2013 Taiwan Business TOPICS

CU S

He A R e DU alth por ST care t on RY Sec the FO tor

IN

THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics Attracting Talent 延攬人才

TAIWAN BUSINESS TOPICS August 2013 | Vol. 43 | Issue 8 中華郵政北台字第 號執照登記為雜誌交寄 5000 8_2013_Cover.indd 1

NT$150

August 2013 | Vol. 43 | Issue 8 www.amcham.com.tw

ISSUE SPONSOR

2013/8/2 5:06:59 PM

Bristol-Myers Squibb (NYSE: BMY), with headquarters in New York City, is a global leader in the research and development of innovative treatments for cancer, cardiovascular and metabolic diseases, hepatitis, HIV/AIDS, psychiatric disorders, rheumatoid arthritis and other serious diseases. Our key business is Biopharmaceuticals, with 2012 sales of US$17.6 billion and R&D investment of US$3.9 billion.

Bristol-Myers Squibb (Taiwan) Ltd., the Taiwan subsidiary, was set up by Bristol-Myers in August 1965, predating the 1989 merger with Squibb that established what at the time was the world’s second largest pharmaceutical company. Starting in 2002, logistics operations in Taiwan have been outsourced to a professional logistics company to enable us to focus on providing clients with the best possible service. In addition, service centers have been set up in Taichung and Kaohsiung to better serve the central and southern Taiwan markets.

At Bristol-Myers Squibb, our mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. We are committed to pursue excellence, reliability, growth, innovation, and fairness. We also believe deeply in corporate social responsibility.

These values have enabled us to maintain our leading role in the market and to increase annual return for our shareholders.

CONTENTS NEWS AND VIEWS

8 Editorial

Drug-pricing Scheme Needs Reconsideration

auguS T 2 0 1 3 vOlumE 43, NumbE r 8 一 ○二年八月號

Publisher

9 Taiwan Briefs

發行人

Andrea Wu

By Jane Rickards

吳王小珍

Editor-in-Chief

13 Issues

總編輯

Don Shapiro

沙蕩

Is There TPP in Taiwan’s Future?; Enhancing the Investment Environment; Tailwinds for ICAO Status

美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Contributing Writer

採訪編輯

Jane Rickards

李可珍

台灣能否加入跨太平洋夥伴協議？； 強化投資環境；台灣順風爭取加入國 際民航組織

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

藥價機制必須重新考慮

翻譯

Yichun Chen, Frank Lin, Sonia Tsai 陳宜君, 林怡平, 蔡函岑

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱：台北市美國商會工商雜誌 發行所：台北市美國商會 臺北市10596民生東路三段129號七樓706室 電話：2718-8226 傳真：2718-8182 Taiwan Business TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2013 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號 印刷所：帆美印刷股份有限公司 經銷商：台灣英文雜誌社 台北市108台北市萬華區長沙街二段66號 發行日期：中華民國一○二年八月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

Chairman/ Alan T. Eusden Vice Chairmen/ Bill Wiseman / William J. Farrell Treasurer: Sean Chao Secretary: Edgard Olaizola 2012-2013 Governors: Richard Chang, Sean Chao, Michael Chu, Louis Ruggiere, Revital Golan, David Pacey, Lee Wood, Ken Wu. 2013-2014 Governors: Alan T. Eusden, Thomas Fann, William Farrell, Edgard Olaizola, Stephen Tan, Fupei Wang, Bill Wiseman.

2012 Supervisors: Susan Chang, Cosmas Lu, Gordon Stewart, Carl Wegner, Julie Yang.

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

COVER SECTION

17 Attracting Talent

延攬人才

By Jane Rickards

This article is the fifth and concluding report in a series of cover stories inspired by President Ma Ying-jeou’s reference last year to the “Five Pillars” vital to Taiwan’s successful future economic development. Previous installments in the series dealt with liberalizing trade (the February issue of Taiwan Business TOPICS), upgrading industry (March), securing a stable energy supply (April), and reforming higher education (May). All back issues can be accessed online in the Publications archive section.

22 Exceptions to the ban 27 An easier path to permanent residency

TAIWAN BuSINESS

30 Primer on the Office Leasing Market

From Jones Lang LaSalle, the ABCs of what you need to know before renting commercial space in Taipei City.

By Jamie Chang

LAW

35 International Scrutiny Helps Taiwan Advance Human Rights This year a group of international experts completed the first comprehensive assessment of human rights on Taiwan.

By Daniel Severson

4

taiwan business topics • august 2013

8 Contents.indd 4

2013/8/2 6:00:47 PM

august 2013 • Volume 43 n umb er 8

COvE r SPONSOr

BEHIND THE NEWS

39 Moving Forward to Create Free Economic Pilot Zones The government views the project as potentially setting the stage for Taiwan’s entry into emerging regional free-trade blocs.

Diabetes Care

By Philip Liu

INDuSTrY

F

|

Diagnostics

|

Vascular

Established Pharmaceuticals

CuS

Medical Optics

|

Molecular

|

Nutrition

A Report on the Healthcare Sector

The abbott Story We are a global broad-based health care company devoted to discovering new medicines, new technologies and new ways to manage health. Our products span the continuum of care, from nutritional products and laboratory diagnostics through medical devices and pharmaceutical therapies. Our comprehensive line of products spans the continuum of life – addressing important health needs from infancy through the golden years.

For more than 125 years, Abbott people have been driven by a constant goal: to advance medical science to help people live healthier lives. It’s part of our heritage and continues to define our work today. Our work across our broad lines of business gives us a wealth of knowledge, understanding and capabilities in a number of health areas, including Medical Nutrition, Pediatric Nutrition, Diabetes Care, Anti-Infectives, Immunology, Cardiovascular, Diagnostics, Renal Care, Molecular, and Medical Optics.

44 The Koo Way to Better Cancer Care

Taiwan’s premier cancer-treatment center operates on the basis of rewards for outcomes instead of productivity – and the results are encouraging.

By Timothy Ferry

46 What to do about Betelnuts?

Abbott Taiwan was founded in 1983 and is headquartered in Taipei. Today, Abbott Taiwan has grown into a large-scale organization of more than 400 employees.

By Timothy Ferry

47 Return to Taiwan

By Timothy Ferry

With sales offices located in Taipei, Taichung and Kaohsiung, our employees are working aggressively for the promotion, delivery and customer service of Abbott products throughout the country. Our products are primarily imported from Abbott’s worldwide manufacturing sites including UK, America, Europe and Asia. Our main customers include key hospitals, medical centers, clinics, clinical laboratories, pharmacies and general consumers.

48 New Attention to Long-term Care

As Taiwan gets closer to becoming a “super-aged society,” social welfare issues are gaining greater prominence.

By Timothy Ferry

50 Domestic Drug Industry Coming of Age

For many years, Abbott Taiwan has maintained a commitment to pioneering, caring and professionalism via providing quality products and services to our patients and customers, fostering a learning environment for our employees and giving back to the communities in which we live and work.

Taiwan-invested companies in China will soon be welcome for listing on the local bourse,

By Jens Kastner

taiwan business topics • august 2013

8 Contents.indd 5

5

2013/8/2 6:00:48 PM

advertorial

a Message from the international research-based Pharmaceutical Manufacturers association (irPMa)

Adopting a Reasonable Approach to Drug Pricing

T

h e r a p i d a g i n g o f Ta i w a n ’s population – by 2025, fully onequarter of the people will be over the age of 65 – clearly poses major challenges to this society, not least for the long-term financial stability of the National Health Insurance program. But the narrowly construed approach being taken by the Ministry of Health and Welfare (MOHW) and its Department of National Health Insurance (DNHI) – focusing almost exclusively on cost containment for pharmaceuticals, even when that discourages the launching of new and innovative drugs in this market – is hardly the solution in the face of the growing number of elderly citizens with serious ailments requiring attention.

T h e g o v e r n m e n t ’s c o s t - c u t t i n g campaign has repeatedly lowered the price at which hospitals and other health providers are reimbursed for pharmaceuticals. Since the hospitals then demand steep discounts from the manufacturers (a practice prohibited in Korea, it is worth noting), Taiwan’s

drug prices are already among the world’s lowest – so low, in fact, that manufacturers now frequently hesitate to launch their latest innovative drugs in this market for fear that the prices will be referenced by other countries.

The most effective treatments in future may therefore no longer be available to Taiwan patients.

As deleterious as the situation is already, it may soon become far worse if the MOHW proceeds with its current draft implementation plan for Article 46 under the Second Generation National Health Insurance Law. The purpose of the article is to adjust the prices of drugs when their patents expire – a reasonable objective if done properly. But besides imposing an abrupt and massive price cut which the manufacturers had no opportunity to take into account in their business planning, the approach the Ministry is taking poses several extremely serious problems from both legal and policy perspectives.

To start with, the proposed draft

Pharmaceutical Patent Application Case Numbers in Recent 5 Years 4000

0.060

3500 3000 2500

0.050 2841

2000

0.040

2579

2330

2315

1949

1500

0.030 0.020

1000 500

803

853

2007

2008

960

957

1063

2009

2010

2011

0

6

0.010 0.000

Number of foreign patents

Proportion of foreign patents

Number of domestic patents

Proportion of domestic patents

enforcement regulations would not merely affect drugs going off-patent in the future following the Second Generation National Health Insurance Law’s coming into effect at the start of 2013, but would reach backwards to cover those with patent expirations over the past five years. Such retroactivity violates a fundamental principle of international jurisprudence.

In several constitutional interpretations, Taiwan’s Council of Grand Justices has upheld that principle, ruling that the effective date for any law should be onward “unless specifically stated otherwise in the statute.” In the current case, justification for retroactivity seems based on a misreading of the Second Generation National Health Insurance Law, which calls for the price adjustment of off-patent medicines to take place “beginning one year after patent expiry and through the fifth year.” As the wording makes no explicit mention of an earlier starting date, the new policy should apply only to products with patents expiring after January this year when the law took effect.

Another critical flaw in the draft regulations is a departure from the common definition of patent protection. For the purpose of implementing Article 46, the MOHW proposes to recognize only patents covering chemical compounds, the active ingredients in the drugs. But pharmaceutical manufacturers also depend heavily on several other types of patents, including those on production processes, formulations, and new indications. If the MOHW uses its intended methodology, it will regard drugs as “off-patent” as soon as their chemical-compound patents expire – subjecting them to price cuts – when in fact the products are still covered by other still-valid patents granted by the Taiwan Intellectual Property Office.

This interpretation of “off-patent” is contrary to accepted international usage

taiwan business topics • august 2013

8_IRPMA.indd 6

2013/8/2 3:43:14 PM

來自中華民國開發性製藥研究協會的消息

and would make a mockery of Taiwan’s intellectual property rights system in the eyes of the rest of the world.

Further, both the attempt at retroactivity and the skewed interpretation of “off-patent” are certain to bring strong objections from Taiwan’s major trading partners as departures from normal trade practice. At a time when Taiwan is reviving its TIFA process with the United States and looking to engage more countries in free trade agreements, it makes no sense to raise new issues that could lead to trade disputes.

In numerous ways, the design of Taiwan’s proposed drug-pricing system seems weighted against the interest of original drug manufacturers, which are being made to bear the brunt of the price-cutting burden. With patented drugs subject to either annual DET cuts or biennial reductions following Price Volume Surveys, and with justoff-patent drugs slated to be identified each quarter to undergo five-year price adjustments, manufacturers may well conclude that it is more advantageous to market their products in Taiwan without patents. Already, the number of pharmaceutical patent applications in Taiwan from foreign companies has been experiencing a steady decline in recent years.

If the trend continues, the impact would be harmful both to Taiwan’s IPR regime and to the growth of the domestic pharmaceutical industry, making it more difficult for local companies to develop generic versions of drugs.

To meet the needs of Taiwan’s citizens as the population ages and faces more healthcare concerns, reliance on continuously slashing pharmaceutical prices cannot be the solution to NHI’s budgetary challenges. Broad discussion needs to take place among the many stakeholders to help shape the optimum healthcare policy, one that successfully cares for patients in need while also meeting the objectives of pharmaceutical-industry development and intellectual property protection. IRPMA and its member companies are ready and willing to be active participants in that process.

advertorial

採用合理的藥品定價機制

台

灣人口老化快速，據估計2025年台灣將有25%的人口超過65歲，這 顯然對社會造成極大挑戰，對全民健康保險長期財務狀況的穩定發 展也產生強烈衝擊。然而，面臨需要照護、關注之高齡人口數量攀 升的問題，衛生福利部及中央健康保險署把焦點過於狹隘地放在抑制藥品支 出增加，導致製藥業者不願將更多創新藥品引進台灣市場，這實非解決問題 之道。 台灣政府推動藥價調降，屢次壓低對醫院及其他醫療機構的藥品給付 價格。由於醫院又向藥廠要求高額折扣（值得注意的是，南韓禁止這種作 法），台灣的藥價在全世界已屬相當低廉，低到藥廠非常擔心其他國家以台 灣的低藥價為定價參考基準，也對於把最新開發的藥品引進台灣市場感到遲 疑。未來台灣的病人可能無法取得效果最佳的治療方式。 這樣的惡劣情形已令業界憂心，衛生福利部若按目前二代健保法第46條 執行辦法草案內容推動相關措施，情形恐怕還會更糟。二代健保法第46條 條文要旨，是在藥品專利逾期時調降其價格，若能妥善執行，不失為一個合 理目標。但是衛生福利部打算採取的藥價調整作法不僅會使藥價在極短時間 內大幅降低，讓藥廠營運計劃來不及因應，在法律及政策層面也產生一些非 常嚴重的問題。 首先，草案中的調價方式，不僅對2013年初二代健保法生效之後專利才 到期的藥品有影響，還預備回溯擴及在此之前五年間專利到期的藥品。這種 溯及既往的作法違反了國際間遵循的法律基本原則。 幾次台灣大法官會議解釋內容都支持這個基本法律原則，認為除非在法條 中另外指出，所有法律之生效應以生效日期往後推算。而目前對第46條條 文要回溯既往的官方理由，似乎誤解了二代健保法對「藥品逾專利期第一年 起開始調降，於五年內逐步調整」的規定。其實條文中並沒有明確指出調降 價格之起始日期必須提前，因此適用範圍應該只包括那些在今年一月新法生 效後專利逾期的藥品。 此草案的另一項缺陷，是它偏離了對於專利保護的一般定義。為了施行二 代健保法第46條，衛生福利部提議只承認化合物（藥品有效成份）所取得 的專利。但是製藥業者也非常重視其他幾種專利，包括與製程、配方與新適 應症有關的專利。若按照衛生福利部目前提出之調價方法，一旦化合物專利 逾期，就等於整個藥品專利逾期，依規定必須降價，但事實上這個藥品仍受 其他經濟部智慧財產局核准專利的保護。這種對於專利逾期的解釋，有違目 前國際通用作法，恐將使台灣智慧財產權保護制度貽笑國際。 其次，藥品調價範圍溯及既往，以及對藥品專利逾期的狹隘解釋，已偏離 國際貿易慣例，必定引起台灣重要貿易夥伴國的強烈反對。台灣正積極投入 剛恢復不久的台美TIFA協商，也尋求與更多國家簽訂自由貿易協定，這種 容易引發貿易爭端的新議題在這個時機出現很不合適。 從各方面來看，目前主管機關提出的藥品調價機制對於原廠製藥業者都 很不利，也使他們必須承受沉重的降價壓力。不管是針對專利藥品每年一次 藥品費用目標制的砍價或兩年一次根據價量調查結果的砍價，還是針對專利 過期藥品（每季確認）的五年逐步砍價，都讓業者覺得，要在台灣這個市場 生存，不申請藥品專利比較好。最近幾年，外商藥廠在台灣申請藥品專利案 件已持續減少。如果這個趨勢不改變，對台灣智慧財產權保護制度，乃至於 國內製藥產業的成長發展都有害，也將使國內業者發展學名藥產品的難度提 高。 要有效因應台灣人口老化及相關醫療照護衍生的各種需求，要解決健保財 務問題，持續調降藥價不是辦法。政府有必要將各方利害關係人納入內容廣 泛的溝通討論過程，如此產生的衛生政策才能真正照顧有需要的病人，讓製 藥產業健全發展，同時確保其智慧財產權不受侵害。中華民國開發性製藥研 究協會與所有會員企業非常樂意積極參與這個過程，做出貢獻。

For more information, please contact: International Research-based Pharmaceutical Manufacturers Association (IRPMA) 9F-8, 188 Nanjing E. Rd., Sec. 5, Taipei 10571, Taiwan Tel: +886-2-2767-5661Fax: +886-2-2746-8575 www.irpmn.org.tw taiwan business topics • august 2013

8_IRPMA.indd 7

7

2013/8/2 3:43:14 PM

E

d

i

t

o

r

i

a

l

Drug-pricing Scheme Needs Reconsideration

T

aiwan has long been an extremely difficult market for international manufacturers of original pharmaceuticals. The health authorities have subjected their products to sharp price cuts every two years and imposed conditions on many new drugs reducing the reimbursement price even further when a certain sales volume is reached. On top of that, the hospitals invariably demand steep discounts. The result has been some of the lowest net price levels in the world, delaying or even deterring companies from introducing new innovative drugs and investing resources in this market. Although Taiwan ought to be an excellent environment for conducting clinical trials, for example, the amount of such research carried out by international companies has been dropping.

The Legislative Yuan’s passage in 2011 of a Second Generation National Health Insurance (2G-NHI) law, which takes effect this year, brought hope of some relief for the original-drug manufacturers. It included the trial adoption of a Drug Expenditure Target (DET) system setting an annual growth target for NHI drug spending, with industry committed to making up the difference if that amount is exceeded. For the manufacturers, the step was welcomed as a more predictable and transparent system than the previous mode of price-cutting, which often seemed arbitrary.

The positive response to 2G-NHI was short-lived, however.

In fact, the way in which the Ministry of Health and Welfare (MOHW) and its Department of National Health Insurance are preparing to implement the 2G-NHI legislation is perceived by the international research-based industry as a severe threat to its continued viability in this market. Of particular concern are the unreasonable provisions in the draft enforcement guidelines for Article 46 of the law, governing price reductions on drugs newly going off-patent. The unfairness and impropriety of the proposed

methodology for this reduction prompted the three major foreign business organizations in Taiwan – the American, European, and Japanese chambers of commerce – to each send letters of protest to the Taiwan government last month.

AmCham Taipei’s letter to Premier Jiang Yi-huah focused on two main issues. One is the MOHW’s plan to implement the reduction not just on drugs as their patents expire after January 2013 – the date the 2G-NHI law takes legal effect – but retroactively on those that went off-patent over the past five years. Such retroactivity is against international legal principles and has been ruled out in past interpretations by Taiwan’s Constitutional Court.

A second major problem is that the draft would take only patents on chemical compounds into consideration, whereas drugs typically are also covered by patents on process, formulation, and new indications. Thus a product would be regarded as “offpatent” – and subjected to a heavy price cut – when the patent on the compound expires, even though it still holds other valid Taiwan patents. The approach would undermine Taiwan’s intellectual property rights regime, and even discourage manufacturers from applying for local patents.

Besides writing to Premier Jiang, AmCham also sent a letter to Legislative Yuan Speaker Wang Jin-pyng, since the MOHW’s enforcement plan appears to skew the legislative intent of the 2G-NHI statute.

So as to avoid international trade disputes, preserve a viable drug market to protect the interests of Taiwan patients, and enable this country to develop a sound indigenous biopharma industry, AmCham urges the health authorities to reconsider the 2G-NHI implementation plan in consultation with industry players and other stakeholders.

藥價機制必須重新考慮

對

生產原廠藥的國際製藥業者而言，台灣長久以來都是個

促使台灣的三大外商團體—美國、歐洲與日本商會在上個月分別

非常難經營的市場。衛生主管當局每兩年就大幅調降他

致函台灣政府表達抗議。

們產品的價格，此外對於達到一定銷售量的新藥更會

台北市美國商會交行政院江宜樺院長的信函聚焦在兩項主要

進一步降低給付價格。除此之外，醫院總是要求藥廠給予大幅折

議題上。一項是衛生福利部計畫執行的降價措施，不但涵蓋專利

扣。結果造成了藥品實價世界最低，使得藥商不願引進創新的新

權在2013年1月二代健保法生效後到期的藥品，而且追溯涵蓋過

藥，也不願在這個市場投入資源。舉例來說，儘管台灣原本應該

去五年間逾專利期的藥品。追溯既往違反國際法律原則，以往在

是進行臨床實驗的極佳環境，國際藥商進行此類研究的數量卻呈

大法官會議處理釋憲案時亦曾遭駁回。

現下滑趨勢。

第二項重大問題是執行計畫只考量化學成份的專利，而藥品

立法院2011年通過的二代健保法（2G-NHI）自今年開始生

所涉及的專利通常還包括製程、配方和新適應症。因此，一項

效，為原廠藥業者帶來略獲喘息機會的希望。新法內容包括試行

產品的成分專利權到期時，儘管其他台灣專利仍然有效，還是

藥品費用支出目標制度（DET），訂定健保用藥支出每年的成

會被視為「逾專利期」，因而得要大幅降價。這種作法會破壞

長目標，並由業界承諾在金額超過目標時補足差額。業者歡迎這

台灣的智慧財產權機制，甚至使得製藥業者不想再申請本地專

項作法，原因是比起以前反覆無常的砍價模式，這套制度比較透

利權。

明且能夠預測。

除了致函江院長，美國商會也曾致函立法院王金平院長，原

不過，對二代健保的正面反應轉瞬即逝。事實上，衛生福利

因是衛生福利部的執行計畫似乎偏離了二代健保法的立法原意。

部與國民健康署準備執行二代健保的方法，在研發導向的國際製

為了避免引起國際貿易爭端，維持藥品市場命脈以保護台灣

藥業者看來，將嚴重威脅他們是否能在這個市場持續生存。新

病患權益，以及讓這個國家能發展健全的本土生技製藥業，美國

法第46條的執行計畫中，有關甫逾專利期藥品降價的不合理規

商會呼籲衛生當局諮詢業者與其他相關組織意見，重新考慮二代

定，尤其受到關注。這項擬議的降價措施既不公平亦不適當，也

健保法執行計畫。

8

taiwan business topics • august 2013

8_Editorial.indd 8

2013/8/2 12:13:55 AM

t

a

i

w

a

n

b

r

i

e

f

s

— jane ri ckards —

MACROECONOMICS stiLL in a sLOwDOwn, saYs aCaDeMia siniCa Emerging markets such as China are starting to show an ominously slower pace of growth. In China, the government is seeking to push through reforms that would help the mainland economy transition to more reliance on domestic demand rather than exports. China is also undergoing the biggest credit squeeze in a decade out of concern that mainland companies’ expansion has been excessive. The situation threatens to slow the region’s recovery, but Beijing is willing to accept lower GDP growth in exchange for hopefully assuring future stability.

Meanwhile, recession in Europe has been more severe than expected.

Given these factors, Taiwan’s prestigious research institute, Academia Sinica, became the latest in a series of institutions to cut its growth forecast for export-dependent Taiwan this year, lowering the figure to 2.35%.

Its earlier forecast, six months ago, called for 3.05% growth. In a report, Academia Sinica's Institute of Economics said Taiwan’s export growth so far this year has been unexpectedly

PROMOTING HUMAN RIGHTS — Chinese activist Chen Guangcheng, center, speaks to lawmakers and supporters during a visit to the Legislative Yuan. phOTO : ap phOTO/Wally saNTaNa

weak. For the first half of 2013, it said, exports of goods grew by only 2.2% “and imports had almost no growth.”

The institute still predicts that momentum may return by the end of the year, bringing the final 2013 export growth figure to 4.93%. The report also noted that consumption is performing poorly, also dragging down growth. “A low growth of real wages has caused consumers to limit their spending,” it said, concluding that private consumption will grow by a meager 1.26% this

Economic indicators Unit: US$ billion Current Account Balance (2013 Q1) Foreign Trade Balance (June) Foreign Trade Balance (Jan-June) New Export Orders (June) Foreign Exchange Reserves (end June) Unemployment (June) Discount Rate (July) Economic Growth Rate 2013 (Q1)p Annual Change in Industrial Output (May) Annual Change in Industrial Output (Jan-May) Annual Change in Consumer Price Index (June) Annual Change in Consumer Price Index (Jan-June NOTE: p=prElimiNary, r=rEvisEd

11.09 3.25 14.6 35.1 406.61 4.14% 1.875% 1.67% -0.07% 0.47% 0.60% 1.31%

Year Earlier 11.06 2.6 11.5 36.4 391.24 4.21% 1.875% 0.59% -0.17% 1.76% 1.47%

souR ces: Moea, Dgbas, cbc, boFt

year. The consumer price index, the institute forecasts, will rise by a mild 1.4% in 2013.

Academia Sinica expects real private-sector investment this year to grow by 6.34%, mainly due to the need for new equipment for semiconductor industry expansion. But as government borrowing is limited by a legal ceiling on government debt of around 48% of GDP, it predicts that public-sector investments will decline.

“If the government’s and state-owned companies’ investments are included, our forecast for annual growth of gross fixed capital formation this year is 4.49%,” the report said. Institute of Economics director Peng Shin-kun said that to ameliorate Taiwan’s increasing economic woes, the central government should raise the debt ceiling and introduce a fiscal stimulus to boost domestic spending and investment.

Meanwhile, the latest export data reflected the global economic uncertainties. Exports saw a sharp jump in June, rising 8.6% year-on-year to US$26.48 billion, with imports showing similar growth of 6.8%

taiwan business topics • august 2013

8_Briefs.indd 9

9

2013/8/2 12:12:10 AM

t

a

i

w

to US$23.23 billion for a favorable trade balance of US$3.25 billion. But May export orders, a leading indicator, came to US$36.33 billion, down 0.4% from the same month last year. The Central Bank in late June left interest rates unchanged, citing China’s slowdown and the uneven pace of global economic recovery. Analysts said decreased rates would not do much to help economic growth, as rates are already at low levels, so the bank opted for stability.

Interest rates have remained the same since June 2011, the longest such period in the bank’s history.

CROSS-STRAIT bbLinD PrC aCtiVist LawYer Visits taiwan Blind Chinese dissident lawyer, Chen Guangcheng, who sparked a diplomatic crisis last year by fleeing house arrest and seeking refuge in the U.S. embassy in Beijing, visited Taiwan in late June for an 18-day visit. Chen told reporters that Taiwan’s democracy could be a model for China to follow, and he met with opposition politicians, including Democratic Progressive Party chairman Su Tseng-chang. But mindful

a

n

b

r

of cross-Strait sensitivities, President Ma Ying-jeou declined to meet with him. A scheduled meeting with Legislative Yuan Speaker Wang Jin-pyng was also unexpectedly canceled when Wang said the large backlog of draft bills awaiting action in the legislature was keeping him too busy. Chen instead gave an impromptu speech in a Legislative Yuan conference room, while scores of lawmakers were engaged in a pushing and shoving match in the legislative chamber over the cross-Strait services pact. Asked for his reaction, Chen said such physical tussles were better than “having tanks go rampant down the squares and streets,” a reference to China’s 1989 Tiananmen Square crackdown.

taiwan anD CHina inK serViCes PaCt In late June, Taiwan and China signed a services agreement, one of the elements called for under the cross-Strait Economic Cooperation Framework Agreement (ECFA) concluded in 2010. In the services pact, Taiwan agreed to open up 64 sectors including barbershops and travel services, while China agreed to open up 80 sectors, including finance,

i

e

f

s

taiwan stock ExchangE indEx & valuE

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

8250

135

8000

120

7750

105

7500

90

7250

75

7000

60

6750

45

6500

30

6250

15

6000

0

August daTa sOUrcE : TWsE

UNiT: NT$ billiON

e-commerce, and travel. The agreement drew considerable criticism from those in affected Taiwanese sectors worried about job losses, and from opposition lawmakers complaining that the Ma administration failed to sufficiently communicate with the legislature before the agreement was signed in Shanghai. The pact must now be ratified by the legislature.

DOMESTIC taiwan ZOO Gets birtH Of first PanDa CUb A giant panda, one of a pair presented to Taiwan from China in late 2008 to foster goodwill, gave birth to a female cub at the Taipei’s Zoo in Muzha in early July. Nineyear-old Yuan Yuan delivered the cub following artificial insemination given in March. Natural pregnancy among pandas in captivity is relatively rare.

Yuan Yuan’s name and the name of her mate Tuan Tuan derive from the Chinese word tuanyuan, meaning “reunion,” an expression of China’s hopes toward Taiwan.

sOLDier’s DeatH sParKs UPrOar TINY BABY — Mother Yuan Yuan and her new cub, the first giant panda to be born at the Taipei Zoo. phOTO : ap ph OTO/TaipE i ZOO

10

A public outcry was sparked in late July over the mysterious death of a military recruit who appears to have died of heatstroke resulting from

taiwan business topics • august 2013

8_Briefs.indd 10

2013/8/2 12:12:10 AM

i

w

a

n

b

r

i

photo : ap p hoto/anja nieDRinghaus

In a major breakthrough, Taiwan inked a free trade agreement with New

s

taiwan PLaYer wins at wiMbLeDOn Hsieh Su-wei became the first Taiwanese tennis player to win a grand slam title when she and Peng Shuai beat Australians Ashleigh Barty and Casey Dellaqua in the Wimble-

taiwan's JanuarY to JulY tradE FigurEs (YEar on YEar comParison)

Japan

23.73 8.89

22.13 9.37

2013

2012

2013

2012

2013

14.42 13.47

2012

2013

2012

2013

Imports

TOTAL

2012

2013

Europe 14.04 14.77

U.S.

15.74 26.81

14.39 38.39

2012

15.59 26.91

37.1

ASEAN

14

HK/China

13.23 15.88

taiwan, new ZeaLanD siGn free traDe DeaL

Zealand in mid-July. It was the first time for Taiwan to enter into an FTA with a country that maintains diplomatic relations with China. Taiwan’s 40th largest trading partner, with annual two-way trade at a meager US$1.2 billion, New Zealand does not feature hugely in Taiwanese trade. But as China did not object to the deal, and as New Zealand is an OECD economy and one of the countries participating in Trans-Pacific Partner-

11.87 16.08

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

f

ship (TPP) negotiations, the diplomatic significance was noteworthy. New Zealand was motivated by business, not by politics. Taiwan is its 12th largest trading partner.

The low-key signing ceremony in Wellington reflected Taiwan’s diplomatic isolation. No senior officials were present at the informal venue, Wellington’s Victoria University. The agreement was signed by the two sides’ de facto ambassadors. Taiwan entered into the agreement under its World Trade Organization status as “The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.”

Taiwanese officials remain optimistic that the New Zealand deal and an upcoming similar pact with Singapore can prove to other nations that Taiwan is capable of meeting high standards of liberalization and that Beijing will not interfere in such developments, raising hopes that Taiwan could eventually join the TPP.

DONE DEAL — Elliott Chang, left, head of the Taipei Economic and Cultural Office in New Zealand, and Stephen Payton, director of New Zealand’s Commerce and Industry Office in Taipei, sign a free trade agreement in Wellington.

punishment consisting of excessive physical exercise in sweltering summer heat. Street protesters numbering in the tens of thousands demanded an impartial investigation into the death of Hung Chung-chiu, 24, who was placed in disciplinary confinement in late June as punishment for bringing a cellphone on base. While in confinement he was forced to perform a regime of sit-ups, push-ups, jumping jacks, and squats before he collapsed and died. Military authorities have reprimanded more than 30 commissioned and non-commissioned officers for their mishandling of the case, but Hung’s family and other groups are still not satisfied, saying the military has not clearly explained numerous unusual circumstances of the case.

Camera-equipped cellphones are not allowed on Taiwanese military bases for security reasons.

e

135.88 150.48

a

135.47 149.92

t

Exports

Unit: US$BN Source: BOFT

taiwan business topics • august 2013

8_Briefs.indd 11

11

2013/8/2 12:12:11 AM

t

a

i

w

don women’s doubles final in early July. Peng, from mainland China, was the third Chinese to win a grand slam doubles title. Together the doubles partners are known as the “crossStrait duo.” The island basked in Hsieh’s glory because Taiwanese feel their international isolation keenly and brim with pride whenever one of their homegrown sons or daughters becomes an international star.

But immediately after the win, Hsieh’s father stirred controversy by saying she was considering giving up Taiwanese citizenship for China’s because of a sponsorship offer from a Chinese brewery worth an annual US$1.63 million, a figure dwarfing her Taiwanese sponsorships of US$50,000. Amid outrage from the media and opposition lawmakers, Legislative Speaker Wang, and Education Minister Chiang Wei-ling promised to do whatever it takes to keep Taiwan’s sport stars in Taiwan.

They wooed several local companies, raising NT$200 million (US$6 million) in corporate sports sponsorships. In the end, whether or not it was a matter of money, Hsieh downplayed her father’s comments, saying her heart belongs to Taiwan.

BUSINESS inDUstriaL feDeratiOn CaLLs fOr bOLD aCtiOn Concurring with many of the themes raised by AmCham Taipei in its 2013 Taiwan White Paper, the Chinese National Federation of Industries (CNFI), the leading organization representing domestic manufacturers, in mid-July urged the government to take bolder action to improve the domestic business environment and bring the local economy out of recession. In its own white paper, the group raised a total of 262 recommendations, the highest number in the organization’s history. Many of them dealt

12

a

n

b

r

i

e

f

s

Su-Wei Hsieh of Taiwan, left, and Shuai Peng of China pose with their trophies after winning against Ashleigh Barty of Australia and Casey Dellacqua of Australia in the Women's doubles final match at the All England Lawn Tennis Championships in Wimbledon, London, Saturday, July 6, 2013. photo : ap p hoto/anja nieDRinghaus

with easing the regulatory regime and removing roadblocks to private investment. CNFI Chairman Rock Hsu, who is also chairman of computer maker Compal Electronics, noted at a press conference that corporate earnings in Taiwan have declined for five consecutive years due to increasingly difficult global conditions, leading to a “vicious cycle of stagnating export growth and firms’ conservative capital spending.”

He urged the government to provide greater incentives to encourage private investment and innovation. The CNFI membership consists of 155 industry associations.

CaPitaL Gains taX rOLLeD baCK The legislature in late June passed a final reading easing rules on a controversial capital gains tax that had been depressing the local stock market turnover for months. The tax on capital gains from transactions of more than NT$1 billion was reduced from 2.25% under the original law to 0.1%, while no tax will be collected from individual investors whose annual transactions are below NT$1 billion. A requirement that investors pay capital gains tax once the TAIEX index reaches 8,500 points was also scrapped. The original laws were

passed last year and set to be implemented in 2014.

HOn Hai DiVersifies The world’s largest contract electronics manufacturer, Taiwan’s Hon Hai Precision Industry Co., is looking to reduce its reliance on making products for America’s Apple Inc., as Apple’s growth slows in the face of fierce competition from Samsung Electronics. Instead, Reuters reported, Hon Hai (also known as Foxcomm) plans to devote more resources to developing higher-margin businesses, such as new technologies, intellectual property, and e-commerce. Focal points will be research and development, software, and patent rights, Hon Hai Chairman Terry Gou told the company's annual shareholders’ meeting. He reported that Hon Hai already ranks eighth globally among companies in terms of the number of patents it holds. On the e-commerce front, it is planning to shift its China retailing focus to online sales, after a joint venture in China with German retailer Metro AG failed because of fierce market competition.

Hon Hai earned more than US$100 billion in revenue last year – with business for Apple estimated to account for up to 60% of the total.

taiwan business topics • august 2013

8_Briefs.indd 12

2013/8/2 12:12:11 AM

Issues

Is There TPP in Taiwan’s Future?

Experts call for more determined action to gain entry into the Trans-Pacific Partnership.

F

oreign commentators friendly to Taiwan have recently been calling on the Ma Ying-jeou government – in increasingly urgent tones – to work more actively toward gaining membership for Taiwan in the Trans-Pacific Partnership (TPP) trade bloc now under development.

At a forum in late June at the Heritage Foundation, the prominent Washington D.C.-based think tank, Heritage economist Derek Scissors said “Taiwan needs to be a lot more aggressive” about TPP membership than most people on the island seem to recognize. The benefits of joining the trade group would be significant, he said, but even more compelling are the potentially dangerous consequences of being excluded from the grouping.

Taiwan has done well in the past because of its important role in the international supply chain for technology products, but that position could disappear if Taiwan is deprived of preferential trade conditions available to its chief competitors, Scissors said. He noted that Taiwan “has a strong work force, good entrepreneurs, and plenty of capital – but only 23 million people and no resources.”

That makes Taiwan vulnerable if it finds itself outside the trade bloc.

“Economics is all about looking at the available substitutes and Taiwan can be substituted for real easy,” said Scissors. “That is the fate of small countries.”

Another panelist at the Heritage program, Jeffrey J. Schott, senior fellow at the Peterson Institute for International Economics, noted that while the impact of trade agreements usually takes some time to be felt, companies much earlier start to factor likely future trends into their business plans. The result may be “investment divergence,” with resources steered into markets that are expected to be the most promising in the future. As AmCham Taipei stressed in its 2013 Taiwan White Paper, Taiwan is already attracting far less foreign direct investment than nearly all of its regional neighbors.

The panel cited the eight-year timeframe for entering the TPP that President Ma has several times alluded to, though recently the President mentioned that the completion of free trade agreements with both New Zealand (already accomplished) and Singapore (expected soon) should permit Taiwan to accelerate that schedule.

Several of the Heritage speakers warned against being overly patient. “If Taiwan waits eight years, where will Taiwan be relative to its competitors in the region?” asked Rupert HammondChambers, president of the U.S.-Taiwan Business Council. He said a shorter timeline is essential to ensure that Taiwan “does not fall further into China’s economic sphere.”

Derek Scissors observed that since the severity of the economic

台灣能否加入跨太平 洋夥伴協議？ 專家呼籲採取更堅決的行動，爭取 加入跨太平洋夥伴協議（TPP）。

多

位友台外國評論家最近以較過去更迫切的 語氣，呼籲馬英九政府更積極為台灣爭取 加入目前持續發展中的跨太平洋夥伴協議 （TPP）。 華府知名智庫傳統基金會（Heritage Foundation） 的經濟學家史劍道（Derek Scissors）六月下旬在該 基金會舉行的一場論壇中指出，對於加入T P P， 「台灣政府必須」比大部分人民所認知的「更加積 極」。他表示，加入TPP這個貿易集團的好處相當 顯著，不過被排除在外的潛在危險後果更應值得關 注。 史劍道表示，台灣過往由於在科技業的國際供 應鏈中所扮演之重要角色而深受其惠，然而一旦台 灣無法享受與主要競爭對手同樣的貿易優惠待遇 之際，則台灣的榮景或將岌岌可危。他指出，台 灣「擁有強大的勞動力、優秀的企業家和充足的 資金，卻只有2300萬人，而且沒有資源」。因此 台灣若被排除在TPP之外，就會相當脆弱。史劍道 說：「經濟學的重點在於尋找可用的替代品，而台 灣相當容易被取代。這是小國的宿命。」 另一位出席論壇的彼德森國際經濟研究所 （Peterson Institute for International Economics）高級 研究員蕭特（Jeffrey J. Schott）指出，雖然人們通 常在一段時間以後方會察覺貿易協議所帶來之衝 擊，但企業往往在制定業務計畫時提早將未來可能 趨勢列為考量。結果可能造成「投資背離」，因為 資源多被投入在未來最看好的市場中。誠如台北市 美國商會在《2013年台灣白皮書》中所強調，台 灣在吸引外來直接投資上遠遠落後於大多數的亞洲 鄰國。 論壇討論小組舉例，馬英九數度暗示將以8年時 間加入TPP，不過最近他又提到，和紐西蘭（已簽 署）、新加坡（即將簽署）之自由貿易協議應可讓 台灣加入TPP的時程加快。傳統基金會論壇上數位 演講人提醒，台灣在這件事上不應過於有耐心。美 台商業協會（U.S.-Taiwan Business Council）會長韓 儒伯（Rupert Hammond-Chambers）質疑：「如果台

taiwan business topics • august 2013

8_Issues.indd 13

13

2013/8/2 12:10:10 AM

Issues threat may not yet be evident, people in Taiwan might imagine that “they don’t have to do anything dramatic” at this stage. He cautioned that if three years from now Taiwan comes to realize the significant danger posed by isolation from the TPP, it may be late to do much about it. He and Hammond-Chambers urged Taiwan to push forward aggressively now with meaningful economic reforms, despite the inevitable resistance from certain industrial sectors and political interests, to convince Taiwan’s trading partners of its commitment to liberalization and setting the stage for Taiwan to be welcomed into the TPP camp.

灣等待8年，還能在區域競爭中佔有一席之地嗎？」 他表示，唯有縮短時程，才能確保台灣「不會進一 步深陷中國的經濟影響圈之中」。 史劍道觀察發現，由於經濟威脅的嚴重性可能還 不明顯，台灣人民可能會認為現階段「無須大動作 因應」。他警告，如果3年後台灣才了解被孤立於 TPP之外的重大危險，可能早已來不及採取對策。 他和韓儒伯敦促台灣現在就積極推動有意義的經濟 改革（儘管將無可避免地招致某些特定產業和政治 利益勢力之反彈），讓貿易夥伴相信台灣推動自由 化之承諾，並為TPP陣營歡迎台灣之加入鋪路。

—– By Don Shapiro

— 撰文／沙蕩

Enhancing the Investment Environment Efforts at communication by AmCham’s PE Committee appear to be bearing fruit.

A

mCham Taipei’s decision last year to establish a Private Equity Committee was prompted largely by the failure in recent years of several high-profile investment cases involving private-equity money to win regulatory approval. The committee’s founding member companies were responding to a worrisome disconnect. With its many well-managed companies, key role in international supply chains, sound legal system, and many other advantages, Taiwan should be well-positioned to attract a substantial share of the expanding amount of PE investment coming into the Asian region. But as noted in this column in the May 2013 issue of Taiwan Business TOPICS, Taiwan actually ranked next to last – ahead only of Pakistan – in the volume of PE investment attracted over the past several years.

Leading international PE firms have clearly hesitated to pursue investment opportunities in Taiwan out of apprehension about the predictability and transparency of the approval process. Given the large sums that need to be first spent on legal, accounting, and consulting fees, these firms tend to submit an investment application only when they feel highly confident it will go through.

To help close the perception gap, AmCham arranged a series of meetings between its PE Committee and relevant government departments – notably the Investment Commission and Department of Investment Services under the Ministry of Economic Affairs (MOEA), the Council for Economic Planning and Development, and the Financial Supervisory Commission. “These sessions were extremely helpful in creating greater mutual understanding,” says William E. Bryson, PE Committee chairman. “Industry and government representatives were each able to communicate their concerns and to respond to one another’s points.”

14

強化投資環境 台北市美國商會私募基金委員會的溝通努 力，顯然正在開花結果。

由

於近年來數起牽涉到私募基金而又備受矚 目的投資案未能成功爭取主管當局批准， 台北市美國商會去年決定設立私募基金委 員會。本委員會的發起會員企業希望針對這樣一個 令人擔憂的脫節現象採取行動。台灣擁有包含管理 良好的企業、在國際供應鏈中扮演關鍵角色，以及 健全的司法體系等許多優勢，理論上應能從越來 越多流入亞洲的私募基金中，吸引大量資金投資 台灣。不過誠如本商會工商雜誌《Taiwan Business TOPIC》在2013年5月號的本專欄中所言，台灣過 去數年來所吸引的私募基金投資總額，其實排名倒 數第二——僅領先巴基斯坦。 主要的國際私募基金業者因為對核准過程的可預 測度和透明度甚為擔憂，因而對於尋求在台的投資 機會明顯裹足不前。考慮到一開始就得花費大筆的 法律、會計和諮詢費用，這些業者往往只有在覺得 極有信心會通過的情況下才會提出投資申請。

taiwan business topics • august 2013

8_Issues.indd 14

2013/8/2 12:10:11 AM

Issues Following those meetings, the Committee has been gratified by a series of local media reports indicating that AmCham’s suggestions are receiving favorable attention by the government. The deputy executive secretary of the Investment Commission, for example, was quoted by the China Post as saying the Commission plans to act speedily to revise inopportune rules and regulations in order to mitigate foreign investors’ uncertainty. The same article cited remarks by the MOEA deputy executive secretary pledging that the ministry will reevaluate the foreign investment application approval process and demand that regulatory agencies publish clear and comprehensive criteria for assessing investment proposals, with specific timetables for reaching final decisions.

Other reports from the Legislative Yuan said lawmakers intend to pass amendments overhauling and streamlining the investment approval process, for example reducing the maximum time allowed for rendering a decision from one year to three months.

Also reportedly underway is a move to amend 55 clauses in the Business Mergers and Acquisitions Act with the aim of improving the domestic environment for private-sector M&A. Specifically, one clause would raise the threshold for shareholder consent to two-thirds of total voting shares before an acquired company could be delisted after a merger. The more stringent conditions are expected to ease regulators’ concerns about the protection of minority shareholder rights in such cases – the main issue when proposed PE investment in electronic-component manufacturer Yageo Corp. was blocked in 2011 – and thus make it easier for investors to delist acquired companies from the stock exchange while those enterprises undergo restructuring.

“What we’re seeing has real potential for enhancing the investment environment,” says AmCham president Andrea Wu. “To help bring that potential to reality, the Chamber will continue to communicate with the relevant authorities as the specifics of the proposed new laws and regulations are drafted.”

為了協助消弭認知差異，本商會安排私募基金委 員會和台灣相關政府單位（尤其是經濟部下轄的投 審會和投資業務處，以及經建會與金管會）進行一 系列會談。私募基金委員會主席柏威廉（William E. Bryso）表示：「這些會議對於培養更多的相互了解 極有助益。業界和政府代表都能有機會說出自己的 疑慮，並回應他人的論點。」 會談過後，一連串的本地媒體報導指出，美國商 會的建言獲得台灣政府的正面關注，本委員會對此 感到滿意。舉例而言，英文《中國郵報》引述投審 會副執行秘書，表示投審會計畫儘速修改不適當的 規章和條例，以減少外國投資者的不確定感。同一 篇報導同時引述經濟部副執行秘書的談話，保證經 濟部會重新評估外國投資的申請核准程序，並要求 主管單位頒布明確而全面性的投資提案評估準則， 以及主管機關達成最後決定所需的明確時程。 其他立法院報告指出，立法委員打算通過徹底 修改並精簡投資核准程序的修正案，例如將做出投 資審核決定的最長期限從一年縮短為三個月。據報 導，同時在進行的還有修改企業併購法中55項條 文，目標是改善國內私部門企業併購的環境。特別 是其中一項條款將把股東的同意門檻提高至所有投 票股份的三分之二，接著消滅公司才可在併購後下 市。此一較嚴格的條件預料可以減少主管單位對於 自己需在這類個案中保護少數股東權益的考量（這 正是2011年私募基金投資電子元件製造商國巨公司 案遭到駁回的主要問題），進而在企業進行組織重 整時，投資人能更容易讓消滅公司從證交所下市。 本商會執行長吳王小珍表示：「當前所見的進 展確實皆可能強化台灣的投資環境。為了協助落實 此一可能性，在提案的新法律和法規進行起草的同 時，本商會將繼續和台灣相關當局溝通。」

—– By Don Shapiro

— 撰文／沙蕩

Tailwinds for ICAO Status Taiwan is hoping to gain observer status at the international aviation assembly this fall.

P

olitical factors – meaning Beijing’s objections to anything smacking of sovereign status accorded to Taiwan – have kept Taiwan out of nearly all international organizations, especially those affiliated with the United Nations.

A few years ago Beijing acquiesced to humanitarian appeals that Taiwan be permitted to attend annual sessions of the World Health Assembly as an observer. Improved cross-Strait relations after the Ma Ying-jeou administration took office contributed to

taiwan business topics • august 2013

8_Issues.indd 15

15

2013/8/2 12:10:11 AM

Issues

making that possible, but perhaps even more pertinent was the impact of the SARS epidemic of 2003 and later fears about the spread of bird flu. In the face of very real risks to public health, standing in the way of Taiwan’s ability to tap into exchanges of information among the world’s health authorities made Beijing seem callous and petty in the eyes of people in Taiwan and elsewhere.

Now Taiwan hopes that a similar logic will enable the island to achieve observer status in the 191-member International Civil Aviation Organization (IACO). Taiwan is responsible for the Taipei Flight Identification Region, through which some one million flights pass each year, and about 50 airlines operate flights from Taiwan to over 100 international destinations. Yet without being linked into the ICAO information system, Taiwan’s Civil Aviation Administration (CAA) often experiences a significant time lag in learning about changes in technology and procedures. Recently, for example, the CAA belatedly discovered that several Southeast Asian countries had changed the codes of flights passing through Taiwan airspace without its knowledge – news that had been disseminated through ICAO. Flight plans were rejected by the Taiwan computer system, which had to be manually overridden. As the episode shows, it is important to bring Taiwan’s aviation authorities into the information loop in the interest of passenger safety and operational efficiency.

Taiwan’s quest for observer status within ICAO got a recent boost when the U.S. Congress in June passed a bill – adopted unanimously by both the House and Senate – in support of that effort. The bill requires the U.S. Secretary of State to develop a strategy for obtaining such status for Taiwan, and to instruct the U.S. delegation at this year’s ICAO Assembly to urge other member states to back the move to admit Taiwan as an observer. When signing the legislation in mid-July, U.S. President Barack Obama reiterated that the U.S. government supports membership for Taiwan in international organizations that do not require statehood as a condition of membership, as well as meaningful participation in organizations where full membership is not possible.

China immediately lodged a protest with Washington that the legislation violated the One China principle.

“The joining of international organizations like ICAO by Taiwan compatriots is a matter for the Chinese people,” China's Foreign Ministry spokeswoman, Hua Chunying, said in a statement. “China opposes any foreign government, group, or individual poking their nose in.”

But some observers found it significant that Beijing’s objection was aimed at U.S. interference in the issue, not at Taiwan taking part in ICAO per se. As the ICAO Assembly meets only once every three years, Taiwan is hoping for a breakthrough at the upcoming session in Montreal starting September 24.

台灣順風爭取加入 國際民航組織 台灣希望能在今年秋天取得國際民航組織的 觀察員身分

由

於北京反對讓台灣沾上任何帶有主權地位的色彩的 此一政治因素，台灣一直遭幾乎所有國際組織拒於 門外，尤其是與聯合國有關的組織。 幾年前，北京基於人道訴求默許讓台灣以觀察員身分 參加世界衛生大會年會。馬英九政府上台後兩岸關係改善 固然對此有所助益，但是2003年嚴重急性呼吸道症候群 （S A R S）疫情爆發的衝擊，以及後來對禽流感擴散的憂 慮，也許才是真正背後的推手。由於事關真實而迫切的公 共衛生危機，從中作梗阻撓台灣取得世界各國衛生當局交 流的資訊使得北京政府在台灣與其他各國人民眼中顯得麻 木不仁且氣量狹小。 如今台灣希望能依循同樣的邏輯讓這個小島在有191個 會員國的國際民航組織取得觀察員身分。台灣負責的台北 飛航情報區每年大約有100萬個航班通過，此外約有50家 航空公司營運由台灣飛往國際之航班，飛航航點達100個 以上。然而，由於沒能和國際民航組織的資訊系統連線， 台灣的民航局（CAA）在取得技術和程序之重大改變的相 關資訊上，往往有相當大的時間落差。 舉例而言，最近民航局事後才發現，有幾個東南亞國家 改變了經過台灣空域的航班代號，由於消息是透過國際民 航組織發布，因此民航局渾然不知。相關航班飛航計畫因 而遭到台灣的電腦系統拒絕，必須改以人工方式撤銷。這 次事件顯示，為了乘客安全和營運效率，將台灣的民航當 局納入這個情報網至為必要。 針對台灣爭取國際民航組織觀察員地位一事，最新進展 誠為美國國會在6月由參眾兩院一致無異議同意通過法案對 此表示支持。法案中要求美國國務卿應擬訂策略協助台灣 取得此一地位，並且指示美國代表團在今年的國際民航組 織大會敦促其他會員國支持接納台灣成為觀察員的動議。 美國總統歐巴馬7月中簽署這項法案時重申，美國政府支 持台灣加入不以國家身分為入會要件的國際組織，也支持 台灣能有意義地參與那些台灣無法加入成為正式會員的組 織。 中國立即就此向華盛頓提出抗議，認為這項法案違反一 個中國原則。中國外交部發言人華春瑩發布聲明說：「台 灣同胞參與國際組織，包括國際民航組織活動問題，是中 國人自己的事。中方堅決反對任何外國政府、組織或個人 插手。」 不過，有些觀察家認為值得關注的在於北京反對的是美 國干預這個議題，而非台灣參與國際民航組織。由於國際 民航組織大會每三年才召開一次，台灣希望在即將於9月 24日於蒙特婁展開的會議期間能就此議題獲得突破。

— 撰文/沙蕩 —– By Don Shapiro

16

taiwan business topics • august 2013

8_Issues.indd 16

2013/8/2 12:10:11 AM

Cover story

TalenT

Attracting Talent 延攬人才

BY JANE RICKARDS

撰文 / 李可珍

taiwan business topics • august 2013

8_CoverStory.indd 17

17

2013/8/2 3:54:20 PM

P This article is the fifth and concluding report in a series of cover stories inspired by President Ma Yingjeou’s reference last year to the “Five Pillars” vital to Taiwan’s successful future economic development. Previous installments in the series dealt with liberalizing trade (the February issue of Taiwan Business TOPICS ), upgrading industry (March), securing a stable energy supply (April), and reforming higher education (May). All back issues can be accessed online in the Publications archive section. 針對馬英九總統去年提出確保台灣經濟發展的「五大支 柱」，本刊前後發表五篇文章加以探討，本文是其中最後 一篇。之前的幾篇分別探討了貿易自由化（T O P I C S二月 號）、產業升級（三月號）、確保能源供應的穩定性（四 月號）和高等教育改革（五月號）。早幾期的T O P I C S月 刊內容，放在台北美國商會網站Publications之下的Topics Archive欄位中。

馬

總統說，延攬外國人才是確保台灣未 來經濟繁榮發展的重要政策，但這方 面的進展有限。台灣要吸引世界一流 人才，有哪些障礙？ 全球性的中高階人才顧問公司主管和在台 跨國企業的重要人士指出，台灣要吸引一流 外來人才，還有許多需要排除的因素。其中 有些因素跟台灣總體經濟的困境有關，例如 薪資偏低而且幾乎沒有調整。還有一些因素 則涉及政府的政策，包括相對偏高的個人所 得稅率和對中國大陸人士受聘來台工作的限 制。 其他障礙包括英語環境未達理想，以及許 多在台灣才看得到的不當管制。這些規範不 僅侷限了跨國企業在台灣的發展，也使得台 灣本地具有雄心壯志的年輕人往海外尋求更 好的發展。台灣的市場條件常與世界脫節， 他們擔心，如果只具備台灣的職場經驗，將 使他們的生涯發展受到限制。 另一方面，就生活品質而言，各方一致認 18

resident Ma Ying-jeou has identified the attracting of foreign talent to Taiwan as a major policy requirement for supporting the island’s future prosperity, yet progress in that respect has been slow. What is standing in the way of making Taiwan a magnet for topnotch personnel from around the world?

Managers of global executive search firms and prominent members of the international business community in Taiwan cite numerous obstacles still lying in the way of wooing the best and brightest from abroad. Some of these, such as low and stagnating salaries, relate to Taiwan’s macroeconomic woes. Others, including the relatively high personal income tax rates and restrictions on the ability of mainland Chinese citizens to be employed in Taiwan, are matters of government policy.

Additional obstacles include the less-thanideal English-speaking environment and the existence of many onerous unique-to-Taiwan regulatory practices. Such regulations not only inhibit the growth of international business here, but also drive ambitious young Taiwanese to seek opportunities overseas, where they can gain a broader business outlook. Limiting their professional experience to Taiwan’s often outof-sync market conditions, they fear, will stunt their career growth.

On the other hand, there is wide agreement that Taiwan has a significant advantage over many of its neighbors in terms of its high quality of life. Taiwan’s friendly people, safe envi-

為台灣比起許多鄰近國家具有很大的優勢。 台灣人民友善，生活環境很安全，自然景觀 壯麗而且風景區容易到達，加上空氣品質大 致良好，這些都是很大的優點，在中國大陸 和區域內工作的人士可以選擇台灣做為舒適 的根據地。但在國際間，並不是大家都知道 台灣具有這些良好的條件，因此需要多加宣 傳和介紹。 行政院經濟建設委員會副主任委員陳小紅 說，台灣人口快速老化，勞動年齡人口逐漸 減少，明顯需要新的人才。台灣每名婦女僅 生育1.1個孩子，生育率低於南韓和日本，而 且在全球排名倒數第三位。台灣潛在勞動人 口最早可能在2015年便開始減少。 台灣經濟曾經有數十年的兩位數成長，從 農業社會進步到已開發經濟體，但美商道富 銀行台北分行總經理黃素貞說，如今台灣陷 於「中等收入困境」。意思是經濟發展到人 均所得達到一定的水準，但很難再進一步提 升。處在這種困局的經濟，既要在先進技術

taiwan business topics • august 2013

8_CoverStory.indd 18

2013/8/2 3:54:21 PM

TalenT

ronment, stunning and easily accessible natural scenery, and generally clean air are major drawing cards that could make the island a comfortable base for those doing business in China and the region.

These assets are not widely known internationally and need to be better promoted, however.

Taiwan’s need for fresh talent is clear, given its rapidly aging society and declining working age population, says Nancy Hsiao-Hung Chen, deputy minister of the Council for Economic Planning and Development (CEPD). Taiwan’s fertility rate – at 1.1 child per woman – is below that of South Korea or Japan, and in fact is the third lowest globally.

Taiwan’s potential workforce is due to start shrinking as early as 2015.

After decades of double-digit growth during Taiwan’s ascendancy from a farming society to developed economy, the island has now become stuck in what Jane Hwang, general manager of State Street Bank and Trust Taipei Branch, describes as a “middle income trap.” The term refers to a situation in which an economy has reached a certain level of per capita income but finds it difficult to move ahead further. Such an economy thus faces challenges in competing both with advanced rivals in high-skill innovation and with low-wage countries in the

inexpensive production of manufactured goods. In addition, the OEM (contract manufacturing) model that Taiwan has relied on so heavily over the years typically means low margins without the greater profits that come from branding and innovative research and development.

As a result, salaries have stayed rather flat for over a decade, falling behind much of the rest of the region. Even for relatively high-paying jobs, such as those

in the financial sector, salaries here are still considerably less than in neighboring countries. Hwang estimates that midlevel banking executives in Taiwan receive half to two-thirds of the income earned by their Hong Kong counterparts. The result is a brain drain, with Taiwan’s best talent opting for better-paying jobs in Shanghai, Hong Kong, or the United States.

“The main reason why talent is not coming here is lack of opportunities,”

HIGH-LEVEL SUPPORT — At various forums over the past few years, President Ma Ying-jeou has emphasized the need for Taiwan to do more to attract international talent as part of its effort to enhance the investment climate.

的創新方面跟已開發國家競爭，又得在低價生產製造業 產品方面，面對工資較低國家的挑戰。而且，台灣多年 來高度倚賴的代工生產模式獲利往往偏低，不像品牌產 品和創新研究與發展那樣可以帶來豐厚的利益。 因此，台灣的薪資十幾年來幾乎沒有成長，上升的幅 度不如區域內許多國家。即使是相對高薪的工作，例如 金融業的職缺，薪水也遠低於鄰近國家的水準。黃素貞 估計，台灣銀行業中層主管的薪水，大約是香港同業薪 水的一半到三分之二。結果造成人才外流，台灣最好的 人才會選擇上海、香港或美國薪資相對較高的工作。 眾群國際人力顧問公司董事總經理方胤中說：「人才 不願意來，主因在於沒有工作機會。」他並指出台灣存 在供需失調的問題。有許多外國高階主管想要到台灣， 在製藥、消費產品和金融服務等行業工作，因此主動把 履歷寄給他。他們想到台灣，一般是因為相較於歐洲和 其他市場，亞洲的經濟前景看好。但進一步詢問之後， 這些人因為台灣提供的薪資較低而打退堂鼓。而且，台 灣的企業對於不會說中文也不瞭解本地市場的外籍主 管，往往興趣缺缺。 同時，方胤中說，有時本地企業會請他的公司在台灣

photo : cna

物色高階主管人才，適合的人選往往很少。他說：「這 是因為台灣好的人才很早就去香港或新加坡發展。那裡 有比較多的發展前景。這對台灣整體人才庫來說不是好 事。」 經建會副主委陳小紅點出另一個問題。經建會曾針 對40多個關鍵產業進行人才調查，受訪的本地企業主 常說，他們在許多重要領域找不到足夠的人才，包括雲 端運算和資訊暨通訊技術的高階設計人才。她說，台灣 會展產業需要在國際行銷和安排國際活動方面具有豐富 經驗的人才，但也有人才不足的現象。但如果問雇主是 否計劃聘用外國人才，他們往往會說不要，原因在於他 們「付不起高薪」。

文化障礙 台灣企業絕大多數是中小企業，而且往往是家族經 營。造華人力資產顧問股份有限公司大中國區總監陸 造仁說，即使是比較大的公司，也存在「或多或少的 家族企業心態」。他說，這個因素使得外國來的主管 難以適應公司文化，而且他們也可能感到挫折，因為

taiwan business topics • august 2013

8_CoverStory.indd 19

19

2013/8/2 3:54:21 PM

Cover story says William Farrell, managing partner for Boyden global executive search. He also points to a mismatch in supply and demand. Boyden receives many unsolicited resumes from senior foreign executives who are considering the idea of working here in a variety of industries ranging from pharmaceuticals to consumer products to financial services, Farrell says. They are generally motivated by the prospect of Asia’s economic rise compared with the stagnation in Europe and other markets. But after inquiring further, they are put off by the relatively low salaries – plus Taiwanese companies tend not be interested in executives who lack Chinese-language abilities and knowledge of the local market.

At the same time, says Farrell, when his firm is asked by local companies to recruit top talent for leadership positions in Taiwan, the pool of available qualified candidates is invariably quite small.

“That’s because bright Taiwanese go off early to build a career in Hong Kong or Singapore where there’s more opportunity for career growth,” he says. “This has a negative impact on the overall talent pool

in the market.”

The CEPD’s Chen notes another mismatch. In the council’s surveys of talent availability in over 40 key industries, local employers often state that they are unable to find sufficient talent in many important areas, including cloud computing and high-level ICT design. There is also a shortage of experienced personnel for the MICE (Meetings, Incentives, Conferencing, and Exhibitions) business to manage international marketing and arrange international events, she says. But when the employers are asked whether they plan to hire foreign talent, she adds, they usually say no, explaining that they “cannot afford to pay the high salaries involved.”

Cultural issues The great majority of Taiwan’s businesses are small-and-medium sized enterprises, often family-run. And even in larger companies, “a degree of family-business mindset” still remains, says Paul Lo, managing director for Greater China with Strategic Executive Search. He

擁有企業的家族成員不願讓外籍主管和他們平起平 坐。他說：「許多公司仍有由上而下的威權式管理文 化。」而且雇用高級人才時，信任和相處融洽的程度 可能比能力更重要。但他認為，這個情況在逐漸改 變，因為許多台灣企業的創辦人已經逝世或退休，而 第二代的企業主可能沒有創辦人的生意頭腦，甚至對 家族企業本身都沒什麼興趣。 對於台灣用什麼辦法最能吸引外國人才的問題， 提供中高階人才招募服務的台灣光輝國際股份有限公 司董事總經理林承皓說，應該降低台灣偏高的個人所 得稅率。他指出，台灣對於年收入在14萬1,000美元 以上的人課徵百分之四十的所得稅，達到香港和新加 坡稅率的兩倍，而這兩個地方的企業所提供的薪資高 於台灣，這使得具有豐富經驗的專業人士不願來台灣 工作。他指出，台灣要吸引人才，得直接跟香港和 新加坡競爭。根據林承皓的經驗，如果台灣降低稅 率，許多目前在中國大陸或區域內其他地方工作的外 籍主管願意來台灣任職。（方胤中補充說，外籍主管 從稅率較低的國家應聘來台灣工作時，往往會期待雇 主多付一些薪水，以彌補繳稅造成的損失，但資方不 見得都願意多負擔這筆費用。） 林承皓指出，中國個人所得稅率最高可達百分 之四十五，但個人可以透過周詳的計畫免除部分 負擔，例如利用房屋支出和子女學費來抵稅。他 說：「在中國實際繳納的所得稅率可以降低到百分之 20

says this factor makes it hard for executives from abroad to adapt to company culture, and they may also find it frustrating to be treated as less than an equal by members of the owning family. “Many companies still have a top-down authoritative management culture,” Lo says, and hiring top talent may be more about trust and comfort levels than purely a question of ability. He sees the situation as gradually changing, however, as the founders of many Taiwan companies die or retire, and the second generation may not possess the same business acumen or even much interest in the family enterprise.

Asked to name the most effective move Taiwan could make to attract foreign talent, Richard Lin, the managing director for Taiwan at Korn/Ferry International, an executive search firm, suggests lowering Taiwan’s relatively high personal income tax rates. He notes that Taiwan’s rate of 40% on income of US$141,000 and above deters highly experienced professionals from accepting jobs in Taiwan when the rates in Hong Kong and Singapore are less than half of that level. Taiwan is directly compet-

二十或百分之三十。」他建議，在稅率維持不變的情 況下，可以針對在台灣的外籍人才訂定類似的減免政 策。 林承皓說：「你可以說：『為何要給外籍人士不 同的待遇？』但他們就是不一樣，因為他們給我們的 企業界和社會帶來很多東西。」他說，台灣的創業精 神在全球名列前茅，但台灣與國際商務人士的接觸不 夠，結果是沒有什麼機會培養在全球經濟體系中成功 所需的國際觀。在職場上與更多外國同事合作，可以 改善這個缺失，讓台灣上班族的水準能夠提升。 台灣無法成為區域營運中心的另一個重要因素， 在於中國大陸員工要受聘來台工作還是有所限制。 中國是世界主要經濟體之一，也是台灣的近鄰，但 台海兩岸之間長期敵對所造成的這個後果，使大陸 人民來台受到層層管制。如果無法從大陸這個主要 市場聘請員工，跨國公司就不太可能把台灣當做區 域的營運總部。 道富銀行台北分行總經理黃素貞指出，如果企業 的區域總部不設在台灣，許多志向遠大的人就會到 國外發展。她說：「台灣的好人才如果想要在職場 有好的發展，就不太會留在台灣。在一個單一市場 工作會使你的視野受限，因為你沒有機會瞭解其他 市場，也就沒有比較的基礎。此外，少了跨國企業 的區域總部，台灣也很難招募目前受聘在中國工作 的外籍人才。」

taiwan business topics • august 2013

8_CoverStory.indd 20

2013/8/2 3:54:21 PM

TalenT

ing for talent against these city states, which also offer higher salaries than those in Taiwan, he notes. In Lin’s experience, many executives now in China or elsewhere in the region would be open to working to Taiwan if the tax burden were lower. (Farrell adds that when candidates for positions are recruited to come to Taiwan from lower-tax countries, they usually expect to receive a taxequalization package to make up for the difference, but companies are not always willing to take on that added expense).

A l t h o u g h C h i n a ’s t o p p e r s o n a l income tax bracket may be as high as 45%, Lin notes that the burden can be offset through careful tax planning, taking advantage of tax breaks on allowances for such items as housing and children’s school tuition. “The effective rate in China can drop to 20% or 30%,” he says. Lin recommends instituting similar tax-relief policies for foreign talent working here, even if the nominal rate remains the same.

“You could say ‘why should expats be treated differently’? But they are different in that they bring a lot to our busi-

BRAIN DRAIN — Many of the students at this job fair in southern Taiwan may wind up taking offers in China or elsewhere overseas because of higher pay and better prospects for career advancement.

台灣的政府說要放寬中國籍人士來台的限制。比方 說，台北美國商會會員經常抱怨，他們在為中國關係 企業的員工辦手續來台灣受訓、開會、從事短期工作 或其他商務活動時，常會面臨延誤或其他問題。眾群 國際的董事總經理方胤中說，台灣要成為區域營運中 心的最大障礙之一，就是在台灣的企業無法臨時把亞 洲地區主要市場的員工一起找來台灣開會，因為在中 國大陸的員工除非提前好幾個星期提出申請，否則便 無法如期前來台灣。 企業常說，申請手續往往費時一個月或更久。但台 灣政府官員說，造成延誤的是中國大陸的行政程序， 問題不在台灣這邊。內政部入出國暨移民署署長謝立 功說，新的規定是企業年營業額如果達到一億新台幣 以上，他們在大陸的同事便可以在網上辦理來台從事 商務活動的申請，並且在三個工作天以內取得入境許 可。根據計畫，這個辦法從明年起將擴大適用於所有 的企業。規模較小的公司目前要完成這個手續需十個 工作天，因為公文可能需要經過好幾個政府部門。 台北美國商會會員提到耗時一個月的問題，原因在 於中國人民要出境，也得經過大陸當局批准，而手續 需要三個星期或更久才能完成。行政院大陸委員會副 主任委員林祖嘉說：「問題出在他們那邊。」雖然有 大陸人民不得在台工作的禁令，但台灣政府想出一些 變通的辦法，讓少數大陸人在台灣工作，並且計劃在 未來擴大適用（請參閱邊欄說明）。

photo : cna

瞄準中國人才 行政院經濟建設委員會副主任委員陳小紅表示， 馬政府延攬國際人才政策的主要目標，著眼於中國大 陸，原因在於大陸人士同樣說國語，也瞭解台灣本地 文化。陳小紅說：「大陸人士是我們延攬人才的最主 要目標，因為我們認為大陸人士要融入台灣的環境不 會有什麼問題。」 她補充說，要吸引頂尖的歐美人 才幾乎是不可能的任務，因為台灣的薪資水準太低。 但是對大陸人士而言，台灣的薪資水準或許比較能接 受。然而，馬政府若要放寬企業雇用中國籍人士的限 制，可能會在國內面臨強大的政治阻力。 政府的移民政策中，外資圈普遍詬病的另一個問題 在於，台灣法令規定企業聘用的外籍白領員工必須擁 有大學學歷，並有兩年以上的工作經驗，除非是跨國 企業調派來台的員工，而且已經在該企業工作一年以 上。具有研究所學歷的外籍人士不受兩年工作經驗的 限制。 行政院勞工委員會智業訓練局外國人聘雇管理組組 長陳瑞嘉強調，只要勞委會與聘用企業之主管機關認 定受僱者條件符合，亦不受兩年工作經驗的限制。舉 例而言，外國投資的五星級飯店若想聘用外國大學畢 業但無工作經驗者，勞委會將徵詢交通部意見（觀光 局隸屬於交通部）。陳瑞嘉說，只要勞委會與交通部

taiwan business topics • august 2013

8_CoverStory.indd 21

21

2013/8/2 3:54:21 PM

Cover story ness community and society,” says Lin. He argues while Taiwan’s entrepreneurial spirit is one of the strongest in the world, Taiwanese lack sufficient exposure to international businesspeople – and as a result have little chance to develop the international mindset needed to succeed in the global economy. Collaborating with more foreign colleagues in the workplace would redress that shortcoming, raising the standards of Taiwanese employees.

Another major obstacle preventing Taiwan from becoming a regional operations center is the continued restriction on the employment of mainland Chinese personnel, a legacy of longtime cross-Strait hostilities, which severely constrains the flow of people from one of the world’s major economies and a close neighbor. Multinationals are unlikely to consider Taiwan as a hub if employees from such a major market as China must be excluded.

State Street’s Hwang notes that in the absence of a company’s regional headquarters in Taiwan, many ambitious people will head offshore. “It’s difficult

for talented people to remain in Taiwan if they want to climb the corporate ladder,” she says. “Working in a single market confines your outlook because you aren’t able to understand the other markets and have no basis for comparison.” Further, the absence of regional headquarters here also leaves Taiwan with little chance to try to poach expatriate talent currently stationed in the world’s most populous market.

The government says it is working to relax the restrictions on mainland personnel. For example, AmCham members often complain of delays and difficulties in bringing employees from sister companies in China to Taiwan for training, conferences, short-term assignments, and other business activities. One of the biggest barriers to Taiwan becoming a regional hub, says Boyden’s Farrell, is the inability for companies here to host meetings that bring employees from major Asian markets together on short notice to resolve a problem, since Chinese colleagues cannot participate unless they have several weeks’ notice to go through

AN EASIER PATh TO PERMANENT RESIDENCY

W

hen Taiwan first instituted a system for granting permanent residency to foreigners more than a decade ago, the process was notoriously bureaucratic. But obtaining a coveted alien permanent residence certificate or APRC is now much faster and more convenient. For long-term residents of Taiwan, the government has eliminated some of the more onerous requirements, such as criminal background checks by the foreigner’s host country.

To date, roughly 8,500 foreigners living in Taiwan hold permanent residency, according to National Immigration Agency (NIA) statistics.

By nationality, the largest contingent is the 1,537 Japanese, who are mainly here for business purposes. The next largest group is the 1,359 Malaysians, followed by 1,011 Thais. Americans, numbering 973, represent the biggest group of Westerners, with the majority of them in the educational field. Most of the foreign permanent residents live either in Taipei or New Taipei City.

Permanent residence status in Taiwan for occupational purposes can be obtained in several different ways. Foreigners who have lived in Taiwan for five consecutive years are eligible to apply, providing there are no large breaks in employment. Periods of residency as a student or foreign laborer do not count toward the required five years. To apply, interested foreigners must also hold a valid alien residence certificate (ARC) that expires at least two months from the time of application. They also need to submit ROC income-tax 22

statements, proof of employment from their company, and evidence either that their monthly salary exceeds NT$37,560 or that they own real estate or movable property worth at least NT$5 million.

The biggest headache in applying for an APRC used to be obtaining clean criminal-record certificates from the applicant’s home country, in addition to similar certificates from the Taiwan police.

The host country police certificates also needed to be notarized by the local Taiwanese overseas mission and translated into Chinese, and the translations then had to be notarized by an overseas mission, Taiwanese notary, or Taiwanese district court.

But in late October last year, the government eliminated this requirement for foreigners who have lived in Taiwan for five years or more and have not left the country for more than three months at a time. These foreigners need only apply for a clear criminal-record certificate from the Taiwanese police, a process that takes only a few working days. This group of foreigners is also exempted from undergoing a health check, whereas other applicants must undergo a health exam and submit a certificate from the Ministry of Health and Welfare as part of their application.

Once a permanent residency application is filed, the process takes at least three weeks and costs NT$10,000. After receiving permanent resident status, foreigners can be employed in any field in Taiwan, but currently must apply to the Council of Labor Affairs

taiwan business topics • august 2013

8_CoverStory.indd 22

2013/8/2 3:54:22 PM

TalenT

the application process.

But officials say the oft-cited delays of a month or more are now the result of Chinese rather than Taiwanese bureaucracy. Director-General Hsieh Li-kung of the National Immigration Agency says that a new system for companies with annual business volume of over NT$100 million enables their mainland associates to file online applications and gain permission to attend events in Taiwan in only three working days. Starting next year, plans call for the system to be expanded to all business ventures. For smaller companies, it currently takes 10 working days for the process, as several different ministries may need to be consulted.

The delays of up to a month reported

by AmCham members are because Chinese nationals also need permission from the mainland authorities, which takes three weeks or more. “The problem is on their side,” says Lin Chu-chia, deputy minister of the Mainland Affairs Council. The government has also found creative ways to allow a relatively small number of mainland personnel to work

here, despite the general ban on that activity, and plans to expand the scope (See the sidebar for more details).

Targeting mainland talent CEPD’s Nancy Chen says the chief target of Ma’s policies for attracting international talent will be mainland Chinese because they speak Mandarin and understand the local culture. “They are the main and first target because we think they won’t have much trouble adjusting to this country,” she says. Attracting top American and European talent is probably impossible, she adds, because Taiwanese salaries are too low – but the salary levels may be more acceptable to mainlanders. Policies to relax entry for Chinese employees may well run into stiff domestic political resistance, however.

Another area of immigration policy that has been widely criticized by the foreign business community is the requirement that white-collar employees hired for a position in Taiwan must hold a bachelor’s degree and have at least two

(CLA) for an “open” work permit if they wish to continue working.

Chen Jui-chia, director of the CLA’s Foreign Workers Administration Division, says the government is planning to eliminate this requirement, however.

Another issue associated with permanent residence has been the requirement that APRC holders spend at least 183 days in Taiwan each year. Expatriates who need to take numerous business trips therefore worry they could lose their permanent residency status.

But this rule is also due to be revised. The government plans to seek a change in the law to permit APRC holders to stay abroad for up to five years without losing their permanent residency status.

Besides obtaining APRC status through length of residence, another way is to make a substantial investment in Taiwan – NT$30 million or more in government bonds over three years or NT$15 million in a profitable enterprise that creates five or more job opportunities for Taiwanese over three years.

The final way to obtain permanent residency is to have professional abilities that can make an outstanding contribution to Taiwan.

Those eligible for this category include foreigners who have received awards from Taiwan’s ministries, the premier, or the president. They also include foreigners who have been rated in the world’s top five in awards ceremonies or competitions in fields that benefit Taiwan’s economy. Other suitable applicants include Olympic medalists, top academics, and senior professionals with skills in emerging industries or key technologies needed by Taiwan, or those who have made an outstanding contribution to democracy, human rights, religion, edu-

years of work experience – unless they are assigned to Taiwan by a multinational company for whom they have worked for at least a year. Holders of graduate degrees are exempt from the two years’ work experience.

Moreover, Chen Jui-chia, director of the Foreign Workers Division within the Council of Labor Affairs (CLA), stresses that the two-year work experience requirement can be waived if the CLA and the ministry in charge of the hiring company’s industry regard it as appropriate. If a foreign-invested fivestar hotel wants to hire a foreign university graduate with no work experience, for example, the CLA would consult with the Ministry of Transportation and Communications, the parent body of the Tourism Bureau. If the CLA and MOTC both “think the foreigner in question is worth hiring, we will forgo the two-year requirement,” he says. Foreigners without a university degree may apply for a work permit only if they have five years of specialist or on-the-job training.

In addition, all foreign white-collar

Applicants for ARCs and APRCs at the National Immigration Agency in Taipei.

photo : Lev nachman

cation, economics, or in improving Taiwan’s image. As an example in this group, NIA Director-General Hsieh Li-kung cites former American Institute in Taiwan Director William Stanton, who was awarded APRC status after retiring from AIT last year.

— By Jane Rickards taiwan business topics • august 2013

8_CoverStory.indd 23

23

2013/8/2 3:54:23 PM

Cover story talent can only be hired if the monthly salary offered is NT$47,971 or higher, and if the hiring company has an annual business volume of NT$10 million or above. The business volume threshold does not apply to private teaching institutions such as bushibans, where the Ministry of Education instead determines how many foreign teachers may be placed in each company after evaluating the size of the operation.

Generally the rejection rate over the years for work permit applications has been quite low. In 2012, for example, out of 8,485 applications, only 49 were turned down. The two main reasons for rejection were that the foreigner in question was not considered qualified and that the hiring company did not have sufficient business volume.

The rationale behind the two-year work experience requirement, explains CEPD’s Nancy Chen, is the perception in Taiwan that this society already has too many college graduates, leading to concern that opening the door too widely to foreign professionals would deprive local citizens of job opportunities. But many see that view as outdated, arguing that liberalizing the policy would in fact help enlarge the overall employment

pie. Korn/Ferry’s Richard Lin, for example, maintains that it is vital for Taiwan’s economic development to encourage as many foreigners as possible to work here as a way to help re-energize the business environment. “The center of economic gravity has shifted to Shanghai and Beijing,” he notes. Shifting some of that international attention back to Taiwan will be difficult without drawing in more foreign talent.

The most recent loosening of the twoyear work experience took place in June last year, when the government decided to allow foreign students from Taiwanese universities, including overseas Chinese students such as those from Hong Kong and Macau, to accept jobs in Taiwan immediately after graduation. The aim was to help keep talent cultivated in Taiwan on the island, rather than merely training them for the benefit of some other economy. The salary threshold for this group was also lowered to NT$37,619. According to the CLA, some 600-700 foreign graduates of Taiwan universities are now working here under this provision.

But the NT$37,619 minimum salary has also come in for criticism. Cosmas Lu, managing director of Barclays Bank

都「認為該名外籍人士值得聘用，我們會排除兩年 工作經驗的限制」。不具大學學歷的外籍人士需有 五年以上的專業經驗或在職訓練，才可申請台灣的 工作簽證。 此外，企業聘僱外籍專業人士，月薪至少需達新 台幣47,971元以上，而且聘僱企業的年營業額要達 到新台幣1,000萬元以上。補習班等私人教育機構 不受年營業額門檻的限制，而是由教育部依機構營 運規模進行評估後，決定各機構可雇用幾名外籍教 師。 一般而言，近年工作簽證申請遭駁回的機率相當 低。以 2012年為例，8,485個工作簽證申請案件 中，只有49件被駁回。申請遭駁回的主因有二：提 出申請的外籍人士資格不符，或是聘僱企業的營業 額未達標準。 陳小紅解釋，限定要有兩年工作經驗的根本原因 在於社會大眾普遍認為大學畢業生比比皆是，有人 擔心如果對外籍專業人士敞開大門，恐會剝奪本國 人才的工作機會。然而，許多人認為這樣的觀念早 已落伍，他們認為政策開放反而有助於擴展整個就 業市場。台灣光輝國際股份有限公司董事總經理林 24

Taipei Branch, says the salary threshold does not help Taiwan develop competitive local talents in the long run. Taiwan should be more open to foreign talents and allow local graduates to compete and learn from them, Lu argues. “Good talents, local or foreign, are not looking to be protected. They are looking to be challenged.They want to be up against the best and increase their own value and competitiveness.”

New legislation In another new initiative, the NIA has drafted wide-ranging amendments to the Immigration Act, says Director-general Hsieh, but the bill is currently stuck in the legislature, which has a large backlog of pending legislation and has accorded the immigration bill relatively low priority. In recent years, it has become much easier for foreigners to acquire permanent residency in the form of an alien permanent resident certificate or APRC (see sidebar). If passed, the draft amendments would ease the situation further by revising the current stipulation that APRC holders must spend 183 days in Taiwan each year or risk losing their status. In the proposed revision, loss of permanent resi-

承皓就主張，延攬更多外籍人士來台工作對國內經 濟發展至關重要，此舉有助於活絡整體經濟環境。 林承皓指出：「世界經濟重心已經轉移到上海和北 京」。若無法吸引更多外國人才來台，台灣很難有 機會再次引起國際社會的重視。 去年六月，政府決定放寬規定，讓台灣各大學的 外籍留學生（包含港、澳僑生），畢業後可立即在 台就業，不受兩年工作經驗限制。這項政策旨在留 住台灣培育的人才，以免為人作嫁。此外，大學應 屆畢業的僑生及外籍生，薪資門檻也調整為新台幣 37,619元。根據勞委會資料顯示，大約有600-700名 外籍生因而受惠，畢業後留在台灣就業。 然而，薪資下限調整為37,619元也遭致批評。巴 克萊銀行台北分行董事總經理陸怡豪認為，長遠來 看，訂定薪資門檻並不能幫助台灣培育出具競爭力 的本國人才。陸怡豪主張，政府應放寬限制，延攬 更多外籍人才來台，讓本國大學畢業生有機會與其 相互切磋，一較高下。他說：「不論是本國或是外 籍人士，優秀人才需要的不是政府保護，他們想要 接受挑戰，想要和頂尖人才較量一番，以提升自己 的價值和競爭力。」

taiwan business topics • august 2013

8_CoverStory.indd 24

2013/8/2 3:54:23 PM

TalenT

dency would occur only if foreigners stay abroad for more than five years.

In another change, the children of Taiwanese nationals born overseas would automatically receive residency rights in Taiwan regardless of their age – opening up another talent pool to be tapped.

Other amendments were introduced for humanitarian reasons to help keep families together, for example allowing disabled unmarried adult children of expatriates with ARCs to also receive ARCs so they can live with their parents.

The draft would also permit the spouses and children of foreigners who receive an APRC for outstanding achievements or high investment to automatically receive permanent residency.

Another outstanding issue involves the retirement rights of foreign academics employed by public universities, who currently are not eligible to receive the same benefits as their local counterparts, even though they pay domestic taxes. The CEPD’s Nancy Chen says that while existing Taiwan law does not permit dual citizenship, the government is now considering allowing highly qualified foreigners to obtain ROC citizenship without giving up their original nationality. Foreign scholars in this category

ENTRY FOR CHINESE PROFESSIONALS — The signing ceremony for a cross-Strait investment protection agreement. With the opening of mainland investment in certain business sectors in Taiwan, a limited number of PRC employees have been allowed to live and work in Taiwan. photo : cna

would then be able to receive Taiwanese retirement packages.

Taiwan law so far permits foreign students to accept internships here, but no system is in place for issuing residency rights to foreign interns who are already university graduates. CEPD’s Chen says

新法規 另一方面，內政部入出國及移民署署長謝立功指 出，移民署已針對「入出國及移民法」提出全面性的 修正草案，但目前這項法案仍在立法院等待審議。在 立法院等待審議通過的法案數目繁多，移民法修正草 案的優先順序並不高。近年來，外籍人士要取得永久 居留權—亦即外僑永久居留證（APRC，請參閱邊欄 說明），比以前容易許多。若移民法修正草案順利通 過，現有規定將進一步放寬。取得永久居留證的外國 人每年須在台住滿183天，否則居留證將被撤銷的規 定將會取消。根據修正版本，要連續五年以上不在台 灣，永久居留證才會遭到撤銷。 另一項修正草案規定，中華民國國民在海外出生 的子女，不論年齡均可自動取得台灣居留權，如此這 個族群可望成為另一個人才庫。其他基於人道考量、 旨在讓外籍人士一家團圓的修正草案條文還包括，取 得外僑居留證的外籍人士若有已經成年但未婚而且身 心障礙、無法自理生活的子女，也可以取得外僑居留 證，讓他們可以來台和父母同住。此外，根據修正草 案，外籍人士若因特殊貢獻或重大投資而取得居留

the government plans to study this issue, however, as graduate internships are becoming a popular trend overseas.

Despite these improvements to overall immigration laws and policies, various regulatory restrictions continue to apply to particular professions. Foreign doctors

證，則他們的配偶和未成年子女也可以自動取得外僑 居留證。 另一項尚待解決的議題，涉及台灣公立大學聘僱之 外國學者的退休權益。依照現行法令規定，即使外籍 教授按時納稅，仍然無法享有與本國籍教授同等的福 利。行政院經濟建設委員會副主任委員陳小紅表示， 雖然現行法令不允許雙重國籍，政府目前正研擬開 放，讓具有專業背景的外籍人士無需放棄本國籍，也 能取得中華民國國籍。如此，外國學者也能受惠於台 灣的退休福利制度。 目前，台灣法規開放外籍學生接受實習工作，然而 已取得學士學位的外籍實習生如何取得在台居留權， 尚無相關規定。陳小紅說，政府將就此議題進行探 討，因為畢業實習在國外已蔚為趨勢。 儘管移民法和移民政策已有了全面性的進展，許多 法規限制仍然對特定外籍專業人士設限。例如，外籍 醫生或建築師必須通過以中文進行的考試並取得本地 證照，才能在台灣執業。行政院勞工委員會職業訓練 局外國人聘雇管理組組長陳瑞嘉解釋，外籍律師可以 向法務部申請在台執行外國法律業務，但必須先通以 中文進行的本國律師執照考試，始可執行台灣法律業

taiwan business topics • august 2013

8_CoverStory.indd 25

25

2013/8/2 3:54:23 PM

Cover story and architects, for example, can only practice in Taiwan if they pass Chineselanguage examinations and obtain a local license. Foreign lawyers, explains Chen Jui-chia, can apply to the Ministry of Justice to practice foreign law but can only practice Taiwanese law if they have a local lawyer’s license, also obtained by sitting for a Chinese-language exam. (A way of getting around this barrier, adds Chen, is for the foreign lawyer to be hired by a local law firm under the formal title of “consultant”). Foreign-trained chiropractors receive no recognition, as there is not even an examination they can take to get licensed.

In the financial sector, in addition, foreign talent is deterred by restrictive laws and regulations, often unique to Taiwan, old-fashioned, and out of line with international practice. Among the many examples cited by Barclay’s Lu are restrictions placed on Taiwan’s bond market. He notes that local life insurance companies, pension funds, and other institutional investors have a strong demand for international bonds, including government bonds, corporate bonds, and other fixed-income instruments. But Taiwan-based banks, unlike their coun-

terparts in London, Singapore, Hong Kong, and New York, are not permitted to broker them.

“This is one of the reasons why we send local talents to Hong Kong,” Lu says. According to AmCham’s 2013 Taiwan White Paper, the fixed-income business has an estimated volume of more than US$120 billion a year, mostly serviced by offshore financial institutions.

“A lot of Taiwanese university students want to work in Taiwanese financial institutions,” says Lu. “But I have to tell them that for one of my most profitable businesses, it’s best that I send you to Hong Kong.”

Lu points to Taiwan’s low level of private equity investment as another obstacle to foreign talent coming to the island. According to the Asian Venture Capital Journal, Taiwan’s level of private equity investment ranks second to last among 17 Asian countries, a state of affairs that industry specialists have attributed to the non-transparent and unpredictable government approval procedures. Lu notes that private equity investors tend to introduce new management models to improve the operations of the companies they invest in, and

務。（陳瑞嘉指出，一個變通的辦法是外籍律師受僱 於本國律師事務所，且正式職稱為「法律顧問」。） 外國認證的脊椎按摩師在台灣亦不受認可，因為台灣 並沒有類似的執照考試。 此外，台灣嚴格的法令規定，也限制了金融產業 聘僱外國人才；這些法規是台灣獨有，早已過時且完 全不符合國際慣例。巴克萊銀行台北分行董事總經理 陸怡豪列舉數例，其中一項是有關債券市場的法規限 制。他指出，本國壽險公司、退休基金、以及其他機 構投資人對於國際債券市場（包括政府債券、公司 債、和其他固定收益債券等）具有高度興趣，然而本 國銀行卻被禁止代理外國債券，只能望著倫敦、新加 坡、香港、紐約的同業興嘆。 陸怡豪說：「這是我們把優秀的台灣員工調派到 香港的原因之一」。根據美國商會2013年《台灣白 皮書》資料顯示，固定收益業務年營業額估計超過 1,200億美元，大多是由海外金融機構所經手。陸怡 豪說：「台灣許多大學生想要在國內金融機構找份工 作，但我必須告訴他們，為了我們銀行最賺錢的業務 著想，我必須派你去香港。」 陸怡豪指出，台灣私募股權投資範圍很小，也成了 吸納外國金融人才來台的另一阻礙。《亞洲創投基金 26

that often involves the infusion of fresh talent. “The lack of private equity investment not only means Taiwan lacks investment money, it also means Taiwan loses in terms of getting experienced people to introduce new and efficient ways of doing business,” Lu says.

As discussed above, the major bright spot mentioned by interviewees is Taiwan’s quality of life, described as one of the best in Asia and a significant potential advantage for Taiwan that could be better leveraged. Richard Lin, whose wife and children live in Shanghai, says issues such as air pollution and food safety are a “grave concern” in China.

“These are serious problems that would make expats think twice about living in places like Beijing,” he says.

Lin says many expatriates, especially those with families, love living in Taiwan. Women and young people can walk safely on the streets even late at night, and a half-hour drive from Taipei can bring you to either mountains or the seashore. “They say Taiwan is the bestkept secret in Asia, whether for tourists or expat living,” Lin notes. “We need to get the word out that this is a wonderful place to live and work.”

期刊》（Asian Venture Capital Journal）指出，台灣私 募股權投資金額在十七個亞洲國家中排名倒數第二。 業界專家認為，這是因為台灣政府審核私募股權的程 序不透明又難以預期。陸怡豪表示，私募股權投資人 往往會引進新的管理模式，改善投資標的的營運狀 況，這個過程常需要引入新的人才。他說：「台灣缺 乏私募股權投資，不僅表示我們缺乏投資金流，也表 示我們無法吸引富有經驗的投資人才來台，並帶來更 新更有效率的經營方式。」 本文先前提到，受訪者提到的唯一優點是台灣的生 活品質。他們認為台灣的生活品質在亞洲數一數二， 這也是台灣深具潛力、可以善加利用的一大優勢。台 灣光輝國際股份有限公司董事總經理林承皓的妻兒都 住在上海，他說，中國空氣污染和食物安全是個「大 問題」。他說：「這些是嚴重的問題，會讓有機會到 北京等城市生活的外籍人士考慮再三。」 林承皓說，許多外籍人士，特別是有家眷的人，都 很喜歡住在台灣。即使是深夜，婦女和青少年都能放 心地走在街上；從台北市開車半小時就能到山上或海 邊。他指出：「外籍人士都說，不論是觀光或舉家遷 移，台灣是亞洲最鮮為人知的祕境。我們需要廣為宣 傳，讓全世界知道台灣是工作和生活的絕佳所在。」

taiwan business topics • august 2013

8_CoverStory.indd 26

2013/8/2 3:54:23 PM

TalenT

ExCEPTIONS TO ThE BAN

D

ecades of cross-Strait tensions and fears of local job losses have caused the Taiwan government to impose a ban on mainland Chinese working in Taiwan, a prohibition that is not likely to be lifted soon.

Yet a limited number of mainland Chinese passport-holders – less than a thousand – have been granted legal permission to live and work in Taiwan for reasons relating to their professional abilities. Plans are in place to allow even more such exceptions, says Vice Minister Lin Chu-chia of the Mainland Affairs Council.

As the Republic of China, Taiwan does not treat mainland Chinese passport-holders the same way as it does Americans or other foreign nationals, but instead applies special cross-Strait provisions. Rather than a visa, visiting mainland Chinese receive a “Taiwan entry and exit certificate,” and when they take up employment here, they don’t receive the usual form of work permit. Instead, Lin explains, work conducted by mainland Chinese is officially described as “providing services.” But all Chinese admitted to work here must be white-collar professionals, and the salaries they receive may not be less than slightly over NT$47,000, similar to the work permit system for other foreigners. Lin stresses that Taiwan has no plans to admit Chinese blue-collar workers.

One way mainland Chinese professionals get to work in Taiwan is if they are employed by a foreign or Taiwanese multinational that wishes to transfer them here, says Lin. For over a decade, he notes, the government has allowed foreign multinationals to transfer up to 10 mainland Chinese employees per firm to Taiwan if they are needed, with their Taiwan stay to be no longer than three years.

For example, Lin explains, if a team of Chinese auditors was auditing an American bank in China, the Taiwan government would permit the same auditing team to come to Taiwan and audit the bank’s Taiwan branch, provided the work did not go on for more than three years. Another stipulation is that these professionals draw their salary from a Chinese source, or at least from outside Taiwan. Since this system started, Lin estimates,

A scuffle at the Legislative Yuan podium. Opposition lawmakers fear that the recently signed cross-Strait services agreement will open the door to more mainland Chinese leverage over the Taiwan economy, including the labor market for service employees. photo : ap photo/WaLLy Santana

only roughly 200 Chinese have worked in Taiwan this way. Earlier this year, however, the government eased restrictions and included large Taiwanese companies with cross-border business in this system.

Another way white-collar mainland workers may work in Taiwan is through a government scheme that started in 2009, permitting limited amounts of Chinese investment in Taiwan, says Lin. For investments of US$200,000, the Chinese investing group is allowed to bring in either two investors or one high-level manager and one investor to work in Taiwan. There is a sliding scale, with investments of US$500,000 allowing for two mainland Chinese investors and one manager, for example. But the number of mainland Chinese professionals is capped at seven per investment. To reach this level, the investment amount needs to be above US$2.5 million.

Lin notes that some Chinese banks, such as China’s major state-owned lender, the Bank of China, have invested US$2.5 million or more in their branches in Taiwan, but despite having reached this investment threshold, they haven’t attempted to bring in seven mainland Chinese professionals. Currently around 560 mainland Chinese are working in Taiwan under the investment scheme.

The services sector pact inked by Taiwan and China in late June is likely to spur even more Chinese investment. Under the agree-

ment, 64 Taiwanese and up to 80 mainland service categories were opened to businesses from the other side of the Strait. For China, these include the wholesale, e-commerce, finance, publishing, and travel services sectors, while Taiwan has opened up travel services, traditional Chinese medicine, barber shops and beauty parlors, and the bridal industry to Chinese investment.

Lin says the Executive Yuan is preparing to loosen regulations governing the residence of mainland Chinese investors. Chinese currently here under the investment scheme, unlike those working for multinationals, must leave after one year. The government plans to extend the period to three years and grant them “so-called business residence,” says Lin, which would make them eligible for National Health Insurance coverage.

In addition, Lin cites plans to introduce multiple entry and exit certificates for mainland Chinese professionals for a period of up to three years to reduce the burden on mainlanders who travel frequently to Taiwan. The National Immigration Agency says the purpose is to coordinate with the government’s plans to create special free economic pilot zones, areas that will be used to demonstrate the benefits of trade liberalization to the rest of Taiwan.

— By Jane Rickards

taiwan business topics • august 2013

8_CoverStory.indd 27

27

2013/8/2 3:54:24 PM

advertorial

Abbott

30 Years of Service to Taiwan

A

bbott Laboratories this year is celebrating double milestones – the 125th anniversary of its founding and the 30th anniversary of its start of operations in Taiwan.

Since the company’s establishment in 1888 by Dr. Wallace C. Abbott, Abbott has grown into one of the world’s largest healthcare companies, with leading positions in the fields of medical devices, diagnostics, nutritional products, and branded generic pharmaceuticals. Last year its US$22 billion in revenue ranked Abbott as the 75th largest company on the Fortune 500, and that was after its research-based pharmaceutical business had been spun off to become AbbVie Inc. A truly global enterprise, Abbott derives 70% of its revenue and employs 65% of its approximately 70,000-strong workforce outside the United States.

In Taiwan, Abbott’s various business units – covering nutrition, medical devices (especially for cardiac and vascular treatment), diagnostics, and pharmaceuticals – have made substantial contributions over the decades to the development of healthcare in this society. In nutrition, for example, Abbott products include such market-leading brands as Ensure for medical nutrition (widely used by post-surgical and cancer patients), Glucerna for diabetics, and the popular Similac infant formula. “Consumers have learned that they can rely on our products for the highest quality and reliability,” says Christine Wong, general manager of Abbott Taiwan’s Nutrition Division.

In the medical device field, Abbott’s Vascular Division has similarly won the trust of surgeons for its stents and other advanced devices for the treatment of coronary artery, peripheral vascular, carotid artery, and structural heart diseases. “Our products are designed to treat the coronary and vascular system using minimally invasive techniques ,” says Dan Silver, general manager of the Vascular Division. “Abbott makes significant investments in new technologies that give doctors better tools with which to save patients and help them improve quality of life.”

One of the latest breakthroughs – not yet introduced in Taiwan – is a bioresorbable vascular scaffold; used in place of a stent, it can be reabsorbed into the body after it has performed its func28

taiwan business topics • august 2013

8_abbott.indd 28

2013/8/2 5:55:33 PM

advertorial

tion of widening the blood vessel. Another is a unique product to treat mitral valve prolapse, a condition in which blood is flowing in the wrong direction.

Silver also cites Abbott’s contribution in training physicians and nurses in the use of new technologies as they become available. Some of the training is done through educational workshops in Taiwan. In addition, many Taiwanese medical professionals have attended Abbott-sponsored conferences abroad or received hands-on training at the company’s advanced training centers in Shanghai and Tokyo, where they can work in simulated operating rooms.

Abbott and its various nutrition-product brands have won numerous awards from local publications and business organizations. Among these, Abbott has been honored

by CommonWealth Magazine as one of the top five foreign-invested companies in terms of corporate citizenship, and its infant formula was recognized in a Management Magazine survey of consumers as one of the most respected of all types of consumer brands.

In line with the worldwide Abbott motto of “Turning Science into Caring,” the company has decided to focus on corporate social responsibility programs as the core of its 30th anniversary observances. On August 30, for example, Abbott employees across the island will volunteer a half day of their time to take part in events in four locations devoted to working with senior citizens, the blind, mentally handicapped children, and others in need of help. “Since caring is one of our key corporate values, and we have a great deal of professional expertise in healthcare to offer, this is the kind of activity we can do best to show our thanks and dedication to Taiwan,” says Christine Wong.

“Abbott’s 30-year history in Taiwan clearly shows our commitment to this market,” adds Silver. “It says Abbott regards Taiwan as a place that is worthy of our presence, our investment, and our people. That commitment is continuing, and we look forward to being an important part of this market for many more decades to come.”

A Tradition of Innovation 125 years ago, Dr. Wallace C. Abbott, a 30-year-old practicing physician and pharmacy proprietor, founded the company that bears his name. Using the active part of a medicinal plant, known as the “alkaloid,” he formed tiny pills called “dosimetric granules,” which provided more accurate and effective dosing for his patients than other treatments available at the time. The demand for these accurate granules soon far exceeded the needs of his own practice, and from these modest origins was born Abbott, one of the world’s broadestbased healthcare companies and a global leader in the discovery, development, and manufacture of products that span the continuum of care.

Abbott Laboratories Services Corp., Taiwan Branch 6F, 51 MinSheng E. Rd., Sec. 3, Taipei 10478, Taiwan Tel: (02) 2505-0828 www.abbott.com.tw; www.abbott.com

taiwan business topics • august 2013

8_abbott.indd 29

29

2013/8/2 5:55:33 PM

TAIWAN busINess

A Primer on the Office Leasing Market From Jones Lang LaSalle, the ABCs of what you need to know before renting commercial space in Taipei City.

BY JAMIE CHANG

D

ifferent cities and business entities often use different definitions for office classifications. At Jones Lang LaSalle (JLL), offices are classified into four major classes: Grade A, Grade B, industrial, and city fringe office buildings.

In Taipei City, those located within the central business districts (CBDs) are usually Grade A or Grade B. Industrial offices in Taipei are those located in the Neihu and Nangang districts, while “city fringe” refers to other parts of the city and to the greater Taipei area.

Since one of JLL’s core businesses is to locate clients to high-quality buildings with suitable business surroundings, convenient amenities, and transit accessibility, Grade A buildings most often meet the required characteristics. This article will focus solely on Grade A buildings in the defined CBDs in Taipei City, utilizing the comprehensive building profiles and performance records available on these properties.

30

8 TB.indd 30

Major submarkets The Taipei Grade A office market mainly consists of four submarkets: Xinyi, Dunhua North, Dunhua South, and Non-Core CBD. Each submarket has distinguishing characteristics and therefore appeals to different types of corporate tenants.

Xinyi – As it is the prime center of Taipei City and home to major financial institutions, government offices, multinational corporations (MNCs), upscale shopping, and luxury residential buildings, this area has maintained the highest rental level of all four submarkets.

Dunhua North – This submarket is considered to be one of the earliest commercial clusters in the city. Due to its proximity to the Songshan Airport and the Minsheng Community (one of the early residential neighbourhoods to adopt Western urban planning concepts), the area used to attract prominent domestic corporations and

up-scale hotels and restaurants. As Taiwan gradually lowered its trade barriers, many foreign business entities were attracted to the area before Xinyi and Dunhua South were entirely developed. Following the opening of direct flights from the Songshan Airport to several Asia Pacific destinations and the increasing new supply of office space in the nearby Neihu and Non-Core submarkets, buildings in this early-established business district have slowly faced the challenges of rising demand and heightened expectations regarding office quality. Competition in the leasing market has stimulated the need for renewal or redevelopment of the aging buildings in the area. Since many corporate tenants have been attracted to other submarkets, Dunhua North currently largely houses domestic corporations and small-to-medium MNCs. Dunhua South – This area was developed slightly later than the adjacent Dunhua North. It contains several landmark commercial buildings that

taiwan business topics • august 2013

2013/8/2 12:15:39 AM

TAIWAN busINes s

provide a high-quality working environment, as well as major retailers and various boutique shops and cafés that appeal to high-end shoppers. The area therefore is often the second top choice after Xinyi for large MNCs and is also home to several domestic bank headquarters. The rental value for Dunhua South is also the second highest following the Xinyi submarket.

Non-Core CBD – This submarket area encompasses the Songjiang Nanjing, city west, and Nanjing East Road areas. Since the extension into the area of the mass rapid transit (MRT) system, several joint redevelopment commercial projects have begun, with direct access to the MRT on the ground floors. Corporate tenants have increasingly been attracted to the area, not only because of the increased transit accessibility, but also due to the newer buildings and cheaper rents. The overall rental level remains the lowest among all the submarkets, however, and the major tenant types are small-to-mid-size MNCs and domestic firms.

Definition of Grade A office As mentioned above, the definition of Grade A offices varies among different cities and business entities. Generally speaking, JLL does not adhere to a hard-and-fast definition to determine whether a building is Grade A, simply because a densely packed city like Taipei does not often see new buildings entering the leasing market. The time-consuming nature of the urban renewal process also means that some of the buildings included in our basket were built as early as 1980.

But there are still some general guidelines to keep in mind, and our commercial leasing team analyzes new properties entering the market to determine the correct classification. The basic guidelines when considering the grade of a property include geographical location, building specifications, quality of management, age of the building, and the building façade.

Geographical location – A Grade A building must fall within one of the four aforementioned Grade A sub-

Figure 1: The distribution of the major Taipei office submarkets

source: Jones Lang LasaLLe research

markets, with easy transportation accessibility and convenient amenities.

Transportation accessibility includes local or regional public transit systems, highways, airports, logistics facilities, etc. Considerations of amenities and surroundings often include zoning restrictions, the land use of peripheral lots, the general profile of the neighbourhood, availability of dining and shopping facilities, etc.

Building specifications – A Grade A building should provide at least 4,000 pings (13,200 square meters) of gross floor area with a minimum of 400 pings per floor. Ceiling height should be at least 2.4 meters, with a raised floor as an optional criterion. Dual risers for electrical power feeds and backup power systems should be equipped in case of power failures. Other specifications may be requested, such as thicker floor plates for the installation of mainframes or heavy equipment. Certain modifications can be negotiated with the landlords through the leasing agents to adjust to the tenant’s needs.

Quality of management – The ideal type of building management is a principal service provider with a systematic

management approach. Since building management encompasses numerous aspects, several different contractors are often needed to provide various maintenance services, such as mechanical and electrical engineering, cleaning, etc. The presence of a single principal professional management entity with multiple sites can bring cost advantages in procurement through economies of scale. The content of the service and the quality standards can first be set through discussion between the management firm and the client, then communicated to the contractors. The management will follow the agreedupon standards to monitor the quality delivered. The service quality involves such aspects as: 1. S t r u c t u r e a n d f u n c t i o n a l i t y o f the management entity, including management methods, positional hierarchy, composition of professions, completeness of building documents, blueprints, board meeting records, etc.

2. Quality of the maintenance work: conformity to various building codes, fire regulations, Leadership in Energy & Environmental

taiwan business topics • august 2013

8 TB.indd 31

31

2013/8/2 12:15:39 AM

TAIWAN busINes s

Ping

Figure 2: Office leasing demand and vacancy trends 100,000

25%

80,000

20%

60,000

15%

40,000

10%

20,000

5%

0

0%

-20,000

00

01

02

03

04

05

06

07

08

09

10

11

12

13F

-10%

-40,000 New Supply (LHS)

Take-up (LHS)

Design (LEED) etc.; cleanliness of interiors and exteriors; functional facilities, etc.

3. S a f e t y a n d s e c u r i t y i s s u e s : f i r e safety, entrance control, surveillance, peripheral control, emergency responses, etc.

4. Additional services tailored to meet the specific needs of tenants, such as foreign languages, housekeeping, dry cleaning, neighbourhood watch, etc.

Age of Buildings – Generally, the age for a building to be considered as A-class is 10 to 15 years. But in a dense city such as Taipei where vacant parcels are scarce, new developments are rare.

Additionally, the urban renewal process usually takes at least five to 10 years to complete, and the costs associated with the time and effort often create great financial burdens for the developers.

Thus, many building owners conduct renovations instead of redevelopment.

But with more new buildings entering the market in recent years, aging buildings will soon face increased competition and the threat of losing tenants to newer and cheaper buildings.

General Appearance of the Building – This criterion considers the appearance of building façades and lobbies, the ceiling height on the ground floor, space layout, floor plans, building materials, and so on. Generally, Grade A buildings should have high ceilings, relatively 32

8 TB.indd 32

-5%

Vacancy Rate (RHS)

spacious lobbies, and wide entrances with adequate space at the front desk for security and management staffs.

In addition, regularly updated tenant boards should be provided.

Leasing market trends A comprehensive record has been kept for more than 20 years, monitoring and analyzing market trends and performances in order to provide up-to-date leasing and investment information to prospective tenants and investors. The market record is constantly updated and archived on the basis of regular contacts and interviews with landlords and corporate tenants. This information is a great help to corporate tenants in efficiently and effectively grasping market conditions, especially for newly arrived foreign entities intending to establish operations or acquire properties in Taipei. Besides the thorough market record, the information packs are tailor-made to provide corporate leasing solutions fulfilling various individual needs.

In this section, the overall market trend will be analyzed in terms of demand, supply, rental performance, and future outlook.

Demand Demand for office space is measured

source: Jones Lang Lasa LLe Market r esearch

in total take-ups. The amount of space taken/occupied includes tenant commitments in new leases and the expansion of leased space. Renewals of existing leases do not count toward additional space taken, since the amount of floor area taken-up was already accounted for when the leases were initially signed.

Office leasing demand tends to be heavily influenced by general economic conditions and government policies. As indicated in figure 2, annual take-ups were adversely impacted in 2009 due to the subprime crisis, dropping to negative growth. These were the periods when the dot-com bubble and subprime crisis took place, respectively. As the world economy recovered from the recession in 2010-2011, office demand also rebounded.

The red line in figure 2 depicts the overall vacancy rate. Over the past decade, there have been three peaks. Two of them coincided with global economic crises, while the third occurred when a large amount of new office space entered the market in 2005. Government policies such as the alleviation of cross-Strait trade barriers have also attracted various business entities to establish offices in Taiwan, in turn creating growth momentum in the office market. In addition, our market record indicates that several Chinese corporations have inquired

taiwan business topics • august 2013

2013/8/2 12:15:39 AM

TAIWAN busINes s

about office availability in the Grade A market in Taipei.

Supply Supply refers to developers constructing new buildings that are considered to be Grade A or building owners converting space from other usage, such as retail, to leasable units.

Theoretically, supply should directly reflect overall economic conditions; the better the economy, the more development. But since Taipei is a highly urbanized city where buildable parcels are scarce, developers often remain active whatever the economic environment, and react promptly once development opportunities arise. Even during economic downturns, corporations with landholdings will develop buildings for their own use, consolidating operations and in turn saving leasing costs. In addition to self-occupied space, extra space is released to the market for external leases. The rental income can then be used to cover the costs associated with building maintenance.

In figure 2, the blue bars representing new supply appear to have no noticeable direct relationship with the state of the economy. Even during the

Rental fluctuation is closely related to vacancies. Figure 3 shows the inverse relationship between vacancy and rental value. When vacancy is low, landlords tend to increase rents and reduce rent incentives. Conversely, when the occupancy rate drops, rents are often lowered and rent-free periods are increased to attract tenants.

Additionally, during the current economic slowdown, corporate tenants have tended to be conservative about their leasing or relocation schemes. As a result, many have tended to maintain their current lease terms. Especially when rents in newly completed buildings are often being raised above the market average, tenants’ retention of existing leases has helped landlords to maintain low vacancies. Frequently, however, landlords with lower vacancies may increase rents at the time of lease renewal or the expansion of leased area.

current anemic and uncertain economic situation, it is anticipated that nearly 50,000 pings (162,000 square meters) of office space will enter the market in 2013. Among the new additions, nearly 25% is planned for owner-occupancy, while the remainder will enter the Grade A market.

Rental Performance Rental performance is mainly determined in terms of achievable rents, rent incentives, and net effective rent.

Achievable rents refer to the final rental amounts agreed upon between landlords and tenants. Rent incentives mostly take the form of rent-free periods, the purpose of which is to serve as an incentive in attracting tenants to commit to new leases and longer terms.

But in order to determine whether actual rental income is increasing or decreasing, net effective rent is calculated. The two figures are inversely proportional to each other: when rent incentives decrease, net effective rent will rise, and vice versa.

Taipei’s office rental performance has been relatively stable over the years; achievable rental values mostly fluctuate within the range of NT$1,800 to NT$3,000 per ping per month.

Tenant preferences When corporations seek office space in a given locality, they usually commission a leasing agent. Such agents not only have a great deal of market knowledge and experience, but also often are well-acquainted with numerous landlords. These relationships can help in

Figure 3: Relationship between Taipei’s office rent and vacancy

$3,000

25%

NTD/Ping/month

$2,800

20%

$2,600 15% $2,400 10%

$2,200

5%

$2,000 $1,800

00

01

02

03

Gross Achievable Rents (LHS)

04

05

06

07

Vacancy Rate (RHS)

08

09

10

11

12

13F

0%

source: Jones Lang Lasa LLe Market research

taiwan business topics • august 2013

8 TB.indd 33

33

2013/8/2 12:15:39 AM

TAIWAN busINes s

negotiating favourable lease terms as well as providing a wider choice of office-building options. In our years of experience in locating office space in Taipei for various prominent foreign and domestic corporations, we have generated a broad-based market database and formed firm relationships with various building owners. From that experience, we have learned that the following are the general criteria used by most tenants when selecting a location: 1. Transportation accessibility: Different types of businesses require different kinds of transportation infrastructure. Most corporate tenants prefer to locate near public transit systems for the sake of easy accessibility for the employees, while some prefer to locate in the proximity of airports, highways, or harbors for logistical advantages.

2. Interior layout: Interior space design is highly important to tenants when drafting seating plans. The positioning of elevator shafts, interior beams, and columns could some-

times be obstacles, dividing the space into odd shapes. Tenants tend to prefer more open space concepts with adequate ceiling heights.

3. Fengshui issues: Fengshui concerns usually involve the position and orientation of the building, office units, entrances, front doors, etc. Each tenant has different preferences or concerns, so being able to provide various choices to meet the differing preferences of each occupant is crucial in the leasing business.

4. Convenient amenities: The characteristics of the peripheral surroundings and accessibility to various services are also important to tenants. For instance, a retailer may prefer to establish offices and stores in the Dunhua South area due to the retail-oriented nature of the area. Food services should also be easily accessible for both daily use and various special occasions.

5. T h e b u i l d i n g ’s i m a g e : Te n a n t s may wish to locate in a prestigious building in order to promote their

own image and attract outstanding employees. Being in a landmark building such as Taipei 101 can help create a positive impression on the firm’s clients and also provide a pleasant working environment for its employees.

Further details This article has covered overall market trends, management characteristics, and leasing preferences. But in order to fulfil the needs and satisfy the differing preferences of different tenants, individualized corporate solutions are normally necessary. It is also vital for prospective tenants to fully grasp current market conditions before making leasing decisions.

— Jamie Chang is a research associate with Jones Lang LaSalle. For further information, contact him at +886 2 8758 9886 or Joe Lin at +886-2-8758-9821.

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.

Subscriptions

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.

Taiwan

q1 year = NT$1,500

q2 years = NT$2,700

Elsewhere in Asia

q1 year = US$75

q2 years = US$140

HK/PRC

q1 year = US$68

q2 years = US$130

USA/Europe

q1 year = US$90

q2 years = US$170

Name: _________________________________________________________________

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: ______________________________________

• Acct. #: 018-1-093665-6

• Please make checks payable to: American Chamber of Commerce in Taipei • Please direct telegraphic transfers to: American Chamber of Commerce in Taipei Standard Chartered Bank, Tunpei Branch (Please fax your transfer receipt to AmCham.)

American Chamber of Commerce in Taipei

8 TB.indd 34

Membership ID#: (if applicable)_______________________

Tel : 886-2-2718-8226

E-mail: amcham@amcham.com.tw

2013/8/2 12:15:39 AM

law

International Scrutiny Helps Taiwan Advance Human Rights This year a group of international experts completed the first comprehensive assessment of human rights on Taiwan.

BY DANIEL SEVERSON

T

aiwan has come a long way since the years of repression and abuses during the period of White Terror. When Taiwan emerged from martial law just a quarter century ago, the struggle for basic rights, including freedom of assembly, speech, and the press, remained fierce. In 1989, democracy activist Cheng Nan-jung famously set himself on fire to protest restrictions on freedom of expression.

Today, Taiwan is a vibrant democracy with a strong two-party system, lively media, and healthy respect for the rule of law. And now, thanks to an ongoing process notable for its creativity and increased civil society participation, the Taiwan government’s compliance with core international human rights norms is receiving increased scrutiny.

In 2009, the Legislative Yuan passed, a n d P r e s i d e n t M a Yi n g - j e o u r a t i fied, two United Nations treaties – the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social, and Cultural Rights (ICESCR). Since

Taiwan is not a UN member state, the UN Secretary General rejected Taiwan’s request to deposit the instruments of ratification. The government nevertheless passed an “Implementation Act” that gives the human rights treaties special status in domestic law; second only to the constitution, the two covenants prevail over any inconsistencies in ordinary legislation.

The Implementation Act further committed the government to bring all laws and regulations in line with the two covenants by December 2011, as well as to establish a human rights reporting mechanism to monitor progress in implementing the treaties.

Pursuant to the Implementation Act, the Ma administration prepared Taiwan’s first official state report, which it released in April 2012. Agreeing to a request from several of Taiwan’s nongovernmental organizations (NGOs), the government then invited a group of international experts to review the official report and evaluate its compliance with the two covenants.

The composition of the group of 10

experts was notable for its gender balance (four women to six men), national diversity (10 different countries, with substantial representation from Asia), and expertise (Manfred Nowak, former UN Special Rapporteur on torture, led the group, which included other members with deep UN human rights experience).

In a process that generally followed UN guidelines, the experts conducted three days of public hearings. Significantly, the review process was held “on site,” enabling greater participation by both the government and civil society in Taiwan. When UN human rights report reviews are conducted in New York or Geneva, typically only a small government delegation is able to participate.

In Taipei, well over 100 official representatives from over 30 government bodies attended. Without the usual time restrictions and travel expenses, over 50 civic groups also had the opportunity to participate in the review process either formally or informally.

When the experts required more information, the government and

taiwan business topics • august 2013

8 law.indd 35

35

2013/8/1 1:47:52 PM

law

The Formosa Magazine trial in 1980 was one of the key events in Taiwan's human-rights evolution from White Terror to democracy.

NGOs were there to provide immediate responses. The experts were impressed with the government’s strong commitment, and they praised civil society’s very active engagement in all aspects of the process, helping them to gain a deeper understanding of many complex issues. One expert even wondered if the on-site process could serve as a model for future reviews in other countries.

In reflecting on the review process, Jerome Cohen, a well-known authority on Chinese law and one of the 10 experts, commended the “various government agencies and the many participating NGOs [for] a remarkable job in presenting, for the first time in such an unusual forum, the progress, problems and prospects regarding a broad range of human rights on the island.”

On March 1, the experts released their “Concluding Observations and Recommendations.” The 17-page report recognizes Taiwan’s significant progress in honoring human rights and makes a series of recommendations for the government to better meet the requirements of the two treaties. The recommendations cover a wide array of issues, from promoting gender equality and safeguarding the rights of indigenous peoples to recognizing torture as a crime and reducing the size of the prison population.

Regarding transitional justice, the experts noted that “the period of tran36

8 law.indd 36

sition has not ended and more is needed to reconcile Taiwanese society,” including effective measures to reveal the full truth of gross human rights violations during the years of the White Terror (which was primarily during the 1950s and 60s).

Monitoring implementation Although the experts issued a concrete list of recommendations, five months after the review’s conclusion, it appears that actually implementing them will be a challenge. The government’s decision in April to proceed with the execution of six death-row inmates – just weeks after the international experts strongly recommended that the Taiwan government move to abolish corporal punishment and immediately reinstate a moratorium on executions – outraged some human rights advocates, for example. “The experts were not happy and took it as an act of bad faith. It has hurt the reputation of the government badly,” reflects Mab Huang, a professor of political science at Taipei’s Soochow University and a member of the Presidential Advisory Committee on Human Rights, a 17-member body created to coordinate and oversee the review.

As regards the general follow-up process, the Ministry of Justice (MOJ) has begun to task relevant government agencies to provide responses to

the experts’ recommendations, and is hosting a series of 20 implementation consultation meetings. Yet members of civil society have expressed disappointment at the lack of concrete progress in addressing the experts’ recommendations. Particularly frustrating to them is the absence from the meetings of highranking government officials capable of changing policy. “They don’t see human rights as a major undertaking for them, so they are reluctant to send high officials. They never send the right person to the meeting. It is just a formality for them,” notes Huang Song-Lih, a professor of public health at National Yang-Ming University and convener of Covenants Watch, a coalition of NGOs formed to monitor the government’s compliance with the covenants.

Prosecutor Kuo Ming-Li, head of the MOJ’s secretariat charged with coordinating the review process, also laments the general absence of high-level officials, but admits that in many cases the “Concluding Observations challenge the most difficult parts of human rights situations that the ministries do not want to face or do not know how to solve – or they are still considering how to solve these problems. That may explain why the ministries are not sending high-ranking officials,” he says.

Part of the problem also seems to derive from questions surrounding the allocation of authority. Do members of

taiwan business topics • august 2013

2013/8/1 1:47:52 PM

law

Professor Jerome Cohen, center, and other members of the international panel of experts that reviewed the report. photo : Co URt ESY oF MINIStRY oF JUStICE

the Presidential Advisory Committee on Human Rights who chair the series of follow-up meetings have clear authority to direct ministries to take concrete steps to implement the Concluding Recommendations? Not all committee members interpret their role in the same way.

Although charged with coordinating the implementation of the recommendations, the MOJ has difficulty giving orders to ministries that enjoy equal rank in the executive structure.

“If we could have the president of the country ask all of the ministries to take the Concluding Observations seriously and to do whatever is necessary to respond to them, I believe things would be different,” says prosecutor Kuo. Contentious issues like the death penalty and forced evictions – policy issues that require weighing competing values and interests – may especially need national leadership.

In the face of bureaucratic resistance, progress has been slower than expected. “I believe there will be piecemeal improvement here and there, for example for the disabled and for migrant workers. But it will be a fairly slow process,” says Mab Huang. NGOs contend that the current series of meetings are insufficient to fully address the experts’ recommendations and hope subsequent meetings will provide the opportunity to debate concrete policy designs. In what was seen as one early

positive development, the Ministry of Interior held a public hearing on July 15 to consider whether or not to ratify the UN Convention on the Rights of Persons with Disabilities.

Meanwhile, others are more optimistic that the judicial system can help the government internalize human rights norms. “The review has forcefully confirmed international human rights norms to be an authoritative source in Taiwan’s legal system,” says Chen Yu-Jie, a Taiwanese lawyer and research fellow at the U.S.-Asia Law Institute at New York University Law School who closely followed the review process. “It has also initiated a process of changing Taiwan’s legal landscape by providing much-needed momentum to push the executive branch, the legislature and the judiciary to move forward in human rights protection.”

The Judicial Yuan has already recognized that criminal trials that fail to separate verdict and sentencing during oral argument can bias decisions and do not comply with the due process guarantee of the ICCPR. This year Taiwan’s Supreme Court, recognizing the ICCPR as domestic law, cited the covenant when it overturned a death penalty ruling on appeal, and it directed the lower court to follow draft legislation that seeks to bring Taiwan’s criminal procedure in line with the two covenants. If Taiwan’s upper courts reverse

decisions that fail to cite the UN covenants, lower courts and other officials will take notice.

Kao Yung-cheng, a lawyer and longtime human rights activist, says he is optimistic that change can be brought about through judicial training. Covenants Watch is already working with the Judicial Yuan to incorporate human rights education into its training for judges. Meanwhile, prosecutor Kuo wants to see user-friendly manuals in the hands of judges and prosecutors to help them cite the covenants in their legal arguments. At the Taiwan Bar Association, Kao educates attorneys on the relevance of the two covenants to their legal practice.

National human rights commission Another item to watch over the coming year is the possible establishment of a national human rights commission in Taiwan. Although the creation of such a commission has long been discussed, advocates hoped that the experts’ recommendation of such a step would provide needed momentum for its founding. Among its functions, a national human rights commission might develop a National Action Plan to protect and promote human rights in Taiwan over the long term, coordinate the government’s efforts in that undertaking, and provide human rights education and training.

Past proposals have encountered at least two hurdles, however. First, because the constitution makes no explicit provision for bodies other than the five Yuans and one Presidential Office, the creation of a national human rights commission is seen by some as problematic. Certain advocates maintain that any commission must be safeguarded by a constitutional amendment. However, the threshold for passing a constitutional amendment in Taiwan is extremely high, and observers therefore look to enabling legislation to do the work.

Second, some parties worry that the function of such an independent institution will either overlap or conflict with

taiwan business topics • august 2013

8 law.indd 37

37

2013/8/1 1:47:53 PM

law

the existing government power structure. The Control Yuan, for instance, serves as the Taiwan government’s ombudsman and has opposed the creation of an independent commission.

Mab Huang chairs a fivemember working group charged with researching the possible nature and establishment of a national human rights commission. He notes that the Control Yuan has well-defined powers and jurisdiction to investigate corrupt and incompetent government officials.

But beyond that, a national human rights commission must be responsible for providing human rights education, preparing human rights reports, and conducting investigations of human rights abuses by private companies, he maintains. Huang envisions a clear-cut division of responsibilities between the Control Yuan and a new national human rights institution.

Would a national human rights institution have powers of investigation?

Would its judgments be legally binding like those of courts? If not, do the functions of education, advocacy, and training justify a separate institution?

These are some of the other questions that the working group will need to grapple with before making its recommendation to the President next year.

In the meantime, the follow-up meetings continue, and the government is drawing up a blueprint for protecting and promoting human rights. In

keeping with UN protocol, the government plans to hold another review of its compliance with the two covenants in four to five years. Covenants Watch will prepare a one-year follow-up report, which it says it will send to the 10 experts to advise them of Taiwan’s midterm progress.

“President Ma is to be commended for investing in the review of the state report,” says lawyer Kao. “But I believe the benefits have so far actually been limited. The government has not done enough to promote implementation within the bureaucracy or explain human rights to the public. The average Taiwanese is not familiar with these commitments.”

An admirable step forward Despite inadequate publicity and media coverage and disappointments in the follow-up meetings, the international review process was valuable.

Given Taiwan’s long separation from the UN, the government and NGOs were not well versed in international human rights processes. The review was an important learning experience. Now they are familiar with a set of international documents and standards. Huang Song-Lih further observes that although NGOs have long pursued activities related to human rights in Taiwan, they often do not use rights-based concepts.

Now those groups are more alert to the

A follow-up session at the Ministry of Justice to review the progress of implementing the report. photo : DANIEL SEVERSoN

38

8 law.indd 38

taiwan business topics • august 2013

phrase “This is our right.”

And to defend those rights, civil society has a new tool to lobby the government. “We are now using, or at least quoting, the Implementation Act a lot,” says Huang. According to Article 8 of the Implementation Act, domestic laws that are not compatible with international standards must be amended within two years. “That gives the Concluding Observations a semi-legal status because now we can say that the international experts have indicated explicitly that this regulation or that law does not comply with the two covenants,” explains Huang.

According to expert Jerome Cohen the process was not only an important opportunity for Taiwan officials and the public to learn and benefit from the views of a highly-experienced group of international human rights experts, but the experts also left more informed about Taiwan's “unique and praiseworthy program” for promoting these goals. “I hope this distinctive process will continue and that the government will foster it by establishing a national human rights commission,” he adds.

The significance of the review process extends beyond Taiwan, too. As Cohen emphasizes, “it especially alerts the Chinese Government and people to the large and increasing gap between Taiwan and the Mainland in political and civil rights.” Given Taiwan’s unsettled international political status, the human rights review process is important for the government of a country keen to receive greater international acknowledgment. Even more importantly, it signals the Taiwan people’s efforts and aspirations to abide by international norms. As prosecutor Kuo maintains, “We are not perfect, but we want to follow international human rights standards. We call on the world to notice this, and we hope that friends and experts can join with us to help us better comply with these standards.”

— Daniel Severson, a former Fulbright Fellow in Taiwan, is a student at the Harvard Law School and Harvard University's John F. Kennedy School of Government.

taiwan business topics • august 2013

38

2013/8/1 1:47:53 PM

behind the news

Moving Forward to Create Free Economic Pilot Zones The government views the project as potentially setting the stage for Taiwan’s entry into emerging regional free-trade blocs.

BY PHILIP LIU

T

h e Ta i w a n g o v e r n m e n t i s gearing up to implement a plan to establish free economic pilot zones as a prelude for lowering trade barriers throughout the economy as a whole. The move is seen as paving the way for Taiwan’s participation in emerging regional free-trade blocs such as the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP, pronounced “are-sep”).

Implementation of the free economic pilot zone scheme – involving the free flow of goods, capital, and human resources in the designated areas – is scheduled to start this month, following formal approval by the Executive Yuan on April 29. The plan was formulated by the Council for Economic Planning and Development (CEPD) based on proposals submitted by the various relevant ministries, and is due to be carried out in two stages. Initially, it will focus on upgrading and expanding the existing six free-trade port areas – namely Taipei, Keelung, Suao, Tai-

chung, and Kaohsiung Harbors, as well as Taoyuan International Airport and some industrial parks such as the Pingtung Agricultural Biotech Park.

Their reach will be extended to neighboring industrial parks, providing bonded-warehouse arrangements aimed primarily at spurring the development of three business sectors: intelligent logistics, international medical tourism, and added-value agriculture. The plan also calls for spurring industrial cooperation with companies located in similar zones in neighboring countries. In late July, CEPD announced that the Financial Supervisory Commission had agreed to allow financial services to be offered in the zones as well, but the specific criteria have not yet been disclosed.

Chinese firms investing in the manufacturing industries in the zones will enjoy treatment equal to foreign investors but will be subject to screening on a case-by-case basis for investing in seven key industries: semiconductors, IC assembly and testing, flat

panel displays (FPD), light-emitting diodes (LED), solar cells, metal-cutting machinery, and electronic and IC production machinery and equipment..

Mainland investors will be accorded World Trade Organization (WTO) treatment for investing in service lines in the zones, except for those involving national security implications.

In addition, foreign white-collar workers in the zones will be exempt from current restrictions requiring them to have two years of prior work experience and limiting them to accepting jobs with monthl y pay of at l east NT$47,971 (US$1,600), offered by companies with annual revenue of at least NT$10 million (US$333,333).

The second stage will kick in – possibly by the end of this year – following Legislative Yuan enactment of a statute governing the free economic pilot zones.

The law will provide handsome tax incentives for a period of 10 years for investments in the free economic pilot zones, whether from foreign or domestic sources. When repatriating offshore

taiwan business topics • august 2013

8 economic zones.indd 39

39

2013/8/2 4:09:41 PM

behind the news up facilities in the zones for the final assembly and packaging of semi-finished products shipped from China. The finished products can then be exported bearing “made-in-Taiwan” labels, significantly increasing their value. Other privileges granted to companies inside the zones include bonded status for customs duties, exemption from the value-added tax and commodity tax, simplified customs-clearance procedures, and greater flexibility in employing foreign laborers.

Expansion underway

Kaohsiung Harbor would be one of prime beneficiaries of the plan for free economic pilot zones. Shown here is a Hong Kong vessel involved in direct cross-Strait shipping. photo : cna

profits back to Taiwan for investing in the zones, overseas Taiwanese businesses and individuals will also be exempt from both the business income tax and alternative minimum tax. For multinationals setting up regional operational headquarters in the zones, the business income tax rate will be reduced to 10% – from the normal 17% – for the first three years. In addition, the law will allow for flexible land usage and zoning for investments in the zones.

Further, enterprises operating in the zones will be able to deduct up to 15% of their R&D outlays from their business income tax, up to a ceiling of 30% of the amount of tax to be paid, for three years starting from the year after their establishment in the zones. Foreign enterprises will enjoy tax exemption for royalties from technology licensing and the sales of patented technologies.

To attract international talent, foreign white-collar workers working in the zones will enjoy tax exemption for half of their incomes in the first three years, mainland Chinese white-collar workers will be granted permission to work and reside in the zones, and foreigners (including Chinese mainlanders) will not be taxed on their overseas income.

During the second stage, aside from 40

the existing six free-trade port areas, municipal governments will be able to apply for central government approval to carry out their own free economic pilot zone projects.

The free economic pilot zone scheme is expected to give a strong boost to the development of the six existing freetrade port zones, which will be able to accommodate diverse new lines and incorporate neighboring industrial parks within their scope. At present, 110 companies are operating in the six free-trade port zones, and their total import-export value last year came to US$16.7 billion. Taoyuan International Airport tops the list with 36 companies, followed by Taichung Harbor with 30, Kaohsiung Harbor with 28, Keelung Harbor with 12, Taipei Harbor with three, and Suao Harbor with one.

The companies in Taichung Harbor recorded trade value of US$5.4 billion last year, triple the amount in 2011, thanks mainly to prosperous business in oil products, while Taipei Harbor has specialized in logistics services for the automotive industry.

Many of the companies in the free-trade port zones are engaged in logistics. In recent years, many Taiwaninvested enterprises in China have set

Except for Keelung and Suao, which have no additional hinterland available for expansion, the zones are currently enlarging their space. Taipei, Taichung, and Kaohsiung Harbors plan to increase their space by a combined total of 584 hectares, including 340 hectares of reclaimed land at Taipei Harbor – much more than the existing 93.7 hectares – to be used as an offshore logistics zone. The first section of 48 hectares is scheduled for completion by the end of 2014.

CEPD Minister Kuan Chung-ming predicts that following implementation of the new scheme, the number of companies inside the free-trade port zones will jump to 200, with their importexport value reaching NT$1 trillion (US$33.3 billion) within two years.

The program should also provide a shot in the arm for the designated priority business lines. It calls, for instance, for the establishment of international medical-care service centers within airport areas, and will also encourage investments in international medical institutions in the pilot zones.

These institutions at first will have to operate in the form of non-profit legal entities, similar to the existing status of local hospitals, but in the second stage, following enactment of the Statute for Free Economic Pilot Zones, they will be allowed to function as corporate bodies.

These medical-care institutions will provide one-stop shopping for medical services, including healthcare treatment, cosmetic surgery, and physical exam-

taiwan business topics • august 2013

8 economic zones.indd 40

2013/8/2 4:09:42 PM

behind the news

inations. They will be excluded from participating in the National Health Insurance program but will be charged an annual franchise fee to help support the NHI. While these institutions’ main purpose will be to serve patients from abroad, especially from China, local residents will also be able to receive service there at their own expense. At a later stage, foreign medical personnel will also be permitted to work at these institutions, up to a maximum level of 20% of the staff. Health and wellnessrelated businesses, such as spas and health products, will also be allowed to enter the zones.

The Ministry of Health and Welfare (the upgraded former Department of Health) predicts that medical-care institutions in the zones will serve 300,000 f o r e i g n p a t i e n t s a y e a r, i n c l u d i n g those from mainland China, bringing in annual revenue of NT$15 billion (IS$500 million) by 2015. Already, in fact, Taiwan has begun to attract medical tourists as a result of promotional efforts by the government. Last year, some 48,000 foreigners, 93% of them mainland Chinese, took physical examinations in Taiwan, quadruple the number in 2011.

With regard to high-value farm products, Minister of Agriculture Chen Bao-ji notes that firms in the free economic pilot zones will be able to import raw materials for processing, before shipping the finished products abroad under local brands. The higher added value will ease the impact on Taiwan agriculture of increasing trends toward trade liberalization. The Council of Agriculture has preliminarily earmarked several lines for development in the pilot zones, including tea, aquarium fish, seedlings, and agricultural machinery.

Meanwhile, CEPD Minister Kuan notes that the free economic pilot zones will be able to link up with similar zones in neighboring nations, notably China’s special economic zones, to facilitate cooperation between firms in Taiwan and their counterparts abroad.

Another benefit of the pilot zone scheme is that it should help the govern-

ment intensify its efforts in recent years to promote development of the logistics industry. The Ministry of Economic Affairs (MOEA) last year launched a four-year “plan for the establishment of large-scale logistics centers,” with the aim of setting up two large-scale logistics centers by 2015. One interested company already filed an application with the MOEA last year to construct such a center in Taoyuan, near the international airport. The planned facility would take up more than half a million square feet of space and involved an investment of US$24.3 billion.

According to the Statute for Private Participation in Public Construction, largescale logistics centers with an area of more than one hectare and investment exceeding NT$300 million (US$10 million) are entitled to enjoy a five-year tax holiday starting from the year of the investor’s choice.

The pilot scheme will enable Taiwan to start preparing itself for joining emerging regional free-trade blocs, notably TPP and RCEP (also known as “ASEAN plus six,” the six being China, Japan, South Korea, India, Australia, and New Zealand), both of which are expected to be finalized in the next

several years. Kuan views the free economic pilot zones as the vanguard for economic liberalization, since they embrace the core concept of liberalization, internationalization, and forward thinking. Premier Jiang Yi-huah has characterized the plan as ushering in another major round of economic and trade liberalization, the first since Taiwan’s accession to the WTO more than a decade ago.

Response from municipalities Many municipal governments have responded enthusiastically to the role they will be able to play in the pilot zone scheme. On April 30, the New Taipei City government unveiled a plan that would begin by linking the Taipei Harbor free-trade port with the city’s seven industrial parks, paving the way for transformation of the entire city into a “high-end service free economic zone.”

Mayor Eric Liluan Chu notes that New Taipei City possesses a number of advantages in developing free economic pilot zones, including the availability of 50 hectares of new reclaimed land at Taipei Harbor and the concentration of logistics firms. Some 872 logistics firms

Air-cargo related logistics are expected to benefit from the liberalized regulations to be put in place in the free economic pilot zone connected with Taoyuan International Airport. photo : cna

taiwan business topics • august 2013

8 economic zones.indd 41

41

2013/8/2 4:09:42 PM

behind the news

operate in the city, and their annual revenue of NT$39.5 billion (US$1.3 billion) gives them a 40% national market share. The revenue is expected to hit NT$80 billion (US$2.7 billion) in five years, according to Yeh Hui-ching, director of the city government’s Economic Development Department.

On April 22, UTi of the United States, the world’s largest logistics firm, set up its Taiwan operating headquarters and Taipei logistics center in Yingge in New Taipei City. The project will entail US$20 million in investment in the first stage, and is expected to create 200 jobs and bring in NT$10 billion (US$333 million) in annual revenue.

On May 3, the chiefs of the three central-Taiwan governments of Taichung, Changhua County, and Nantou County agreed to join forces to establish a “central Taiwan free economic pilot zone” by combining Taichung Harbor, Ta i c hung Ch in g C h u a n K a n g A irport, and the 3,000-hectare Changhua Coastal Industrial Zone, the largest industrial zone in Taiwan. The resulting composite free economic pilot zone would specialize in intelligent logistics, medical tourism, and value-added agricultural operations.

In addition, the Kaohsiung Harbor free-trade zone may join hands with Pingtung’s agricultural park to form a free economic pilot zone. The agricultural park now accommodates 80 firms, mainly in the fields of scientific Chinese herbal medicine, aquarium fish, and animal and plant vaccines. It generated NT$4 billion (US$133 million) in business in 2012, up 38% from the year before. An Asia-Pacific aquatic operations center costing NT$1.19 billion (US$40 million) is about to be completed within the park. To facilitate expansion, the park plans to acquire a neighboring plot of 120 hectares of land belonging to the state-owned Taiwan Sugar Corp.

Despite the government’s enthusiasm about the free economic pilot zones, the plan has also been the subject of considerable criticism. Lin Hsiang-kai, professor of economics at National Taiwan University and economic advisor to the former Democratic 42

Mainland Chinese patients at a Taiwan hospital for cosmetic surgery. The new plan envisions substantial expansion of the medical tourism business. photo : cna

Progressive Party (DPP) government, objects that the tax incentives provided to firms inside the zones will discriminate against those in the rest of Taiwan, and that liberalizing employment requirements in the pilot zones for foreign white-collar workers will affect job opportunities for Taiwanese elsewhere. He argues that if the policy is desirable, the government should implement deregulation nationwide, not just in specific localities. Lin also expresses concern that given the already low business income tax in Taiwan, further tax incentives will impact the government’s financial health and constrain its ability to undertake necessary infrastructure investments. He adds that the scheme will encourage local firms to set up paper companies abroad and then return to Taiwan to invest as overseas companies, thereby qualifying to enjoy extra tax breaks.

Others charge that the scheme runs counter to the government’s established taxation policy, adopted in the wake of the expiration of the Statute for Industrial Upgrading in 2009. The stated aim was to create a low-taxation environment by cutting business income tax from original 25% to 17%, abandoning the previous practice of offering

tax incentives to specific industries. The free economic pilot zone scheme, say critics, underscores the government’s inability to wean business from reliance on tax incentives as a means of encouraging investment. Moreover, the scheme introduces some unprecedented tax incentives, such as tax exemption for overseas profits repatriated by Taiwanese businesspersons and enterprises, as well as the three-year tax exemption on half the income of foreign whitecollar workers. Those measures are estimated to cost the national coffers NT$50 billion (US$1.7 billion) in tax revenue per year, three to four times the scale for the existing Statute for Industrial Innovation.

Kuan Chung-ming counters that the tax incentives are patterned after the experience of other countries. He describes the aim as forging an internationally competitive tax environment in order to foster new industries and attract more domestic and foreign investment, thereby expanding the economy and creating new sources of tax revenue. By promoting high-end service industries with high added value, he says, the program will help rectify the problem of low added value faced by many existing local industries.

taiwan business topics • august 2013

8 economic zones.indd 42

2013/8/2 4:09:43 PM

INDUSTRY

F

CUS

A Report on the Healthcare Sector

taiwan business topics • august 2013

8 IF.indd 43

43

2013/8/2 4:21:06 PM

INDUSTRY

F

CUS

The Koo Way to Better Cancer Care Taiwan’s premier cancer-treatment center operates on the basis of rewards for outcomes instead of productivity – and the results are encouraging.

IN THIS SURVEY

BY TIMOTHY FERRY

• The Koo Way to Better Cancer Care p44

• What to do about betelnuts?

46

• Returning to Taiwan

47

• New Attention to Long-Term Care

8 4

• Domestic Drug Industry Coming of Age

p50

44

8 IF.indd 44

N

estled in the hills of Beitou, the Koo Foundation Sun Yat Sen Cancer Center (KFSYSCC) is a long way from the hustle and bustle of metropolitan Taipei’s major urban hospitals. Lacking the crowds and noise found in most area hospitals, the center’s relative isolation gives it a quieter, more subdued energy. Boutique shopping and cafes, along with outdoor space for concerts and entertainment, provide comfort and distraction for worried patients and their family members.

Distinct as this setting is, though, what really sets the institution apart from its peers is results. The Center achieves five-year survival rates – the usual metric for cancer treatment – 15-20% higher than even the top hospitals in Taiwan, with rates sometimes nearly 30% above average.

Every year the KF-SYSCC’s 120 physicians treat thousands of patients.

The hospital has an overall fiveyear survival rate of 61% (compared with Taiwan’s overall survival rate of 43%), with a nearly 90% survival

rate for breast cancer.

For some cancers, the Center’s results rival even prestigious cancer treatment centers in the United States, long the gold standard for cancer treatment.

Rising incomes and the increasingly sedentary white-collar society in Taiwan – like everywhere else with similar income levels – translates into high rates of heart disease, stroke, and most significantly, cancer. Statistics from the former Department of Health (DOH), now the Ministry of Health and Welfare, show that cancer claimed 43,665 lives in 2012, dwarfing the second leading cause of death, heart disease, by nearly a factor of three. In the United States, smoking cessation programs and greater cancer awareness have led to gradual declines in the disease, but Taiwan’s cancer rates have actually held steady and in some cases – such as colorectal, oral cavity, and breast cancers – are actually increasing.

DOH recorded about 183,500 cancer patients in 2011, compared with

taiwan business topics • august 2013

2013/8/2 4:21:07 PM

A Report on the Healthcare Sector

169,200 cases in 2008.

Cancer has been Taiwan’s leading cause of death since 1982, and in 2012 accounted for 28.4% of the total 153,823 deaths in Taiwan, the DOH reported recently. “This is a society that to some degree is still undergoing a transformation,” observes Dr. Andrew Huang, founder and president of the KF-SYSCC. The dietary pattern is shifting, he says, “from low calorie to high calorie, from low fat to high fat, from high fiber to low fiber,” and the lifestyle “from more ambulatory to more sedentary.” He attributes the rise in many cancers to these changes in diet and lifestyle. Breast cancer is the most prevalent cancer for women in Taiwan, while lung cancer – predictably, considering smoking rates for men that continue above 30% – is the most common for males.

Huang established the Center in 1990 as the first and still only independent cancer institution in Taiwan. Along the way, he set up an organizational model that departs sharply from standard procedures in other Taiwanese hospitals operating under the National Health Insurance (NHI) system. Instead of seeing up to 100 patients a session, with only a few minutes of time for each one, doctors at the KF-SYSCC see only 20, spending an average of around 30 minutes with individual patients. At most hospitals, patients see various specialists separately, but at the KF-SYSCC, teams of doctors – including oncologists, surgeons, radiologists, and nutritionists –

Dr. Andrew Huang, who is concurrently a professor of medicine at Duke University, heads Taiwan's leading hospital for cancer treatment. photo : photo C oURtESY oF KF-SYSCC

see cancer patients simultaneously, first creating and then executing a comprehensive plan of treatment.

The cushy setting and innovative care model seem almost indulgent in the Spartan arena of Taiwan’s medical system, but match what many people expect from a cancer center for the wealthy. Yet herein lies the KF-SYSCC’s greatest paradox; while the philanthropic Koo family provided the seed money for the cancer center, “98% of our revenue is from the NHI and less than 2% is from

private patients,” says Huang.

From strict adherence to international SOPs for care to staffing structures to innovative salary models, the KF-SYSCC under Huang’s direction demonstrates that it is feasible to provide innovative, high-quality, caring treatment within the NHI framework.

A number of factors contribute to the KF-SYSCC’s success in treating cancer. For one, says Huang, strict adherence to SOPs in treating patients mean better quality care. For example, patients receiving radiation therapy for cancers of the head and neck must be fixed securely in place to ensure that the radiation is delivered to precisely the same place each time, something that other hospitals with fewer adherences to operating procedure are not always able to do. “The devil is in the details,” Huang observes.

Mode of payment The most significant factor setting the cancer center apart, though, is the way that doctors are paid. The NHI typically pays doctors for services rendered, incentivizing doctors to work harder to see more patients and deliver more procedures. In Huang’s view, this approach

taiwan business topics • august 2013

8 IF.indd 45

45

2013/8/2 4:21:08 PM

INDUSTRY

F

CUS

leads to overwork, stress, and competition among doctors to achieve the greatest possible income. “If you pay by procedure, they (physicians) will work their life out to get good pay. They don’t relax enough,” says Huang, with the result that exhausted and stressed-out doctors “don’t have the kindness that’s required, the willingness to talk to the person and provide a bit more attention.”

With pay for service leading each phy-

sician to try to see as many patients as possible, in addition, little time is left for teamwork and cooperation in the interest of patient well-being. Under those conditions, “no one wants to stop and help their colleagues,” Huang notes.

At the KF-SYSCC, however, doctors are paid a fixed salary, allowing them to see far fewer patients while still earning an “above-average” income. The hospital gets reimbursed by the NHI for

services rendered, the same as other hospitals, but then distributes the reimbursements as salaries.

Huang says people are often skeptical that doctors paid in this manner will be motivated to work hard, as they would get the same salary regardless. But here is the special sauce of the KF-SYSCC’s success: substantial bonuses for quality of service – not quantity – and positive results.

“If the physician performs well with

What to do about betelnuts?

D

r. Jacqueline Whang-Peng, head of Taipei Medical University Hospital’s International Cancer Institute, recalls that a decade ago she was part of an Academia Sinica team exploring ways to reduce oral cancer rates by regulating the consumption of betelnut, the fruit of the acacia tree. At the time, betelnut had already been recognized as a cancer risk, and Taiwan’s famous betelnut-chewing culture of sexy “betelnut beauties” selling their products to truck drivers and others had led to oral cancer rates far exceeding those of most nations. But when word got out that the academy was looking at ways to curb betelnut chewing, it became the target of vehement protests by betelnut supporters, including farmers and vendors. The scholars even had to relocate conferences looking into the issue away from the Academia Sinica campus for fear of creating a potentially explosive situation. In the end, efforts to contain the use of betelnuts were essentially abandoned.

“We really have to try and control betelnuts,” says Whang-Peng. But so far, she laments, “we have no way to stop people from chewing them.”

Betelnut chewing occupies a curious niche in Taiwanese culture. Often sold out of roadside stalls by young women wearing sexy outfits, betelnuts continue to be widely consumed, especially by working-class laborers and truck drivers, who say the mild stimulant gives them the energy they need to do their jobs over long hours.

46

8 IF.indd 46

Yet the dangers of betelnut chewing are apparent. Whang-Peng says that for men in Taiwan between the ages of 45 and 55, oral cancer attributed to betelnut chewing is the most prevalent form of cancer. Overall for men in Taiwan, oral cavity cancer is the fourth most prevalent cancer, behind only liver, colorectal, and lung cancers. And with Taiwan’s universal healthcare system, the risks are borne not only by the victims themselves but by all citizens who pay premiums to the National Health Insurance program.

The lack of regulation of betelnut sales stands in stark contrast to strict controls over tobacco. In 2009, Taiwan strengthened its Tobacco Hazards Prevention Act to ban tobacco use in most indoor spaces, including worksites, bars, and restaurants, and smokers find themselves increasingly unwelcome in many other public spaces. Steep fines are levied for violators, and smoking rates, though still stubbornly high at 33.5% for males, have been falling. The total number of smokers declined from 3.5 million in 2008, about 22% of the adult population, to 3.1 million in 2011, or 19.1%.

By contrast, betelnut farmers, vendors, and users operate in what Whang-Peng calls a “gray zone for the department of health.” The betelnut business is usually conducted under the table, with vendors paying tax based not on actual sales but on estimates determined by the amount of electricity their shops consume. Even regulations requiring Taiwan’s iconic betelnut beauties to cover

photo : toBIE opENShAW

up – the girls are now prohibited from revealing the three-Bs (breasts, bottoms, and bellies) – have barely had an impact on betelnut consumption.

The contrast between the regulatory schemes for these two different addictive substances in some way reflects the difference in their markets. While smokers are often educated, white-collar employees, betelnut chewers are by-and-large less educated blue-collar workers. According to a health survey in 2009, nearly three quarters of regular betelnut chewers had no more than a high school education, with nearly half having completed only junior high. Awareness of the risks is lower in this segment of the population.

Also as the protests at Academia Sinica demonstrate, betelnut chewers are a force to be reckoned with. Unlike the family-friendly demonstrations seen against nuclear power or government corruption, the protests by betelnut supporters have included episodes of violent intimidation. Yet in the face of rising cancer rates – and the cost to the healthcare system – can this status quo be maintained?

— By Timothy Ferry

taiwan business topics • august 2013

2013/8/2 4:21:08 PM

A Report on the Healthcare Sector

high quality and strong attention to the patients’ needs, that person gets higher pay in terms of year-end bonus,” says Huang. Doctors are evaluated by colleagues, subordinates, and supervisors in a 360-degree assessment more typical of business than medicine, and the amount of the bonuses awarded can be quite substantial. This system motivates physicians to focus on the quality of their work and leads to greater cooperation among the teams, increasing the odds for earning bonuses.

It also means that doctors can slow down and pay more attention to fewer patients. Staff members at the KF-SYSCC have a better work-life balance and are more able to continue their studies and hone their skills, again leading to better quality care, according to Huang.

Surprisingly, though, this model has not been embraced by other institutions.

“We are the only hospital that does this,” Huang says. The reason? “99.9% of physicians prefer the other model.” Not so at the KF-SYSCC, however, which has a retention rate for its doctors of 95%, with little of the burnout typically seen in overworked healthcare workers.

With a degree from National Taiwan University and medical training at the

University of Pennsylvania and the Duke University Comprehensive Care Center, Huang – who continue to hold a professorship at Duke – is highly esteemed in both Taiwan and the United States. He first came up with the idea for a medical center dedicated to treating cancer in 1980, during the course of fieldwork for U-Penn on Taiwan’s cancer rates. At that time, cancer was already rising as a cause of death, and would take the lead in 1982, so he saw an obvious need. “I discovered that there was no institution throughout Taiwan that supported the treatment of cancer as a specialty,” he says.

He proposed the idea for establishing the cancer center at that time, but the proposal stalled for a decade as Huang continued his academic research and clinical practice in the United States.

Towards the end of the 1980s, he teamed up with one of the leading officials responsible for Taiwan’s economic development, K.T. Lee, then Minister without Portfolio in charge of science and technology development, to set up a cancer center within the walls of Renai Hospital in Taipei City. With a small staff and few patients, “we built a prototype of cohesiveness,” recalls Huang. At that time, he recalls, every staff member knew every

patient and this intimacy and team bond became the model for the later expansion to the present location in Beitou in 1997.

The KF-SYSCC now has 200 beds and employs 1,300 people, including 120 staff physicians. Huang adds that while the Center is small compared with Taiwan’s major medical centers (National Taiwan University Hospital, for example, has a capacity of 2,000 beds), the more attentive care at the KF-SYSCC reduces the average hospital stay to four days, compared with 10 for the majority of medical institutions. The more frequent turnover makes it possible to treat disproportionately more patients every year.

Ta i w a n ’s h e a l t h c a r e s y s t e m h a s impressed many observers around the world, and indeed the fees are extremely low and many of the doctors are firstrate practitioners. But the lack of much face time with each doctor and the disorientation that affects patients as they are shuttled from one doctor to another are widely voiced complaints. Huang presents a compelling case for reworking the basic approach of Taiwan’s NHI towards outcomes rather than mere services, incentivizing doctors to treat fewer patients but to provide them with better treatment.

Returning to Taiwan

F

ollowing careers in the U.S., some respected Taiwanese physicians have come back to help transform Taiwan healthcare.

Andrew Huang isn’t the only doctor to come back to Taiwan from a successful medical career abroad to contribute to the local healthcare system. After 17 years in the United States as chief medical director for clinical oncology at the National Institutes of Health (NIH), Dr. Jacqueline Whang-Peng also returned to Taiwan to help strengthen the island’s cancer care system.

Following a career that began with a degree in medicine from National Taiwan University in 1956, Whang-Peng’s career spans continents, and she has earned positions at the top of both American and Taiwanese medical and academic professions.

Now her roles include chair professor at Taipei Medical University (TMU) and head of the Taipei Medical University Hospital’s International Cancer Institute, aside from being a student adviser and practicing physician, and she maintains a schedule that would exhaust someone half of her age. Yet she shows no signs of slowing down, and indeed feels it is vital that she pass her

Dr. Jacqueline Whang-Peng, center, with TMU colleagues. photo : CoURtESY oF t MU

taiwan business topics • august 2013

8 IF.indd 47

47

2013/8/2 4:21:09 PM

INDUSTRY

F

CUS

experience on to the next generation of oncologists.

Whang-Peng says the impetus for establishing a cancer center at TMUH comes from the president, Dr. Yun Yen, who likewise returned to Taiwan after an illustrious career with the acclaimed U.S. cancer institute City of Hope and a professorship at Cal Tech. Now all of the hospitals in the TMU system – TMUH, Wan Fang Hospital in Muzha, and Shuang Ho Hospital in the Zhonghe district of New Taipei City – all have passing rates for quality in cancer treatment.

In agreeing to take over as head of the International Cancer Center, says Whang-Peng, the motivation was that the small setting would allow her to offer better, more comprehensive care to patients. She notes that typically a cancer diagnosis requires a number of steps handled by different doctors, all happening sequentially with lots of waiting time. “It might be a month before you are diagnosed. The other hospitals are busy with so many patients and so few physicians,” she observes, echoing a common complaint.

Instead, her center in the basement of Building #2 at TMUH is small and intimate, which allows it to offer more personalized treatment than most institutions. “If you’re able to pay a little bit more, we have all the people you need to see at once,” she says, referring to the team effort that replaces the usual sequential medical care. The International Cancer Institute charges NT$2,500 (US$75) per visit, five times the usual rate for seeing a doctor at a Taiwan hospital, but a pittance by U.S. standards.

The center provides all of the necessary services and treatment that a cancer patient might need, including psychological counseling and nutrition plans.

Personalized treatment plays a huge role in modern cancer treatment. “Nowadays we have so many targeted therapies,” says Whang-Peng, noting that oncologists are increasingly able to tailor treatments based on specific chemical markers in a patient’s body. These markers – changes in hormones and other chemicals in the body that reveal clues about the effet of the disease on the patient – can then provide guideposts for treatment.

Cancers also seem to behave differently in different popula-

tions or ethnic groups, with both biological and cultural factors coming into play. Whang-Peng notes, for example, that “nobody has oral cancer like Taiwan,” due to the high rates of betelnut chewing. In addition, the median age for breast cancer here is 10 years younger than in most countries. “We don’t know why,” she concedes.

According to Whang-Peng, Taiwan has a fairly good track record in cancer treatment, lagging only slightly behind the United States in overall survival rates. She also notes that the National Health Insurance program provides funding for some of the most advanced and costly medicines in oncology, including AstraZeneca’s lung cancer drug Iressa, Genentech’s colorectal cancer drug Avastin, and Bayer’s kidney cancer drug Sorafenib.

Still, research funding is “peanuts” compared to the United States, she says, not surprisingly as healthcare expenditure equals less than 7% of Gross Domestic Product, compared with the U.S. figure of over 17%. Taiwanese doctors very often have overseas experience, especially in the United States, studying, doing research, and even practicing. The relationship is mutually beneficial, as U.S. universities and research labs have a strong need for excellent personnel, while Taiwanese doctors benefit from exposure to the highest quality medical system in the world. Taiwan regularly collaborates with U.S. institutions on cancer research; TMUH, for example, works closely with the City of Hope and NIH. The government is aiming to increase the level of expenditure on healthcare, with President Ma Ying-jeou promising to raise the proportion from 6.2% of GDP in 2010 to 7.5% in 2018.

But after rising to 6.9% of GDP in 2011, healthcare spending as a share of the economy dropped last year to 6.5%.

Whang-Peng says TMUH won government grants for cancer research four years ago and hopes to extend the grants to continue research that is now showing promise of leading to commercial development.

— By Timothy Ferry

New Attention to Long-term Care As Taiwan gets closer to becoming a “super-aged society,” social welfare issues are gaining greater prominence.

BY TIMOTHY FERRY

48

8 IF.indd 48

taiwan business topics • august 2013

2013/8/2 4:21:09 PM

A Report on the Healthcare Sector

T

aiwan is sitting on a ticking demographic time bomb, with the expanding number of elderly people combined with ultra-low birth rates threatening the island’s future prosperity and well-being. Taiwan is rapidly transitioning from an “aging society” to an “aged society,” and by 2025 will be a “super-aged society” with a quarter of the population over the age of 65. The needs of the elderly look likely to stretch the capabilities of the current social services and medical systems.

Deep-seated reforms to some of Taiwan’s most vital institutions, like pensions and healthcare, will be needed.

Currently, 11.5% of Taiwan’s population is considered elderly, not especially high compared with the 17% in several European Union countries and 24% in Japan. But what is alarming is the rate at which Taiwan is aging. The island became an “aging society,” defined as 7% of the population over the age of 65, in 1993, and it will breach the 14% threshold for an “aged society” by 2017. That development will take only 24 years, compared with the 115 years it took France and 74 years for the United States to make the same transition.

The elderly’s proportion of the population is expected to continue rising, and by 2025, only eight years later, Taiwan will burst through the 20% ceiling to become a “super-aged society” with 4.8 million senior citizens. Meanwhile, Taiwan’s fertility rate – the number of children any given woman is expected to have in a lifetime – is 1.11, among the very lowest in the world, tied with Hong Kong but below the figures for Japan and South Korea.

By 2030, Taiwan’s demographics will resemble Japan’s – a super-aged society with nearly a quarter of the population over the age of 65 and a ratio of two senior citizens for every one child. Social scientists warn of a future freighted with huge numbers of senior citizens requiring expensive long-term care but supported by ever dwindling numbers of workers, who likewise must prepare for their own retirements.

James Cherng-tay Hsueh, who as Minister without Portfolio from 2008 to 2012 took charge of coordinating the government’s response to this slowly unfolding crisis, provides clear examples of what’s at stake. Now a sociology professor at National Taiwan University, Hsueh notes in a recent paper that medical costs in the over-65 age group increased by 90% between 2000 and 2010, when it reached NT$178.3 billion, accounting for 34% of total medical spending. However, the actual number of senior citizens increased by only 30% in that decade, indicating that the costs for caring for the elderly are increasing even faster than the population. For the age bracket above 80 years old, medical costs in 2010 reached NT$55.8 billion, a 203% increase from 10 years earlier. “If we do not increase the premium rates, the system will collapse by 2025,” Hsueh says.

The government has already implemented a number of key reforms, including raising premium rates for the National Health Insurance (NHI) program and pension system, despite vehement opposition from civic groups. Several new pieces of legislation are also being discussed, including a Long-term Care Service Act, Long-term Care Network Act [any idea what that entails?], and Long-term Care Insurance Act, with the aim of establishing a web of comprehensive sustainable care for

increasingly elderly population.

Another significant change was last month’s inauguration of the Ministry of Health and Welfare (MOHW), which joins the former Department of Health (DOH) with the social affairs department previously under the Interior Ministry. At the ceremony launching the new ministry, Premier Jiang Yi-huah said that the government expects MOHW to provide “a more efficient, integrated, and real-time service for the people” through the synergies the reorganization creates. Dr. Chiu Wen-Ta, the former president of Taipei Medical University and the DOH minister since 2011, continues as head of the enlarged ministry.

MOHW’s formation is the “mark of a new era in health and social welfare history,” says Chan Hou-sheng, a cabinet minister in the Lee Teng-hui administration and currently a professor of sociology and social work at National Taiwan University (NTU). Social welfare and public health, he says, share a common concern: “care for the elderly and for the economic and social stability of disadvantaged groups.” Equally important, he notes, creation of the new ministry elevates responsibility for social welfare to a cabinet-level position, a clear indication that Taiwan is taking social welfare issues seriously.

“The needs are growing not only for income security provided by the pension bureau but also for healthcare,” says Chan. He notes that the combination of health and social welfare at the ministerial level is just one step toward establishing a “long-term care system providing for old people and focusing on community care and home care.”

While top-down reforms are required, many argue that society’s perception of social welfare also needs to change.

Currently Taiwan’s disadvantaged – the poverty-stricken, disabled, elderly, and chronically ill – are served either directly by the government through public hospitals or government agencies, or through non-profit organizations (NPOs) such as the Eden Foundation or World Vision. However, as the numbers of elderly and chronically ill rise, the government and NPOs will be hard pressed to handle their needs.

Indeed, voices are being heard advocating that Taiwan allow the operation of private, for-profit firms as is the case in most developed nations. Currently, profit-making social-welfare organizations are generally not permitted in Taiwan (although some are able to operate under license from an NPO). The ban stems mainly from widely held cultural attitudes that disdain the notion of profiting off others’ misfortunes and that view those working in the field as having social status. But Hsueh predicts that “sooner or later, when the market expands and the number of disabled elderly increases,” it will prove impossible to maintain the existing prohibition.

Despite feelings in Taiwan that welfare for those in need should not be a source of profits, Chan Hou-Sheng notes that globally there is “a great emerging trend for the private sector to care for these social welfare needs.” Private, for-profit social-service organizations are common in many Western countries for everything from geriatric care to private prisons to care for the mentally disabled. Many of these companies have strong track records of delivering social services more efficiently and at lower cost than government agencies, while still able to earn a profit.

taiwan business topics • august 2013

8 IF.indd 49

49

2013/8/2 4:21:09 PM

INDUSTRY

F

CUS

Private-sector role The development of the private sector would help foster the government’s call for more community- and home-based care for the chronically ill as an alternative to institutionalization. JeanFrancoise Piffard, head of Air Liquide Healthcare Asia, a Frenchinvested enterprise, says that in terms of both cost to the NHI system and comfort for patients, home-care for the chronically ill will be essential – it’s only a question of time. “On the path to economic maturity, Taiwan will have to consider treating chronic disease at home as a main priority to improve patients’ lives and improve costs,” says Piffard. “It’s been demonstrated everywhere that this is more efficient for the healthcare economy.”

Air Liquide Healthcare provides ventilation products and home-care services to patients suffering from breathing issues such as COPD (chronic obstructive pulmonary disease) and sleep apnea. The company is already well established in Japan, Hong Kong, South Korea and other Asian centers that recognize the benefits of caring for such patients at home. As of yet, home ventilation for people with COPD and sleep apnea is not covered by NHI, and people using the services of Air Liquide must pay out of pocket.

Once a policy decision is made that home-care for chronic diseases is the best course, Piffard says, the next step is to link reimbursements directly to home-care services. He says this is a more difficult decision to make than it might seem, because bringing home-care under NHI coverage will not necessarily reduce the number of hospitalized patients. Although the average cost per patient should decrease, the number of people under care – and the total costs – is likely to increase.

In Taiwan as in other countries, Chan notes, many people are willing to pay for better quality of service and will be “delighted to receive care provided by profit-making organizations.” In an aging society, he observes, care should come from as many sources as possible – the government and NPOs, but also the profit-making sector.

Allowing private for-profits into the social-services industry is only one of the changes that will be needed for Taiwan to pre-

pare for the inevitable demographic shifts. Mentioned above were several new legislative initiatives that will potentially reinvent Taiwan’s delivery of long-term care services. Chan, who has been involved in crafting the ideas behind the bill, says that the intent of these bills is to gradually move the chronically ill “out of the NHI and into long-term-care insurance.”

Hsueh, who has also been working on these pending pieces of legislation for years, says that several different versions of the bills are still being considered. But as they all have the potential to create sweeping changes in Taiwan’s society, he feels that it is best to be cautious before committing to any one approach.

Perhaps the biggest change that needs to happen regards people’s expectations, especially the belief that the government can provide a comprehensive social safety net – including healthcare and retirement pensions – at low tax rates and for low premiums. People in Taiwan expect a “cradle to grave” welfare state, says James Hsueh, but they are unwilling to pay for it. Premiums and taxes are too low to support the desired level of social welfare, and many social-welfare programs are already facing financial pressure. What could work in an era “when we had a lot of young people able to pay” is unsustainable in an aging population, he notes.

However, Hsueh also acknowledges the political challenges of making these painful changes, since ultimately carrying out reform will mean asking workers to pay more and get less. Not surprisingly, every attempt at reform has become the target of virulent opposition. Advocacy groups accuse the government of bringing “pain to the people” whenever an increase in pension or healthcare premiums – or the level of NHI co-pay fees – is proposed.

Perhaps even more fundamentally, people need to shift their perception of aging, says Chan. He notes that in Taiwan, and in much of the rest of the world, the phenomenon of aging is always presented as a problem, as a potential drain on society.

But in Japan, he observes, “they are trying to transform the social value of old people into a positive,” with a focus not on the needs of the elderly but on the contributions old people can make, both “economically and socially.”

Domestic Drug Industry Coming of Age Local companies are eyeing the Chinese market as they seek to develop new products.

BY JENS KASTNER

50

8 IF.indd 50

R

ecent months have produced two events illustrating how Taiwan's local pharmaceutical industry, long known mainly for producing generic drugs, is moving into a new stage of development. First was the establishment in late 2012 of the Taiwan Research-based Biopharmaceutical Manufacturers Association (TRPMA), whose 25 charter members focus on new drug development. Then in May this year, local firm TaiGen Biotechnology simultaneously submitted a New Drug Application (NDA) with the Taiwan Food and Drug Administration

taiwan business topics • august 2013

2013/8/2 4:21:09 PM

A Report on the Healthcare Sector

(TFDA) and the China Food and Drug Administration (CFDA) for its antibiotic nemonoxacin. Making this milestone possible was the Cross-strait Cooperation Agreement on Medicine and Public Health Affairs (CSCA-MPHA) under the broader Economic Cooperation Framework Agreement (ECFA) signed between Taiwan and China in 2010.

Broadly speaking, biopharmaceutical research and development on the island has been driven by two groups of players with different technology platforms and business models. One of them consists of Taiwanese scientists who built distinguished careers in the United States and Europe before returning with expertise and experience enabling them to establish R&D-based companies in Taiwan.

Among the most prominent such firms are TaiGen, which specializes in developing treatments for cancer, diabetescaused complications, and infectious diseases, and PharmaEssentia, which concentrates on developing new methods for protein engineering.

In the second group are companies that started off as generic-drug makers but subsequently begun developing new drug delivery systems. These systems alter the existing drug's characteristics – such as penetration, absorption, and excretion – enabling the dosage frequency to be reduced and extending the application of the drug to new indications. Such an approach was taken, for example, by TTY Biopharm with oncology drugs and the Taiwan Liposome Co. (TLC) for liposome systems. Another fruit of Taiwan's biopharmaceutical R&D has been supplements combining Traditional Chinese Medicine (TCM), modern capsules, and Western marketing techniques. Examples are anti-fatigue and liver-protective products made of niu zhang zhe, a wild mushroom grown in the decayed wood of stout camphor trees.

As a rule of thumb, new combinations and new delivery systems are required to undergo clinical trials, but other biopharmaceutical R&D products do not if the chemical compound on which they are based had already achieved the necessary approvals.

Over the decades, drug makers from the United States, Europe, and Japan with

Research at the Development Center for Biotechnology concentrates on the early stages of new drug development. photo :DCB

operations in Taiwan contributed to the emergence of a viable biopharmaceutical R&D industry on the island. From the early 1990s onward, they introduced not only innovative products but also modern management concepts regarding marketing, quality assurance, and training into Taiwan. Arguably equally important was the foreign pharmaceutical companies' role in conducting clinical trials in Taiwan, which again involved a transfer of know-how to local researchers.

But with the closure of most of the international firms’ manufacturing sites in Taiwan due mainly to the relatively high cost of production, much of the impact of these companies on Taiwan's domestic biopharmaceutical R&D has ebbed. An indicator on how the domestic pharmaceutical industry has risen in prominence was Taiwan's inclusion earlier this year in the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S). This PIC/ S GMP standard enables Taiwan and the health authorities of the 41 other member countries to mutually recognize the certification of pharmaceuticals, an achievement that Taiwan's regional competitors Japan, South Korea and China have yet to attain.

Still, the total revenue of the industry – including pharmaceuticals, medical devices, and licensing and royalty fees from biopharmaceutical R&D – remains

relatively humble. The 2012 figure came to US$8.7 billion, according to the government-sponsored Development Center for Biotechnology (DCB), representing a rise of 6.1% from the previous year.

In comparison, Taiwan Semiconductor Manufacturing Co. (TSMC), Taiwan's world-leading semiconductor foundry, took in nearly double that amount in the same period.

About two decades ago, the Taiwanese government began making the development of a viable biopharmaceutical industry, conducting its own R&D, a major priority. Since then, a large number of action plans have been implemented and tax breaks and research grants awarded, and about a dozen specialized biotech industrial parks were established.

Over time, the business model of choice for local biopharmaceutical R&D firms became the in-licensing/out-licensing circle. In this model, a candidate drug is acquired from another company in the hope that value-adding R&D will turn it into a winner that can eventually be sold to a multinational at a large profit.

Instead of such R&D in bits and pieces, the government is currently promoting the idea of “translational” drug development, meaning that the whole process from drug discovery to regulatory approval takes place on the island.

The latest headline-creating effort in this

taiwan business topics • august 2013

8 IF.indd 51

51

2013/8/2 4:21:10 PM

INDUSTRY

F

CUS

direction is the plan for a National Biotechnology Research Park in suburban Taipei, scheduled for completion in 2016.

Within the Park, the DCB, which primarily shoulders responsibility for the early stages of new drug development (that is, from toxicological screenings to animal testings in mice and dogs) will collaborate closely with Academia Sinica, Taiwan's leading academic institution for basic research.

According to DCB President Jeff Wang, R&D in the Park will focus on new biologics and small molecule drugs in the areas of cancer, immune disease, and infectious disease, among others. All projects aim for U.S., EU, Taiwan, and China approvals, he says. Also to be integrated into the Park are a TFDA drug validation unit and the newly launched Supra Integration and Incubation Center, which aims to reduce red tape in providing funding to qualified R&D companies. Once the drugs have completed preclinical studies in the Park, they will be turned over to the Hsinchu Biomedical Science Park Hospital and other organizations for clinical trials, thus making the R&D truly translational.

Roads into China and ASEAN The trend of increasing cross-Strait regulatory harmonization for pharmaceuticals may offer some significant benefits for Taiwan, says Heather Lin, Chief Operating Officer of the International Research-Based Pharmaceutical Manufacturers Association (IRPMA), an association of 40 international pharmaceutical companies active on the Taiwan market. Because Taiwan has an excellent reputation for well-run clinical trials, she predicts that more multinational drug companies will choose Taiwan as location for their clinical trials if all data from such trials data is recognized by China in future. Clinical investment into Taiwan would then increase greatly, she notes.

Another aspect of Taiwan’s potential positioning as a gateway to China is Taiwan's huge database on diseases, such as hepatitis B, liver cirrhosis, liver cancer, diabetes, and lung cancer, that are particularly common in ethnic Chinese populations, Lin says. This resource

52

8 IF.indd 52

could be a major advantage for Taiwan’s biopharmaceutical industry in approaching the massive Chinese market.

Carol Cheng, Chief Operating Officer of TRPMA, notes that the development of new drugs for diseases prevalent among ethnic Chinese has been a mutual and prominent target for the health authorities on both sides of the Taiwan Strait. She says that TRPMA members will seek to leverage the advantages of Taiwan’s experienced researchers, high-quality healthcare, and advanced regulatory management to speed up their new drug development projects. In addition, Cheng expresses hope that the signing of the CSCA-MPHA will prompt the TFDA and CFDA to follow the guidelines of the International Conference on Harmonization (ICH) – a project that aims to develop consensus among the pharmaceutical regulatory authorities and experts of Europe, Japan and the United States on regulations related to NDA and Investigational New Drugs (IND), and to facilitate joint inspections of clinical trial centers and manufacturing sites.

Cheng emphasizes, however, that even though TaiGen's simultaneous NDA for nemonoxacin in Taiwan and China was indeed a milestone on the road toward swift license approval in both markets, Taiwan's biopharmaceutical companies will need more than the backing of government-to-government agreements to do well in China. Given the enormity and importance of the China market, she notes, companies will need to develop individual strategies for success. TRPMA tries to assist by serving as a platform for mutual support among Taiwanese drug developers, as well as to provide a collective voice for communicating with government, Cheng says.

In the early 2000s, some Taiwanese biopharma companies had already set up offices in China, and some teamed up with Chinese firms to conduct research projects or enter into distribution agreements for the Chinese market, where the multi-layered sales channels are quite complicated.

But Cheng says the cooperation has not extended to Chinese investment in Taiwanese companies, as there is no lack of funding in Taiwan for good projects, with abundant capital available either from pri-

vate investors or IPOs. She notes that the number of biopharmaceutical companies listed on the Taiwan Stock Exchange (TWSE) and the emerging-stock securities market, GreTai, increased from 40 in 2008 to around 70 in 2013, giving a solid boost to the capital-intensive R&D biopharma industry in Taiwan.

Aside from China, Taiwan's biopharmaceutical R&D companies have been gaining footholds in some other important markets as well. Some firms have engaged in collaboration with their international peers to fund expensive late-stage clinical trials in the United States, Europe, and Japan, and thereby gain access to those markets. But recently the growing ASEAN market, with its half billion people and rapidly growing middle class, has attracts a great deal of interest. Taiwan is closely watching ASEAN members' efforts to harmonize one another's pharmaceutical regulations by 2015, but the island's diplomatic isolation might make it somewhat difficult for Taiwan's pharmaceutical companies to link in to that effort, industry observers say. On the other hand, Taiwan’s recent entry into PIC/S is a hopeful sign that entry barriers to made-in-Taiwan pharmaceutical products may be less formidable than in the past.

Arguably the most important factor for Taiwan's biopharmaceutical R&D companies may be that, after a decade or more devoted to developing new technology platforms and products, many of them are now arriving at a stage where their efforts are beginning to pay off. TRPMA's Cheng predicts that by 2018 about five truly Taiwanese-developed new chemical entities (NCE) will have been brought to the global market, and TaiGen's nemonoxacin next year is due to become the first Taiwanese-developed drug to be launched and reimbursed by the island's National Health Insurance program.

In addition, a lot more Taiwanese-developed drugs are in the pipeline. DCB data shows that 93 new drugs from Taiwan are currently undergoing clinical trials, of which 28 are botanical drugs.

IRPMA’s Lin notes that collaboration in marketing with the multinational pharmaceutical companies can contribute greatly to bringing such products successfully to the international market.

taiwan business topics • august 2013

2013/8/2 4:21:10 PM

s e e i n g ta i w a n

Taiwan’s Never-Ending Celebrations

T

he Ta iwa n To u r is m B u r ea u declared 2013 to be “Time For Celebration,” and so far the year has been a smashing success.

Domestic and international tourists have flocked to the sporting spectaculars, religious celebrations, cultural festivals, and natural treasures showcased by the program. Over the next few months, “Time For Celebration” is set to end in style with a slew of events brimming with romance, color, and excitement.

The final quarter of each year is an exceptionally comfortable time to visit Taiwan. In Taipei, daytime temperatures average 24.5 degrees Celsius (76 degrees Fahrenheit) in October and 17.9 degrees Celsius (64 degrees Fahrenheit) in December. In much of the country, November and December are the driest months of the year, so it is an ideal season for outdoor activities.

Here is an introduction to some of the reasons to visit Taiwan before the end of the year: Weddings in Alishan. More and more young couples in other countries a r e c h o o s i n g Ta i w a n a s a h o n e y moon destination, with some flying in especially to benefit from the skills of Taiwan’s renowned wedding-album photographers. Others, eager

to have a wedding with a difference, sign up for marriage rites that draw on the traditions of Taiwan’s indigenous Austronesian minority. In 2013, the island’s most famous mountain resort area is offering marriage packages under the name “Love in Alishan – Wedding Under The Sacred Tree.” For details, contact the Alishan National Scenic Area Administration (www.alinsa.net).

Huashan Living Arts Festival. Over the past two decades, Taiwan’s economy has reduced its reliance on heavy

industry and embraced services that leverage the island’s creativity and cultural strengths. No place exemplifies this trend better than Taipei’s Huashan 1914 Creative Park. A winery until 1987, the buildings now serve as studios, performances spaces, and restaurants. This October’s Huashan Living Arts Festival will be a treat for those who adore the theater. The location could hardly be more convenient, as the park is just a short walk from the Zhongxiao Fuxing Station, served by the Blue and Brown lines of the city’s MRT rapid-transit rail system.

Yunlin Puppet Theater Festival.

Despite the competition from TV and computer games, the art form known as budaixi (Chinese for “hand puppet drama”) remains extremely popul a r i n Ta i w a n . O f t e n s e e n d u r i n g temple celebrations, puppetry shows

交 通 部 觀 光 局 廣 告 TTB AD

taiwan business topics • august 2013

8_SeeTW.indd 53

53

2013/8/1 1:44:39 PM

g atna i w a n s e e i nsge et iani w

are colorful, comedic, and exuberant. The International Yunlin Puppet Theater Festival, to be held in October, celebrates not only budaixi but also shadow puppetry and related genres.

The festival is centered on the Yunlin Hand Puppet Museum in the town of Huwei in the central Taiwan county of Yunlin, and there is no better place for such an extravaganza. Huwei was where puppet maestro and innovator Huang Hai-tai was born, and where in 1931 he founded the troupe now known as PiLi International Multimedia. As its name suggests, the group – which has produced wildly popular TV shows as well as full-length movies – takes a high-tech approach to the art form. Their performances are spectacles enhanced by dry ice, pyrotechnics, and sound effects. In recent years, puppeteers from the United States, Holland, Japan, Israel, Spain, France, and the Czech Republic have joined local troupes in making the festival a resounding success.

Sunrise LPGA Taiwan Championship. Yani Tseng is one of Taiwan’s heroes. The youngest player in the world ever, male or female, to win five major international championships, she was the world’s no. 1 female golfer for more than two years until earlier this year. Her success has raised golf’s profile in Taiwan, and from October 24 to 27 golf fans will converge on the Sunrise Golf and Country Club in northern Taiwan’s Taoyuan County for the Sunrise LPGA Taiwan Championship. Tseng won the inaugural 2011 event; last year, Norway’s Suzann Pettersen was victorious. This year’s purse totals US$2 million.

Miaoli Hakka Food Festival. About o n e i n s i x Ta i w a n e s e i s o f H a k k a 54

descent, and this ethnic minority has its own cuisine as well as a unique language and distinctive customs. For gourmets, November’s Hakka Food Festival in Miaoli County will be an exceptional opportunity to try Hakka cooking in all its glory. In addition to being a major bastion of Hakka tradition, mountainous Miaoli is splendidly scenic.

Running, cycling, and surfing events.

Like golf, running has grown in popularity in recent years; Taiwan’s bestknown jogger is President Ma Yingjeou. Visiting athletes may want to mark November 2, the date of this year’s Taroko Gorge Marathon, in their diaries. The venue is one of Taiwan’s most powerful tourist magnets, a dramatic and unspoiled valley where visitors can hike, watch birds, or simply gaze in wonder at vertical walls of marble. It is fitting that sportsmen and sportswomen should exert themselves mightily in a place that owes its beauty to awesome natural forces.

Another major run is tentatively scheduled for December 15: The 2013 Taipei Marathon, which will feature not only a full marathon and a half-marathon, but also 9km and 3km fun runs.

A full list of upcoming street races can be found on the English pages of the Chinese Taipei Road Running Association’s website (www.sportsnet.org. tw). If you are thinking of entering any of these races, sign up as early as possible as participant numbers are capped.

Between these two marathons, the country’s roads will see a different kind of sporting action: The 2013 Taiwan Cycling Festival, set for November 9 to 17. Overlapping with the cycling festival will be an event showcasing Taiwan’s gorgeous east coast: The 2013 Taiwan Open of Surfing that will

be held November 15 to 19 in Taitung County.

Hot springs, butterflies, and jazz. If exercise leaves you with sore muscles, consider relaxing in one of Taiwan’s 100-plus natural hot springs. Soaking in geothermally-warmed mineral-enriched waters, then partaking of fine cuisine, is a custom celebrated and promoted by the annual Taiwan Hot Spring and Fine-Cuisine Carnival, which runs from late fall until the Lunar New Year.

Taiwan’s ecological wonders have been astounding outsiders since the late 19th century, and one of them, the Purple Butterfly Valley in south Taiwan’s Maolin, is often compared to Mexico’s world-famous Monarch B u t t e r f l y Va l l e y. B o t h d r a w h u g e swarms of migrating lepidopterans, but while the Mexican valley attracts just one species, Taiwan’s draws four kinds of butterflies in substantial numbers.

Maolin also boasts gorgeous mountain scenery and vibrant aboriginal culture, so it is no surprise it has become a favorite wintertime destination.

Alternatively, head south at the very end of the year. The Chiayi City International Band Festival will jazz up the region as a mix of local and overseas musicians perform accessible, uplifting music at various venues.

For further details of these and other events, as well as general travel information about Taiwan, visit the website of Taiwan's Tourism Bureau (www. taiwan.net.tw), or call the 24-hour tourist information hotline 0800-011-765 (toll free within Taiwan).

taiwan business topics • august 2013

8_SeeTW.indd 54

2013/8/1 1:44:40 PM