UPDATE 1-Taiwan plans business zone to boost economy

(Adds details, background on other economy-boosting measures in paragraphs 7 and 8)

By Doug Young

TAIPEI Dec 30 (Reuters) - Taiwan is planning to set up a special zone to lure more Taiwanese-run businesses, many now in China, back home as part of its broader drive to boost the local economy, Premier Liu Chao-shiuan said on Tuesday.

Liu said the zone was still in the planning process, and declined to give details such as where it would be, or what kinds of facilities or incentives it might offer to companies that set up shop there.

"We're in the process of planning a special trade zone for Taiwan businesses," he said at a year-end media briefing, adding that many Taiwan-rooted companies had set up shop abroad in the past due to concerns over high costs at home.

But with costs rising rapidly in China over the last year, putting a strain on many Taiwanese firms and forcing a growing number to close, the Taiwan government is hoping to step in and lure some of those companies to come back home.

"What kind of business they would want to do in this zone is up to them, but we want to supply them with good technology, facilities and infrastructure," Liu said.

Establishment of the zone is part of broader plans by the administration of President Ma Ying-jeou, who took office in May, to boost the local economy, which was sluggish even before the global financial crisis reached a peak in the fall.

The government has been unveiling a steady stream of economic-boosting measures since Ma took office in May.

Liu said those included T$500 billion ($15 billion) worth of infrastructure spending over the next four years; T$200 billion to boost industry competitiveness and T$85.7 billion for a shopping voucher programme announced last month.

The imperative to improve the economy, which is highly dependent on exports, has only grown since much of the world officially entered recession in the second half of this year.

Taiwanese firms have been moving their manufacturing plants out of Taiwan to low-costs bases such as China over the past decade or so and the island's government has been trying to lure them back to lift private investments, a driver of economic growth.

Separately, Liu said that the economics ministry was still working with the island's DRAM memory chip makers, which have posted massive losses in recent quarters amid the global sector's worst-ever downturn.

He said the ministry has formed a special team of experts to work with the industry, whose major players include Powerchip (5346.TWO), Nanya Technology (2408.TW) and ProMOS 5387.TWO, which is thought to be in the worst shape.

He said tie-ups with non-Taiwanese companies were a possibility, but declined to give further details.

ProMOS and Powerchip previously confirmed they have submitted plans to the government on how they would improve their situations, though no final decisions have been reached yet. Two names that have come up several times as potential long-term tie up partners are Japan's Elpida 6665.T and U.S.-based Micron Technology MU.N.

(Editing by Jacqueline Wong)