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TAIWAN BUSINESS TOPICS May 2014 | Vol. 44 | Issue 5 中華郵政北台字第 號執照登記為雜誌交寄 5000 5_2014_Cover.indd 1

National Health Insurance: Looking Beyond 2G 全民健保:後二代的展望 Interview with NDC Minister Kuan Industry Focus: ICT Petrochemical Industry

May 2014 | Vol. 44 | Issue 5

NT$150

ISSUE SPONSOR

Published by the American Chamber Of Commerce In Taipei

2014/5/5 8:31:17 PM


CONTENTS NEWS AND VIEWS

6 Editorial may 2 0 1 4

Welcome Progress in U.S. Economic Relations

vOlumE 44, N umbEr 5 一○三年五 月號

Publisher

7 Taiwan Briefs

發行人

Andrea Wu

By Jane Rickards

吳王小珍

Editor-in-Chief

11 Issues

總編輯

Don Shapiro

沙蕩

Associate Editor

Regulating the Advertising of Food to Children; Restructuring in the IPR Police; A Nourishing Brew for Taiwan’s NGOs

副主編

Tim Ferry

法緹姆 美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

規範兒童食品廣告;保護智慧財產權 警察改組;給台灣的非政府組織補一 補

Manager, Publications Sales & Marketing 廣告行銷經理

Caroline Lee

李佳紋

Translation

樂見美台經濟關係出現進展

By Don Shapiro and Abraham Gerber

翻譯

Yichun Chen, Sonia Tsai 陳宜君,蔡函岑

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱:台北市美國商會工商雜誌 發行所:台北市美國商會 臺北市10596民生東路三段129號七樓706室 電話:2718-8226 傳真:2718-8182 Taiwan Business TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2014 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號:台誌第一零九六九號 印刷所:帆美印刷股份有限公司 經銷商:台灣英文雜誌社 台北市108台北市萬華區長沙街二段66號 發行日期:中華民國一○三年五月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

Chairman/ Thomas Fann Vice Chairmen/ Scott Meikle / William J. Farrell Treasurer: Cosmas Lu Secretary: Fupei Wang 2013-2014 Governors: Thomas Fann, William Farrell, Ajit Nayak, Neal Stovicek, Stephen Tan, Fupei Wang, Bill Wiseman. 2014-2015 Governors: William E. Bryson Jr., Sean Chao, Rodney Van Dooren, Douglas Klein, Cosmas Lu, Scott Meikle, Dan Silver, Ken Wu.

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

4

COVER SECTION

15 National Health Insurance: Looking Beyond 2G

全民健保:後二代的展望 By Don Shapiro

By adding a supplementary premium, the Second Generation NHI legislation has secured financial stability for the healthcare system for the time being. But fiscal pressures will increase in the years ahead due to the aging of Taiwan society and the advent of new medical technologies. How Taiwan deals with those challenges will have a major impact on the continuing quality of the healthcare system and the viability of the market for innovative pharmaceuticals and medical devices.

20 Dr. Yeh Goes to Washington 22 The Need for Clear Separation 25 Putting Prescription Records on the Cloud

INTERVIEW

26 National Development Council Minister Kuan Chung-ming 27 Introducing the Regulatory Reform Center BACKGROUNDER

29 India Calling

Economic relations with Taiwan are still at an early stage, but the potential for growth in trade and investment is high. By Tsering Namgyal

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ISSUE SPONSOR

TAIWAN BUSINESS

32 Coming Up: a Taiwaneseinvested Naphtha Cracker in China

Eli Lilly and Company

Blocked in Taiwan by environmental concerns, the petrochemical industry looks across the Strait. By Jens Kastner

INDUSTRY

F

CUS 請置入檔案

Lilly unites caring with discovery to make life better for people around the world.

A Report on the ICT Sector Looking for New Opportunities

For more than 135 years, Eli Lilly and Company is a leading, innovation-driven corporation committed to developing a growing portfolio of best-in-class and firstin-class pharmaceutical products that help people live longer, healthier, and more active lives.

36 Taiwanese ICT Firms See Their Future in Services By Philip Liu

Lilly products treat Diabetes, Oncology, Osteoporosis, Schizophrenia, Attention Deficit Hyperactivity Disorder, Depression, Men's Health, and many other conditions. We're committed to bringing life-changing medicines to those who need them, advancing the understanding and management of disease, and providing meaningful support to patients living with illness and to the people who care for them.

40 Taiwan Aspires to Restart Stalled ITA Talks By Philip Liu

41 For Notebooks, Stability but No Excitement By Jens Kastner

43 Taiwan’s Smartphone Sector Slows Down

Lilly employs more than 38,000 people worldwide and markets our medicines in 125 countries. We also have conduct clinical research in more than 55 countries and research and development facilities located in 8 countries.

By Jens Kastner

48 AMCHAM EVENT

Founded in 1966, Lilly Taiwan is dedicated to providing besting-class products and exceptional service to our customers in Taiwan. In the future, we will work on reinforcing our relationships with the local government, medical societies, and advocacy groups in the hope of contributing more to Taiwan’s life sciences industry. At the same time, we will conduct more and more philanthropic activities because we believe that we have a responsibility to be a good corporate citizen in our communities.

2014 Green Forum

CGA-14-005-Apr

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Welcome Progress in U.S. Economic Relations

L

ast month brought several highly encouraging developments in U.S.-Taiwan economic relations. On April 4, negotiators from the two sides held successful discussions in Washington, D.C. under the umbrella of the bilateral Trade & Investment Framework Agreement (TIFA), serving to move the bilateral economic agenda forward. Two weeks later, Taiwan played host to Administrator Gina McCarthy of the U.S. Environmental Protection Agency, the first cabinet-rank U.S. official to visit Taiwan in 14 years. As regular readers of Taiwan Business TOPICS are well aware, the high-level TIFA Council meeting, which is supposed to take place routinely on an annual basis, was suspended for more than five years beginning in 2007 because of U.S. displeasure over Taiwan’s restrictions on the import of American beef. Resumption of the TIFA Council negotiations a year ago was an important breakthrough. AmCham Taipei is gratified that the sessions now appear to have been firmly restored to an annual schedule, despite continuing disagreements on some agricultural issues. It was unfair to the rest of the U.S. business community to have halted talks because of unhappiness over the treatment of a single commodity. There is no shortage of topics for the two sides to discuss, as attested to by the busy TIFA agenda. Here is how a news release from the Office of the U.S. Trade Representative (USTR) summarized the content of the talks: “U.S. and Taiwan experts agreed to continue fully utilizing the Investment and the Technical Barriers to Trade working groups launched at last year’s TIFA Council meeting and build on recent positive steps being taken by Taiwan to clarify investment criteria, lift data localization requirements in the financial sector, and to revise standards and multi-pack

labeling requirements. The Taiwan authorities outlined plans to devote necessary resources to strengthen IPR enforcement. The two sides recognized the need for further engagement on intellectual property protection, including in the challenging but critical area of online piracy as well as on pharmaceutical and medical device issues over the next year.” USTR also mentioned the close cooperation between Taiwan and the United States on various multinational trade initiatives, including efforts under the WTO to advance a Trade in Services Agreement and expand the Information Technology Agreement. Although AmCham Taipei was disappointed that the U.S. side was not yet ready at the TIFA Council meeting to announce the launch of negotiations on a Bilateral Investment Agreement, we appreciate that the Investment Working Group under TIFA will continue to look into the feasibility of entering into a BIA. Regarding the visit of EPA Administrator McCarthy, the Chamber has long urged the U.S. government to return to a policy of periodic trips to Taiwan by Cabinet officials. Such visits are both a confirmation of the continuing close bilateral relationship and an opportunity to widen those economic relations by extending them to new areas of cooperation. The McCarthy mission highlighted the many interests shared by Taiwan and the United States in the area of environmental protection, and hopefully will enable the two sides to take on additional mutual initiatives. Now that the EPA Administrator’s visit has broken the ice, we look forward to the frequent inclusion of a Taiwan stopover on the itineraries of Cabinet officers when they plan trips to the Asia Pacific.

樂見美台經濟關係出現進展

台經濟關係上月出現數項令人高度振奮的發展。雙

化對智慧財產權的保護。雙方都認同,未來一年有必要在

方談判代表根據推動雙邊經濟進程的貿易暨投資架構

保護智慧財產權(包括充滿挑戰卻至關重要的網路侵權領

協定(TIFA)框架,4月4日在華府進行討論,成果

域),以及製藥和醫療用品等議題上進一步合作。」美國貿

園滿。兩週後,台灣接待來訪的美國環保署長麥卡馨(Gina

易代表署還提及台美在種種跨國貿易計畫上的密切合作,

McCarthy),她是14年來第一位訪台的美國內閣層級官員。

包括在世界貿易組織(W T O)框架下,推動服務貿易協定

本刊的忠實讀者非常清楚,由高層代表進行的貿易暨投資 架構協定聯席委員會(TIFA Council)會議,理應每年定期

(Trade in Services Agreement)談判,並擴大資訊科技協 定(Information Technology Agreement)的協商。

舉行,但因美國不滿台灣限制美牛進口,自2007年起中斷超

美方在TIFA Council會議中,並未做好宣布啟動雙邊投資

過5年。TIFA Council談判在1年前恢復是一大突破。本商會

協定(Bilateral Investment Agreement,簡稱BIA)談判的

很高興看到如今協商似乎穩定恢復每年舉行,儘管雙方在一

準備,令本商會失望。但TIFA投資工作小組將繼續研究進入

些農業議題上仍有歧見。因為不滿單一商品蒙受的待遇就暫

BIA談判的可行性,本會深表感激。

停談判,對美國商界的其它業者並不公平。

有關麥卡馨署長訪台一事,本商會長久以來一直敦促美國

TIFA會議議程繁多,證明美台雙方不乏可以討論的議題。

政府恢復內閣官員定期訪台的政策。這類訪問不但能確認雙

以下是美國貿易代表署(USTR)發布的會談內容摘要新聞

邊緊密關係的持續,也是將經濟合作關係擴展至新的領域。

稿:「美台專家同意,繼續充分透過去年在TIFA Council

麥卡馨此行凸顯台美在環保領域有許多合作的空間,希望能

會議中成立的投資工作小組和技術性貿易障礙工作小組,在

藉此促使雙方推動更多合作計畫。

台灣最近採取正面措施的基礎上,釐清投資條件,解除金融

美國環保署長訪台已經為美國內閣官員來訪跨出第一步。

業資料只限在台灣境內流通的要求,並修改測試標準和多重

本商會希望其他內閣在規劃亞太地區訪問行程時,能常將台

包裝標示規定。台灣當局提出計畫,將投入必要資源,強

灣列為其中一站。

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— by jane ri ckards —

MACROECONOMICS GaininG steaM The government-funded ChungHua Institution for Economic Research (CIER) last month nudged its forecast for Taiwan’s 2014 GDP growth upwards, from a December prediction of 3.03% to 3.05%. CIER President Wu Chung-shu said better-than-expected global economic recovery would provide a boost for Taiwan’s crucial export sector. The think tank is more optimistic than the government’s Directorate-General of Budget, Accounting and Statistics, which in February predicted GDP growth of 2.82% for this year. Wu noted numerous continuing uncertainties that could affect the forecast, including the pace of quantitative easing by the U.S Federal Reserve, which could heighten volatility in financial markets, and the structural adjustments China is making to its economy. The Asian Development Bank (ADB) said in a recent report that while economies in advanced nations were improving, growth in developing countries in Asia might be constrained over the next two years by a slowdown in China. ADB deputy chief economist Zhuang Juzhong said growth trends in East Asia, in particular, would flatten, as the Chinese authorities move to rein in credit growth and adjust their economy from one driven by often wasteful investment to one powered by consumption. R e f l e c t i n g t h a t s h i f t , Ta i w a n ’s normally robust volume of exports to Hong Kong and China, which take roughly two-fifths of Taiwanese shipments by value, contracted slightly by 0.3% in March even as exports to other nations increased, the Ministry of Finance said. At US$27.76 billion overall, March exports showed growth of 2% year-on-year. The biggest increases were to Europe and the United States,

END OF OCCUPATION — After receiving assurances from Speaker Wang Jin-pyng, student leaders called off their 24-day takeover of the Legislative Yuan assembly chamber. photo : ap/ wally santana

at 10% and 10.3% respectively. Export orders, a sign of shipments to come in the next few months, posted strong growth of 5.7% in February to come to US$30.71 billion. The industrial production index also posted an increase of 7% in this month. However, CIER is predicting that domestic consumption will remain stagnant, as salary levels continue to stay flat. As many economists expected, the Central Bank’s end-of-March board meeting left interest rates untouched due to uncertainties relating to the Chinese slowdown and Taiwan’s remarkably low inflation rate (the consumer price index is forecast to rise 1.07% this year). The discount rate has remained at 1.875% since the third quarter of 2011. Economists say Taiwan’s bank rates generally move in tandem with the U.S. Federal Reserve because of Taiwan’s heavy reliance on the U.S. market, and the Fed has yet to hike rates.

DOMESTIC Ma’s OVertUres tO stUDents rebUffeD President Ma Ying-jeou faced one of the gravest challenges of his presidency when students staged a 24-day occupation of the main debating chamber of the Legislative Yuan in a protest that lasted until April 10. The students and their supporters, known as the Sunflower Movement, aimed to prevent ruling Kuomintang lawmakers from approving a cross-Strait agreement liberalizing trade in services. Ma has staked both Taiwan’s economic recovery and his legacy on relations with China, and his administration has argued that legislative approval of the pact is needed if Taiwan is to gain Beijing’s acquiescence for it to enter into free trade agreements with more other countries or to join regional trade groupings such as the

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planned Trans-Pacific Partnership (TPP). As many Taiwanese sympathized with the students’ position that Taiwan needs to be wary of economic integration with its authoritarian neighbor, Ma could not afford to resort to harsh measures to remove the demonstrators, leaving the legislature paralyzed until mid-April. The protesters’ main demand was for the legislature to enact a law allowing for greater public and legislative oversight of cross-Strait pacts before lawmakers dealt with the services agreement. The Sunflower Movement objected that the services pact was negotiated in secret and favors big business and other interest groups. Offering an olive branch, Ma asked to meet with the student leaders to explain the government’s stance but was rebuffed. In early April, the Executive Yuan drafted a bill for monitoring cross-Strait agreements by requiring public consultations and adopting national security screening measures. But student leader Chen Wei-ting dismissed the bill as “insincere.” One complaint was that the draft bill, once enacted by the legislature, would not apply retroactively to the services pact itself.

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not the end,” the Sunflower Movement said in a statement. Later, around 1,000 protesters converged on a Taipei police precinct, complaining about the allegedly brutal way the police had removed diehard protesters who remained outside the legislature after the students left. The Presidential Office and many KMT leaders expressed surprise over the commitment that Wang, a powerful figure in the KMT but one who has been on the outs with President Ma, gave the students about first passing the monitoring bill. The Executive Yuan’s stated policy was that bill and the services pact should be dealt with simultaneously. The difference in positions raised concern in the KMT that disunity could weaken the party’s chances in the 2016 presidential election. Some political analysts saw Wang as attempting to take control of the crisis precisely to challenge Ma’s leadership. Animosity between the two intensified last September after Ma unsuccessfully sought to expel Wang from the party for alleged influence peddling. Currently the fate of the services pact is unclear. Premier Jiang Yi-huah

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warned that if a monitoring bill is enacted first, as Wang promised, the delay in passing the services agreement could cause two years of economic decline. Others said a delay might even cause the pact to be cancelled. A former chairman of the American Institute in Taiwan, Richard Bush, also cautioned that the protests might make other nations doubt Taiwan’s reliability as a trading partner. “It’s important for Taiwan to reassure other trading partners that the commitments that its negotiators made during negotiations can actually be ratified within Taiwan’s domestic political system,” he said during a visit to Taipei.

tsai inG-wen tO be OPPOsitiOn LeaDer Former presidential candidate Tsai Ing-wen is expected to become chairman of the opposition Democratic Progressive Party (DPP) after two other influential figures in the party, current DPP chairman Su Tseng-chang and former Premier Frank Hsieh, dropped out of running ahead of a party election in May, citing the need for party unity. Tsai, 58, holds

sPeaKer wanG stePs in, stUDents enD PrOtest In the end, it was not Ma who persuaded the students to end their occupation, but rather his political rival, Legislative Speaker Wang Jin-pyng. Visiting the students in the chamber amid great media fanfare, Wang promised that a monitoring bill would be passed before lawmakers reviewed the cross-Strait services pact. Urging the protestors to go home, he stressed that the legislative paralysis was preventing the passage of key laws. The students greeted the Speaker’s visit as the first gesture of goodwill, and announced that they would depart in a few days. “The flame that was ignited on March 18 is a preface to a new series of democratic movements. Leaving the legislature is

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THE ONCE AND FUTURE CHAIRMAN — With her two main rivals out of the race, Tsai Ing-wen, the 2012 Democratic Progressive Party presidential candidate, seems assured of election as the party’s next chairman. photo : cna

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in the agreement to renegotiate sections in dispute. But China firmly ruled out this possibility, insisting that the service pact be left intact and implemented as is. A spokeswoman for China’s Taiwan Affairs Office said those living on either side of the Taiwan Strait do not want to see the peaceful development of crossStrait relations “interfered with and destroyed,” Taiwan’s Central News Agency reported.

I N T E R N AT I O N A L first Visit in 14 Years frOM a U.s. Cabinet OffiCer EPA Administrator Gina McCarthy was the first Cabinet-rank American official to visit Taiwan in 14 years.

Taiwan last month saw the first visit from a US cabinet-level official in 14 years. The American Institute in Taiwan said the visit from Environmental Protection Agency administrator Gina McCarthy celebrated 20 years of U.STaiwan cooperation on a wide-range of environmental issues. Her trip to Asia, which included a visit to Hanoi, was also to highlight environmental cooperation between the United States and its partners in the Asia Pacific region. McCarthy met with President Ma, who said her visit was of great significance to bilateral ties. China lodged an expected protest with Washington, accusing the

photo : wikipedia

United States of violating promises that Taiwan would not be treated as a sovereign state. McCarthy stressed the importance of environmental education by visiting elementary schools and delivering a speech at National Taiwan University, where she described the Taiwanese as among the most environmentally responsible people in the world and referred to Taipei as one of Asia’s most liveable cities. She said the U.S. EPA would

TAIWAN'S JAN.-mAr. 2014 TrADE FIGUrES (YEAr- ON-YEAr COmPArISON)

2013

ASEAN

2014

2013

2013

7.27 6.76

7.01 7.65

6.66 7.25

2014

2013

2014

2013

Exports

2014

2013

Europe

7.76 6.6

U.S.

2014

TOTAL

41.05 45.59

2014

Japan

43.96 45.4

HK/China

CHina rULes OUt CHanGes in serViCes PaCt Looking for a way to resolve the impasse over the services agreement, MAC chairman Wang raised the idea that the legislature first approve the pact, after which Taiwan and China could use an urgent-consultation mechanism

i

13.84 7.53

The chief negotiators between Taiwan and China, Straits Exchange Foundation Chairman Lin Join-sane and Association for Relations Across the Taiwan Strait President Chen Demin, said during a meeting in Yunnan that high-level negotiations would continue in the future despite the student protests questioning the cross-Strait services agreement. But behind the scenes, all was not so rosy. A historic visit by a cabinet-level Chinese official, expected in April, was delayed owing to the protests, officials said. The visit from Zhang Zhijun, the head of China’s policymaking Taiwan Affairs Office, would have amounted to the first formal visit to Taiwan from a PRC central-government official. Zhang was invited to Taiwan by Mainland Affairs Council (MAC) chairman Wang Yu-chi when they met in Nanjing in February in the first formal meeting between sitting Taiwanese and Chinese officials since the Chinese Civil War.

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14.08

CHinese Minister DeLaYs Visit

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a Master of Laws from Cornell University and a doctorate from the London School of Economics and Political Science. A former chairwoman of the Mainland Affairs Council and a former vice premier, Tsai also played a key role in the 1990s in preparing for Taiwan’s WTO accession and was chairwoman of the DPP from 2008 to 2012. She is considered a moderate and recently pledged to cultivate more young leaders in the DPP ahead of municipal elections at the end of the year.

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a

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Imports

UNIT: US$ Billion SOURCE: BOFT/MOEA

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continue to partner with its counterpart in Taiwan, the Environmental Protection Administration, as part of a grouping of environmental agencies in the region. Shortly after McCarthy’s trip, Robert Wang, the American senior official for APEC (the Asia-Pacific Economic Cooperation organization), also visited Taiwan last month.

taiwan reDUCes OrDer fOr U.s. warsHiPs Taiwan last month cut an order for second-hand warships from the United States from four to two, citing budgetary constraints. Defense Minister Yen Ming told the legislature that Taiwan originally requested more than four Oliver Hazard Perry-class guided missile frigates from the United States, and Washington had promised to sell four of the vessels. The House of Representatives last month then agreed to authorize the sale, which infuriated China. Beijing’s defense ministry said the House decision would cause “severe damage” to military relations between the United States and China, and urged Washington to put a stop to arms sales to Taiwan altogether. The Senate is expected to vote on the matter after its spring recess. Some analysts said the 1980s-era ships, which have been taken out of service by the U.S. Navy,

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are too old to significantly correct the growing imbalance in military preparedness between Taiwan and China. U.S. lawmakers in early April also reaffirmed their commitment to the Taiwan Relations Act on its 35th anniversary. The law commits the United States to provide Taiwan with arms of a defensive nature, and serves as the basis for relations with Taiwan in the absence of formal diplomatic recognition.

BUSINESS HtC POsts LarGer LOsses tHan eXPeCteD As local smartphone maker HTC battles against global behemoths Apple and Samsung, in early April it posted a far larger first-quarter loss than analysts had expected. At NT$1.88 billion (about US$62.7 million), the loss – the second in two quarters – exceeded the median estimate from Bloomberg analysts of NT$1.71 billion. First-quarter revenue also fell 22.6% to NT$33.12 billion (US$1.1 billion). In late March the company released the HTC One M8, the latest version of its HTC One, in hopes that it would bring an improvement in profits. HTC, which was one of the first smartphone makers to adopt the Android operating system, was

Unit: US$ billion Current Account Balance (Q4 2013)

Year Earlier 17.14

12.30

Foreign Trade Balance (Mar.)

1.95

3.20

Foreign Trade Balance (Jan.-Mar.)

6.47

4.64

New Export Orders (Mar.) Foreign Exchange Reserves (end Feb.) Unemployment (Mar.) Discount Rate (Feb.)

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taiwan stock ExchangE indEx & valuE

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

9000

145

8750

130

8500

115

8250

100

8000

85

7750

70

7500

55

7250

40

7000

25

6750

10

March

Economic indicators

37.9

27.1

418.0

404.1

4.03%

4.17%

1.875%

1.875%

Economic Growth Rate (Q4 2013)f

2.95%

3.85%

Annual Change in Industrial Output (Mar.)p

3.05%

-3.22%

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

2.39%

Annual Change in Consumer Price Index (Mar.)

1.61%

Annual Change in Consumer Price Index (Jan.-Mar.)p

0.79%

note: p=pReliminaRy F= Final

i

1.36%

souR ces: moea, DGbas, cbc, boFt

Data souRce: tw se

Unit: nt$ billion

once considered a peer of Apple and Samsung, but recently its global market share has fallen to an estimated 2%. In that competition, analysts say HTC is handicapped by its much smaller size and marketing budget than Apple and Samsung. HTC reportedly recently hired the former head of marketing for Samsung Electronics America’s mobile phone business as an advisor to chairwoman Cher Wang.

CHinatrUst aCQUires JaPanese banK The Financial Supervisory Commission (FSC) said last month it had approved plans from CTBC Financial Holding Co. (formerly known as Chinatrust), to acquire the Tokyo Star Bank for 53 billion yen (US$530 million) in the first takeover of a Japanese commercial lender by a foreign bank. CTBC will buy a controlling stake from shareholders including Lone Star Funds, Shinsei Bank, and Credit Agricole. The FSC said the acquisition will allow CTBC Bank, Taiwan’s largest credit-card issuer, to tap retail banking and cross-border financing across Asia. Takeover of the Japanese bank, with its 31 outlets and 1,200 employees, will also allow CTBC to expand in the Japanese market. The deal still needs approval by Japanese regulators.

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Regulating the Advertising of Food to Children The goal is laudable, but the methodology in the proposed restrictions is impractical.

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n amendment to the Food Sanitation Act passed by the Legislative Yuan in February last year sought to target the problem of childhood obesity by authorizing the placement of advertising and marketing restrictions on “foods not suitable for long-term consumption by children.” But in line with general practice in Taiwan, the specific details of the regulation were left unstipulated, to be filled in by later implementation regulations issued by the executive branch. Those enforcement guidelines are now under preparation by the Taiwan Food and Drug Administration (TFDA), which has made known its intention to complete the process this June. Within the food industry, responsible companies fully endorse the objective of promoting a healthier lifestyle and recognize the particular concern about advertising to children under 12. Based on the current draft of the proposed regulation, however, questions have arisen about the practicality of the approach that the authorities are considering. As often happens, the most difficult challenge is one of definition: How to identify the specific kinds of foods that should be covered by the restrictions? To its credit, the TFDA sought scientific precedent, selecting for reference some international guidelines on what constitutes a balanced diet. But in taking standards designed to evaluate a person’s overall daily intake and applying them to individual food items, the regulators are proposing a system that is both unreasonable and impractical. For example, the nutritional criteria in the draft regulation that would determine which foods are “not suitable for long-term consumption by children” would include foods where: • Total fat contributes more than 30% of the total calories. • Saturated fat contributes more than 10% of total calories. • Sugar contributes more than 10% of total calories. • More than 0.3 grams of trans fat are contained in each 100 grams or 100 milliliters of the product. • More than 1 milligram of sodium is contained per calorie. Attempting to use these general dietary guidelines to determine which particular products may be advertised to children would quickly confound the regulators with a long list of anomalies. To cite but one of many examples, bottled water would be among the proscribed products. Since it contains some sodium but has no calories, it would be prohibited for having “more than 1 milligram of sodium per calorie.” Rather than proceed with regulations that would prove unworkable, it would be advisable to take the time to devise

規範兒童食品廣告 目標值得讚許,但研議中的限制措施所採 取方法並不可行。

法院去年6月通過的食品衛生管理法針對兒 童肥胖問題,授權限制「不適合兒童長期 食用食品」的廣告和行銷。不過法規並未 規定具體內容,而是沿用台灣的一般作法,¬即留 待行政部門日後公布的施行細則來做規範。據了 解,施行細則正由食品藥物管理署規劃中,可望在 今年6月完成。 有責任感的食品業者不但完全贊同推廣較健康生 活形態的目標,並認為針對12歲以下兒童廣告尤其 值得擔心。不過根據目前研議中的施行細則草案, 有關當局所考慮方法及可行性令人質疑。一如經常 出現的情況,最困難的挑戰就是:如何定義應受限 制食品的具體種類? 值得讚許的是,食品藥物管理署向科學文獻取 經,並選擇參考國際間均衡飲食的準則。不過在擬 定每人一日食品類別及建議攝取量評的估過程中, 主管當局提出一套既不合理也不可行的系統。例如 施行細則草案中的營養標準決定「不適合兒童長期 食用」的食品包括: • 30%以上的總熱量來自脂肪。 • 10%以上的總熱量來自飽和脂肪。 • 10%以上的總熱量來自糖分。 • 每100克或100毫升的產品中,含有0.3克以上 的反式脂肪。 • 每1大卡熱量中含有1毫克以上的鈉。 若試圖以如上一般飲食準則來決定何種產品廣 告可針對兒童為特定對象,主管當局很快就會被一 長串例外情況弄得狼狽不堪。茲從眾多實例中舉出 一例:瓶裝水會被列為禁止對象,因為它含有一些

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a sounder approach to meeting the praiseworthy objectives. Unless the new regulations and enforcement system are carefully thought out, attempts at implementation will bring inconvenience to manufacturers, advertising media, and even the regulators, without much positive benefit in improving children’s health. —– By Don Shapiro

鈉,卻沒有熱量,會因「每1大卡熱量中含有超過 1毫克的鈉」而被禁止。 與其繼續推動不可行的施行細則,建議將時間 用於籌畫更周全的政策。經過週詳考慮後所制定 的施行細則,方能避免在執行時為製造商、廣告 媒體、甚至主管機關造成不便,並為在改善兒童 健康上有所幫助。 — 撰文/沙蕩

Restructuring in the IPR Police AmCham receives assurances that the changes will not reduce the effectiveness of enforcement.

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decade ago, intellectual property rights (IPR) protection was among the issues at the very top of AmCham Taipei’s advocacy agenda, and the Office of the U.S. Trade Representative (USTR) still included Taiwan on its 301 Priority Watch List of countries considered to be egregious IPR offenders. Although some issues remain, since that time Taiwan has made striking progress in improving its IPR regime. New legislation governing copyrights, trademarks, patents, and trade secrecy have strengthened the legal framework and increased penalties for infringement, and establishment of a dedicated Intellectual Property Court and training programs for judges have provided more consistent and professional judicial support. Another step also contributed heavily to Taiwan’s transformation from a haven for counterfeiters to a market that is able to boast about its emphasis on IPR as one of its attractions for foreign investors – the operation of a special police task force to bolster the enforcement of IPR-related criminal offenses. Because of the positive role of the Intellectual Property Rights Police (IPRP) over the years, a reorganization – and apparent downsizing – of the unit that went into effect from the beginning of this year caused the business and legal communities to take notice. Under the restructuring within the National Police Agency, the IPRP has become part of the Criminal Investigation Bureau and is now known as the Second Special Police Corps (SSPC) of the Criminal Investigation Brigade. The change raised certain points regarding the staffing and future effectiveness of the force: • The number of officers assigned to the SSPC may be less than the number assigned to its predecessor IPRP, which 12

保護智慧財產權 警察改組 台北市美國商會獲得保證 改組不會減少智財權保護力度

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年前,智慧財產權的保護是台北市美 國商會最重要的推動項目之一,而且 台灣還被視為嚴重侵犯智財權的國家 之一,因此列在美國貿易代表署的特別301優先觀 察名單上。 雖然有些問題依然存在,但台灣在過去10年 當中,在加強智財權的保護方面有了長足進步。 有關著作權、商標、專利和商業機密的新法律強 化了保護智財權的法律架構,同時提高侵權的罰 則。成立專責的智慧財產法院以及為法官提供訓 練課程,也在司法上為智財權的保護提供更一貫 而且專業的後盾。 台灣曾經是盜版天堂,如今卻可以拿台灣對 智財權的保護當做吸引外資的優勢之一。在這個 蛻變的背後還有個重要因素,那就是一個警察大 隊,專責處理與智慧財產權有關的犯罪案件。保 護智慧財產權警察大隊這些年來扮演很正面的角 色,因此它今年初生效的改組行動─顯然是縮編

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itself was staffed well below its authorized force of 218. • Not all IPRP officers will be transferred to the SSPC, and it was unclear whether the SSPC would handle IPR cases exclusively. • The IPRP force consisted of seven squadrons, one in each of seven major cities, while the SSPC maintains only one team each in the Taipei, Taichung, and Kaohsiung municipalities. • The Taiwan Intellectual Property Office (TIPO) under the Ministry of Economic Affairs will not subsidize enforcement rewards for the SSPC, as it did for the IPRP, and will likely not maintain its administrative supervision over IPR enforcement. At the invitation of AmCham’s Intellectual Property & Licensing Committee, SSPC Commander Lee Ching-chuan made a luncheon-meeting presentation to address these issues. He provided assurances that the staffing, qualifications, and budget of the SSPC will be adequate to effectively fight infringement, and confirmed that the SSPC will remain exclusively dedicated to handling IPR-related criminal cases. Lee also stressed that placing the unit within the Criminal Investigation Brigade will increase its prestige and its members’ opportunities for promotion, making it easier to recruit high-caliber personnel in the future. Because of the changed nature of IPR infringement in Taiwan, he added, the unit no longer needs a huge level of manpower to inspect night markets for counterfeit music and movie disks. Now it is more important to have a highly trained team of computer-savvy officers who can effectively monitor online infringement. IP&L Co-chair Jason Chen said at the luncheon that the Committee looks forward to working with the police to ensure that the reorganization enhances the authorities’ ability to enforce IPR in Taiwan. —– By Don Shapiro

A Nourishing Brew for Taiwan’s NGOs AmCham’s new TechSoup partnership Brings Technology to Everyone

─不免引起企業界和法律界的注意。 隨著警政署的改組,保護智慧財產權警察大隊 成為刑事警察局的一部分,改為刑事警察大隊的 保二總隊。在這項變動生效之後,有些關於人員 編制和未來功效的問題引起注意: • 保護智慧財產權警察大隊原本人力就未達編 制的218人,改為刑事警察大隊之後,員警 人數可能更少。 • 保智大隊的員警並未全部納入新的單位;不 清楚刑事警察大隊是否只處理智財權侵權案 件。 • 保智大隊原本有七個中隊,分別派駐在七個 主要城市,刑事警察大隊則只在台北、台中 和高雄各派一組人力。 • 經濟部智慧財產局原本有補助發給保智大隊 的破案獎金,但改為刑事警察大隊之後,這 項補助取消,而且智財局可能不會繼續負責 對智財權保護執法的行政監督。 在台北市美國商會智慧財產權與授權委員會的 邀請下,刑事警察大隊的大隊長李清泉在一場午 餐會中針對這些問題提出說明。他保證,以大隊 的人力、條件和預算,可以有效打擊侵權行為。 他並且證實,這個大隊將繼續專責處理智產權相 關刑事案件。他也強調,將這個單位納入刑事警 察局可以提升它的地位,員警陞遷機會也會增 加,這讓大隊在未來可以比較容易招募到優秀人 才。他並說,台灣的侵權行為性質與過去不同, 保智警察不需要像過去那樣出動大量人力到夜市 取締盜版音樂和電影光碟。現在的重點是要有受 過良好訓練而且電腦技術純熟的員警,以有效監 控網上的侵權行為。 台北市美國商會智慧財產權與授權委員會共同 主席陳世杰在餐會上表示,委員會期待與警方合 作,以確保這次改組能強化當局落實智財權保護 的能力。 — 撰文/沙蕩

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n the eve of Earth Day 2014, AmCham Taipei last month announced the official launch of a new partnership with Microsoft, the Frontier Foundation, and Chung Yuan Christian University to help provide refurbished computers to worthy Taiwanese non-profit organizations who otherwise may be unable to afford new equipment. The Frontier Foundation is the local affiliate of TechSoup Global, a similar worldwide initiative. The new program with AmCham builds on an existing partnership between Microsoft Taiwan and the Frontier Foundation to provide free software. According to Frontier Foundation CEO Tsai Shu-Fang, organizations receiving the software often request computer hardware as well. However,

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Issues 給台灣的非政府組織 補一補 台北市美國商會參與科技濃湯計畫

在 past efforts to meet this demand were hampered by insufficient donations and irregular supply. While scattered donations have enabled the Frontier Foundation to provide computers to over 200 NGOs over the last two years, more than 300 NGOs remain on the Foundation’s waiting list, underscoring the urgent need for further donations. AmCham’s TechSoup partnership steps into this gap, providing a platform for the stable, long-term supply of refurbished computers as the Chamber’s more than 500 member companies regularly replace a substantial volume of computer hardware. “With over 60 years in Taiwan, AmCham is deeply rooted in Taiwan,” said Chairman Thomas Fann in a media briefing about the program. “Our member firms are committed to contributing to the prosperity of the society of which they are part.” Once AmCham members donate computers, volunteer students at Chung Yuan Christian University will repair and refurbish the equipment. Chang Yao-Jen, a professor of computer engineering at Chung Yuan, said the students seek to create an ideal “out-of-box experience” for the donations’ recipients. While independent donations of computer hardware often quickly end up collecting dust in a corner for lack of volunteers to help with repairs, the work of Chung Yuan students, combined with the new software donated by Microsoft, ensures that all donated computers are immediately usable. The Frontier Foundation vets the applications from NGOs to confirm that they are creditable, registered organizations. Even before April’s official launch, the TechSoup partnership over the last two months has already received over 100 computers from AmCham members, including Eiger, Ford Lio Ho, HAVI Logistics, Hawley & Hazel, Pepsico, and the Trade Council of Denmark. TechSoup will be an ongoing initiative for AmCham as one of its Corporate Social Responsibility (CSR) efforts, providing a venue for member companies to give back to the community of which they are a part. “We have to do all we can,” said Thomas Fann, “because we are part of the same society, living and flourishing together.” M ore information about participating in TechSoup can be found on the AmCham website at www.amcham.com.tw/ connect/techsoup . — By Abraham Gerber

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2014年4月的世界地球日前夕,台北市美國 商會宣布與微軟、開拓文教基金會及中原大 學成立新的合作計畫,要提供再生電腦給符 合資格而沒有足夠經費添購新電腦的本地非政府組 織。 全球科技濃湯組織在全球推動類似的工作,而 開拓文教基金會是它在台灣的相關機構。在台北市 美國商會參與這項新的計畫之前,台灣微軟與開拓 文教基金會之間已有提供免費軟體的合作項目。據 基金會執行長蔡淑芳表示,獲得軟體的非政府組織 常會希望也能取得電腦硬體,但過去要滿足這項需 求的努力受限於捐贈不足和沒有固定的來源。過去 兩年,基金會陸續收到捐贈品之後,轉送給200多 個非政府組織,但等待提供電腦的組織還有300多 個,顯示對捐贈電腦的需求十分迫切。 台北市美國商會的科技濃湯合作計畫,就是要填 補這個空缺。它提供一個長期而穩定的再生電腦供 應平台,因為商會的500多家會員公司每隔一段時 間就會更換數量可觀的電腦硬體。商會會長范炘在 合作計畫媒體簡報會上表示:「台北市美國商會成 立60多年,已在台灣深深紮根。商會的會員公司是 台灣社會的一部分,決心要對這個社會的良好發展 做出貢獻。」 台北市美國商會的會員公司捐出電腦之後,中原 大學的學生志工會負責修理翻新。中原電腦工程教 授張耀仁說,學生們希望讓獲得電腦的人能有「開 箱即用」的美好經驗。個別捐贈的電腦因為沒有志 工幫忙修理,往往很快就被棄置在角落招灰塵。有 了中原大學學生的參與,加上微軟捐贈的新軟體, 可以確保每一台捐贈的電腦都可以馬上開機使用。 開拓文教基金會的工作,是要審查提出申請的非政 府組織,確定受贈單位都是登記有案的機構。 科技濃湯合作計畫在四月正式成立之前,便已 在兩個月當中收到100多部電腦,捐贈單位包括艾 格峰外國法事務律師事務所(E i g e r)、福特六和 汽車公司、夏暉物流(HAVI Logistics)、好來化 工(Hawley & Hazel)、台灣百事食品(Pepsico) 等商會會員以及丹麥商務辦事處(Trade Council of Denmark)。科技濃湯將會是台北市美國商會善盡企 業社會責任的一項持續性的工作,它讓會員公司有 個渠道,可以回饋他們所屬 的社會。會長范炘說: 「我們應該要竭盡所能,因為我們都同屬於一個社 會,與這個社會共存共榮。」 若要參與科技濃湯技畫,可上台北市美國商會 網頁取得更多資訊:www.amcham.com.tw/connect/ techsoup   — 撰文/ 柯博文

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Cover story

NatioNal HealtH iNsuraNce: lookiNg BeyoNd 2g 全民健保:後二代的展望 BY DON SHAPIRO

撰文 / 沙蕩

photo : cna

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By adding a supplementary premium, the Second Generation NHI legislation has secured financial stability for the healthcare system for the time being. But fiscal pressures will increase in the years ahead due to the aging of Taiwan society and the advent of new medical technologies. How Taiwan deals with those challenges will have a major impact on the continuing quality of the healthcare system and the viability of the market for innovative pharmaceuticals and medical devices.

為推動二代健保所進行的修法,增加了補充保費,讓全民 健保制度的財政暫時穩定下來。但隨著台灣人口老化以及 醫療新科技的來臨,健保的財政負擔在未來幾年將會加 重。台灣因應這些挑戰的做法,對維持健保品質並兼顧創 新藥品及醫療器材市場的努力,將會有重大影響。

灣為了改革全民健康保險計畫,曾激 辯好幾個月,衛生署長還曾一度請辭 (後來接受慰留),但在2011年終於 通過修法,推動所謂的「二代全民健康保險」 ─簡稱二代健保,針對薪水以外的收入扣取補 充保費,使得台灣廣受歡迎的全民健保制度免 於破產。修訂後的全民健康保險法延後一年實 施,在2013年初生效。除了加收補充保費, 新法也在健保支出方面做了若干修正,包括更 改部分對醫院所使用藥品及醫療器材的給付程 序。 雖然修法使得健保制度至少在未來三年或更 長的時間內不致於破產,但相關各方是在紛擾 的政治過程中針對修法內容達成協議,而結果 是包括政府在內,沒有一方完全滿意。如今新 法生效不到一年半,有些施行細則是在幾個月 前才完全擬定,但政府已經在展望未來,想要 針對各方的批評研究出改革之道。 衛生福利部去年成立由學者和卸任政府官員 組成的專案小組,由前任衛生署長葉金川擔任 16

ollowing months of vitriolic debate that caused the then health minister to tender his resignation (later retracted), passage of legislation in 2011 to put in place what’s been called the “Second Generation” National Health Insurance program – 2G NHI for short – rescued Taiwan’s highly popular universal healthcare system from the brink of bankruptcy by creating a new supplementary premium covering non-salary income. The revised NHI Act, which came into force at the start of 2013 after a year’s postponement, also included certain modifications on the expense side, revising some of the procedures for reimbursing hospitals for pharmaceuticals and medical devices used in treatments. But while the 2G NHI Act saved the system from financial collapse, at least for the next three years or more, the tumultuous political process under which the law was hammered out left none of the major stakeholders, including the government, wholly satisfied. Now, less than a year and a half after the law went into effect – and just months since some of its implementation regulations were finalized – efforts are already underway to look beyond the current NHI program to try to remedy some of its perceived shortcomings. T h e M i n i s t r y o f H e a l t h a n d We l f a r e (MOHW) last year appointed a task force, composed of scholars and ex-government officials and chaired by former health minis-

召集人,目的是要針對1995年開辦的全民健 保提出改善建議。據說專案小組的評估即將完 成 ,預料將在將在未來幾週提出報告,然後 公開發表他們的結論。 專案小組提出的構想對於導引未來有關健保 改革的公開討論,預料將有所幫助,但瞭解這 個過程的消息人士警告說,解決問題的辦法不 會很快定案。由於危機式的迫切性已不存在, 要就重大立法改革建立廣泛的政治共識,一般 認為難度太高,特別是在當今緊張的政治環境 下。 全民健保大部分收入來自保費,而專案小組 研究的焦點之一即健保的保費結構。在第一代 健保實施期間,當局只針對民眾薪資扣取健保 費。到了2009年,健保就累積龐大赤字,金 額超過550億新台幣(將近20億美元)。官員 曾警告說,赤字很快將逼近1,000億新台幣。 而且,健保體系依法必須維持相當於一個月的 保險給付支出的安全準備金。但長期以來,安 全準備金的實際金額未達到這個標準。為解決

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ter Yeh Ching-chuan, to come up with policy recommendations for improving the system, which was first introduced in 1995. The group is reportedly close to completing its evaluation, and is expected to submit its report, followed by a public announcement of the main findings, within the coming weeks. Although the ideas generated by the task force can be expected to help shape the agenda for future public discussion of healthcare reform, sources close to the process caution that no quick fixes are likely, especially if any amendments to the law are required. In the absence of another crisis atmosphere, developing the necessary broad political consensus to undertake major legislative change is considered too difficult a stretch, particularly in today’s strained political environment. One of the main focuses of the task force will be the premium structure that the NHI must rely on for the bulk of its revenue. In the first generation of the program, when the premium was levied exclusively on payroll income, by 2009 the NHI had run up a massive deficit of more than NT$55 billion (nearly US$2 billion) and officials were warning that the amount might soon balloon to NT$100 billion. Moreover, the system

had long been operating below its legally mandated reserve of an amount equal to at least one month’s operating expenditures. The initial solution proposed by the then Department of Health (elevation to ministry status took place in July last year) was to base the premium not just on salaries but on total household income. When that proposition encountered fierce resistance from various quarters – for example, from investors worried that it would dampen the stock market and other business activity at a time of economic sluggishness – DOH Minister Yaung Chih-liang eventually came up with a compromise: the 2% additional premium to be imposed on non-salary income such as stock dividends, bonuses above a certain level, professional-service income, honorariums, and rental income. Considering that the level was much lower than the regular 5.17% premium on salaries, the 2% charge on supplementary income quieted much of the opposition. Calculations also showed that the amount of revenue generated by the extra premium would be enough to permit a reduction in the payroll premium from the 5.17% to 4.91% – winning support for the compromise from groups concerned about the impact on economically less-privileged segments of society.

健保財務問題,衛生署(去年7月升格為衛生福利 部)起初提議,將保費計算的標準,在個人薪資 之外再加計家戶總所得。 這項提議遭到部分人士強烈反對,例如投資 人說,台灣經濟成長動能遲緩,如果提議落實, 將不利於股市和其他商業活動。當時的衛生署長 楊志良最後提出折衷辦法:對薪資以外收入如股 利、超過一定額度的獎金、執行業務收入、兼差 所得和租金收入中扣取2%的補充保費。從薪資扣 取的保費比率為5.17%,而補充保費比率低了很 多,批評聲浪因此大致平息。而且根據估算,扣 取補充保費所帶來的健保收入,可以讓薪資的健 保扣除額從5.17%降為4.91%。原本擔心社會弱勢 族群將會遭受衝擊的團體,因而支持衛生署的折 衷方案。 由於有額外的保費來源,健保去年獲得640億 新台幣的空前盈餘,今年第一季的盈餘更達到 335億。這讓健保累計財務轉虧為盈,到3月底的 結餘達1,186.5億之多。衛生福利部長邱文達在 寫給TOPICS的電子郵件中說,補充保費「讓全民

Minister of Health and Welfare Chiu Wen-Ta says the introduction of the 2% supplementary premium has “ensured the continued sustainability of the (NHI) program and enhanced social equity.”. photo : mohw

健保確定可以永續經營,並且增進了社會的公平 性」。

其它長期問題 不過現階段財務狀況突然好轉,並不意味健保 已擺脫長期的給付問題。參與健保規劃的所有人 都很清楚未來所面臨人口老化迅速成長的挑戰。 邱文達指出:「高齡化社會是未來影響健保醫 藥支出最大的因素。」根據國家發展委員會的資 料,65歲及以上人口的比例在2010年為11%, 預料2017年會增至14%(達到「高齡社會」的門 檻),2025年則成長至20%(「超高齡」社會門 檻)。進一步估算,到2060年時,65歲及以上的 年長公民將占總人口的42%以上。 老年人必然是健保服務的最大使用族群,不只 因為其易患有心臟病、癌症等疾病,還須控制高 血壓、高膽固醇和糖尿病等慢性健康問題,更別 說許多失去行動能力的人需要長期照護。邱文達 表示,他現階段的頭號要務就是要在健保制度中

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Cover story With the help of the additional sources of income, the NHI registered a record surplus last year of NT$64 billion and another NT$33.5 billion in the first quarter of 2014. That inflow has turned the system’s cumulative financial status from a flood of red ink into a comfortable account surplus of NT$118.65 billion as of the end of March. Introduction of the supplementary premium has “ensured the continued sustainability of the program and enhanced social equity,” Health Minister Chiu Wen-Ta told Taiwan Business TOPICS by email.

Longer-term concerns The turnaround in the program’s current financial condition does not mean it is safe from threats to its longer-range solvency, however. Everyone involved in healthcare planning is keenly aware of the demographic challenge ahead as the proportion of the elderly in Taiwan’s population rapidly increases. “The aging society will be the largest driving force affecting NHI medical spending in the future,” noted Minister Chiu. According to National Development Council data, the proportion of the population aged 65 and over is expected to rise from 11% in 2010 to 14% (the threshold for being

considered an “aged society”) in 2017 and to 20% (the threshold for a “superaged” society) by 2025. Looking further ahead to 2060, senior citizens 65 and over could account for over 42% of the population. The elderly are inevitably the largest consumers of healthcare services, not only for such ailments as heart disease and cancer, but also for the control of chronic conditions such as hypertension, high cholesterol, and diabetes – not to mention the need for long-term care for the disabled. Minister Chiu says his current top priority is to develop a “comprehensive social safety net” for the elderly by building long-term-care insurance into the NHI program and ensuring the availability of sufficient longterm care resources. The stated goal is to “ease families’ financial burdens and ultimately advance the goal of helping people who are in some way incapacitated to live more independent lives.” A second challenge for the health insurance system is the rapid progress globally in the development of new health technologies. Although the potential benefit to patients of access to innovative new drugs and medical devices is enormous, the new products are also often more costly, adding to the financial pres-

A poster explains the new system of a 2% supplementary premium on non-salary income in addition to the regular 4.91% payroll premium.

sures on the NHI. “According to international studies, the cost of technologies accounts for about 40% of the growth in medical expenditures,” Minister Chiu noted. “It is therefore one of the major factors for us to look at when planning for the future.” To help in determining the optimal use of resources, he said, MOHW has been making increased use of a methodology called Health Technology Assessments (HTAs), designed to evaluate the costeffectiveness, budget impact, and ethical, legal, and social implications (ELSI) of new technologies entering the pipeline. Taiwan introduced HTA in 2007 as part of the decision-making process for the listing of new drugs, and extended the practice to medical devices in 2011 and to medical services this year. A requirement that HTA procedures be employed was written into the 2G NHI law, and preparations are now underway to establish a National Institute of Health Technology Assessment as an independent, non-profit organization to assist the ministry with HTA appraisals. Given the complexity of the assignment, which requires expertise in both medical affairs and economics, the challenge for the new institute will be in recruiting and training sufficiently expert personnel.

建立長期照護的保險機制以確保有足夠的長期照 護資源,為老年人開發「全面性的社會安全網 絡」。他的目標是要「減輕家屬的財務負擔,最 終則是幫助在某種程度上失能的人享有更獨立的 生活」。 健保系統的第二項挑戰則是全球的新衛生科技 發展進步迅速。這對病人來說極可能帶來獲得創 新性新藥和設備治療的好處,但新產品通常較昂 貴,對健保構成更大的財務壓力。邱文達說:「 國際研究發現,在醫療支出成長中,科技成本約 占40%。」「因此這是我們未來規劃時須考量的 一大因素。」 他指出,為了協助善用資源,衛生福利部越來 越倚重所謂的醫藥科技評估(HTA)方法,這是 用來評估成本效益、預算影響,以及使用新科技 對道德、法律和社會的衝擊程度。台灣在2007年 開始將HTA列為新藥納入健保給付決策程序的一 環,2011年擴大應用到醫療器材決策,今年則 擴及醫療服務。二代健保法已明文規定必須採用 HTA評估程序,目前正籌備成立獨立的非營利組 織: 國家醫療科技評估中心,以協助衛福部進行

photo : cna

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Considering the long-term need for greater financial support for the NHI due to the aging population and development of new technologies – as well as the continuing public controversy over the question of social fairness – the advisory task force appointed by MOHW is expected to revisit the issue of the premium structure. Critics of the current system, for example, argue that even after establishment of the supplementary premium, the wealthier members of society are still not adequately contributing their share to supporting the healthcare system. The critics question whether a mere 2% rate is reasonable on bonuses or capital gains that may amount to many millions of dollars. Interest groups such as the National Health Insurance Civic Surveillance Alliance – a coalition of organizations dealing with social issues concerning labor, women, the handicapped, and others – continue to press for a thoroughgoing reform of the premium system. “Actually, what we have now is not a real 2G NHI – at best, it ought to be considered 1.5G,” says Eva Teng, spokesperson of the Alliance. “A real 2G wouldn’t have two different premium systems [one for salaries and one for supplemental income] in one health-insurance scheme.”

The current system is probably the best that could have been achieved in the political climate of 2011, she continues, but inevitably “it is causing very unequal and unfair results,” with the bulk of the premium income still coming from payroll contributions. A disproportionate amount of the burden continues to fall on the working class, including low-income groups, and those who are unemployed still have to pay a monthly premium to

HTA評估。由於評估作業須同時涉及醫療和經濟 的專門知識,相當複雜,國家醫療科技評估中心 面臨的挑戰將是招募並訓練足夠的專業人員。 由於人口老化和對新科技的需求,加上長久以 來的社會公平爭議,健保必須長期獲得更���固的 財務支援,因此衛福部指派的諮詢特別小組預料 會重新檢討保費結構問題。例如現行制度中為人 所詬病的一點就是即使建立補充保費機制,收入 較高民眾所繳的保費仍不足以支撐健保體系。對 於那些擁有高達數百萬元的紅利或資本獲利的族 群若僅課徵2%的健保補充費是否合理,引發外界 質疑。 由勞工、婦女、殘障等社會組織聯合組成的民 間監督健保聯盟,以及其它利益團體,持續施壓 要求徹底改革保費制度。民間監督健保聯盟發言 人滕西華表示:「其實我們現在擁有的不是真正 的二代健保,頂多應該算是1.5代。」「真正的二 代健保不會讓一個健保體制中存在兩套不同的保 費制度(一是針對薪資所得,另一個則針對額外 收入)。」 滕西華還說,現行健保體制可能是在2011年的

The ceremony marking the elevation of the Bureau of National Health Insurance of the Department of Health to the National Health Administration of the Ministry of Health and Welfare. photo : mohw

政治氛圍下所能達成的最好制度,但大部分的保 費收入仍來自薪資所得,無可避免「將造成非常 不平等、不公平的結果」。包括低收入族群在內 的勞工階級繼續背負比例並不合理的保費重擔; 失業者仍須每月繳交保費,才能維持享有健保的 資格。滕西華表示:「解決辦法就是回歸以家庭 總收入作為保費計算依據的構想。」「我們就是 應該只在乎收入總額,而非來源。」

對業界的衝擊 衛生福利部和中央健康保險署為了確保健保財 務健全,在努力節制成本。台北市美國商會從事 醫療相關產業的會員公司對當局的這項挑戰能夠 體諒,但他們指出,若干控制成本的做法,包括 二代健保上路後採取的部分措施,可能會有嚴重 的負面效應,不僅衝擊供應商的業績,也會使病 人和醫師可能無法取得國際間最新的療法。台北 市美國商會的製藥與醫療器材兩個委員會已關切 的表示,指出台灣給付價格非常低,加上產品核 准上市和核定給付價格的過程冗長,非常不利於

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maintain their eligibility for benefits. “The answer is to go back to the idea of basing the premium on total household income,” says Teng. “We just should just care about the amount of income, regardless of the source.”

The impact on business AmCham Taipei’s member companies in healthcare-related industries have been sympathetic to the challenge faced by the MOHW and its National Health

Insurance Administration (NHIA) in seeking to hold down costs for the sake of the system’s fiscal soundness. But they caution that certain cost-control measures, including some introduced as part of the 2G NHI initiatives, could have a seriously negative effect not merely on the bottom line for suppliers, but also on access by patients and physicians to the best new treatments available internationally. The Chamber’s Pharmaceutical Committee and Medical Devices Committee have both expressed concern that the extremely low reimbursement prices offered in Taiwan, plus the long process for product approval and the assignment of reimbursement prices, discourages the entry of the latest innovative technologies into the market, to the detriment of the standard of care available in Taiwan. The International Research-based Pharmaceutical Manufacturers Association (IRPMA), with whom the AmCham Pharmaceutical Committee coordinates closely, has borrowed golfing terminol-

Dr. Yeh Goes to Washington Yeh Ching-chuan, Taiwan’s health minister in 2008-2009, in March was invited to explain Taiwan’s National Health Insurance program before the U.S. Senate Committee on Health, Education, Labor & Pensions amid controversy surrounding U.S. President Barack Obama’s healthcare program. Excerpts from his testimony follow: • Currently, 99.6% of the population, about 23 million people, is enrolled in the NHI program. Taiwan is the only country in the last 30 years to reach universal coverage and a single payer system at the same time. • A single-payer system has a single risk pool, since everyone is mandated to enroll. This enables cross-subsidization among diverse groups with not only different socioeconomic status but also different health status. Studies show that the premium contribution compared to the health resources utilized are favorable to the low and middle-low income classes. • The general public has been very satisfied with the NHI. Although in the first half-year satisfaction rates were as low as 25-40%, by the end of the first year they rose to 60%, and after the end of the second year, they have always been between 70 and 80% up to the present. • A single insurance administration has the benefit of very low administrative cost, which was only 1.15% of total NHI spending in 2012. Although there is no choice of insurers,

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people enjoy complete free choice of providers. The latter compels the providers to be competitive and efficient. Price competition is limited to those services not covered by the NHI program. It is quality competition in nature, not price competition; but it certainly is competition. • The NHI is the most successful public policy in Taiwan. One reason for the high satisfaction is that premium and co-payment rates are low. The premium rate is 4.91% of the payroll income, and total national health spending is only 6.62% of GDP, of which the NHI itself is 4% of GDP. In its 19-year history, the NHIA only raised the premium rate two times: from 4.25% (of the payroll) to 4.55% in 2002, and to 4.91% in 2012. In 2013, another 2% of the non-payroll income to the NHI premium base as an additional source of funding. • Some critics say that such low fees must beget problems with our service quality. However, our life expectancy is comparable to that of the developed world. In 2012, it was 79.4 years old: for males 76.1, and for females 83. Taiwan’s infant mortality rate is as low as 3.7 per thousand, and maternal mortality was between 5 and 8.5 per 100,000 in the years from 2005 to 2012. • The NHI’s total premium revenue comes from three sources: government (36%), which will not default on premiums;

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ogy to describe the syndrome as one of “low, low, slow.” As IRPMA uses it, the phrase refers to the low reimbursement prices being offered in Taiwan for new drugs (more on that in the next paragraph); the low rate of approval on applications for new drug reimbursement that go to the main decision-making body, the Pharmaceutical Benefits Reimbursement Scheme committee (PBRS), for discussion; and the drawn-out nature of the reimbursement approval process. IRPMA notes that only 36% of the newdrug applications first reviewed by a panel of appointed experts and then sent to PBRS for further discussion were approved during a period (February to October) surveyed last year. It also calculates that the average time needed for a drug to obtain reimbursement pricing – and thus be considered by hospitals for inclusion in their inventories – has grown to 475 calendar days, compared with an already long 360 days a few years ago, with as much as 867 days needed for cancer drugs.

According to the association, the reimbursement prices available from NHIA have dropped sharply over the years compared with other markets, and are now among the world’s lowest. IRPMA notes that while Taiwan in 1995 reimbursed new drugs at 89% of the median price among 10 benchmarked developed markets known as the A-10, by the first three quarters of last year the level had fallen to only 42.3%. The reason is that when new drugs apply for reimbursement, NHIA generally sets the price after comparison with local “comparators” – drugs already on the market that perform a similar function. But industry argues that those comparator prices are a skewed yardstick, because they have already gone through numerous rounds of heavy price cuts since their original launch. Every other year, the government conducts a Price-Volume Survey (PVS) of drug prices, and then readjusts them in an effort to remove the “pharmaceutical price gap.” Sometimes more lyrically called the “black hole,” the

gap is the difference between the amount NHIA reimbursed a hospital or other healthcare provider for a given drug and the price the hospital actually paid the pharmaceutical supplier after demanding and receiving a discount. (The problem is that the gap never disappears; after each price cut, the hospitals continue to expect discounts). Industry considers that a key factor in the unsatisfactory reimbursement process is the domination of the PBRS committee by hospital administrators, who hold 13 of the 26 seats in the group. For hospital management, the chief focus is generally holding down drug expenditures in order to be able to devote a larger portion of their fixed budgets to other hospital services. As a result, the hospital executives tend to favor lower prices and the slower introduction of expensive new treatments. PBRS was established under the 2G NHI law with the aim of widening the decision-making net, as seats on the committee are also held by five

employers (26%); and the public (38%). Our citizens are quite law-abiding, so the compliance rate is very high. The “bad debt rate” was just around 0.9% in 2011. The government pays 100% of the premiums for low-income households (currently 1% of the population) and extends interestfree loans to the near-poor (2% of the population). • Taiwan spends roughly 25% of the NHI budget on drugs. Multinational pharmaceutical companies often allege that prices paid by the NHI are too low. However, the NHI introduces 40 to 50 new drugs every year. So spending for new drugs per total NHI expenditure continues to rise. About one percentage of the 3-5% percent annual growth in spending of the NHI is for new drugs. Indeed, there are some delays in coverage for new drugs and new technologies. Adoption of new technology, including drugs, is often delayed by two to five years after adoption by the U.S. • The NHIA issues every insured a credit card–size IC card Former Health Minister Yeh Ching-chuan shows his NHI card while for accessing health care. As all providers in Taiwan submit testifying before a U.S. Senate committee. photo : cna claims electronically based on the patient records they keep, we can do very detailed profiling of both patients and providers. We have complete profiles on utilization by patients’ icy, the reasonably stable political system, a physical infrastructure income level, geographic location, number of visits, number capable of delivering on health policy, and the setting up of a good of hospitalizations, etc. health IT system from the very beginning to provide data as a basis Yeh also listed what he considers to be the main reasons for for policy making. In addition, the NHI system was launched durthe NHI program’s success, including the competent technocrats ing a period of good economic growth, enabling the government and dedicated leaders who devised and implemented a sound polto absorb the cost increases associated with its establishment. taiwan business topics • may 2014

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Cover story public health and legal scholars, six delegates from “payer” groups such as labor and consumer representatives, and two government officials. IRPMA and two local industry associations attend the meetings as non-voting observers. But aside from the domination of PBRS by hospital interests, the new system has posed some other difficulties. One is that the current two-tiered process – consideration of applications by both the

expert panel and PBRS – takes additional time. A second is that PBRS deals with pharmaceutical issues only every other month, devoting the alternate-month meetings to medical devices, whereas its predecessor body took up drug applications each time. And a third is that the broad composition of the committee means that members have a widely varying familiarity with and understanding of healthcare issues.

The government perspective R e p r e s e n t i n g N H I A i n a n i n t e rview with TOPICS, Chen Shang-Ping, senior executive director of the Administration’s Medical Review and Pharmaceutical Benefits Division, affirmed the government’s commitment to encouraging the entry of new and potentially lifesaving or life-enhancing pharmaceuticals, although he differed with some of

The Need for Clear Separation

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ach year in its submission to the Taiwan White Paper, AmCham Taipei’s Pharmaceutical Committee identifies what it considers to be a fundamental long-range solution to many of the problems in Taiwan’s healthcare system – the separation of dispensing from prescribing (SDP). A complicating factor in broaching this topic is that the term SDP can have two different meanings. The Ministry of Health and Welfare (MOHW) usually uses it in the sense that after diagnosing the patient’s condition, a doctor prescribes the necessary medication, but the actual dispensing of the medicine must be left to a licensed pharmacist. Under provisions of the law that have been in effect since 1997, doctors may do their own dispensing only in emergency situations or in remote areas where there is no pharmacy within 1.8 kilometers of the clinic. By that yardstick, Taiwan has already achieved SDP. To the pharmaceutical industry and many other analysts, however, genuine SDP cannot exist as long the dispensing is being done inside the hospital or clinic, or under the direct management of the medical-service provider. In Taiwan, the vast majority of prescriptions are filled by pharmacists on the payroll of the hospital or clinic, which critics say still presents a moral hazard. Especially for large hospitals where key decisions are made by professional managers, can the temptation be avoided to make financial considerations the determining factor in which drugs to prescribe or even to stock? “The pharmaceutical issue comes down to the fact that hospitals and physicians have a vested interest in drugs, since every major hospital relies on the profit from drugs to sustain its operations,” says Huang Weng-Foung, a professor at National YangMing University’s Institute of Health and Welfare Policy and a member of the task force set up by MOHW to advise on healthcare policy reform. “As a result, you can’t solve the pharmaceutical pricing problem by price cutting. The problem is embedded in the whole system.” Wang Shu-Hwa, senior executive officer of MOHW’s Medical Affairs Division, says the Ministry has been striving to promote the release of prescriptions to the network of more than 5,000 NHIcontracted community pharmacies, but runs into resistance from

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patients as much as the hospitals. “There’s a difference in national culture and habit [from the West],” she says. “Taiwanese people trust the hospitals and clinics more than outside pharmacies, and they also find it more convenient to get their medication there. When we promote SDP, the public is often opposed to it.” According to the MOHW website, the overall release rate of prescriptions to pharmacies is currently 32% for clinics but only 0.63% for hospitals. In seeking to raise the rate in recent years, MOHW has disseminated posters encouraging the public to fill prescriptions at pharmacies, especially for the treatment of chronic conditions such as diabetes, hypertension, and high cholesterol. When those patients see their doctor once a quarter, they receive prescriptions for three months of medication – to be filled a month at a time. Because many patients rely on community pharmacies for the second and third installments, the release rate for those medications has increased from 29.14% in 2009 to 34.78% in the first three quarters of 2013. Wang Shu-Hwa says MOHW considers that trend to be positive, and is trying to make the more than 20 hospitals owned and operated by the Ministry a model for others to follow. But the critics contend that there is still a long way to go before the healthcare system is weaned from dependence on pharmaceuticals to sustain itself. — By Don Shapiro

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IRPMA’s statistics. According to NHIA’s calculation, for example, drug reimbursement prices last year equaled 62% of the A-10 median price (rather than the 42.3% cited by IRPMA) and the amount of time needed to obtain reimbursement under 2G has been 277 days (instead of 475), which would be in the mid-range internationally. (Due to deadline pressure, TOPICS had no time to explore the differences in methodology that might account for the disparities.) Nevertheless, Chen stressed NHIA’s desire to work with industry to improve the reimbursement process. He noted several recent developments: • Strengthening the PBRS committee’s ability to balance cost concerns with greater weight on patient benefits through plans to add medical clinicians to the committee’s membership and providing more training to the payer-group representatives to enable them to take a more active role in the deliberations. • Boosting transparency by posting recordings of the PBRS committee proceedings on the NHIA website. • Informing companies when their reimbursement applications are rejected by the expert panel, instead of making them wait a month or two for the results to be reported to the PBRS committee. The change, scheduled to start this month, will enable manufacturers to start earlier to prepare an appeal. Facing some similar problems, the medical device industry complains of a lengthy reimbursement process that makes Taiwan one of the later markets to receive new technology, as well as low initial prices followed by PVSbased price cuts. But the medical-device sector also has

台灣引進最新的創新醫療技術,使台灣的醫療品質受 到不利影響。 善用與國際科研有密切相聯的中華民國開發性製 藥研究協會,台北市美國商會製藥委員會用高爾夫術 語「低、低、慢」來形容上述現象。意思是台灣對新 藥的給付價格很低(下一段詳述),新藥品在提出申 請後,經負責核准給付的健保署討論並且批准的比例 很低,而且核准給付的過程很漫長。開發性製藥研究 協會指出,根據他們在去年2月到10月所做的調查, 在那段期間,新藥品申請案經過專家委員會審查再送 到討論之後,僅有36%獲得批准。規定個別藥品必需 取得核定的給付價格,醫院方能將它納入藥方。幾年 前,個別藥品取得給付價格平均要花360天,已經是 很長時間,但據開發性製藥研究協會估算,現在已延 長為475天,癌症藥品更長達867天。 據協會表示,跟其他市場比較,健保署核定的給付 價格在過去幾年大幅降低,位居在全球之後。醫藥界 拿10個已開發國家的藥品市場做為標準,稱為A-10。 協會指出,在1995年,台灣核准的新藥給付價格是 A-10中位數價格的89%,但到了去年前三季,這個數 字降為42.3%。原因在於新藥在申請給付價格時,健

An NHIA poster reminds patients that prescriptions can be filled at community pharmacies affiliated with the National Health Insurance system.

保署在訂價前會拿新藥與本地的對照藥品做比較,也 就是已在本地上市而且功能類似的藥品。但製藥界人 士認為,拿對照藥品的價格做比較有失公平,因為這 些藥品在上市之後,價格已經多次大幅調降。政府每 兩年會進行一次藥價調查,然後加以調整,目的是要 排除「藥價差」。業界稱藥價差為「藥價黑洞」,它 是指健保署給付醫院和其他醫療院所的單一藥品價 格,以及它和醫院實際付給藥品供應商的價格之間的 差距。關鍵是醫院會跟藥品供應商要求折扣,而且能 夠如願。(問題在於藥價差永遠不會消失—理由是藥 價每次調降之後,醫院還是會要求打折。) 核定全民健康保險藥物給付項目及支付標準共同擬 訂會議 (PBRS) 有26位成員,其中有13位是醫院的主 管。製藥界人士認為,這個會議由醫院主管主導,是 藥價核准程序難以令人滿意的關鍵因素。為有效利用 預算,醫院管理者,總將以控制藥品開銷為手段,以 便將較多經費用於提供其他服務。後果是共同擬訂會 議當中的醫院主管追求低價格,更甚於加速引進較貴 的新藥。 是在二代健保修法時成立,目的在擴大決策的參 與,因為共同擬訂會議成員也包括5位公共衛生和法

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Cover story some particular issues of its own. 2G provides for a “balance billing” system under which the cost of selected advanced devices is covered partially by NHI, with the remainder paid out-of-pocket by the patient. The system is a way to permit access to more sophisticated, expensive devices without over-burdening the NHI budget. But the implementation rules call for monitoring discrepancies in the prices being charged by different hospitals and potentially imposing a price cap under certain conditions. Industry and NHIA

are continuing to discuss how that can be accomplished in a way that respects free-market principles and recognizes the variation in quality and materials among different brands of products. Another new wrinkle under 2G is the introduction of a complicated approval procedure to enable non-reimbursed devices (including those still in the long queue for reimbursement decisions) to be available to patients on a “self-paid” basis. The manufacturers contend that since self-paid devices have no impact on

律學者,還有6位納稅人團體代表,例如勞工和消費 團體代表,以及兩位政府官員。開發性製藥研究協會 和兩個本地製藥協會的代表以觀察員身分出席會議, 但沒有投票權。除了是由醫院主管主導之外,這個新 的制度還有若干其他問題。一個是現行的兩階段程序 會花更長時間─新申請要先由專家委員會(藥事小組) 審查,才送到。第二個問題在於每隔一個月才會討論 到藥品申請,另一個月是討論醫療器材。之前每次集 會時,都會審查新藥的申請。第三個問題:擴大參與 的結果,是各成員對醫療議題的熟悉和瞭解程度有很 大差異。

政府觀點 健保署醫審及藥材組專門委員陳尚斌代表該署接受 本刊訪問時,證實政府已承諾會鼓勵可能足以拯救或 強化生命的新藥進入台灣,不過他提出不同於中華民 國開發性製藥研究協會(IRPMA)的統計數據。例如 根據健保署計算,去年的藥品給付價格相當於10國藥 價中位數的62%(並非IRPMA所說的42.3%),在二 代健保制度下取得給付的全部所需時間為277天(而 非475天),在國際間屬於中等水準。(由於截稿時 間的限制,本刊並未探究可能造成前述數據落差的研 究方法差異。) 不過陳尚斌強調,健保署希望和業界合作,改善給 付程序。他指出最近出現數項進展,包括: • 透過增加藥價審議會議(PBRS)臨床醫師會員 數的計畫,強化PBRS平衡成本問題的能力,更 重視病患權益,並加強對付費團體代表的訓練, 讓他們能在審議時扮演更積極的角色。 • 在健保署網站公布PBRS的會議記錄,提高透明 度。 • 專家小組駁回藥品給付申請案時就通知業者, 而非任他們空等一、兩個月,待審議結果通報 PBRS後才知道。前述變動預定5月生效,業者將 可提早準備上訴。 醫療器材業也有類似問題。業者抱怨,冗長的給付 程序,加上多次藥價調查後的給付價格調降,導致台 灣成為新科技較慢上市的市場之一。不過醫療器材業 24

NHI finances, and their safety and efficacy have already been approved by the Taiwan Foods and Drug Administration, the approval mechanism constitutes a market access barrier to new technology. Eva Teng of the Surveillance Alliance says that her organization “agrees that for innovative drugs and new-technology medical devices, the prices received by the companies are really too low.” She is concerned that failure to solve the problem will lead to a time lag in those products’ entry into the Taiwan market,

也面臨其產業特有的一些問題。二代健保所提供的「 公平付費」機制,獲選的先進器材費用會獲得健保署 部分給付,其餘由患者自費。這讓患者可以使用較尖 端的昂貴器材,卻不會對健保預算造成過度負擔。不 過施行細則規定監督各醫院收費的價差,在某些狀況 下還會限制收費上限。針對給付方式應如何依照尊重 自由市場的原則進行,並承認不同品牌產品的品質和 使用材料會有差異,業者和健保署尚在持續交換意 見。 二代健保引發的另一個新問題,就是提供一套複 雜的批准程序,讓病患透過自費使用不在給付之列的 器材(包括仍在大排長龍申請給付批准的產品)。器 材製造商聲稱,由於自費器材並不會影響健保財務, 產品的安全性和功效也早已獲得台灣食品藥物管理署 核准,給付批准機制反構成新科技進入台灣市場的障 礙。 滕西華指出,她所屬的民間監督健保聯盟「贊同創 新藥物和新科技醫療器材業者獲得的給付價格確實太 低」。她擔心若不能解決此問題,會導致這些產品進 入台灣市場的時間落後,損及公眾利益。不過就如本 文一開始所說,民間監督健保聯盟認為,改革保費結 構,讓健保制度獲得足夠的收入,才能解決問題。 衛福部的諮詢特別小組和台灣政府計畫在今年召開 的全國藥政會議(2008年以來首次),預料還會討 論其它構想。許多民眾都希望政府達成的結論是,增 加對健保的公共投資才是最好的辦法。目前台灣的健 保支出只占國內生產毛額(GDP)的6.6%,遠低於多 數已開發國家。美國在歐巴馬健保(Obamacare)推 出前的比例為17.9%,可能並不值得他國仿效,但世 界銀行(World Bank)的統計數據顯示,日本在2012 年為10.1%,南韓則是7.5%。馬英九總統在2008年 首度競選總統期間,曾支持將台灣健保支出提高至 7%,但後來發現此目標遙不可及。 衛福部諮詢特別小組成員之一的國立陽明大學衛 生福利研究所教授黃文鴻指出:「對於健保產業的投 資,我國政治領袖應考慮,只須增加0.3%的GDP,就 可製造出400億台幣或甚至更多亟需的資源。」「台 灣目前的健保制度非常物超所值,但問題在於它能否 維持下去。」

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impairing the public interest. But as mentioned previously in this report, the Alliance considers that the answer is to provide the NHI system with sufficient revenue by reforming the premium structure. Other ideas are expected to be broached by the MOHW’s advisory task force and at a National Drug Policy Conference that the government is planning to convene later this year – the first such conference since 2008. Many stakeholders hope the government will

conclude that its best recourse is to increase the level of public investment in healthcare. Currently Taiwan devotes just 6.6% of GDP to healthcare spending, far lower than most developed countries. The 17.9% in the pre-Obamacare United States may not be a model to emulate, but World Bank figures show a 2012 level of 10.1% in Japan and 7.5% in Korea. During President Ma Ying-jeou’s firstterm campaign in 2008, he embraced the goal of raising Taiwan’s healthcare expenditure to 7%, but later found it impossi-

ble to reach that goal. “Our political leaders should consider that just by adding 0.3% of GDP into the healthcare sector, we would be making NT$40 billion or even more in badly needed resources available,” notes Huang Weng-Foung, a professor at National Yang-Ming University’s Institute of Health and Welfare Policy and a member of the MOHW task force. “The Taiwan healthcare system right now is excellent value for the money. The question is whether it’s sustainable.”

Putting Prescription Records on the Cloud

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new project launched by the Ministry of Health and Welfare (MOHW) last July enables physicians and pharmacists in participating healthcare institutions to view all the medications prescribed to a given patient during the previous three months under the National Health Insurance program. Within 20 seconds of inserting the patient’s NHI card in a reader (less than half that time at a major medical center), the record of all recent out-patient and in-patient prescriptions will appear on the screen. Known as PharmaCloud, the system is designed to foster patient-centered care – increasing the safety and efficacy of prescriptions by preventing duplications and drug interactions. Medical institutions are given the choice of implementing the system across-the-board, limiting it to elderly patients (aged 75 and above) who tend to have multiple ailments, or targeting specific chronic conditions such as hypertension, diabetes, and high cholesterol. “PharmaCloud will play a significant role in enhancing patient safety and the quality of prescriptions,” says Minister of Health and Welfare Chiu Wen-ta. “Now physicians will be able to view the drug histories of patients in different hospitals to prevent over-prescribing or negative effects from interaction between drugs.” Chiu adds that one benefit of the use of cloud technology is to provide real-time information feedback for diagnoses, treatments, and medication. He notes that a picture archiving and communication system (PACS) is being developed for information-sharing among physicians for better diagnoses and reduction in duplications. Although some individual Canadian provinces have introduced a similar system, Taiwan is the first country to establish one on a nationwide basis. Other countries have already shown interest in learning from its experience. At a conference in Taipei last December organized by the National Health Insurance Administration to explain to the domestic medical community how cloud technology can help enhance drug utilization, specialists from Korea and India were also in attendance. As of last month, a total of 350 hospitals and clinics around the

island had already been linked into the system and the number of records checked had exceeded 266,000. The goal for 2014 is to further expand the network, particularly among major hospitals. In future, besides adding more medical institutions, plans call for broadening the PharmaCloud functions, including enabling individual patients to access their own data on recent prescription history. The system was developed in close coordination with specialists from Taiwan’s IT industry. Considering the sensitivity of medical records and the strict provisions of Taiwan’s Personal Data Protection Act, the biggest challenge was to ensure the absolute security of data stored on the cloud. Participating medical institutions do not need to incur a heavy IT investment, as they are already part of the Virtual Private Network (VPN) linking hospitals and clinics with the National Health Insurance system. The biggest expense will be for bandwidth, which the MOHW will help defray through subsidies. — By Don Shapiro

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interview

Interview with the National Development Council Minister Kuan Chung-ming holds a Ph.D. in economics from the University of California, San Diego, and has taught at the University of Illinois in Champaign-Urbana and National Taiwan University. He has also been elected as an Academician at Academia Sinica, Taiwan’s prestigious national academy. He joined the government as a Minister without Portfolio in 2012, and in 2013 was named Minister of the Council for Economic Planning and Development (CEPD), which this year was elevated to become the National Development Council (NDC). Below are excerpts from an interview with taiwan Business tOPiCS Editor-in-chief Don Shapiro. On the major challenges facing the Taiwan economy. Right now Taiwan is facing three major obstacles – lack of momentum for economic growth, failure to successfully transform our industrial structure, and inability to connect to the regional economic network. With regard to economic momentum, Taiwan was a key player in the PC and notebook era, but it’s not so important in the mobile era. In addition, our efforts in areas like DRAM, solar panels, and TFT-LCD all succeeded for a certain time but later ran into difficulties. So one big issue is how to regain our momentum. A closely related issue is Taiwan’s industrial structure. Many of our manufacturing industries have focused too much on cost-down strategies instead of creating value. Their added value is small and actually has been shrinking in recent years. To survive, instead of upgrading, they shifted production offshore to mainland China and ASEAN countries. Of course when an economy reaches a certain level, it usually switches direction and services become more important, or you add more services content to your manufacturing. But Taiwan hasn’t been successful in that either. Our services industry hasn’t grown. In fact, if you set aside triangulartrade-related income, our services export income is declining. So our manufacturing ran into difficulty and failed to upgrade, and the services industries haven’t found a way to expand. Third, in recent years this region has undergone substantial economic integration through free trade agreements, but Taiwan was not part of that process. As a result, our manufacturers already have difficulty selling their products, and our market share, including in mainland China and the ASEAN countries, has been in decline. In the ASEAN countries, for example, our machine tools face a severe challenge from Japan for high-end products and from mainland China for low-end products. Although exports are still growing at a certain pace, that pace is below average, which is why we are losing market share. 26

On what the government can do to help improve the situation. The Ministry of Economic Affairs has been doing a lot to help manufacturers try to upgrade. From the NDC’s perspective, if the job can be done by the MOEA, then usually we don’t step in. We do things that involve more cross-ministry coordination. I summarize those things as D-I-G – with D standing for diversification, I for innovation, and G for globalization. Let’s start with diversification. Exclusion from those free trade agreements is one reason why our exports have ran into difficulty, but at the same time we haven’t really committed enough resources to promote our products or try to expand our markets. My observation is that when we faced severe competition from Korea, we sort of backed out of the advanced markets and tried to focus on the emerging markets. But Korea also showed up in the emerging markets, so we began to look for even more emerging markets. That’s not right. In the past, our products – not just industrial products but also consumer products – enjoyed a certain reputation and advantages compared with other countries, but we didn’t put enough emphasis on maintaining the competitiveness of those products. Our export promotion began to focus mainly on industrial products because that’s easier – when you get an order, it’s for a huge amount. But for consumer products, it’s much more difficult; you need to have the right channel to penetrate the market. That takes extra effort, but we didn’t devote enough resources to it. So now we are trying to focus on diversification, and we have a program to promote it. In our trade policy, we need to promote not just goods export but also services export. And even for goods export, we need to diversify our markets, and develop more types of products that we can sell to different markets. Instead of just concentrating on industrial components, we should focus more on consumer products as well. For example, one of the major products we sell to the EU

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interview market is our bicycles. That’s one of very few consumer products for which we enjoy a large market share in the advanced economies. But this is something we should emphasize more. We have other products, including some types of sporting goods and quick-design clothing, that we could promote more to make them into our next product like bicycles. We need to diversify our markets, diversify our products – even our marketing strategy should be changed. To sell consumer products, you need a different kind of marketing strategy. For example, we noticed that TAITRA [Taiwan’s trade promotion organization] has lots of offices around the world, but typically each one is very small – fewer than 10 employees in Los Angeles and maybe just three or five in some other locations. How can you expect such a small team to do very much? Probably they will just stick with their old connections and old programs. We should focus on certain pivotal locations, and spend more resources and send more people there to expand their scope. Different countries with different cultural backgrounds and different levels of economic development need different marketing strategies. For example, MOEA wants to put more emphasis on Muslim markets and newly emerging markets like North Africa. We could put more resources into a location like Istanbul, for instance, that can serve as a starting point to cover an area with a similar culture. Even in Europe, since the EU is virtually one market, perhaps we should just concentrate on several major locations instead of having lots of small offices scattered around.

Also we should pay more attention to online trading and internet marketing, which was pretty much ignored in the past. How can we use the internet to expand our market, both B2B and B2C? For B2C, there is a huge market of overseas Chinese in ASEAN countries, and with the internet you have a chance to access markets that you couldn’t access before. For promoting service exports, we are still cooking a new program. We don’t have the details yet, but the basic idea is to focus on Taiwan’s comparative advantages. Right now, the area getting the most attention is tourism. Since the travel market was opened to Chinese visitors, we seem quite satisfied with that. But in fact we should really be placing more emphasis on our financial industry. Its exports have actually declined in the past 10 years. The market share has shrunk because they are so severely regulated. With some deregulation, we can regain momentum in our financial industry and improve their ability to export. Instead of traditional services, we should focus more on what’s called “modern services” – those financial, professional services or information services. We do have some foundation in this area. For example, Taiwan has trained up lots of good financial personnel, but because the market was shrinking, many people chose to work abroad because of better pay or job opportunities that the Taiwan market didn’t provide. Deregulating will create more business in Taiwan, which will attract more people to come back. Now for the “I” part – Innovation. Because Taiwan does have talent but needs renewed momentum, we need

Introducing the Regulatory Reform Center Connie Chang became director of what is now the Regulatory Reform Center (RRC) under the National Development Council (NDC) in December last year. Her office, with a staff of 25, is responsible for coordinating among government agencies to strive to ensure that laws and regulations are fair, reasonable, and in line with international practice. During the past few months, she has presided over a total of 15 meetings that looked for ways to resolve various outstanding issues from AmCham’s 2013 taiwan white Paper. Following are excerpts from an interview with taiwan Business tOPiCS Editor-in-chief Don Shapiro. On the mission of the RRC. Even though we’re called the Regulatory Reform Center, we’re very much about coordination. I always tell my colleagues that the way we can really contribute to the system is by providing third-party opinions. Many times industry has its stance, while the government authorities hold onto their existing positions, and the two sides never really communicate. But when you listen to both sides carefully, you may come up with some third options. I always encourage people to meet half way. Then there’s a good chance to find a solution that will satisfy both sides. By coordinating these efforts, our aim is to help improve Taiwan’s regulations and regulatory systems and bring them into international alignment. We often hear people com-

plain about regulations that are “Taiwan-unique” – not found anywhere else. What’s worse is when a regulation is a patchwork of all the strictest laws from different countries. In doing that, the regulators may be trying to make the law more comprehensive, but the result is to create more barriers to the investment activities of foreign companies or even local companies. There needs to be a change of mindset here. What we’re aiming for is not so much deregulation as smart regulation. Society needs rules for everyone to follow, but there’s got to be a level playing field for foreigners and Taiwanese businesses. And if you come up with a Taiwan-unique regulation, you need to give some thought as to why no one else is doing things that way.

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interview new ideas. In fact, what we need is more start-up companies, which will bring new ideas. Previously Taiwan focused on hardware, but now the internet’s the key thing. We need more people to develop apps, new business models, things that aren’t tangible business assets. We have a new program called Head Start Taiwan to try to attract people to come in, and also to change the regulations to make it easier for them to set up a company here and enjoy more profit. What government can do is build the right environment to give startups the chance to grow up in Taiwan. We do have lots of young talent, but often people with ideas choose to set up their company in Singapore or the Cayman Islands, because of tax considerations and the rules on the shareholding structure. We’re working on solving those problems. In addition, NDC has control of the National Development Fund, which we plan to use as a starting point to work with international venture capitalists. What we really need is not just their money, but their knowledge. Taiwan’s VCs don’t really have the ability to identify areas of potential in the internet market. We want to tap the know-how of those international VCs. Besides attracting startups to come to Taiwan, we want to set up a mechanism to help them grow – we call it “from startup to scale up.” We’re working on the details of a specific plan right now. As to “G” – Globalization – we mentioned Taiwan’s

failure to connect with the regional network, so our government now is working hard to prepare ourselves to join TPP and RCEP. This Council’s Regulatory Reform Center is doing some of this. Another aspect is the Free Economic Pilot Zone (FEPZ) program. This isn’t like mainland China’s special zones. It’s not an area government has to put a lot of money into for infrastructure. Part of the FEPZ concept, again, is deregulation. Hopefully we’ll enable people to come into Taiwan more easily and operate in the FEPZ more easily, reducing the hassle that arises from bringing things in from foreign countries. The business activities in the FEPZ will include smart logistics, international healthcare, financial services, added-value agriculture, and education innovation. We want to experiment with different kinds of deregulation to observe the consequences. Will it cause some adverse effect on Taiwan’s economy? If it brings a lot of positive benefit, then we should apply it to the rest of the island. Is the progress so far satisfactory? Not really, because to implement this program, we need a special act that excludes the applicability of certain laws and regulations. This bill is still in the Legislative Yuan, and because it does relate to some extent to mainland China, it becomes somewhat sensitive. But we’re trying very hard to persuade the legislators that this is really important for our economy.

On ways to improve the regulatory process. On January 15, I made a report to the Premier, with many ministers in attendance. We talked about Good Regulatory Practice (GRP), which is a process that has received a lot of attention in APEC and in the OECD countries for many years. We participated in some peer-review studies in APEC and noticed that Taiwan has all the right institutions in place, but the actual practice by the people making the regulations may be another story. One important element of GRP is to first coordinate well among government agencies when you’re formulating your strategy and policy, and to engage in public consultation at an early stage, not just after the statute or regulation has been drafted. The Premier asked us to do some capacity-building within the administration. We plan to invite four international experts on RIA [regulatory impact analysis] to speak to about 200 people within the government on April 30 and May 1. The speakers will be from Australia, New Zealand, Korea, and Belgium. We’ll try to learn from their experience and see what we can do here in Taiwan. Hopefully we’ll make better regulations in the future, but right now we need to revise existing laws and regulations that are too strict and have become barriers in the business environment here. So we’re making a point of listening to the people who are governed by the regulations. That’s why we’re working closely with AmCham, ECCT, and the local business federations – tackling one issue at a time. It’s been productive, but it takes a lot of effort.

Some of them can be very defensive, and some are quite open-minded. But I’ve noticed that in general people are more forthcoming than they used to be. Maybe it’s because of all the talk about TPP and FTAs. People know that we need to open up, which requires us to loosen up on our regulations a bit and be more internationally coherent. I don’t see the possibility that any coordination meetings will conclude with 100% satisfactory results for the business community. Other interested parties always have their concerns as well, and the government has to take care of the needs of both sides. But step by step we’re making progress on issues in a long list of sectors, including pharmaceuticals, medical devices, insurance, human resources, education, and others.

On the response of regulators to requests for reform. 28

On how the bureaucracy and industry could develop improved working relations. I hope my colleagues in other ministries can appreciate that when business comes up with all these suggestions, there’s a reason for it. Industry wants the government to make changes because the regulations are really affecting their business operations here in Taiwan. I hope those in government will listen and try to understand why the requests are being made. Then the discussion between the two sides will be more fruitful. At the same time, I need the business community to understand that the government has to consider the interests of different parties, and sometimes the interest of one party may collide with those of another. So when you come to the government with a request for change, think about possible solutions not just from your own perspective but also from the government’s.

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BACKGROUNDER

India Calling Economic relations with Taiwan are still at an early stage, but the potential for growth in trade and investment is high.

BY TSERING NAMGYAL

B

ack in the 1980s and into the 1990s, numerous Indian trading companies were based in Taipei, using their trading acumen and international networks to export “Made in Taiwan” products to customers around the world, especially in the Middle East and Africa. They shipped such goods as bicycles, shoes, and toys, the kind of consumer products that then served as the backbone of the export empire that had made Taiwan one of the four Asian Tigers, along with Korea, Hong Kong,

and Singapore. Then came the rise of China as a manufacturer of labor-intensive products, and the migration of Taiwanese factories to set up production on the mainland. Most of the Indian trading companies left Taiwan at the same time. In those days and even now, most Taiwanese had little knowledge of India, which for them was a mystery shrouded by mysticism. Even though India has produced world-class companies over the years, Taiwan business

The 7th Taiwan-India Industrial Exhibition was held in the Indian city of Chennai last September. The event has become an important bridge in commercial dealings between the two countries.

people’s image of the country was not that of an investment destination but rather of holy men with dreadlocks, foreheads smeared with ash, bathing in the sacred river Ganges. But that view began to change gradually over the past decade, as stories about the emergence of the Indian economy as a viable player, particularly in areas such as software, started to appear in the international and Taiwan media. More recently, the slowdown in the Chinese economy and projections that India will overtake China as the world’s most populated country have drawn increasing attention to India as a potentially attractive destination for investment. While Taiwan and India do not maintain formal diplomatic relations, since 1995 they have maintained organizations in each other’s capitals that operate as de facto embassies. India’s office in Taipei is called the India Taipei Association (ITA), while Taiwan has opened the Taipei Economic and Cultural Office in New Delhi (which also has a branch office in the southern Indian city of Chennai). The Taiwanese have also begun to travel to India in large numbers, for both business and tourism. For instance, every winter thousands of Taiwanese Buddhists visit pilgrimage sites in India

photo : cna

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BACKGROUNDER

to trace the origins of their religion. Back in the 1980s, there were no direct flights between India and Taiwan, but China Airlines opened a route in 2002 and now flies directly to New Delhi four times a week (with service from New Delhi to Rome three times a week). The presence in Taiwan of some 500 Indian university students and the growing popularity of Indian food and other cultural products such as films have also helped bring Indian culture closer to the Taiwanese. Taiwan-born director Ang Lee’s Life of Pi (based on a Booker Prize-winning novel about India by the Canadian author Yann Martel), and the Indian move Three Idiots was the longest-running foreign film ever to show in Taiwan. M o r e s u b s t a n t i v e l y, I n d i a a n d Taiwan signed a bilateral Investment and Protection Agreement in 2002 and a Double Tax Avoidance Agreement and an agreement for Mutual Assistance in Customs Matters in August 2011. The India Taipei Association says several additional negotiations are currently underway to bring the economic and cultural relations closer between the two sides. Though two-way trade – at US$6.3 billion last year – remains relatively small, it has grown sharply, increasing six-fold since 2001. In 2013, Taiwan exported US$3.53 billion worth of goods to India, far less than its sells to Indonesia (US$5.7 billion) or the Philippines (US$9.8 billion). India accounted for less than 2% of Taiwan’s total exports to Asia in 2013. On the import side, electrical equipment accounted for more than half of the US$2.75 billion worth of goods Taiwan bought from India. For the future, however, India – with its steadily rising per-capita GDP and middle class of nearly 200 million people – represents a market that Taiwan cannot ignore. Unlike the rapidly aging populations of many countries, half of the people in India are below the age of 25. “Taiwanese investors are particularly interested in the demographic-dividend angle of the India story,” seeing a “consumption story” embedded in it as well, says 30

Sarah Chang, who manages the Taishin India Fund, an open-ended India-focused mutual fund listed in Taiwan with an asset size of NT$220 million. In hope of developing this potentially lucrative market, several large Taiwanese companies have already set up operations in India. One of Taiwan’s largest IT manufacturing companies, Foxconn (also known as Hon Hai Precision) has a plant in Chennai. Companies with marketing offices in India include Asustek, a leading computer-maker, also in Chennai; Volktek, a provider of fiber networking solutions, in Hyderabad; and Moxa, a manufacturer of device networks, in Bangalore. Merit Lilin, which exports security cameras to India, is also currently planning to set up an office. Mega Bank, one of Taiwan’s largest financial institutions, has maintained a rep office in Mumbai for the past six years, though an informed source says the unit has not met expectations. While noting the increased Taiwanese interest in the Indian market, those with experience there caution that it is not an easy market to crack – and undoubtedly quite different from anything local companies might have encountered before. “It’s a very different culture, and the infrastructure is particularly weak, though we believe there’s a lot of potential for cooperation,” says Jun Chuang, a business development manager for Moxa in Bangalore. Despite the challenges, some companies are already reaping success. One of them is Asustek, which entered the Indian market in 2007 and now ranks fourth in notebook computer sales with a market share of 5%. For tablets, Asustek has a market share of 3-5%, and it is aiming at achieving a double-digit market share this year in the consumer notebook segment. The company now has more than 100 of its own stores across India, with the figure expected to double by the end of this year. Brillate Lin, the Chennai-based sales manager for Asustek, says India is an excellent market for IT products, with a huge potential for growth. Hybrid

devices have been doing particularly well there. “Asustek has merged luxury and tech in a single space,” Lin says. Asustek regards India as one of its key markets and has adopted a strategic approach to developing the market, taking its diversity into account by catering to different consumer trends in the various regions of the country, he says. The Indian market is anything but static, however. With regard to the latest technologies, Indian consumers have become more receptive and more specific in their demand. The large proportion of young people in the population, and the growing data usage among the younger generation, create a huge potential market for multi-use gadgets. “Asustek has products at different price points with best-in-class features and hybrid designs with a solid output, providing a better computing experience to the users,” Lin says. “In view of the current scenario, Asustek holds long-term plans for India, with significant focus on the notebook, tablet, and hybrid devices market.”

Other areas of growth Taiwanese investment in India still has considerable room for growth, however, as most Taiwanese investors continue to remain focused on China. India is “still not on their top priority list,” says Shambhu Hakki, Deputy Director General of the ITA. Yet the Indian officials are making a strong effort to drum up investment, for example holding regular investment seminars around Taiwan to introduce India to the Taiwanese. According to the India office, the most promising sectors for collaboration between India and Taiwan are Electronic Systems Design and Manufacturing (ESDM), machinery, auto parts, green energy, agri-businesses, food processing, biotechnology, pharmaceuticals, tourism, and education. ITA points out that Taiwanese investors may opt for a joint venture, wholly owned subsidiary, or other business models. Unlike most countries in East Asia, the Indian market requires a lot of patience. “Whoever wants to get into

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BACKGROUNDER

the India market will have to be prepa re d fo r th e lo n g h a u l,” s a y s N. Balakrishnan, a Hong Kong-based business professional who has started several businesses in India, including a few Chinese-language centers. One potential area of cooperation is agriculture. Taiwan has a good foundation in agricultural technology, and India’s farming sector needs assistance, as current agricultural productivity is only one-third that of China. According to Balakrishnan, India also has a huge shortage of hotel rooms. It could be an attractive market for Taiwanese boutique business hotels, since 3-star hotels can be built there at relatively low cost. Tourism is a big industry in India and has tremendous growth potential, since India is slated to grant visa-on-arrival to travelers from more countries – raising the total to nearly 180 countries by this coming October. Other businesses that Balakrishnan considers to have good potential for Taiwanese companies include various light industrial goods, such as small power generators, water pumps, and small industrial machines. “A small number of Taiwan companies are taking advantage of this, and there is still a lot of room to grow,” he says. In addition, observers point to opportunities for Taiwan’s snack food and restaurant businesses in India, where consumption is starting from a low base and growing fast. India is also seen as one of the best places to do chip design, because engineering talent is so cheap. The product cycle of the average chip is only six months, which means it is important to design chips quickly. “If you use 10 Korean engineers to design a chip, you won’t be able to recoup the cost of the chip in six months – but you can if you use 10 Indian engineers,” says Balakrishnan. After design is completed, the chips are fabricated in Taiwan or Korea. Since tariffs are high and India is a big enough market, more Taiwanese companies in future are expected to adopt a long-term investment horizon and set up manufacturing facilities in India. At this stage, however, given Taiwan’s high savings rate and estab-

Acclaimed Taiwanese-American director Ang Lee is accompanied at a press conference by Indian actor Suraj Sharma, the star of his film Life of Pi.

photo : cna

lished capital markets, the easiest way for individual Taiwanese investors to benefit from the India growth story is through portfolio investment. Taiwanbased mutual fund companies have already rolled out numerous India-focused mutual funds to facilitate indirect investment in India. Denominated in NT dollars, they have no currency risk. Most of these funds were launched a few years ago when the media begun to focus on the so-called BRIC countries (Brazil, Russia, India, and China) as potential engines of global growth. “There has been a lot of interest in terms of portfolio investment,” says ITA’s Hakki. The locally available mutual funds include Eastspring India Fund, Yuanta P. Shares MSCI India Index Fund, ING India Star Fund, Capital India Medium & Small Cap Fund, and Taishin India Fund. Most of them hold shares in some of India’s top bluechip companies. For instance, ING India Star’s major holdings include ITC Ltd., Infosys Ltd., Tata Consultancy Services Ltd., Housing Development Finance Ltd., HCL Technologies, and Reliance Industries Ltd., in that order. All five mutual funds have a stake in Indian software giant Infosys Ltd. Thanks to the rally in the Indian stock market during the current election season most of these funds have performed well. “I think there will

be more and more investment in the India market,” says Sarah Chang of the Taishin India Fund. She expects India’s GDP growth rate to accelerate going forward, reaching nearly 7% in 2016. The general sentiment is that the new government is likely to accelerate economic reforms, which means Taiwanese investors are likely to increase their investment in the Indian market, she says. Akih Yeh, who manages the ING India Fund, is quite optimistic about near-term prospects. In the past, he says, investors were often disappointed in the performance of the Indian market due mainly to the high inflation, which for c e d the Indian cent ral bank t o raise interest rates. Still, some sectors – such as software and pharmaceuticals – performed well, due in part to the depreciation of the Indian currency, which enabled export-led companies to lock in exchange-rate gains. Yeh looks forward to economic conditions changing for the better after the elections (the results are expected to be announced on May 16), with the consumer sector especially likely to benefit as the Indian economy gathers steam. Such a pickup in the Indian economy seems likely to further attract interest from Taiwan businesses, eventually translating into stronger, more substantive ties between the two countries.

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TAIWAN busINess

Coming Up: a Taiwanese-invested Naphtha Cracker in China Blocked in Taiwan by environmental concerns, the petrochemical industry looks across the Strait.

BY JENS KASTNER

A

fter plans by a Taiwanese petrochemical consortium to build a large-scale new petrochemical complex broke down twice, first in Taiwan and then in Malaysia, a similar project now seems to be moving ahead in China’s Fujian Province. Taiwan’s Investment Commission, a unit under the Ministry of Economic Affairs (MOEA), gave its approval for the project this past January, three months after MOEA dropped a ban on Taiwanese investment in naphtha cracking, the key part in upstream petrochemical production, across the Taiwan Strait. It was also some two decades after local industrialists first proposed building such a complex in China. The project led by USI Corp., a leading producer of polyethylene, involves seven local petrochemical companies, which together plan to invest US$263.6 million to establish a naphtha cracker. It is due to be the heart of an “integrated refinery and petrochemical park” that the Taiwanese consortium plans to set up in a 50-50 joint venture with China’s Sinopec, a state-owned enterprise that is the mainland’s largest 32

oil and gas company. The Taiwanese-invested park will be located in Fujian’s Gulei Petrochemical Zone, one of three such zones in Fujian that were included in China’s 12th Five-Year Plan. The initial investment is significant on its own, but the final price tag is expected to dwarf that amount. J.H. Shieh, executive manager of the Petrochemical Industry Association of Taiwan (PIAT), stresses that the initially approved US$263.6 million is only for the naphtha cracker, with the ultimate investment likely to reach about US$15 billion, as the “integrated refinery and petrochemical park” will include a petroleum refinery, up to 30 midstream plants, and further downstream plants. “This figure was presumably not prominently mentioned in the press because only the actual naphtha cracker needed Taiwan’s regulatory approval,” says Shieh. He adds that although Beijing’s final approval is still pending, the initial and most crucial one was already granted in March 2013. According to an industry source who requested anonymity, the plant is likely to get final approval from the Chinese

authorities in the second half of this year and start operations in three years, reaching full capacity in five to eight years.

No room for expanding locally Naphtha cracking is the most important segment of the upstream petrochemical industry. It converts naphtha, a gasoline-like product, into various intermediates or feedstocks, chiefly ethylene, a gas difficult to transport but needed in the production of everything from plastic packaging and insulation to footwear and automotive antifreeze. Taiwan owes much of its economic development to the export of such products, but with growing income levels has come the emergence of a spirited environmental movement stressing the ecological costs of over-industrialization. In 2011, after years of holdups in the construction schedule due to environmental impact assessments, strenuous opposition by environmentalists finally forced the government to scuttle the Kuokuang project that would have put

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a US$20 billion complex for naphtha cracking and associated petrochemicals along the coast of Taiwan’s Changhua County. The Kuokuang consortium was led by the CPC Corp. Taiwan, the stateowned oil company, joined by such private-sector investors as Ho Tung Chemical, Oriental Union Chemical, and China Man-Made Fiber. Opponents argued that the complex would be built on ecologically valuable wetlands and raise air pollution in the area to unacceptable levels, and that shipping to its harbor would threaten the habitat of the endangered Indo-Pacific humpback dolphin. To meet the objections, the consortium offered to substantially reduce the scale of the complex, but in the end President Ma announced the project’s outright cancellation. When it became clear that further substantial expansion of the upstream petrochemical sector would be impossible on the island, CPC and its partners sought to develop a naphtha-cracking project in Malaysia, but this too was abandoned last year, partly owing to environmental opposition and partly to economic considerations. Meanwhile, China, the “world’s factory” and home to thousands of Taiwanese-invested production plants, has all along been seen as the more logical place to expand, not least because environmental protests there are less consequential. But with its ‘be patient’ policy that in the 1990s forbade Taiwanese direct investment in China’s high-tech sector, infrastructure, and in any project worth more than US$50 million, the Kuomintang-led administration under President Lee Teng-hui made a Taiwanese-invested naphtha cracker in China impossible. Formosa Plastics Group (FPG) had committed to set up a US$7 billion “Haicang” complex in Fujian, but Lee did not gave in even though the firm pledged that none of the investment capital would come directly from Taiwan. “It is said that FPG founder Wang Yung-ching and Lee turned from buddies to enemies over this; FPG then set up its complex in Mailiao in Taiwan’s Yunlin County instead, with the help of incentives from the Lee government,”

recalls Hu Sheng-Cheng, a prominent Academia Sinica economist and former head of Taiwan’s Council for Economic Planning and Development (now the National Development Council). The Democratic Progressive Party government of Chen Shui-bian retained the ban on Taiwanese investment in naphtha crackers in China over fears that they would be followed across the Strait by both capital-intensive midstream petrochemical production and labor-intensive downstream operations. This fear is based on the reality that refineries, naphtha crackers, and plants churning out plastics products are ideally located in close proximity to one another to save on transportation costs, especially for petrochemical materials that can be moved through short pipelines to avoid the expense of shipment in sophisticated freezer ships at ultra-low temperatures and under high pressure.

Ethylene anxiety? Wi t h a n o u t p u t o f o v e r 4 m i l lion metric tons per year of ethylene, Taiwan is among the top 10 petrochemical producers in world. But when the local petrochemical industry tried to rally support for approval of the Kuokuang project, it argued that scrapping the project could bring about an ethylene shortage on the island. The

Ma Ying-jeou government employed the same argument to overcome opposition from some legislators to lifting the ban on investment in China in naphtha cracking. To help counter the opposition, the Investment Commission attached the condition that ethylene produced in China by Taiwanese firms must be shipped back to Taiwan whenever supply-and-demand conditions require it. In September 2011, in a cross-Strait first, the Chinese tanker Pengshun transported ethylene from Jiangsu province to Kaohsiung to help meet shortterm needs, but now that Kuokuang is dead and Gulei is taking shape, such warnings of ethylene shortage in Taiwan are conspicuously absent. “There is no anxiety about ethylene supply in Taiwan, and shortages forcing the shipping of ethylene from Fujian to Taiwan won’t come about anyway,” says Shieh. He observes that Taiwan’s current ethylene production capacity will remain unchanged, as government policy calls for the existing crackers to stay in operation. In addition, Taiwan now imports around 400,000 metric tons of ethylene for downstream plants, sourced from Thailand, Saudi Arabia, and even Japan, for example when Japan has a surplus of ethylene due to temporary shutdowns at its downstream plants. Moreover, CPC, which along with

Formosa Plastics Group's huge complex in Mailiao in Yulin County may be the last big petrochemical project to get approval to be constructed in Taiwan. photo : cna

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FPG operates naphtha crackers in Taiwan, had stridently warned in 2011 that Taiwan will face a 500,000-ton shortfall in output in 2015. Now, however, it calmly responded to a query by stating that “CPC will import ethylene if necessary to cover the domestic supply shortage of the petrochemical material.”

Shale gas impact? Hu says the new project makes sense for the consortium, as the location was wisely chosen. “Because the depth of the [nearby] Zhangzhou port is very good, it is already used by Sinopec,” he notes, adding that the Gulei project is mainly intended to attract further Taiwanese petrochemical investment, bringing about a clustering effect, which will help the new project become competitive. Intriguingly, according to Hu, some pioneering work in that area has been done by Chen Yu-hao, the onetime chairman of the Tuntex Group who has been a fugitive in China since his

indictment for embezzlement in Taiwan in 2003. Chen reportedly has set up a plant on the mainland that produces paraxylene (PX), a chemical essential to the manufacture of plastic bottles and polyester clothing. PX is now seeing increasing use in the automotive sector, as automakers seek to make cars lighter by replacing metal. Shieh weighs in that China already has about 100 naphtha crackers, but Taiwanese crackers are more efficient, enhancing the attractiveness of the Gulei complex. He furthermore believes that the Gulei cracker will be well placed because China’s consumption of ethylene is likely to see strong growth in the future as the mainland economy continues to modernize. “Taiwan consumes 100 kilograms of ethylene per capita per year, and the U.S., Japan and Germany 80 kilograms,” Shieh notes. “In China the usage is only 20 kilograms, which strongly suggests that demand will catch up rapidly.” He dismisses concerns that ethylene produced by FPG’s subsidiary

in the United States – Formosa Plastics Corp. USA – from U.S. shale gas in its plant in Point Comfort, Texas and a planned one in Louisiana will directly impact the naphtha-cracking business in Asia, including the Gulei project – even though ethylene produced from shale gas now costs only about 30% of the price of conventionally produced ethylene in North America. “To Asia, they may ship downstream products such as polyethylene [the most common plastic, primarily used for packaging] which comes in pellets, but it is still too expensive to ship ethylene across the Pacific,” Shieh says. “You make ethylene in the U.S. and you may distribute it in North and South America, or even in the EU, where cracker capacity is shrinking due to high operation costs, but not in Asia,” he elaborates. On the other hand, some industry reports forecast possible supply gluts that could drive down global prices, suggesting that challenges remain strong for Taiwan’s ethylene producers.

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A Report on the ICT Sector

Looking for New Opportunities

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Taiwanese ICT Firms See Their Future in Services Thinning margins on the hardware side are increasingly forcing companies to look for new business models.

IN THIS SURVEY BY PHILIP LIU

• Taiwanese ICT Firms See Their Future in Services p. 36

• Taiwan Aspires to Restart Stalled ITA Talks

p.40

• For Notebooks, Stability but No Excitement p.41

• Taiwan’s Smartphone Sector Slows Down

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fter winning certification as a qualified supplier by the Malaysian government in late November 2013, Wistron, a leading Taiwanese contractor manufacturer in the ICT (information and communications technology) sector, is poised to construct 3,0004,000 “electronic classrooms” in the Southeast Asian nation this year. The project, which is being conducted in cooperation with Malaysian educational institutions, combines hardware, software, and cloud-computing services into a fully integrated educational solution tailored to Malaysia’s needs. For Wistron, the project represents a major stride in its efforts to tap into the ICT service market, a strategy being followed by many other ICT firms in Taiwan as their traditional contract-production business faces shrinking demand, growing competition, and thinner margins. The Malaysian project is an extension of a similar undertaking by Wistron in Taiwan, where it has already built 100 electronic classrooms, and is prelude to even more

ambitious plans targeting other Southeast Asian markets, including Indonesia and Vietnam, as well as China. Wistron plans to cooperate with Chinese telecom firms to carry out “digital-family” projects in some 1,000 households in Beijing on a trial basis. “Digital-family” is defined as applications and services that encompass entertainment, home medical care, and household security. President Robert Hwang notes that Wistron is striving to transform itself from simply being a contract manufacturer into a TSP (technology service provider) offering total solutions in such areas as education, digital home life, and business management for small and medium enterprises. Hwang says the strategy is being adopted in response to acute competition in the contract-production market, adding that Wistron’s mainstay notebook-PC manufacturing business will decline to only 40% of the company’s total sales in the next few years. At the same time, gross margins for the notebook-PC manufacturing business are expected to

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drop to 1-2% from the current 3-4%. “We will shift our resources to software and the cloud-end sector, which boasts stronger growth potential,” says Hwang, predicting that the new business model will achieve substantial scale by 2015. Hon Hai Group, the world’s leading EMS (electronic manufacturing service) provider, is also making the transformation into a tech service provider. Hon Hai took a major step in that direction by winning an LTE (Long-Term Evolution) license last October with a bid of NT$9.18 billion (US$306 million) in Taiwan’s initial auction of 4G spectrum. The 4G venture is part of Hon Hai’s overall development strategy of combining the group’s established strengths in manufacturing electronic devices with new forays into telecom and cloud computing. The company plans to develop various smart 3C products and medical-care systems for the Taiwan market that can be linked through 4G or even more advanced network services. Hon Hai Chairman Terry

Gou says that the group aims to eventually expand into the international market for 4G services, rather than focus on Taiwan alone. To oversee its deployment of new-generation ICT technology based on smart application services, the group has set up a strategic development center and hired Lu Hsueh-chin, former chairman of Chunghwa Telecom, to run it. “We aim to transform Hon Hai from a company of tech manufacturing to a company of tech service,” Gou was quoted as saying in media reports following the announcement of the strategic development. Many other major Taiwanese ICT firms are jumping onto the ICT service bandwagon. Acer, for instance, is developing a cloud-computing business, dubbed BYOC (build your own cloud), which includes cloud-computing services for both individuals and enterprises. The company already has over 1 million clients for such service, which is being overseen by a new BYOC and

tablet product business group headed by Shih Hsuan-hui, son of Acer’s founder and chairman, Stan Shih. The new group is part of an organizational restructuring orchestrated by Stan Shih in mid-January in an effort to turn around the struggling computer maker. “We will sell our hardware as part of our cloud-computing service, which will also contain lots of software and services,” he said during a media event introducing Jason Chen, new Acer CEO, to the press on January 13.

Seeking integrated solutions The changes occurring in Taiwan’s ICT sector reflect a global trend towards the provision of solutions and services, rather than just hardware. The ICT hardware industry has been suffering from increasingly thin margins due to the large number of competitors and limited differentiation among products. Companies in the sector are looking for alternative business models. At the same time, the rapid

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expansion in internet applications in the post-PC era – notably the emerging services of cloud-computing, “big data,” mobile applications, and social media – has triggered massive IT investments and provided huge opportunities for ICT firms. The most successful example of transformation to the new model is IBM, whose Department of Global Services now boasts annual sales of US$30 billion, with employment of 135,000. IDC, an international ICT market research body, reports that nearly twothirds of enterprises worldwide plan to embrace cloud computing, with half of them regarding investment in cloud computing as their highest priority. The trend will greatly boost the need for servers for cloud-end data centers, which held a 15% share in the global server market in 2013, according to the Market Intelligence & Consulting Institute (MIC) under the government-sponsored Institute for Information Industry (known as “Triple-I”). The emergence of cloud-computing services, along with the popularity of social media and smartphones, has spawned a fast-rising big-data market – i n v o l v i n g d a t a s t o r a g e , c o n v e rsion, division, and integration – that facilitates the analysis of business information, improves decision making, and enhances competitiveness. IDC predicts that the global big-data market will enjoy a CAGR (compound average growth rate) of 31.7% between 2012 and 2016, reaching US$23.8 billion by 2016.

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According to Triple-I, another study shows that by 2015, enterprises worldwide will sink US$120 billion into bigdata analysis. The advent of the 4G LTE era will spur a heavy need for mobile data, further stimulating the development of big-data services. “Along with the increasing deployment of 4G transmission bases and the further popularity of smartphones as they become less expensive, demand will pick up for the big-data industry,” says Chien Po-yi, assistant vice president of Cathay Futures. In addition, Taiwanese ICT firms are gearing up to tap the enormous business potential associated with the movement towards “smart cities” that is being spearheaded by IBM. The term “smart cities” refers to the application of information and telecom technologies – as embodied by the Internet of Things (or the network of internet-linked objects) – in various core operational systems of a city, such as commerce, transportation, communications, water, and energy, promising to greatly enhance the quality of life for its citizens. IDC points out that more than 1,000 cities worldwide have embarked on the transformation into smart cities. China alone envisions the creation of 600-800 smart cities by 2015, involving procurement opportunities worth US$15 billion. Advantech, an industrial-computer manufacturer from Taiwan, has already rolled out a number of smart city-related solutions, including smart buildings, smart greenhouses, digital medicine,

smart retailing, smart monitoring, digital logistics, and car fleet management. Chairman K.C. Liu anticipates substantial business growth in smart-city applications and the Internet of Things, forecasting annual sales for his company of US$2 billion in the next several years, double 2013’s US$1 billion. “To achieve the goal, we will invest heavily in Taiwan and actively recruit high-level talent in related fields,” says company president Ho Chun-sheng. Triple-I is spearheading the foray into the ICT service sector. In late 2013, for instance, it signed a contract with Wistron and National Central University for joint development of remote learning based on cloud-end service. It has also teamed up with Chunghwa Telecom and the Industrial Development Bureau of the Ministry of Economic Affairs (MOEA) to develop cloud-end data center solutions. With the support of MOEA’s Department of Industrial Technology, the Cloud System Software Institute of Triple-I has successfully developed various types of cloud-end system software, such as Cloud Appliance for Enterprise (CAFE). The Cloud System Software Institute has already transferred its CAFE technology to local ICT firms, including Inventec, Asustek, and Gigabyte, for the development of cloud-end products and solutions. In addition, it has partnered with IBM Taiwan in assisting Taiwanese firms in the fields of manufacturing, medicine, energy, and information security to tap big data-related business opportunities. Meanwhile, Chunghwa Telecom, in which the government still owns a controlling stake, is aggressively targeting the ICT service market. In 2013, the company listed ICT value-added service, along with its core telecom business and overseas investment, as one of its three development directions. It successfully developed the Virtuoso cloud-end operating system, which has been sold to some 2,000 corporate clients. In cooperation with National Cheng Kung University and TaiDoc Technology, a household medical-device manufacturer, it also rolled out a remote health-management system, featuring a wearable remote health monitor, in February this year.

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Mass production is scheduled for later this year. It also launched e-store management software to help small and mediumsized stores achieve effective management and cut operating costs. Chung Fukuei, vice president of CHT, notes that the company has over 10,000 clients for its cloud-end solutions, with more than 50% growth in revenue expected in 2014. CHT Chairman Rick Tsai says the company has established solid footholds in smart transportation, wearable devices, and e-healthcare, and is planning to “partner with local ICT firms in spearheading the foray into the smart-city market.”

Entering new markets Taiwanese ICT firms are joining the global fray in seeking to tap the huge potential of the emerging market of smart mobile devices. Increased demand for such devices is being fueled by the popularity of 4G LTE service, including in-car ICT devices with internet access functions (known as telematics) and wearable smart devices such as smart watches. Industry insiders note that auto models furnished with a wider array of telematics products are set to hit the market in 2014. IHS, a market research body, predicts that the scale of the global telematics market will jump 44% to 19 million devices in 2014. MIC estimates that the output value of Taiwan’s telematics industry grew by 13.3% to US$20 billion in 2013. Hon Hai, for one, has included the development of car electronics as part of its “7C” strategy, along with computers, consumer electronics, communications, content, channels, and care (medical care). As part of this plan, it has invested in the Hua-chuang Automobile Information Technical Center, which was organized by MOEA to concentrate on car electronics. Avantech, for its part, has received orders from Brazil for 6,000 sets of telematics hardware and software solutions worth US$6 million, to be installed on buses, the main mode of mass transportation in Latin America. Meanwhile, Taiwanese electronics makers Guider Care Co. introduced an

Android-based smart watch in September 2013, scheduled to hit the market in the first half this year. The company plans to offer two kinds of smart watches: one for monitoring the health status of senior citizens and the other to enable parents to monitor the location of their children. Another company, neoVideo, founded in 2005, has recently received a fresh capital injection of NT$60 million (US$2 million) from Flytech Group, a supplier of POS (point of sales) systems. The new investment more than doubles its paid-in capital and will enable neoVideo to expand its output as an OE (original equipment) manufacturer, mainly for wireless communications modules and e-call telematics boxes, used to call for road rescue. Former Acer Chairman C.T. Wang says that use of smart mobile devices to tap various cloud-end services in a wireless broadband environment will dominate the development of the global ICT industry in the next decade. According to MIC, the global market for wearable devices will top US$3.1 billion in 2014 and rise to US$34.1 billion in 2018. The Industrial Economics & Knowledge Center (IEK) under Taiwan’s Industrial Technology Research Institute(ITRI)predicts that wearable devices will become a major growth driver for the global smart handheld devices market in the coming years, taking over the role of smartphones and tablet PCs. “The ICT industry will face, sooner or later, a slowdown in the growth of pop-

ular smart handheld devices, such as smartphones, which will stimulate firms in the field to come up with even more innovative devices,” says Chi Chao-yin, chief of IEK’s electronics section. To help accelerate Taiwan’s advances in smart mobile devices, the National Science Council (NSC), recently upgraded to become the Ministry of Science and Technology, early this year forged an agreement among the Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chip foundry; MediaTek, a leading fabless IC maker; Chunghwa Telecom; the Ruentex Group; and ITRI to establish a new company. The venture aims to invest NT$1 billion (US$33 million) over three years to develop small mobile smart devices, tailored to specific needs, in contrast to fullscale devices such as iPads and iPhones. As a result, the new enterprise has been dubbed the “Small Apple Orchard Company” by Cyrus Chu, former chairman of the NSC. Such initiatives are considered critical for Taiwan’s ICT industry to regain growth momentum and increase profitability. The industry’s hardware production value last year topped US$133 billion, accounting for over half of Taiwan’s total industrial output, compared with a value of US$13.3 billion for communications services. But with margins on hardware thinning and technology rapidly evolving, to remain viable and profitable businesses, Taiwanese ICT firms need to evolve as well.

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Taiwan Aspires to Restart Stalled ITA Talks BY PHILIP LIU

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alks in the World Trade Organization (WTO) to expand the highly successful Information Technology Agreement (ITA) stalled in late 2013 due to significant differences between major technology exporter China and other ITA signatories, including the United States, Japan, and Taiwan. The ITA eliminates tariffs on hundreds of Information and Communication Technology (ICT) products in eight broad categories, including computers, semiconductors, and manufacturing equipment. Signed by 75 countries who collectively manufacture 97% of the world’s technology products, the ITA is considered by the WTO to be one of the most commercially successful trade agreements ever signed, having been instrumental in tripling the annual global value of ICT trade from its signing in 1996 through 2010, when the figure reached US$1.4 trillion. The ITA hasn’t been significantly updated since its inception, however, despite a vastly changed technology landscape. Talks in Bali this past fall were intended to expand the range of products covered under the original ITA in a new agreement, dubbed ITA2, which would allow for tariff-free trade on a host of the latest technology products, including smart phones, flat screen TVs, and GPS controllers. But unexpected pushback from China, the world’s biggest ICT exporter and major beneficiary of the current ITA, has scuttled the talks for now. On November 18 last year, China presented a list of 59 items

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which it demanded be excluded from ITA2. The exemption list includes many hi-tech products, such as multi-component semiconductors (MCOs), semiconductor manufacturing equipment, medical devices, and audio-visual products, in which the United States and other industrially advanced nations excel. FPD (flat panel display) products, for which Taiwan has a significant share of the global market, also appear on the list. In addition, China delivered a “staging list” of 82 items for which it proposes that full tariff elimination be postponed for seven to 10 years. China’s long list of exemptions stands in sharp contrast to the response of other participants, such as the 10 sensitive products cited by the European Union, one by the United States, and none by Canada. The breakdown in talks is especially disappointing for Taiwan, as Taiwan’s IT industry, which accounts for 40-50% of Taiwan’s exports, has benefited greatly from the original ITA since the island’s accession to the WTO in 2002. Shih Hui-tzu, a research fellow at Chung-Hua Institution for Economic Research, says that “ITA2 would offset the adverse effect of Taiwan’s inability to sign free trade agreements with major trade partners in a short time,” allowing Taiwan’s digital products to gain greater market penetration across the globe. China’s recalcitrance on the ITA2 surprised other participating nations, as China has benefited massively from the original ITA. But China economy expert Derek Scissors, resident scholar with the American Enterprise Institute, says the root of the current impasse lies precisely in this success. “Those very benefits have spread the impact of ITA to most provinces and a number of ministries,” he explained in an email to Taiwan Business TOPICS, resulting in China’s Ministry of Commerce having to “consult with an exceptionally large number of domestic political actors,” creating a situation of bureaucratic inertia rather than outright opposition to the terms of the ITA2. He also notes that with China undergoing profound shifts in its economy, “the uncertain policy environment is making it worse.” Additionally, China’s National Development and Reform Commission has been critical of foreign multinationals and U.S. technology firms in particular. “It may be politically risky at present to argue strongly for concessions to foreigners,” Scis-

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sors observes. China’s exclusion list sparked a strong backlash from other major ITA members. Karel De Gucht, European Commissioner for Trade, urged China to withdraw its exemption list, charging that Beijing’s stance is at odds with its role as the world’s largest exporter of information technology products. China makes more than a quarter of the world’s ICT goods. U.S. Trade Representative Michael Froman has said that China’s refusal to commit to expanded ITA coverage endangers the talks and calls into question China’s commitment to free trade. Representatives from Taiwan, Australia, Japan, and South Korea all expressed regrets over China’s intransigence, particularly as it has been the largest beneficiary of ITA. In response, Yu Jianhua, China’s deputy representative to the talks, blamed the stalemate on the excessive expectation of other members and claimed that China had reached the limits of its flexibility. Angelos Pangratis, EU ambassador to the WTO who presided over the meeting, suspended the session as a result of the stark differences between China and other ITA members. Gao Hucheng, China’s Minister of Commerce, placed blame for the stalled talks firmly on the United States. In a statement provided to Reuters last November, Gao said that the United States was turning “a blind eye to the big differences between Chinese and U.S. firms” and wasn’t giving due credit to stark

disparities in the development levels of participating nations. Talks can proceed without Chinese participation, and in fact, if agreement is reached among the other parties, China can still reap the benefits under WTO’s “Most Favored Nation” rules. But Scissors cautions that this result is no free pass, as market access to China will not improve without China’s direct participation in the agreement, and because China’s track record indicates that it is more likely to stick to the letter, rather than the spirit, of international agreements. “The more precise the guiding language, the more foreign partners can expect genuine Chinese compliance,” Scissors observes. To overcome the impasse, Scissors suggests that participating ITA members move forward on ITA2 talks without China “while making clear that China is welcome to join at any time,” suggesting that this approach “will put more pressure on China to overcome its internal political inertia.” Otherwise, the options are to abandon the effort for the time being or simply to cave in to China’s demands for numerous exclusions, an option Scissors says would be “quite unwise.” ITA2 talks began in earnest in May 2012, with over 50 WTO members participating, including Taiwan. Before the breakdown of talks last November, the great majority of participants had preliminarily agreed on the inclusion of some 250 items into the extended coverage of the agreement.

For Notebooks, Stability but No Excitement BY JENS KASTNER

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he growing popularity of tablet PCs and smartphones continues to eat into the global market for notebooks. That’s bad news for Taiwan’s Original Brand Manufacturers (OBM) and contract notebook makers. According to Gartner, a U.S. information technology research and advisory firm, last year worldwide shipments of notebook PCs declined by 14.8% from 2012 to 166 million units. Meanwhile, global shipments of tablets in 2013 surged by 68% to reach 195.4 million units, while smartphones rose by 42.3% to 968 million units. Taiwan’s two major OBMs – Asustek

Computer Inc. and Acer Inc. – and a number of contract manufacturers such as Quanta Computer Inc. and Compal Electronics Inc., accounted for an overwhelming 86.9% of the global notebook computer industry in 2013, according to the Taipei-based Market Intelligence & Consulting Institute (MIC). That exposure leaves them highly vulnerable to declines in the market. Furthermore, competition – mainly from lower-priced tablet computers – is forcing notebook makers to push lower priced models, which puts Taiwan’s manufacturers at a disadvantage relative to their Chinese competitors. According to MIC

analysts Evelyn Chang and Jane Yeh, China’s supply chain for semiconductors and other key electrical components for notebooks is maturing, putting Chinese manufacturers in a better position to meet the relentless pressure to cut prices. As a result, Taiwan’s 2013 global note-

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book market share fell by 2.3 percentage points from 2012’s 89%. Given the profound changes the global notebook computer industry is undergoing, can Taiwan’s OBMs and contract manufacturers adapt and survive in this new environment? The answer seems to be a tentative yes. For one, while Gartner sees a continuing drop in the notebook computer market, it forecasts that the pace of decrease will markedly slow in 2014 and 2015 – to 9.9% and 5.4% respectively – which suggests that the decline is bottoming out. Also, major players including Microsoft and Intel are making moves to stimulate demand for notebooks, though the results remain uncertain so far. Moreover, a comparison of the performances of Taiwan’s OBM players shows that their prospects are uneven. Acer, the world’s fourth-largest notebook brand and once Taiwan’s premier OBM, saw its revenue contract by a steep 16.2% to NT$360.2 billion (US$11.9 billion) in 2013. The company attributed the drop to having overestimated market demand for notebooks with touch panels as well as for Ultrabooks, which are thin, Intel processor-powered high-end notebooks. Its rival, Asustek, the world’s thirdlargest notebook brand, has fared m a r k e d l y b e t t e r. D r i v e n b y s t r o n g sales of its Transformer Book T100 – a detachable notebook made up of tablet and keyboard – Asustek’s net profit dropped last year by a comparatively mild 4% to NT$21.5 billion (US$710 million). Asustek is expected to expand its share of the overall PC market this year to become the world’s third-largest PC brand behind Lenovo Group and Hewlett-Packard (HP). Nevertheless, shrinking shipments and market shares are having a direct impact on the bottom line for Taiwan’s notebook makers and are generating some fundamental changes in how they do their business. “Downstream companies who used to manufacture key components for PCs are seeking transformations, extending their reach to other highprofit-margin products like tablets and smartphones,” MIC analysts Chang and Yeh observed by email. Recent press releases from Taiwan’s

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notebook players support this assessment, showing that both OBMs and contract manufacturers are clearly on the lookout for alternative revenue streams. Asustek CEO Jerry Shen told investors that this year the company will shift focus to its smartphone business, while Acer’s new president and CEO Jason Chen stated that he is “banking on the development of cloud-computing services.” Meanwhile, contract notebook makers are following suit. C.C. Leung, vice chairman of Quanta, the world’s largest contract notebook maker, has indicated that the company will move in the direction of cloud computing. Ray Chen, president of Compal, the secondlargest contract notebook maker, says he expects “growth this year to be driven by non-notebook products.” Wistron Corp., the world’s third-largest contract notebook maker, is likewise seeking to turn around the company’s fortunes by promoting non-notebook products. And Inventec Corp., the fourth-largest notebook manufacturer, foresees that its shipments of servers will grow to a record 25% of total sales this year, amid slowing notebook business.

Moving target Greatly complicating matters for decision-makers in the notebook sector is that analysts seem unable to provide accurate forecasts or market analysis, according to Ray Yang, principal admin-

istrator of the Electronics & System Resource Division of the Industrial Economics & Knowledge Center (IEK), itself a unit of the Hsinchu-based Industrial Technology Research Institute (ITRI). “Today, almost all resources for research and industry analysis either by the private sector or the Taiwanese government are pumped into the smartphone corner, and all that is done for the notebook sector is related to studying consumer behavior regarding purchasing and using habits with respect to the differences in the three categories: tablet, smartphone, and notebook,” he says. This lack of resources dedicated exclusively to the notebook sector hampers efforts to adapt to future changes in the market. But an even bigger problem for the notebook sector, according to Yang, is that “the trends which researchers were so sure they had identified just two years ago have failed to materialize, and things are taking truly unpredictable directions.” For one, Yang notes that as recently as two years ago, the future of the tablet computer sector was declared all but dead by a great number of market researchers. This false estimation – which in retrospect seems highly counterintuitive – was based on numerous surveys finding that many consumers only turned on the tablet during weekends and at home. “This made analysts conclude that the iPad tablet hype at its height back then would fade away before long, leaving the consumer of the future with

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only two devices: a notebook for home and a smartphone for away from home,” Yang says. “But the tablet computer sector continues to thrive, due in no small measure to the creation of new product types that are being lumped into the ‘tablet’ segment.” He elaborates that tablet-based notebooks, such as Asustek’s Transformer Book T100, as well as ultra-mobile PCs (which are small devices using touchscreen or a stylus pen), created a host of new offerings that have unexpectedly driven consumer demand for smaller devices, in turn gnawing away at the market share of the classic notebook. Similarly problematic is that the traditional categorization by product type has become categorization by panel size, Yang notes. He says brand companies feel compelled to serve any kind of consumer, even though few people would still settle for 17-inch panels, for example. “Because predicting human behavior is so tough, Taiwan’s notebook makers have all conceivable panel sizes,” Yang says. “If there are 10 possible forms and panel sizes, these companies probably will do all of them in order not to miss out on a single successful trend.” On the other hand, this overwhelming variety presents considerable risks for the OBMs, as it could easily make them lose focus on their core products. Yang

cites two case studies showing that Acer wasted much investment, production resources, and precious time on product development that led to few results, while Asustek determinately made the most of its rival’s decline by showing better market instincts and keeping a tighter focus on core attributes.

Pushing demand To trigger a meaningful notebook replacement wave, Microsoft Corp. – which earns revenue from notebooks by collecting license fees from Acer, Asustek, HP, etc. for using its operating system – terminated all support for Windows XP operating system-powered products as of April 8. Those still operating a notebook running on XP after that day will have to deal with viruses and hacker attacks on their own and will get no authorized safety updates, which presumably will compel users to switch to a brand-new notebook, ideally running XP’s successor, Windows 8. “Because of this Microsoft tactic, a lot of market researchers predict that this year or next year will be a turnaround one for the notebook players,” notes Yang. But MIC researcher Yeh is not among those who see this happening any time soon, if at all. She notes that other factors are in play that could postpone

or weaken the predicted wave of notebook computer sales. In particular, she cites chipmaker Intel’s plans to launch its new Bay Trail Atom-based processors designed for notebooks in the second half of the year, which may spur consumers to wait even longer before purchasing a new notebook computer. Still, while the notebook sector may not be able to return to even marginal growth rates any time soon, the business will likely remain stable, says Yang. Emerging markets remain healthy sources of demand, he says, noting that first-time computer consumers in emerging markets are more likely to purchase a notebook over a desktop or tablet. Yang also notes that internet companies, such as Alibaba, Amazon, Facebook, and Google, may totally change the landscape for smartphones and tablets in the years ahead at the expense of the current Top 10 in these two sectors, but he is positive that they will stay clear of the notebook business. “Most of the current stakeholders in the notebook sector will still be around in five years, very much unlike the hugely dynamic smartphone, tablet, and transformer sectors,” Yang predicts. “The notebook will not be a star, but will nonetheless continue to be a cash cow for Intel, Microsoft, Lenovo, Asustek, and so forth.”

Taiwan’s Smartphone Sector Slows Down Manufacturers are increasingly looking to emerging markets for their business opportunities. BY JENS KASTNER

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CUS on the Electronic Manufacturing Service (EMS) business This emphasis on assembly limits Taiwanese companies’ involvement in design and component selection, in turn restricting their competitive edge and bargaining capability. Chen and Yang further note that although smartphone components made in Taiwan include panels, passive components such as capacitors and resistors, printed circuit boards (PCB), flexible print circuits (FPC), camera lens, LED backlit modules, central processing units (CPU), memory, and semiconductors, “only some touch components provided by Taiwanese companies are used in the iPads and iPhones of Apple, their largest client.” The result is that Taiwan’s smartphone supply chain is kept from being as complete and efficient as it has been for PCs.

Uncertainties ahead

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y 2015, worldwide shipments of smartphones will have increased more than two-fold from 2012 to reach 1.4 billion units. But in the same period, shipments from Taiwanese companies will have grown by a significantly slower 73%, according to the same forecast by the Hsinchu-based Industrial Economics & Knowledge Center (IEK) under the Industrial Technology Research Institute (ITRI). Confirming this worrying trend, the Taipei-based Market Intelligence & Consulting Institute (MIC) reports that Taiwan’s share of worldwide smartphone shipments dropped to 24.1% in 2013, from 29.7% the previous year. And MIC predicts Taiwan’s share of global smartphone shipments will continue to fall – to less than 20% by 2018. The reasons for this worsening slump are readily apparent. According to MIC analysts Sophia Chen and Joen Yang, prior to 2012 Apple’s iPhone dominated the smartphone universe, boosting the business of its Taiwanese contract manufacturers. Combined with Taiwanese smartphone maker HTC’s previously strong performance in global markets, Taiwanese makers held about 30% of the worldwide smartphone supply chain. “But beginning in 2012, Samsung has outperformed Apple and recently has widened the lead, while HTC’s market share continues to dip further,” the MIC analysts note, adding that Chinese contract manufacturers have begun to turn away from Taiwan-made components, as Chinese component manufacturers have become more capable. The two explain that while cooperating with Apple can ensure that Taiwanese companies’ shipment volumes continue to exceed those of major South Korean and Chinese rivals, the partnerships between Apple and Taiwanese companies are based

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Among Taiwan’s original brand manufacturer (OBM) players in the smartphone business, HTC has about a 95% share of the export market, with Asustek Computer (maker of the Asus brand) and Acer accounting for the remainder. Arima Photovoltaic & Optical Corp., Compal Electronics, and Inventec Corp. are the island’s leaders in the original design manufacturer (ODM) segment, producing mainly for Sony, Motorola Mobility, Lenovo, and Xiaomi, while Hon Hai Precision Industry Co. (also known as Foxconn) provides EMS service to Apple. Despite the various business models employed by these companies, according to IEK, they all share the uncertainty of not knowing who will be the Top 10 global smartphone brands over the next five years. Whether HTC or even Apple will be among the survivors will have huge consequences for their respective Taiwanese ODMs and EMS providers. Ray Yang, Principal Administrator of the IEK Electronics & System Resource Division, says that a key factor in the global smartphone market will be success in focusing on the features that most appeal to consumers. But correctly identifying those features will continue to be a challenge. “Should it be the panel, memory, sensor, or perhaps the user interface?” he asks, noting that unlike earlier phases of the smartphone market, camera quality is unlikely to change much and will be a less significant factor. Yang identifies a second factor that will likely have a significant impact on the global smartphone industry – the increasing prevalence of cheaper smartphones running open source operating systems (OS), especially Google’s Android, or other lesser known brands. Google launched Android in 2008 (HTC’s Dream model was the first smartphone to feature Android) and according to IT market analytics firm International Data Corporation (IDC), phones running Android took 78.1% of the global market, most of them low-cost smartphones intended for emerging markets. IEK’s Yang cites an Android-based smartphone manufactured by Nokia as a prominent example of this trend. He says that such phones “will not only be good but also cheap enough to win over many millions of feature-phone users in Africa, India, and other emerging markets at the expense of first-tier brands’ global market share.” A third factor that bears on the fortunes of Taiwan’s OBM, ODM, and EMS operations, says Yang, is that Chinese software

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A Report on the ICT Sector

companies, most notably Baidu Inc., Tencent Holdings’s QQ, and the Alibaba Group, may follow in Amazon’s footsteps in creating their own smartphone brands in order to fully hook the customer on proprietary e-commerce software embedded in the smartphone hardware. “It’s not yet very clear if that will happen and if so to what extent,” says Yang. “But if it does, it means very tough times ahead for HTC and Asus.” On the other hand, Yang observes a possible silver lining for Taiwan: increased chip orders for Taiwanese semiconductor firms such as MediaTek Inc., supplier of much of the world’s smartphone chips. Yang adds that this phenomenon could also boost Taiwan’s ODM manufacturers, “as the Chinese internet companies needing manufacturing capability will turn to Taiwan to look for it, including through Xiaomi,” Yang says. The future trends pointed out by Yang might already be at work. According to IEK, 2014 will be first year that the production value of OBMs will be exceeded by the value of Taiwanese ODM production, which is on track to comprise an estimated 52% of the market, up from 48% in 2013. IEK sees the this trend continuing over the next few years, with ODM manufacturing predicted to take 55% of the market value in 2015 and 60% in 2016.

New frontiers As technology advances and component costs come down, smartphones are no longer primarily for wealthy nations, and many smartphone makers are seeking opportunities in emerging markets. For example, Seafarx Inc., a Taipei-based OBM/ ODM that produces Mediatek chipset-based smartphones in China and Taiwan that sell for between US$150 and $250, is an enthusiastic member of the Taiwan-Africa Business Association. Taiwan’s Far EasTone Telecommunications functions as Seafarx’s main local retail channel for its Eliya branded phones, which are often purchased by banks, stock brokerages, and universities to be given as gifts. But Seafarx’s international ambitions are focused strongly on pushing sales in Africa, India and the Middle East, where the firm sees ample room for growth. Contrary to conventional wisdom, customers in emerging markets such as Africa aren’t motivated simply by price, but are as choosy as their developed nations counterparts in terms of features and quality, says Tim Yu, the Seafarx sales manager. “They keep asking for high specs, such as bigger screens, high resolution cameras, 32 GB ROM storage memory, powerful eight-core CPU, and so forth, meaning they fully accept the medium price range,” says Yu. As a result, he says, Seafarx is able to “design smartphones with specs that are just below those found in the HTC, Apple, and Samsung benchmark ones, for reasonable margins.” Yu observes that African customers choose smartphones the same way they choose PCs, with serious contemplation of features and attributes and extensive product comparison. But it’s not just market opportunities that add to the attractiveness of emerging markets for Taiwan’s small and medium sized OBMs/ODMs. Yu says that bureaucratic hurdles add signifi-

cantly to the cost of doing business in many developed nations. For example, the U.S. Federal Communications Commission’s FCC certification for telecom products to be sold in the U.S. market may cost hundreds of thousands of U.S. dollars, if not over US$1 million, whereas countries such as Nigeria and Egypt typically require only the European Union’s CE marking and perhaps also its Restriction of Hazardous Substances Directive (RoHS) certification for smartphone imports, both of which are far cheaper to obtain. Arko Industrial Inc. is another medium-sized Taiwanese OBM/ODM smartphone maker seeking opportunities in emerging markets. The company, like Seafarx, employs Mediatek chipsets in its designs, usually manufacturing tablets and smartphones in batches ranging from 1,000 to 20,000 units, partly in its own factory in China and partly with Chinese subcontractors. Arko lists Europe, the United States, South America, Mexico, South Africa, Russia, and the Middle East as its key markets. “Since smartphones have only really been around for two or three years, many people in those markets still make do with old-style feature phones, strongly suggesting that the demand for entry-level, low-and-mid priced smartphones will greatly increase for some time to come,” says Arko’s president, Calvin Hsu. He observes that the number of local smartphone brands seen in emerging markets is increasing, adding to their ODM business, and also that more mid-range smartphone brands are being launched by retail channels in the West, “particularly those in the electronic retail chain category, whose traditional core business has been the distribution of PCs, PC peripheries, and PC accessories.” Hsu says that as the cost of hardware and operating systems comes down, Arko is seeing a significant share of sales go to businesses that promote their own products by bundling them with low cost or even give-away smartphones. Further, while the top-tier players such as Apple, Samsung, and HTC still enjoy significant brand loyalty, Hsu notes that “not everybody is able or willing to spend NT$20,000 on a smartphone that is not notably better than one that goes for NT$5,000.” He adds that while top players take this fact into consideration in their pricing policies, “they will nonetheless find it very difficult to cater to the low and mid-price markets.” The result, Hsu forecasts, is that “players like us will see their market share steadily increasing.”

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s e e i n g ta i w a n

Food, Culture, and Outdoor Fun at Taiwan’s Festivals

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pend a week in Taiwan, and you are almost certain to see a festival of some kind. To spread the word about Taiwan’s rich and diverse festival culture, and help potential visitors plan itineraries around events that interest them, Taiwan’s Tourism Bureau is highlighting 42 world-class activities in 2014 as part of its “Time For Celebration” promotion. Several, such as the International Dajia Mazu Sightseeing and Culture Festival, are expressions of age-old traditions. The faithful believe the goddess Mazu (often spelled Matsu) was once a human being, born in Fujian (the coastal Chinese province nearest Taiwan) on the 23rd day of the third lunar month, 960AD. Originally the patron saint of seafarers, she is now the most revered deity in Taiwan’s vast folk pantheon. Each spring, to celebrate the goddess’s birthday, one of Taiwan’s most precious Mazu icons leaves its home in Taichung’s Dajia Jenn Lann

Temple and embarks on a nine-day tour of affiliated shrines. More than a million devotees accompany the effigy, some covering the entire 300km route on foot. The pilgrimage is said to be the largest regular religious event in the world outside India, but there is much more to it than walking and praying. Folk religion in Taiwan is incredibly colorful, and entertainment laid on for gods and goddesses is enjoyed by all. In addition to Taiwanese opera and traditional puppet shows, zhentou troupes perform lion dances, dragon dances, and stilt-walking stunts. The Mazu pilgrimage this year ran from April 7 to April 15, and included all of these plus other cultural performances. The second quarter of 2014 is chockfull of lively festivals. Whether you are a gourmet, a culture vulture, or a passionate lover of the great outdoors, you will find no shortage of things to do. The area around Donggang, in Taiwan’s southernmost county of Ping-

tung, attracts all three kinds of visitor. Seafood fans go to enjoy the town’s delectable bluefin tuna, sakura shrimp, and escolar roe. Those curious about Taiwan’s vibrant temple culture hope to witness the triennial boat-burning ritual. Birdwatchers explore the nearby wetlands, searching for winter migrants. For many, however, the greatest excitement happens between April 26 and May 11, when Dapeng Bay – just a few kilometers from central Donggang – serves as the main venue for the Dapeng Bay International Regatta. The 532-hectare lagoon is ideal for all kinds of watersports. In addition to year-round sunshine, the bay enjoys consistent winds. Yet because its mouth is narrow, the waves are minuscule. It is thus an excellent place to get on a windsurfing rig or aboard a sloop. The regatta, organized by the Dapeng Bay National Scenic Area Administration (www.dbnsa.gov.tw), brings together local and overseas yachtsmen and windsurfers. In Taiwan, as in ethnic Chinese societies in general, fireworks have a cultural significance far exceeding that in Western countries. Massive quantities are shot off during folk-religion parades and celebrations, while families mark weddings and other happy occasions with barrages of rockets and strings of firecrackers. It is no wonder that dazzling firework displays are much loved by Taiwan’s people. The Penghu Fireworks Festival is

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an added reason to visit the Penghu archipelago, 90 islands some 45 kilometers off Taiwan’s southwest coast. Penghu is both ancient and unspoiled. The first Chinese settlers came here almost a thousand years ago, and many of the very old and intensely photogenic homes they made using local basalt stone still stand. The archipelago has attractive beaches, superb seafood, and a tremendously relaxing atmosphere. It is an early-to-bed, early-rise sort of place, but every Monday and Thursday evening between April 14 and June 19 there is a good reason to stay out a little later. At 9 p.m. on those days, the skies above Magong’s Guanyin Temple erupt with 15 minutes of fireworks, an incentive devised by the Penghu National Scenic Area Administration (www. penghu-nsa.gov.tw) to encourage visitors to stay beyond the weekends and to come before the summer peak season. By May, the weather throughout Taiwan is warm. In Taipei, daytime temperatures hover around 25 degrees Celsius (77 degrees Fahrenheit), while the south enjoys day after day of sunshine. Not surprisingly, many people head to beaches such as Baishawan and Fulong near Taipei, or Kending on Taiwan’s southernmost tip. Kicking off May 3 and lasting until the end of June, the 2014 Fulong International Sand Sculpture Festival is the seventh edition of an event that draws crowds to Taiwan’s north coast. The sand here, soft quartz that sticks

together very well when wet, is perfect for creating works of art inspired by Chinese myths, architectural landmarks, movies, and cartoons. Professional sand sculptors from overseas will join Taiwanese artists in shaping on-the-spot masterpieces, hoping to win cash prizes as well as the adulation of visitors. All forms of exercise have grown in popularity in Taiwan in recent years. Running is one, and athletic visitors interested in combining their exercise regimen with sightseeing may want to mark May 18 or May 25 in their diaries. The earlier date is when the Kenting National Park Marathon will be held at the popular beach resort. A week later, the Miaoli Expressway 72 Marathon will showcase splendid hill country in the northwest. Both events include not only full and half-marathons, but also shorter fun runs. For sportsmen and sportswomen who want an even greater challenge, the weekend of June 21-22 promises excitement with a difference. As its name suggests, the 2014 Xiuguluan River Rafting Triathlon is no ordinary competition. Instead of swimming, competing teams have to navigate

inflatable boats down an 11-kilometer section of the Xiuguluan River in the eastern county of Hualien. This waterway, Taiwan’s most popular whitewater rafting location, is rated “class two” by international standards, meaning it is calm enough to be safe for firsttime rafters, while still having enough eddies, rapids, and drops to make for a fun outing. As soon as they get out of their boats, the triathletes will run 12.6kilometers on Local Road 64, a route adored by cyclists because of the lovely views it offers. The race concludes with a 44-kilometer bike dash to eastern Taiwan’s stunning Pacific Coast. The annual Taiwan Balloon Festival offers the chance to see another part of eastern Taiwan from high above. The festival starts on May 30 and runs through the summer. Balloons take off from Luye High Terrace, a plateau that is also one of Taiwan’s top paragliding spots. A short video on the event’s website (http://balloontaiwan.taitung. gov.tw/) shows off the area’s magnificent landscape. Even if you have no interest in balloon rides or paragliding, you should consider coming here for the tea plantations and excellent scenery. Tourists also flock to two nearby villages. One, Yong’an, is a mixed Han Chinese and aboriginal community at the base of the Central Mountain Range. The other, now called Longtian, was established in 1917 to attract settlers from Japan, which ruled Taiwan between 1895 and 1945. Scores of immigrants arrived, and some of the Japanese-style wooden bungalows they built still exist. For further details of these and other events, as well as general travel information about Taiwan, visit the website of Taiwan’s Tourism Bureau (www. taiwan.net.tw), or call the 24-hour tourist information hotline 0800-011-765 (toll free within Taiwan).

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Green Forum

AmCham Taipei’s Green Forum Bringing together sustainability and business Supported by

BY TIMOTHY FERRY

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mCham Taipei commemorated Earth Day 2014 with a Green Forum entitled “Go Green: For a Sustainable Taiwan” on April 24. The event brought together business leaders in green technology from Taiwan and abroad for an exchange of ideas, challenges, and learnings that can help put Taiwan and the world on the path towards sustainable development. The latest in a series of green technology forums and conferences organized by AmCham Taipei, this year’s Green Forum was supported by DuPont Taiwan and Siemens Taiwan. It featured panelists from KPMG Sustainability Consulting Co., Taiwan, Siemens Taiwan, Corning Display Technologies Taiwan (CDTT), and Miniwiz Sustainable Energy Development Co. “Green” is big in Taiwan, as both an ethic and a business focus. Despite its relatively small size geographically, Taiwan packs a big punch in global technology markets, and has the carbon footprint to match. At 12 tons per capita per year, the heavily industrialized island has some of the highest carbon emissions in Asia. Under the administration of President Ma Ying-jeou, Taiwan has placed environmental issues and sustainability at the fore of policy initiatives and maintains ambitious goals for carbon reduction and developing renewable energy. Taiwan already has one of the largest solar-cell manufacturing industries in the world, along with impressive shares of LED lighting and electric vehicle value chains. The forum’s speakers stressed that 48

From right to left, moderator Niven Huang of KPMG Taiwan discusses green tech with panelists Erdal Elver of Siemens Taiwan, Corning Taiwan's Daniel Tseng and Christopher Yen of Miniwiz Energy.

“green tech” can be both environmentally friendly and profitable. Keynote Speaker Eugene Chien is a former head of Taiwan’s Environmental Protection Administration (among other important government positions he has held), and is founder and chairman of the Taiwan Institute for Sustainable Energy. Chien got the event started with a wide-ranging and comprehensive look at why sustainable development is such an important issue in Taiwan and how Taiwan can both improve its environmental scorecard and its business environment. Chien reminded the audience of the devastation wrought in 2009 by Typhoon Morakot, which killed over 500 people and caused billions of US dollars in damage, earning the island

second place on the 2009 Global Climate Risk Index. The climate changelinked extreme weather exhibited by Morakot, along with the Ma administration’s push to place environmental issues and education to the fore of policy initiatives, has raised awareness to the point where over 90% of Taiwanese believe that global climate change is caused by humans and that society needs to take measures to mitigate its impact. Chien noted that Taiwan is a significant contributor of greenhouse gas emissions due to its industrial sector skewed towards high energy-consuming sectors such as petrochemicals, steel, and ICT. While Taiwan has lessened reliance on coal-generated power plants to make greater use of cleaner LNG

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Green Forum

and renewable energy, Taiwan’s carbon emissions remain among the highest in East Asia. The prescription, according to Chien, is a threefold effort involving behavior and lifestyle changes towards more sustainable consumerism, technological innovations that enhance energy efficiency and renewable energies, and market forces that compel greener choices. He observed that Taiwan has already begun the transformation towards a sustainable economy, with major green public transportation and infrastructure projects already completed or being constructed by the government, greater investment by private enterprise in green buildings, and increased consumer demand for organic foods and other environmentally friendly products. On the industrial innovation side, the solutions for reducing Taiwan’s environmental impact were provided by a panel that included moderator Niven Huang, General Manager of KPMG Sustainability Consulting Co., Taiwan; Erdal Elver, President and CEO of Siemens Taiwan; Daniel Tseng, President of Corning Display Technologies Taiwan (CDTT), and Christopher Yen, Chief Materials Engineer of Miniwiz Sustainable Energy Development Co. Elver emphasized Siemens’ large portfolio of green tech-related sectors, including energy generation, energy transmission and distribution, and energy consumption and efficiency. Through these combined efforts, Sie-

mens’ abatement of carbon came to 377 million tons in 2013, equivalent to the total combined emissions of 12 of the world’s largest cities. Elver recommended numerous ways for Taiwan to reach its carbon reduction goals, including greater utilization of wind energy, revamping old fossil fuel plants to improve output, and retrofitting factories with the latest technology to reduce energy consumption. Corning’s Tseng discussed how his company’s manufacturing facilities in Taiwan are focusing on both processing and materials to make greener products for their customers. For example, Corning’s innovative Eagle XG Slim glass substrates eliminate the need for heavy metals and other toxins even as their advanced processing allows their Taichung manufacturing facility to earn a Leadership in Energy and Environmental Design (LEED) Gold certification. As Tseng noted, at Corning “we approach the question of sustainability as we do any other problem – as an opportunity to innovate, create new products, and put the best ideas to work.” While Siemens and Corning are firmly established global players, Miniwiz shows that startups in environmental-related industries are also having an impact. As Miniwiz’s Yen explained, the company is involved in the recycling of plastics, transforming garbage into energy-efficient, low-cost building materials. And while most of

Panelists and supporters closed the AmCham Taipei Green Forum 2014 with a group photo on stage.

Keynote Speaker Eugene Chien, former head of Taiwan’s EPA and founder and c h a i r m a n o f t h e Ta i w a n I n s t i t u t e f o r Sustainable Energy, offers his views and insights into green tech and sustainability.

these products – such as insulation or ventilation –remain unseen, Taiwan’s famed Eco-Ark translucent building was built almost entirely using innovative POLLI-Brick™ created by Miniwiz from PET plastic bottles. Unlike previous years’ events that focused on renewable energy such as wind and solar, Green Forum 2014 highlighted the great strides made in energyefficient manufacturing that can both reduce environmental impact and also save energy, particularly as Taiwan must meet 98% of its energy needs through imports. For example, Siemens’ Elver noted that the latest variable-speed electric motors used in factories consume up to 70% less energy than conventional motors, translating into big savings for Taiwan’s manufacturers. “There is no question that manufacturing can be an energy-intensive business, and we have to address that,” noted Corning’s Tseng. “We’re doing so in three primary ways – through our current and emerging products, through manufacturing innovation, and through the local activities taking place at our plants.” The forum ended on a positive note, with the speakers touting the opportunities for new business models and cost savings enabled by green technology – though they also acknowledged that the road won’t necessarily be easy. As Miniwiz’s Yen observed: “The challenge remains how to turn sustainability into a value-added framework with practical applications for the future.”

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Taiwan Business TOPICS May 2014