Nov 2014 taiwan business topics vol 44 issue 11 by AmCham Taipei

www.amcham.com.tw THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics

TAIWAN BUSINESS TOPICS November 2014 | Vol. 44 | Issue 11 中華郵政北台字第號執照登記為雜誌交寄 5000 11_2014_Cover.indd 1

THE TAIWAN ECONOMY: OUTLOOK FOR 2015 2015年經濟展望 • Industry Focus: A Report on the Real Estate Sector

November 2014 | Vol. 44 | Issue 11

NT$150

ISSUE SPONSOR

Published by the American Chamber Of Commerce In Taipei

2014/11/6 10:02:34 AM

CONTENTS NEWS AND VIEWS

6 Editorial

Restoring Confidence in the Food Supply

NOvE mb Er 2 0 1 4 vOlumE 44, N umbE r 11 一○ 三年十一月號

重建民眾對食品的信心

7 Taiwan Briefs Publisher

By Timothy Ferry

發行人

Andrea Wu

11 Taiwan Business Alliance 12 Issues

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro

沙蕩

Associate Editor

Advice from Michael Porter; Chemical Registration Update; Deregulating the Securities Settlement Process

副主編

Tim Ferry

法緹姆美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Manager, Publications Sales & Marketing 廣告行銷經理

Caroline Lee

李佳紋

Translation

波特教授的建言；化學物質登記制度最新發展；證券交割法規鬆綁 By Don Shapiro

翻譯

Jay Chen, Yichun Chen, Charlize Hung 陳正杰, 陳宜君, 洪兆怡

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱：台北市美國商會工商雜誌發行所：台北市美國商會臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182 Taiwan Business TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2014 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號印刷所：帆美印刷股份有限公司經銷商：台灣英文雜誌社台北市108台北市萬華區長沙街二段66號發行日期：中華民國一○三年十一月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

Chairman/ Thomas Fann Vice Chairmen/ Scott Meikle / William J. Farrell Treasurer: Cosmas Lu Secretary: Fupei Wang 2013-2014 Governors: Thomas Fann, William Farrell, Ajit Nayak, Neal Stovicek, Stephen Tan, Fupei Wang, Bill Wiseman. 2014-2015 Governors: William E. Bryson Jr., Sean Chao, Rodney Van Dooren, Cosmas Lu, Scott Meikle, Dan Silver, Gordon Stewart, Ken Wu. 2014 Supervisors: Anita Chen, Midee Chen, Joseph Lin, Louis Ruggiere, Vincent Shih. COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Derek Yung; Banking/ Victor Kuan; Capital Markets/ Miranda Liaw, C.P. Liu, Shirley Tsai; Chemical Manufacturers/ Michael Wong; CSR/ Lume Liao, Fupei Wang; Customs & International Trade/ Stephen Tan; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Cosmas Lu; Human Resources/ Richard Lin, Seraphim Mar, Vickie Chen; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Arthur Cozad, Joseph Day, Dan Ting; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Vincent Shih; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, Tse-Mau Ng, Dan Silver; Pharmaceutical/ Margaret E. Driscoll, David Lin, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin; Real Estate/ Tony Chao; Retail/ Prudence Jang, Ajit Nayak, Wern-Yuen Tan; Sustainable Development/ Kenny Jeng, Kernel Wang; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, Scott Meikle, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, Achim v. Hake.

COVER SECTION

17 The Taiwan Economy: Outlook for 2015

2015年經濟展望 With its heavy reliance on exports, especially of electronics products, the Taiwan economy is always subject to external factors that are difficult to predict. But the consensus among economists is that Taiwan – despite continuing long-term challenges – will do reasonably well in the coming year, perhaps somewhat better than in 2014. A surprising development this year was the relative strength of domestic consumption as a contributor to GDP, though it remains uncertain whether that will still be the case in 2015. By Timothy Ferry

20 Into the Future with the Internet of Things 24 Tourism and the Cost-down Model 26 The Rise of the Red Supply Chain

TAIWAN BUSINESS

30 Despite Riots and Red Tape, Taiwanese Investment Still Grows in Vietnam

Provisions of the Trans-Pacific Partnership could cause more textile operations to set up there.

By Jens Kastner

LIFE IN TAIWAN

33 Dealing with Culture Shock

Taiwan is a relatively easy environment in which to live, but inevitably many expatriates find the transition to a new culture to be a challenge.

By Michael Mullahy

taiwan business topics • november 2014

11 Contents.indd 4

2014/11/6 11:07:16 AM

COvE r SPONSOr

nove mbe r 2014 • volume 44 n umbe r 1 1

LAW

36 Food Safety: A Legal Perspective

Prosecutors have been winning criminal fraud convictions in adulterated food cases but better civil and administrative tools are needed.

By Peter Dernbach, Gary Kuo, and Michael Fahey

INDuSTrY

CuS

關於3M 公認的創新研發領導者，1902年成立的3M公司生產數以萬計創新產品在多元的市場服務客戶。3M的創新力量來自於旗下46個技術平台，藉由各項技術的結合與創新，發展出極具巧思的解決方案來滿足客戶的需求。3M全球89,000名的同仁在2013年創造了310億

A Report on the Real Estate Sector

美元的營業額，目前3M在70多個國家設有子公司。3M 台灣成立於

42 Surviving Taiwan’s Sky-high Housing Prices

1969年，在台北設有辦公室，台中、高雄各有一個聯絡處，物流中心設於桃園縣大園鄉，生產線及技術研發中心則設立於桃園縣楊梅

The government is making efforts to cool down the market through tax and mortgage policies.

市，3M台灣於2005 年在南部科學園區成立台灣明尼蘇達光電股份有限公司，為台灣地區唯一專業製造光學增光膜的生產單位。目前

By Timothy Ferry

約有2,000位同仁在台灣各地為顧客提供服務。更多詳情資訊請上

45 What Foreigners Can Own

WWW.3M.COM.TW, 或加入3M facebook與我們聯繫。。

By Jens Kastner

46 Insurers Interested in Superficies Rights and Overseas Projects

About 3m

The regulator’s strict criteria for investment in the domestic commercial market has spurred companies to look at other opportunities.

3M is a diversified technology company operating worldwide across five business segments: Industrial; Electronics & Energy; Health care; Safety and Graphics; Consumer. Founded in 1902, 3M has expanded significantly over the years from its core strengths of abrasives, industrial tapes, adhesives, and film products. A recognized leader in research and development, 3M today produces thousands of innovative products for dozens of diverse markets. 3M currently employs around 89,000 people worldwide and has operations in more than 70 countries.

By Philip Liu

49 Taking Care of the Building

Where the real estate market leads, Taiwan’s property management industry follows. By Jules Quartly

AMCHAM EVENT

28 Judging Ad Campaigns on Creativity Night taiwan business topics • november 2014

11 Contents.indd 5

Established in 1969, 3M Taiwan is based in Taipei and has a customer sales center respectively in Taichung and Kaohsiung; a warehouse in Dayuan, Taoyuan County; as well as a plant and a R&D center in Yangmei, Taoyuan County. In 2005, 3M Taiwan Optronics Corporation was established in the South Taiwan Science Park. There are more than 2,000 3M employees serving customers throughout Taiwan.

2014/11/6 11:07:18 AM

Restoring Confidence in the Food Supply

ven after repeated food-safety incidents in Taiwan, the recent adulterated edible-oil crisis has come as a drastic shock due to the magnitude of its scope and the utter unscrupulousness of certain offenders. As an organization dedicated to ethical and responsible business practices as one of its core values, AmCham Taipei finds it deeply distressing that any companies could engage in such unconscionable behavior. After many past warnings of fundamental problems in Taiwan’s food safety regime failed to bring solutions, it is now vital that the government put an effective system in place to restore confidence in the food supply. But in doing so, the authorities need to be mindful of potential pitfalls that may undercut the success of the endeavor. Chief among these is the frequent past practice in Taiwan of enacting stringent legislation, but neglecting to follow up with equally strict enforcement. The end result is merely to penalize decent companies that take on the effort and expense of adhering to the letter of the law, while dishonest competitors cut corners without detection. Much of the responsibility in this country for actual enforcement resides with city and county-level governments. To ensure that laws and regulations are enforced properly and consistently, the central government will need to create mechanisms to carefully monitor the performance of local authorities. Another challenge will be devising a new food-safety system that not only addresses the immediate concerns raised by the current scandal, but that serves as a guarantor of Taiwan’s food standards for the long term. The process of undertaking comprehensive and practical reforms should entail consultations with recognized top-quality producers, both domestic and international, to gain the benefit of their expertise. They can advise from

practical experience on what food manufacturers should be doing to ensure sound quality assurance throughout the supply chain and production process. In addition, the Law section of this issue of Taiwan Business TOPICS provides some insight into the legal aspects of countering serious food-safety violations. As the article points out, an obstacle to stiffening the punishment in food safety cases has been the doctrine in Taiwan that the same offense should not be penalized twice – once through administrative fines and again through judicial prosecution. Although the principal of double jeopardy is hardly unique to Taiwan, in the United States it applies only to criminal proceedings. Several bills currently before the Legislative Yuan aim at redefining the doctrine to make heavier penalties available. In the wake of the latest scandal, the government has expressed its determination to solve the food-safety problem once and for all. Much is riding on its ability to succeed in that effort. An angry and anguished public deserves to have its confidence restored in the reliability of the food it consumes each day. There are broader implications for the economy as well. Taiwan exports some US$1.7 billion worth of food products per year, and already some overseas markets are showing a reluctance to continue purchasing from Taiwan suppliers. Also at risk is the continued vitality of Taiwan’s tourism industry, since the outstanding local cuisine is one of the biggest attractions for foreign visitors. Establishment of the new cross-agency Food Safety Office under the Executive Yuan is a promising start in getting Taiwan back on track. AmCham and its member companies stand ready to provide support through information on international corporate best practices as reference.

重建民眾對食品的信心然台灣先前已發生多起食品安全事件，但最近的油品危機由於牽涉甚廣，且特定業者惡性重大，依然駭人聽聞。台北市美國商會的核心價值之一，在於致力提倡企業的道德與責任，正因如此，台灣特定企業如此黑心的行為，令本商會深感痛心。有關台灣食品安全機制的根本問題，過去已出現許多警訊，卻無法換來解決之道，如今政府必須建立有效制度，才能恢復民眾對食品的信心。但在建立制度的過程中，當局需要注意避免潛在的問題，以免努力的成效打折。潛在問題主要包括台灣往往訂定嚴格的法規，但事後未能嚴格執行，結果只是循規蹈矩的企業負擔加重，因為他們配合法規投注心力與經費，無良商人卻投機取巧，無人過問。在台灣，法令的執行常由縣市政府負責，為確保法規能夠適切執行、全國一致，中央政府需要建立機制，密切監督地方政府在這方面的表現。另一項挑戰在於設計一套新的食品安全制度，它不僅要能因應這次油品醜聞所揭發的問題，還要能長期保障台灣食品的水準。在這個進行全面與務實改革的過程中，應該請教國內外公認的頂尖食品業者，吸收他們的專業知識。他們可以根據實際

雖

經驗提供建言，說明食品製造商要在供應鍊與生產過程中確保良好品質，應該要有什麼作為。此外，本期Taiwan Business TOPICS與法律相關的文章，針對如何打擊嚴重危害食品安全的行為提供法律層面的見解。文章指出，要在食品安全案件中加強制裁不法業者存在一個障礙，那就是「一罪不二罰」的原則：行政罰鍰與刑事起訴只能擇一。一罪不二審的原則並非台灣獨有，但在美國，它僅適用於刑事案件。有好幾項修法提案已送到立法院，目的在重新界定這項原則，讓不法商人可以受到更嚴厲的制裁。經歷最新這起食安醜聞，政府已表明決心要一勞永逸解決食品安全問題。這項努力能否成功，關係重大。憤怒苦惱的民眾應該要能夠恢復信心，確信他們每天吃進肚裡的食物安全無虞。食品安全也關係到台灣的經濟。台灣每年食品出口金額約達17億美元，而部分海外市場已經表明不願繼續向台灣採購食品。台灣的觀光業能否持續蓬勃發展，也因食安醜聞而出現隱憂，行政院成立跨部會食品安全辦公室，是重新確立台灣食品安全的一個好的開始，台北市美國商會與會員企業願意提供資訊，介紹國際企業在確保食安方面最好的做法，以此支持政府的行動。

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2014/11/2 11:51:02 PM

— by TI M O TH y f e rry —

BATTLING IT OUT IN TAIPEI CITY — The two candidates competing in the mayoral race are both political neophytes. The KMT’s Sean Lien, left, was a financial-sector executive whose candidacy was promoted by his father, former Vice President Lien Chan. The DPP, rather than nominating a member of its own party, is supporting independent Ko Wen-je, a prominent surgeon. photos: cna

DOMESTIC 9-in-1 eLeCtiOns sHOw tOUGH raCe fOr KMt This year’s “9-in-1” elections, to be held November 29, will see more than 11,000 elected positions filled across nine levels of government, ranging from neighborhood wardens to mayors in Taiwan’s six “special municipalities.” Opinion polls conducted by Taiwan Indicator Survey Research Co. and made public in mid-October showed that Taiwan’s two main southernmost cities remain comfortably green. Kaohsiung’s Democratic Progressive Party (DPP) incumbent mayor, Chen Chu, leads her opponent, Kuomintang (KMT) candidate Yang Chiu-hsing, by a massive 58.8% to 10.4%. The race in Tainan is even more unbalanced, with DPP incumbent William Lai polling a 69.4% share versus KMT challenger Huang Hsiushuang’s 6.4%. Taipei City and Taichung City, both usually KMT strongholds, look in doubt for the ruling party, with opposition candidates in both races leading in the polls (see below). New Taipei

City and Taoyuan look brighter for the pan-blues. New Taipei City incumbent, KMT member Eric Chu, leads DPP challenger Yu Shyi-kun in the polls by 43.9% to 14.8%, while Taoyuan incumbent John Wu leads with a 32.7% poll share compared to 11.2% for the DPP’s Cheng Wen-tsang.

KMt’s Lien LaGGinG beHinD KO in POLLs Wi t h a c c u s a t i o n s r a n g i n g f r o m buying votes to buying human organs, the Taipei mayoral race at least has been lively. But with polls showing KMT candidate Sean Lien badly trailing independent but “pan-green”-backed candidate Ko Wen-je, 25% to 44%, the end might be a foregone conclusion. Sean Lien, the son of former KMT chairman and twice presidential candidate Lien Chan, earned a law degree at Columbia University Law School and became an investment banker before accepting the chairmanship of the Taipei EasyCard Corp. Lien was shot in the face while stumping for a local candidate at a campaign event in 2010, and was

treated by Ko, his now opponent in the race for Taipei City mayor. Ko is a highly accomplished surgeon specializing in trauma, intensive care, and organ transplants, and wrote the regulations and procedures on organ transplants in Taiwan. Recent news reports said an author who interviewed Ko for a book on organ transplants in Taiwan suggested that Ko had gone to China to harvest organs from executed prisoners. Ko has denied the claim, and the writer says he seems to have been misinterpreted. A s u r v e y b y t h e L i b e r t y Ti m e s released October 29 gave Ko a 44.38% to 24.85% lead over Lien, little changed from a United Daily News survey released October 21 that put Ko ahead 42% to 29%.

taiCHUnG raCe rePrise Of 2005 In 2005, Lin Chia-lung suffered a convincing defeat in the run for Taichung mayor, falling to the KMT’s Jason Hu by a wide 90,000-vote margin. In 2014, Lin is once again running for Taichung

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Taiwan entered its second month of dealing with the waste oil scandal with the unappetizing revelation on October 1 that Kuo Lieh-cheng, owner of the Pingtung oil factory that allegedly sold tainted oil products to major foods manufacturer Chang Guann, admitted that the oil his company had sold was manufactured from gutter oil, grease, waste from tanneries, and recycled food oil. This tainted oil was then distributed by Chang Guann throughout Taiwan’s food supply. On October 3, indictments were served on the chairman of Chang Guann and on Kuo. Only days after Minister of Health and Welfare Chiu Wen-ta declared “an end to the scandal,” assuring the public that no tainted oil products remained on the shelves, prosecutors began investigating the Cheng-I Food Co., a subsidiary of food manufacturing behemoth Ting Hsin International Group, for other food-safety violations – this time involving diluting oils intended for human consumption with materials intended for animal feed. Ting Hsin is controlled by the Wei brothers, who also own the Hong Kong listed company Tingyi Holding Co., which occupies a 57% share

TAIWAN'S JAN.-SepT. 2014 TRADe FIGUReS (YeAR- ON-YeAR COMpARISON)

2013

2014

24.23 18.75

25.71 20.24

20.43 21.88

21.81 23.2

Europe

2013

2014

2013

2014

Exports

234.65 208.3

2013

44.16

2014

TOTAL

25.7

14.9 31.54

2013

43.1 24.02

14.28 32.4

2014 U.S.

ASEAN

226.62 201.76

Japan

92.73 36.96

89.16 32.7

2013

Imports

waste OiL Crisis eXPanDs in sCOPe

mayor, but this time around he leads Hu in opinion polls 48%-24%, according to a survey conducted by the United Daily News and released October 30. Hu took over the mayor’s seat in 2001 and has held it ever since, winning three elections, the first two for Taichung City mayor and the third for mayor of the newly formed Taichung special municipality, which merged Taichung City and County into a single administrative unit on a par with Taipei City. The merger also removed term-limit barriers on Hu, which has enabled him to remain in office for 13 years. Hu, an Oxford Ph.D. in international relations who formerly served as foreign minister and representative to the United States, cites the recently launched bus rapid transit system and world-class development such as the National Taichung Theater among his accomplishments. Lin, who holds a doctorate in political science from Yale, is best known for serving in various capacities during the DPP administration of Chen Shui-bian. He says that since his defeat for mayor in 2005 he has been studying the needs of the Taichung area and has put together a plan for improving the city’s environment, public transportation, and social welfare.

HK/China

UNIT: US$ Billion SOURCE: BOFT/MOEA

TAINTED — Cheng-I Food is accused of adulterating its edible oil products with materials intended for use as animal feed. photo : cna

of China’s instant-noodle market under the brand name Master Kong. The Wei brothers stand at second place on the Forbes list of Taiwan’s wealthiest, with a fortune estimated by the magazine at US$8.6 billion. Prosecutors detained at least eight executives of Ting Hsin subsidiaries between October 9 and 13, and on October 16 Ting Hsin announced that it would pull out of Taiwan’s oil market and donate NT$3 billion to promote food safety standards. The next day, Wei Ying-chung, the third of the four Wei brothers, was detained for his role in the scandal; he was formally indicted on October 30 and faces a possible 30-year prison sentence. Wei Ying-chiao, the eldest of the clan and chairman of Ting Hsin, bowed to public outrage over the scandal and resigned his seat on the board of the Taipei Financial Center Corp., owners of the Taipei 101 building. The scandal has embroiled not only the executives of these companies, but

taiwan business topics • november 2014

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their thousands of employees as well. With most of Ting Hsin brands under popular boycott, the company is reportedly considering selling off its stakes in some subsidiaries, including longstanding food manufacturer Wei Chuan. Wei Chuan has almost 60 years in the Taiwan market and was only taken over by Ting Hsin in 1998; Ting Hsin now owns more than 40% of its shares and Wei Ying-chung served as its president. Wei Chuan was also embroiled in a similar waste oil scandal in November last year, and Wei Ying-chuan was out on bail from that case, before the current case broke. The scandal has also touched Namchow Chemical Industrial Co. and President Nisshin, a subsidiary of UniPresident, both well-known makers of food products. Namchow was fined NT$30 million for false customs declarations on imported oil products October 19, but its products passed safety inspections and have been returned to store shelves after being briefly removed. President Nisshin, the oil manufacturing unit of the Uni-President group, reported that problems with its production lines over the summer caused it to procure what turned out to be tainted oil from Ting Hsin, leading to a recall of some of Uni-

TAIWAN STOCk exChANGe peRFORMANCe

THE RED LINE SHOWS CHANGES IN VALUE AND THE SHADED AREA CHANGES IN THE TAIEX INDEX.

9750

135

9500

120

9250

105

9000

8750

8500

8250

8000

7750

7500

October Data source: twse

unit: nt$ billion

eCONOMIC INDICATORS Unit: US$ billion

Year Earlier

Current Account Balance (Q2 2014)

16.47

13.8

Foreign Trade Balance (Jan.-Sept.)

26.35

24.86

New Export Orders (Sept.) Foreign Exchange Reserves (end Sept.) Unemployment (Sept.) Discount Rate (Sept.) Economic Growth Rate (Q2 2014)p

43.3

38.4

420,696

412,611

3.96%

4.24%

1.875%

3.74%

2.69%

10.30%

-0.21%

Annual Change in Industrial Output (Jan.-Sept.)p

5.60%

0.47%

Annual Change in Consumer Price Index (Sept.)

0.72%

0.84%

Annual Change in Consumer Price Index (Jan.-Sept.)

1.32%

0.88%

Annual Change in Industrial Output (Sept.)p

p=preliminary

President’s products. In response to the recent food safety scandals, the Executive Yuan launched the cross-ministry Food Safety Office to streamline monitoring and investigation of food safety in Taiwan. The office will have between 20 and 25 fulltime staff members assembled from the Ministry of the Interior, Ministry of Economic Affairs, Ministry of Health and Welfare, Ministry of Justice, and the Council of Agriculture. The office will be organized into four teams responsible for inspections and food safety regulations and enforcement; managing an IT platform; management and coordination; and emergency response and communication.

HeaLtH Minister resiGns; sUCCessOr naMeD Chiu Wen-ta resigned as Minister of Health and Welfare on October 4 to take responsibility for the waste oil crisis that continues to grip the nation. A physician and former president of Taiwan Medical University, Chiu had served as minister for three years, overseeing implementation of the secondgeneration National Health Insurance scheme that restored the national healthcare system to a sound financial footing. He also engaged in medical diplomacy by attending meetings of the

sources: moea, DGbas, cbc, boFt

World Health Assembly, and promoted national bike helmet laws aimed at reducing incidences of brain injury. Unfortunately, his tenure was plagued by a series of food scandals, including plasticizer illegally added to drinks and desserts in 2011, tainted starches and oils last year, and the current waste oil incident. Chiu was the sixth cabinet minister to step down this year, following changes in the economic affairs, education, labor, and environment portfoliios, as well as the resignation of a minister without portfolio. Named to succeed Chiu was Minister without Portfolio Chiang Been-huang, a Ph.D. in food science from the University of Illinois and the first non-physician to serve as health minister. Premier Jiang Yi-huah expressed hope that Chiang’s background in food and biotechnology would enable him to reform Taiwan’s food-safety institutions to ensure that consumers are protected. Chiang vowed in interviews that he would set up a three-tier monitoring system that would employ a “food product cloud” to make it possible to monitor food products from their source, tracking deliveries and recording the purpose and quantity of each product. He also said that his ministry will work together with the National Police Agency to root out underground food manufacturers.

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AFTERMATH OF A CRASH — Wreckage of the Air Force AT-3 trainer jet that went down in Kaohsiung. The pilot died after an unsuccessful bail-out attempt. photo : cna

In another personnel change after the latest food scandal broke, Director-General Yeh Ming-kung of the Ministry’s Food and Drug Administration was transferred from that post and replaced by Deputy Director-General Chiang Yu-mei as Acting Director-General.

fOreiGn DiGnitaries HeLP CeLebrate natiOnaL DaY On October 10, the “Double Ten” national day, Taiwan was joined by a number of foreign dignitaries in marking 103 years since the formation of the Republic of China. The event featured presentations by the Ministry of National Defense Honor Guard and Joint Military Marching Band, and a flyover of AT-3 training jets piloted b y t h e T h u n d e r Ti g e r A i r S q u a d ron aerobatics team, who flew over the Presidential Building trailing red, white and blue smoke in honor of the national flag. President Ma Ying-jeou and First Lady Chow Mei-ching were joined in the celebrations by Paraguayan President Horacio Cartes, Burkina Faso’s now-deposed President Blaise Compaore, Honduran Vice President Lorena Enriqueta Herrera Estevez, and Panamanian First Lady Lorena Isabel Castillo de Varela.

Pei-yuan was piloting the AT-3 during training exercises when his plane clipped another training jet. Chuang’s jet then went into a tailspin before crashing into a field over the Zihguan district of Kaohsiung City. The pilot attempted to eject from the plane, but was too low to the ground and media reports indicate that the parachute never fully opened. Air Force personnel attempted to rescue him, rushing him to the Gangshan branch of the Armed Forces Kaohsiung Hospital, but medical personnel were unable to revive him. The pilot of the other AT-3 involved in the accident managed to land safely at the Air Force Academy.

I N T E R N AT I O N A L

annUaL LGbt ParaDe PrOMOtes GaY PriDe

Ma Praises HOnG KOnG PrOtestOrs tO NY TIMES

On Saturday, October 25, more than 65,000 gays, lesbians, bisexuals, and transgender people and their supporters marched in the Twelfth Annual LGBT Pride Parade. Originally held in 2003 with only 1,000 marchers, the parade has become one of the biggest LGBT Pride events in the region, and attracts attendees from around Asia and the world. The annual event is intended as a platform to promote awareness and solidarity with the LGBT community and as a way to show support for the controversial proposed “marriage equality” act, which would legalize gay marriage but is opposed by some religious and other groups.

President Ma Ying-jeou reiterated his support for pro-democracy protesters in Hong Kong in an interview with the New York Times October 31. Observing that democracy in Hong Kong or even the mainland would “shorten the psychological distance between people f r o m t h e t w o s i d e s o f t h e Ta i w a n Strait,” the president said he did not believe his expression of support for the Hong Kong protests would harm cross-Strait relations. He also explained that his support for these protesters did not contradict his earlier criticisms of Taiwan’s Sunflower Movement, in which student demonstrators seized the legislative assembly hall in protest of a proposed trade-in-services pact with China. “I support democracy, but oppose violence,” Ma said. Ma also fielded questions on Taiwan’s lagging military budget in the face of China’s own military buildup and about Taiwan s potential participation in several regional trade blocs. Taiwan is pitching to enter the U.S.-led TransPacific Partnership (TPP), and Ma also expressed a desire for Taiwan to enter the China-backed Regional Comprehensive Economic Partnership (RCEP).

DEFENSE air fOrCe PiLOt KiLLeD in traininG CrasH An Air Force training pilot died October 21 from injuries sustained from a crash over Kaohsiung City after his 30-year-old AT-3 training jet collided with another AT-3 during a routine training mission of the Thunder Tigers Aerobatics Team, the Air Force announced. Lieutenant Colonel Chuang

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AmCham Representation at 2014 Business Alliance Conference

he 11th annual Taiwan Business Alliance Conference organized by the Ministry of Economic Affairs featured the signing of letters of intent with 23 foreign companies – nine from the United States, eight from Asia, and six from Europe – who pledged new investments amounting to a combined total of over US$3 billion in the next three years. The event, held October 8 at the Taipei International Convention Center, was co-organized by the Commerce Development Research Institute (CDRI) and Digitimes. President Ma Ying-jeou delivered an address outlining Taiwan’s advantages as a destination for foreign investment, stressing its strategic central location in East Asia, high-quality workforce, efficient industrial clusters, ability to foster innovation, and stable cross-Strait relations, providing entrée to the vast China market. The president then posed for individual photos with representatives of each of the 23 companies that have expressed their intention to either expand existing operations in Taiwan or launch a new investment. AmCham Taipei member companies played a prominent role at the event. Among the companies signing letters of intent were Corning Inc., Costco Wholesale, DBS, and HSBC. In addition, the keynote address was given by HSBC President John Li, Corning Taiwan president Daniel Tseng with who introduced Taiwan’s President Ma

strengths to would-be investors. He cited the island’s strong trade and investment connections with both China and Southeast Asia, good risk control that enabled Taiwan to weather international financial crises better than most HSBC President John Li countries, relatively low funding costs, growing asset-management demand to serve an aging population, and fast-increasing market for RMB-related financial products. A panel discussion led by Francis Liang, newly appointed chairman of the Taiwan External Trade Development Council (TAITRA), included two AmCham member companies – Avis Taiwan and DHL – among the three panelists. Discussing the reasons for their companies’ interest in the Taiwan market, Avis President Andy Peng emphasized the strength of the business environment, rapid growth in tourism, and active assistance from the government, while DHL General Manager Michael Lai praised the infrastructure, “fantastic” geographical location, government support, “high consumption power” of the local population, and high caliber of the labor force. Among three presentations of successful investment cases was one by Ken Wu, president and managing director of Alcatel-Lucent Taiwan, who outlined his company’s involvement in plans to create a “Smart City” as part of the Aerotropolis project being launched in the area including and surrounding the international airport in Taoyuan. The project will entail intelligent energy, transportation, buildings, water supply, and governance, all run with the benefit of the latest telecommunications technology.

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Issues

Advice from Michael Porter The distinguished Harvard professor suggests how to ensure the sustainability of Taiwan’s national healthcare system. photo : c ommonwealth publishing

aiwan’s National Health Insurance (NHI) program is highly popular with the public and widely admired abroad, but like many of its counterparts around the world, it is under constant, heavy financial pressure that strains its sustainability. On a recent visit to Taiwan, eminent Harvard Business School professor Michael E. Porter, a recognized authority on healthcare management, offered a set of recommendations on how healthcare delivery needs to be reorganized to assure long-term viability. Elaborating on ideas presented in his 2006 book, Redefining Health Care (co-authored with Elizabeth Olmsted Teisberg and recently published in Taiwan in a Chinese-language edition by the Commonwealth Publishing Group), Porter outlined his suggestions in a speech at the Grand Hotel to an audience composed mainly of healthcare industry professionals. Entitled “Value-based Care Delivery: Implications for Taiwan,” the presentation stressed that maximizing value for the patient should be the “central driving principle behind any healthcare reform.” Improving value will infuse greater efficiency into the system, leading ultimately to both higher quality and lower costs. In contrast, Porter said, the approach in Taiwan until now has been to concentrate on driving down payments, but the result has merely been a “downward spiral” in which, for example, doctors face excessive workloads, having only a few minutes to spend on each patient. [AmCham’s Pharmaceutical and Medical Device committees would cite the additional example of reimbursement prices so low as to discourage drug and medical-equipment manufacturers from launching innovative new products in this market]. To shift the focus to value creation, Porter urges the Taiwan authorities to embark on a national healthcare reform policy to be carried out over the next five to eight years. He sees such a plan as encompassing five key initiatives: 1. Develop a comprehensive system for measuring, and eventually reporting, healthcare outcomes for each patient treated. Porter laments that healthcare administrators and regulators around the world have usually operated in a “fact-free zone,” making decisions without access to extensive data on the results of a given course of treatment. How often did complications arise? How often did the patient have to be readmitted to the hospital? How soon was the patient able to return to work or otherwise resume normal activity? Without measurement, it is impossible to evaluate which institutions, which doctors, and which forms of treatment are truly successful and which are not. 2. Start to organize treatment – especially for complex, high-cost conditions – around Integrated Practice Units (IPUs), multidisciplinary teams that focus holistically on the needs of the patient. The current fragmented model of treatment is inherently inefficient. Research has shown that having a single team that encompasses all the necessary skills for treatment of a given condition – and accumulating knowledge and experience about 12

波特教授的建言針對如何確保台灣健保制度永續經營，哈佛大學著名教授波特提出具體建議

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灣的全民健康保險深受民眾肯定，在國外也廣獲讚賞，但跟世界許多國家的健保制度一樣，台灣的全民健保長期負擔沈重的財政壓力，其永續性因而面臨威脅。哈佛大學商學院著名教授邁可‧波特是公認的醫療管理權威，他最近到台灣訪問時提出多項建議，主張醫療服務提供的方式需要重整，才能確保永續經營。他曾在2006年完成的《醫療革命》（與伊莉莎白‧泰絲柏格共同著作，中文版最近由遠見天下文化公司在台灣出版）一書中談到這些觀念，訪台期間在台北圓山飯店的一場演講中做了進一步闡述。這場演講的聽眾，主要是醫療界的專業人士。這場演講主題是「醫療革命的迫切性」，波特在演說中強調，盡可能地提高醫療服務對病人的價值，應該是「任何醫療改革的核心指導原則」。因為提升價值代表增進醫療體系的效率，最終可望帶來更高的服務品質，和較低的成本。但波特說，台灣目前的做法主要是在壓低給付金額，結果是健保體系向下沈淪，例如醫師工作壓力過於沈重，為每個病人看診只能花幾分鐘。 [台北市美國商會的製藥委員會及醫療器材委員會補充指出，健保給付標準偏低，會讓藥品與醫療器材廠商不願在台灣推出創新的產品。] 為了把重點轉移到創造醫療的價值，波特敦促台灣當局在未來5至8年推動全國醫療改革，其中應包括5項主要內容：一、建立完整制度以衡量並彙報每位病人接受治療的結果。波特說，世界各國的醫療機構主管與主管機關往往是在一個「事實的真空」裡運作，他們做決定的時候，沒有某項治療效果的大量數據可做參考。例如併發症多常發生？病患多常需要再次住院？病人多快可以重返工作崗位或恢復正常的生活？少了這些衡量，就不可能評估哪些醫療院所、哪些醫師以及何種方式的治療是真正有效，哪些對病人沒有幫助。二、開始建立「整合醫療單位」（IPU），尤其是針對複雜、醫療費用偏高的疾病。

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Issues that condition – leads to dramatically better rates of success. 3. Introduce cost-accounting methods to enable the real cost to be calculated for the entire cycle of care for a given condition. The result, said Porter, would be “transformative,” leading to huge opportunities for both heightened efficiency and cost reduction. 4. Replace fee-for-service payment to healthcare providers with a “bundled” payment that sets a standardized reimbursement for that cycle of care. Fee-for-service provides no incentive to improve value, as all service is reimbursed, even additional care necessitated by inferior treatment to start with. Under bundling, there is no extra payment for poor treatment that requires additional procedures. 5. Adopt better Information Technology (IT) platforms to provide clinicians with fuller, constantly updated data about all relevant aspects of their patients’ health condition. A strong IT foundation is the underpinning for all of the other reforms. Only with the assurance of good data, readily accessible, is it possible to compile and analyze the necessary measurements, build a sound organizational framework, and set the right price structure. Porter urged medical institutions in Taiwan to shed the notion that every hospital needs to provide every type of medical service. Instead, he advocates greater specialization, with each organization concentrating on the type of service it performs best – and developing means to offer that service not just in its own vicinity but to a wide geographical area. Although Taiwan is still lagging behind the curve as some organizations in other countries start to adopt new approaches to healthcare, Porter expressed confidence that Taiwan is actually well-positioned to be a leader in this coming healthcare revolution. Among Taiwan’s advantages he cited its abundance of talented professionals and strong IT sector, as well as the existence of a single-payer system. With healthcare policy centralized within the government, implementing changes in direction may be easier than in systems where decision-making is more diffused. Another reason for his optimism, he told the audience, is the excellent pioneering work already being done in Taiwan at the Koo Foundation Sun Yat-sen Cancer Center under the leadership of president Andrew Huang. If Taiwan adopts the right strategy, said Porter, it can greatly improve the standard of healthcare in this country – and in the process become a “beacon and model” for other countries.

I P U是涵括好幾個領域的團隊，為病患的需要提供全方位的照護。現行分散式的醫療模式從本質上就很難有極佳效率，而研究顯示，針對特定疾病，如果有個團隊具備治療所需的全部技術，並且能累積相關的知識與經驗，則病患痊癒的比率可大幅提高。三、引進成本會計的做法，計算某個疾病完整療程的真正成本。波特說，這將帶來「截然不同」的結果，很有可能使得效率提高，同時讓成本降低。四、停止對醫療院所「論量計酬」的做法，改採「包裹式」給付制度，為整個療程訂定標準化的給付金額。論量計酬制無法創造提高醫療價值的誘因，因為只要提供服務，就會獲得給付，即使是因為醫療品質不佳而導致需要額外的照護也不例外。而在包裹式給付制度之下，這些額外的照護就不會得到額外的給付。五、利用更佳的資訊科技（IT）平台，針對病患健康狀況的各個層面為醫師提供完整且持續更新的資訊。穩固的I T架構是所有其他改革的基礎，唯有資訊品質良好、隨時可以取得，才有可能彙整並分析必要的評估數據，建立健全的組織架構，並訂定正確的價格結構。波特呼籲台灣的醫療院所，揚棄每家醫院必須提供全面醫療服務的觀念，他主張加強專業分工，讓每家院所專注於它最擅長的醫療項目，並且發展出一套做法，不僅為鄰近的病患提供服務，還能照顧更廣大地區的民眾。其他國家的一些醫療機構已經開始採取新的做法，台灣在這方面有些落後，但波特相信，台灣很有機會在未來這波醫療革命中扮演領導者的角色。他列出台灣的優勢，包括有眾多的優秀醫療人才、實力堅強的IT產業，而且是由單一機構負責所有的醫療給付。台灣的醫療政策決策權集中在政府手中，若要改變方向，可能會比決策權較分散的國家更為容易。波特在演講中說，他感到樂觀的另一個原因，在於和信醫院在院長黃達夫領導下，已經在台灣做了非常好的前導工作。波特說，如果台灣採取正確的策略，將可進一步提升醫療水準，並成為其他國家的指標與典範。

—– By Don Shapiro

— 撰文／沙蕩

Chemical Registration Update

s previously discussed in this space in the February 2014 issue, two separate government agencies – the Environmental Protection Administration (EPA) and the Ministry of Labor’s Occupational Safety and Health Administration (OSHA) – both have regulatory authority over the safety of chem-

化學物質登記制度最新發展

014年 2月號的TOPICS曾在本欄提到，環境保護署與勞動部的職業安全衛生署都是化學物質安全的主管機關，後者的責任在於確保職場的衛生與安全，環保署則要保障環境與一般大眾的安全。

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Issues ical substances. OSHA’s responsibility is to ensure health and safety within the workplace, while the EPA’s is to safeguard the environment and the general public. For the past year, each agency has been working on its own regulations for the registration of chemical products manufactured in or imported into Taiwan, including requirements for testing and documentation to determine their level of potential risk. The registration program proposed by the EPA was mandated under the Toxic Chemical Substances Control Act passed in late 2013, while OSHA is introducing a system of New Chemical Nominations (NCN) to add to its Existing Chemical Nominations (ECN). Industry had expected that the two efforts would be coordinated so that manufacturers and importers in the end could deal with a single set of regulations, a single registration platform, and a single window of contact. Instead, EPA and OSHA have each announced their own systems, with numerous disparities in definitions, standards, and rules for compliance. There are also differences in the all-important matter of how confidential business information (CBI) would be handled, to ensure that proprietary data is kept protected. In a recent series of meetings, AmCham Taipei’s Chemical Manufacturers Committee has been collaborating with the Taiwan Responsible Care Association, an organization promoting best practices in the chemical industry, to review the EPA and OSHA draft regulations and offer practical recommendations. The group has expressed its concern that requiring compliance with two different sets of overlapping rules would create a burden on industry sufficient to seriously damage Taiwan’s investment environment. With time running short before the new regulations are set to take effect in the coming months, it may be time for the Executive Yuan to step in to conduct cross-agency coordination, helping work out a harmonized system that selects the best options from both the EPA and OSHA versions. —– By Don Shapiro

Revising the Securities Settlement Process Permitting transaction clearing and settlement to be outsourced would bring multiple advantages.

ne of the recommendations of AmCham Taipei’s Capital Markets Committee in the 2014 Taiwan White Paper is to allow brokers to outsource securities clearing and settlement services. Under current regulations, each broker needs to make significant investment in technology and infrastructure on post-trade clearing and settlement, while the market assumes settlement risk on each broker. As the Committee’s position paper stated, “brokers who outsource are more flexible and better placed to take advantage of opportunities in Asia’s turbulent markets, while saving costs when 14

在過去一年當中，這兩個機構分別訂定自己的一套規定，要來規範本地生產或進口到台灣的化學產品的登記，其中包括測試與建立檔案紀錄的規定，以確定化學產品的潛在的風險高低。環保署的登記辦法，是依2013年底通過的毒性化學物質管理法提出，職業安全衛生署則是在原本的既有化學物質提報系統之上外，增加新化學物質提報系統。業界原本期待這兩項制度將會整合，到最後生產廠商與進口商可以有單一的登記平台和單一窗口，以及單一的法規可以遵循，有個單一的登記平台和單一的窗口。結果卻是環保署與職業安全衛生署各自宣布自己的草案，二者之間有許多不同的定義、標準與配合的做法。另外在一個很重要的問題上，二者之間也有做法不一之處，那就是如何處理商業機密，以確保專屬資訊受到保護。最近在一系列的會議中，台北市美國商會的化學製造商委員會與中華民國化學工業責任照顧協會共同檢視環保署與職業安全衛生署提出的兩份草案，並提供實質際的建議。中華民國化學工業責任照顧協會宗旨在於推廣提升化學產業的良好作為。美商會的化學製造商委員會已經表達，以兩套不同但彼此重疊的規定要求業界配合，將對業者造成沈重負擔，使台灣的投資環境受到不利影響。新的規定即將在未來幾個月內生效，行政院可能需要介入，進行跨部會協調，從環保署與職業安全衛生署兩個不同的版本中擷取最好的條文，訂定出一致的制度。 — 撰文／沙蕩

證券交割法規鬆綁允許證券商委外處理交易結算與交割作業可帶來多項效益

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北市美國商會資本市場委員會在2014年台灣白皮書中所提的建議之一，是允許證券商證券得將結算與交割作業委外給其他機構。在目前的法規之下，每家證券商需要在交易後的結算與交割系統及基本設備上進行相當大的投資，而市場則需承擔個別證券商的交割風險。資本市場委員會在白皮書中指出，「將作業委外的證券商較具彈性，既能在亞洲市場波動的時機獲利，並能在交易清淡的時候節省成本」。

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Issues volumes are thin.” On a recent visit to Taipei, Ryan Cuthbertson, Head of Product Development, Sub-Custody and Clearing, HSBC Securities Services in Hong Kong, shared a presentation with interested parties on how market efficiency could be improved by allowing the introduction of either an Account Operator or Third Party Clearing (TPC) model, or both, as means of carrying out clearing and settlement. Under the Account Operator system, the exchange participant (broker) appoints an Account Operator to clear and settle trades on its behalf, but the broker retains responsibility for market-side settlement and maintains its role as the member of, and counterparty to, the central clearing house and depository. Under TPC, the exchange participant appoints a General Clearing Participant (GCP) to clear and settle trades, and the GCP also takes up the clearing and settlement operation and obligation on behalf of the broker. “Operationally the result is the same,” says Cuthbertson. “The difference is who has the obligation to the exchange.” As the GCPs are typically large multinational banking institutions with ample capital, they are in a position to bring greater security to the settlement process. Higher netting efficiency in the market can also be achieved, as many brokers’ trades are cleared under a few clearers. Additional advantages of appointing a GCP is the assurance of no broker defaults, reduced failed trades, quicker time to market, and the potential for remote trading, adding more liquidity to the market. For brokers, either system can bring a number of benefits, including: • Reducing operating costs, since fixed overheads such as staff and infrastructure costs can be replaced by variable costs in the form of transaction fees when trades are settled/cleared by an Account Operator or GCP. • Reducing operational risk by outsourcing the clearing and settlement process to an entity specialized in that activity. • Reducing the need for IT investment, as the responsibility for expensive back-office systems is shifted to the Account Operator or GCP. • Enabling the Exchange Participant to focus more on its core competencies in broking/trading. Within the Asia-Pacific region, Taiwan is currently one of the few major markets not to allow either Account Operator or TPC clearing. Both systems are being utilized in Australia, Hong Kong, Singapore, and New Zealand; only Account Operator clearing in India, Malaysia, and Thailand; and only TPC in Japan. In addition, the Philippines, Indonesia and Korea are studying the possibility of adopting one or the other. Quite often, adoption of an Account Operator system is the first stage, since it involves less need to alter existing rules and regulations, but may be followed by the opening up of TPC. With its involvement by major multinational financial institutions, TPC can help attract more international investment to a market. Although historically many brokers in Taiwan have felt comfortable handling their own clearance and settlement, in recent years – particularly since the international financial crisis – more of them reportedly have concluded that working through an Account Operator or GCP would be to their advantage. AmCham’s Capital Markets Committee continues to ask the regulator to liberalize the pertinent regulations to bring Taiwan in line with what is clearly a regional trend.

匯豐銀行證券服務處次保管業務產品主管 Ryan Cuthbertson最近到台北訪問時，與相關人士分享證券商以「委外帳戶管理」(Account O p e r a t or)與／或「第三方結算」(T h i r d Pa r t y Clearing)模式進行結算與交割作業，有助提升市場效率。委外帳戶管理模式，是由證券商指定一家委外帳戶管理機構代為進行交易的結算與交割業務，但該證券商依舊以其結算會員及集保成員的身分承擔市場端的交割責任。第三方結算模式，則是證券商指定由一家「一般結算會員」(General Clearing Participant)代表該證券商進行結算與交割的作業並且承擔其相關之責任。 Cuthbertson說：「在作業方面，二者的結果是一樣的，差別在於何者要對交易所負責。」一般結算會員往往是大型的跨國金融機構，有充足的資本，因此可以為交割過程帶來較高的安全性。且因通常多家證券商指定少數幾家結算會員負責結算，市場可達到較高的淨額給付效益。指定一般結算會員擔任第三方結算者的其他好處還包括避免證券商違約、減少交割失敗、提升市場參與效率、以及發展遠距交易的可能性，使市場的流動性升高。對證券商來說，以上兩種模式均可帶來許多益處，包括： ‧ 降低營運成本，將固定成本如人事及設備成本改為變動成本如交易費，僅在委外帳戶管理機構或一般結算會員完成交易結算 /交割時，才會產生交易費成本。 ‧ 藉著將結算與交割作業委外給專門機構，降低證券商的作業風險。 ‧ 減少對系統投資的需求，由委外帳戶管理者或一般結算會員建置昂貴的後台系統。 ‧ 讓證券商專注於核心業務，即證券經紀及交易。目前在亞太地區，僅少數幾個主要市場仍不允許委外帳戶管理或第三方結算制度，台灣是其中之一。澳洲、香港、新加坡和紐西蘭允許以上兩種模式，印度、馬來西亞和泰國只允許委外帳戶管理模式，日本只允許第三方結算模式。另外，菲律賓、印尼和韓國正在研究採用其中一種模式的可能性。採納委外帳戶管理制度往往是第一步，因為其比較不需要修改現行的法規，而且未來可以進一步開放第三方結算制度。第三方結算因為有大型跨國金融機構的參與，如經採納，將有助於吸引更多國際投資進入本地市場。雖然許多台灣證券商傳統上習慣自行負責結算與交割，但最近幾年，特別是在國際金融海嘯之後，有更多證券商表示採納委外帳戶管理或第三方結算更有效益。因此，台北市美國商會資本市場委員會持續尋求主管機關放寬相關規定，讓台灣的作業模式符合亞太區域明顯的發展趨勢。

—– By Don Shapiro

— 撰文／沙蕩

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the taiwan economy: outlook For 2015 2015年經濟展望

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TAIWAN GDP GROWTH FORECASTS 4.1%

Barclays

4.5% 3.46% 3.53%

CIER

3.41%

DGBAS

3.51% 3.4% 3.5%

TIER

3.57% 3.49%

Yuanta-Polaris

2014

2015

With its heavy reliance on exports, especially of electronics products, the Taiwan economy is always subject to external factors that are difficult to predict. But the consensus among economists is that Taiwan – despite continuing long-term challenges – will do reasonably

ost leading economists expect the Taiwan economy to do slightly better in 2015 than in 2014, buoyed largely by modest improvements in the world economy that increase demand for Taiwan’s tech products. “As long as ICT does well, then the economy does well,” observes Academia Sinica economist Hu Shengcheng, a former Cabinet minister during the Chen Shui-bian administration, expressing the common wisdom over Taiwan’s economy. Taiwan’s information and communications technology (ICT) industry, a major component of the economy for the better part of two decades, is the heart of the electronics sector that accounts for 52% of manufacturing value and over 40% of exports. Given the deep collaboration between the island’s ICT manufacturers and many global technology brands, particularly Apple Inc., most economists are forecasting economic growth for Taiwan – both this year and next – of between 3.4% and 3.9%, attributed in large part to a rise in exports, much of it related to the newly launched iPhone 6. Taiwanese components makers, including Taiwan Semiconductor Manufacturing Co. (TSMC), Catcher Technology, and Largan Precision, are major suppliers to Apple Inc., while another Taiwan-headquartered firm, Hon Hai Precision, does most of the assembly for Apple in China. “The tech sector has been rising in double-digit figures,” notes Tony Phoo, an economist with Standard Chartered Bank Taiwan. “The numbers are really very strong.”

well in the coming year, perhaps somewhat better than in 2014. A surprising development this year was the relative strength of domestic consumption as a contributor to GDP, though it remains uncertain whether that will still be the case in 2015. 台灣經濟高度仰賴出口，尤其是電子產品，因此總是容易受到難以預料的外來因素影響。不過本刊訪問的經濟學家一致認為，台灣經濟雖仍持續面臨長期挑戰，但未來一年會相當不錯，甚至可能略優於2014年。今年出現一項出乎預料的發展，就是國內消費相對強勁，帶動經濟成長，不過目前還無法判斷此一趨勢是否會延續到2015年。 BY TimoThY ferrY 撰文 / 法緹姆

台

灣多數知名經濟學家預測，台灣經濟在2015年的表現會略優於2014年，主要是因為世界經濟溫和好轉，對台灣科技產品的需求增加所致。曾在前總統陳水扁執政時期擔任高層官員的中央研究院院士胡勝正表示：「只要資通訊（ICT）產業好，台灣經濟就會好。」這也是各界對台灣經濟的普遍看法。資通訊產業不但是台灣過去十多年來的經濟主力，也是電子業的核心，占製造業產值的52%，在整體出口的占比更超過40%。台灣資通訊製造業者和許多跨國科技品牌密切合作，尤其是美國蘋果公司（Apple Inc）。接受本刊訪問的多數經濟學家因此預測，台灣今年和明年的經濟成長率在3.4%到3.9%之間，這大多得歸功於出口成長，尤其是蘋果推出iPhone 6新款手機。包括台積電、可成和大立光在內的台灣零組件製造商都是蘋果的主要供應商，另一家台灣科技大廠鴻海組裝蘋果產品的業務，則大多在中國進行。渣打銀行首席經濟分析師符銘財表示：「科技業一直以兩位數的速度成

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But while exports are a major factor in Taiwan’s economic performance, this year’s positive growth forecast owes far more to domestic demand than to exports. According to the government’s Directorate General of Budgeting, Accounting and Statistics (DGBAS), exports will contribute only 26% of Taiwan’s GDP growth this year – .91 percentage points out of the estimated total 3.41% growth. This proportion is a slight decline from last year’s export contribution of 32%, but quite a steep drop from the more typical 87% level of 2012 or 85% of 2011. Gordon Sun of the Taiwan Institute for Economic Research (TIER) says that while tech exports have seen growth in 2014, he remains unimpressed by 2014’s export numbers. “This year our exports are just average,” he observes. “We’re not surprised by exports, but we are surprised by consumption.” DGBAS expects the contribution of private consumption to GDP growth this year to reach a high 41% (1.4 percentage points of the total 3.41% growth). Taiwan’s economic output consists out of about 30% from industry, 68% from services and less than 2% from agriculture and fisheries. But economists note that the service sector has generally been

長」，「真的非常強勁」。出口雖是影響台灣經濟表現的一大因素，但今年經濟之所以會出現正成長，內需的貢獻遠高於出口。根據行政院主計總處預測，台灣今年的國內生產毛額（G D P）成長只有26%來自出口，亦即在總成長率預測值3.41%中，僅貢獻0.91個百分點。今年的出口占比略低於去年的 32%，但若和2012年87%及2011年 85%的典型情況相比，則是大幅滑落。台灣經濟研究院景氣預測中心主任孫明德表示，儘管科技業出口在 2014年有所成長，但整體出口成績平平。他指出，「台灣今年的出口只有平均水準」，「出口並未令人驚艷，消費卻出乎意料的好。」主計總處預測，民間消費對今年經濟成長率的貢獻可望高達41%，在預估的3.41%總成長率中占1.4個百

constrained by Taiwan’s relatively small population and relatively low incomes. “ Yo u m a y t h i n k t h e s e r v i c e i n d u s try is purely domestic demand oriented, but Taiwan cannot create good jobs or income growth unless we export, because the domestic market is just too small,” observes National Taiwan University economist Chen Tain-jy, a former head of the government’s Council for Economic Planning and Development (now the National Development Council). “Only with scale can you advance the value of services.” Yet Taiwan has had little success in exporting services. Various scholars and institutions inevitably differ somewhat in their forecasts for the Taiwan economy (see the chart on the previous page), but they tend to agree on the strong impact of domestic demand on this year’s GDP growth. That recent upturn in domestic demand is considered to be largely the result of the liberalization of regulations governing certain industries, particularly tourism and finance, as well as private investment spurred by expansion projects among Taiwan’s export industries. Of the components of domestic demand, capital formation – and particularly the subcategory of private investment–has been a significant contribu-

tor to this year’s GDP growth numbers. Private investment is expected to account for 0.53 percentage points – or more than 15% – of the total 2014 economic growth rate, and it has been led by two main drivers: aircraft purchases by Taiwan’s two leading international carriers and large-scale capital expenditures in the semiconductor industry. Taiwan’s national carrier, China Airlines, and its rival EVA Air both invested heavily in new equipment this year. EVA took delivery of the first two of a total of seven new Boeing 777-300 series jets, while China Air is introducing its own Boeing 777-300 series, complete with tea lounges and other special amenities in first class. According to Liang Kuo-yuan, chairman and president of Yuanta-Polaris Research Institute, the commercial aircraft purchases comprised more than half of all capital investment in the second quarter this year. Meanwhile, TSMC went on something of a spending spree to prepare itself for the iPhone 6 launch. According to TIER’s Sun, the company invested more than NT$100 billion (US$3.3 billion) in that effort. Stephen Su, general director of the Industrial Economics & Knowledge Center (IEK) under the Industrial Technology Research Institute (ITRI) says that

The business class section of one of the new China Airlines aircraft. photo : cal

分點。台灣的經濟產出約30%來自工業，服務業占68%，農漁業則不到 2%。不過多位經濟學家指出，受到台灣人口相對少、所得相對也低的影響，服務業發展普遍受到限制。曾任經建會（即國發會前身）主委的台大經濟系教授陳添枝指出，「可以想見，服務業純粹是國內需求導向，除非能出口，否則台灣無法

創造良好的工作機會或所得成長，因為國內市場實在太小」，「唯有規模才能提高服務價值。」但台灣過去出口服務的經驗並不成功。不同學者和機構對台灣經濟的預測無可避免會略有出入（詳見附表），不過他們都認為，內需對今年的經濟成長有強烈的影響，最近這波內需成長主要是因為某些產業的監管鬆綁，尤其是觀光業和金融

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into tHe Future witH tHe internet oF tHinGs Can Taiwan transform its economy away from an OEM/ exports-driven model toward one that is services and domestically oriented? “Not possible,” says Chen Tain-jy, an economist at National Taiwan University and former head of the Council for Economic Planning and Development, now the National Development Council. Although services account for nearly 70% of Taiwan’s GDP, the service sector remains underdeveloped, and upgrading it is difficult given the limited scale of Taiwan’s market of 23 million people. But Taiwan has made little headway in trying to export its services. “Over the long term, I think manufacturing is still central,” says Chen. Instead of services, he looks towards budding technologies, especially in the Internet of Things (IoT) and wearable devices as providing strong potential for growth. Wearable devices such as smartwatches and fitness monitors are already growing in popularity, while IoT promises to connect the most mundane of appliances – including refrigerators, coffee pots, and air conditioners – to the cloud, allowing them to be remotely managed for consumers’ maximum convenience. The Industrial Economic & Knowledge Center (IEK) under the Industrial Technology Research Institute (ITRI) forecasts that by 2020 connected devices will outnumber smartphones by five or six times – some 25 billion in all. Chen sees Taiwan’s electronics industry as well-positioned to ride this next technological wave for several reasons. Most of the development of these technologies will likely come from marquee American brands such as Apple and Google, companies with which Taiwanese manufacturers already have deep relationships. Further, increasing concern over China’s porous intellectual property protection – as well as darker concerns over spy technology embedded into seemingly ordinary technologies and apps – put Taiwan at a relative advantage. IEK’s Su adds that Taiwan also has an edge in terms of talent and reputation, as evidenced by the number of U.S. and Chinese companies that seek to recruit engineering talent on the island. Given these factors, Chen predicts that Taiwanese manufacturers will further enhance their relationships with American tech firms, allowing them to move up the value chain with respect to innovation and design. “What’s different now is that instead of selling something to the U.S. client by purely offering manufacturing services, we will be engaged in product development or even innovation, and probably have responsibility for some kind of aftermarket services,” he says. “It will be a new era of economic growth, and when it takes off, it’s going to change the way manufacturing and services are done.” — By Timothy Ferry

each year TSMC typically invests more than half its income – which in 2013 totaled US$6.34 billion – in new equipment and R&D to maintain its dominance in the global semiconductor foundry business, but that 2014’s investments were high even by those standards.

Financial services An improvement in the financial services sector is another noteworthy element in the current economic picture. Although Taiwan’s financial industry pales in comparison with those of Singapore and Hong Kong, it is nevertheless picking up steam. Cheng Chengmount, president of the Taiwan Academy of Banking and Finance, refers to finance as currently “the most promising sector” in Taiwan’s economy, noting that banks’ net profits have been hitting record highs as they take advantage of liberalized rules allowing greater penetration of the China market. Standard Chartered’s Phoo says he has been impressed by the amount of deregulation undertaken by the Financial Supervisory Commission (FSC) under Chairman William Ming-chung Tseng. “Last year we saw how the RMB (China’s currency) market in Taiwan took off,” he observes. “That definitely helped give some momentum to the financial sector.” He notes that the FSC also relaxed restrictions on eligibility to issue RMB-denominated Formosa bonds and liberalized regulations on overseas investment by insurance companies. Cheng Cheng-mount further points to FSC’s current policy of encouraging branches to open branches in Southeast Asia.

業，另外出口產業的擴張計畫也帶動民間投資成長。在內需的各項構成要素中，資本形成是促成今年經濟成長亮麗的一大因素，尤其是來自於民間投資。2014年的總成長率中，民間投資預料會占0.53個百分點，比率超過15%，主要是受到飛行國際航線的華航和長榮兩大航空公司採購飛機，以及半導體業大規模資本支出的帶動。台灣的國籍航空公司華航，及其競爭對手長榮，今年都大手筆投資採購新設備。長榮共訂購7架波音777-300型客機，其中第一批已交機；華航的同型客機也即將陸續投役，頭等艙設有文創茶品區等設施。元大寶華綜合經濟研究院董事長兼院長梁國源指出，台灣今年第二季的資本投資半數以上來自商業客機採購。在此同時，台積電繼續大手筆投資，準備投入生產iPhone 6。台經院的孫明德透露，台積電為iPhone 6投資超過新台幣1000億元（相當於33億美元）。台積電2013年的總營收達63.4 億美元。工業技術研究院產業經濟與趨勢研究

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“The government and the regulators want to see an improvement in the financial sector’s share of GDP over time,” Phoo says. Right now, the financial services industry comprises about 6% of GDP, compared to 15-16% in Hong Kong and Singapore. “Taiwan has a lot of room to grow,” Phoo concludes. “Right now some business goes to Hong Kong and Singapore that rightfully should belong to Taiwan,” he says, noting that under the right regulatory conditions those transactions would take place here. Another aspect affecting private consumption is the chronic stagnation in wage levels plaguing Taiwan. Yuanta-Polaris’ Liang notes, however, that while real wages per capita are almost equivalent to the level of 1997, “the employment situation has improved, so that even if wages per capita haven’t increased, the total income received by the labor force has increased, and that helps private consumption.” He adds that this year’s dividend payments have been rather good, and “we expect that trend will continue in 2015.” TIER’s Sun is less sanguine about private consumption. He notes that consumption has been weak for the past decade for several reasons, includ-

中心主任蘇孟宗表示，台積電每年通常都會把一半營收所得轉投資於新設備和研發，以維持其在全球半導體晶圓代工業務的優勢，不過即使是以台積電的標準來看，2014年的投資比例也相當高。

金融服務業金融服務業情況好轉是目前台灣經濟另一個值得注意的現象。台灣金融業表現雖不如新加坡、香港出色，卻不斷加速茁壯。台灣金融研訓院院長鄭貞茂認為，金融業目前是台灣經濟中「最大有可為的產業」，因為當局放寬規定，允許銀行擴大進軍中國市場，各家業者的淨獲利紛紛創新高。渣打的符銘財表示，金管會在主委曾銘宗率領下，讓大量法規鬆綁，令他印象深刻。符銘財表

ing Taiwan’s aging society and low birth rate. Having an even more immediate impact, he says, is the presence of some one million Taiwanese – 10% of the total workforce – in mainland China. “This 10% consists of highly skilled managers and high-level engineers, so we lost highincome workers,” he says. He also cites the low salaries and high cost of property as forcing people to

save instead spend, also affecting domestic consumption. If not for tourism and a rising stock market picking up the slack, it is doubtful that this year’s private consumption would be so high, he says. The Taiwan Stock Exchange (TWSE) weighted index has risen 6.4% this year, and Academia Sinica’s Hu notes that a distinguishing characteristic of the Taiwan market is the preponder-

The strong market reception for the new Apple device has meant an upsurge in orders for Taiwan suppliers of components. photo : cna

示：「人民幣市場去年在台灣快速發展，肯定為金融業注入一些動能。」他指出，金管會還放寬發行人民幣計價寶島債的限制，並讓保險業者的海外投資規定鬆綁。鄭貞茂也指出，金管會目前的政策是鼓勵各銀行前往東南亞開設分行。符銘財表示：「政府和主管單位樂見金融業在G D P的占比逐漸提高。」目前金融業約占GDP的6%，香港和新加坡則是15%到16%。符銘財因此認為「台灣還有許多成長空間」，「目前流向香港和新加坡的一些業務其實應屬於台灣」，在適當的監管條件下，這些交易可在台灣進行。另一個影響台灣民間消費的現象是薪資長期停滯不前。不過元大寶華的梁國源指出，人均實質薪資幾乎停留在1997年的水準，但「就業狀況已有改善，因此即使個人平均

薪資並未成長，所有勞動力的整體所得還是有所增加，有助於帶動民間消費」。他還表示，今年的企業員工分紅相當不錯，「預料此一趨勢會延續到2015年」。台經院的孫明德對民間消費的看法較不樂觀。他指出，台灣過去十年來消費不振，原因包括台灣社會老化和出生率低落等。他表示，還有一個因素對民間消費具有更直接的影響，就是台灣約有100萬人住在中國大陸，占所有勞動力的 10%。他表示:「這10%的人都是具有高度技能的管理人才和高階工程師，因此台灣流失的是高所得勞工。」孫明德還表示，低薪和高房價迫使民眾省錢度日，不願花錢，也影響國內消費。他質疑，若不是有觀光業和股市上漲拉抬，今年的民間消費可能不會這麼多。

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ance of individual as opposed to institutional investors. Around 60% of the turnover is accounted for by retail investors, and their consumption behavior is directly impacted by whether stock prices are rising. “If they feel rich that day, they’ll spend more money,” he says. “If they don’t, they stay home and don’t consume.” Although domestic demand rose as a proportion of Taiwan’s economic growth in 2014, exports – particularly of ICT products – continue to be a fundamental pillar of the economy. According to the Bureau of Foreign Trade (BOFT), total exports in the first three quarters of this year came to US$234.64 billion, a 3% rise over the same period last year. Electrical/electronic exports were valued at US$98.72 billion, a nearly 10% rise over the US$91.38 billion of the same period last year. As a proportion of total exports, electrical/electronic goods amounted to 42.1% from January to September this year, up from 40.3% a year earlier.

Bullwhip and Apple effects As an export-driven economy, Taiwan is inextricably tied to changes in global demand, which can have a dispropor-

台灣證交所加權指數今年上漲 6.4%。中研院的胡勝正指出，台灣股市的一大特色就是相對於法人投資人，散戶相當活躍。股市約60% 的交易額來自散戶，他們的消費行為直接受到股價是否上漲影響。他說：「如果他們今天覺得手頭寬裕，就會多花點錢；如果覺得拮据，就會待在家裡不消費。」台灣2014年的經濟成長中，內需雖占了較大比重，但出口仍是經濟的基本支柱，尤其是資通訊產品。根據經濟部國際貿易局統計，今年前三季的出口共達2346.4億美元，較去年同期成長3%。電機和電子出口總值為987.2億美元，較去年同期的913.8億美元成長近10%。電機和電子產品在今年1到9月整體出口的占比為42.1%，高於去年同期的 40.3%。

The BULLWhiP effeCT oN TAiWAN’S eLeCTroNiCS SeCTor

End-User Demand

Brands

OEM/ODM/EMS Manufacturing

Parts & Components Suppliers

Outsourcing

source: yuanta-polaris researcH institute

tionate impact on Taiwanese industry as a result of the “bullwhip effect,” notes Liang of Yuanta-Polaris. The bullwhip effect describes the pattern in the supply chain in which the economic impact becomes more pronounced at each stage of the process (see the accompanying chart). Particularly in ICT, Taiwanese makers tend to occupy the mid-stream, responsible for contract manufacturing and the supply of parts and components. As a result, the degree of impact from changes in global demand may be greater than in countries, such as Korea, that depend more on global brands. In

2009, for example, Taiwan’s exports plummeted by over 6% on a relatively small drop in global demand, while Korea’s exports dropped only slightly. Conversely, however, even a small rise in global demand will likely bring larger benefit to Taiwan’s exporters. But with Taiwan’s export sector strongly focused on ICT, another crucial factor might be dubbed the “Apple effect.” Apple Inc. is the largest customer for Taiwan’s ICT components, and the release of the iPhone 6 has had a massive impact on the local economy. Economists estimate that the iPhone 6 launch

長鞭與蘋果效應

但由於台灣的出口以資訊暨通訊產業為主，還有另一項可稱為「蘋果效應」的重要因素。蘋果公司是台灣資訊暨通訊零組件最大的客戶，iPhone 6的問世對台灣經濟帶來重大影響。經濟學者估計，iPhone 6 上市將對台灣2014年的GDP成長率貢獻0.4個百分點。梁國源預測，蘋果推出iPhone 6及伴隨而來的長鞭效應，將推升台灣今年的G D P成長率到3.57%（高於主計總處的預測），但在此同時，雖然國際貨幣基金預測明年全球G D P成長將會加快，成長率會從今年的3.3%增加到3.85%，但梁國源預測，台灣明年的成長率將下滑到3.4%。他預期台灣資訊暨通訊產業在智慧型穿戴裝置與物聯網方面會有若干好的發展，但他也說，「明年別期待台灣企業能受惠於蘋果效應」。在過去幾年，台灣的出口出現相

元大寶華的梁國源指出，台灣的經濟以出口為導向，與全球需求的變化有密不可分的關係，而在「長鞭效應」之下，全球需求的變化對台灣的產業具有特別重大的影響。所謂的「長鞭效應」是指在供應鍊當中，經濟的衝擊越到後面越加明顯（請見圖表）。特別是在資訊暨通訊技術產業方面，台灣的企業一般位居中游，負責產品代工及供應零組件。因此，全球需求的變化對台灣的衝擊，可能大於比較仰賴塑造全球品牌的韓國等國家。例如在 2009年，全球需求只降低了一些，台灣的出口就減少6%以上，韓國的出口則只有小幅衰退。但另一方面，全球需求只要升高一些些，就可能給台灣的出口產業帶來較大的好處。

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will account for 0.4 percentage points within Taiwan’s GDP growth rate for 2014. So while Yuanta-Polaris’ Liang predicts 3.57% GDP growth (higher than the DGBAS forecast) for Taiwan this year on the strength of the iPhone 6 launch and the attendant bullwhip effect, he expects a decline next year to 3.49%, despite the International Monetary Fund’s prediction of faster global GDP in 2015, up from 3.3% in 2014 to 3.85%. Although he envisions some promising developments for Taiwan’s ICT industry in wearable devices and the Internet of Things, Liang says that “next year you cannot expect that Taiwan’s firms will enjoy the iPhone effect.” Taiwan’s exports have fluctuated fairly widely over the past few years. They reached a peak of US$308.25 billion in 2011, before sinking to US$301.11 billion in 2012 and regained some lost ground in 2013 to reach US$305.44 billion. If current trends continue, 2014 will likely be a new record year for exports, but some skepticism exists over whether the momentum can be sustained going into 2015. “We are an export-dependent country and exports have seen virtually zero growth over the last three years,” observes National Taiwan University’s

Chen. “We are still in a transition period recovering from the 2008 crisis,” he says, forecasting that “the global economy will not get back to normal for the next few years.” China’s expected slowdown to an estimated 7.3% growth rate this year, the slowest pace in 33 years, is also likely to have a strong impact on Taiwan’s exports. Chen says that with more than 25% of Taiwan’s exports going directly to China (including Hong Kong, this figure rises to nearly 40%), “when China slows down, that means we slow down.” As discussed in another article in this section, China’s growing capability in technology manufacturing also presents a significant challenge to Taiwan’s exports. With the Eurozone improving but still relatively weak, the United States is left as the one bright spot on the map, with an expected 3.2% growth rate this year. Many other interrelated factors are in play, some domestic and some international, that might impact Taiwan’s economy going forward. Taiwan’s housing market is one. Standard Chartered’s Phoo notes that the government has introduced several measures aimed at cooling what was seen as an overheated market. As a result, housing prices in Taipei have stagnated for the past several quarters, and

當大的波動；2011年台灣的出口金額達到3,082億5,000萬美元，隔年降為3,011億1,000萬美元，去年則略為回升到3,054億4,000萬美元。按照目前趨勢，今年出口可望創下新高，但這個趨勢能否持續到明年，不無疑慮。台灣大學的陳添枝說：「我們仰賴出口，而我們的出口在過去3年幾乎是零成長。我們還處在2008年金融海嘯過後的過渡階段。」他並預測，「全球經濟未來幾年還不會恢復到正常的狀態」。中國今年的成長率預料將降為 7.3%，創33年來的新低。這對台灣的出口也可能造成重大衝擊。陳添枝說，由於台灣有25%的出口直接銷往中國（如果包括香港，則比率提高到將近40%），「中國成長減緩，我們也會減緩」。本期另一篇文章談到，中國科技產業的能力逐

漸提升，也對台灣的出口形成重大挑戰。歐元區國家經濟雖有改善，但仍相對低迷，美國成為唯一的經濟亮點，今年的成長率可望達到 3.2%。還有一些彼此互相牽動的國內和國際因素，可能影響台灣的經濟走向。一個因素是台灣的房市。渣打銀行的符銘財指出，政府已採取好幾項措施，要讓被認為過熱的房市降溫，結果是房屋價格在過去好幾季停止上漲，成交量也大幅減少。他說：「因此房地產業顯然是我們需要注意的地方。如果是健康的調控，就不致於對經濟或明年的成長展望造成太大的負面衝擊。」但台灣有大量資金投入房市（請見本期的Industry Focus），如果房價大幅下滑，將會有不利影響。此外，總統和立委選舉預定於 2016年1月舉行，競選活動主要將

the number of transactions has declined considerably. “So the property sector is clearly one area we need to keep an eye on,” he notes. “If it’s a healthy correction, it shouldn’t do much harm to the economy or the growth outlook for next year.” With a considerable amount of Taiwan’s wealth tied up in property (see this issue’s Industry Focus), however, a sharp decline in housing prices would be damaging. In addition, presidential and legislative elections are scheduled to be held in January 2016, with most campaigning taking place in 2015. Academia Sinica’s Hu notes that major elections usually contribute to consumption as candidates hold banquets, rallies, and other activities, and print large quantities of campaign literature. Phoo adds that during election years, the government often adopts a slightly more expansionary fiscal policy to fuel the economy. But it is unlikely to be more than slight due to tight constraints on the government budget and the slow pace at which public investment projects move forward.

Prices and employment Inflation is unlikely to be a problem, with Liang Kuo-yuan forecasting that the rise in the Consumer Price Index (CPI)

落在2015年。中研院的胡勝正指出，重要選舉往往會帶動消費，因為候選人要辦餐會、造勢及其他活動，還要印大量的文宣品。符銘財也說，在選舉年，政府通常會採取稍微偏向擴張的財政政策，以刺激經濟成長。但由於政府預算緊縮，而且公共投資工程進度緩慢，擴張的幅度可能相當有限。

物價和就業通貨膨脹不大可能變成一大問題，元大寶華的梁國源預測，消費者物價指數（C P I）進入2015年將因「巨大閒置產能」而維持在1.5％左右。因為台灣的工業產能嚴重低度利用，隨著不景氣導致通貨膨脹降低，使台灣經濟表現低於其潛在能力。九月份的失業率來到3.96％，相

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較2009年和2010年的超過5％紀錄，表現更佳。但是從歷史角度來看，4％左右的失業率對台灣已經是高點。梁國源預測，失業率數字將持續下滑。金融研訓院的鄭貞茂也同意勞動市場逐漸改善，卻感嘆就業市場增加的工作大多是相對低薪的服務業。他同時指出長期勞動力失調，隨著製造業求才若渴，求職者卻更嚮往即便低薪卻具空調的辦公環境。國際油價迅速下跌，目前每桶原油基準價格低於 80美元，被認為對台灣具備消極和積極雙重潛在影響。渣打銀行符銘財指出，一方面，油價下跌帶動全球經濟緊縮壓力可能會抑制整體需求；另一方面，由於台灣所有能源需求幾乎仰賴進口，每年進口約3億桶石油，低價將有助於整體貿易平衡，有利出口產業降低生產成本，並賦予家庭有能力將收入支配在燃油以外的項目上。他的結論是，「整體看來，油價下跌比較像中性因子，或對台灣經濟成長前景略具正面意義。」。全球經濟也面臨如烏克蘭戰爭、伊波拉危機和伊斯蘭國崛起等頭號風險，以及包括日本和歐洲持續緩慢成長等相較平穩的風險。中華經濟研究院副院長王健全從目前歐洲採取財政寬鬆政策跡象來看，對該區域傾向樂觀。他表示，「他們別無選擇。」，因為財政緊縮政策只會惡化該區域的經濟困境。中國也面臨因其財政與貨幣寬鬆政策，比如說透過降低銀行存款準備金利率，而放緩了經濟成長。不過王健全指出，這個階段還搭載著會加重原本就已過度擴張之房地產市場的風險。他說，中國政府將竭力確保所有補充流動資金，都注入戰略性新興產業，例如含苞待放的半導體行業(詳見邊欄相關文章) ，而非鋼鐵與水泥等已過度建設的傳統重工業。

will remain at around 1.5% into 2015, due in no small measure to the “huge negative output gap.” Because of heavy underutilization in Taiwan’s industrial capacity, the Taiwan economy is performing below its potential, with that slack resulting in low inflation. September’s unemployment figure came in at 3.96%, much better than the more than 5% recorded in 2009 and 2010. But historically, unemployment of around 4% is high for Taiwan, and Liang forecasts that the figure will continue to decline. Cheng Cheng-mount concurs that the labor market is improving, but laments that most of the employment being created is relatively low-paid jobs in service industries. He also notes a chronic labor force mismatch, with the manufacturing sector needing more workers but job-seekers preferring air-conditioned offices, even at lower pay. The rapid drop in international oil prices – currently below US$80 per barrel for benchmark crude – is thought to have both potentially negative and positive implications for Taiwan. On the one hand, Phoo notes, falling oil prices drive deflationary pressure on the global economy, which might dampen overall demand. But on the other hand, since Taiwan relies on imports for nearly all of its energy needs, importing roughly 300 million barrels of oil a year, lower prices would aid the overall trade balance, help export industries reduce production costs, and give households more discretionary income to spend on items other than fuel. “Overall, it’s probably more of a neutral factor, or a slight positive in terms of the growth outlook for Taiwan,” he concludes. The global economy also faces headline risks such as war in Ukraine, the ebola crisis, and the rise of the Islamic State, along with more prosaic risks including continued sluggish growth in Japan and Europe. Vice President Wang Jiann-chyuan of the Chung-Hua Institution for Economic Research (CIER) tends to be optimistic about Europe, due to signs that it is adopting looser

Tour groups, mainly from China, have been the biggest contributor to the rapid growth in Taiwan tourism in the past few years. photo : cna

tourism anD tHe costDown moDel Tourism to Taiwan is surging, with arrivals hitting new peaks every year. More than eight million tourists visited Taiwan in 2013, spending over US$12 billion and providing a welcome source of jobs and income in many remote areas. The growth in the tourism industry is considered one of the more stellar successes of the Ma administration’s goal of diversifying the Taiwan economy, lessening reliance on ICT manufacturing and promoting service-driven industries. “Right now we’re too focused on electronic goods,” says Wu Ming-huei, director of the National Development Council’s department of economic development. 24

She notes that in response to intensifying competition from Korea and increasingly China, the government “is trying to diversify our exports and develop the service industry.” By importing demand, tourism in effect allows Taiwan to export its services without actually going abroad. “It’s another kind of export,” explains economist Gordon Sun of the Taiwan Institute of Economic Research (TIER). “Foreign people come here to buy our services.” Developing the tourism industry is also instrumental in addressing the nagging problem of widening income inequality. While electronics manufacturing contributes greatly to GDP growth, its capitalintensive nature means it does little to expand employment. Most of the benefits accrue to the owners. Tourism, by contrast, generates large numbers of jobs and disperses them throughout Taiwan. Gordon Sun notes that the lowest unemployment rates in Taiwan are in rural Chiayi and Hualien, not in the business centers of Taipei or Taichung. “Because many tourists go to Sun Moon

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fiscal policies. “They have no choice,” he says, since austerity measures have only exacerbated the region’s economic woes. China is also countering its slowdown with a loosened fiscal and monetary policy, for example by reducing the reserve ratio for banks, but Wang notes that this step carries the risk of aggravating an already overextended property market. He says the Chinese government will try to ensure that any added liquidity gets funneled to strategic industries, such as the budding semiconductor industry [see the sidebar on the “Red Supply Chain”] rather than overbuilt traditional heavy industries like steel and cement. The U.S. Federal Reserve’s quantitative-easing bond buying, which has buoyed the global economy for three years, is now coming to an end, and when the United States will actually raise its benchmark interest rates remains another wild card. Phoo says that if the Fed were to raise interest rates, “Taiwan will not be entirely unscathed.” The concern is that higher interest rates would draw international liquidity away from Taiwan’s stock market and back to the United States. However, this trend might be counterbalanced by looser financial policies adopted in Japan and the EU, preventing a sudden tightening of liquidity around the world. Phoo adds that Taiwan’s relatively healthy current account balances and external debt positions would also ameliorate such shocks. A more pressing concern for Taiwan’s stock market is the impending capital gains tax on investment income, due to come into effect with the start of 2015. Academia Sinica’s Hu says that while the proposed tax would actually impact only the very wealthy, as it is limited to big investors with annual transactions exceeding NT$1 billion in value, it nevertheless is already having a psychological effect on the whole market. Cheng observes that Taiwan is already starting to see money flow overseas. But in the real economy, the signs are that Taiwan in 2015 will do at least as well as in 2014 – and very possibly even better.

Lake or Alishan or Hualien, young people who live there can work in a restaurant or drive a bus or sell tea to the visitors,” he says. Local economies benefit when young people to continue to live there instead of migrating to metropolises. On the other hand, critics observe that Taiwan has been developing its tourism industry in quick and easy fashion, focusing on the lowest hanging fruit – the budget traveler from China. Little investment has gone into creating top-quality facilities or services. In 2013, more than half of the more than eight million visitors hailed from either China or Hong Kong/Macau. Those arrivals increased by 13.7% over the previous year. Although total visitors in 2013 increased by 9.64% and total expenditures were up 4.7%, expenditures per visitor declined by 4.53%. According to several economists, this trend is a further indica-

Lower world oil prices are expected to have both favorable and unfavorable effects on the economy.

photo : cna

美國聯邦儲備委員會購買政府公債，而使全球經濟提振三年的量化寬鬆政策即將接近尾聲；若美國真的提高基準利率，仍會是振興經濟的另一大王牌。但符銘財認為，假使美國聯準會真的提高利率，「台灣將不會毫髮無傷。」。令人擔憂的原因是，高利率會把國際流動資金抽離台灣股市轉回美國。然而，此一趨勢可能會與日本和歐盟的財政寬鬆政策相抵消，防止世界各地流動資金突然緊縮。符銘財補充，台灣相對健全的經常帳餘額和外債狀態將有助於緩解這種衝擊。而台灣股市更迫在眉睫的問題，是即將自2015年起恢復課徵證券交易所得稅。中研院的胡勝正表示，儘管此建議稅收限制在年交易金額超過十億元的大戶，實際上只會影響富豪，但對整體市場已產生心理效應。鄭貞茂甚至觀察到台灣資金已開始流向海外。但是從經濟實際面看來，各種跡象顯示台灣在 2015年的表現將跟2014年一樣好，甚至可能更好。

tion of the “cost down” business model that permeates most of Taiwan’s industries. “Right now our Tourism Bureau is content with the current success,” says Wang Jiannchyuan, vice president of the Chung-Hua Institution for Economic Research (CIER). “The government feels that they’ve made a lot of effort to bring in the tourists, but they don’t do much investment.” He compared it to the OEM approach in manufacturing. The cost-down approach has worked well in transforming Taiwan into an industrial powerhouse, but may also contribute to some of the problems facing the island, including income stagnation and even the edible-oil scandal that has gripped the nation recently. “Why do we have these food safety issues?” asks economist Hu Sheng-cheng of Academia Sinica, a former head of the government’s Council for Economic Plan-

ning and Development (now the National Development Council). “Because manufacturers want to cut down the cost. How we raise the value added, rather than cutting down the cost, will affect the future of the economy. The benefits of our cost-down approach are coming to an end.” In tourism, economists urge the government to begin this transition by shifting from simply seeking more and more visitors to working to attract higher-end tourists seeking a better quality experience. That would entail putting more resources into upgrading the tourism industry. On the other hand, tourist satisfaction levels are up from 86% in 2007 to 95% in 2013. Perhaps the government understands the market demand after all.

— By Timothy Ferry taiwan business topics • november 2014

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cover story 2015 Forecast

tHe rise oF tHe reD supply cHain The cooperative cross-Strait manufacturing relationship is evolving into one of stiff competition. BY TimoThY ferrY

espite unease in Taiwan over the economy’s heavy dependence on China, which after all still represents a significant political and military threat to the island, Taiwan’s manufacturing sector has clearly benefited over the years from its ability to utilize the mainland as a production base to reduce costs. The China connection has been especially valuable for the electronics industry, which accounts for more than 50% of Taiwan’s manufacturing output. Electronics companies continued to source high-tech components and materials in Taiwan, shipping them across the Strait for assembly in combination with lowervalue parts from China. The manufacture of Apple’s iPhone 6 is a case in point. While Terry Gou’s Hon Hai does nearly all of the iPhone assembly in China, the device is made from components largely sourced from Taiwanese suppliers. But that positive relationship has depended on two conditions: China remaining a source of low-cost labor and its technological level remaining relatively unsophisticated. But as China develops, its labor has become more expensive while its tech sector has advanced. Now, says economist Gordon Sun of the Taiwan Institute of Economic Research (TIER), in many tech sectors, particularly flat panel displays and solar energy, “China can produce the same quality of product as Taiwan.” As a result, companies manufacturing in China – including Taiwanese-invested operations – have less need to import key components from Taiwan. The movement of many factories from coastal areas to 26

the hinterland in search of lower production costs is further accelerating this trend. Taiwan’s media has dubbed this phenomenon the “Red Supply Chain” – meaning that everything necessary to build a product can be sourced from Chinese suppliers. Sun notes that in some sectors, particularly petrochemicals, China has already completed this transition – witness the plans by Taiwanese companies to invest in building a naphtha cracker and associated units in a new petrochemical zone in Fujian Province. Some economists express concern that the next target for China is the sector that has proven so lucrative for Taiwanese industrialists for decades: information and communications technology (ICT) components and semiconductors. Noting that this tendency is already occurring in the ICT sector, Wang Jiannchyuan, vice president of the Chung Hua Institution for Economic Research (CIER), says that whereas China previously depended on Taiwan for as much as 90% of its supply of ICT components, this proportion has fallen to 60% and continues to slide. As Gordon Sun puts it, China is “no longer our customer, but rather our competitor.” National Taiwan University economist Chen Tain-jy points out that China is already spending heavily to develop and upgrade its ICT and semiconductor industries. “They are buying U.S. companies and trying to beef up their local design capability, and they want to increase their capacity in IC manufacturing,” he observes. As part of that effort, China last month won agreement from

Taiwan’s United Microelectronics Corp. (UMC) to invest US$1.35 billion to enter into a joint venture in Xiamen to provide foundry services for 12-inch wafers. Chinese technology firms has been taking advantage of lagging salary levels in Taiwan to lure Taiwanese engineers and scientists by offering up to five times more in compensation. “All of this means they are ready to play in this game,” says Chen. The potential ramifications of a big push by China to compete with Taiwan in ICT and semiconductors are perhaps illustrated by the state of the global solar photovoltaic (PV) industry. Before 2010, solar PV manufacturing was highly profitable for Taiwan’s nascent makers. By early 2011, however, China was already making inroads. Supported by government loans and mandates to spur investment and employment, China’s solar industry rapidly expanded capacity. The resulting extreme imbalance in global supply and demand caused prices to plummet, driving most Western solar PV manufacturers out of the industry and leaving Taiwan’s makers struggling to survive.

The lead in semiconductors Could this same thing happen to Taiwan’s electronics industry, particularly its crucial semiconductor industry? At 7.3% of the total GDP, semiconductor production is an “important but not overwhelming” element of Taiwan’s economy, according to Stephen Su, general director of the Industrial Economics & Knowledge Center (IEK), a divi-

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2015 Forecast

sion of quasi-public Industrial Technology Research Institute (ITRI). The vital importance of the sector, instead, lies in its high “value added,” meaning that the return on investment is far greater. Taiwan currently has the world’s second-largest market share in semiconductors, trailing only the United States. Of the four segments of semiconductor manufacturing – foundry, IC design, memory, and packaging – Taiwan leads in the foundry area with a 61% global market share, and in packaging with 55%. Led by the world’s number one contract chip maker, Taiwan Semiconductor Manufacturing Co. (TSMC), the IC foundry business is a major pillar of Taiwan’s technological strength. To maintain its edge against global rivals, TSMC every year plows half of its earnings back into capital investment and R&D, making the company a significant contributor not only to Taiwan’s overall exports but also to domestic demand. Other observers are quick to point out that loss of competitiveness in semiconductors has been a lingering boogieman in Taiwan’s collective unconsciousness for over a decade. “We’ve talked about this since day one,” observes Academia Sinica economist Hu Shengcheng, saying that such fears that have been raised ever since Richard Chang sold his company to TSMC and then founded Semiconductor Manufacturing International Corp. (SMIC) in Shanghai some 15 years ago. Hu notes that while China is able to succeed in many product areas, competing in the rarefied atmosphere of semiconductors is a very different game. “It needs a synergy of engineers, confidence, and mutual trust between companies and their clients. It requires more than just money.” Client trust is a major factor in TSMC’s dominance of the global foundry business. TSMC works closely with its customers to develop customized products, a relationship that entails a significant amount of valuable intellectual property that technology firms go to great lengths to protect. In that respect, China, with its poor IPR record, is put at a comparative disadvantage. CIER’s Wang notes that TSMC also invests heavily in R&D to ensure that it remains

ahead of its competitors, and that its own vast patent portfolio enables it to share technology with customers, providing assurance that their products are not violating other firms’ IP. Because of the high entry barriers in foundry services in terms of both capital expenditure and knowhow, Taiwan still enjoys a comfortable lead not only over China but globally, says IEK’s Su. Although several foundries are operating in China, their technology remains far behind Taiwan’s, he notes, and as packaging is closely tied to foundry services, China doesn’t enjoy an advantage there either. In memory chips, Taiwan has had less success, but the industry has recently consolidated and stabilized, and Su notes that the remaining makers enjoy decent profitability. In China, in contrast, memory technology is still in the research stage, far from ready for commercial application. Su cautions that while China’s forays into semiconductors have not yet been highly successful, Chinese companies are accumulating more expertise and gradually “closing the gap.” In related industries, such as LED and LCD manufacturing, China is regarded as only one or two years behind Taiwan, and in solar PV

manufacturing it is at least on par with Taiwan, if not more advanced. In one semiconductor segment – IC design (often referred to as “fabless” operations) – China is proving especially competitive. As Su explains, IC design is less capital-intensive than foundry services or packaging, making it easier to catch up. “If you have the people and the IP, it’s possible you can do it,” he says. Another factor in China’s favor is that IC design is more geared towards applications. China’s large mobile device industry (led by Huawei) and PC industry (Lenovo) provide ready opportunities for the development of such applications. China has set success in IC design as a prime goal, and is already forming large IC design houses that may one day rival Taiwan’s giants, Mediatek and Morningstar. So while Taiwan remains strong in semiconductors overall, Su warns that the industry needs to remain vigilant and to continue to invest in people and equipment to keeps its lead. NTU’s Chen concurs. “Once China catches up [in an industry segment], you have to abandon it,” he observes. “So you have to keep running. It’s a war, so you just have to keep fighting.”

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amcham event

Judging Ad Campaigns on Creativity Night

mCham Taipei’s annual Creativity Night, held October 16 in the ballroom of Shangri-La’s Far Eastern Plaza, gave the 173 attendees the chance to admire – and rate – some of the year’s award-winning advertising campaigns from around the world. Host Doug Klein, co-chair of AmCham’s Retail Committee, opened the evening with an introduction to the proceedings, followed by a mock TV

spot that parodied many of advertising’s most infuriating clichés. Following a gourmet dinner, the attendees paid rapt attention as video clips were shown of a selection of nearly 50 winners from the 2014 annual CLIO awards. The CLIOs are the most widely recognized international awards competition for advertising, design, and digital and communications work. The 2014 awards ceremony was held in New York only two weeks before AmCham’s Creativity Night. To turn the evening into a contest, the various tables competed to see which could most accurately guess the level of prize each ad campaign had actually won: Grand, Gold, Silver, or Bronze. After each round, the table mates would consult with one another

and then rank their choices on worksheets provided by AmCham staff. The winning team, from Costco Wholesale, took home prizes of gift bags. The CLIO entries covered creative works from a broad range of media – including traditional categories such as print, film, and audio, as well as categories for digital marketing, social engagement, innovative media, and integrated campaigns. The 2014 Creativity Night was s p o n s o r e d b y A b b o t t Ta i w a n & McCann Taiwan. Prizes were sponsored by Procter & Gamble, and equipment by Shangri-La’s Far Eastern Plaza Hotel Taipei. Brain Magazine, Doug Klein, and Marketing and Distribution co-chair Gordon Stewart were also instrumental in putting the event together.

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TAIWAN busINess

Despite riots anD reD tape, taiwanese investment stiLL Grows in vietnam Provisions of the Trans-Pacific Partnership could cause more textile operations to set up there.

BY JENS KASTNER

ast May, tens of thousands of protestors in Vietnam, angry with China over its decision to place an oil rig in disputed waters near the Paracel Islands, rampaged through the industrial cities of Binh Duong and Dong Nai, burning more than a dozen factories bearing Chinese-language characters on their signage. At least four people died over several days of violence, which saw more than 350 factories damaged and caused billions of dollars in losses. But while the rioters intended to target PRC-owned factories, nearly all of the destroyed facilities were in fact the property of investors from other locations, primarily Taiwan. At the time, the riots shook the confidence of the Taiwanese and international business communities, with many questioning Vietnam’s continued suitability as an investment destination. At least one Hong Kong-based garment maker suspended operations in the immediate aftermath. But the episode also focused attention on the vast scale of Taiwan’s investments in the Southeast Asian nation – and within a month, most Taiwanese-owned factories were back in full operation. 30

DESTRUCTION — Although anti-Chinese riots in Vietnam last spring caused serious damage to many Taiwanese-owned factories, the incident did not cause Taiwanese investors to pull out of the market. photo : ap/ Jeff nesmith

Vietnam remains the fifth largest destination for outward Taiwanese foreign direct investment (FDI), and Taiwan continues to be the fifth largest source of incoming FDI for Vietnam. Taiwanese investment in Vietnam approved by Taiwan’s Ministry of Economic Affairs (MOEA) more than doubled in 2012 to reach almost US$1 billion, and then grew by another 84% in 2013. Taiwanese FDI into Vietnam then contracted by 76.4% in the first eight months of this year compared to the

same period a year ago, according to MOEA data. But Kristy Hsu, director of the Taipei-based Taiwan ASEAN Study Center under the Chung-Hua Institution for Economic Research (CIER), observes that “FDI amounts and number of cases are actually higher than what we s e e in t he st at i st i cs because it is not mandatory to report the FDI to the MOEA and also because neither Taiwan nor Vietnam’s national data reflects Taiwanese FDI through third countries, such as the Cayman

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Islands.” She adds that she is unaware of any relatively large-scale investment cases being reconsidered, let alone withdrawn, because of the riots. There are a number of reasons why Vietnam remains high on the list of targets for Taiwanese investors, despite the violence and losses. Rising costs and slowing economic growth have reduced China's attractiveness as an investment location, particularly for manufacturing low value-added goods such as textiles and cheap electronics. Taiwanese manufacturers often regard Vietnam as an appealing alternative site for their operations because of the lower production costs as well as the many cultural similarities between Taiwan and Vietnam. Even more significantly, Vietnam’s inclusion in the ongoing first round of Trans-Pacific Partnership (TPP) negotiations and its talks with the European Union on a bilateral free-trade agreement (FTA), projected to be signed later this year, add to the country’s allure over more populous Association of Southeast Asian Nations (ASEAN) member countries such as Indonesia and the Philippines. The TPP alone will likely encompass 40% of the world’s GDP, and as the two trade pacts take shape, Taiwanese manufacturers are increasingly viewing Vietnam as an effective gateway to crucial consumer markets in the United States and EU. “Last year showed very strong growth because of the TPP effect,” observes CIER’s Hsu. She notes that “Taiwanese companies, particularly in the upstream textile industry, are investing more in Vietnam as they try to take advantage of the country’s TPP participation and its resulting connection to key consumer markets.” The single most important factor for the recent surge of Taiwanese textile FDI in Vietnam is the TPP’s “yarnforward” rule, which stipulates that clothing products must be made with yarn procured from other TPP member countries in order to be granted tariff concessions. Vietnam’s upstream chemical and textile industries lag far behind their Taiwanese counterparts and the country’s spinning mills primarily produce basic acrylic or acrylic-cotton

yarns. Vietnam-based garment manufacturers therefore rely heavily on imports of fiber as well as dyestuff from countries with more sophisticated upstream textile industries, especially China, India, South Korea, and Taiwan – none of which are participants in the TPP negotiations (Taiwan hopes to be included in an eventual second round of negotiations, as does Korea). Currently 88% of the Vietnam textile industry’s materials come from non-TPP countries, according to the Vietnam Textile and Apparel Association. Vietnam’s TPP negotiators have been pushing for acceptance of a “short supply list,” which would allow signatory countries to continue to buy certain types of yarn and fabrics from non-TPP members for another three to five years in order to keep their downstream manufacturers going. But Bui Trong Nguyen, secretary-general of the Saigon Association of Garment-TextileEmbroidery-Knitting (AGTEK), says that such a list would probably “only cover certain high-tech yarns, not knitting yarns.” But it is the knitting yarns – used chiefly for the production of sweaters, T-shirts, socks, and underwear – that will be needed the most to meet the huge demand in major markets such as the United States once the TPP tariff reductions kick in. Current drafts of the trade agreement are believed to call for a drop in duties on U.S. imports of garments from fellow TPP member-countries to zero from the current 17% to 18%. Taiwan’s exclusion from selling yarn to Vietnam’s garment makers under TPP, if it materializes, might even be exacerbated by a similar yarnforward restriction imposed in a proposed FTA between Vietnam and the EU. According to industry insiders, EU member states from southern and eastern Europe, which have their own downstream textile industries to protect, are vehemently opposed to the pact if it grants Vietnam liberal rules of origin. To prepare for this eventuality, Taiwanese upstream textile producers – most prominently the Formosa Plastics Group (FPG), which produces textiles,

plastics, and steel in Vietnam, as well as such other companies as Far Eastern New Century Corp. and Tainan Spinning Co., among others – are all making substantial investments in Vietnam’s domestic yarn-manufacturing industry. “Yarn-forward has not yet been decided on, but the TPP will very likely adopt it,” says Hsu. “Taiwanese companies would like to get prepared for an era when yarn-forward is applied.”

Less allure for electronics Taiwanese firms also have substantial investments in Vietnam’s local electronics manufacturing industry, particularly in home appliances, electrical equipment, and machinery parts, which are linked to supply chains in Taiwan and China. But the surge in new Taiwanese investment in the Vietnamese textile sector is unlikely to be replicated in the electronics industry, as most of the products already benefit from tariff-free trade under the Information Technology Agreement (ITA) signed in 1996 by over 75 countries, including both Vietnam and Taiwan. A follow-up agreement is currently under negotiation to cover more recent categories of electronics goods invented since 1996, including smartphone technology. Since Vietnam’s electronics industry tends to be focused on less innovative products, however, the impact of this expanded agreement will also likely be limited. The ITA covers eight categories of electronics products, including computers, semiconductors, semiconductor manufacturing equipment, telecommunication apparatus, instruments and apparatus, data-storage media and software, and parts and accessories, according to the World Trade Organization’s website. Home appliances are not included, though. As a result, Brian Chen, industry analyst with the Taipeibased Market Intelligence & Consulting Institute under the Institute for Information Industry, cites Taiwanese appliance maker TECO as “a good example of a Taiwanese brand vendor positioned to benefit from Vietnam’s likely TPP inclusion and the Vietnam-EU FTA.” He notes that TECO exports to the United

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States and EU from its home appliances plant in Vietnam. Chen points out that several Taiwanese electronics makers are actually withdrawing or otherwise minimizing their presence in Vietnam. For example, last March Tatung stopped producing home appliances in Vietnam, while original design manufacturer Compal Electronics abandoned its plans to set up a notebook PC plant there. According to Vietnamese newspaper reports, Compal completed the construction of the laptop manufacturing factory, but ceased operations in 2011 after several months of trial production. Meanwhile, Foxconn last year was criticized by the Vietnamese authorities for delaying its approved investment plans for years, and Chen notes the company has recently tended to emphasize Indonesia over Vietnam as a Southeast Asian manufacturing site. Insufficient regulatory coherence and excessive red tape in Vietnam appear to be the reasons, he says. While China-based manufacturers face rapidly rising wages and the central government’s increasingly determined push for better working conditions in supply chains, their peers in Vietnam shoulder burdens that arguably are similarly weighty. Apart from the daunting tasks of sourcing raw materials domestically that have a chance to pass stringent environmental and safety standards in the United States and the EU, there are also ample accounts of erratic policy-making. High on the list of foreign investors’ complaints are Vietnam’s restrictions on the use of foreign personnel. Since 2012, for example, rules require that whenever an expat work permit is extended, a training contract must be signed with a Vietnamese national who will replace the foreigner once the extension expires. “All expats are subject to these regulations, even the most senior at the CEO level,” observes Michael Grosbøl, CEO of Danish workwear manufacturer Mascot International, which has three factories in Vietnam. “Such restrictions have been met with repeated appeals from Eurocham [the European Chamber of Commerce in Vietnam] 32

GETTING A FOOTHOLD — Vietnam has been a favored destination for Taiwanese-invested operations in relatively labor-intensive industries.

photo : cna

and other business organizations, but so far the Vietnamese authorities seem adamant to continue with even more restrictions,” he adds. Grosbøl further points to what he perceives as a glaring lack of transparency in Vietnam’s bureaucracy. Official information is often vague, containing inconsistencies and occasionally conflicting statements, with different laws even contradicting each other, he says. According to Grosbøl, “this leads in some cases to internal disagreements between Vietnamese authorities, making it difficult for companies to operate according to new laws and regulations.” An additional risk in the case of Taiwanese investors is insufficient investor protection, which is partly due to Taiwan’s complicated status as an “entity sui generis,” an unrecognized state. Although Taiwan and Vietnam signed a bilateral investment agreement in 1993 and renewed it last year, that has not been enough to ensure adequate com-

pensation to Taiwanese investors in the event things go as wrong as they did during the May riots, according to Justin Huang, secretary-general of the Taiwan Textile Federation. The two sides are currently in negotiations to extend protection to Taiwanese FDI coming through third countries. Bert Lim, president of the Taipeibased World Economics Society think tank, suggests that Vietnamese authorities’ regulatory attitude may have more of an impact than the riots in turning away Taiwanese FDI. “In the 1960s, we had anti-Chinese rioting in Jakarta, but Taiwan’s FDI in Indonesia continued to increase until well into the 1980s, and it was pretty much the same with anti-Chinese rioting in Malaysia and the Philippines,” he says. “And the reason the Philippines has now very little Taiwanese FDI is not because of political risk but because of red tape, which is worse from the investors’ perspective.”

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life in taiwan

DEALING WITH cuLture sHocK Taiwan is a relatively easy environment in which to live, but inevitably many expatriates find the transition to a new culture to be a challenge.

BY MICHAEL MULLAHY

f you’re an expat in Taiwan, you have probably experienced some symptoms of culture shock. Maybe excitement about living in such a vibrant culture, or perhaps exasperation at the crowded cities and sweltering summers. Most people have heard the term “culture shock,” but what exactly does it mean? The first group that experiences culture shock consists of tourists, international students, and international workers. This group usually stays in the host culture temporarily, expecting to return home after a certain period of time. Interestingly, those in this group frequently also experience reverse culture shock after returning home. Members of the second group, immigrants and refugees, tend to stay longterm or even for a lifetime. This group usually crosses cultures in the hope of having a better life, and may come from disadvantaged backgrounds. For them, the process of culture shock and cultural adjustment can be longer, more difficult, and more complex. Since the process of culture shock also depends on individual factors beyond which group you belong to, every individual’s experience of culture shock will be different. For some, such as those with a history of successful cultural adjustments, it will not be severe. Others will experience severe culture

shock, even to the point of needing to return home prematurely. Additionally, culture shock can occur quickly, over weeks or month, or else appear as a slow process taking years or even decades. It all depends on the individual’s mindset, support network, and unique life experiences.

What is culture? Cultures are like icebergs, with the small obvious part appearing above the water, but the enormous unseen part lying deep beneath the surface. When we think of culture, it’s easy to imagine the types of things you see in National Geographic pictorials: colorful clothing, delicious foods, interesting architecture, and exotic languages. Culture is much more than this, however. When we learn about or adjust to living in a new culture, we encounter a whole world of differences below the surface. These “hidden” aspects of culture include communication patterns, taboos and social rules, family structures, and social hierarchies. Different writers have described different models of culture shock, but most agree that the process includes four or five stages. These stages constitute a U shape. Typically a person will feel elated at the beginning, terrible in the middle, and then finally successfully

adapt to the new culture. The first stage is called the Honeymoon Stage, and for a good reason. When we move across cultures, it can feel just like our honeymoon. Everything we encounter is new and exciting. The freshness of our new home feels exhilarating, and we want to experience as much of it as possible. Naturally, though, the honeymoon stage will end. If we expected an exotic, enchanting life in our new culture, sooner or later we will be faced with the reality that our life will be more or less the same, with the same familiar headaches. Just because you live overseas doesn’t mean your child won’t get sick! As the honeymoon feeling fades, the Distress Stage begins. Differences between the home and host cultures become more apparent and problematic, and day-to-day stressors begin building up. The list of common symptoms is long, and includes difficulty concentrating, sleep and appetite changes, relationship conflicts, homesickness, boredom, compulsive eating and drinking, and irritability towards the host culture. In the third stage, things are still looking bad. The Re-integration Stage is characterized by a refusal to accept cultural differences, and hostility and even contempt towards members of the host culture. In this stage it is common to

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idealize life in one’s home country and think seriously about returning home. The second and third stages are the core of the culture shock experiences. Psychologist Ronald Taft described six core aspects of culture shock: (1) stress from working to adapt to the host culture, (2) a sense of loss from changes in social networks and professional networks, (3) a feeling of being rejected by members of the new culture, (4) feelings of confusion about one’s role, self-identity, and values in the new environment, (5) surprise and stress due to noticing cultural differences, and (6) feelings of powerlessness due to not being able to cope with the new environment. This stage is the polar opposite of the honeymoon stage – everything about the host culture seems bad, and there’s no way to escape it. With time, though, the culture shock passes. It is partly an issue of gaining skills. With better language skills and more experience navigating life in the host culture, many of the initial stressors are easily overcome. Another key is a stronger social network, with growing personal and professional connections facilitating smoother adjustment. On a deeper level, many people find they are able to accept certain parts of the host culture. The extremes of complete acceptance during the honeymoon

stage and complete rejection during the culture shock stages have given way to a more balanced understanding of which aspects of the host culture are acceptable and which aspects are best ignored. This fourth stage is termed the Autonomy Stage, and it eventually leads to the final Independence Stage. The ideal result of successful cross-cultural adjustment is that the individual feels comfortable in the host culture, possibly even feeling like it is a “second home.” It’s important to note that not everyone will achieve this final stage. Many people get stuck in earlier stages, or leave the country before the process of culture shock and adjustment has completed. With long-term expats, the differences in adjustment become clearer. You may have noticed that some people tend to become more integrated into the host culture than others. Assimilation occurs when individuals accept the cultural norms of the host culture, and lose their original cultural identity. Separation is the opposite, and occurs when individuals completely reject the host culture in favor of preserving their culture of origin. A clear example is ethnic enclaves, where people recreate their original culture in a certain place. The final type is integration, which is a happy medium.

Individuals are able to have an awareness of their own cultural background and identity, while still having a degree of integration with the host culture.

The Taiwan environment Adjusting to life in Taiwan is a unique experience for most Westerners. Some aspects of life in Taiwan make the transition more challenging. Taiwan lacks the international milieu of Asia’s more globalized cities such as Hong Kong and Singapore. English is less commonly used, and imported goods and Western-style services are harder to find. On the other hand, living in Taiwan can be a uniquely rewarding experience. It’s easy to appreciate Taiwan’s thriving traditional culture, beautiful scenery, and friendly people. In addition, living here is made easier by the good transportation system, comprehensive health insurance, and the many Taiwanese people who have studied or worked abroad. Becoming fluent in Chinese is not a prerequisite for living in Taiwan. If your lifestyle includes a driver, personal assistant, and membership in the American Club, it isn’t terribly important to know how to say much more than “hello” and “thank you.” If you are living more independently, however, you will experience more challenges with the language. Some of the more common challenges for using Chinese include apartment hunting, ordering food, or consulting a mechanic. Having a Chinese-speaking friend can be extremely helpful, but knowing the language yourself will definitely pay off. Some foreigners find that living in Taiwan isn’t right for them, or the challenges of living here are too great, and decide to return home or move elsewhere as soon as possible. At the other extreme are foreigners who have decided to make Taiwan home for the long term, and may have married a local, started a business, or gained permanent residence. Personally, I find Taiwan to have a wonderful balance between the familiar a n d t h e u n k n o w n . F o r m e t h e r e ’s always an element of adventure to nav-

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igating Taiwanese culture, traveling around the island, and studying the Chinese language. At the same time, it’s easy to find familiar comforts like pizza or take a convenient taxi or MRT ride across town.

Tips for adjusting Patience is very important. Remind yourself that it’s normal to have difficulty navigating a foreign country, and that sooner or later you will feel better and you will discover what you enjoy about living here. It’s also important to have realistic expectations about your personal and professional adjustment. If you expect that you will quickly and effortlessly master the local language, culture, and work environment, you are setting yourself up for disappointment. Because a key risk factor for culture shock is stress, simple stress reduction strategies are important. Pay attention to how you are eating, sleeping, exercising, and relaxing. Since your social connections may have suffered from moving overseas, consider joining groups and taking more time to meet people (for example, go to as many AmCham functions as you can). If you are having difficulty adjusting, remember that you can ask for help!

NOT YOUR HOMETOWN SUPERMARKET — A group of expats on a Center-organized tour of a traditional wet market.

pHoto : community services center

How can you know if you are having difficulty? If you are not sleeping well for many weeks, you are having trouble. If you find yourself drinking too much, you are having difficulty adjusting. If you see any significant change in your life patterns, you are having difficulty. If you find yourself angry all the time, you are having difficulty. The Community Services Center in Tienmu is the largest provider of English-language counseling in Taiwan. We provide individual, couples, and family counseling in English and Chinese.

The Center’s counselors have experience working on a wide range of issues (including culture shock). We can help you develop stress reduction strategies. The Center also provides classes, tours, and other events for the international community. Many of the Center’s publications are helpful for expats adjusting to Taiwan, including Taipei Living and Taiwan A to Z. — Michael Mullahy is a postmaster’s counseling intern at the Community Services Center

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2014/11/3 12:00:21 AM

law

FOOD SAFETY: A LeGaL perspective Prosecutors have been winning criminal fraud convictions in adulterated food cases but better civil and administrative tools are needed.

A Kaohsiung government inspector checks on beverages during the 2011 plasticizer scandal.

phOTO : cnA

BY PETER DERNBACH, GARY KUO, AND MICHAEL FAHEY

aiwan’s public and business community were dismayed in early September by news that leading brands of lard oil had been manufactured using oils recycled from food waste, reused cooking oil, and imported animal oils intended for feed production. By mid-October, more than 350 products had been recalled. This latest food crisis is the third in four years. In 2011, Taiwan’s Food and Drug Administration discovered that clouding agents used in many food products contained toxic plasticizers, leading to extensive recalls. The next year, a major supplier was caught adulterating cooking oils. The frequency of problems with Taiwan’s food has undermined consumer confidence at home, and the government estimates that the food industry will lose NT$12.3 billion (about US$410 million) in 2014 sales, mostly in the domestic market. A more intangible loss is the serious damage done to Taiwan’s growing reputation as a unique culinary destination and source of high quality food and drink. The Economist covered the 2011 plasticizer crisis and the New York Times published an editorial in September calling on Taiwan’s government 36

to deal with the systemic issues revealed by the latest cooking oil crisis. Any systemic reform will necessarily involve Taiwan’s legal system. This article, after briefly touching on the bran oil tragedy of 1979, will focus on the 2011 plasticizer and the 2012 olive oil cases. Our findings are that Taiwan’s criminal justice system now deals with those directly responsible for endangering food safety efficiently and harshly, but that civil and administrative remedies remain less effective. Food safety has played a central role in the development of a modern product liability regime in Taiwan and, more broadly, in the development of civil society. In 1979, more than 50 people died in central Taiwan after consuming locally produced rice bran oil contaminated with PCBs. At least 2,000 others suffered serious long-term health consequences, some of which were passed down to their children. Adding to the tragedy, Taiwan’s court system took 14 years to convict the principals of the company on charges of criminal bodily injury and sentenced them to 10-year prison terms. A charge of criminal bodily injury is made if someone intentionally injures another person or damages

that person’s health. It is punishable by a sentence of up to three years (and a fine) for ordinary injuries, three to ten years for grievous injury, and seven years to life if death results. In the 2011 plasticizer and 2012 olive oil cases discussed below, prosecutors were unable to charge defendants in either case with criminal bodily injury because it was not proven that consumers suffered physical injury or harm. Instead, prosecutors included criminal fraud charges in both indictments, and as a result obtained sentences similar to those in the 1979 bran oil cases far more quickly even though far less harm was caused. Yu Shen Fragrances Ltd. manufactured clouding agents that it sold to downstream manufacturers of food products, including beverages, juice concentrate, jam, and baked goods. Clouding agents are used to thicken food products and produce a cloudy appearance, enhancing visual appeal. Before 2006, Yu Shen Fragrances used palm oil to manufacture clouding agents. In 2006, it replaced palm oil with chemical compounds known as DEHP and DNOP, which are plasticizer additives that increase the plasticity or fluidity of materials such as PVC.

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Clouding agents based on DEHP and DNOP are cheaper, last longer, and work better than traditional clouding agents based on palm oil. Taiwan’s Environmental Protection Administration classified DEHP and DNOP as toxic substances in 2009. But between 2005 and 2011, Yu Shen Fragrances sold 31,720 kilograms of clouding agents to 16 downstream customers including some of Taiwan’s bestknown food and beverage brands. Yu Shen Fragrances and its owners were prosecuted in 2011 and ultimately convicted of criminal fraud and violating the Food Safety Administration Act. The company was fined NT$24 million; its two owners were sentenced to 15- and 12-year terms and fined NT$120,000 and NT$100,000 respectively. The convictions were affirmed by the Supreme Court in December 2012, just 18 months after the start of the investigation.

Class action Class action lawsuits in Taiwan are relatively rare because they are restricted to litigation arising out of product liability, securities litigation, and privacy claims. Only a qualified non-profit organization can bring a class action and, in the case of product liability claims, stringent proof-of-purchase requirements limit the pool of prospective plaintiffs. Established in 1980 following the bran oil tragedy, the Consumers’ Foundation is an independent nonprofit organization with standing to bring product liability claims on behalf of a group of at least 20 similarly situated consumers. Since 2000, it has brought 10 product liability class actions, of which two (including the plasticizer case) arose out of food safety problems. In 2012, the Consumers’ Foundation brought a class action product liability claim in the New Taipei City District Court against Yu Shen Fragrances, a second supplier of clouding agents containing plasticizers, and 33 downstream manufacturers, distributors, and retailers of food, beverage, and cosmetics products. The lawsuit

sought NT$2.4 billion for nine types of harm, as well as punitive damages. Although the Consumers’ Foundation prevailed, the District Court awarded just NT$1.2 million because the court allowed recovery for only one type of harm alleged in the suit. Punitive damages were also disallowed. A product liability claim in Taiwan will succeed if the product is found to be defective and to cause an actual injury to a purchaser. The elements of a product liability claim are therefore defect, causation, and actual injury. If a product liability claim meets these three requirements, anyone who manufactures, distributes, or sells a defective product is jointly and severally liable with others in the supply chain for damages – other than purely economic loss – that flow from the injury. Neither intent nor negligence needs to be shown for liability to attach. Punitive damages, however, cannot be applied unless intent or negligence is shown. A product is deemed defective if it fails to meet the expectation of safety created by contemporary scientific and technical standards. A presumption that products containing DEHP and DNOP are unsafe arose because these chemicals are not approved food additives in Taiwan. To overcome that presumption, Yu Shen Fragrances and the other defendants needed to show that DEHP and DNOP were indeed safe. They were unable to do so because DEHP and DNOP are not food additives and also because their known toxic properties create a foreseeable risk of harm. (U.S. lawyers in particular will recognize many familiar concepts in Taiwanese product liability theory up to this point.) In Taiwan the mainstream theory of causation for product liability and other tort claims is “adequate causation” (相當因果關係). A is a cause of the outcome B only if A significantly increases the objective probability of B. This doctrine comes to Taiwan from German jurisprudence. The Consumers’ Foundation case largely foundered on its inability to show that the consumption of the relatively small amounts of DEHP and DNOP in the clouding agents signifi-

cantly increased the probability of the eight of the nine types of actual injuries, including harm to one’s health, that the Consumers’ Foundation claimed were suffered by consumers. However, the District Court held that the consumption of small amounts of DEPH and DNOP in the clouding agents did not significantly increase the probability of injury over the long term because the minimal amounts involved were generally metabolized within 24 hours. Similarly, the judgment said it was unlikely that these minimal amounts interfered with the ability of affected consumers to work. Ultimately the District Court agreed that the only harm objectively likely to have been caused by the purchase or consumption of the defective products was the consumers’ expenditure for the products. The third element of a product liability claim is actual injury. Those who purchased products containing DHEP and DNOP were able to show actual injury in the form of financial loss if they could produce documentary proof of purchase. Since few consumers retain records or receipts of their purchases, Yu Shen Fragrances’ liability was far less than the gains it realized by selling more than 31,000 kilograms of clouding agents.

Punitive damages The District Court declined to impose punitive damages on any defendants, including Yu Shen Fragrances, due to the form of the Consumers’ F o u n d a t i o n ’s s t a t e m e n t o f c l a i m . Taiwan allows punitive damages only in situations expressly cited in a statute. The Consumer Protection Act provides for treble punitive damages for intentionally placing a defective product on the market and double damages for doing so negligently. Yu S h e n F r a g r a n c e s ’ i n t e n t i n placing defective clouding agents on the market was clear, because it knew that plasticizers should not be added to food products. The District Court therefore could have imposed punitive damages on the company if the statement of claim had named Yu Shen

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Fragrances alone as liable for punitive damages. In contrast, the downstream suppliers did not sell the defective products intentionally or negligently because they presumably had no knowledge that the clouding agent contained unapproved additives. The Consumers’ Foundation statement of claim against Yu Shen Fragrances, however, asked the Court to impose joint and several liability on Yu Shen Fragrances and all the co-defendants for NT$2 billion in damages without separating out punitive damages. The District Court denied all punitive damages on grounds that the requested “joint and several” liability would effectively leave the downstream suppliers liable for Yu Shen Fragrances’ punitive damages despite their lack of requisite intent or negligence. As a result, the downstream suppliers were each found to be jointly and severally liable with Yu Shen Fragrances, the other supplier, and the owners, but this liability extended only to the amount of their aggregate sales of the defective products. This liability ranged from NT$9 to N$80,000.

2012 olive oil cases Chang Chi Foodstuff Factory Co. was a large domestic manufacturer of cooking oils in central Taiwan. Its chairman, Kao Cheng-li, along with two key employees, personally supervised the formulation and manufacturing of the company’s products, including olive oil, saffron oil, and chili oil. To reduce costs, Kao blended cheaper oils such as canola into the company’s products. In addition, its olive oil used copper chlorophyllin for coloring. After labeling its cooking oils as “100% pure,” “pure,” or as containing expensive oils, Chang Chi Foodstuff sold them to major domestic cooking oil brands or to wholesalers under Chang Chi Foodstuff’s own brands. The Food Safety and Sanitation Act (FSSA), formerly the Food Sanitation Act, has been amended eight times since 2000. Before June 2013, the Act already prohibited manufacturing or selling adulterated or counterfeit foods and 38

food additives. If local health authorities detected adulterated or fake foods, they had the power under the Act to impose an administrative fine regardless of whether the food actually harmed the health of consumers (although for the offense to be punished as a criminal act, it was necessary for the adulterated food to have harmed human health). Between 2000 and 2012, the maximum administrative fine was increased from NT$150,000 to NT$6 million. In June 2013, the Act was amended to increase the administrative penalty to a maximum of NT$50 million or the gains received from the manufacture or sale of the adulterated food, provided those gains exceed NT$50 million and the Department of Health determines that the circumstances are serious enough to warrant an enhanced fine. The June 2013 amendment also removed the requirement that adulterated food must harm human health to be punished as a criminal offense. These amendments played an important role in the Chang Chi Foodstuff olive oil cases. Acting on anonymous complaints in October 2013, the Changhua County Health Department discovered that Chang Chi Foodstuff had been adulterating its products. Chang Chi Foodstuff and chairman Kao were quickly indicted on criminal charges of violating the FSSA and committing fraud. One day later, the Changhua Health Department imposed an unprecedented fine of NT$1.85 billion on Chang Chi Foodstuff based on the theory that the gains from selling the adulterated oil had far exceeded the maximum administrative fine. Chang Chi Foodstuff and Kao opted for simplified criminal proceedings and were duly convicted by the Changhua District Court in February this year. The Court imposed a fine of NT$50 million on the company and sentenced Kao to 16 years’ imprisonment. Various employees of the company received lesser suspended sentences.

Administrative appeal Government decisions in Taiwan

such as fines can be appealed. If the first appeal to the designated board of appeals in the executive branch is unsuccessful, the appellant gains standing to seek relief in the judicial branch’s administrative courts. In practice, appeals are rarely successful in the executive branch. The administrative courts, however, may frequently overturn administrative decisions such as environmental approvals and antitrust penalties. After the convictions by the District Court, Chang Chi Foodstuff appealed to the Ministry of Health’s board of appeals on multiple grounds. Relying largely on two opinions from the Ministry of Justice, the board found that although the amount of the fine was justified under the circumstances, the fine contravened the Administrative Penalty Act’s rule that the imposition of criminal punishment for an act precludes punishment for the same act by an administrative penalty. Accordingly, the board of appeals vacated the NT$1.85 billion administrative fine against Chang Chi Foodstuff because it had already been convicted in the District Court criminal proceedings. This decision disappointed many members of the public who have called for action to ensure that those who profit from selling adulterated food bear the cost of their wrongdoing. It might also surprise U.S. lawyers since the U.S. Supreme Court unanimously held in Hudson v. United States that the Double Jeopardy Clause of the U.S. Constitution does not apply to non-criminal penalties. The Taiwanese rule is far from being unique to Taiwan. It is an expression of the Roman legal doctrine known as ne bis in idem (Latin for “not twice for the same thing”). The Taiwanese version of ne bis in idem is based on Section 21 of the German Administrative Offences Act. The doctrine can also be found in the German Constitution, the Seventh Protocol of the European Convention on Human Rights, and the International Covenant on Civil and Political Rights (ICCPR), which Taiwan adopted as domestic law in 2009. Taiwan’s Constitutional Court has held that although the Taiwanese Constitution

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does not expressly provide for ne bis in idem, it is nonetheless a core constitutional protection. The Legislative Yuan’s rationale for adopting this rule was that the severity of criminal punishment should suffice to deter others from committing the same crime, and also because the more stringent rules governing judicial proceedings tend to ensure due process for those punished by the state. Currently, several bills before the legislature are seeking a solution to the problem of criminal proceedings preempting the legislature’s efforts to increase administrative fines. One bill would simply state that the Administrative Penalty Act’s rule on double punishment does not apply to administrative fines authorized by the FSSA. However, the Ministry of Justice has voiced concerns that creating exceptions to the rule would be inconsistent with Taiwan’s commitments under the ICCPR. Another bill follows a longstanding approach adopted in the Traffic Safety Act, whereby the convicted party must pay any remaining balance of an administrative fine after a criminal fine has been imposed. Chang Chi Foodstuff and its chairman also appealed their criminal convictions by the Changhua District Court. During the District Court proceedings, Chang Chi Foodstuff and Kao admitted their guilt to the offense of false labeling under the Criminal Code. Since the Intellectual Property Court now has jurisdiction over criminal falselabeling appeals, the case was removed to the IP Court. The IP Court largely upheld the District Court’s decision, although it reduced Chang Chi Foodstuff’s criminal fine to NT$34 million and Kao’s sentence for fraud to 12 years. The decision is important, however, because it illustrates that the Taiwan courts will treat sales of adulterated or fake food not as only violations of the FSSA, but also as criminal fraud. In his appeal, Kao argued that his admission that he had caused Chang Chi Foodstuff to misrepresent the quality of its cooking oils should mean that his culpability is limited to the

offense of criminal mislabeling, which carries a maximum sentence of one year. He also argued that fraud – the unlawful taking of property by deceptive means – should not apply because the FSSA is a specialized law, and that normally when a specialized law defines an offense or rule more specifically than does the general law, it is the specialized law that should be applied. As a result, Kao argued that his conviction on the charge of adulterating or counterfeiting food should have precluded any conviction for fraud. The IP Court rejected this line of reasoning on the grounds that the offenses stipulated in the FSSA and in the Criminal Code serve different purposes. The FSSA prohibition on adulterated or counterfeited food serves to promote market efficiency and consumer trust by ensuring that food labels accurately reflect the contents. In contrast, fraud has been made a crime to protect property rights from being stolen by deceit. Since the criminalization of food adulteration/counterfeiting and fraud have different purposes, the Court ruled that application of the Criminal Code’s fraud provision was not blocked by the FSSA. Both criminal mislabeling and food adulteration/counterfeiting are deceptive acts. Chang Chi Foodstuff misrepresented its products by labeling them as 100% pure olive oil when olive oil constituted less than 50% of the contents after adulteration by cheaper oils. It did the same when it sold consumers fake saffron oil that in fact contained no saffron oil. This deception caused consumers and Chang Chi Foodstuff’s downstream suppliers to purchase Chang Chi products in fraudulent transactions over a period of eight years. In effect, the IP Court’s reasoning in the Chang Chi Foodstuff case suggests that sales of adulterated or counterfeit food will constitute fraud if consumers rely on misrepresentations about the product’s purity or nature.

Conclusion Taiwan has come a long way since the bran oil tragedy of 1979. Thirty

years ago Taiwan lacked the administrative resources that enabled it to detect plasticizers in clouding agents in 2011and to order the effective recalls of cooking oils in 2012 and 2013. The criminal justice system has developed a theory of fraud based on violations of the FSSA that imposes criminal penalties swiftly and harshly on those who adulterate or counterfeit food products – even in cases where there is no immediate threat to health. In other litigation arising from product warranty and recalls not discussed here, downstream businesses including Uni-President, TaiSugar, and Formosa Oilseed that purchased plasticizer clouding agents and adulterated oils prevailed and received reasonably substantial awards of damages. Nonetheless, the scale of the ongoing lard oil crisis shows that more needs to be done. To answer the calls for systemic change, Taiwan now needs to grapple with the difficult constitutional questions posed by Taiwan’s commitment to the rule that conduct should not be punished twice. It also needs to consider how the costs of breakdowns in food safety can be allocated equitably across the supply chain to provide enhanced incentives for businesses to comply with the law rather than society relying solely on moral suasion. Further, Taiwan needs to ensure that consumers receive more adequate compensation for their injuries. Taiwan is rightly renowned for its vibrant culture of street food and innovative cuisine. Better food safety laws will give its courts the tools to protect that heritage.

— Peter Dernbach and Gary Kuo are partners, and Michael Fahey a paralegal, at Winkler Partners, Attorneys at Law of Taiwan and Foreign Legal Affairs. Dernbach is co-chair of AmCham’s IP&L Committee and heads the IP practice at Winkler Partners. Kuo’s practice focuses primarily on intellectual property and competition law.

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INDUSTRY

CUS

A Report on the Real Estate Sector

photo : cna

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Surviving Taiwan’s Sky-high Housing Prices The government is making efforts to cool down the market through tax and mortgage policies.

BY TIMOTHY FERRY

IN THIS SURVEY

• Surviving Taiwan’s Sky-high Housing Prices p42

• What Foreigners Can Own

p45

• Insurers Interested in Superficies Rights and Overseas Projects p46

• Taking Care of the Building

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p49

ith the cost of housing in the city at 15 times median annual incomes, Taipei’s real estate market is one of the priciest in the world. Recent actions by the government aimed at lowering prices have succeeded in slowing the rate of transactions, yet prices remain stubbornly high. And although property costs in Taipei have declined by a fraction, they have been offset by surging prices in other metropolises, particularly Kaohsiung. What are the implications for the middle class, already beset by stagnating wages, as well for Taiwanese investors who have seen the housing market as their best bet for reasonable returns? According to data from local realtor Taiwan Realty Inc., in the second quarter this year housing prices averaged NT$220,370 per ping, a traditional unit of measure equivalent to roughly 3.3 square meters. But this average is heavily skewed by Taipei City, where prices averaged NT$538,900 per ping (US$5,357/sq.m.), whereas other areas averaged less than NT$160,000 per ping (US$1,591/sq.m.). Prices i n N e w Ta i p e i C i t y a v e r a g e d

NT$289,400 per ping (US$2,877/ sq.m.) in the same survey. These prices have led Taiwan to the top of the charts internationally in terms of housing unaffordability. The 2014 Demographia International Housing Affordability Survey, conducted by Wendell Cox Consultancy of the United States, evaluates housing markets in terms of Price to Income Ratio (PIR), comparing median housing prices according to the number of years of median income needed to purchase a home. PIRs of 3.0 and below are considered “affordable,” and those of 5.1 and above “severely unaffordable.” Hong Kong led the list with a 14.9 PIR, “the highest recorded (least affordable) in the 10 years of the Demographia International Housing Affordability Survey,” followed by Vancouver with 10.3 and San Francisco at 9.2. Singapore came in with a comparatively affordable PIR of 5.1, while Japan was ranked as merely “moderately unaffordable” with a PIR of 4. Although the survey didn’t cover Taiwan’s real estate market, Taiwan’s Construction and Planning Agency, under the Ministry of Interior, employed the same methodology

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A Report on the Real Estate Sector

using data compiled from the same time period (Quarter III, 2013). Its analysis put Taipei City’s housing costs at a world-leading PIR of 15.01, while New Taipei City’s PIR of 12.07 pushed Vancouver and San Francisco out of the top three. Taiwan’s overall PIR stood at 8.37, placing the entire country above the “severely unaffordable” threshold.

Reviewing the causes An association of civic groups called the Housing Movement has protested that such exorbitant housing prices deny citizens the right to “have a home, to live with quality and dignity.” The group calls for three major reforms: comprehensive revision of housing policies to curb speculative activity, construction of more public housing to meet the needs of lower-income residents, and protection of property rights from land expropriation. Central to the movement’s demands is a call for reform of the rental market to push landowners to put more of their holdings on the market as rental units. Housing bubbles are nothing new in Taiwan and the property market has been quite sensitive to price shocks both up and down. The Housing Movement that recently emerged paid tribute to an earlier activist group – Snails without Shells – that formed in 1989 to protest prohibitively expensive housing costs. The difference between then and now, says Taipei Deputy Mayor Chang Chin-oh, a professor of land economics at National Cheng-chi University (NCCU), is that “Today the PRI is even worse! Back then it was 10 times, while now it is 15 times.” Writing in the journal Habitat International, Chang, joined by fellow scholars Teng Hsiao-jung from NCCU and University of Hong Kong professor K.W. Chau, notes that housing bubbles are to be expected in Taipei (and Hong Kong) due to “the state of economic development, the dependence on exports, strong ties of their currencies to the USD, and dense populations.” These factors converge to make the housing market particularly susceptible to external shocks, “which may lead to the formation of bubbles.” It’s therefore no surprise that Taiwan’s

housing market really took off in 2009, the first year of the United States’ Quantitative Easing bond-buying program that stimulated money flows around the globe, much of which ended up seeking returns in East Asia, including Taipei’s housing market. Money has flowed into property as the investment of choice for a number of reasons. Perhaps the most significant factor is cultural. In the Habitat International paper, Chang and his associates quote an old Chinese saying: “Owning land is the only way to become rich.” With property taking on dual roles of both housing and investment, the real-estate market has always been attractive. In addition, many in Taiwan see money from China as behind the rise in the housing market – an accusation supported by revelations that the now

infamous Wei brothers, owners of the Ting Hsin food company at the heart of the gutter oil scandal still gripping the nation, used part of their instant-noodle fortune gained in China to speculate in Taipei’s housing market. Reportedly, the brothers owned at least 14 luxury apartments in the exclusive Xinyi district. But the Wei brothers are the only the most high-profile examples of wealth earned in China returning to Taiwan, pumping up the market with speculative investments. Wang Jiann-chyuan, vice president of the Chung-Hua Institution for Economic Research (CIER), agrees that one factor driving up the real estate market is wealthy overseas Taiwanese looking for effective returns in a market that they are familiar with. He also cities tax policies, including the proposed capital gains tax on stock earnings, as well as a lackluster

A protester marches in downtown Taipei in early October behind a sign reading ”Give Me Affordable Housing.” photo : cna

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business environment, as “crowding out” investments in other sectors besides property. “If you invest in real business, maybe the return is not so high, so most of the money goes to the property market,” he observes. Academia Sinica academician Hu Sheng-cheng, a former chairman of the Council for Economic Planning and Development (now the National Development Council) and Financial Supervisory Commission (FSC), says another factor pushing up Taiwan’s housing prices is excess liquidity. “In Taiwan, we have excess savings – last year it was NT$1.57 trillion, about 10.2% of GNP,” he notes. Since this excess liquidity finds too few investment opportunities, he explains, “it flows to the housing market, affecting housing prices.” Low mortgage rates (about half those in the United States), low property taxes, and low down payments (20% is the norm) further fuel the housing market. According to media reports, the Wei brothers put as little as 1% down on their Xinyi properties. Because of that overall low cost of ownership, property owners can afford to sit on a vacant property without it earning rental income. Property taxes are levied by local officials, based on assessments that are also set by the local authorities; with an eye on the next election, they are reluctant to impose heavy taxes. Since the bulk of even local budgets comes from the central government, the local administrators are under little pressure to ramp up revenue. Wang of CIER estimates that total property taxes (including taxes on land) add up to less than 1% of the value. “The mortgage market gives you an incentive to speculate, while the low taxes give you an incentive to hold it, so real estate is a good investment,” observes Deputy Mayor Chang. He adds that Taipei, as the capital and major business center, attracts most of the investment and generates most of the jobs in Taiwan, giving further impetus to the housing market.

Examining the consequences As described in September’s Taiwan Business TOPICS, the high cost of

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housing plays a strong role in exacerbating wealth inequality. “The winners are fewer, the losers many,” says Chang. Another negative result is a stifling of Taiwan’s economic development, as money that could be invested in innovative business pursuits gets funneled into property instead. “It’s sucking resources and capital into real estate,” says Chang. “Real estate has become one of the reasons why Taiwan’s economy is slowing down.” There is also a social impact as people move further from the city center in search of lower housing prices. The burden on the transportation system increases, and with social services such as schools and hospitals, as well as entertainment and leisure resources, concentrated in Taipei, those living outside the city face a lower standard of living. Economist Gordon Sun of the Taiwan Institute of Economic Research (TIER) adds that the strain of saving to purchase a house limits spending on other aspects of life. The lower consumption slows the growth of Taiwan’s GDP. One way to ameliorate the crisis in housing prices would be to strengthen the rental market. “Even if I cannot own a house in Taipei, at least I can rent a house in Taipei,” says Chang. Taiwanese enjoy a high rate of home ownership – around 80% of all households own at least one property, while only 20% are renters, compared to a 60-40 split in the United States. In Taiwanese society, those who do not own property feel insecure and never fully successful. Partly for those cultural reasons, the rental market in Taiwan has remained weak. Rents are low in comparison to both housing prices and median incomes. Another characteristic of the market is that for a high proportion of the units rented out, the transaction is kept unofficial. To avoid the high tax liability on rental income, landlords often choose to keep the property vacant, or if they do take a tenant, to do so under the table, without any lease, circumventing having to declare the income. The result is that a good deal of the housing stock in Taiwan stands empty – around 15% by some estimates (in the United States, the figure is only about

5%). The lack of a well-developed formal rental market prevents both landlords and tenants from enjoying the legal protections that such a system would entail. Of greater concern, though, is that the lack of a formal rental market prevents the government from subsidizing rent payments for low-income households. Chang says that public housing should account for at least 5% of total housing, and in Hong Kong and Singapore actually accounts for far more – roughly 50% and 80% respectively. In Taiwan, the figure is less than 1%. Chang points to important distinctions among these East Asian markets in regard to property markets, in that while in Hong Kong and Singapore the government is the ultimate owner of the land, in Taiwan land belongs to a private owner, which limits the resources that Taiwan’s government can provide to public housing. Chang rejects the Housing Movement’s call to build more public housing, which he says would severely tax the government’s resources while benefitting relatively few. Instead, he has focused on the option of providing rent subsidies to the needy, following the example of Section 8 housing laws in the United States. However, here the government runs into the roadblock of an informal rental market. The government may wish to provide a rental subsidy in the form of a voucher, but landlords are unwilling to accept it, Chang says, explaining that if the landlord accepts the subsidy, “he enters the formal market and must pay income tax.” To work around this obstacle, he says that the Taipei City government has called for reforms that will allow landlords who accept rental subsidies to get a break on their income tax, but the city still hasn't gained the central government’s approval.

Bringing prices back to earth The government is acutely aware of the situation and has enacted a number of proposals aimed at curbing the market. One is the imposition of steep tax rates on houses sold within a year of purchase, and lower – but still higher than usual – taxes on houses sold during

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the second year of ownership. The rates do not apply to properties used as the owner’s primary housing. The FSC has also introduced measures intended to raise borrowing costs for housing buyers, such as tightened mortgage standards and higher down payments. Economist Liang Kuo-yuan, chairman and president of the Yuanta-Polaris Research Institute, says down payments on secondary and luxury homes have now been increased to “30%, 40%, maybe 50%.” He also notes the likelihood of an interest rate hike next year if the U.S. Federal Reserve raises benchmark rates sometime in 2015. “If the U.S. moves, I think the Taiwan interest rate

will move as well,” he says. In the wake of the edible oil scandal, Liang further sees a slackening in the flow of money into Taiwan from Taishang, the Taiwanese businesspeople in China. “Now the Taiwanese people have a very bad image” of Taishang buying up local real estate with wealth gained in China. “If that flow decreases,” he says, it will reduce one of the factors responsible for driving up prices. Rather than falling, housing prices for all of Taiwan were up 3.92% yearon-year in the second quarter, according to Taiwan Realty. Although prices have declined slightly in Taipei City – by 0.66% year-on-year – that drop contrasts

wHat ForeiGners can oWn BY JENS KASTNER

f you happen to be in the market for a salt plant, hunting reserve, or coal mine, or if you are a resident of the state of Oklahoma looking to buy property abroad, then unfortunately Taiwan isn’t the location for you. While Taiwan actually has fairly liberal laws regulating property acquisition for foreigners, the above are examples of certain restrictions that do apply, both on where the person is from, and what kinds of property they wish to acquire. Under the Land Act, which governs the sale and use of “all land lying within the territorial limits of the Republic of China,” foreigners are permitted to acquire real estate in Taiwan if their home countries or territories entitle Republic of China (ROC) nationals to the same rights. The list of countries and territories that do includes most U.S. states, most European Union members, Japan, and Korea, as well as Australia and New Zealand. This principle of reciprocity extends to a second list of countries and territories that grant limited rights of property ownership to Taiwanese citizens, and whose nationals are granted similarly limited rights. A final list includes countries and territories that ban Taiwanese from owning property, and are likewise banned from property ownership in Taiwan. This third list includes only one U.S. state, Oklahoma, as well as Uganda, Iran, Cambodia, and 16 other countries and territories. For nationals entitled to property ownership, Taiwan’s government stipulates that documents proving reciprocity must be notarized by ROC embassies, repre-

with rising price levels in Taoyuan (up 9%), New Taipei City (up 8.47%), and Kaohsiung (up 6.34%). On the other hand, the volume of transactions is declining, according to media reports and interviews with real estate agents. At the beginning of November, local media reported that transactions were at a 10-year low across Taiwan, and fell 6.5% in Taipei in October alone, usually the peak season for sales. Transactions across Taiwan are down 12% so far this year. Deputy Mayor Chang envisions a “soft landing,” with the government determined to bring the PRI down to 10 years or less within the next several years.

sentative offices or other agencies authorized by the Ministry of Foreign Affairs (MOFA). Even for foreigners who are entitled to buy real estate in Taiwan, however, certain types of property are off limits, including forests, hunting reserves, salt plants, mineral deposits, water resources, military bases and areas, as well as land “adjacent to the national frontiers.” Property purchases by foreigners are limited to residences, business sites, office buildings, shops, factories, churches, hospitals, schools for children of foreigners, diplomatic and counselor buildings, buildings of organizations for the promotion of public welfare, and cemeteries. In addition, foreigners are allowed to acquire property if the investment is assessed by relevant authorities as helpful in a major infrastructure project, promotes overall economic development, or involves the agricultural and animal husbandry industries. Such properties include tourist hotels, factories and industrial zones, public infrastructure, and urban renovation, among others. The laws further distinguish foreign individuals from foreign companies. While individuals must obtain the consent of MOFA, applications for property acquisition by companies must go through the Ministry of Economic Affairs (MOEA), which must first recognize the applicant’s legal status. While overseas Chinese residing abroad but holding both foreign and ROC citizenships are treated in the same way as ROC citizens, heavier restrictions apply to mainland Chinese. Individual citizens and “legal persons” (for example, corporations and non-profit institutions) of the People’s Republic of China may acquire real estate in Taiwan if the type of purchase is approved under the “Regulations on Property Transactions for Mainland Area Citizens in the Taiwan Area.” However, members and officials of, and organizations affiliated with, the Chinese Communist Party, the Chinese military or any other mainland Chinese political and government organization are prohibited from buying property. All documents issued in

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mainland China must be verified by an agency or commission established or designated by the Executive Yuan. Unlike most foreigners, mainland buyers may not transfer Taiwan property within three years of the purchase. The same rules that apply to other foreigners also apply to mainland Chinese when it comes to the kinds of property that may be purchased and their use – for example, the prohibitions on buying mines or forestry reserves, and limiting usage to industrial, commercial and business operations such as factories, business premises, and office space. Also, like foreigners, Chinese citizens may be allowed to acquire property if the investment is deemed useful for infrastructure development, industry, or Taiwan’s overall economic development. But unlike foreigners, Chinese citizens are banned from purchasing real estate in port zones, as well as areas where the purchase would affect Taiwan’s major construction companies and developers, involve property speculation and monopolization, or endanger national security or social stability. To make the point that ownership does not automatically

translate into right of residency in Taiwan, mainland Chinese who do not hold residency permits, for example through work or marriage, are only allowed to live in the house for a maximum of four months within a year. Moreover, while no rules restrict how many residential units may be acquired by foreigners, the Ministry of Interior (MOI) limits the number of residential units sold to Chinese citizens to 400 each year under the “Regulations on Property Transactions for Mainland Area Citizens in the Taiwan Area.” As of October 8, the number of mainland Chinese applicants was still “quite far from reaching its annual quota for this year,” according to an MOI official. These rules appear to be easily circumvented, however, as Chinese citizens reputedly often purchase Taiwan residential property either through third countries or local partners. Additionally, China’s “Hong Kong Region” is not covered by the special regulations governing the “mainland area,” but rather falls under the Land Act, where it is included on the second list of countries and territories granted limited rights.

Insurers Interested in Superficies Rights and Overseas Projects The regulator’s strict criteria for investment in the domestic commercial market has spurred companies to look at other opportunities. BY PHILIP LIU

nsurance companies traditionally are among the biggest investors in the commercial property market. But in Taiwan the Financial Supervisory Commission’s regulation that such investments must generate minimum returns of 2.875% a year has made it quite difficult for insurers to find enough permissible investment opportunities, especially in the greater Taipei area. As a result, Taiwanese insurance firms have been showing increasing interest in realty projects on public land involving “superficies” rights (covering whatever is above the ground, but not the land itself). Such projects tend to bring steady, rel-

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atively high returns over the long term, despite the absence of incremental value from the land. The most noteworthy recent case was the public bidding for the 50-year superficies rights of the “A25” plot of land in the popular Xinyi planned area of Taipei. After several aborted tenders, the project was awarded this summer by the Taipei City government to Fubon Life Insurance for a bid of NT$17.3 billion (US$576 million), on top of an annual lease fee of NT$202.7 million (US$6.8 million). Fubon plans to spend another NT$30 billion (US$1 billion) to build a multi-use commercial building on

the site, which spans 5,452 pings (over 18,000 square meters) and is considered to be the last complete large plot of land in the Xinyi area. The building will serve as the new headquarters for Fubon Financial Holding Corp., as well as house commercial outlets and a tourist hotel. The project is scheduled to break ground in March 2016 and be completed by 2020. Design proposals are being sought from renowned architects in Italy, France, and the U.K. Richard M. Tsai, vice chairman of Fubon Financial Holding, notes that despite lack of the benefit of increased land value, the project will produce

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steady rental income, which is critical for insurance firms. In terms of the franchise fee, the “A25” project is the second-largest superficies right-based project ever undertaken in Taiwan. The largest continues to be the one involving the 5,357-ping plot of the land, also in the Xinyi planned area, that previously served as the second exhibition hall of the Taipei World Trade Center. The rights to that site were won by Nan Shan Life Insurance for NT$26.9 billion (US$897 million) in 2012. Superficies right-based projects have also figured prominently in realty investments of other major insurance firms. Shin Kong Life Insurance, for instance, inked a contract with the Taipei City government in February this year for a realty development project on city-owned land inside the Nangang Business Park. The company agreed to pay NT$2.023 billion (US$67.4 million) for the superficies rights, plus an annual lease fee of NT$15 million (US$500,000). Vice President Hsu Shih-yun of Shin Kong says the company plans to spend NT$3.7 billion (US$123 million) to build a composite building of 19-stories, plus five basement floors, with total floor space of 9,000 pings, to accommodate offices, a hotel, convenience stores, and other shops. According to company president Tsai Hsiung-chi, the annual rate of return for the project is expected to exceed 4%. For Shin Kong, the project is its second superficies rights-based endeavor. It previously acquired the A12 plot of land, also in the Xinyi planned area and owned by Taipei City government, on which it has constructed the Shin Kong Xinyi Financial Center and the Le Meridien hotel. Insurance firms are setting their sights on eight other superficies rights-based projects to be released by the government this year. Among them are the old campus of Longhua Elementary School in Kaohsiung, the Taiwan Railway Administration switchyard in Nangang, and the C3 plot in Nangang belonging to the Taiwan Fertilizer Corp. (although technically privatized, the government is still the controlling shareholder with a 45% stake). The eight projects are expected

The Le Meridien hotel occupies part of a site for which Shin Kong Life Insurance acquired the superficies rights. pHoto : widipedia/ s olomon203

to be worth a total of NT$26.6 billion (US$887 million) for government coffers from the superficies rights. To avoid public criticism, as happened in the past, that premier public land was being sold off at low cost to the benefit of private parties, the government has adopted a policy of releasing public land in greater Taipei only in the form of superficies rights. Total proceeds to the government from such sales amounted to NT$50 billion (US$1.67 billion) in 2013, up from NT$37.2 billion (US$1.24 billion) in 2012.

Lower costs One attraction of superficies rightsbased projects for insurance firms is the simpler administrative procedure, as such investments do not require approval from the FSC. But the major appeal is the lower cost when land is not included in the deal. Typically the cost of 70-year superficies rights for a site in the Xinyi planned area amounts to only 70% of the market value of the land. In general, insurance firms are looking for superficies rights-based projects with at least 500 pings of land area, suitable for building high rises capable of generating at least 3% in investment returns. As mentioned above, insurance com-

panies have been embracing superficies rights-based projects due to the regulator’s heavy restrictions on their realty investments. Many insurance firms, for instance, have shunned the purchase of vacant lots for fear of being unable to break ground within nine months of obtaining a construction license, as required by the FSC’s Insurance Bureau. Moreover, following years of steep increases in the value of commercial properties in the greater Taipei area, it has been virtually impossible for insurance firms to find realty investment opportunities in that region capable of guaranteeing investment returns of at least 2.875%, as the FSC requires. The rate of return for office buildings in downtown Taipei now stands at 2-2.2% on average, according to industry insiders. Colliers International, the global real estate services organization, notes that the differential between the yield on commercial properties in Taipei and bank loan rates has dropped to mere 0.2-0.4 percentage point since 2012, a far cry from the level of 2-3.5 percentage points that once prevailed. It reports that the average annual yield for commercial properties throughout the city now comes to only 2.5-2.6%, the lowest among all major cities in the Asia-Pacific. According to Andrew Liu, president of Colliers Interna-

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CUS million) in overseas properties. Fubon is looking for suitable targets in Europe – mainly in Germany, the U.K., and France. The United States is not being considered for the time being, due to U.S. legal restrictions on real estate investments by foreign financial institutions.

International exposure

A view from above of the Xinyi planned district, where the city has been selling superficies rights to certain plots of land. photo : Wikipedia

tional Taiwan, the total transaction value for commercial properties in Taiwan last year reached just NT$84 billion (US$2.8 billion), the lowest since 2008, and the level may decline further this year to NT$80 billion (US$2.7 billion) at most. The latest statistics from CBRE Ltd., the realty consulting firm, put the annual yield rate for office space in downtown Taipei at a mere 2.2%, compared with 2.8% in Hong Kong, 3.5% in Tokyo and Singapore, 3.8% in western London, and 4.7% in New York. Due to the scarcity of investment opportunities in greater Taipei, major life insurance firms in Taiwan have stepped up the pace of making forays into overseas markets, after the FSC gave the green light for such investments in 2013. Cathay Life Insurance, the leading life insurer in Taiwan, has made the most headway in overseas realty markets. It has spent 1.4 billion yuan (US$224 million) in China’s realty market, including five stories (3,555 pings of space) in building B of the Eastern Financial Plaza in Shanghai. In addition, it obtained FSC approval in November last year to invest up to 400 million pounds (NT$20 billion or US$667 million) in properties in London. The company plans to purchase four commercial buildings in the city, and is still looking for proper targets. In addition, according to Chairman Tsai

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Hong-tu, it is looking for opportunities in Tokyo and Boston. With authorization from its board of directors for the investment of up to NT$36 billion (US$1.2 billion) in overseas properties, Shin Kong Life has focused on the commercial property markets in Tokyo, Beijing, and London. In Tokyo, where the city’s selection to host the 2020 Olympics has given a strong boost to the realty market, Shin Kong is currently engaged in negotiations for the purchase of six commercial buildings. It has also decided on specific investment targets in Beijing and is evaluating their worth, and is searching for proper targets in specific areas of London, according to Chiu Yung-hsiang, the company’s senior assistant president. Chiu notes that the company’s overseas focus is on office buildings, which are considered relatively easy to manage. For the sake of tax benefits and to lower risk, each investment will be carried out by means of a specific-purpose vehicle company or SPV – an entity set up specifically for the project. Shin Kong Financial’s Hsu Shih-yun notes that the company will only consider overseas realty projects capable of generating at least 4% after-tax net profit. At Fubon Life, the board of directors has authorized investment of NT$5 billion to $8 billion (US$167 million to $267

In addition to diversification of risk, overseas realty investments are viewed as enabling Taiwanese companies to gain wider experience and boost their international image. Andrew Liu of Colliers predicts that overseas investments by major local insurance firms will accelerate, especially for properties in major business hubs in mature markets, particularly in locations with large ethnic Chinese populations. Tony Chao, country head of Jones Lang LaSalle, Taiwan, notes that this is a good time for insurance firms to enter the European realty market, as prices are relatively low since the European economy has yet to fully recover from the global financial crisis. To facilitate the trend, the Insurance Bureau has removed the restriction capping overseas realty investments by insurance firms at 10% of their equity capital, although they still have to make applications on a case-by-case basis. However, FSC Chairman William Mingchung Tseng has said that the regulator plans to waive the need for insurance firms with sound financial footing and good records in legal compliance to gain prior FSC approval for overseas realty investments. Instead, they would only have to notify the FSC of such projects. On the domestic front, insurance firms are also diversifying their realty investments. Cathay Life, for instance, has been actively investing in logistics facilities because of the rapid growth in market demand. In March, it announced joint development with affiliate Ally Logistic Property of a smart logis tics park, the largest in Taiwan, in New Taipei City’s Ruifang district. The plan is to build modern warehousing facilities with total floor space of 20,000 pings for lease to Ally. In addition, Cathay is hunting for land to build similar logis-

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tics facilities in Taoyuan, Taichung, and Kaohsiung with a combined target floor space of 200,000 pings. “Logistics will be the next focus for realty investments by Cathay,” says Lin Chao-ting, a company vice president, adding that the lease of the Ruifang facilities to Ally will generate annual returns of 3-4%, compared with the 1.2% yield rate for 10-year government bonds, 1.6-1.8% for corporate bonds, and 2% for the funding cost of new insurance policies. Lin says there is a growing interest among logistics firms to lease such facilities so as to greatly reduce operating costs and enable the firms to focus on integrating upstream and downstream businesses, developing cloud-end

smart operations, and even expanding into the Asia-Pacific market. In late 2012, Cathay also won a 50-year franchise for development of a 22-hectare special industrial zone neighboring the Taoyuan high-speed rail station. It plans to invest some NT$20 billion (US$667 million) in the zone, including partnering with the Gloria Hotel Group in constructing Gloria Outlets, a U.S.-style one-story outlet mall scheduled for inauguration in 2015; the site will also accommodate a five-star hotel, office building, and cinema complex. While superficies-rights projects and overseas investments are presenting insurers with greater opportunities, members of both the insurance and real estate

industries also hope that the government will reconsider the current regulation requiring the 2.875% minimum yield. The issue was raised by AmCham Taipei's Real Estate Committee in the 2014 Taiwan White Paper, which urges the authorities to recognize the tremendous variation in real estate values by geographical area. “Because leasing demand in major metropolitan areas like Taipei City is higher and more stable than in second-tier cities, it generates more stable and secure incomes,” the Committee’s position paper noted. It therefore recommended that the required minimum yield in those areas be adjusted to 2-2.5% to “enable insurers to flexibly and strategically allocate their investment resources.”

Taking Care of the Building Where the real estate market leads, Taiwan’s property management industry follows. BY JULES QUARTLY photo : iSS

roperty management could be likened to an invisible hand, cleaning and clearing up, making sure a building operates in a safe and efficient manner. Essentially, it keeps the real estate business ticking. Since Taiwan’s real estate market is expanding in terms of price and volume – generating up to 9% of the country’s GDP, according to a Bank of America Merrill Lynch report – this presents huge opportunities for the property management industry, which is experiencing rapid evolution and development. Man-

power, efficiency, and environmental concerns are just some of the issues that require fresh approaches. At the same time, the often chaotic and faded nature of much of Taiwan’s real estate compares poorly with developed countries, China’s major cities, and regions such as Hong Kong. This clearly signals the need for more effective property management and has attracted some of the world’s major companies into the market – including Colliers International, Chicago-based Jones Lang LaSalle, Japanese affiliates of Nippon Housing and

Mitsubishi Electric, and Savills Property Services (U.K), which has expanded out of Beijing. Another major player, ISS (Integrated Service Solutions), is the world’s fourth biggest private employer, according to Taiwan Country Manager Peter Trampe. Founded in 1901, the Danish giant employs 530,000 people and operates in more than 50 countries. It took root in Taiwan in 2007, and employs about 2,800 people here. Trampe says ISS is now the largest facility services group in the country, with

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a list of blue-chip clients that includes Citibank, the British Trade & Cultural Office Taiwan, Taipei Metro Tower, and Pacific Sogo Department Stores. Its business is roughly segmented into residential (30%), retail (30%), commercial (30%), and healthcare (10%), with the latter two being the main drivers of growth. ISS specializes in providing what it calls Integrated Facility Services, which combine facility management, support, cleaning, catering, and security services as a “single solution,” Trampe says. “The beauty of this is our customers see one service provider, one culture, and there are service synergies.” Everyone from the cleaner to front desk is employed and trained by ISS, and in addition to following local or Ministry of Labor regulations the company is a signatory to the United Nations Global Compact, which guarantees labor rights and environmental protections. It pays pensions, health benefits, and labor insurance to encourage employee retention, while offering training and career development to promote staff loyalty and work satisfaction. Trampe stresses how important it is for staff at all levels to say “hello” to users of the facility, as building relationships creates “a service mentality and service with a human touch.” The payoff? ISS won “The Best Labor Safety Company” award for proper and safe working conditions from Taipei’s mayor for 2013 and 2014. ISS Marketing Development Manager Brenda Lin cites the example of how the floors are kept clean. In addition to supplying the right equipment (dry microfiber cloths, which save water), using better chemicals means less chemicals and reduced harm to the environment. She says staff are trained to be efficient and take heed of health and safety rules, and their work is monitored according to clearly set out KPIs (key performance indicators). Lin says this knowledge-based approach is slowly changing the expectations of property owners, lessors, and lessees. “To some extent we operate in a ‘just fix it’ culture, which shortens the lifetime of the asset. It is one of our challenges to educate people about the merits and importance of maintaining a

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building.” Trampe adds that this approach is quite different from most local and even other international property management companies, which tend to adopt a more piecemeal business model, such as contracting different companies for specialized services and emphasizing “hands on deck” rather than training, continuous improvement, and career development. To start with, he notes, the traditional model tends to reflect a “fix-it-when-it’sbroke culture rather than prevention.” Second, companies and institutions tend to contract out services on a headcount rather than efficiency basis, meaning they are looking to employ a set number of people rather than look at how the job can be best managed. Third, “there is a ‘clean it even if it’s not dirty attitude,’” meaning no thought is going into how the job can be done best, as long as it is seen to be done. Countries like China have the benefit of cheap migrant labor, Trampe notes, while places like Hong Kong bring in substantial numbers of immigrant workers. In contrast, Taiwan allows foreign labor only in limited sectors – like elderly care or manufacturing – and there are minimum wage requirements for locals, so property management companies tend to face higher labor costs. “I would describe the situation in Taiwan as negative employment because we have to pay a lot of overtime to cover the holes,” he says.

Manpower and revenue About 420,000 people are estimated to work in Taiwan’s property management industry, according to a 2013 Digitimes report. This total includes condominium management, security and cleaning companies, waste disposal, and real estate management. The output value approaches NT$800 billion (US$26.7 billion) per annum. This level of revenue signifies that the market is highly attractive, and a lot of companies are sniffing around for a piece of the pie, from the international heavyweights to mom ‘n’ pop operators. The market has, however, traditionally been dominated by large local conglomer-

ates creating affiliate companies, such as Shin Kong Life Insurance’s real estate service company, Far Eastern Group’s Fealty Properties Management, and Pacific Construction’s Auk Contractors Co. One example, perhaps, of a commercial building that has seen better days, even though it’s not that old, is Core Pacific Living Mall on Taipei’s BaDe Road. The shopping mall opened in a blaze of publicity 13 years ago. Bright, shiny, and designed by the award-winning Jerde Partnership, it was promoted as a “city within a city” and initially operated 24/7. Fast-forward to today and the façade of grandeur is all that is left of what was a gleaming vision. Now it is decidedly low-rent. Stickers for sales promotions or their ghostly remains are everywhere, electric cord extensions poke out of carpets, the lighting is a pale vellum yellow, the food court is a mélange of chipped wood and grimy floor tiles, and the overweight guy serving meals in the canteen wears a shirt that reflects the previous days’ menus in streaks of grease. It would appear to be, at least in part, a property management failure. What was once an award-winning building now looks in places more like a night market – and its value has plummeted. A representative from the operator, Core Pacific City Co., confirmed that the building’s security and maintenance were outsourced, but didn’t wish to comment further. On a domestic level, structural problems prevent Taiwan’s property management industry from reaching the levels of its counterparts in other developed countries. For instance, a traditional fouror five-story apartment block is typically owned by a collection of individuals. Taiwan has an unusually high home-ownership rate of 87%, according to a June report by Global Property Guide, and incredibly this rate is still rising. “Our problem here in Taiwan when talking about apartments is that they are owned individually and ruled by committee,” Peter Trampe says. “This means 30 owners and 30 different visions of how to go about maintaining a building. Quite often it also means the lowest quality vision wins out because they don’t want to pay out.”

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In essence, little preventive maintenance takes place, unless absolutely necessary, and as a result the building tends to look shabby and fall apart more quickly. While the relatively low replacement rate of old buildings with new ones is also to blame, the result is a housing stock that is generally of a fairly low standard.

Local approach There are, of course, examples of how a local approach to property management can pay dividends. Luxury apartments on XinYi Road and butler-type service systems keep their moneyed and celebrity clients pampered and safe. Meanwhile, companies like CMI Group and its property Worldwide House Building on MinSheng East Road has been providing quality commercial leasing for more than 20 years. Its clients include your own American Chamber of Commerce in Taipei, Cathay Pacific, and MercedesBenz, among others. Carrie Liao, manager of Worldwide House Management Office, has a background in hotel management and it shows. From her immaculate personal appearance to the type of tea served during our interview, it’s clear she incorporates the ideas of a service culture and attention to detail in everything she does. She lists the SOPs (standard operating procedures) that have to be followed by staff, the detailed briefings she gives to new tenants about the building’s regulations, and the performance indicators that contractors are required to meet. Liao says local firms provide both maintenance and security through annually renewable contracts and are longterm partners. While she does not disparage foreign firms, she notes the language barrier and their lesser familiarity with local properties and people. She emphasizes values like loyalty, stability, and experience. “We are like a big family and this means greater loyalty and contributions. Stability is better, as is safety in such an environment,” Liao says. “Money is not everything because we are talking about long-term relationships.” Another example of a local approach

Full-service property management companies look after everything from security to cleaning, maintenance, and the front desk. photoS: iSS

that works is that of Taiwan Secom, a company that was established in 1977 but has moved with the times to take a lead position in the country’s security service market. Part of the Goldsun Group, Secom takes a high-tech, intelligent approach to the challenges of providing comprehensive security solutions, such as portable position devices, digital monitoring, and fire-fighting systems. Associate vice president Nelson Chang says it’s important to find a cutting edge in such a competitive market. “We are a unique company and lots of people have tried to duplicate our business model. We are smart, quick, and adaptable, and bring a lot of innovation to the table.” For instance, Chang says, the company’s concept of security is to provide “an invisible umbrella of safety” rather than just employing more security guards. Taiwan Secom has explored how the Internet of Things (IoT) can help achieve peace of mind. “We approach the market in a different in a way, because labor costs keep going up and quality devices can do a decent job.” While not hard to find, local success stories are perhaps the exception rather than the rule. Looking down on the capital from the lofty perspective of the immaculately maintained Taipei 101, the majority of the city’s buildings are poor relations. Industry insiders offer a panoply of reasons why this is the case: short-term thinking due to perceived political instability, profiteering, an inward-looking rather than an inter-

national outlook, and poor regulatory oversight. The good news is that the high gross margins of property management make it an attractive business. There are also fresh opportunities to be exploited, including servicing luxury apartments, the need for urban renewal, and more healthcare and elderly care facilities as demographics change and the nation grays. At the same time the government has increasingly prioritized professionalization of property management since the adoption of its “Guidelines and Action Plans for Property Management Service Industry Development” in 2004. The sector is now viewed as an emerging industry to be encouraged. Finally, the “China effect” has also come into play. The growth in crossStrait economic ties is epitomized by the Economic Co-operation Framework Agreement (ECFA), signed in 2010. Indirectly, this has encouraged major state-run Chinese companies to look for headquarters in Taiwan, especially in Taipei’s A-class office market. The result is more money in the real estate market and greater demand for property management. Early this year, Jones Lang LaSalle forecast that the value of Taiwan’s commercial property transactions would grow 10% percent in 2014, with office rents increasing 5%. And where the property market leads, property management will follow. Whether it’s cleaning, maintenance, or security, the demand is there – and if change appears slow, it is change nevertheless.

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Wheels in Motion: 2014 Taiwan Cycling Festival

f you visited Taiwan 30 years ago, you would have seen bicycles everywhere. Factory employees rode them to work. College students cycled from dormitory to campus. If a farmer balanced two sacks of sweet potatoes on the back of his bike and tied half-adozen live chickens to the handlebars so he could sell them all in a nearby town, no one gave a second look. Twenty years ago, however, the number of bicycles on Taiwan’s streets was dropping fast. As the standard of living rose, thousands of Taiwanese gave up pedaling and began commuting by motorcycle or car. But not long ago, something remarkable happened. Making the most of their extra free time once two-day weekends had become the norm – and eager to live healthier lives – a great many Taiwanese rediscovered the joys of cycling. This trend was both anticipated and bolstered by a hit local movie, 2007’s Island Etude. In it, a young man spends a week exploring Taiwan by bike, along the way immersing himself in the

island’s natural beauty and rich traditional culture. Since then, thousands of Taiwanese have saddled up and cycled all the way around their homeland. The total huandao (“round the island”) distance depends on the precise route, but is usually well over 1,000 kilometers. Like climbing Jade Mountain, the tallest peak in Taiwan and northeast Asia, such bike journeys have become a rite of passage. Realizing the health and environmental benefits of increased cycling, in recent years the Taiwan government has launched a number of pro-bicycle initiatives. Traveling with bikes on trains has gotten much easier. In Taipei and Kaohsiung, bike enthusiasts can take their “iron horses” (as many Taiwanese refer to their bicycles) on certain mass rapid-transit trains, opening up those metropolises and their hinterlands for exploration. Assisting cyclists – with tea and drinking water as well as directions – has been added to the duties of the police force. Several of the island’s prettiest towns, among

photos: taiwan cyclist Federation

them Guanshan in Taitung County and Meinong in Kaohsiung City, have laid out bike paths linking sites of cultural and ecological importance. Private-sector bike-rental businesses have proliferated, including a chain operated by Giant Bicycles, the Taiwanbased company that is the world’s number-one bike manufacturer. Its rental arm can provide bikes and other items suitable even for tall Westerners; these can be collected at one location and returned at another – perfect for those on short visits to Taiwan who wish to bike from, say, Hualien to Taitung. Both cities face the Pacific Ocean in Taiwan’s unspoiled east, and nowhere are the often-quoted words of Giant’s founder, King Liu, more apt: “Driving is too fast. Walking is too slow. Riding is the best way to enjoy the most beautiful scenes of life.” “Taiwan's value for cycling comes from its unique location and topography,” says Andrew Kerslake, an American cyclist who’s lived in Taiwan for 16 years. “In a relatively short distance a rider can skim along the deep waters of the Pacific Ocean, soar above alpine peaks, pass between the urban and the rural, disappear into the shadows of the jungle or lazily soft pedal along a meandering cycling trail. Taiwan surely has the potential to become the Tuscany, Flanders or Pyre-

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s e e i n g ta i w a n

photo : taiwan cyclist Federation

nees of Asia.” Kerslake blogs about the island’s biking scene at http://taiwanincycles.blogspot.com. To b u i l d a w a r e n e s s o f Ta i w a n as a bicycling destination, and also to encourage those interested in the sport but not ready to contemplate the 100km-plus, gradient-attacking epics regularly undertaken by Kerslake and his friends, Taiwan’s Tourism Bureau holds an annual Taiwan Cycling Festival (http://taiwanbike.tw). The core event of the 2014 edition runs from November 8 to 16 and has be e n du b b e d th e “ F o r m o s a 9 0 0 .” Formosa is an old name for Taiwan, a word of Portuguese origin that means “beautiful.” It is a fitting label for this activity, as participants will enjoy some of the island’s finest natural scenery during their 900km, nine-day-long rides. Twelve teams will represent various demographics including businesspeople, women, the physically challenged, senior citizens, and international riders. Teams will set off from various locations around Taiwan, including Taipei. Thanks to purpose-built bike trails and a range of bicycle-rental options, sightseeing by bike has become very popular at Sun Moon Lake. As part of the Taiwan Cycling Festival, the lake and its scenic environs will host the “Come! Bikeday” on November 9. The 6km and 30km events are aimed at the general public, while the 50km route –

a loop through aboriginal settlements south of the lake, with some serious climbing – should satisfy hardcore cyclists. For details about registering and bike rentals, contact the Sun Moon Lake National Scenic Area Administration (www.sunmoonlake.gov.tw; Tel: +886 49 285-5668 ext. 1239). The festival’s blue-ribbon event is undoubtedly the Taiwan KOM Challenge, scheduled for November 15. Unlike the “king of the mountains” titles awarded to hill-hopping cyclists in long-distance races such as the Tour de France, the Taiwan KOM Challenge is a one-day, 105km stand-alone race. After starting within sight of the Pacific Ocean near Hualien City, competitors proceed through world-famous Taroko Gorge and into the uplands beyond. Riders must assail gradients of up to 27%. The finish line at Wuling near Hehuanshan (a mountain famous for snowfall around Chinese Lunar New Year) is at an altitude of 3,275 meters, slightly over two miles above sea level. To join the challenge, riders must be capable of finishing the route in six and a half hours. No more than 400 will be allowed to sign up, and among them will be renowned professionals chasing prizes of up to NT$1 million. The 2013 winner was Rhaim Emami of Iran, who needed less than three and a half hours! Because the final 10 kilometers is so brutal, the organizers have this

year added a simultaneous but slightly shorter ride to Dayuling, 2,565 meters above sea level. No more than 100 cyclists will be allowed to register for this sub-race. The event’s official website (www. taiwankom.org) has videos and articles alongside registration details, but the allure of this contest is perhaps best described by Daniel Carruthers of New Zealand. After participating in the 2012 challenge, he said the event is “the toughest, the most beautiful, with the highest elevation gain on a paved twisting road that snakes its way through a jaw-dropping Taroko Gorge, through some dense forests and eventually up to one of the highest points in Taiwan... it is possible that this is the longest and most varied beautiful climb in the world.” Individuals working in the bicycle industry might consider arriving a few days earlier so they can attend Taichung Bike Week, which this year runs from November 4 to 7. The event is a unique trade show matching Taiwan’s exceptional strengths in OEM with the needs of product managers from around the world. For details of several other events associated with the Cycling Festival, as well as general travel information about Taiwan, visit the website of Taiwan's Tourism Bureau (www.taiwan.net.tw), or call the 24-hour tourist information hotline 0800-011-765 (toll free within the ROC).

photo : taiwan cyclist Federation

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Vision

About CropLife

CropLife International is a global alliance of plant science and technology industries. We act as the industry's representative and are committed to protecting crops and developments in agricultural biotechnology throughout the world. We promote various measures that can promote sustainable agriculture in order to protect the rights of farmers and consumers as well as to protect our environment. The motto of CropLife International is to provide transparent information and to engage in positive dialogue and communication with leading experts concerned with the future of food and agriculture. We are dedicated to protecting and maintaining the safety of plant technology products, and call upon proprietors and farmers to use these products in a responsible manner in order to give our consumers a number of safe, diverse, healthy, and economic choices in food.

Mission of CropLife Taiwan

CropLife Taiwan is a non-government organization (NGO) committed to the vision of the open sharing of information and communicating with all levels of Taiwanese society. The objectives are to promote crop protection and to establish supervision and control systems for biotech products in the supply chain. CropLife Taiwan includes two committees on Crop Protection and Plant Biotechnology. For crop protection, our main focus shall be to establish supervision and control systems for the supply chain in order to safeguard the health of our farmers and consumers. Through education as well as dialogue and collaboration with our judiciary, legislative, and executive agencies, we shall combat smuggling and counterfeit agricultural chemicals to promote public health, protect our environment, and promote Taiwan's image on the international stage. For agricultural biotechnology, CropLife Taiwan hopes to promote popular science education so that the public understands the benefits to farming, the environment, and society that are provided by biotech crops. These benefits include: • Satisfying the food and nutritional needs of the world's growing population. • Greatly reducing the usage of pesticides and herbicides during farming in order to reduce the impact caused to the environment. • Improve the usage efficiency of water and other non-renewable resources. • Develop crops that are resistant to natural adversities and improve crop yields. CropLife Taiwan acts as the local representative of CropLife International and shall continue to communicate with Taiwanese agricultural technology industries and various stakeholders. We shall drive the most stringent regulations and standards for supply chain supervision and control and encourage decision- and policy-making processes that are based on scientific facts.

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Working towards sustainable agriculture • In order to achieve the common objectives of sustainable agriculture, CropLife shall assist industries and various groups associated with plant technology that include growers, consumers, decision makers, academia, and corporations, and establish communication systems and form partnerships. • We shall make full use of various advancements developed by plant technology industries, promote these technologies to further supplement sustainable agriculture, and work closely with the associated agencies. • For us, sustainable agriculture is an agricultural system that can achieve the following objectives on a long-term basis: 1) Satisfy human requirements for food and dietary fiber. 2) Promote environmental quality and protect natural resources that agricultural economies are dependent upon. 3) Use the most efficient methods to apply existing technologies, non-renewable resources, and agricultural resources in order to effectively integrate natural biological cycles and control. 4) Maintain the economic feasibility of agricultural activities. 5) Promote the living standards of farmers and the whole of society.

Mission

• As a global network, CropLife International plays the role of messenger for plant technology industries and is committed to improving mutual understanding, building communication channels, and promoting the relevant technologies for the development of sustainable agriculture in order to achieve the common objectives of sustainable agriculture. • CropLife provides a voice for plant technology industries during international forums, conferences, and when meeting with the relevant agencies associated with plant technology. • CropLife shall lead and coordinate various branches in regions and countries throughout the world. Each member shall act as a delegated representative for the plant technology industry. • When representing plant technology industries, CropLife shall strive to listen and learn about the opinions given by every stakeholder in order to search for and arrive at a consensus amongst these different perspectives. At the same time, CropLife shall help various agencies understand the role, recent dynamics, perspectives, values, and beliefs of the plant technology industry.

For further information about CropLife, please refer to our official website: www.croplife.org

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