When I was growing up, the “Made in Taiwan” stamp was a reason for derision, as it denoted inferior quality goods. But those initial exports — which began stepping up in the 1960s — set the stage for the Taiwan of today: a growing economy, fueled by advancements in technology.

While China garners most of the attention of investors trying to cash in on Asia’s tremendous growth of the past few decades, investors would be amiss not to recognize the growing importance of Taiwan on the world stage.

As I’ve pointed out in a recent article, in 2010, Taiwan was the fourth-fastest-growing economy in the world, with a GDP improvement of 10.8%. The slow global recovery took a bite out of that expansion this year, but Taiwan’s GDP growth still is estimated to come in at about 4.5%, followed by a 4.2% increase next year.

From a largely agrarian economy, Taiwan’s electronics and tech products now lead the country’s exports and are forecast to rise by 3% to 5% next year. Taiwan supplies the majority of contract computer chip manufacturing (foundry services) to the world and also is one of the leading manufacturers of LCD panels. Taiwan also is one of the top manufacturers of DRAM computer memory, networking equipment and consumer electronics.

China is the biggest buyer and supplier to Taiwan, accounting for 28% and 13.2% of its exports and imports, respectively. But the U.S. accounts for 11.4% of Taiwan’s exports and is its third-largest trading partner, scooping up as many electronics and consumer goods that our money can buy.

An additional boon to Taiwan’s economy is from the growing significance of its foreign direct investment (FDI).

In 2010, Taiwan was tied for No. 29 in global accumulated FDI, with about $111 billion currently in-country. In just 10 years — since its accession to the World Trade Organization — the country has more than doubled the $44.8 billion it received during the almost 50-year period from 1952 to 2000!

The entry to the WTO has been the biggest boost to FDI, but the Taiwanese government also treats foreign firms very well, including offering mostly unrestricted trade-related capital flows, abolishing the 50% foreign ownership limit in 2001 (for most industries), and lifting the amount of portfolio investment in the majority of companies listed on the Taiwan Stock Exchange. The government also offers investment incentives for monies put to work in several areas, including energy conservation and emerging or strategic industries.

Another huge impact on Taiwan’s growth was the 2010 Economic Cooperation Framework Agreement the country inked with China to cut tariffs to expand trade between the two nations. It’s working well, with China bringing in about $130 million to Taiwan last year. And Taiwan now is going to allow Chinese investors to buy up to 10% in Taiwanese tech companies and up to 50% in new tech-sector joint ventures — sure to spur even more expansion.

Consequently, foreign investment in Taiwan is booming. Through August of this year, FDI rose 13.04%, or $2.95 billion, over 2010. Most of that FDI is in the electronics and electrical industries, but funds also are being directed toward the banking and insurance services, chemicals, trade and basic metals.

About 400 foreign companies operate in Taiwan, and about 100 have set up a regional headquarters in the country — a number that is expected to rise to 300 by 2015, according to a recent government report. Those companies include Applied Materials (NASDAQ:AMAT), the world’s largest producer of chipmaking equipment in the U.S., and ASML Holding N.V. (NASDAQ:ASML), Europe’s biggest semiconductor-equipment maker.

During last fall’s Taiwan Business Alliance Conference, 32 foreign companies — including Dell (NASDAQ:DELL), DHL International GmbH and Novartis (NYSE:NVS) — signed letters of intent to invest in Taiwan during the 2011, to the tune of about $1.66 billion.

FDI from the U.S. and offshore monies from its multinationals contribute the largest portion (24%) of foreign funds to Taiwan, followed by Japan (21%).

Sounds good, doesn’t it? A growing economy, significant increase in global trade and a rush to beat down the doors to invest directly in the country by hundreds of foreign firms — what’s not to like?

Consequently, you might ask, “How does an investor get involved in this growth?”

Let me first say that, of course, investing internationally during a slow global recovery is a speculative venture. Europe’s woes — as you’ve seen in the past year — have drastically affected stock markets around the world. And Asian stocks have been some of the worst hit. In fact, MSCI’s EAFE Index (representing developed markets outside of North America, including Europe, Australasia and the Far East) is down 11.3% year-to-date.

So it might not yet be time to jump into Taiwan.

But that time is coming. And the good news is that the Taiwan Stock Exchange is vibrant and modern. Now 50 years old, it has 758 companies listed as of 2010 and enjoys a market cap of $784 billion. The exchange was one of the first global markets to embrace computerized trading, and recently has announced upgrades, to be completed by the end of 2013, that will allow algorithmic or high-frequency trading strategies to align it with other international exchanges.

Also, about 10 Taiwan American Depository Receipts are available to investors.

However, I would recommend that most folks who wish to participate in Taiwan’s growth story concentrate on exchange-traded funds. That way you get diversification and a professional money manager who has some knowledge of the inner workings of the country and its corporations. I just think buying individual stocks in Taiwan right now, for most investors, would be an exercise in great risk thanks to global uncertainty.

More than 60 ETFs include Taiwanese businesses as part of their portfolio of Asian countries, but just a couple that focus exclusively on Taiwanese investments.

• iShares MSCI Taiwan Index (NYSE:EWT) is primarily comprised of shares in large-cap companies, with about 60% of its investments in the tech sector, followed by large holdings in finance and consumer cyclical. Its portfolio includes Taiwan Semiconductor, Hon Hai Precision, HTC Corporation, Chunghwa Telecom and Mediatek Inc. This ETF has had a -20.9% return so far this year but has a three-year return of 18.29%. Morningstar gives EWT a two-star rating.
• IQ Taiwan Small Cap ETF (NYSE:TWON) was created in mid-2010. This ETF focuses on small-cap companies, including Yungtay Engineering Co., Ltd., Kerry TJ Logistics Co Ltd. and Compal Communications Inc. The ETF is down 29.33% year-to-date and is not yet rated by Morningstar.

Both EWT and TWON are extremely volatile, with TWON more so because of its small-cap investments. Most investors would be more suited to owning a more macro-focused ETF that would include Taiwan but also allow you to participate in the tremendous growth across many Asian countries.

Very risk-tolerant investors, however, might want to move EWT and TWON onto their watch lists right now for a possible buy as soon as Europe’s problems cease to be the major headlines of the day. Once global growth becomes less constrained, the Asian economies — particularly Taiwan — might offer some significant gains to the investor who can tolerate a high degree of risk.

As of this writing, Nancy Zambell did not hold a position in any of the aforementioned securities.