By participating in cross-functional discussions, treasury can influence business decisions, manage financial risks and support initiatives aligned with the company’s long-term goals,” she explains.
Another area is sustainability and supporting environmental, social and governance (ESG) goals. “As businesses face growing pressure to meet ESG expectations, treasury can play an important role in aligning financial strategies with sustainability goals,” Ho says.
“This includes managing sustainable finance instruments, such as green bonds, integrating ESG criteria into investment and financing decisions, and helping the business meet regulatory and investor expectations regarding sustainability,” she adds. This approach helped FENC to clinch the Best Sustainable Treasury Solution 2024 accolade at the Adam Smith Awards Asia.
