TOPICS 2013 February Issue by AmCham Taipei

Bu 2 0 1 SP sines 3 Am EC s Cl Cha IA imat m T e a L RE Survipei PO ey

THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics Liberalizing Trade 鬆綁貿易

TAIWAN BUSINESS TOPICS February 2013 | Vol. 43 | Issue 2 中華郵政北台字第號執照登記為雜誌交寄 5000 2_2013_Cover.indd 1

NT$150

February 2013 | Vol. 43 | Issue 2 www.amcham.com.tw

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CONTENTS NEWS AND VIEWS

6 Editorial

f eb rua ry 2 0 1 3 volume 43, number 2 一 ○二年二月號

The Key to an Improved Business Outlook

加強改革，讓台灣景氣展望更好

7 Taiwan Briefs

Publisher

發行人

Andrea Wu Editor-in-Chief

總編輯

Don Shapiro

Safeguarding Trade Secrets; Does the PDPA Go Overboard?; Eliminating Illegal Pesticides

沙蕩美術主任 /

Art Director/ Production Coordinator

Katia Chen

後製統籌

陳國梅

Staff Writer

捍衛營業秘密；個資法管太多？；剷除非法農藥

採訪編輯

Jane Rickards

By Don Shapiro

11 Issues

吳王小珍

李可珍

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

翻譯

Yichun Chen, Frank Lin, Sonia Tsai

陳宜君, 林治平, 蔡函岑

COVER SECTION

15 Liberalizing Trade

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 2013 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○二年二月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Alan T. Eusden Vice Chairmen/ Bill Wiseman / William J. Farrell Treasurer: Sean Chao Secretary: Edgard Olaizola

鬆綁貿易 By Jane Rickards

In his remarks at the 2012 Hsieh Nien Fan banquet hosted by AmCham Taipei last March, President Ma outlined what he termed the Five Pillars need to support Taiwan’s future economic prosperity. Future issues of the magazine will deal Starting in this issue, Taiwan Business with the remaining pillars: Promoting TOPICS will be examining those pilIndustrial Innovation, Ensuring Energy lars in turn in more detail. First on Security, Boosting Higher Education, the list is the importance of further and Attracting Foreign Talent. liberalizing Taiwan’s trade regime. That effort will entail reducing regulatory burdens through deregulation, 20 New Opportunity for eradicating protectionist mindsets, Opening in Services and entering into more free trade pacts with Taiwan’s trading partners. 26 Coming Soon: Trade Pacts

with Singapore and New Zealand

2012-2013 Governors: Richard Chang, Sean Chao, Michael Chu, Louis Ruggiere, Revital Golan, David Pacey, Lee Wood, Ken Wu. 2013-2014 Governors: Alan T. Eusden, Thomas Fann, William Farrell, Edgard Olaizola, Stephen Tan, Fupei Wang, Bill Wiseman. 2013 Supervisors: Susan Chang, Cosmas Lu, Gordon Stewart, Carl Wegner, Julie Yang. COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Winnie Yu; Banking/ Victor Kuan; Capital Markets/ John Chen, Jane Hwang, C.P. Liu; Chemical Manufacturers/ Luke Du, John Tsai; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou; Human Resources/ Richard Lin, Seraphim Mar; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Mark O’Dell, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Scott Meikle; Manufacturing/ Alan T. Eusden, Thomas Fan; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, Albert Lim, Tse-Mau Ng; Pharmaceutical/ David Lin, Edgard Olaizola, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin, Dan Silver; Real Estate/ Tony Chao; Retail/ Prudence Jang, Douglas Klein; Sustainable Development/ Kenny Jeng, Davis Lin; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, John Ryan, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Trade/ Stephen Tan; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, David Pacey.

TAIWAN BUSINESS

27 Ramping Up Taiwan’s Software Industry As Taiwan’s ICT hardware manufacturers encounter slower growth, can the software industry propel the next wave of growth? By Emily Chen

taiwan business topics • february 2013

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fe bruary 2013 • Volume 43 n umbe r 2

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38 2013 AmCham Taipei Business Climate Survey: Summary of Results

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2 Contents.indd 5

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The Key to an Improved Business Outlook

he results of AmCham Taipei’s 2013 Business Climate Survey, summarized elsewhere in this issue, prompted some observers to wonder about an apparent anomaly in the responses. The business executives surveyed expressed considerable optimism about prospects for the coming year. They said, for example, that they expected to see an increase in revenue and profits from 2012, and 53% of their companies (up from 43% the year before) have plans to increase their investment in Taiwan during 2013. Yet when asked about the five-year outlook for their business in Taiwan, just 56% said they were optimistic – continuing a downward trend from the 81% in 2011 and 70% in 2012. Although the reason for the difference between the nearterm and medium-term outlook is not dealt with explicitly in the survey, it is possible to extrapolate from the survey data to find an explanation. Several of the primary concerns raised by respondents about the business environment are issues whose impact may be felt increasingly strongly as time goes by – unless steps are taken promptly to forestall that development. Some key examples: • The threat of economic isolation if political factors keep Taiwan from participating in emerging regional trade blocs and deter major trading countries from negotiating free trade agreements (FTAs) with Taiwan. • Chronic bureaucratic inefficiencies that hamper Taiwan’s competitiveness at a time when some leading trade rivals are actively engaging in reform and deregulation to accelerate their progress. Respondents cited lack of transparency and insufficient notice before regulatory changes are introduced as significant problems. • Human resource deficiencies – both an inadequate availability

of talent in certain fields and the insufficient creativity and initiative in what is otherwise an excellent workforce. Fortunately, there is still time to turn the situation around and rebuild broader confidence in Taiwan as a good place to invest for the long-term. In fact, developments in recent weeks offer cause for some optimism on that score. Taiwan and the United States, for example, have now confirmed that the longstalled Trade and Investment Framework Agreement (TIFA) talks between the two countries will be held in March. In late January, a bipartisan delegation from the U.S. House of Representatives’ Foreign Affairs Committee, led by Committee Chairman Edward Royce, visited Taipei with an even more ambitious message – support for the two countries to enter into negotiations for an FTA. The same month, news was released that 20 WTO member economies – including Taiwan, the United States, the European Union, and Japan – may soon start negotiations on an International Services Agreement (ISA). Participating in the ISA, as well as moving forward on an FTA with the United States, would go a long way in helping Taiwan to avert economic marginalization. It would also give Taiwan the incentive to bring its regulatory procedures up to a high international standard and to further open its economy for the unimpeded flow of goods and services, money, and talent. With those changes, both domestic and foreign investors would unquestionably view Taiwan’s economic prospects – for whatever timespan – as exceedingly robust. AmCham Taipei looks forward to concrete progress on TIFA, an FTA with the United States, and ISA, with the result that the five-year outlook in next year’s Business Climate Survey takes a sharp turn for the better.

加強改革，讓台灣景氣展望更好

台

表後（摘要內容請參閱本期雜誌），部份觀察家認

儘管如此，台灣仍然有機會扭轉頹勢，重建外資企業深耕

為，受訪會員的回覆相當值得探究。大致而言，受

台灣的意願與信心。事實上，近期這方面的進展，令業界樂

訪的會員企業高階經理人表示，看好2013年景氣展望。例

觀其成。例如，台灣與美國均已表示，延宕多時的台美貿易

如，企業經理人預期未來一年公司營收和利潤可望提升，其

暨投資架構協定(TIFA)相關協商將於三月重新展開。一月下

中53%的受訪者表示公司計畫在2013 年增加對台投資，高

旬，美國眾議院外交委員會的跨黨派代表團訪台，領隊的委

於2012年上次調查時的43%。然而，受訪者對台灣未來五年

員會主席羅伊斯（Edward Royce）帶來令人振奮的消息：

商業景氣的樂觀程度持續下滑，相較於2011年的81%、2012

美方支持兩國展開自由貿易協定談判。此外，新聞稿指出，

年的70%，今年僅有56%的受訪商會會員抱持正面展望。

世界貿易組織的二十個成員經濟體 – 包括台灣、美國、

北市美國商會《2013商業景氣調查》結果於一月發

儘管問卷內容並未細究受訪者對於短期和中期景氣展望不同的原因，從問卷資料中仍然可歸納出一些結論。受訪者關切的幾項經商環境的重要議題，若未能及時採取行動積極改

才；台灣人力品質堪稱優秀，但創造力和主動性有待加強。

歐盟、日本 – 近期可望展開國際服務協定（International Services Agreement, ISA）的相關協商。若能加入國際服務協定，並持續與美方進行FTA的相關協

善，其衝擊將日益強烈。茲列舉主要議題如下：

商，將有助台灣扭轉經濟孤立的處境，也能促使台灣改善法

．台灣若受政治因素牽制，無法參與新興的區域貿易組織，

規程序以達國際級的高水準，並進一步開放國內市場，使貨

恐陷入經濟孤立的窘境；主要貿易國也沒有誘因願與台灣簽署自由貿易協定。

物、服務、資金與人才均得以不受阻礙的自由流動。若能實踐上述改革，國內外的投資者無疑將極度樂觀看

．台灣政府長期以來行政效能不彰，拖累台灣的國際競爭

待台灣的經濟前景，無論是短期或是長期展望皆然。台北市

力，同時間主要貿易對手則積極推動改革與法規鬆綁，加

美國商會衷心期盼，台美貿易暨投資架構協定、自由貿易協

快發展進度。受訪者認為台灣商業環境的主要問題在於法

定、及國際服務協定的相關協商，均能獲得實質進展；明年

規不夠透明，法規變動實施前亦未能充分告知。

商會對會員企業進行商業景氣調查時，受訪者對於台灣未來5

．人力資源質量不符合業界需求 – 部分產業找不到所需專業人 6

年的展望將能大幅反轉，氣象一新。

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2013/2/6 3:36:29 PM

— BY DO N SH AP I RO —

MACROECONOMICS GOODBYE 2012, HELLO A ROSIERLOOKING 2013 2012 turned out to be a disappointing year for the Taiwan economy. Initially, leading domestic and foreign forecasting institutions had optimistically projected economic growth rates for the year in the range of 4-5%. In the course of the year, however, they repeatedly adjusted those forecasts downward, mainly due to uncertainties in the international market that affected demand for Taiwan’s export products. It now appears that the Taiwan economy grew by only 1.25% last year, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS), and then only because of a stronger-than-expected 3.42% growth achieved in the fourth quarter due to increased private consumption. The foreign trade statistics tell much of the story. Both exports and imports showed negative growth in 2012 – exports finishing the year at US$301.1 billion, down 2.3% from 2011, and imports at US$270.7 billion, down 3.8%. The only major market to see an increase in shipments from Taiwan was ASEAN, where the Taiwan stock exchange index & value

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

8000

135

7750

120

7500

105

7250

7000

6750

6500

6250

6000

5750

January chart source: TwSE

Unit: NTD billion

MOVING UP — President Ma Ying-jeou tapped Yale-educated Vice Premier Jiang Yi-huah to take over the Premiership from Sean Chen, who resigned for health reasons. photo : cna

value of exports grew by almost 10%. But trade aside, there were some positive notes: unemployment in 2012 averaged 4.24%, the lowest since 2008, and consumer prices remained stable. The outlook for 2013 seems much brighter than last year’s performance. The United States successfully averted going over the “fiscal cliff” and the U.S. economy appears to be gaining strength; at the same Europe is emerging from the debt crisis weakened but no longer in crisis mode. For Taiwan’s export-driven economy, recovery in the West offers hope of a quickened economic pace at home. A s a r e s u l t , u n l i k e l a s t y e a r ’s phenomenon of a steady lowering of growth forecasts, this time the trend is for upward revisions. DGBAS, for example, in late January boosted its GDP growth forecast for 2013 to 3.53%, up from the 3.15% it announced in November. The government statistics bureau also sees exports growing by slightly over 6% this year. The private Taiwan Institute of Economic Research (TIER) takes a

similar view of the prospects for 2013, foreseeing GDP growth of 3.49% in its latest forecast (compared to the 3.42% it released in November). A number of other organizations were even more sanguine in their expectations for Taiwan’s GDP growth in the coming year, including the Chung-Hua Institution for Economic Research (3.6%), Cathay Financial Holding and Moody’s (both 3.8%), YuantaPolaris Research institute (3.85%), and HSBC at the high end of the scale (4.2%). Fueling the optimism were increases in the consumer confidence index and in export orders.

DOMESTIC SEAN CHEN STEPS DOWN; JIANG BECOMES PREMIER The new year has brought a new government. Premier Sean Chen resigned in late January, citing health concerns after his most recent medic a l c h e c k - u p . To s u c c e e d C h e n , President Ma Ying-jeou named Vice Premier Jiang Yi-huah, a Ph.d. in political science from Yale University who

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five-year term when his current term expires this month. That will make him the longest-serving governor in the history of the Central Bank.

spent most of his career in academia before becoming minister of the Executive Yuan’s Research, Development and Evaluation Commission in 2008 and Minister of Interior a year later. According to media reports, at 52 he becomes the youngest premier in the history of the Republic of China. Succeeding Jiang as vice premier is Minister of Communications and Transportation Mao Chi-kuo (C.K. Mao), who has held a number of key positions in his career, including the chairmanship of Chunghwa Telecom. MOTC Vice Minister Yeh Kuang-shih will move up to become the minister. Other Cabinet changes, responding to public criticism of Taiwan’s economic performance in the past year, saw China Airlines Chairman Chang Chia-juch, a former MOTC vice minister, take over from Shih Yen-shiang to become Minister of Economic Affairs, while Minister Without Portfolio Kuan Chung-ming was named to succeed Yiin Chii-ming as head of the Council for Economic Planning and Development (CEPD). Other Cabinet appointments may come after the Chinese New Year, but one highlevel government post that will not be affected by any reshuffling is the governorship of the Central Bank. It was announced that Governor Perng Fainan will be reappointed for a fourth

MA PLEDGES PENSION REFORM PROGRAM Following weeks of public discussion about the risk that the Labor Insurance Fund and retirement funds for the military, civil service, and teachers would run out of money sometime between 2019 and 2031, President Ma in late January announced plans for a major overhaul of the pension system. He said the government would continue to study various options, and would present a final plan to the Legislative Yuan in April. The proposal is expected to entail a higher premium rate and smaller payback in benefits for labor insurance. In addition, Examination Yuan President John Kuan will change the current formula for calculating civil servants’ pensions from the “Rule of 85” to the “Rule of 90.” Under this formula, a public servant can retire with benefits only after the total of his or her age plus the number of years of service adds up to 90. The government will also need to decide how to revamp the existing program under which many retired military personnel and civil servants receive preferen-

43.57 118.67

5.2 18.23

47.58 18.88

32.64 50.74

31.4 55.7

2012

2011

2012

2011

2012

2011

2012

25.76 36.36

23.6 32.98

29.6 31.2

28.27 28.77

Europe

2011

2012

2011

2012

Imports

TOTAL

270.7 301.1

45.27 124.04

2011

U.S.

ASEAN

281.4 308.3

Japan

Exports

tial 18% guaranteed interest on their pension funds. The opposition DPP said it would unveil its own competing proposal after the complete government plan has been made public.

KMT WINS TAICHUNG BY-ELECTION FOR LY SEAT When controversial independent lawmaker Yen Ching-piao from Taichung was forced to give up his seat to start serving a prison term on corruption charges, the opposition Democratic Progressive Party (DPP) thought it had a good opportunity to increase its representation in the Legislative Yuan. But when the ruling Nationalist Party or Kuomintang (KMT) nominated Yen’s son, Yen Kuan-hen, to run in the by-election to fill the seat, a close-fought campaign ensued. When the votes were counted in late January, the younger Yen had nosed out the DPP’s Chen Shi-kai by just 1,138 ballots out of the 131,776 that were cast. Despite the elder Yen’s alleged gangster connections and several run-ins with the law – he previously did prison time for the illegal possession of firearms – he remains highly popular in central Taiwan, where he is respected for his support of one of Taiwan’s most prominent Matsu temples.

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

TAIWAN'S JANUARY TRADE FIGURES (YEAR ON YEAR COMPARISON)

HK/China

Unit: US$BN Source: BOFT

U.S.-TAIWAN TRADE TALKS NOW BACK ON TRACK Due to displeasure over Taiwan’s restrictions on the import of American beef products, the U.S. government has not held what used to be routine annual trade negotiations with Taiwan since 2007. AmCham Taipei has long argued that the lack of those “TIFA talks” (for the Trade and Investment Framework Agreement under which they are conducted) has severely disadvantaged a broad cross-section of U.S. industries facing issues in the Taiwan market.

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VISITING CODEL — Congressman Edward Royce, chairman of the House Foreign Affairs Committee, shakes hands with AmCham Taipei President Andrea Wu following a breakfast meeting in which Royce's delegation discussed trade issues with AmCham leaders and AIT representatives.

In early February, the U.S.-based chairman of the American Insti tute in Taiwan, Raymond Burghardt, announced in Taipei that the TIFA talks would be held sometime in March, with the U.S. delegation led by Deputy U.S. Trade Representative Demetrios Marantis and the Taiwan side by Vice Economics Minister Cho Shih-chao. An unidentified local official told Taiwan’s Central News Agency that Taiwan’s major objectives in the talks would be faster progress toward a bilateral investment agreement (BIA) and discussion of the American attitude regarding Taiwan’s eventual participation in the Trans-Pacific Partnership (TPP) regional trade bloc now under formation. The resumption of TIFA talks was made possible by the Taiwan government’s action last fall to lift its ban on the sale of beef products containing the feed additive ractopamine, which is widely used by U.S. ranchers. A remaining question, however, is whether Washington will now push

to have the opening extended to pork products containing ractopamine. The hog farmers constitute a powerful interest group making this subject a sensitive political issue. Aside from his announcement about TIFA, Burghardt told the local media that his main focus on this trip was security matters. In addition to his meetings with senior government and opposition-party officials, he visited a Patriot anti-missile-missile site and the defense ministry’s Taipei Regional Control Center.

CONGRESSIONAL VISITORS OFFER MORE SUGGESTIONS In further good news last month r e l a t e d t o U . S . - Ta i w a n b i l a t e r a l relations, three Congressional delegations visited the island, advocating additional steps to improve the relationship on a variety of fronts. The visitors were Senator James Inhofe, Republican of Oklahoma and co-chair of the Senate Taiwan Caucus; Senator Lisa Murkowski, Republican of

Alaska; and a seven-member, bipartisan group from the House Foreign Affairs Committee, led by its new chairman, Edward Royce, Republican of California. Although all of them covered a number of topics, Inhofe particularly stressed the need for the United States to continue to supply Taiwan with advanced weaponry, including F-16C/D jet fighters; Murkowski promoted the idea of Taiwan importing inexpensive liquefied natural gas from Alaska to help meet its energy needs; and the Royce delegation expressed its support for the United States and Taiwan to enter into formal negotiations for a free trade agreement (FTA). In a breakfast meeting with AmCham leaders, both Democrats and Republicans on the committee said Taiwan does not have the problems other potential FTA candidates might face in terms of such issues as human rights, labor conditions, and environmental protection. In his meeting with the delegation, President Ma requested U.S. assistance

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in finding a way to replace the antiquated submarines in the ROC Navy.

BUSINESS New Drug Pricing Method Approved The number one issue in the pharmaceutical position paper in AmCham Ta i p e i ’s Ta i w a n W h i t e P a p e r i n recent years has been the need for the National Health Insurance program to adopt a Drug Expenditure Target (DET) system to help control costs without imposing drastic and unpredictable price cuts on the drug industry. Currently, following a wave of such cross-the-board cuts over the past decade, the reimbursement price for drugs in Taiwan is so low – among the lowest in the world – that manufacturers have been increasingly reluctant to launch new products here. Under the proposed DET solution, a reasonable growth target would be set annually for drug expenditures in the coming year; if the target is exceeded, industry would commit to make up the difference. A provision enabling use of the DET mechanism was included in the Second Generation National Health Insurance Act passed in January 2011, but until now uncertainty remained as to whether the government would put it into effect. The answer came in late January when the Department of Health disclosed that it would

Economic Indicators Current Account Balance (2012 Q3)r 11.64 Foreign Trade Balance (Dec) 4.13 Foreign Trade Balance (Jan-Dec) 30.38 New Export Orders (November) 11.84 Foreign Exchange Reserves (end Dec) 403.17 Unemployment (November) 4.27% Overnight Interest Rate (Jan 31) 0.386% Economic Growth Rate (2012 Q3) p 0.98% Annual Change in Industrial Output (Nov) p 5.85% Annual Change in Industrial Output (Jan-Nov) p -0.32% Annual Change in Consumer Price Index (Nov) 1.59% Annual change in Consumer Price Index (Jan- Nov) 1.96% NOTE: P-PRELIMINARY, R-REVISED

implement DET on a two-year trial basis, setting the growth target for the coming year at 4.427%, which is in the range of the past average of 4-5%. The acceptance of DET is “very encouraging news,” says Edgard Olaizola, co-chair of the AmCham Pharmaceutical Committee. “But it is hard to give a full evaluation because there are some details on how it will be implemented that have not yet been made clear. Still, this is moving in the right direction,” and industry representatives look forward to communicating with the government about the specifics, he says.

SCINOPHARM PLANS U.S. JOINT VENTURE Biotech company ScinoPharm Taiwan Ltd. and Newark, Delawarebased Foresee Pharmaceutical have announced plans for a joint venture

Year Earlier 10.26 2.32 26.8 11.1 385.55 4.28% 0.403% 3.53% -4.58% 1.03%

SOURCES: MOEA, DGBAS, CBC, BOFT

to develop a series of peptide injectable drugs. The first will be a drug for the treatment of prostate cancer that will formulate leuprolide (the active ingredient of Abbott Labs’ Lupron) a proprietary controlled-release drug delivery system. ScinoPharm, based in the Southern Taiwan Science Park in Tainan, said it would invest US$3.6 million to take a 15% share in the new venture. “This collaboration with Foresee signifies ScinoPharm's strategic move into the new drug development field with focus on applying new drug delivery technologies involving oncological APIs (active pharmaceutical ingredients,” said Jo Shen, president and chief executive of ScinoPharm. Foresee, established in 2011, is a spin-off from the research division of QPS holdings.

FORMOSA HOTELS PLANS EXPANSION Formosa International Hotels Corp., the owner of the “Regent” brand in the luxury segment, announced plans to open four more “Just Sleep” budget hotels this year in Taipei, Kaohsiung, Hualien, and Yilan. To staff the new facilities, the company will be recruiting about 400 new employees. It will also be adding a Regent Hotel on the Indonesian island of Bali.

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Safeguarding Trade Secrets The government is commended for new legislation that strengthens Taiwan’s IPR protection.

he Legislative Yuan’s recent passage of amendments strengthening the Trade Secrets Protection Act has been hailed by technology companies in Taiwan, both domestic and foreign-invested, as a major step in bolstering the safeguarding of intellectual property. The revised law establishes stricter penalties, including the introduction of criminal liability, for those convicted of misappropriating companies’ valuable proprietary information. In cases of illegal acquisition, use, or leaking of commercial secrets through theft or unauthorized copying, the new law provides for punishment of up to five years imprisonment and between NT$1 million (US$34,400) and NT$10 million in fines. If the violator’s personal gain from the illegal action exceeds NT$10 million, a further fine of up to three times the amount of the gain can be imposed. Heavier penalties can also be imposed if the trade secrets have been passed to other countries. In letters to Minister of Economic Affairs Shih Yen-shiang and Legislative Yuan speaker Wang Jin-pyng, AmCham Taipei expressed its gratitude to the executive and legislative branches for their rapid response in acting on industry concerns. The letter to Minister Shih particularly praised the “unyielding efforts of Director-General Wang Mei-Hua and her dedicated colleagues at [MOEA’s] Taiwan Intellectual Property Office [TIPO].” The letters noted that as a result of these stronger legal remedies against IPR violations, Taiwan is “now even better positioned to compete with other economies in the region.” With the focus of attention for trade-secret protection now shifting to the enforcement stage, AmCham Taipei’s Intellectual Property & Licensing (IP&L) Committee has raised some additional suggestions to help overcome the inherent difficulty in collecting evidence against violators in such cases: • Amend the Witness Protection Law to provide legal immunity to a co-conspirator who agrees to testify against other offenders in a trade-secret misappropriation case. Granting such immunity is already common practice in anti-trust and some other types of criminal proceedings. • Amend the Communications and Surveillance Act to empower the Ministry of Justice’s Investigation Bureau to use wiretaps to gather evidence against individuals strongly suspected of involvement in trade-secret misappropriation. • Revise judicial rules to require defendants to make a substantive defense – instead of simply flatly denying any wrongdoing – when there are sufficient grounds to suspect their culpability. That step is considered necessary because the Taiwan legal system lacks the process of “discovery” found in U.S. civil

捍衛營業秘密台灣政府加強智慧財產權保護機制，順利通過營業秘密法修正案，受業界好評。

立

法院近期三讀通過營業秘密法修正案，加強保護機制，國內外科技公司視之為智慧財產防護的一大進展。修正法案增定更嚴格的刑罰，包括盜用公司重要專利資訊而遭判刑者的刑事責任。以竊取、擅自重製等不正當方法取得、使用、或洩漏營業秘密的行為，修正案增訂刑事責任，最高可處五年有期徒刑，得併科台幣一百萬元（相當於 $34,000美元）以上、一千萬元以下罰金。犯罪行為人所得利益超過一千萬元時，並得在其所得利益 3倍範圍內酌量加重。若洩漏營業秘密到國外者，更可加重處罰。台北市美國商會致函經濟部長施顏祥與立法院長王金平，對於行政及立法部門迅速回應業界疑慮之舉，表達感謝之意。致施部長感謝函中特別讚揚「智慧財產局王美花局長與全體同仁辛勤不懈的努力」。信中指出，由於政府已加重智慧財產權侵犯者之刑責，如今台灣「在區域經濟體中更具國際競爭力」。隨著業界關注焦點轉移至保護營業秘密的執法階段，台北市美國商會的智慧財產權與授權委員會再提出幾項建言，以期降低營業秘密侵權案件中蒐證之困難度： • 修訂證人保護法：營業秘密侵害案件中，對於同意出面作證的共犯免除或減輕其刑責。在反托拉斯案件和其他刑事訴訟案件中，免責協商已是普遍作法。 • 修訂通訊保障及監察法：授權法務部調查局利用電話竊聽裝置，針對涉嫌竊取營業秘密的嫌疑犯蒐集犯罪證據。 • 修改相關法規，若被告嫌疑重大（有充分理由懷疑其有罪），須提出充分辯護 –– 而非僅單純宣稱無不法行為。這項修正實為必要，因為台灣司法體系缺乏類似美國民事訴訟的「證據揭示」程序，可讓訴訟雙方在案

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procedure to enable each side in a dispute to obtain information from the other before the case goes to trial. These recommendations will need to be discussed further with the Ministry of Justice and Judicial Yuan. Within its own area of responsibility, TIPO has pledged to carry out an educational campaign to make the public – as well as judges and prosecutors – more aware of the importance of effective trade-secret protection. At a meeting with IP&L Committee representatives, Director-General Wang said her organization would be communicating with both individual companies and various business associations to spread the word on how to safeguard trade secrets.

件開庭前取得對方的資訊。上述建言仍須與法務部及司法院進一步磋商。於其權責範圍內，經濟部智慧財產局已承諾將推動教育方案，讓社會大眾（以及法官及檢察官）進一步體認到有效保護營業秘密的重要性。王美花局長會晤美國商會智慧財產權與授權委員會代表時表示，該局將與企業和產業協會持續溝通，強化營業秘密保護的整體意識。

—撰文／沙蕩

—– By Don Shapiro

Does the PDPA Go Overboard? The new Personal Data Protection Act may be too farreaching to be practical.

n the months since the bulk of Taiwan’s ultra-strict new Personal Data Protection Act (PDPA) came into effect on October 1 last year (two articles in the law are still pending), nearly everyone in this country has been unknowingly breaking the law. That was the message at a recent AmCham luncheon presentation by attorney Seraphim Mar, senior partner at Baker & McKenzie and co-chair of the Chamber’s Human Resources Committee. Even the government has been guilty, she noted, alluding to the Ministry of Justice’s public release of ex-president Chen Shui-bian’s medical records without his permission. The law is so broad and all-encompassing – it protects any data (including photographs not obtained from a public source) deemed “sufficient to directly or indirectly identify a person” – that it is easy to be an inadvertent offender. Just passing someone’s business card to a third party without first getting his/her okay would be a violation. HR departments will need to exercise great caution on what information they gather on employees or job applicants and how long they retain data on those who have already left the company or were passed over for hiring. Businesses will have to be sure they do not use customer information for a purpose other than the one they originally stated – without taking steps to again gain the customer’s explicit consent. (An example would be collecting contact information for a lucky draw and then using it for a sales campaign). Covered under the PDPA are the collection, processing, and use of a long list of different types of personal data, from the mundane (e.g. birthday, marital status, contact information) to the clearly more sensitive (e.g. medical records, sexual orientation, criminal records). International transmission of the data is treated especially seriously. 12

個資法管太多？新版個人資料保護法影響層面極其廣泛，在實務上或許造成困難。

自

從台灣相當嚴格的新版個資法大部分條文（該法中的兩項條文仍懸而未決）在去年 10月1日生效後，這幾個月來，幾乎所有台灣人都在不自覺中違反這項法律。這是國際通商法律事務所資深合夥律師兼台北市美國商會人力資源委員會共同主席馬靜如，最近在商會午餐演講會中提到的主旨。她談到法務部未經前總統陳水扁許可就公開他的醫療紀錄時特別指出，即使政府也會犯罪。這項法律涉及的範圍如此廣泛且無所不包——它保護所有被視為「足以直接或間接辨識某人身分」的資料（包括並非從公共來源取得的照片）——稍不注意就很容易觸犯。在未先取得許可的情況下，光是把某人的名片傳遞第三方，就是違法。人力資源部門對於蒐集到的員工或求職者資料，以及對早已離職或未錄取者的資料該保留多久，必須極為謹慎。企業必須確定，在未採取行動再次取得顧客的明確同意前，不會將顧客資料用於當初所指定以外的用途（例如為了抽獎所蒐集的連絡資料，後來用於銷售活動中）。

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Besides civil liability, conviction for violating the PDPA could potentially carry criminal penalties of up to five years’ imprisonment and NT$1 million in fines. In certain instances, the CEO of the violating company could be held personally responsible for the same amount in the form of an administrative fine, unless his/her obligation to seek to prevent the violation is proven to have been fulfilled. Mar provided some practical advice for staying on the right side of the law. Among the key points: • At the time of data collection, inform the person as to the name of the collector, the intended purpose, the type of data being collected, the time period and area in which the data will be used, the parties that will use the collected data, the way in which it will be used, and the impact on the person’s rights and interests if the data is not provided. • The individual must also be notified of his/her rights to review, copy, supplement, correct, and delete the data, as well as to stop the collector from collecting, processing, or using his/her information, • Under the law, the communication does not have to be in writing, but since oral notification can be difficult to prove in case of a dispute, make sure to get written consent. Although most companies hope to use one single all-purpose consent form or letter, that is rarely feasible. Prepare multiple letters to cover different circumstances. Mar noted that the law is well-intentioned, motivated by instances of data leaks and the profusion of scam operations. But she considers that the scope of the legislation will prove to be so wide-ranging as to be unmanageable. She urged AmCham member companies who encounter difficulty complying with the PDPA to share their experience with the HR Committee, which may later offer suggestions to the government on ways in which the law could be amended to make it more workable.

個資法涵蓋蒐集、處理和使用一長串不同類型的個人資料，從一般性（例如生日、婚姻狀況、連絡資訊）到顯然較為敏感（例如醫療紀錄、性取向、犯罪前科）都包括在內。國際間的資料傳送被看得特別嚴重。除了民事責任，違反個資法被定罪，可能會面臨最高五年徒刑的刑罰與新台幣一百萬元罰金。在某些情況下，違法公司的最高管理主管可能得負起個人責任，繳交等額罰金，除非他能證明已善盡避免違法的義務。馬靜如提出一些不會觸犯這項法律的實用建議。重點包括： • 蒐集資料時，向蒐集對象告知有關蒐集人員的姓名、希望的用途、蒐集的資料類型、資料使用的期間和範圍、將使用所蒐集資料的所有相關者、使用方式，以及若不提供資料對其權利和利益的影響。 • 個人也必須注意他檢視、拷貝、補充、更正、刪除資料，以及阻止蒐集人員蒐集、處理或使用個人資料的權利。 • 根據這項法律，溝通未必要以書面方式進行，不過發生糾紛時，由於口頭通知會難以證明，要確保拿到同意書。大部份公司都希望使用單一的萬能式同意書或信，不過這很少行得通。準備多種同意書以因應不同的狀況。馬靜如指出，個資法立意良善，是鑒於多起資料外洩實例和詐騙猖獗而興起立法動機。不過她認為，事實將證明這項法律的涵蓋範圍廣泛到無法控制，她敦促在遵守個資法時遭遇困難的美國商會會員企業，將自身經驗與商會人力資源委員會分享，該委員會或許以後可向台灣政府提出修改個資法的相關建議，讓這項法律能更順暢運作。

—– By Don Shapiro

—撰文／沙蕩

Eliminating Illegal Pesticides A new Cabinet-level task force is seeking to solve a decades-old problem once and for all.

n AmCham’s 2012 Taiwan White Paper published last June, the Agro-Chemical Committee raised the alarm that the problem of widespread use of illegal pesticides on Taiwan’s vegetable farms – an issue broached year after year in the White Paper since 2001 – was in fact becoming more serious rather than diminishing over time. The Committee noted that a study it commissioned, conducted by two academic institutions, found that unregistered and untested

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products – mostly smuggled in from China – accounted for more than 30% of the pesticides in use. Considering the consequent health risk both to farmers and the general public, AmCham drew special attention to the issue during a meeting in August with Premier Sean Chen. The Premier responded by appointing a task force, headed by Vice Premier Jiang Yi-huah and including representatives from the Council of Agriculture (COA) and other relevant government agencies, to tackle the problem. To follow up on the progress, AmCham last month organized a discussion between Agro-Chemical Committee leaders and COA Minister Chen Bao-ji and his staff. The Committee was gratified to hear that the task force was undertaking a three-pronged approach to combat illegal pesticides: • Intensified outreach programs to inform farmers of the dangers that the use of illicit pesticides poses to themselves and consumers. • Increased inspections and investigations to impede the entry of illegal products at Customs, and with the help of law enforcement agencies and local governments to take action against distributors and retailers involved in the sale of such goods. • Educational programs to make prosecutors and judges aware of the seriousness of these offenses, so that violators receive appropriately severe penalties as a deterrent to others. When the Committee proposed amending the law to permit revocation of the business licenses of retailers found selling unlicensed pesticides, COA officials responded that such a provision already existed, but perhaps had not been widely utilized. The Council plans to urge local governments to take advantage of this option as an effective means to discourage infringement. Also discussed at the meeting with COA was the Committee’s second 2012 White Paper issue: “Adopt clear and effective rules governing new product registration.” The business representatives noted that since new rules with more complicated procedures and higher fees came into effect in 2010, no new active ingredients have been approved for entry into the market. The lack of new licensed products, they argued, holds back the development of Taiwan agriculture and may even contribute to the proliferation of the illegal competitors. COA agreed to the industry representatives' request to schedule small-scale quarterly meetings to discuss ways to make the registration system more efficient and accelerate the entry of new products. “This was an extremely productive session – hopefully just the beginning for continued positive communication,” says Melody Wang, chair of the Agro-Chemical Committee. “Minister Chen made clear that he is dedicated to internationalizing and upgrading Taiwan’s agricultural sector to make it more competitive, and we are more than willing to help.” —– By Don Shapiro

剷除非法農藥行政院新成立跨部會聯合查緝小組，希望一勞永逸解決一個幾十年的老問題。

在

台北市美國商會去年發布的2012年台灣白皮書中，農化委員會提出警告說，台灣蔬菜產區使用非法農藥的情況猖獗，自2001 年以來白皮書年復一年提起此事，但這些年來這個問題事實上並未減輕，反而越來越嚴重。委員會指出，曾委託兩個學術機構進行研究，結果發現使用的農藥有超過30%是未曾登記和檢驗的產品，大都是由中國走私進來。考量到因此對農民與大眾健康造成的危險，台北市美國商會去年8月拜會行政院長陳冲時，特別請他重視這個議題。陳冲院長因而指示成立聯合查緝小組，處理這個問題，小組成員包括農業委員會和相關政府機關的代表。為追蹤相關進展，台北市美國商會一月與農委會舉辦一場白皮書議題討論會議，與會的包括商會農化委員會領導成員以及農委會主委陳保基和他的幕僚。農化委員會樂聞查緝小組為取締非法農藥，將採取三管齊下的作法： * 強化推廣計畫，讓農民知道使用非法農藥對自己和消費者都有危險。 * 加強檢查和調查，阻止非法產品通過海關，以及透過執法機關和地方政府的協助，採取行動取締涉及銷售此類產品的通路商和零售商。 * 推行教育計畫，讓檢察官與法官意識到這些違法行為的嚴重性，以期違法者能受到適當的嚴厲處罰，收到殺雞儆猴的效果。農化委員會曾建議修改法律，規定零售商若遭查獲販賣未獲許可的農藥，可以撤銷它們的營業執照；農委會官員的回應是，已有類似規範，只是可能尚未廣為運用。農委會計畫敦促地方政府，利用這個選項為工具，有效防止違法行為。與農委會的會議中，也討論了商會農化委員會在 2012年白皮書中提出的第二項議題：「農藥登記制度應更清楚有效。」業界代表指出，自新規定於 2010年實施以來，程序較為複雜，費用也較高，至今尚無有效新成分獲准進入市場。他們認為，獲得許可的新產品不足，會阻礙台灣農業的發展，甚至可能助長非法業者坐大。農委會同意業界代表的要求，準備安排每季舉行小規模會議，討論如何讓登記制度更有效率，以及加速新產品進入市場。農化委員會主席王美玲表示：「這次會議成效極佳，希望這只是持續積極溝通的開始。陳主委表明他將致力推動台灣農業的國際化和升級，使之更具競爭力，我們非常樂意對此做出貢獻。」

—撰文／沙蕩 14

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Cover story

TRADE LIBERALIZATION

Liberalizing Trade 鬆綁貿易 BY JANE RICKARDS

撰文 / 李可珍

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Cover story In his remarks at the 2012 Hsieh Nien Fan banquet hosted by AmCham Taipei last March, President Ma outlined what he termed the Five Pillars needed to support Taiwan’s future economic prosperity. Starting in this issue, Taiwan Business TOPICS will be examining those pillars in turn in more detail. First on the list is the importance of further liberalizing Taiwan’s trade regime. That effort will entail reducing regulatory burdens through deregulation, eradicating protectionist mindsets, and entering into more free trade pacts with Taiwan’s trading partners. Future issues of the magazine will deal with the remaining pillars: Promoting Industrial Innovation, Ensuring Energy Security, Boosting Higher Education, and Attracting Foreign Talent.

馬英九總統去年4月在台北市美國商會2012年謝年飯致詞時，提出他認為促進台灣未來經濟繁榮所需的五大支柱。美國商會Taiwan Business TOPICS 雜誌自本期開始，將逐項仔細檢視這些支柱。列在第一項的是貿易自由化。隨之而來的是透過解除管制減輕法規上的負擔，去除保護主義心態，以及與台灣的貿易夥伴締訂更多自由貿易協議。本雜誌在今後幾期將討論另外四項支柱：促進產業創新、確保能源安全、促進高等教育和吸引外國人才。

年多以前，南韓國會通過與美國的自由貿易協議，當時一位反對黨議員在議場噴催淚瓦斯，執政黨議員投票時幾乎喘不過氣。警衛阻止反對黨議員助理衝進議場時，玻璃門被砸得粉碎，在國會外，警方對數以千計示威群眾發射水砲。抗議民眾的主要訴求是，韓國農民將因此無法維持生計。談起台灣本身今後的貿易自由化，經濟部次長卓士昭表示：「我們認為台灣也會出現幾乎相同狀況，但我們不知道程度會如何。」他指出，台灣許多團體不太可能贊同這個構想，尤其是農民。政府所以願意面對這種阻力，馬總統所以把貿易自由化列為改善台灣經濟的主要目標，原因在於就國內經濟改革和所簽訂貿易協議的數目兩方面而言，台灣都落後亞洲鄰國。若不能趕上競爭對手，參與更多貿易協議，不管是雙邊或多邊協議，台灣恐將陷入越來越大經濟劣勢。雖然農民和某些其他傾向保護主義的團體可能反對進一步開放市場，在出口導向的台灣，大部

一

hen South Korea’s parliament approved a free trade agreement with the United States a little over a year ago, Korean ruling party members voted while choking on tear gas sprayed by an opposition lawmaker. Glass doors were shattered as security guards prevented opposition legislative aides from barging into the chamber, and police fired water cannons at thousands of demonstrators outside. Among the protesters’ main complaints was that Korean farmers would be deprived of their livelihoods. When it comes to Taiwan’s own future trade liberalization, “we perceive that very much the same scenario will happen in Taiwan as well, but we don’t know to what degree,” says Vice Economic Affairs Minister Cho Shih-chao. Various groups in Taiwan, particularly farmers, are unlikely to favor the idea, he notes. The reason why the government is willing to face such resistance – and why President Ma Ying-jeou is citing trade liberalization as a major objective for improving the island’s economy – is that Taiwan is significantly lagging behind its Asian neighbors in terms of both domestic economic reform and the number of trade agreements signed. Without matching its competitors by participating in more trade pacts, whether bilateral or multilateral, Taiwan risks finding itself at a mounting economic disadvantage. Though

分工商組織都強力主張締訂更多協議，讓它們能在其他市場獲得互惠利益。台灣目前正談判簽訂兩項自由貿易協議，二者都是重大的外交突破，因為台灣與中國簽署經濟合作架構協議（E C F A），這在政治上才成為可能。這兩項協議都可望在今後幾個月簽署（參見邊欄），分別是與新加坡的台星經濟夥伴協議（ASTEP），以及與紐西蘭的經濟合作協議（ECA）。此外，印尼、印度和菲律賓如今也都在研究與台灣簽署類似協議是否可行。另一方面，為了台灣進口牛肉的爭議而停頓近六年後，與美國簽訂台美貿易暨投資架構協議（TIFA）的雙邊會談也可望很快恢復。台灣希望 TIFA進程恢復後，有助於在今後八年內加入跨太平洋夥伴協議（T P P）。這是美國領導推動的新自由貿易區。台灣還有意參與擬議中的區域全面經濟夥伴關係（RCEP），這個組織將涵蓋東南亞國家協會（ASEAN）十國，加上澳洲、中國、印度、日本、韓國和紐西蘭，目標是在2015年降低區域內的貿易障礙。不過，台灣若要加入RCEP，

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farmers and some other protectionist-minded groups may oppose further market opening, most business organizations in export-oriented Taiwan strongly advocate entering into more agreements that will give them reciprocal benefits in other markets. In two significant diplomatic breakthroughs – made politically feasible by Taiwan’s Economic Cooperation Framework Agreement (ECFA) with China – Taiwan is currently negotiating two freetrade-style agreements. Both ASTEP (the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership) and an ECA (Economic Cooperation Agreement) with New Zealand are expected to be signed in the next few months (see sidebar). In addition, Indonesia, India, and the Philippines are now studying the feasibility of entering into similar agreements with Taiwan. Further, bilateral trade talks with the United States under what is known as the Trade and Investment Framework Agreement (TIFA) are slated to resume in March after a nearly sixyear hiatus due to a dispute over beef imports into Taiwan. Reviving the TIFA process, Taiwan hopes, will enable it to join the emerging U.S.-led,11-nation Trans-Pacific Partnership (TPP) free-

On a visit to the Southern Taiwan Science Park in August 2011, President Ma calls on the TYC Brother Industrial Co., which decided to build a new plant to take advantage of the ECFA pact with China. photo :cna

trade bloc within the coming eight years. Taiwan is also interested in taking part in the planned Regional Comprehensive Economic Partnership (RCEP), which would group the 10-nation Association of Southeast Asian Nations (ASEAN) with Australia, China, India, Japan, Korea, and New Zealand, with a goal of lowering trade barriers across the region by 2015. With regard to RCEP, however, Taiwan’s entry may be especially difficult as China is an influential member. Most of Taiwan’s regional competitors

可能特別困難，因為中國是具影響力的成員。台灣的地區競爭對手大都已簽署多項自由貿易協定，但台灣除了中國與中美洲地區四個小國以外，缺少與其他經濟體的自由貿易管道，對於一個極度仰賴出口帶動經濟的國家而言，這是嚴重障礙。以台灣在科技產品出口方面的主要對手南韓為例，就已簽署八項自由貿易協定，涵蓋46個國家。南韓也是唯一與美國、歐洲聯盟和東南亞國協都已簽署自由貿易協定的國家。半官方中華經濟研究院（CIER）台灣WTO中心副執行長李淳博士說，20年之前，台灣是亞洲貿易自由化的先鋒。台灣因渴望加入世界貿易組織（WTO），在1990年代推動許多重大經濟改革措施。不過，在 2002年大功告成之後，台灣的自由化即陷停頓。李淳表示：「我們休了很長的假。」自由化腳步放慢的因素之一，是台灣的外交孤立。主張獨立的民主進步黨執政時，北京施壓其他國家，不得與台灣談判貿易協定。在此同時，WTO的杜哈回合談判缺乏進展，也促使各國政府尋求自行締訂雙邊和多邊貿易協定。結果是台灣被排除在十年前興起的

have already signed a multitude of FTAs, making Taiwan’s current lack of freetrade channels to economies other than China and four small Central American nations a serious handicap for a country that relies heavily on exports to drive its economy. Taiwan’s main rival in tech exports, South Korea, for example, has signed eight free trade agreements covering 46 countries. It is the only country to have concluded FTAs with the United States, the European Union, and ASEAN. Roy Chun Lee, deputy execu-

這股全球區域整合趨勢之外。這種情況到了2010年才改變，當時台灣能夠與中國簽訂ECFA，是馬總統改善海峽兩岸關係的成果。海峽兩岸的貿易協議既已先簽訂，北京顯然比較安心，觀察家相信北京因而同意台灣與新加坡、紐西蘭和一些其他可能的協定。不過，目前還不清楚這種比較心胸開放的態度是否會擴及台灣參與TPP與RCEP等貿易集團，或者是否會擴及與美國、歐盟等貿易強權簽訂自由貿易協定。在全球與區域貿易整合向前邁進之際，台灣只是站在一邊，而且直到最近都沒有感受到壓力，認為必須要推行經濟改革，以達到自由貿易協定所要求的標準。在其他地方，例如韓國，這種壓力已成為自由化的驅動力，而且程度超越WTO的基本標準。皮特森國際經濟研究所的客座研究員榮大聶（Daniel Rosen），也是分析全球經濟趨勢的諮詢機構榮鼎集團的合夥人，他表示，台灣若能大刀闊斧改革，達到較高標準，例如TPP的標準，也將有利國內整體經濟。他以電子郵件回覆TOPICS雜誌的提問時說，改革「就如逆水行舟，不進則退」。

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Cover story tive director of the Taiwan WTO and RTA Center at the semi-official ChungHua Institution for Economic Research (CIER), notes that two decades ago Taiwan was at the forefront of Asian trade liberalization. It undertook a host of major economic reforms in the 1990s, spurred by a desire to enter the World Trade Organization (WTO). But after that feat was accomplished in 2002, Taiwan’s liberalization stagnated. “We took a long holiday,” says Lee. One factor behind this slowdown was Taiwan’s diplomatic isolation. When the pro-independence Democratic Progressive Party (DPP) was in power, Beijing pressured other countries to refrain from negotiating trade agreements with Taiwan. Meanwhile, the lack of progress in the WTO’s Doha Round was spurring various governments to seek their own bilateral and multilateral free trade agreements. The result was Taiwan’s exclusion from a global trend toward regional integration that started a decade ago. The situation did not change until 2010 when Taiwan was able to sign the ECFA trade pact with China, the result of President Ma’s warmer cross-Strait policies. With a Taiwan-China trade pact having been concluded first, Beijing was apparently mollified and is believed by analysts to have given the green light to

the Singaporean, New Zealand, and some other potential deals. It is still unknown, however, whether that more open-minded attitude would extend to Taiwan’s participating in trade blocs such as TPP and RCEP, or to her inking FTAs with major trading powers such as the United States and European Union. Standing on the sidelines as global and regional trade integration progressed, Taiwan until recently did not feel pressured to implement the economic reforms needed to meet the standards required in an FTA – pressure that elsewhere, such as in Korea, has been a driving force for liberalization beyond basic WTO standards. Daniel Rosen, visiting fellow at the Peterson Institute for International Economics and a partner in the Rhodium Group, which analyzes global economic trends, says it would beneficial for the domestic economy overall if Taiwan were to implement substantial reform efforts to meet a higher level of standards, such as those of the TPP. Reform is “like a rowboat moving against the current,” he said in emailed answers to questions posed by TOPICS. “If it doesn’t push forward, it tends to regress.” Liberalization is also seen as helping to attract more foreign investment, another area in which Taiwan has been lagging far behind other Asian countries.

Then Deputy U.S. Trade Representative Karan Bhatia was met by then Vice Economics Minister Steve Chen when he arrived for TIFA talks in Taipei in 2006.

The two main groups likely to oppose trade liberalization are farmers and midand low-level government functionaries (despite the bureaucrats’ proclamations to the contrary), insiders say. Taiwan Institute of Economic Research economist Chang Chien-yi notes that the anti-globalization movement in itself is not especially strong in Taiwan, as seen during the lead-up to Taiwan’s 2002 WTO accession. It is a different matter, though, when the deal involves China, causing the public, especially DPP supporters, to fear that Taiwan’s sovereignty may be at risk. The DPP launched mass protests against ECFA, but Liu Da-nien, director of CIER’s Regional Development Study Center, says the idea of Taiwan joining the TPP, in which China is unlikely to be a member, can be expected to win broad bipartisan support. “Some DPP members complain about why [TPP admission] has to take eight years and think the period should be even shorter,” Liu says. He adds that if the DPP returns to power, Taiwan’s policies of seeking economic cooperation agreements with other countries are unlikely to change.

Numerous challenges Whatever type of trade negotiation Taiwan engages in, it will face the chal-

自由化也咸認有助吸引更多外來投資，這是台灣遠遠落後其他亞洲國家的另一個地方。了解內情人士說，可能反對貿易自由化的主要有兩批人，分別是農民和中低階層政府人員（儘管官僚的官方說法相反）。台灣經濟研究院經濟專家張建一博士指出，由2002年台灣加入WTO 之前的情況看來，台灣反全球化運動的力量不是特別強。不過，如果事情牽涉到中國，就另當別論，會引起大眾擔心可能危及台灣主權，民進黨的支持者尤其如此。民進黨曾發動大規模抗議，反對簽訂ECFA，但中華經濟研究院區域發展研究中心的劉大年博士表示，台灣加入TPP的構想倒是可望獲得朝野兩大黨廣泛支持，因為中國不太可能成為TPP成員。劉大年說：「有些民進黨人士還抱怨，（加入TPP）為什麼還要等上八年，認為時間應該可以短些。」他又說，如果民進黨重新執政，台灣尋求與其他國家簽署經濟合作協議的政策不太可能改變。

photo :cna

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lenge of lowering tariff and non-tariff barriers and liberalizing regulations. The most controversial aspect of tariff reduction will be the impact on farmers. Taiwan’s agricultural tariffs currently average about 13%, in contrast to 4.3% for industrial products. Tariffs for some items, such as rice, peanuts, garlic, and red beans, are in excess of 200%. With just a few exceptions, such as laundry machines and some metal products, Taiwan’s manufacturing sectors are considered strong enough to do without tariff protection. Vice Minister Cho says Taiwan would be comfortable reducing its industrial product tariffs to zero (a TPP requirement) if needed. Although agriculture accounts for only 1.8% of Taiwan’s GDP, most farm products would be uncompetitive against those of major agricultural countries such as the United States and Australia if agriculture receives tariff-free treatment. The DPP, with its main political base in southern Taiwan, traditionally supports farmers, and the government also sees them as an interest group it doesn’t want to offend. Cho says the government is referencing how Korea managed farmers’ subsidies in the wake of its FTA with the United States. But he adds that since Taiwan must also consider the importance of maintaining a stable agricultural

Car manufacturers are eager to see Taiwan enter into more trade agreements, since they believe the domestic auto industry’s future will depend on its ability to increase exports. photo : courtesy of ford lio ho

sector in the interest of food security, it will be reluctant to remove all agricultural tariffs. Two other components of Taiwan’s needed domestic reforms are further opening of the service sector and the loosening of regulatory restrictions. CIER’s Lee regards the most difficult aspect of Taiwan’s trade liberalization as persuading government bureaucrats that reform

重重挑戰無論台灣進行何種貿易談判，都將面臨降低關稅與非關稅障礙以及鬆綁法規的挑戰。降低關稅最受爭議的是會對農民造成衝擊。目前台灣的農產品進品關稅平均約13%，而工業產品只有4.3%。稻米、花生、大蒜和紅豆的稅率更超過200%。除了少數例外，例如洗衣機和某些金屬製品，台灣的製造業獲公認實力夠強，不必關稅保護。卓次長說，如果有需要，台灣能承受（依TPP規定）將工業產品關稅降到零。農業雖然只占台灣國內生產毛額（GDP）的1.8%，如果農產品得到免關稅待遇，面對美國和澳洲等農業大國的產品，大部分台灣農產品將無力競爭。民進黨的主要政治根基在南台灣，傳統上比較支持農民，而政府也把農民視為應避免得罪的團體。卓次長說，政府將參考韓國在與美國簽訂自由貿易協定後，如何處理對農民補貼的問題。不過，他又說，由於為了確保糧食安全，台灣也必須考慮維持穩定農業的重要性，將不太願意去除所有農產品關稅。

is inevitable, though he perceives some gradual improvement over the past six months. Still, while the upper levels of government are serious about reform, he says, “there is a diminishing amount of seriousness as you go down the ladder.” Commentators generally cite the legislative process as another obstacle to reform. Inter-party conflict or public pressure on lawmakers often cause

台灣必須推行的國內改革還有另兩大要點，就是進一步開放服務業和放寬法規限制。中華經濟研究院的李淳注意到，過去六個月已逐漸有些進步，但認為台灣要推動貿易自由化，最大困難是說服政府官僚改革是不可避免的。然而，他說，雖然政府高層對改革是來真的，「但隨著層級降低，認真態度也遞減」。評論家通常認為，立法程序的問題是改革的另一項障礙。儘管國民黨占多數優勢，往往由於政黨間的衝突或是大眾對立法委員的壓力，使得政府提出的法案在立法院遭灌水或修改。台灣經濟研究院的張建一說：「即使執政黨希望有所作為，卻常綁手綁腳。」舉例而言，2010年立法院曾採取行動，撤銷台灣政府與美國協商達成的決定，內容是解除對部分美國牛肉產品的禁令。這使得恢復TIFA會談的時間延後，也讓華盛頓的許多人士覺得，台灣是個不可靠的貿易夥伴。行政部門內部也有改革阻力。一位要求匿名的知情人士說，政府官員有時會以本地業者和民眾反對為理由，主張必須放慢貿易自由化的速度，但這項阻礙其實往往「出自主管官員本身，卻拿業者當抗拒改革的

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Cover story government proposals to be watered down or altered in the Legislative Yuan, despite the large Kuomintang (KMT) majority. “Even when the ruling party wants to do something, its hands are frequently tied,” says the TIER’s Chang. An example was the 2010 legislative action that negated a government protocol negotiated with the United States to lift bans on some American beef products. The move stalled the resumption of TIFA talks and gave many in Washington the impression that Taiwan is an unreli-

able trading partner. There is also resistance to reform within the executive branch. When government officials cite opposition from local industry and the public as a reason why they must go slow on trade liberalization, the obstruction usually is actually “from the regulators themselves, using industry as a scapegoat to resist reform,” says a knowledgeable source who asked not to be identified by name. “I would say 70% of liberalization reform requires cooperation from the government rather

than industry. They are the major stakeholders, the ones who feel the impact… not industry.” In fact, he says, most domestic industries feel that are competitive enough to hold their own in the domestic market, and are usually happy to see trade pacts go forward that reduce barriers for their companies in foreign markets. From AmCham Taipei’s experience, in fact, both domestic and foreign-invested players in certain major industrial sectors have been urging the govern-

New Opportunity For Opening In Services Taiwan might be diplomatically isolated – but at least it has friends. A group of World Trade Organization members, including Taiwan, who dub themselves the “Really Good Friends of Services” is moving forward on a proposed plurilateral service trade agreement known as the International Services Agreement or ISA. The United States is a guiding member of the 20-member group (China is not involved) that seeks to promote global services liberalization. Taiwan’s participation in the high-standard ISA will push it to liberalize its services sector in line with world standards, with farreaching consequences for the island’s economy. United States Trade Representative Ron Kirk notified Congress of the Obama Administration’s intent to enter into ISA negotiations with the 19 other economies, including Taiwan, in mid-January. Currently, each of the 20 members is consulting with domestic stakeholders for feedback and conducting comprehensive evaluations of their services sector and international priorities, says Ministry of Economic Affairs Vice Minister Cho Shih-chao. Once this process is concluded, it is hoped the 20 members will begin the negotiation process this spring. As yet, there are no estimates for when the ISA could be concluded. ISA “is a good opportunity to demonstrate that Taiwan is ready to engage in high-standard liberalization,” says Roy Chun Lee, deputy executive director of the Taiwan WTO and RTA Center at the Chung-Hua Institution for Economic Research. “It is one of the best examples that can showcase we are serious, as opposed to just talking about seriousness.” After the failure of the WTO’s Doha Round to reach agreement on comprehensive reform, some members of the group, frustrated with the lack of progress, got together to look for new ways to create a multilateral arrangement for services liberalization with the conviction that opening up services markets is critical for supporting economic development. “The genesis of the ISA lies in our hardnosed assessment that we will simply will not be able to make real progress on services trade liberalization any time soon under existing WTO frameworks,” said Deputy U.S. Trade Representative Michael Punke in an address to

a congressional committee last September. “The positions of major players are too firmly entrenched and too closely tied to a web of issues.” The 20 participating countries represent nearly two-thirds of global trade in services, the USTR said. Participants hope that the more than 100 services agreements that have been notified to the WTO in the 18 years since the General Agreement on Trade in Services (GATS) came into effect will all be placed under the one umbrella in the ISA, imposing a high standard for liberalization. The group wants to streamline high standards for market access across varied geographic regions – members are diverse as Peru, Turkey Israel and Costa Rica – and through this influence the norms of international practice. The U.S. government believes this will be beneficial for America. According to the USTR, tradable services are one-fifth as likely to be exported out of the U.S. than manufactured goods. If barriers are removed and business services are exported in the same proportion as manufactured goods, U.S. exports could increase by as much as US$800 billion. The agreement will also be beneficial for Taiwan. The CIER’s Lee says Taiwan’s interest in the agreement is mainly connected to its aspirations of entering the TPP in eight years. He notes that most of the ISA’s 20 members are also TPP members and once Taiwan concludes the ISA, “you virtually finish one-third of TPP negotiations.” The U.S. has told Taiwan that is demanding the same standards from ISA members as it does for the TPP. “Joining the ISA allows us to understand what is going on in the TPP,” Lee notes. Meanwhile, other observers said the agreement will be beneficial for the competitiveness of Taiwan’s domestic economy overall, significantly expanding Taiwan’s international trade in services, which would also help attract foreign investment. “Taiwan has for years tried to improve its position as a north Asian services hub, and this would be a tremendous new opportunity to get serious domestically about doing so,” says Daniel Rosen, a visiting fellow at the Peterson Institute for International Economics and a partner in the Rhodium Group.

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ment to help them promote exports by participating in more free trade agreements. A prime example is the automotive industry, which needs high volume to be economical. Taiwan’s domestic market is too small to guarantee the industry’s future prosperity, and being excluded from regional trade blocs would limit the export potential. Rather than industry being the impediment, says the source, it tends to be the civil servants who feel uncomfortable about change, uneasy about the increased government transparency required under FTAs. “They don’t want to be criticized – it is a headache for them. A lot of public servants don’t feel comfortable with being more accountable.” As an example of the need for more transparency, CIER’s Lee cites the practice under which Taiwanese government agencies, such as the Financial Supervisory Commission (FSC), publish draft regulations in advance of their implementation. Only seven days are typically offered for public comment – generally not enough time to produce a well-thoughtout response – in contrast to the more common public comment period of 40-60 days among more advanced economies, especially for more sensitive or complicated sectors such as financial regulation. Another example, says Lee, is that in negotiating its KORUS FTA with Korea, the United States prevailed on Seoul to

The agricultural sector is considered the one that could be most vulnerable to competition from imports, and farmers are expected to oppose trade liberalization. photo :cna

modify its financial regulators’ habit of summoning company executives to come by to “have coffee,” a euphemism for the opportunity to pressure companies – outside normal channels and with no written record – to change their business behavior or adopt certain policies. The he kafei model is also found in Taiwan, Lee says. The regulators can say afterward that anything the companies agreed to during these informal conversations was accepted purely on a voluntary basis, even though the agreement was prompted by

代罪羔羊」。他又說：「在我看來，推動自由化的改革，七成要靠政府合作，而非業者。他們才是主要利害關係所在，會感受到衝擊的人，而非業者。」事實上，他說，國內業者大都覺得，他們有足夠的競爭力，可以在國內市場挺得住，而且他們通常樂見貿易協定獲得進展，因為可以減少他們公司在外國市場的障礙。其實，根據台北市美國商會的經驗，部分主要產業的國內外投資者都呼籲政府，應參加更多自由貿易協定，以促進出口。汽車業是個重要的例子，需要提高產量才能達到經濟規模。台灣的國內市場太小，難以確保汽車業的未來榮景，而遭排除在地區貿易集團之外，將限制出口潛力。這位人士說，構成障礙的並不是業者，而是對改變感到不自在的公務員，他們對於自由貿易協定規定要增加政府的透明度覺得不安。「他們不希望受到批評，這讓他們覺得頭痛。許多公僕對於要多負責任覺得並不好。」中華經濟研究院的李淳舉了個例子，說明增加透

intimidation and fear of later regulatory retaliation if they refused. As the understanding is private, the regulators can also deny everything in future if challenged. Westerners generally are uncomfortable with this Asian practice, as they prefer regulations to be set out explicitly in black and white. According to Lee, the KORUS negotiations brought agreement that if the he kafei practice continues, the regulators must write up the conclusions of such meetings and post them on their official website for public comment.

明度的必要。他指出，台灣的政府機構會預先公告法規的草案，然後才付諸執行，例如金融管理委員會。通常只有七天時間讓大眾提供意見，而這點時間通常不足以提出思慮周密的回應，相形之下，在較先進的經濟體，公開徵詢意見的期間比較常見的是40至60 天，尤其是在金融規範等比較敏感或複雜的領域。李淳又說，另有一個例子，美國與韓國談判美韓自由貿易協定（KORUS FTA）時，美方勸說韓方改變金融主管機關找公司高級主管去「喝咖啡」的習慣，這是好聽的說法，其實就是利用這機會對公司施壓，讓公司改變商業行為，或是採納特定政策，由於不是透過正常管道，不會留下書面紀錄。李淳表示，在台灣也可以看到這種喝咖啡的模式。即使相關公司是因受到恫嚇而同意任何事情，或是害怕拒絕會遭到主管機關秋後算帳才同意，主管機關在事後都可以說，相關公司在這些非正式談話場合會點頭，純粹是自願接受。由於是在不公開情況下達成同意，未來若是受到質疑，主管機關也可以把一切推得一乾二淨。

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Cover story Also in the financial sector, AmCham Taipei has been aware of efforts by the FSC to press foreign-invested banks and insurance companies to conduct all their data processing in Taiwan instead of utilizing centralized regional data centers offshore. Under KORUS, the Koreans had to give up a similar practice, and the Office of the U.S. Trade Representative has stressed that the free flow of information across borders is a central principle that it expects trading partners to uphold.

Tackling telecom Another sector where regulations would likely need to be changed if Taiwan engages in major FTA negotiations is telecommunications. Lee notes the current absence of provisions promoting competition between governmentcontrolled Chunghua Telecom (CHT) and other companies, such as rules on facility sharing over the “last mile,” the final leg of communications networks delivering connectivity to end users. Although CHT is not now required to engage in such sharing on a non-discriminatory basis with other competitors, says Lee, such an obligation has been included in most recent FTAs signed in Asia. Taiwan’s National Communications Commission is consequently working on draft amendments to the telecoms law that would

incorporate it. A s t o t h e s e r v i c e s e c t o r, w h e n Taiwan entered the WTO, it was asked to go further in services liberalization compared with existing members who had entered the international trade body earlier. That led Taiwan, on paper at least, to have one of the region’s most liberal service regimes a decade ago. But today, says Lee, other Asian countries have negotiated FTAs containing much broader requirements and “have already surpassed us to reach another level of liberalization.” As a result, some Taiwanese laws governing services are extremely outmoded, he notes. One area that foreign trading partners may target for reform is the special law that grants Chunghwa Post the ability to offer insurance services but exempts it from much of the regulatory burden imposed on regular insurance companies, leading to charges of unfair competition. Currently the government is in the process of assessing government policies across the board to see what needs to be revised, says Vice Minister Cho. “We are examining the gap between our economic regulatory and tariff structures in comparison to other countries, especially with reference to the FTAs Korea has signed with the E.U. and United States.” As part of this process, Cho says, the government last September upgraded

西方人對亞洲的這種作法大都覺得不安，因為他們寧可所有規定都用白紙黑字寫得清清楚楚。據李淳表示，KORUS談判中達成協議，如果這種喝咖啡的作法持續，主管機關必須詳細記錄這類會面的結論，並且公布在官方網站，接受大眾公評。台北市美國商會也知道金融業有種現象，就是金管會會對外資銀行與保險公司施壓，要他們在台灣進行所有資料處理工作，而非利用海外的集中化區域資料中心。根據KORUS協定，韓國也必須放棄類似作法，而美國貿易代表署強調，資訊能越過國界自由流通是個中心信念，期望貿易夥伴都能支持。

處理電信業如果台灣要進行重要的自由貿易協定談判，另有一個產業的的規定可能也得要改變，那就是電信業。李淳指出，目前沒有法規促進公營的中華電信公司（C H T）與其他公司競爭，例如有關所謂「最後一哩」管道基礎設施共用的規定，這是指通訊網路中讓 22

a more-than-a-decade-old trade policy committee previously chaired by the vice premier, renaming it the “Committee of Global and Economic and Trade Strategy” and designating the premier to be the chairman. The new committee has been given the mandate of developing effective approaches for Taiwan’s participation in regional economic integration. To assist the group, Premier Sean Chen has also created an advisory board called the “Consultative Group of Industrial and Academic Sectors,” consisting of industry leaders and scholars. While the committee led by the premier will set overall policy directions, yet another new group will work under its guidance to come up with the detailed specifics. This “Task Force on Global Economic and Trade Strategy” will be coordinated by the Ministry of Economic Affairs (MOEA), but its members will consist of vice ministers from different ministries. The task force is modeled on one used by Korea when preparing for its own FTAs, and will entail several working groups specializing in such areas as services and technical barriers to trade. “We are using Korea as the benchmark,” Lee says. Cho says Taiwan is particularly interested in studying how South Korea was able to overcome strong domestic opposition in a difficult political climate. He

終端用戶能夠連線的最後一段里程。李淳又說，雖然目前沒有規定中華電信必須一視同仁，與其他競爭業者一起分享，但這種義務已納入亞洲最近簽訂的大部分自由貿易協定。台灣的國家通訊傳播委員會因而正在草擬電信法修正案，將會納入這項規定。至於服務業，台灣加入WTO時，依要求必須進一步推動服務業自由化，程度應與較早加入這個國際貿易組織的原有會員國相當。這使得台灣十年前即擁有這個地區最自由的服務業制度，至少在理論上是如此。不過，李淳表示。如今其他亞洲國家所談判達成的自由貿易協定，包含更為廣泛的規定，「已經超越我們，達到另一層次的自由化」。因此，他說，台灣某些規範服務業的法律已非常過時。外國貿易夥伴可能列為改革目標的一點，是讓中華郵政公司能夠提供保險服務的特別法。這項法律讓中華郵政豁免正規保險公司所承受的法規負擔，引來不公平競的指控。經濟部卓次長說，目前政府還在評估全面政策，以了解何處必須修訂。他說：「我們正在檢視我國經

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notes the extent to which the Korean government communicated with the public, explaining the potential benefits of KORUS through public hearings and debates, and identifying sectors that would be disadvantaged by the FTA and need assistance or compensation. “In the end, the Korean government finally won the support of the conservative camp and the business sector,” Cho says. “The resolution and sincerity that the Korean government showed are worthy of emulation.” As pilot projects, the government is also planning to establish special zones in which liberalized regulations on investment and labor, among other measures, will hopefully enable operations to be more efficient and attract increased investment. The aim is to “demonstrate that the impact of liberalization on our economy will be very limited,” says the CIER’s Lee. “We will use the zones as a showcase to convince industry and society in general that liberalization is beneficial for us overall.” If the strategy is successful, the area encompassed within the zones would be gradually enlarged until it covers all of Taiwan. According to a statement released by the Executive Yuan, Premier Chen was briefed on the plan at an inter-ministerial meeting in mid-January. The zones are described as including industrial innovation centers, free ports, an international

medical services center, and a center for training global talent. Once the Executive Yuan approves the initiative, the Council for Economic Planning and Development (CEPD) is expected to present draft laws and an implementation plan to the legislature for priority passage in the coming session. Kaohsiung will be the site of one of the zones, with other cities permitted to apply once the law has been enacted. Vice Minister Cho says the concept is still in the planning stages and the government still does not know what the final version will look like or how the liberalized economic zones will differ from Taiwan’s existing free trade zones. To prepare for taking on more international trade negotiations, the government is also drawing up plans for a program to train more personnel to act as negotiators. TIER’s Chang and other economists have noted that Taiwan is handicapped in seeking economic cooperation agreements as it currently lacks sufficient qualified negotiators.

TPP vs. RCEP Of the two regional trade blocs that Taiwan hopes to join, the TPP is considered easier in terms of domestic politics, as mentioned earlier. But Taiwan may find it tough to meet the TPP’s high standards. And even though China is not a

濟的法規與關稅結構與其他國家相比的差距，尤其將參考韓國分別與歐洲聯盟和美國簽訂的自由貿易協定。」卓次長說，在這項過程中，政府去年9月將已有超過10年歷史的貿易政策小組升格，這個小組原本由行政院副院長擔任召集人，如今更名為「國際經貿策略小組」，並由行政院長擔任召集人。這個新設小組的使命是是發展有效的方法，讓台灣參與區域經濟整合。為協助這個小組，行政院長陳冲也成立一個產學界諮詢顧問小組，成員包括產業界領袖和學者。由行政院長主持的這個小組將訂定整體政策方向，另有一個新設的小組將在其指導下提出詳細細節。這個「全球經貿策略專案小組」將由經濟部負責協調，但成員將包括不同部會的次長。這個專案小組效法韓國準備推動簽署自由貿易協定時設立的小組，下面還將有幾個工作小組，專攻服務業以及貿易的技術障礙等領域。李淳說：「我們以韓國為樣板。」卓次長表示，台灣尤其感興趣的是，韓國處於困難的政治情勢，如何能夠克服強大的國內反對力量。

party to the agreement, it may still try to block Taiwan’s entry through pressure on certain TPP members. The 11-nation TPP grouping (besides the United States it includes Southeast Asian nations such as Brunei, Malaysia, Singapore, and Vietnam; Australia and New Zealand; Chile and Peru; and Canada and Mexico) currently represents 650 million people with a total gross domestic product of around US$21 trillion. There is no formal deadline for concluding the still ongoing negotiations, but October next year is being targeted to coincide with the annual APEC summit. The U.S. attitude toward Taiwan’s entry is unclear at this point, but generally it is believed the United States wants Taiwan to demonstrate its seriousness about addressing outstanding bilateral issues before it will even reveal its stance on Taiwan’s TPP chances. Vice Minister Cho is optimistic, noting U.S. officials’ comments that if APEC members are willing to accept the TPP’s terms and conditions, they are eligible to join. Since Taiwan is a member of APEC, “under these circumstances, we are fully eligible to join the TPP,” he says. The vice minister adds that Singapore and New Zealand, with which Taiwan are about to sign free trade agreements, are founding TPP members. Besides

他指出，韓國政府大力與公眾溝通，透過公聽會和辯論會說明簽訂KORUS的可能好處，同時確定將受到自由貿易協定不利影響而需協助或補償的產業。卓次長說：「到了最後，韓國政府終於贏得保守派陣營和商業界的支持。韓國政府展現的決心和誠意值得效法。」政府也計畫推行試驗方案，建立一些特區，採取各項措施，包括鬆綁投資與勞工規定，希望能讓營運更有效率，以吸引更多投資。中華經濟研究院的李淳說，這麼做的目的是「證明自由化對我們經濟的衝擊非常有限」。「我們將把這些特區當成櫥窗，讓業界與社會大致相信，自由化整體上對我們有利。」如果這項策略成功，這些示範區涵蓋的地區將逐漸擴大，直至遍及整個台灣。根據行政院發布的聲明，陳冲院長於1月中在一項跨部會會議接受有關這項計畫的簡報。這些示範區據稱將設有產業創新中心、自由港、國際醫療服務中心和全球人才訓練中心。一旦行政院批准這項計畫，經濟建設委員會可望向立法院提出法律案和執行方案，

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The introduction of cross-Strait express postal service last September was another example of the growth in trade and communications ties between Taiwan and China. photo :cna

在下個會期優先通過。高雄將是這些示範區的地點之一，等到法律通過後，其他城市也可以申請設立。卓次長說，這個構想還在規劃階段，政府也還不知道最後版本會是什麼模樣，或是這些自由經濟示範區會和台灣現有的自由貿易港區有何不同。為準備從事更多國際貿易談判，政府也擬訂計畫，將訓練更多人員擔任談判代表。台灣經濟研究院的張建一和其他經濟學家都曾指出，台灣目前缺乏足夠的稱職談判人員，這成了尋求經濟合作協定的障礙。

跨太平洋夥伴協議與區域全面經濟夥伴關係台灣希望加入的兩個區域貿易集團中，如前所述，就國內政情而言，跨太平洋夥伴協議（TPP）咸認是比較容易的一個。不過，台灣可能發現難以達到TPP 的高標準。而且即使中國不是這項協議的成員，仍可能透過對某些TPP成員施壓，設法阻撓台灣加入。 TPP集團目前有11國參與（除了美國，還包括東南亞國家如汶萊、馬來西亞、新加坡和越南；還有澳洲和紐西蘭，智利和秘魯，以及加拿大和墨西哥），目前共有6億5000萬人口，國內生產毛額總計約21兆美元。這項協議目前還在談判中，沒有正式的完成期限，但明年10月被定為目標，因為正值亞太經濟合作會議（APEC）舉行年度高峰會。美國對台灣加入TPP的態度目前還不明朗，但一般 24

the resumption of TIFA talks, Taiwan’s participation in an International Services Agreement being negotiated in Geneva (see sidebar) would also be likely to improve Taiwan’s chances of being considered. Reaching the TPP’s high standards may be a stretch, however. TIER’s Chang says he expects that TPP members will need to eliminate tariffs on over 95% of their products, but Cho says it is still unknown whether that requirement will apply as broadly to agricultural products. Since the TPP negotiations are closed-door sessions, few details have become public so far. “We are looking to see what the end results are and how we can fit into this,” he says. The government has already commissioned studies from economists on what structural and regulatory changes would be needed for Taiwan to join the TPP and the likely impact of entry. Daniel Rosen regards Taiwan as reasonably well-positioned for TPP eligibility as it already maintains a fairly advanced trade and investment policy

相信美國希望台灣先證明會認真處理尚未解決的雙邊議題，然後才會透露對台灣參與TPP問題的立場。卓次長態度樂觀，他表示美國官員曾經說過，如果 APEC成員願意接受TPP的條款與條件，就有資格加入。他說，台灣既然是APEC成員，「在這樣的情況下，我們完全有資格加入TPP」。卓次長又說，即將和台灣簽訂自由貿易協議的新加坡和紐西蘭，都是TPP的創始成員。除了恢復與美國的TIFA會談，台灣也將參與日內瓦關於國際服務業協定的談判（見邊欄），這也可能有助台灣獲考慮入會的機會。不過，要達到TPP的高標準可能還有一大段路。台灣經濟研究院的張建一說，他預期TPP會員將須去除超過95%產品的關稅，但卓次長表示，目前還不知道這項規定是否也大體適用於農產品。由於TPP談判是閉門會議，迄今公開的細節很少。他說：「我們將看看最後結果如何，還有我們要如何配合。」政府已經委託經濟學者研究，台灣必須做那些結構和法規上的改變，才能夠加入TPP，以及入會的可能衝擊如何。榮大聶認為，台灣要取得加入TPP的資格，處境相當有利，因為目前已經維持相當先進的貿易與投資政策環境。他表示，台灣「要加入TPP，不是要做重大讓步的問題，關鍵在兩件事：1)證明能夠以很有秩序的方式處理國內的既得利益，像是TIFA會談這樣的基本貿易政策互動能夠恢復；2)證明台北對於與中國大陸的關係有足夠信心，能夠不怕來自北京的隱藏威脅

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environment. Taiwan’s “TPP participation is not so much a matter of major concessions, but rather two things: 1) demonstration that domestic vested interests can be managed in an orderly enough manner to permit the resumption of basic trade policy interactions like TIFA talks, and 2) demonstration that Taipei is sufficiently confident about its relationship with mainland China that it can engage in TPP discussions without fear of veiled threats or pressure from Beijing,” Rosen says. China’s attitude on this score also remains unclear, but CIER’s Lee describes Beijing as the “number one obstacle” to Taiwan’s TPP participation. Although American officials such as U.S. Trade Representative Ron Kirk have said they would welcome China’s eventual participation, the TPP standards for issues such as state-run enterprises presumably rule out China’s joining for a long time to come. At the same time, says CIER’s Liu, it is an “open secret” that Beijing views the TPP as a U.S. strategy to contain China by engaging Southeast Asian countries through commercial diplomacy.

Consequently, Taiwan’s negotiations for TPP entry would need to be “delicate and sensitive.” Although politically it may be harder for Taiwan to enter RCEP than the TPP, economically it may make even more sense. Taiwanese companies have made huge investments both in China (an estimated US$180 billion or more) and in the ASEAN economies (US$85 billion), the major players in RCEP. Cho notes that ASEAN now is also Taiwan’s second-largest trading partner next to China, which receives 40% of Taiwan’s exports. Some 60% of Taiwan’s trade is with the RCEP countries, notes CIER’s Lee, compared with 35% with TPP members. If Taiwan is to maintain its current level of economic success, he adds, joining the RCEP bloc must be high priority, since ASEAN nations are catching up to Taiwan in production techniques used in global supply chains. In addition, Taiwan will want to negotiate trade agreements with nations that also have FTAs with competitor Korea. “If it isn’t part of this integrated network, Taiwan could

或壓力，從事TPP談判」。中國對這方面問題的態度也仍然不清楚，但中華經濟研究院的李淳形容，北京是台灣參與TPP的「頭號障礙」。儘管美國貿易談判代表柯克等美方官員曾表示，他們歡迎中國最終能參加，但TPP對諸如國營事業等議題的標準，據推測意味在今後很長時間排除了中國加入的可能。在此同時，中華經濟研究院的劉大年表示，北京認為TPP是美國透過商業外交手段，拉攏東南亞國家來圍堵中國的策略，而這已是「公開的秘密」。因此，台灣加入TPP的談判必須「手法巧妙而反應靈敏」。雖然在政治上來說，台灣要加入RCEP可能比 TPP 更困難，但就經濟角度來看，加入RCEP可能更有意義。台灣的公司在中國（估計約1800億美元或更多）和東南亞國家協會各經濟體（約850億美元）都有鉅額投資，而這些國家正是RCEP的主要成員。卓次長指出，東協目前是台灣的第二大貿易夥伴，僅次於中國，而中國占了台灣出口比重的40%。中華經濟研究院的李淳指出，RCEP國家約占台灣對外貿易的60%，而TPP成員則占約35%。他又說，如果台灣要維持目前水準的經濟成果，務必要將加入 RCEP列為高度優先，因為東協國家在全球供應鍊中使用的生產技術即將趕上台灣。此外，台灣將希望和也與競爭對手韓國訂有自由貿易協定的國家談判貿易協定。李淳說：「如果台灣不能成為這個整合網路的一部分，在經濟上可能變得更邊緣化，遭全球買家忽

become more economically marginalized, bypassed by global buyers,” Lee says. At TIER, Chang estimates that Taiwan’s exclusion from RCEP could lop off at least one percentage point from GDP growth each year. Convincing China that enabling Taiwan to join this integration process is in Beijing’s interest will be tricky, analysts say – especially accomplishing it in a way that it isn’t perceived domestically as undermining Taiwan’s de facto independent status. Lee notes that Hong Kong is applying to join RCEP as part of China, an option the Taiwanese public would find unacceptable. “It is possible Taiwan could get accepted [into RCEP], but only on terms acceptable to Beijing,” says Rosen. But many analysts, including Rosen, think if Taiwan becomes firmly embedded in other regional trade agreements, such as the TPP, Beijing may seek to balance that by bringing Taiwan into the RCEP. “With the momentum in TPP and now an International Services Agreement growing, Beijing may be inclined to offer Taipei

視。」台灣經濟研究院的張建一估計，台灣遭RCEP 排除在外，每年國內生產毛額的成長率可能少掉至少一個百分點。分析家表示，要讓中國相信，台灣若能加入這個整合過程，對北京也有利，將是相當棘手的事，尤其是達到這個目標的方法，又要在國內不致被認為會危及台灣的實際獨立地位。李淳指出，香港將以中國一部分的身分申請加入RCEP，這個選項台灣民眾會覺得難以接受。榮大聶說：「台灣有可能獲接受（加入RCEP），但只能依據北京所能接受的條件。」不過，包括榮大聶在內，許多分析家都認為，如果台灣變成諸如TPP 等其他區域性貿易協定的穩固成員，北京也許會想藉由把台灣納入RCEP來平衡。榮大聶指出：「隨著TPP 還有如今再加上國際服務業協定的氣勢增強，北京也許會傾向給台北機會，以比較容易的條件加入對北京友好而與東協有關的談判進程。」北京領導階層目前進行的交班換屆過程再繼續下去後，對於台灣是否可能加入RCEP的問題，中國的立場可能會變得比較明朗。中華經濟研究院的李淳也指出，中國與部分東協國家對南海領土主張和貿易問題的爭端越演越烈，可能逐漸削弱其對RCEP的影響力。最後，台灣認為自己的利益所在，是與越多其他貿易夥伴盡可能密切結合在一起越好。卓次長的結論是：「當然，大家會問何者對我們比較重要，TPP或 RCEP？但我得告訴你，二者同等重要。」

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Cover story the opportunity to join in Beijing-friendly ASEAN-related discussions on easier terms,” Rosen notes. China’s stance on Taiwan’s possible RCEP entry may possibly become clearer after the leadership transition now underway in Beijing has proceeded further. The

CIER’s Lee also notes that China’s growing disputes with some ASEAN countries over Indonesia over territorial claims in the South China Sea and trade matters may gradually diminish its influence over RCEP. In the end, Taiwan sees its interest

as tying itself as closely as possible to as many other trading partners as it can. “Of course, people will ask which one is more important to us, the TPP or RCEP,” concludes Vice Minister Cho. “But I would have to tell you, they are both equally important.”

Coming Soon: Trade Pacts with Singapore and New Zealand

aiwan is poised to soon announce the conclusion of free trade accords with New Zealand and Singapore. Most of the chapters in the agreements have been completed, says Ministry of Economic Affairs Vice Minister Cho Shih-chao. “There is only a small fraction left to be discussed.” The two countries are both quite small – New Zealand with a population of over 4 million and Singapore with over 5 million. But the significance of the agreements will not be measured by the size of the economies or the trade volume. The two pacts will amount to a diplomatic breakthrough for Taiwan, which previously was blocked by Beijing from negotiating such agreements with most countries. Once before, during the administration of pro-independence President Chen Shui-bian, Taiwan came close to entering into free-trade negotiations with Singapore, only for it to be called off at the last minute when Beijing exerted pressure on Singapore, analysts said. Taiwan is not describing itself as a sovereign state in these upcoming agreements. In line with President Ma Ying-jeou’s pragmatic diplomacy, it is using its World Trade Organization moniker, the Separate Customs Territory of Taiwan, Pengu, Kinmen and Matsu. Even so, the start of negotiations with Singapore in 2011 on what is known as ASTEP (the agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu), and with New Zealand in 2012 on an ECA (Economic Cooperation Agreement) was only made possible after the Ma administration had worked to lower cross-Strait tensions and inked the ECFA free-trade pact framework with China in 2010. Pundits say Beijing, offering an olive branch in return, then refrained from pressuring the two nations to shun Taiwan. Roy Chun Lee, deputy executive director of the Taiwan WTO and RTA center at the semi-official Chung-Hua Institution for Economic Research, notes that both nations already have FTAs with China, and New Zealand also has an FTA with Hong Kong. Countries in this situation are viewed more favorably by Beijing as potential Taiwanese freetrade partners. “We are joking that there is an implicit rule for Taiwan’s ECA engagement,” Lee says. “The rule is China first, Taiwan next.” The pacts themselves are likely to be good for Taiwan’s economy, both in terms of reforms Taiwan needs to commit to in order to meet the comprehensive high standards of the agreements and in terms of the

benefits they will bring. Vice Minister Cho says Singapore is expected to invest in Taiwan’s financial services, an area where the city-state excels, as well as in Taiwan’s petrochemical sector and other areas. New Zealand and Taiwan have highly complementary economies, with Taiwan importing items such as dairy products and meat, while exporting machinery. Even their two agricultural sectors are complementary, as Taiwan has a sub-tropical climate and New Zealand’s is temperate. As a result, although agriculture is a sensitive issue in Taiwan, talks over reducing agricultural tariffs have not produced significant protests from Taiwan farmers, diplomatic sources said. For New Zealand, the deal has nothing to do with politics. It sees Taiwan as an important market. In fact, the island is New Zealand’s 12th largest export market, according to the New Zealand foreign ministry website, and its food products are very popular with Taiwan consumers (it is Taiwan’s largest butter supplier, for example.) In addition, the small and economically highly liberal nation generally likes to sign bilateral trade agreements relatively early on in the game to establish its trade presence ahead of bigger players. For instance, it was the first OECD country to conclude a comprehensive FTA with China. The two landmark agreements may help Taiwan ink economic cooperation agreements with other nations. First, they allow Taiwan to demonstrate that it is capable of meeting conditions for signing such agreements and that Beijing has acquiesced. Secondly, Cho says, a few agricultural exporting countries are nervous about the New Zealand deal and are watching developments closely to see if they also require a pact to maintain their trade edge in Taiwan. And, although New Zealand does not view the pact as related to Taiwan’s TPP entry, both Singapore and New Zealand are founding TPP members and are also in RCEP, which Taiwanese officials think should help Taiwan if it seeks to join these trading blocs. Currently, other countries such as India, Indonesia, and the Philippines are reported to be studying the feasibility of entering into freetrade negotiations with Taiwan. Recently, prominent members of the U.S. Congress have also been calling on the United States to consider such a step. – By Jane Rickards

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Ramping Up Taiwan’s Software Industry As Taiwan’s ICT hardware manufacturers encounter slower growth, can the software industry propel the next wave of growth?

BY EMILY CHEN

aiwan’s software ecosystem, which has long lagged behind the island’s dynamic information technology (IT) hardware industry, is on the cusp of “totally transforming,” says senior market analyst Peipei Wu of IDC, the tech-sector market research, analysis, and advisory firm. Four major trends are seen as driving this change: cloud computing, big data, social media, and mobility. Though the software industry in Taiwan is still fragmented, consisting of various diverse sub-sectors, companies in the industry share both some strengths – such as proximity to Taiwan’s well-developed hardware manufacturing – and challenges such as cultivating talent and understanding global consumer demands. Between 2007 and 2012, Taiwan’s software industry saw average annual growth of 9.2% in production value. Growth in 2012 in software industry output was an even higher 13.2%, bringing the total to NT$162.3 billion (US$5.5 billion), according to the Market Intelligence Center (MIC) of the semi-governmental Institute for Information Industry (III). Among the subsectors, the systems integration business contributed approximately NT$103 billion, information outsourcing NT$30.8

billion, software information security NT$14.9 billion, embedded software NT$9.5 billion, and commercial-use software NT$4 billion. In comparison, Taiwan’s IT hardware production value has experienced an average annual growth of 8.8% from 2007 to 2012, and in 2012 grew 14.1% to approximately NT$4.6 trillion (US$155.4 billion), according to the MIC. In 2002, III introduced the Capability Maturity Model Integration (CMMI) system – a process improvement method developed by the Software Engineering Institute at Carnegie Mellon University – to help increase the global competitiveness of domestic software companies. So far, a total of 157 Taiwanese companies have received CMMI certification, up from about 50 companies in 2007. Among the major success stories in Taiwan’s software industry are CyberLink and Trend Micro. CyberLink began in 1996 as a multimedia software firm specializing in video and audio playback. It was among the first companies to collaborate with YouTube in enabling users to upload videos directly onto a website. Today, the company’s flagship product, the Creative Director Family, is a suite of advanced video,

audio, and photo editing software that targets the consumer and “prosumer” (semi-professional consumer) market. PowerDirector, the video editing software, has won PC Magazine’s Editor’s Choice Award for four consecutive years. The company was listed on the Taiwan stock exchange in 2000. CEO Alice Chang says the digital creativity market is growing rapidly because the ecosystem of mobile devices and social media is also expanding. She hopes to leverage the ecosystem to ensure that video becomes comfortable and intuitive to play, edit, and manage on all devices. CyberLink’s corporate customers include HP, Dell, Sony, and Lenovo. Chang credits CyberLink’s proximity to chip manufacturers, original equipment manufacturers (OEMs), and original design manufacturers (ODMs) in Taiwan as one reason for the company’s continued success. The proximity allows for a synergistic relationship: hardware manufacturers can preload CyberLink products onto notebooks and tablets to ship as a value-added bundle, and CyberLink “make[s] sure we can fully utilize the beauty of the hardware capabilities to claim the title of fastest video editor in the world,” says Chang.

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At Trend Micro, Bob Hung, general manager for Taiwan and Hong Kong, attributes the anti-virus software company’s achievements to the founders’ vision from day one of building an international brand. The three Taiwanese co-founders launched Trend Micro in Los Angeles in 1988 and established a presence in Taipei soon after. The company acquired a Japanese software firm in 1992, and went public in Tokyo six years later. Its first consumer product PC-cillin won awards from such publications as Windows Magazine and PC Computing. Hung says Trend Micro was the first to provide anti-virus protection for server sites and internet gateways (routers or modems). The firm is now focused on extending its expertise in information security to mobile devices and cloud computing, for both consumers and enterprises. Market research firm Technavio named Trend Micro number one in global cloud security in 2012. Trend Micro’s research and development operations are currently headquartered in Taiwan. “For software start-ups, it’s very important to understand user experience,” Hung says. “The service or product you provide needs to meet their basic needs. If you can think of such an idea, your opportunities will grow quickly. With Google Play and Apple’s App Store, if you have a breakthrough, your marketing chan-

nels are already established.” One way to “pinpoint user demand” is to take advantage of business analytics and big data,” he notes. “With an increase in bandwidth, mobile devices, and cloud, data volume is at a near-exploding level. [Such] data can be used [to understand] user behavior and [create] targeted marketing.” Systex, another rare success story of a purely software-oriented company based in Taiwan, was founded in 1997 to provide corporate clients with systems integration, technology, and outsourcing services. Since its inception, the company has served over 40,000 customers across almost every industry, though the largest volume of business has been in telecommunications, banking, and government. With 3,000 employees and 48 branch offices in the region, the company aims to be an “IT department store” and “single contact, one stop shop” for enterprise clients throughout Greater China and Southeast Asia. For six consecutive years, Taiwan’s CommonWealth magazine has named Systex the top company in the software category on its list of top 500 service operations. This year, the company is particularly focused on researching and developing software for business mobility, big data, and cloud computing services. In business mobility, Systex has helped clients manage the flow of content, data, and cash via user-friendly

CyberLink's PhotoDirector software for video editing has won numerous awards from PC Magazine. photo : CYBERLINK

mobile applications such as near-field communication software for secure mobile payments and location-based services for marketing, tourism, and traffic information. Systex considers itself a “cloud enabler,” working with developers, operators, and end-users to deploy cloud technology and employ business analytics to mine big data. In March 2012, the company deployed Asia's first end-to-end solution for big data, the self-branded Etu Appliance. Etu is designed to help businesses improve competitiveness by processing unstructured data, extracting valuable information, and presenting it in a user-friendly format to assist strategic decision-making about market trends and customer needs. “The question that we talk about is: you’re sitting on a gold mine and how do you dig the gold from the mine and come up with useful information?” notes Richard Tang, general manager of Systex’s APAC Telecom Business Unit. Yet another Taiwan company that has distinguished itself in this field is Symbio, founded in 1994 by former members of IBM’s OS/2 PC operating system R&D team in Taipei. The company provides software engineering and R&D co-creation services to technology innovators worldwide, with customers that include China Mobile, Google, IBM, Microsoft, PayPal, Nokia, and Samsung. Applying expertise in user experience and mobile devices, embedded systems, cross-platform applications, cloud services, and enterprise software, Symbio’s ultimate vision is to be the world's preeminent software creation foundry, meaning that technology companies would not need to hire their own software engineers but could rather outsource all their software needs to Symbio. “In the future, every industry will become a softwaredriven industry – whether industrial automation, financial services and management, or integrating digital content and software into the overall customer experience,” says Symbio CEO Jacob Hsu. “I think every industry will undergo that transformation.” Besides Taiwan, Symbio now has

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labs in China, Finland, Stockholm, and the United States, taking advantage of unique software development expertise in each location and combining them into single product development teams. Hsu describes Silicon Valley as “the locomotive that drives the rest of the train,” due to its proximity to the headquarters of major software platforms such as Apple’s iOS, Google’s Android, and Facebook. Likewise, Taiwan has an advantage because of the presence of so many leading hardware manufacturers. “We are seeing the re-imagination of all types of products – phones, TVs, connected cars are all melding together [in] the software interface,” explains Hsu. “All hardware will need to be integrated with software, and [companies will] want to do that at the point of origin where things are being made.” In Taiwan, Symbio works closely with hardware manufacturers because there is high demand for content-rich consumer devices fused with exceptional user experience. This requirement calls for the tightly-knit integration of hardware and software. At any given time, Hsu says, the company’s lab in Taiwan is working on 20-30 new products. Taiwan has “a special form of creativity that the rest of the world hasn’t caught on to yet,” says Hsu. The younger generation in Taiwan consumes media and entertainment from across Northeast Asia and the United States, and its domestic entertainment industry targets a global Chinese-speaking audience. Hsu says that as the software and creative industries fuse together, the combination will produce a “sweet spot” for Taiwan. Ho Peichi, director of Embedded Multimedia Software Solutions at Kaohsiung-based Brogent, says that besides technical skills, creativity is one of the most important characteristics for personnel in software development. The company can train smart employees in sector-specific software coding, but creativity and imagination are not attributes that can be easily developed through in-house training. She encourages engineering majors to register for cross-disciplinary courses in university, especially in design or the

The Nankang Software Incubator located in the Nankang Software Park.

arts, to foster a broader perspective and different ways of thinking. In addition, passion is very important, she says, because a crucial part of software development is thinking outside of the box. It takes passion to fuel developers’ perseverance in facing the exhausting task of trial and error to fix bugs and solve new problems. At CyberLink, the company policy is to recruit global talent and offer engineers the opportunity to go through one-year rotations in the product planning and marketing departments. “In order to make them fearless, we encourage engineers to come out of their comfort zone – to come out of the engineering side, see the world, and face the users,” says Chang. In these roles, the engineers hear customer complaints and gain an understanding of how to create better products. Liu Nien-Chen, Senior Director at Microsoft Taiwan, suggests that the government needs to focus more on incubating software talent to fulfill industry demand. While Taiwan universities tend to teach students programming for open-source software, there is a strong need for Windows professionals in ODMs/OEMs, software vendors, and enterprise. Microsoft has cooperated with the Ministry of Education to enhance curriculum and improve faculty’s knowledge in the Windows operating system. Tr e n d M i c r o h a s a l s o c o l l a b o -

photo : III

rated with the Ministry of Education to develop university curriculums, providing training to professors and course materials for students to enable them to become more familiar with cloud computing. The company sends various senior level software developers to university campuses to share their areas of expertise throughout each semester. For the past three years, Trend Micro has also hosted a programming contest; since 2011, the highest performing interns have been offered internships with the company. Last year, 23 students participated in the internship program. Based on years of consulting experience with software companies in both China and Taiwan, Eddy Lin of IBM’s Software Group says that software companies in Taiwan require a change in mindset. Instead of aspiring to be number one in Taiwan, Greater China, or even Asia, they should set a target of becoming number one globally – and become more comfortable with taking risks in order set themselves apart from competitors. “When I’m in China, every time we talk about a new concept or solution, the customer will ask us, ‘How can we do this better than the U.S. companies?’ because they want to [be] the number one worldwide. But when we talk to Taiwan customers, the customers always ask ‘Do you have [any] references? Who is your reference? How was their result?’” observes Lin. “We need

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to take more risks. We always think too much and slow down our speed to take action. We need to try, because then at least we have a chance to do something different. Maybe we aren’t successful, but we learn something in that, and then we can change our direction.” Software is an inherently risky business, stresses Symbio’s Hsu. “Software is more and more like a content business, with a hit-driven business model. You need to find the Ang Lee of soft-

ware – a director, a producer – to go and build products,” he reflects. Although Taiwanese software engineers tend to be good at working diligently and being creative in what they develop, the market environment does not necessarily encourage a risk-taking culture where engineers can “take a philosophical leap to develop new products,” he says. A potential area of strength for the island lies with overseas Taiwanese, says Hsu, especially those who have

worked in Silicon Valley and returned to Taiwan to seek new opportunities. He finds that such individuals “have a higher appetite for risk.” Hsu makes a point of sending some of Symbio’s Taiwanese engineers to the United States “for exposure to and assimilation with the market they’ll be operating in.” According to Shieh Lon-Fon, chief of the Information Technology Industries Division at the Industrial Development Bureau (IDB) of the Ministry

Trailblazer in Multimedia Software and Digital Content Johnny Huang and C.H. Ouyang co-founded Brogent Technologies in 2001, during the advent of smartphones and personal digital assistants (PDAs). Brogent started as an embedded multimedia software solut i o n c o m p a n y, o f f e r i n g multimedia CODEC (a computer program capable Brogent's headquarters building and its i-Ride in the Kaohsiung Sky. of encoding or decoding a digital data stream) solutions for phone manufacturers’ consumer and enterprise devices. The Kaohsiung-based company was dedicated to developing customized, audio and visual mobile software solutions on an OEM and ODM basis. At the time, most mobile devices employed monochrome or grayscale screens, and few if any were capable of video playback. Hardware chip sets were still expensive to manufacture, so embedding advanced software and attracting user interface was a means of stimulating consumer interest. Anticipating a growing demand for high-quality color graphics and video playback, Brogent invested in multimedia CODEC and 3D user interface development. Brogent’s software solutions have since been employed in a wide array of hardware devices, including car navigation systems, portable media players, tablet PCs, internet protocol TV (IP TV), and digital set-top boxes. As the cost of hardware components became cheaper, central processing units faster, and screen resolutions sharper, Brogent’s customers required more advanced embedded multimedia software solutions to distinguish themselves from competitors. The company was one of the first in Taiwan to provide customized 3D user interface home screens and workflow design to OEMs/ODMs. In 2007, Brogent launched a new business line to develop mobile applications under its own 9SApp (pronounced “nice app”) brand, with a focus on lifestyle and game apps. Today, Brogent is listed on the OTC market in Taiwan and had revenue in 2012 of NT$287 million (US$9.7 million), a nearly 70% increase over 2011. The company’s crown jewel is the media-based attraction business it introduced in 2007 featuring a series of indoor simulators that showcase state-of-the-art image, audio, virtual reality, and computer graphic technologies. Customers include international theme parks, museums, exhibition halls, and large shopping and entertainment centers, including Canada Place in Vancouver. Most recently, Brogent was commissioned to develop a simulator ride for the 2014 Winter Olympic Games in Sochi, Russia. Brogent has applied for and benefited from several government incentives. Huang explains that the relocation of Brogent’s new office to the Kaohsiung Software Park was only made possible by the government’s low land leasing rate for software technology companies. The new location will allow Brogent to increase capacity – it currently employs nearly 100 employees – and accept a larger number of orders. The firm has also received government subsidies for real estate tax, bank loan interest payments, research and development, and salaries for newly hired software engineers. Other government subsidies and grants cover the creation of digital content of cultural value for export. — By Emily Chen

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of Economic Affairs (MOEA), the Taiwan government is focusing primarily on promoting cloud computing, digital content, and intelligent living among the software sub-sectors. The main means of promoting that development is by providing direct services to software start-ups and small and medium-sized software firms in industrial parks. The government-initiated software parks in Taipei, Kaohsiung, and Taichung offer resident companies convenient infrastructure, integration of information system supply chains, access to global resources (such as investors and marketing channels), as well as subsidies for R&D, training, and other purposes. The Nankang Software Park in Taipei is home to the Nankang Software Incubator (NSI), established by the Development Fund of MOEA’s Small and Medium Enterprise Administration. Since 2002, III has been responsible for operating NSI, whose services include technical assistance, legal support, marketing, investment matchmaking, and assistance in public listings. According to Oliver Weng, Director of III’s Industry Development Augmentation Division, over 120 soft-

Whether the government’s wide array of targeted services and incentives will drive a new wave of growth in the domestic software sector or produce the next CyberLink and Trend Micro remains to be seen. A crucial segment of the software industry that is still lacking in Taiwan is the link between venture capital and high potential software start-ups. Volker Heistermann, managing director of venture capital firm and start-up incubator Yushan Ventures, works with NSI to host Startup Lab and Start-up Weekend events across Taiwan to encourage young entrepreneurs to develop viable business plans with investors, designers, and entrepreneurs. Regarding venture capital funding for software start-ups in Taiwan, Heistermann says: “I promise you, all this money that’s in Taiwan, it’s going to come to the forefront for software start-ups the moment we have one big success.” “People in Taiwan love to watch somebody do something, and if it’s successful, they jump on the bandwagon and either do it better, or help, or partner,” he says. “We have to show the money that we can do it – that we can think big and be successful.”

ware start-ups have graduated from the incubator. Some 90% of the companies are still in operation and 53 of them have gone through public listings so far. Among the 56 current tenants at NSI are brothers Jerry and Andy Kuo, selfprofessed “serial entrepreneurs” who in 2007 launched Atlaspost, a social network and group buying service that was acquired by Groupon in 2010 to become Groupon Taiwan. Up to 15% of a company’s R&D expenditures can be claimed as a deductible expense against business income tax. MOEA’s Department of Industrial Technology also offers grants to fund new technology and product development through the Industrial Technology Development Program and Small Business Innovation Research Program; IDB provides a similar grant through the Leading New Product Development Project. Furthermore, in 2008, IDB relaxed application requirements for “approved companies with high-tech products or successfully developed technologies” – foreign or domestic – to be listed over-the-counter on the GreTai Securities Market to enable them to access funding from the capital market.

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business topics • february 2013 31 E-mail: taiwan amcham@amcham.com.tw

2013/2/6 9:11:51 PM

doing business

Leading through Partnership: How to Escape the Trust Tax Understanding partnerships and systems are the key to engaged employees and a productive workplace.

BY DAVID CHARD

eading Through Partnership. In this article we will focus on the importance of partnership, define it, and explore why partnerships regularly fail to reach their potential in organizations. Everyone knows successful organizations depend on people to form and maintain effective partnerships with one another, as well as with external stakeholders on whose goodwill their business depends. But what is the reality that we regularly experience? Instead of a vibrant, empowering and robust network of partnerships, what we often experience is something like open warfare. And we will show that when partnerships do not emerge or are lost, the costs to business are staggering. The Trust Tax. In his best-selling book Business at the Speed of Trust, author and organizational leadership expert Stephen Covey, Jr. makes a compelling case that lack of trust between members of an organization and external stakeholders is the main problem of suffering businesses. He introduces a new model for mapping systems results: Old Model: Strategy x Execution = Results (S x E) = R Updated Model: (Strategy x Execution) x Trust = Results (S x E)T = R 32

Do the simple math. In the updated model, when “T” (trust) is high, Results are going to be higher; when T is low, Results are going to be lower. Of course, we all know that Trust is the cornerstone of any relationship, whether personal or organizational. And that every business is really a network of relationships that are either flourishing or floundering. When Trust is low, partnerships flounder, never reaching the potential we want them to. When Trust is high, the business moves ahead much faster, “at the Speed of Trust.” The big questions are: what happens to the trust that we hoped would be there? Why is it quickly lost on a regular basis, almost before it can take root? And how can we develop a culture of partnership characterized by deep, ongoing trust? Let’s consider the following definition of Partnership: “A relationship in which we are jointly committed to the success of whatever endeavor, process or project we are in.” The key elements of this definition are: • Relationship • Jointly Committed to Success • Whatever Process or Project (we are in) That’s fairly simple. “It should be easy,” we think. But as

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doing business

we all know, something happens with great regularity that knocks us out of partnership with different people in the organization of which we are a part. What is that? According to systems expert Barry Oshry, author of Seeing Systems and Leading Systems, there is a simple answer to this question. What knocks us out of partnership is that when “stuff happens,” we: • Take it personally. • Make up a story about the other person. • Assess the other person as incompetent, insensitive, or malicious. • Get mad, get angry, get even. And that’s the end of partnership! This re-active response to the daily “stuff” that happens in the world of organizations is repeated countless times every day, all over the world. It is the main reason why organizations regularly fail to build the culture of trust and networks of partnerships that lead to high retention, high-performing teams, and high profits. And it is one of the major reasons why employees are “actively disengaged” from their work. In a widely read 2006 Gallup Survey on Employee Engagement (And Disengagement), Gallup researchers sought to discover which factors differed most strongly among engaged employees (29% of respondents) and those who were not engaged (56%) or actively disengaged (15%). The survey found that engaged employees: • Are more productive, profitable, and safe. • Create stronger customer relationships. • Stay longer with their companies than disengaged employees. • C a t a l y z e “ o u t s i d e - t h e - b o x ” thinking in management and customer service. The same survey also found that in 2006 alone, the “lower productivity of actively disengaged workers (15%) cost the U.S. economy about $328 billion” – without taking into account the 56% of the workforce that was simply “not

engaged.” Ta i w a n i s n o e x c e p t i o n w h e n it comes to disengaged employees, according to a Gallup World Survey from September 2012 that covered Australia, New Zealand, South Korea, Singapore, Taiwan, and Japan. The survey explored employee satisfaction across three dimensions: “Thriving, Struggling, and Suffering.”

Results showed that in Taiwan 61% of employees fell into the “Struggling” zone, ranking third highest in dissatisfaction after Japan and Hong Kong. Only 34% of Taiwan respondents were “Thriving” in the workplace. According to the Gallup report, there is a “direct link between low Career Wellbeing and low productivity and low retention.” And we all know the correlation between low retention and decreased profits. It’s easy to see, globally and locally, that the cost to business of disengaged employees is staggering. And it is safe to assume that disengaged employees are not experiencing thriving partnerships with others in the organization. We’d like to suggest two major areas to look to for the causes of disengagement among employees: 1. Policies, plans, systems, processes. 2. System Blindness (and the reactive responses that blindness engenders). By all means, create more enlightened policies, systems, and processes that support business success and make

for happier people. But we are here to tell you that even if you do, if you overlook the second factor, System Blindness, you will continue to witness the regular breakdown of partnerships and the related loss of trust, and you are going to be paying the Trust Tax, big time. What is “System Blindness?” In Oshry’s book Seeing Systems, he demonstrates how most organizations are divided into distinct “worlds” of Tops, Bottoms, Middles, and Customers. These four distinct worlds come with their own “preexisting conditions” that shape the worldview of their inhabitants. Living within those conditions are people, using all their best resources and abilities simply to survive. They are entirely focused on surviving in their own worlds. As a result, they do not “see” the conditions of the others’ worlds, and since they can’t see the conditions of others, neither can they understand or empathize with them. From time to time, even though we don’t “see” behind the walls that make others’ world’s invisible to us, what we do see is “stuff” that floats over those walls and into our worlds. “Stuff!” We all know what that is: • Plans, adjustments, directives. • Mysterious behaviors or requests. • Nothing (a lack of response to our input). • Toxic messages, attitudes, rebuffs, etc. And because we don’t understand that this “stuff” most often came from the best intentions of those others struggling to survive in their worlds (which we don’t see), we routinely and automatically: • Take it personally • Make up a story • Assess “them” as incompetent, insensitive, malicious, etc. • Get angry, get mad, get even And that is the end of the partnership. Not every time, not everyone, but with great regularity. When this happens, we are living in what Barry Oshry calls “The Side Show” – a place

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of drama, loss of trust, blaming and shaming – with great energy loss for the system. Because when we are in the reactive mentality or “Old Dance” of the “Side Show,” we are no longer “jointly committed to the success of whatever endeavor, process, or project we are in.” Not unlike true war, the “Side Show” costs businesses and people billions of dollars every single year. Ironically, the war of “stuff” is regularly triggered by the stories we make up about each other…and then take as real! What Else is Possible? The good news is that, with a new set of lenses that allow us to see into and experience the “pre-existing conditions” of others’ worlds, we have the possibility to create what Oshry calls “The Center Ring” of the organization. In the Center Ring, partnerships flourish and prosper. Trust is high and stays high. Things happen quickly, obstacles are overcome, objectives achieved. And people are excited and happy to be a part of it – even ready to “go the extra mile” – the very definition of the Actively Engaged employee. Yes, all that IS possible. However, it requires leaders who can clearly see the entire system they are leading, and who are capable of leading others to see the whole system as well. The Scientific Method has long held that to obtain a different outcome, one should change the experimental variables. These are several changes that Oshry suggests we consider: • Learn to have active empathy for the “conditions” in which other players in the system struggle to survive. • Take a personal stand, a commitment, to stay in partnership, rather than fall into the trance of “The Old Dance” – being reactive when “stuff happens.” • Create regular “Times Out of Time” in which there are opportunities for all members of the system to express what is happening in their “worlds,” so that others can understand their experience, and to share valuable 34

information needed by other parts of the system in order to move their projects ahead. New Definition of Leadership. All of this theory sounds good, but it is easier said than done. This is where leaders must play their roles. But what is the definition of leadership we are using here? “Leaders are those people, who regardless of their position or role in the organization, consistently take a stand to support and maintain partnerships throughout the system they are in, to

Only 34% of Taiwan respondents were “Thriving” in the workplace. support the success of everyone in the system.” Leading means leading by personal example. Each of us has a choice about how we respond to the “stuff” that inevitably seems directed at us. We can react instinctively and enter the downward spiral of the Side Show, or we can take the time to observe our reactions and then choose in favor of our commitment to partnership. The Side Show, it turns out, is familiar and predictable. Living in the Center Ring is not predictable, though it is always there as a human possibility. The data show that businesses (and their leaders) are leaving billions of dollars on the table worldwide – in lost productivity, high employee turnover, and slow response times – and these are all examples of paying the Trust Tax. Our conversations with CEOs in Taiwan reflect that “high turnover” and “poor team communication” continue to vex organizations here. The Big Surprise? Most of what seems deeply personal to us is not personal at all. Instead of interpreting “stuff” as if it was aimed directly at us, we can begin to understand that we are

not merely relating “person to person” with others in the system, we are in truth relating “world to world” – from our world, with its own unique conditions, to theirs. When we all wake up to this it will be like the lights going on in a dark room. We will see each other differently, through the lens of empathy, with an unshakable stand for partnership. We will witness the birth of Homo Systemicus – a person that sees and has empathy for the whole system – and no longer will we say “we have met the enemy, and he is us.” Does this sound impossible? According to Barry Oshry, when people declare such a possibility “impossible,” it is simply “the sound of the Old Dance” reverberating. The implication is that the New Dance is already in the process of being born, emerging as the new path for human collaboration and effectiveness. If you take a stand that “it’s impossible,” that is a choice, and that choice has consequences. Some of our customers in China and Taiwan are already beginning to see the importance of providing a systemic perspective for their emerging leaders as a means to achieve better communication, collaboration, teamwork, and overall satisfaction among employees. Our advice: As a leader (and we are all leaders), consider carefully which stand you will take because, whichever one you are modeling, it will be copied and replicated by all those around you. They can’t help it, because people learn by copying others. Each time you choose to take a Stand for Partnership, that is going to be visible. And each time the New Dance steps become easier to follow. Makes sense, right? Can you hear the music?

— David Chard is president of EngagingMinds, a Taipei-based leadership development consultancy that is certified and licensed by Power and Systems to lead Oshry's “Organization Workshop™”

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life in taiwan

Service Clubs Thrive in Taiwan The compassion of the Taiwanese people makes it possible for the local Rotary, Kiwanis, and Lions organizations to stand out internationally.

BY ALAN PATTERSON

t’s a regular meeting of the Kiwanis International leadership in Taiwan on a recent Tuesday afternoon. Hundreds of representatives who have come to New Taipei City’s Shulin District by bus from around the island stand and shout greetings as the ranking officers from various localities are introduced. The Kiwaneans, all of them volunteers and most of them past middle age, will spend the better part of the day discussing the social work projects the organization is engaged in. On a per capita basis, Taiwanese participation in Kiwanis and other major international service clubs such as Rotary International and Lions Clubs International is among the highest in the world. “People in Taiwan like to do social work,” explains Kiwanis Taiwan Chairman Chian Chu-chin. “We believe that as you sow, so shall you reap.” Taiwan also rates high in terms of the charitable donations of members through the service organizations. Rotary International, for example, does an annual ranking in which Rotary Taiwan was the sixth largest giver overall – and number one per capita – in the survey conducted last year (see accompanying chart). Generations ago, people interested in doing civic work in Taiwan typically joined religious groups devoted to deities such as the earth god (Tudigong) or Matsu, the goddess of the sea, or even school organizations, Chian notes. But in more

recent decades, people have flocked to the service clubs, where they believe they can achieve greater impact, he says. In many smaller towns on the island – not just in the big metropolitan centers – visitors will find plaques in hotels and restaurants identifying the venue as the meeting site for Rotary, Kiwanis, or Lions. Taiwan stands out as a place where people are eager to help those who are less fortunate, according to Dale Holmgren, an American who is a former president of the Englishspeaking Rotary club in Taiwan. “The people here are very warm, caring, and giving,” he says. The service clubs also provide members with an opportunity to network and promote their business interests, but the priority still remains social service. The three organizations all began in the United States early in the twentieth century, and their flourishing in Taiwan in part reflects the special connection that has long existed between Taiwan and the United States. Chapters of the international service clubs got started in Taiwan in the years following World War II. The first Rotary club on the island, founded in 1948, was the English-speaking Rotary Club Taiwan, which continues to meet each Thursday at the Caesar Park Hotel. Known as the “mother club,” it spawned a movement that has grown to 595 clubs with 22,000 members, which gives Taiwan – with its population of 23 million people

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life in taiwan

– an extremely high per capita representation among the 1.2 million members of Rotary worldwide. Besides the English-speaking club, there is also a Japanese-speaking chapter, but all the rest conduct their business in either Mandarin or Taiwanese. Kiwanis Taiwan was founded in 1967, with many of the early members coming from China Airlines or the Air Force, and today has about 13,000 members on the island. Another 6,000 high school and college students are members of local chapters of the Kiwanis Key Club and Circle K organizations. Kiwanis Taiwan also accounts for a disproportionately large portion of Kiwanis International’s 240,000 members. Despite the strong position of Rotary and Kiwanis, Taiwan’s largest service organization by membership is the Lions Clubs. Founded in Taiwan in 1953, the local Lions organization has more than 40,000 members. Globally, the Lions operate in 205 countries and have 1.37 million members. Rotary's motto is “Service above Self,” which Holmgren says has been exemplified by the group’s campaign that has helped to wipe out polio in all but three countries of the world. When Holmgren first came to Taiwan 54 years ago with the U.S. military, he recalls, polio was not uncommon among Taiwan’s population. Around that time, Rotary started to provide care for polio

Rotary's Leading Contributor Nations Taiwan is No. 6, No. 1 Per Capita

Ranking 1 2 3 4 5 6 7 8 9 10 11 12

Country Total Contribution TC Per Capita USA $73,193,645 $211.61 Japan $17, 783,250 $203.71 India $14,251,614 $129.01 Korea $10,874,301 $186.65 Canada $7,715,829 296.33% Taiwan $6,515,740 $313.42 Germany $6,178,681 $122.04 Australia $6,021,620 $188.31 UK $5,391,498 $103.32 Brazil $5,382,807 $99.07 Italy $5,034,566 $119.05 France $3,866,461 $116.68

Source: Rotary International

sufferers in Taiwan, donating several million dollars. Similar campaigns have targeted the alleviation or elimination of other diseases, such as malaria, around the world, he adds. Many people would be glad to donate to social causes but don’t know how to go about it, especially with assurance that the money will be used properly, Holmgren says. “It’s a question of awareness – you need awareness to know what to give and where to give.” One way in which Rotary helps to raise awareness is to host guest speakers who deliver presentations on social work efforts around the world. At a recent Rotary luncheon in Taipei, for example, the guest speaker was Junji Sugawara, founder of Save Sendai 311, a relief organization created following Japan’s horrific 9.0 magnitude earthquake and tsunami in March 2011 that has killed an estimated 20,000 people. Today, nearly two years later, Sendai remains a disaster area, with thousands left suffering, homeless, and jobless. Many children have been left orphans. Rotary members at the luncheon pledged their support.

Helping young people Kiwanis International, for its part, has “Serving the Children of the World”

Ranking by TC Per Capita 3 4 9 6 2 1 10 5 14 15 11 12 Currency: US$

as its motto, and much of its work is devoted to helping young people. Kiwanis Taiwan works closely with organizations such as Taiwan’s Tzu Chi Foundation, founded by Dharma Master Cheng Yen, a Buddhist nun in Hualien. Kiwanis and Tzu Chi hold annual events to help orphans in Taiwan. In addition, Kiwanis does fundraising for Christian groups in the Taichung area that deliver meals to elderly shut-ins. Recently, Kiwanis also held auctions to raise money for needy local families in which the mothers are immigrants from such places as Vietnam and China. “We also provide guidance to the kids of those families,” says Chian. Kiwanis Taiwan makes substantial donations to overseas charities as well. “After the Sendai earthquake in Japan, we immediately donated NT$4 million (US$138,000) for relief work,” C h i a n s a y s . A n d K i w a n i s Ta i w a n is cooperating with UNESCO on a project to eliminate tetanus internationally. The local service club donated US$70,000 last year and expects to donate another US$60,000 this year, according to Chian. About half of Kiwanis’s donations go abroad and the other half is spent at home, Chian says. He estimates that Kiwanis Taiwan will spend more than

Gary Huang is in line to become the worldwide head of Rotary International in 2014-2015, recognition of Taiwan's important role in the organization. photo : ROTARY

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life in taiwan

NT$100 million (US$3.4 million) on charity work domestically in 2012. How does Kiwanis Taiwan ensure that its contributions are effective? “We give our money directly to the responsible people,” Chian says. “If we find that children need to buy books and stationery, we will give money to their parents.” The president of Lions Club Taiwan i s Ts a i C h i n - L i e n , w h o h e a d s t h e Kung Hsing Plastic Machinery Co. Tsai helped mobilize the Lions Club Taiwan to support disaster relief work following Taiwan’s magnitude 7.3 earthquake in September 1999 that killed 2,415 people. More recently, Tsai has pledged to lead the Lions to provide more community services. He has put forward a plan to cooperate with the Lions Clubs International Foundation and the Bill Gates Foundation in a global effort to prevent measles. This Measles Initiative aims to reduce measles mortality globally, working together with such organizations as UNICEF, WHO, the U.S. Centers for Disease Control (CDC), the American Red Cross, and the United Nations Foundation. The Measles Initiative has supported the vaccination of more than 700 million children since 2001. The bulk of Taiwan’s service clubs’ members are leaders of small and medium-sized businesses, or professionals such as doctors, lawyers, and accountants. However, they have also included a number of influential dignitaries as members. President Ma Yingjeou has been a member of both Rotary and Kiwanis, and the charter president of Rotary Taiwan was Yen Chia-kan (C.K.Yen), who later was to serve in many high positions in the Republic of China, including premier, vice president, and briefly president after the death of Chiang Kai-shek. Important business figures who were active in Rotary over the years include Yulon Motors founder T.L. Yen, Continental Engineering Corp. founder Glyn Ing, and Taiwan Cement chairman C.F. Koo, who also made his mark as Taiwan’s chief crossStrait negotiator. Kiwanis counts former Taiwan Vice President Annette Lu

Kiwanis Taiwan Chairman Chian Chu-chin devotes himself full-time to the organization and is often found visiting local clubs. photo : Kiwanis Taiwan

among its members. Helping to burnish Taiwan’s image around the world, a local Rotarian – Gary Huang – is in line to become president of Rotary International for 2014-2015. Huang was selected last August by the organization’s Nominations Committee, which is normally tantamount to election. During his term of office, he will work out of Rotary International’s office in Chicago, but will spend much of his time traveling, representing Rotary around the world. The position is unpaid, but considered a high honor among Rotarians. Huang has had a long career in the local security and insurance industries. He has served on the boards of Taiwan Sogo Shinkong Security Co., Shin Kong Life Real Estate Service Co., and the P.S. Insurance Agency. He is also managing director of Taipei Life-Line Association, a social service organization. Unlike Rotary, which holds luncheon meetings on business days, Kiwanis Taiwan appears to be more grass roots. The group holds most of its activities during the weekends when more people are able to participate, Chian says. The top echelon of Kiwanis Taiwan is generally composed of business owners such as Chian who have already passed the day-to-day management of their enterprises to others. Chian, whose career was in the chemical business, says he

devotes himself full time to Kiwanis and regularly donates money to Kiwanis activities. In addition to the time and donations, the price of membership in the service clubs is not insignificant. A Rotary membership in Taiwan comes to about NT$70,000 per year, including the cost of the weekly luncheons where members get together to discuss ongoing efforts and listen to the presentations of guest speakers. Annual fees for Kiwanis members vary from one locality to another in Taiwan but the average amount is about NT$25,000, Chian says. The service clubs say their membership numbers are growing in Taiwan thanks largely to affiliated clubs especially created for young people. Kiwanis sponsors the Key Club and Circle K, while Rotary has Rotaract, a service club for young men and women aged 18 to 30. Kiwanis Taiwan also attracts new members through the charity work it does. For example, Kiwanis members often work with blood-donation teams around the island. The blood donors often become curious about Kiwanis and later join, Chian says. Retired teachers frequently volunteer to work with the Kiwanis youth organizations as a way to continue in help young people.

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2013 Business Climate Survey

2013 Business Climate Survey Summary of Results

Results of the online survey conducted in November and December 2012 by Independent Marketing Pty Limited on behalf of AmCham Taipei. Of the 407 voting representatives (mainly CEOs) from AmCham member companies invited to take part, 269 did so for a 66% response rate. The sample covered a wide spectrum of companies by size of employment â&#x20AC;&#x201C; from the very small to the very large. The primary business focus of more than 70% of the respondents is to supply goods or services to the Taiwan domestic market.

American Chamber of Commerce in Taipei Suite 706, Worldwide House 129 MinSheng East Road, Section 3, Taipei 10596, Taiwan Tel: +886-2-2718-8226 Fax: +886-2-2718-8182 www.amcham.com.tw

I ss u e

S ponsor

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2013 Business Climate Survey

Amid basic optimism, growing cautiousness Message from 2013 AmCham Chairman Alan T. Eusden

For its 2013 Business Climate Survey, AmCham Taipei invited the 407 voting representatives from our member companies (mainly CEOs) to answer about 20 questions about the investment environment in an online questionnaire. I wish to thank the 269 members who took the time to participate in the survey. The outstanding 66% response rate was the highest in the past three years in which AmCham has conducted this exercise. We believe that high degree of interest can be attributed to the experience of the past two years; members have seen how the information gathered through the survey enables AmCham to shape its policies and advocacy positions to reflect the needs and interests of the membership more effectively. In many respects, the results of this year’s survey are quite similar to those of 2011 and 2012. One positive difference, however, was that 53% of respondents (compared with 43% last year) said their company plans further investment in the coming year. Less favorably, there was a continuing decline in the level of optimism about the five-year outlook for business in Taiwan. Part of that growing cautiousness may be attributed to the many uncertainties in the global economy, but part may also reflect concern as to whether Taiwan is responding rapidly enough to various factors challenging its competitiveness. In several important areas, the 2013 survey results show that the Taiwan government deserves commendation for its achievements, including progress in cross-Strait economic relations, tax reform such as the adjustment of the corporate tax rate to make Taiwan more competitive within the Asian region, and further strengthening IPR protection. At the same time, the survey pinpoints areas where further efforts are needed to remove what are perceived as serious obstacles to sustained economic growth: • Human Resources. Constraints on hiring professionals from abroad are a growing burden, and the workforce – while excellent in many respects – is not yet “world-class” in creativity and ability to take the initiative. Thankfully, the government has recognized this problem. In his 2013 New Year’s Address, President Ma referred to the “clear mismatch between how we are training students and what industry is actually calling for” as one of the key challenges his administration aims to address. • Bureaucratic inefficiencies. Among the problems cited by the survey respondents are inconsistent regulatory interpretations, inadequate or out-of-date laws and regulations, insufficient notice before changes to laws or regulations go into effect, and lack of transparency. Encouragingly, Premier Chen recently directed all ministries to speed up their respective reform measures to better meet the needs of the nation. • Tax structure. Although the corporate tax rate has been reduced, the high personal income rate discourages many foreign experts from accepting assignments in Taiwan, affecting Taiwan’s international competitiveness. The incentive system for encouraging R&D also needs further review. AmCham is heartened that the President, Premier, and other high-level officials have recognized some of the problems Taiwan business is facing and are working on finding solutions. We hope the survey results will provide useful reference for the government in pursuing those reforms. In addition, for the reference of the U.S. government we note that 62% of the respondents say the lack of Trade and Investment Framework Agreement (TIFA) talks has caused disadvantages for their business, while 59% say the same about the lack of a Bilateral Investment Agreement (BIA) between Taiwan and the U.S. and 51% take that position regarding the lack of a Bilateral Taxation Agreement (BTA). Those numbers are extremely high considering that not all AmCham members are in lines of business that would be affected by TIFA or a BIA or BTA, and in fact not all are U.S.-invested companies. In closing, I would like to express the Chamber’s appreciation to Gordon Stewart of Independent Marketing Pty Limited for his professional assistance in planning and executing this project.

Alan T. Eusden 2013 AmCham Taipei Chairman

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2013 Business Climate Survey

EXECUTIVE SUMMARY Key Indicators

81% 74%

*Note! Statistically significant change from 2012

72%

81%

69%

66% 59%

*Note! Statistically significant change from 2012

54%

52%

70% *Note! Statistically significant change from 2012

56%

43%

2010 2011 2012 2013

Profitability

Forecast for Revenue & Profit Growth

Investment

5-Year Business Outlook

Major Takeaways • AmCham’s business leaders saw a general softening in their companies’ profitability in 2012, with a significant decline in those reporting that the year was either “very” or “relatively” profitable. For 2013, however, they are forecasting a modest improvement in results. • Many companies (53% compared with 43% last year) said they will increase their investment in Taiwan during the next 12 months. But in most cases the level of new investment will be slight. • A worrisome trend is the continuing drop in the degree of optimism regarding Taiwan’s five-year business outlook. This year only 56% of respondents said they were optimistic, compared with 71% in the 2012 survey and 81% in 2011. • Bureaucratic obstacles continue to be a common and persistent theme negatively impacting business. It is cited through this survey (as it was in the past two years) as being a major barrier to success and the number-one issue that companies would like to see the government tackle aggressively. Some progress has occurred, but more must be done to streamline procedures and to simplify and clarify regulations. • Among other issues, those related to Human Resources are the major concerns for our business leaders. Specifically, they point to shortcomings with the quantity and to some extent the quality of the workforce and with the costs associated with employment. • ECFA is generally seen as good for Taiwan and for the respondents’ businesses, though the level of enthusiasm has declined somewhat. • The majority of respondents believe their businesses have been disadvantaged by the lack of Taiwan-U.S. TIFA talks, as well as by the absence of bilateral investment and taxation agreements with the U.S. • The amount of M&A activity engaged in by our member companies continues to be limited. • The respondents were again highly positive about the living environment in Taiwan. The major defect cited is that Taiwan is insufficiently “English-friendly.”

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2013 Business Climate Survey

Detailed Findings 2012: A Slower Year for Business Only 10% of respondents described their company's performance in 2012 as “very profitable” – down from 14% for 2011 and 21% for 2010. The 66% describing the past year as either “very profitable” or “relatively profitable” was also down from the 72% for 2011 and 74% for 2010. For 31% of respondents, the results in 2012 were merely “break-even” or close to it.

■ How would you characterize your Taiwan business's financial performance in 2012? 10%

Very profitable

14%

21%

56% 58%

Relatively profitable Break-even or small profit/loss Relatively large loss 1% 1% 0%

Very large loss

53% 31% *Note! Statistically significant change from 2012

24% 24%

3% 3% 3%

2012

2013

2011 60 %

2013 forecast: Modest improvement A total of 69% of the business leaders are expecting an increase in the level of both revenue and profits in the coming year – virtually the same as last year's 68%, but far less than the 82% in the 2011 survey. Most of the rest expect conditions to "Remain the Same" for 2013, rather than anticipating a decline in either revenue or profits.

■ What is your Taiwan business's revenue & profits forecast for 2013 compared with 2012? 13% 11%

Substantial growth in both Revenues & Profits 2% 2%

Substantial growth in Revenues & modest growth in Profits

Modest growth in Revenues & substantial growth in Profits

17%

0% 3%

Modest growth in both Revenues & Profits

53%

46% 19%

Remain the same 2% 3% 3% 2% 2% 3% 1% 0% 0%

Modest growth in Revenues & no change in Profits Modest growth in Revenues & modest decline in Profits Modest decline in Revenues & modest growth in Profits Modest decline in both Revenues & Profits

23%

10%

6% 10

54%

2012

2013 20

2011 60 %

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2013 Business Climate Survey

Near-term Investment: Better News The survey shows an uptick in planned investment levels for the coming year – with 53% of respondents saying their entity plans either a "substantial increase" or "slight increase" in investment levels in 2013. That percentage is a major improvement from the 43% in that category in 2012 , and is nearly a return to the 54% citing such plans in 2011.

■ What is likely to happen to your entity's level of investment in Taiwan over the next 12 months? 11% 10%

Substantial increase

16%

*Note! Statistically significant

Slight increase

42% change from 2012

33%

No change 6%

Slight decrease 2% 2% 3% 1% 2% 1%

Substantial decrease Don't know/can't say

*Note! Statistically significant change from 2012

38% 39% 36%

13%

2013

41%

2012

2011

50%

Looking forward five years The survey found a continuing decline in the degree of optimism regarding the five-year business outlook for Taiwan. This year only 56% of the business leaders say they are either "optimistic" or "slightly optimistic" about that outlook, compared with 71% in 2012 and a high 81% in 2011. Those either "pessimistic" or "slightly pessimistic" came to 19% this year, as against 8% in 2012 and 13% in 2011.

■ How would you describe your five-year business outlook for Taiwan? 19%

Optimistic

*Note! Statistically significant change from 2012

28% 29% 37%

Slightly optimistic

52%

Neutral

22%

Slightly pessimistic

Pessimistic

1% 0

43%

26%

16% 10%

2013

2012

2011

3% 10

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2013 Business Climate Survey

What impacts their business?

Consistently over the past three years, respondents have rated “changes in local demand” as the factor having the biggest impact on their operations. That is not surprising, considering that most of the member companies focus chiefly on the Taiwan market. Among other factors cited, however, most are areas in which the Taiwan government can have a direct and substantial influence. These include inconsistent regulatory interpretations, governmental bureaucracy, inadequate/out-dated laws and regulations, conditions hampering companies’ ability to recruit appropriate personnel, insufficient notice before changes to regulations or laws are introduced, lack of transparency, and government reform/restructuring. Two of the top ten responses were new to the list this year: Insufficient notice before changes to regulations or laws are introduced, and government reform/restructuring.

■ Which of the following impact your operation in Taiwan, and how much of an impact do they have?

Top Ten Responses Overall 2013 2012 2011 Ranking Ranking Ranking

Issues

Changes in local demand

Inconsistent regulatory interpretations

Governmental bureaucracy

Inadequate/out-dated laws

Ability to recruit appropriate new personnel

New in 2013

Insufficient notice before changes to regulations or laws are introduced

Currency exchange rate fluctuations

Changes in employment expenses

New in 2013

Lack of transparency Government reform/restructuring

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2013 Business Climate Survey

Much more needs to be done

The survey asked about the main priorities the Taiwan government should adopt in the coming year to help business. The top replies were: • Simplify government bureaucracy (cited by 47% of respondents) • Increase foreign direct investment incentives (29%) • Reduce personal taxation (24%) • Reduce corporate taxation further (21%) • Liberalize the labor market (20%)

■ What are the main things the Taiwan government could do to help your entity in the next 12 months?

Issue

2013

2012

2011

Simplify government bureaucracy

47%

44%

47%

Increase direct foreign investment incentives

29%

25%

Reduce personal taxation

24%

21%

33%

Reduce corporate taxation further

21%

20%

Liberalize the labor market

20%

16%

15%

Sign bilateral trade deals with other (non-USA) countries

15%

11%

19%

Speed up ECFA

15%

19%

Improve Research & Development incentives

14%

17%

Re-engage in TIFA talks with the USA

13%

14%

Broaden ECFA

13%

16%

19%

Introduce stronger Corporate Governance rules

12%

11%

16%

Tighten enforcement of illegal imports

11%

Reduce tariffs

11%

10%

Tighten enforcement of Intellectual Property Rights

11%

Improve training incentives

Negotiate and sign a Bilateral Investment Agreement with the USA

Increase direct flights to/from the Mainland

13%

12%

Negotiate and sign a Bilateral Tax Agreement with the USA

Open up the tertiary education market to foreign players

Tighten enforcement of Trade Secrets Protection

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2013/2/6 4:00:21 PM

2013 Business Climate Survey

The major worries confronting business With regard to the major risks facing their operation in the years ahead, most respondents cited the threat of economic slowdowns, whether globally (cited by 72% of respondents), domestically (58%), or in major overseas markets such as China (42%), the United States (41%), or Europe (35%). Besides economic slowdowns, the number one concern is the possibility of “increased governmental interference,” at 39% an increase from the past surveys. Among other concerns are “lack of human resources” (35%) and rising inflation (26%). “Increased domestic political unrest” declined as a concern – it was cited by 22% of respondents as opposed to 32% in 2012, an election year.

■ What are the major risks facing your entity in the coming years? 72% 74% 69%

Global economic slowdown Economic slowdown in domestic consumption

54%

Economic slowdown in Mainland China

28%

Economic slowdown in US

27%

Increased Governmental interference

28%

Economic slowdown in Europe Lack of Human Resources Taiwan Inflation rising

19%

Increased domestic political unrest Taiwan Unemployment rising Taiwan Dollar (TWD) depreciation Decreased exports

10%

Taiwan Dollar (TWD) appreciation 4% 4% 2% 4% 2% 2%

Other Increased imports 0

22% 22%

26%

58% 64%

42% 41% 41% 40% 39%

34% 35% 36% 35% 35% 36% 32% 33%

18% 16% 20% 18% 24% 18% 16% 15% 15% 17% 22%

2013 10

2012 70

2011 80 %

Human Resources continues to be a big issue Deficiencies in the quantity and quality of available human resources are one of the highest risk factors seen as confronting Taiwan-based businesses in the future. We ask our corporate leaders about their impressions of the quality of the available human capital in Taiwan.

■ How would you describe the quality of available Human Capital in Taiwan?* Hardworking Very trustworthy Extremely well educated Very loyal Highly productive Easy to develop/train Show a high degree of emotional maturity Well-rounded Easy to retain Show a great deal of initiative Easy to recruit Of 'World-class' Standard Show a good deal of creativity -50

100

150

200

* Net Promoter Scores (net difference of positive scores minus negative scores)

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250

300

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2013/2/6 4:01:06 PM

2013 Business Climate Survey

The impact of ECFA

Business leaders are (still) bullish on ECFA but… The Economic Cooperation Framework Agreement (ECFA) between Taiwan and China continues to be viewed in a positive light. But the proportion of respondents seeing it as having a “very positive” effect on Taiwan has dropped significantly – 13% in this year’s survey, compared with 40% in 2011 and 30% in 2012. At the same time, there was a marked increase in the number regarding ECFA as having “some positive effect.”

■ ECFA’s Effect on My Business 5%

Very Positive Effect

15%

Some Positive Effect

44%

38%

42%

37%

Neither Positive nor Negative 2% 3%

Some Negative Effect

2% 1% 2%

Very Negative Effect Don't know/Can't say

41%

27% 7%

7% 8% 0

2012

2013

10%

2011 50

■ ECFA’s Effect on Taiwan 13%

Very Positive Effect

*Note! Statistically significant change from 2012

30%

40%

Some Positive Effect

46%

Neither Positive nor Negative

3% 4% 2% 5% 1% 3% 2%

Some Negative Effect Very Negative Effect Don't know/Can't say

2% 0

60% *Note! Statistically significant change from 2012

49%

13% 11%

9% 9% 10

2013 20

2012 50

2011 60

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2013 Business Climate Survey

TIFA/BIA/BTA

■ What is the impact of the lack of TIFA talks on your business? A total of 62% of respondents say the lack of TIFA talks has caused disadvantages for their business. The number is a increase from the 53% saying so in 2012. 9% 8%

Major disadvantage

29%

Disadvantage

23% 24% 22% 21% 25%

Slight disadvantage Not a disadvantage 18%

Don’t know/Can’t say 0

22%

*Note! Statistically marked change from 2012

2013 25

2012

■ W hat is the effect on your business of the lack of a Bilateral Investment Agreement between Taiwan and the U.S.? A total of 59% of respondents – up from the 53% in 2012 – see the lack of a Bilateral Investment Agreement with the U.S. as disadvantageous for their business. 9% 8%

Major disadvantage Disadvantage

23% 22% 22% 21%

Slight disadvantage Not a disadvantage

20%

Don’t know/Can’t say 0

28%

25%

22%

2013 25

2012

■ W hat is the effect on your business of the lack of a Bilateral Taxation Agreement between Taiwan and the U.S.?

Exactly half of respondents – about the same as the 51% in 2012 – consider the lack of a Bilateral Tax Agreement with the U.S. as disadvantageous for their business.

Major disadvantage

10%

Disadvantage

21%

24%

19% 20%

Slight disadvantage Not a disadvantage

22%

Don’t know/Can’t say 0

25%

28%

25% 25

2013

2012

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2013/2/6 4:02:30 PM

2013 Business Climate Survey

M&A ■ Did your entity pursue a merger or acquisition with a Taiwanese entity in the past 12 months? 5%

4% 4% 4%

5% 2% 18%

Yes, and it was completed

17%

Yes, and it is still in process

71% 71%

Yes, but the effort failed Considered, but did not pursue No, did not consider

2012

2013

The amount of M&A activity being undertaken is still quite limited.

■ In the next 12 months, would you consider M&A activity? 7%

11%

13%

17%

16%

Definitely

17%

Possibly

19%

Unlikely

18%

22%

Definitely not

27%

28%

Don’t know Prefer not to answer

2013

2012

23% of respondents, similar to last year's 22%, say they will "definitely" or "possibly" consider M&A activity in the coming year.

■ For M&A attempted in the past 12 months, what were the greatest challenges? Negotiation of valuation gap Conducting due diligence Finding an appropriate target Transparency of regulations Inconsistent regulatory interpretations Post-deal restructuring Financial issues Cultural issues Obtaining government approvals Negotiating the letter of intent Language issues Obtaining permission for target to be sold 0

Major Challenge

Second

Third

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2013/2/6 4:02:59 PM

2013 Business Climate Survey

Living in Taiwan

The respondents regard Taiwan as a safe, friendly place to live for themselves and their families.

The Top Ten Benefits of Living in Taiwan* 2013

2012

2011

Benefits

Taiwanese people are extremely nice

My family feels safe in Taiwan

Taiwan is an easy country to live in

Taiwan provides quality healthcare services

Taiwan delivers reliable electricity

Taiwan provides adequate shopping opportunities

6 6 5

Alternative transportation options are usable and provide options to driving my car (i.e., buses, bike lanes, taxis, trains, sidewalks)

The postal service is excellent

Mobile telephone coverage is excellent Recycling and trash services meet needs

But some things could be improvedâ&#x20AC;Ś

The Least Appreciated Aspects of Living in Taiwan* 2013

2012

2011

Benefits

New in 2012

Water runoff from storms is controlled and minimizes flooding

Taiwan provides quality drinking water

Banking and other financial services are excellent

The sewage system in Taiwan works reliably

Taiwan provides quality youth activities

Taiwan provides an 'English-friendly' environment for me and my family

7 5 4

The library services provided to our community are current and meet our needs

Street surfaces are drivable and safe

The standard of schooling is excellent

10 12 17

The Taiwan government is approving measures that enhance the quality of life in our community * Net Promoter Scores (net difference of positive scores minus negative scores)

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2013/2/6 4:03:27 PM

s e e i n g ta i w a n

Time for Celebration

aiwan has been called an island of extraordinary natural beauty, an island of gods, and even an island of butterflies. But few outsiders know that it is also an island of festivals, boasting carnivals, exhibitions, parades, and large-scale cultural events virtually every day of the year. Some of these celebrations, such as the Lantern Festival, build on ancient traditions carried to the island more than 300 years ago by settlers from the Chinese mainland. Others express the Austronesian heritage of Taiwan’s aboriginal minority. Some have a much shorter history – the Taipei Culinary Exhibition, for example, was first held in 1990. Several, the Sun Moon Lake Cross-Lake Swimming Carnival, for example, are sporting rather than cultural in nature. To h e l p p o t e n t i a l v i s i t o r s t o

Taiwan plan itineraries around events that interest them, the Republic of China’s Tourism Bureau is highlighting 42 world-class activities in 2013 as part of its “Time for Celebration” promotion. The selected events showcase Taiwan’s culinary delights, most loved sports, finest scenery, and greatest ecological treasures, as well as its religious, folk, and ethnicminority cultures. To enable travelers to gather and store information about the activities, the Tourism Bureau has created free downloadable calendar pages and smartphone apps full of food, accommodation, transportation, and shopping links. Featured events take place in each season and every region, including the ROC’s outlying islands, so whatever time of year you plan to visit Taiwan, and wherever business or family commitments may take you, you’ll find no shortage of things to do. Early spring is an excellent time to visit Taiwan. In Taipei, daytime temperatures average 18 degrees

Celsius (64 degrees Fahrenheit). Down island, the weather is even better. In the historic city of Tainan, you are almost guaranteed day after day of sunshine. Two of the “Time for Celebration” focal points in the first quarter of 2013 have long histories: The Pingxi Sky Lantern Festival, held in New Taipei City’s Pingxi District, and the Yanshui Beehive Fireworks Festival, celebrated in Tainan City’s Yanshui District. More than 90 years ago, Pingxi developed rapidly into a bustling town after coal was discovered in the surrounding hills. Mining has long ceased, but day-trippers continue to pour in, drawn by a blend of pleasing scenery and enchanting nostalgia. The town can be reached via an historic branch railway line. Built in 1921 to haul coal, and kept running because it is a big hit with tourists, the railroad’s six stations provide access to waterfalls, hiking trails, and a museum dedicated to the coal industry.

交通部觀光局廣告 TTB AD

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s e e i n g ta i w a n

Pingxi is actually very close to Taipei, just 11 kilometers away to the east. But back in the 19th century it was utterly remote, and getting from any of the area’s isolated mountain communities to the outside world involved hours of walking. Inconvenience was not the only problem. At that time, much of Ta i w a n ’s i n t e r i o r w a s p l a g u e d b y banditry. Those living in the Pingxi area developed a unique custom in response to the threat. Every day at dusk, each cluster of homesteads lit a paper lantern and sent it skyward, reassuring nearby hamlets that all was well with them. Taiwan is now a safe, modern society, and dispatching lanterns into the darkening sky has come to mean something quite different. These days, many of the tourists who visit Pingxi launch their lanterns at the end of a day spent enjoying local scenery and tasty snacks. Ready-to-fly lanterns, made of paper stretched over a frame of thin wire, are available from roadside vendors. Before launching a lantern, it is customary to use a calligraphy brush to write something on the side – a general wish for health and happiness, perhaps, or maybe a request for success in business

val includes a Valentine’s Day special mini-festival on February 14. Also, visitors are being polled to find the three best “declarations of love or praise” (the specified length is from 10 to 50 Chinese characters) that can be fitted on the side of a lantern. For details of these activities and more, go to the festival’s official website at www.2013unique.com.tw. Like Pingxi’s Sky Lantern Festival, the origins of Yanshui’s Beehive Fireworks Festival are far from joyous. The event celebrates a plague expulsion rite that is said to have been held in the eleventh year of the reign of the Qing Emperor Guangxu (1885 on the Gregorian calendar). According to one source, “an epidemic occurred, which neither medicine nor doctors could defeat. A multitude of people died each day, and local residents were exceptionally panicstricken.” To drive out the evil spirits they blamed for the pestilence, townsfolk walked through the streets carrying an effigy of Guan Gong, a deified general regarded as the Chinese god of brotherhood and righteousness. At every turn, they burned piles of spirit money and let off masses of firecrackers. The exorcism worked – the epidemic soon receded, and commemorative parades have been held ever since around the time of the Lantern Festival. The modern festival is

sponsored by local businesses and temples, so there is no charge for participation. However, if you plan to attend you should be aware there is a dress code of sorts. This is no ordinary fireworks display. In fact, nothing like the Yanshui Beehive Fireworks Festival happens anywhere else in the world. It is an audience-participation event in which hundreds of thousands of fireworks are fired at, into, and around those watching. Most of those who linger near the frontline, close to the so-called “beehives” that spew bottle rockets in every direction, wear full-face motorcycle helmets, thick fire-resistant clothing, and gloves. Like the Running of the Bulls in the Spanish town of Pamplona, those who attend experience an adrenalin rush they will remember for the rest of their lives. The event has grown in popularity, so in recent years there have been “beehive fireworks parades” on two nights rather than one. The most exciting parts of the 2013 Yanshui Beehive Fireworks Festival will be between dusk and dawn on the 14th and 15th day of the first lunar month, February 23 and 24. For 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 the ROC).

or love. At the base of each lantern is a cloth soaked in paraffin or a small cup of rubbing alcohol, which – when set alight – provides the heat that propels the lantern upward. Releasing a personalized lantern and watching it rise in the night sky until it has shrunk to a minute yellow speck is a romantic moment that countless couples have shared. Inevitably, the 2013 Pingxi Sky Lantern Festitaiwan business topics • february 2013

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