Taipei, July 16 (CNA) The local machine tool sector is planning to invest NT$10 billion (US$346 million) in Taiwan over the next three years to meet growing global demand, the Ministry of Economic Affairs said Saturday.

Domestic machine tool firms, including Hiwin Technologies Corp. and Fair Friend Group, will launch large-sized investment projects in technology parks located in Taichung, Yunlin and Chiayi over the period, and Japanese companies have also shown interest.

One of the key factors driving new investment in the sector has been the implementation of the Economic Cooperation Framework Agreement (ECFA) Taiwan and China signed in 2010, the ministry said.

Machine tools were among the items included in the trade pact's early harvest list -- which took effect on Jan. 1, 2011 -- making them eligible for preferential duties or duty-free status when imported by China.

Exports of Taiwan-made machine tools to China in the first half of this year rose 43 percent from a year earlier to US$820 million (NT$23.7 billion).

Aside from growing investment by domestic machine tool firms, machine tool heavyweights from Japan are also setting up production bases in Taiwan to capitalize on the strong demand from China.

Fanuc Corp., Japan's largest machine tool firm, invested NT$2 billion in Taiwan soon after the ECFA was signed in June 2010 to open a low- to medium-end computer numerical control (CNC) machine tool production line.

Fanuc's production line, which started operations in April, is expected to have an output value of NT$10 billion a year.

The Japanese firm is also in talks with the ministry on setting up a high-end CNC machine tool production line on the island.

Meanwhile, Kuraki Co. Ltd. and Okuma Corp. of Japan have also invested NT$200 million and NT$700 million respectively to set up machine tool production facilities in Taiwan.

In 2010, Taiwan's US$3 billion in machine tool exports was the fourth highest of any country in the world. The figure is likely to rise to US$4 billion