Page 1


INDUSTRY FOCUS A Report on the Medical Device Industry

April 2011


Vo l u m e 4 1 N u m b e r 4


w w w. a m c h a m . c o m . t w


Decision Time for the Chemical Industry 石化產業的決戰時刻

April 2011 • VOLUME 41 NUMBER 4 中華郵政北台字第 號執照登記為雜誌交寄 5000 4_2011_Cover.indd 1


2011/4/27 10:50:30 AM



4 Editorial

10 Issues

Many Items for Discussion AprIl 2011

VOlum E 41, NumbE r 4

5 Taiwan briefs



Andrea Wu

Disappearing U.S. Beef; Talking to Luxembourg; Taxing Worldwide Income


By Jane Rickards





Don Shapiro Art Director/


沙蕩 美術主任 /

Production Coordinator

Katia Chen Staff Writer

Jane Rickards

In the end, environmental considerations trumped arguments emphasizing economic development, as President Ma Ying-jeou acted to rule out construction of the Kuokuang petrochemical complex at the proposed wetlands site in Changhua County. The government immediately sought to reassure the petrochemical industry that other means would be found to meet its need for new production facilities, but it seemed likely that the only solution would be to move the project offshore, perhaps to Malaysia or Indonesia – or even China. By Jane Rickards 撰文/李可珍


陳國梅 採訪編輯


Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao



Zep Hu

消聲匿跡的美國牛肉;繼續推動與盧森堡 的金管備忘錄;海外所得首度課稅



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: website: 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

14 Decision Time for the Chemical Industry

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

17 ITrI’s role in upgrading 21 Saving the Dolphins? 24 Not much Gain From ECFA

or members. © Copyright 2011 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105敦化北路222巷19之1號1樓 發行日期:中華民國一○○年四月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Bill Wiseman Vice Chairmen/ William E. Bryson / David Pacey Treasurer: Carl Wegner Secretary/ William J. Farrell 2010-2011 Governors: Michael Chu, Alan Eusden, Douglas R. Klein, Cindy Shueh Lin, David Pacey, Stephen Y. Tan, Lee Wood. 2011-2012 Governors: William E. Bryson, Alexander Duncan, Christopher Fay, William Farrell, Steven Lee, Neal Stovicek, Carl Wegner, Bill Wiseman.

28 Spurring Competitiveness through Government reorganization

When the reengineering plan takes effect next year, the 760 administrative units in the Executive Yuan will be reduced by 100. By James Peng


32 Tracing Taiwan’s Transformation

A review of Becoming Taiwan: From Colonialism to Democracy, edited by Ann Heylen and Scott Sommers. By June Teufel Dreyer

2011 Supervisors: George Chao, Varaporn Dhamcharee, Jenny Lin, Ashvin Subramanyam, Ken Wu. COMMITTEES: Agro-Chemical/ Mong Yang Tan; Asset Management/ Christine Jih, Winnie Yu; Banking/ Carl Chien; Capital Markets/ William Bryson, Jane Hwang, Jimin Kao; Chemical Manufacturers/ David Price; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Stephen Tan; Human Resources/ Richard Lin, Seraphim Mar, Ashvin Subramanyam; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Mark OÆDell, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Jeffrey Harris, Scott Meikle, Douglas Weinstein; Manufacturing/ George Chao, Albert Li; Marketing & Distribution/ Christopher Fay, Wei Hsiang, Gordon Stewart; Medical Devices/ Daniel Yu; Pharmaceutical/ David Lin, Jaime Robledo Cadavid; Real Estate/ Peter Crowhurst, Kristy Hwang; Retail/ Angela Chang, Prudence Jang, Douglas Klein; Sustainable Development/ Eng Leong Goh, Kenny Jeng; Tax/ May Lee, Cheli Liaw, Josephine Peng; Technology/ Revital Golan, R.C. Liang, Jeanne Wang, Deborah Yen; Telecommunications & Media/ Thomas Ee, June Su, Jason Wang; Transportation/ Gary Wu; Travel & Tourism/ Pauline Leung, David Pacey.

TrAVEl & lEISurE

45 The lure of Shenkeng Tofu By Owain Mckimm


taiwan business topics • april 2011

4_2011 Contents.indd 2

2011/4/27 5:07:47 PM

apri l 2011 • Volume 41 n umbe r 4




Medical Devices: Research and the Regulatory Environment 38 Developing the Domestic Industry By Alan Patterson

42 rationalizing the rules By Don Shapiro


36 AmCham Companies Through the Years 49 Earth Day Exhibition

april 2011 • taiwan business topics

4_2011 Contents.indd 3


2011/4/27 5:07:52 PM

E d i t o r i a l 眾多經貿議題仍待解決

灣限制美國牛肉進口的爭議,導致美台 「貿易暨投資架構協定」(TIFA)下的定

期談判遲遲無法恢復。(美牛相關問題,詳見本 期「議題」專欄。) 但美國貿易代表署(U S T R)近期公布的 「2011年外國貿易障礙的國家貿易評估」 (NTE)卻清楚顯示,美國與台灣除了牛肉,還 有很多議題需要解決。台北市美國商會希望,就 算TIFA談判無法儘快恢復,USTR列舉的部分議 題仍能透過其他管道獲得解決。 商會認為需要注意的議題包括:

• 關稅稅率:USTR報告指出,美國企業仍要 求台灣降低多種商品的關稅,包括重型機 車、紅酒、罐裝湯品、餅乾(甜餅)、零 食、果菜汁、馬鈴薯及其製品,以及多種蔬 果。

• 智慧財產權:報告表明,雖然整體而言,台 灣具有良好的智財權保障與執法,但部分領 域仍待改進,包括網路侵權行為、對於抄襲 他人產品包裝與外觀的行為欠缺規範管制、 偽劣藥品仍然猖獗,以及進口或轉運中國製 仿冒品。

• 藥品:報告說明,美國希望台灣持續與相關 各方討論溝通,以建立有利新藥研發與病患 近用權益的政策。

• 醫療器材:報告表示,廠商難以接受全民健 保的定價方式,因為低價產品得以獲得充分 補貼,但高科技與高品質的產品卻給付不 足,導致廠商不願引進高階產品。

• 醫療服務:報告發現,台灣仍不願承認或發 放執照給脊骨神經醫師;而且只有不做廣 告、不宣稱療效,脊骨神經醫師才被允許執 業。

• 付費電視:報告陳述,台灣法律限制外資參 與付費電視業務,包括直接投資不得超過總 資產的20%,直、間接投資合計需低於資產 的60%。此外,過度管制收視月費,影響民 眾收視選擇,及業者數位化的意願。

• 技術性貿易障礙:報告認為,有別於國際慣 例,台灣要求「量販包」每一件內容物都要 獨立標示,而且在進口商與經銷商之外,還 必須列明製造商與聯絡方式。 台灣當然也有想談的經貿議題,例如增進綠 能開發等領域的雙邊合作。商會認為,美國與台 灣固然必須解決牛肉問題,以利TIFA談判的恢 復,但同時也不應放棄以密集的工作階層對話化 解其他領域的歧見。 4

Many IteMs for DIscussIon


ontinuing disagreement over Taiwan’s constraints on the import of U.S. beef reports [see the Issues section of this magazine for more details] has held up the scheduling of the next round of U.S.-Taiwan trade negotiations under what is known as the Trade and Investment Framework Agreement (TIFA). But a look at the Taiwan section of the “2011 National Trade Estimate Report on Foreign Trade Barriers” recently published by the Office of the U.S. Trade Representative (USTR) makes clear that there are many trade-related issues besides beef that the two governments need to discuss. AmCham Taipei hopes that even if TIFA talks are unable to resume in the short-term, work on some of the outstanding issues cited by USTR can progress in the meantime through other channels. Below is just a sampling of the issues deserving attention: • Tariff rates. The USTR report notes that “U.S. industry continues to request that Taiwan lower tariffs on many goods, including large motorcycles, wine, canned soups, cookies (sweet biscuits), snack foods, vegetable juices, potato and potato products, and various fruits and vegetables.” • Intellectual Property Rights. While acknowledging that Taiwan generally provides good IPR protection and enforcement, the report refers to a number of areas needing improvement. These include the infringement of copyrighted material on the internet, inadequate protection for the packaging and outward appearance of products (trade dress), the continued availability of counterfeit pharmaceuticals, and the import and transshipment of counterfeit products from China. • Pharmaceuticals. The report notes that “the United States encourages Taiwan to continue to consult with relevant stakeholders in implementing policies that will facilitate the private sector’s development of innovative products and improve patients’ access to such products.” • Medical devices. USTR cites industry dissatisfaction with the National Health Insurance pricing policy that “effectively subsidizes lowercost devices, while underpaying for high-tech, higher quality devices, discouraging the introduction of these devices into the Taiwan market.” • Healthcare services. The report observes that “Taiwan does not license or recognize chiropractors as legitimate medical practitioners, and allows chiropractors to practice in Taiwan only if they do not advertise their services and make no claims about the results or efficacy of treatments.” • Pay TV services. Taiwan law “restricts foreign investment in pay television services to a total equity share of 20% for direct investment or 60% for direct plus indirect investment,” the report states. In addition, it says overly restrictive caps on monthly cable television fees hamper the Taiwan public’s access to a broader range of programming and reduce the cable industry’s incentives to invest in digitalization. • Technical barriers to trade. Mentioned as contrary to international practice were requirements that all items in a retail multipack be labeled individually and that all “commodity goods” be labeled with the name and contact information of the manufacturer, not just the importer or distributor. The Taiwan side undoubtedly also has relevant issues on its agenda, including proposals for increased bilateral cooperation in such areas as greenenergy development. It would be in the interest of both sides, while seeking progress on the beef problem to enable the formal TIFA process to resume, to hold intensive if lower-level discussions on the many other areas of concern.

taiwan business topics • april 2011

4_2011_Editorial.indd 4

2011/4/27 10:58:39 AM

BY ja n e R I CKaR DS


FORECASTS SAY GROWTH BETTER THAN EXPECTED The British-based global financial conglomerate HSBC in early April raised its forecast for Taiwan’s 2011 GDP by 0.3 percentage points to 5%, compared with its earlier forecast of 4.7%. Viewing exports as the main driver, HSBC predicted they would grow by 13.5% this year, as demand for electronics in the United States and key European markets bounce back more vigorously than earlier anticipated. Reconstruction efforts in Japan and demand in China created by its recently announced 12th five-year plan – which provides for enormous investment in urban infrastructure – were also seen as boosting Taiwan’s exports. Like many other analysts, the British bank warned of unpredictable factors that might cause the forecast to be overly optimistic, including the possibility of escalating turmoil in the Middle East and North Africa that could lead to rising oil prices. According to local media, HSBC said if oil prices hit US$120 a barrel, Taiwan’s consumer price index could increase by as much as 3.7% this year, compared with the current forecast of 2.3%.

Other uncertain factors included the degree that Beijing decides to tighten its monetary policy, which might lead to lowering demand from Taiwan’s number one trading partner, and the possibility that Japan might fail to resolve its radiation leakage crisis, which could prolong supply disruption to Taiwanese exporters and even lead to regional economic collapse. Taiwan’s Polaris Research Institute in late March also raised its Taiwan GDP forecast to 4.78%, higher than a December forecast of 4.62%, also citing higherthan-expected momentum in exports, as well as strong domestic demand. The figure might have been an even higher 5.01%, Polaris president Liang Kuo-yuan was quoted as saying by local media, but

after the Japanese earthquake, Polaris scaled back its forecast by 0.23 percentage points, anticipating that the disaster would affect both Taiwan's exports and domestic demand to some degree. Exports in March gave a reasonably strong showing of 16.7% growth yearon-year, the Ministry of Finance said, standing at US$27.25 billion for the month, while imports at US$25.48 billion also grew 16.7%, with the trade balance in surplus by US$1.77 billion. Export orders, a sign of exports to come in the next few months, were also strong at US$11.48 billion for March, representing 13.37% growth, the Ministry of Economic Affairs (MOEA) said. Industrial production at 13.28% actually slipped from February’s 15.38%

Taiwan sTock exchange index & value





















chart soU rce: twse


March Unit: ntD billion

and January’s 17.52%, the MOEA reported. All sectors posted growth except for building and construction, which decreased by 58.96%. The slump was likely due to anticipation of the soon-to-be implemented “luxury tax,” which will impose a 15% tax on properties sold within a year of purchase and a 10% tax on those sold within two years, a plan aimed at curbing speculation. Unemployment, at 4.48% for March, also continued to fall, down from February’s 4.69%, the Directorate General of Budget, Accounting and Statistics said. The consumer price index in March posted a year-on-year change of 1.41%, with the government forecasting 2% for the entire year, a figure lower than HSBC’s forecast of 2.3%. Unlike some other Asian countries that face the possibility of roaring inflation, Taiwan's is expected to be quite mild. The Central Bank at the end of March raised interest rates by 12.5 basis points to 1.75%, a move that was broadly expected by economists. It follows hikes in the last three quarters, also by 12.5 basis points each time. In a statement, the Central Bank noted that Middle Eastern and North African instability, along with april 2011 • taiwan business topics

4_2011_Briefs.indd 5


2011/4/26 4:16:09 PM

THREE CONTENDERS — The three candidates running for the Democratic Progressive Party's presidential nomination, left to right, Hsu Hsin-liang, Tsai Ing-wen, and Su Tseng-chang, taking part in a forum sponsored by the Liberty Times. photo : cna

the Japanese earthquake, created inflationary pressure and uncertainties. It noted that “market interest rates moved up gradually and imported inflationary pressures also heightened,” and said that “against this backdrop, the Board judges that a rate increase can help control inflation expectations and safeguard price stability.” DOMESTIC

DPP CONTENDERS DECLARE CANDIDACIES Democratic Progressive Party (DPP) chairwoman Tsai Ing-wen, former premier Su Tseng-chang, and former DPP chairman Hsu Hsin-liang by late March had all declared their ambitions to be the party’s presidential candidate, registering to participate in a primary in 6

the form of a series of opinion polls to be conducted from April 25 to April 29. Tsai and Su were leading neck-and-neck in the popularity stakes, according to surveys conducted by the local media. They have similar platforms, holding a much milder stance towards China than pro-independence firebrand, former President Chen Shui-bian. Su has had more administrative experience. Besides acting as premier under former president Chen, he has been elected Pingtung County magistrate twice and Taipei County magistrate once. But Tsai, as DPP chair, was able to guide the party out of the lowest point in its history, following the massive corruption scandals surrounding Chen, to help the party thrash the KMT in municipal elections

in November in terms of the overall vote total. The DPP presidential nominee will be announced May 4. In related news, the Central Election Commission announced in late April that the presidential and legislative elections would be held simultaneously early next year, a week before the Chinese New Year holiday. President Ma ying-jeou has registered to run, unchallenged, for the Kuomintang (KMT) nomination for a re-election bid.

ROW OVER ALLEGED LOSS OF DOCUMENTS The Presidential Office in late March announced that it would ask the watchdog Control Yuan to determine if 17 former ranking officials who served under former President Chen should be held responsible for around

36,000 documents that the government says are missing in violation of the National Archives Act and two other laws. Presidential Office spokesman Lo Chih-chiang said the complaint was the result of a two-year investigation, but opposition DPP political figures termed the charges a smear attempt ahead of the presidential election. They noted that it came just one day before Su Tseng-chang, one of the 17, declared his candidacy for the DPP presidential nomination. All 17 involved have denied any wrongdoing, saying the documents were invitations and other unimportant materials. The incident attracted the attention of 34 academics, Taiwan activists, and former officials and diplomats from the United States, Canada, Europe, and Australia, who wrote an open letter to President Ma Yingjeou. “We are disquieted by the timing of this announcement,” they wrote adding that if any documents were “missing,” this should have been noted during the transition period between administrations in 2008. “To come up with this matter three years later, when the primaries for next year’s presidential elections are underway, suggests a political motive,” the letter said. According to local media

taiwan business topics • april 2011

4_2011_Briefs.indd 6

2011/4/26 4:16:14 PM

reports, government and KMT officials were incensed by the letter’s questioning of their motivations.

ANTI-NUCLEAR FEELING INCREASES SHARPLY Anti-nuclear sentiment in Taiwan has risen sharply following the massive earthquake and tsunami that struck Japan in early March and the ongoing crisis at Japan’s stricken nuclear reactors in Fukushima Prefecture. Organizers of a rally in Taipei in late March calling for a halt to construction of Taiwan’s fourth nuclear plant, to be located in Taipei County, claimed an attendance of 10,000 demonstrators (police put the figure at a more modest 1,500). The protestors also urged the government not to extend the life of Taiwan’s existing nuclear reactors, one of which dates back as far as the 1970s. Taiwan lies on the same earthquake-prone

fault line as Japan. DPP presidential contenders Tsai and Su have made environmentalism and antinuclear sentiment a campaign focus. Generally the DPP, which has long been opposed to the use of nuclear power, has received a boost from the controversy sparked by the situation in Japan, while the KMT, which traditionally has supported nuclear energy, was handed something of a blow. The DPP has advocated that Taiwan do more to develop renewable energy sources, and released polls showing that more than 60% of the public have no confidence in the Taiwan governments’ ability to handle a nuclear crisis. Put on the defensive, both Ma and the Executive Yuan began holding daily briefings on the effect the Japanese earthquake was having on Taiwan. Premier Wu

WE PROTEST — Anti-nuclear demonstrators, responding to the disaster in Japan, urging the government to phase out the use of nuclear power in Taiwan.

Den-yih also reassured the public that the government would not launch the fourth nuclear power plant until it had been inspected by international experts. Compounding public fears, radiation – though not at harmful levels – was found on imported food items from Japan, and passengers traveling through Taiwan were forced to undergo radiation checks. Taiwan also served as a base for hundreds of American and Australian diplomatic staff and dependents who were evacuated from Japan. I N T E R N AT I O N A L

MORE QUESTIONS ON U.S. ARMS SALES Throughout March and early April, supporters of Taiwan in Washington stepped up accusations that the United States is allowing Taiwan’s military capacities to erode, at the same time as a Pentagon report notes that the crossStrait military balance is continuing “to shift in the mainland’s favor.” In a telephone interview, Rupert Hammond-Chambers, president of the U.STaiwan Business Council, said he did not think the State Department would announce any major arms sales to Taiwan before the island’s presidential election next year, including

an expected US$4.5 billion upgrade to Taiwan’s F-16 A/B fighter jets. Last year, analysts were predicting that the deal would be announced at around this time. Taiwan is also asking for 66 of the more advanced F-16 C/D fighter jets, first sought in 2006, but that request has also been put off. The situation caused Richard Lugar, the ranking Republican on the U.S. Senate Foreign Relations Committee, to write to Secretary of State Hilary Clinton expressing concern “that if the Administration does not act favorably on Taiwan’s letter of request for sales of F-16 C/ D aircraft, Taiwan…in the next decade will have no credible air-to-air capability.” The State Department denies that it has imposed a freeze on arms sales to Taiwan, but last November Taiwan’s Ministry of Defense said it was forced to return over US$1.4 billion to Taiwan’s treasury as a consequence of U.S. indecision on arms sales. “My own view as to what is driving the Obama leadership is relations with China and priorities such as military-to-military talks,” said HammondChambers. In March, Charles Glaser, a professor at George Washington University, also wrote a controversial article in the

photo : ap/c hiang Ying -Ying

april 2011 • taiwan business topics

4_2011_Briefs.indd 7


2011/4/26 4:16:18 PM

American insurance company Metlife in late March agreed to sell its Taiwan business to the Chinatrust Financial Holding Co. for US$180 million, making it the latest in a string of foreign life insurers to leave the Taiwan market. The move will strengthen Chinatrust Financial by providing it with an insurance affiliate. The deal requires regulatory approval, which might be slow. A month later, Fubon Financial Holding said it was considering a bid for the Taiwanese assets of New York Life.

FOXCONN MAY BOOST PRESENCE IN BRAZIL Brazilian President Dilma Rousseff said the Foxconn Technology Group may spend US$12 billion over five to six years to expand production in his country, in what would be the Taiwanese company’s biggest investment overseas, Bloomberg reported in mid-April. A Foxconn spokesman told Bloomberg 8

LEGISLATIVE YUAN PASSES LUXURY TAX The legislature in midApril passed what has been called the “luxury tax” – a special tax on certain real estate investments and luxury goods – in an effort to curb surging prices that threaten to create an asset bubble. The “Selective Goods and Services Sale Tax Act” levies a 10% tax on purchases of automobiles, private jets, and


2010 Imports

10.10 4.6 28.82 392.63

Unemployment (Feb.) Overnight Interest Rate (March 31) Economic Growth Rate (2010 Q4)P Change in Industrial Output y-on-y (Feb.)p Change in Industrial Output y-on-y (Jan.-Feb.)p Change in Consumer Price Index y-on-y (March) Change in Consumer Price Index y-on-y (Jan.-March)p

4.69% 0.287% 6.92% 13.28% 15.52% 1.41% 1.28%

p: prelimin ary

69.3 73.8

56.9 61.6


Europe 5.7 6.8


2011 Exports

yachts valued at over NT$3 million (about US$100,000). In addition, a 10% tax will be levied on any investment property sold within two years, with the rate rising to 15% if the property is sold within one year. The tax, which will not apply to properties used by the owners as their own residence, represents an effort to curb real estate speculation. Soaring housing prices, especially in the Taipei area,

Unit: US$ Billion CCurrent Account Balance (2010 Q4) Foreign Trade Balance (Jan.-Mar.) New Export Orders (Feb.) Foreign Exchange Reserves (end March)


Year Earlier 11.81 4.90 23.49 355.04 5.76% 0.157% 9.22% 36.50% 1.27% 1.29%

soU rces: Moea, Dgbas, cbc, boFt

7.3 7.9




6.5 9.0











economic indicaToRs





6.8 8.1



5.9 6.6


Taiwan's JanuaRY-maRch TRade FiguRes (YeaR on YeaR comPaRison)

that the maker of Apple’s iPhone and Dell computers is giving “serious consideration” to further investment in the South American country but has yet to decide on details. The expansion may help the Taiwanese company, which employs more than a million people in China, scale back its reliance on its manufacturing base in the southern Chinese city of Shenzhen, where wages are climbing.


influential Foreign Policy magazine suggesting that the United States should back away from its defense commitments to Taiwan as they have created an unnecessary irritant in Sino-U.S relations.




Unit: US$BN Source: BOFT

have made it difficult for average income earners to afford to buy property.

MEDIATEK MERGES WITH RALINK TECHNOLOGY Taiwan’s biggest IC chip design house, Mediatek, in mid-March said it will acquire the Ralink Technology Corp., a local chipmaker specializing in products for the wireless home networking and broadband access semiconductor markets, in a share swap valued at NT$18.2 billion (US$616 million). The takeover will allow Mediatek to tap into Ralink’s range of chips used in WiFi wireless internet and digital subscriber line communications equipment. The transaction amounts to Taiwan’s largest technology M&A activity in almost two years. The agreement will take effect October 1, pending regulatory reviews.

taiwan business topics • april 2011

4_2011_Briefs.indd 8

2011/4/26 4:16:19 PM

assessing the impact of the Japanese Quake


espite widespread public apprehension that Japan’s multiple calamity of a severe earthquake and tsunami coupled with damaged nuclear reactors and radiation leakage could have a severe impact on Taiwan’s economy and related international supply chains, most analysts now conclude that the effect is likely to be mild – while stressing that the true situation may not be known for a few months. “The global market assessment of the Japan earthq uake is that this is likely to be manageable,” said Standard Chartered economist Tony Phoo in a presentation to an AmCham luncheon. He noted that despite being the world’s third largest economy, and Taiwan’s second largest trading partner next to China, Japan's contribution to global growth is only 4%. “Despite all the concern about Japan, what really matters in the global economy,” he said, is “China and the U.S.” Christina Liu, minister of the Council for Economic Planning and Development, at the end of March predicted that the disaster would cut into Taiwan’s gross domestic product (GDP) this year by 0.2 to 0.3 percentage points at most. Other experts noted that the main problems for Taiwan companies due to the Japanese disaster were shortages of particular types of components that are only sourced from Japan, as opposed to an overall shutdown of specific supply chains. Analysts also said as Taiwanese ICT companies were currently able to rely on existing inventories of Japanese goods, and since alternative sources for many items are likely to be available through complex global supply chains, the actual impact of these shortages was unlikely to be known until current inventories run out in June or July. For example, said Phoo, around 90% of the factories producing the world’s supply of ICT substrates are located in the quake zone. He mentioned that the Mistubishi Gas Chemical Co., the world’s largest producer of bismaleimide-triazine (BT) resin, a material used to make substrates that connect chips used in handsets to printed circuit boards, accounts for half of global BT resin supply. The company’s entire production line stopped due to quake damage, triggering concerns last month that this could result in market shortages of the latest smartphones. However, this has not been the case – at least as yet. Daniel Heyler, managing director for global research with the Asian Technology Team at Merrill Lynch, said that besides ICT substrates, the second-largest impact from the quake could be on the production of NAND flash memory chips, widely used in smartphones and tablet PCs. Although Japanese-made NAND flash memory

accounts for nearly 40% of the market, so far there hasn't seemed to be a major impact on this industry. The fundamental question is whether Japanese companies can recover – or Taiwan companies come up with acceptable substitutes for the components in question – before inventories run out, analysts said. “From our talks [with companies], we get the feeling most are adequately supplied for two to three months,” Phoo said. “If this drags on until June or July, we could see severe disruptions of Japanese supply chains,” he told the AmCham audience. “Even 50% less in those materials could bring a significant slowdown.” For example, BT resin is shipped to companies such as Taiwan’s Unimicron that convert it to IC substrate. Industry sources told TOPICS at the time of the quake that Unimicron had enough BT resin inventory for five to six weeks and the company believed some Taiwanese suppliers could provide similar though somewhat lowerend material. Phoo also dismissed concerns that Taiwanese tourism might take a severe blow, hurting the economy. Although Japanese tourist arrivals currently number around one million each year, around 1.5 million Chinese visitors came last year and their numbers are still growing. “The future of Taiwan tourism is with mainland Chinese tourists,” he said. In addition, he pointed out that tourism amounts to barely 3% of Taiwan’s GDP, unlike other countries in the region where tourism revenues equal 6% or 7% of GDP. Overall, said Phoo said, the economic impact from the recent disaster is likely to be far less than that of the powerful earthquake that hit the Kobe region in 1995. This time, the earthquake-stricken region normally contributes only 6.2% to Japan’s national GDP, compared with 13.1% for the Kobe region, due to its greater concentration of population and industrial facilities. Phoo further predicted that Japan’s economy would start to rebound in a sharp V-shaped recovery starting in the second half of this year due to reconstruction efforts. Chen Miao, the macroeconomic forecaster at the Taiwan Institute of Economic Research, said that it was currently impossible to know the potential impact of the Japanese quake, citing the secrecy of Taiwanese companies concerning their inventories and complex trading relationships. “It’s all a big 'if' at the moment,” he concluded. “No one knows the uncertainties companies are facing. Real data is very hard to find.” — By Jane Rickards april 2011 • taiwan business topics

4_2011_Briefs.indd 9


2011/4/26 4:16:20 PM


Disappearing U.S. Beef Taiwan’s restrictions on a feed additive are threatening to keep American beef out of the local market.


ntil recently, it is unlikely that many people in Taiwan had ever heard of the livestock feed-additive ractopamine. But this substance, widely used by ranchers in the United States and many other countries to promote weight gain and lean meat in cattle – though banned in Taiwan – has become the center of a trade dispute that has disrupted plans to resume bilateral economic negotiations between the United States and Taiwan under what is known as the Trade and Investment Framework Agreement (TIFA). The issue surfaced in mid-January when a shipment of U.S. beef containing small amounts of ractopamine was rejected by the Taiwan authorities, who had not previously conducted inspections for the ingredient. When other shipments ran into similar problems, most of the major U.S. exporters and Taiwan importers decided to halt orders of American beef until the problem could be resolved. After a record year in 2010 in which US$218 million worth of U.S. beef was sold in Taiwan, sales are currently half of last year’s level and are likely to continue falling if the ractopamine problem cannot be overcome. The controversy has aroused an indignant response from Washington, where members of both the executive and legislative branches were already upset over another aspect of the beef issue – action by the Legislative Yuan last year to continue bans on certain U.S. beef products despite a protocol signed by the two governments to open the market more widely. After the ractopamine problem emerged, four of the most powerful members of Congress on trade matters – Chairman Max Baucus and Ranking Member Orrin Hatch of the Senate Finance Committee, and Chairman Dave Camp and Ranking Member Sander Levin of the House Ways and Means Committee (two Democrats and two Republicans) – wrote to President Ma Ying-jeou to argue that American beef is among the safest in the world and to complain that Taiwan is unjustifiably imposing unscientific restrictions as a form of trade barrier. When President Ma spoke at AmCham’s Hsieh Nien Fan banquet in March, he announced that a government task force had been formed under the leadership of Minister Without Portfolio Yiin Chii-ming to come up with a solution. So far the task force appears mainly engaged in conducting a series of seminars designed to educate the public that consumption of beef from animals fed with reasonable amounts of ractopamine does not pose any danger to human health. That conclusion, in fact, was also the finding of the Taiwan government in 2007, when it notified the World Trade Organization of its intention to set a Maximum Residue Level (MRL) for ractopamine in beef products and to allow the import of


消聲匿跡的美國牛肉 瘦肉精零檢出的限制恐將迫使美牛退 出台灣市場

瘦肉精引發台美貿易爭端之前,相信 許多台灣人並不知道這種飼料添加 物。雖然台灣禁止使用瘦肉精,但美 國與許多其他國家的畜牧業者早已採用瘦肉 精,以增加牛隻的體重與瘦肉。瘦肉精爭議擾 亂了台美貿易談判的時程,導致貿易暨投資架 構協定(TIFA)下的定期談判遲遲無法恢復。 瘦肉精風波開始於今年一月中旬,一批美國 牛肉被驗出帶有微量瘦肉精後遭到退回。台灣 主管機關之前並未執行瘦肉精的查驗。越來越 多美牛被驗出瘦肉精後,多數美國出口商與台 灣進口商決定,在事態獲得釐清前暫緩訂、交 貨。美牛進口總值在2010年創下新高,達2.18 億美元。但受瘦肉精影響,今年至目前為止僅 有去年同期的一半;而且,如果爭議持續存 在,進口總值還將繼續下滑。 美方對此的反應相當憤怒。華府的行政與立 法部門本來就已經非常不滿美牛對台出口的狀 況,因為台灣立法院去年初修法禁止特定品項 的美牛進口,違背美台所簽訂的牛肉進口議定 書。瘦肉精爭議出現後,主管貿易事務的四位 重量級國會議員,即參院財委會主席包克斯與 少數黨資深議員海契,以及眾院撥款委員會主 席坎普與少數黨資深議員李文,聯名致函馬英 九總統,強調美牛安全無虞,台灣強加無根據 的限制是構築貿易障礙。 馬英九三月於台北市美國商會謝年飯致詞 時表示,政務委員尹啟銘已經組成專案小組研 商解決之道。小組目前的主要工作,仍在宣導 合理範圍內的瘦肉精殘留不致危害健康。事 實上,台灣政府2007年就已經認知到此一事 實,並決定通報世界貿易組織(W T O),將

taiwan business topics • april 2011

4_2011_Issues.indd 10

2011/4/27 5:04:32 PM

Issue s

meat that complies with that standard. The MRL was never set, however, following vehement protests from Taiwan’s hog farmers. Although Taiwan does not have a large beef industry to protect, pig-raising is a major agricultural activity – and lifting the ban on ractopamine would presumably open the door to competition from U.S. pork. In the meantime, the question of setting an MRL for ractopamine is due to be on the agenda of the annual meeting in July of the Codex Alimentarius Commission, the United Nations-affiliated body that sets international food safety standards. Should Codex adopt such a standard, Taiwan could benefit from some political cover if it wishes to ease the current ban. But most observers believe the odds of positive action at Codex are slim, given the European Union’s staunch opposition to the use of feed additives except for therapeutic purposes. In addition, the closer the timing before Taiwan’s presidential election next year, the more politically sensitive such agricultural issues can become. “AmCham therefore hopes that a way can be found to resolve this issue at an early date,” says Andrea Wu, the Chamber president. “It will be most unfortunate if this obstacle continues to prevent the two sides from moving ahead with the TIFA talks and restoring the spirit of bilateral cooperation.”

會擬定牛肉瘦肉精最高殘留量(M R L)的標 準,以及允許標準範圍內的肉品進口。 但在養豬業的強力反彈下,最高殘留量標 準胎死腹中。台灣的牛肉產業雖然弱勢,但 養豬仍是主要農業活動之一;豬農擔心,一 旦開放瘦肉精,將導致美國豬肉大舉入侵。 聯合國的國際食品標準委員會(C o d e x) 預定在七月召開的年會中討論瘦肉精殘留標 準。如果Codex能夠建立國際標準,台灣放寬 瘦肉精使用的政治壓力將舒緩許多。但多數 專家認為,Codex今年不太可能達成共識,因 為歐洲仍堅決反對醫療目的以外的飼料添加 物。 台灣明年將舉行總統大選,農業問題的政 治敏感度將越來越高。因此,美國商會執行 長吳王小珍認為,瘦肉精問題應該越快解決 越好,不該讓牛肉問題繼續妨礙TIFA談判以 及雙邊合作。 —撰文/沙蕩

—By Don Shapiro

Talking to Luxembourg The offshore fund business could reap some benefits from a Stage II Memorandum of Understanding.


he Grand Duchy of Luxembourg may be only 2,500 square kilometers in area, with a population of about half a million people, but it is one of the world’s most important centers for banking, investment funds, and other financial services. Of the offshore investment funds approved for sale in Taiwan, some 75% are domiciled in Luxembourg. For that reason, AmCham’s Asset Management Committee has been actively encouraging greater cooperation between the regulators in the two countries – Taiwan’s Financial Supervisory Commission (FSC) and Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) – to enable the fund business between the two markets to be carried on even more smoothly. A start was made on that process last year when the two regulatory bodies signed a firststage Memorandum of Understanding, a “getting to know you” arrangement that establishes the basis for the exchange of financial supervisory information. Now the Committee is urging the two commissions to proceed to a second-stage MOU for the mutual recognition of investment funds,

繼續推動與盧森堡 的金管備忘錄 第二階段備忘錄如能簽訂,將使境外 基金業者共蒙其惠

森堡大公國或許是個小國,土地面積 2,500平方公里、人口約50萬,但卻 是全球最重要的銀行、投資及金融服 務中心。台灣核准的境外基金,約75%在盧 森堡註冊。

april 2011 • taiwan business topics

4_2011_Issues.indd 11


2011/4/27 5:04:33 PM

Issues which would have much more practical implications. Members of the fund industry anticipate a number of advantages if the Stage II MOU could be successfully negotiated: • Luxembourg-domiciled funds potentially could receive a waiver from FSC rules requiring offshore funds to have a minimum one-year track record, giving them speedier access to the Taiwan market. • Having recognized Luxembourg’s standards for investor protection, Taiwan could be expected to exempt Luxembourg funds from its current derivatives limit of 40% of a fund’s net asset value. • The sharing of resources between the FSC and the CSSF could help the FSC’s Securities and Futures Bureau to accelerate its approval process for new offshore-fund applications. • Because Taiwan has been unable for political reasons to become a member of the Financial Action Task Force (FATF), the main international body responsible for promoting anti-money-laundering (AML) activity, distributors of Luxembourg-domiciled funds in Taiwan have had to comply with stricter than usual AML requirements. Through a Stage II MOU, it could be possible for Taiwan to gain recognition as a “FATF-equivalent” entity, enjoying the same status and obligations for AML purposes as other countries in the eyes of the Luxembourg authorities. A fuller explanation of the potential benefits of the agreement will appear in the Asset Management Committee’s position paper in the 2011 Taiwan White Paper to be released in early June.

—By Don Shapiro

台北市美國商會資產管理委員會因此一直積 極鼓勵兩國金管機關能更深化互動,藉由台灣 金融監督管理委員會與盧森堡金融業監管委員 會的合作,使兩國基金市場的流通更為順暢。 兩國金管機關去年簽訂第一階段監理合作備忘 錄是個不錯的開始,因為相互瞭解將有助建立 金管資訊交流的基礎。 資產管理委員會希望兩國能更進一步、簽訂 第二階段的備忘錄,以相互承認基金達成更務 實的成果。基金業者相信,第二階段備忘錄將 能帶來不少好處,包括: • 已 於 盧 森 堡 註 冊 的 基 金 或 許 能 獲 得 豁 免,不必再向金管會提交過去一年的營 收紀錄,因而能夠更快引進台灣市場; • 基於盧森堡對投資人的完善保障,台灣 或許願意放寬盧森堡註冊基金的衍生性 商品交易比重,不再受限於淨資產40%的 門檻; • 台灣與盧森堡的資訊分享,或許能縮短 金管會證期局對新款海外基金申請案的 審查時間; • 受 制 於 政 治 因 素 , 台 灣 仍 無 法 加 入 防制跨國洗錢的「金融行動小組」 (FATF),盧森堡註冊基金在台發行商 因而必須遵守比國際防制洗錢規範更為 嚴格的標準。第二階段備忘錄或許能夠 協助台灣成為「準FATF金融體」,使盧 森堡願以等同其他國家的待遇與規範看 待台灣市場。 資產管理委員會將會在今年六月發表的 《2011年台灣白皮書》中,更完整說明第二 階段備忘錄的好處。


Taxing Worldwide Income This year’s returns will take Alternative Minimum Tax on overseas income into account for the first time.


n 2006, Taiwan introduced an Alternative Minimum Tax (AMT) in an effort to ensure that individuals with high amounts of income not subject to withholding still paid their fair share of personal income tax. But it deferred the most controversial part of the AMT scheme – the inclusion of overseas income – until 2010, to give both taxpayers and the tax author-


taiwan business topics • april 2011

4_2011_Issues.indd 12

2011/4/27 5:04:34 PM

Issue s

ities time to prepare. As the deadline approaches in May for filing tax returns on 2010 income, many tax professionals are concluding that there are still more questions than answers as to how the system will work in practice. One issue that has concerned AmCham’s Tax Committee is that the AMT law is being applied to all “residents” of Taiwan – defined as anyone who has either established a household registry in Taiwan or spent at least 183 days on the island during the previous calendar year – including foreign nationals. Noting the unfairness of taxing foreign residents here on income from the sale of investments that may have long preceded their arrival in Taiwan, such as a house or equities in their home country, the Committee recommended that the Ministry of Finance follow the practice being used by China of exempting foreign nationals from taxation on their worldwide income for the first five years of their residence in the PRC. But the MOF has not been very sympathetic to that suggestion, noting what it considers to be the high thresholds before an individual or married couple filing a joint return would be subject to AMT on overseas income. One threshold is that the AMT only applies to those with annual income of NT$6 million (about US$200,000) or more, and another is that overseas income is only included if it amounts to at least NT$1 million (about US$33,000). A credit on taxes paid to foreign jurisdictions can be deducted from that overseas income, up to a certain ceiling, but CPAs are concerned that the documentation being requested as evidence of those tax payments may prove to be very difficult to obtain in practice. In addition, the tax office is requiring that those documents be attested to by a Taiwan embassy or representative office in the given country, which adds a further layer of paperwork to the process. Another challenge in calculating tax credits will be that not all foreign jurisdictions define their tax year as the calendar year, as Taiwan does, creating some complicated timing issues. It is also unclear what means the tax authorities may have to check on undeclared overseas income, or whether they will need to rely primarily on taxpayers’ voluntary submission of information. At a recent luncheon meeting sponsored by the AmCham Tax Committee and featuring a presentation by Heidi Liu, a tax partner at Ernst & Young, the Committee cautioned that numerous problems are likely to surface with this year’s tax processing due to the newness of the system and the inexperience of the tax officers with the issues involved. It encourages AmCham members to notify the Chamber about any questions or difficulties they encounter, so that the Tax Committee may seek clarification from the tax authorities.

海外所得首度課稅 海外所得今年將首度納入最低稅負制

灣2006年實施最低稅負制,目的在 使高所得族群仍需繳納一定比例的所 得稅。但海外所得的爭議太大,因此 延到2010年才生效,讓納稅人與稅捐機關有 充分的準備時間。然而,五月的報稅期即將 到來,許多稅務專家仍未得到政府的充分說 明,釐清海外所得的申報程序。 台北市美國商會稅務委員會擔憂的議題之 一是,所有「居民」都要納入最低稅負制, 包括在台具有戶籍者,以及前一年在台居住 超過183天的人(包括外籍人士)。外籍人 士可能在抵台之前很久,就已經處理掉母國 的房屋或資產,但這些收入卻仍將納入最低 稅負制;委員會認為此一作法並不公平,也 希望財政部能比照中國的處理方式,即外籍 人士移居中國的前五年不需申報海外所得。 但財政部並未積極回應,認為個人或夫妻 合併申報的最低稅負制門檻已經夠高。條件 之一是年所得超過600萬新台幣,另一個則 是海外所得需超過100萬新台幣。 另外,雖然在一定範圍內,海外繳稅證明 可以抵扣台灣所得稅;但會計師擔心,繳稅 證明可能很難取得。此外,稅捐機關還要求 ,繳稅證明必須由台灣駐當地的使領館驗證 ,使申報過程更為繁複。最後,有些國家並 不像台灣,是以日曆年度做為報稅依據,因 此時間落差也是問題。 未獲釐清的疑問還包括,稅務機關將如何 查驗海外所得是否詳實申報,還是單憑納稅 人自行申報的資料就可認定。 商會稅務委員會最近舉辦午餐會,邀請 安永聯合會計師事務所執業會計師劉惠雯演 講。委員會除了藉此提醒與會者,新制上路 ,加上稅務官員並不完全瞭解相關問題,因 此今年的報稅過程可能會出現很多問題,也 鼓勵商會成員碰到問題應該反映給商會,方 便稅務委員會匯整後請主管機關說明。

—By Don Shapiro


april 2011 • taiwan business topics

4_2011_Issues.indd 13


2011/4/27 5:04:34 PM

Cover Story


Decision Time for the Chemical Industry 石化產業的決戰時刻


n the end, environmental considerations trumped arguments emphasizing economic development, as President Ma Ying-jeou acted to rule out construction of the Kuokuang petrochemical complex at the proposed wetlands site in Changhua County. The government immediately sought to reassure the petrochemical industry that other means would be found to meet its need for new production facilities, but it seemed likely that the only solution would be to move the project offshore, perhaps to Malaysia or Indonesia – or even to China.

馬 英九總統決定中止國光石化於彰化大城濕地設立新廠,顯示環保訴求仍然優先於經濟發 展。政府雖然連忙向石化產業保證,仍有其他選項可以滿足產能擴充的需求,但目前看 來,唯一的可行之道就是海外建廠,包括馬來西亞、印尼,甚至是中國。 By JANE rICKArDS



taiwan business topics • april 2011

4_11_CoverStory.indd 14

2011/4/26 4:29:56 PM



or years a question mark has hovered over the future of Taiwan’s commodity chemical manufacturing industry. But now the warning signs are starker than ever for a sector the government estimates to account (if you include downstream processing) for almost a third of the economy’s manufacturing activity, the employment of over 400,000 workers, and a substantial proportion of export revenues. Just as this issue of Taiwan Business TOPICS was going to press, President Ma Ying-jeou settled a longstanding controversy by announcing that for environmental reasons a planned NT$620 billion (US$21.3 billion) petrochemical complex to be built by the Kuokuang Petrochemical Technology Co. would not be constructed at the proposed site along the coast of Changhua County. Companies in the petrochemical industry had regarded Kuokuang, which was to include a naphtha cracker and associated midstream plants, as well as an oil refinery and industrial harbor, as essential for securing sufficient future supplies of feedstocks. F o l l o w i n g M a ’s a n n o u n c e m e n t , Premier Wu Den-yih sought to reassure the industry that the government would help find another solution for the project. Since locating another suitable site within Taiwan is thought to be out of the question, it seems likely that the invest-

ment will go overseas, with Malaysia and Indonesia mentioned most often as possible destinations. Minister of Economic Affairs Shih Yen-hsiang raised another possibility when he dropped his previous opposition to Taiwanese investment to construct naphtha-cracking units in China – though on the condition that the output from the plants could be freely shipped back to Taiwan. In making his decision, Ma acted even before the environmental impact assessment process for the Kuokuang project had fully run its course. A review panel of experts had been unable to reach agreement despite lengthy deliberations, divided between rejecting the project and giving it conditional approval, with the final determination to be made in May by the formal Environmental Impact Assessment Committee. But the President pre-empted the process, telling a press conference that the government was halting the project – in which the state-owned oil company is the largest shareholder – because it would have an “unbearable” impact on the ecology of the surrounding area. Amid charges from a rising environmental movement that the island is already over-polluted and over-crowded, and with what is expected to be a tightly contested presidential election now just over half a year away, the two main opposition presidential hopefuls – Tsai Ing-wen and Su Tseng-chang – had both

灣長期以來一直欠缺清楚的化工產業發展 政策,但生死存亡的關鍵時刻似乎已經越 來越逼近。包含下游加工在內的泛化工產 業已佔台灣製造業產值近1/3,雇用人數超過40 萬,同時也是外銷主力之一。 本期TOPICS即將付印之際,馬英九總統基於環 保考量決定中止國光石化新廠案。國光石化原定 投資6,200億新台幣,於彰化濱海地區建立輕油 裂解廠、中階原料廠與工業港。石化業者之前的 期待是,國光案能夠彌補原料供需的落差。 馬英九宣布停建後,行政院長吳敦義向石化業 者保證,政府願意尋找其他替代選項。由於台灣 內部已經不太可能容納國光新廠,最可能的選項 就是移往海外,可能地點包括馬來西亞與印尼。 另一個可能地點則是中國,因為經濟部長施顏祥 已經修正反對立場。施顏祥原先主張,就算輕油

already come out against the project on the grounds that it would destroy unique wetlands. With proposed annual ethylene capacity of 1.2 million metric tons, equal to more than a quarter of Taiwan’s current production of ethylene (the most important feedstock for petrochemicals), the Kuokuang complex has been considered vital by Taiwan’s commodity chemical manufacturers for the future of their industry. Petrochemicals form a large chunk of this sector and Taiwan had regarded it as crucial to maintain selfsufficiency in ethylene production, given the booming demand in other countries and the resultant high cost of importing. Although the Ministry of Economic Affairs had set a goal of keeping Taiwan’s ethylene self-sufficiency rate at over 90%, MOEA Minister Shih Yen-hsiang had warned that without Kuokuang the level would fall to 64% in the coming decades. Shih, a strong supporter of keeping the project in Taiwan, nevertheless in early April for the first time raised the possibility that the government would consider moving all or part of the project to an overseas destination, in case Kuokuang was unable to proceed in Taiwan as currently planned. Intended to replace the aging 5th Naphtha Cracker in Kaohsiung run by the state-owned CPC Taiwan Corp. (formerly called Chinese Petroleum), the Kuokuang project has been stalled for

裂解廠的原料成品能夠不受限制地運回台灣,他 還是反對前往中國設廠。 馬英九的否決,甚至沒等國光案環境影響評估 完成應有程序。環評專案小組4月21、22日的會 議無法達成共識,最後決定「否決」、「有條件 通過」兩案併陳。國光案原本應由環評大會在五 月做出最後裁定,但馬英九決意提前介入,召開 記者會宣布,政府將中止國光建廠,因為新廠將 對環境造成不可承受的傷害。 環保人士認為台灣的污染已經太嚴重、工業 密度已經太高,加上總統大選只剩不到一年,民 進黨兩位主要參選人蔡英文與蘇貞昌稍早已經表 態,反對可能傷害彰化大城濕地的石化開發案。 國光石化新廠原本預估年產120萬公噸乙烯, 超過台灣現有產量的1/4。乙烯是石化工業的重 要原料,石化業則是化工產業的主力之一,國光

april 2011 • taiwan business topics

4_11_CoverStory.indd 15


2011/4/26 4:30:01 PM

Cover Story five years and its location shifted from Yunlin to Changhua County while undergoing a series of stringent environmental impact assessments from independent committees appointed by the Environmental Protection Administration (EPA). Kuokuang Petrochemical is a joint venture between CPC, which owns a 43% stake, and private-sector producers who would use the feedstock to make downstream products. Uncertainties and delays such as those currently being experienced are anathema to investors, notes J.H Shieh, executive manager of the Petrochemical Industry Association of Taiwan (PIAT). Among three major investments projects currently proposed to boost the petrochemical industry’s growth, two of them – Kuokuang and the fifth-stage expansion of Formosa Plastics’ 6th Naphtha Cracker – have been held up by environmental assessment processes for years. Considering the difficulty of further large-scale expansion in the production of commodity chemicals in Taiwan because of environmental and energy concerns, upgrading the industry to produce highend, sophisticated chemicals – a move that would follow the path taken by Japan around a decade ago – is the most suitable direction the industry can take, experts say. But this trend has so far been slow to develop in the industry, and many of the small and medium-sized companies in

the sector appear to lack the funds and technical capacity to make that leap. As a sign of the government’s concern, the Executive Yuan in June plans to convene a Strategic Review Board – consisting of representatives from academia, industry, and the government – to discuss how the petrochemical industry can upgrade to the manufacture of high-end chemicals, says Su Tsung-tsan, general director of the Material and Chemical Research Laboratories at the Industrial Technology Research Institute.

Pillar of the economy PIAT’s Shieh describes petrochemical manufacturing as one of four pillars holding up Taiwan’s economy, along with ICT electronics, flat panel displays, and semiconductors. He notes that, broadly defined, it accounts for 30% of Taiwan’s manufacturing production value. In addition, Taiwan’s 4.02 million metric tons a year in ethylene production makes it the world’s ninth largest producer, ahead of such industrial nations as France and Germany, though behind Korea and Iran (the United States is the world’s largest producer). Taiwan is also a major exporter of petrochemical products, and at one point was home to a complete upstream, midstream, and downstream supply chain. As labor costs started to rise in the 1990s, however, portions of the midstream and

案因此被認為攸關台灣化工產業的未來發展。 其他國家的乙烯需求越來越大,持續推升市場價 格,因此維持乙烯自主產能有其必要。 國光案原本是要取代過於老舊的台灣中油第五 輕油裂解工廠(五輕),但計畫至今已經拖延五 年,且地點由雲林換到彰化,還必須接受嚴格環 評。國光石化43%的股權由台灣中油持有,其他 股權則屬於下游石化業者。 台灣區石油化學同業公會總幹事謝俊雄說,國 光案的不確定性與一拖再拖,簡直就是下游廠商 的夢魘。石化產業發展的三大計畫中,國光與台 塑石化的六輕五期擴建都已經在環境影響評估卡 了好多年。 專家認為,基於環境考量與能源節約,化工產 業未來不太可能有大幅度的產能擴增計畫;未來 的可行之道是學習日本經驗,轉型生產高階、精


around 60-80% of the downstream processing factories making items of plastics and synthetic fiber relocated overseas, mainly to China, says Shieh. Despite facing environmental constraints, upstream producers could not relocate so easily. Both for strategic reasons and because of the potential impact on employment, the Taiwan government was loath to see domestic companies’ naphtha-cracking operations move offshore, especially to China. But since much of the customer base is now situated across the Taiwan Strait, exports of intermediate materials have become an important part of the business model. The PIAT says more than 60% of Taiwan’s petrochemical exports go to China, including large quantities of polyvinyl chloride (PVC) and purified terephthalic acid (PTA), which is used to make polyester fiber. Although foreign investment has played a relatively small role in Taiwan’s petrochemical manufacturing, a major exception is the China American Petrochemical Co. (CAPCO), founded in 1976 as a 60:40 joint venture between Amoco Chemicals (later acquired by BP) and CPC – and now the largest PTA producer in Asia, with 1.42 million metric tons of annual capacity. Despite the shadows hanging over the industry, so far it has enjoyed moderate, healthy growth. Darren Liang, an analyst with the Taiwan Institute of Economic

密產品。 但台灣化工產業迄今並未積極轉型,特別是許 多中小型企業欠缺足夠的資金與技術。工業技術 研究院材料與化工研究所所長蘇宗粲指出,政府 顯然瞭解問題的嚴重性,因此計畫在六月的產官 學「產業策略會議」(SRB)中,討論石化產業 的轉型方案。

經濟支柱 石化公會的謝俊雄認為,台灣經濟發展的四 大支柱是石化、資通訊、面板及半導體;從廣 義角度界定,泛石化產業已佔台灣製造產值的 30%。此外,每年402萬公噸的乙烯產量是全 球第九大,雖然比不上南韓與伊朗,但優於法 國、德國等先進工業國。美國仍是全球最大的

taiwan business topics • april 2011

4_11_CoverStory.indd 16

2011/4/26 4:30:01 PM


ItrI's role in Upgrading Research, says that while the number of companies involved in petrochemical processing had declined from 14,889 in 2006 to 14,290 last year, sales value in that period rose from NT$1.4 trillion to NT$1.78 trillion. Liang calculates that export value as a proportion of sales last year came to 93.85%, up from 83.55% in 2006. Last year, the industry’s production value, boosted by global recovery and a roaring appetite from China, amounted to NT$1.9 trillion, a growth of 25.4% from the year before. Within this total, the subsector of chemical materials grew by a whopping 34.8% year-on-year, finished manufactured chemical products by 22.3%, rubber products by 28.4%, and plastics products by 16.7%. The MOEA's Industrial Development Bureau (IDB), using an even broader definition of the industry than Liang’s, adds that once all relevant downstream supply chains are considered, including synthetic rubber, chemical resins, and man-made fiber textiles, the petrochemical industry can claim a total production value of NT$3.3 trillion and around 420,000 employees. Ta i w a n ’s c o m p a r a t i v e a d v a n t a g e s compared with rival Asian nations, such as Korea, include cost-efficient operations, relatively high-quality production, and a talented workforce, says Danny Lin, the recently-retired general manger of Dow Chemical Taiwan. Another advantage, says CAPCO chairman Arthur Kung, is that the major market in the region is nearby China. Taiwan is a more convenient base for serv-

乙烯生產國。 同時,台灣除了是石化產品的主要輸 出國之一,也一度具有完整的上、中、 下游供給鏈。石化公會的謝俊雄說,薪 資水準1990年代開始提高後,部分中 游業者,及六成至八成下游業者,如塑 膠與化纖,決定遷往中國等地。 上游業者雖然面臨相同挑戰,但另 起爐灶的難度很高。基於戰略考量與 就業需求,台灣政府當然不樂見輕油裂 解工廠移往海外,特別是中國。然而, 因為中下游業者多數已經移到對岸, 中階成品外銷便成為主要產銷模式。 石化公會指出,台灣石化產品超過六 成是銷往中國,包括大量的聚氯乙烯 (PVC),以及聚酯纖維的原料對苯二


“plant factory” that would allow crops such as strawberries and tomatoes to grow during conditions of extreme global warming or in the wrong season is one of the ways that Taiwan’s current high-end chemical technology could be utilized commercially, says Su Tsung-tsan, general director of the Material and Chemical Research Laboratories at Taiwan’s Industrial Technology Research Institute. Such “plant factories,” a current ITRI research initiative, involve utilizing a kind of plastic film that rejects infra-red light. They could help spur the development of high-end agriculture, one of Six Emerging Industries the government is fostering as part of an industrial restructuring to reduce reliance on electronics exports, says Su. Another area of research that ITRI could target for future commercialization is the field of biomaterials (any matter, surface, or construct that interacts with biological systems). The results might have relevance to another three of the Six Emerging Industries – medical devices and healthcare, biotech, and green energy. One class of biomaterials, known as “red bio,” consists of medical-related high-end chemicals that can be used for early diagnosis or for therapy. Giving an example, Su says ITRI has developed a formula involving iron oxide at a nano-level that is paramagnetic (a form of magnetism that that occurs only in the presence of an externally applied magnetic field.) “If we inject this into a human body or animal body, we could use a magnetic detector to detect where the magnetic particle is, and then use this for diagnostics, to see the cancer cell,” says Su. ITRI has already transferred this technology to a local company called Centerlab, which has submitted an application to the U.S Food and Drug Administration for approval. Another area in biomaterials involves so-called “white bio,” which uses renewable energy sources such as biological material from living or recently living organisms, for example wood waste, to make eco-friendly ICT products. Su says nano-technology is involved in at least 70% of the research conducted at the Material and Chemical Research Laboratories, which has 750 full-time staff and another 200 contract workers, amounting to a little over 10% of the entire ITRI workforce. As a sign of Taiwan’s success in the field of high-end chemicals, a few of ITRI’s inventions have already won international awards. In 2009, its STOBA battery won a prestigious R&D 100 Award, given annually by R&D Magazine to the 100 most significant, innovative research projects in multiple disciplines. The STOBA material, a nano-grade high molecular material, prevents fires in lithium batteries, the core technology for developing electric cars. The Ministry of Economic Affairs (MOEA) announced in a statement in March that it intends to disseminate this technology to Taiwan businesses for small quantity production. Companies that have already invested in the use of STOBA technology include Delta Electronics, China Synthetic Rubber, and Formosa Plastics, according to MOEA. In 2010, another Taiwan invention relating to high-end chemicals won an R&D 100 Award. The invention, Reddex, a non-toxic fire-resistant material, both provides ignition resistance and slows combustion. “This allows more time for people to escape,” says an ITRI statement, and for the production of less – and non-toxic – smoke, one of the most harmful aspects of a fire. It also enables “firefighters to get to a scene before the fire has dramatically intensified, limiting the building’s structural damage, which can save lives and money.” ITRI expects Reddex to be globally commercialized within three years by material manufacturers working with the fire protection, coatings, and building industries. — By Jane Rickards

april 2011 • taiwan business topics

4_11_CoverStory.indd 17


2011/4/26 4:30:01 PM

Cover Story ing that market than are such countries in the region as Thailand and Singapore, and that benefit will be further sharpened by the cross-Strait Economic Cooperation Framework Agreement (ECFA) signed last year, says Kung. But with environmental pressures hampering the Taiwan industry’s expansion, another worry is how well Taiwan will be able to meet future competition from companies in the Middle East and China. “The Middle East used to be just a raw material exporter, but now there are lots of midstream and downstream products coming out of Saudi Arabia, Kuwait and Qatar,” says CAPCO's Kung. They are increasingly competing with Taiwanese products ranging from primary products such as ethylene and propylene to intermediate polymers. China is also aggressively expanding its chemical manufacturing capacity to meet rising domestic demand. According to Global Insight, China’s compound annual growth rate (CAGR) for chemical sales was 8.8% in the 1990s, rising to 19.6% in the period 2000-2010 and outstripping its GDP CAGR of 10.5%. In contrast, the CAGR for Taiwan’s chemical sales for 2000-2010 was 8.2%. In its 2010 annual report, PIAT predicts that China will catch up with the United States by 2020 to share first place among the world’s ethylene producers as well as becoming the largest chemical market. But Raymond Hsu,

ANOTHER QUESTION MARK — Uncertainty due to environmental issues also plagues Formosa Plastics’ application for fifth-stage expansion of the naphtha cracker at its huge petrochemical complex in Mailiao in Yunlin County. photo : cna

an associate director with Corporate and Fund Raisings at Taiwan Ratings, an affiliate of Standard and Poor’s, points out that for environmental reasons, China will probably be unable to build sufficient capacity to meet domestic demand, leaving some room for Taiwanese companies in the mainland market.

5th cracker to close With the Kuokuang project in limbo, the scheduled 2015 closure of the 5th Naphtha Cracker in Kaohsiung, which supplies around 500,000 tons of ethylene

甲酸(PTA)。 外資充其量只能算是「低度參與」台灣石化產 業;唯一的例外是中美和石油化學公司。成立於 1975年的中美和,六成資金來自現已併入BP的亞 美和石油(Amoco),四成來自台灣中油。中美 和現為亞洲最大的PTA供應商,年產142萬公噸。 儘管產業前景不明,但化工業目前仍能維持溫 和、健康的成長。台灣經濟研究院分析師梁宜峰 表示,雖然石化加工業者家數由2006年的14,889 家減少到去年的14,290家,但同期銷售額仍由新 台幣1.4兆元增加到1.78兆元;同時,出口比例也 由2006年83.55%增加到去年的93.85%。 石化業總產值去年增加到1.9兆新台幣,比前 年大增25.4%,主因是全球經濟回溫,以及中國 的大量需求。其中,化工原料類年增34.8%,化 工成品類成長22.3%,橡膠類28.4%,塑膠類則為


a year, will cause CPC to lose nearly half of its 1.08 million tons of annual capacity, says Hsu. That development would also undermine the government’s desire to maintain CPC’s competitiveness vis-àvis its private-sector rival, the Formosa Plastics Group. Formosa is vertically integrated, with upstream, midstream and downstream facilities, but CPC specializes in upstream materials, servicing throngs of smaller customers in the middle- and downstream. Although CPC's Kaohsiung facilities date back to the 1960s and 1970s, the 5th Naphtha Cracker currently

16.7%。 經濟部工業局的涵蓋範圍更為廣泛,合成橡 膠、合成樹脂、化纖布料等下游產業都納入後, 石化業產值可達3.3兆新台幣,員工總數約42萬。 剛從台灣陶氏化學總經理一職退休的林宗輝 說,與南韓等區域競爭對手相比,台灣的相對優 勢包括成本管控較佳、產品品質較好,與具備專 業的員工。中美和的董事長孔祥雲則說,另一項 優勢是臨近區域最大市場–中國。孔祥雲認為, 比起泰國與新加坡等亞洲國家,台灣更容易打進 中國市場;在兩岸經濟合作架構協議簽訂後,此 一優勢還會擴大。 台灣石化業的擴張已然受制於環保壓力,接下 來還將面臨中東與中國的挑戰。中美和的孔祥雲 說,「中東國家過去只在意原油輸出,但沙烏地 阿拉伯、科威特、卡達現在都已大力拓展中、下

taiwan business topics • april 2011

4_11_CoverStory.indd 18

2011/4/26 4:30:04 PM


supplies more than 45% of the feedstock needed by domestic industry. AmCham’s Chemical Manufacturers Committee estimates that its closure would cause dozens of petrochemical plants located in the nearby Jenwu and Tashe Industrial Parks to shut down, forcing the domestic petrochemical industry to cut its production scale by half. The Committee has lobbied to keep the site running, but CAPCO’s Kung agrees with other analysts who view the government as unlikely to reverse the decision, given what have been tense relations with the local community. The Kuokuang plans that have recently been under review were already scaled down from the original proposal, with investment slashed from NT$933 billion to NT$620 billion and the projected level of CO 2 emissions reduced from around 7.3 million tons a year to 4.98 million. But even the more modest version of the plan encountered vehement opposition. The Kuokuang investors, which also include the Far Eastern Group at 20% and the Chang Chun Group at 20%, will now need to consider the option of relocating the project overseas. According to the IDB, the Kuokuang complex would have added 2.25% to Taiwan’s GDP – while directly providing 7,000 jobs and another 200,000 indirectly. Opponents of the Kuokuang complex argued it would destroy natural wetlands worthy of conservation and potentially

pollute one of the island’s most fertile agricultural areas. Perhaps the environmentalist's most important case is that Kuokuang's construction would likely hasten the extinction of indigenous dolphins [see sidebar.] More broadly, Robin Winkler, co-convener of the Green Party Taiwan, argues that Taiwan necessarily will sooner or later need to move away from reliance on petrochemical production simply to keep the environment livable. “The question is whether we accept this now or wait until we have no choice and face more economic disruption and climate change,” he says. It is not immediately clear what the residents of Changhua themselves think about the project. Kuo Chao-chung, chief of the IDB section that covers the chemical industry, says 70% are in favor, as they believe it will boost the local econ-

omy, but Soochow University political scientist Lo Chih-cheng cites polls conducted by the media and non-government organizations as showing the majority of the local population to be against it.

Decision on Mailiao Besides the uncertainty about Kuokuang, the fate of Formosa Plastics’ proposed US$8.7 billion fifth-phase expansion of its naphtha cracker at its enormous Mailiao complex also hangs in the balance. A final decision on the environmental impact is expected this year, but Hsu of Taiwan Ratings says that “according to our conversations with Formosa, they don’t really believe that getting approval has a high chance; they aren’t very optimistic about the outlook.”

thE tAIwAN PEtroChEmICAl INDUStry, UPStrEAm to DowNStrEAm monetaRy unit: nt$ Billion

Sales Value Import Value Export Value Domestic Demand No. of Companies Employees

2006 1,458 1,124 1,218 1,364 14,889 59,834

2007 1,667 1,348 1,529 1,487 14,679 59,710

2008 1,715 1,541 1,687 1,568 14,099 60,241

2009 1,427 1,106 1,331 1,202 14,072 60,491

2010 1,782 1,605 1,673 1,715 14,290 62,331

note: taiwan institute of e conomic ReseaRch

游產品」。不論是乙烯、丙烯等初階成品,或是 聚合體等中階成品,這些國家與台灣的競爭都將 越來越激烈。 另一方面,中國也正在積極擴大化工製造產能 以滿足國內日增的需求。經研機構「全球洞察」 分析指出,中國化工銷售在1990年代的複合年增 率為8.8%,但2000年至2010年的複合年增率已經 提高到19.6%,甚至超越國內生產總值(GDP)的 複合年增率10.5%。台灣化工銷售2000年至2010 年的複合年增率為8.2%。 石化公會2010年年報預測,中國將在2020年追 上美國,成為全球最大的乙烯生產國之一,同時 也將成為全球最大的化工市場。中華信用評等企 業暨基金評等部資深協理許智清認為,因為環境 限制,中國大概沒辦法完全滿足國內需求,台灣 廠商仍有介入空間。

五輕除役 中華信評的許智清指出,國光案半途腰斬, 年產50萬公噸乙烯的五輕又按原時程於2015除 役,台灣中油108萬公噸的年產量等於硬生生砍 掉一半。事態果真至此,台灣中油勢必無法滿足 政府期待,以穩定實力抗衡民營的台塑。台塑的 經營模式是垂直整合上、中、下游產業,但台灣 中油專攻上游原料,成品都出售給中下游客戶。 台灣中油位於高雄的各輕油裂解廠最早啟用於 1960年代。五輕目前能夠滿足國內需求的45%。 台北市美國商會化學製造商委員會評估,五輕一 旦除役,仁武與大社工業區的數十家石化廠可能 因此關門,國內生產規模恐將減少一半。委員會 希望五輕繼續運作,但中美和的孔祥雲與其他專 家認為,政府不太可能收回成命,因為地方已經

april 2011 • taiwan business topics

4_11_CoverStory.indd 19


2011/4/26 4:30:04 PM

Cover Story thE INtEGrAtED PEtroChEmICAl ProDUCtIoN SyStEm

Oil/Natural Gas

Starting materials

Cracking Separation Refining


Alkanes Olefins Diolenfins Aromatics etc.

Basic materials

Intermediates Monomers/Polymers



Plastics/Rubbers Syn. Fibers/Detergents Solvents, etc.


End products

Middle Stream


Finished Products

souRce: p etRochemical industRy association of taiwan

為此抗爭多年。 環評小組日前審查的計畫,投資額已經由原先 的新台幣9,330億縮減到6,200億,二氧化碳年排 放量也由730萬公噸降到498萬公噸。但縮小版的 國光案仍然遭遇強烈反對。 國光石化的大股東,除了台灣中油之外,還包 括各持有20%股份的遠東集團與長春集團;相關 股東現在必須考慮海外設廠。經濟部工業局原先 的評估認為,國光新廠營運後,台灣的GDP將可 增加2.25%,創造7,000個直接就業機會與20萬個 間接就業機會。 反對國光案的人認為,寶貴的濕地將被摧毀, 台灣最肥沃的農地也將因此遭殃。環保人士最有 力的訴求是,國光案將加速中華白海豚的滅絕。 環保人士文魯彬認為,為了保障環境,台灣遲早 必須放棄石化產業,「問題只在於,我們是要現


在就做,還是等到經濟影響更大、氣候變得更糟 時才被迫去做?」 彰化當地居民的看法仍趨兩極。經濟部工業局 民生化工組科長郭肇中說,70%的居民贊成,因 為他們相信國光案有助經濟;但東吳大學政治學 系副教授羅致政引述媒體與非政府組織的民調指 出,多數居民反對建廠。

六輕仍未定案 如同國光案,2800億新台幣的台塑麥寮六輕五 期擴建也前途難卜。環境影響評估最終報告今年 應該出爐,但中華信評的許智清說,「我們詢問 台塑的答覆是,他們不太樂觀,認為(五期)過 關的機會不大」。 業界認為,台灣中油的三輕如果能夠更新設

taiwan business topics • april 2011

4_11_CoverStory.indd 20

2011/4/26 4:30:05 PM


Saving the Dolphins? Industry sources say renovations at CPC’s third naphtha cracker in Linyuan, which will boost annual ethylene capacity from around 230,000 tons to 600,000, could somewhat offset the potential loss of Kuokuang. Construction of the NT$47 billion project began in 2009 and is scheduled for completion in 2013. In addition, CPC is also planning to build a petrochemical logistics center in Kaohsiung Harbor to facilitate the import of petrochemical raw materials. At first glance, the resistance to expansion of Taiwan’s petrochemical industry might seem inevitable, given the island’s relatively small size and dense population. But some chemical manufacturing executives attribute the problem mainly to the history in Taiwan of lax government enforcement and poor operational management by some companies. The resulting accidents, fires, and pollution have eroded public support for the industry. One executive with broad international experience, who asked not to be identified by name, points to the thriving petrochemical industry in Singapore, which is also densely populated and short of space. “The density of the population shouldn’t be the key factor,” he says. He notes that in Singapore, the regulations are tough and strictly enforced. “If you look at Japan, Korea, China, and Singapore, I haven’t really come across a situation in these other countries where perceptions of the chemical industry are so negative,” he continues. “In Taiwan, it’s just assumed chemicals are bad.” He urges the

備,將乙烯年產量由23萬公噸增加到 60萬公噸,或許能多少彌補國光無法過 關的損失。470億台幣三輕更新工程已 在2009年開始,預計2013年完工。此 外,台灣中油也計畫在高雄港增建石化 儲運中心。 乍看之下,反對石化業者擴大產能似 乎無可避免,畢竟台灣土地有限、人口 又多。但有些石化業主管認為,真正的 原因在於政府執法鬆散,以及部分公司 管理不當,引發意外、火災、污染後, 民眾自然心存疑懼。一位國際經驗廣泛 的主管說新加坡就是最佳反證:星島一 樣地小人稠,但石化業卻能蓬勃發展。 他說,「人口密集不該是決定性因素, 重點是新加坡能夠嚴格立法、積極執


group of 70 to 80 endangered dolphins, which swim up and down the eastern side of the Taiwan Strait, figured prominently in the recent debates on whether the Kuokuang petrochemical complex should proceed, which in turn have serious implications for the future of Taiwan’s entire petrochemical industry. Environmentalists charged that the more than 4,000 hectares of land that the Kuokuang Petrochemical Technology Co. plans to reclaim from the sea will spoil the pink-hued dolphins’ habitat, drastically reducing their chances of survival. As a species, the Indo-Pacific humpback dolphin (Sousa chinensis), is found all over the world, including the shores of Africa and Australia. But in 2002, scientists confirmed that a unique, isolated sub-population of the species had been found off the coast of Taiwan, where the locals had nicknamed them “Matsu’s fish.” By 2008, the world’s most prestigious international conservation body, the International Union for Conservation of Nature and Natural Resources, had classed this sub-population of Taiwanese dolphins as “critically endangered,” the final level before extinction. The dolphins, which live off a stretch of shore spanning from Miaoli to Tainan, like to live in waters less than 30 meters deep, so that removal of shallow water through land reclamation could be very harmful to their habitat, scientists say. While these mammals normally do not congregate in the area near the planned Kuokuang complex, the plant would cut right into their path for seasonal migration. “What Kuokuang would do is put an enormous land mass right in the middle of their habitat,” says Robin Winkler, co-convener of the Green Party, Taiwan. Kuo Chao-chung, chief of the section dealing with the chemical industry at the Industrial Development Bureau, says that the most recent version of the plans for the Kuokuang complex, as submitted to the Environmental Protection Administration late last year, had set aside a fund of NT$100 million to protect the dolphins and create conditions to help them flourish, including a path for them to swim through on their migration. But the environmentalists have slammed that plan as nothing more than building a “death channel.” President Ma's decision to halt the Kuokuang project has now given the dolphins a reprieve. — By Jane Rickards

april 2011 • taiwan business topics

4_11_CoverStory.indd 21


2011/4/26 4:30:06 PM

Cover Story

STOP THAT PLANT—Representatives of environmentalist groups opposing the Kuokuang project stage a sit-in in front of the Presidential Office Building. photo : cna

government to do more to highlight the contributions of chemicals to the economy, while at the same time taking more effective action “to make sure all the players stick by the rules, take care of the environment, and take care of safety.” The Kuokuang controversy highlights a lack of government coordination. For example, the watchdog Control Yuan in early April released a report saying the project should be halted because the site is vulnerable to serious land subsidence problems. The report noted that Kuokuang will need 400,000 tons of water daily to operate, while

available resources are only 380,000 tons a day. ITRI’s Su, however, says the report’s assumptions were erroneous, as Kuokuang, which has been designed according to European Union guidelines, calls mainly for use of recycled water and incorporates plans for a desalinization plant. The company had pledged that the project would not utilize wetlands or nearby groundwater for industrial purposes, the IDB adds. “This needs to be made clear, as everyone takes the Control Yuan very seriously,” says Su. M o r e a l a r m i n g l y, l a s t y e a r s a w four major but non-fatal fires at plants

法」。 這位主管說,「日本、南韓、中國、新加 坡,實在沒有哪個國家像台灣一樣討厭石化業 的」,「台灣一提到化工就沒好話」。他希望政 府努力多提化工業對經濟的貢獻,同時確保每家 公司都遵守法令,注重環保與工安」。 國光案的僵局反映了政府內部欠缺溝通協調。 其例之一,監察院四月初公布國光案調查報告, 認為全案應該中止,因為預定建地有嚴重的下沉 現象,而且國光新廠每日用水40萬公噸,但供水 量卻只有38萬公噸。工研院的蘇宗粲說,監院 報告是基於錯誤假設,因為國光案是按照歐盟標 準,主要利用回收水,且加入淡化的海水。經濟 部工業局則表示,國光石化保證不會開發濕地,


owned by Formosa Plastics. Three were at the group’s Mailiao complex, with one fire in July running for two days at its residual desulfurization unit, leading to severe agricultural damage in the nearby area. Although Formosa paid the Yunlin County government NT$500 million in compensation, thousands of angry residents later blocked all three roads leading to the complex, demanding further reimbursement. In another example, a fire at a synthetic paper plant owned by the Formosa Petrochemicals Corp. last August took 17 hours to put out, and the company was fined NT$1 million for the black rain and strong stench the fire had produced. The executive quoted earlier maintains that the government is taking a contradictory stance: while Kuokuang's plans were even stricter than those of European plants, he says, “on the other hand, some of the existing plants are not even running at mainland Chinese standards. Why has the government not asked other plants to follow the same standards as Kuokuang?” Backing up this argument, Winkler notes that Formosa’s 6th naphtha cracker was approved under looser conditions at a time of less environmental awareness.

Need for compliance Winkler, who sat on one of the EPA’s environment impact assessment committees from 2005 to 2007, says around 1,200 projects were approved in this period but only six people were assigned b y t h e E PA t o m o n i t o r t h e c o m p a -

也不會利用地下水。但蘇宗粲認為,「國光石化 必須把話講清楚,因為大家都把監院報告當一回 事」。 台塑各地廠房去年共有四起重大火災,其中三 起在麥寮。烯烴一廠去年七月的大火延燒兩天, 導致附近農作嚴重受損。雖然台塑賠償雲林縣府 5億新台幣,但數千居民仍然封路圍堵廠區,要 求更多賠償。南亞嘉義二廠去年八月失火後,花 了17個小時才撲滅,公司最後因黑雨與惡臭遭罰 百萬台幣。 石化業主管說,「政府明顯有雙重標準,國光 案是超過歐盟的嚴格標準,但某些現有廠房卻連 中國的標準都不到」,「政府為什麼不能要求其 他業者都達到同樣標準?」環保人士文魯彬贊同

taiwan business topics • april 2011

4_11_CoverStory.indd 22

2011/4/26 4:30:09 PM


nies’ compliance. Lin of Dow Chemical Taiwan, alluding to last year’s accidents, says that the industry needs to pay more attention to the public’s safety and environmental controls. “If you’re going to invest here, you need sufficient equipment for environmental protection and you need to train up employees to safety standards,” he maintains. Chan Chang-Chuan, a professor of public health at National Taiwan University, dismisses the argument that Taiwan should be able to accommodate a petrochemical industry if Singapore can, noting that Singapore’s air quality is up to four times better than Taiwan’s due to superior environmental management. “Cancers, especially lung cancer, leukemia and liver cancer, are highly co-related to petrochemical emissions,” says Chan, who conducted the first study of residents around the Mailiao complex for the Yunlin County government. Since Mailiao began operations in 1999, “there has been a statistically significant increase in cancer mortality,” he says. (The IDB denies a cancer link, noting that Kinmen, which has no petrochemical plants, has the highest rate of deaths from cancer.) Interestingly, both activists and industry players say the environmental assessment process needs to be improved through greater transparency and fairness. Winkler says that when he sat on the environmental assessment committee, companies would make deals with local elites behind the scenes, for example providing sponsorship for a school in exchange for certain concessions. For their part,

industry executives charge that the opacity of the process means that it is difficult for investors to understand the evaluation criteria and other “rules of the game.” “I wish the government could do something about making the rules more measurable and clear,” says CAPCO’s Kung. David Price, regional manager of Air Products Asia’s electronics division and the chair of AmCham’s Chemical Manufacturers Committee, also mentioned the slowness of these assessments, which often take years to complete. “Meanwhile, things are getting more competitive globally year by year,” he says. “It’s something the government cannot be complacent about for long.” As for the future, Su says that at the pre-meeting for the Cabinet’s Strategic Review Board, attendees reached the tentative consensus that a good direction for upgrading the industry would be to coordinate high-end chemical production with the development of Taiwan’s Six Emerging Industries – medicine and health care, cultural and creative industries, tourism, green energy, high-end agriculture, and biotech. Another consensus, Su says, was to examine China’s recently announced 12th Five-year Plan to look for opportunities for Taiwan companies to take advantage of. Although analysts said Taiwan has no choice but to move to high-end chemical manufacturing, there appears to be no major push under way at this point to do so, though some individual companies are taking this step, particularly in the use of nanotech in textiles.

這個看法,認為台塑六輕能夠興建,是因為當時 標準較鬆、環保意識也不夠。

誰來監督? 曾於2005年至2007年擔任環保署環評委員的文 魯彬說,他任職期間共通過1,200件計畫,但只有 六個人負責監督。前陶氏化學總經理林宗輝引述 去年的工安意外指出,化工業者實在應該多注意 安全與環保,「企業要走得長遠,就應該有足夠 的環保設施,以及充份的安全訓練」。 台灣大學公共衛生學院教授詹長權不認為台 灣有條件發展等同新加坡規模的石化產業,因為 新加坡嚴格管制環境污染,使得空氣品質比台灣

CAPCO, which has produced PTA for 35 years, is now looking to diversify in the face of growing Middle-Eastern competition, reports Kung. In January last year, for example, it announced a project with Taiwan’s TSRC Corp., which specializes in synthetic rubber, to develop products such as SIS (styrene-isoprene-styrene), for use in adhesives and soundproofing. Formosa Plastics also successfully upgraded production of a commodity chemical, EVA (ethylene vinyl acetate.) Originally sold at a low price for making shoes, the group received help from ITRI in successfully refining the manufacturing process to produce higher-grade EVA for packaging materials for solar cells, a development that increased profit margins substantially. Hsu of Taiwan Ratings views such upgrading of existing products, rather than the creation of entirely new sophisticated chemicals, as the most efficient model for Taiwan’s SMEs to follow if they wish to increase profitability. “For most chemical companies in Taiwan, the plant scale is small and they don’t have a sufficient tech base or financial strength to develop very fine chemicals,” he says. ITRI hopes to facilitate this process by providing companies with common research and test platforms. The IDB also has plans for an R&D center to research ways to manufacture high value-added chemicals. As both the electronics and chemical manufacturing sectors in Taiwan are well-developed, a future strength may also turn out to be developing fine chemicals for the high-tech sector.

好四倍。率先調查麥寮居民健康狀況的詹長權 說,「癌症,特別是肺癌、血癌、肝癌,都與石 化排放密切相關」,「台塑六輕1999年開始商轉 後,居民的癌症致死率就明顯增加」。不過經濟 部工業局否認,指出沒有石化廠的金門,癌症死 亡率卻是最高。 值得注意的是,環保人士與企業主管都認為, 環境影響評估應該更透明、公平。環保人士文魯 彬說,當他還是環評委員時,企業可以私下和地 方人士交換條件,比如說捐款給學校以換取更寬 鬆的條件。企業主管則認為,環評的黑箱作業, 讓業者很難瞭解評判標準與其他「遊戲規則」。 中美和的孔祥雲說,「我希望政府能讓規則更 明確」。亞普公司亞洲區電子部副總裁、商會化

april 2011 • taiwan business topics

4_11_CoverStory.indd 23


2011/4/26 4:30:09 PM

Cover Story

Not much Gain From ECFA


hen companies in Taiwan’s petrochemical industry first learned of plans for Taiwan and China to enter into an Economic Cooperation Framework Agreement (ECFA), they excitedly started drawing up a list of items they hoped to see quickly earmarked for tariff reduction as part of the pact’s “Early Harvest” provisions. But after Taipei and Beijing signed the ECFA last June, says J.H. Shieh, executive manager of the Petrochemical Industry Association of Taiwan, the Taiwan companies were disappointed to discover that China had declined to liberalize imports of the products they considered the most important: the five major commodity plastics known as polyvinyl chloride (PVC), polypropylene (PP), acrylonitrile butadiene styrene (ABS), polyethylene (PE), and polystyrene (PS), along with four synthetic fiber intermediates – purified terephthalic acid (PTA), ethylene glycol (EG), acrylonitrile (AN), and caprolactam (CPL). “The amount Taiwan sells to China is just too much, and they felt Taiwan was too strong,” says Shieh, adding that at least four million tons of these products are exported to China annually. “The talk sounded so good that [China] wanted to give the Taiwan people so many benefits, but actually nothing materialized," he says. The association has calculated that if China liberalized these tariffs, most of which are 6.5%, it would lose NT$30 billion a year. Although a total of 88 items related to petrochemicals were included in the Early

Harvest list, Shieh says they were either liberalized in too piecemeal a fashion to have an impact or did not benefit Taiwan greatly. “For example, with TDI (toluene diisocyanate), for making plastic foam, it was given tariff-free treatment, but in Taiwan, there is only one maker, only 20-30 tons are exported each year, and Taiwan itself doesn’t have enough of it,” Shieh says. “It was meaningless.” Shieh is also pessimistic that these items will be liberalized after a second round of trade talks. In his opinion, Beijing’s hardest task was persuading Taiwan to sign the ECFA in the first place, so the first round of tariff cuts will probably be the most favorable to Taiwan. Now China is in a stronger position, he says. “If they didn’t give us the items in the first round of talks, they aren’t likely to give them in the second round.” Raymond Hsu, an associate director with Corporate and Fund Ratings at Taiwan Ratings, an affiliate of Standard and Poor’s, says China is adopting a strategic stance to protect its own large-scale chemical manufacturers, such as Sinopec, until they are strong enough to compete against Taiwanese companies. “Chinese companies are relatively weak in the PVC market and there is an oversupply issue in China with both PVC and polyethylene (PE),” Hsu says. “Even though (Beijing) is quite politicsorientated, I guess when you’re talking about money, there’s quite significant pressure from their own chemical companies. We hear they have quite a significant influence on policy.” Hsu says he thinks Beijing will eventually

學製造商委員會主席普萊斯則提及環評程序太過 費時,往往要好幾年才能完成。他說,「在此期 間,全球競爭只會越來越激烈」,「政府不該墨 守成規」。 工研院的蘇宗粲指出,產業策略會議的會前會 中,與會者已經達成初步共識,良好的產業升級 策略應該整合高階化工產製與六大新興產業,即 醫療照護、文化創意、觀光旅遊、綠色能源、精 緻農業、生物科技。蘇宗粲說,另一項共識是檢 視中國十二五計畫,以尋找台灣潛在商機。 雖然專家都認為台灣必須轉型至高階化工製 造,但目前顯然沒有足夠的推升動力。不過少數 企業已經開始升級,特別是開發奈米級布料。 中美和的孔祥雲表示,公司過去35年都在生產 PTA,但面臨中東國家的競爭,他們也必須多元 經營。中美和去年一月宣布與台灣橡膠結盟,合


liberalize these commodities, but the issue is the timing: he does not know how long it will take before Beijing thinks its own chemical industry is ready to face Taiwanese competition. “The PRC is shutting down inefficient facilities, and trying to upgrade their technology and scale, but I don’t know how fast they can complete their restructuring,” Hsu says. “I have no idea about the timetable, but it should be counted in years, not months or quarters.” Arthur Kung, the chairman of CAPCO, is more optimistic, noting that even though the material benefits of ECFA are currently limited, the peaceful environment caused by improved cross-Strait relations has created a much better environment for petrochemical business to be conducted between the two sides. Meanwhile, analysts say, an FTA with Singapore, which the government also hopes to sign and which Beijing appears to have given the nod to, would bring more symbolic than substantive benefit to Taiwan’s petrochemical sector – possibly setting an example for other countries that were previously fearful of incurring China’s wrath by signing trade agreements with Taiwan. Taiwan continues to hopes that China, the major export market for Taiwan’s chemicals, will eventually further liberalize the crossStrait petrochemical trade in ways that give Taiwan an edge over rivals Korea and Japan, which have not yet signed free trade agreements with China. — By Jane Rickards

作開發黏合與密封用的「苯乙烯–異戊二烯–苯 乙烯共聚合物」(SIS)。 台塑則成功提升「乙烯–醋酸乙烯酯共聚物」 (EVA)的產製。EVA原用於製鞋,但在工研院 協助下,台塑順利改良生產程序,以提供可用於 太陽能面板的EVA,大幅提升EVA的利潤。 中華信評的許智清認為,對於台灣中小企業 來說,改良現有產品,會比開發全新產品,更有 助提升獲利。他說,「台灣多數化工廠的規模太 小、技術不足,也缺乏足夠財力,要開發非常精 密的產品難度很高」。 工研院的目標之一是,提供共同研發測試平台 以協助企業轉型。經濟部工業局也正計畫籌組研 發中心,以開發高附加價值的化合物。此外,台 灣的電子與化工業都有完善基礎,因此開發高科 技業所需的精密化合物也是一條可行之路。

taiwan business topics • april 2011

4_11_CoverStory.indd 24

2011/4/26 4:30:09 PM


A MessAge froM IrPMA

Carry Out Drug Pricing Reform through Speedy Implementation of the "Drug Expenditure Target" System


his year began with good news, when the Legislative Yuan on January 4 passed what has been called the "Second Generation National Health Insurance" law. On behalf of the research-based pharmaceutical industry, we would like to extend our congratulations to the Department of Health (DOH) and its Bureau of National Health Insurance (BNHI) on the enactment of this milestone legislation that should contribute substantially to restoring financial soundness to Taiwan's national healthcare system. Among the most noteworthy achievements of the new law is that it authorizes the establishment of a Drug Expenditure Target (DET) mechanism. Under this process, industry representatives and BNHI would annually reach agreement on a target figure for pharmaceutical expenditures for the coming year, based on the current year's actual amount, plus a reasonable percentage of growth. In case the target figure should then be exceeded, industry commits to making up the difference by adjusting reimbursement prices in the following year. For the government, DET provides further assurance that costs can be controlled in the interest of a financially sustainable National Health Insurance system. For the drug manufacturers, the mechanism offers greater predictability and stability than the existing system under which BNHI periodically

conducts a Price Volume Survey, followed by what are often sweeping price cuts. Six such rounds of Surveys and price cuts have already been held since 2000, dramatically reducing the reimbursement prices for NHI drugs. The result has been to make prices in Taiwan for original drugs among the lowest in the world – on average only 28% of the level in the United States. At that level, drug manufacturers have been discouraged from launching new products in the Taiwan market, curtailing patient access to innovative medicines. As consumer-group advocates have noted at recent meetings with government officials on this subject, low drug prices are counter-productive if they reduce the availability of optimal treatment for those with ailments. It is obvious that all stakeholders expect that the government could immediately study the new system and use it to replace the current PVS. The R&D-based manufacturers urge the government to take action now to ensure that the new DET program can be initiated smoothly as soon as possible – starting by setting a clear timeline for discussions with the relevant stakeholders on the details for implementing the new system. Once those specifics are in place, concrete preparations for DET under the new Second Generation NHI Law can proceed for the benefit of the authorities, the industry, and the public.

IRPMA International Research-based Pharmaceutical Manufacturers Association 9F-8, 188 NanJing e. rd., Sec. 5, taipei 10571, taiwan tel: +886-2-2767-5661 Fax: +886-2-2746-8575


taiwan business topics •april 2011

4_2011AdvertorialIRPMA.indd 26

2011/4/27 5:05:52 PM



落實藥價改革, 儘速實施藥品費用 支出目標制度 年一開年就有好消息,立法院1月4日正式 完成「二代健保」的修法。中華民國開發 性製藥研究協會(I R P M A)在此希望向 衛生署與中央健康保險局道賀,因為這項歷史性的 改革可望顯著恢復健保的財政穩定。 對製藥產業而言,二代健保最重要的變革之一 是建立「藥品費用支出目標制度」(D E T)。未 來,中央健保局與醫界及製藥產業可依歷年藥品實 際支出,依合理成長比例,訂定次年的藥品支出目 標。萬一實際支出超過議定目標,可於次年調整藥 價以為因應。 對政府而言,D E T更有計劃性地控制藥品支 出,對製藥產業而言,D E T制比現行的藥價調查 制,更能保證價格及市場的可預測性與穩定度。台 灣自2000年起,已經進行過六次藥價調查與大幅 藥價調降。 其結果是,台灣市場的新藥價格已居全球最低水 準,平均只有美國的28%。藥廠因此不願積極引進 新藥,病患反而無法近用品質更好的藥品。消保團 體近期與政府官員會面時已經提及,如果降低給付 價格反而限縮病患的醫療自主權,則持續降價將弊 多於利。顯見各界均期待政府應儘速研議新制度以 取代舊的藥價調查制。 I R P M A與會員呼籲政府立即採取行動,確保 D E T能儘速順利上路;而第一步就是設定明確時 程,與相關各方討論新制的實施方式。只要敲定具 體內容,二代健保的D E T新制定能大步邁進,為 政府、廠商與民眾提供更優質的服務。

中華民國開發性製藥研究協會(IRPMA) 台北市10571南京東路五段188號9F-8 電話:02-2767-5661 傳真:02-2746-8575

april 2011 • taiwan business topics

4_2011AdvertorialIRPMA.indd 27


2011/4/27 5:05:54 PM



Spurring Competitiveness through Government Reorganization When the reengineering plan takes effect next year, the 760 administrative units in the Executive Yuan will be reduced by 100.



ver the past 23 years, Taiwan several times conducted detailed studies of the need to reorganize the executive branch of government to make it more streamlined and efficient – only to have political and administrative obstacles arise to stymie the process. But the necessary legislation was finally enacted early last year, enabling preparations for a major overhaul of the Executive Yuan to move forward in earnest. When the reengineering goes into effect from January 2012, the number of Cabinet-level organizations will be cut by about one quarter, from the current 37 to 29. By that time, the Legislative Yuan will presumably have passed an additional 130 bills to further reduce the number of government agencies at the sub-ministry level. It is expected that this process will decrease the number of tertiary agencies (usually called bureaus or administrations) from the current


140 to 110, and the number of fourthlevel agencies from 583 to 521. In all, that would leave the executive branch with a total of 660 administrative units, 100 less than at present. Of the 110 tertiary organizations, 70 will perform line functions, while the remainder will be affiliated institutions engaged in such staff functions as testing, inspection, research, and training. In addition, the program aims to cut executive-branch employment to 160,000 from the current 164,400 over five years, reducing payroll costs by about NT$2.1 billion (US$72.4 million) over that time. Starting this June, the Cabinet will be providing an incentive program to encourage early retirement. The aim of the reengineering, which is being carried out by a task force led by Vice Premier Sean Chen and divided into seven sub-teams, is to

remove administrative bottlenecks and enable Taiwan to maintain a ranking as one of the world’s 10 most competitive economies. When Taiwan moved up to eighth place last year from 23rd in 2009 in the prestigious annual IMD survey of the world’s most competitive economies, many observers concluded that the survey results already anticipated the impact of the pending reorganization. “Under the trend of globalization, competition among countries is getting more and more drastic,” says Sung Yuhsieh, deputy minister of the Cabinet’s Research, Development and Evaluation Commission (RDEC), which spearheaded the reengineering plan. In the face of growing challenges regarding energy use, climate change, and sustainability, he notes, governments have to deal with ever more complex considerations in policy-making and implementation.

taiwan business topics • april 2011

4_11_gov.indd 28

2011/4/26 4:04:33 PM


“We have done all the related preparation and will definitely launch [the revamping] as planned,” Premier Wu Den-yih told foreign reporters on March 29. “The biggest challenge is that for those departments that will be merged, some department chiefs will no longer be chiefs, and their rankings and salaries might be lowered. Such problems are the main reason why the reorganization plan has been talked about for more than 20 years but no action was taken until now. But no matter how difficult it will be, we will try to communicate and overcome the obstacles.” If the Legislative Yuan fails to pass all the 130 related bills by the end of this year, the designated new agencies will still be able to operate from January next year under provisional laws and regulations, Sung notes. But the laws require that the reengineering be completed by the end of 2014. “My personal judgment is that we can stabilize 80 to 90% of the operation within one year after we activate the reorganization,” he says. AmCham member companies asked for their opinion of the restructuring have largely praised the direction of the effort, though some expressed disappointment at how long it has taken to achieve. “In general, the reorganization is positive, but maybe not enough,” says Paul Lee, chairman and CEO of Global Construction International and co-chair of AmCham’s Infrastructure Committee. He notes that private companies, competing for their very survival, are usually able to push through reorganization programs with great speed, but “the government has taken more than 20 years to plan the reorganization and the reorganization itself will take three years to complete – that shows that they don’t have a sense of urgency at all.” For decades, it was widely recognized that the size of Taiwan’s central government had grown overly large and cumbersome – causing too much time and effort to be expended in coordination among various agencies with overlapping or related functions. Back in 1947 when the Constitution of the

Republic of China was promulgated while the government was still based on the mainland, the Executive Yuan consisted of just eight ministries and two councils. Over the years, however, new ministry-level organizations were added one by one without any overall effort to reexamine how they interfaced with one another. About 23 years ago, then RDEC Minister Ma Ying-jeou, who became Ta i w a n ’s P r e s i d e n t i n M a y 2 0 0 8 , sought to initiate a reorganization plan, but not until last year did any version manage to win sufficient support to be enacted by the Legislative Yuan. “Now President Ma has cashed his checks,” says Sung, who has been in charge of the reengineering plan over the past 10 years. Following implementation of the restructuring, the Executive Yuan will conduct a long-term cost-benefit analysis and monitor how much efficiency has been enhanced. The goal to reduce the average time government spends on a given case by 30% within two to three years, Sung says. Various agencies will also combine their computer data centers to cut costs. Initial estimates show that if seven agencies share a computer data center, some US$2 million can be saved in equipment procurement, Sung notes. The reorganization will also cut electricity bills and other overhead. Currently 37 ministry-level agencies are using rented space for at least some of their offices, and a portion of the rental costs can be eliminated after the reorganization, although exact figures are not yet available.

Seamless administration Beginning in 2012, the Executive Yuan will consist of 14 ministries, eight councils, three independent commissions, and four affiliated organizations. The major objective is to eliminate overlapping functions and responsibilities, simplifying administration by reducing the need for complicated and time-consuming inter-agency coordination. “The goal is to achieve seamless administration” so that government

services can be provided to the public in the most efficient manner,” says Sung. The reengineering is also providing an opportunity to clear up the previously often confusingly inconsistent nomenclature applied to government organizations. Under the new system, “councils” and “commissions” will be defined as second-level organizations equivalent to ministries. The term “commission” will imply a degree of independence from the rest of the bureaucracy. “Bureaus” and “administrations” will be thirdlevel organizations under a ministry, council, or commission. “Bureaus” will be responsible for execution only, while “administrations” will have a role in policy planning in addition to their duties in executing policy. In the past, officials designated as “ministers” headed not only ministries but also some councils, departments, and administrations. In the future, a clear distinction will be made between ministries (which have both policymaking and implementation functions) and councils (responsible for coordination). Elevated to ministry status will be such units as Agriculture, Culture, Environment and Natural Resources, Labor, Science and Technology, and Health and Welfare. In addition, the Ministry of Economic Affairs (MOEA) is being broadened in scope to become the Ministry of Economic & Energy Affairs (MEEA) to reflect rising global concerns with climate change and energy use. An Energy Administration will be established under the MEEA as both a policy-making and execution agency to strengthen national energy policy and better address the issues of climate change. “The change in portfolio to cover economic and energy affairs should be a positive development,” says Eng Leong Goh, managing director of BASF Taiwan Ltd. and co-chair of AmCham’s Sustainable Development Committee. Besides the Energy Administration, the MEEA will also consist of five bureaus covering Industrial Development, Industrial Parks, Trade and Commerce, Small and Medium Enter-

april 2011 • taiwan business topics

4_11_gov.indd 29


2011/4/26 4:04:34 PM


prises, and Standards, Metrology and Inspection respectively. The Bureau of Industrial Parks will be responsible for the island’s science parks (formerly under the National Science Council) as well as the conventional industrial parks. The Bureau of Trade and Commerce represents a merger of the Bureau of Foreign Trade and the MOEA’s Department of Commerce. The objective of the changes is described as simplification and centralization to better respond to changing business trends. Also within the new MEEA structure, the functions currently performed by the Investment Commission and the Department of Investment Services will be folded into the new Bureau of Industrial Development (BID). Officials say that no changes are contemplated in the foreign-investment approval system, but that the process should become better coordinated. The MEEA will also have a new D e p a r t m e n t o f I n d u s t r i a l P o l i c y, responsible for industrial and investment policy issues within the Ministry, and its State-owned Enterprise Commission will be transformed into the Department of Resources and Business Management. The Department of Health has been expanded to become the Ministry of Health and Welfare in recognition of the needs of Taiwan’s aging society. Further, the Environmental Protection Administration will play a larger role as the Ministry of Environment and Natural Resources (MENR), combining the water, land, forestry, and atmosphere management currently separately managed by bureaus under different ministries. “Such integration will provide full-scale, thorough services with better efficiency from the standpoint of citizens,” Sung says, and will allow better coordination and higher efficiency for disaster prevention and response. The Weather Bureau will move from the Ministry of Transportation and Communications (MOTC) to the MENR, while the Bureau of Mines and the Geological Survey under the MOEA will merge into one administration


under the MENR. At the MOTC, which will become the Ministry of Transportation and Construction, part of the Public Construction Commission (PCC), now under the Cabinet, and part of the Construction Planning Agency (CPA) currently under the Ministry of Interior will merge into one department under the Ministry. Another portion of the CPA will become a bureau for implementation under the MOTC, while the procurement functions of PCC will move to the Ministry of Finance. The new arrangements are intended to aid the integration of the nationwid e land tr ans por tation s ys te m, centralize authority over the construction and engineering technology related industries, and strengthen management of the national infrastructure. The main agencies under the reorganized MOTC will be the National Freeway Bureau, Highways Bureau, Civil Aeronautics Bureau, Railways Bureau, Maritime and Port Bureau (which will assume responsibility for regulating the four existing harbor bureaus, whose business operations will be combined under a state-owned corporation), and the Tourism Administration (an upgraded version of the current Tourism Bureau). “ T h e c h a n g e s w o n ’t a f f e c t t h e MOTC much,” says Deputy Minister Yeh Kuang-shih. “It just moves in the construction business, and won’t affect the infrastructure projects already set.” In a March 25 meeting with AmCham members, Yeh said the MOTC has budgeted about NT$1.92 trillion on transportation-related infrastructure projects for 2009 to 2015, welcoming foreign investors to join the bids. Lee of Global Construction says he hopes the reorganization will enable the government to take appropriate action to improve the quality, cost, and timing of infrastructure projects. “For those three aspects, just compare us with neighboring countries like Hong Kong, Singapore, and Japan, and I think our score is not high,” he says. He cited the quality of Taiwan’s airports and the sufficiency of water resources and electrical power as areas needing urgent attention.

Upgrading to Administration Although the reorganization plan did not accept AmCham’s suggestion that the Tourism Bureau be elevated to ministry level to give it the resources and authority to more effectively promote Taiwan as a tourist destination, the plan does upgrade the agency from a bureau to an administration, while retaining it under the MOTC. As an administration, explains Sung, the agency will have policy-making authority, while as a bureau it could only implement the policies determined at a higher level. He also notes that the plan provides for flexibility in the appointment of the Tourism Administration chief. “It could be either a civil servant or a political appointee recruited from the industry,” he says. “That is a big breakthrough.” Industry representatives are reserving judgment on whether the changes will be sufficient. “At this point, we are not sure whether this reorganization will really provide the Tourism Bureau with more authority and power,” says Pauline Leung, CEO of Compass Public Relations and cochair of AmCham’s Travel & Tourism Committee. “Before, they could not change certain things because of their level in the government hierarchy. Now perhaps there will be more efficiency and more support within government for the Tourism Bureau’s requests.” Besides the Tourism Administration, the reengineering creates three other administrations – the MEEA’s Energy Administration, the MENR’s Land Management Administration, and the Ministry of Health and Welfare’s National Health Insurance Administration – that will have policy-making responsibilities and the possibility of being led by political appointees. In another change at the second administrative level, the National Science Council (NSC) and the Atomic Energy Council will be combined to form a new Ministry of Science and Te c hnology. T he NSC’s t hree key missions are to promote national scientific development, support academic research, and develop science-based

taiwan business topics • april 2011

4_11_gov.indd 30

2011/4/26 4:04:34 PM


industrial parks, says NSC Deputy Minister Chen Cheng-hong. The formation of the new Ministry of Science and Technology will strengthen R&D in scientific applications, promote more large-scale application technology projects, and spur development policies for major emerging technologies, Chen says. “The biggest challenge will be to integrate the research and development in different fields to stimulate creativity, and to push for cooperation among government institutions, academics, and industry to effectively build up a solid foundation for scientific and technology development,” he adds. Another new organization will be the Maritime Affairs Council, formed in recognition of Taiwan’s position as an island state. In addition, a National Development Council (NDC) to oversee long-term planning and inter-agency coordination will be created from the merger of the RDEC, the Council for Economic Planning and Development (CEPD), the public construction supervision units of the PCC, and the data processing center of the DirectorateGeneral of Budget, Accounting & Statistics. “The integration of national development-related agencies will help the government planning become more thorough and forward looking, and it will simplify and upgrade the efficiency of the policy-making processes previously handled by different agencies,” says CEPD deputy minister Hu Chung-ying. “It’s a big challenge for us, as the merger of four different agencies with different cultures is very complicated and it will take time to adjust and integrate.” Also included in the reorganization plan will be an increase in the number of ministers without portfolio within the Cabinet – from the current structure of five to seven positions to a new range of seven to nine. These officials, though not assigned to run a particular ministry, play an important role in vetting proposed new legislation and overseeing projects that may involve the jurisdiction of more than one ministry.

The Revised Structure at Selected Ministries Second level

Third level

Ministry of Foreign Affairs

Bureau of Consular Affairs

Ministry of Finance

National Treasury Agency Taxation Agency Five regional National Tax Bureaus Customs Administration National Property Administration Financial Data Center

Ministry of Economic and

Industrial Development Bureau

Energy Affairs

Bureau of Trade and Commerce Energy Administration Bureau of Small and Medium Enterprises Bureau of Intellectual Property Bureau of Industrial Parks Bureau of Standards, Metrology and Inspection

Ministry of Transportation and

Tourism Administration


National Freeway Bureau Highways Bureau Civil Aeronautics Bureau Railways Bureau Maritime and Ports Bureau

Ministry of Health and Welfare

Disease Control Administration Food and Drug Administration National Health Insurance Administration Public Health Administration

april 2011 • taiwan business topics

4_11_gov.indd 31


2011/4/26 4:04:34 PM



Tracing Taiwan’s Transformation Twelve scholars look at how Taiwanese society developed under the administrations of the Qing Dynasty, Japanese colonial rule, and the Kuomintang.



Chinese to settle in the yuanzhumin s implied by the title areas of the Rift Valley on Taiwan’s Becoming Taiwan, this book East Coast ended in disaster. Disease is about the forces that have and the hostility of the natives meant transformed what – to outsiders, at that only a few enclaves were able least – was an unremarkable island to survive, and these were confined on the fringe of the Chinese empire to the port areas of what are now to its current position as one of Hualian and Taitung. the leading trading powers of the One group of settlers was able to world and a vibrant democracy. The exist only because the Ami, the Rift authors, most of whom have or have Valley’s largest indigenous group, had European affiliations, represent agreed to hire them as laborers. In a mix of junior and senior scholars order to minimize native rebellions, from outside the English-speaking the Qing established boundaries world that was heretofore dominated between native and Han settler areas. by Anglo-Saxon perspectives. QuesAlthough it did little to prevent Han tions of culture and identity form a from moving into those lands, neicommon theme for the 12 authors ther did the Qing administration (only a few of whose chapters can support those who transgressed the be summarized here for reasons of boundaries. space). Becoming Taiwan: From Colonialism to Democracy This situation changed abruptly Fittingly for a work entitled Edited by Ann Heylen and Scott Sommers with the shipwreck of a boat from Becoming Taiwan, the book begins Harrassowitz Verlag, Weisbaden, 2010. Okinawa off the coast of southeast with the island’s aboriginal (yuan223 pages. Taiwan. The sailors who managed to z h u m i n ) p o p u l a t i o n . P. K e r i m ISBN-10: 3447063742; ISBN-13: 978make it to dry ground were massaFriedman’s chapter examines how 3447063746 cred by a different indigenous group, these people were incorporated into the Paiwan. Japan, which claimed the successive outside societies that jurisdiction over Okinawa (albeit on grounds that were tenhave ruled the island – first the Qing, then the Japanese, and uous at that time), demanded reparations, sending three finally the Kuomintang (KMT). Under the Qing, the questhousand soldiers to occupy the area until their demands were tion might have more accurately been phrased the other way met. The force withdrew when, at the end of 1874, the Qing around: to ask how the yuanzhumin intended to incorporate government agreed to pay compensation, thereby inadverthe Han Chinese. According to the authors, most efforts by


taiwan business topics • april 2011

4_11_book.indd 32

2011/4/26 4:08:45 PM


tently confirming Japan’s claim over Okinawa. Qing authorities were, however, alert to Japan’s interest in Taiwan, and changed the dynasty’s policies to encourage Han settlement in native lands. Inducements included the provision of draft animals and agricultural implements as well as a three-year tax exemption. Aborigines were to be assimilated, with schools established to teach them Confucian ethics and to speak the Minnan language of Fujian, from which most Han had emigrated. Despite these efforts, Japan displaced the Qing as rulers of Taiwan in 1895. Eager to demonstrate to the Western world that it was an enlightened colonial power deserving a place of honor in the international community, and also to incorporate Taiwan’s agricultural resources into Japan’s impressive economic development program, the imperial government’s policies were also assimilative, although in a more systematic and thorough-going way than the more haphazard methods of the Qing administration. Natives were now taught to speak Japanese rather than Minnan. The process was uneven, both geographically and temporally. When the Chinese KMT government arrived in 1945 displacing Japan, it enlisted the aid of missionaries to educate the aboriginals. Missionaries, as they had done during the period of Dutch control of Taiwan, helped the natives to become literate in their own languages. For the KMT, it was more important for them to learn to speak Mandarin. The Jesuits made an effort to help them do so, but as Alexander Tsungming Chen’s contribution to the volume makes clear, it was a formidable task. Chen cites a French monsignor’s diplomatically-phrased assessment of the situation as “a cacophony of languages, but the Formosans understand each other better than the constructors of the Tower of Babel.” Difficulties occurred since many indigenous languages as well as Minnan and Hakka do not have an equivalent or suitable translation, but the use of languages other than Mandarin in the missionaries’ activities was frowned on by the authorities. When priests stopped saying mass in Latin and began using Mandarin after the Council of Vatican II (1962-1965), one parishioner observed: Previously, when Father used Latin, Christ’s language, we understood nothing, but the Christ understood well. Now, we cannot understand the mass in Mandarin, nor [can] the Christ. Chen concludes that it was always difficult for the Taiwanese people to understand the common points between Catholicism and native religions, and that understanding became all the more difficult due to the KMT government’s political and social concerns.

Aboriginals in literature Darryl Sterk’s chapter shows how the treatment of aboriginals in literature has changed over time. In the 1950s and 1960s, which Sterk terms the high point of colonial interethnic romance in Taiwanese film and fiction, the plots would feature aboriginal maidens falling in love with Chinese men. Two themes emerge: the assimilative and the exoticizing.

In On Mount Hehuan, produced in 1958, an explosives engineer, his profession symbolizing the KMT blasting the island into modern productive form, meets a pretty aboriginal schoolteacher. They fall in love; she dresses in Chinese clothing and instructs her students to speak perfect Mandarin. Offensive native beliefs give way to Christianity, shamanistic healers to modern medicine. Love conquers all; there are no impediments to the formation of a new ethical and ethnic national order. In 1999’s Remains of Life, the relationship between Maiden, representing Taiwan, and the narrator, symbolizing the KMT government, is more complicated. Although they travel together, they do not sleep together. Maiden speaks Atayal and is familiar with the myths of her people, yet listens to Mozart and Chopin. Narrator considers staying in the area, marrying an Atayal woman, and even opening a coffee shop named for a rebellious ethnic leader. Ultimately, however, he understands that it is not easy to “go native” and leaves. By this time, native writers were beginning to emerge, adding their own perspective to literature. In Huaixiang (懷 湘), the Atayal protagonist has been given her name, connoting homesickness for Hunan Province, where she has never been, by her father’s Hunanese commanding officer. But a homophone for the name is 懷鄉, meaning to be homesick for one’s native village, and in the end the heroine moves to an aboriginal village, though not her own, where she engages in high-altitude mushroom cultivation and helps to build the local community. Currently, aboriginality is accorded high respect in Taiwan, with the very idea of a civilizing mission considered suspect. Sterk believes that democratization in the aboriginal context now means active participation in the national economy along with creative reinterpretation of the aboriginal tradition. How to incorporate the influence of the 50 years during which Taiwan was ruled by Japan is explored in Min-Chin Chiang’s thoughtful chapter. During the political liberalization of the 1990s, phenomena the author calls “heritagization” and “museumification” arose in reaction to what she terms the cultural amnesia of the previous period. Chiang cites the preservation of a building called the Siliandong 四連棟, built in the Japanese colonial period in the old mining town of Jinguashi, as a case study of both, concluding that the aim of local museums to reconstruct an authentic sense of place involves selectivity as well as comprising multiple voices and conflicting political intentions. For example, when the Siliandong reconstruction was complete, the Japanese architect who had supervised the process suggested that a traditional dedication ceremony be performed at the site. The idea was appealing, both for educational purposes and because it was expected to attract media attention. After all parties had agreed, however, difference among the Japanese, Taiwanese, and Chinese notions of what the ceremony would entail became apparent. The Japanese rite had more of a religious connotation, but in contrast, the local authorities and businesses who had contributed to the renovation expected to be honored. Even the color of the traditional

april 2011 • taiwan business topics

4_11_book.indd 33


2011/4/26 4:08:45 PM


no health care, job background cloth became placement assistance, an issue; according to or other government Japanese culture, it benefits. Suspected should be white, which of harboring commuTaiwanese consider an nist sympathies, they unlucky color. were likely to be the Delicate negotiatarget of government tions resulted in carefully surveillance. With the crafted compromises. political liberalization The name of the deity of the latter 1980s, the being prayed to was r e t u r n e d Ta i w a n e s e replaced with “all gods veterans began to petiand goddesses” in order tion the government to incorporate diverse to repatriate their erstbeliefs rather than pay while comrades, and at homage to the Japathe end of 1988 Taipei nese deity alone. The allowed the first solhelp of local contributors dier living in China to was acknowledged by CULTURE CLASHES — Holding a dedication ceremony for the preserved building in Jinguashi known as the Siliandong turned out to be come to Taiwan, albeit having their names rather Japanese a highly complicated undertaking. photo : cna only for a short comthan those of the gods passionate visit. Later, inscribed on a wooden permanent residence panel attached to the cenpermits began to be issued, though the entrance criteria were tral beam of the building, and the background cloth was strict. Not a few applicants were refused; others passed away changed to striped red and white. The furnishing of the four while the Taipei government was considering their petitions. houses comprising the complex also represented comproNot until the 1990s were the ex-soldiers declared eligible for mises among the different historical memories of various pensions. Still, they continued to be regarded with suspicion groups in the area. and referred to condescendingly as mainlanders. Siliandong opened to the public in 2007, becoming a Even sadder was that their own family members saw the tourist attraction as well as the set for a television miniseries returnees as strangers. After many years of not hearing from featuring a cast of attractive young stars who were favorites the men, relatives often assumed that they had passed away, of the younger generation. Chiang observes that, influenced had them legally declared dead, and took possession of their by mass consumption and media power, the structure is now assets. When the “dearly departed” materialized, some family not so much a heritage site as a romantic setting for cinema members worried that they were imposters. More than one idols. A new collective memory is being shaped through the veteran found that relatives were unwilling to serve as guarelectronic media and tourist visits; the meaning of “heritage” antors, as the KMT required of each returnee. For those in Taiwan is being transformed, the original effort at preserwho did manage to find guarantors, a lengthy legal process vation of history notwithstanding. awaited. First, they had to file a lawsuit to annul their deaths, reclaim their original names and household registrations, and Taiwanese KMT soldiers be issued identification cards. Only then were they able to file another lawsuit to reclaim their property. Shi-chi Mike Lan’s poignant chapter discusses the experiEven those who did not have these problems found it difences of KMT soldiers of Taiwanese origin, many of whom ficult to reintegrate into a society that had changed so much were abandoned in China after Chiang Kai-shek’s government in their absence, as in fact they themselves had changed in was defeated by Mao Zedong’s communist (CCP) forces. Life decades of living under communist rule. Lan notes the simithere was difficult. Some Taiwanese were trained in preparalarity of the returnees’ plight with that of the protagonist of tion for an invasion to “liberate” Taiwan; others were sent to Albert Camus’ L’Etranger: they were considered outsiders on fight in Korea. Discharged after the Korean War ended CCP both sides of the Taiwan Strait. plans to attack Taiwan, they took civilian jobs and established In a wrenching epilogue, the author describes the 1980 families in China, but found themselves discriminated against. suicide of Xu Zhaorong, a Taiwanese-KMT soldier activist. During the Cultural Revolution, not only the veterans but their Having successfully lobbied for the construction of a War and children were attacked as KMT agents, spies for the Japanese, Peace Memorial Park with a monument to the soldiers, Xu set traitors, and half a dozen other even more disparaging names. himself afire on learning that the Kaohsiung City Council had For the Taiwanese who had managed to make it back to voted to relocate the monument and remove the word “war” Taiwan with the other retreating KMT troops, life was only from the name of the park. somewhat better. Unlike soldiers born in China, they received


taiwan business topics • april 2011

4_11_book.indd 34

2011/4/26 4:08:46 PM


Questions of language are the focus of several chapters, with contributors seeing them from different perspectives. Scott Sommers views the Taiwanese language as a major conduit for the emergence of a Taiwanese identity. After Japanese was imposed as the language of public life and schooling, the Taiwanese language became a form of resistance against Japanese colonialism. The restrictions of the colonial government notwithstanding, this was a golden age for Taiwanese writing. Scholars advanced the idea that the weakness of Taiwanese was its lack of a written script. By the end of the 1920s, a clash occurred between those who advocated a localized form of Mandarin and a written form of Taiwanese. Ann Heylen has found that, unfort u n a t e l y, t h e v a s t m a j o r i t y o f t h e sophisticated and lively debates between the two groups have been lost to history. Sommers continues that a Taiwanese language was never able to make the transition from theory to functional script, even before the KMT

formal curriculum and in the form of private tutoring outside it. Given the increasing business ties between Taiwan and China, Sommers might have made the same point about market forces determining the need for fluency in Mandarin. The author concludes that virtually nothing has been able to penetrate the powerful monopoly that Mandarin has established in public education. As is perhaps appropriate for a nation that is still a work in progress, the book has no conclusion. The authors have succeeded in producing a well-crafted mosaic of the evolution of Taiwan society and its formative influences up to the present. As always, the future cannot be predicted.

arrived and imposed a Mandarin-only policy. After 40 years, the Taiwanese language became virtually irrelevant in the professional and educational aspirations of the Taiwanese. This attitude changed when Chen Shui-bian was elected president in 2000. The freedom to speak in one’s language of personal choice was quickly established, with all elementary school children receiving at least one class a week in mother-tongue language instruction – which could also be Hakka or one of the indigenous languages such as Ami or Paiwan. An examination was commissioned that contained questions written in Chinese script representing spoken Taiwanese. However, resistance came not only from pro-China groups but from Hakka leaders within the DPP, with the result that the examination was never implemented. At the same time, driven by commercial considerations, an enormous expansion in English-language instruction has occurred, both within the

— June Teufel Dreyer is professor of political science at the University of Miami, Florida.

TOPICS can be found in the Eslite, Kingstone, Caves and Hess bookstores in Taipei, Taichung and Kaohsiung. But why wait until we’re on the stands? Make sure of getting a copy by filling in the subscription form below.


Fill out this form and post or fax to 886-2-2718-8182 with your payment or receipt. AmCham will begin your subscription upon receipt of payment. Taiwan

q1 year = NT$1,500

q2 years = NT$2,700

Elsewhere in Asia

q1 year = US$75

q2 years = US$140


q1 year = US$68

q2 years = US$130


q1 year = US$90

q2 years = US$170

Name: _________________________________________________________________

Membership ID#: (if applicable)_______________________

Company: ___________________________________________________________________________ Telephone: ____________________________ Mailing address:______________________________________________________________________________________________________________ Email Address: _______________________________________________________________________________________________________________ qBill to Account (members only)





qTelegraphic Transfer

Credit card number: _________________________________________________ Cardholder’s name: ______________________________________ Expiration date: ________________________________________________ Total amount (NT$/US$): ______________________________________ Signature: ______________________________________________________________________ Date: ______________________________________

• Acct. #: 141-53-80050-0-9-0

• Please make checks payable to: American Chamber of Commerce in Taipei • Please direct telegraphic transfers to: American Chamber of Commerce in Taipei Chinatrust Commercial Bank Chungshan Branch (Please fax your transfer receipt to AmCham.)

American Chamber of Commerce in Taipei

4_11_book.indd 35

Tel : 886-2-2718-8226


2011/4/26 4:08:46 PM

AmCham Companies through the Years As AmCham Taipei turns back the clock during this anniversary year to review its six decades of service, it is also asking its member companies to share photo remembrances of their early presence in Taiwan.

The S.S. President Polk, one of the first vessels of American President Lines to call in Taiwan, prepares to enter Keelung Harbor on March 4, 1956. The 16,000-ton steamer, carrying both cargo and passengers, began its voyage in Boston.

Then Premier Hau Pei-tsun being briefed in 1991 on completion of the first four units of the Taichung Power Plant designed by Gibsin Engineers, a U.S.-Taiwan joint venture. Now with 10 units, Taichung is the largest-coalfired power station in the world, supplying more than 20% of Taiwan's electricity needs.

Corning first established its position in Taiwan's display industry in 1971, when it formed the Pacific Glass Corporation (PGC) to produce cathode ray tubes (CRTs) for TV sets. Pictured at the opening ceremony of the company's plant in Taoyuan on March 20, 1973 were, left to right, PGC President Glenn Yeaky, U.S. Ambassador Walter P. McConaughy, and ROC Vice President Yen Chia-kan.

V i s i t i n g Ta i w a n i n M a r c h 1 9 7 5 t o e x p l o r e b u s i n e s s opportunities, United Airlines' Vice President for cargo operations, J.B. Gebhardt (second from left), predicts that Taiwan will become an important market for the carrier. At the far left is Robert Chu, the airline's longtime general sales agent in Taiwan.

4-historical page.indd 36

2011/4/26 4:18:32 PM

Research and the Regulatory Environment



photo : courtesy of taiwan medical services internationalization action plan

4_2011_IF.indd 37

A Report on the Medical Device Industry april 2011 • taiwan business topics


2011/4/27 5:50:15 PM



A Report on the Medical Device Industry

Developing the Domestic Industry The Biomedical Technology and Device Research Laboratories at ITRI is playing a key role in providing R&D support. BY ALAN PATTERSON


• Developing the Domestic Industry


• Rationalizing the Rules




aiwan’s next big success after its achievements in electronics will be in medical devices, says National Science Council (NSC) Minister Lee Lou-Chuang. The government believes the technology Taiwan has accumulated in the electronics industry can be re-applied to create a new generation of highadded-value medical equipment. A major milestone in the Taiwan government’s effort to accelerate the growth of the domestic medicaldevice industry will be the opening in May this year of the Hsinchu Biomedical Science Park. The first of several bio-medical science parks planned for the island, the facility is aimed at shepherding R&D with high market potential through clinical trials and into the development of commercial products. The site of the Hsinchu Biomedical Science Park is right next door to the Industrial Technology Research Institute (ITRI), Taiwan’s largest R&D organization, whose divisions include the Biomedical Technology and Device Research Laboratories. “Our work is quite unique,” says

Shau Yio-Wha, vice president of the Laboratories, which focuses its R&D chiefly on incorporating electronics into medical apparatus. “We have 1,000 Ph.D.s, and maybe 200 can [one day] become partners in biomedical spinoff companies.” Taiwan’s medical-device sector is potentially as large as its semiconductor industry, says Shau, and the margins may be far higher than what most chip companies are enjoying. “I have confidence that the profits for new medical device companies can be up to 60%,” he says. The Taiwan government has been seeking to boost the domestic medicaldevice industry for the past decade on the assumption that affluent, aging populations around the world will spur rapidly growing demand for equipment used for diagnostics, medical treatment, and health maintenance. But according to some experts, the best opportunities may already have passed. A December 2010 Bloomberg News report, for example, quoted Derrick Sung, a Sanford Bernstein & Co. analyst, as saying the medical-device industry is now trans-

taiwan business topics • april 2011

4_2011_IF.indd 38

2011/4/27 5:50:19 PM

A Report on the Medical Device Industry





Value (US$ billions)

Growth Rate

2005 2006 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f

1.84 2.14 2.5 2.65 2.85 3 3.5 4 4.5 5 5.5

16.30% 16.82% 6.00% 7.55% 5.26% 16.67% 14.29% 12.50% 11.11% 10.00%

note: f=forecast sources: taiwan m edical & Biotechnology industry association and ministry of economic affairs

forming from a high-growth sector into a mature business. Other significant obstacles may also stand in the way for Taiwan. Medical devices typically need to meet rigorous standards for safety and efficacy, and as a result development time can be far longer than the six months to a year it takes to launch the consumer electronics products that Taiwan is famous for. Moreover, laws and regulations on medical devices can vary substantially from one nation to the next. Still, Ben Chen, chairman of the Ta i w a n M e d i c a l & B i o t e c h n o l o g y Industry Association, views the twoto-three-year product development and approval cycle as a reasonable investment period for Taiwan’s mostly small and medium-sized enterprises – in contrast to the decade or so required for pharmaceuticals. And he notes that Taiwan has already gained a solid foothold in the business. Domestic production value grew at a rate of more than 5% during each of the past three years, suffering no impact from the recent global recession, and last year reached a total of US$3 billion. While that 5% growth was considered a good achievement during

a difficult period, it was in fact much slower than the more than 16% annual growth the industry registered during 2006 and 2007. By 2015, says Chen, Taiwan’s production value is expected to come to US$5.5 billion, nearly double the 2010 level and lifting the annual growth rate back above 10%. How will Taiwan do it? “In recent years, the government has adopted new leading projects for the development of high-end medical equipment,” Chen says. “ITRI, the Metal Industry Research & Development Center, incubation centers at universities, and the Medical and Pharmaceutical Industry Technology and Development Center have all made big contributions to the Taiwan industry. They have provided help with meeting regulations and undertaking key R&D projects.” Among the products these projects have targeted are systems for dental care, telesurgery, respiratory care, in vitro diagnostics, and high-end imaging systems such as digital X-ray machines and MRI scanners. “Taiwan is already No. 1 in a lot of products such as glucose monitors, blood pressure devices, and electric wheelchairs,” says Chen “But the gross

margin for these products is low, so we are now targeting the high end, where there is more value added.” Since glucose monitoring products represent a US$10 billion global market, ITRI is working on developing more advanced but still affordable technology, Shau says. He sees the main opportunity for Taiwan companies as concentrating on such home-use devices of various kinds, while the large multinationals dominate the portion of the business that concentrates on supplying more sophisticated equipment to hospitals. Although the incorporation of biotech into medical devices has so far been a business where only a few tech giants have dared to tread in Taiwan, both the government and ITRI see huge potential in this area. “Taiwan has the capability with regard to miniaturization, semiconductors, power savings, and systems integration,” says Shau, who is also a professor at National Taiwan University’s Institute of Applied Mechanics. “In the past, the missing link was that technologists never got into how doctors think.” Five years ago, Shau joined ITRI to work side by side with medical doctors, who are an integral part of the R&D

april 2011 • taiwan business topics

4_2011_IF.indd 39


2011/4/27 5:50:20 PM



A Report on the Medical Device Industry

team at the Biomedical Technology and Device Research Laboratories. His team has also conducted its own user research, which led to the conclusion that individual healthcare is a potentially large business opportunity that isn’t readily seen by looking at the existing market. “Now people are looking for treatment outside hospitals,” he says. “Decentralized care started growing five years ago after hospital costs started soaring.” As a first step, ITRI has been working with the regulators to find solutions for hospitals interested in offering decentralized care. The niche for Taiwan companies would be to provide lowcost devices that ordinary consumers could afford. One example of a widespread disorder where Taiwan companies could find a business opportunity is sleep apnea, a chronic medical condition under which an affected person repeatedly stops breathing during sleep. Such episodes can last 10 seconds or more and cause oxygen levels in the blood to drop. The condition can cause and worsen other medical conditions, including hypertension, heart failure, and diabetes. The worldwide market for sleep apnea devices today is worth US$1 billion, says Shau, who believes it is potentially 10 times that size.

photo : courtesy of taiwan medical services internationalization action plan


Currently, sufferers need to go to a hospital for diagnosis while they are sleeping. New devices from Taiwan can potentially be used at home to monitor the severity of the sleep apnea and changes in physiological conditions, he says. Another area of market opportunity is respiratory diseases, which tend to be more common in Asia’s emerging markets, he adds. Taiwan companies can make oxygen generators and masks worn during sleep that pump air into the respiratory tract.

OEM relationships Many of Taiwan’s medical-device makers for years have been contract manufacturers for big multinationals in the business such as Philips and Medtronics, Chen says. But he recognizes the difficulty for local companies to make the leap to establishing their own brands. “The Taiwan government has been emphasizing brand marketing,” Chen says. “But some of the overseas buyers have brands that have been established for more than 100 years” and have extensive international marketing and distribution networks in place. “For the time being, Taiwan is doing OEM (original equipment manufacturing), but

some companies hope to build their own brands.” Chen says the Medical Device Industrial Cluster in the Southern Taiwan Science Park, in which Taiwan’s NSC has invested NT$5 billion, has attracted nearly 30 companies that offer easy “one-stop shopping” for companies doing procurement. One of the foreign investors in the cluster is Aurora Asia International, a unit of U.S.-based Aurora Imaging Technology, which makes MRI scanning equipment used to screen for breast cancer. Microlife is one example of a Taiwan company that has had success building a global brand, says Chen. The company makes digital diagnostic products such as blood pressure monitors and thermometers. Its operation in Switzerland handles design and validation of products, while the Taiwan parent company takes charge of engineering and production. Potentially, the main markets for Taiwan’s medical-device manufacturers are the BRIC nations – Brazil, Russia, India, and China. Initially, for reasons of geography, culture, language, and market familiarity, it will be natural for Taiwan to focus primarily on China. This past December, Taiwan signed biotechnology cooperation agreements with China after the two sides entered into the Economic Cooperation Framework Agreement (ECFA) in June last year. The agreements will help Taiwan medical-device companies gain faster entry to China, according to Chen. “For us to succeed in this field, we have to find the right channels,” says Shau. “It's happening now. Manufacturers in China have become sales channels and service centers [for our products]. Taiwanese companies are providing the manufacturing and technical standards in joint ventures with Chinese companies.” Products deemed to have good potential will be selected for clinical trials, after which the two sides will jointly explore global markets, Shau says. “We hope our agreements with China will attract more international companies to Taiwan [as a stepping stone] to enter the China market,” Chen says. “Entry to the China market has been very difficult due to regulatory and political issues,”

taiwan business topics • april 2011

4_2011_IF.indd 40

2011/4/27 5:50:20 PM

A Report on the Medical Device Industry



photo : courtesy of itri

and international players can ease their way by teaming up with Taiwanese partners with experience in that market. As a dedicated R&D unit with about NT$80 million in direct funding per year, in addition to licensing fees and royalties, the ITRI Biomedical Technology and Device Research Laboratories do not get engaged in commercial manufacturing. They have, however, developed and spun off technology to private companies for the production of equipment such as non-invasive blood pressure monitoring devices and electrocardiogram devices. The R&D support to companies interested in making low-cost home-care devices extends to some of the island’s major corporations. Quanta, the world’s largest contract manufacturer of notebook computers, for example, used ITRI technology to enter the medical device business about four years ago. After making electrocardiogram devices for hospitals, it switched to consumer electronics for healthcare to tap what it

believes is a larger market. Qisda, another electronics contract manufacturer that is part of the BenQ Group, has acquired medical device technology from ITRI that it has used to partner with companies in China to sell hospital electronics for surgery and natal care. ITRI has also helped Taiwan’s Delta Electronics with technology for diabetic care, starting with glucose monitors as a first step into the business, and it has cooperated with overseas companies such as U.S.-based Exactech, Inc., a developer and producer of bone and joint restoration products. ITRI and Exactech have worked together to develop bio materials for knee replacement. With the new technology, the patient can be released from the hospital after a 30-minute surgical procedure, whereas the conventional treatment requires six weeks to three months, says Shau. The results of clinical trials have been very positive, he adds. Transfer of technology from ITRI to

the private sector can take place in several different ways, including licensing agreements and the creation of spin-off companies if some of the key researchers can obtain venture-capital funding. Another method is to jointly develop technology for specific applications with companies that provide funding for the research and possibly contribute to the staffing of the R&D team. There is also a less desirable way in which ITRI’s technology may enter the marketplace – through the poaching of ITRI employees by private companies. The ambitious aim for Taiwan’s medical-device industry to revive growth, boost profit margins, and build new brands as it uses the island’s prowess in electronics to move up the value-added chain. The plan relies heavily on Taiwan’s ability to enter emerging markets such as China. Particularly after the signing of ECFA, multinational companies may be closely watching developments to see if new opportunities are emerging.

april 2011 • taiwan business topics

4_2011_IF.indd 41


2011/4/27 5:50:23 PM



A Report on the Medical Device Industry

Rationalizing the Rules AmCham’s Medical Devices Committee has suggestions regarding both product regulation and the method of setting reimbursement prices.



hile the bulk of the medical devices made by domestic producers are relatively simple products designed for home use, such as blood glucose and hypertension monitors, the numerous multinational manufacturers selling into the Taiwan market concentrate mainly on more sophisticated devices used by hospitals in surgical procedures. For them, the policies carried out by the relevant government agencies – regarding product licensing by the Department of Health’s Taiwan Food and Drug Administration (TFDA) and the setting of reimbursement pricing by the DOH’s Bureau of National Health Insurance – have an immense bearing on the viability of their business. I n t h e A m C h a m Ta i p e i M e d i c a l Devices Committee’s preliminary discussions for preparation of its section in the 2011 Taiwan White Paper scheduled for release in early June, one of the major topics of focus has been the difficulties caused by the regulation of medical devices in Taiwan through the provisions of the Pharmaceutical Affairs Law. In the United States, the European Union, and most countries of the world, medical devices are governed under an entirely separate legislative framework from that used for pharmaceuticals. While Japan was formerly an exception, also treating the two industries


under the same law, in recent years it has been amending its statutes to take the differences between drugs and medical devices into greater account. The Medical Devices Committee has urged Taiwan to follow suit, suggesting that the easiest approach would be to establish a separate chapter dealing with medical devices, though still within the Pharmaceutical Affairs Law. Members of the medical device industry note that while pharmaceuticals are prescribed by physicians, it is ultimately up to the patient to take them in the proper dosage, increasing the importance of safeguards to assure the safety of the product. Medical devices, on the other hand, are chiefly used by surgeons who can make informed professional judgments about the product and how to use it. Among the many differences between the two industries is that the manufacturing process for medical devices tends to be more complex. Normally only one company is clearly responsible for the production of a pharmaceutical, but a medical device may be assembled from components from many different sources or may even be outsourced completely to a contract manufacturer. As a result, in the absence of clear guidelines under the law, medical device companies often have difficulty satisfying the TFDA about the identity of the “manufacturer” of the

product. Rather than the factory where the device may actually have been assembled on an OEM basis, the industry urges the TFDA to accept the “legal manufacturer” as the company that has legal liability for the product and is responsible for its post-market surveillance. A similar problem arises in identifying the country of origin of the device for labeling purposes. “It’s becoming increasingly common to have a transnational division of labor in the medical device industry,” notes Emily Chiang, senior regulatory affairs manager for Medtronic (Taiwan). “You might have assembly in Mexico, for example, of parts from China and other countries, and then sterilization in the United States.” Problems sometimes arise with labeling since the Customs administration may regard the country of origin as the place the goods were shipped from, rather than the location of the company with responsibility for the product. The Committee is urging the TFDA and the Directorate General of Customs to coordinate to work out a reasonable solution. Another difference from pharmaceuticals is the much shorter product life-cycle for devices. The product development and testing phase for a new drug can easily last a decade, but it may then enjoy a long period of stable market position through patent protec-

taiwan business topics • april 2011

4_2011_IF.indd 42

2011/4/27 5:50:23 PM

A Report on the Medical Device Industry

tion. For medical devices, the life of the product may be just a year or two before it is replaced by a different model with improved functions. Because the changes tend to be incremental rather than dramatic new innovations, patent protection is less frequent. Given the faster pace of their business, medical device companies consider it vital to receive speedy approval of new products to take full advantage of what may be a limited market window. The frequent changes that occur in products can also present a problem. Modifications to products or labeling require TFDA registration, but the Taiwan regulators sometimes reject an application – even when their U.S. or European counterparts have already approved a similar request – on the grounds that what is involved is a completely new product, not a revision to an old one. “The definition of what is a ‘change’ is not clear enough and it’s not always consistent with international practice,” says Chiang. The Committee is asking TFDA to “establish a consistent procedure and standardize the criteria for amendment registration” based on international practice.

Balance billing A whole other set of issues for the multinational companies marketing medical devices in Taiwan surrounds the process of reimbursement pricing under the National Health Insurance program. One of these issues concerns the use of “Balance Billing,” in which patients still have access to certain medical devices that may be too expensive for the NHI system to pay for completely, as long as they are willing to cover a portion of the cost out of pocket. Balance billing was authorized under the “Second Generation” NHI Law passed at the beginning of this year, but the question remains as to whether a cap will be imposed on the amount that a patient can be asked to pay for a given device. The Committee, noting the difficulty of setting a fair ceiling price, advocates leaving that question to market forces. Devices that perform the same basic function may still vary considerably by

photo : courtesy of itri

quality and features, it maintains, and so should not be restricted to the same price level. Also addressed by the Committee have been issues related to BNHI’s recent introduction to Taiwan of a type of payment system known as Diagnosis Related Groups (DRG), in which hospitals are reimbursed as a package for the entire treatment for a particular ailment. Of the many countries around the world that have implemented DRG systems, Taiwan appears to be the only one that would simultaneously set reimbursement prices for the individual medical devices used as part of the procedure covered by the DRG. The industry is asking that the individual product pricing be eliminated as unnecessary. As with the pharmaceutical sector, the medical device companies in Taiwan have been subject to periodic Price-Volume Surveys (PVS) conducted by the BNHI in an attempt to close the gap between the reimbursement prices it pays hospitals and the amount the hospital has actually paid the manufacturer after discounts. These Surveys are normally followed by substantial reductions in the reimbursement prices offered, impairing the profitability of the medical device busi-



ness but not eliminating the price gap, which normally reappears when hospitals again demand discounts. The Committee is requesting cancellation of the PVS system as it applies to medical devices, on the grounds that the system lacks both transparency and a reliable auditing mechanism to assure its accuracy, and that it over-emphasizes cost to the neglect of medical quality and the value of the medical device. It stresses that suppressing the price by use of the PVS also risks discouraging manufacturers from bringing new technology and new devices to the Taiwan market, restricting the choices available for optimal clinical treatment. Further, the Committee argues that it finds no basis under existing law for subjecting medical devices to the PVS. An additional item on the Committee’s advocacy agenda is the inclusion of numerous medical devices on the list of products still banned from being imported into Taiwan if they are made in China. More and more international medical device companies have been setting up manufacturing sites in China as part of their regional or global business plans, but they may find that they are unable to serve the Taiwan market from that site due to this government’s restrictions on China-made products. In arguing for a liberalization of the policy, the Committee recognizes the government’s concern about the quality standards of Chinese medical products and the potential public-health ramifications, and it is therefore recommending that the market opening begin with the import from China of medical devices made there by multinational companies, especially products that have already proven to be of high standard by being certified for sale in the United States, the European Union, and other major international markets. When manufacturing in China, says the Committee, multinational companies apply the same level of quality control as in their home country. Among the specific items the Committee is asking the Bureau of Foreign Trade to reevaluate for removal from the import ban are surgical adhesive tape, intravenous administration sets, and ultrasonic scanning apparatus.

april 2011 • taiwan business topics

4_2011_IF.indd 43


2011/4/27 5:50:24 PM

p51.pdf 2011/3/29 7:22:32 PM









the Lure of shenkeng tofu


story and photos By oWaIn MCKIMM


Stinky tofu and spicy pig intestines are among the signature dishes to be found on Shenkeng's Old Street.

ofu in its many and varied forms is one of the most popular food items in Taiwan. But one place where it is truly ubiquitous is the small town of Shenkeng, often called the “tofu capital” of Taiwan. Shenkeng, with a population of about 20,000, lies in the outskirts of Taipei just past Muzha. It contains a few nice temples and a handful of oldstyle houses, but the real attraction is the beancurd-packed “Old Street,” where you can only walk for a minute or two before being swamped with the sights and smells of tofu-mania. After counting roughly 20 eateries and stalls specializing in tofu (not including those purveying tofu-based desserts), we decided to try one at random, since making an informed choice here would challenge even a true connoisseur. The store that pulled us in, largely due to the décor and despite the boiling vats of oozing stinky tofu fermenting in the front, was Gu Zao Cuo (古早 厝) – a pleasant, bustling place decorated with antique wicker baskets and water vessels, and with walls plastered incongruously with old kungfu movie posters. Since the restaurant was rather full, we shared a table with a hungry family that had just ordered a feast of local delights. Plates of tofu rolls, dried tofu, and slurpy thick noodles were soon piled high in front of us. But rather than following their lead, we decided to be a little more adventurous, selecting a dish called Spicy Three Treasures Stinky Tofu (麻辣三寶臭豆腐) – a vast foray into exotic spiciness. Arriving on its own little bubbling

stove, the dish mainly consisted of the “three treasures” of pig’s intestine, chewy slabs of congealed duck blood, and a sprinkling of tiny dried fish. The tofu, a mildly pungent variety, was nestled in between these other ingredients. As unfamiliar as most of the contents would seem to Western tastes, it was surprising to discover that the flavor was fairly un-extraordinary. The intestine was more texture than taste, the duck blood was chewy and gelatinous, and the tiny fish hardy registered beyond a crunch and a hint of sea breeze. The tofu, while slightly offputting in aroma, had only a mild, warming bluntness about it when chewed. Taiwanese often compare stinky tofu to a strong cheese – “It smells bad, but tastes great!” – but unlike a good strong cheese, the intensity of the stinky tofu didn’t seem to transfer from odor to flavor. Our dish relied more on the spicy element to give the taste buds a kick. Ready for something perhaps a bit stronger, we left Gu Zao Cuo in search of more pungent fare. Being only about 300 meters in length, the Old Street quickly presented us with another option. Wang Shui Cheng (王水成), next door to a temple and proudly displaying its historical credentials on a big board, was one of the first shops in Shengkeng to start selling the special local tofu way back in 1956. The local tofu-masters, the Chen family, made their beancurd using the especially pure water found in Shenkeng, which combined with an ancestral recipe that involves

april 2011 • taiwan business topics

4_11_travel.indd 45


2011/4/26 3:58:00 PM


DELICACIES — Tofu ice cream, a steaming pot of stinky tofu, and (below) Three Treasures Stinky Tofu under preparation.

the stewing of natural bittern and slow boiling, creates an especially fragrant variety of the curd, as well as leaving a pleasing smoky flavor in the mouth. Back in the day, Wang Shui Cheng would buy three wooden slabs of this tofu every morning, and then turn it into three different kinds of dishes: Braised Tofu ( 紅燒豆腐), Tofu Soup ( 豆腐羹), and Tofu Fish Stew (豆腐魚). The first two were considered everyday fare, while the Fish Stew was mostly enjoyed on payday, when the local miners could treat themselves to such a delicacy. Nowadays Wang Shui Cheng offers a long list of starred chef specialties, as well as some quirky side dishes. We finally settled on the Spicy Stinky Tofu (麻辣臭豆腐), recommended by the couple sitting opposite us, with some Spicy Pig Intestines (麻辣大腸頭) as a side-dish. It was our second helping of stinky tofu in one afternoon, and we


were expecting something similar to the earlier, red-pepper-dependent version with more bark than bite. While packing quite a fiery kick, however, this dish seemed to contain a vaudevillian array of textures and flavors that revealed something different with each inquiring mouthful. Spicy, then eggy, then sloppy like a bread pudding, then soft, frothy, spongy and finally smelly, this dish not only confirmed everything considered bizarre about stinky tofu, but also managed to make them into something unfathomably delicious. After we continued our walk for a few minutes, passing a long line of people waiting for some barbequed tofu (lathered in a special sauce no doubt), the tofu restaurants began to peter out, only to be replaced by the even more niche-market phenomenon of shops specializing in tofu desserts. Grabbing the opportunity to taste some of the legendary tofu ice-cream, we rushed to the nearest stall and quickly ordered a cone of Carbon Baked Tofu (碳燒豆腐) flavor ice cream. Creamy, with the slightly smoky aftertaste of classic Shenkeng tofu, it made a nice change from the rigorous flavors of lunch and took us back to some tofu basics, simple and refreshing.

Just a few meters away at Shenken Tofu Ice Cream (深坑豆腐冰淇淋), we found an even more abundant source of tofu ice-cream. This old store is located in one of Shenkeng’s most beautiful buildings – the old Huang residence, fronted by a classical Chinese-style stone doorway and baroque trappings. Besides the traditional tofu ice cream, sesame, soy, and caramel flavors are also available here. Our favorite, though, was their Fresh Milk Tofu Brain (鮮奶豆腐腦), a slippery flan-like cube of tofu that wobbled sweetly as we wolfed it down. Shenkeng regularly holds festivals to showcase its status as the gourmet capital of New Taipei City, though recent events like the “Four Treasures” festival (the four treasures being tofu, bamboo shoots, black pork, and Pouchong tea) and the “Taiwanese Opera Heritage” festival demonstrate Shenkeng’s increasing eagerness not to be typecast solely as a Mecca for tofu lovers. But as keen as it may be to expand its repertoire, there is no doubt why the number of tourists packing the streets of Shenkeng is enough to match even the great Shilin market on any given weekend. It is the unmistakable lure of the best and most varied source of tofu anywhere in Taiwan, enough even to make a cynic crave a second helping.

taiwan business topics • april 2011

4_11_travel.indd 46

2011/4/26 3:58:04 PM

s e e i n g ta i w a n

Sailing and Vacationing at Dapeng Bay p ho t o s : C o urte sy of t ou r i sm B u r e au


t o u r i s m B u r e a u , r e p. o f C h i n a

s increasing numbers of foreign visitors are discovering, Taiwan's coastline is more than a place to soak up the sun and play in the surf. It is also a paradise for birdwatchers and a heaven for seafood lovers. The region that includes Dapeng Bay in the southernmost county of Pingtung is well known on both counts. Each winter, the bay and the wetlands that surround it attract scores of migratory bird species, while the adjacent town of Donggang is renowned for its world-class bluefin tuna and other delicacies. Dapeng Bay has another advantage – one that is immediately obvious to those who have a chance to get on a windsurfing rig or aboard a sloop. In addition to year-round sunshine, the bay enjoys consistent winds. Yet because the mouth of this 532-hectare lagoon is so narrow, the waves are minuscule. As a result, it is an excellent place for all kinds of watersports. In a word, sailing here is a breeze. Some 3.5 kilometers long and about 1.8 kilometers across, the bay has an average depth of five meters. Among its unique features is a small island that consists entirely of discarded oyster shells. This islet, a legacy of the years when more than 13,000 oyster-raising platforms covered the bay, now nurtures schools of lively fish. The Pen Bay, a resort inside Dapeng

Bay that will boast world-class facilities, is nearing completion. And the entire region's profile will be lifted this May with the 2011 Dapeng Bay International Regatta, which promises to be the most exciting yachting event in Taiwan's history. The regatta will be preceded by the inaugural Taiwan Strait Race, a 350-nauticalmile dash from Hong Kong to Kaohsiung, the waterfront metropolis that brands itself Taiwan's “ocean capital.” The Taiwan Strait Race will begin at 12:10 p.m. Hong Kong time on May 21. In terms of International Sailing Federation (ISAF) ratings, it is a Category 1 offshore race – meaning that participating yachts are required to be completely self-sufficient for extended periods of time, and prepared to meet serious emergencies without the expectation of outside assistance. The race is being organized by the Royal Hong Kong Yacht Club (

april 2011 • taiwan business topics

4_11_SeeTW.indd 47


2011/4/26 4:26:02 PM

s e e i n g ta i w a n

hk) with assistance from the Kaohsiung City government ( and the Chinese-Taipei Sailing Association ( For crews, crossing the Taiwan Strait involves a lot of physical effort and most likely a little discomfort, but they can look forward to a warm welcome when they reach Kaohsiung. Taiwan's second-largest city not only has a comfortable climate and friendly people, but also a fine selection of restaurants, several fascinating museums, and enough retail outlets to satisfy hardcore shopaholics. Getting around the city is very easy, thanks to the KMRT (Kaohsiung Mass Rapid Transit system), plentiful and inexpensive taxis, and a growing network of bicycle trails. The arrival of foreign yachts in Kaohsiung is fitting in an historical sense, because this city is where merchants from Europe and North America arrived in sailboats in the 1860s, seeking tea, camphor, and other Taiwanese products. As the yachts sail into Kaohsiung Harbor, they will pass within sight of a relic of that era, a hilltop redbrick villa. It once served as the official residence of the British Consul, and is now one of Kaohsiung's most


distinctive buildings. The Dapeng Bay International Regatta will begin on May 27 with a skippers' briefing in Kaohsiung. The following day, participants will race southeast along the coastline to Dapeng Bay, a distance of 18 nautical miles. May 29 will see a series of inshore races in what has been dubbed Taiwan's maritime “golden triangle” – the patch of ocean between Kaohsiung, Dapeng Bay, and the tiny yet scenic island of Xiao Liuqiu. On May 30, the vessels will head back to Kaohsiung, and on the last day of May, they will leave Taiwan. The regatta is being hosted by the Dapeng Bay National Scenic Area A d m i n i s t r a t i o n ( w w w. d b n s a . g o v. tw), Kaohsiung City government, and Pingtung County Government, and organized by various sports bodies, including the Chinese-Taipei Sailing Association. The regatta's organizers will assist entrants with entry and customs matters as well as anchorage. Various free services will be provided, including 24-hour security for moored vessels, airport pickup and transfer, plus an evening banquet. When not sailing, regatta entrants can enjoy the 13.3-kilo-

meter-long cycle track that encircles the bay, or join free on-land excursions organized by the ROC Tourism Bureau. In recent years, several facilities have been added to Dapeng Bay, but central to the transformation of this former military base (from the early 1940s to the late 1970s) turned oyster-farming center (until 2003) turned into a hot spot for recreational sailing has been the construction of Taiwan's first drawbridge. This brand new addition to the landscape – inaugurated early this spring – opens so that large yachts can enter and leave the bay. Some 579 meters long and 71 meters high, this striking asymmetrical structure can be seen from several kilometers away. Since 2009, the Dapeng Bay National Scenic Area Administration and Pingtung County government have been holding an annual windsurfing competition that sees entrants sail from the bay all the way to Xiao Liuqiu, a oneway distance of nine nautical miles. This year's races will last from May 21 to 29. Xiao Liuqiu itself is deserving of everyone's time. Just 6.8 square kilometers in area, it is surrounded by pristine ocean rich in coral, fish, turtles, and other marine species. The island has a restful ambiance quite different from that of Kaohsiung, and a thoroughly traditional community life. For further information about the Dapeng Bay International Regatta, contact the Dapeng Bay National Scenic Area Administration ( tw; tel: +886 8 833-8100). The registration hotline is tel: +886 7 551-0500; fax: +886 7 551-0600; email: For all kinds of travel information, call Taiwan's 24-hour tourist information hotline: 0800-011-765.

taiwan business topics • april 2011

4_11_SeeTW.indd 48

2011/4/26 4:26:06 PM

AmCham Earth Day Exhibition Eight member companies present their green products and solutions. BY JANE RICKARDS


rom a unique plastics product that protects coasts from erosion while providing a habitat for indigenous wildlife to plans for the world’s tallest green building, AmCham member companies at the Chamber’s “Going for Green” exhibition in celebration of Earth Day showed off their latest innovations. The event, promoting sustainable business and sustainable living, was held as part of the Chamber’s commemoration of its 60th anniversary year. “We’re reminded by many recent disasters, such as Hurricane Katrina, and most recently the earthquake and tsunami in Japan, that we really need to save energy, reduce greenhouse gas emissions, and find solutions on how to sustain going green,” said AmCham President Andrea Wu at the exhibition’s opening. David Gu, marketing manager for BASF Polyurethanes, described his company’s innovative solution for protecting coastlines, known as Elastocoast. Resembling closely-packed piles of small rocks and involving a two-component polyurethane plastic, Elastocoast can reduce the impact of waves on the shoreline and save up to 75% of construction materials compared with conventional materials such as concrete. Around 50% of the ingredients consist of natural, renewable raw materials and it can even provide a habitat for the animal and plant world. Elastocast has already been successfully used in Germany and other nations, Gu said. In another presentation, Oscar Ng, Corporate Marketing and Public Affairs manager of 3M Taiwan, described how 3M first launched environmentally-conscious policies in 1975. By 2011, the company had won many awards recognizing its commitment to the environment, such as the 2007 U.S E.P.A. clean air excellence award. As an example of 3M’s environmentally friendly products, he cited its Novec 1230 Fire Protection Fluid that is unusual in that it does not harm the ozone layer in any way, as well as 3M’s light enhancement optical films for enhancing the brightness of a TV or notebook screen, while saving energy. Representing Del Solar, Evelyn Tsai, a project manager in the Sales & Marketing Division, described how her company, founded in 2004 as an affiliate of Taiwan’s Delta Group, created the solar cell roof for the 2009 World Games stadium in Kaohsiung. Consisting of 8,844 solar modules, it is the largest solar energy system ever to be integrated into a sports

stadium and can annually produce over 1.1 million kilowatthours of electricity. Colin Tsai, the sales manager for DuPont Taiwan, described the company’s latest invention, Sorona® fiber-grade polymer. Made partially with agricultural feedstocks instead of petrochemicals, it reduces dependence on fossil fuels. In addition to use in making fibers, apparel, and carpets, Sorona ® can be used in films, engineering resins, and other applications. It contains 37% renewably sourced ingredients by weight. “It requires 30% less energy than a product with an equal amount of nylon [derived] from petrochemicals,” Tsai said. In a presentation for Kimberly-Clark, famous for its Kleenex tissues and other paper products, spokeswoman Grace Chen introduced the company’s AIRFLEX technology, which allows paper towels and tissues to be wrapped more tightly, so that 25% more product could be inserted in one pack, reducing the environmental burden of extra packaging. She also said the company has pledged to help conserve forests by using only wood fiber that has been certified as coming from sustainable forests for its tissue products. These efforts are in line with the company’s green campaign of “reduce today, respect tomorrow,” she said. Julia Hung of Philips Taiwan then described how the company’s latest range of LED lamps are 85% more energy efficient than traditional incandescent light bulbs, while Ray Jui, Corporate Communications Manager of Siemens Taiwan, introduced the company’s efforts to help educate the Taiwan public about the importance of sustainability. He noted that the company has already conducted programs attended by some 1,500 primary school students in Taiwan, with more sessions being planned. Finally, Cathy Yang, spokeswoman for Taipei 101, where the event was held, said the building was striving for accreditation as a LEED (Leadership in Energy and Environmental Design) building, in anticipation of becoming the world’s tallest green building. She said the skyscraper expected to receive this certification at the LEED Platinum level by July, citing the building’s low use of water and recycling of waste materials. In addition, she said, Taipei 101 has set up a “Green Corner” in its ground-level lobby to educate other businesses and visitors about the LEED process.

april 2011 • taiwan business topics

4_11_earthday.indd 49


2011/4/26 3:48:55 PM


taiwan business topics • april 2011

4_11_earthday.indd 50

2011/4/26 3:49:10 PM


Cover Story: Chemical Industry Industry Focus: Medical Device