Korea and Taiwan recently began talks for a Bilateral Investment Treaty, their first move toward economic cooperation since the two countries severed diplomatic ties 20 years ago.

The two sides met on June 21 in Taiwan to exchange views on the treaty to guarantee investment in each other’s country at Taipei’s request, Korean Trade Ministry officials said Friday.

Actual negotiations are slated to begin in October in Seoul.

BITs grant investments made by an investor of one contracting state in the territory of a number of guarantees including fair and equitable treatment, protection from expropriation, free transfer of means and full protection and security. Korea has BITs with about 80 countries.

“The talks started as there have been strong requests for a BIT from the industrial sectors of both countries for a long time,” Seoul’s Deputy Minister for FTA Choi Seok-young said.

“China has not said anything about our talks with Taiwan.”

Taiwan cut off diplomatic relations with Korea in 1992 after Korea established ties with China, which claims Taiwan as its own territory.

Trade volumes and investment between Korea and Taiwan have continued to increase.

Two-way trade amounted to nearly $33 billion last year. Korea’s exports to Taiwan hit $18.3 billion making it the sixth largest exporter to the island. Korea’s imports from Taiwan, the 11th largest exporter to Korea, reached $14.7 billion.

Taipei seeks to increase exports through a BIT with Korea, which inked free trade agreements with the European Union and the U.S. If Taiwanese companies build factories in Korea, they can enjoy the benefits of Korea’s FTAs.

The Seoul government believes an increase in investment from Taiwan could help create more jobs.

Relations between China and Taiwan have also improved in recent years.

In June 2010 China and Taiwan signed an Economic Cooperation Framework Agreement, a de facto free trade agreement that cut tariffs on many manufactured goods and services.

By Kim So-hyun (sophie@heraldcorp.com)