Overview of Taiwan s Leasing Industry

Transcription

1 Overview of Taiwan s Leasing Industry 1. Taiwan s Economic Review 1.1 Major Economic Indicators in 2007 Year 2007 Unit Economic Growth Rate 5.72 % GDP 383 US$ billion Per Capita GDP 16,792 US$ GNP 393 US$ billion Per Capita GNP 17,252 US$ Money Supply 4.30 % Private Investment Growth 3.39 % Consumer Price Index 1.80 % Export 246 US$ billion Import 219 US$ billion Unemployment Rate 3.91% % Prime Rate 4.30 % Source: Department of Statistics, Executive Yuan, R.O.C. 1.2 Economic Performances in 2007 As 2007 as whole, Taiwan s foreign trades experienced a growing trend since our major exporting partner countries had solid economy growth. Thus, boosted by the brilliant external demand and robust private fixed capital formation, mainly from high-tech and aviation industries, in 2007 the economy grew by 5.72%, much better than previously forecasted. With regard to the foreign trade, exports expanded by 10.1% with value of US$246 billion and imports expanded by 8.2% with value of US$219 billion. In addition, industrial production registered an average growth of 8.1%. CPI and WPI increased by 1.8% and 6.5%, respectively. Furthermore, the unemployment rate recorded 3.91% the same level as in M1B and M2 expanded by 6.4% and 4.3% respectively. Since late May 2007, both long-term and short-term market interest rates have 1

2 trended up, as tight funding conditions prompted banks to adopt a cautious attitude towards funds operations. Commercial paper rate and interbank rate increased by 1.9% and 2.0% respectively. The rediscount rate was raised to 3.375% in December, from 3.25%. 1.3 Prospects for is viewed as a turning point year. Owing to the chain effect of sub-prime mortgage crisis, the surge of oil and raw material prices, the global economy is facing slowdown in growth. The economy growth of Taiwan is forecasted 4.32% in 2008, with GNP of US$428 billion and GDP per capita reaching US$18,042. As global economic prospects are becoming less buoyant, exports will be anticipated to increase mildly in 2008, growing by 6.1%, supported by sound economic situation in emerging markets. Induced by export expansion, imports will be able to increase 6.3%. As the unfreezing of oil and electricity price in Taiwan, inflation pressure continues to rise. The central bank increases interest rate moderately in order to curb inflation. Furthermore, WPI is estimated to be between 2.4% and 7.4% by major research institutions. Since rising cost of raw materials have added to consumer price inflation pressure gradually, CPI inflation will not be below 2%. However, with stable prices of durable consumer goods and services, CPI is likely to see a moderate increase of 2.0% for the whole year. The government will keep alerting about price risks to achieve the inflation target of below 2%. In conclusion, the 2008 economy is expected to grow at a stable pace. 2. Taiwan s Leasing Industry 2.1 Market Growth According to the statistics of The Taipei Leasing Association, it showed that the leasing industry grew sharply in 2004 and reached the peak in However, it started to slow down in the following year. In 2007, the business recovered with a growth of 13%. Furthermore, by comparing the contract amount of leasing and installment, the business ratios were 24% vs. 76%. As you can see clearly, the contract amount of leasing business decreased by 15% in In comparison, the contract amount of installment business increased by 26%. 2

3 Table 1 Year 2003~2007 Contract Amount of Leasing & Installment Unit: NTD Thousand Business Leasing 32,949,751 26,803,322 30,981,126 36,290,214 30,797,799 Installment 57,251, ,516, ,969,448 78,585,905 99,022,031 Total 90,201, ,320, ,950, ,876, ,819,830 Change % - 41% 7% -16% 13% Figure 2 Five-year Change of Contract Amount of Leasing & Installment 120,000,000 90,000,000 60,000,000 30,000, Leasing Installment 2.2 Major Market Players In 2007, there were a total of twenty-four members, registered with The Taipei Leasing Association and they were the major market players in the leasing market as well. The members are divided into four different categories by banking affiliates, independent leasing companies, captives and foreign financial companies as shown in the following table. As you can see, the group of bank affiliates was the majority with eleven members. There were only five members under independent leasing companies. Table 3 Categories of members in 2007 Category No. of Member % of Ratio 3

4 Bank Affiliate 11 45% Independent Leasing Company 5 21% Captive 4 17% Foreign Financial Company 4 17% 2.3 Market Shares With regard to the market share, the biggest group; bank affiliates, does not represent majority of the total market size. In figure 4, the group of independent leasing companies is the leader with more than 50% of market shares. Additionally, the group of captive ranked the second with 27% of market shares. However, the biggest group, bank affiliates has only 14% of market shares. Finally, the group of foreign financial companies has the lowest market shares, which was 5%. Among those members, the market leader of Taiwan leasing industry was Chailease Finance Co. Ltd., which belonged to the group of the independent leasing companies. The company was established for more than 30 years and also has been the market leaders for a long period of time. Its market share reached 49.6% in Figure 4 Market Shares of Major Players by Categories in 2007 Bank Affiliate 14% Independent Leasing Company 54% Captive 27% Foreign Financial Company 5% Category % of Market Share Independent Leasing Company 54% Captive 27% Bank Affiliat 14% Foreign Financial Company 5% 4

5 2.4 Business Brief Business Types Basically, business types of leasing industry in Taiwan can be defined as two major categories. The first category is the leasing business and the other one is the installment. According to the table 5, it can be realized generally that the leasing business took about 30% of total business and installment took about 70% of all. However, the ratio of leasing business showed a sign of decline from 32% in 2006 to 24% in Table 5 Year 2005~2007 Contract Amount of Leasing & Installment by Property Unit: NTD Thousand Type of Property Leasing Installment Leasing Installment Leasing Installment Manufacture 10,397,593 11,820,724 7,960,304 8,850,068 5,664,611 8,640,344 OA 1,725,534 2,690,241 4,224,725 3,853,829 2,265,252 5,806,983 Vehicle &Tran. 14,694,919 48,951,500 18,454,924 15,349,739 18,694,290 29,071,002 Construction 2,453,680 2,260, ,050 2,555, ,363 2,017,288 Medical 424, , ,972 1,095,849 1,691, ,276 Raw Material 320,312 36,383, ,777 42,644, ,522 49,748,481 Others 964,838 2,300,671 4,237,310 8,571,772 1,901,832 3,392,657 Sub-total 30,981, ,969,448 36,290,214 78,585,905 30,797,799 99,022,031 Total 135,950, ,876, ,819,830 Table 6 Year 2005~2007 Percentage of Contract Amount of Leasing & Installment by Property Unit:% Type of Property Leasing Installment Leasing Installment Leasing Installment Manufacture 8% 9% 7% 8% 4% 7% OA 1% 2% 4% 3% 2% 4% Vehicle &Tran. 11% 36% 16% 13% 14% 22% Construction 2% 2% 1% 2% 0% 2% Medical 0% 0% 0% 1% 1% 0% Raw Material 0% 27% 0% 37% 0% 38% Others 1% 2% 4% 7% 1% 3% 5

6 Sub-total 23% 77% 32% 68% 24% 76% Total 100% 100% 100% Types of Property As show by the statistics, from 2005 to 2007, the predominant properties of leasing industry were manufacture, vehicle and transportation, and raw materials. These three types of property accounted for more than 80% of the total transactions and generated more than 100 billion contract amounts. In particular, the type of vehicle and transportation, having increased in 2007, despite that it had dropped significantly in This was due to the recovery in the domestic vehicle market and corporate car leasing business. In addition, although the type of manufacture accounted for 11% of the total transactions in 2007, the contract volume started to decrease gradually from 22.2 billion in 2005 to 14.3 billion in With regard to the type of raw material, which was the biggest portion, it had 38% of total transactions in The type of raw materials grew steadily from 36.7 billion in 2005 to 49.9 billion in Table 7 Year Contract Amount by Property Unit: NTD thousand Type of Property Change % for 2007 Manufacture 22,218,317 16,810,372 14,304, % OA 4,415,775 8,078,554 8,072, % Vehicle& Transportation 63,646,419 33,804,663 47,765, % Construction 4,713,860 3,239,084 2,410, % Medical 987,294 1,624,821 2,037, % Raw Materials 36,703,400 42,746,853 49,935, % Others 3,265,509 8,571,772 5,294, % Total 135,950, ,876, ,819,830 13% Table 8 Year 2005~2007 Percentage of Contract Amount by Property Unit: % Type of Property Change % for 2007 Manufacture 16% 15% 11% -4% 6

7 OA 3% 7% 6% -1% Vehicle& Transportation 47% 29% 37% 8% Construction 3% 3% 2% -1% Medical 1% 1% 2% 1% Raw Materials 27% 37% 38% 1% Others 2% 7% 4% -3% Total 100% 100% 100% - Terms of Contract From the table below, it is shown that more than 50% of contract terms were between 24 months to 36 months. Terms equal or above 48 months only accounted for about 10~15%, even lower in The term of 36 months accounted for the largest proportion in 2005 and 2006; but in 2007 the term of 24 months overtook and became the largest with 40.06%. The main reason for this change could be attributed to the decline of new car sales. As we know, new car leases were prefer longer terms; however, owing to the decline of new car sales in 2007 caused the change of term distribution. Table 9 Year 2005~2007 Percentage of Contract Amount by Contract Term Unit: % Term Change % for 2007 Below 12 months 13.8% 23.2% 16.19% -7.01% 18 months 9.7% 9.5% 6.76% -2.74% 24 months 23.8% 23.3% 40.06% 16.76% 36 months 34.9% 29.1% 26.11% -2.99% 48 months 10.6% 6.3% 4.18% -2.12% 60 months 6.9% 5% 2.86% -2.14% Above 60 months 0.3% 3.6% 3.85% 0.25% Major Target - SMEs As the result of the credit policies of bank institutions, it has been difficult for SMEs to obtain financial resources from commercial banks. Therefore, SMEs turned to leasing companies to obtain sources of finance. Hence, SMEs and leasing companies developed closed business ties. Over a long period of time, SMEs became the main target market for Taiwan s leasing industry, particularly 7

8 for independent leasing companies. For SMEs, leasing companies not only could provide more flexible finance sources, but also more efficient services to them. From 2005 to 2006, the contract amount from SMEs accounted for more than 70% of total contract amounts; however, the ratio dropped down to 59% in That might have attributed to that fact that more and more Taiwanese SMEs have moved to China gradually. Table 10 Percentage of SMEs by Contract Amount Unit: NTD Thousand Year Contract Amount from SMEs 1 113,916,287 82,454,580 76,176,767 Total Contract Amount 135,950, ,876, ,819,830 % of SMEs 84% 72% 59% 3. Prospects for Taiwan s Leasing Industry As the leasing industry in Taiwan becomes ever more mature and competitive, leasing companies are facing more and more challenges in this market. Therefore, it is a major task for leasing companies to expand market scopes and develop new business opportunities. Furthermore, the legislation of Finance Company Act is an important factor for the leasing industry. The Finance Company Act has been discussed for few years. The aim is to facilitate leasing companies to operate in the same business scope as finance companies. In other words, leasing companies would be recognized as finance companies and allowed to operate financial business areas, such as consumer loan, invoice discount, guarantee business and so forth. As a result, the Act would encourage and positively affect the leasing industry a lot in the future. With regard to the legislative progress of Finance Company Act, there has been significant progress in 2008 and the Act is expected to be passed in the near future. Once Finance Company Act is enacted, it would create a new age for both the leasing and the financial industries in Taiwan. 1 SMEs represent the enterprises with capital below 100 million NTD (approximately 3 million USD). 8