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Tr A an R e DU spor por ST tatiot on RY n S the FO ecto C r

IN

THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics

Upgrading Industry 產業升級

TAIWAN BUSINESS TOPICS March 2013 | Vol. 43 | Issue 3 中華郵政北台字第 號執照登記為雜誌交寄 5000 3_2013_Cover.indd 1

NT$150

March 2013 | Vol. 43 | Issue 3 www.amcham.com.tw

ISSUE SPONSOR

2013/3/14 7:02:46 PM


2013 APCAC_delegate.pdf 2013/3/18 4:15:30 PM

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CONTENTS NEWS AND VIEWS

6 Editorial

Looking Beyond TIFA

ma rCh 2 0 1 3 vOlumE 43, N umbE r 3 一○二年三 月號

台美TIFA會談帶來新展望

7 Taiwan Briefs Publisher

By Jane Rickards and Don Shapiro

發行人

Andrea Wu

11 Issues

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro

Insufficient Tax Revenue? Promote Payment by Plastic; Border Control for Digital Piracy; Getting Medical Devices to Market More Rapidly

沙蕩 美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Staff Writer

採訪編輯

Jane Rickards

李可珍

稅收不足?鼓勵全民簽帳消費;數位 盜版的邊界管制;加速醫療器材在台 灣上市

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

By Don Shapiro

翻譯

Yichun Chen, Frank Lin, Sonia Tsai 陳宜君, 林治平, 蔡函岑

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱:台北市美國商會工商雜誌 發行所:台北市美國商會 臺北市10596民生東路三段129號七樓706室 電話:2718-8226 傳真:2718-8182 Taiwan Business TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 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○二年三月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

Chairman/ Alan T. Eusden Vice Chairmen/ Bill Wiseman / William J. Farrell Treasurer: Sean Chao Secretary: Edgard Olaizola 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. 2012 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/ 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/ Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Scott Meikle; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, 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.

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COVER SECTION

15 Upgrading Industry

產業升級 By Timothy Ferry

This issue continues the examination, begun in last month’s magazine with a look at Trade Liberalization, of the Five Pillars for Taiwan’s future development outlined by President Ma Ying-jeou at AmCham Taipei’s 2012 Hsieh Nien Fan banquet. This month’s installment deals with the government’s efforts to help Taiwan industry elevate itself to a higher level of technology in order to assure its continued competitiveness.

20 Going from Commodity to Specialty Chemicals

22 Lack of Start-up Ecosystem Takes a Toll

TAIWAN BUSINESS

24 Shift in Focus for Medical Tourism

The emphasis for most hospitals will now be on attracting patients from China rather than the West. By Lianna Nicole Faruolo

27 Occupational Safety and Health Getting More Attention

A spate of problems two years ago has aroused more awareness by government and industry of the need to improve the working environment. By Philip Liu

taiwan business topics • march 2013

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marc h 2013 • Volume 43 n umbe r 3

iNDuSTrY

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iSSuE SPONSOr

CuS

Citi: Taiwan’s Banking Leader

Transportation:

Getting around 32 Taiwan Rides a Strong Tailwind

Cargo volume has slumped, but passenger traffic should grow if the infrastructure can support it.

Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.

By Alan Patterson

Citi is proud to have had a strong presence in Taiwan since 1965. Being the leader in Taiwan’s banking industry, Citibank Taiwan Limited (CTL) has been recognized as the Best Foreign Commercial Bank in Taiwan for the past 16 consecutive years by FinanceAsia and as the Most Admired Bank in Taiwan for 18 consecutive years by CommonWealth Magazine.

34 Terminal 3 Consultancy Contract Awarded 35 Taipei MRT: Growing Year by Year Customer satisfaction with the system and its service is among the highest in the world.

CTL's Institutional Clients Group provides top-tier corporations with a full range of value-added local and cross-border products and services. Leveraging Citi’s world-class banking platform, CTL acts as clients’ partner to support and grow their businesses to the next level by delivering cost effective solutions with a flexibility that is unmatched by Citi’s competitors.

By Emily Chen

37 Kaohsiung MRT: Striving for Higher Volumes 38 Taxis Take to a New Business Model

CTL’s Consumer Banking leads the market by pioneering Wealth Management banking service, providing wealth advisory service, local and multi-currency deposits to premium accounts and a variety of mutual funds, bonds, HK and U.S. stocks. By providing customers with value-added services, CTL’s Cards business enjoys high customer satisfaction and strong brand recognition in the market.

Satellite fleets seek to raise efficiency and professionalism through technology and training. By Philip Liu

41 Driving a Taxi for the Sake of Freedom

Citi believes strongly in its responsibility to both Taiwan and the global community. Since 1995, CTL has been actively involved in educating the next generation, community care, financial education, and environment protection in Taiwan. Over the past 18 years, the CitiUnited Way Fundraising Campaign has benefited more than one million disadvantaged people in Taiwan.

By Philip Liu

LAW

42 Taiwan Employment Law for the Busy Executive By John Eastwood

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Citi aims to become the world’s digital bank. In addition to introducing smart banking branches in 2010 and launching advanced mobile banking services in 2011 that include location-based offers, premium search, and Facebook check-in, Citi possesses the innovative culture that positions it to lead the digital trend and deliver more effective, dynamic, and convenient approaches to better serve clients.

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Looking Beyond TIFA

A

fter nearly six years without U.S.-Taiwan high-level negotiations under the Trade and Investment Framework Agreement, it came as a great relief when the TIFA talks were finally held in Taipei earlier this month, made possible by Taiwan’s resolution last fall of the major issue restricting imports of U.S. beef into this market. But considering the deep discord caused by the beef dispute, concern had inevitably arisen in Taiwan that economic relations with the United States might now fall hostage to yet another agricultural issue – this time pork, which has a much larger and more vocal domestic constituency in Taiwan than beef. As the local hog industry and some legislators pressed government officials to pledge never to open the market to American pork, U.S. companies in the many other industries with trade issues with Taiwan worried that TIFA would again become bogged down by differences over a single commodity. As it turned out, there was no cause for worry on that score. The TIFA trade negotiators on both sides showed determination to move forward on a broad range of topics, and to closely monitor the progress. They established two working groups – one on investment-related matters and the other on technical barriers to trade – to tackle nitty-gritty issues and report back on their headway every quarter. Officials from the two governments will continue to discuss other issues through periodic digital video conferences, and the timing for the next formal TIFA has already been set for next summer in Washington, D.C. Even more positively, the participants from both sides reportedly came away energized, enthusiastic about the potential for building an increasingly robust trade and investment relationship between the United States and Taiwan. For both countries,

greater mutual economic engagement can help in attaining their goals of increasing exports, diversifying markets, and creating more employment. Contributing to the favorable atmosphere in the talks were recent initiatives taken by Taiwan on issues important to the U.S. business community. As urged by AmCham, for example, Taiwan lately has strengthened its laws against misappropriation of trade secrets and acted to provide more market stability for innovative pharmaceuticals by creating a Drug Expenditure Target system. Despite all of these healthy developments, however, longerterm questions remain. Will it be possible to move U.S.-Taiwan economic relations forward to a new and advanced stage – for example by concluding a Bilateral Investment Agreement, bringing Taiwan into the multilateral Trans-Pacific Partnership (TPP) being led by the United States, or even negotiating a U.S.-Taiwan Free Trade Agreement (FTA). Any or all of these developments would be major accomplishments for Taiwan. But Washington can hardly be expected to support those further initiatives unless Taiwan clearly demonstrates its commitment to free trade and open markets. More importantly, that step is in Taiwan’s own interest. Eliminating excessive regulation will help inject new energy into the domestic economy; retreating from protectionism will open the way for greater acceptance for Taiwan within the international economic arena. TIFA has provided a glimpse of what is possible for the future. The Taiwan government needs to start a vigorous program of public education to prevent bureaucratic mindsets and the narrow concerns of particular industry sectors from obstructing what is in the overall national interest.

台美TIFA會談帶來新展望

美「貿易暨投資架構協定」(TIFA)談判停滯近六

達成提振出口、市場多元化、增加就業等目標。近來台灣對

年後,隨著台灣去年秋季解決美牛進口的問題,雙

於美國企業界關切的重要議題採取行動,也為台美談判營造

方代表三月初總算在台北重啟高層會談。然而美牛

出良好的氛圍。舉例而言,在台北市美國商會的敦促之下,

問題所引起的廣大爭議,不免讓人憂心台美經貿關係是否將

近期台灣政府已強化侵犯營業秘密的相關立法,並建立「藥

再度受到農業議題所牽動---這次換成豬肉問題;比起牛肉,

費支出目標制度」,為藥廠開發的新藥提供更穩定的市場環

台灣食用豬肉的人口更多,關注這個議題的各方發言分貝也

境。

更高。在其他領域與台灣有貿易問題尚待解決的美商憂心,

儘管有上述的正面發展,但中長期的問題仍然存在。台美

只要台灣豬肉業者與部分立委對政府官員施壓,要求承諾不

經貿關係能否更上層樓,進入更緊密的新階段?例如簽署雙

會開放美豬入關,雙方對單一商品的歧見將使得TIFA 談判

邊投資協定(BIA),讓台灣有機會參與美國主導的多邊的

再次陷入泥淖。

泛太平洋夥伴關係協定(TPP),甚至進而協商台美自由貿

結果證明, 這些擔心都是多餘的。台美雙方的TIFA談判 代表均展現決心,要在廣泛的議題上取得進展,並密切注意

易協定(FTA)。上述協定的協商或簽署,將成為台灣經貿 外交上的重大成就。

會談進度。雙方代表成立兩個工作小組---一個負責處理投資

然而,除非台灣能夠明確展現出維護自由貿易與開放市

相關議題,另一個處理雙邊貿易的技術障礙---以處理各項細

場的決心,難以期待美方支持進一步的雙邊發展。更重要的

節,並每季回報工作進度。台美官員將定期召開視訊會議,

是,展現這個決心也符合台灣自身利益。法規適度鬆綁,將

持續討論其他議題。下一次正式的TIFA會談已訂於明年夏天

為台灣市場挹注新的能量;捨棄貿易保護主義,將使國際經

在華府召開。

貿市場進一步接納台灣。

更好的消息是,據報導指出,會談結束後雙方與會者都顯

TIFA 已勾勒出未來的各種可能性。台灣政府需要積極推

得相當振奮,樂觀期待台美能夠建立更為健全的貿易與投資

動公民教育,避免官僚心態或受限於個別產業的狹隘觀點,

關係。對於台美兩國而言,深化經貿合作關係,有助於雙方

影響了整體國家利益。

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— BY JANE RI CKARDS AND DO N SH AP I RO —

MACROECONOMICS Mixed signals With the world economy in an upswing – as consumers across the globe now buy more of Taiwan’s hightech exports such as smart phones and tablets – economic data throughout February continued to reflect expectations that Taiwan is gradually emerging from last year’s doldrums to undergo a U-shaped economic recovery. At the same time, February data also showed signs that the recovery remains patchy. T h e g o v e r n m e n t ’s D i r e c t o rate General of Budget, Accounting and Statistics (DGBAS) in February upped its GDP forecast for this year to 3.59% from an earlier 3.42% a n n o u n c e d i n J a n u a r y, s a y i n g i t expected the momentum of global recovery to be stable throughout the year. Other forecasting agencies see Taiwan’s economic prospects as even brighter, with Taiwan’s Cathay Financial Holding raising Taiwan’s its GDP forecast to 4.23%, up from an earlier 3.88%, and Switzerland’s UBS revising its forecast for this year to 4.2%, an increase from the previous 3.7%. The Swiss bank noted that exports, equivalent to 70% of Taiwan’s nominal Taiwan sTock exchange index & value

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

8250

135

8000

120

7750

105

7500

90

7250

75

7000

60

6750

45

6500

30

6250

15

6000

0

February chart source: twse

Unit: ntD billion

HIGH-LEVEL MEET — Chinese Communist Party General Secretary Xi Jinping, right, confers with Lien Chan, honorary chairman of Taiwan's Kuomintang ruling party, at the Great Hall of the People in Beijing. photo : ap p hoto/Xinhua, Ding Lin

GDP, drive the economy and corporate profits. It expects the export sector to do well this year, provided that the U.S. economy holds up, demand from China keeps improving, and the Eurozone, now recovering from its debt crisis, sees no further shocks. Trade statistics still gave a mixed picture. While export orders, a sign of things to come in the next few months, rose 18% in January to reach US$37.14 billion, expanding for the fifth consecutive month, exports in February contracted 15.8% year-onyear to amount to US$19.7 billion, the Ministry of Economic Affairs reported. Imports fell 8.5% from a year earlier to amount to US18.82 billion, for a favorable trade balance of US$920 million. The export decline in February, the biggest slide in 13 months, in large part reflected the impact of the long Chinese New Year holiday. However, it also underscored the fragility of global economic recovery, as the 15.8% drop was far steeper than what economists had been anticipating. Reuters noted that South Korea’s exports also fell sharply in

February as the yen’s slide due to Japan’s stimulus policies hit Korean manufacturers. Nevertheless, the unemployment rate continued to fall for the third consecutive month. The January unemployment rate, at 4.16%, was down from the previous month’s figure of 4.18%. Seasonally adjusted, the decline was from 4.21% to 4.2%. At the same time, real wages including bonuses and other compensation declined by 1.6% last year from the year before, reflecting global competition and corporate belt-tightening during ailing 2012.

CROSS-STRAIT lien CHan Meets CHina’s new leader In a meeting with Lien Chan, h o n o r a r y c h a i r m a n o f Ta i w a n ’s ruling Kuomintang (KMT), China’s new leader, Xi Jinping, in late February reaffirmed Beijing’s desire to eventually bring Taiwan under its political control but pledged to maintain peaceful cross-Strait relations.

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will not be approved. Construction of the plant is now 98% complete, and any halt to the project would incur huge costs. With nuclear power accounting for almost 20% of Taiwan’s electricity generation, the government says that Taiwan would face power shortages in a few years if the plant is not put into operation. As a sign of the rising opposition to nuclear power in Taiwan, however, tens of thousands of protesters took to the streets across four cities in early March to demand that the power plant be scrapped.

want want’s bid reJeCted bY nCC NO NUKES — Tens of thousands of demonstrators took to the streets March 9 to express opposition to the nearly completed fourth nuclear power plant of the state-owned Taiwan Power Co. photo : ap p hoto/waLLy santana

The comments were seen as indicating that the Taiwan-China relationship is unlikely to see dramatic changes in the near future. It was the first time for Xi to meet with a ranking Taiwanese political figure since he took over the reins of the Chinese Communist Party last November, and the meeting was viewed as a litmus test for how Xi might handle relations with Taiwan. Xi also promised to “pragmatically forge ahead” to develop new achievements in cross-Strait ties that would enrich the people on both sides of the Taiwan Strait. Lien, a former vice president and premier who lost two presidential races to pro-independence (and now imprisoned) president Chen Shui-bian, brought a 30-member delegation of politicians and businesspeople with him on the four-day visit.

DOMESTIC gOVt OKs referendUM On nUClear Plant Premier Jiang Yi-huah announced in late February that the government supports the idea of holding a referendum to decide the fate of Taiwan’s US$10 billion fourth nuclear power

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plant currently under construction in New Taipei City and slated to begin operations in 2015. Officials say the vote would likely take place in July or August. The KMT, which traditionally has backed the project to build the two-reactor facility, was thus able to one-up the opposition Democratic Progressive Party, as DPP chairman Su Tseng-chang had been calling for a similar referendum to be held with next year’s municipal elections, a move that likely would benefit the DPP in the balloting due to the rising anti-nuclear sentiment in Taiwan following the Fukushima disaster in Japan two years ago. In response, the DPP called for a change in the referendum law to lower the currently extremely high threshold for a referendum motion to be approved – participation by at least half of all eligible voters, with at least half of the ballots cast favoring passage of the motion. Of the six referendums Taiwan has held since the law came into effect in 2004, all have failed to pass. The KMT therefore appears to be backing the referendum as a political gesture to boost its image, while assuming that the motion

Plans by media magnate Tsai Engmeng to buy China Network Systems, whose 1.18 million cable-TV subscribers equal about one-quarter of the total in Taiwan, were scuppered in late February when media regulators ruled that his Want Want China Times Group had not met the required conditions for the purchase. Amid public concerns that Tsai is amassing a media monopoly and that his group is overly sympathetic to China, the National Communications Commission last year set three conditions for the purchase to go through. It demanded that Tsai and his family members and associates completely dissociate themselves from his CtiTV’s news channel, that his China Television Co. (CTV) digital news channel be changed into a nonnews channel, and that CTV adopt an independent editorial system. In an apparent effort to get around those conditions, the group filed for approval with the commission after placing 75% of the shares in CtiTV owned by Tsai and his family in trust with the Industrial Bank of Taiwan. But the NCC ruled that placing the property in a third-party trust did not change the controlling relations between the property and the property owner. According to local media reports, NCC officials said that if Tsai can find another way

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to meet the conditions, he may file another application. CNS is currently owned by private equity company MBK partners. The value of the proposed sale was reportedly US$2.4 billion.

I N T E R N AT I O N A L tifa talKs PrOdUCe POsitiVe MOMentUM For more than five years, disagreements over Taiwan’s restrictions on the import of U.S. beef products kept high-level trade negotiators from Taiwan and the United States from sitting down for what used to be routine annual discussions of outstanding issues as part of the Trade and Investment Framework Agreement (TIFA) signed in 1994. But Taiwan’s setting of permissible limits last year for traces in beef of a leanness-enhancing feed additive called ractopamine opened the way for resumption of the TIFA Talks. They were finally held on March 11 in Taipei, led by Deputy U.S. Trade Representative Demetrios Marantis – heading an American delegation that also included representatives from the State, Agriculture, and Commerce Departments – and Deputy Minister of Economic Affairs Cho Shih-chao.

SHAKE ON IT — Deputy U.S. Trade Representative Demetrios Marantis and Deputy Minister of Economic Affairs Cho Shih-chao congratulate each other on the completion of successful TIFA talks. photo : cna

At the conclusion of the meeting, Ambassador Marantis hailed the “hard work of both sides and the positive outcomes achieved.” The immediate results included the announcement of joint statements on investment principles and on ICT (information and communications technology) services, as well as the launch of new TIFA working groups on investment and technical barriers to trade. Although the two joint statements are not legally binding, they are considered significant expressions of public-policy commitment.

Taiwan's JanuaRY To FebRuaRY TRade FiguRes (YeaR on YeaR coMPaRison)

Japan

ASEAN

TOTAL

2013

4.55 4.6

4.21 4.63

4.66 4.29

2012

2013

2012

2013

Imports

2012

2013

Europe

3.62 4.8

U.S.

2012

270.7 301.1

2013

281.4 308.3

6.98

2012

4.97 8.74

7.36 2.77

2013

4.78 8.18

6.84

2012

3

6.12

16.8

17.52

HK/China

Exports

Unit: US$BN Source: BOFT

The seven investment principles cited are an open and non-discriminatory investment climate, level playing field, strong protection for investors and investments, fair and binding dispute settlement, robust transparency and public participation rules, responsible business conduct, and narrowly tailored reviews of national security considerations. Establishment of the investment working group was seen as creating a potential pathway to the eventual signing of a bilateral investment agreement, which was one of the objectives raised by the Taiwan side. Marantis also praised the progress Taiwan has made in recent months in strengthening its laws to deter the misappropriation of trade secrets and in establishing a pilot Drug Expenditure Target system to create a more stable market for innovative medicines – both items that have been high on the AmCham Taipei advocacy agenda. Under heavy domestic pressure from hog farmers and their political allies, the Taiwan side was adamant against relaxing the ban against ractopamine in pork as was done for beef. In his news release and press conference remarks, Marantis scrupulously avoided using the sensitive word

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“pork.” But he made a point of stressing the need for Taiwan to adopt “food safety measures – including those relating to meat exports – that are based on science and consistent with international standards.” Although Marantis had to return to Washington ahead of schedule (he was later appointed by President Obama as Acting U.S. Trade Representative to fill the vacancy left by the resignation of USTR Ron Kirk), the rest of the delegation remained in Taiwan for two more days of working-level discussions with various ministries. Among the areas covered were pharmaceutical, medicaldevice, intellectual property, investmentapproval, and labeling issues, the status of U.S. professionals such as lawyers and chiropractors, and the protection of cross-border data flows.

ang lee’s OsCar sPUrs lOCal Pride Ang Lee’s Academy Awards win this year directing the adventure film Life of Pi has made him a national hero. President Ma Ying-jeou thanked Lee for “pushing Taiwan towards the world” and noted that all Taiwanese are proud of him. Although he has lived in the United States for decades, Lee was born in Taiwan and identifies strongly with the island. In his acceptance speech, he made the point that the movie could not have been made without the help of Taiwan, especially the city of Taichung where most of the film was shot. Taiwanese feel a keen sense of diplomatic isolation and tend to enthusiastically cheer on any native son who becomes famous internationally. Life of Pi altogether won four Oscars, the most of any film this year, and this follows Lee’s 2005 win for Brokeback Mountain, a film about a love affair between two gay cowboys. Following the success of Life of Pi, the government hopes to attract more foreignbased production crews to film on the island to help boost the economy.

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econoMic indicaToRs

Current Account Balance (2012 Q4) Foreign Trade Balance (Feb) Foreign Trade Balance (Jan-Feb) New Export Orders (January) Foreign Exchange Reserves (end Feb)

15.96 0.919 1.39 37.13 404.08

Unemployment (January) Overnight Interest Rate (Feb 27) Economic Growth Rate (2012 Q4) p Annual Change in Industrial Output (Dec.) r Annual Change in Industrial Output (Jan-Dec.) r Annual Change in Consumer Price Index (Feb) p Annual change in Consumer Price Index (Jan- Feb) p note: p- preLiminary, r-reViseD

BUSINESS taiwan begins rMb bUsiness Cross-Strait renminbi trade-settlement services were officially launched in Taiwan in early February, making Taiwan the second most important international market for RMB business after Hong Kong. The move will undoubtedly provide a boost for Taiwan’s overcrowded banking sector, and local investors will now have more options beyond generally lowyield Taiwan dollar assets, Reuters reported. Taiwanese companies operating in China will also have access to lower-cost RMB funding. But regulatory barriers restricting global issuers and investors operations in Taiwan mean that the island’s RMB bond market will not easily surpass or even catch up to Hong Kong in international terms, Reuters added.

twin tOwers tender PrOJeCt COllaPses A Malaysian consortium led by ICB Corp. has lost its chance to build the NT$80 billion (US$2.7 billion) Taipei Twin Towers, Taiwan’s biggest urban development initiative. ICB, a Kuala Lumpur-listed property developer, said in a stock exchange filing in Malaysia in late February that the Taipei City Government had cancelled the consortium’s award to handle the proj-

4.16% 0.389% 3.72% 2.05% -0.05% 2.97% 2.04%

Year Earlier 12.10 2.88 3.4 31.5 394.43 4.18% 0.400% 1.21% -8.06% 5.03% 0.25%

sources: moea, Dgbas, cbc, boFt

ect after the parties failed to agree on contract terms. Quoting Taipei City government officials, the Taipei Times reported that the consortium failed to furnish a NT$1.89 billion (US$63.7 million) performance bond by the agreed-upon deadline. The consortium, which includes Taipei Gateway International Development, was reported in October to have won the bid to develop the towers, to be constructed next to the Taipei Railway Station. But after failing to receive the bond, the city government announced that it will start negotiating the contract with the runner-up bidder, Taiwan’s BES Engineering Corp. Amid headlines in local media about a “botched bid” and opposition allegations that the city government was covering up for the reportedly financially-troubled consortium, the head of the Taipei City government’s Department of Rapid Transit Systems resigned. According to media reports, Taipei Mayor Hau Long-bin blamed the department for being unaware of the consortium’s financial difficulties and promised to make the contract negotiation process with BES Engineering more open and transparent. The two high rise-buildings are intended to serve as the main hub connecting the airport-Taipei MRT line, now being constructed, with other MRT lines and railway networks.

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Insufficient Tax Revenue? Promote Payment by Plastic The Korean experience over the past two decades provides worthwhile reference.

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t a time when the Taiwan government is facing severe budgetary challenges to meet mounting needs in funding national defense, infrastructure development, and a host of social services, South Korea may provide a model worth studying for how to increase tax revenue effectively. In the early1990s, the Korean government recognized that if consumers made greater use of credit or debit cards to pay for purchases, the computerized recording of those sales would prevent businesses from failing to report, or under-reporting, their income at tax time. In addition, the amount of Value Added Tax (VAT) captured would increase. Starting in 1994, Seoul began implementing a variety of active policy measures aimed at encouraging the use of purchases with plastic rather than cash. The first wave was aimed at merchants, providing a VAT deduction on card sales as an incentive. That was followed by an income-tax deduction on incremental card sales in 1997 and the introduction of a lottery system for businesses against card receipts in 2000. Similar inducements were also offered for consumers – a personal income-tax deduction in 1999 for credit/ debit card expenditures over a certain level, and a national card-receipt lottery that was run from 2000 to 2006. A televised drawing conducted on the last Saturday of each month attracted widespread public attention. The incentives were accompanied by stiff enforcement regulations. It became a criminal offense, punishable by a year’s imprisonment and the equivalent of a US$10,000 fine, for a VATpaying business to refuse to accept payment by card or to impose a surcharge for such payment. Today, almost all businesses in Korea accept credit cards, including all taxicabs and many street vendors. Korean citizens have grown used to handling their daily affairs with little or no cash, and they encounter some culture shock when traveling abroad and finding that other countries are not nearly so cashless. A recent presentation at a MasterCard Taiwan workshop by Dongchun Choi, president of MasterCard Korea, noted that the proportion of personal consumption expenditure made on credit and debit cards in Korea has grown from only 5% in 1990 to some 75% today – among the highest levels in the world. According to a Euromonitor study, the corresponding figure for Taiwan was 19% in 2011. From another perspective, the value of card payments as a proportion of GDP comes to an unusually steep 42.6% in Korea, compared with 27.2% in the United States and an estimated 12.5% in Taiwan. The emphasis on card payment in Korea – as well as the introduc-

稅收不足? 鼓勵全民簽帳消費 南韓二十年來的推卡經驗,值得台灣借鏡。

前政府為因應國防、基礎建設、各種社會 福利等日益增長的財政支出,面臨預算赤 字攀升的嚴峻挑戰。南韓可作為借鏡研究 對象,藉以了解如何能有效增加稅收。 1990年代初期,南韓政府體認到,消費者付款 時若多使用信用卡或簽帳卡,存入電腦的銷售記錄 可以防止商家逃稅、或在申報營業額的時候以多報 少。此外,加值型營業稅金額亦會隨著詳盡的電腦 紀錄而提高。 自1994年開始,南韓政府積極推動一連串的政 策措施,意在鼓勵民眾少用現金,多用信用卡消 費。第一波政策鎖定商家,根據信用卡營業額給予 加值型營業稅減免的獎勵措施。接著1997年推行 信用卡營業額成長可獲得所得稅減免政策;2000 年針對商家推出信用卡收據抽獎辦法。另外,南韓 政府也針對消費者推出類似的獎勵機制:1999年 推行消費者信用卡或簽帳卡消費達到一定金額,個 人所得稅可獲得減免;2000年至2006年間並推出 信用卡/簽帳卡收據為對獎憑據的全國性摸彩。每 月最後一個週六,電視上播出開獎過程,引起廣大 民眾的注意。 這些獎勵措施均設有嚴格的執行法規。需要繳加 值型營業稅的商家如果拒絕接受消費者以信用卡/ 簽帳卡付費,或收取額外費用,就是觸法行為,可 判處一年有期徒刑,以及相當於一萬美元的罰款。 今日南韓幾乎所有商家都接受信用卡,包括計程 車和許多攤販。南韓民眾早已習慣出門辦事不帶現 金(或只帶少許);他們出國的時候發現其他國家 信用卡沒有這麼普及,還覺得不太習慣。 台灣萬事達卡近期舉辦一場工作坊,邀請南韓萬 事達卡總裁崔曈天發表演講。他指出,南韓信用卡 及簽帳卡消費支出的比重,已由1990年的5% 大幅 躍升至現今的75%,高居全球之冠。Euromonitor一 份研究指出, 2011年台灣的這個比重僅有19%。 從另一角度觀之,信用卡付費總額佔南韓國內 生產總值(GDP) 比重高達42.6%,遠高於美國的 27.2% 和台灣的12.5%。

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tion in recent years of various forms of stored value and electronic payment – has helped broaden the tax base to meet the demand for government services. In 1999, for example, the proportion of businesses paying tax was under 40%, but it has steadily grown since then, reaching 73.77% in 2011, the most recent figure available. Of course, card usage is also subject to abuse, and Korea – like Taiwan – went through periods when the environment lent itself to irresponsible practice on the part of too many people. But proper regulation and consumer education can ensure that such problems are minimized. On the whole, Korea’s experience in shrinking the underground economy by promoting card payments offers meaningful reference. —– By Don Shapiro

南韓政府對信用卡付費的重視,加上近幾年推 出的各式儲值及電子付費機制,使政府得以擴大 稅基,用以支付各項政府服務開支。以1990年為 例,商家繳稅的比例低於40%,但此後呈現穩步成 長,根據官方最新數字,這個比例到2010年躍升 為73.77% 。 當然,信用卡可能遭到濫用,南韓和台灣均經歷 過這樣的時期,塑膠卡片的便利性衍生出許多不負 責的消費行為。然而,完善的法規與對消費者的宣 導教育,應可減少這類問題。整體而言,南韓政府 藉推廣信用卡和簽帳卡付費使逃漏稅現象減少的經 驗,對台灣頗具參考價值。 —撰文/沙蕩

Border Control for Digital Piracy Is it possible to block infringing sites based outside Taiwan?

W

hen rights-holders such as music or movie companies discover that a domestic website is carrying pirated content infringing on their copyright, Taiwan has procedures in place to provide them with relief. Under the Noticeand-Takedown procedure that the Legislative Yuan added to the Copyright Law in 2009, a rights-holder can issue a notification to the Internet Services Provider (ISP), which in turn notifies the website of the complaint. If the website does not dispute the charge, the ISP can proceed to remove the infringing material from the site without incurring any legal liability. Although the matter may need to be resolved in the courts if the website contends that the allegation is erroneous, in most cases the Notice-and-Takedown mechanism has proven to be an effective means of dealing with the problem of domestic Internet piracy. But what can be done when the website is housed in another country, beyond the reach of Taiwan's regulatory and law-enforcement agencies? At present, no recourse exists, and as a result movie and music companies, as well as book and magazine publishers, are losing millions of dollars annually in business opportunities as would-be customers download free material from websites located offshore, especially in China. At a recent workshop on “Combating Digital Piracy in Taiwan” organized by the American Institute in Taiwan and co-sponsored by the Motion Picture Association and the Recording Industry Foundation in Taiwan, industry representatives urged the Taiwan government to step in to block the domain name or Internet Protocol (IP) of sites deemed to be serious habitual infringers. They 12

數位盜版的邊界管制 是否可能封鎖設在台灣境外的侵權網站?

樂或電影公司若擁有著作權,而發現國內 網站有侵權的盜版內容,台灣已有相關救 濟程序。根據行政院2009年修訂著作權法 時加入的「通知及取下」程序,著作權人可通知網 路服務提供者(ISP),這些業者再告知遭舉報的 網站。如果網站對所受控訴沒有異議,網路服務提 供者可逕行移除網站上的侵權內容,不會招致任何 法律責任。若是網站辯稱所受指控有誤,雖然此事 可能必須在法院解決,但在大部分情況下,「通知 及取下」機制已證明是處理國內網路侵權問題的有 效辦法。 不過,若是網站設在另一個國家,超過台灣主 管機關與執法機構的力量所能及,能怎麼辦呢?目 前尚無救濟管道,導致電影與音樂公司,還有書籍 與雜誌的出版公司,每年損失價值數百萬美元的商 機,因為準顧客可由海外網站下載免費的內容,尤 其是中國的網站。

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noted that in at least three countries – South Korea, India, and Malaysia – the authority to make that judgment has been assigned to a government agency, which may then ask the national communications commission to take action to prevent the offending site from being viewed by Internet users in its territory. In Korea, for example, attempts to access the site are redirected to a page carrying an educational message about respecting intellectual property rights. In some other jurisdictions, the responsibility for determining whether a site is a notorious infringer rests with the courts rather than an administrative body. The situation in Taiwan is unclear as to whether either the courts or any administrative agency have the legal authority to issue a finding that a site should be blocked. If not, should – and would – the Legislative Yuan enact a law granting this authority? What objective criteria would such a law stipulate for evaluating whether a site deserves to be blocked? How can it be ensured that freedom of expression and freedom of access to information are not impaired in the process? Describing the issue as “very complicated,” Director-General Wang Mei-hua of the Taiwan Intellectual Property Office, a division of the Ministry of Economic Affairs, promised attendees at the workshop that TIPO would continue to study the matter and hold further discussions with all stakeholders. Certainly, the experience of some Western countries is that such proposals can be highly controversial. Two years ago, a draft Stop Online Piracy Act (SOPA) to block infringing websites was put before the U.S. Congress, but the bill was not enacted in the face of widespread criticism that it represented a form of censorship. Similar legislation met a similar fate in the United Kingdom. But internationally as well as in Taiwan, the issue remains alive and will continue to be debated. —– By Don Shapiro

最近有一場打擊台灣數位盜版座談會,由美國 在台協會主辦,美國電影協會與台灣唱片出版事業 基金會協辦,業界代表在會中呼籲台灣政府採取行 動,對於被認定是嚴重慣常侵權的網站,應封鎖它 們的網域名稱或網際網路協議(IP)位址。他們指 出,至少有南韓、印度與馬來西亞三個國家,授權 政府機構作此裁定,然後得要求國家傳播委員會這 類機關採取行動,防止違法網站讓境內網路用戶看 到。例如在韓國,如果有人想上這類網站,會被轉 址前往另一個網頁,上面有關於尊重智慧財產權的 教育訊息。在另外某些地區,則是由法院而非行政 機關負責,判定網站是否是惡名昭彰的侵權慣犯。 台灣的法院或任何行機關是否有法定權力,可以 裁定應該封鎖某個網站,則情況還不清楚。如果目 前尚無這種權力,立法院是否應該又會不會立法授 權呢?這樣一項法律應該訂定什麼客觀標準,以評 估一個網站是否應遭封鎖呢?還有,要如何確保表 達自由與取得資訊的自由在此過程不會受損? 經濟部智慧財產局長王美花形容這個議題「非常 複雜」,但她在座談會上承諾,智財局會繼續研究 此事,並與所有利益相關各方進一步討論。 當然,根據某些西方國家的經驗,這類提案可 能有高度爭議性。兩年前,美國國會曾提出禁止網 路盜版法案(SOPA),希望封鎖侵權網站,但這 項法案並未過關成為法律,原因是遭各界批評這代 表某種形式的審查。英國的類似法案命運也相去不 遠。不過,在國際上和在台灣,這個議題仍然備受 注目,將繼續辯論下去。

—撰文/沙蕩

Getting Medical Devices to Market More Rapidly Several factors in Taiwan inhibit the early launch of innovative new products.

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ne of the special characteristics of the medical device industry is the short lifecycle of its products – typically just a few years – as a result of the steady, rapid introduction of new technologies. For that reason, medical device manufacturers feel constant pressure to get their latest products to market quickly. In Taiwan, that goal has been nearly impossible to accomplish, due to the extremely lengthy process for approving new products and assigning them a reimbursement price for use by hospitals

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and clinics under the National Health Insurance program. Since the long process can be considered a type of market barrier, AmCham’s Medical Device Committee has asked the Office of the U.S. Trade Representative (USTR) to raise the issue at this month’s bilateral Trade and Investment Framework Agreement (TIFA) talks in Taipei. The Committee attributes the delays in the product registration process in large part to the continuing lack of experienced personnel at the Department of Health’s Taiwan Food and Drug Administration (TFDA), which was established in 2010. It also cites another cause: “the lack of clarity and transparency in the regulations, and inconsistency in applying them.” A related problem has been obstacles to introducing innovative new products to the market during the period of a year or two between the completion of licensing and the granting of the reimbursement price. For years, the industry has requested that patients in Taiwan be given access to such devices on an optional, self-pay basis, but until recently that option was totally prohibited. Now a mechanism is in place to permit companies to apply for a self-pay code (necessary so that patients can be invoiced) for already licensed products, but the manufacturers are objecting that the system is not working effectively. They note that the approval rate for such applications has been very low – only about 10%. In 46% of the cases, the Bureau of National Health Insurance (BNHI) rejected the application on the grounds that the device is already covered under existing NHI procedure fees. The manufacturers regard that decision as unfair, in that the schedule of procedure fees has remained unchanged for several years, even as more sophisticated devices have been introduced to the market. In another 24% of the cases, the BNHI response was that the device performs the same function as an item that has already been granted a reimbursement price. Again, the industry notes the unacceptably low price levels involved. According to the Medical Device Committee, the BNHI personnel considering these applications frequently misjudge whether the product in question is new and different from what is already covered. Medical device companies regularly bring out new versions of products using technological advances to improve the products’ efficacy in treatment. Asking the manufacturers to make these products available in Taiwan at the same low reimbursement price as earlier devices is unreasonable; often the company will prefer not to enter the reimbursement system at all. Further, there would seem to be no justification for denying patients the right to access these devices on a purely voluntary self-pay basis. The deadline for resolving this issue is approaching. The self-pay option is due to come into effect on May 1, and products that do not have the self-pay code by that date will not be available for patients and their surgeons. The Committee hopes that discussions during TIFA will help lead to a solution for the benefit of Taiwan’s healthcare environment as a whole. —– By Don Shapiro

加速醫療器材在台灣上市 在台灣,有數項因素阻礙創新的新產品及 早上市。

療器材業的特色之一,就是產品生命週期 短――通常只有數年――這是不斷迅速引 進新技術的結果。因此,醫療器材製造商 一直面臨將最新產品迅速上市的壓力。 在台灣,這個目標向來幾乎不可能達成,因為在 全民健保計畫下,批准新產品和核定醫院與診所給 付價格的過程極為漫長。由於漫長的過程會被視為 某種市場障礙,台北市美國商會的醫療器材委員會 已請求美國貿易代表署(USTR),在三月於台北舉 行的雙邊貿易暨投資架構協定(TIFA)會談中提出 此議題。 產品登記過程延宕,商會醫療器材委員會在很大 程度上歸咎於台灣衛生署於2010年設立的食品藥物 管理局一直缺���有經驗的人員,同時還提出另一個 原因:法規不夠清晰透明,且施行時欠缺一貫性。 在創新新產品獲發許可與取得核價之間的一或兩 年期間,有個相關的問題一直是產品上市的障礙。 多年來,業界要求讓台灣的病患能在自由選擇的自 費基礎上使用這類器材,但直到最近,這個選項仍 被完全禁止。目前對於已獲許可的產品實施允許業 者申請自費特材代碼(必須如此才能向病患收取費 用)的機制,但製造商基於此系統運作不夠有效而 反彈。 業者指出,這類申請案的核准比率一直非常 低――只有約10%。46%的申請個案遭到中央健保 局以器材已納入既有健保處置費用範圍的理由,駁 回申請。製造商認為此決定並不公允,因為處置費 價目表已維持數年未變,即使已有更精密的器材被 引入市場。在另外24%的個案中,健保局的回應是 器材的功能和已取得核價的某品項一樣。業界再次 表示,這意味給付價格低到令人無法接受。 據商會醫療器材委員會表示,健保局人員對於 申請案包括之產品是否夠新穎,以及是否和已列入 給付的品項有所不同,經常判斷錯誤。醫療器材業 者經常推出採用更先進技術改善產品功能的新版產 品。要求業者以和較早期款式器材同樣低廉的給付 價格,在台灣推出新產品,並不合理;通常業者寧 可根本不要納入健保給付體系。再者,如此迫使病 患放棄在純粹自願自費的基礎上使用這些器材的權 利,亦不合理。 解決此問題的期限即將來臨。自費選項預定在5 月1日生效,在此之前未取得自費特材代碼的產品 將無法提供病患和醫師使用。商會醫材委員會希 望,在TIFA會談期間進行的討論, 。

—撰文/沙蕩

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Cover story

UPGRADING INDUSTRY

Upgrading Industry 產業升級 BY TIMOTHY FERRY

撰文 / 法緹姆

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Robot arm attached to a Tongtai high-speed drilling, milling and tapping machine, used in the auto and appliance-making industries. photo :t im Ferry

This issue continues the examination, begun in last month’s magazine with a look at Trade Liberalization, of the Five Pillars for Taiwan’s future development outlined by President Ma Ying-jeou at AmCham Taipei’s 2012 Hsieh Nien Fan banquet. This month’s installment deals with the government’s efforts to help Taiwan industry elevate itself to a higher level of technology in order to assure its continued competitiveness. 馬英九總統出席台北市美國商會2012年謝年飯時,提出台 灣未來發展五大支柱。TOPICS雜誌從上一期開始探討這個 主題,首先檢視貿易自由化,本期雜誌則是要看看台灣政 府在幫助產業提升技術層次,以厚植產業競爭力所做的努 力。

產業升級(摘要) 月在台北世貿中心舉行的台北國際工具機 展,具有未來主義科幻小說的感覺。儘管 具有規模,也相當耀眼,但台北國際工具 機展並不代表工具機的領先優勢。台灣在此產業 具有重要的全球性地位,不過在先進工具機科技 上卻遠落後於德、美等創新強國。 大部分的其它台灣產業也是如此。從未是創新 樞紐的台灣,長久以來在高科技製造中扮演中間 者的角色――既不太貴,也不太便宜。這是好事 ――有類似日本的品質,價格卻低得多――讓台 灣得以發展成為全世界最大的製造樞紐之一。 不過在科技進步的同時,許多人擔心此一狀況 的價值正逐漸衰退。台美產業合作推動辦公室連 結組組長廖錫卿的觀察是:「我們面臨(代工) 模式的獲利率不斷萎縮。」該單位是政府資助的

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he Taipei International Machine Tool Show (TIMTOS) held at Taipei’s World Trade Center this month had a futuristic, sci-fi feel to it. Giant semi-automated machines towered above visitors like alien robots caught in mid-transformation, silently going through smooth, regular motions. Disjointed robotic arms displayed their dexterity in manipulating objects, while huge drills penetrated steel without operators. Despite the scale and glitz, though, TIMTOS can’t claim to represent the leading edge of machine tools. And despite Taiwan’s significant global presence in this industry, the island lags well behind innovation powerhouses such as Germany and the United States in advancing machine tool technology. “People don’t come here for the latest tech,” concedes Sam Chen, marketing manager for industrial conglomerate Fairfriends Group. “They come here for the best deal.” Chen might be talking about the machine tools industry, but he could be describing most of Taiwan’s industrial base. Never really an innovation hub, Taiwan has long played a middle-of-the-road Goldilocks role in hightech manufacturing – neither too expensive nor too cheap. “You pay only a percentage of the Japanese price, but get almost equal quality,” says Chen. “We’re more affordable.” It’s a good proposition – Japan-like quality at near-China prices – and it has enabled Taiwan to develop into one of the largest manufacturing hubs in the world. Accord-

機構,尋求促使台、美產業關係更加密切。 另外,台灣的商業模式(比中國好,只不過貴 了一點)在某種程度上仰賴仍停滯在低價與粗劣 品質的中國。不過中國現正迅速進步中。 許多人質疑,台灣目前的商業模式沒有重大 的改變,能否繼續帶來經濟成長,以及提升台灣 2300萬人的生活水準。台灣人對於薪資停滯不 前、生活花費卻節節攀升的情況,越來越氣餒。 這些疑慮促使馬政府將產業轉型列為總統第二 任期的施政重點。因此經濟部推出2020年產業發 展策略,尋求讓台灣轉型為「全球創新中心、亞 太營運樞紐、台商營運總部」。 此策略包含多項計畫與政策倡議,目標是促使 台灣工業擺脫過去的代工模式,邁向較為知識和 創新導向的未來經濟。其中部分計畫正在初期履 行階段。有一項是尋求讓被選定的台灣產業進行 徹底改變,包括智慧化工具機、創新時尚紡織、

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ing to the Industrial Development Bureau (IDB) under the Ministry of Economic Affairs (MOEA), Taiwan accounts for 50% of the world’s LCD exports and is a leader in semiconductors, petrochemicals, and machinery. Taiwan exported US$301.1 billion worth of goods last year, mostly in information and communications technology products (33%), chemicals and plastics (30%), and machinery (27%). As technology relentlessly advances and innovation seems to trump mere efficiency, however, many worry that the value of this proposition is declining. “The reality is that Taiwan companies by and large remain at the lower rungs of the value-added chain, where profit margins are low and innovation is minimal,” President Ma Ying-jeou noted in his speech last year at AmCham Taipei’s Hsieh Nien Fan banquet. “We face shrinking profit margins from the [contract-manufacturing] model,” observes Sebastian S.C. Liau, a division director at the Taiwan-USA Industrial Cooperation Promotion Office (TUSA), a government-sponsored agency seeking closer ties between Taiwan and U.S. industries. Further, Taiwan’s business model – better than China, just a little more expensive – relies to a certain extent on China remaining a backwater of low prices and poor quality. While China has

Machine tools such as lathes and drills for the metalworking industry have become one of Taiwan’s largest export industries.

物流和通訊服務。另一項是「隱形冠軍」計畫,要在 所有本土產業中發掘和支持具有高度潛力的企業。 經濟部工業局表示,主要目標是鼓勵發展服務導向 的製造業。例如,不再只是生產和銷售工具機,新模 式將包含研究客戶的特定需求,然後將產品客製化, 以滿足這些需求。業者不僅只是出售機具,還要銷售 服務。 台灣的機械產業大部分由中小企業組成。小規模有 其不利之處;例如業者缺乏資金投資研發。不過它也 提供這個產業擁有比日本和南韓的大規模垂直整合競 爭對手更大的彈性。機械產業群聚在台中――在方圓 20公里內有眾多生產各式各樣零件的業者――是這個 產業成功的一項不可或缺因素。業者總是能快速取得 零件,降低成本,不同的業者合作讓整個群落受益。 台灣政府正以多項管道對機械產業提供協助。半官 方的外貿協會補助業者參加海外貿易展,工研院和私 人企業合作,共同開發關鍵技術。

photo :tim Ferry

紡織是本計畫的另一個目標產業。台灣在勞力密集 的服飾製造不再具有競爭力,但自動化讓它在織品市 場保有重要的市占率,尤其是特殊人造纖維產品,例 如尼龍和萊卡。不過利潤非常低,台灣製造商現在尋 求往下游發展,在中國和越南經營自己的服裝工廠, 在部分個案中還發展自有品牌,以獲取較高利潤。 在另一項計畫中,台灣借用德國的隱形冠軍概念― ―中小企業的知名度相對較低,但在價值鏈的某個特 殊環節居主導地位。台灣政府正尋求發掘具有潛力的 隱形冠軍,然後以任何必要的方式支持他們。考量獲 選公司的健全成績表現,挑選過程應注重精確,而不 只是試圖從整個產業中「挑出贏家和輸家」,涵蓋的 產業多元性也可降低整體風險。 2009年的金融海嘯顯露出倚賴出口的台灣的脆弱。 政府的結論是台灣必須擁有無法被其它業者輕易取代 的特殊產品。工業局已制定評判潛在隱形冠軍的七項 標準:前瞻性的領導階層、無法被輕易複製的技術、

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The Fairfriends Enterprise Group display at TIMTOS. The group owns 55 companies around the world and has expanded from machinery and pneumatic tools into green tech. photo : t im Ferry

long been the poster-child for low-cost, poor-quality goods, its technological and manufacturing advances (not to mention better marketing) have thrust several major companies – among them Lenovo in computers, Suntech in solar energy – to the front ranks of global brands. If China can gain on Taiwan’s quality, it would present a significant potential threat. Without major changes, many question whether Taiwan’s current business model can continue to deliver economic growth and a rising standard of living for Taiwan’s 23 million people, who are increasingly frustrated with stagnating salaries while living costs inch upwards. These concerns have caused the Ma

administration to make industrial transformation the centerpiece of the president’s second term. As a result, MOEA has launched the 2020 Industrial Development Strategy – the umbrella for an array of programs under an alphabetsoup of agencies, bureaus, and research centers – that is seeking to transform Taiwan into “a global innovation center, Asia-Pacific operations hub, and operations headquarters for Taiwanese corporations.” The Strategy involves a number of programs and policy initiatives aimed at prodding Taiwanese industries away from the contract manufacturing model of the past toward a more knowledge-

重視研發和創新的企業文化、優良的品牌,以及特有 的利基市場。工業局已宣布第一屆卓越中堅企業獎頒 給10家業者。製造自行車的巨大公司可能是唯一讓國 際消費者廣泛熟悉的企業。除了10家獲獎廠商,工業 局也確認其它15家企業應享有本計畫的特殊待遇―― 不論是資金、外勞配額、技術或行銷。 在尋求改造工業基礎的過程中,台灣不只尋找點 子,也在物色夥伴,由台美產業合作推動辦公室領導 尋覓。該單位由經濟部在去年秋季設立,和美國多家 主要研究中心與實驗室密切合作,以台美相異卻互補 的長處為基礎。儘管台灣以製造中心著稱,研發卻從 來不是其強項,即使以每年獲得的美國專利數來看, 台灣經常排名在美國和德國之後。這些專利大部分是 針對通常以降低成本為目標的製造程序,而非帶來新 產品和系統的突破性科技。 相反的,美國的許多工業基礎已流失到海外,即使 18

and innovation-driven economy of the future. Some of these programs are in the early stages of implementation. One is an initiative that will seek to make sweeping changes in selected Taiwan industries, including smart machine tools, innovative textiles, logistics, and telecommunication services. Another is the “Mittelstand” program to identify and support high-potential companies across the spectrum of domestic industry. The name is borrowed from German, where it normally refers to small and medium-sized enterprises, but Taiwan is using it in the sense of “Hidden Champions.” Through these policy initiatives, President Ma says the government hopes to wean Taiwan’s industrial base off low-innovation, low-margin contract manufacturing, using strategies focused on R&D and marketing to transform Taiwan “from a cost-down, efficiency-driven economy into a value-up, innovationdriven economy.”

Service-oriented manufacturing Hsiao Chen-Jung, director of the IDB’s Industrial Policy Division, says the starting point for these initiatives was an awareness of Taiwan’s existing strengths in manufacturing and management, and a desire to find ways to add value to those assets. “What is added value?” he asks. “Is it service? Is it total solution? It could be anything that increases our product value.”

它在創新上領先全世界。台灣對應用研究和商業化非 常拿手,美國則很擅長創新,但只有一小部分能夠商 業化。台美產業合作推動辦公室希望促使雙方攜手, 以加速創新的商業化。 該單位也希望鼓勵美國科技業者在台灣設立或擴大 業務。早在台美產業合作推動辦公室創立之前,數家 傑出美國企業就已在台灣設立研究中心,包括康寧、 微軟和谷歌。 綜觀台灣政府的所有計畫,目標著實令人印象深 刻。工業局表示希望培植超過150家具高度潛力的中 小企業,激勵總額達1000億新台幣(33億美元)的 新投資,並創造1萬個工作機會。不過可能會有一項 重大挑戰,就是不論薪資有多優渥,台灣年輕人如今 都不願接受工業的工作,喜歡待在辦公室環境。政府 提供的支持可能必須要能保證,為台灣產業的持續生 存力提供足夠的人才庫。

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The IDB says that a chief goal is to encourage the development of a serviceoriented manufacturing industry. Hsiao gives the example of machine tools. The current business model is simply to produce and sell machines, he says. Under the new model, Taiwanese manufacturers would strive first to understand the specific needs of the client and then customize their products to meet those needs. Machinery makers could even provide further service to the customer in the form of remote monitoring. “You don’t just sell the machine, you sell the service,” Hsiao notes. Ta i w a n ’s m a c h i n e r y i n d u s t r y i s centered in Taichung and consists mostly of SMEs – some little more than workshops with a small number of workers. The small scale has its disadvantages, but it also provides the industry with greater flexibility than massive vertically integrated competitors in Japan and Korea. The outcome has been referred to as the “9-8-3 rule” – 98% of products can be delivered within three days. Allen Shan, international trade manager of Ishan Precision Ind. Co., a machinery maker based in Taichung, says that the machinery industrial cluster in Taichung – the multitude of companies within a 20-kilometer radius that produce a wide range of components – is an essential ingredient in the industry’s success. “Manufacturers don’t need to prepare lots of inventory, because you can always get parts quickly,” making for greater flexibility and lower costs, he notes. In addition, the various companies work in the spirit of cooperation to ensure that the whole cluster benefits. “We are competitors, yes, but we are also collaborators,” says Shan. “Everybody knows one another.” At the same time, the predominantly SME character of the industry has several downsides. Costs are higher relative to China, mostly due to scale, and smaller operations lack the budget to undertake R&D. “Our technology is still a little behind Japan,” Shan admits. Government offices are providing assistance to the machinery industry in a number of ways. The semi-official Taiwan External Trade Development Council (TAITRA) assists by providing

funds for companies to travel to trade expos abroad to market their products. The Industrial Technology Research Institute (ITRI) also plays a role, partnering with private firms to jointly develop key technologies such as those for automation equipment, service-based business models, and control units for computercontrolled machine. The textiles industry is another sector being targeted for this program. Garment manufacturing once played a huge role in Taiwan’s economy, but labor-intensive apparel making has generally moved to cheaper locations like China and Vietnam. Automation, operational efficiencies, and the use of imported labor from Southeast Asia have allowed Taiwan to retain a significant market share in

fabrics, however, especially the production of specialty synthetic-fiber goods such as nylon and lycra. This upstream segment produces very low margins, t h o u g h , a p r o b l e m t h a t Ta i w a n e s e makers have struggled with for years. They are now looking downstream to running their own garment factories in China and Vietnam – creating demand to make use of their own supply of fabric. In some cases, they are even developing their own consumer brands. Textile maker Yuyuan, for example, has brought out a cycling-wear brand, Fma, while breathable waterproof fabric maker Gtex has developed the Gfun brand of sportswear. The Libolon Group has created the GoHiking consumer brand and FN.ICE B2B brand, and has invested in offshore

Given the sophistication of the machinery made in Taiwan, the government aims to turn it into a manufacturing services industry. photo :tim Ferry

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Cover story GOING FROM COMMOdITY TO SPECIALTY CHEMICALS

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he petrochemical industry is another prime target of the government’s plans for upgrading. That step might seem long overdue, considering that the goal of quadrupling R&D spending in the industry by 2020 would still only bring the figure to 2% of annual sales. The currently average in the industry in Taiwan is just one-tenth of the 5% that leading global chemical companies plough into research. The Taiwan petrochemical sector currently has a value-added ratio – a manufacturing term to evaluate relative profitability – of only 15%. The comparable figure in Japan is 40%. The High Value Petrochemical Industry Promotion Office (PIPO), an organization under the Ministry of Economic Affairs (MOEA) charged with aiding local petrochemical companies transition to higher-value-added chemicals, is trying to improve these numbers. “In the past, all of the technologies used in Taiwan were licensed from Europe and the U.S.,” says executive director Eugene Lin. “Now Taiwanese firms are trying to develop their own technology – especially in high-value chemicals.” MOEA announced the policy of promoting higher-value specialty chemicals two years ago after the government pulled the plug, due to opposition on environmental grounds, on a project by Kuokuang Petrochemical, a consortium led by the state-owned oil company, CPC Taiwan Corp., to build a new naphtha cracker. Instead of expanding upstream petrochemical capacity to make feedstock available for commodity-chemical production, the government urged manufacturers to switch course to developing more sophisticated products and offered to assist in the transformation. PIPO is helping to arrange cooperative projects between private companies and R&D centers such as the Industrial Technology Research Institute (ITRI) to do original research. They have homed in on 43 products that look like good candidates for value-added ratios of 30% – but these aren’t expected to lift the industry average to above 20% before 2020. Lin also stresses that Taiwan welcomes U.S. companies to invest here in joint ventures with local partners, saying “PIPO can be the matchmaker.” It might seem strange for a country that imports all of its crude oil to have concentrated on producing commodity products such as PET plastics. The reason is that technology licenses are costly and grow more expensive for products higher up the value-added chain. Besides, these high-value chemicals are so profitable that foreign companies are generally reluctant to license the technology.

石化業轉型: 從一般商品升級為專業化學製品(摘要) 石化產業是政府升級轉型計畫另一個主要改革項目。 這一步似乎早就應該開始,因為即使能夠達成在2020 年以前將研發經費提高四倍的目標,金額也只佔這個產 業年度營收的2%。全球主要石化業者的研發投入比例 達5%,台灣石化產業目前的平均值則只有這個數字的 1/10。台灣石化產業目前附加價值率(製造業術語,用 來評估相對獲利率)僅達15%。日本石化產業的附加價 值率高達40%。 經濟部設立石化產業高值化推動辦公室(PIPO),任 務是協助國內石化業轉型升級,朝向高附加價值之化學 20

photo :tim Ferry

Upgrading to higher-value products will be a big challenge for the industry, but the burgeoning global competition in commodity petrochemicals is a big motivator. The low-tech nature of Taiwan’s current products make the industry keenly susceptible to competition, and oilproducing nations such as Saudi Arabia are developing their own petrochemicals industries. China also looms as an ever-present rival, another factor in the need for an upgrade. PIPO’s Lin gives an example that illustrates the size of the task ahead. Taiwan currently has too much manufacturing capacity in the commodity chemical PTA, used in making an array of plastics. But Lin says the chemistry of PTA can easily be tweaked to produce another chemical – CHDM – that has a higher value and is used as a packing material. The problem is that the product is patent-protected and already on the market. The patent-holder, a major American petrochemicals firm, is unlikely to license it, notes Lin, and besides, local companies “don’t want to pay the licensing fee.” Having run into that roadblock, PIPO now plans to try to use the same raw material to create a new product that serves the same function as CHDM. In conjunction with ITRI and private enterprises, PIPO will start working on that research project next year and hopes it can be completed within four years. Overall, the government is budgeting NT$600 million (US$2 million) this year for research into value-added petrochemicals. “It’s not much,” admits Lin, “but it’s better than in previous years.” — By Timothy Ferry

產品發展。該辦公室目前積極鼓勵國內石化公司發展自 有技術, 以期提升附加價值率。 國營中國石油公司轉投資的國光石化興建輕油裂解廠 的計畫,因環保人士反對而決定停建後,經濟部於兩年 前宣布推動高附加價值專業化學產品的政策。政府敦促 石化業者不要為了給通用化學品供應原料而擴充上游產 能,並表明願意提供協助,幫業者轉型研發較精密的化 學產品。 目前,經濟部石化產業高值化推動辦公室正積極規劃 合作專案,媒合民間公司與工研院等研發中心共同進行 原創性研究。他們已經鎖定43項附加價值率可能達到 30%的產品。

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garment factories. Justin Huang, secretary-general of the non-profit Taiwan Textile Federation, says the attraction for developing a brand is clear – much higher profit margins – but the risk is also higher. “If you can sell [your production], you can make a lot of money,” he observes. “But if you can’t, you have only inventory.” Ta i w a n e s e m a k e r s e n t e r i n g i n t o consumer branding face significant hurdles. First, competition is cutthroat and markets like the United States and European Union already have their own well-established brands. The manufacturers may also wind up competing with their own OEM customers, and differences in culture and business style can be challenges to communicating brand value. The small size of the Taiwan domestic market is another reason why Taiwanese consumer brands struggle, says Robert Jou of the Taiwan Textile Research Institute (TTRI). “Having a big enough domestic market enables you to test the market thoroughly before trying to go international,” he says. The obvious solution to this problem is to expand into China, with which Taiwan shares a culture and language. But this approach, too, presents major hurdles in that global competitors are active in the Chinese market and indigenous Chinese brands are also coming up. Selling to Chinese consumers can also be challenging because often they have no real concept of the clothes, only appreciating that the brand is expensive, says Justin Huang. He notes that a consumer in New York would never mix several luxury brands such as Luis Vuitton, Prada, and Gucci together in the same outfit because “each represents a totally different lifestyle, while in China you can see many people walking around like brand collections.” Even more pressing is the evolution of e-commerce on the mainland, with millions of RMB flowing through online commerce sites such as Alibaba every day. “This has destroyed the traditional market channels,” Huang says, denying brands lucrative profit margins. It has resulted in wide losses for even some of China’s leading clothing lines, and Taiwanese brands are struggling even more, he says.

Hidden champions In his book Hidden Champions , Hermann Simon explores the reasons for Germany’s manufacturing success. Hidden champions are SMEs that are relatively unknown but are dominant in a particular segment of the value chain. The Taiwan government has taken this idea as a launching pad for a program that looks for likely contenders as hidden champions, and then supports them in whatever way is needed for them to make the push to global dominance. Given the sound track record of the companies chosen, the selection is expected to be much more accurate than attempting to “pick winners and losers” from among entire industrial sectors, and the diversity of industries covered also reduces the overall risk. IDB’s Hsiao says that the notion stems from Taiwan’s vulnerability to the vagaries of the global economy. Taiwan is one of the world’s most trade-dependent nations, with exports accounting for more than 60% of Gross Domestic Product. The 2009 collapse of the global economy offered some bitter lessons, with exports plunging and Taiwan’s economy contracting sharply. To guard against a repeat of this occurrence, Hsiao says, the government realized that “we must have special products that cannot

be easily replaced by other companies.” The IDB has established a list of seven criteria to gauge the potential for companies to achieve the status of hidden champion. These include forward thinking leadership, technology that cannot be easily replicated, a company culture that values R&D and innovation, a good brand (either B2B or B2C), and a specific niche market. The bureau has nearly finished its months-long surveys of prospective companies from across Taiwan’s industries, and has already announced the first Mittelstand Award to 10 enterprises that embody the hiddenchampions standard. Testing and EV components maker Chroma ATE made the grade, as did machine tool component manufacturer HiWin, textile-machinery maker Pai Lung Machinery Mill, Kenda Tires, Chang Chun Plastics, Ubright Optronics, Apex Machinery (coolant systems), TXC Corp. (electronic components), and Franz Collection (porcelain decorative accessories). Bicycle-producer Giant Manufacturing is probably the only company included that might be widely familiar to consumers internationally. IDB notes that Giant’s success is based on its high-tech aluminum alloys frames that allow for unprecedented strength and lightness, enabling the one-time ODM to rise to the numberthree position in the U.S. and EU markets.

Skilled garment makers transform designers' concepts into wearable goods at the workshops of the Taiwan Textile Federation. photo :tim Ferry

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Cover story But technology and market share alone don’t make a Mittelstand Award winner, and IDB’s Hsiao takes note of Giant’s forward-looking leadership. Rather than just selling consumers a bicycle, Hsiao says the company actually sells a lifestyle, the “culture of bicycles.” Giant sponsors the U-bike program of bike rentals at many MRT station and has embarked on another initiative, Giant Adventures, to guide bicycle adventure tours around Taiwan and other locations around the global. “This is really a service-oriented manufacturer,” observes Hsiao. Aside from the 10 award winners, IDB has identified another 15 companies deserving of special treatment under the program. “We will give these companies high priority to provide them with fund-

ing resources” and other support, Hsiao promises. For some companies, the need might be technological, and Taiwan’s 17 research centers are prepared to be part of the support team. For others, such as Eminent Luggage, it might mean raising the quota for foreign laborers so they can increase output. For new brand Gfun sportswear, help with branding and marketing might be needed.

TUSA Ta i w a n i s l o o k i n g n o t o n l y f o r ideas but also for partners as it seeks to revamp its industrial base, and the Taiwan-USA Industrial Cooperation Promotion Office (TUSA) is leading the search. The office, established by MOEA last fall, works closely with lead-

ing research centers and laboratories in the United States in a collaboration based on the differing but complementary strengths of the two nations. While Taiwan is renowned as a manufacturing center, R&D has never been its strong suit, even though Taiwan usually ranks after the United States and Germany in the number of U.S. patents awarded annually. Most of those patents are for manufacturing processes, frequently aimed at cost reduction, rather than breakthrough technologies leading to new products and systems. The United States, on the other hand, has lost much of its industrial base to offshoring even as it leads the world in innovation. Steve C.H. Lin, the executive secretary of TUSA, says that nearly twothirds of the advanced technology used

LACk OF START-uP ECOSYSTEM TAkES A TOLL

J

amie Lin, founder of app Works Ventures, one of Taiwan’s first software start-up incubators, says he has “started to worry about Taiwan in the post-PC world.” With shrinking profit margins in the information and communications technology (ICT) hardware industry and rising global demand for innovative mobile and internet applications, Lin fears that Taiwan could be left in the dust if it fails to foster an ecosystem friendly to entrepreneurial activity in order to jumpstart the next wave of economic growth. “Startups are part of the process of regenerating an economy,” and Taiwan needs to do more to cultivate them, adds John Ryan, co-founder and president of Pixel Qi, a U.S. company involved in developing lowpower computer display technology. Although President Ma Ying-jeou paints a rosy picture of an “industrial transformation” that can maintain Taiwan’s competitiveness in the face of steep competition from neighboring rivals such as Korea and has even launched a few programs for boosting marketing, along with research and development, local and overseas tech experts say that unless the government lifts regulatory barriers, including archaic rules on taxes and funding, it remains doubtful if the island can improve its competitiveness – or even maintain it . “In Taiwan, we’re suffering from outdated legal regimes,” Lin says. As a result, “early-stage investing activities are very limited.” This situation mars a potentially ideal environment for creating tech start-ups of all kinds, not just in software. Taiwan has a good education system, tech-savvy population, and excellent intellectual property rights protection compared to its regional neighbors. Salaries along with living and business costs are relatively low. Lin notes that Taiwanese laws relating to stock issuance and establishing companies are seriously out of step with the rest of the world. Startups are generally high-risk investments and few generate any real 22

income in their early years, with their value contained in their intellectual property rather than actual revenues. But Taiwanese law makes it expensive to establish such companies as all shares sold in any company are required to be initially valued at a minimum of NT$10 per share regardless of the company’s real value. This requirement for start-up companies to assume a minimum value is not seen in any startup haven ranging from Silicon Valley to Israel. In more modern financial regimes, a private company is assumed to have virtually no value until the company starts creating it. Taiwan’s legal requirement effectively deters potential investors from investing in Taiwanese startup companies. “For a seed-stage startup, you’re not making anything,” observes Lin. These laws force earlystage investors to pay a premium and take on excessive risks, encouraging many potential investors to sit on the sidelines before the startups get to the point where a NT$10 per share valuation makes financial sense to them. This situation is “not something that is easily fixable,” Lin notes, and will require across-the-board amendments to Taiwan’s legal and taxation systems. Nevertheless, Lin feels it is absolutely necessary, saying “VCs and entrepreneurs should be free to decide the earnings per share they want to issue the stock at.” Taiwan also lacks a limited-partnership business structure, the preferred business framework used by insurance companies and other large institutional investors in the West to invest in startups. This shortcoming deprives new Taiwan enterprises of huge potential sources of funding. If Taiwan permitted limited partnerships, says John Ryan, it would lead to “U.S. insurance companies and venture companies in the U.S. and universities seeing Taiwan as a destination for investment.” Another problem for Taiwanese startups in gaining funding from abroad is the onerous restrictions the government imposes on incoming

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UPGRADING INDUSTRY

in Taiwan manufacturing is licensed from American firms. U.S. companies tend to lead in technology development in such areas as ICT, biotech, green tech, and app development. “Taiwan is very good at applied research and commercialization, and the U.S. is very good at innovation, but only a small percentage is commercialized,” says Lin. “Why don’t we get together to speed up the commercialization of innovation?” TUSA is focused primarily on green energy, biotech, and ICT – industries that are changing so rapidly that they can still be considered “emerging,” even though they have existed for some time. Lin says Taiwan’s strategy is to link up with national research labs in the United States such as the Lawrence Berkeley and

Los Alamos for exploratory research and possible joint projects. But the office also aims to encourage U.S. tech firms to set up or expand operations in Taiwan. Long before TUSA’s creation, several prominent American companies had already established research centers in Taiwan, including Corning, Microsoft, and Google. Taking all the government programs together, the objectives are impressive. The IDB says it is shooting to develop over 150 high-potential SMEs, spurring a total of NT$100 billion (US$3.3 billion) in new investment, and creating 10,000 jobs. One big challenge, however, might be in the area of human resources. Factory jobs are considered “black-hand” work – the equivalent in Chinese of blue collar

– and while they might pay competitive salaries, many young people would prefer to work for less in a clean office environment. TTRI’s Jou says that most textile departments in the universities have changed their name to use the term “fashion industry” to reflect the changing taste of modern students. The machinery industry, adds Sam Chen of Fairfriends Group, is already graying, with most engineers in their forties or older, and very few young people entering the industry. “Vocational tech skills are undeveloped,” he says. “We lack upcoming talent.” He and others hope the government can lend support in developing the talent pool to ensure the continued viability of Taiwan’s industries.

funds, depriving local companies of the firsthand insights into overseas markets that foreign investors bring. In addition, Taiwan’s classification of corporate structures and different share classes is murky and ambiguous, further deterring investors. Investors in startups generally wish to hold preferred stock, as this classification allows them to get paid first when the company is sold or goes public, while also protecting the rights of the founders against being pushed out by other investors. This system is considered vital for any startup ecosystem, says Lin. But although relevant laws have been changed to make the practice possible, the implementation rules have still not been promulgated. Lin says many new companies from Taiwan are thus choosing to incorporate in foreign tax havens. Appworks has successfully incubated 16 companies over the past few years and each one was set up offshore, he notes. As a result, the government loses potential tax revenue and the companies have to pay higher legal and accounting fees. Despite these obstacles, Ryan chose to incorporate a subsidiary in Taiwan, although he

agrees that “the regulations and company law and practices around starting companies in Taiwan are not favorable for startups.” On the positive side, Taiwan has made progress in streamlining the business registration process. In June 2011, for example, the Ministry of Economic Affairs (MOEA) shortened the waiting period and made it possible for applicants to fill out a single form online instead of submitting hard-copy forms in person to multiple government departments. In another positive initiative, MOEA and Yushan Ventures last year held a series of events called “Start-Up Labs” to connect startup founders with VC firms. Five teams were selected from among over 400 applicants to undergo a 22-day entrepreneurship boot camp and receive NT$1 million (US$29,000) in seed funding from the hosting organizations, which included Google and Microsoft.

台灣政策環境限制新創公司發展 (摘要)

定降低了投資者在創新事業投資的意願,因為它 迫使早期投資者支付溢價,並承擔過高的風險。 該有的做法,是讓創投資本家與創業人士決定股 票發行價格。 • 西方的保險公司等大型機構投資人投資創新事業 時,偏好有限合夥關係的合作模式,但這種模式 在台灣並不存在,導致台灣的新創公司無法與大 筆資金來源建立合作關係。 • 此外,與其他國家不同的是,有興趣投資台灣新 創公司的投資者無法持有優先股。但這項機制對 於創業生態極為重要。 因此,許多新創公司寧可在其他國家成立註冊,這造 成台灣失去稅收來源,而公司也必須支付較高的法律和 會計費用的雙輸局面。

新創公司對於活化經濟至為重要,台灣若無法營造有 利創業活動的生態,資通訊技術產業可能失去競爭力。 目前的環境不利於新創公司,主要歸因於亟待更新的稅 制及募資規定等方面的法規障礙。 相較於區域鄰國,台灣擁有優質的教育系統和深諳科 技的人民,智慧財產權也受到良好保護;但這個照理說 對培育科技業新創公司相當理想的環境,受到上述情況 的不利影響。 台灣發行股票和創立公司的相關立法,與其他各國的 做法很不一樣。問題包括: • 台灣有個特別的規定,就是不論公司實際市值多 少,新發行股票每股最低面額都是10元。這個規

— By Timothy Ferry with additional reporting by Emily Chen

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Shift in Focus for Medical Tourism The emphasis for most hospitals will now be on attracting patients from China rather than the West.

BY LIANNA NICOLE FARUOLO

G

eneral tourism is one of the M a a d m i n i s t r a t i o n ’s “ S i x Emerging Industries” and plays heavily into the administration’s campaign to boost national development. Within this sector, medical tourism has been identified as having high potential to grow from its current relatively underdeveloped state. A few years ago, Taiwan’s initial efforts to boost its medical tourism industry were hampered by its inability to project and market itself to the West, where most medical tourists typically originate. Today, a quick scan of the main medical tourism websites shows that the government has yet to fully embrace the marketing power of the Internet. Some English-language information websites have, in fact, not been updated since 2010. Medical tourism promotion sites in Korea and Singapore, by comparison, have a clear competitive edge over Taiwan. The disparity may lead one to wonder whether Taiwan is serious about attracting foreign medical tourists. According to Richard Wu, CEO and Secretary-General of the Taiwan 24

Task Force for Medical Travel – a platform designed to utilize medical, tourism, and government resources to promote the industry – Taiwan is indeed serious about the undertaking, but has decided to target a different sort of customer than the traditional Westerner. “We’ve decided to shift our focus towards targeting Chinese tourists,” Wu says. “The potential tourist population there is many times larger than those in the United States and Europe.” This strategy has developed over the past few years as a result of sev-

eral factors – the most important being the Ma administration’s decision to lift travel restrictions on mainland tourists. In January 2011, the Taiwan government opened the door to individual Chinese tourists, eliminating the requirement for group travel in order to enter the island. According to the Taiwan National Immigration Agency, the number of Chinese tourists reached a record high of over 2.23 million in 2012 – nearly double the figure the year before. The Taiwan Task Force for Medical Travel says that almost 146,000 of these tourists were med-

MEDICAL TRAVELERS TO TAIWAN Year People / Services Outpatient Inpatient Plastic Surgery/Cosmetics Health Examinations

2008

2009

2010

2011

63,388 1,102 1,072 2,983

78,553 1,818 3,902 5,234

96,850 2,336 3,125 8,532

92,931 3,105 3,254 9,843

source: taiwan task Force For medical t ravel

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National Taiwan University Hospital reportedly does not plan to target Chinese patients for its medical tourism program.

ical travelers, coming to have a surgical procedure performed or perhaps to undergo a complete health checkup. Wu cites additional factors that went into the decision to concentrate on attracting patients from across the Strait. “Taiwan’s English is not yet at a comfortable level. The mainlanders speak Mandarin and share cultural and historical ties that the Western tourists do not,” Wu explains. “Besides, the Chinese are already here, and more are coming every year.” It appears that reliance on the increasing number of mainland tourists may not be the strategy for all hospitals, though. National Taiwan University Hospital (NTUH), the leading public hospital on the island and a popular medical tourist destination, declined a request from Taiwan Business TOPICS for a formal interview. But an NTUH representative did state that the hospital has its own view about the best policy direction to take. “We are a hospital whose values center around promoting the reputation of Taiwan as a worldclass medical center,” the representative said. “We do not seek out mainland

tourists. Our priority is not to maximize income.” Taiwan is seen as a competitive location for medical tourism because it has been able to keep its healthcare costs low while maintaining a world-class standard of quality. Fourteen of the hospitals on the island are accredited by the Joint Commission International (JCI), the not-for-profit organization that evaluates healthcare institutions in the United States and around the world, and medical procedures in Taiwan are often less than half the price charged in Western hospitals. To compare, the average liver transplant in the United States can cost US$500,000, whereas Taiwan offers almost the same quality (as evidenced by survival rates) for US$100,000 – just one-fifth as much. How does Taiwan sustain this balance? The answer, says Wu, lies in what he calls Taiwan’s “Golden Ration” in which 70% of medical institutions are privately held and the remaining 30% are public. This 70/30 ratio stimulates competition within the domestic medical industry, spurring the private institutions to employ the most cost-effective

photo : ntuh

and best management practices in order to survive, while the public hospitals provide accessible care for lower-income citizens. “Competition is very tough and motivates hospitals to do their best while cutting costs,” says Wu.

Still some shortcomings Despite Taiwan’s low prices and high quality, its hospitals can at times face challenges when trying to duplicate the experience of a Western hospital. Some of the problems can be attributed to bureaucratic inefficiencies within the hospitals, says Don Gilliland, a cofounder of Formosa Medical Travel, a company established to act as a middleman to bring medical tourists to Taiwan. “The Task Force and the government have done a good job of getting the hospitals prepared with JCI accreditations and special administrative procedures including language assistance, separate patient areas, and so on,” he says. “We found, however, that there may be a risk aversion and so the hospitals might take an excessive amount of time getting the patient

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through procedures. There are too many departments and a lack of unified decision-making. At times, patients found themselves waiting three extra, unexpected weeks for the medical procedure to begin.” Other more-serious logistic and bureaucratic hurdles have impeded Taiwan’s efforts to project itself as a world-class medical tourism center. For instance, plans were announced in 2010 for a 1,700-hectare Aerotropolis to be built in the area around the Taoyuan International Airport at a cost of nearly US$16 billion. An international medical tourism hospital to be included in the massive infrastructure project was expected to bring billions of U.S. dollars into the local economy. But due to regulatory complications and resistance from local communities, the Aerotropolis plan is on hold. It is awaiting future deliberation with no clear timeline for development. In addition, hospitals face cost pressures resulting from a government-set “global budget” that limits a hospital’s resources. Since Taiwan law prohibits hospitals from advertising to the general public to attract business, increased

TOTAL MEDICAL TRAVELERS TO TAIWAN 2008 - 2012 (JAN.-NOV.) 145,909

150000

120000

108,033 109,133 89,525

90000 68,545

60000

30000

0

2008

2009

2010

2011

2012 (11 months)

source: taiwan task Force For medical travel

26

The high-quality medical care at Taiwan's healthcare institutions provide a strong basis for promoting medical tourism. photo : cna

medical tourism would provide an avenue for increasing revenue. While the annual gross income from medical tourism is currently quite small at just over NT$5 billion (around US$167 million), Wu confidently predicts a 20% annual increase. “We’re still in the early stage, the growth stage, so this is a reasonable expectation,” he says. As the medical tourism industry grows, it can be expected that the island will experience a boost in its medical sector development in general. The additional revenue, for example, should give Taiwan the financial resources to procure more of the latest, most advanced medical equipment and to add more staff at better pay. Wu cautions, however, that if the government fails to appropriate sufficient funds for a marketing campaign, the industry will have great difficulty reaching its potential. “Singapore spends US$100 million a year on promotion and receives US$700 million in revenue as a result,” he notes. “Korea is on the same track.” Taiwan, in contrast, now spends a mere NT$15 million (US$500,000) a year on such promotional activities. Attributing the shortage of marketing funds to the “very democratic

nature of Taiwan and its legislature,” Wu says objections to promoting medical tourism are often based on fears that a “two-tier” system will arise in which the extra money spent by foreigners causes them to receive a better level of care than what is available to local patients. While some other countries that have emerged as medical tourism destinations, such as Thailand or India, often suffer from shortages of healthcare resources in certain cities and in rural areas, Taiwan does not have this problem. “Taiwan is fully capable, with enough beds and doctors to satisfy demand from both its citizens and foreigners,” Wu says in seeking to assure the doubters. As of now, medical tourists account for less than 1% of patients served in Taiwan’s healthcare industry – not a high enough figure to threaten the quality of care for its citizens. But as the number of Chinese tourists increases year by year, finding a way to balance the available resources will be a key element in ensuring that Taiwan’s hospitals remain world-class and that its national healthcare system continues to enjoy a high rate of satisfaction on the part of the local population.

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Occupational Safety and Health Getting More Attention A spate of problems two years ago has aroused more awareness by government and industry of the need to improve the working environment. BY PHILIP LIU

I

n the wake of seven serious fires in 2010 and 2011 at the Formosa Plastics Group (FPG) petrochemical complex in Yunlin County’s Mailiao Industrial Zone, plus a series of suicides during the same period at the huge Shenzhen plant of the Foxconn Group (the mainland-Chinese operation of Hon Hai Precision, Taiwan’s leading manufacturer), the government and private industry have become more conscious of the importance of occupational health (physical and mental) and safety. Part of the government’s response has been promotion of a Taiwan Occupational Safety and Health Management System (TOSHMS) to foster a safer and healthier working environment. For its part, FPG has carried out a comprehensive plan to improve the safety system and facilities of the Mailiao complex, including the NT$12 billion (US$414 million) replacement of some 3,000 kilometers of pipelines at risk of leakage of petrochemical fluids due to corrosion by salt in the ground (the complex is built on reclaimed land). The leakage problem proved to be the main reason for the fires. In 2012, the company also required all employees to take over 10 days of advanced safety courses, and expanded the number of

plant-safety staff to 1,400. At Hon Hai, Chairman Terry Guo personally took charge of oversight of the company’s reaction to the worldwide negative publicity caused by the spate of suicides. The company installed safety nets outside the lower floors of its factory dormitories, hired psychologists to provide counseling to its workers (many of them young people far from their homes in rural areas), and organized its personnel into small work teams to look out for one another’s welfare. In mid-2010, Foxconn twice raised the wages of employees at the Shenzhen factory for a total of a 120% increase. It also reduced overtime, installed new recreational facilities, and introduced more group activities. Along with other high-profile incidents, the two cases were responsible for prompting the Executive Yuan to draft an amended Labor Safety and Health Law (renamed the Occupational Safety and Health Law) in late 2012. The bill, now with the Legislative Yuan, would expand the law’s coverage to all 10.67 million workers in Taiwan, instead of limiting it as now to the 6.7 million workers in certain designated sectors such as manufacturing and construction. CLA officials say it should be assured of passage due to the wide con-

sultation with both industry and labor groups during the drafting. The bill would require the petrochemical industry and other high-risk operations to install complete safety and health measures and management systems, as well as carry out periodic risk evaluations for submission to the government. Should fires, explosions, or poisoning occur in such workplaces, causing death or three or more injuries, the enterprises would be liable to a fine of NT$30,000-$3 million (US$1,035$103,450), which could be repeated until the problem is eliminated. The fine could exceed NT$3 million if the companies involved gained more than that amount from violating the regulations. The draft further outlaws the manufacture, importation, or sale of machinery or other equipment, as well as chemical products, that fail to meet safety standards. To prevent overwork, it will also require employers to adopt precautionary measures for highrisk laborers, such as those engaged in repetitive tasks or working rotating shifts and night shifts. And it subjects employers to fines of NT$30,000$300,000 (US$1,035-$10,345) if laborers contract occupational diseases. Another section of the proposed law would require enterprises with over 50

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workers to have a doctor or nurse on the payroll or under contract to provide guidance on potential medical issues. Currently the provision applies only to companies with more than 300 employees. The heightened awareness of the importance of occupational safety and health since the high-profile incidents of several years ago have also facilitated the efforts of the Cabinet-level Council of Labor Affairs (CLA) to promote the institution of TOSHMS, which is a national standard. The CLA started that push in mid-2008, with the aim of bringing Taiwan’s labor safety and health measures more in line with international forms and more fully integrating them into corporate management. TOSHMS systematically improves the work flow related to labor safety and health, thereby removing potential hazards in the working environment. Enterprises that have adopted TOSHMS have cut the occupational accident rate by an average of 20%. As of mid-December 2012, 765 enterprises in Taiwan had instituted TOSHMS and passed certification, offering quality safety and health protection to over 700,000 laborers. Of those companies, 70% were in manufacturing and 62.4% were considered large high-risk enterprises with over 300 employees. Some hi-tech firms were able to halve their premium rates for occupational accident insurance as a result of the improved management of labor safety and health. Three TOSHMS promotional associations in northern, central, and southern Taiwan organize seminars and training courses, and provide opportunities for companies to share their experience.

Help for SMEs The CLA has also been paying special attention to small and medium enterprises, as companies with fewer than 99 employees account for 87% of all fatal occupational accidents, according to a study by the CLA’s Institute of Occupational Safety and Health (IOSH). The study attributes that phenomenon to SME’s higher turnover and less emphasis 28

OccUPAtIOnAL AccIdentS In tAIwAn Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total 33,709 38,862 38,386 36,326 36,488 38,155 37,348 38,984 38,797 40,650 37,986 39,877 39,776

Injuries/diseases 28,244 33,053 33,004 31,363 32,113 34,094 33,605 35,338 35,391 37,339 35,112 36,948 36,662

Disabilities 4,815 5,207 4,839 4,456 3,974 3,695 3,361 3,321 3,113 2,992 2,586 2,663 2,820

Deaths 650 602 543 507 401 366 382 325 293 319 288 266 294

source: bureau of Labor i nsurance

on employee education and training in occupational safety and health. The Institute has helped over 400 enterprises to reduce workplace hazards; among the key steps has been the improvement of air ventilation in the factories. Since September 2007, CLA has been assisting municipal governments in seeking to improve labor safety and health conditions in SME factories through on-site inspections and subsidies to help pay for facilities and training. In 2010, emulating a practice in Japan, CLA worked with municipal governments to establish labor safety and health “families” – clusters in which core enterprises provide their expertise to guide other companies in improving their working environments. Another government organization that contributes to workplace health and safety is the Industrial Development Bureau of the Ministry of Economic Affairs, which since 1990 has dispatched teams to help over 9,000 factories improve their working environments. Under its assistance, 55 regional organizations for labor safety and health have also been formed in industrial zones. Statistics of the Bureau of Labor Insurance show that in 2011 Taiwan had 294 cases of deaths and 2,820 disabilities resulting from occupational accidents, compared with 650 and

4,815 respectively in 1999. There were 33 occupational-accident deaths per million workers in the manufacturing sector in Taiwan that year, compared with seven in Britain (the lowest worldwide), 22 in Germany, 24 in Japan, 30 in the United States, and 120 in Korea, according to IOSH. “The marked improvement in occupational safety and health in Taiwan in recent years results mainly from the progress of the society, which leads to greater emphasis on the safety and health of laborers and therefore to intensified inspection by the government, causing better enforcement of related regulations,” says Institute Chairman Lin Chin-chi. The increased awareness by local workers of their own interests also play a role, as evidenced by the growth in the number of labor complaints to 16,000 a year currently, compared with 3,000 some 10 years ago, according to Lin. In 2009, the most recent data available, manufacturing accounted for 47.1% of all occupational accidents resulting in disabilities, followed by construction with 16.7% and the wholesale/ retail sector with 14.2%. But an IOSH study concludes that construction is the most dangerous industry, responsible for 62% of the 3,097 occupational deaths during the period 2002-2009. Next was manufacturing with 30.2%, and

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transportation, warehousing, and communications with 6.6%. Occupational health, which formerly came in for much less attention than occupational accidents, is now receiving greater emphasis. CLA has revised the definition of occupational disease to include all ailments whose occurrence or deterioration is associated with one’s job, rather than the past stipulation that the condition must occur at the workplace during working hours. The change is especially relevant to diseases or deaths associated with overwork, such as myocardial infarction or stroke, and enables ailing laborers or the families of deceased workers to collect compensation from the Labor Insurance fund. The revision was made in December 2010, prompted by a number of highly publicized cases of death due to overwork. In the first three quarters of 2011, Labor Insurance made payments in 66 cases involving overwork – including 34 deaths, triple the number in the same period of 2010. Of the 66 cases, manufacturing accounted for 35%, followed by transportation and warehousing with 17%, and security and cleaning with 16%. The average age of the victims was 45, and 63 of them were male. The incidents were found to be due mainly to prolonged periods of heavy overtime. A c c o r d i n g t o a C L A s t u d y, t h e three types of business with the longest working hours are all in the service sector: real estate (46.9 hours a week on average) security services (45.9), and entertainment and leisure (45.3), compared with the national average of 43 hours. In some occupations, such as engineers at hi-tech companies, the working hours may not be extraordinarily long on paper, but in practice employees regularly need to work late into the night, without overtime pay, to complete their duties. In general, Taiwan enterprises have become increasingly aware of the critical importance of occupational safety and health. Some have learned the lesson the hard way. The Chang Chun Petrochemical factory in Miaoli County, for instance, experienced two explosions and fires in the past two years. Since

The kickoff of Dupont Taiwan's 2011 Safety Committee campaign. Dupont is widely admired for its safety programs. photo : Dupont taiwan

then, the 80-year-old chairman, Lin Shuhung, has been personally presiding over regular educational and training courses on factory safety. He has been constantly visiting Chang Chun’s factory sites, seeking to instill the concept of labor safety in plant managers so as to achieve the goal of zero factory accidents to safeguard both workers and the neighboring community. In July 2011, a large fire broke out in the factory of DSM-AGI Corp., a producer of UV-curable resins in Tainan. With the support of its parent firm DSM in the Netherlands, the company renovated its factory facilities and introduced new safety procedures, technology, and equipment before resuming operations a year later. Many well-established firms in Taiwan have long set up complete factory-safety systems. United Microelectronics Corp. (UMC), the world’s second-largest IC foundry, for instance, passed the OHSAS18001 international factory-safety certification as long as a decade ago. The company has put a solid safety culture in place, featuring complete regulations, strict discipline, and the participation of all personnel. Executives and plant managers inspect factories regularly to assure the safety of work sites. Thanks to its excellent performance in labor safety, the com-

pany won the first national labor-safety award in 2007. DuPont Taiwan was another winner of the first national labor-security prize. The company’s deep-rooted laborsafety culture has become a model that numerous enterprises in Taiwan have sought to follow. The DuPont safety culture can be traced back to its founding 200 years ago as a producer of explosives, for which safety is vital. It is regarded as the core value of the company, along with the belief that “all injuries are preventable.” The company’s safety culture features a comprehensive set of rules and standards – equal to three thick volumes of an encyclopedia – covering every sector of the factory and office. The rules and standards are updated annually, referencing the latest experience, studies of near accidents, and occupational incidents at other companies. The extent of the detail can be seen in some of the rules for offices. Bright anti-slippage tapes are attached at the entrance to caution visitors to watch their step. Overcoats must be hung in closets instead of draped over the backs of chairs, lest they could drop to the floor, causing those passing by to trip. Pens and pencils in pen holders must be placed with the pointed end facing down. A map of safety escape routes

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pasted on the wall also indicates which pillars staffers should stand next to in case of earthquake. Running is absolutely prohibited, even if one is about to be late for a meeting. Those driving company cars must undergo training in “defensive driving” at least once a year at the company’s driving training center in Hsinchu. Through constant training and education, the company has made every worker capable of caring not only for his or her safety but also others’. An employee’s safety record is the first criterion looked at in the year-end performance evaluation, and personnel are even required to report any accidents outside the company to their superiors or be subject to penalties for failing to do so. Safety is also a vital consideration in procurement, and any change in equipment, process technology, or operation must undergo a safety assessment. The board of directors gives out awards to the units with excellent safety performance, and cash prizes are given to staffers who propose effective safetyrelated improvements in manufacturing processes. Due to this extraordinary emphasis on safety, DuPont’s electronics factory in Taoyuan as of the end of February had

accumulated 24,620,294 consecutive hours of operation without any employee having to stop work because of injury. The titanium dioxide plant in Kuanyin, also in Taoyuan County, had reached 12,404,054 hours of safe operation. For their part, many hi-tech firms have taken pains to help their employees cope with the heavy pressure associated with their highly competitive working environment. DRAM maker Rexchip Electronics, for instance, allows its employees to exercise during their last hour of office time. UMC has installed a recreational center in its factory compound, complete with swimming pool, basketball court, gym facilities, and massage room; there is also a medical-care unit and psychological counseling center. Ivan Information, an integrated information-system solutions provider, allows its employees to take a two-hour “emotional leave” twice a month. The company provides a NT$200 (US$7) subsidy for them to do such things as watch a movie, drink coffee, or get their hair washed. Many hi-tech firms are paying for their employees to have regular physical checkups. Lianan Wellness Center reports that in recent years more and

more enterprises, especially in in the tech sector, arrange for group physical exams at an average cost of NT$11,000 (US$379) per employee. Quite a few foreign-invested firms offer high-level physical exams for their executives, costing as much as NT$100,000 (US$3,448) per person. As a result, company-sponsored group examinations now account for over 60% of the market, compared with 10% a decade ago. With regard to the high accident rate in the construction industry, both the government and construction firms are making efforts to promote safer conditions. The New Taipei City government, for instance, has introduced a system for the certification of “low-risk construction sites.” Construction firms without the certification are not permitted to take part in public construction projects of the city government. One of the companies that have passed the certification is Continental Engineering – for a construction site in New Taipei City’s Banqiao District. Company president Chen Hsueh-sheng notes that safety training and facilities, such as standard construction frames and safety nets, typically account for 1.5-2% of the company’s costs.

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Taiwan Rides a Strong Tailwind Cargo volume has slumped, but passenger traffic should grow if the infrastructure can support it. BY ALAN PATTERSON

IN THIS SURVEY

T • Taiwan Rides a Strong Tailwind

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• Taipei MRT: Growing Year by Year

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• Taxis Take to a New Business Model p38

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o expand capacity and strengthen Taiwan’s role as an Asian cargo and passenger hub, the government is pushing ahead with plans to construct a third terminal at the Taoyuan International Airport. Scheduled to open in 2018, the facility will represent a huge increase in capacity compared with the existing two terminals. The expansion will enable Taiwan’s aviation sector to continue the strong growth it has been experiencing since the opening of direct flights with China in December 2008. Yet some industry insiders say that meeting the 2018 deadline is less crucial than taking the time to create an overall plan for Terminal 3 that will meet the needs of airlines at the same time as it dazzles visitors to Taiwan. “Getting a world-class Terminal 3 done is more important than meeting the timeline,” says Vivian Lo, Cathay Pacific’s general manager for Taiwan and South Korea. “Well done is better than just good enough.” During the coming 20 years, Asia Pacific travel will drive nearly half of the world's air traffic growth – with regional growth averaging 6.4% per year, according to aircraft maker Boeing. To match that growth projec-

tion, Taiwan will need to execute its plan for Terminal 3 and supporting infrastructure effectively. The island’s international airports are currently operating at more than 80% of capacity. In 2012, Taiwan’s international air traffic set a new record of 34.5 million passengers and 1,647,000 metric tons of freight, according to the government’s Civil Aeronautics Administration (CAA). Since 2008 when the most recent global recession started, Taiwan’s passenger numbers have risen by more than 36% while cargo volume has increased by more than 6%, the CAA says. Last year, 2.58 million passengers came to Taiwan from China, a 45% increase from 2011. A cross-Strait agreement reached in December 2012 will enable that volume to grow further by increasing flights to and from China from 558 to 616 a week, with more destinations opened on both sides. “This year will be the first time that Taiwan will have more flights to mainland China than does Hong Kong,” says CAA Director General Jean Shen. Although Hong Kong currently serves nearly twice as many total passengers as Taiwan, she says it is possible Taiwan may

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Artist's rendering of the planned Taoyuan Airport third terminal and surrounding area. photo : ttiac

eventually overtake Hong Kong in that category as well. Austin Cheng, president of Taiwanbased EVA Air, describes the outlook for Taiwan’s passenger business as “optimistic,” based on growing traffic from China and Japan. However, “cargo is another story,” he says. Airfreight has slumped in the past few years, reflecting the downturn in the global economy. Another factor has been the shift in the nature of Taiwan’s electronics exports, says Cheng, whose company ranks as the world’s seventh largest carrier of air cargo. Shipments of bulky printers and computer monitors have declined as consumer demand has switched to small mobile devices such as tablets and smartphones. More of the electronics shipments are also going by sea to save costs, Cheng notes, leading to overcapacity in the airfreight business. But he says last year was probably the trough, and he sees the Taoyuan airport as having good potential to grow as a transshipment hub. In the meantime, passenger traffic is receiving a further lift from the U.S. visa-waiver program for Taiwanese visitors that went into effect last November. “We’re looking for a range of about 20-30% growth for traffic between Taiwan and the U.S.,” says Raymond Chang, Delta Airlines’ general manager for Taiwan and South Korea. “After the visa-waiver program was granted in Korea, we saw an approximate 30% increase in traffic to the U.S. But Korea is a little different from Taiwan because

they have another factor, which is the free-trade agreement (FTA).” The visa-waiver program has prompted several U.S.-based carriers to open or reopen direct service to the United States from Taiwan. Hawaiian Airlines has announced that it will offer direct flights three times a week between Taoyuan and Honolulu starting in July this year. And United Airlines is preparing to revive – probably in June – its daily nonstop flights between Taipei and San Francisco, which were discontinued in October last year. In 2012, total outbound passengers from Taiwan surpassed 10 million, representing more than 10% growth from the previous year. About 600,000 of those passengers were heading for the United States. Taiwan’s advances roughly mirror overall growth in the Asia Pacific region. According to the Hong Kong International Airport website, the airport had 53.9 million passengers in 2011, the most recent year for which statistics are available. South Korea’s Incheon Airport has grown quickly to reach 38 million passengers, about the same as Bangkok in 2011, according to Delta’s Chang. By comparison, Taoyuan International Airport recorded a 12% increase last year, mainly due to cross-Strait travel, bringing its volume up to about 28 million passengers. Eva’s Cheng adds that the entry of low-cost carriers (LCCs) such as Air Asia was also a factor in boosting the

traffic, as were the increased routes to Japan under the Open Skies agreement entered into by the two governments in November 2011 in an effort to promote a free-market environment. Rather than matching the rapid growth being registered in China, “most likely, Taiwan’s growth will be moderate in the next 5-10 years,” says Cathay Pacific’s Lo. If Taiwan is to grow more substantially, it will need a major expansion in infrastructure, including inland transportation systems, hotels large enough to host big conventions, and additional tourist attractions, she says. Taiwan also lacks an FTA with the United States, which – aside from the trade benefits – has driven air travel between the United States and South Korea, according to Delta’s Chang. Korean executives are making frequent visits to the United States to meet with American counterparts, Chang notes. “That’s really helping the market.” EVA’s Cheng also mentions regulatory restrictions as an obstacle. “Mainland Chinese passport-holders are not allowed to transit through the Taoyuan Airport,” he notes. “They also need visas to enter Taiwan, and the period required for application is quite long. That has a big impact.”

Potential as a cargo hub Taiwan already plays the role of a key cargo hub in East Asia, says Cheng. The recent entry of China Airlines and EVA

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into international alliances Sky Team and Star Alliance respectively should help boost the volume of transshipped cargo carried by the two Taiwan-based airlines, he says. Ye t C h e n g i s l e s s c e r t a i n a b o u t whether Taiwan can displace Hong Kong as the region’s largest cargo hub. “To achieve this goal, [making improvements at] the Taoyuan Airport is very important,” Cheng says. “Our runways are quite out of date.” Also referring to infrastructure needs, Delta’s Chang emphasizes the importance of completing Terminal 3 and building the multi-function Taoyuan Aerotropolis, still in the planning stage, in the area surrounding the airport. The difference in the quality of cargo facilities between Hong Kong and Taiwan is not only large but also widening, notes Cathay Pacific’s Lo. “The biggest hubs in the world are not necessarily the most ideally located,” she says. “A hub is effective as a function of a number of things: economic growth, infrastructure, airport, size and number of airlines, and number of flights. Hong Kong is largest hub in the world not because of domestic production – Hong Kong has none – but it is near the Pearl River delta. Hong Kong also has a great network with Shanghai. It is tapped into the key sources of cargo.” Cathay Pacific plans to open the big-

gest and most advanced terminal in the world in Hong Kong, Lo continues. Scheduled to start operations later this year, the new terminal will add 2.6 million tons of capacity a year, bringing Hong Kong’s total to 7.4 million tons annually, Lo says. As competition has intensified for a shrinking global cargo volume, the Taiwan carriers have lost out to rivals, Lo continues, adding that air shipments of Taiwan’s manufactured goods have stagnated. Only high-value exports go by air, she says.

Current goals With work just beginning on Terminal 3, airline executives hope to see increased attention in the coming several years on improving conditions at the first two terminals, which Vivian Lo says are now operating at about 80% of capacity. “Until the recent refurbishment, Terminal 1 was seen as one of the oldest-looking airports in Asia,” she says, adding that Cathay hopes to work with the airport authority to help make Terminal 1 more efficient. Opinions differ on how urgently the Taoyuan Airport will need Terminal 3 by 2018. Lo says the 2018 target for opening Terminal 3 is based on forecasts

of 5% annual market growth, but she considers that the target will be difficult to achieve without improvement in the overall tourism infrastructure. She also wonders whether five years will be sufficient to design and construct “a properly sized world-class terminal. EVA’s Cheng, on the other hand, says the Taoyuan Airport has already reached about 90% of its capacity (a higher estimate than provided by Vivian Lo) and risks reaching a level where the facility is overstrained. “Peak hours are already very critical at existing capacity,” he says. “Improvement of the runways is the most important issue. The sooner this is finished, the better.” He regards the 2018 target date for opening Terminal 3 as a “pretty aggressive milestone,” but says “it will be crucial to maintaining Taiwan’s global competitiveness.” Another question mark is whether consolidation will occur among the six Taiwan-based airlines. Besides the two large carriers, the others – Far Eastern Air Transport, Mandarin Airlines, TransAsia Airways, and Uni Air – concentrated on the domestic market until the advent of the High Speed Rail undercut the profitability of most routes over the past decade. The smaller carriers have shifted to serving secondary regional routes and

Terminal 3 Consultancy Contract Awarded

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he state-owned Taiwan Taoyuan International Airport Co. has awarded a US$44 million, seven-year general consultancy contract to an international joint venture for development of a third terminal and surrounding area at the airport. The joint venture is being led by Netherlands Airport Consultants (NACO). The other members of the consortium are two U.S. companies, New York City-based Parsons Brinckerhoff (PB) and San Francisco-based T.Y Lin International. The new Terminal 3 will be connected with Terminal 2 and the area in between will be developed to accommodate a ground transportation center, parking spaces, and commercial real estate. The new terminal will ultimately be capable of handling 43 million passengers annually. “The airport expansion will allow the airport to regain

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a position as a major aviation hub and become an even stronger driver for the national economy, following examples set by Amsterdam Airport Schiphol, among others,” said Rik Krabbendam, NACO’s managing director, in a statement. PB, whose Taiwan operation is a member of AmCham Taipei, is known for its expertise in project and construction management, and will be responsible for the program management of the project. “We are proud to be a part of this strategic development,” said Frank Lin, general manager of Parson Brinckerhoff Taiwan. “We look forward to working with the Taoyuan Airport Company to meet quality, cost, and schedule requirements, as well as facilitate the development of the Taoyuan Aerotropolis program.” PB is part of Balfour Beatty, an international infrastructure services group.

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taking a share of the cross-Strait direct flights. “They are thinking about mergers or consolidation,” says CAA Director-General Shen, adding that the ideal number of domestic airlines would be “less than six, but more than two.” Besides the entry of several Chinabased airlines, also to serve the crossStrait market, more than 10 LCCs are now operating here to fly to regional destinations. “In terms of supply, it’s saturated,” says Delta’s Chang. Despite the added competition, some of the big carriers say they are doing

better than ever. “Ten or twenty years ago, people would have thought the opening of direct flights between Taiwan and China would hurt Cathay Pacific a lot,” says Vivian Lo. “Interestingly, the only time since the opening of direct flights that we cut down on our flights was during the 2008 financial crisis. Right now, we have the highest number of flights ever – 191 flights every week between Hong Kong and Taiwan.” Further competition is likely, as Taiwan is negotiating with more than five nations on Open Skies agreements that

will open the local market to still more carriers, according to a CAA official. Taiwan has a good opportunity to expand its role in the global air transport business. To reach that goal, however, local officials may need to learn from the successes of other airport authorities. In particular, Hong Kong’s successful transition from its old Kai Tak Airport in 1997 to the new Hong Kong International Airport – which has enabled Hong Kong to nearly double arrivals by air at the same time as it has impressed visitors – may serve as the best example.

Taipei MRT: Growing Year by Year Customer satisfaction with the system and its service is among the highest in the world. BY EMILY CHEN

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a i p e i ’s M a s s R a p i d Tr a n s i t System (MRT) currently operates 10 metro lines, spanning a total of 116.9 kilometers and 102 stations. MRT ridership rose from 566 million in 2011 to a total of 602 million in 2012, and average daily ridership increased from 1.5 million to 1.6 million. In 2012, 16 kilometers of new tracks and 14 stations were unveiled on the Xinzhuang line, stretching from Fu Jen University station to Guting station. Taipei City government’s ultimate vision is to place an MRT station within a 500meter walk from almost any part of downtown Taipei. By the end of this year, Taipei City Government’s Department of Rapid Transit Systems (DORTS) expects to complete the new Xinyi line, an extension of the Tamsui line that will run 6.4 kilometers through seven underground stations: Chiang Kai-Shek Memorial Hall, Dongmen, Daan Park, Daan, Xinyi

Anhe, Taipei 101/World Trade Center, and Elephant Mountain. The new line will connect to the Xindian line at Chiang Kai-Shek Memorial Hall, the Xinzhuang line at Dongmen, and the Wenhu Line at Daan, alleviating rider congestion at the transfer stations Zhongxiao Xinsheng and Zhongxiao Fuxing. Once complete, the Xinyi line will enable riders to travel from Taipei Main Station to Taipei 101 in 11 minutes. Above ground, the city government envisages XinYi Road to be the Avenue des Champs-Élysées of Taipei, with smooth, broad roads and sidewalks lined with greenery. An estimated 1,700 roadside trees will be planted along XinYi Road this year. Construction of the new line is part of the “New Ten Major Construction Projects” introduced by then-premier Yu Shyi-kun in 2003 to lay the groundwork for Taiwan’s future growth. The original “Ten Major Construction Projects,”

introduced by Premier Chiang Ching-kuo in 1974, produced the first Freeway, Taiwan’s first integrated steel mill, and the Chiang Kai-shek International Airport, among other accomplishments. Ta i p e i M a y o r H a o L u n g - b i n announced on January 3 that 90% of the Xinyi line infrastructure has been completed, including tunnels and main structures along the line. Construction teams are now focused on building underground utilities and pipelines, station exits, architectural decorations, and road surfaces. The next phase of construction will see nine months of stability tests and inspection exams. DORTS anticipates launching the line’s commercial service by the next New Year’s countdown at Civic Plaza. On the Xinzhuang line, Dongmen station began service last September, enabling the linking of Zhongxiao Xinsheng and Guting stations by 2.3-kilometers of tracks. The city government

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Above, a depiction of XinYi Road after completion of the Xinyi Line; Below, a diagram showing the underground MRT and common utility duct tunnels of the Xinyi Line. photos anD Graphics: Dorts

expects Dongmen station to attract more business to the nearby Yongkang Street neighborhood. According to DORTS, which is responsible for comprehensive network planning and construction, the work along this section was among the most difficult it has ever executed. Under Dongmen station are 72-meter-deep diaphragm walls (reinforced concrete walls), the deepest of any MRT station in Taipei, which enclose five tunnels stacked above, below, and beside one another. Four of the five tunnels underneath Dongmen station, each 6.1 meters in

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external diameter, are for MRT use – two tunnels for the Xinzhuang line and two for the Xinyi line. The fourth, 5.4 meters wide, will be used for common utility ducts. This project was the city’s first simultaneous construction of so many tunnels, and the first time utility ducts have been built concurrently with MRT lines. The 6,900-meter-long duct, which will also contain water supply and sewage pipes, will save the city the cost and inconvenience of a second excavation to lay major utility pipelines along Xinyi Road. Building the Xinyi line has required

rerouting traffic along one of Taipei’s main transportation arteries, prompting complaints by residents and motorists alike. Businesses along Xinyi Road have grumbled that MRT construction has led to a decline in business, but DORTS Deputy Commissioner Fu Shih-Choib says the city has sought to compensate businesses by offering tax deductions. To add to the challenge, the line’s Elephant Mountain station is located in Zhongqiang Park, home to a green tree frog habitat that the construction team has endeavored to protect by digging six ecological restoration ponds, installing embedded water source pipelines, and erecting protective netting. DORTS categorizes MRT lines by three stages. Stage one lines are those that are already in commercial service, stage two are new lines approved for construction, and stage three refers to proposed new lines still under planning. Currently, stage one encompasses 116.9 kilometers of tracks and 102 MRT stations, including sections of the following lines: Wenshan-Neihu (which entered commercial service in 1996), Tamsui (1997), Zhonghe (1998), Xindian (1999), Nangang (1999), Banqiao (1999), Xiananmen (2000), Tucheng (2006), Nangang eastern extension up to Nangang Station (2008), Luzhou (2010), and Xinzhuang (2010). Projects currently classified as stage two are expected to be completed by December 2018, and cover 50.5 kilometers of tracks and 44 stations. Fu says that by the end of 2013, passengers can expect the opening of the Xinzhuang line from Fu Jen University to Huilong, a 3.1kilometer section with two new stations. Also by year-end, DORTS is due to complete construction of the Songshan line, comprising eight new stations along 8.5 kilometers, although commercial service will not commence until after safety inspections are concluded in 2014. The Songshan line will connect the existing Xindian line at Ximen station to the new Songshan station, passing through Beimen, Zhongshan, Songjiang Nanjing, Nanjing East Road, Taipei Arena, and Nanjing Sanmin along the way. It will intersect with the Tamsui line at Zhongshan, the Zhonghe line at Songjiang Nanjing, and the Wenhu line at

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Nanjing East Road. D O RT S ’ o t h e r s t a g e - t w o p r o j ects include the portion of theTaiwan Taoyuan International Airport line from Sanchong to Taipei City (due for completion in October 2014), the Circular line phase one (December 2015), Xinyi eastern extension (2017), Wanda-Zhonghe-Shulin line phase one (December 2018), and Tucheng line extension to Dingpu (timing to be determined). The cost of stage two is currently estimated at about NT$290 billion

(about US$9.7 billion), according to Wang June-Huey, chief of the department’s Comprehensive Planning Division Sub-Division 1. Projects in stage three may add up to 111.6 kilometers in length to earlier Taipei MRT lines. The planned construction, yet to be approved, is expected to include the Wanda-Zhonghe-Shulin line phase two; north-south line; MinshengXizhi line; Ankeng line; Sanying line; Shezi, Shilin, and Beitou light rail lines; and north and south sections of the Cir-

cular line. DORTS forecasts average daily ridership of 3.6 million passengers after the approximately 270-kilometer-long network is finished. F r o m 2 0 0 4 t o 2 0 0 8 , t h e Ta i p e i MRT was annually rated the most reliable metro system among international members of the Nova Urban Railway Benchmarking Group and the Community of Metros International Railway Benchmarking Group, according to the London Imperial College's Railway Technology Strategy Centre. However, during

Kaohsiung MRT: Striving for Higher Volumes

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he Kaohsiung MRT (KMRT) system, launched in 2008, operates two intersecting metro lines that span a distance of 41 kilometers. The Red Line runs north-south, covering 28 kilometers and 24 stations; the Orange Line runs 13 kilometers eastwest across 14 stations. Passengers who travel to Kaohsiung by High Speed Rail can transfer to the KMRT at Zuoying station. Those who arrive by regular train can connect at Zuoying or Kaohsiung Main Station. Kaohsiung International Airport has its own stop on the Red Line. Total ridership on the KMRT increased from 49.6 million in 2011 to about 56.5 million in 2012. Average daily ridership grew from 126,000 to approximately 154,000 over the same period. Customer satisfaction achieved a rating of 85% for three consecutive years beginning in 2009. Unlike the Taipei MRT, which is built by the Taipei City Department of Rapid Transit Systems and operated privately by the Taipei Rapid Transit Corp., the Kaohsiung Rapid Transit Corp. (KRTC) utilizes a build-operate-transfer (BOT) model of infrastructure financing, meaning the network is both constructed and operated by KRTC at present. KRTC’s paid-in capital is NT$10 billion (US$333 million), with the investment coming from several companies plus the Executive Yuan’s National Development Fund. Under the BOT terms, KRTC’s operations will be transferred to the Kaohsiung city government in 2037. During the bidding process in 1999, the city government estimated that average daily ridership would reach around 560,000 by 2011. But KRTC has been continuously operating at a loss due to lower than expected passenger volume. The company has been in the red by about NT$200 million (US$6.7 million) annually. To break even on operating costs, KMRT would need to

attain an average daily passenger volume of 180,000, which it hopes to reach by 2014. Kaohsiung residents still rely heavily on cars and motorcycles. The southern city is more spread out than Taipei, and the two metro lines hardly reach the majority of Kaohsiung’s population. KRTC has initiated a number of efforts to increase access to the KMRT, including collaborating with third-party vendors to run shuttle buses from high schools, hospitals, and major industrial centers to KMRT stations. The corporation has also applied for and received public environmental protection funds to subsidize transfer discounts for commuters who borrow public bicycles, often used to commute to and from stations. In July 2011, KRTC took over operation of Kaohsiung Public Bike – established in 2009 – from the city government. With over 70 rental stations, the bikes are used an average of 10,000 times per month. KRTC and the government hope that eventually expanding the service to 300 stations will lead to a significant jump in MRT ridership. In the future, a 22-kilometer, circular light rail system will be added to the KMRT system. Construction on the first stage is planned to begin this year, with commercial service to start in mid-2015. The second stage is expected to begin operation by 2019. The central government will provide up to NT$6.4 billion (US$213 million) in funding and the city government NT$1.8 billion. KMRT Director-General Chen Tsun-yung anticipates that the light rail may raise the KMRT’s daily passenger volume by approximately 52.7%. — By Emily Chen

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the summer of 2009, the newly launched Muzha line experienced multiple delays caused by door and system malfunctions. These were largely due to the difficulty of integrating the Neihu extension, built by Canadian company Bombadier between 2003 and 2009, with the existing Muzha line built by French company Matra. Nova’s safety benchmark tracks the frequency of malfunctions causing at least a five-minute delay in service. Chan Shitsung, director of the Taipei Rapid Transit Corp. (TRTC) Planning Division, says Taipei’s MRT is still highly ranked on Nova’s benchmark index, but other cities have since caught up in safety standards. To d a y, Ta i p e i ’s M RT i s w i d e l y regarded by users as clean, punctual, and convenient. The MRT’s passenger satisfaction rate in 2011 was 95.8%, among the highest ranking in the world for a mass transit system. Every year since 2003, TRTC – the company that oversees operation and maintenance of the MRT system – has hired a third-party research firm to survey customer satisfaction. In recent years, the survey has asked the

opinion of a random selection of passengers about 27 aspects of the MRT system, its facilities, and customer service. For each survey question, respondents rate the degree of importance of the topic and their level of satisfaction. TRTC then seeks to make improvements in the following year according to topics that customers most frequently rated high in importance and low in satisfaction. In 2012, one such improvement was adding air conditioning in the Maokong station and improving ventilation on gondolas by mounting windows and fans. In 2011, based on passenger feedback from surveys, TRTC pledged to improve safety – especially for female passengers – by adding new closed-circuit television cameras in stations and railway cars. TRTC also affixed panic buttons in restrooms, coordinated taxi pick-up services, and designated new safety zones on platforms to be more closely monitored at night. Currently TRTC is installing platform screen doors at MRT stations. Of the 102 stations in operation, 50 – mostly transfer stops and stations with high pas-

senger volume – already have such doors installed. Over the next two years, TRTC will add platform screen doors at 15 more stations. At stations without the safety doors, track intrusion detection systems are in place, using infrared detectors and laser measurement sensors. One recurring suggestion that TRTC receives from customers each year is to increase the system’s operating hours. Chan says this ranges from passengers who would like the MRT to close one hour later on weekends to those who desire 24-hour MRT access. But the operator considers that it would be nearly impossible to keep trains running any later than at present. The MRT functions from 6 a.m. to 12 midnight daily; tracks are inspected starting at 5 a.m. and the last trains return to the depot at 1:30 a.m. This leaves only a three-and-a-half-hour window for track maintenance, rolling stock cleaning, and work activity such as the installation of platform screen doors. TRTC’s priority is to ensure a safe and orderly MRT system for passengers, says Chan.

Taxis Take to a New Business Model Satellite fleets seek to raise efficiency and professionalism through technology and training. BY PHILIP LIU

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A Report on the Transportation Sector

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n response to soaring oil prices and the competition from improved public transportation, taxi drivers in Taipei are increasingly affiliating with satellite taxi fleets to help them enhance operating efficiency with the support of high technology. While still owning their own vehicles, they benefit from services provided by the company. Taiwan Taxi, the leading satellite taxi fleet, exemplifies the trend. Founded in 2002, it was able to list its shares on the GreTai Stock Market (over-the-counter) on November 7, 2012 at a high NT$72 per share due to its solid financial base. The company took in revenue of NT$619 million (US$21.3 million), up 15% year-on-year, in the first 11 months in 2012. Revenue is estimated to come to NT$800 million (US$38.1 million) for 2012 as a whole and is predicted to top NT$1 billion (US$34.5 million) in 2013. The after-tax net profit stood at NT$110 million (US$3.8 million) in the first three quarters of 2012, equal to NT$3.3 per share, and institutional investors estimate that it will amount to NT$5 per share for the full year. The company’s network consists of 12,000 taxis, or 13% of the total of 87,000 taxis in Taiwan. These include 10,000 cabs in greater Taipei (including Keelung), or 18% of the total of 57,000 in the area. Every day, the company receives 100,000 phone calls to summon taxis and serves 300,000 passengers. Chairman Gary Lin says Taiwan Taxi will continue expanding at the rate of 1,000 taxis a year, reaching 25,000 taxis in the long term. In the fourth quarter of 2012, the company established a sub-brand, City Taxi, to provide satellite services to smaller taxi fleets. In order to expand the operation, the company will step up efforts to recruit drivers to join its camp, targeting those whose cars are less than five years old. Lin doesn’t rule out the acquisition of other taxi firms as well. In addition, Taiwan Taxi and City Taxi late last year jointly offered 500 places in a training program for people wishing to enter the taxi field. The training period lasts one and a half to two months, and consists of free courses covering preparation for taking the licensing exam, and advice on leasing or buying vehicles, and on how best to find customers. While trainees are not required to join one of the two fleets after completing the training, many apparently choose to do so. Fees paid to the company amount to some NT$$3,000 (US$103) a month. In recent years, Taiwan Taxi has been seeking to diversify its sources of income, which now include such activities as painting ads on auto bodies, providing auto maintenance and repair services for member drivers, and engaging in group vehicle purchases. As a result, the proportion of revenue coming from fees collected from drivers has declined from 70% of the total to less than 30%. The company’s goal is to further develop other lines of businesses, such as express delivery, auto leasing, insurance, and travel. Lin is preparing to make forays into the mainland China or Southeast Asian markets within the next two years. Since becoming chairman in 2004, Lin has been trying to raise the professional standards in the taxi business through better training and the use of technology-based logistical support. The previous low entry threshold, he points out, meant that cabbies were often people who turned to driving a taxi, sometimes just for the short-term, only because could not find

other employment. The public therefore had an unfavorable impression of them, and the drivers lacked a sense of pride in their occupation. To bolster their self-esteem and respect for their vocation, Lin set a dress code for member taxi drivers, including vest, white shirt, tie, dress pants, and black leather shoes. Member drivers also have to follow a code of behavior that includes refraining from smoking and betel-nut chewing, making every effort to return lost objects to passengers, and avoiding discussions with passengers about politics or religion. For major violations such as sexual harassment, violence, or failure to return lost objects, member drivers face expulsion from the organization. They are also required to replace vehicles that are five years old.

Encouraging politeness Since last October, member drivers have been pasting the sticker “polite driving” on their taxis to demonstrate their pledge to respect the right of pedestrians to walk on zebra crossings, and larger vehicles are being made available to accommodate elderly or infirm passengers with wheelchairs. To enhance operating efficiency, Taiwan Taxi discourages its drivers from simply roving the streets in search of patrons. Instead, the company’s computerized system pinpoints areas where would-be passenger are concentrated and guides drivers to those locations – reducing fuel consumption and increasing ridership. Customers can also use their home phone, mobile phone (voice call or APP), computer, or devices at convenience stores to contact Taiwan Taxi, which will then dispatch the message to the in-car devices of member taxis. The company has also selected 1,000 member drivers for training to obtain tourist-guide licenses and is preparing to offer guided travel services – especially for the “free independent travelers” from mainland China, whose numbers are expected to surge in the coming few years. Due to its reputation for reliability, Taiwan Taxi has secured over 1,600 corporate accounts on a long-term basis. When company personnel take a member taxi, they sign a service sheet and their finance department will be billed monthly. Corporate customers find that the arrangement helps to control costs by preventing their staffers from inflating their taxi charges. Taiwan Taxi also has contracts with a number of hotels in Taipei, including Shangri-La’s Far Eastern Plaza, Sunworld Dynasty, and the Sheraton Grande Taipei, to help the hotels ensure that their guests and visitors are served by clean and reliable taxicabs and that lost objects have a greater chance of being retrieved due to the company’s computerized recordkeeping. In addition, mobilizing the fleet makes it easier to efficiently transport large crowds after a large-scale conference or banquet at the hotel. L i n r e p o r t s t h a t Ta i w a n Ta x i ’s m e m b e r d r i v e r s n e t NT$40,000 (US$1,379) on average per month, 30% higher than their peers, working 12 hours a day (including meal times), five days a week. “We have 800 member drivers who earn NT$100,000 (US$3,448) or more a month by accumulating large numbers of loyal customers through their extraordi-

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INDUSTRY

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nary service,” notes Lin. “These customers often call on them for long-distance transportation, such as going to or leaving Taoyuan Airport when they make overseas trips.” Lin plans to invest NT$760 million (US$26.2 million) to build a 27,000-square meter “Taxi Life Park” in Yingge in New Taipei City, scheduled for completion at the end of 2014. The park will contain facilities for both training and recreation for member drivers. In another decade or two, Lin hopes, the status of the profession will have been elevated sufficiently that many new graduates will opt for driving a taxi as a career. Emulating the success of Taiwan Taxi, some 18 other satellite taxi-dispatching firms have also emerged in Taipei, including DaiAi, M-Taxi, and Fuxie. The trend is expected to grow, since it has become increasingly difficult for taxi drivers to make a good living operating independently. Higher oil prices have raised costs, the widening MRT system is cutting into demand, and the sluggish economy has induced more people to enter the business – including some operating without licenses (an estimated 1,000 in Taipei City). As a result of the oversupply, a government study shows, the average empty-taxi rate in Taipei exceeds 50%. Consequently, the Taipei City government has frozen the issuances of new taxi licenses at the current level.

Fares and earnings Taxi rates have remained unchanged from 2007, with the starting fee in greater Taipei set at NT$70 for the first 1.25 kilometers. NT$5 is charged for every extra 250 meters, or for every 100 seconds of slow-driving or waiting time. An extra NT$20 is chargeable per trip between 11 p.m. and 6 a.m. According to a study by the Ministry of Transportation and Communications (MOTC) released in late 2012, local taxi drivers’ income, the number of passengers, and the daily driving mileage all increased in 2011, while the empty-taxi rate dropped. The average monthly income reached NT$42,653 (US$1,470), 14% higher than in 2009. The study also showed that the income of drivers affiliated with dispatching firms was 40% higher than for non-members. The study was based on a survey of 20,000 taxi drivers, which received 8,000 valid replies. Another study by the Taipei City Public Transportation Office found that taxi drivers in the city drive 10.5 hours a day and 28 days a month on the average. It also concluded that the long hours of work in a confined space impair drivers’ health. Liang Ping-liang, chairman of the ROC Taxi Business Association, disputes the MOTC finding, saying that drivers’ income has declined over the past five years due to an oversupply of taxis and the expansion of the MRT network in greater Taipei. He calculates that in 2011, after deducting depreciation and other costs, a taxi driver could net only a little over NT$10,000 (US$345) a month. Peng Chih-yuan, spokesman for the National Taxi Reform League, offers yet another figure for drivers’ net income in Taipei City – NT$19,000 (US$655). He reckons that the hourly wage for taxi drivers is now only NT$71, compared with NT$119 in 1997, significantly lower than the minimum hourly wage of NT$109 for part-time workers set by the

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Council of Labor Affairs. Besides the low income, taxi drivers face various kinds of risks, especially during night-time driving, including auto accidents, passengers refusing to pay, drunken passengers, robbery, and even murder. “While many passengers are afraid of encountering bizarre taxi drivers, it is much more common for taxi drivers to carry bizarre passengers, since they have no choice as to what passengers they take,” says Yang Tao-min, chairman of City Taxi. The practice of allowing passengers to hail taxis anywhere along the street is very convenient for customers, but often results in accidents, as trailing motorcyclists or motorists may fail to respond when taxis stop abruptly. In the first nine months of 2012, a total of 4,916 auto accidents involving taxis occurred in Taipei City, equivalent to 18 a day, resulting in 2,924 injuries and 12 deaths. Taipei City Councilor Wang Hung-wei has therefore suggested allowing passengers to board taxicabs only at fixed taxi stands, unless the cab has been summoned to a specific address by phone. Chen Chun-hung, section chief at Taipei City’s Public Transportation Office, says the department plans to establish new taxi stands at proper locations, including in front of convenience stores. To clarify the responsibility for auto accidents, most taxi drivers have installed event data recorders in their cars. Sometimes such recorders serve unexpected functions. An example was the highly publicized incident last year in which Japanese-Taiwanese performer Makiyo and a Japanese male friend got into a dispute with their taxi driver that led to the driver being kicked and beaten so badly that he need hospitalization. The whole occurrence was captured on the recorders of two other taxis nearby, providing firm evidence for the prosecutor. Makiyo and her companion were given suspended sentences after agreeing to compensate the driver with NT$3 million (US$103,000), and the Japanese defendant was also expelled from Taiwan. In recent years, the government has tried to ease taxi drivers’ livelihood in various ways. For example, the state-run oil company, CPC Taiwan, subsidizes taxi drivers’ gasoline expenses by NT$5 per liter up to a maximum of 400 liters per month. Last year the maximum was 450 liters, and the reduction has elicited strong protests from taxi drivers, who argue that even the original level was grossly insufficient. MOTC has said it will review the policy. In addition, the government is offering a subsidy of NT$40,000 (US$1,379) toward the purchase of a new vehicle by taxi drivers who scrap a car that is more than seven years old. The program was initiated last year and aims to replace 20,000 old taxis over a four-year period. At present, an estimated 48,000 taxis in Taiwan – about half the total – are over seven years old. Some auto manufacturers have been matching the subsidy with special discounts for taxi drivers’ new-car purchases. Another program, since discontinued, encouraged taxi drivers to convert their cars to dual-use of gasoline and liquefied petroleum gas (LPG) by subsidizing half the cost of the conversion, as well as the cost of the LPG fuel, which is less polluting.

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A Report on the Transportation Sector

From the start of 2008 until the program was terminated at the end of 2012, some 25,000 were converted. Now the government intends to switch its focus to gasoline/electric hybrid cars. In addition, following the launch of fifth-stage emission standards last October, new gasoline cars will be even more environmentally friendly than gasoline/LPG models. Hotel.com, a global online hotel-service provider recently, released a taxi service survey for major cities worldwide in which Taipei ranked in seventh place, behind London, New York, Tokyo, Shanghai, Bangkok, and Berlin. In 2011, by comparison, Taipei failed to make the top 10 on the list. The survey,

based on the responses of 1,600 travelers from 28 countries, covers seven items, including the cleanliness of the taxis; the taxi driver’s friendliness and familiarity with the local environment; the cost-value, quality, and safety of the ride; and the availability of taxis.

Driving a Taxi for the Sake of Freedom

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hen Chien-wen had a midlife crisis in 2002 when he was 50 years old. As a paint-engineering contractor, he frequently had to join dinner parties and drink a lot with his customers, impairing his health and his ability to take good care of his family. At the urging of his wife, he decided to change occupations – becoming a taxi driver because of the relatively free lifestyle, allowing him to set his own hours. The workload was still high, but now – more than a decade later – Chen has the satisfaction of having enabled his three children to complete their education. His daughter earned a doctoral degree in chemical engineering in the United States and now works for Intel, the elder son has a master’s degree in civil engineering and is employed by a Japaneseinvested construction firm in Taiwan, and the younger son majored in information technology and serves in the computer department of a local securities firm. Chen typically wakes up at 4:30 a.m. to play tennis with friends. Then he returns home to take a bath and have breakfast before putting on the uniform of Taiwan Taxi, the largest satellite taxi fleet in Taiwan, and starting work at 8 a.m. His first passengers – people rushing to avoid being late for work – are often picked up in his Neihu neighborhood. Otherwise, he heads toward the Miramar shopping center hot spot, and usually his

GPS device will soon display a message from Taiwan Taxi’s computer system that a passenger is waiting at a spot close by. Throughout the day, when the cab is vacant he joins the virtual waiting line in the Taiwan Taxi system or a physical queue in front of a hotel or hospital with which Taiwan Taxi has a contract. The fleet headquarters will also notify him of passenger opportunities, assigning priority among member drivers according to their distance from the passenger. Usually, Chen goes home for lunch and a nap before working again. He calls it a day at 7 or 8 p.m. before heading home for dinner. He takes off weekends, as well as national holidays. Chen drives a 2,000c.c. Camry that he purchased for over NT$700,000 (US$24,138). He spent NT$50,000 (US$1,724) to convert the car to dual gasoline-LPG use to save on fuel costs. He washes the car every morning, considering a clean vehicle, along with neat attire, to be a matter of self-respect. “You have to respect yourself before passengers can respect you,” says Chen. He nets around NT$25,000 (US$862) a month after deducting such costs as fuel, depreciation, the Taiwan Taxi membership fee, and NT$1,000 to the firm from which he leases the operating license. Although qualified to apply for an individual operating license, which requires at least six years of work as a taxi driver

without any major traffic violations, he prefers to be affiliated with a taxi company, which can help with such matters as payment of tickets, or with auto accidents should they occur. In addition, individual operating licenses can be revoked in case of major traffic infringements. Besides his income from taxi driving, since last year Chen has also been receiving a labor-insurance pension of NT$19,000 (US$655) a month. He plans to continue driving a taxi until he is 68, the age of mandatory retirement for taxi drivers. Chen notes that since the opening of the Wenhu MRT line, the number of taxi passengers in Neihu each morning has dropped considerably. To earn a relatively decent living, a Taipei taxi driver typically has to work 12-14 hours a day, according to Chen. “It is especially difficult, both spiritually and physically, for those drivers with economic pressure,” he says. Chen notes that the quality of taxi service in Taipei has improved a lot in recent years, thanks to the popularity of satellite taxi fleets. “In my car, for instance, there is a device allowing headquarters personnel to monitor the cleanliness of my car and my behavior,” he says. ”Passengers can also pass their comment on the taxi service to the headquarters by filling a short questionnaire on the screen.” — By Philip Liu

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law

Taiwan Employment Law for the Busy Executive A review of some common employer-employee situations and how best to deal with them.

BY JOHN EASTWOOD

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or American companies operating in Taiwan and Greater China, it’s important to balance local legal needs with global standards and expectations. Often the headquarters will have global or regional templates that local offices are expected to use to ensure conformity, but the busy Taiwan-based executive may not be familiar with the ins and outs of Taiwan employment law, severance conditions, and pension rights. Depending on the size of the operation, companies may or may not have a local HR manager, and executives often worry about whether as a foreign-owned company, they can get away with some of the local practices that supposedly “all” Taiwanese companies use. What we hope to provide here is an overview of some of the common situations and issues that arise. Under Taiwan law, employers and employees have great latitude to reach employment arrangements that suit the parties involved, but employees' rights and benefits cannot be less than the minimum standards set out in the Labor Standards Act (LSA) and other employment-related laws and regulations. International companies often wish to have an “at-will,” “exempt,” or “salaried” relationship with their Taiwan employees and mid-level management, but Taiwan’s employment law scheme does not permit such an approach.

“Mandate” agreements

While nearly all the employees will be considered to have the full range of rights and protections offered by Taiwan’s LSA and Labor Pension Act (LPA), it is possible to separate the treatment of a top-level manager from the rest of the employees through the use of a “mandate” agreement. Essentially, such an agreement appoints the manager to his/her local position and allows for removal from that position with or without cause, which can be a huge benefit in cases where fighting over the cause for termination of a manager could be 42

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expensive or embarrassing. Such positions traditionally do not provide for severance payments, unless the agreement with the manager specifically stipulates it. Typical problems that interfere with the greater flexibility and benefits of a mandate agreement include country manager contracts that specifically call the manager an “employee” throughout or that specify that the relationship is to be “subject to the terms of Taiwan’s Labor Standards Act.”

Treatment of overtime

Overtime matters can be a major stumbling block for multinational companies in Taiwan, which often assume that contracts defining large categories of employees as “exempt” or “salaried” will help them avoid overtime payments. Other than the top-level country manager, essentially all other employees (including other senior managers and mid-level managers) will be treated as having overtime pay rights. While employees may not rock the boat during their period of employment, such issues will often come to a head if a termination is necessary. There have been cases of employees presenting the Taiwan labor authorities with extensive documentation of their overtime work on the way out the door. One method for maintaining some control over overtime practices is to require prior approval from line management before employees perform overtime work.

Fixed-term contracts

Employment contracts in Taiwan are either fixed-term or non-fixed-term. The intent of this distinction is to ensure that employees are not deprived of certain rights, such as severance, job security, and retirement benefits. However, these rights and benefits are often regularly deliberately abused by employers in Taiwan who try to avoid such obligations by keeping employees on a continuous cycle of back-to-back

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law

employment terms. The LSA requires limiting fixed-term contracts to temporary or short-term work of less than six months, seasonal work of a non-continuous nature, or specified work that can be completed within a specific period of time. Under the LSA, any labor contract for continuous work will be considered a non-fixed-term contract, and the labor authorities and courts will disregard fixed-term contracts in situations where it is demonstrated that the work was actually continuous, such as cases where: • The employer raises no immediate objection when an employee continues his or her work. • On the conclusion of a new contract, both the prior contract and the new contract were for a term of more than 90 days, and the period of time between the expiration of the prior contract and the beginning of the new contract did not exceed 30 days. • The work is not seasonal, temporary (less than six months), short-term (less than six months), or project-specific (must be registered if over 12 months).

Termination and severance rights

Employment in Taiwan is almost never considered to be “at will” (meaning that either party has the right to terminate the relationship at any point without penalty), and the labor laws set strict restrictions on the termination of employment. A dismissal is permissible in the following circumstances: • The employer is ceasing business or the ownership of the employer is transferred. • The employer suffers a loss or curtails business operations. • The operations of the employer are suspended for more than one month by reason of force majeure. • The business nature of the employer is altered, necessitating a reduction in the number of employees, and there are no suitable job openings for the redundant employees. • The employee is confirmed to be incompetent to carry out the work assigned to him or her. In all of those situations, the employer must give notice and pay severance to the terminated employee. There are also some more dire circumstances under which the employer has no obligation to give advance notice or pay severance: • The employee misrepresents facts at the time of signing the employment contract, thereby misleading the employer, with possible resulting damages. • The employee commits violence against or insults the employer, the employer's family, the employer's representative, or fellow employees. • The employee seriously breaches the employment contract or violates the work rules. • The employee is sentenced by a court in the final judgment to detention or a more severe punishment, and the sentence has not been commuted to probation or a fine. • The employee purposefully causes damage to or excessively abuses machinery, equipment, tools, raw materials, products, or any articles belonging to the employer, or

intentionally discloses the technological or business secrets of the employer. • The employee is absent from work for three consecutive days, or for six days in a month, without justifiable reasons. If severance must be paid, then the calculation will depend on when the employee was hired, whether the employee is Taiwanese or a foreigner, and the employee’s average pay over the previous six months. The date that the Labor Pension Act came into force, July 1, 2005, is a key date for local Taiwanese employees in that those hired before that time have their severance calculated under the LSA (1 month per year of service), while those hired on or after it have their severance calculated under the Labor Pension Act (1/2 month per year of service). Local Taiwanese employees hired before July 1, 2005 who later “opted in” will have a pro-rata mix of the two rates. Foreign employees are currently not eligible for the Labor Pension Act provisions, and so their severance is covered under the LSA calculation. The severance calculation will generally include salary plus non-discretionary bonuses (earned commissions, guaranteed “14th month” pay, etc.) but not completely discretionary bonuses of the sort that are subject to vague “economic performance of the company” concepts.

Work Rules

An internally published set of company “work rules” is quite normal within many Taiwan workplaces, and they are legally required for companies with 30 or more employees. An up-to-date set must be submitted to the local labor authorities, and the employees must have access to it. Companies, including those with fewer than 30 employees, may include their work rules within the employment contracts. But it is necessary to notify and receive consent from the employees before any change to the work rules can be made that is detrimental to the rights or benefits of the employees. Still, work rules can be extremely helpful in laying out with great specificity all sorts of company expectations that aren’t covered in typical employment contracts or in the provisions of the LSA. The terms of the LSA greatly restrict the circumstances in which an employee can be terminated without a notice period or severance rights. Managers who lack suitable work rules may therefore find themselves stuck with blatant employee misbehavior that is not covered by the narrow terminology of the LSA requirements. Just because employees haven’t broken any office equipment, hit any managers, been convicted of any major crimes, lied about their background, or explicitly broken the terms of the employment contract should not give them license to do a whole range of other things considered intolerable in an international company. In addition, the terms of the LSA often appear aimed at manufacturing environments instead of the dynamics of white-collar offices. With a good set of work rules, a company can provide itself with sufficient legal cover for handling the disciplining or firing employees in a flexible and sensible way that supports the maintenance of international HR standards. Such rules can cover a wide range of issues, including personal use

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of computers and other office resources, ethical and moral conduct, honest dealings within the office, and the handling of sensitive business information. The work rules should not be left for those “gotcha” moments when employees are found lying about customer orders, sending inappropriate emails, running a web business or writing a novel from their cubicle, or committing sexual harassment. Training sessions should be conducted to ensure that employees understand the expectations under which they are working, and it’s better to be proactive than reactive. Some of our clients hold annual training sessions to cover such subjects as: • Corporate policies and work rules • Antitrust/unfair-competition laws • U.S. Foreign Corrupt Practices Act requirements and local anti-bribery laws The importance of paying attention to trade secrets and intellectual property issues is not confined to Taiwan’s technology-rich environment. The close economic and cultural ties across the Strait to the People’s Republic of China mean that information can move fast beyond borders and into the hands of existing and future competitors.

that are the same or similar to those used by the employer for the company or its products or services.

Non-Competition Agreements

Trade secrets can include a wide swath of information, from production methods and future plans, through to customer preferences and needs, sales and financial data, and many other types of key non-public information about your company and its operations. While many employment agreements will include provisions regarding the protection of confidential information, it is also vital to pay attention internally to how confidential information is treated. Employees should be trained in how and when to label materials as “confidential,” how to restrict access to certain files or documents, how to maintain a “clean desk” policy, what are appropriate shredding or document-destruction procedures, etc. Even in this modern day and age, enormous amounts of key information are still simply thrown out with the trash, allowing competitors and investigators access to a wealth of non-public information. Reasonable procedures need to be in place to protect confidential information from disclosure, as this factor will certainly arise in any subsequent dispute.

Non-compete obligations for employees are a regular source of headaches, for no matter how much multinational companies try to combat the “myth of irreplaceability,” the fact is that managers hate to see former key personnel working for a competitor, using their insider knowledge to steal away customers. Taiwan’s Council of Labor Affairs released a set of guidelines that, while not mandatory, are referenced regularly when Taiwan courts look into the validity of a non-compete obligation. Generally, the term covered by the agreement should be two years or less, as anything longer risks invalidating the non-compete in its entirety. The geographic scope also needs to be reasonable, so that the former employee is not prevented from earning a living; barring future employment within Taiwan will often work, and many companies will block “Greater China” (Taiwan, Hong Kong, Macau, and the People’s Republic of China). If there are specific competitors you have in mind, it can be worth specifying them. Compensation in exchange for the non-compete is useful. Some companies state in the employment agreement that compensation for the non-compete has been factored specifically into the employee’s regular salary, while other companies will actually set aside fairly significant amounts of compensation to go to employees after their departure in exchange for a time in which the employee is expected not to work. For particularly sensitive research or management positions, a specific compensation in exchange for a non-compete period can be useful in demonstrating the conscious decision of the former employee to violate the contractual obligation. Non-competes should be reserved for key management, customer-service, sales, or technological positions, as Taiwan courts tend not to enforce such provisions for low-level administrative employees. In one extreme case we are aware of, a Taiwanese company was threatening a former secretary with a non-compete provision that included a penalty of more than a full year of her salary at the company. If you have concerns about trade secrets being disclosed to competitors by your lowest-level employees, a better solution is to more effectively control the flow of sensitive information internally.

Intellectual Property

Conclusions

Trade Secrets

It should be made clear to employees that their working time efforts go to the company, and many companies explicitly state in the employee agreements that the economic rights to any inventions, improvements, copyrightable works, etc. developed by the employee are to be treated as “works for hire” and belong to the employer. Companies should also monitor their own trademarks to ensure that there are no obvious gaps in coverage, as this is a fairly common way for disgruntled employees to try to get revenge. One of the standard clauses in the employment contract should state that even after termination of the employment relationship, the employee shall not file or register any trademarks, service marks, or domain names 44

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Good employment practices are not that difficult to implement, but they do require attention to advance planning, clear communications, and follow-up training. It’s a lot easier to deal with typical employer-employee problems proactively at the time of hiring, in the employment rules, and through regular communications than to try to clean up messes after the fact when relations have soured or distrust has seeped into the employer-employee relationship. — John Eastwood is a technology and employment lawyer at Eiger Law. He can be reached at john.eastwood@ eigerlaw.com.

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s e e i n g ta i w a n

Time for Celebration

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aiwan has tremendous natural beauty and fabulously diverse ecosystems. Its cities are filled with superb restaurants, alluring teahouses, ancient temples, and worldclass examples of modern architecture. But if anything makes Taiwan a unique and increasingly popular tourist destination, it is its culture and the ways these beliefs, customs, and attitudes are expressed. M o d e r n Ta i w a n e s e c u l t u r e draws on many traditions. The Austronesian origins of the island’s indigenous people are reflected in their languages, songs, and dances. Migrants from Fujian – the province of mainland China closest to Taiwan – began arriving in large numbers in the 17th century, bringing with them a pantheon of folk gods to which their descendants remain passionately committed. Japan ruled Taiwan between 1895 and 1945, and the Japanese legacy includes landmark public buildings and a fondness among the Taiwanese for Japanese cuisine. The million-plus mainland Chinese who relocated to Taiwan around 1949 impacted every facet of

society. Later, when the United States became Taiwan’s number-one trading partner, interest in Hollywood movies, Disney cartoons, and baseball surged. 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 especially interest them, the Taiwan Tourism Bureau is highlighting 42 world-class activities in 2013 as part of its “Time for Celebration” promotion. A year-long journey of excitement and color, from Taiwan’s north to its south, from remote mountain villages to outlying islands, “Time for Celebration” showcases Taiwan’s culinary delights, most loved sports, finest scenery, and greatest ecological treasures, as well as religious and

ethnic-minority customs. So that travelers can 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. Promotional materials include coupons for free gifts and discounts. Late spring is a splendid time to visit Taiwan, and not just because a slew of major events is going to be held in April, May, and June. In Taipei, daytime temperatures hover around 25 degrees Celsius (77 degrees Fahrenheit), while the south enjoys day after day of sunshine. Take an excursion into the countryside and you are sure to see wildflowers and butterflies in abundance. One part of the country that enjoys excellent weather year-round i s D a p e n g B a y, a l a g o o n o n t h e southwest coast. The 2013 Dapeng Bay International Regatta, which runs from April 13 to May 19, is part of a long-term plan to develop this 3.5km-long body of water into a world-class, world-renowned watersports venue. This goal is attainable because the lagoon has so many

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natural advantages. In addition to yearround sunshine, there are consistent winds. But because the mouth of the bay – now spanned by Asia’s longest moveable bridge – is narrow, the waves are minuscule, making conditions ideal for windsurfers and novice sailors. The regatta will feature a range of contests, from ultra-serious yacht races expected to attract foreign competitors to less-intense events designed to introduce recreational boating to a Taiwanese public that, until recently, associated the sea mainly with fishing. Taiwan is the biggest island on the Tropic of Cancer, which crosses the country just south of Chiayi City. About a third of Taiwan lies inside the tropics, while two-thirds is sub-tropical. To usher in the hot season, a series of food and cultural events called Summer Solstice at 23.5 North Latitude (the Tropic of Cancer) starts on June 21 – the longest day of the year – and continues for another 16 days. One of the venues will be the Solar Exploration Center, located precisely 23.5 degrees north of the equator and just a few meters west of Taiwan’s main north-south railway line. Tropic of Cancer-related monuments have stood here since 1908, when the Japanese colonial authorities then ruling Taiwan extended the railroad from Taiwan’s north this far south. Another event epitomizing summer is June’s Xiuguluan River Rafting Activity. An exuberant celebration of the great outdoors, rafting is an excellent way to see a 24km-long pristine stretch of east Taiwan’s Xiuguluan River. By 46

international standards, this waterway is “class two,” meaning it is calm enough to be safe for first-time rafters, yet has enough eddies, rapids, and drops to make floating fun. For those who prefer to engage with nature in a more contemplative manner, Taiwan offers world-class birdwatching. Including regular migrants and occasional vagrant birds, around 600 avian species have been recorded in Taiwan, an incredible number for a country of its size. Of these, 29 are endemic, meaning they can be seen nowhere else on Earth. The ROC offers ornithologists a chance to see one of the world’s rarest birds, the Chinese Crested Tern. This species, first recorded in the late 19th century, was long thought extinct, so its rediscovery in 2000 in the Matsu Islands (an ROC-administered archipelago northwest of Taiwan) set the birding world afire with excitement. June is when many of the world’s Chinese Crested Terns – which may number no more than 50 – return to Matsu to nest and breed. To make life easier for birders, the Matsu National Scenic Area Administration (www. matsu-nsa.gov.tw) is organizing TernWatching Tours. These boat excursions will go to the Matsu Islands Tern Refuge, one of the remotest parts of this unspoiled but fascinating corner of the ROC. Compared with Western countries, Taiwan has few sporting traditions, but each summer the island gets excited about a uniquely Chinese test of strength and speed: Dragon-boat races,

held to mark a festival on the fifth day of the fifth lunar month (which in 2013 falls on June 12). Legend associates these races with Qu Yuan, a poet, scholar, and official. In 278 BC, he leapt into a river in central China, holding a large stone to end his life in a protest against corruption. Local people, who revered him as a wise and just administrator, jumped into their boats and raced across the river in a bid to save him. Modern dragon-boat races are reenactments of this unsuccessful rescue attempt, it is said. Also, the associated custom of eating zongzi – tamale-like concoctions of sticky rice, pork, mushrooms, and peanuts – supposedly stems from the offerings distraught onlookers threw into the river, to placate the spirits dwelling beneath the surface. Races are held in all of Taiwan’s major cities, but the most exciting dragon-boat contest – several foreign teams are slated to participate – will be the Lukang Dragon Boat Festival. The host town, Lukang, was a busy seaport in the 18th century and has retained much of that era’s character. Anyone planning a visit to Taiwan should remember that the 42 events showcased by “Time for Celebration” are just a cross-section of the country’s astonishing cultural depth and wealth. 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).

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