2011vol.41No.12 by AmCham Taipei

INDUSTRY FOCUS A Report on the Automotive Sector

December 2011

Vo l u m e 4 1 N u m b e r 1 2

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

Gauging the Cross-Strait Economic Benefit 評估兩岸經貿利基

NT$150

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ISSUE SPONSOR

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CONTENTS

NEWS AND VIEWS

6 Editorial

9 Issues

Benchmarking Korea DECEmbEr 2011

VOlum E 41, NumbEr 12

一○○年十二月號

Publisher

Andrea Wu

發行人

求變求新

Mid-Point White Paper Review; Measuring Taiwan’s Competitiveness; Welcome Visa Waiver

追上南韓

7 Taiwan briefs By Jane Rickards

《台灣白皮書》期中檢討；剖析台灣競爭力；赴美免簽開放可期

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro Art Director/

沙蕩

COVEr SECTION

美術主任 /

Production Coordinator

Katia Chen Staff Writer

Jane Rickards

後製統籌

陳國梅採訪編輯

李可珍

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

Zep Hu

翻譯

胡立宗

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

18 Gauging the Cross-Strait Economic benefit

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

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 2011 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號印刷所：帆美印刷股份有限公司經銷商：台灣英文雜誌社台北市105敦化北路222巷19之1號1樓發行日期：中華民國一○○年十二月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Bill Wiseman Vice Chairmen/ William E. Bryson / David Pacey Treasurer: Carl Wegner Secretary/ William J. Farrell

27 Cross-Strait relations and the Next President

2010-2011 Governors: Michael Chu, Alan Eusden, Douglas R. Klein, Cindy Shueh Lin, David Pacey, Stephen Y. Tan, Lee Wood. 2011-2012 Governors: William E. Bryson, Alexander Duncan, Christopher Fay, William Farrell, Steven Lee, Neal Stovicek, Carl Wegner, Bill Wiseman. 2011 Supervisors: George Chao, Varaporn Dhamcharee, Jenny Lin, Ashvin Subramanyam, Ken Wu. COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Winnie Yu; Banking/ Victor Kuan; Capital Markets/ William Bryson, Jane Hwang, Jimin Kao; Chemical Manufacturers/ David Price; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Stephen Tan; Human Resources/ Richard Lin, Seraphim Mar, Ashvin Subramanyam; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Mark OÆDell, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Scott Meikle; Manufacturing/ George Chao, Albert Li; Marketing & Distribution/ Christopher Fay, Wei Hsiang, Gordon Stewart; Medical Devices/ Nelson Hsu, Daniel Yu; Pharmaceutical/ David Lin, Edgard Olaizola, Jun Hong Park; Real Estate/ Peter Crowhurst, Kristy Hwang; Retail/ Prudence Jang, Douglas Klein; Sustainable Development/ Eng Leong Goh, Kenny Jeng; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, R.C. Liang, Jeanne Wang, Deborah Yen; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Transportation/ Michael Chu; Travel & Tourism/ Pauline Leung, David Pacey.

評估兩岸經貿利基 With more than 3 million Chinese travelers due to visit Taiwan this year, tourism is the number-one example of how cross-Strait agreements in recent years have made a contribution to the Taiwan economy. ECFA may eventually prove to be equally important, but in the first year of the “earlyharvest” program, only a limited number of trade items were eligible for tariff-free treatment. Negotiations are still proceeding on an investment protection agreement and a full-scale free-trade pact for commodities.

By Jane Rickards 撰文／李可珍

TAIWAN lIVING

29 Western Faces, Taiwanese Schoolbooks

A growing number of parents are sending their children to local schools to develop their Chineselanguage skills. By Steven Crook

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decemb e r 2011 • Volume 41 n umbe r 12

INDuSTrY F

COVEr SPONSOr

CuS

Ford: bringing New Technologies for Quality, Green, Safe, and Smart Cars Ford Lio Ho Motor Company has been operating successfully in Taiwan for 39 years. With the 2-millionth vehicle milestone achieved at the end of 2010, FLH remains fully committed to the local auto industry and continues to focus on its position as a high quality, cost-efficient producer of vehicles, engines, and components.

Automotive Sector: Riding High

Under the One Ford plan, FLH continues to expand its business to build a Strong Business with Great products, and contribute to a Better World by leveraging Ford's global brand pillars in quality, green, safe, and smart vehicles.

34 Getting back into Gear By Don Shapiro 36 Ford Consolidates its market Presence By Don Shapiro 37 luxury models Still Zooming Ahead loan ratios By Alan Patterson

QUALITY: FLH has focused on continuous quality improvement since its establishment in Taiwan, putting customer satisfaction as its priority. With its successful manufacturing experience, it currently has over 1,300 disciplined employees who have been building high-quality products to satisfy local and overseas customers. GREEN: Ford is committed to offer customers fuel-economy vehicles in each segment. World-class Ford technologies such as EcoBoost and TDCi engines have been introduced to Taiwan in the Mondeo and Focus models, which remain the most fuel-efficient vehicles in their respective segments. Ford Lio Ho also took the lead in the local auto industry to support the Environmental Protection Agency’s carbon-reduction initiative by promised to decrease CO2 emissions by at least 15% by 2015. The initiative is part of FLH's commitment for a sustainable business in Taiwan. SAFETY: Ford's world-class technologies in safety features provide our consumers with peace of mind while driving on the road. Ford Lio Ho will continue to satisfy consumers by introducing products with new safety features.

40 Taiwan Seeks major role in Electric Vehicles By Timothy Ferry 42 EVs: Donald Wu Does it His Way By Timothy Ferry 44 Good Potential for Auto Electronics By Timothy Ferry

rEFErENCE

SMART: While offering safe, high-performing vehicles that also deliver outstanding fuel economy, FLH has also been aggressively enhancing customers' “fun-to-drive” experience. Ford’s use of affordable smart technology helps make driving a pleasure. Since its establishment in Taiwan, FLH has been contributing to a better world by engaging in a variety of programs to serve the community. The Ford Driving Skills for Life program provides training in habits and techniques for safe and environmentally friendly driving. With support from the Ministry of Transportation and Communications, the program has attracted thousands of participants over the past three years, including more than 1,000 so far this year. For its various community initiatives, FLH received CommonWealth Magazine’s 2011 Excellence in CSR award.

47 An index to TOPICS articles in 2011.

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E d i t o r i a l 求變求新追上南韓界銀行「經商環境報告」2012

世

年共評比183個經濟體的競爭力表現，也特別針對南韓做了專題

研究，凸顯韓國過去數年的顯著進步。南韓今年首度進入前十名，自去年的15 名一躍而為全球第八名。相較之下，台灣為第25名（關於台灣的情形，請見本期雜誌Issue部份）。台灣業者與官員近來高度關切南韓經濟表現。南韓與台灣長期激烈競逐國際出口市場，而兩國的國內生產毛額（G D P）與外銷總額直到十多年前才出現落差。自此之後，南韓逐漸拉開差距，而初期的主因在於南韓國內市場較大，以及大型廠商能夠建立國際品牌。台韓間的差距仍在擴大，現在的動力則是政治領袖的堅定決心，竭盡所能使南韓成為經貿重鎮。不顧國內反彈聲浪，南韓已在雙邊自由貿易協定（FTA）上邁出大步，與歐盟的FTA於 2011年七月生效，與美國的F T A則僅待南韓國會批准。韓歐與韓美F T A生效後，不僅絕大多數產品可享零關稅，非關稅貿易障礙也將顯著降低，使南韓產品進入歐美兩大市場時，具有台灣沒有的優勢。完成F T A談判並非易事，過去幾任政府必須堅定貿易自由化的立場，以對抗來自農牧、汽車等重要產業的反對聲浪。世銀專題研究同時凸顯南韓近年來推動的多元制度改革，如何成功改善經商環境，特別是中小企業。總統府國家競爭力委員會2008年起每兩個月開會一次，官員、企業與工會領袖、學者共同擬定經商環境改善之道，包括簡化行政程序、降低相關成本。委員會的成果反映在南韓的投資吸引力越來越強。台灣不能坐視差距拉大。台北市美國商會深切期待，2012年新任總統能夠援引南韓經驗，致力行政、法制、政策改革，確保台灣經濟的穩健發展。改革成敗取決於政治決心。台灣需要具備充分勇氣，願意挑戰難題，且能團結民心的政治領袖。

Benchmarking Korea

hen the World Bank recently released its 2012 Doing Business report rating the competitiveness of 183 economies, it included a special case study saluting South Korea for the striking improvements in its business climate over the past several years. Korea this year moved into eighth place in the Doing Business survey – up from No. 15 last year – the first time it has made it into the global top ten. By comparison, Taiwan was No. 25 (see the Issues section of this magazine for a fuller discussion of how Taiwan fared). Korea is much on the minds of industrialists and government officials in this country these days. Long Taiwan’s keenest direct competitor in international export markets, Korea until a few decades ago was basically neck and neck with Taiwan in terms of GDP and export volume. Then the Koreans gradually surged ahead, initially due mainly to their bigger domestic market and the ability of their larger-sized corporations to establish major international brands. Now the gap is widening further, and this time much of the credit goes to the staunch determination of Korea’s political leaders to turn their economy into a global powerhouse. Overcoming strong domestic protectionist opposition, Seoul has completed a wideranging free trade agreement (FTA) with the European Union that came into effect this past July, and it has also successfully negotiated an FTA with the United States that has been ratified by the U.S. Congress, though not yet by the Korean legislature. Under these agreements, tariffs will be eliminated on nearly all products, and non-tariff barriers will also be substantially reduced, giving Korean goods a significant advantage against Taiwanese counterparts in two of the world's most important markets. To accomplish those breakthroughs, successive Korean governments had to be willing to expend their political capital to surmount strong resistance to liberalized trade among a number of influential sectors of the economy, including the agricultural lobby and the auto industry. The World Bank case study also shows how the Korean government in recent years drove a program of “multipronged regulatory reform” to increase the ease of doing business, especially for small and medium enterprises. A Presidential Council on National Competitiveness has been meeting twice monthly since 2008 to bring together government officials, business and labor leaders, and academics to find ways to improve the business environment by simplifying administrative procedures and reducing related costs. The fruits of that project can be seen in Korea’s impressive leap forward as a welcoming location for business. Taiwan cannot afford to be left behind. AmCham urges the winner of the upcoming presidential election to follow Korea’s example, devoting his or her term of office to putting in place the administrative, legal, and policy reforms to assure a sound economic future for Taiwan. Success or failure in that effort will be largely a matter of political will. Taiwan needs political leaders with the courage to take on big challenges and the ability to rally public support behind their vision.

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BY JA N E R I CKA R D S

“deteriorating,” DGBAS also modified its forecast for next year from the 4.38% it announced in October to 4.19%. In early December, the Asian Development Bank came out with its latest forecasts for Taiwan’s economic growth – 4.6% for this year, down from a September figure of 4.8%, and 4.1% in 2012, down from September’s 4.7%. In other new forecasts, the Chung-hua Institution for Economic Research lowered its economic forecast for 2012 to 4.07%, Goldman Sachs to 3%, and UBS Investment Research to a lowly 1.5%. Exports in November showed slowing growth, as consumers of electronics in Europe and the United States tightened their belts in the normally flourishing Christmas season. According to Customs figures,

MACROECONOMICS

GROWTH FORECASTS REVISED DOWNWARD Reflecting rising concern about the impact of the European debt crisis and persisting high U.S. unemployment on the global economy, local and international forecasting organizations have been revising their GDP growth projections for Taiwan downward – but not by major proportions. The government’s Directorate General of Budget, Accounting and Statistics in late November released a forecast that Taiwan’s economic growth this year would come to 4.51%, down slightly from an October prediction of 4.56%, which itself was a drop from an earlier figure. Describing global economic conditions as

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

2011

23.57 33.63

23.5 26.5

28.8 26.9

Europe

23 28.8

U.S.

2010

2011

2010

2011

Imports

259.98 284.35

2011

TOTAL

292.2

2010

30.29 46.59

16.82

2011

26.3 37.8

47.5 16.6

48.32

41.93

104.9 34

2010

ASEAN

250.8

Japan

114.53

HK/China

Exports

2010

2011

Unit: US$BN Source: BOFT

Taiwan stock exchange index & value

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

8000

130

7750

120

7500

110

7250

100

7000

6750

6500

6250

6000

5750

November chart source: TwSE

Unit: NT D billion

exports were up a mere 1.3%, to US$24.68 billion, over the same month of last year – but down nearly 9% when compared with October figures – while imports at US$21.47 billion were lower by 10.4% yearon-year. November’s trade balance of US$3.2 billion was still favorable. Export orders, an indicator of trends in the next few months, were slightly better, showing 4.38% growth year-on-year to reach US$37.21 billion. Unemployment rose to 4.3% in October, up from 4.28% in September. The Central Bank, economists say, is expected to keep interest rates unchanged over the coming months. But in early December, the government unveiled the first stage of a new stimulus effort. Vice Premier

Sean Chen said the government would expand investment in public projects and help industries create new jobs. In particular, the government will install hundreds of thousands of LED street lights across the island to help the slumping LED industry, and will also subsidize purchases of energysaving home appliances. The government said it would closely monitor the impact of the economic slowdown at weekly highlevel meetings, while looking to stabilize financial markets and keep a check on inflation. CROSS-STRAIT

CHINESE EYE TAIWAN’S PRESIDENTIAL ELECTION In an apparent effort to get to see Taiwan’s upcoming presidential elections

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with his own eyes, 35-year old Guo Zhiyong, a native of Xinjiang Province far in the interior, set off from coastal Fujian Province on a flotation device made from bamboo and Styrofoam. After seven hours in the sea, he had only reached as far as the outlying island of Kinmen, where he was apprehended by the Taiwanese Coast Guard. “I want to see your elections, with campaign flags flying all over the place,” he told local reporters after his arrest. The televised presidential debates in Taiwan between President Ma Ying-jeou, Democratic Progressive Party candidate Tsai Ing-wen, and People First Party candidate James Soong were also viewed by millions of mainlanders over the Internet, even though many of the video links were blocked by government censors.

Large numbers of approving comments were posted on Chinese microblogging sites, local and international media reported. DOMESTIC

THREE PRESIDENTIAL CANDIDATES DEBATE ON TELEVISION Presidential candidates Ma, Tsai, and Soong faced off in the first televised debate in early December, taking questions from leading Taiwanese journalists and from one another. Election observers expressed surprise that Ma’s attacks on Tsai were more aggressive than expected, while Soong’s stance towards Ma appeared more conciliatory. Soong, a former high-ranking Kuomintang official who now leads the People First Party, is known to heartily dislike Ma and was expected to

CHRISTMAS PIGGIES — Tsai Ing-wen’s supporters provided encouragement, and financial assistance, by contributing money-filled piggy banks to the DPP.

TAIWAN JIA YO—President Ma Ying-jeou on the campaign trail, accompanied by popular TV personality Pai Ping-Ping, left.

photo : cna

vehemently assail the president. But his criticisms were rather moderate and he praised some of Ma’s China policies, such as the Taiwan-China Economic Cooperation Framework Agreement (ECFA). Besides favoring warmer ties with China, Soong also said more attention should be given to Taiwan’s middle class and to small and medium industries. Ma and Tsai took an approach of tacitly declaring a truce with Soong, pointing out elements of Soong’s arguments they agreed with and thus marginalizing him from their cross-fire as they attacked each other. Ma began by likening Tsai to former DPP president Chen Shui-bian, who is now jailed for massive corruption. “Are we willing to backpedal to the days of the DPP administration when the government was corrupt and the coun-

try was isolated? None of us is willing,” Ma said, to which Tsai retorted: “The one who is facing you is Tsai Ing-wen, not Chen Shui-bian.” Ma also touted the achievements of his administration, noting that the ECFA signing had led to discussions on similar free trade-style agreements with Singapore and New Zealand and an investment pact signed with Japan. Tsai replied that despite these steps, people still find it hard to find jobs, and housing prices are soaring while salaries are stagnating. Tsai accused Ma’s administration of being wasteful, saying it had been “spending, spending and spending more,” incurring a debt of NT$1.3 trillion. Tsai also said that the “1992 Consensus” – in which Taipei and Beijing allegedly both accepted that they are part of “one China” but agreed

photo : cna

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to disagree on the definition of that concept – was a KMT invention. Acceptance of the 1992 consensus is believed to be Beijing’s precondition for negotiating with a Taiwanese government. Ma described Tsai’s alternative proposal of democratically forging a “Taiwan consensus” for dealing with China as “an empty idea that no one understands,” warning that it could cause instability and put Taiwan in danger.

PUBLIC REACTION TO DEBATES MIXED Polls after the debate showed mixed results, with some indicating that the majority of the viewers rated Ma’s performance the best and some Tsai’s. A TVBS survey of over 1,000 people showed that 30% considered Ma the winner of the debate, followed by Tsai at 27% and Soong 20%. The same poll found that 38% of respondents said they would vote for Ma in the presidential election, compared with 32% for Tsai and 12% for Soong. Pro-opposition analysts argued to TOPICS that Ma showed weakness in spending so much time criticizing the DPP, whereas normally the attack role is taken by the opposition towards the incumbent government, and added that Ma did not reveal much new

vision for Taiwan. ProKMT supporters generally said Ma argued more successfully, with a better debating style. The midDecember debate between vice presidential candidates, the first-ever such debate for Taiwan, saw the DPP’s Su Jia-chyuan put in a more polished and focused performance than Tsai had. In the TVBS poll of over 1,000 members of the public polled after this debate, 39% said Su’s performance was best, 38% gave the nod to KMT vice presidential candidate and incumbent premier Wu Den-yih, and 6% favored Soong’s running mate Lin Ruey-shiung. The same TVBS poll also found support for Tsai and Ma locked at 39% each in one of Taiwan’s tightestever elections. The final debate between presidential candidates was held December 17.

ing the press that he was greatly impressed with the facility’s safety measures. He also gave a speech at National Taiwan University entitled “Tackling Future Energy Challenges.” The American Institute in Taiwan said in a statement that Poneman was seeking to promote greater public and private-sector cooperation between Taiwan and the United States in fields such as scientific research, nuclear energy, and renewable energy technologies. His visit followed that of another high-level American visitor, Rajiv Shah, administrator of the U.S. Agency for International Development, in early December. Shah said that Taiwan had a role to play in helping Washington and other governments assist disaster victims and the poor around the world. He also met with President Ma and spoke with representatives from Taiwan's

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

HIGH-LEVEL VISITS BY U.S. OFFICIALS In the highest-level visit to Taiwan by an American official in over a decade, U.S. Deputy Secretary of Energy Daniel B. Poneman in mid-December included Taipei as part of an Asian tour. Poneman met with President Ma and visited Taiwan’s Kuosheng nuclear power plant, later tell-

foreign, health, and defense ministries on finding ways for the United States and Taiwan to work together on issues including disaster response, healthcare, and global food security. He told the local media the United States would like to cooperate more with Taiwan in delivering humanitarian assistance, eliminating hunger and child malnutrition, and investing in healthcare to reduce infectious diseases. In a speech at the AIT’s “American Footprints in Taiwan” exhibition, Shah said that Taiwan had transformed itself from a country receiving U.S. aid to a partner with the United States in development cooperation. The assistance the United States offered to Taiwan and South Korea in the 1950s and 1960s cost less than 1% of its national budget but “have paid tremendous dividends,” he said.

Economic Indicators Unit: US$ Billion Current Account Balance (2011 Q3) 10.21 Foreign Trade Balance (Jan-Nov) 24.36 New Export Orders (Nov) 36.65 Foreign Exchange Reserves (end Nov) 387.97 Unemployment (Oct) 4.30% Overnight Interest Rate (Nov 30) 0.397% Economic Growth Rate (2011 Q3p) 3.42% Change in Industrial Output y-on-y (Oct)p 1.41% Change in Industrial Output y.-on.y (Jan-Oct) 7.09% Change in Consumer Price Index y-on-y (Nov) 1.22% Change in Consumer Price Index y-on-y (Jan-Nov) 1.40% Note:

p: preliminary

Year Earlier 8.99 21.77 35.65 379.26 4.92% 0.230% 9.80% 14.39% 28.20% 1.53% 0.94%

SOURCES: MOEA, DGBAS, CBC, BOFT

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SLIGHT IMPROVEMENT IN CORRUPTION INDEX Taiwan this year ranked 32nd out of 183 countries and territories in terms of clean governance, moving up one place from its 2010 ranking, according to Berlin-based Transparency International’s 2011 Corruption Perceptions Index, which ranks countries and territories according to their perceived levels of publicsector corruption. A score of 10 indicates a very clean government while 0 represents highly corrupt. Taiwan ranked 6.1, an advance of 0.3 points from the year before, beating Israel at 5.8, South Korea at 5.4, Italy at 3.9, and China at 3.6. It was still far behind the winner New Zealand with a score of 9.5 and runner-up Denmark with 9.4. BUSINESS

DELTA ELECTRONICS EXPANDS IN CHINA Taiwan’s Delta Electronics, which specializes in power management solutions, is expanding its presence in China in order to promote brand awareness of its products on the mainland, the Taiwan External Trade Development Council (TAITRA) said in a news release. The Delta Group recently announced the opening of an oper10

the Taiwanese company assembling and testing DRAM memory chips for Elpida.

CONSTRUCTIONS STARTS ON NEW TSMC PROJECT

GROUNDBREAKING — Chairman Morris Chang and Economics Minister Shih Yen-shiang wield shovels as TSMC starts construction on a new production facility in the Central Taiwan Science Park. photo : cna

ations center and R&D building in Shanghai, which was constructed using modern green technology such as indoor LED lighting, rainwater recycling facilities, and a rooftop solar energy system from Delta. “China has already become the largest manufacturing base for global new energy, electrical, and electronics industries,” said Delta’s founder and chairman Bruce Cheng, adding that the new Delta Shanghai Operations Center would help speed up Delta’s response time to developments in the Chinese market.

ELPIDA TO SELL UNIT TO TAIWAN PARTNER Elpida Memory Inc., Japan’s biggest maker of dynamic-random-access (DRAM) or memory chips, in late November agreed to sell preferred stock in

its subsidiary EBS Inc. to Taiwanese semiconductor company Walton Advanced Engineering for US$50 million, Elpida said in a statement in late November. The move is expected to support Elpida’s flagging business, amid poor market conditions, with DRAM prices having fallen nearly 50% over the past half year, according to Japan’s Nikkei. The companies expect to complete the share transfer by midDecember. “The share transfer will help boost Elpida’s financial strength. In the face of the severe DRAM market and turmoil in global financial markets, including record-breaking yen appreciation, Elpida is looking at multiple ways to improve its financial position,” the company said. Kaohsiung-based Walton and Elpida have a longstanding relationship, with

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract microchip maker, said in early December that its new plant in the Central Taiwan Science Park in Taichung would create at least 8,000 jobs and generate US$3 billion in annual revenue starting next year. The announcement was made during a groundbreaking ceremony for the third-phase expansion of the plant, known as Fab 15. The company said the project represents a new milestone in its continued investment in Taiwan, and TSMC chairman Morris Chang also stressed the company’s “strong foundation in Taiwan.” TSMC began construction of Fab 15 in July 2010 and said that operations at the first two portions of the plant will begin production next year. The company has said total investment in the plant, which has 1,400 employees, will exceed US$10 billion. The fab is designed to be environmentally friendly, with energy conservation and pollution control technology to recycle rainwater and generate power from solar energy.

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Issue s

Mid-Point White Paper Review More AmCham issues appear headed for resolution than in 2010-2011.

ach spring when AmCham Taipei releases its Taiwan White Paper, part of the exercise is to review the progress of issues raised in the previous year’s edition. This year the Chamber was dismayed to find that only two of the 114 issues covered in the 2010 White Paper could be checked off as “resolved” – the lowest number since the tracking began in 2004. The number of issues rated by AmCham’s committees as still unresolved but having received “satisfactory follow-up” – 12 – was also an all-time low, as was the 12.3% of all issues that could be rated as either solved or enjoying satisfactory follow-up. Now, a mid-cycle review of the 2011 White Paper issues reveals at least a somewhat better performance this year, as three items can already be marked as resolved, with half a year still to go: Banking. While the White Paper was at the printer in late May, the Financial Supervisory Commission (FSC) announced that overseas branches and offshore banking units (OBUs) of Taiwanese banks would be allowed to conduct Renminbi (RMB) settlement business for cross-border trading. The policy change, addressing Issue 3 in the AmCham Banking Committee’s position paper, will help financial institutions here to remain competitive with banks in other countries. Insurance. The Legislative Yuan last month amended Article 146-4 of the Insurance Act to authorize the Insurance Bureau of the FSC to permit companies selling policies denominated in foreign currencies to make foreign-currency investments beyond the normal limit of 45% of their liabilities, provided they meet certain requirements to be set by the FSC. The change, enabling insurers to implement proper matching of assets and liabilities, had been requested in the AmCham Insurance Committee’s position paper since 2007. Although there is still some concern about how the implementation regulations will be worded, the Committee regards passage of the amendment as a major step forward. Sustainable Development. The Committee reports that the government has taken the steps it recommended to “promote sustainable public infrastructure projects.” One measure was to establish regulations and authorize certificating parties to certify new construction materials and technologies that have been proven effective in advanced countries for use in public projects in Taiwan. In addition, the Public Construction Commission has defined in the enforcement rules of the Government Procurement Act that project owners and designers shall be exempt from liability as a result of incorporating certified new materials and technologies into public infrastructure projects. On various other issues, some AmCham committees report concrete progress or partial resolution. A sampling: Human Resources. While not going so far as to “eliminate the

《台灣白皮書》期中檢討美國商會2011年提出之白皮書議題，可望獲得解決的比例高於2010年度

台

北市美國商會每年上半年準備年度《台灣白皮書》時，都會重新審視前一年度產業相關議題的進展，商會於2011年非常訝異地發現，2010年度114項議題竟然只有兩項可以列為「已解決」，創2004年開始追蹤以後的新低。而商會各委員會認為「尚未解決但進度令人滿意」也只有12項，同樣創下歷史新低。整體而言，只有 12.3%的議題是已解決或已在處理中。歲末年初之際，2011年度產業議題的期中檢討顯示，今年的進展應該會比去年樂觀，因為三項議題在半年之間已經獲得解決：銀行：白皮書五月付印之際，行政院金融監督管理委員會宣布，台灣金融機構的海外分行與境外金融中心（OBU）可望開辦跨境貿易的人民幣結算業務。如同美國商會銀行委員會在產業議題第三項所表明的，金管政策的放寬將有助金融機構維持國際競爭力。保險：立法院上個月修正通過保險法第146條之 4，授權金管會保險局在業者滿足特定條件下，允許外幣計價非投資型保單的承作公司，得以不受外幣資產需低於投資總額45%的限制。美國商會保險委員會自2007年開始就持續要求修法，而在法令變更後，保險業者將更可合理配置資產與負債。雖然施行細則的明確條文尚未定案，但保險委員會相信保險法的修正確實是重要的一步。永續發展：永續發展委員會指出，政府確實已經採納產業議題所建議的行動，以落實永續性的公共基礎建設。其中一項是制定規範並授權認證機構，對於已被先進國家證明實際效益的新式建材與技

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Issues two-year work experience requirement” for hiring foreign professionals as suggested by the committee, the Council of Labor Affairs said it would consider companies’ applications to waive that requirement on a case-by-case basis. Insurance. The Executive Yuan approved an amendment to the Labor Pension Act to remove provisions requiring consent and participation by at least 50% of employees before life insurers could offer annuity insurance products in a given workplace. The proposed amendment was sent to the Legislative Yuan in November. But the bill does not address two other restrictions standing in the way of wider use of annuities – the stipulation that the workplace employ at least 200 people and that the plan provide a guaranteed minimum return equal to or greater than the two-year time-deposit rate. Intellectual Property & Licensing. The Patent Law and Trademark Law were revised during the past half-year, and although the amendments did not incorporate most of the specific changes requested by the committee, they did provide badly needed modernization and streamlined the process involved. The committee expressed regret that the revised Patent Law did not call for stricter penalties for offenders and that the new version of the Trademark Law did not offer greater protection in the areas of “passing off” and “trade dress.” In addition, in a December 1 meeting with the AmCham committee, Director-General Wang Mei-hua of the Taiwan Intellectual Property Office (TIPO) provided assurances that some of the committee’s main concerns were already on the agency’s priority list for attention during 2012. These include better coordination with Customs to deal with counterfeit goods smuggled in from China in small packages, adopting “Internet Border Control” measures to block access to illegal website engaged in serious infringement activity, and improving the efficiency of the Intellectual Property Court. Already this year, the number of IP Court judges was increased from 9 to 12. Medical Devices. The committee reports receiving verbal agreement from the Taiwan Food & Drug Administration (TFDA) that it will redefine the “manufacturer” of a product as the company that has legal liability for the item rather than the factory where the production was conducted (often on a contract basis). The committee is now awaiting formal written confirmation of the change. Retail. Issue 3 in this section was entitled “Maintain reasonable regulatory standards for toothpaste products,” and consisted of two parts. Part I dealt with a proposed amendment to the National Standard that would have required the placement of Chinese labeling on the toothpaste tube itself in addition to the existing Taiwan-specific labeling on the outer package. Eventually that plan was dropped by the Ministry of Economic Affairs after it understood the difficulty in compliance for international brands, which source the same tubes for use among a number of markets in the region. It would also have placed such a strict limit on the permissible concentration of fluoride that some of the most popular sizes of containers could not be sold on the domestic market. Still unsettled, however, is Part II, a proposal by the TFDA to redefine toothpaste from a general product to a cosmetic, which entails more stringent regulation. A bill to make that change has not yet

術，得以核發認證、用於台灣的公共建設。此外，行政院公共工程委員會也在政府採購法的施行細則中明訂，因公共工程納入獲認證之新式材料與技術所衍生的責任，工程業主與設計者得以豁免。其他議題上，部分委員會認為已有具體進展或是已獲局部解決，如：人力資源：針對外籍專業人才赴台就業必須具備兩年工作經驗，雖然政府並未完全採納人力資源委員會予以廢除的建議，但行政院勞工委員會已經回應，願意依個案狀況放寬上述限制。保險：行政院已經同意修改勞工退休金條例，使特定公司的年金保險計畫不必再獲得50%以上勞工的同意並且參加。修正草案已在11月送交立法院。但草案仍保留另外兩項限制條款：一，投保公司必須僱用200名以上勞工；二，最低保證收益需達兩年定存利率。智慧財產權與授權：專利法與商標法已在過去半年獲得修改，雖然修正案並未納入委員會的多數建議，但仍稱得上是更為現代化，而相關程序也獲得簡化。委員會遺憾的是，專利法仍未對侵權者制定更為嚴厲的罰則，而商標法也未強化對商標誤導及外觀包裝的保護。此外，經濟部智慧財產局局長王美花12月1日與委員會開會時保證，委員會部分主要顧慮已經列為智財局2012年的優先注意事項，包括與海關加強合作、查緝以小包裝自中國走私進口的仿冒品；採取網路邊界管制措施，以防堵嚴重侵權的非法網站；以及改善智慧財產法院的效能。2011年內，智財法院的法官已經由九人增加至12人。醫療器材：美國商會醫療器材委員會表示，已經接到行政院衛生署食品藥物管理局的口頭保證，產品製造商的定義將作修改，使公司而非工廠需對產品負起法律責任，因為工廠很多時候只是承包者。委員會正在等待正式書面通知。零售：零售委員會產業議題第二項的標題為「維持牙膏產品合理的法規架構」，而內容分為兩大部分，首先是呼籲放棄修改牙膏的國家標準，不應要求外包裝支盒與原始容器都需印製繁體中文的產品資訊。經濟部後來決定放棄，因為瞭解到國際品牌確有配合上的困難，因為廠商都是以相同軟管同時供應多個國家市場。其次，經濟部原本也打算限制單元容器內的氟化物總量，導致台灣消費者最習慣的包裝恐將無法販售。此一部分的問題仍未解決，因為食品藥物管理局希望將牙膏的分類由一般商品

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Issue s

been voted on by the Legislative Yuan, but is expected to be on the agenda again next year. Chemical Manufacturers. Following President Ma’s decision last April to cancel the proposed Kuokuang petrochemical project for environmental reasons, the committee expressed concern in the White Paper about whether the industry would have a sufficient supply of feedstock to meet its development needs. As no other suitable site is available in Taiwan, a proposal is moving forward for a consortium of Taiwanese petrochemical companies to joint venture with China’s state-owned Sinopec Corp. to build a naphtha cracker on the mainland, with the Taiwan investors to have management control and the right to ship a major portion of the output back to Taiwan. Chiropractic. The Department of Health has requested that the Ministry of Education study the establishment of a department of chiropractic in a domestic medical college as a step toward the eventual official recognition and licensing of doctors of chiropractic in Taiwan. In some other industry sectors, however, AmCham committees were dismayed by the lack of progress – or even negative results – over the past half year: Infrastructure. In its issue “Reconsider the Energy Development Guideline,” the committee argued that the CO2 reduction targets adopted by the government are highly unrealistic and should be re-evaluated. Instead, the Ma administration has recommitted itself to reaching those targets. At the same time, the government has reacted to the Fukushima disaster in Japan by stating its intention to phase out Taiwan’s existing nuclear plants, which would put an even greater burden on the energy mix without providing a practical solution. Banking. The position paper urged the government to “exercise caution in requiring the relocation of data centers of Taiwan” in view of the high cost of such relocation, the global trend toward centralized facilities, and the satisfactory level of data security already in place. But after months of discussion with the five foreign banks that have set up (or are in the process of setting up) Taiwan subsidiaries after acquiring local banks, the FSC insisted that they conduct their data-processing onshore. The Commission, however, did agree to give the banks four years to comply and to limit the request to consumer banking operations. What came as a surprise when the final policy was announced was that it is being applied not only to those subsidiaries, but to foreign bank branches that had not been part of the discussion. That disclosure added to previous complaints that the entire decision-making process had been non-transparent. Pharmaceuticals. When a proposal to establish a Drug Expenditure Target (DET) system was passed as part of the secondgeneration National Health Insurance Act, the committee urged the government to implement the system immediately instead of waiting until 2012, and to drop plans for carrying out the 7th Price Volume Survey (PVS) and subsequent price cuts. On the contrary, the timing and methodology for DET have still not been decided upon, and the 7th PVS was conducted this fall, resulting in an estimated market impact of more than NT$12 billion (US$400 million). That comes after the six previous rounds of price cuts have already made patented drug prices in Taiwan so low that

改為化粧品，使得相關規定更為嚴格。此一更動的法源依據化粧品衛生管理條例尚未獲得立院通過，但明年仍可能納入議程。化學製造商：馬英九總統基於環保因素決定中止國光石化新設廠房，美國商會化學製造商委員會曾於白皮書中表達擔憂，認為原料供給可能難以滿足需求。由於台灣沒有其他適合建廠的地點，國內石化業者因而可能與對岸的中國石油化工集團合作，在中國設立輕油裂解廠；而台灣股東的條件是主導公司管理，以及有權運回多數的成品。脊骨神經醫學：衛生署已經要求教育部，研究國內醫學院設立脊骨神經醫學系的可行性，以做為未來正式承認及核發證照的基礎。然而，部分委員會則失望於過去半年的缺乏進展，甚至是倒退：基礎建設：委員會在產業議題中提出，政府應該重新考量能源發展綱要，因為二氧化碳減量目標不切實際、亟需重新審視。但馬政府仍然堅持原本的減碳目標。而且，由於日本福島核災，政府更宣示逐步停用核能發電，未來可能因缺乏務實替代方案而衝擊合理供電能力。銀行：銀行委員會呼籲，政府宜審慎思考跨國銀行境外資訊中心遷入台灣的衝擊，包括增加營運成本、違反集中運作的國際趨勢、以及浪費現有的資料安全維護機制。但是，因為併購國內銀行而已經或可能設立台灣子公司的五家外資銀行，在與行政院金融監督管理委員會密集討論後，仍然無法改變金管會要求資訊中心遷入台灣的決定。不過，金管會同意給予四年緩衝期，並將受影響範圍限於消費金融業務。但當最終方案公布時，卻使業者都大吃一驚，因為新制不但適用於子行，還納入從未出現在討論過程的外銀在台分行。此一狀況更加深業界對於主管機關決策過程不夠透明的印象。製藥：藥品費用支出目標（D E T）新制確定納入二代健保後，製藥委員會當即呼籲政府立即實施、不要等到2012年，同時停止第七次藥價調查（PVS）及確定隨之而來的給付調降。事與願違， DET的實施時間與方式迄今仍未定案，但第七次藥價調查已在秋季進行，預估對市場藥價總額之影響可能達新台幣120億元。前六次給付調降已經使台灣市場的新藥價格低到不能再低，導致藥廠不願引

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Issues manufacturers hesitate to launch new products here, affecting patient access to medication. “On the one hand, it’s good that we’ve already passed last year’s low-water mark for success with White Paper issues,” says AmCham President Andrea Wu. “On the other, we wish we could be making even more progress. I hope the government will again review the status of the issues, especially the ones designated in the ‘For Early Action’ section of the White Paper, to see what else can be accomplished in the next few months.” —– By Don Shapiro

進新品，最終受到影響的還是病患的用藥權益。商會執行長吳王小珍表示，「從好的一面來說，在議題解決上半年內就已經完成比去年整年還多的項目；但從好還要更好的角度而言，商會期待接下來的半年能有更多進展」，「商會盼望政府能夠重新審視產業議題的處理進度，特別是白皮書中『宜優先解決議題』列出的問題，瞭解能在未來幾個月內完成的改革」。

—撰文／沙蕩

Measuring Taiwan’s Competitiveness The World Bank’s annual Doing Business survey helps spot strengths and weaknesses.

he annual Doing Business report issued by the World Bank provides governments with an invaluable assessment of their countries’ state of competitiveness. Unlike many such international surveys, it focuses on practical, measurable factors such as the amount of time needed to obtain a construction permit or file a tax return, or the degree of legal protection for minority shareholders. Taiwan has made good use of these findings over the past few years to improve its business environment, and as a result has moved steadily up in its ranking. In the recently published Doing Business report for 2012, Taiwan – referred to as Taiwan, China by the World Bank – stood in 25th place out of the 183 countries surveyed. Although that was listed as a drop of one place from the 24th position for 2011, last year’s report in fact had ranked Taiwan as number 33. Since then, changes to the methodology brought about a recalculation. In either case, this country appears to have made some significant strides since its 2009 ranking way down in number 61. The most impressive improvement came in the category of Starting a Business, which saw Taiwan climb from an embarrassing 119th place three years ago to come in as number 16 for 2012. During that time, the number of days needed to complete the process of opening a new business was cut from 42 to only 10. The report cites the introduction this year of an “online one-stop shop for business registration” as a significant reform. As was the case last year, the top three spots on the global list were held by Singapore, Hong Kong, and New Zealand. This time, the United States moved up to the fourth spot and Denmark to fifth, while the United Kingdom fell from fourth to seventh. Besides Singapore and Hong Kong, other Asian countries ranking higher than Taiwan were Korea (8), Thailand (17), Malaysia (18), and Japan (20). China was number 91. Korea entered the global top 10

剖析台灣競爭力世銀經商環境報告既報喜也報憂

世

界銀行每年公布的「經商環境報告」是政府瞭解本國競爭力的重要參考。與許多全球性調查不同，經商報告側重實務面、可量化的評比標準，例如取得建築許可、申報營業所得所需要的時日，或是對持股較少之股東的法律保障程度。台灣過去幾年確實充分參考經商報告，而經營環境的改善也反映在排名的持續提升上。最近公布的 2012年度報告，雖然依舊稱「中國．台灣」，但台灣的排名已經躍居183個受調國家中的第25名。雖然最新報告因為評比方式改變，將台灣2011年的排名改為第24名，但2011年報告的原始排名，台灣為第33名。不論如何，台灣現在的表現都優於2009年的第61 名。進步最多的項目是「新創事業」，台灣在三年前排名全球第119名，現在已是全球第16名。三年之間，新創事業申辦程序的總天數已由42天降至10 天。今年的報告特別引述網路申辦系統做為台灣年度重要改革之一。

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Issue s

for the first time, and its “multi-pronged regulatory reform” was praised in a special case study included in the report. The category in which Taiwan fared the best was Getting Electricity, in which its third place ranking was exceeded only by Iceland and Germany. To the credit of the Taiwan Power Co., arranging for an electrical power connection to a new warehouse facility can be done in only 23 days and at a reasonable cost. Bringing down Taiwan’s overall score were rankings in 88th place for Enforcing Contracts, 87th for Dealing with Construction Permits, and 79th for Protecting Investors. Under Enforcing Contracts, for example, it was found that resolving a commercial dispute through the courts typically involves 45 procedures over 510 days, at a cost of 17.7% of the claim. In Korea, by contrast, the corresponding figures are 33 procedures, 230 days, and 10.3% of the claim. The score for protecting minority investors was based on detailed surveys of corporate and securities lawyers, and an examination of securities regulations, company laws, and court rules of evidence. Taiwan’s performance was close to the average for East Asia and the Pacific, but well below such locations as New Zealand and Singapore. “Overall, AmCham is pleased to see the progress Taiwan has made, but clearly we ought to be doing even better,” says AmCham Taipei President Andrea Wu. “The Doing Business report helps to spotlight the areas of weakness that need more work.” —– By Don Shapiro

就整體排名而言，前三名依舊是新加坡、香港、紐西蘭。此外，美國第四、丹麥第五，而英國自第四滑落至第七名。除了新加坡與香港，其他排名高於台灣的亞洲國家包括：南韓第八、泰國第17、馬來西亞第18、日本第20。而中國排名第91。南韓是首度進入全球前十名，因此報告還以專題研究的方式報告其多元制度改革。台灣表現最佳的項目是全球第三名的「電力供應」，僅次於愛爾蘭及德國。這項成績得歸功於台灣電力公司，因為新設廠房的電力聯結平均都能在 23天內完成、且收費合理。台灣表現不好的項目包括全球第88名的「契約執行」、第87的「營建許可」、第79的「投資保障」。以契約執行為例，報告指出，商業糾紛訴請司法處理通常需要要45道程序、510天，且費用可達求償金額的17.7%。但在南韓，商業糾紛通常只需約33道程序、230天，及求償金額10.3%的費用。至於小股東的權益保障，報告的評比方式主要是調查企業與證券律師的看法，以及檢視證券法規、企業法規與法院證據法則。台灣的表現接近東亞與太平洋地區的平均水準，但遠遜於紐西蘭與新加坡等地。台北市美國商會執行長吳王小珍表示，「整體而言，美國商會滿意台灣所達成的進步，但台灣顯然還能做得更好」，「經商報告點出的缺點，台灣可以再加把勁」。 —撰文／沙蕩

Welcome Visa Waiver Besides the issues addressed to the Taiwan government in the White Paper, AmCham annually also makes certain Requests to Washington. In recent years, prominent among those items has been the recommendation that the U.S. government “extend visa-waiver treatment to Taiwanese travelers.” That suggestion has also been among the messages that the Chamber’s “Washington Doorknock” delegation has been delivering in the U.S. capital in recent years. Just before Christmas, the United States announced through the American Institute in Taiwan that Taiwan was being nominated for inclusion in the U.S. Visa Waiver Program, pending a review of its homeland security and immigration policies. A team from the U.S. Department of Homeland Security is expected to come to Taiwan early next year to conduct that review, and Taiwan is expected to be officially added to the Program within 2012. Besides being an expression of the good will and close relations between the United States and Taiwan, visa waiver has been supported by AmCham as a means of stimulating tourism between the two countries.

赴美免簽開放可期台北市美國商會每年除了以《台灣白皮書》向台灣政府提出建言，白皮書中也會以「對美國政府的期待」向美國政府表明意願。近幾年最重要的議題莫過於，台灣旅客何時才能享有免簽赴美的待遇。而在美國商會訪問華府的「叩門之旅」中，代表團同樣持續建議，美國應將台灣納入免簽計畫（VWP）。就在耶誕節之前，美國在台協會（AIT）終於宣布，台灣已經成為免簽計畫候選國。美國國土安全部的工作小組預定2012年初抵台，評估台灣的國土安全及入出境管理；一旦通過評估，台灣可望在同年正式加入免簽計畫。商會認為，台灣納入免簽計畫除了凸顯美國、台灣之間善意、緊密的互動，同樣也將帶動美台之間商旅觀光人數的明顯成長。

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ADVERTORIAL

New Agency Takes Aim at Corruption

Agency Against Corruption Director-General Chou Chih-Jung (left) and Minister of Justice Tseng Yung-Fu at the opening ceremony for the AAC in July.

n his Inaugural Address on May 2 0 , 2 0 0 8 , P r e s i d e n t M a Yi n g jeou pledged that “restoring political ethics to regain the people’s trust in government” would be one of his major objectives in office. “The new administration will push for clean politics and set strict standards for the integrity and efficiency of officials,” he stated. “It will also provide a code for the interaction between the public and private sectors to prevent money politics.” To provide an institutional framework to make good on that pledge, the administration this past July established the Agency Against Corruption (AAC) as a unit under the Ministry of Justice. The mission of the new organization will be to reduce corruption, increase the conviction rate of those indicted for corruption, and boost Taiwan’s international reputation for having clean and efficient government operations. Chosen as Director-General of the new agency was Chou Chih-Jung, a senior prosecutor and Ministry of Justice official who holds a Master’s degree from National Taiwan University’s Graduate Institute of National Development. Chou stresses that the AAC aims to nurture an environment of

zero tolerance toward corruption. He notes that the Agency will collaborate closely with existing government institutions involved in attacking corruption – including the Control Yuan, Prosecutors Offices, and Investigation Bureau, Ministry of Justice – without duplicating their efforts. “Those agencies look mostly at corrective measures, whereas the AAC is the very first agency to take a holistic approach to preventing corruption, investigating corruption, and eradicating corruption.” The AAC has 180 personnel at the initial stage. In remarks delivered at the opening ceremony for the new agency, President Ma said that his previous experience as Minister of Justice taught him that the best way to fight corruption is to prevent it from happening in the first place – in part by compensating public servants adequately so that they are less likely to give in to temptation. But it is also necessary to have strict and comprehensive laws and regulations in place to deter officials from engaging in corrupt activities, he said. One of the AAC’s tasks will be to review existing laws relevant to combating corruption and to recommend any needed revisions. Perhaps even more important is to

foster a culture within government in which officials take pride in maintaining their integrity. In this regard, the AAC plans to work together with the more than 1,100 ethics offices under its supervision that operate within government organizations throughout the nation. The ethics officers will be tasked with creating an environment that is antithetical to corruption. They are also responsible for detecting and reporting any irregular activities among civil servants in their jurisdictions – but to do so in a way that does not discourage officials from taking initiative in the public interest. As a further deterrence, when criminal acts of corruption do occur, the AAC has also set the goal to raising the conviction rate when the cases go to trial. Accomplishing that will require presenting the court with solid and convincing evidence, while also protecting the human rights of the accused. Acknowledging that the current conviction rate of cases involved graft or corruption end is not high enough, the AAC has referred to an increased conviction rate as the “lynchpin of corruption eradication.” As it begins its work, the AAC has identified certain “high-risk” areas that may need special attention: Corruption-prone areas of government activity, including public construction, drug procurement under National Health Insurance, medical device procurement, destruction of un-registered and expired products, forestry management, and the procurement of lunches at elementary and junior high schools.

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Prominent government officials such as Vice President Vincent Siew (fourth from left) participated in the AAC's observance of International Anti-Corruption Day.

To help it achieve its goals, the Agency has established a Clean Politics Advisory Committee consisting of 15 impartial representatives from outside of government to supervise the transparency and independence of AAC operations and provide advice on how to make improvements. Chou further emphasizes his wish to work closely with the private sector, including foreign business organizations such as the American Chamber of Commerce, to help spread the word on the government’s determination to eliminate corruption. “The AAC hopes to maintain a continuous dialogue with the foreign business community and to help coordinate with the relevant government agencies when foreign companies need assistance.” He notes that if a business is approached by a government official seeking a bribe or becomes aware of other corrupt activity by government personnel, the company is encour-

aged to bring the problem to the attention of the AAC by phone (the 24-hour corruption exposition hotline is 0800286-586), letter, fax (02-2562-1156), e-mail (gechief-p@mail.moj.gov.tw), or visit to the AAC offices. “The AAC will take all such reports of corrupt conduct very seriously,” said the Director-General. “We will confirm with the whistleblower within 48 hours as to the status of the accusation. The priority will be to protect the identity of the whistleblowers, because we want the public to be able to trust the AAC completely.” This month the AAC organized a number of activities, in cooperation with the local chapter of Transparency International, in observance of International Anti-Corruption Day on December 9, the date in 2003 on which the United Nations Convention Against Corruption was adopted. Among the activities were a forum on clean governance and an exhibition on Taiwan’s anti-corruption efforts, examples of the

AAC sponsored a forum on corporate good faith as one of the International Anti-Corruption Day activities.

kind of public communication the AAC intends to engage in to raise citizens’ awareness of the value of clean politics in society. Although not a signatory to the pact, the Republic of China has committed itself to following its principles. In fact, creation of the AAC was in accordance with the Convention’s stipulation that governments establish one or more organizations dedicated to preventing corruption. Director-General Chou noted that in the 2011 Corruption Perception Index (CPI) conducted by Transparency International, Taiwan achieved a score of 6.1 (a perfect score is 10), ranking it in 32nd place among the 183 countries surveyed. In 2010 the score was 5.8. “The recent CPI result is recognition that Taiwan is moving in the right direction in terms of fighting corruption, but there is still much room for improvement,” said Chou. “Our goal is to bring our government to a very high level of cleanliness.”

Agency Against Corruption 6F, 318 Songjiang Rd., Taipei, Taiwan 10468 Tel: +886-2-2567-5586 24-hour Anti-corruption Hotline: 0800-286-586 Anti-corruption Fax: (02)2562-1156 E-mail: gechief-p@mail.moj.gov.tw http://www.aac.moj.gov.tw/ mp290.html

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Cover Story

COVER STORY

Gauging the Cross-Strait Economic Benefit 評估兩岸經貿利基

ith more than 3 million Chinese travelers due to visit Taiwan this year, tourism is the number-one example of how cross-Strait agreements in recent years have made a contribution to the Taiwan economy. ECFA may eventually prove to be equally important, but in the first year of the “early-harvest” program, only a limited number of trade items were eligible for tariff-free treatment. Negotiations are still proceeding on an investment protection agreement and a full-scale free-trade pact for commodities.

011年，超過三百萬中國觀光客造訪台灣，旅遊已成為兩岸推動多項協議的最佳成果之一，凸顯經貿往來對台灣經濟的助益。長遠來看，兩岸經濟合作架構協議（E C F A）也將體現同樣的重要性，但「早收清單」實施的第一年，只有少數產品能夠享有零關稅優惠。此外，投資保障協議與全面性關稅協定則仍待協商。 By JANE rICKArDS

撰文／李可珍

photos: cna

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Cross-Strait

resident Ma Ying-jeou and his government have eased tensions with China to their lowest point in six decades through cross-Strait business agreements. But a review of the most important initiatives signed with China – on tourism, investment, direct transport links, and the Economic Cooperation Framework Agreement (ECFA) paving the way for a free trade agreement – show only limited monetary gains so far, aside from tourism. Even in that sector, some formidable glitches are holding up progress, and economists say the economic benefits, while substantial, may not be nearly as high as the government estimates. In the meantime, cross-Strait economic negotiations are continuing, focusing in particular on an investment protection agreement and starting work on a comprehensive commodity trade agreement to follow up on the ECFA “early harvest” that took effect this year. Looking first at tourism, since Taiwan opened the door to Chinese group tours in July 2008, China has overtaken Japan as Taiwan’s largest source of tourists. Yeh Kai-ping, deputy director for economic affairs at the government’s Mainland Affairs Council (MAC), reports that through the end of November this year, 2.92 million Chinese have visited Taiwan,

馬

spending around US$4.95 billion in the local economy. A confidential MAC report leaked to TOPICS puts the direct economic contribution of the roughly 1.6 million Chinese tourists that visited last year at around US$2 billion, adding 0.28 percentage points to the island’s GDP growth rate. The indirect effects, the report adds, are even higher. Investment in hotels and other tourist infrastructure to accommodate the visitors is booming, for example. The MAC report estimates that hotel investment over the next three years, including new establishments and renovations to existing facilities, will come to NT$79.74 billion (US$2.63 billion), and the opening to Chinese tourists has allowed the island to attract new international hotel brands, such as the W-hotel and Le Meridien. In addition, says Steve Lin, professor of economics at National Chengchi University and a China specialist, various products sold to Chinese tourists, such as Alishan mountain tea, are proving to be a boon to sections of the less-developed south. Last year, total sales of pineapple cakes was NT$25 billion, Lin notes, a five-time increase compared with four years ago. “Our tourist industry is really expanding fast now,” Lin says. In the middle of this year, however, the number of Chinese group tours coming

英九總統與行政團隊藉由兩岸經貿協議使台海緊張情勢降至60年來最平和的階段。但審視兩岸間的重要進展，包括開放觀光、投資協議、海空直航，以及可能成為自由貿易協定（FTA）的兩岸經濟合作架構協議（ECFA），除了觀光旅遊外，實質利益其實有限。就算是中國觀光客來台部分，進展仍然受制於部分負面因素，而經濟專家認為，經濟效應雖然明顯，但並不見得都符合政府預期。同時，兩岸仍在進行經貿談判，特別是投資保障協議，以及ECFA「早期收穫清單」生效後的商品全面降低關稅。就觀光而言，自2008年七月開放陸客團體行後，中國已經取代日本成為台灣最大的旅客來源。行政院大陸委員會經濟處副處長葉凱萍指出，今年至 11月底，陸客累積人數已經達到292萬人次，消費 49.5億美元。TOPICS取得的一份陸委會內部報告顯示，去年來台的160萬陸客，對台灣的經濟貢獻度達20億美元，提高年度國內生產毛額（GDP）0.28

to Taiwan began to fall. Kung Ming-hsin, vice president of the Taiwan Institute of Economic Research (TIER), estimates that arrivals dropped by 22% in May, 28% in June, and 4.5% in July, compared with the same months a year earlier. One reason is believed to be political sensitivities surrounding Taiwan’s upcoming presidential election. Another was undoubtedly a serious accident in April on the scenic Alishan forest railway that killed five Chinese visitors and injured scores more. Yet another significant factor, informed observers say, has been behind-the-scenes discord between Chinese and Taiwanese travel agencies – friction that has caused the quality and reputation of tourism in Taiwan for mainland visitors to diminish sharply. Although Tourism Bureau regulations stipulate that Taiwan tour operators must spend a minimum of US$60 per day on each Chinese tourist for hotels, food, transportation, and other needs, the real expenditure is closer to US$30, says Kung. While the amount Chinese tourists pay to mainland travel agencies averages US$120 a day, the Chinese companies have generally been pocketing huge profits, turning over only a quarter or so of the revenue to their Taiwanese counterparts to cover operations. Tristan Liu, another TIER economist, adds that the operations of Chinese travel

個百分點。陸委會報告指出，陸客的間接貢獻度更高，例如明顯吸引資金流入旅館與其他觀光設施。報告推估，未來三年的旅館投資額，包括新建與改建，將達到797.4億新台幣（26.3億美元）；同時，陸客觀光商機也吸引更多國際旅館業者進駐，如W酒店（W Hotel）與艾美酒店（Le Meridien）。政治大學經濟系教授林祖嘉也認為，陸客喜歡的多種特產，好比說阿里山茶，都為經濟發展較慢的南部鄉村地區帶來可觀收益。林祖嘉說，鳳梨酥去年全年的銷售額為250億新台幣，是四年前的五倍。他說，「台灣觀光業的確快速擴張」。但自今年中開始，陸客觀光團開始減少。台灣經濟研究院副院長龔明鑫推估，與去年同期相比，五月少了22%，六月少了28%，七月少了4.5%。原因之一可能是台灣總統大選將屆引發的政治效應。另一個因素則是阿里山森林小火車四月底發生嚴重事故，導致陸客五死多傷。瞭解產業的專家認為，陸客減少的原因還包括兩

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Cover Story Cross-Strait Economic Statistics Exports from Taiwan to Mainland China 2006 2007 2008 2009 2010

Amount (US$bn) 63,332.4 74,279.1 73,982.1 62,090.9 84,832.2

Imports from Mainland China to Taiwan

Change (%) 12.5 17.3 -0.4 -16.1 36.6

Amount (US$bn) 24,783.1 28,019.2 31,415.9 24,503.7 35,952.2

Change (%) 23.3 13.1 12.1 -21.9 28.9

Approved Investment in Mainland China Cases 1,090 996 643 590 914

Amount (US$bn) 7.64 9.97 10.69 7.14 14.62

SOURCES: MOEA, MAC

agencies are opaque and he suspects that under-the-table payoffs to Chinese officials also cut into the revenue. “The Chinese tourism industry is a monopoly with political connections to provincial, local, and central governments,” Liu says. Further, the Chinese travel agencies are ill-informed about costs in Taiwan. “In mainland China, hotel expenses are much lower,” he notes. “They think US$30 is a very decent price for domestic travel, but it isn’t enough for Taiwan.” Another problem is that the Chinese travel agencies often drag their heels in making payments to Taiwan tour operators – and sometimes do not pay them at all. The leaked MAC report estimates that Taiwan tourist agencies are collectively owed over NT$5 billion

(about US$167 million) in unpaid tour expenses. To make up for the squeeze on their finances, Taiwan tour operators are striking deals with glitzy retail outlets to deliver bus-loads of Chinese tourists in exchange for commissions of up to 50% on goods sold. As a result, besides getting poor food and being lodged in cut-price and often seedy, out-of- theway hotels, many Chinese tourists are finding that a large part of their itinerary consists of stops at flashy shops where they are urged to spend money on designer brands at prices that are not especially cheap for Asia. Many of the Chinese visitors feel ripped off, and once back home, their complaints discourage other would-be travelers to Taiwan

岸旅行業者的內鬨，嚴重影響陸客赴台觀光的品質與聲譽。台經院的龔明鑫透露，雖然交通部觀光局規定，陸客每人每日食衣住行的費用不得低於60美元，但事實上只接近30美元。同時，雖然每位陸客付給對岸旅行社平均每天120美元的團費，但中國旅行業者往往扣下大筆款項，只願意分配給台灣旅行業者約四分之一的團費。台經院副研究員呂曜志認為，中國旅行業的運作不夠透明，甚至可能還得「分紅」以收買官員。呂曜志說，「中國旅遊業多由少數有關係的人壟斷，後台不是省市地方官員，就是中央級大官」。此外，中國旅行業者並不瞭解台灣的旅館行情，「因為中國的旅館住宿便宜很多，他們大概以為，國內旅遊30美元就非常夠用，但這個價位對台灣並不夠」。另一個問題則是，中國的旅行社付款並不爽快，有時根本乾脆賴帳。陸委會內部報告指出，台灣旅遊業者遭到積欠的款項超過50億新台幣。為了彌補財務漏洞，台灣的旅行業者轉向價格浮

from making the trip. The quality of Taiwan tours has been so bad that it became the subject of an August editorial in the China Daily. The frayed image of Taiwan tourism, Liu notes, also makes it difficult for the Chinese travel agencies to raise the price of a tour, as US$120 a day is the market standard for Asian travel. “For that price, tourists can go to Japan,” he says.

Moral suasion Acknowledging the problem, the MAC’s Yeh says she hopes that Taipei and Beijing can resolve the situation through bilateral negotiations. “We hope we can improve the quality of the tourism,” Yeh says. “We don’t want people coming here

誇的零售業者，一車一車的將陸客送到店裡消費，以換取甚至高達商品價格五成的佣金。結果，除了餐飲住宿品質低落，陸客往往發現自己的行程充滿了消費購物，停留的商店雖然光鮮亮麗，但各種名牌商品的價格也不便宜。許多陸客都覺得自己被騙了，回到家鄉後自然不會對台灣行有什麼好話，親朋好友自然不願嘗試訪台行程。台灣旅遊品質低落，甚至登上八月某日的「中國日報」社論。台經院的呂曜志認為，台灣觀光的不佳形象，自然也讓對岸協力業者更難提高團費，至少達到亞洲旅遊每日120美元的平均水準。他說，「如果要那麼高的價格，陸客都可以去日本玩了」。

道德勸說陸委會的葉凱萍說她瞭解旅遊品質的問題，但希望兩岸能夠透過談判解決相關問題。葉凱萍說，「台灣希望改善旅遊品質，不希望觀光過後只帶走不滿」。她表示，除了每日60美元的基本費用，政府

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Cross-Strait

and complaining afterwards.” She notes that besides the US$60 threshold, the government now is also setting standards for the hotel rooms, food, and beverages provided to the Chinese tourists. The MAC report also called attention to the need for the authorities on the two sides of the Taiwan Strait to “step up moral persuasion of travel agencies by requiring them to sign ethics agreements.” The Taiwan Tourism Bureau has arranged for about 170 local travel agencies to sign such ethics pacts, which took effect in September. Although it is very hard for the government to monitor operations and catch offenders, 83 Taiwan travel agencies have received punishments since 2009 – over 40% of all operators serving mainland tours – an indication of how frequent these infractions are, Kung says. He and Liu believe the problem can only be totally resolved if Taiwan travel agencies are allowed to operate in China, signing up tour members directly. Kung adds that the government’s estimate of US$2 billion generated by Chinese tourism to Taiwan in 2010 is reasonable – but says a sizeable chunk stays in China rather than contributing to the Taiwan economy. In addition, Taiwan is not yet reaping much economic benefit from a program that started at the end of June this year to allow individual tourist travel from

China, although it is still early days. After all, when Chinese group tours started in 2008, initially only one-third of the quota of 3,000 visitors per day was used, due to a lack of awareness and cumbersome regulations. At present, individual tourists can only come from the cities of Beijing, Shanghai, and Xiamen, and they must deal with spools of red tape. Yeh says that through the end of November, 22,000 people had come here under this program, and the numbers have been growing, from 93 people per day in June to 224 in November. But another reason why growth is slow, Kung says, is that Chinese

travel agencies do not want to promote individual tourism as the commissions are too small, since all mainland travelers need to do is apply for visa-like travel documents. “They prefer group tours, as the commission is much higher,” he says. Direct air connections initiated under the Ma administration have grown from weekend charter flights in mid-2008 to the current 558 weekly passenger flights (half departing from Taiwan, half from China ), with a total of 41 destinations in China and seven in Taiwan. There are also 56 weekly cargo flights. Yeh says that as of the end of October this year,

AT THE TABLE — The cross-Strait Economic Cooperation Committee established under ECFA at its second meeting, held in November in Hangzhou. photo : cna

也正在制定陸客的旅館、用餐與飲料收費標準。陸委會的報告也指出，兩岸應該積極道德勸說旅遊業者，呼籲業者簽訂自律公約，而觀光局也的確邀集 170家台灣業者，今年九月實施自律公約。台經院的龔明鑫指出，雖然政府真的要監督與執法並非易事，但2009年以來已經有83家台灣業者遭到處罰，占接待陸客業者的四成以上，顯示偷斤減兩的狀況的確常見。龔明鑫與呂曜志這兩位專家都認為，根本性的解決之道在於開放台灣旅遊業者赴大陸經營，直接在對岸招攬旅客。龔明鑫認為，政府推估陸客2010年產生20億美元的收益算是合理，但問題在於，很大一部分的收益都留在中國，未能幫助台灣經濟。此外，陸客自由行雖然已自六月上路，但近半年來的觀察，對台灣經濟的實際助益有限。同時，雖然團體行已自2008年開放，但初期實際到訪人數只有開放名額每日三千人的三分之一，究其原因還是宣傳效果不足及簽證手續繁瑣。目前，只有北京、上海與廈門居民可以來台自由行，但也同樣得

面對繁複的申請程序。陸委會的葉凱萍說，至11月底前，2萬2000人已經成行，而且每日入境人數也在增加，由六月的每日93人，增至11月的每日224 人。但台經院的龔明鑫表示，人數成長不如預期的原因之一是中國旅遊業者不太願意鼓勵自由行，畢竟利潤有限，而且自由行旅客往往只需備妥申請文件即可。他說，「旅行社當然喜歡團體行，因為利潤高得多」。馬政府開放兩岸直航後，航班已經由2008年中的週末包機，增加至每週雙向合計558次航班，且航點增加至中國41個、台灣七個城市。貨運班次也增加至每週56班。陸委會的葉凱萍說，至今年10月底，兩岸直航已搭載過150萬人次，而且載客率很高。她表示，至於時間的節省，如果以桃園至上海的民航航班為例，以前從香港等第三地轉機，大概得花上六至八小時，現在只要80分鐘；海運直航的貨物運送時間更可以減少16至27小時。台經院的呂曜志表示，直航雖然便利，但他認為，約百萬之眾的台商並未如政府所期待地回流台

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Cover Story

photo : air china

photo : China Southern Airlines

FLYING DIRECT — Flight attendants from Air China (left) and an aircraft from China Southern Airlines (right), two of the mainland airlines serving the cross-Strait routes.

over 15 million people had taken these flights, which are often fully booked. Giving an example of the time saved, she notes that flying from Taoyuan to Shanghai, which used to involve changing planes in a third location such as Hong Kong, previously took six to eight hours but can now be accomplished in only 80 minutes. In addition, the direct sea transportation links save 16-27 hours of sailing time, she says. But despite the convenience of the direct flights, Liu of TIER says he does not have the impression that many of the

estimated one million Taiwanese living and doing business on the mainland – the so-called Taishang – are relocating their businesses back to Taiwan as the government had hoped. Whether such relocation is taking place is difficult to tell, adds Tung Chen-yuan, a professor at the Graduate Institute of Development Studies of National Chengchi University, since “only people who want preferential treatment from the government would declare they were doing so.” But Tung notes a change in Taiwanese investment on the mainland that may

灣。政大國家發展研究所教授童振源認為，台商回流是否成真很難預料，因為只有想要爭取優惠待遇的人會宣稱自己想回台灣發展。但政大的童振源指出，因為直航，台商對中國的投資模式也許已經出現改變。2008年之前，赴大陸投資的多半是中小企業，平均金額約300萬美元；但2008之後，規模已經顯著放大到2000萬美元以上。童振源推測，「海空直航或許讓大型企業更加願意投資對岸市場」；而且，中國已經開始轉型，由外銷歐美市場的組裝基地，變成擁有更為龐大的主要市場之一。

逐步降低關稅無庸置疑的是，兩岸最重要的經貿協議當屬2010 年中簽定的E C F A，而其早收清單的539項台灣商品、267項中國產品預定在三年內降至零關稅。 ECFA同時規範兩岸未來數年的經貿自由化進程，包括貨品、服務、投資與爭端解決機制的談判。

relate to the direct flights. Before 2008, the investment was mainly driven by small and medium enterprises (SMEs), with average project size of around US$3 million. After 2008, the scale increased dramatically to figures of US$20 million and over. “Probably direct flights and direct shipping are providing some incentives for big enterprises to invest in China more,” Tung concludes. In addition, China is shifting from being a base for final assembly of exports to Western countries to having a powerful domestic economy in its own right, he says.

部分批評者認為ECFA實際功效有限，因為至今為止尚未對台灣經濟產生太多幫助。但經濟部常務次長梁國新在接受TOPICS訪問時強調，ECFA生效的第一年，雖然只有72類台製產品納入早收清單的免稅優惠，占總外銷項目的13.3%，但因此省下的關稅已有166.9億美元。梁國新說，2012年1月1日以後，將有另外436項產品納入，等於94%的早收項目都將免稅，效果一定會更明顯。僅管早收清單才剛上路，但部分跡象已經顯示 E C F A對外銷的幫助。陸委會引述中國海關資料指出，今年前十個月，台灣出口至中國的總額成長 9.17%，而早收清單項目則成長12.64%，節省的關稅為1億2560萬美元。在工業產品中，各類工具機的表現非常亮眼。不過，早收清單中表現最佳的是 18項農漁產品，在今年一至十月出口成長154%。經濟部常次梁國新更強調，申請免稅待遇的公司中，超過五成過去從未外銷中國，顯示E C F A已經讓國內廠商瞭解中國市場的潛力，「附帶的利益頗為可觀」。

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Cross-Strait

Lower tariffs in stages Undoubtedly the most significant cross-Strait business agreement is ECFA, signed in the middle of last year. The “early harvest” portion of the agreement calls for tariffs on 539 Taiwanese goods and 267 Chinese ones to be phased out over the next three years. The pact otherwise outlines steps the two sides will take to fully liberalize relations over the next several years, including the negotiation of an agreement on the trade in goods and another on services, an investment agreement, and a dispute settlement agreement. Some critics have raised doubts about ECFA’s value, noting that it seems to have added little punch to the Taiwan economy so far. But Vice Economics Minister Francis Liang, in an interview with TOPICS, offered the reminder that in this first year of ECFA's being in effect, only 72 of Taiwan’s export categories on the early-harvest list, or 13.3% the total, are receiving duty-free treatment in China. The tariff savings were worth US$16.69 billion. Liang says the impact will be far greater after another 436 items qualify for tariff-free treatment on January 1, meaning that 94% of early harvest items will be duty-exempt in 2012. Even so, there are signs that ECFA is already helping exports. Citing Chinese

MUST-SEE SIGHT — Chinese tourists look out over Taipei from the observation deck on the 89th floor of Taipei 101.

photo : cna

customs statistics, MAC says the total value of Taiwan shipments to the mainland grew by 9.17% in the first 10 months of this year, whereas the exports of early-harvest items rose by 12.64% in the same period, with around US$125.6 million saved in tariff cuts. Among industrial products, various types of machinery did extremely well. But the standout performers were the 18 agricultural and fishery items on the early harvest list, which saw export growth of 154% in the January-October period. Furthermore, says Liang, over 50% of the companies

但經濟專家也指出，南韓同時間對中國的出口成長幅度還稍微高於台灣的早收清單項目。台經院的龔明鑫指出，「此一現象表明關稅不是出口成長的唯一因素」。政大的童振源警告，台灣正在喪失競爭力，唯有產業升級才能自我強化。經濟部常次梁國新評估，兩岸貿易成長低於南韓的另一個原因是，歐美市場疲弱不振，台灣70％以上對中國的外銷都是半成品，於對岸組裝完後還是要賣到歐美；但南韓賣到中國的產品，更多是迎合當地市場的品牌商品。政大的童振源引述中國總體經濟資料庫的數據指出，E C F A並未改變台灣產品在中國市占率逐年下滑的趨勢。市占率最高的一年是2002年的12.9%，接著一路下滑至2011年上半年的7.4%。童振源認為，「早收清單或許能幫助特定品項，但對整體競爭力的幫助並不明顯」。他也指出，台灣對中國的總投資額，雖然去年底已經達到1800億美元，但增幅已經趨緩、不再快速成長，而投資額又牽動貿易，畢竟台灣對中國的出口有半數是由投資帶動。

that applied for tariff-free treatment had never exported to China before, showing that the ECFA has helped educate local companies about China's market potential. “Obviously that was a great fringe benefit,” he says But economists point out that rival Korea’s exports to China in the same period registered a slightly higher growth than Taiwan’s early harvest items. “This shows there are factors more import an t t h an t ar i ff s ,” sa y s t he TI E R' s Kung, while Tung warns that Taiwan is losing competitiveness and urges

但經濟部常次梁國新仍相信，ECFA將能逐漸幫助台灣成品打進中國市場，也有助提昇台灣產品的品牌知名度。陸委會的葉凱萍直言，不論如何，如果沒有ECFA，情況可能對台灣更為不利。 ECFA的另一個積極面向是，其他國家更願意與台灣談判雙邊經貿協定，使台灣免於經濟邊緣化。台灣與新加坡的「台星經濟夥伴協議」（ASTEP）正在洽談，不過雙方對推動方式仍有歧見：台灣據稱希望先簽架構協定，以向台灣民眾與國際很快地交出成績單，但新加坡想要全面性、FTA式的協定，以全面開放服務業市場。政大的童振源說，「進度緩慢的原因在於，台灣政府並未拿出積極自由化的方案」。此外，台灣與紐西蘭將要展開可行性研究，以決定是否洽簽FTA式的「經濟合作協議」（ECA）。中華經濟研究院研究員劉大年指出，中國的默許已經是公開的秘密，畢竟紐西蘭已經與中國和香港簽定 FTA。劉大年表示，中、紐已經完成FTA的事實，讓北京的溫和派更能說服強硬派，避免後者堅持封

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Cover Story it to strengthen itself through industrial upgrading. Another reason why Taiwan’s cross-Strait export growth rate has slowed more than Korea’s, says Vice Minister Liang, is because the European and U.S. markets are slumping – and more than 70% of Taiwan’s exports to China are semi-finished goods destined for further assembly there before eventual shipment to the West. Korea, on the other hand, sells more branded finished products for China’s burgeoning domestic market. Referring to figures from the China Premium Database, Tung argues that ECFA has not reversed a longstanding trend for Taiwan’s market share in China to decline. That market share hit a record 12.9% in 2002, and has since dropped to the 7.4% of the first half of 2011. “The early harvest program might help with some particular items, but it’s not significant in helping with Taiwan’s overall competitiveness,” Tung argues. He adds that Taiwan’s accumulated investment in China, estimated at US$180 billion at the end of last year, is now flattening out rather than continuing to increase rapidly – with a consequent impact on trade, since half of Taiwan’s exports to China is driven by investment. Still, Vice Minister Liang argues that ECFA will gradually help promote the export of finished goods to the Chinese

domestic market, along with brand recognition of Taiwanese goods. At the very least, says MAC’s Yeh, “if there was no ECFA, the situation would be even more disadvantageous for us.” There are also encouraging signs that ECFA is making other countries more receptive to the idea of entering into negotiations with Taiwan for bilateral trade agreements, helping Taiwan reduce the risk of economic marginalization. Talks have begun with Singapore, for example, though apparently the two sides have differing ideas on how to proceed. Taiwan reportedly wishes to start with a framework agreement in order to show rapid progress to the Taiwan public and the outside world, while Singapore wants a comprehensive FTA-style agreement with full liberalization of services. “Progress has been slow because the Taiwan government did not present a plan for wide liberalization,” Tung says. I n a d d i t i o n , Ta i w a n a n d N e w Zealand are soon to conduct a joint feasibility study for an FTA-style pact that would be called an economic cooperation agreement (ECA). Liu Da-nien, a research fellow at the semi-official Chung-hua Institution for Economic Research, says it is an “open secret” that Beijing gave its assent to the New Zealand deal on the grounds that the Pacific nation had already signed FTAs

殺台灣的國際空間。他說，整體而言，如果對方國家已經與中國簽訂 F T A，台灣的確比較容易洽談經貿協定。陸委會指出，除了新加坡，菲律賓與印尼這兩個東南亞國家協會（ASEAN）的會員國，在中國與東協的FTA在2010年生效後，也有意與台灣談判F T A。而印度，雖然尚未與中國簽訂F T A，卻也想要和台灣試著談判FTA。

參與跨太平洋夥伴協議 Deputy Economics Minister Francis Liang says the major impact from ECFA's "early harvest" list has yet to kick in.

政大的童振源指出，台灣與紐西蘭的貿易以乳品及肉類為主，僅占台灣對外貿易總額的0.2%，新加坡所占比例較高，但也只有約3.6%，因此台灣與兩國的經貿協定象徵意

with China and Hong Kong. This fact makes it easier for moderates in the Beijing government to win over hardliners who have objections to Taiwan having its own diplomatic space, Liu says, adding that in general it will be easier for Taiwan to enter into trade agreements with nations that have already concluded FTAs with China. Besides Singapore, according to MAC, two other ASEAN nations – the Philippines and Indonesia – have expressed interest in FTA-style agreements with Taiwan (a China-ASEAN free trade agreement went into effect in 2010). India, which does not have a trade pact with China, has also shown interest in negotiating with Taiwan.

Interest in the TPP Tung of National Chengchi University notes that Taiwan’s trade with New Zealand – mainly dairy and meat products – amounts to only 0.2% of its total external trade, while Singapore’s share is 3.6%, making these potential agreements largely symbolic. He argues Taiwan should focus instead on its major trading partners, such as Europe and the United States. But others have pointed out Singapore and New Zealand’s special significance as founding members of the TransPacific Partnership (TPP), which has

義較大。童振源認為，台灣應該更專注推動與重要貿易夥伴的F T A，例如歐盟與美國。但其他專家強調，新加坡與紐西蘭具有特殊意義，因為兩國乃是跨太平洋夥伴協議（TPP）創始國。TPP已經獲得美國支持，似乎很有機會發展成重要區域經濟聯盟，其目的之一便在於制衡中國對亞太日漸增強的經濟影響。馬英九上個月出席台北市美國商會年度會員大會時重申，台灣希望加入TPP，雖然台灣可能需要十年時間做好準備，包括扭轉國內的保護主義氛圍。雖然台灣政府認為，ECFA有助吸引跨國企業增加對台投資，但迄今只有少數個案成真。台灣的外國直接投資（FDI）近年持續減少，2010

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Cross-Strait

INDIVIDUAL TRAVELERS — Left, a visitor from Beijing in the investment management business and his wife look at a new luxury apartment building in Taichung, and right, airline personnel prepare gift bags for mainland tourists to encourage them to do more shopping while in Taiwan. photos: cna

gained U.S. support and appears likely to develop into a major regional trade grouping, in part designed to counter China’s growing economic sway in the Asia-Pacific. In remarks at Amcham’s Annual General Meeting last month, President Ma Ying-jeou reiterated Taiwan’s desire to participate in the TPP, though he said Taiwan might need 10 years to prepare, including taking steps to overcome protectionist sentiment at home. Although the government says the ECFA signing has stimulated increased interest among multinational companies in investing in Taiwan, relatively

few concrete cases have materialized so far. Foreign direct investment has been declining in Taiwan in recent years, and last year came to a low US$3.8 billion, compared with Korea’s US$12.9 billion and Vietnam’s US$11 billion. Tung says FDI did increase this year by 20.6% from January to October to reach US$3.6 billion, but considers the level as “still very small compared to other countries.” Pointing to data from the United Nations World Investment Report, Tung says that from 2000 to 2007, Taiwan’s share of the world’s FDI was 0.31%, but from 2008 to 2010 it was only 0.26%,

年僅有38億美元；而南韓同期為129億美元，越南 110億美元。政大的童振源說，2011年一至十月的 FDI確實較2010年同期增加20.6%，達到36億美元，但與其他國家相比仍然偏低。政大的童振源引述聯合國「世界投資報告」指出，2000年至2007年，台灣F D I占全球比例仍有 0.31%，但2008年至2010年降至0.26%，低於區域內多數國家。他說，「ECFA目前只是尚未完全落實的架構協議，很難有效說服外國投資人加碼，因此多半仍在觀望」。日本企業似乎最為願意將台灣當成進軍中國的跳板，藉由ECFA的簽訂獲得關稅優惠。台灣與日本在九月間簽訂投資協議，使兩國企業投資對方市場時可以獲得國民待遇，市場開放度也更高。經濟部常次梁國新表示，台日經貿投資往來長達數十年，但直到現在才能簽訂投資協議，部分原因在日本企業看待台灣的方式已經轉變，足以成為進軍大中華市場的門戶。至於中國對台投資，雖然政府已在2009年中解除

a lower figure than for most of its neighbors. “ECFA so far is only a framework and does not offer sufficient motives for foreign investors to invest in Taiwan,” Tung says. “They will watch and wait.” Japanese companies have seemed to be the most inclined to view Taiwan as a springboard to China, taking advantage of ECFA to gain tariff advantages. Taiwan and Japan in September concluded an investment pact that allows companies from the two sides to enjoy the same benefits as local counterparts when investing in each other’s territories, with particularly broad market access. Vice Minister Liang notes that although Taiwan has

部分限制，但投資金額仍然有限。目前已有247項產業開放中資參與，其中大部分為製造或服務業，另有約24%為公共建設相關。不過，就高科技業而言，現存企業的中資持股比例仍不得超過10%，新設合資企業的中資持股比例也不能超過50%。迄今，尚無中資企業表態願意合作投資。陸委會指出，中國對台投資案為185件，核准金額 1.7億美元，與台灣對中國投資額不成比例。台經院研究發現，中資最有興趣的產業包括批發、物流、倉儲，部分原因在於建立自身產品的通路；另外還有電子、電腦、光學儀器業的准許投資項目。經濟部常次梁國新說，考量到開放中資僅僅一年半，1.7億美元算是很不錯的成績，「畢竟需要一點時間才能讓中國企業發現商機、擬定投資策略」。陸委會的葉凱萍透露，政府正考慮開放新的投資項目，（如果國民黨繼續執政）可能會在總統選後宣布，但她不願說明敏感的高科技領域是否會納入。據稱，兩岸談判多時的投資保障協議，仍在研商最終版本的用字遣詞。中經院的劉大年指出，按照正常的

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Cover Story maintained trade and investment relations with Japan for many decades, the pact only became possible now, “partially because Japanese businessmen look at Taiwan in a new light, as a regional gateway to the greater China market.” With regard to Chinese investment into Taiwan, the Taiwan government began to remove barriers in mid-2009, but so far the results have been quite limited. To date, 247 sectors have been opened to investment from from China – mostly in manufacturing and services, but also including around 24% involving public infrastructure projects. Chinese investors are permitted to take only a 10% stake in Taiwan’s prized high-tech companies, or 50% in the case of joint ventures. So far, no Chinese companies have expressed interest in joint ventures. The number of investment cases currently stands at 185, according to the MAC, with approved investment value of US$170 million, a tiny fraction of Taiwan’s investment in China. The industries in which Chinese investors have shown the most interest include wholesale, logistics, and storage – partly to create distribution channels for mainland products – as well as permitted sectors in electronics, computers, and optical instruments, TIER’s studies have found. Considering that this market has only been open to Chinese investors for a year and a half, Liang says he regards the US$170 million level as a rather good result. “It takes time for Chinese businesses to look at possibilities and decide on an investment strategy,” he says.

According to MAC’s Yeh, the government is preparing for a new round of opening to Chinese investment, likely to be announced after the presidential election (assuming a Kuomintang victory), although she declined to say whether sensitive high-tech areas will be opened further. The two sides are reportedly still negotiating on the final wording of the investment protection agreement, which has been a lengthy process. Normally with an FTA, CIER’s Liu explains, disputes between one country’s investor and another country’s government are resolved by an international tribunal, but this approach is unacceptable to China, which views Taiwan as part of its territory. Taiwan, says Lin, responding to fears from the Taishang that local Chinese courts could be corrupt and biased against them, does not accept China’s stance, and has made various suggestions such as arbitration in Singapore or by the Paris-based International Chamber of Commerce, but these have been rejected by Beijing. The Taishang have also been wary of accepting Hong Kong as the venue, though one possibility currently being mooted, Lin says, is to locate the arbitration in Hong Kong but with the team of arbitrators divided equally among representatives from China, Taiwan, and Singapore. MAC’s Yeh confirms that this scenario has been discussed, among others, “but both sides still don’t feel satisfied and we will continue to work hard” to find a solution. In addition, says Yeh, the agree-

FTA模式，一國投資人與對方政府的貿易糾紛應該交由國際仲裁，但中國不可能接受，因為對岸認為台灣是領土的一部分。政大的林祖嘉指出，基於台商的擔憂，認為中國地方法院不夠廉潔、也可能歧視台商，台灣並未接受中國對貿易仲裁的安排，並提出多項對案，例如交由新加坡法院或巴黎的國際商會（ICC）處理，但中國已經回絕。台商也不願交由香港司法體系處理，林祖嘉表示，兩岸正在討論的折衷方案之一是，在香港進行仲裁，但仲裁團必須由中國、台灣、新加坡代表等比組成。陸委會的葉凱萍證實，兩岸的確討論過香港等可能方案，但雙方仍不滿意，未來還將持續溝通。此外，陸委會的葉凱萍說，兩岸投資保障協議的涵蓋面將大於一般投保協定，因為台商還希望獲得人身安全的保證，畢竟過去某些投資糾紛的案例導致台商

ment will go beyond the ordinary scope of international investment agreements, as the Taishang are also seeking protection of their personal safety, as there have been instances of Taiwanese businesspeople put under arrest during previous investment disputes. Although this factor has made the discussions more complex, she says the investment protection accord will definitely be signed at bilateral talks between Taipei and Beijing’s top negotiators P.K Chiang and Chen Yunlin scheduled for the first half of 2012. Besides the investment issues, commodity trade liberalization is likely to be the next major cross-Strait initiative. Vice Minister Liang notes that such negotiations normally need two to three years to complete, but concedes that Taiwan and China are entering a tougher phase – no matter who is elected next month – since the early-harvest items represented “low hanging fruit.” The commodity trade agreement will need to cover around 8,000 items, and the current plan is to complete the negotiation in one go, rather than have a second or third “harvest.” Adding to the difficulty of the negotiations will be the penchant of various industries on both sides of the Strait to seek to protect their turf against competition. On the other hand, international pressures – rival Korea’s success in signing FTAs with the United States and Europe, the emerging TPP, and the economic slowdown in the West – could spur Taiwan to quicken the pace to seek to maintain its competitiveness.

遭到拘捕。她說，雖然人身保障使談判更為複雜，但投保協定一定會在2012年上半年的「江陳會」中簽署。江陳會即台灣的海峽交流基金會董事長江丙坤，與中國的海峽兩岸關係協會會長陳雲林，代表兩岸雙方所進行的定期談判。除了投資保障，商品貿易自由化也可能是下階段的重點。經濟部常次梁國新表示，類似談判通常需要兩至三年才能完成，但因為早收清單只是「容易的先做」，因此不管大選結果，兩岸談判的難度未來只會更高。商品貿易協議可能納入8,000項產品，目前的計畫是一步到位，不要分兩到三次逐步開放。更增談判難度的問題之一是，各自內部的產業都會竭力排拒外來競爭。另外，國際經濟情勢的變化，包括南韓與美歐的FTA、TPP的逐漸成形、西方國家的復甦疲弱，都可能迫使台灣加快腳步以維持競爭力。

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cross-strait

CroSS-StrAIt rElAtIoNS AND thE NExt prESIDENt

ma ying-jeou Cross-Strait economic relations will definitely be warmer if President Ma Yingjeou is re-elected than with a victory by the independence-leaning Democratic Progressive Party (DPP), which Beijing has long distrusted. With the Kuomintang remaining in power, a cross-Strait investment protection agreement currently being negotiated can be expected to be signed in the first half of 2012. Ma’s second term would also be likely to see further opening to investment in Taiwan by Chinese companies, expansion of the individual tourism program, and continued talks by the two sides on liberalizing commodity and services trade as called for under ECFA. But although Ma is undoubtedly Beijing’s preferred candidate in the Taiwanese presidential campaign, not everything in the crossStrait relationship is necessarily rosy. Analysts

tsai Ing-wen Tsai is a moderate compared with most previous DPP leaders, and despite having organized vocal rallies opposing ECFA before the pact’s signing last year, she does not intend to put a halt to the ECFA process, says DPP spokeswoman Hsiao Bi-khim. “Now that ECFA is a reality,” says Hsiao, negotiations on the remaining areas to be covered will continue if the DPP is elected. The party will also push strongly for trade agreements with other nations to balance dependency on China, Hsiao adds, and although it is open to investment from China, it might place restrictions in areas

say Beijing was irked by Ma’s call for a referendum on the proposed peace accord that he touted in October as part of his “Golden Decade” plan for Taiwan’s prosperity in the next 10 years. The idea of a plebiscite is anathema to Beijing, which regards it as the prerogative of a sovereign state. To make matters worse from the point of view of the Chinese Communist leadership, Ma then visited Chinese first exhibition in the Chinese-speaking world of dissident artist Ai Wei-wei’s work in late November. Unlike the DPP, Ma’s Kuomintang accepts the “1992 Consensus” under which Taipei and Beijing agree that there is but one China, and that Taiwan is a part of it, but agree to disagree on precisely what that means in practice. The formula leaves room for Taiwan to interpret that the “China” in the phrase refers not to the People’s Republic of China per se, but to a broader Chinese nation. For Beijing, that compromise at least ensures that Taiwan does not embrace a total separation from China. “China has no choice but to deal with Ma,” says George Tsai, a political scientist at the Chinese Culture University. But Alexander Huang, a professor of war gaming and strategic studies at Tamkang University, adds that Ma will still have to work at restoring Beijing’s confidence if re-elected, noting that Communist Chinese leaders were especially offended by the visit to the Ai Wei-wei exhibit. He also says Beijing may be losing patience with the KMT’s tendency to adopt a stance critical of the mainland at election time. “They will say ‘you cannot come back to me every time say-

ing I lied to the people because I needed to salvage my popularity,’” Huang maintains. In addition, with Chinese President Hu Jintao preparing to hand over the leadership of the Chinese Communist Party to Xi Jinping, cross-Strait relations are likely to be put on the backburner for a while as China focuses on internal politics. “They will keep the crossStrait flow as calm as possible through this period,” Huang says. George Tsai predicts that with its longterm goal of unification in mind, China would use a second term for Ma to quicken the pace somewhat on economic relations, as well as in the areas of culture, education, and possibly politics. “The first four years for Ma was peace creation; the second four will be peace consolidation,” he says. But a formal peace accord, an idea raised by Ma in October that met a sharply negative public reaction, would be too complicated to be negotiated in the next four years, he adds, although some interim steps such as military confidence building measures could be a possibility. Steve Lin, a China specialist in the economics department of National Chengchi University, disagrees about the likelihood for political talks, saying that China has noted the strong public opposition in Taiwan to the idea of a peace accord. As a result, he says, China can be expected to slow the pace in every area of cross-Strait interaction but economics. “The economic cooperation will be faster, pressured by troubles in the world economy, but political talks will be postponed,” he concludes.

related to national security such as certain technology products and telecommunications. But the overarching – and perhaps insurmountable – sticking point with Beijing is Tsai’s refusal to accept the “1992 consensus,” which China has termed a prerequisite for it to engage in talks with any government in Taipei. Instead, Tsai has stressed forging a “Taiwan consensus” to achieve general agreement domestically on the approach to take toward China before entering into any political talks. Along those lines, a DPP National Security Strategy Paper calls for setting up a “framework for peaceful interaction between Taiwan and China.”

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Cover Story George Tsai says that based on discussions with Beijing’s experts on Taiwan affairs, the most likely scenario following a DPP victory for the presidency would be for progress in cross-Strait relations to stall for at least the first half of 2012. During that period, there would be a freeze on new cross-Strait accords, although agreements already implemented, such as the ECFA “early harvest” list, would probably stay in place. But Professor Tsai does not rule out the possibility of a more drastic reaction by China, causing a deterioration in cross-Strait relations. That could include a reduction in direct flights and a cut-off by Beijing’s semi-official Association for Relations Across the Taiwan Strait (ARATS) in its contacts with its counterpart in Taipei, the Straits Exchange Foundation (SEF), leaving any negotiations between the two sides to be conducted by private-sector organizations entrusted by each government. In addition, China might limit the flow of tourists to Taiwan, as it did when Chinese visitors to Kaohsiung decreased in 2009 after the DPP mayor screened a documentary about Xinjiang independence activist Rebiyah Kadeer. On the other hand, notes George Tsai, neither side wants a confrontation, and Beijing, which has invested much energy in

offering economic sweeteners as part of its long-term goal of unifying Taiwan with the mainland, won’t easily abandon that strategy. Tsai Ing-wen is also keen to keep Taiwan’s economy ticking. It may therefore be possible for the DPP to creatively devise terminology that describes the cross-Strait relationship in a way that is acceptable to Beijing without upsetting the party’s supporters, analysts say. George Tsai says a possibility would be a “constitutional consensus,” as the DPP accepts the Republic of China constitution, which in name extends to the whole of China. Alexander Huang of Tamkang University says another possibility would be for Tsai Ing-wen to say she accepts all consensuses in Taiwan, including the 1992 consensus. In that case, economic relations with a suspicious Beijing might make slow progress, but not unravel altogether. China’s leadership transition this autumn could also be a factor in how Beijing responds. Some say hardliners in China’s government may respond to a DPP victory by arguing that Hu’s policies of bringing Taiwan closer to China with economic incentives such as the ECFA have not worked, and use the leadership change to push for a return to the old reliance on military threats. But “as long as Taiwan does not push the envelope too much,

I think the hardliners can be constrained,” says George Tsai. Huang also notes that the DPP’s rising popularity in the last two months of campaigning has caught Beijing by surprise. “They are not psychologically ready for Taiwan to openly abandon the ’92 consensus,” Huang says, predicting that a Tsai Ing-wen win would lead to a long period of adjustment in Beijing. Another factor to watch is the long transition period in Taiwan between the presidential election and inauguration day. If Tsai Ing-wen is elected, the outgoing officials will be lame ducks for four months, while the new team will not yet have any authority to act. If there is a confrontation in the South China Sea, earthquake, or nuclear disaster, the government could be hamstrung in its ability to respond. The attitude of the U.S. government also needs to be considered. Washington was distressed by what it viewed as the provocative actions toward China of the previous DPP government under Chen Shui-bian, which it feared could drag the United States into a crisis in the Taiwan Strait. It has welcomed the efforts of the Ma administration to promote peaceful cross-Strait ties. Tsai Ing-wen “needs to send a clear message to Beijing that she has no intention of stirring up a crisis in the Taiwan Strait, but the main target is Washington,” Huang says. A substantial part of the DPP’s National Security Strategy Paper calls for reinforcement of the strategic partnership with the United States. SQUARING OFF — The three presidential candidates – left to right, James Soong, Ma Ying-jeou, and Tsai ing-wen – during a televised campaign debate on December 17. photo : cna

James Soong If People First Party (PFP) candidate James Soong astounds the pollsters by winning the presidential election, the result for cross-Strait economic relations would be very much the same as under a Ma Ying-jeou administration, analysts say. Negotiations on liberalization of goods and services under ECFA will proceed, along with the investment protection agreement, individual tourism program, and other cross-Strait economic agreements. “It wouldn’t be much different from what Beijing would do in the case of a Ma victory,” notes Alexander Huang Soong was formerly a high-level KMT official, and even after splitting with the party to

start his own PFP, he remained a KMT ally for a long time as a fellow member of the “pan-blue” bloc. He accepts the 1992 consensus, which Beijing has set as a precondition for engaging in negotiations with Taiwan. Moreover, Soong is the only candidate to have visited China, which he did in his capacity as PFP chairman in 2005, receiving red-carpet treatment and meeting with Chinese President Hu Jintao. In early December, Soong said that if elected in January he intends to become the first Taiwanese president to visit China, so as to promote goodwill and peace. If elected, he has also pledged to convene conferences to discuss China issues to enable various segments of the public to have a say in the policymaking process.

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TAIWAN LIVING

Western Faces, Taiwanese Schoolbooks A growing number of parents are sending their children to local schools to develop their Chinese-language skills.

BY STEVEN CROOK

citizenship. As a result, many decade or two ago, if “ex-foreigners” became local you saw a youngster students. with a Western face Local schools have been in Taipei, it was reasonable attracting an increasing to assume he or she attended number of foreign famiTaipei American School (TAS) lies living in Taiwan for two or another international reasons. The first, a conseschool. Nowadays you cannot quence of China’s rise, is that be so sure, because more and many parents hope their chilmore expatriate families from dren can master Mandarin North America and Europe Chinese. The second is that are sending their children some international compato regular public schools in nies operating in Taiwan no which the language of instruclonger offer their foreign staff tion is Mandarin Chinese. such generous expatriate Although detailed statispackages. tics are hard to come by, the LEARNING THE LANGUAGE AND CULTURE--Lucas Everett with his Sending a child to TAS Ministry of Education says kindergarten teacher in a local private school. costs at least NT$532,000 that 250 non-ROC nationals Photo : courtesy of Morgan e verett (about US$17,700) per year. were studying in public senior There is also a one-time caphigh schools and vocational ital fee of NT$200,000 per student. mean much. Speaking anonymously, the schools in the 2009-2010 school year. Now that many of Taiwan’s cities and official pointed out that some youngThe ministry did not provide numbers counties have abolished lunch, textsters in local schools reside in the ROC for earlier years, nor indicate the stubook, and other fees, local public on foreign passports, even though both dents’ nationalities. elementary and junior high schools are their parents are Taiwanese, and “no When this writer, following the mineffectively free. one” regards them as foreigners. Also, istry’s suggestion, began asking local “We think it's important for all chilunder Taiwan’s Nationality Law as governments how many foreign citidren to have the opportunity to learn amended in 2000, children born to forzens are enrolled in their elementary a second language, and Chinese is the eign fathers and local mothers after and junior high schools, a civil serobvious choice given where we live,” 1988 were permitted to take up ROC vant explained why such tallies may not

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says Morgan Everett. Her youngest son, Lucas, has been attending a private, church-affiliated Chinese-language preschool since the American family relocated from Thailand to Taiwan three years ago. “It’s important to us that our children are given the opportunity to learn the language of the culture around them. We want them to feel they’re part of the community they live in, and be able to develop friendships with children in our neighborhood,” says Morgan. “We also feel that learning Chinese will benefit their future, as we think that China will continue to become more influential in business and on the world stage.” Morgan and her husband, Mike – a consultant with a not-for-profit agency – were unable to place their older son, Aidan, in the same kindergarten because of his age. “They were hesitant to take on a child who was almost five and had no Mandarin ability,” she recalls. “We could have gotten him into a [Chinese-language] preschool, but after reassessing and observing him during our transition to Taiwan, we decided he would do better in an English-speaking environment,” says Morgan. “His personality is very serious and reserved, and he has a tendency to get anxious in situations where he can't make himself understood. We didn't feel like adding the stress of a new language environment to his life at that point. I think that brings up an important point – you have to take your child's personality and needs into consideration when choosing a school or learning approach. Every child is different.” In the end, the Everetts kept Aidan at home until he was old enough to attend the kindergarten at Morrison Academy’s Bethany Campus in Taipei.

and youngest to local schools,” says MaDonna Maurer, a mother of three from the United States. “My husband and I have worked with international schools for many years. We saw the benefits of young children picking up the local languages even before we had our own children, so we knew that if we wanted them to really grasp the tones and pronunciations, they would need to go to a local school. International schools usually have a language class, but only for an hour or so a day. We knew they needed to be exposed to it for a longer period of time, and kindergarten is perfect for that.” The Maurers’ three children all went to local kindergartens, but had quite different experiences. “Our youngest had a difficult time at first, but she has a natural gift for talking a lot and picked up Mandarin quickly. The teachers told us she was very involved in classroom activities,” recalls MaDonna. “Our son, who is the oldest, was much shyer and it took him much longer to learn Mandarin. The first few months were very difficult. It took quite a while for him to start talking to his classmates and teachers.” The Maurers’ son and younger daughter are now in grades four and one, respectively, in international s c h o o l s . “ We w a n t t h e m t o g r a s p reading and writing in English. We had originally planned to do the switch at grade two or three, but due to personal

circumstances we did it at grade one,” says MaDonna, who has written about this transition her blog, Raising my TCKs (http://raisingmytcks.wordpress. com). “TCK” is an acronym for “thirdculture kid.” The main reason why the Maurers returned to Taipei – where MaDonna’s German husband, Uwe, grew up – is that their older daughter, who was then two, needed a form of speech therapy not available in the mainland Chinese city where they previously lived. Between the ages of four and six, the daughter attended a local Chinese-language special-education kindergarten (“and loved it,” recalls MaDonna). She is now being homeschooled. Language-learning is also the main motive for Salome Grobbelaar and Willem Kukkuk, qualified teachers and the parents of Wikus Kukkuk. Wikus was born in South Africa on May 20, 2009. In 2010, his parents returned to Taipei, where they had worked between 2005 and 2007. “We came back to Taiwan because of the violence and poor salaries in South Africa,” Salome says. “We plan to stay for the next 15 to 20 years, if the situation in South Africa doesn’t change, so our son must be fluent in the language. Therefore, we immediately decided to put him in a Chinese class.” Wikus’s parents are not concerned that a Chinese-language school environment will undermine acquisition of

Getting the tones down “Language learning was our main reason for sending our oldest THE EVERETTS--(Left to right) Mike, Lucas, Aiden, and Morgan. Photo : courtesy of Nadia Reid

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TAIWAN LIVING Catherine Openshaw has had a positive experience with the local public school she has been attending. Photo : courtesy of Tobie Op enshaw

his mother tongue, Afrikaans, or English. “We want to focus on his Chinese abilities because we can help him with English at home,” says Salome. “Luckily we have many Afrikaans friends here, so he is used to hearing the language a lot,” Salome explains. “At the moment his Afrikaans abilities are really good for a child of his age. We have to read and sing songs constantly, and my mom often sends new books from South Africa. We try to focus on certain words every week. We also try to speak in full sentences using adjectives.” “However, it took a while for him to understand that he must speak Chinese at school and Afrikaans at home,” she adds. “You may wonder why we are doing this. The main reason is that we are proud of our culture and we want him to experience it, and there’s always the hope that circumstances may change in South Africa, and we’ll return.” Salome admits that her and her husband’s Chinese abilities are “zero.” Fortunately, she has a co-worker who translates important messages from Wikus’s teacher. “He also helps me fill in forms and write notes,” she says. “I do, however, miss discussing his day at school with the teacher, just to ask the teacher: ‘How’s he doing? Did he eat all his vegetables? Did he say any new Chinese words?’ Simple things like that.” Communication has also been an issue for Morgan and Mike Everett, even though they both speak Mandarin. “We can't read Chinese well, and we had difficulty at first with the piles of papers that came home with Lucas,” Morgan recalls. “Sometimes we missed out on an event or didn't send Lucas with what he needed for the day because we couldn't fully understand the teachers' letters. We had to work

closely with his head teacher to make sure we were doing what we were supposed to be doing.” The Everetts hope to keep Lucas in Chinese-language schooling until first or second grade, then switch to an international school. “We want him to learn Chinese, but we want his language of eloquence to be English. That is our native tongue, and he’ll likely attend university in the U.S.” Salome and Willem, by contrast, plan for Wikus to attend a normal public school throughout his elementary education, and they have been impressed by the ones they have seen. “Public schools here are well funded. Most have fewer than 30 students in a class and the equipment is unbelievable,” says Salome.

Differences among schools Hopefully, Wikus will fare better than one of his compatriots did a decade ago. Cape Town-born William Openshaw enrolled in a Taoyuan public elementary school in 2000, after spending two years in a nearby English-language kindergarten where his parents, Tobie and Corné, were then working. “It was a disaster,” recalls Tobie. “Because it was a new school, almost all the teachers were inexperienced, and many of the students had never seen a foreign kid before.” Tobie and Corné wanted William to try a public school, “so he'd learn Chinese and become better-integrated.” The family also had a financial motive, as the alternative would have been a hugely more expensive private Englishlanguage school. In an article about schooling his children in Taiwan that he wrote in 2009

for Culture.TW, a website sponsored by the Council for Cultural Affairs, Tobie vividly describes the moment, two weeks into the first semester, when he realized the experiment was going badly wrong. “My abiding memory of that place is arriving at the school to see my son charging full speed down a corridor, the hunted look of an animal in his eyes, with a pack of perhaps 15 wild kids after him, all trying to touch him, hit him, grab him. Needless to say, we took them out right away.” Since then, William has attended the private school in New Taipei City where his mother works. It is expensive, charging over NT$60,000 per semester, but William has thrived. He is now in his final year of senior high. Along the way he has picked up fluent spoken Mandarin, although his written Chinese is not good enough for him to join university-level courses taught in Mandarin, Tobie says. Rather than join a program taught in English at a Taiwan university, William is preparing to study film and media at New York University's new Abu Dhabi campus. Eight years after the debacle in Taoyuan, the Openshaws’ daughter reached elementary school age, and they decided to give the local education system another shot. “We now live in a different area, where Westerners aren't such a rare sight. During the summer, we took Catherine to the elementary school one block away for a dry run.” Openshaw advises parents considering a particular public school to ask the teachers if they have any experience dealing with children who are not native speakers of Chinese. In the case of the school Catherine now attends, the answer was “no.” Nevertheless, Tobie and his wife were impressed by the number of teachers there who could speak English and who had overseas education. That background proved useful on a number of occasions, he says. Also, the tutor hired to coach Catherine in Chinese and math helps Tobie

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and Corné communicate with their daughter’s teachers. “Finding a good tutor is quite easy,” says Tobie. “There are many people, among them qualified teachers, who are available and not expensive.” Still, both William and Catherine struggled to make friends at school. “It's a problem that can persist for quite a while, but they've largely overcome it,” says Tobie. “Some kids didn't want to be their friends simply because our children are foreigners. On the other hand, some parents encouraged their son or daughter to befriend 'the foreign child' because they wanted their own kids to practice their English.” “For a while, some kids were saying our daughter smelled or that her hair smelled,” says Tobie. “Initially, we didn't know this was going on. When we did find out, we sent a stern message to the teacher, asking her to put a stop to it, which she did.” According to Tobie, the ostracism his daughter faced “probably isn't much worse than the taunting suffered by, say, overweight kids or others who happen to be different.” “My children tend to make friends with the kids who are already outsiders for some reason,” he goes on to say. “The end result is that they've learned how to get along with people who are different, to accept their differences, and to communicate despite those differences.” R o m a a n d Vi k r a m M e h t a a r e from India, and have been living in Taiwan for 23 years. Roma edits Centered on Taipei, a magazine published by the Community Services Center, a non-profit organization that offers counseling, orientation, and other services to Taiwan's international community. She is also a partner in a Tianmu-based printing company. Vikram has been running his own business for many years. R o m a a n d Vi k r a m ' s d a u g h t e r Ayesha attended a local Chinese-language kindergarten, then studied at TAS from first grade until she left to attend university in Australia. Their son Manav was born in Taipei in 1991 and stayed in the public Chinese-language

THE MEHTAS: Daughter Ayesha got most of her schooling at TAS, but son Manav went to local schools until fifth grade. Photo : courtesy of roma mehta

school system until fifth grade, when he transferred to TAS. “We were informed that language locks in at the age of 10, so until then it's important to stay in the environment that supports language learning if it isn't your mother tongue,” says Roma, adding that at home the family speaks both English and Hindi. On the other hand, the Mehtas were keen to move Manav to TAS “to provide him with a more flexible study program, where independent thought and creativity is encouraged.” Manav was the only student of Indian descent in his elementary school. “He was obviously different, but the school, the teachers, and students were very helpful and supportive,” Roma recalls. “There was one incident where students were a little unpleasant, but the counselors, teachers, and parents helped us address it right away and were open to having a discussion about teaching the students that being different is not a bad thing.” Manav's shift to American-style schooling was not without glitches, some of which related to creativity. “We went through a transition period where a lot of things needed to be addressed, especially regarding the way kids learn, or are conditioned to learn,” says Roma. “Free expression in painting and drawing is not encouraged [in Taiwan's

public schools], and I had to work with the teachers at TAS to help them understand why Manav had a fear of coloring outside the lines, or a fear of being terrible at art.” Manav himself describes the move to TAS as “very difficult.” Language was part of the problem, he says. “Even though my parents speak English, I was used to speaking Mandarin 90% of the time. My English reading and writing wasn’t up to scratch,” he recalls. He managed to catch up. At the same time – thanks to TV, reading, and simply living in Taiwan – he has preserved most of the Chinese skills he learned at elementary school. In early 2012, he will start studying for a bachelor’s degree in advertising at Chinese Culture University. The program is taught entirely in Chinese, and Manav does not anticipate problems communicating with his teachers and peers, or understanding the required reading. However, because he never learned to write Chinese-language essays at senior-high level, he thinks it is likely he will need help when completing assignments. “If the goal is simply learning Chinese, there are other ways,” advises Tobie Openshaw. “As for getting a good education, [parents should be aware that] local elementary schools are very much sink-or-swim environments. If you fall behind, you stay behind.”

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Getting Back into Gear Around 380,000 cars are expected to be sold in the Taiwan market in 2011, the most in years. BY DON SHAPIRO

IN THIS SURVEY

• Getting Back into Gear

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• Ford Consolidates its Market Presence

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• Luxury Models Still Zooming Ahead

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• Taiwan Seeks Major Role in Electric Vehicles p40 • In EVs, Donald Wu Does it His Way

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• Good Potential for Auto Electronics

p44

ust a few years ago, conditions in Taiwan’s automotive market were looking rather dismal. After three straight years of negative growth, only 229,297 cars were sold in 2008, less than half of the 514,617 achieved in 2005. But the auto market has since returned to steady annual growth, hitting 294,423 vehicles sold in 2009 and 327,615 in 2010, with 11-month sales in 2011 of 347,411 units. The projected full-year figure for 2011 is between 370,000 and 380,000 cars to make it the industry’s best year since 2005, according to the Taiwan Transportation Vehicle Manufacturers Association (TTVMA). A year ago when TOPICS last surveyed the Taiwan auto market, the performance for the coming year was not expected to be quite so strong. Most domestic manufacturers were forecasting 2011 sales in the range of 320,000 to 333,000 cars, with the most optimistic projection at 340,000. It now appears that those forecasts will be exceeded by 10% or more. That growth, in addition, came despite production difficulties faced by some of the local factories when component deliveries were disrupted by the earthquake and tsunami in Japan and later by the flooding in Thailand. Albert Kwok-Po Li, president of the Ford Lio Ho Motor Co., says the

outstanding record this year was due to Taiwan’s robust economic performance in the first half, when the economic growth rate was 6.62% year-on-year in the first quarter and 4.52% in the second. “The stock market was very good early on in the year, and the economy was actually growing quite well before the impact of the European crisis hit,” he says. “As a result, people were feeling optimistic, and in the car industry it’s all a question of consumer confidence – that’s what drives sales.” Li points to the pent-up demand in the domestic market as a second factor. “If you look at the average annual sales over the last 10 or 12 years, Taiwan is a market in the 400,000-450,000 unit-a-year range, so based on people’s driving habits and the replacement cycle, this year’s 380,000 is actually still below average,” he says. “People can only hold back so long.” That pent-up demand for replacement vehicles – 50% of the 7 million registered motor vehicles in Taiwan are more than 10 years old – helps explain why the prognosis for 2012 sales continues to be fairly optimistic, despite the slowdown in the Taiwan economy and the numerous uncertainties in the global economic picture. The industry is expecting next year’s figure to match the 2011 sales level, and Li says it

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might even be slightly higher if economic conditions hold up reasonably well. Another positive factor is expected to be the lineup of numerous new models that Taiwan automakers – including Toyota, Nissan (Yulon), Ford, and Luxgen – are preparing to launch in 2012. “New product entries always help to spur auto sales,” says TTVMA Secretary-General Chen Min-Teh. A program recently announced by the Ministry of Transportation and Communications (MOTC) to give owners of older taxis more incentive to upgrade their vehicles should also help stimulate the market in 2012. The MOTC has identified some 8,000 taxicabs that are more than 14 years old, and will offer owners a subsidy of NT$30,000 toward the purchase of a new model for up to 5,000 qualified applicants who also agree to take a course in vehicle maintenance at a local motor vehicle bureau. If more than 5,000 applications are received, the recipients will be chosen by lot. “We’ve been proposing for the past few years that the government adopt a program to encourage the replacement of older cars,” says Chen. A similar idea has also appeared for several years in the Transportation Committee section of AmCham’s Taiwan White Paper. Because the aging vehicles are more polluting and less fuel-efficient than the latest models, the replacement program should bring gains in terms of environmental friendliness and energy saving. And since the newer models incorporate more safety features, the program should also enhance Taiwan’s transportation safety. “The government understands the need to get these older vehicles off the road, but it only has so much money to spend on the program,” says Chen. “So it’s starting with taxis, which makes sense as they’re running on the streets all

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The redesigned Ford dealer showroom in Hsinchu will be the prototype for over 20 more around the island. photo : ford lio ho

day, so the environmental impact is the greatest. But we hope that this is only the first wave, and that eventually subsidies will also be provided for private cars.” To provide further incentive, some of the car manufacturers are providing additional discounts toward purchases of the replacement taxis.

Cross-Strait issues Another current major topic of interest in the domestic auto industry is Taiwan’s ongoing trade negotiations with China under the Economic Cooperation Framework Agreement (ECFA) signed in 2010. Under the “early harvest” provisions that went into effect at the beginning of 2011, 33 types of automotive components made in Taiwan are earmarked as eligible for customs-duty reductions in China, reaching a zero-tariff level in 2012. According to the TTVMA’s Chen, exports of those items to the main-

land showed a 23% increase in the first three quarters of 2011. The early-harvest list did not include built-up vehicles, however. “That’s something that we hope can be brought up as part of the negotiations currently underway for a commodity trade agreement under ECFA,” says Chen. “"If an equitable arrangement can be worked out, it would be a big help for the car industries on both sides of the Strait.” TTVMA envisions a quota system in which each side would be allotted a given number of vehicles per year for shipment across the Strait, and in view of the huge disparity in size of the two car markets, it proposes a ratio of 10:1 in which Taiwan would import one car from China for every 10 that it exports to the mainland. “Last year some 18 million cars were sold in China – about 50 times as many as in Taiwan,” says Chen. “And because of the economy of scale, their production cost is much lower than ours. If they were

A Recovering Taiwan Auto Market

2002

2003

2004

2005

2006

2007

2008

2009

2010

Domestic Products

345,211

357,285

422,410

444,470

306,388

271,665

186,753

233,979

252,722

259,692

53,671

56,629

61,882

70,157

59,928

55,116

42,744

60,444

74,893

87,719

Total

398,882

413,914

484,292

514,617

366,316

326,781

229,497

294,423

327,615

347,411

Growth rate

14.81%

3.77%

17%

6.26%

-28.82%

-10.79%

-29.77%

28.29%

11.27%

17%

Imports

2011 (11 months)

SOURCES: TTVMA based on MOTC data

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able to enter this market in an unlimited way – and with tariff-free or low-tariff treatment under ECFA – we wouldn’t be able to compete.” Chen says the cross-Strait negotiators will have to hold a lot more discussion before China’s attitude toward this proposal is known, but some in the industry are rather pessimistic that Beijing will agree to any plan in the near-term that allows for complete vehicles from Taiwan to be imported into China. The reason, says one company executive, is China’s regulation limiting foreign ownership in auto-manufacturing operations to a max-

imum of 50%. “They’re worried that foreign brands might seek to get around that restriction by making cars in Taiwan for shipment to China,” he notes. If that obstacle could be overcome, opening of the mainland market to builtup automobiles from Taiwan would be a big boon for the domestic industry, which is saddled with the need to produce a large number of different models. The relatively low quantity per model increases production costs. By selling some cars to China and gaining greater economy of scale, the local manufacturers could benefit from reduced unit

costs on both sides of the Strait. On the regulatory side, tighter antipollution controls are coming into effect in Taiwan this year as the Environmental Protection Administration prepares to enforce its Fifth Phase Emission Standards, modeled on European Union standards. The new standards will apply from January 1 for diesel engines and October 1 for gasoline-powered cars. “The standards are getting stricter and stricter, but Taiwan manufacturers appreciate the government’s environmental objectives and make sure to take steps to comply,” says Chen. “But of course this

Ford Consolidates its Market Presence

ith the withdrawal of General Motors and Chrysler from Taiwan following their financial difficulties and government bailout a few years ago, the sole remaining U.S. car manufacturer in this market is Ford Motor, which operates through its 70%-owned joint venture, Ford Lio Ho. The company makes both Ford and Mazda brands at its plant in Jhongli. More than just a survivor in this highly competitive market, Ford has been underscoring its long-term commitment to Taiwan. At ceremonies in November last year marking the rollout of the two millionth vehicle since the company’s founding in 1972, Joe Hinrichs, Ford’s president for Asia-Pacific and Africa, announced – to cheers from the assembled employees – that the company would launch four new models before the end of 2013. The first of these – the 1.6-liter Fiesta in both sedan and hatchback models – was introduced this month at the Taipei International Auto Show and will be available to customers from March. As an import, the Fiesta has already proven its popularity in this market, especially among younger drivers. “It’s a very limber, nice-handling car, with a big trunk and a powerful, peppy engine,” says Ford Lio Ho President Albert Kwok-Po Li. “It comes with voice control, all the latest safety features, and even a drawer underneath the passenger seat where women can put their shoes.” One more new model – the identity of which is still confidential – will be launched before the end of 2012. Another sign of the Ford commitment to the market is the plan to cooperate with its dealers in opening more than 20 completely renovated showrooms in the coming year, similar to the prototype recently unveiled in Hsinchu. “It’s

Celebrating the opening of the Hsinchu showroom. photo : ford lio ho

really impressive-looking and fits our changing image of appealing to the younger generation,” says Li. Besides achieving strong sales growth and maintaining its market share in 2011, Ford Lio Ho also scored substantial gains in both employee satisfaction and customer satisfaction, leading the company’s Asia Pacific region in both categories. Among the factors leading to higher customer satisfaction have been the ready availability of parts for servicing, a hot line for consumer feedback, and the provision of retail financing on an island-wide basis. As one of its major Corporate Social Responsibility activities, Ford Lio Ho sponsors a Driving Skills for Life program that teaches safe and environmentally friendly driving habits. More than a thousand drivers have gone through the course this year.

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compliance also entails higher costs and often it’s not possible to pass that on to the consumer, so there’s a financial burden.” With regard to CO 2 emissions, the government has asked the manufacturers to achieve a 15% reduction by 2015, and the industry is watching whether even more stringent controls may follow in future in line with international goals to decrease carbon footprints. “Taiwan is a small and densely populated area, so this is naturally is naturally a concern,” Chen notes. “But this will also raise costs, so we’re communicating with the government on how to implement it without

affecting the industry’s development. The manufacturers will need sufficient transition time so they can gradually adjust.” Part of the effort to promote greener vehicles is the program to encourage development of electric cars in Taiwan (covered in another article in this section), as well as hybrids, diesels, and other alternative vehicles. In terms of automotive trade, 2011 has been a banner year for Taiwan. Sales of imported cars seem poised to surpass 90,000 units, and through the first 11 months of the year, imports took a 22.86% market share, the highest level

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since 1995. Many of these were premium cars (see the next article in this section), which did especially well in the first half of the year as consumers sought to avoid the “luxury tax” that became effective in July. Less well-known is that Taiwan is also a car exporter. The biggest contributor in the export column has been Toyotaaffiliate Kuozui Motors, which in 2011 is expected to ship a total of more than 50,000 Corolla Altis sedans to countries in the Middle East in support of the parent company’s global export program. Ford Lio Ho is also shipping its Escape SUV to Australia, Japan, and New Zealand.

Luxury Models Still Zooming Ahead The eight major premium brands in 2010 enjoyed one of their best years ever. BY ALAN PATTERSON

aiwan’s luxury car market, by most accounts, is booming. The sector is poised to far exceed the nearly 20% growth forecast for automobile sales in Taiwan in 2011, according to industry executives and associations. The main premium auto brands in Taiwan, in descending order by sales, are Mercedes-Benz, BMW, Lexus, Audi, Volvo, Infiniti, Saab, and Jaguar. This year, Mercedes-Benz is forecast to retake the lead from BMW, which held the top spot during the past three years, based on Taipei Automobile Distributors Association (TADA) statistics. Sales in 2011 for the eight premium brands will soar by more than 41% from last year, TADA statistics show – although the briskest sales took place in the first half of the year before Taiwan’s new 10%

“luxury tax” took effect for cars with a pricetag above NT$3 million (about US$100,000). “This year is by far the best year we've ever had in Taiwan,” says Mercedes-Benz Taiwan President Eberhard Kern. He says that sales in Taiwan for the German carmaker will jump by about 40% in 2011, in line with growth expectations for the luxury car segment as a whole. The strength of the luxury car market appears to be unfazed by slowing economic growth in Taiwan. This year, the island’s economy is expected to grow by about half of the 10.88% recorded in 2010, when Taiwan roared back from the global recession that started in 2008. “We never expected this year to be so booming,” says Wilson Shih, marketing manager of Scandinavia-Asia Corp.,

which has the Saab dealership in Taiwan. “The M-shaped society has become more apparent in recent years,” he notes, using a term coined by Japanese economist Kenichi Ohmae to describe a trend toward a widening gap in income distribution. Kern attributes the market leadership of Mercedes-Benz in the premium segment to the high value that Taiwan consumers place on the company brand. “We have been here for more than 40 years and have a loyal customer base,” Kern says. Mercedes this year has about 3% of the overall auto market in Taiwan, compared with about 2% of the global market, he adds. In 2011, Mercedes-Benz introduced 10 new models that include the company’s classic sedans as well as new vehicles

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such as an SUV lineup that was rolled out in the fourth quarter. The new products have been well accepted by Taiwanese customers, and business has broadened from the company’s mainstay sedans, Kern says. Many of the premium car brands in Taiwan are aiming at a new demographic – people younger than the typically middle-aged individuals who have “made it” and want to splash out on a luxury car, local auto executives say. Taiwan is quite a mature market, with overall sales rather stagnant over the past decade, Kern notes. Now Taiwanese customers are upgrading to higher quality products, especially when buying cars, he observes. “Taiwanese drive their cars for quite a long time,” says Kern. “Because you drive your car longer, you would like to spend a bit more money to get the most sophisticated one.” Not all of the luxury auto brands in Taiwan have been having a good year, however. Saab, one of the “premium-eight” brands in the local market, expects its 2011 sales in Taiwan to fall by about 10% from last year, which would mark the second straight year for sales to drop. Media reports that the Swedish company may go out of business are a likely key reason for the decline. Saab’s largest investor, Swedish Automobile, is in continuing talks on Saab’s future, and the company faces “much uncertainty” in completing a proposed deal to structure investments from two Chinese auto com-

panies, according to a December 1 report by Bloomberg News. “We will consider all options for the company, including an orderly wind-down,” CEO Victor Muller said in a statement cited by the Bloomberg report. The uncertainty about Saab’s future has scared off some buyers in Taiwan, according to Shih. Halts in Saab’s production in Sweden as well as delayed salary payments have also left showrooms in Taiwan with just barely enough cars to go around. “Potential buyers are hesitating,” Shih says. “The value of the brand is going down.” In addition, sales of Jaguar in Taiwan have stagnated since 2008, with about 100 cars sold annually starting from that time, based on TADA figures. That number is down from 2004, when 490 Jaguars were sold on the island. Like Saab, Jaguar may also be suffering in this market from a tainted brand image. In March 2008, U.S. automaker Ford sold the famous British brand to India’s car juggernaut, Tata Motors.

Emerging pinnacle The other six key premium brands in Taiwan have all seen unit sales rebound from the slowdown in 2008, and another trend is the emergence of a new pinnacle of vehicles selling in the price range of NT$10 million (US$333,000) and more per automobile. Brands in this ultraluxury segment include such names as Bentley, Ferrari, Lamborghini, Lotus,

Maibach, Maserati, and Rolls Royce. These days, it is not unusual to see a phalanx of Ferraris or Lamborghinis roaring in tight formation along the roads in Taiwan. The groups are often members of clubs created by the brands to help promote sales and build camaraderie among car owners. Lamborghini officially started selling its cars in Taiwan in 2002, according to Alex Chao, president of Lamborghini Taiwan, who previously sold the Italianmade supercars in Taiwan on the gray market. Lamborghini is now selling about 30 cars per year in Taiwan, an increase of about 30% from previous years, he says. “ T h e m a r k e t i n Ta i w a n i s j u s t starting,” Chao said in Lamborghini’s Neihu District showroom featuring the company’s newest Avantador models. “Sales of Lamborghinis in Taiwan still lag behind Singapore and Hong Kong, but I’m certain consumers here have the same purchasing power as people in those markets.” In Singapore, Lamborghini sales are nearly double those in Taiwan despite the fact that Singapore has less than a quarter of Taiwan’s population and its notoriously heavy taxes on cars also make Lamborghinis far more expensive there than in Taiwan. Wealthy consumers in Taiwan have been less enthusiastic about buying Lambos because they are more conservative and prefer to avoid the limelight, Chao says. “In Taiwan, if you buy a Lamborghini, the news spreads very quickly. Your staff and even domestic

Cars Sold per Year by the Premium Brands

2004

2005

2006

2007

2008

2009

2010

2011 (F)

Mercedes-Benz

7,304

7,603

6,385

6,395

3,909

4,915

7,375

12,000

BMW

5,563

6,633

5,685

6,233

3,967

4,922

7,545

11,000

Lexus

7,164

8,084

7,427

7,601

4,737

5,952

6,617

8,000

Audi

1,837

2,029

2,003

1,917

967

1,437

2,303

3,000

Volvo

1,727

1,605

1,105

1,282

1,432

1,749

2,653

4,000

Infiniti

1,134

1,512

975

805

706

858

952

1,000

Saab

614

584

706

583

295

396

390

350

Jaguar

490

378

239

161

109

108

100

25,833

28,428

24,525

24,977

16,122

20,325

27,943

39,450

Total

SOURCES: Taipei Automobile Distribu tors Association

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helpers start to gossip.” Typical Lamborghini buyers in Taiwan are owners of small and medium-sized companies, mainly in traditional manufacturing, according to Chao. They tend to be very meticulous about their choice of automobile and disregard the usual conventions. One recent buyer chose a custom metallic pink finish for his Lamborghini, says Chao, who by way of contrast notes that Ferrari buyers frequently select the company’s traditional racing red for their cars. Lamborghini buyers choose every color in the rainbow as well as black, says Chao, while showing a photo of a matte ebony Lambo he drives. “The Lamborghini buyer thinks, ‘I am who I am,’” Chao says. “They have their own logic.”

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Mercedes-Benz Taiwan President & CEO Eberhard Kern with celebrities at the 2011 Hit FM Music Ceremony sponsored by the company.

Expectations still rosy Despite widely held expectation that global economic growth will slow next year, Taiwan’s luxury car dealers are generally looking forward to continued growth in 2012, albeit at a slower pace. “We suppose that regardless of all the financial uncertainty in the market, Taiwan will have a good year,” says Kern of Mercedes-Benz. “Although the economies next year in Europe and the U.S. will not be good, growth in Taiwan should be okay. We should exceed 15% growth,” says Lamborghini’s Chao. “Our buyers are more resilient to economic downturns.” Kern points to two key factors supporting his growth expectations. For one, the Taipei Auto Show this month will present an exciting array of new Mercedes-Benz cars. Secondly, an increasing number of customers are concerned with more than just buying a car. In response, Mercedes-Benz introduced a new service package for car buyers a few months ago. Kern also says the company is preparing to offer some innovative financial arrangements for prospective auto buyers next year (he declined to provide more details until the official announcement is made). “If you look at the finance and leasing market, Taiwan is different from the U.S. or Europe. We are on the way to creating international-standard financial products. We want to offer customers a

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photo : mercedes-benz

complete solution.” Lamborghini’s Chao is also looking to make improvements in customer relationship management to boost sales in Taiwan. The company has sponsored events such as golf competitions, round-the-island driving tours, and wine tastings for Lamborghini owners. “It’s a chance for people in the same circles to get together and build friendships,” he says. Chao has even held co-branding events with investment banks such as Switzerland-based UBS, although it maintains a privacy policy of not sharing its customer list. While Taiwan’s electronics industry accounts for nearly half of the island’s manufacturing output, Lamborghini owners in Taiwan have not typically made their fortunes in high tech. “Quite a few of our buyers are in traditional manufacturing, and there are some from financial holdings companies,” Chao says. Mercedes’ Kern sees other trends in the Taiwan market, such as a growing interest in fuel efficiency. “That may be one reason why Mercedes-Benz is so successful in Taiwan,” Kern says. “We offer quite a few highly efficient products, and this is not just about engines but also transmissions.” In some of the latest models from Mercedes-Benz, the motor shuts down when the car stops at a red

light. When the driver releases the brake, the motor restarts. Kern also notes that next year his company will be among the first to offer a totally electric car in this market. Another trend he has observed is toward smaller cars. Families are getting smaller, and cars tend to be largely for urban use. Mercedes-Benz plans to introduce a new generation of its A-class automobiles in Taiwan toward the end of 2012 as the solution for those looking for smaller vehicles, Kern says. Taiwan’s luxury auto market potentially could be even larger and growing faster if not for problems with what is known as homologation – the certification of a product to assure that it meets regulatory standards. In Taiwan, the government maintains some regulations on automobiles that are different from those of any other nation in the world. For a car dealer selling only a few hundred units per year, the limited scale can make homologation very costly, the auto dealers say. Be that as it may, Taiwan’s luxury car market appears poised for strong growth next year and for the longer term as the premium brands broaden product lines to expand their market reach and as the island’s wealthy individuals acquire a taste for supercars.

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Taiwan Seeks Major Role in Electric Vehicles Local researchers are focusing on key issues such as battery cost and safety. BY TIMOTHY FERRY

PHOTOS: Timothy Ferry

n a nondescript commercial building in the industrial Wugu district of New Taipei City, company representatives for startup CityPower show off a device that they hope will pave the way for electric transportation in Taiwan. Inside their showroom, the company displays a dozen or so motor scooters refitted with electric motors and battery packs. Lining the showroom walls are hulking kiosks with rows of shoebox sized drawers, resembling a wall of post office boxes. A CityPower employee lifts the seat of the scooter he is driving and removes a five kilogram rectangular battery pack. He presents his membership ID and public transportation EZ card in front of the kiosk sensor, and one of the drawers slowly emerges, empty. The employee places the battery into the drawer, which then smoothly retracts with the battery inside, ready for charging. Another drawer opens, this time with a charged battery to be fitted on the scooter. The battery switch can be completed in less than a minute, at a cost of under NT$20, cheaper than a liter of gasoline. The scooter can then be driven a distance of up to 30 kilometers, with no emissions. CityPower plans to start with a couple

of pilot projects on one of the outer islands and in Banciao, but has big plans to have up to 200,000 electric scooters on the road by 2015. Its battery swap system resembles that of Better Place, a well-publicized system being implemented in Israel and elsewhere, but with Taiwanese characteristics. It’s cheap, automated, and intended for motor scooters rather than cars. The battery kiosks operate with smooth precision – not untried prototypes but market-ready equipment. In fact, CityPower general manager K.S. Hong ran a very similar business in China for electric bicycles. China has large numbers of electric bicycles in urban areas where motor scooters and motorcycles are often banned, and for three years he ran a successful batteryswap business for electric bicycles in Suzhou – actually predating Better Place – before deciding that Taiwan presents a far more interesting market. Taiwan has a number of distinct advantages over China in this regard, including the highest density of motor scooters in the world – 14 million of them for a population of 23 million. In addition, most driving is done in urban areas at slower speeds and with less

distance to cover, both pluses when considering electric transportation. But most importantly, government policy and business instinct are both pointing in the same direction: the future of transportation will be electric. Currently, Taiwanese firms big and small, industrial research organizations, and government agencies are all focused on bringing the future of electric transportation into reality. Government organizations such as the Automotive Research and Testing Center (ARTC) and the Industrial Development Bureau (IDB), and public-private partnerships such as the Industrial Technology Research Institute (ITRI), are providing much of the infrastructure and brainpower for R&D into vehicle electrification. And Taiwanese firms are using licensed technology as well as doing their own R&D to lock into EV supply chains – from materials to batteries to motors and systems. According to market research firm BCC Research, the global electric vehicle market is expected to grow 18.5% annually between 2010 and 2015, when the market value is forecast to reach US$78 billion. Another market research firm, Global Industry Analysts, predicts that

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2.6 million EVs will be on the world’s roads by 2015. IHS Global Insight foresees 20% of the global auto market comprised of fully electric or plug-in hybrid electric vehicles by 2030. Many of the world’s top auto makers seem fully committed to making these predictions come true. Volkswagen CEO Martin Winterkorn, for example, said in May 2010 that “our goal must be zeroemission vehicles powered by electricity from renewable sources.” Seeing a potential for business, Taiwanese companies are leveraging the island’s strengths in IC chip making, optics, and machinery to join this industry in force – and some of them are already partnering with prominent EV makers around the world. E-one Moli builds batteries for BMW’s Mini-E electric vehicle, while Fukuta and Chroma ATE supply motors and testing equipment for Tesla. Luxgen, part of the local Yulon Group, offers three high-end electric versions of its most popular SUVs. Many of these firms are actively supported by the government with loans and grants to fuel the nascent industry, and that policy – set by President Ma Yingjeou’s administration in 2009, is likely to continue regardless of who wins the January 14 election. At the Taipei International Electric Vehicle show last April, Vice Economics Minister Hwang Jungchiou announced an NT$9.7-billion plan for 10 pilot projects around the country to develop electronic vehicles and business models appropriate for Taiwan. The plan envisions 60,000 electric vehicles in operation by 2016. Alan Hong of CityPower, citing Taiwan’s government policy as one of the prime reasons the company shifted from Suzhou to Taiwan in 2007, notes that Taiwan’s Environmental Protection Administration is actually supplying a good chunk of the startup capital.

Challenges ahead Despite the considerable hype surrounding the industry, however, the future of electric transport is far from certain. EVs face significant hurdles that might yet stymie their commercial prospects – namely safety, range, and battery-charging

time, not to mention high costs. The latest battery technology – lithium ion – costs US$1,000 per kilowatt hour to run. Nissan’s all-electric Leaf comes equipped with a 24-kilowatt-hour battery pack, while Chevy’s range-extended hybrid Volt has a 16-kilowatt-hour version, both adding significantly to the cost of the vehicles. Further, operating an EV involves serious environmental tradeoffs that may give prospective buyers second thoughts. The problems, as ever, stem from the batteries. Electric transportation requires a huge amount of electricity – EV batteries typically hold many times the amount of electricity that a typical house will use in a day, says ITRI’s Wang. But charging and holding this much electricity is potentially dangerous, the charging typically takes hours to complete, and the battery generally runs out of power in under 100 kilometers, far less range than a tank of gas provides. Further, the element lithium is found in only a handful of locations, especially Chile and Bolivia in South America, and there are already reports that lithium mining is laying waste to the salt fields of the Atacama Desert. In addition, the rise of fiery politician Evo Morales to the Bolivian presidency raises the specter of an essential resource being largely controlled by an unfriendly regime. Unlike a couple of years ago when battery performance was the main focus, more recently safety has risen to prominence as a result of battery fires that occurred this past July in several Chevy Volts days after crash tests. Also controversial was that General Motors did not make the incident public until November. In many ways, the media furor over the Volt fires owed much to the public’s unfamiliarity and fascination with this new technology. Chen Chen-foo, senior general manager for Yulon’s Hua-chuang Automobile Information Technical Center (HAITEC) subsidiary, recently reminded an EV conference sponsored by the ROC-USA Business Council that with an internal combustion (IC) engine, you are carrying around a “big bomb” – your fuel tank – beneath your car. Due to the vastly different chemical properties and processes involved, the risk of fire in an EV is orders of magnitude less than with

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a gasoline-fueled car, he said. Does that mean EVs are totally safe? “Actually they’re not,” HAITEC’s Chen admits. And fires are only part of the threat. Chen says that EVs inevitably involve some high voltage, and “when there’s high voltage, there’s a risk of getting electrical shock.” Donald Wu, founder and CEO of Pihsiang Electric Vehicles, says that safety should be the primary concern for EV and battery makers. “If you can’t fully control the battery as far as safety is concerned, you’d better stay out of the EV business,” he advises. Wu’s company uses weld-less battery cells with internal fuses that prevent short circuits in individual cells from affecting – and possibly igniting – the rest of the battery. Without this system, a short-circuited cell could potentially cause a chain reaction with devastating effects. The tradeoff is a marked decrease in battery capacity. Pihsiang’s cars – tiny two seaters suitable only for urban transport – get half the range that many other EVs offer. Although lithium is not polluting in the same way as are toxins such as cadmium and lead – two components of earlier battery types – it is highly unstable and potentially explosive. Automakers currently house EV batteries in strong steel cases inside the car. But Wu says that as his batteries are safer, they don’t require such strong housing, saving weight that translates into less energy usage. James Wang, general director of ITRI’s Mechanical and Systems Research Laboratories, is in charge of ITRI’s crossdiscipline, cross-laboratory EV project. He says his team opts for a different approach to safety with its patented STOVA battery material technology. When this material reaches 150 degrees Celsius, he explains, a chemical reaction occurs that stops the lithium from reacting, automatically shutting down the battery and preventing a fire. Safety and cost are just two of the obstacles facing widespread acceptance of EVs. Phrases like “pilot project,” “test run,” and “not commercially available at this time” are still commonly heard when discussing EVs. In many places – not just Taiwan – the “inevitable” electrifica-

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tion of transport is discussed but with few visible signs of progress. Even in greentech-mad Germany, where no one seems to object to higher energy bills as the price for use of low-carbon renewable energy, EVs have yet to be widely accepted. According to a report from the German Trade Office in Taiwan, Germany has already installed over 700 EV batterycharging stations and has targets for “6 million EVs on German roads by 2030, with a further EUR 1 billion government funding for advanced R&D.” But Germans are also justly proud of their worldbeating auto industry and enjoy power and performance. Will many embrace EVs when a trip from Munich to Berlin – 500 kilometers, usually taking eight hours – would instead take three days?

Government project Still, these obstacles can also be viewed as opportunities for solutions, and Taiwan is set to begin testing various technologies and business models in

a pilot project announced by Minister of Economic Affairs Shih Yen-shiang this past November. The Smart Electric Vehicles Pilot Project earmarks NT$2.2 billion (US$72.79 million) for several tests of EVs under real market circumstances. In Taipei, Yulon will provide 40 Luxgen SUV EVs and 60 Tobe-brand M’Car compacts for rent, while the Taipei city government will build charging stations at transportation hubs. Similar programs in Taichung and New Taipei City will enable government workers to use EVs as routine service vehicles. ITRI’s Wang, who is involved in both the technological and business sides of the program, says that one of the purposes of the various pilot projects is to “validate the business model.” Since “every country has a unique way for how people use vehicles,” the pilot project will help assess how EVs can best fit into Taiwanese society. A second aim, he notes, is to “validate the energy supply system.” Numerous different standards for battery

charging exist around the world, and Taiwan plans to use the U.S. standard of 220-volt/32-amp AC chargers. The pilot projects will in part test how well Taipower’s grid holds up to sudden increases in electricity demand. Overall, the programs should help Taiwan develop its local EV market, as well as explore the opportunities for export. Wang concedes that “some of the parameters in Taiwan,” particularly the relatively low price of fuel, are not favorable to development of the domestic EV market. Unlike Europe, where gasoline prices are steep, people in Taiwan have little financial incentive to switch to electric cars, he says. That factor is believed to be the major reason for the failure of a previous government program here to encourage scooter riders to switch to electric models. Chi-Jen Yang, technology policy analyst at Duke University’s Center on Global Change, contrasts Taiwan’s failure to promote electric scooters with China’s inadvertent success in popularizing elec-

In EVs, Donald Wu Does it His Way

entioning the name Donald Wu of Pihsiang Manufacturing to anyone working in Taiwan’s automotive industry is bound to produce a nervous chuckle or at least a raised eyebrow. Donald Wu is something of an outsider in Taiwan’s automotive and electronics industries. He says he gets no benefit from government agencies, unlike others in the industry, including Yulon, E-one Moli, and Fukuta. But that hasn’t stopped the entrepreneur from succeeding on the global stage. Through a blend of professional expertise, market prescience, and a good deal of creativity, this iconoclast has built Pihsiang into one of the main players in the expanding market of personal electric mobility scooters – the kind seen in Wal-marts around America for the obese and infirm. Now Wu is taking on a bigger challenge – becoming a leader in the drive to make electric vehicles the transportation of the future. “We are destroying the earth,” he says. “How to reduce CO2 is the key.” For him, the solution to the pressing problem of global warming and carbon emissions is simple: “The easiest thing we can do is to go into pure electric vehicles.” To reach this goal, Wu’s latest venture, Pihsiang Electric Vehicles Manufacturing, is set to introduce its Achensa electric

Donald Wu and his two-seater Achensa. photos: timothy ferry

vehicle. Calling the Achensa two-seater electric vehicle a “car,” though, is generous. Wu himself refers to the vehicle as “urban transport,” and the safety standards for quadricycles – fourwheeled scooters – apply. It’s tiny (only 2.1 meters long and 1.1 meters wide), lightweight, and probably won’t be winning any design awards – although you never know. But that’s exactly the point as far as Wu is concerned. “Big car companies want to make their electric cars very advanced looking, very futuristic.” Instead, he says, “We try to convince the consumer with an inexpensive unit with high performance.” While the cost of any new technology is always high at the beginning before economies of scale develop, Wu says Pihsiang can offer its Achensa two-seater for US$10,000, a far cry from the Nissan Leaf’s US$40,000 price tag.

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tric bicycles. He says that Taiwan spent NT$1.9 billion (US$63.3 million) in the late 1990s on subsidizing electric scooters to make them comparably priced to IC engine-powered scooters, but with little success. Quality issues and an uninspired marketing approach conspired to derail the program. At the same time, China was undergoing explosive growth in its electric bicycle market, from 56,000 units on the road in 1998 to over 21 million by 2008. This growth, however, was less the result of technological revolution or forward thinking than of what Yang describes as a “policy accident.” Beginning in the late 1990s, many Chinese municipalities banned the use of small motorcycles and scooters to reduce congestion and improve safety, but electric bikes, categorized as non-motor vehicles, were exempted from the bans and saw a rapid rise in demand. Looking at the prospects in Taiwan, James Wang concludes that “none of the business models is viable without sub-

sidies,” which are part of all current government EV-related programs. He speculates that a commercial market for EVs might emerge before a consumer market, as businesses are more likely to look past the higher purchase price of an EV to instead consider the cheaper operating cost. That is a matter both of the lower cost of electricity versus gasoline and of the savings on maintenance, since EVs have 75% fewer moving parts than engine-powered counterparts. But creating a viable domestic market is only one of the government program’s goals. Another is securing a place for Taiwan in the vast and growing EV supply chain. Instituting these pilot programs, says Wang, “we hope that (EV) proponents can have a very good reference point so that suppliers can sell their OEM to other countries and other car makers.” Positive results from these pilot projects would benefit not only whole car makers such as Pihsiang and Luxgen but also parts suppliers such as Fukuta and Chroma ATE.

He says he can achieve these cost efficiencies by using common materials and generic designs that can be easily assembled. “I could make a very fashionable car. But to do that, you have to hire a very expensive designer to design it, and you need molds and stamping – everything you have to do from scratch. I prefer to use materials I can purchase anywhere much more cheaply.” Wu says this ethos of cost reduction goes into everything Pihsiang does, including the materials used in building the frame and chassis. “When you design the thing, what kind of material are you going to use? Do you need a specialist to make the component or can an ordinary employee assemble it? That makes a big difference in cost,” he stresses. Whatever costs savings are derived from simplicity in design, however, can be minimal compared with the source of the greatest expense in electric vehicles – the battery. Batteries are the Achilles heel of electric vehicles: expensive, heavy, possibly dangerous, limited in their energy storage capacity, and requiring hours of charging. Wu says his patented lithium-iron batteries are easy to produce, and are lighter and less expensive to manufacture than other brands. Then there are issues of charging time. EVs run on AC battery systems, but they can be charged by either AC or DC chargers depending on how they are outfitted. DC chargers are “fast chargers” – they can often charge a battery to within 80% of capacity in 30 minutes. The problem is that they slowly damage the battery, greatly reducing its life. AC chargers are safer and will allow the battery to continue

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Duke University’s Yang notes that the technology behind electric vehicles “is not quite proven” and that widespread acceptance of EVs will take longer than many expect. ITRI’s Wang agrees, citing “substantial obstacles” blocking the way forward for the EV industry. Rather than involving a sudden break from internal combustion engines to fully electric vehicles, the process will be more evolutionary, he suggests. Pointing to Taiwan’s significant advances in other aspects of vehicle “electrification,” such as electric power steering and transmissions, he considers that fully electric vehicles will come about through the gradual replacement of more and more of the components with electronics until finally the drive train itself will be electric. Though unsure how long that process will take, Wang says he feels assured that the breadth of Taiwan’s industry, with its multitude of interdisciplinary technologies and capacity for innovation, will enable the island to achieve a strong presence in this rising industry.

to be operational for longer, but take up to eight hours or more to charge a battery. The holy grail of battery charging is to make the process the equivalent of filling up at a gas station – within five minutes. Wu says Pihsiang has a battery that can charge to over 90% capacity within five minutes, and indeed demonstrated it for TOPICS at the company headquarters in Hsinchu. But industry skeptics say that Pihsiang hasn’t had the achievement verified by testing labs. Also, the DC charger that was used delivered 320 volts, far greater than the 120 or 220 volts typically used in households. Wu admits that his Achensa EVs would need a couple of hours to charge off a conventional outlet. Further, while other EVs might boast a range of 100 kilometers or more, Achensas can only reach 50-60 kilometers before needing recharging, another reason Wu dubs them “urban transport.” Wu is banking on international efforts at carbon reduction to create a market, and foresees exports of 30,000 to 40,000 units shipped from his factory in Suao over the next year or two – “unless we do more.” He is highly optimistic about the near future of electric vehicles, but doesn’t shy away from the challenges involved. “Everyone has to make some effort – both government and business. And the user has to sacrifice a bit on the performance.” But with the fate of the world at stake, he believes these sacrifices are a small price to pay. — By Timothy Ferry

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Good Potential for Auto Electronics Taiwan’s research laboratories are working together with manufacturers to develop high-tech new products. BY TIMOTHY FERRY

and fuel savings and the need hristmas weekend for automakers to differenbrought more than tiate their products in a tight holiday cheer for Taiglobal economy. They see wan’s auto industry with the strong demand for safety and opening of the 19th Taipei security systems, powertrain International Auto Show in and emissions components, Taipei’s World Trade Center. and communication and navThe biennial event this year igation electronics. features 200 new models, the With well-financed R&D most ever – many of them centers such as ITRI, large concept electric and hybrid corporations with a strong cars – and is expected to presence in electronics mandraw over 190,000 visitors ufacturing, and nimble and before ending January 1. hungry small and mediumT h e s i z e o f t h i s y e a r ’s event reflects the Taiwan’s A Taiwan-made Luxgen electric vehicle unveiled at the Taipei Interna- sized enterprises (SMEs), tional Auto show. Taiwan seems well-situated government interest in develPHOTO : TIMOTHY FERRY to take advantage of this oping the local auto industry, burgeoning market. particularly the auto elecAccording to the Taiwan External Trade Development tronics components and systems segments. Taiwan’s depth of Council (TAITRA), Taiwan’s exports of auto electronics reached experience and expertise in semiconductors and information NT$120 billion (around US$4 billion) in the first eight months technology should give this portion of the industry a signifof this year, a 6% year-on-year increase. Taiwan also holds the icant advantage, according to many industry insiders. “The top global position in auto lamps, with a 70% market share. performance of our ICT technology is a very good strength From producing materials for lithium ion batteries to high-tech for Taiwan,” observes James Wang, general director of the optical safety nets, to systems that can park your car for you, Mechanical and Systems Research Laboratories under Taiwan’s Taiwanese firms are hard at work developing and expanding Industrial Technology Research Institute (ITRI). these key sectors. ITRI – a public/private R&D center – is at the fore of auto The work being done at the Automotive Research and electronics development in Taiwan. Along with more high-proTesting Center (ARTC) is another example of Taiwan’s commitfile research on electric vehicles, ITRI’s labs are hard at work ment to its automotive electronics industry. Established jointly developing technologies for telematics (vehicle information sysin 1990 by the Ministry of Economic Affairs (MOEA) and the tems), crash warning systems, and blind spot protection, as well Ministry of Transportation and Communications (MOTC), as electric power steering, air conditioning, and braking systems. ARTC sprawls over 129 hectares in Changhua County’s Lugong “The features we are going to provide will give people a more Township, and consists of research labs, testing centers, and comfortable and safer future,” Wang says, promising that these most prominently a 119-hectare automotive “Proving Ground” features will “reduce the tension in driving.” where autos are tested for roadworthiness. The global market for automotive electronics components The institute’s 386 researchers work in 12 labs and two and systems is already over US$125 billion, and is set to nearly design centers, and the organization also provides business-mandouble to US$244 billion by 2017, according to market analysis agement consulting for the local automotive industry. by Strategy Analytics. Industry research group Freedonia agrees, From a business perspective, the overriding goal for Taiwan’s saying this surge in the market for automotive electronics will be auto electronics industry is to attain a position as an OEM supfueled by regulatory pressures to improve safety, auto emissions,

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plier to global auto makers, notes ITRI’s Wang notes. That step would involve a significant change from the current situation in Taiwan’s automotive components industry, where most of products are intended for the aftermarket. Crucial to attaining this goal is c h o o s i n g t h e r i g h t p a r t n e r s . C u rrently the partners ITRI and ARTC are working with include many of Taiwan’s biggest auto electronics and electrical vehicle makers, including Pihsiang Machinery, E-one Moli, and Delta Electronics. SMEs are not left out in the cold, however. Taiwan’s economy is built on SMEs, and the auto electronics sector is no exception. Mannie Chen, marketing specialist for Create Electronic Optical Co., says the company leverages its strength in lenses to produce such aftermarket products as drive recorders (essentially flight recorders for cars) that can clarify responsibility in case of accidents. The recorders can also provide videos for users to upload and view on their own computers. The company also licenses technology from ARTC for its Forward Collision Warning System that sounds an alarm when obstacles move in the way of the driver. “Happiness comes from driving safely,” Chen says. “That’s our company mission.” The company notes that it first cut its teeth in the Japanese market for drive recorders, a market much more tightly regulated than Taiwan’s. Chen says, for example, that in Taiwan consumers expect their drive recorder to come with a dashboard monitor to enable them to watch as they drive. “But in Japan, if you include a monitor you can’t pass the safety test.” She says the lax regulation in Taiwan results in the local market being flooded with low priced and low quality automotive components that might actually endanger drivers rather than help them remain safe.

Loose regulation This situation points to a contradiction in government policy towards automotive electronics. While Taiwan is an electronics-manufacturing powerhouse, an

unregulated market allows products to be introduced that might be of low quality or inadequately proven, and that could retard Taiwan’s efforts to reach the top of the value chain for auto electronics. So far none of Taiwan’s advanced systems – collision warning systems and rear-view cameras, for example – are being sourced by international car companies, and in their haste to make a buck, Taiwan’s low-end auto components makers could damage Taiwan’s credibility. ITRI’s Wang notes that many of the systems produced by Taiwanese manufacturers for the aftermarket are only available elsewhere on very premium models from makers such as MercedesBenz and Volvo – leading him to question the quality of some of the products being produced locally. “A lot of the market manufacturers can come up with a simple system with basic cameras and such,” he says, but with poor quality “they could sour the market.” Wang says the mission of Taiwan’s R&D centers is to help develop reliable and robust electronic components that will meet consumer needs. The enthusiasm for this mission is evident in the young researchers and technicians at ARTC. On a recent tour of the facilities provided for this writer, they proudly displayed some of their latest efforts, including a steel electronic powersteering column that promises to provide better performance while eliminating the drag from conventional hydraulic pulleys. Another system uses facial-recognition technology trained on the driver to ensure alertness. Drooping eyelids or a slumping head elicit a strong rebuke from the system in the form of a jarring alarm. Perhaps the most eerie are the systems that actually take over the controls of the car. ARTC techs gleefully show off their scale model’s ability to parallel park a car, expertly maneuvering itself between parked cars on the model street. Aided by cameras placed strategically around the outside of the car, the system employs software that can “see” obstacles such as a small child and stop the action. Another technology being developed by ARTC is a system to keep cars safely in their lanes. Some versions of the

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system actually take control of the vehicle should the driver veer wildly out of the lane. At present, though, even ARTC personnel admit that a computer’s taking control over the car might be a bit too robust for many drivers. Many of these products are still in the development stage and will need to be tested further at ARTC’s Proving Grounds. Yet they all seem to offer promising new technologies to enhance Taiwan’s industrial competiveness. At the same time, there is no guarantee that this potential will translate into a smooth road ahead for Taiwan’s auto electronics industry. Mannie Chen says that with 90% of Create’s market in Japan, sales have been off since the earthquake. Business isn’t looking good in the European market either, and the United States also has a weak economy and its consumers have never shown much interest in gadgets to enhance driver safety and comfort. The China market offers brighter opportunities. Last year, Taiwan’s MOEA hosted the Cross-Strait Automobile Industrial Cooperation Convention to enhance cooperation between members of the auto industry on the two sides of the Taiwan Strait. China’s auto market has already eclipsed the United States at over 18 million units sold in 2010, more than 13 million of them passenger vehicles and SUVs, according to The New York Times. While 64% of the market consists of foreign imports, the lower rungs of the industry are dominated by local models such as Chery and BYD. China’s domestic manufacturers offer substantial opportunities for Taiwanese auto electronics suppliers and makers. Luxgen, noted for its advanced electronic systems in both its conventional and electric vehicles, has already gone into a joint venture with Chinese automaker Dong Feng to produce its Luxgen 7 model and is seeing brisk sales. And with 30-40% of the cost of producing a conventional vehicle already in electronics, and that figure set to rise to 50-60% as cars become smarter and more sophisticated, Taiwan’s may have a chance to grab a significant slice of the global auto electronics pie.

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expressing our appreciation to TOPICSâ&#x20AC;&#x2122; 2011 cover sponsors

The following four pages are devoted to an index of the articles that appeared in Taiwan Business TOPICS over the past year. In addition to the reference value, the index serves as a reminder of the broad range of subject matter that the magazine has covered in the past 12 months. If you have found these reports to be enjoyable reading and useful to your business, thanks are due to the companies that were instrumental in supporting the magazine through their role as cover sponsors: 3M, Air Products, Citibank Taiwan, Corning Display Technologies, Ford Lio Ho, Franklin Templeton Investments, Fubon Financial, Micron, Philips, and Standard Chartered Bank.

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Taiwan Business TOPICS 2011 Index of Articles

section

category AGRICULTURE

Issues Taiwan Business Doorknock Doorknock

AMERICAN CHAMBER Anniversay Anniversay Events Anniversay Anniversay Events Anniversay Anniversay Events Events Anniversay Anniversay Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Events Anniversay Anniversay

page no. 10 30 25 28

article Disappearing U.S. Beef Deep-Sea Fishing: Facing Issues of Sustainability Beef Remains Nagging Issue in U.S.-Taiwan Relations Why the Beef Issue is so Sensitive

issue April August October October

Recollections and Reminiscences (from Former Chairmen) AmCham Companies through the Years An Anniversary Hsieh Nien Fan AmCham Companies through the Years AmCham Companies through the Years AmCham Earth Day Exhibition AmCham Companies through the Years AmCham Companies through the Years AmCham Hits the Links Fun for the Fourth AmCham Companies through the Years AmCham Companies through the Years Helping Forge the Taiwan Relations Act 1979: Maintaining a Vibrant Expat Community The Taiwan White Paper as Advocacy Instrument Making AmCham's Voice Heard in Washington Taiwan Business TOPICS: AmCham's Communication Channel An Eventful Six Decades of Programs Anniversary Reception Marks "Sixty Years of Partnership" AmCham Companies through the Years AmCham Companies through the Years

February February March March April April May June June July July August September September September September September September September October November

38 51 46 50 36 49 15 39 47 47 50 50 28 32 57 62 66 68 70 2 50

AUTOMOTIVE

Industry Focus Industry Focus Industry Focus Industry Focus Industry Focus Industry Focus

Getting Back Into Gear Ford Consolidates its Market Position Luxury Models Still Zooming Ahead Taiwan Seeks Major Role in Electric Vehicles Evs: Donald Wu Does it His Way Good Potential for Auto Electronics

December December December December December December

34 36 37 40 42 44

BOOK REVIEWS

Books Books Books Travel & Culture Books Books

China 2020 The Path of Taiwan's Democracy Becoming Taiwan A Guide to the Guidebooks The Growing Chinese Naval Capacity Giving Taiwan Her Due

March March April June July October

31 32 32 34 30 31

BUSINESS CLIMATE

Issues 2011 Taiwan White Paper Editorial Cover Section Editorial Taiwan Business Editorial Issues Issues

What's in a Name? (Business names in Chinese) AmCham's annual macro and micro analysis Encouraging Foreign Investment Putting New Taipei City on the Map A Need for Open Dialogue (banking regulation) Using Social Media in Business Benchmarking Korea Mid-Point White Paper Review Measuring Taiwan’s Competitiveness

March May July July August August December December December

11 4 13 4 25 6 11 14

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Taiwan Business TOPICS 2010 Index of Articles

page no. 14 17 24 10

Cover Section Cover Section Cover Section Issues

article Decision Time for the Chemical Industry ITRI's Role in Upgrading Not Much Gain from ECFA (Chemical Sector) Protecting Proprietary Chemical Information

issue April April April August

CROSS-STRAIT

Cover Section Cover Section Analysis Cover Section Cover Section

Taiwan Banks Eye China Market Not Much Gain from ECFA (Chemical Sector) Is Taiwan Too Economically Dependent on China? Gauging the Cross-Strait Economic Benefit Cross-Strait Relations and the Next President

February April November December December

22 24 30 18 27

DEFENSE

Books

The Growing Chinese Naval Capacity

July

ECONOMY

Taiwan Briefs Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Anniversary Issue Taiwan Business Cover Section Cover Section Cover Section Analysis Editorial

Assessing the Impact of the Japanese Quake 1950s: Achieving Stabilization 1960s: Welcoming Foreign Investment 1970s: Building the Infrastructure 1980s: Gearing up for High Tech 1990s: Opening the Market 2000s: Coming to Grips with China The View from 1972: U.S. Companies' Contribution Prospects for 2012: Slowdown Ahead A Demographic Timebomb Looking for Domestic Economic Drivers Is Taiwan Too Economically Dependent on China? Benchmarking Korea

April September September September September September September October November November November November December

9 7 14 20 37 42 47 34 18 22 28 30 6

EDUCATION & TRAINING

Behind the News Industry Focus Taiwan Living

How to Inculcate Creativity? Shortcomings in Education and Training (hospitality) Western Faces, Taiwanese Schoolbooks

August August December

34 43 29

ENERGY

Editorial

An Increased Energy Challenge

March

ENVIRONMENT

Cover Section Events

Saving the Dolphins? AmCham Earth Day Exhibition

April April

21 49

Where Should Bank Data Procesing be Conducted? Growing Taiwan's Banks Taiwan Banks Eye China Market Talking to Luxembourg "Last Inch": Is Taiwan's Financial Market Ready for Upgrading? A Need for Open Dialogue (banking regulation) Interview with Taiwan Stock Exchange Chairman Schive Chi Financial Ombudsman System Ready for Launch DRAM Industry Woes Impact Bad Loan Ratios Ongoing Legal Disputes over Lehman Assets

February February February April July August October October October October

4 15 22 11 25 4 38 40 42 45

category CHEMICAL MANUFACTURING

section

FINANCIAL SERVICES Editorial Cover Section Cover Section Issues Behind the News Editorial Industry Focus Industry Focus Industry Focus Industry Focus

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Taiwan Business TOPICS 2011 Index of Articles

Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine Wine & Dine

article Chinese New Year: Time for Indulgence The Great Taiwan Treasure Hunt Any Wednesday The Roots of Taiwanese Cuisine East Meets West Over Breakfast Dining Out in the Deep South Promoting Taiwan through its Food Taiwan's Single Malt Sensation Drinking Games at Champagne Restaurant Update 2011

issue January January January January January January January January January January

GOVERNMENT

In Government Circles Issues In Government Circles Anniversary Issue Issues Issues Editorial

Spurring Competitiveness through Government Reorganization Lessons from the Plasticizer Scare Control Yuan: Taiwan's Unique Government "Watchdog" The Taiwan White Paper as Advocacy Instrument Improving the APRC Application Process Long Wait for Sale Approval Benchmarking Korea

April July July September October November December

28 9 34 57 11 12 6

HEALTHCARE

Issues Taiwan Business Issues Cover Section Cover Section Cover Section

Reforming National Health Insurance Getting Smokers to Quit Lessons from the Plasticizer Scare How Healthy is Taiwan? The Importance of Exercise Campaigning against Smoking

February March July October October October

10 24 9 15 20 24

HUMAN RESOURCES

Behind the News Industry Focus

How to Inculcate Creativity? Shortcomings in Education and Training (hospitality)

August August

34 43

INDUSTRY

Commentary Cover Section Cover Section Cover Section Industry Focus Industry Focus Industry Focus Industry Focus Cover Section Taiwan Business Issues Industry Focus

Taiwan: Regional Manufacturing Headquarters by 2020 Taiwan R&D - the 3% Solution Key Multinational R&D Investors in Taiwan Imagineering at ITRI Should Taiwan be Generating More Start-ups? A Slowdown in Startups Taiwan Regulators Veto KKR-backed Buyout of Yageo Taiwan's Magic Touch behind the Apple iPad Semiconductors: Continuing Growth, Mounting Challenges Machinery Industry Poised to Join "NT$1 Trillion Club" Tax Laws and R&D Competitiveness DRAM Industry Woes Impact Bad Loan Ratios

February March March March July July July July August August October October

12 13 19 23 38 40 42 45 13 28 13 42

INTELLECTUAL PROPERTY RIGHTS

Issues Issues Issues Issues

Revising the Patent Law Protecting Proprietary Chemical Information Regulating the Collection of Royalties Revised Patent Law Adopted

August August August November

9 10 11 12

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