2011Vol.41No.3 by AmCham Taipei

INDUSTRY FOCUS A Report on the Property Market

March 2011

Vo l u m e 4 1 N u m b e r 3

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

Taiwan R&D – the 3% Solution 突破產業研發瓶頸

NT$150

3_2011_Cover.indd 1

COVER SPONSOR

2011/3/29 2:46:47 PM

CONTENTS

NEWS AND VIEWS

4 Editorial

9 Issues

An Increased Energy Challenge mArCh 2011

VOlum E 41, NumbE r 3

一○○年三月號

Publisher

Andrea Wu

發行人

5 Taiwan briefs

By Jane Rickards

吳王小珍

Editor-in-Chief

Art Director/

強化美台貿易；商業登記學問大；奢侈稅即將上路

COVEr SECTION

總編輯

Don Shapiro

Booming Bilateral Trade; What’s in a Name; Coming; the Luxury Tax

能源問題越來越複雜

沙蕩美術主任 /

Production Coordinator

Katia Chen Staff Writer

Jane Rickards

14 Taiwan r&D – the 3% Solution

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

突破產業研發瓶頸 Although Taiwan views its research and development capability as one of its chief assets in building its economic future, it has been falling behind some of its regional rivals in its level of expenditure on R&D. Some economists suggest that the government do more to attract R&D operations by multinational corporations, which currently account for only about 1.3% of the total expenditure. By Alan Patterson 撰文／白逸仁

19 Key multinational r&D Investors in Taiwan 23 Imagineering at ITrI

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

TAIWAN buSINESS

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○○年三月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

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

24 Getting Smokers to Quit

If sheer willpower doesn’t work, other possibilities are nicotine replacement therapies and – just don’t put it in an ad – smokeless tobacco. By Timothy Ferry

lAW

28 Enforcing Foreign litigation and Arbitration Decisions

Some pointers on what multinational companies need to know before entering into a contract with a Taiwan party or starting litigation. By John Eastwood and Eve Chen

bOOKS

31 Can the West Guide how China Develops? By Owain Mckimm A Review of China 2020 by Michael A. Santoro

32 Ah-bian Wasn’t the first “Troublemaker”

By Don Shapiro A review of The Path to Taiwan’s Democracy by Nat H. Bellocchi

COVER PHOTO (Courtesy of ITRI): The award-winning FlexUPD flat flexible speaker developed at ITRI.

taiwan business topics • march 2011

3_2011 Contents.indd 2

2011/3/29 6:38:38 PM

marc h 2011 • Volume 41 n umbe r 3

INDUSTRY F

COVER SPONSOR

CUS

Property Market: Cooling Down the Overheating 34 Preventing a Major Bubble

By Don Shapiro

36 Urban Renewal: Time for Take-off?

By Philip Liu

39 Growing Investment in Shopping Malls

By Philip Liu

42 Business Centers Provide Flexibility and Convenience

By Aimee Wong

AMCHAM EVENTS

46 An Anniversary Hsieh Nien Fan 50 AmCham Companies Through the Years

CORRECTION The cover story on banking in the February issue of TOPICS gave Citibank’s profits in 2009 as NT$6,337 million based on Financial Supervisory Commission website data. According to Citi, that data was incomplete, covering only one of Citi’s two units in Taiwan. The total should be NT$13,008 million, placing Citi second in profitability that year.

march 2011 • taiwan business topics

3_2011 Contents.indd 3

2011/3/29 6:38:41 PM

E d i t o r i a l 能源問題越來越複雜

地

震與海嘯重創日本福島第一核電廠，核災恐慌使台灣的能源問題更形複雜。

儘管國內反核聲浪從未平息，但在福島核災之前，幾經波折的台電核四廠似乎終於步上坦途。經濟部除了計畫延長現有核電廠的除役年限，放寬現行的40年壽限，避免核一廠在 2018年關閉，同時也計畫在現有電廠內增設發電機組。受到日本核災影響，這些計畫已經出現變數。核能發電佔全台總供應量的20%。如果政府決定中止或減少核電，勢必得以煤炭或燃油發電取代。台灣的地理條件已難再擴大水力發電的規模；而太陽能與風力發電等再生能源雖然值得開發，但進一步擴大規模的可能性也偏低。馬政府承諾短期內大幅減少二氧化碳排放量，2020年降到2005年的水準、2025年降到 2000年的水準，台電因此必須考慮大幅提高液化天然氣的發電比例。不過，液化天然氣發電的碳排放量雖然低於煤炭，但也價格也高出許多。台電估算，以液化天然氣取代煤炭，2020年前的能源支出，每年將增加600 億新台幣。經濟部能源局最近悄悄公布「能源發展綱領政策評估」，其中坦承就算大幅增加能源支出，也難以達成2020年的減排目標。唯一的可行方案是碳交易，每年以420億新台幣購買排放額度；如果核一與核二照原定時程於 2020年前除役，碳交易還將增加到450億元。落實國際共識、改善地球環境固然重要，但不可忽視台灣製造產業的競爭力。每年增加 1000億新台幣的能源支出，包括購買液化天然氣的600億元，與碳交易的400億元，將嚴重影響台灣的產製成本，連帶使工作機會流向其他區域國家。能源安全也不容忽視。台灣現在還能維持兩個月的煤炭安全存量；但需要特殊船舶與設施的液化天然氣，安全存量僅有十天，一旦供應受到干擾，將嚴重影響經濟穩定。減碳政策所帶來的環境改善是否大過所增加的成本與風險？台北市美國商會相信，相關決定必須經過充分、透明的討論，且允許相關各方充分表達意見，再由人民做出最終決定。能源政策的分析評估目前尚未落實，但經歷過福島核災後，其重要性更為凸顯。 4

An Increased Energy Challenge

he earthquake/tsunami damage to the nuclear power plants in Japan’s Fukushima Prefecture and resulting radiation scare have further compounded the energy challenges facing Taiwan. Despite the fervent anti-nuclear movement in this country, before this incident it seemed reasonably certain that the long-delayed fourth nuclear power plant was now close to finally coming onstream. Energy planners were also anticipating an extension of the lifecycle of the three existing plants (currently set at 40 years, with the first unit due to be retired in 2018), and were even contemplating the construction of additional generating units at the four existing sites. In the wake of the Japanese disaster, none of those developments can now be taken for granted. Nuclear power currently accounts for a sizeable 20% of Taiwan’s electricity needs. If its place in Taiwan’s energy mix is to be phased out or reduced, the choice of a substitute essentially comes down to either coalfired or gas-fired plants. Taiwan is not blessed with further resources for developing hydroelectric power, and renewable energy sources such as solar and wind power – while they should certainly be encouraged – are considered unlikely ever to account for more than a few percent of the power-generation total. In line with the voluntary commitment the Ma administration has made to sharply decreasing CO2 emissions in the fairly short-term – to 2005 levels by 2020, and to 2000 levels by 2025 – the Taiwan Power Co. would need to greatly expand its use of liquefied natural gas (LNG). Although a cleaner fuel than coal, LNG is also far more expensive. Increased use of gas instead of coal, it is estimated, would add NT$60 billion (about US$2 billion) a year to Taiwan’s energy costs by 2020. As a recent draft of Energy Policy Guidelines quietly issued by the Bureau of Energy makes clear, even that expenditure would not be sufficient to achieve the ambitious emission targets set for 2020. Reaching those objectives would be possible only through carbon trading, purchasing credits worth NT$42 billion annually – or up to NT$45 billion if the first two nuclear units are retired on schedule before 2020. Contributing to the worldwide effort to improve the living environment is a vital consideration, but so is Taiwan’s ability to maintain the competitiveness of its manufacturing industries. The burden of more than NT$100 billion a year in added energy expenditures – NT$60 billion from burning additional LNG and over NT$40 billion from buying carbon credits – would heavily impact the cost of production in Taiwan versus other locations, with consequences for employment levels on the island. Yet another consideration is energy security, since Taiwan is able to maintain about a two-month supply of coal, compared with only a10-day storage of LNG due to the need for specialized ships and facilities. A disruption in the supply would also have serious consequences for the economy. Are the environmental gains from meeting the administration’s goals worth the costs and risks? AmCham Taipei believes that this decision needs to be made by the people of Taiwan based on a thorough and transparent discussion of the issue, with all relevant stakeholders given the opportunity to provide their input. That analysis, which is yet to take place, is made even more crucial by the recent events in Fukushima.

taiwan business topics • march 2011

3_2011_Editorial.indd 4

2011/3/29 7:08:02 PM

BY ja n e R I CKA R D S

MACROECONOMICS

HEALTHY GROWTH BUT SPECTRE OF INFLATION In an unexpected move, the government’s statistics agency upped and then lowered Taiwan’s GDP forecast for this year in a matter of weeks. On January 31, the Directorate General of Budget, Accounting and Statistics (DGAS) came out with an economic growth projection of 5.03% before lowering it to 4.92% on February 17. The second figure is still considerably higher than agency's previous forecast for 2011 of 4.51% made last year, and the reason for the quick change, government officials said, was that their most recent calculations of 2010 fourth quarter growth were 6.92%. Combined with an overall spectacular year of 10.82% growth, the higher baseline would make it difficult for Taiwan to sustain GDP of 5% or more this year. Still, the likelihood that Taiwan’s economy will give a strong showing this year still remains unchanged. “The latest world economic forecast indicates the growth of the world economy in 2011 will extend the strong performance,” the DGBAS said in a statement. “Accordingly Taiwan’s exports are anticipated to

continue with double-digit growth.” Exports gave their best-ever performance for the month of February, the Finance Ministry said, amid strong demand for ICT products and even more so for plastics and chemicals. The export level rose 27.3% over the same month of last year to reach US$21.25 billion. Total imports, at US$20.33 billion, were up a solid 28.7% over the same month of last year. Mainland China and Hong Kong were the biggest destination for Taiwan’s exports, at US$8.72 billion with growth of 31.8%, followed by the Association of Southeast Asian Nations (ASEAN) at US$3.58 billion and 42.4% growth, and then the United States at US$2.36 billion and 24.5%. Export orders, a sign of

shipments to come in the next few months, showed slower growth at US$34 billion, up 13.47% from a year earlier. The main economic concern at this time is inflation. DGBAS is now forecasting a 2% increase in the consumer price index (CPI) this year, compared with a rise of only 0.96% last year. While even 2% is considered mild compared with other nations, the government is taking the risk seriously. According to local media reports, the Department of Customs Administration under the Ministry of Finance plans to launch tariff cuts on flour, milk powder, and other selected import goods to cope with expected hikes in domestic prices. Prosecutors have also vowed to crack down on people who hoard food staples.

Taiwan stock exchange index & value

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

9500

185

9250

175

9000

165

8750

155

8500

145

8250

135

8000

125

7750

115

7500

105

7250

February chart source: TwSE

Unit: NTD billion

In a report released by the DGBAS on February 17, the year-on-year change in the CPI was 1.33% for February, up from a revised 1.1% in January. By category, food prices for February rose 2.62% on a year earlier, housing costs climbed 0.63%, and transportation increased 1.42%. Economists have recently warned that higher costs for raw materials and crude oil, partially as a result of the unrest in the Middle East, could be a drag on growth. CROSS-STRAIT

GENERAL ARRESTED AS SUSPECTED SPY A senior Taiwan army general was detained in late January on suspicions he had been spying for China for over six years in what analysts said was the most serious infiltration of Taiwan’s military since martial law was lifted in 1987, and possibly the most serious ever. The suspect, Major General Lo Hsien-che, 51, head of the Communications, Electronics and Information Division at Army Command headquarters, reportedly had access to some of the military’s most sensitive communications data. Local media said that included crucial components relating to

march 2011 • taiwan business topics

3_2011_Briefs.indd 5

2011/3/29 6:21:22 PM

Po Sheng, an umbrella system for modernizing Taiwan’s C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance), which has received much U.S. technological assistance. Numerous reports said the U.S government was instrumental in alerting Taiwan to Lo’s espionage activities. According to defense ministry officials, Lo first began gathering intelligence for the Chinese in 2004 when stationed in Thailand as an attaché. A multi-agency task force is currently assessing the damage caused by the leaks, but analysts said the incident was unlikely to influence either U.S. arms sales to Taiwan or warming cross-Strait economic ties.

TOP PRC NEGOTIATOR VENTURES SOUTH Chen Yunlin, the head of Beijing’s semi-official cross-Strait negotiating agency, the Association for Relations Across the Taiwan Strait (ARATS), in late February led an investment tour to southern Taiwan. It was his first time to visit the region, stronghold of the proindependence Democratic Progressive Party (DPP). Chen’s first visit to Taiwan in late 2008 was marred by rowdy and often violent DPP-organized demonstra6

HEADING SOUTH — Chen Yunlin, right, China's top negotiator with Taiwan, shakes hands with Vice Chairman Kao Koong-lian of Taiwan's Straits Exchange Foundation on his arrival at Taoyuan International Airport. Chen then began a six-day visit to the southern portion to the island. photo : ap

tions, and in the same year his deputy was pushed to the ground and roughed up by DPP supporters during a visit to southern Tainan. This time the police took no chances, reportedly mobilizing an over 1,000-stong security team to protect Chen and his entourage of Chinese business people. But apparently mindful of the coming presidential election in 2012 and the need to win over middleof-the-road voters, the DPP magistrates of southern cities, whiles still declining to meet Chen, said they would not endorse or organize any rallies. Still, Chen was persistently dogged by small individual protest groups during his meetings with farmers and business people in Kaohsiung, Chiayi, and Yunlin. The demonstrators shouted slogans that Taiwan and China were

two separate countries and threw various flowers as a stand-in for out-of-season jasmine, which has become emblematic of democratic movements in the Middle East and China. DOMESTIC

DPP LANDSLIDE IN BY-ELECTIONS The DPP was able to retain two legislative seats in southern Taiwan in by-elections in early March, keeping the party’s legislative seats at 33 to the ruling Kuomintang’s 73. The win was interpreted by the local media as another warning for the KMT, following its lackluster performance in municipal elections late last year, where it took a majority of mayoralties but fell behind the DPP in the overall vote total. Although DPP victories in Taiwan’s south are

nothing unusual, in 2008 the party won these two seats by narrow margins compared with this year's decisive levels. In the race in Tainan, DPP candidate Hsu Tain-tsair carried 61% of the vote, while his counterpart in Kaohsiung, Lin Tai-hua, obtained a whopping 69%. Voter turnout at less than 34% for both by-elections was remarkably low. The seats were made vacant after the previous DPP incumbents were elected to new posts in the November mayoral elections.

CABINET UNDERGOES MINOR RESHUFFLE Last month’s Briefs reported that Liao Liou-yi, a former interior minister and regional politician with factional clout in central Taiwan, succeeded King Pu-tsung as KMT secretary general, and that Chiu Wen-tai replaced Yaung Chih-liang as health minister. Other appointments that followed in the limited Cabinet reshuffle included a new National Youth Commission minister, Jack Yun-jie Lee, who holds a doctorate in public policy from the University of North Carolina at Chapel Hill, and a new Mongolian and Tibetan Affairs Minister, Luo Yingshay, an attorney and previously an advisor to Ma. Public Construction

taiwan business topics • march 2011

3_2011_Briefs.indd 6

2011/3/29 6:21:27 PM

Commission officials also said Lee Hong-yuan, a flood control expert, would take over from the current minister, Frank LiangShiow Fan, in April.

TAIWAN GOLFER NOW NUMBER ONE Taiwanese golfer Yani Tseng swung her way into the number one global ranking in women’s golf in mid-February when she won the Australian Ladies Masters in Queensland. She then went on to win the Honda LPGA [Ladies’ Professional Golf Association] tournament in Thailand, her fourth win in five international golfing competitions this year. The managing editor of America’s influential Golf Digest , Roger Schiffman, then declared her the “hottest player in the world.” In a blog he wrote for the magazine in early March, he said “she is suddenly filling the LPGA void left by the exodus of Annika Sorenstam and then Lorena Ochoa.”

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

TAIWAN, PHILIPPINES IN DIPOMATIC SPAT The Taiwan and Philippine governments were embroiled in a row throughout early March sparked by the deportation to China of 14 Taiwanese fraud suspects. Taipei says Manila ignored its requests to repatriate the 14, who were arrested by Filipino authorities on December 27 on suspicions of involvement in a fraud ring that swindled a reported US$20 million out of mainland Chinese victims. Instead, Manila deported the 14 Taiwanese, along with 10 Chinese suspects, to the mainland. For many Taiwanese, that act implies that Manila thinks Beijing exercises sovereignty over Taiwan. Gravely offended Taiwanese foreign affairs officials summoned the de facto Philippine ambassador in Taipei for questioning several times and threatened to review existing bilateral ties between the two countries. After Manila still failed to meet Taiwan’s request for an apology, the Taiwanese representative to Manila was recalled in early February and tough new screening procedures

WE PROTEST — Filipino workers demonstrate in front of the Presidential Office Building, urging Taiwan not to impose a freeze on guest labor from the Philippines in the wake of the diplomatic dispute between the two governments. photo : AP/Chiang Ying -ying

for Filipino laborers were introduced, effectively imposing a ban on the entry of new Filipino workers to Taiwan. Hundreds of Filipino laborers protested outside the Presidential Office, saying the diplomatic incident should not deprive them of the right to make a living on the island. Following two subsequent fence-mending visits from a former Philippine senator acting as an emissary for the Philippine President Benigno Aquino III, and Manila’s actions in removing two of its senior officials from the Filipino bureau of immigration, which was regarded by Taipei as a form of apology, Taiwan eventually lifted all restrictions on Filipino labor.

WORLD NUMBER ONE — Taiwan’s Yani Tseng won the HSBC Singapore Golf Tournament in February for her fifth LPGA victory in a row, maintaining her status as the world’s best woman golfer.

JAPANESE DISASTER TO IMPACT INDUSTRY In mid-March, northeastern Japan was hit by the largest earthquake in the country's history (it measured 9.0 on the Richter scale), triggering a massive tsunami. By mid-March the death toll had surpassed 6,400, with a more than 10,200 missing, and the world watched in horror as Japanese engineers battled to prevent a meltdown at a severely-damaged nuclear reactor complex in Fukushima. The dire situation prompted the first-ever televised address in Japan from Emperor Akihito. In Taiwan, President Ma came under intense pressure from the opposition and environmental activists to explain how safe Taiwan’s own three nuclear reactors were, with calls to review Taiwan’s nuclear policies and put a halt to

photo : cna

march 2011 • taiwan business topics

3_2011_Briefs.indd 7

2011/3/29 6:21:30 PM

BUSINESS

NEW SECTORS OPENED TO CHINESE INVESTMENT Taiwan in early March announced a new round of 42 business categories open to Chinese investment, including a partial opening of critical hightech industries, bringing the total number to 246. In measures reflecting Taiwan’s concerns about technology transfer and protection of its intellectual property, Chinese investors will be permitted to own no more than a 10% stake in Taiwanese companies in the integrated circuit industry. This includes semiconductor packaging and testing, 8

CORPORATE GOVERNANCE SAID BELOW STANDARD Corporate governance in Taiwan still remains well below international standards, the Asian Corporate Governance Association says in a report released in late February, its first policy paper on Taiwan. The ACGA report expressed surprise that the appointment of independent directors is still not manda-

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

Japan

ASEAN

Imports

p: preliminary

2011

43.8 46.6

35 38.4

2010

2011 Exports

Year Earlier 11.81 3.40 30.37 352.73 5.68% 0.108% 9.22% -2.37% -1.33% 2.09%

SOURCES: MOEA, DGBAS, CBC, BOFT

4.5 4.8

4.3 5.2

Europe

tory for listed companies and said investors often find it difficult to vote in an informed manner at shareholder meetings. In general, long-term international institutional investors view Taiwan as a “difficult and challenging market,” it said. The relative absence of their representatives on the boards of Taiwan companies, combined with a dominance of family-

Unit: US$ Billion Current Account Balance (2010 Q4) 10.10 Foreign Trade Balance (Jan.-Feb.) 2.80 New Export Orders (Jan.) 34.46 Foreign Exchange Reserves (end Feb.) 390.69 Unemployment (Jan.) 4.64% Overnight Interest Rate (Feb. 25) 0.272% Economic Growth Rate (2010 Q4)P 6.92% Change in Industrial Output y-on-y (Jan.)p 17.19% Change in Consumer Price Index y-on-y (Jan.)p 1.11% Change in Consumer Price Index y-on-y (Jan.-Feb.)p 1.11%

7.7 5.7

2011

U.S.

2010

4.9

4 3

2010

3.5 4.4

2011

2.7

6.5

7.3

8.8

16.2

2010

Economic Indicators

Note:

TOTAL

18.9

HK/China

3.7 4.1

liquid crystal displays, and assorted components. In other technology fields, Chinese companies will be limited to joint ventures with a maximum stake of 50%. For some industries, including battery manufacturing, wind turbines, and metal production, the government is allowing unlimited investment. A number of services are also newly open to unlimited Chinese investment, including tourism-related cable cars, amusement parks, and theme parks.

construction of Taiwan’s fourth nuclear plant. Global supply chains were also damaged, though most business executives said it would be a while before they could assess the damage, as supply chains are so complex. Daniel Heyler, managing director for global research at Merrill Lynch's Asian Technology Team, said: “We predict four to six months of rockiness – a very disputed and abnormal supply chain.” TOPICS will give a more detailed analysis of how the earthquake is affecting industries ranging from ICT to tourism in its next issue.

2010

2011

2010

2011

Unit: US$BN Source: BOFT

controlled management and the slow pace of legislative reforms have prevented sustained pressure for change, it concluded, stating that the reforms enacted so far have been piecemeal and inconsistent. Besides recommending that regulators insist that listed companies appoint a minimum of three independent directors and hold independent audits, the report also recommended that Taiwan allow foreign investors to give proxies to other investors in shareholder voting. “We believe that if Taiwan brings its corporate governance regime more closely in line with global best practices, this would help to attract more investment and make its capital markets more internationally competitive,” the ACGA said in a statement.

taiwan business topics • march 2011

3_2011_Briefs.indd 8

2011/3/29 6:21:31 PM

Issue s

Booming Bilateral Trade The United States is stepping up efforts to expand exports to the Taiwan market.

強化美台貿易

n his speech at AmCham’s annual Hsieh Nien Fan banquet on March 9, American Institute in Taiwan (AIT) Director William A. Stanton conveyed U.S. government concern over Taiwan’s continuing restrictions on the import of U.S. beef products – a disagreement that appears to be holding up the scheduling of the next round of trade and investment talks between the two trading partners. But while media reports tend to focus almost exclusively on the problems in the trade relationship, Stanton’s speech also called attention to the large and fastgrowing volume of commerce actually being conducted between the United States and Taiwan. “U.S. exports to Taiwan increased by a whopping 43%, from US$16.7 billion in 2009 to US$23.9 billion in 2010,” he noted. “The United States also increased its imports from Taiwan by 27%, from US$28 billion to US$35.5 billion. With our two-way trade volume at over US$59 billion, Taiwan moved up one notch to become the United States’ ninth largest trading partner.” Due to differences in methodology and the timing of shipments, Taiwan’s statistics vary slightly from the American numbers, but tell the same story. According to Taiwan Customs figures, the value of U.S. exports to Taiwan rose 40% to reach US$25.4 billion, while its imports from Taiwan increased 33% to US$31.5 billion. The growth has continued so far in 2011, with American exports to this market rising by over 16% in the first two months and its imports from Taiwan up by a solid 27%. By any calculation, the overall U.S. trade with Taiwan exceeds that of Brazil, Russia, or India. Of the BRIC countries currently receiving so much attention, only China is a larger trading partner for the United

美國持續拓展對台出口

美

國在台協會（AIT）台北辦事處處長司徒文三月九日於台北市美國商會2011 年謝年飯晚宴致詞時表示，美國非常遺憾台灣仍然限制美國牛肉的進口。而牛肉問題遲遲無法解決，顯然已經影響到美台貿易暨投資架構協定（TIFA）下的雙邊談判。雖然媒體多半只關心美台貿易上的歧見，司徒文的演講中卻也點出，美國與台灣之間的經貿往來既緊密又成長快速。司徒文說，「美國對台灣的出口總值已從2009年的167億美元，增加為2010年的239億美元，成長幅度高達 43%；美國自台灣進口的總值也增加了27%，由280億美元成長到355億美元。2010年雙邊貿易總額超過590億美元，台灣也由美國第十大貿易夥伴，變成第九」。儘管因為計算方式與出到貨時間差，台灣的統計數據跟美方有點落差，但仍足以顯示經貿關係的緊密。台灣的進出口統計顯示，2010 年台灣自美國進口的總值成長40%，達254億美元，台灣對美國出口的總值則成長33%，達 315億美元。2011年前兩個月，雙邊貿易仍持續成長：與2010年同期相比，美國對台出口

march 2011 • taiwan business topics

3_2011_Issues.indd 9

2011/3/29 6:19:47 PM

Issues

States. But as Stanton also mentioned in his speech, China’s population is about 56 times larger than Taiwan’s, yet last year it purchased only about three-and-a-half times as many goods from the United States as did Taiwan. Stanton went on to express the hope that continued growth in the U.S.-Taiwan trade will “contribute to achieving President Obama’s National Export Initiative (NEI) goal announced last year of doubling overall U.S. exports by 2015.” In order to achieve this five-year goal, a 15% overall U.S. export growth rate is required every year. The 43% increase in U.S. export to Taiwan last year well surpassed that 15% growth rate. At AIT, the Commercial Section, representing the U.S. Department of Commerce, takes the lead in promoting sales of U.S. industrial goods and services to Taiwan, while AIT's Agricultural Trade Office, representing the U.S. Department of Agriculture, is responsible for promoting exports of U.S. food, agricultural, and wood products. Commercial Section Chief Helen Hwang notes that among the various tools available for promoting exports in support of the NEI, AIT is particularly relying on expanded use of trade missions in both directions – arranging for Taiwanese buyers to attend major U.S. trade exhibitions and for American exporters to exhibit at industry events in Taiwan. The AIT Commercial Section has identified 16 important U.S. industry shows, all accredited under the Commerce Department’s International Buyer Program (IBP), as having good potential for the Taiwan market, and it plans to help put together Taiwan delegations to attend a minimum of nine of them this year (up from just two such groups last year). By joining the delegation rather than attending independently, the Taiwanese participants are able to enjoy lower travel costs, a prebriefing before leaving Taiwan, registration assistance and discounts for the majority of IBP trade shows, an AIT-sponsored delegation catalog featuring each individual member of the Taiwan trade mission, a welcome dinner upon arrival in the United States, the assistance of an AIT industry specialist who will accompany the group and help make introductions and set up business meetings on the U.S. end, and the services of a tour guide. In some cases, a welcome-back reception will be held for the delegation after its return to Taipei. The next such event will be the National Association of Broadcasters Show (NAB), April 11-14 in Las Vegas, which features equipment, technology, and programming content for the radio and television industries. “We thought that if we could come up with a group of 15 from Taiwan, it would be a good success,” says Hwang. “But we were delighted to find that 40 participants have signed up.” Coming in the other direction, representatives of U.S. book publishers formed a sizeable contingent at the recent Taipei International Book Exhibition held in February. U.S. pavilions are also being organized at such other local events this year as SecuTech Taipei (for electronic security, information security, fire and safety products and services), Taipei International Travel Fair, and Taipei International Building Construction & Decoration Exposition. In organizing and promoting these events, says Hwang, AIT has been cooperating closely with local partners such as the various domestic industry associations. “Building partnerships has been absolutely essential,” she notes. —By Don Shapiro

增加16%，美國自台進口更增加27%。不論以美國或是台灣的統計為準，美國與台灣的貿易總值都超過金磚四國中的巴西、俄羅斯、印度，唯一的例外是中國。但如同司徒文所說，中國的人口是台灣的56倍，但2010年自美國進口的總值，僅為台灣的3.5倍。司徒文接著表示，希望美台貿易關係能持續進展，成為更好的貿易夥伴，以達成美國總統歐巴馬的國家出口計畫（NEI），即2015年前使美國出口倍增。為達成NEI五年計畫目標，美國外銷每年必須至少成長15%；然而，美國對台出口2010年年增43%，遠超出15%的門檻。 AIT台北辦事處的商務組，代表美國商務部負責拓展美國商品與服務；農業貿易辦事處則代表農業部，負責推廣美國食品、農產與林木產品。商務組組長黃海蘭指出，提高出口以達成 NEI目標的管道很多，但AIT特別重視雙邊商務訪問團，即安排台灣買方參加美國主要貿易展覽，與協助美國出口廠商參加台灣商展。 A I T商務組已經鎖定美國16個重要商展，這些展覽不但經過美國商務部國際採購團計劃（IBP）的認可，也非常適合台灣市場的需求。商務組2010年曾經安排採購團參加兩項商展，但今年希望至少參加九個商展。相較於個別前往，加入採購團的好處除了旅費更低廉，行前安排簡報，報到有人協助，而且多數IBP商展也將提供折扣。此外，AIT還將製作團員名冊，於團員抵達美國後舉行接待晚宴，指派產業專家隨團提供簡介與安排買賣方的商務會談，並安排觀光導覽。部分採購團返回台北後，AIT還將舉辦接風餐會。下一次的採購團預定前往拉斯維加斯參加4 月11日至14日的美國國家廣播協會大展（NAB Show），展出重點為廣播與電視的設備、科技與節目內容。黃海蘭說，「我們原本以為，採購團如果能有15人，應該就算很不錯了」，「結果竟然有40多人報名」。二月份剛落幕的台北國際書展，美國出版業者組成龐大代表團參加。主攻商務與資訊安全的台北國際安全博覽會、台北國際航太暨國防工業展覽會、台北國際旅展、台北國際建築建材暨產品展等活動，也都看得到美國代表團的攤位。黃海蘭說，為了籌辦與推廣相關活動，AIT 和工商團體等組織一直密切合作，「建立伙伴關係絕對是優先工作」。

—撰文／沙蕩

taiwan business topics • march 2011

3_2011_Issues.indd 10

2011/3/29 6:19:48 PM

Issue s

What’s in a Name? Currently only business names in Chinese characters are considered official.

Taiwan may feel a sense of pride that home-grown companies such as Taiwan Semiconductor Manufacturing Co. (TSMC) and HTC Corp. have built global reputations as major players in their industries. Technically speaking, however, no such companies as TSMC or HTC even exist under the Taiwan legal system – only 台灣積體電路製造股份有限公司and宏達國際電子股份有限公司. Like all other Taiwan and foreign business organizations operating in this country, those entities are registered domestically only by their names in Chinese characters. “A company that signs contracts or correspondence or uses business cards or websites displaying only an English company name may have difficulty proving that it, in fact, is that company,” notes a locally based lawyer. “This creates legal uncertainty any time a Taiwan company uses an English name, whether in or outside Taiwan.” Recently this issue was brought up at a meeting attended by AmCham member companies at the Ministry of Economic Affairs (MOEA), which has responsibility for the approval and registration of company names. According to the Ministry’s guidelines governing that process, registration of a company name must be made using Chinese characters. Even the use of numerals is not permitted. Multinational companies operating in Taiwan must select a Chinese name. They often pick one that approximates the sound of the parent company’s name in its own language, but many times the name in Chinese bears no connection whatsoever to the original name. As AmCham members reminded MOEA, the Taiwan Stock Exchange and GreTai Securities Market for over-the-counter transactions have been encouraging multinational companies to list in Taiwan and to issue Taiwan Depository Receipts. But if a discrepancy exists between a company’s legal name internationally and the one it operates under in Taiwan, enterprises may hesitate to take that step. At the same time, considering that the operations of many local companies are becoming increasingly internationalized, the lack of a legally-recognized English name in their home market may pose potential difficulties. As a solution, it has been suggested that Taiwan follow the example of Hong Kong in allowing companies’ legally registered names to be composed of English and/or Chinese characters, as well as numerals. MOEA should be able to make this change in its own regulations, without the need to go through the Legislative Yuan to seek amendment of any law, for the convenience of both foreigninvested and domestic enterprises.

—By Don Shapiro

商業登記學問大台灣現行公司登記僅允許以中文名稱

SMC（台積電）與HTC（宏達電）等企業能成為國際大廠，許多台灣人應該同感驕傲。但就法律實物面而言，台灣的法律體系中從來沒有TSMC或HTC這些公司，只有「台灣積體電路製造股份有限公司」與「宏達國際電子股份有限公司」。其他本土或外資企業也是一樣，在台灣完成公司登記的只有中文名稱。一位在台執業的律師指出，「只使用英文名稱的企業，簽訂合約、客戶聯絡，或是製作名片與網站，可能都會碰上對方懷疑的眼光，『我怎麼知道你真的就是這家公司？』」，「因此，台灣企業使用英文名稱時，不論是在台灣或國外，都可能碰到一些法律爭議」。台北市美國商會最近拜會負責公司審查與登記的經濟部時，主動提出英文公司名稱的相關問題。經濟部的規定是，公司登記必須使用中文字樣，連阿拉伯數字都不允許。跨國公司也必須幫自己取個中文名稱。常見的作法是，選個音調近似原名的中文譯名，但譯名卻往往喪失原名的意涵。商會成員向經濟部強調，台灣證券交易所與證券櫃檯買賣中心一直鼓勵跨國企業來台上市、發行台灣存託憑證（TDR）；但如果公司國際通用名稱與在台使用的名稱不同，企業可能因此放棄在台上市。同時，許多台灣企業的經營已經越來越國際化，在母國無法以英文進行公司登記，勢必引發辨識上的困難。解決方式之一是比照香港的作法，允許公司以英文、中文、阿拉伯數字進行登記。改善公司登記制度，只需經濟部修改行政法規，不需立法院修法配合，但卻可以給國內外企業莫大的方便。

—撰文／沙蕩

march 2011 • taiwan business topics

3_2011_Issues.indd 11

2011/3/29 6:19:49 PM

Issues

Coming: the Luxury Tax For importers, a question mark is how to deal with exchange rate fluctuations.

奢侈稅即將上路

he official name is the Special Merchandise and Services Tax, but everyone is calling it the Luxury Tax. The measure, recently approved by the Cabinet and scheduled to take effect July 1 if passed in time by the Legislative Yuan, is mainly designed to cool down what is viewed as an overheated property market, but will also affect other high-priced goods and services. Under the scheme, a 10% tax will be applied to automobiles, aircraft, and yachts priced at over NT$3 million (about US$100,000), as well as furniture, furs, coral, ivory, tortoise shell, and other products derived from protected species and worth over NT$500,000. Also subject to a 10% tax will be sales of golf club and other memberships valued at over NT$500,000. For details on how the tax would be applied to real estate, see the Industry Focus section on the property market elsewhere in this issue. For products made in Taiwan, the tax would be imposed on the local manufacturer based on the sales price, and for imported items, it would be levied on the importer based on the import price plus the import duty and commodity tax. Importers of luxury automobiles say they will need to see the final bill enacted by the legislature, as well as the content of the implementation regulations that follow, before they can fully assess the potential impact of the tax. But one of their concerns is how – given the frequent fluctuation in exchange rates – they will be able to handle the pricing of vehicles when the import price in foreign currency is in the neighborhood of NT$3 million. Since the model may or may not reach the threshold of being liable to the tax, depending on the exchange rate at any given time, consumers will be met with confusion and uncertainty.

進口商質疑並未充分考慮匯率波動

行

政院院會最近剛通過俗稱「奢侈稅」的特種貨物及勞務稅。如果立法院配合立法，奢侈稅最快今年7月1日開徵。奢侈稅的主要目的是抑制房地產炒作，但也會衝擊其他高價貨品與服務。未來，價格超過300萬新台幣的汽車、遊艇、私人飛機，以及50萬以上的家具、毛皮、珊瑚、象牙、龜甲，及保育類動物產製品，都將課徵10%的奢侈稅。價值超過50萬元的高球俱樂部球證與其他會員資格同樣需要繳納10%的奢侈稅。房地產的適用稅率則請參閱本期的「產業焦點」。台灣國內產製的商品，將依售價向製造商課徵奢侈稅；舶來品則將依進口價格，與關稅、貨物稅合併，向進口商課徵。高價進口車商表示，必須等立法完成、施行細則公布後，才能估算調漲幅度。但車商的顧慮是，匯率經常波動，進口價格在 300萬新台幣附近的車款，該怎麼處理？台幣升值，車價就會低於課稅門檻，但台幣貶值，車價又會高於門檻，經常變動的價格將造成消費者困擾。

—撰文／沙蕩 —By Don Shapiro

taiwan business topics • march 2011

3_2011_Issues.indd 12

2011/3/29 6:19:50 PM

COVER STORY

R & D

Taiwan R&D – the 3% Solution 突破產業研發瓶頸

lthough Taiwan views its research and development capability as one of its chief assets in building its economic future, it has been falling behind some of its regional rivals in its level of expenditure on R&D. Some economists suggest that the government do more to attract R&D operations by multinational corporations, which currently account for only about 1.3% of the total expenditure.

D P的比例，仍低於某台灣將研發能力視為經濟發展的重要基石，但研發經費佔G 些區域競爭對手。經濟專家認為，跨國公司對台灣的研發投資，現在僅佔全國總值1.3%，政府實應更積極誘導外商增資。 BY ALAN PATTERSON

撰文／白逸仁

photo :ItRI

march 2011 • taiwan business topics

3_11_CoverStory.indd 13

2011/3/30 8:45:35 AM

Cover Story

n an effort to boost national technological development and competitiveness, Taiwan soon after the start of the new century set a goal for overall R&D expenditures to reach 3% of GDP by 2006 so as to keep up with such other advanced Asian nations as Japan and South Korea. That target was never reached, and the closest the island came to it was the 2.94% attained in 2009. Final data for 2010 is expected to show a decline to 2.7% because GDP rose sharply last year while R&D expenditures were little changed. Now the government has once again set its sights on reaching the elusive 3% figure by 2012. “I’ve asked President Ma Ying-jeou to increase the 2012 budget for R&D to achieve this goal,” says National Science Council (NSC) Minister Lee Lou-Chuang, who oversees the Taiwan government’s science and technology plans and reviews the R&D budgets and funding for the various ministries. Many see the standstill in Taiwan’s R&D growth as reason for concern. Taiwan’s biggest rival in the global export market, South Korea, passed the 3% mark in 2007. In China, the world’s workshop, R&D expenditures currently account for only about 1.7% of GDP, but the level of R&D spending is soaring by 20% annually, Minister Lee says. In addition, the size of the pie

台灣

is much larger, as China’s 2010 GDP of US$5.87 trillion is more than ten times that of Taiwan’s US$453.7 billion. S o m e i n t h e Ta i w a n g o v e r n ment doubt that the 3% target can be achieved even by 2012. “A more realistic goal is 2015,” says Vivian Lien, director of the Industrial Policy Division of Taiwan’s Industrial Development Bureau. She notes that some members of the Legislative Yuan have been seeking to cut the budget for science and technology R&D, but hopes that lawmakers will come around to seeing the benefit of more investment in that area. With the 3% mark still a shifting target, some economists have been questioning whether it is the Taiwan government that should be doing the heavy lifting. “The government has been reducing R&D expenditures,” says Jason Kao, deputy director of the Taiwan Institute of Economic Research (TIER). “For the nation, it's a good thing. The private sector is investing more.” Overall, corporate spending now accounts for more than 70% of the total R&D expenditure in Taiwan, according to the NSC, up from the 63% contribution of the private sector in 2003. This year, the category of industrial production and technology will account for almost 18% of total R&D spending in Taiwan, according to

為提升科技研發與產業競爭力，曾經設定2006年之前要將總研發經費佔國內生產總值（G D P）的比例拉高至3%以上，以跟上日本、南韓等亞洲先進國家。但五年後的今天，目標仍未達成。最接近的一次是2009 年的2.94%；2010年的比例可能反而降到 2.7%，因為G D P大幅成長的同時，研發支出並未等速成長。政府最新的目標是2012年突破3%。行政院國家科學委員會主任委員李羅權說，「我已請馬英九總統增加2012年的政府科研預算，以利目標達成」。國科會的職責在監督政府的科學與研發計畫，並擬定各部會的研發預算與經費。許多人認為，研發支出成長緩慢，最終將

TIER. Second comes health sciences at 16.3%, followed by cloud computing, electric vehicles, and renewable energy. In emerging industries such as electric cars and renewable energy, Taiwan started R&D around 2009, and the I D B ’s L i e n s a y s “ t h e g o v e r n m e n t should spend more” in those fields. TIER’s Kao suggests that more can be done to improve Taiwan’s R&D investment environment for multinational companies, who account for about 1.3% of Taiwan’s total R&D expenditures. “This is very low compared with some other countries where it is about 3-5%,” Kao says. He said the government should continue to make it easier for foreign companies to set up and maintain operations in Taiwan.

Investment environment Taiwan has considerable room for improvement in the R&D investment environment, according to members of the foreign business community. When Taiwan’s Statute for Upgrading Industries was phased out in 2009, replaced the following year by the Statute for Industrial Innovation, the new law revised the tax incentive program for R&D and also decreased the corporate income tax to 17% percent from 25%. Under the new Statute, a 15% credit for R&D expenditures to be offset

影響台灣經濟。長期與台灣競爭外銷市場的南韓，研發經費佔GDP比例已在2007年超過3%。國科會的李羅權說，身為世界工廠的中國，研發經費現在雖然僅佔G D P的1.7%，但每年都以 20%的速度增加；此外，中國2010年的G D P達 5.87兆美元，已是台灣4537億美元的十倍以上。部分政府官員認為2012年很難突破3%。經濟部工業局產業政策組組長連玉蘋就覺得2015年可能更為實際；而且部分立法委員揚言刪減科研預算，現在只能希望立委更深入瞭解研發投資的必要性。達成3%的目標，是否只能靠政府增加科研預算？部分經濟專家持反對立場。台灣經濟研究院研究三所副所長高仁山說，「政府減少科研預算不是壞事，因為這代表民間投資增加」。

taiwan business topics • march 2011

3_11_CoverStory.indd 14

2011/3/30 8:45:36 AM

R & D

Taiwan R&D Funding and Sources

240

Other

Government

Corporate

210 180 NT$ Billions

against the business income tax is available for projects that qualify. The bar for receiving the tax credit has been set extremely high, however. “Tax incentives are hard to qualify for,” says Nathan Kaiser, a partner at Eiger Law. “In order for the tax rate to be lowered to 17%, a number of earlier tax incentives for R&D were scrapped, in a political, last-minute quid pro quo. The tax authorities were told by the Legislative Yuan to cap total incentives at a nominal amount of money rather than set conditions based on industrial-policy considerations.” The application process for R&D tax incentives is now quite onerous, says Kaiser. Companies file their applications with the IDB, which reviews the nature of the research project, but the process is non-transparent. Applicants receive no feedback from the IDB on its findings, and the final approval or rejection comes from the tax authorities. “This seems unconstitutional and illegal,” Kaiser says. “There should be a right of information and a right of administrative appeal with regard to the decision by every authority involved. This is a cornerstone of administrative law.” R.C. Liang, chief technology officer of Delta Electronics, adds that “it is important for companies applying for incentive programs to see a fair, open, and clear process.” He particularly urges the government to “develop more integrated policies and incentive programs for renew-

150 120 90 60 30 0

國科會資料顯示，民間研發經費2003年佔總額 63%，現在已經增加到70%。台經院針對各產業研發經費的分析發現，今年度的工業生產與科技類已可佔國內整體研發投資的18%，醫療科學類也有16.3%，其次則是雲端運算、電動車、再生能源。台灣自2009年開始鼓勵電動車與再生能源等新興產業的研發投資，不過經濟部的連玉蘋認為政府投入的資源還可以再多一點。台經院的高仁山則認為，與其一味訴求增加政府預算，不如著手改善跨國企業的研發投資環境。他指出，跨國企業對台灣的研發投資目前僅佔全國研發經費的1.3%，相較之下，部分國家的比例達到3%至5%，「顯示跨國廠商的研發投資並未飽和」。

2003

2004

2005

2006

2007

2008

Source: National Science Council http://www.nsc.gov.tw/tech/book/data_main/I-2.pdf

改善研發投資環境外商社群的普遍看法是，台灣的研發投資環境還有很大的改進空間。「促進產業升級條例」2009年底失效後，「產業創新條例」自 2010年取而代之。產創條例一方面將營利事業所得稅率由25%調低為17%，另一方面延續獎勵研發的租稅優惠，允許研發支出的15%用於抵扣營所稅。但研發計畫可以抵扣的條件卻很嚴苛。艾格峰外國法事務律師事務所執行理事王納森說，「研發計畫很難滿足抵免租稅的條件」，「營所稅率雖然降至17%，原先獎勵研發的部分租稅優惠卻被取消，以滿足獨厚企業的政治批評」，「但稅捐機關又被立法院要求以名目金額限制租稅優惠總額，不能以產業政策

march 2011 • taiwan business topics

3_11_CoverStory.indd 15

2011/3/30 8:45:36 AM

Cover Story Taiwan’s R&D Spending as a Percentage of GDP

6 5 %

4 2.39

2.51

2.57

2.78

2.94

Year 2005

2006

2007

2008

2009

2.7

2 1 0

2010 (forecast)

A biotech setback

Sources: TIER, National Science Council

able energy applications through greater coordination among the Ministry of Economic Affairs, Environmental Protection Administration, and Ministry of Transportation and Communications.” Taiwan’s Ministry of Finance (MOF), which oversees the local tax regime, has the final say on tax credits for R&D, notes the IDB’s Lien. “The IDB just provides administrative assistance to the MOF” in evaluating the technological merits of the project, she says. “We think the IDB's opinion is part of the process but not the final stage.”

In practice, there should be no limit on the number of applications for tax credits that are approved, according to Lien. The IDB will be evaluating the situation this year, the first year that the Statute for Industrial Innovation has been in effect, and make appropriate adjustments in following years, Lien says. But she notes that the Legislative Yuan is seeking to hold down the government budget, and the MOF is under pressure to maintain tax revenue. Even so, for multinationals such as Microsoft and IBM, tax incentives are not

考量設定排除條款」。艾格峰的王納森指出，研發抵扣的申請手續變得很繁瑣。公司得向經濟部工業局提交申請，工業局再據以審定研發計畫是否符合規定。但過程並不透明，因為工業局從不向企業說明原因，是否核准都得等稅捐機關通知。王納森說，「這種作法有違憲、違法之虞」，「申請人有知的權利，以及提起行政訴訟的權利，這才符合行政訴訟法的精神」。台達電子技術長梁榮昌說，「有意申請的廠商都希望，研發抵扣審查的過程能夠公平、公開、明確」，「更希望政府能夠協調經濟部、環保署、交通部，整合再生能源申請案的政策與獎勵。」經濟部的連玉蘋表示，主管全國租稅業務的財政部，才有研發抵扣的最終認定權，工業局

3_11_CoverStory.indd 16

the main attraction for investing in R&D in Taiwan. “In Microsoft’s view, our [decision-making on] R&D expenditure is based on talent,” says Taiwan research head Michael Chang, who oversees a team of about 40 R&D engineers whose skills he praises. “Tax incentives are not the key reason for investment.” IBM, which has been rapidly expanding the capacity of its research laboratories in Taiwan, takes a similar view. “There’s a tremendous talent pool here coming out of universities and businesses,” says Chris Verne, director of Worldwide High Volume System x Development for IBM. “Taiwan has become a tech hub. Tech trends often start here.”

The R&D success in the Information Technology sector has not been easy to duplicate in other industries, however. Taiwan government's plan to make the island an Asian hub in the global pharmaceutical industry, for example, was set back in the middle of the past decade when U.K.-based GlaxoSmithKline (GSK) withdrew from a project to establish a large-scale vaccine manufacturing plant on the island, according to BiotechEast, an organization that covers the life science industry in Taiwan. GSK initially won the build-own-operate (BOO) vaccine contract with incentives including a government guarantee to purchase

只能協助財政部瞭解計畫的技術價值，由於「工業局的看法並非最終認定，因此難以對廠商說明」。經濟部的連玉蘋表示，經過核准的研發抵扣項目，申請案一般不會有太多限制。連玉蘋說，企業納稅今年首次適用產創條例，工業局會評估今年的狀況後，逐年做出適當調整；不過，現實的困難是，立院希望節制政府支出，財政部則希望穩定稅收。不過，對微軟、IBM等大型跨國企業，稅賦優惠並不是研發投資多寡的關鍵因素。微軟大中華區商業應用事務部測試副總經理張仁炯說，對微軟來說，研發經費要放在哪個市場，決定因素在人才，而台灣的40位研發工程師的確不錯。因此他認為，稅賦優惠並非關鍵。正在快速擴張台灣研發規模的I B M也持相同

2011/3/30 8:45:36 AM

R & D

2.5 million doses of seasonal flu vaccine every year for 10 years, says BiotechEast. The project was a tender open to local and international vaccine firms as part of a Department of Health (DOH) effort to make Taiwan self-reliant in public health-related bioproducts such as vaccines and antiviral drugs. The plan resulted from the 2003 outbreak of severe acute respiratory syndrome (SARS) and the threat of a similar health crisis from bird flu. GSK canceled the deal in part because it was unhappy about the Taiwan government's insistence that the company transfer its core vaccine technology to local industry as a condition of the contract, BiotechEast says. The contract ended up with a local company, ADImmune. Intellectual property (IP) protection is an important consideration when a company is assessing Taiwan as a site for a significant investment, notes John Eastwood, a partner with Eiger Law. “The Taiwan government scared off a lot of potential tech and R&D investment when they went on a compulsory licensing rampage” a few years ago, he says. “Through heavy-handed interference in the local patent licensing market, they projected to the world that Taiwan was interested in short-term gain for local companies instead of a long-term view of providing a level playing field for tech companies.” photo :ITRI

看法。IBM台灣系統與科技研發中心總經理樊克思說，「台灣的大學與業界都不難找到優秀人才」，所以「台灣已經變成科技樞紐，往往能夠引領科技趨勢」。

記取生技業的教訓但不容忽略的是，其他產業並不是資訊業。專營台灣生技業國際媒合的東方生技網指出，政府雖然有意打造台灣成為亞洲的製藥中心，但葛蘭素史克藥廠（GSK）決定放棄在台建立疫苗廠，卻是一項挫敗。GSK拿下的合約是以BOO 方式建立疫苗廠，且政府保證十年間每年採購 250萬劑流感疫苗。這項BOO案的起源是2003年的SARS，與其後

3_11_CoverStory.indd 17

的禽流感疫情。衛生署原先希望藉由國內外疫苗廠競標，以建立疫苗與抗病毒劑等公衛生醫產品的自主產能。東方生技網指出，G S K放棄合約的部分原因是，台灣政府非常堅持、而且明列在合約中，要求得標廠商必須將疫苗核心技術轉移給國內業者。GSK退出後，疫苗廠改由國光生物科技接手。艾格峰外國法事務律師事務所合夥人江東林認為，智慧財產權是否能獲得保障，是企業決定是否對台進行重大投資的重要考量。他說，「台灣前幾年硬推強制授權的作法，的確嚇走不少科技與研發投資案」，「政府強勢介入專利授權的市場機制，國際上的印象當然不好，認為台灣只在乎國內業者的短期利益，不是真正有心打造科技業的公平競爭環境」。

2011/3/30 8:45:38 AM

Cover Story National Rankings of Gross R&D Spending

Rank Country Expenditures on R&D % of GDP PPP (billions of US$) 1 United States 405.3 2.70% 2 China 153.7 1.40% 3 Japan 144.1 3.30% 4 Germany 69.5 2.30% 5 South Korea 44.8 3.00% 6 France 42.2 1.90% 7 United Kingdom 38.4 1.70% 8 India 36.1 0.90% 9 Canada 24.3 1.80% 10 Russia 23.1 1.00% 11 Brazil 19.4 0.90% 12 Taiwan 19 2.30% 13 Italy 19 1.10% Note: Expressed as adjusted for Purchasing Power Parity Source: Wikipedia

Singapore and other countries in the region were quick to capitalize on that opportunity, promoting themselves as a “safer” option for tech companies, according to Eastwood. In recent years, a number of leading pharmaceutical and biotechnology companies have established regional headquarters in Singapore, enabling the city-state to develop into one of Asia’s fastest growing bioclusters, according to material published

by the Singapore Economic Development Board (EDB). These companies include AstraZeneca, Bayer, Boehringer-Ingelheim, Bristol-Myers Squibb, Genzyme, GSK, Merck, Novartis, Quintiles, Sanofi-Aventis, and ScheringPlough. Lonza, Novartis, GSK, and Genentech have announced plans for five major biologics facilities worth a total of US$1.5 billion in capital expenditure within less than two years, the EDB

艾格峰的江東林指出，新加坡與鄰近國家當然不會放過大好機會，自然會大力宣傳自己才是科技業者「更安全」的選項。新加坡經濟發展局指出，阿斯特捷利康、拜耳、百靈佳殷格翰、必治妥施貴寶、健臻、G S K、默克、諾華、昆泰、賽諾菲安萬特、先靈葆雅等頂尖藥廠與生技公司，近年陸續選擇新加坡建立區域總部，已使新加坡成為亞洲最快速成長的生技據點之一。另外，龍沙、諾華、GSK與基因科技（Genentech）已經宣布，兩年內將投資15億美元於新加坡興建五座生技藥品工廠。回頭看台灣，瑞健集團（SHL Group）可說是最積極投資台灣市場的醫療業者之一。SHL行銷部總監高福曼說，「SHL Medical今年將首度在台進行研發」，「研發工作過去是在其他國家進行，但分散執行有利公司營運，而且台灣也

report said. Currently, Taiwan can point to the SHL Group, the world’s largest privately owned designer, developer, and manufacturer of advanced drug delivery devices, as one of its most active investors. The group is divided into three units: SHL Medical, SHL Healthcare, and SHL Technologies. “This year will be the first for SHL Medical to conduct R&D in Taiwan,” says SHL Group Marketing Director Steven Kaufman. “Previously, this R&D was done in overseas locations. It’s good to diversify, and Taiwan has a lot of very talented people.” Kaufman declines to say whether SHL has qualified for R&D tax incentives, but urges the government to streamline the application process for companies that are interested. The authorities should also reconsider how to define biotech, which currently includes everything from wheelchairs to digital thermometers, he says. “Look at Singapore and how they have grown their biotech industry,” Kaufman says. NSC Minister Lee says he expects local R&D efforts to help boost growth in Taiwan’s domestic medical device i n d u s t r y. T h e H s i n c h u B i o m e d i c a l Science Park will be formally opened on May 18 this year next door to the Industrial Technology Research Institute (ITRI), providing facilities for some key anchor companies, he says. In addition, Lee notes that the Kaohsiung Biomedi-

具有高水準人才」。S H L是全球最大的藥物輸送系統設計、研發與製造商，集團成員為S H L Medical、SHL Healthcare，及SHL Technologies。瑞健的高福曼不願評論集團是否可以獲得稅賦優惠，但希望申請程序更為便捷。他說，主管機關應該重新考慮生技業的定義，因為現在從輪椅到電子溫度計的產品幾乎是無所不包，「參考新加坡發展生技產業的作法，或許是不錯的選項」。國科會的李羅權並不悲觀，他認定總還是會有足夠的研發投資能協助醫療器材產業發展。李羅權表示，新竹生物醫學園區5月18日正式營運後，將可容納部分關鍵業者；至於南科高雄園區的生醫科技產業聚落計畫，奧羅瑞影像科技已經決定設立乳癌偵測設備的研發中心，史丹佛大學與倫敦帝國理工學院也表達過加入意

taiwan business topics • march 2011

3_11_CoverStory.indd 18

2011/3/30 8:45:38 AM

R & D

Key Multinational R&D Investors in Taiwan

ultinational companies account for about 1.3% of Taiwan’s total R&D expenditures, which the Taiwan Institute of Economic Research (TIER) calls low compared with other nations. But that figure may rise due to improvements in Taiwan’s investment climate in recent years. National Science Council (NSC) Minister Lee Lou-Chuang notes that a number of competitiveness indices from international organizations show Taiwan has soared upward in business environment rankings in recent years. Perhaps the best indicator may be the number of new R&D projects recently undertaken in Taiwan by multinational companies. In December last year, the Department of Industrial Technology (DoIT), a unit of the Ministry of Economic Affairs (MOEA), announced that 15 foreign enterprises had applied to establish R&D centers in Taiwan with total investment close to the government’s 2010 target of US$500 million for such projects. Although it did not list all 15 companies, DoIT mentioned that those commitments include NT$1.1 billion (US$36.7 million) from Netherlands-based ASML, the world’s largest supplier of lithography systems for the semiconductor industry, in an ASML Global 200mm Technology Center; almost NT$800 million from IBM for the establishment of a next-generation information equipment R&D center; NT$400 million from Microsoft to finance a Microsoft Software and Services Excellence Center; and NT$150 million from Belgium’s IMEC for a Taiwan Innovation Center to focus on microelectronics, medical electronics, green energy, and other interdisciplinary applications. DoIT also referred to a NT$3.6 billion commitment from Hewlett-Packard, which it said is the largest planned investment (like Microsoft and IBM, HP declined to comment on the DoIT figures). “We're making a sizable R&D investment in Taiwan,” says Ike Harris, vice president in charge of HP’s notebook supply chain. “HP’s investment in Taiwan is strategic for mobile computing. That includes notebooks for consumer and commercial

markets as well as industry-standard servers. It's a broad portfolio of development.” In 2002, HP’s personal systems group set up a product development center (PDC) in Taiwan, one of just a handful around the world. The Taiwan PDC started with about 30 people and now has five-and-a-half floors staffed with hundreds of R&D engineers. “Taiwan has an innovative environment,” says Robert Mihalik, director of HP’s Innovation Program Office. “It’s a great place to nurture talent.” For Microsoft, one of the focuses of the local R&D work has been cloud computing, which is also a key initiative for the Taiwan government. “Our investment is more than just money,” says Liu Nien-Chen, a senior developer with Microsoft. He adds that because the DoIT figure apparently came from just one of three Microsoft centers doing R&D in Taiwan, the total amount of Microsoft’s planned R&D investment is probably even greater. Microsoft software architects provide their vision and proof of concept to local enterprises and government organizations to help them improve their software environment, he notes. “Our effort is to bring the global experience to customers,” says Michael Chang, Microsoft’s principal test manager and onsite manager for all R&D in Taiwan. “We help them to bridge the gap. IT in Taiwan is probably five years behind the U.S., technologywise. In software adaptation, Taiwan is behind. That's why the government welcomes our work.” HP views Taiwan as a key location for commercialization of the results of the R&D process. “An entire ecosystem is represented here,” says Harris. “The rate at which you commercialize out of the lab is a huge advantage for Taiwan. That's a recent trend which will only accelerate.” To HP, innovation in manufacturing operations is one of Taiwan’s major strengths. “We were the first company to apply in-mold roll (IMR) film on notebook enclosures,” says Harris. “That's when notebooks went from plain silver to high gloss coverings or patterns. While IMR itself was not a Taiwan

innovation, the actual process of applying that was done by a Taiwan company in molding injection in 2006, and it was quickly adopted by the entire industry.” At Corning, Connie Yichun Wang, director of the Corning Research Center Taiwan, says the company is looking to expand its R&D presence in Taiwan. “It’s a very positive environment because of the opportunity to work with Taiwan companies who are very openminded to adapt anything new and know how to make something real in the shortest possible time,” she says. As an indication of the growing internationalization of Taiwan’s R&D effort, NSC Minister Lee points to the government’s recent establishment of the International Research-Intensive Center of Excellence (I-RICE), a research hub aimed at attracting internationally renowned scholars and researchers to Taiwan. On January 26 this year, the NSC announced NT$150 million in grants to each of three I-RICE centers. One of them is a research center jointly established by Intel and National Taiwan University on the NTU campus to explore new machineto-machine (M2M) technologies with the support from NSC. Another proposed I-RICE in Advanced Bioengineering Research will involve collaboration among National Yang Ming University (NYMU), National Chiao Tung University (NCTU), and the University of California, San Diego (UCSD). The third, an International Center for Dynamical Biomarkers and Translational Medicine, will be a joint effort by the Research Center for Adaptive Data Analysis at National Central University (NCU) and the Rey Institute for Non-linear Dynamics in Medicine at Boston’s Beth Israel Deaconess Medical Center, in affiliation with Harvard Medical School. The NSC says it expects to sign three more agreements this year, one of which may include IBM, which has made a “strong proposal,” according to Lee. IBM declined to comment on the prospective agreement.

— By Alan Patterson

march 2011 • taiwan business topics

3_11_CoverStory.indd 19

2011/3/30 8:45:38 AM

Cover Story cal Cluster has attracted Boston's Aurora Imaging Technology for an R&D center focusing on breast cancer detection equipment, and that Stanford University and Britain’s Imperial College have also expressed interest in joining the cluster. “We have many things that complement what these schools lack, such as optical devices and chip design,” Lee says.

Picking the winners It can be tough choosing the winners in rapidly growing technology markets such as mobile networking. In Taiwan, a major supplier of wireless network products worldwide, the government several years ago aimed to kickstart a new domestic industry – equipment for WiMAX, otherwise known as Worldwide Interoperability for Microwave Access. A bridge from the current 3G mobile technology to 4G., WiMAX can enable faster transfers of voice, data, and videos on devices such as mobile phones, laptops, and tablet computers. Through a project called M-Taiwan, Ta i w a n s o u g h t t o j u m p s t a r t R & D and manufacturing for the domestic WiMAX equipment industry and capture a larger piece of the global market for wireless network equipment. M-Taiwan was a four-year program launched in December 2005 with a total budget worth the equivalent of US$212 million. It was expected to result in

domestic industry investment of approximately US$630 million on WiMAX network infrastructure. The 2005 plan of the Science & Technology Advisory Group (STAG) under the Executive Yuan stated that “WiMAX technology will be a focus for the future of the Taiwan information and communications technology (ICT) industry and will be the preferred technology to deliver M-Service, M-Learning and M-Life in the ‘M (Mobile)-Taiwan Program.’” But at the same time as the WiMAX project in Taiwan was launched, a plethora of other mobile networking technologies with acronyms such as TD-LTE (time division duplex long-term evolution) emerged. “The WiMAX market is battling through a tough year, with perceptions of the technology dented by the promise of TD-LTE, which overshadows WiMAX like a black cloud,” said Infonetics Research analyst Richard Webb in a December 2010 report. WiMAX has yet to account for a significant portion of Taiwan’s telecommunications production. The value of Taiwan’s communications equipment and components in 2009 was worth NT$398 billion (US$13.3 billion), according to the latest information from the IDB. During the same period, the IDB data shows that Taiwan’s WiMAX products accounted for less than one percent of that amount at NT$8.8 billion. To be sure, Taiwan has its share of

願。他說，「我們有許多東西可以和學術機構互補，例如光學器材與晶片設計。」

慎選重點產業想以政府預算增加投資總額當然容易，但問題在於，政府是否選到真正有發展潛力的產業。舉例來說，行動通訊的確是快速成長的市場，但鎖定明日之星絕非易事。身為無線網路設備的全球主要供應國，台灣幾年之前選定 WiMAX產業為發展重點。介於行動通訊科技 3G與4G之間的WiMAX，可以大幅提高手機、筆電、個人電腦的語音、資料、影片傳輸速度。這個稱為「行動台灣」（M-Taiwan）的計

companies that have used R&D effectively. Global management consultant McKinsey & Co. says some of the best examples of enterprises that have used R&D to boost top- and bottomline growth are Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract manufacturer of chips, and HTC Corp., the world’s third-ranked smartphone maker. “TSMC owns all of its key technology, and it has a 80-85% market share for advanced technology in their semiconductor process,” says Bill Wiseman, head of McKinsey’s Taipei office. “They are now number two in the semiconductor industry following Intel.” This year, TSMC plans to increase its R&D budget by nearly 20% from last year to more than NT$1.1 billion (US$40 million), TSMC Chairman Morris Chang said on a conference call with analysts in January. Much of the money will go toward developing chips made with 40 nanometer technology. The smaller circuits on chips produced with the technology will enable the creation of ever smaller electronic devices that include more functions and consume less power. Minister Lee notes that TSMC and the NSC are working together to fund advanced research in Taiwan’s universities. Taiwan’s National Nano Device Laboratory, which has facilities in both the Hsinchu and Southern Science Parks, is now doing research for semiconductor

畫，目標之一是快速發展國內WiMAX的研發與製造能力，儘早介入無線網路的國際市場。四年期的M-Taiwan自2005年12月展開，以政府預算2.12億美元，引導產業投資約6.3億美元。行政院科技顧問組2005年的計畫方針是， WiMAX將是台灣資通訊產業的未來重點，也將是M-Taiwan計畫中行動服務（M-Service）、行動學習（M-Learning）、行動生活（M-Life）的重點科技。但同時間，T D-L T E等其他多項科技也在崛起。Infonetics Research的分析師Richard Webb在2010年12月的報告中指出，WiMAX 市場經歷了艱困的一年；T D-L T E就像是罩頂烏雲，侵蝕了原先對W i M A X的樂觀期待。

taiwan business topics • march 2011

3_11_CoverStory.indd 20

2011/3/30 8:45:38 AM

R & D

photo :ITRI

process technology at the 16 nanometer level, he points out. For its part, HTC, which has developed its own technology and built a famous global brand in the past five years, has successfully leapfrogged from Microsoft’s Windows operating system to Google’s Android in an aim to offer

customers market-leading functions in the company’s distinctive handsets. “HTC Chairwoman Cher Wang saw the opportunity and made a quick move,” says TIER Deputy Director Kao. Wang, the daughter of the late tycoon Wang Yungching, founder of the Formosa Plastics Group, “was more entrepreneurial than

WiMAX現在仍不是台灣的主力電信產品。工業局最新資料顯示，台灣通訊設備與元件2009 年的總產值為3980億新台幣（133億美元）； WiMAX產品同期產值88億新台幣，還不到總值的1%。但相對於WiMAX的經驗，台灣部分企業的確沒有虛耗研發能量。全球管理諮詢機構麥肯錫公司指出，台灣的確有能夠妥善運用研發能力創造利潤與營收的企業，例如全球最大的晶圓代工業者台灣積體電路，以及全球第三的智慧手機供應商宏達國際電子。麥肯錫台北分公司總經理魏世民說，「台積電生產所需的關鍵技術全為自有，而半導體製程所需的先進技術，他們的市佔率也達80%至85%」，「台積電已經是半導體產業的第二名，僅次於英特爾」。台積電董事長張忠謀今年一月向產業分析師

other business leaders.” Taiwan has a number of other mobile phone makers such as Acer, ASUS, and BenQ, all of which have a longer history than HTC. HTC has one of the highest R&D expenditures among Taiwan companies as a percentage of annual revenue. In 2008, the company spent over 35% of

表示，台積電2010年的研發費用為11億新台幣，今年可望再增加20%；其中大部份將用於40 奈米製程的相關研發。40奈米的優勢在於，電子產品體積更小，但功能更多、耗電更少。國科會的李羅權指出，台積電與國科會已經合作資助國內大學的先進研究。此外，竹科與南科都有據點的國家研究院奈米元件實驗室，現在也在開發16奈米半導體製程。至於宏達電，靠著自有技術，宏達電已在過去五年間發展成全球知名品牌，同時由微軟 Windows系統成功轉換到Google的Android平台，以提供消費者更為先進的手機功能。台經院的高仁山說，「宏達電董事長王雪紅看到機會絕不放過」，「身為台塑集團創辦人王永慶的女兒，王雪紅顯然比其他企業老闆更瞭解什麼叫勇於創新」。台灣有許多知名手機製造商，如宏碁、華

march 2011 • taiwan business topics

3_11_CoverStory.indd 21

2011/3/30 8:45:41 AM

Cover Story its annual revenue on R&D and 32% in 2009, Kao says, adding that the correlation between the company’s revenue growth and R&D spending is close. Taiwan’s key strength in R&D is the ability to develop products that are cost competitive, according to McKinsey. “Engineers in Taiwan have a mindset that is very pragmatic,” says Wiseman. “For that reason, Taiwan is a natural place to come and recruit people.” Microsoft, the world’s biggest software company, sees still more strengths in Taiwan’s R&D environment. “The education system and cultural differences [compared with some other Asian countries] are a big advantage,” says Microsoft’s Chang, noting that the culture in Taiwan encourages people to collaborate. “It's about teamwork. This is how we evaluate it.” ITRI President Shyu Jyuo-Min says the target for Taiwan’s R&D spending to reach 3% of GDP is an important goal to boost the island’s competitiveness. He compares Taiwan to Israel, which spends more than 4% of its GDP on R&D and has a vibrant technology industry. Achieving the 3% target is within reach, yet it may require a new type of collaboration – not so much among Taiwan’s various R&D lab researchers, but rather between government and private-sector business leaders. The aim would be to improve Taiwan’s investment environment and legal system to parlay Taiwan’s much vaunted strength in electronics into such new areas as medical devices and green technology.

The ITRI Organization Business Development Units • International Business Center • Technology Transfer Center • Commercialization and Industry Service Center Core Laboratories • Electronics and Optoelectronics Research Laboratories • Information and Communications Research Laboratories • Mechanical and Systems Research Laboratories • Material and Chemical Research Laboratories • Green Energy & Environment Research Labs • Biomedical technology and Device Research Labs Focus Centers • Display Technology Center • Service Systems Technology Center • Cloud Computing Center for Mobile Application Linkage Centers • Creativity Lab • NanoTechnology Research Center • Industrial Economics & Knowledge Center • Center for Measurement Standards

碩、明基，但都無法像宏達電快速崛起。以研發經費佔年營收比例來看，宏達電是台灣最高的幾個企業之一。台經院的高仁山指出，宏達電2008年的研發經費佔年營收35%， 2009年也有32%；而企業營收成長速度與研發經費多寡有密切相關。麥肯錫的資料顯示，台灣研發的強項是能讓產品的成本更具競爭力。麥肯錫的魏世民說，「台灣的工程師非常務實，懂得成本控制與功能花俏之間的取捨，因此台灣確實值得企業投資與招募人才」。全球最大軟體供應商微軟則看到台灣的另一個強項。微軟的張仁炯說，「與部分亞洲國

家相比，台灣的教育體系與文化差異別具優勢」，「因為台灣鼓勵合作，團隊合作才是重點」。工業技術研究院院長徐爵民認為，研發支出超過GDP的3%，對台灣增加競爭力是項重要指標。他以色列為例指出，以國研發支出已經超過GDP的4%，科技業自然活力十足。 3%似乎並不困難，但要達到目標需要新型態的合作，這並非是說企業研發人員彼此之間該加強合作，而是政府與民間應該深化合作。改善台灣的投資環境與法規制度，才能將電子業的成功經驗，化為醫療器材與綠能科技等新興產業的發展動能。

taiwan business topics • march 2011

3_11_CoverStory.indd 22

2011/3/30 8:45:41 AM

R & D

Imagineering at ITRI

ith an annual budget of about NT$18 billion (US$600 million) and 6,000 researchers, the Industrial Technology Research Institute (ITRI, pronounced “E-tree”) is by far the largest R&D organization in Taiwan – and in fact one of the largest in the world. The mission of the national research organization, which gets about half its funding from the Taiwan government and half from the private sector, is to strengthen Taiwan’s technological competitiveness. As a prime example of its accomplishments, Taiwan’s current economic prowess is due in no small part to the establishment of a domestic semiconductor industry decades ago by ITRI. Less than a decade after the institute was founded in 1973, a groundbreaking research project in semiconductors resulted in such spinoffs from ITRI as Taiwan Semiconductor Manufacturing Co. (TSMC) and its smaller rival, United Microelectronics Corp. (UMC). These and a number of other companies have formed what is now Taiwan’s most important industry, encompassing chipmakers, chip designers, and other companies that are part of an extensive infrastructure in electronics. On completion of ITRI’s Submicron Project for the domestic semiconductor industry in the early 1990s, project leader C.Y. Lu said that ITRI would have difficulty making further contributions to the chip industry because domestic companies such as TSMC were able to conduct R&D on their own with more advanced in-house facilities. In the 1990s, ITRI laboratories also helped extend the lifecycle of some of Taiwan’s traditional industries by researching new technologies and materials. Its work on lightweight but durable carbon-graphite materials was a boon to the bicycle and sporting goods industries, for example. But in recent years, there has been less agreement on the direction that ITRI should take. Some critics have faulted it for failure to develop breakthrough new technologies with valuable commercial applications or spawning new domestic industries with huge market potential such as green energy. Despite ITRI’s huge annual budget, “you don't see the results,” says Taiwan Institute of Economic Research (TIER) Deputy Director Jason Kao. “When the private sector has the capacity to conduct R&D on its own, you shouldn't interfere.” He also sees ITRI as “aiming at safe projects with returns in one to two years,” instead of undertaking more advanced R&D on technologies that are still a decade or more away from commercialization. TIER proposed in a recent meeting of the Science & Technology Advisory Group (STAG), which advises Taiwan’s Premier on development policy and programs, that about one-quarter of ITRI’s funding should be for high-risk programs, Kao notes. ITRI President Shyu Jyuo-Min responds that the Institute, rather than competing with the private sector, “is doing research that no one else is doing,” often in collaboration with private companies. He adds that ITRI is still working to upgrade existing industries and foster the development of new ones, with particular emphasis on green energy and biomedical devices. “The environment has continued to evolve, so we need to adjust,” Shyu says. R.C. Liang, chairman and CEO of DelSolar Co., a joint venture between ITRI and Delta Electronics, credits ITRI and other research organizations in Taiwan with providing the company with strong support in R&D, marketing, training, and technical services. “In the past few

years, ITRI has devoted more resources in developing eco-friendly and sustainable energy technologies,” he notes. Yet despite those efforts, say international analysts, Taiwan has made far less of a splash in green industries than has China, which has grabbed headlines in such areas as electric cars and solar energy. Chinese electric-car maker BYD has even attracted investment from tycoon Warren Buffett. ITRI’s Shyu offers several examples of his organization’s recent projects that carry the potential for commercial success. With local LCD maker AU Optronics Corp., ITRI has developed a flexible substrate for flat displays that may find commercial applications in newspapers and books. AUO’s plans for commercialization of the technology have remained confidential. Another recent ITRI accomplishment mentioned by Shyu is a flat flexible speaker that won the 2010 Technology Innovation Award from the Wall Street Journal. The technology will be spun off to a new company that plans to make paper-thin speakers that can be woven into clothing and other types of fabric or connected to mobile audio players such as Apple iPods. Since the Taiwan government commissions about half of ITRI’s projects, the type of R&D that ITRI conducts depends heavily on government policy, Shyu says. He notes that the government’s current priority is its “Six Emerging Industries” – tourism, medicine and healthcare, biotechnology, green energy, cultural and creative industries, and high-end agriculture. Some observers say the focus on short-term R&D may have limited Taiwan’s ability to develop unique new products with high profit margins. “Taiwan should be investing more in innovation,” says Bill Wiseman, managing partner in Taiwan for McKinsey & Co., the management consulting firm. “ITRI is a technology house. We need an innovation center as well – right now it is a pretty large and obvious gap.” National Science Council Minister Lee Lou-Chuang, an ITRI board member, agrees that Taiwan needs to innovate in services and in the creation of new brands. Bu he stops short of saying Taiwan needs an organization to lead innovation, and he defends ITRI’s recent work. “Some ITRI centers that have not produced results have disappeared,” says Lee. “They can reorganize very quickly. They are very dynamic.” The minister also notes the need for better coordination with the work being done in the research laboratories at Taiwan’s top universities. He says the NSC has been monitoring the research results of university professors to identify potential commercial applications, and is implementing bridging projects to facilitate commercialization for a wide variety of products. In the early years, the government wisely supported ITRI to boost development of the domestic electronics industry, yet today most of the profits in the global electronics industry today go to the big brand owners, says Vivian Lien, director of the Industrial Policy Division of Taiwan’s Industrial Development Bureau. “We face a problem in the information and communication technology (ICT) industry because of our low added value,” Lien says. “I agree the R&D budget is important, but brand creation is also very important.” — By Alan Patterson

march 2011 • taiwan business topics

3_11_CoverStory.indd 23

2011/3/30 8:45:42 AM

taiwan busines s

Getting Smokers to Quit If sheer willpower doesn’t work, other possibilities are nicotine replacement therapies and – just don’t put it in an ad – smokeless tobacco.

BY TIMOTHY FERRY

he John Tung Foundation, Taiwan’s leading anti-tobacco nongovernmental organization, knows a thing or two about the power of celebrity appeal. Some of Taiwan’s most famous entertainers have served as honorary chairpersons, lending the JTF the value of their names and giving the group an impact far beyond the reach of most NGOs. Jay Chou, currently Taiwan’s most popular celebrity, for instance, has been enlisted in the JTF’s campaign to discourage young people from smoking. Life-size cutouts of him wearing an anti-smoking message on a t-shirt can be seen at all Taiwan public schools, from elementary to university levels. Meanwhile, Jolin Tsai, another wildly popular Taiwanese pop star, is featured in the JTF’s Quit and Win campaign aimed at Taiwan’s overwhelmingly male smoking population. JTF spokesperson Lin Ching-li says

this type of campaign has been a mainstay with the organization because “these celebrities are the most influential members of their generations” and because they “are not famous only in Taiwan, they can influence the Asia region or even the whole world.” But celebrity endorsements are only one of the resources the anti-tobacco lobbying group brings to the fray nowadays. The JTF has armies of volunteers actively policing convenience stores – sometimes armed with hidden cameras – monitoring them for compliance with tobacco laws. Volunteers reportedly have also camped outside legislators’ offices when new tobacco legislation was being considered to press lawmakers to vote for tighter regulations. Legislation enacted in recent years is testament to the foundation’s success in pushing the public debate, and Taiwan now has strict new regulations in place on the marketing, sale, and

consumption of tobacco products. But with smoking rates remaining stubbornly high, the question becomes: Are even the best efforts of the antitobacco forces enough to limit the damage wrought by tobacco in Taiwan? And further: Are there other approaches besides regulatory efforts that could help mitigate tobacco’s harmfulness to society? A revised version of the longstanding Tobacco Hazards Prevention Act (THPA) went into effect in January 2009. Inspired by the World Health Organization’s Framework Convention on Tobacco Control, the new law established broad indoor and workplace smoking bans, increased surcharges on tobacco products, and stipulated that packaging be festooned with horrific images of the ravages of tobacco on the human body. T h e a m e n d e d T H PA h a s t r a n s formed Taiwan into one of the least

taiwan business topics • march 2011

3_11_TB.indd 24

2011/3/29 6:17:48 PM

taiwan busines s

friendly places in the world to engage in marketing tobacco products. Tobacco companies are prohibited from nearly all forms of promotion or communication with the public, and the THPA adds to longstanding bans on conventional advertising for tobacco by further barring tobacco discount offerings, instore displays, and events sponsorships. Even the language of newscasts related to tobacco is scrutinized to ensure that it does not encourage smoking, and in 2010 a local TV station was threatened with fines for airing an insufficiently negative story on tobacco. The only weapons remaining in the tobacco companies’ arsenals are the powerfully addictive nature of the drug nicotine, and smoking’s continued image as cool. But so far, these seem to be enough. Taiwan’s smoking rate hovers at roughly 20% for all adults, but varies sharply along gender lines. According to government statistics, nearly 36% of adult men in Taiwan smoke, compared with less than 5% of women, a ratio that reflects negative stereotypes of women smokers common throughout much of Asia. In China, for instance, the smoking rate is given as nearly 60% for adult men, but less than 4% for women, while the comparable figures in Vietnam are 50% for men and only 3.5% for women. But the social stigma for women smoking leads many industry insiders and public health experts to suspect that the incidence is actually higher than official statistics indicate. According to the Taiwan Report on Tobacco 2010 published by the Department of Health’s Bureau of Health Promotion (BHP), Taiwan had 3.61 million smokers in 2009 – 3.23 million males and 380,000 females. The total has declined by 330,000 or 2% from 2008, but the extent to which the THPA’s provisions contributed to this drop is unclear. Smoking among men was already markedly declining; as recently as 2002, over 48% of men

in Taiwan smoked. The rate of decline seems little improved from those previous years under less stringent regulatory regimes, indicating that other factors – such as rising incomes and healthier lifestyles – may also be in play. Further, according to the Taiwan Report on Tobacco 2010, smoking rates for junior and senior high school students, at 7.8% and 14.8% respectively, remain little changed or actually increased since the stricter THPA was passed. And as men in their 30s and 40s remain the largest demographic for smokers, the full impact on illness and mortality may only be felt decades from now. The Taiwan Report on Tobacco notes that “of every two young-tomiddle-aged adult males, one is a smoker.” Already the top three causes of death in Taiwan – cancer, heart disease, and cerebrovascular disease (including strokes) – are all closely linked to smoking. Cancer alone causes 38% of all deaths in Taiwan, roughly 40,000 per year, according to figures supplied by the Government Information Office. If Taiwan’s smoking rates fail to decline markedly – or begin to decline and then stagnate, as they have in many countries – the costs to Taiwan’s public health will only grow in future. The United States saw total smoking rates of 40% as recently as the 1970s. They then declined sharply over the next 20 years, until they reached roughly 20% in 2000, and they have stayed at that level ever since.

such as the BHP, a major mission is to help these smokers sitting on the fence to finally put down their cigarettes. As authorized by the THPA, a NT$20 health surcharge is levied on the sale of every pack of cigarettes for use in sponsoring various programs to help people quit smoking. A toll-free hotline, for example, directs would-be non-smokers t o o n e o f Ta i w a n ’s 2 , 1 1 3 o u t p a tient smoking-cessation clinics spread around the island. Smokers can receive eight weeks of subsidized smokingcessation treatment that includes counseling, health examinations, and weekly medical monitoring to guard against relapse. Medications such as nicotine gums and patches are subsidized at NT$250 per week, and double that for low-income individuals. The BHP reports success rates – measured as staying off tobacco for at least six months – of up to 20% for these cessation clinics. Yet pharmaceutical companies note that they have

Many want to stop Despite the high smoking rates, awareness in Taiwan of the dangers of smoking is also high. Tobacco manufacturer’s own data indicates that at least two-thirds of all smokers, especially middle-aged men facing declining health and often family pressure, have a strong desire to quit. For the JTF and government bodies

CELEBERITY POWER — Representations of Jay Chou are on campus to remind students that smoking is deleterious to one’s health. photo : courtesy of john tung foundation

march 2011 • taiwan business topics

3_11_TB.indd 25

2011/3/29 6:17:54 PM

taiwan busines s

not seen significant increases in the use of their nicotine replacement therapy (NRT) products after an initial upsurge in 2009. Novartis, which makes two NRT products, reports that sales in Taiwan of its Nicotinell nicotine patches surged 18% in 2009 to reach US$2 million on the widespread publicity that followed enactment of the amended THPA. Sales then dropped 36% in 2 0 1 0 , h o w e v e r. N o v a r t i s Ta i w a n spokesperson Tasha Tsai attributes the decline in sales partly to waning interest in quitting by smokers who had gotten used to the new law’s stipulations, but also in part to decreased government funding for the cessation clinics. BHP officers explain that tightened standards for smoking-cessation clinics, including mandatory carbon-monoxide blood measurements to ensure that clinic-goers are not smoking, caused a number of clinics to drop out of the program last year. But the BHP says it anticipates renewed growth in the number of smoking-cessation clinics and would-be quitters in 2011. And Novartis expects a 5-10% increase in sales over the coming year, says Tasha Tsai, conditional on government support for the cessation clinics. NRT products are sold not only in clinics but also over-the-counter in pharmacies. So far, Taiwan seems to have avoided the potential downside of NRT use: a wave of former smokers who end up becoming addicted to the therapy itself, at much greater financial cost and also some health risks. The JTF regards such fears as overblown. It notes, for instance, that the relatively low cost of cigarettes in Taiwan deters users from becoming addicted to NRTs. Since regular NRT use would be far more expensive than smoking, consumers will quickly either quit nicotine entirely or simply relapse to smoking. A 36-piece pack of Novartis’s Nicotinell 4-milligram nicotine gum sells for about NT$580, while the same size pack in the lower 2-milligram dosage sells for NT$450. A pack of cigarettes by contrast costs only NT$60-$75. BHP officers say they have not witnessed the phenomenon of NRT

addiction in Taiwan. Pharmaceutical companies also note that as even OTC medications are sold through pharmacies, where trained pharmacists can offer advice and guidance to prospective quitters, NRT use is at least somewhat controlled. The tobacco companies, for their part, have come up with their own answer to how to cater to the wouldbe quitter who recognizes the dangers of smoking but simply can’t break his addiction. At least two U.S.-based tobacco companies see a small but growing market niche for smokeless oral tobacco products, which they suggest are safer than smoking while satisfying an addict’s craving for nicotine. In January 2010, Reynolds American International (part of the same conglomerate as R.J. Reynolds Tobacco), introduced an innovative dissolvable tobacco product into the Taiwan market under the “Revo” brand. Philip Morris International teamed up with Swedish Match to introduce the “General” brand of snus – Swedish snuff, but placed under the upper lip rather than inhaled like Western snuff – to Taiwan six months later. On the face of it, the move to market tobacco as “less harmful” seems counterintuitive. After years of reports of misinformation and deception on the part of the tobacco industry, the public is generally well aware of the dangers of tobacco and mistrustful about any claims made by the tobacco companies. Also, tobacco in any form contains at least 30 known carcinogens, and smokeless tobacco chews and dips are linked to some of the grislier cancers in the gums, jaws, and esophagus. In the United States, packaging for oral tobacco must show specific graphic warnings featuring images of young men with half of their faces removed due to cancers caused by dipping. Tobacco companies now strictly adhere to an official line that essentially concedes that tobacco is deadly and that users should quit. But they also maintain that there is a gradation of risk among tobacco products, that some products – while not safe – might present less

risk to the user than others, and that a migration to less risky alternatives would benefit overall public health. This argument follows the doctrine of “harm reduction” – the effort to decrease the harm caused by a certain behavior instead of trying to eliminate the behavior entirely. Examples include providing clean needles to heroin addicts and condoms to teenagers. For many, harm reduction strategies are morally repugnant. How can facilitating drug addiction or teen sex possibly be a public good? Experts in public health, though, consider the benefits – reducing HIV infections and teen pregnancies – as warranting such measures.

The Swedish model Sweden’s experience with snus lends support to the harm reduction approach for tobacco. According to Philip Morris International, “Swedish snus is heattreated instead of fermented as are some other smokeless tobacco products. This helps explain the low concentrations of harmful components in Swedish snus, including tobacco-specific nitrosamines (TSNs).” TSNs are the primary cancer-causing agents in tobacco. Snus is manufactured under the Swedish Match’s Gothaitek standards that treat it as a food product. Reynolds says its dissolvable tobacco is also manufactured under the same standard. Snus contains nicotine, often far more than cigarettes, and over a quarter of Swedish men use it regularly. Sweden now has one of the lowest smoking rates for men in the developed world – 14%. Roughly 18% of Swedish women are smokers, and while snus has traditionally been a male activity, the habit is growing for women as well. As Physicians for a Smoke-Free Canada notes in their study disputing much of the Swedish experience, some 40% of Swedish men are addicted to tobacco in one form or another, a figure even higher than Taiwan’s. Yet despite this, Sweden’s incidence of cancer and heart disease is among the lowest in the developed world. For the tobacco companies, snus represents a way for people to continue

taiwan business topics • march 2011

3_11_TB.indd 26

2011/3/29 6:17:54 PM

taiwan busines s ORAL ALTERNATIVE — A dissolvable tobacco product for sale at the cigarette stand in a retail store. photo : courtesy of john tung foundation

to use tobacco while suffering fewer ill consequences. In essence, it’s the same deadly drug, only in a safer form – plus eliminating the problem of secondhand smoke. Unsurprisingly, the anti-tobacco movement rejects the argument, and snus remains banned in many countries, including the entire European Union (with the obvious exception of Sweden), Hong Kong, and Singapore. The JTF says the tobacco industry marketed “Light” and “Mild” cigarettes under the same harm-reduction theory, when in fact these cigarettes presented identical cancer and other health risks as regular cigarettes. They say that snus and dissolvable tobaccos are just as dangerous as smoking, and that tobacco companies are deceiving the public with their harm-reduction arguments. On the other hand, there has been evidence that snus and dissolvables do in fact present reduced risk. Britain’s Royal College of Physicians found that for most major health effects, “smoking is many times more dangerous than

smokeless tobacco use,” and that “as a way of using nicotine, the consumption of non-combustible [smokeless] tobacco is on the order of 10-1,000 times less hazardous than smoking, depending on the product.” A report published in the British scientific journal The Lancet notes: “A logical harm reduction approach for the millions of smokers who are unlikely to achieve complete abstinence… is to promote the substitution of tobacco smoking with an alternative, less hazardous means of obtaining nicotine.” This line of reasoning fails to convince either the BHP or JTF. The BHP, for instance, notes that as these products require no spitting, they can be used covertly, thus circumventing the THPA provisions against any indoor or workplace use of tobacco, smoking or oral. In television news broadcasts, the JTF has raised concerns that children might mistake Reynolds’ dissolvable tobacco product “Revo” for candy. The Foundation also says it wants to hold a solid line against Big Tobacco,

allowing for no compromise on its anti-tobacco stance. But does denying the hundreds of thousands of smokers in Taiwan knowledge of alternatives condemn many of them to an early grave? In a written statement, Philip Morris’ country manager Becky Cho says: “We would like to be able to explain what the product is and how it differs from conventional cigarettes” – but it can’t, due to the THPA mandates. Strict marketing curbs prevent all communication of the product to consumers. And with the category of product, oral tobacco, all but unknown in Taiwan, many see little chance of either snus or dissolvables succeeding in this market. Jesse Falowitz, a strategic planner for a marketing consultancy advising international tobacco companies in Taiwan, has concluded that oral tobaccos are not viable here, at least “not any time in the near future.” Says Falowitz: “People in Taiwan are unlikely to go against the grain of society, and these kinds of products would definitely mean going against the grain.” In fact, when Reynolds launched its “Revo” product last January, the only people who actually noticed seemed to be the JTF. The Foundation vehemently attacked the company, comparing it to the notorious opium traders of the 19th century, making the otherwise unknown product the subject of headlines and TV broadcasts around the island. But even this publicity did little to impact sales, which remained at basement levels. Ultimately, Taiwan’s tobacco contest may turn into a war of attrition, hinging on whether the government and its NGO partners can successfully discourage new smokers from starting up, while older smokers die off. Or it may be that the JTF just hasn’t found the right celebrity for its Quit and Win campaign. Jolin Tsai is cute, but perhaps just a bit too youthful to persuade those millions of male smokers in their 30s and 40s. A-Mei, are you available?

march 2011 • taiwan business topics

3_11_TB.indd 27

2011/3/29 6:17:55 PM

law

Enforcing Foreign Litigation and Arbitration Decisions Some pointers on what multinational companies need to know before entering into a contract with a Taiwan party or starting litigation.

BY JOHN EASTWOOD AND EVE CHEN

ith an increasing number of litigation and arbitration cases being brought against Taiwan parties in jurisdictions overseas for commercial, intellectualproperty, tort, and other matters, it’s important to consider how to make future judgments enforceable in Taiwan. Given Taiwan’s unique diplomatic isolation, it can be helpful to get legal advice at a couple of key junctures: before entering into a contract with a Taiwan party and before commencing litigation against a Taiwan party. Not planning ahead and not taking into account the close economic connections between Taiwan and China can severely limit your options later on. When a U.S. company is putting together a contract with a Taiwanese counterpart, it has the opportunity to specify the geographic location (the country or even the city), venue (a specific court or arbitration or mediation organization), law to be applied, and other useful details upfront. The usual textbook approach is to specify one’s own laws and jurisdiction or arbitral tribunals to handle any disputes that may later arise under a contract, on the assumption that overseas courts may give an unfair “home court” advantage to the local company. If things go sour and you need to use the courts to try to urgently stop misbehavior by a contract counterparty, however, it will be discomforting to realize that the U.S. jurisdiction selected to handle “any and all disputes arising under this contract” does not have much power over people sitting 12 or 13 time zones away. It also doesn’t help if you try to take urgent local action in Taiwan, China, or one of the many other countries where Taiwanese companies manufac-

ture goods and the counterparty is able to produce a contract specifying, say, that the “state courts of New York” are the designated venue where the two companies are supposed to resolve their legal differences. Depending on the contract and what might be at stake in a dispute, it can make sense to give up the “home court” advantage and to consider setting the venue for litigation or arbitration in Taiwan. While it may be smart to stay out of relatively undeveloped court systems that have a history of anti-foreigner prejudice, the Taiwan legal system is generally cleaner and more straightforward than those of the PRC and many other jurisdictions in the region – and depending on the goals of the litigation, it offers many advantages with regards to speed. Unlike most American courts, the Taiwan legal system does not entail extensive pre-trial review and discovery of documents, which can save a lot of time and money. On the other hand, the Taiwan system tends to award lower damages, and the lesser examination of evidence also means that it can be harder to build a case for compensation for past harm. Because of the extensive economic contacts between Taiwan and other manufacturing centers in Southeast Asia and the PRC, it’s important not to limit jurisdiction and venue clauses so tightly that you cannot take action. Companies entering into contracts with Taiwan parties are well advised to keep in mind and keep straight the tangled webs of manufacturing, marketing, and other entities that are often used as part of Greater China business operations. Sometimes these serve legitimate tax or administrative functions, but they can also

taiwan business topics • march 2011

3_11_law.indd 28

2011/3/29 7:07:09 PM

law

be used to seek to avoid litigation liability. We have frequently come across companies with a mix of entities with highly similar Chinese and Romanized names – and cases where contracts were signed by the “wrong” entity. Aside from knowing who’s who in a contract, it’s important to be aware that when criminal activity is afoot, overly restrictive jurisdiction clauses may be waved about by your contract counterparty’s manufacturing plants in Southeast Asia or China as a way of getting rid of police or other government officials you’ve mobilized. Many local officials will not be very helpful if they think they can avoid lots of work by pointing to a contract you signed that specified “the exclusive jurisdiction of the state courts of New York for any and all disputes,” in any contractual matter where dispute might need injunctive-type or emergency relief (particularly where significant trade secrets or other intellectual properties are involved). It will therefore often be advisable to keep open the option, at the foreign company’s sole election, of using the criminal, civil, and administrative laws of any jurisdiction worldwide necessary to protect its intellectual property or confidential information, and to reserve the foreign jurisdiction for the truly commercial issues of quality, on-time delivery, improper packaging, and payment.

Pre-litigation considerations The Taiwan Code of Civil Procedure (CCP) allows for the enforcement of “irrevocable” foreign judgments (i.e., final judgments) but states in Article 402 that a judgment will not be valid if: 1) the foreign court has no jurisdiction under Taiwan law; 2) the losing party has not “responded” to the action – except where service of process is accomplished in that foreign country or served via judicial assistance in Taiwan; 3) the judgment or the procedure is incompatible with public order or good morals; or 4) there is no reciprocal recognition from the foreign court for Taiwan judgments. Practically speaking, the Taiwan courts do not find many jurisdictional or public order/good morals problems – the lion’s share of problems arise in evaluating service of process and reciprocity.

Service of process (the delivery of the relevant court documents to the defendant) matters, particularly if it is likely that a Taiwan party will not “respond” in the foreign court. Once a Taiwan defendant has “responded,” the foreign plaintiff is in good shape and can proceed without worrying about following the usual Taiwanese service method via the court system. But precisely what constitutes “response” seems not to have yet been clarified by any Taiwan court opinions, and only a few legal scholars have ventured to put thoughts on paper, briefly suggesting that it should be interpreted to include “appearances” (e.g., the filing of pleadings or the actual physical presence of a Taiwan party’s counsel in a courtroom) even for the purpose of arguing jurisdictional issues. In a trade-secrets case in the Western District of New York federal district court a few years back, a Taiwanese manufacturer accused of stealing some highly confidential machine blueprints from a major U.S. company was thought likely to be a no-show in court. The Taiwanese company had retained counsel in New York, but all pre-trial discussions had indicated that the U.S. company might have to go to the trouble and expense of translating all the complaint documents into Chinese and sending them through the U.S. State Department to the Taiwan government in a procedure called “judicial assistance” (essentially the U.S. judge asks his Taiwanese judge counterparts at the Judicial Yuan to assist). The night before the first hearing, however, the Taiwanese company faxed to the court a one-page document from one of the company’s directors that in effect stated: “You have no jurisdiction over our company. And we didn’t steal anything, either!” The company thus unwittingly filed arguments both on jurisdictional matters and on the merits to the U.S. court and opened itself up to future enforcement within Taiwan. As foreign parties cannot always count on a Taiwan company’s representatives being available to accept service of process in the country where the litigation will be brought, we often recommend using a two-pronged method in which documents are served upon the company in Taiwan first by registered mail or personal delivery (with affidavit of service), followed by service using the judicial assistance procedure if the party does not make an appearance in court. Some expla-

march 2011 • taiwan business topics

3_11_law.indd 29

2011/3/29 7:07:10 PM

law

nation to the court may be necessary, as some American judges may be hesitant to stop proceedings already underway just to move forward with a judicial assistance request for service of process. Reciprocity then becomes the next major hurdle. Before launching into overseas litigation against a Taiwan party, it’s often a good idea to research whether that jurisdiction has a particularly favorable or unfavorable history with regard to recognizing Taiwan court decisions. The United States has a long track record of such favorable precedents. However, even countries without history on their side can put together alternative documentation and/or expert opinions showing that their courts should have no problems with accepting and enforcing a valid Taiwan decision. If a situation involves possible eventual enforcement into China, it is also worth keeping in mind that the PRC does not have a good record yet for enforcement of U.S. decisions, although arbitration might be a useful option.

Pre-arbitration considerations Owing to the realities of the “one China” policy situation, Taiwan is not a member of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the “New York Convention”), but Taiwan’s Arbitration Law lays out fairly workable rules for enforcement of foreign arbitral awards into Taiwan. One useful factor for companies doing business in cross-Strait situations is that while Taiwan is not a member of the New York Convention, the PRC is. The Taiwan Arbitration Law’s Article 49 stipulates similar requirements for foreign arbitral awards to the ones that CCP Article 402 has for litigation decisions. They allow for dismissal of a request for enforcement where: 1) the recognition or enforcement of the arbitral award is contrary to public order or good morals; 2) the dispute is not arbitrable under Taiwan laws; or 3) the country where the arbitral award is made or whose laws govern the arbitral award does not recognize Taiwan’s arbitral awards. In the course of our own enforcement of arbitral decisions into Taiwan, the procedure has been fairly straightforward and significantly easier on the issue of default judgments and service of process than the requirements of the CCP for foreign court judgments. Because arbitration notices are normally handled via courier services, registered mail, personal delivery, or similar commercial means, for example, the use of “judicial assistance”-style procedures is not necessary for service of foreign arbitration documents. Taiwan courts will normally look at whether the documents went to the right person, were delivered to the correct address, and whether the delivery method was among those allowed by the arbitration institution handling the dispute. Problems commonly arise when the Taiwan counterparties’ Chinese names are unknown or have changed, where the Taiwan counterparty has moved addresses, or when the counterparty is given the opportunity to refuse to accept inter-

national courier deliveries. It can be useful in contracts with Taiwan parties to ensure that the section covering the means for “notice” between the parties requires the parties to keep such address information updated and to include the “notice” provision among the items that shall be deemed to survive the termination of the agreement. It can be tempting to speed forward into arbitration where you know the other party is being unresponsive, but it can hurt later enforcement of the decision not to take a step back and make sure that documents have in fact been delivered. It can also be helpful to think creatively in a challenging delivery situation so that an otherwise “international” package looks more innocently “local.” With sufficient background information, quality investigation firms can often locate a Taiwan counterparty’s Chinese name and registered/ domicile address, at which point delivery can be accomplished through a variety of means. Reciprocity is normally not hard to establish, although it can be worth running checks to ensure that there is no obvious negative history. Taiwan is not a major player in international arbitration, and so there is not much history of foreign countries’ enforcement of Taiwanese arbitral decisions. Again, as with litigation, there is a good past record of enforcement for decisions from the United States, and in many other situations an opinion from a suitable court official or expert academic will go a long way in ensuring that a particular jurisdiction will not block enforcement of a Taiwanese arbitral decision.

Conclusions Before entering into a contract with a Taiwan-based company or commencing overseas litigation or arbitration against a Taiwan-based party, it would be prudent to consult with counsel experienced in handling and advising on these issues. If injunctive relief in Taiwan is important, it may be a good idea to be ready to take action locally or to reserve those rights if the matter involves a contract. If legal action against a Taiwan party in an overseas jurisdiction is necessary, there are still many things that can be done to speed up service of process and to lay the groundwork for an enforceable foreign decision. Once overseas litigation or arbitration is underway, there are also many ways by which counsel can help provide litigation support, including locating defendant assets, providing legal opinions, working with investigators, and even monitoring relevant Chinese-language media.

— John Eastwood (john.eastwood@eigerlaw.com) and Eve Chen (eve.chen@eigerlaw.com) are attorneys with extensive experience counseling clients on litigation matters and the enforcement of foreign arbitral and litigation awards.

taiwan business topics • march 2011

3_11_law.indd 30

2011/3/29 7:07:10 PM

books

Can the West Guide How China Develops? BY OWAIN MCKIMM

020: less than 10 years away, and yet 10 years is a very long time in business – enough for a nation to establish itself as a true world power, but also more than enough for a nascent economy to collapse under the weight of its own promise. These are the possibilities that Michael A. Santoro, professor of business ethics at Rutgers University, weighs in his most recent book. Academic, yet at the same time personal, this analysis of the problems facing China – and perhaps more importantly, the West’s relationship with the Eastern juggernaut over the coming decade – tries to look past the longstanding international disapproval over Tiananmen and the eerie discomfort following the triumph of the 2008 Olympics, to a future where China and the West celebrate together a history of mutual economic expansion. Easier said than done, according to Santoro. This book expertly juggles a China that would happily gloss over an affront to its pride by French pro-Tibet reactionaries in the run-up to the Olympics because of the deeply invested French millions in the Carrefour chain (and its 40,000 Chinese employees), but is increasingly following a dangerously confrontational stance on “internal” i s s u e s s u c h a s Ta i w a n i n f e a r o f appearing subservient to foreign powers in the eyes of its own people. Though sometimes carried away with the economic statistics and acronyms that appear with disarming frequency, Santoro redeems himself by turning his attention to the true voice of China: its billion-strong population.

China 2020: How Western Business Can - and Should - Influence Social and Political Change in the Coming Decade By Michael A. Santoro. Cornell University Press, Ithaca, NY, 2009. 162 pages. ISBN: 978-0801446955

Interviews with members of China’s indispensible migrant work force, who provide a massive contingent of factory and construction workers, as well as informative chapters on drug manufacturing and on the Chinese people’s obsession with using the internet (almost as large as the government’s obsession with censoring it) infuse this book with insight into China’s fragile internal politics and its inevitable influence on the national business agenda. Santoro’s description of a country that has spent 30 years industrializing and 10 of those as part of the World

Trade Organization depicts a society well into the throes of a shakeup of its core economic principles, as it slowly adopts such staple Western ideas as workers’ rights and a minimum wage. These new institutions may deprive China of its past status as cheap labor capital of the world in favor of neighboring countries like Vietnam, but promise to empower its vast population with an increasingly middle class agenda with the potential to change the shape of the world economy as we know it. Santoro envisages two possibilities for the China of 2020: one, an increasingly accountable government ruling over a stable workplace amid peacefulness and prosperity; the other, a rebellious mass of mistreated workers and increasingly fervent nationalists who blame the failure of their nation on the Western “exploiters” who promised so much in 2010. Santoro’s message is abundantly clear: that China depends upon the West more than the West realizes, to guide it morally through an economic and political transition that is the product of their mutual ambition. If the process fails, Western businessmen, who have the power to “affect the pace and direction of social and political change in China,” must shoulder some of the blame for fudging such a golden opportunity. Unfortunately, Santoro is rather vague on just how this can be accomplished. What he ultimately comes up with – and even he himself seems aware of its naiveté – is a kind of benevolent “tough love,” tactfully wooing China with an uncompromising, yet attractive set of business standards.

march 2011 • taiwan business topics

3_11_bookindd 31

2011/3/29 6:14:12 PM

books

Ah-Bian Wasn’t the first “Troublemaker” BY don shapiro

at Bellocchi started his government career in 1955 as member of the Diplomatic Courier Service, hand-carrying documents to embassies and consulates in the era before secure wireless communications. He ended it as the Washingtonbased chairman of the American Institute in Taiwan (yes, we know AIT is a “non-official” organization) in 1995, after four-and-a-half years in the post. The author states in the introduction that this book, which was selfpublished, “is written primarily for my family and friends.” But it suffers badly from a lack of professional editing and proofreading, leading not only to numerous typos but even the frequent duplication of material from page to page. That is unfortunate, because much of what Bellocchi has to say would be of interest to anyone closely following U.S.-Taiwan relations. His time in the AIT chairmanship was a period of significant change in Taiwan’s political system, as Lee Tenghui consolidated power within the ruling Kuomintang. Among the events that occurred in that period were the forced retirement of the elder, mainland-elected legislators leading to the emergence of the Legislative Yuan as a political force; the dismantling of the feared internal-security organ, the Taiwan Garrison Command; revision of the criminal code to base treason on action rather than intention, thus legalizing the advocacy of Taiwan independence; Lee’s controversial trip to the United States to speak at Cornell University; the growing strength of the opposition Democratic Progressive Party; and the preparations for the first direct presidential election in 1996. As much as Chen Shui-bian came to be reviled as a “troublemaker” by the George W. Bush administration for taking what were seen as provoca-

The Path to Taiwan’s Democracy: Memories of an American Diplomat By Nat H. Bellocchi Bellocchi & Co., 2010. 213 pages ISBN-10: 145288384X; ISBN-13: 9781452883847

tive actions toward Beijing, this book is a reminder that the same adjective was also liberally applied to Lee Tenghui during the Clinton years, when – it is now often forgotten – WashingtonBeijing relations were also frequently strained. The State Department fought bitterly to deny Lee a visa to go to Cornell, for example, and resented it deeply when the White House gave in under Congressional and media pressure. According to Bellocchi, from the time Lee took office he had been dismissed in Washington as a “closet independence supporter,” not to be trusted. And Taiwan’s efforts to promote democracy, in his view, were too often viewed by U.S. officials as creating problems in U.S. relations with Beijing, rather than as something to be welcomed and encouraged. That perception led to many “lost opportunities” in strengthening American

ties with Taiwan and helping it play a greater role in the international arena. In a sentiment he expressed in 1993 but undoubtedly still agrees with, Bellocchi wrote that “in my judgment it is possible to pursue our broad objectives in our relationship with Taiwan more vigorously without detriment to the process of strengthening our relations with the PRC.” Even in the economic sphere, the bilateral relationship was not always smooth going. Taiwan took umbrage when it was singled out for sanctions under the Pelly Amendment (protecting endangered species) for insufficient action to block trade in rhinoceros horn and tiger bone. And Bellocchi refers several times to the “IPR crisis” when the Legislative Yuan refused to approve changes to the Copyright Law that the Taiwan executive branch had already promised the United States to undertake (shades of the current beefimport dispute). In his closing chapter, Bellocchi notes that “What we have witnessed is a Taiwan that has gone through a peaceful revolution and is very substantially different than the Taiwan that existed when the U.S. shaped its policies toward the island in 1979…It took some time before the PRC and the U.S., each in its own way, have come to recognize the changed situation. Neither has developed an effective strategy to accommodate it, however.” The U.S. side, he notes, has long expected Taiwan to maintain a low profile and avoid raising tensions with the PRC. “‘Low profile,’ however, and ‘democracy’ are practically a contradiction in terms,” he observes. “With the now active oversight function of the Legislative Yuan and the open media that ferrets out even the most sensitive of issues, low profile is no longer possible.”

taiwan business topics • march 2011

3_11_bookindd 32

2011/3/29 6:14:15 PM

Cooling Down the Overheating

INDUSTRY F

CUS

A Report on the Property Market march 2011 â&#x20AC;˘ taiwan business topics

3_2011_IF.indd 33

2011/3/30 8:57:24 AM

INDUSTRY F

CUS

A Report on the Property Market

Preventing a Major Bubble Prices in the Taipei area have been soaring to the influx of overseas money and anticipation of increased investment from China. BY DON SHAPIRO

IN THIS SURVEY

• Preventing a Major Bubble

p30

• Urban Renewal: Time for Take-off?

p36

• Growing Investment in Shopping Malls

p39

• Business Centers Provide Flexibility and Convenience

p42

urrently the hot topic in the real estate market is the government’s plan to include certain property transactions within the provisions of the proposed “luxury tax.” Under the draft recently sent to the legislature by the Executive Yuan, a 10% tax would be imposed on residential and commercial property (other than for the owner’s self-use) if it is resold within two years of purchase. If the sale comes within one year of the initial purchase, the tax rate would be an even higher 15% of the traded value. The motivation is to curb speculation, cooling off what nearly everyone agrees has been an overheated property market, especially in the greater Taipei area. Housing prices have risen to a level that is beyond the ability of most younger home-buyers to afford, or that commits them to so many decades of paying off mortgages that they have no chance to start saving for retirement. But while sympathizing with the social objectives of the government policy, members of the real estate industry have some concerns about the methodology and likely efficacy of

the plan. One of the chief concerns is the inclusion in its scope of commercial property. “If we implement this, Taiwan will be the only market in the world that has this kind of tax on the commercial market,” says Tony Chao, Taiwan Country Head for Jones Lang LaSalle, the global real estate services company. He views the measure as having a potential negative impact for the Taiwan economy, discouraging some investors from entering the market and thereby dampening economic development. Although such wouldbe investors may have no intention of selling within a year or two, they still must consider the big tax bite they would incur if forced to sell early due to unforeseen financial difficulties or other emergencies. Chao notes that similar initiatives taken or planned in Singapore, Hong Kong, and China to make housing more affordable do not extend to commercial property. At CB Richard Ellis, another leading real estate services company, Kristy Hwang, senior director for Agency Services & Investment Properties, questions the fairness of imposing a flat transaction tax, rather than

taiwan business topics • march 2011

3_2011_IF.indd 34

2011/3/30 8:57:28 AM

A Report on the Property Market

INDUSTRY F

CUS

photo : jones lang lasalle

tying the tax to the amount of capital gains. Again, the concern is the penalization of owners who need to sell because of some type of emergency. Opinions differ as to how effective the proposed tax may be in bringing down prices. “In what is a very liquid market, not highly indebted, it’ll probably slow the market down for a while, but I doubt that it’ll cause the price to drop,” says Peter Crowhurst, senior vice president of the Taiwan branch of ING Real Estate Investment Management. “We’re already seeing some clients taking a wait and see attitude, pulling their properties off the market,” adds Kristy Hwang. She foresees a drop in prices of 10-20% in portions of New Taipei City, such as the Xinzhuang, Linkou, and Danshui districts, where prices had approximately doubled within the past year. “But in prime locations in Taipei City, we might not even see any transactions, because owners who originally were thinking of selling will put it on hold.” Tony Chao suggests that a better way to attack the price problem would be to meet growing demand with more supply, such as through more efficient urban renewal programs [see the next

article in this section] and more, higherquality public housing. He also urges greater transparency in market data to ensure that genuine transaction prices get reported. Several factors seem to be behind the recent spike in property levels in the greater Taipei area. One has been the heavy buying activity by overseas Chinese, prompted largely by the severely depressed real estate market in the United States and elsewhere, as well as the reduction in Taiwan’s inheritance tax rate from 50% to 10%. “You might as well put your money somewhere where there’s a capital appreciation,” says Hwang. “So a lot of funds that were placed overseas are coming back to this market. That sector accounts for about 50% of the buying force for residential property.”

The China factor Another factor, affecting both the residential and commercial markets, is the anticipation of increased buying activity by mainland Chinese investors as cross-Strait regulations continue to be liberalized. Already a small but promising flow of property investment has materialized as Chinese companies start to enter

this market. Tony Chao notes that in the less than two years since Taiwan opened the door to specified categories of Chinese investors, a total of 107 mainland corporations have registered here. But they are mainly starting out very conservatively, leasing small spaces of 50-60 pings – though in prime locations – while looking forward to expanding their offices as their business grows. “Every province, every bank that can step foot into Taiwan wants a small office to start with,” says Kristy Hwang. The Bank of China and Bank of Communications have already set up representative offices, and Jones Lang LaSalle is working with the Chinese Merchant Bank and China Construction Bank to help them find sites. Also prominent among the early arrivals are Chinese airlines serving cross-Strait routes, as well as high-tech and green-energyrelated companies. “Overall we see strong interest from China – a lot of people are coming over and looking,” says Tony Chao. “But not many transactions are going to materialize immediately because there are still quite a few regulatory or political constraints.” With an eye to opportunities a bit further the road when additional

march 2011 • taiwan business topics

3_2011_IF.indd 35

2011/3/30 8:57:29 AM

INDUSTRY F

CUS

A Report on the Property Market

deregulation has taken place, for example, one Chinese developer has been scouting potential manufacturing sites in industrial parks, says Chao. Another mainland developer is investigating a project to build vacation homes for wealthy Chinese, especially those from northern provinces seeking a warmer climate in the winter months and perhaps relief from asthma and arthritis. Under current regulations, a visiting Chinese may stay in Taiwan for a maximum of four months in a year. Also appealing is the chance to buy a house outright and be able to pass it on to one’s heirs, whereas property holdings in China are limited to 50 or 60 years. The superior medical service in Taiwan is another draw, in addition to the common language and culture. Also driving the market is the return of profits that local companies have earned from their operations across the Strait – what ING’s Crowhurst refers to as “Taiwanese money made in China, spent in Taiwan.” Multinationals are also showing a renewed interest in the market following last year’s negotiation of the cross-Strait Economic Cooperation Framework Agreement (ECFA), according to a Jones Lang LaSalle report. Decathlon of France, for instance, the world’s second largest sporting-goods retail chain, reportedly is preparing to open 15 stores in Taiwan over the next

few years, with an operational headquarters in Taichung, near where most of the island’s sporting goods manufacturers are located. Costco is also reportedly ready to undertake further expansion. CB Richard Ellis reports that it is working with several international brands, such as U.S. clothing retailer Forever 21 as well as some well-established Japanese and Australian companies, to enter or enlarge their presence in Taiwan. In many cases, the motivation is the recent surge in Taiwan’s tourism, especially visitors from China. “With a population of 23 million, Taiwan’s market depth is a bit shallow,” says Kristy Hwang. “But now if Taiwan can attract 5 million more people a year from the PRC, on top of the original 3 million visitors, that increases the potential consumption population by one-third, which is quite dramatic.” International and domestic investors are also reacting to the pick-up in the Taiwan economy, which rose by double digits last year and is expected to have another good year in 2011 (though with slower growth than 2010). Commercial transactions for class-A office buildings tend to be a leading indicator, coming ahead of economic recovery as investors buy in anticipation of future demand. But the leasing market generally follows recovery by half a year to a year, says Tony Chao, since companies wait to sign

Urban Renewal: Time for Take-off? Progress until now has been slow, but there are signs that government may be becoming more serious about promoting redevelopment. BY PHILIP LIU

contracts until they definitely need the space. That is why sales prices have risen steeply, but rental prices have remained flat, bringing yields down below 3%. Jones Lang LaSalle foresees a rise in rent for Taipei’s class-A offices this year of 5-10%, however, since so little new supply has been coming onto the market. No major new buildings are scheduled to open this year or next, and last year there were only two – Shin Kong’s A-12 building in the XinYi District and the Taipei Financial Center on the corner of Nanjing East and DunHua North Roads. In terms of the future of the market, Chao says he is encouraged by the unprecedented interest being shown by international developers, as opposed to pure investors, in some current projects. To help drum up that interest, Taipei Mayor Hau Lung-bin recently led delegations to Singapore and Hong Kong to make presentations regarding several prime plots of city-owned land that will be tendered in the second half of this year for development. These include a 17,708-square-meter site that encompasses the A15, A18, and A20 plots in the XinYi District, available for hotel, office, retail, and other non-residential uses with a targeted investment amount of about US$920 million. The nearby A25 parcel of 20,311 square meters for similar use carries a target investment amount of about US$430 million.

as the time finally come for widespread urban renewal activity in greater Taipei and other cities with large quantities of old, low-quality housing? Optimists point to signs that construction companies are beginning to pay more attention to the opportunities due to the increasing scarcity of vacant plots in urban areas and the lower development costs compared with other projects. The trend started with small and medium-sized firms, but now seems to be spreading to larger players. In addition, government at both the central and municipal levels seems to have new awareness of the importance of urban

taiwan business topics • march 2011

3_2011_IF.indd 36

2011/3/30 8:57:30 AM

A Report on the Property Market

redevelopment in lowering housing costs, upgrading safety against fires and earthquakes, and improving the quality and attractiveness of city life. But other observers note the continuing slow pace of such projects in recent years. Last year the Taipei City Government’s Urban Redevelopment Office approved only 14 new cases, even less than the already low 18 cases per year approved in 2008 and 2009. The major obstacle to urban renewal in Taiwan is the complicated property ownership structure, where nearly all apartment units are condominiums. Under the law, urban renewal projects can proceed once the developer has gained agreement from at least two-thirds of the individual owners, representing three-quarters of the total land area. Gaining that agreement can be a long and difficult process. But real estate industry professionals say that even when the required numbers are met, government officials tend to be reluctant to step in and enforce the law – apparently fearing unfavorable media publicity if the authorities compel hold-outs to abide by their neighbors’ consensus and move out of their homes (albeit to rent-free temporary accommodations provided by the developer). Typically it takes at least eight years to negotiate agreements with the necessary number of owners, tear down the building, and start construction. “You can’t call eight years effective urban renewal,” says Kristy Hwang, senior director for agency services and investment properties at CB Richard Ellis Taiwan. She adds that in one case her company was involved in, it took the investor a full 18 years from the start of negotiations to groundbreaking. “Taipei is a lovely setting, but it’s full of ugly buildings put up 30 or 40 years ago to meet the demand from the rush of migrants flocking to Taipei from other parts of Taiwan,” says Tony Chao, Taiwan Country Head for Jones Lang LaSalle. He also urges government to make every effort to accelerate the urban renewal process. There are some hopeful signs that government is becoming more responsive. Taipei Mayor Hau Lung-bin notes that

many elderly residents of old buildings have urged him to carry out reconstruction projects so that they can enjoy a better life while remaining among their neighbors in the environment they have become accustomed to. During his reelection campaign late last year, Hau therefore listed urban renewal as one of the major planks in his platform, including cooperation with New Taipei City (formerly Taipei County) to rebuild apartment buildings on both sides of the Danshui River. The Taipei City government is particularly targeting four- or five-story apartment buildings built 30 or more years ago. Taipei is estimated to have 140,000 such buildings, which suffer from lack of parking space, inadequate fire-prevention and fire-fighting facilities, and the absence of elevators. Given Taiwan’s rapidly ageing population, the lack of elevators is a particularly serious problem. For old buildings in this category, the city government last October raised the floor-area ratio for urban renewal projects to twice the ordinary level, assuring residents even more space in the reconstructed building. Projects must occupy a site of at least 2,000 square meters to qualify for the incentive. The city government also encourages owners of buildings of historic value to donate them to the city government after renovation and to solicit private parties to manage them as cultural facilities. In return, the owners are granted a certain right of floor area space, which can be sold to the developers of realty projects in other locations in what is known as the transfer of development rights. There are now seven such urban regeneration stations (URS) in Taipei, including three buildings on DiHua Street. Ding Yuh-chyurn, Taipei’s commissioner of urban development, stresses that urban renewal is essential to overhaul the city’s landscape and to promote its internationalization. The pursuit of urban renewal is also a major policy of the central government. On November 25 last year, the Executive Yuan passed an “Action Plan for the Urban Renewal Industry,” which aims at spurring the reconstruc-

INDUSTRY F

CUS

tion or renovation of old buildings by means of subsidies and the incentive of expanding the floor-area ratio. The plan calls for appropriating NT$18.4 billion (US$634 million) over a four-year period starting in 2011, mainly to help subsidize the reconstruction of houses over 30 years old or the renovation of houses over 20 years old. Renovation includes exterior rejuvenation, green beautification, and the installation of barrier-free facilities and elevators. Implementing the plan will also provide some economic stimulus. According to Ministry of Interior (MOI) statistics, Taiwan has 4.8 million buildings that are over 20 years old, and another 3 million over 30 years old. Reconstruction of those 3 million buildings would entail expenditures of NT$7,267 billion (US$251 billion), or NT$242.2 billion (US$8.4 billion) annually over a 30-year period. Under the plan, buildings more than 20 years old can be rebuilt at the same floor-area ratio, even if it is higher than the existing legal standards, and the installation of elevators can be excluded from the tally of floorarea ratio. A 20% markup in floor area ratio will be provided to green buildings or buildings featuring antiearthquake functions, the adoption of green materials, a barrier-free environment, or energy- or water-conservation measures. To qualify, the urban renewable projects must reach a minimum scale, which in Taipei City is set at 2,000 square meters for the base area. Because of these handsome incentives, many people have rushed to buy older apartment-building units for investment purposes in recent years, contributing to a rise in prices. Prices in such buildings in downtown Taipei have surpassed the prices of high-rise residential buildings of the same age, and are even comparable to the prices of new residential buildings. The average transaction price for an apartment in a walkup building in the XinYi District has hit NT$640,000 (US$22,069) per ping, compared with NT$540,000 (US$18,620) for high-rise residential buildings of the same age in the district.

march 2011 • taiwan business topics

3_2011_IF.indd 37

2011/3/30 8:57:30 AM

INDUSTRY F

CUS

A Report on the Property Market

Photo : cna

Successful examples One of the most successful development companies in urban renewal is Quankun Construction, which plans to initiate a project on GuiYang Street, near the Presidential Office Building, in the fourth quarter. The plan calls for construction of a 19-story building on a half-hectare plot of land, for which the company anticipates total sales of NT$3.5 billion (US$121 million). The project involves 130 households, with complicated land-rights registration, but the company managed to iron out the differences among the property-owners in just three and a half years – less than half the average length of time in Taiwan for such negotiations – a testament to its experience in the urban renewal field. Quankun now has 10 mature urban renewal projects, all in greater Taipei, with total projected sales of NT$20 billion (US$690 million). Company CEO Liao Hsueh-hsin notes that Quankun decided to get involved in urban renewal in 2005, seeing that it lacked the financial wherewithal to compete with insurance firms and large construction companies in bidding for vacant plots of land released by

the National Property Administration under the Ministry of Finance. Gaining agreement from the numerous landlords proved to be a formidable task, complicated by the penchant of friends and relatives to offer opinions. In addition, many households have made illegal additions to their homes and are therefore concerned that agreeing to the reconstruction terms will leave them with less living space than before. To win the support of residents, the company emulates Japanese practice by setting up an office on the site. Its representatives make themselves available to chat with residents at any time, so as to familiarize them with the spirit of urban renewal and the company’s management concepts. Liao says urban renewal will inevitably become a major trend in the market, in that it is the optimal channel for small and medium-sized construction firms to obtain land for development projects, while lowering their risk and need for capital. Another contractor, Rich Development, formerly an active participant in bids for vacant land, last year reversed its policy due to the sky-high land prices and is now emphasizing urban renewal. It

now has several projects in hand in some attractive locations in Taipei City. In view of the success of the small and medium-scale players, large construction companies – including Farglory, Huaku, Hiyes, and Hiwealth – have followed suit. Huaku currently has seven to eight urban renewal projects underway, including one on DunHua North Road opposite the Taipei Arena. Farglory has formed a 20-person task force to promote its urban renewal business. Many established companies with realty holdings in downtown areas also undertake urban renewal projects to cash in on their tremendous profit potential. China Electric Manufacturing Corp., for instance, has decided to raze its headquarters building on ZhongXiao East Road in order to put up a new structure with over 1,000 pings (36,000 square feet) of floor space. Three major commercial banks – First, Chang Hwa, and Hua Nan – are also planning (or already undertaking) reconstruction of old office buildings in Taipei under the auspices of the urban renewal program. Chang Hwa, for instance, plans to dismantle its building on ChongQing South Road, covering an area of 190 pings, in expectation of earning over

taiwan business topics • march 2011

3_2011_IF.indd 38

2011/3/30 3:47:49 PM

A Report on the Property Market

To help provide the urban renewal projects with needed financing, the Land Bank of Taiwan has decided to establish an urban renewal investment trust company in the first half this year. It aims to raise a trust fund of NT$3 billion (US$103.4 million) within one year for investing in urban renewal projects. Even the government is getting involved in such projects. The Executive Yuan is scheduled to solicit investors via public bidding for six major governmentsponsored projects on the sites of existing public facilities. These include the Nangang train yard in Taipei City, Keelung train station, Huakuang community in

Taipei City, Hsinchu railway station, Chiayi railway station, and Kaohsiung Harbor railway station. The Kaohsiung Harbor station, for instance, covers 15.5 hectares, including 3.5 hectares reserved for a projected railway park. The remaining 12 hectares are to be developed in four stages, with the government soliciting private investors through public bidding for 50-year surface rights. The first-phase project covers 1.82 hectares and entails projected investment of NT$8.14 billion (US$280 million), including NT$141 million (US$4.7 million) from the government and NT$8 billion (US$276 million) from

INDUSTRY F

CUS

the private sector. The project will feature such facilities as department stores, tourist hotels, and theme restaurants. Many developers have expressed strong interest in the Nangang train yard project, since it is situated at the convergence of the Taipei MRT system, conventional railway, and high-speed rail. The MOI’s Construction and Planning Agency plans to hold a public tender for the project in June. It calls for total investment of NT$48.5 billion (US$1.7 billion), mainly for the development of a composite business center that will be integrated with nearby cultural, software, and exhibition centers.

Growing Investment in Shopping Malls Besides some major new projects, substantial capital is being put into the renovation of existing facilities.

BY PHILIP LIU

long with the gradual improvement in the domestic economy, a wave of new investment interest in shopping malls has been taking place, giving the sector a shot in the arm after years of languid development since its inception on the island 12 years ago. The most noteworthy new project is E-DA World, which started operations last December in Kaohsiung City with much fanfare. With a sprawling area spanning 90 hectares, it is a multifunction facility that contains not only a shopping center but hotels, an amusement park, 1,800-seat theater, and an exhibition ground capable of accommodating 700 booths. The developer is the E-United Group, a leading firm in the steel industry that made available a huge capital outlay of NT$30 billion (US$1 billion) for the project. The theater alone cost NT$1 billion to construct.

With 58,000 pings (over 2 million square feet) of floor space, the shopping center is positioned as an “outlet mall,” where branded manufacturers sell their stock directly to the public at discount. Some 300 brands, including Gucci and Valentino, have set up boutiques in the shopping center, which is also furnished with such entertainment facilities as movie theaters and an ice skating rink, basketball court, and Ferris wheel. In addition, an 8,600-ping public square provides a venue for various performances and events, especially on holidays. E-United Group chairman Lin I-shou describes E-DA World as a miniature city, designed to meet the various needs of tourists from both Taiwan and China. According to the group’s projections, E-DA World will attract 500,000 visitors monthly and register revenue of NT$5 billion (US$172 million) this year and potentially double that within three years.

march 2011 • taiwan business topics

3_2011_IF.indd 39

2011/3/30 8:57:31 AM

INDUSTRY F

CUS

A Report on the Property Market

photo : tourism bureau

In various other locations around the island, substantial investment has gone into the modernization and improvement of existing shopping malls to give them a new lease on life. Taimall in Taoyuan County’s Nankan area, for example, was relaunched in mid-December last year after a 20-month renovation at a cost of NT$1.5 billion (US$52 million). Renovation of the facility, Taiwan’s first shopping center, entailed an extensive overhaul in the layout of most floors and the introduction of more international brands. The project, carried out in response to changes in the demographic structure and consumption behavior of local consumers, followed the purchase of the mall two years ago by GIC, an investment firm owned by the Singaporean government. GIC dispatched a consulting team from Singapore to oversee the work. Kuo Ta-chun, president of Taimall, projects that the renovated facility will achieve records sales of NT$3.6 billion (US$120 million) this year. He points to the fast-growing population in Taoyuan, the enhancement of purchasing power and living standards in the area, and the increase in foreign tourists, notably those from mainland China. In another renovation project, the Windance Shopping Center in Hsinchu City is preparing to resume operations after having been idled for over three years. The Far Eastern Group acquired the property last May for NT$5.8 billion (US$200 million), and the renovation is being executed by the group’s Pacific Sogo Department Store at a cost of more than NT$1 billion. The facility is scheduled to reopen in September this year. General Manager Lee Kuang-jung notes that the new Win-

dance will focus not only on shopping but also on entertainment (including ice skating, bowling, baseball batting cages, and an amusement park) and dining. Entertainment and dining are expected to generate 40% of total sales. Far Eastern has won full support for the project from the Hsinchu City government, which has pledged to improve the roads leading to the site and to provide more parking spaces. When Windance opened in July 2003 with 10,000 pings of floor space, it boasted that it was the largest shopping center in Southeast Asia, but it was closed in late 2007 after running up a huge deficit. The reopening is expected to revitalize the neighboring commercial district near the Hsinchu railway station, where store-space rentals plunged 30-40% in the wake of its closure. In Taichung City, after a year-long renovation and a soft opening last December, Taichung Central Mall is scheduled for a grand re-opening on April 22 under a new name: “Mode Mall.” The renovation work was orchestrated by ING Real Estate Investment Management. “The leasing results are looking very encouraging, with over 90% of the space committed,” notes Peter J. Crowhurst, Senior Vice President of the company’s Taiwan branch. “We took an underperforming asset and created a performing asset by reorganizing the management, improving the tenancy, getting getter activity over the property, and spending a considerable amount of money on renovation to bring it to a quality standard that people would like to go to. The tenants include many wellknown international brands, such as Carrefour, McDonald’s,

taiwan business topics • march 2011

3_2011_IF.indd 40

2011/3/30 8:57:33 AM

A Report on the Property Market

Starbucks, Sisley, Levi’s, ViewShow cinema, and a balanced selection of restaurants.” Prior to acquiring the mall, ING conducted a thorough demographic study of the neighborhood and consequently positioned the shopping center to target the middle-income population. Crowhurst notes that the management of shopping malls is a highly specialized field, quite different from other areas of real estate, but one in which ING Real Estate has considerable experience. Among the critical success factors are getting the right tenancy mix, layout, and general appeal of the mall.

More projects planned A number of new shopping-center projects are also on the drawing board. Tainan Textile Group, for instance, plans to invest NT$5 billion (US$172 million) to construct a large shopping center on a 2.6-hectare site on the eastern side of Tainan City. The project will be executed by the Uni-President Enterprises Group, an affiliate of Tainan Textile, which runs the Dream Mall shopping center in Kaohsiung City. A shopping center is even going up in the offshore island of Kinmen, as part of the “Kinmen Commercial and Leisure Park” project being carried out by the Taiwan Land Development Corp. on a 50-year BOT (build-operate-transfer) basis. With an investment budget totaling NT$3.7 billion (US$128 million), the park is slated to contain a duty-free shopping center, hotel, and other tourist facilities on a 7.45 hectare site. The facility will mainly target Chinese customers, especially the 50 million population within the “West-Strait Economic Zone” around Fujian Province. Xiamen City, separated from Kinmen only by a narrow strip of sea, attracts some 21 million tourists a year, many of whom are likely to be interested in patronizing the projected park. In fact, mainland Chinese tourists have become an increasingly important customer base for many shopping centers within Taiwan proper, and a key factor behind the revived investment interest in such facilities. After six years of red ink, for example Taipei 101 registered a net profit for the first time in the first half of 2010. That first-half profit of NT$123 million (US$4.2 million) is expected to top NT$350 million (US$12 million) for

photo : tourism bureau

INDUSTRY F

CUS

the year as a whole. Michael Liu, spokesman of the Taipei Financial Center, which manages Taipei 101, attributes the turnaround – two years ahead of the original schedule – to the patronage of mainland Chinese customers, especially at the shopping mall and observatory. The observatory took in revenue of NT$300 million (US$10.3 million) monthly in 2010, thanks to the influx of Chinese visitors, who accounted for half of the total, enabling the number of visitors to soar by 2.2 times last year over 2009. Due to the contribution of Chinese customers and the upturn in domestic consumption, the shopping mall last year recorded sales growth of over 20% to reach just under NT$9 billion (US$310 million). Wang Hsiang-wan, general manager of E-DA World’s shopping center, also expects mainland Chinese tourists to be a major source of business for his facility, as they already accounted for a major share of the visitors during the soft-opening period. Viewing shopping malls as a boost to economic development outside of already congested city centers, the government started to encourage their establishment over 10 years ago by offering various incentives. These facilities also offer customers a comfortable and convenient shopping environment, as well as various entertainment and leisure services so that families may opt to spend an entire day there. As a result of those merits, malls have been increasingly popular among local consumers. Liu Yao-tung, chairman of the Taiwan Council of Shopping Centers, estimates that there are now some 30 shopping malls around the island, with total sales topping NT$100 billion (US$3.3 billion) a year. Among the major ones are Metro Walk in Taoyuan County’s Chungli City and Taimall in Nankan; Core Pacific City, Taipei Metro, Breeze Center, Miramar, Taipei 101 Mall, and Asiaworld in Taipei city); Power Center and Global Mall in Zhonghe District of New Taipei City; Nice Plaza in Chiayi; Sugar Mall in Tainan; Mode Mall in Taichung; and Dream Mall and E-DA World in Kaohsiung. The large numbers of customers attracted to shopping malls can have a positive impact on the development of neighboring commercial areas as well. Dream Mall, for instance, has triggered the launch of major development projects in the neighborhood, stimulated a rise in realty prices in the area by 20%, and created over 4,000 job opportunities for firms supplying software and hardware support to stores in the mall. Mode Mall in Taichung has had a similar effect, and in Taipei the inauguration of Q-Square last year has revitalized the formerly seedy business district behind the Taipei Railway Station. Compared with countries like the United States and Australia, Taiwan has faced challenges in the development of shopping centers because of its limited available land and high population density. Chairman Liu of the Taiwan Council of Shopping Centers remains upbeat about the prospects for the business, however, since people in Taiwan have become more demanding about what they expect from their shopping experiences as living standards have risen. Noting that shopping malls account for less than 10% of total retail sales in Taiwan, a far cry from the 55% in the United States and 30% in Britain, he points to tremendous opportunity for future growth.

march 2011 • taiwan business topics

3_2011_IF.indd 41

2011/3/30 8:57:35 AM

INDUSTRY F

CUS

A Report on the Property Market

Business Centers Provide Flexibility and Convenience The first such serviced office opened in Taipei in 1993. Now there are more than 30, ranging from the luxurious to the more modest, for either short- or long-term occupancy. BY AIMEE WONG

photo : farglory

hen Scott Weaver was laid off in 2009 after 15 years as an analyst in the brokerage industry in Taiwan, he decided he needed a change. He’d always dreamed of owning his own company and wanted to contribute to Taiwan while tackling a new line of work and new challenges. He decided to set up his own consulting business, and came to the conclusion that the best way to get started was to locate in a business center. In many ways, setting up a company in the United States is more compli-

cated than it is in Taiwan. There are more regulations, including state and federal laws, and the tax structure is more complex. But in other ways it’s simpler and requires less capital; companies can operate from home without registering a business address, for example. In order to incorporate in Taiwan, companies must register a business addresses with the Ministry of Economic Affairs. Incorporation offers many benefits, including increased customer confidence and the ability to deduct business expenses and apply for government contracts. One

reason for the increasing popularity of business centers in Taiwan is that they provide companies with a one-stop solution to establishing a business address and acquiring a range of useful business facilities and services. Business centers, also known as serviced offices or executive suites, are operated by management companies who rent large amounts of space and then sublet smaller offices to other businesses. They differ from ordinary commercial office space in that they offer furnished offices, flexible lease terms, and additional services and amenities. Whereas traditional office space requires signing a multiple-year contract, business centers offer lease terms by the month, week, day – or even by the hour. They usually provide shared areas such as waiting rooms, conference rooms, lounge areas, and break rooms or kitchen areas. Additionally, shared equipment such as fax machines, copiers, scanners, and video conference equipment can save small businesses many start-up costs. Serviced offices can also save businesses staffing costs by centrally handling reception, security, cleaning, maintenance, IT support, phone-answering, postal mailing and receipt, and secretarial services. Weaver founded Taiwan Tempo, a

taiwan business topics • march 2011

3_2011_IF.indd 42

2011/3/30 8:57:37 AM

A Report on the Property Market

company that assists Taiwanese companies with English marketing materials and websites, as well as doing market research for overseas companies that plan to expand into Taiwan. Although fluent in Chinese and familiar with the business environment in Taiwan, he faced the challenge that any start-up business would require large amounts of capital, research, and groundwork. As a small sole-proprietor service company, he recognized that it would be simpler and more cost-effective to have the support of a business center. The main factors to consider when selecting a business center are the cost, location, and services offered. After visiting a few different locations, Weaver ended up selecting Taipei Modern Business Center because it had the services he needed, including conference rooms and IT support, and was situated closer to his home. He wanted a fully-furnished office with IT support, copying, faxing, meeting rooms, kitchen, and mail sending and receipt. “Each place has its own personality,” he says. “The environment is important; cost is important.” On the other hand, companies that meet often with many clients might value a location in a certain neighborhood or one conveniently situated along main transportation routes. BT Global Services, an international managed IT service business, selected Farglory Business Center in part due to its location. As a branch of the BT Group, a U.K.-based company offering telecommunications service in more than 170 countries, it is part of one of the 200 largest companies in the world. In addition to conference areas, recreation areas, and reception, secretarial, 24/7 security, and surveillance services, the company also attached great importance to location. “It needs to be in the center business area in Taipei city,” said Isabelle Cho, Project Coordinator BT Asia Pacific. “Farglory fits our plan very well. It is situated on DunHua North Road, where Taipei’s financial business center is.” In terms of price, a typical serviced office costs two to three times the price of leasing an empty office space. Keeping in mind that the markup includes furnishing, access to public office areas, and

INDUSTRY F

CUS

photo : executive center

a wealth of services, the benefits can far outweigh the costs for many companies.

A look at the history When the founder of the Farglory Group, Chao Teng-Hsiung, noticed a business center during a trip to the United States, he spotted an opportunity. Farglory Business Center was inaugurated in 1993, at a time when no other companies were offering a similar service in Taiwan. Farglory Group, one of the largest companies in Taiwan, is a multifaceted conglomerate engaged in a variety of other industries, including property development and construction, finance and insurance, air cargo logistics, and recreation and leisure. Although more than 30 business centers now operate in Taipei, Farglory’s are the only ones with ISO 9002 certification, says Emile Lin, general manager of Farglory Business Center. In addition to Farglory’s four business centers in Taiwan, it also operates four in China. Farglory says it prides itself on the quality and luxurious feel of its furnishing and equipment in addition to the rigorous training of its secretaries, many of whom previously worked for airlines or international hotels. It also takes advantage of its longer period of operating experience in Taiwan with over 600 “strategic alliances,” local companies that provide a vast array of services to its members, including computer, transportation, housing, and marketing. “Our number one responsibility is to help cli-

ents make their companies successful,” said Lin. “We want to have a long-term relationship with our customers, so we work very hard, spend lots of time, and invest money.” Since the humble beginnings in 1993, business centers have been catching on quickly in Taiwan. When The Executive Centre opened its first office in 2005 in the landmark Taipei 101 Tower, the city’s most prestigious office building, it rented half of the 37th floor. After reaching full occupancy in six month, it took over the entire floor. The market leader in Asia, the company now operates 28 centers in 15 cities in Asia, including two in Taipei (the other is in the Far Eastern Plaza office building). “We don’t have the most locations, but we go for the best locations,” says Jacqueline Lin, general manager. Although comparatively new to Taiwan, Regus is the world’s leading provider of serviced offices, operating over 1,100 business centers in 85 countries. Its global presence is an advantage for multinational companies, allowing for quick communication and service between different branches. Frequent business travelers have easy access to facilities and services in any of the other cities in which Regus operates. Additionally, the center’s location in the XinYi District of Taipei is conveniently near the Taipei city government, Taipei World Trade Center, and Taipei 101. “The location, the building – all of these are things we look for,” says Troy Lin, general manager. “We maintain the same standards in design, services,

march 2011 • taiwan business topics

3_2011_IF.indd 43

2011/3/30 8:57:37 AM

INDUSTRY F

CUS

A Report on the Property Market

and security across our locations.” For companies that value cost-efficiency over prime locale, Taipei Modern Business Center offers all the standard services in a location a bit removed from the city’s bustling financial hub. Scott Weaver recalls that all the companies he researched offered the basic services he needed: furnished office, secretarial and mailing services, meeting rooms, and IT setup. But Taipei Modern Business Center was more reasonably priced and located closer to his home, shortening his commute time. photo : regus

Taipei market When one considers Taiwan’s role in the international business world, it’s not surprising that the serviced office concept has really taken off. The market is smaller and more stable than China’s, offering a gentler learning curve but slower growth. “In Shanghai, business can pick up really quickly, but in times of financial crisis it can drop precipitously,” said Jacqueline Lin. “Taiwan is more stable.” For a small operation with only a handful of employees, a business center is ideal. “In China, companies that use the business center will only stay for one year because they grow fast; the market develops very fast,” said Emile Lin. “They can quickly build up the economic scale to expand their office size.” On the other hand, many international companies in Taiwan only require a modest presence – not large enough to justify opening a whole new office. The convenience and cost savings offered by serviced offices appeal to a variety of clients. For recent startups like Taiwan Tempo, they offer a quick way to enter the market without a large amount of capital for furnishings and administrative personnel. For interna-

photo : taipei modern

tional companies looking to enter or test out the market in Taiwan, they provide flexible lease terms and quick setup. Five years ago Google Inc. leased a small office with The Executive Centre – five workstations for five engineers. During their two-year stay, they progressively expanded to 40 workstations before finally deciding to move into their own office space. A business center location may even offer a long-term solution for some larger companies. Although BT Global has no plans to expand its operations here, its Taiwan branch includes support personnel for its Asia-Pacific regional projects. “These projects have various lengths, with the potential to be extended or completed in advance,” said Isabelle Cho. “We need to operate in a business center that can provide us with contract-term flexibility and room-space flexibility.” Business centers with offices in other countries, such as Regus, The Executive Centre, and Farglory, help companies to efficiently communicate and execute tasks internationally, even without personal travel to the other countries. With a simple phone call, a secretary in Taipei can instruct her associate in Shanghai to mail a package or contact a potential partner on a client’s behalf. Flexible lease terms also appeal to larger companies working on a temporary project or companies experiencing unexpected growth who may require a provisional overflow office while expanding the main branch. Not surprisingly, the majority of companies in serviced offices in Taiwan are foreign companies, many in the IT

industry. Finally, business travelers can take advantage of a “virtual office” option offered by many executive suites. This choice provides business registration, a mailing address, phone answering, and administrative support without a dedicated physical office. The option is perfect for individuals who travel often or need a business presence but do not spend much time behind a desk. They can save on the cost of leasing a physical office but retain a range of executive services. Scott Weaver’s experience in the business center has been positive. He praises the quiet environment, new facilities, and helpful staff, which has been instrumental in solving unexpected problems. “I’ve never had a situation come up where they couldn’t meet my needs,” he said. “You get team support without having to plan or pay for it individually.” At Farglory, Isabelle Cho describes the office as spacious and clean. She finds the secretarial staff to be well-trained and helpful in facilitating meetings with customers and business visitors, while the business manager was able to customize the rental contract according to her company’s requirements. After almost one year at a business center, Weaver says he has learned a lot and built a good foundation. Regardless of future growth, he has no plans to move. One advantage of the business center is the flexibility for expansion. Companies can easily upgrade to a larger office and even keep the same address. “It’s just the best option there is,” he remarks.

taiwan business topics • march 2011

3_2011_IF.indd 44

2011/3/30 8:57:39 AM

Are You Reading a Borrowed Copy? The cost of a year's subscription to Taiwan Business TOPICS is so economical – NT$1,500, or about what you might pay for a single business lunch – that there's no need to have to rely on your friends or colleagues to see the magazine. As a subscriber, you'll have your own copy mailed directly to your home or office, so you'll be sure not to miss any of the vital information carried in TOPICS.

Subscribe now to be sure of seeing every issue.

TOPICS can be found in the Eslite, Kingstone, Caves and Hess bookstores in Taipei, Taichung and Kaohsiung.

But why wait until we’re on the stands? Make sure of getting a copy by filling in the subscription form below. American Chamber of Commerce in Taipei

Tel : 886-2-2718-8226

E-mail: amcham@amcham.com.tw

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

Taiwan

q1 year = NT$1,500

q2 years = NT$2,700

HK/PRC

q1 year = US$68

q2 years = US$130

Elsewhere in Asia

q1 year = US$75

q2 years = US$140

USA/Europe

q1 year = US$90

q2 years = US$170

Name: _____________________________________________________

Membership ID#: (if applicable)_____________________

Company: ________________________________________________________________ Telephone: __________________________ Mailing address:___________________________________________________________________________________________ Email Address: ____________________________________________________________________________________________ qBill to Account (members only)

qAMEX

qMaster

qVISA

qCheck

qTelegraphic Transfer

Credit card number: ___________________________________ Cardholder’s name: ________________________________ Expiration date: _______________________________________ Total amount (NT$/US$): ___________________________ Signature: _____________________________________________________

Date: _______________________________________

• Please make checks payable to: American Chamber of Commerce in Taipei • Please direct telegraphic transfers to: American Chamber of Commerce in Taipei • Acct. #: 141-53-80050-0-9-0 Chinatrust Commercial Bank Chungshan Branch (Please fax your transfer receipt to AmCham.)

Fullpage_Subscription_09.indd 45

2011/3/29 7:16:24 PM

An Anniversary Hsieh Nien Fan

or the 43rd annual Hsieh Nien Fan, part of the commemoration of AmCham Taipei’s 60th anniversary, a record 620 members and guests filled the ballroom of the Grand Hyatt Taipei to take part in the Chamber’s expression of thanks to Taiwan government officials and business leaders for their support over the past year. President Ma Ying-jeou once again delivered the keynote address, then stayed for the dinner and to toast each table. Remarks by American Institute in Taiwan Director William A. Stanton praised AmCham Taipei for its “significant and highly positive role,” including its “leadership in shaping U.S. relations with Taiwan” in the “uncertain months following the U.S. 1978 decision to recognize mainland China.” Among the other government dignitaries in attendance were Premier Wu Den-yih, National Security Council Secretary-General Victor Hu, Ministers of State Ovid Tzeng and Lin Cheng-jer, Foreign Minister Timothy Yang, Finance Minister Lee Sush-der, Health Minister Chiu Wen-ta, Environmental Protection Minister Stephen Shen, Mainland Affairs Minister Lai Shin-yuan, Economic Planning & Development Minister Christina Liu, National Youth Commission Minister Jack Lee, Cultural Affairs Minister Emile Sheng, Chairman Frank Fan of the Public Construction Commission, and three members of the Legislative Yuan. Attendees enjoyed a sumptuous meal featuring roasted U.S. beef tenderloin, accompanied by Jacob’s Creek Chardonnay Pinot Noir Sparkling, Jacob’s Creek Chardonnay, Jacob’s Creek Shiraz Cabernet, and Royal Salute 21-Year-old Blended Scotch Whisky. Making the event possible was the generosity of the evening’s sponsors: Gold Sponsor Franklin Templeton Investments; Wine & Liquor Sponsor Royal Salute Scotch Whisky; Executive Silver Sponsor Standard Chartered Bank; Silver Sponsors Air Products, Corning, HSBC, and Tobacco Institute of the Republic of China; Bronze Sponsors Alcatel-Lucent, American Express, Baker & McKenzie, Dun & Bradstreet, Citi Bank, Grand Hyatt, K&L Gates, Philips, Procter & Gamble, and Synopsys; and General Sponsors McKinsey & Co., Micron, and Roche.

GOLD SPONSOR

WINE & LIQUOR

EXECUTIVE SILVER SILVER

BRONZE

GENERAL 46

taiwan business topics • march 2011

3_11_HNF.indd 46

2011/3/30 4:40:55 PM

march 2011 â&#x20AC;˘ taiwan business topics

3_11_HNF.indd 47

2011/3/29 7:06:42 PM

A Park Honoring a Japanese Engineer p ho t o s : Co urt es y o f si raya n at i o n al s C en i C area a d m i n i st r at i on

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

h e J a p a n e s e , w h o r u l e d Ta i w a n between 1895 and 1945, left their imprint in every corner of the island. Taiwan's people have mixed feelings about that colonial period, since Japanese rule was often harsh, and the economy was organized to meet Japan's requirements and benefit Japanese enterprises. Nevertheless, during the colonial era Taiwan enjoyed rapid development and social stability. Of the individual Japanese remembered for their contributions to Taiwan, none is revered more highly than Yoichi Hatta (1886-1942), a civil engineer. By unlocking the agricultural potential of southwestern Taiwan, Hatta helped feed four generations of Taiwanese. Hatta's achievements have been the subject of numerous Chinese- and Japanese-language articles and books. His life story inspired a feature-length cartoon – Yoichi Hatta: The Father of the Chianan Canal, released in 2009. Tourists who wish to know more about Hatta and his legacy will soon have a new place to visit. To honor the man and highlight his contributions, the Siraya National Scenic Area (www.siraya-nsa.gov.tw) has established the Yoichi Hatta Memorial Park. Anyone interested in the lifestyles and architecture

of 1920s Japan will enjoy the park, which is expected to become one of the national scenic area's leading attractions. The grand opening is scheduled for May 8, the 68th anniversary of Hatta's death and a full century after he first arrived in Taiwan. Around US$300,000 has been spent in building the 3.9-hectare park, but more important than the budget are the care and attention lavished on the project. Scholars and historical organizations in both Taiwan and Japan were consulted during the design phase, as were Hatta's descendants, to ensure that every aspect is historically accurate. The centerpiece of the park – which is located less than a kilometer from Wushantou Dam, the landmark with which Hatta is synonymous – is the house where he lived with his wife and eight children. All four of the Japanese-style wooden bungalows on the site, including the former Hatta residence, have been faithfully renovated using traditional materials. The beams are cypress, an especially fragrant wood which the Japanese call hinoki. Some of the internal partitions are paper, while others are wattle and daub (lattices of bamboo smeared with a mix of soil and rice husks).

taiwan business topics • march 2011

3_11_SeeTW.indd 48

2011/3/29 6:25:18 PM

s e e i n g ta i w a n The furniture and furnishings inside the buildings are either genuine heirlooms from the 1920s and 1930s, or articles chosen and arranged to match the mood of the period. In front of the house is a new bronze statue of Mrs. Hatta, who also showed a great love for Taiwan. Elsewhere in the park there is a service center and an exhibition hall where visitors can watch multimedia shows about Hatta, his work, and the Chianan Plain. In addition, the tennis court Hatta installed for the use of his staff has been recreated. Hatta was loved by his workers because he took good care of them; he built a school and a hospital, and organized sports events and entertainment. Within just a few years of graduating from Tokyo Imperial University, Hatta had proved his capabilities while working on water-supply projects in northern Taiwan. In 1920, he was assigned to a remote site about 30 kilometers from Tainan. At the time, it was a sunbaked and malarial flatland, prone to both floods and droughts. At that time, Japan was suffering from food shortages, and Hatta's job was to create a reservoir and network of irrigation canals that could transform this unproductive, hardscrabble landscape into rich agricultural land. That he succeeded is obvious to 21st century visitors driving across the Chianan Plain that accounts for much of Chiayi County and Tainan Special Municipality. Scenes of bucolic prosperity greet the visitor. Rice – then as now a staple food in Taiwan and Japan – is grown in large quantities, as is corn, sugarcane, and sweet potatoes. When Hatta arrived, the region lacked roads, so he ordered the laying of a branch railroad that could bring in building materials and heavy machinery. Some solutions were low-tech, however. To compact soil for the laying of foundations, herds of water buffalo were used to tamp it down. Over the course of a decade, Hatta supervised the construction of numerous tunnels (one of them three kilometers long), plus several thousand kilometers of canals, channels, and ditches to carry water to

the fields. Central to the project was the 1,273-meter-long, 66-meter-high, rock-filled barricade now known as Wushantou Dam. In both size and technical complexity, the dam is a watershed in the history of civil engineering. Nothing like it had been attempted before in Asia, and it literally changed the face of a good part of southern Taiwan. In recent years, a coalition of academics, farmers’ associations, and civic groups have campaigned to have the entire irrigation system added to UNESCO’s World Heritage list. The 1,300-hectare reservoir is fed by more than 30 streams, and its nickname, Coral Lake, is inspired by its shape. With numerous peninsulas and inlets, in aerial photos it indeed resembles a piece of blue-green coral. In addition to irrigating 100,000 hectares of farmland, the waters of Coral Lake generate hydroelectric power. The surrounding trees, bamboo, and thick foliage make the lake an especially good place for camping, barbecues and nature rambles. In 1931, the local people showed their gratitude to Hatta by commissioning a bronze statue of the engineer. It can be seen inside the Wushantou Reservoir Scenic Area, atop a hillock shaded by camphor and beefwood trees. The statue itself is rather unusual because of a condition set by Hatta

when he reluctantly agreed to pose for it. He said it should not be stiffly formal nor idealized, but rather an accurate depiction of how he looked when working – sitting on the ground, scratching his head with his right hand and gazing wistfully into the distance, as if pondering an especially difficult engineering problem. When Taiwan returned to Chinese rule in 1945 at the end of a long and brutal war, many symbols and relics of the Japanese colonial era were done away with. Sympathetic local residents removed the statue, fearing the new government would order it destroyed. Kept hidden until 1981, it was then restored to its original place. These days, visitors will often see fresh flowers in front of the statue – further evidence of the high esteem in which Hatta is still held. Nearby stands the Hatta Memorial Museum, a one-room exhibition hall filled with fascinating photographs; some show Hatta with his family, while others chart the construction of the dam. In one corner, some of Hatta's clothes have been preserved for posterity. Yoichi Hatta Memorial Park will be open to the public every day, and admission will be free, at least for the initial period. The Wushantou Reservoir Scenic Area is open from 6 a.m. to 6 p.m. daily, and admission is NT$200 per person (parking extra).

march 2011 • taiwan business topics

3_11_SeeTW.indd 49

2011/3/29 6:25:20 PM

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

In the early years after the establishment of IBM Taiwan in 1956, mainframe computers were usually delivered to customers by ox-cart because their large size and weight.

The first Northwest Airlines aircraft to land in Taipei, a piston-engine DC-7C, arrived at Sungshan Airport on April 25, 1957 on a trial flight from Tokyo. Northwest continued service to Taiwan until it was merged into Delta Air Lines two years ago.

Minister of Economic Affairs K.T. Li presented an award to Moses Shapiro, Vice Chairman of General Instrument, in May 1968 in recognition of the company’s pioneering role in developing Taiwan’s electronics industry. GI was later acquired by Vishay General Semiconductor.

The ceremony on July 28, 1967 for the opening of American Express Bank’s Taipei Branch on XuChang Street. Cutting the ribbon was Finance Minister Chen Ching-yu. AmEx Bank was purchased by Standard Chartered in 2008, but American Express International continues to operate its travel network and credit-card business in Taiwan.

3-historical page.indd 50

2011/3/29 7:14:22 PM

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

CMY