February 2015 Taiwan Business TOPICS by AmCham Taipei

CONTENTS

fE b r ua ry 2 0 1 5 vO lumE 45, NumbE r 2 一○四年二月號

Publisher

發行人

Andrea Wu

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro

沙蕩

Associate Editor

副主編

Tim Ferry

法緹姆美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Manager, Publications Sales & Marketing 廣告行銷經理

Caroline Lee

李佳紋

Translation

NEWS AND VIEWS

翻譯

Jay Chen, Yichun Chen, Charlize Hung

11 Issues

Postponed Government Restructuring; Animal Testing for Cosmetics; Gradual Liberalization for Online Insurance

陳正杰, 陳宜君, 洪兆怡

6 Editorial 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

Setting High Aspirations

志在高瞻遠矚更上一層

7 Taiwan Briefs By Timothy Ferry

政府組織改造期限延長；化妝品的動物實驗；線上購買保險限制逐漸放寬 By Philip Liu and Don Shapiro

COVER SECTION

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 2015 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must

15 How Safe is Taiwan’s Food?

檢視台灣食品安全

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○四年二月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

Chairman/ Thomas Fann Vice Chairmen/ Scott Meikle / Dan Silver Treasurer: Cosmas Lu Secretary: Fupei Wang 2014-2015 Governors: William E. Bryson Jr., Sean Chao, Rodney Van Dooren, Cosmas Lu, Scott Meikle, Dan Silver, Gordon Stewart, Ken Wu. 2015-2016 Governors: Margaret Driscoll, Thomas Fann, Ajit Nayak, Vincent Shih, Stephen Tan, Fupei Wang, Lee Wood.

2015 Supervisors: Arthur Cozad, Kai Speth, Neal Stovicek,Wern-Yuen Tan, Neil Waters. COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Derek Yung; Banking/ Victor Kuan; Capital Markets/ Miranda Liaw, C.P. Liu, Shirley Tsai; Chemical Manufacturers/ Michael Wong; CSR/ Lume Liao, Fupei Wang; Customs & International Trade/ Stephen Tan; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Cosmas Lu; Human Resources/ Richard Lin, Seraphim Mar, Vickie Chen; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Arthur Cozad, Joseph Day, Dan Ting; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Vincent Shih; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Tse-Mau Ng, Dan Silver; Pharmaceutical/ Margaret E. Driscoll, David Lin, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin; Real Estate/ Tony Chao; Retail/ Prudence Jang, Ajit Nayak, Wern-Yuen Tan; Sustainable Development/ Kenny Jeng, Kernel Wang; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, Scott Meikle, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, Achim v. Hake.

taiwan business topics • february 2015

Good eating has long been one of the joys of living in Taiwan, but a series of food-related scandals has left the public concerned about the safety and reliability of the food supply. Although the government has been taking action, the problem is not easy to resolve, given the large number of unregistered factories and food providers. By Timothy Ferry

20 TFDA in the Cross Hairs

LIVING IN TAIWAN

26 The Best of American Education at Taipei American School

TAS has kept pace as policies and programs at the most successful U.S. schools have adapted to meet new educational demands.

By Sharon Hennessy

24 The Advantages of Industry Self-regulation

The GMP system is designed to bring sufficient expertise to the certification process.

COV ER SPONSOR f e br uary 2 015 • Volu me 45 n u mb er 2

BEHIND THE NEWS

31 Can Taiwan Solve its Water Problem?

The island’s ultra-low tap-water rates will present an obstacle to conservation.

By Jens Kastner

SPECIAL REPORT

35 The 2015 AmCham Taipei Business Climate Survey

taiwan business topics • february 2015

Setting High Aspirations

n the recently released 2015 Index of Economic Freedom conducted by the Washington, D.C.-based think tank The Heritage Foundation in association with the Wall Street Journal, Taiwan received its best score ever, ranking as the world’s 14th freest economy (up three places from last year) and fifth in the Asia-Pacific. The exercise measures such factors as Rule of Law, Regulatory Efficiency, Open Markets, and Limited Government. Taiwan’s recognition by Heritage is a noteworthy achievement, and is consistent with findings in AmCham Taipei’s 2015 Business Climate Survey, reported on in this issue of Taiwan Business TOPICS, that executives of foreign companies operating in this market generally regard it as an excellent place to do business. Most respondents expressed their intention to continue to expand investment and manpower. At the same time, Taiwan’s competitiveness as an investment location needs to be looked at in a broader context. Although its “freedom score” from Heritage of 75.1 out of 100 placed it in the “Mostly Free” category, that level is substantially below the 89.9 attained by Hong Kong and 89.4 by Singapore, the highest rankings worldwide and two of only five economies to make it into the topmost bracket, labeled “Free,” without any modifier. It is no coincidence that many of the potential business opportunities that fail to materialize in Taiwan wind up in those two markets, especially for financial and other specialized services (both Hong Kong and Singapore) and for certain technology sectors (Singapore). Rather than being satisfied with its “Mostly Free” score, Taiwan needs to take up the challenge of how to vault itself into the ranks of the very best of the best. In addition, Taiwan should draw no satisfaction from its superior performance in the Heritage survey compared with China

(way down in 139th place) or South Korea (29th). Both of those countries enjoy other advantages that outweigh the economic freedom considerations – in China’s case, its rapid growth and the mammoth size of the economy, and for Korea its large corporations and high level of success in negotiating free trade agreements with other countries. Taiwan must compete on other factors, and the business-friendliness of the economic environment is the most salient. Both the Heritage study and the AmCham Business Climate Survey, while giving Taiwan good marks overall, also serve to point up areas in need of improvement if Taiwan is to burnish its attractiveness to business. Among the weaknesses cited in the Economic Freedom report, for example, are an excessively rigid labor market that impedes mobility, overly complicated and timeconsuming license-application processes, and perceived problems with corruption. Each year, the business leaders responding to the AmCham survey have complained about undue bureaucracy and the number of “Taiwan-unique” regulations that are out of sync with general international practices and standards. In the 2015 survey, the respondents cited “inconsistent regulatory interpretations” as their biggest headache. Under Minister Kuan Chung-ming, the Taiwan government’s National Development Council has been spearheading efforts to carry out necessary deregulation and liberalization. Following Kuan’s decision to return to academia, the position is now being taken up by former economics minister Woody Duh. AmCham expects that under his leadership, the NDC will continue to advance an ambitious agenda for reform – one that it will receive the strong backing of both the Executive Yuan and Legislative Yuan.

志在高瞻遠矚更上一層

近

日由美國華府智庫傳統基金會與華爾街日報聯合出版

再說，臺灣不該因為在傳統基金會調查報告中，表現比中

的《2015年經濟自由度》報告中，臺灣獲得有史以

國(幾乎掛車尾的139名)或南韓(第29名)優異而志得意滿。中

來最佳成績，在全球最自由經濟體中排行第14名（較

國與南韓正享受著他們大於經濟自由度的快活優勢成果中 –

去年上升三名），亞太地區則名列第五。受評比的項目有：

以中國來說，其優勢在龐大且成長快速的經濟規模，而韓國

法治、監管效能、開放市場、以及政府管制等。

的優勢則在於大型企業，與跟其他國家簽訂自由貿易協定等

臺灣能獲致傳統基金會的表彰認可是項顯著的成就，且其結果與台北美國商會所做的《2015年商業景氣調查》如

高層次成功。臺灣必須以其他因素出線，而友好的商業經濟環境就是最突出的競爭力。

出一轍，該調查報告刊載於本期新聞月刊Taiwan Business

對臺灣整體性的評分，無論是傳統基金會調查報告，或

TOPICS中，在台營運的外商公司高級主管普遍認為臺灣是適

美國商會的商務環境調查報告，所點出臺灣需改進的地方，

合經商的絕佳環境。大多數受訪企業表示打算繼續擴大投資

皆有助臺灣商業吸引力發光發亮。例如，引述經濟自由度報

及擴展人力。

告中，指出臺灣的弱點包括過於僵化的勞動力市場，阻礙流

同時，作為投資地的臺灣，對競爭力的眼光應放得更廣更

動力，過於複雜且耗時的執照申請程序，和貪汙認知問題等

遠。儘管「自由度成績」在滿分100分中獲得75.1分，被傳統

等。每年，企業領袖對美國商會所做的調查，經常抱怨過度

基金會歸類在「大部分自由」類別中，分數卻遠低於得分89.9

的官僚及「臺灣特有」超過一般國際慣例標準的法規數量。

分及89.4分的香港和新加坡。香港與新加坡排名分居全球第

在2015年的調查中，引述受訪企業所說「前後矛盾的法規釋

一、二名，是不經修正即被歸類「最自由」類別的五個國家

義」最讓人頭痛。

之二。許多無法在臺灣實踐的潛在商機，都能在香港及新加

中華民國政府國家發展委員會，在部長管中閔領導下，帶

坡兩地市場開枝散葉並非巧合，尤其是金融與其他專業服務

頭努力進行必要的管制規定撤銷和自由化。而在管決定重返

（香港和新加坡兩者皆是）以及特殊技術部分（新加坡）。

學術界後，該職務由前經濟部長杜紫軍接任。美國商會期待

與其對位於「大部分自由」類別沾沾自喜，臺灣更該接受挑

在他的領導下，國發會將會繼續推動野心勃勃的改革計劃—

戰，讓自己精益求精更上一層。

一項同時擁有行政院和立法院為堅強後盾的改革計畫。

taiwan business topics • february 2015

— by TI M O TH y f erry —

MACROECONOMICS MOstLY GOOD news Taiwan moved up three places in the annual world Economic Freedom Index [see the Editorial in this issue] by the Washington, D.C.-based Heritage Foundation, to be ranked the 14th freest economy in the world. Bolstered by high scores in business and trade freedoms, the rank marks the seventh year in a row that Taiwan has moved up the list. The new ranking follows other welcome news: Taiwan’s unemployment dropped once more in December, to 3.79%, a seven-year low. Consumer confidence, as measured by National Central University, rose 1.87 points in January to 88.23, the highest score ever achieved. The gains in the overall index were attributed mainly to improved consumer sentiment regarding the stock market, prospects for employment, and the impact of consumer prices on household finances. Taiwan’s Consumer Price Index remained low in December at 0.61%, according to the Directorate General of Budget, Accounting and Statistics (DGBAS). Exports also saw gains in December and for the whole of 2014, rising 2.4% month-on-month and 5% for the year, at US$25.65 billion and US$313.83 billion respectively. Meanwhile, export orders, a leading indicator, totaled US$470 billion for 2014, a 7% rise over 2013’s US$442.93 billion. Economic growth came in at a better-than-expected 3.78% for the third quarter of 2014, and economists are optimistic that final calculations will show that the economy reached, if not exceeded, its forecasted 3.41% GDP growth rate for 2014. One factor spurring growth has been low oil prices, which help fuel domestic consumption by freeing up disposable income for other purchases. Externally, a major contributor has been strong demand for electronics around

RAISING CONTROVERSY — Taiwan’s representative in the United States thought a flag-raising ceremony would demonstrate improved U.S.-Taiwan relations, but the U.S. government reacted strongly that it did not appreciate the move. ph oto : cna

the world, particularly from the United States, where growth has exceeded expectations. Third quarter growth came to 5%, according to the U.S. Department of Commerce’s Bureau of Economic Analysis. The United States took 12% of Taiwan’s exports for 2014. According to Standard Chartered Bank, a rise of 1% in GDP growth in the United States translates into 0.7% growth in Taiwan’s economy. Taiwan’s tech sector accounts for some 32% of its total exports, and surging sales – especially for the new iPhone 6 – have bolstered local manufacturers. Exports of electrical/electronic products rose 13.5% for the year, to US$99.99 billion. The electrical/electronics and machinery sectors, which together make up some 50% of all exports, grew at a combined rate of 7.7% last year to reach US$154.89 billion. DGBAS is forecasting GDP growth for 2015 at 3.51%, but economists in the private sector see Taiwan performing even better. Tony Phoo of Standard Chartered Taiwan is projecting solid 4.3% growth on the strength of U.S.

demand and falling fuel prices. Taiwan Asia Strategy Consulting also raised its 2015 forecast to 3.8%. However, not all the recent news has been good news. Slowing growth in China is a concern, as around 40% of Taiwan’s exports go to China and Hong Kong (26% directly to China). Taiwan Ratings, the local affiliate of Standard and Poor’s, estimates that a 1% fall in China’s growth rate translates into a 2.3% decline in Taiwan’s. China’s 2014 growth was widely reported as 7.3% – the lowest since 1990 – and is forecast to come in at 7% next year. Weakness in Japan and the EU is also expected to continue.

I N T E R N AT I O N A L fLaG raisinG raises eYebrOws When an unprecedented ceremony raising the flag of the Republic of China took place January 1 at Twin Oaks, a Washington, D.C. estate owned by Taiwan, the event was initially portrayed by Taiwan’s representative in the United

taiwan business topics • february 2015

States as signaling strengthened ties between Taipei and Washington. But the move quickly backfired. China predictably expressed outrage over the incident, and U.S. State Department spokesperson Jen Psaki conveyed U.S. “disappointment” that Taiwan’s envoys had acted without prior consultation. She cautioned Taipei not to take any unilateral action that might damage Taiwan-U.S. ties. Twin Oaks Estate was the official residence of the ROC ambassador until 1979 when the United States switched official recognition from Taipei to Beijing. Since that time the U.S. government has imposed certain restrictions on how the property is to be used. Media reports initially said the January 1 event was the first time the ROC flag had been flown at Twin Oaks since derecognition. Later, Taiwan’s top envoy to the United States, Shen Lyushun, noted that the flag had been raised on Taiwan’s National Day, October 10, 2014, although no ceremony was held at that time. Shen also corrected earlier reports that he had notified U.S. officials of the intention to raise the flag. State Department spokesperson Psaki said the flag-raising was “inconsistent with U.S. policy” towards Taiwan, but added that “nothing has changed as it relates to our (Taiwan and U.S.) relationship.” Taiwan sTock exchange PeRFoRMance

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

9750

135

9500

120

9250

105

9000

8750

8500

8250

8000

7750

7500

December data source: twse

Unit: nt$ billion

taiwan business topics • february 2015

CULLING POULTRY — The Formosa Plastics Group provided manpower and disinfecting equipment, as at this goose farm in Chiayi, to help in the effort to respond to the avian flu outbreak. photo : cna

DOMESTIC MOtC HeaD resiGns OVer Hsr faiLUre Minister of Transportation and Communication (MOTC) Yeh Kuangshih tendered his resignation on January 7 to accept responsibility for the failure of the Legislative Yuan to approve his plan to rescue the Taiwan High Speed Rail Corp. (THSRC) from bankruptcy. Yeh, who had held the office since February 2013, said that without the restructuring plan in place, the HSR will fall under government receivership, “possibly at society’s expense.” Although both the president and premier urged Yeh to stay on the job, his resignation was eventually accepted, and MOTC deputy minister Chen Chien-yu was tapped as his successor. The High Speed Rail has faced financial issues nearly from its inception. Yeh’s proposal was to extend the concession period of the five main investors in the THSRC under the current BuiltOperate-Transfer model by 40 years to allow the company to continue operations at minimal expense to taxpayers. The plan estimated that THSRC could earn NT$3.158 trillion in revenues

over the extended duration of concession, allowing it to cover its operational costs and debt while paying dividends of NT$196.4 billion to its investors, which include the Bank of Panhsin, United Microelectronics Corp., and Continental Engineering Corp. H o w e v e r, i n a r a r e s h o w o f bipartisanship, the legislature’s Transportation Committee unanimously rejected the proposal, saying it offered too much to investors at the expense of ordinary riders.

CHen sHUi-bian ParOLeD fOr HeaLtH reasOns Former president Chen Shui-bian, serving an 18-year-plus prison term after having been convicted of corruption, was released on medical parole on January 5, following a determination by the evaluation council of the Ministry of Justice’s Correction Agency that his health condition had deteriorated. On that basis, the Taichung District Prosecutors Office, which has jurisdiction over the Taichung Prison where Chen was serving his sentence, granted him a one-month release to his family home in Kaohsiung – guaranteed by bail of NT$2 million. The ex-president is reportedly suffering

from sleep apnea, loss of motor control, suspected Parkinson’s disease, and other ailments. The 64-year old will need to return to prison once his health stabilizes, the Correction Agency said, noting that the time on parole will not count towards completing his sentence.

birD fLU OUtbreaK striKes tHOUsanDs An outbreak of bird flu that began afflicting poultry in Taiwan as early as last fall has escalated into a full-blown epidemic, with the cabinet-level Council of Agriculture (COA) noting that 142 farms raising a total of 770,000 birds had been affected. Nearly 90,000 birds had been culled as of January 16. The outbreak is concentrated in five regions – Changhua, Chiayi, Yunlin, Pingtung, and Tainan – and seems to have been spread to the island from neighboring countries by migratory birds. At least two different strains of avian flu have been identified: the common H5N8 strain responsible for outbreaks around the world in recent years, and a new H2N5 strain that seems to point to the virus’s ongoing evolution. When the outbreak was first noticed late last year, the H2N5 strain was seen as only afflicting waterfowl, particularly geese, but has now been identified in chickens as well.

AFTER THE FALL — An immobilized Ah-he at the side of the road. The hippo was dead by the next morning, and the entire incident raised questions about the competence of Taiwan’s private zoos. photo : cna

Along with mass culls, the COA has introduced a number of other measures to contain the outbreak and mitigate its effects on the food supply as the Chinese New Year approaches. The steps include tactics to prevent migratory birds from interacting with domestic poultry and requirements that farms show certification of being free of the virus before delivering poultry to slaughterhouses. The COA recommends cooking poultry meat and eggs well before eating. It advises that traces of bird flu virus can

Taiwan's Jan.-dec. 2014 TRade FigURes (YeaR- on-YeaR coMPaRison)

305.44 269.9

2014

2013

32.56 25.2

28.72 30.71

27.75 29.99

Europe

2014

2013

2014

2013

Exports

313.84

2013

TOTAL

274.23

2014

34.87 27.42

U.S.

57.89 32.39

2013

58.64 33.51

19.22 43.16

2014

19.91

2013

ASEAN

41.7

2014

Japan

121.22 44.25

124.69 49.83

HK/China

Imports

UNIT: US$ Billion SOURCE: BOFT/MOEA

be wiped out by cooking at temperatures above 70 degrees Celsius.

HiPPO DeatH raises COnCerns The gruesome death of An-he, an 18-year-old hippopotamus and the star attraction at privately owned Skyzoo, from injuries sustained from a fall from a moving truck, shined a spotlight on the questionable animal care in Taiwan’s estimated 37 private zoos. Animal-rights and environmental groups have raised doubts about Taiwan’s capacity to regulate the industry as well as owners’ ability to care for large, exotic and possibly rare or dangerous animals. While 1,190-kilogram Ah-he was being transported to a temporary habitat in Taichung from Skyzoo in Miaoli Country on December 28, it leapt from the moving truck, colliding with a parked car as it fell and suffering serious injuries. It reportedly lay on the roadside, unable to move, before a crane and large container were finally located and put into service to lift the hippo back onto a truck – only for the crane’s cable to break, causing the animal to drop two meters to the ground. Ah-he was eventually transported to a pond on a farm

taiwan business topics • february 2015

where it was found dead the next morning. An autopsy conducted by the Taipei Zoo revealed that the hippo’s lungs had burst through its diaphragm. Skyzoo has been targeted for violations in the past, and it reportedly did not have a license for Ah-he as required by law.

Ma sUes JOUrnaList OVer bribe CHarGes P r e s i d e n t M a Yi n g - j e o u f i l e d a lawsuit against outspoken commentator and TV talk show host Clara Chou on December 30, alleging defamation over her repeated public accusations that he had received illegal campaign donations. In an open letter to Ma posted on her Facebook account in early December, Chou related information she said she had been given by a former high-ranking official of the National Security Bureau. This person claimed to have heard through a friend that Ma’s campaign had received under-the-table donations totaling NT$200 million from disgraced food manufacturer Ting Hsin. Taiwan law caps corporate donations at NT$3 million. Making the matter even more sensitive is that Ting Hsin was at the heart of last year’s waste oil scandals. Its chairman, Wei Ying-chun, has been indicted on charges of public fraud, forgery, and violations to the food sani-

PASSING THE TORCH — President Ma Ying-jeou congratulates his successor as KMT chairman, New Taipei City Mayor Eric Chu. photo : cna

tary act that could keep him in prison for 30 years. According to Chou, the illegal donations caused the Ma administration to refrain from pursuing Ting Hsin in the early days of the scandal. Chou called for an investigation into the charges by the Special Investigation Division (SID) of the Supreme Prosecutors’ Office. The SID acknowledged receiving the complaint and has opened an investigation. The case has sparked a slew of lawsuits and countersuits. Several members of the ruling Kuomintang

econoMic indicaToRs Unit: US$ billion Current Account Balance (Q3 2014)p Foreign Trade Balance (Jan.-Dec.) New Export Orders (Dec.)

14.9

39.61

35.54

43.5

Foreign Exchange Reserves (end Dec.)

418.98

417.98

Unemployment (Nov.)

3.89%

4.16%

1.875%

Discount Rate (Jan.) Economic Growth Rate Q3 2014p

3.63%

1.45%

Annual Change in Industrial Output (Nov.)p

6.86%

-0.22%

Annual Change in Industrial Output (Jan.-Nov.)p

5.94%

0.39%

Annual Change in Consumer Price Index (Nov.)

0.86%

0.68%

Annual Change in Consumer Price Index (Jan.-Nov.)

1.26%

0.83%

p=preliM inary

Year Earlier 15.8

taiwan business topics • february 2015

sources: Moea, d Gbas,cbc, boft

(KMT) implicated in the charges are also suing Chou, while Chou in turn has filed suit against Vice President Wu Den-yi, who is also vice-chairman of the KMT, alleging failure to rein in party members out to intimidate her. Ma is demanding NT$10 million in compensation and an apology published in four major newspapers, according to his lawyer. The president has also filed a criminal complaint against Chou, alleging libel.

KMt eLeCts eriC CHU as new CHairMan The KMT elected Eric Chu, the recently reelected mayor of New Taipei City, as its new chairman on January 17. Elections were held following Ma Ying-jeou’s resignation as party head last December to take responsibility for the party’s drubbing in the general elections on November 29 last year. Chu, running uncontested for the post, garnered 99.61% of the votes cast by party members throughout Taiwan, the highest proportion ever for a KMT chair since the balloting was opened up to general party members in 2000. Lien Chan won 97.07% of the vote in 2001, while Ma won 94.18% in 2009.

Issues

Postponed Government Restructuring The deadline for completion of the reorganization plan has been extended to the end of this year.

nder the original schedule, a plan for extensive restructuring of the government’s executive branch – reducing the number of cabinet-level agencies from 37 to 29 and enhancing efficiency by bringing related functions under the same ministry – was supposed to be completed between January 1, 2012 and December 31, 2014. Over the past two years, 22 new or restructured central-level agencies have indeed received legislative approval and started operations. These include the Ministry of Culture (upgrading the former Council for Cultural Affairs), Ministry of Labor (from the Council of Labor Affairs), Ministry of Science and Technology (National Science Council), Ministry of Health and Welfare (Department of Health), and the National Development Council (Council for Economic Planning and Development). But continued disagreements within the Legislative Yuan (LY) over transformation of some remaining agencies made it clear for some time that the year-end 2014 deadline would be impossible to meet. On December 17, the legislature passed a bill proposed by Kuomintang (KMT) lawmaker Lu Hsueh-chang to postpone the deadline by one year. The seven organizations still awaiting legislative action are the proposed Ministry of Economic and Energy Affairs (currently the Ministry of Economic Affairs), Ministry of Transportation and Construction (now the Ministry of Transportation and Communications), Ministry of Agriculture (Council of Agriculture), Ministry of Environment and Natural Resources (mainly the Environmental Protection Administration), Ministry of Interior, Mainland Affairs Council, and a new Ocean Affairs Council. The hold-up in approval reflects a wider phenomenon in the LY – the practice in the parliamentary body, despite the large KMT majority, of seeking consensus among various political forces before voting on major bills. The new organizational statute for the Mainland Affairs Council, for instance, has been blocked by the Taiwan Solidarity Union, whose party caucus opposes the idea of mutual establishment of official representative offices by Taiwan and China. Negotiations among the legislative caucuses of the various parties have reportedly ironed out most of the major differences that were blocking approval of enabling legislation. Agreement was reached, for example, to keep the Central Weather Bureau under the Ministry of Transportation and Construction, rather than transfer it to the Ministry of Environment and Natural Resources as originally planned; to incorporate the Mongolian and Tibetan Affairs Commission into the Mainland Affairs Council; and to retain the Taiwan Forestry Research Institute under the Ministry of Agri-

政府組織改造期限延長台灣政府的組織改造計畫期限延至今年底。

行

政院的大規模組織改造計畫擬將37個部會精簡為29個，把相關職責整併交由同一部會負責，以提高效率。該計畫照原定進度，應在2012年1月1日至2014年12月31 日間完成。過去兩年來，的確有22個全新或經調整的中央部會獲得立法院通過後掛牌運作，包括文化部（由原文化建設委員會升格）、勞動部（原勞工委員會）、科技部（原國家科學委員會）、衛生福利部（原衛生署）和國家發展委員會（原經濟建設委員會）。不過立法院內部對其餘部分部會的調整一直存有歧見，組改無法在2014年底的期限前完成。立法院在12月17日通過國民黨立委呂學樟版的組改暫行條例草案，將期限延長一年。尚待立院通過立法的7個部會包括：研議成立的經濟及能源部（由現行經濟部改制）、交通及建設部（交通部改制）、農業部（由農委會升格）、環境資源部（主要來自環保署升格）、內政部、大陸委員會，以及新成立的海洋委員會。政府組改審議延誤反映立法院一個常見的現象――儘管國民黨在立院擁有大多數席次，但立院的慣例是在重大法案表決前，會尋求各政治勢力的共識。例如大陸委員會的新組織條例就被台聯阻擋，因該黨黨團反對台灣和中國互設官方辦事處。據傳立院各政黨黨團已透過協商，排除阻礙部會組織條例審議的大部分重大歧見。例如各黨已達成協議，讓中央氣象局留在交通及建設

taiwan business topics • february 2015

Issues

culture to facilitate forestation, instead of transferring it to the Ministry of Environment and National Resources (although the Ministry will still take over the Institute’s functions related to biodiversity and the preservation of natural resources). Still to be resolved, however, are several divergent bills put forth by individual legislators – in addition to a bill formulated by the Executive Yuan – for the organizational statute of the Ocean Affairs Council. The Council is expected to incorporate the existing Coast Guard Administration, along with new entities responsible for oceanic policy planning and promotion, oceanic resources, maritime safety, coastal management, and oceanic culture/education. In addition, some legislators are asking for reconsideration of a previously reached consensus that the Ministry of Environment and Natural Resources structure would include both a National Parks Administration (upgraded from the current National Parks Department under the Ministry of Interior) and a Forestry and Conservation Administration (from the existing Forestry Bureau of the Council of Agriculture). Maintaining that the functions of the two administrations heavily overlap, these lawmakers are calling for them to be combined under the reorganization program.

部，而非照原計畫改隸環境資源部；蒙藏委員會併入大陸委員會；不再要求林業試驗所併入環境資源部，而是留在農業部協助管理森林，但林業試驗所的生物多樣性和自然資源保護相關業務將會併入環境資源部。不過海洋委員會組織條例草案有個別立委提出數個不同版本，加上行政院也有自己的版本，此問題尚待解決。海洋委員會預料會整合現有的海巡署，並成立新機構，負責海洋政策、海洋資源、海事安全、海岸管理和海洋文化／教育等業務之規劃及推廣。此外，立院過去曾達成共識，就是環境資源部應包括國家公園署（由原內政部營建署國家公園管理處升格）和森林及保育署（原農業部林務局）。不過現在有部分立委要求重新審議，堅稱前述兩署的職責嚴重重疊，應在政府組改計畫中予以合併。

— 撰文／劉柏登

— By Philip Liu

Animal Testing for Cosmetics How to protect animals while also ensuring consumer safety?

化妝品的動物實驗

bill currently before the Legislative Yuan would prohibit the manufacture and sale in Taiwan of cosmetics products tested on animals when alternative methods are available. It would authorize the Taiwan Food and Drug Administration (TFDA) to designate the alternative methods specified for industry use. If the law is passed, Taiwan would follow such other markets as the European Union, Norway, Israel, and India, all of which banned cosmetics tested on animals within the past few years. In addition, Korea recently announced a ban on animal testing for finished cosmetics products, with the intention to extend the ban to ingredients in the future. In recent years, intensive publicity campaigns by such organizations as People for the Ethical Treatment of Animals (PETA), Cruelty Free International, and the Humane Society International have crusaded to end such testing, which often involves irritation or corrosion to the skin and eyes. Frequently the argument is used that while testing on animals by pharmaceutical companies may be acceptable in the interest of saving human lives, it is not justified 12

taiwan business topics • february 2015

如何兼顧動物保護與化妝品安全？

立

法院正審查在台製造與銷售之化妝品若有替代檢測方法將禁止動物實驗的法案，授權由食品藥物管理署明定業者可使用的替代檢測法。該法若通過，台灣將追隨歐盟（E u r o p e a n Union）、挪威、以色列和印度等市場近年內陸續禁止化妝品進行動物實驗的腳步。此外，南韓最近宣布禁止化妝品成品進行動物實驗，並打算未來將禁令範圍擴及原料。善待動物組織（People for the Ethical Treatment of Animals，簡稱PETA）、國際杜絕殘酷組織（Cruelty Free International）和國際人道協會（Humane Society International）等機構近年頻頻

Issues

merely to improve people’s appearance. The protests, often using photos of cuddly rabbits and cute white mice, have had an impact on public opinion, and many cosmetics companies have pledged to refrain from animal testing and have agreed to place certification logos on their products. Other members of the cosmetics industry, however, have had strong reservations about imposing an abrupt end to animal testing, stressing the continued need to assure the safety of cosmetics products and their ingredients before use by consumers. A key question is whether sufficiently effective alternative testing methods are in fact available. Opinion differs on this point, but some of the major manufacturers insist that while scientists around the world are working hard to develop effective alternative methods, so far the substitute methods do not achieve the same level of accuracy as animal testing, particularly for toxicity potentially leading to cancer. They wish to forestall a situation in which outside pressure might lead to the endorsement in Taiwan of alternative methods that may not be fully up to standard. In the absence of animal testing, say some prominent members of the industry, they would have serious concerns about their continued ability to guarantee safe products to consumers. As a result, their suggestion is for the Legislative Yuan to postpone consideration of the bill until the proven effectiveness of alternative means has been confirmed. Another factor deserving consideration is that animal testing is permitted in such cosmetics manufacturing centers as Japan, the United States, ASEAN, and China. Once Taiwan were to implement the proposed ban, it would lose the flexibility to import products from those areas. If postponement of the bill is an impossibility, a longer grace period could be considered between promulgation of the law and the date of implementation. The proposed Taiwan legislation currently calls for a grace period of one year for finished products, two years for raw materials, and three years for the active ingredients in medicated cosmetics. An extension would give manufacturers more time to develop substitute testing methods and adjust their marketing and distribution. — By Don Shapiro

Gradual Liberalization for Online Insurance Industry looks forward to potential further opening later this year.

發動宣傳攻勢，矢言要終結常牽涉刺激或腐蝕動物皮膚和眼睛的實驗。這些人士通常主張，製藥業者進行動物實驗是為了挽救人命，或許尚可接受；但僅為改善人類外貌而犧牲動物，則說不過去。他們示威時常高舉惹人憐愛的兔子和可愛白老鼠照片，對輿論產生影響，許多化妝品業者因此承諾不再進行動物實驗，並同意在產品標示相關認證標誌。不過其它化妝品業者對於貿然停止動物實驗持強烈保留態度，強調有必要持續在消費者使用化妝品前為產品和成分安全把關。此問題的關鍵癥結在於確實有效的替代檢測方法是否存在。各界對此看法不一，但部分化妝品大廠堅稱，儘管世界各地科學家都在努力開發有效的替代方法，迄今有些替代方法仍未能達到和動物實驗相仿的準確性，特別是可能引發癌症的毒性檢測。這些業者希望預先阻止台灣因外來壓力而支持可能尚未完全符合標準的替代方法。部分重量級業界人士指出，若不使用動物實驗，他們會極為擔心業者是否還能向消費者保證產品安全。因此他們建議立法院，在確認替代方法證實有效前，暫緩審查此法案。另一個必須考慮的因素是，日本、美國、東南亞國協（ASEAN）和中國等化妝品製造重鎮都允許動物實驗。一旦台灣實施禁令，可能無法再從這些地區彈性進口產品。若立法院不暫緩審查此法案，或許可考慮延長從法律頒布到正式實施之間的寬限期。台灣目前研議中的條文規定，成品的寬限期為1年，原物料2年，含藥化妝品的活性成分則有3年。延長寬限期，可讓製造商有更充裕時間開發替代檢測法，並進行行銷與銷售調整。

— 撰文／沙蕩

n AmCham’s Taiwan White Paper for the past several years, the Insurance Committee urged the government to enable consumers to purchase relatively simple types of insurance more conveniently online. For example, the Committee’s position paper suggested revision of a regulation requiring online purchasers of insurance policies to use “digital signatures” on their applications. Because of the complicated and cumbersome registration and authentication process involved, that requirement discouraged many potential customers from utilizing the ecommerce channel. Since then, the Insurance Bureau (IB) under the Financial Supervisory Commission has begun to take

taiwan business topics • february 2015

Issues 線上購買保險限制逐漸放寬業界期待今年更進一步開放

台 steps aimed at facilitating the online purchase of certain types of insurance policies. Under new regulations announced in August last year, for instance, it allowed existing customers of an insurance company to use the internet to purchase additional travel insurance, term life, and accident insurance. Members of the insurance industry, however, consider that the scope of the liberalization remains too narrow. One reason is that while the new regulations eliminated the need for a digital signature, the requirement was replaced by an equally complex two-stage process in which consumers twice need to obtain a one-time password (OTP), first to register as a member of the system and then again to carry out the transaction. Other limitations imposed by the regulator have also constrained the growth of the online business. The amount of travel insurance that one person can buy from a single company was capped at NT$6 million in benefits, or a maximum of NT$10 million from all providers. For accident and term life, the benefits cap was set at NT$1.5 million from a single company – too low a level to attract much consumer interest. In late December the IB issued phase-two regulations, which slightly widened the scope of eligibility for online purchasing. Besides existing policy-holders, the revision opened the market to new customers paying for the transaction with a credit card or through a bank account. Now discussion is under way among industry representatives, working in consultation with the Life Insurance Association of the Republic of China and the Taiwan Insurance Institute, on proposals to present to the IB for phase-three regulations, perhaps to be implemented in the middle of this year. Among the recommendations being considered are opening the ecommerce channel to healthinsurance products, raising the benefits cap on online insurance purchases (whether the customer is buying from one or multiple companies), and streamlining the transaction process from two steps to one. Industry has suggested that the regulators follow the models in place in such other jurisdictions as the United States, United Kingdom, Hong Kong, and New Zealand, which have provided for system security while also assuring market growth and customer convenience. — By Don Shapiro

taiwan business topics • february 2015

北市美國商會保險委員會在過去幾年的《台灣白皮書》中，敦促政府讓消費者可以在網上更方便地購買簡單類型的保險，例如保險委員會在立場文件中建議，修改要求線上購買保險者必須在線上要保書使用「數位簽名」的規定。數位簽名登記與認證的程序複雜不便，許多潛在保險客戶因此不願使用電子商務這個管道。後來，金融監督管理委員會保險局開始採取一些作為，以提高在網路上購買部分種類保險的便利性。例如，去年8月公布的新規定，保險局已開放保險公司原有保戶在網上購買附加旅遊平安保險、定期壽險和意外險。但保險業者認為，開放的程度依然不足，原因之一在於新規定雖然不再要求數位簽名，卻改採一個同樣複雜的兩階段步驟：要保人必須先登記成為會員，取得一次性的密碼，然後才能進行交易。監管機構的其他限制措施，也侷限了線上保險業務的成長。每位保戶向單一公司所能購買的旅遊平安保險保額不得超過新台幣600萬元，向多家公司合計購買的保額則以1,000萬元為限。至於意外險和定期壽險，單一公司的保額上限為150萬元，低到難以引起眾多消費者的興趣。 12月底，保險局公布了第二階段規定，將線上購買保險的範圍略微放寬。根據新規定，除了原有保戶，以信用卡或銀行帳戶支付保費的民眾也可以在網路上購買保險。目前保險業界正在進行討論，並與中華民國人壽保險商業同業公會及保險事業發展中心諮商，準備針對可能在今年中施行的第三階段規定向保險局提出建議。考量中的建議，包括讓客戶透過電子商務管道購買健康保險產品、調高線上購買保險的保額（不論保戶是向一家或多家公司購買保險），以及簡化交易程序、將兩階段調整為一階段等等。美國、英國、香港與紐西蘭現行的模式，不僅保障系統安全性，並兼顧了市場成長與客戶的便利，因此保險業界建議監管單位應參採這些國家與地區的做法。

— 撰文／沙蕩

Cover story Food SaFety

How SaFe iS taiwan’S Food? 檢視台灣食品安全

photo : Craig Ferguson

taiwan business topics • february 2015

Cover story Food SaFety

Night market vendors are demanding more documentation from their upstream vendors so they can assure customers of the safety of the food being offered. photo : C na

Good eating has long been one of the joys of living in Taiwan, but a series of food-related scan-

n the wake of a slew of shocking food-safety scandals over the past four years, Taiwan’s reputation as a gastronomic paradise is under threat. Beginning with plasticizer found in cold drinks, jams, and pastries, followed by tainted starch products and counterfeit olive oil made green with a chemical additive, and culminating in last year’s horrific waste-oil scandal that embroiled several of Taiwan’s most venerable firms, the series of incidents has crushed consumer confidence in the safety of the food supply. The brazen malfeasance of prominent players, especially Wei Yingchun of the tycoon Wei brothers, not to mention the inadequacies exposed in the government regulatory system, outraged the public as much as the gory details of tannery waste and diseased animal corpses mixed into food oil. The public demanded action, and the government, including the judiciary and legislators, responded. The Legislative Yuan amended the law to impose steeper fines and tougher prison sentences for violators, and added the word Safety to the statute – now called the Act Governing Food Safety and Sanitation. Prosecutors indicted violators operating throughout the oils supply chain, and the perpetrators, including high-level executives, have either been sentenced to lengthy prison terms or remain in custody awaiting trial. And the Executive Yuan, for its part, has decided to add 70 new inspectors to the Taiwan Food and Drug Administration (TFDA) staff to improve the authorities’

dals has left the public concerned about the safety and reliability of the food supply. Although the government has been taking action, the problem is not easy to resolve, given the large number of unregistered factories and food providers. 享受美食向來是在台灣生活的樂趣之一，但食安醜聞層出不窮，令民眾對食品安全與可靠性擔憂不已。政府已採取補救措施，但台灣有許多未註冊的工廠和食品業者，要解決食安疑慮並不容易。

BY TIMOTHY FERRY

taiwan business topics • february 2015

撰文 / 法緹姆

灣過去4年來發生多起震驚各界的食品安全醜聞，重創美食天堂的美譽。先是冷飲、果醬和麵包糕點驗出塑化劑，接著查出毒澱粉、添加銅葉綠素調色的假橄欖油，到去年台灣數家聲譽最卓著的食品廠捲入令人心驚的餿水油事件。這一連串事件徹底摧毀消費者對食品安全的信心。令全民激憤的是多位備受矚目的企業主被指控犯下的不法行為，尤其是食品大亨頂新集團魏家四兄弟中的魏應充，更不用說這些事件凸顯政府食安把關體系的不足，還有業者在食用油中混入皮革廢油和病死動物屍油，實在駭人聽聞。民眾要求政府有所作為，因此包括司法單位和立法院在內的政府部門都起而行動。立法院進行了修法，加重違法者的罰金和刑期，並在法源名稱中加入「安全」一詞，成為《食品安全衛生管理法》。檢方起訴整個餿水油供應鏈的觸法人員，包括企業高層在內的涉案者不是被判處加重刑期，就是仍然在押待審。至於行政院則決定讓衛福部食

台

Food SaFety

Tsai of the OFS says the TFDA only began a campaign for the mass registration of food providers in April last year in the wake of the olive oil scandal, and has so far registered around 170,000 businesses. But she also estimates that this number represents only around onethird of the total. Further, the registration process entails entering only the most rudimentary information – the name of the company (if any) and the owner’s identity and business address – into the TFDA database. Still, it’s a start on gaining control over a largely unregulated market. Tsai explains that manufacturers of food additives will need to file more detailed information, “like what kind of additives they produce, the specific ingredients, and the use and sources for all of their products.”

ability to conduct meaningful monitoring. Even more significant was the Executive Yuan’s creation of an Office of Food Safety (OFS), an independent body to coordinate policy, information sharing, and inspections among the various ministries and agencies responsible for food safety, including the TFDA under the Ministry of Health and Welfare, Council of Agriculture (COA), and Industrial Development Bureau of the Ministry of Economic Affairs. The OFS, currently headed by Acting Director-General Tsai Shu-jean, reports to the deputy premier and ultimately to the premier, and is also involved in the establishment of a “food cloud” that promises to enhance interministry tracking of food materials, ingredients, and additives. But are these moves sufficient? Is Taiwan putting enough resources toward finally solving its food-related problems, and are those resources being put where they will be most effectively utilized? While most experts agree that progress has been made, many also say that much more needs to be done to satisfactorily ensure the safety of Taiwan’s food supply. Former TFDA director-general Kang Jaw-jou, now a professor in the Institute of Toxicology at National Taiwan University’s College of Medicine, says he

is surprised that the administration has not put even more effort into resolving the issues, considering the sharp rebuke delivered by the electorate to the ruling Kuomintang (KMT) last fall. Political analysts have attributed the KMT’s dismal performance in those elections in no small measure to the perception that the government in power had not done enough to prevent such problems. Although he expected the pointed defeat at the polls would spur more rapid change, Kang says he is not totally pessimistic. “We are getting better, but very slowly,” he observes. “We need a surge of effort.” The challenge is enormous. Taiwan’s food supply is alarmingly unregulated, and it would seem to be a testament to the integrity of most food providers that scandals are not more common. From backalley noodle and tofu manufacturers to ubiquitous street-side vendors and momand-pop eateries, an estimated two-thirds of Taiwan’s food providers operate under the radar of government regulators. For historical and cultural reasons, street food is almost entirely unregulated, a fact that has not diminished the popularity of night markets. Like owning a firearm in Nevada, it is considered the right of every Taiwanese person to setup a roadside stand to sell homemade dou-gan.

Taiwan passed its first food sanitation law in 1978 and began regulating food additives in 1990. Although food safety was previously covered by a bureau within what was then the government’s Department of Health, it was only as recently as 2010 that those functions were expanded and placed under a specialized TFDA. The legacy of this

品藥物管理署增加70名稽查人員，以提升當局的有效監督能力。更重要的是行政院成立食品安全辦公室，作為協調政策、資訊分享，以及衛福部食藥署、農委會、經濟部工業局等食安主管機關之間稽查工作的獨立單位。食安辦目前由代理主任蔡淑貞帶領，直接向行政院副院長報告，最終負責對象則為行政院長。該辦公室也推動建立「食品雲」，加強各部會之間對食材、原料和添加物的追蹤合作。不過前述種種措施是否足以確保食安？台灣是否投入足夠資源徹底解決食品相關問題？還有這些資源是否能發揮最大效益？本刊訪問的專家大多認同台灣對食安把關確實已有進步，但多位受訪者認為還須採取更多行動，才能落實確保台灣的食品安全。曾任衛生署食品藥物管理局（即

今食藥署）局長的台大醫學院毒理學研究所教授康照洲表示，選民在去年11月九合一選舉中以選票狠狠修理執政的國民黨，但政府並未因此投注更多心力解決食安問題，頗令他詫異。政治分析家將國民黨此次慘敗，歸咎於選民大多感覺不到政府付出足夠的努力防止類似問題重演。康照洲預料這次的敗選會刺激政府加速改革，此外他對食安前景並非全然悲觀。他觀察發現，「我們正在改進，但非常緩慢」，「必須再努力加把勁」。食安挑戰相當艱鉅。台灣的食品把關機制異常鬆散，但食安醜聞的爆發頻率並未太頻繁，似乎顯示多數食品業者都是正派經營。這些業者包括陋巷中的製麵鋪和豆腐坊、無所不在的路邊攤和小館子等，估計其中約有三分之二並未接受政府

監管。受到歷史和文化因素影響，台灣的街頭小吃業者幾乎都未接受政府稽查，但這並不影響民眾對夜市的喜愛。一如美國內華達（Nevada）州居民可以擁有槍械，台灣民眾認為人人都有權在路邊擺攤販賣自製豆乾。食安辦代主任蔡淑貞表示，橄欖油添加銅葉綠素事件爆發後，食藥署從去年4月起展開大規模的食品業者註冊計畫，目前已有約17萬商家完成登記。不過她估計這個數目只占全體業者的三分之一左右。此外，註冊程序只規定業者須在食藥署資料庫中登錄公司所有人身分、營業地址等最基本的資料，若有店鋪或公司名稱也應輸入。不過對於大都未納入監管的食品市場而言，要求業者註冊只是管理的起點。蔡淑貞表示，未來會要求食品添

Legacy issues

taiwan business topics • february 2015

Cover story Food SaFety

unregulated market allowed unsafe and unhealthy practices to continue, apparently without many of the violators even being aware that what they were doing was wrong. “A lot of these problems have been existing for decades,” observes Kenneth Yeh-Lin Chan, chairman of Taisun Group, a major food oil manufacturer, and executive director of the Taiwan Food Industry Development Association. “In the old days, certain practices were okay, but now these things are not acceptable anymore.” The plasticizer that was used in clouding agents in foods and beverages is a case in point. Kang, who served as the first head of the TFDA, says these additives were in use for nearly four decades without being detected, and most of those employing the substance were probably unaware of its potential harm to human health. Elden Cheng, vice president of Brothers Farm Foods Co., one of Taiwan’s major tofu and soymilk producers, observes that “the knowledge base for all the food manufacturers is very low” because of the low bar for entry into the market. “For the food industry, the baseline is very low,” he says. “My aunt can decide to manufacture something and

sell it online because it’s so easy.” If the government were to establish a licensing program for food vendors, it would force them to gain at least a basic understanding of formal best practices, he notes. “Food vendors could be required to take an exam to demonstrate knowledge of food safety and preparation before being allowed to actually sell their product.” Taisun’s Chan urges government and industry to work together to achieve a safe and sustainable food supply for the country by improving the knowledge base and modernizing the whole industry. “If you don’t upgrade, you’re going to keep disgracing yourself,” he warns. A basic challenge will be ensuring that manufacturers are subject to effective periodic inspections. Taiwan has approximately 6,000 food factories big enough to gain the attention of the regulators, but the TFDA has only 500 inspectors in its ranks, and they are also responsible for hundreds of thousands of restaurants and other food providers. As a result, the TFDA staff relies on the local governments’ bureaus of health for most of the inspection activity. But local governments may be too close to the industries in their jurisdiction – their tax base – to be willing to catch them out on violations. Kang says

that during his tenure as TFDA head, he experienced situations where the TFDA detected a problem and requested further investigation from the local offices, only to have them reply that “we don’t know where this problem is coming from.” TFDA’s answer was “you should know,” he says. “Like a local police officer should know all of the criminals in his area. It just depends on whether he wants to catch them or not.” OFS’s Tsai cites another problem with local inspectors: their lack of resources and expertise. “The local bureaus have limited human resources, so when they do inspections they don’t do it in a very detailed way,” she says. “They just look around and make sure that it is sanitary, but they can’t spend the whole day going through the records.” C o m m u n i c a t i o n s a m o n g d i f f e rent government agencies have also been a problem affecting food safety, along with the absence of a system for tracking imported chemicals and ingredients, as well as a lack of specifications for some important food additives. Last year’s gutter oil scandal illustrates the gaps in the system. The problem came to light on September 4 when prosecutors investigating a supposed waste oil recycler in Pingtung discovered

加物製造商提供更詳細的資料，「例如生產的添加物種類、確切成分、所有產品的用途和來源等」。

將塑化劑當作食品和飲料的起雲劑使用，即是一例。曾任食藥署首任署長的康照洲表示，業者將塑化劑當添加物使用近40年都未被發現，他們可能大多不知道塑化劑會對人體健康構成潛在危害。台灣的豆腐與豆漿主要生產商川武食品公司副總經理成安知發現，食品市場的進入門檻很低，因此「所有食品製造商的知識基礎都非常薄弱」。他說，「食品業的入門標準非常低」，「連我的伯母都可製作東西上網販賣，因為非常容易」。他指出，「若政府能建立食品攤販執照制度，就可迫使業者對正式的最佳實作規範起碼要有基本了解」，「可以要求食品小販參加考試，證明具備食品安全和烹調知識，然後才可獲准實際販賣產品」。泰山的詹岳霖敦促政府和業界合

作，改善從業人員的知識基礎，並推動整個產業現代化，為國家建立可長可久的安全食品供應制度。他提醒業者：「若不設法提升，就會一直丟人現眼。」食安把關的基本挑戰之一就是要確保廠商接受有效的定期稽查。台灣約有6,000座規模大到足以引起主管單位注意的食品工廠，但食藥署只有500名稽查人力，而且還得負責監督數十萬家餐廳與其它餐飲業者。因此食藥署須仰賴地方政府的衛生局執行大部分稽查任務。不過轄區內業者是地方稅收的來源，地方政府可能因為彼此往來密切，影響他們舉發業者的違法行為。康照洲表示，他在食藥署長任內曾發生該局發現問題，要求地方官員進一步調查，卻只得到「不知問題從何而來」的答覆，食藥局後來回覆「你應該知道」，「就像員

後遺症問題台灣在1978年通過首部食品衛生法規，1990年開始規範食品添加物。食品安全過去是由衛生署其一局處負責，直到2010年才擴大食安把關業務，並改由專責的食品藥物管理署負責。由於食品市場未受政府監管，導致業者一直採行不安全、不衛生的營業作法，許多違規業者顯然並不知道自己觸法。台灣食用油大廠泰山企業的董事長詹岳霖表示，「許多問題存在數十年之久」，「某些作法在過去並未引發非議，如今卻被視為不可取」。詹岳霖目前同時擔任台灣食品產業發展協會理事長。 18

taiwan business topics • february 2015

Food SaFety

that the owner of the recycling plant, Kuo Lieh-cheng, was actually making food-grade lard from waste oil. The raw materials included oil from grease traps, waste from tanneries, and diseased animal carcasses (alarmingly referred to as “corpse oil” in prominent English-language media). The lard was sold to the Chang Guann Co., a major food manufacturer, which distributed it – some 243 tons in total – throughout Taiwan’s food supply. It wound up in a host of food products, including baked goods and meat jerky. The public was of course outraged, but what was also alarming was that the prosecutors who broke the case were from Taichung, a clear indication that the Pingtung authorities had failed in their duties. A farmer in the area had for years complained to Pingtung officials about the factory, but a thorough investigation was never mounted. More disturbingly, the Pingtung Department of Environmental Protection had actually visited to site on two occasions but the inspectors never cited the plant for environmental violations and never mentioned to health officials that it was manufacturing food oils. “When the EPA inspectors went in and noticed that this is a food production area, they might have asked, ‘why do they

警應對轄區內所有罪犯瞭若指掌，就看他要不要抓而已」。食安辦的蔡淑貞則舉出另一個問題：地方稽查人員缺乏資源和專業。她說：「地方的人力資源有限，所以執行稽查時無法太仔細」，「只是到處看看，確定現場環境符合衛生規定，但不會花一整天清查紀錄文件」。其它會影響食安把關工作的問題包括各政府單位之間的溝通、缺乏追蹤進口化學製品和成分的系統，以及部分重要食品添加物缺乏明確規範。去年爆發的地溝油事件凸顯把關系統中的漏洞。檢方在9月4日調查屏東一家廢油回收廠，卻發現負責人郭烈成其實是利用廢油製造食用豬油，才讓問題曝光。郭烈成使用的原料包括利用集油器收集的廢油、皮革廠廢料和病死動物屍體

have all of these industrial chemicals?’” says former TFDA chief Kang. “They should have called the health inspectors.” But they didn’t, and as Kuo’s factory wasn’t licensed to manufacture food, as far as the health bureau was concerned, it apparently didn’t exist. “We need a better integrated system,” Kang concludes.

Tracking waste oil Another issue, according to Sheen Lee-yan, a professor at National Taiwan University’s Institute of Food Science and Technology, is that around half of the waste oil produced in Taiwan is collected by independent recyclers, who ostensibly

The Kaohsiung health bureau seized nearly 3,000 cans of cooking oil on suspicion that the product had been mixed with waste oil. photo : cna

（主流英語媒體以駭人聽聞的「屍油」稱之），共製成約243噸的黑心豬油，賣給食用油品大廠強冠公司，再轉銷給全台食品商。包括烘焙糕點、肉乾在內的等食品業者。這當然引發群情激憤，但同樣令人驚訝的是本案是由台中檢方破獲，顯示屏東當局並未善盡職責。屏東一位農民多年來持續向地方官員檢舉郭烈成的工廠，但當局從未進行徹查。更令人不安的是，屏東環保局其實曾兩度到工廠稽查，但未查出工廠違反環保規定，也未將該廠製造食用油一事通報衛生部門。康照洲表示：「屏東環保稽查人員進入工廠，發現廠內有食品生產區時，大可詢問廠方：『為何現場全是工業化學原料？』」「他們應通報衛生稽查員」，結果卻未這麼做；由於郭烈成的工廠並未取得食

品生產執照，只須由衛生局出面即可取締，但顯然跨部門之間並未互相通報。康照洲因此做出結論：「我們的體制需要更密切整合。」

追蹤廢油台灣大學食品科技研究所教授沈立言表示，另一個問題，在於台灣所產生的廢油大約有一半是由獨立的回收業者收集。業者表面上是將廢油轉賣給生質燃料或肥皂的製造商。沈立言指出，在2014年年底之前，「廢油在回收之後流往何處，幾乎沒有追蹤與監管」。郭烈成不僅規避了衛生官員的監督，也躲過環保官員的糾察（唯一例外是有稽查人員兩次造訪），但沈立言說，環境保護署最近已「採行新政策，規定回收廢油的個人或公司全都需要取得執照」。

taiwan business topics • february 2015

tFDa in the Cross hairs

n its short five years of existence, Taiwan’s Food and Drug Administration (TFDA) has had to confront a number of hot button issues at the center of national controversies, including plasticizers in cold drinks and food items, starches contaminated with illegal chemical additives, and waste and feed oil in the edible oils supply. The TFDA and scandal have become so intertwined in the public mind that its principal organizer and original directorgeneral, Kang Jaw-jou, who served until mid-2013, says many people have been led to think that establishment of the nation’s food and drug watchdog somehow actually worsened the food-safety situation in Taiwan. In its handling of the various food scandals, the TFDA has been criticized for a slow pace of investigations and has even been suspected by the media of deliberately stalling probes at the behest of the administration to protect political allies. Morale in the agency has plunged. “Many people are quitting because they’re putting in such long hours but still getting all this criticism,” notes Kang. Sheen Lee-yan, professor in the Institute of Food Science at National Taiwan University, observes that as investigations uncover more scandals within the food supply, it gives the public the misconception that the situation is worsening, instead of improving. “This is the challenge of successful public policies,” he observes. The 2011 plasticizer scandal was an early trial by fire for the nascent agency. In March 2011, TFDA lab analysts discovered the plasticizer DEHP, generally used in making PVC, in several popular cold drinks. DEHP has been linked to obesity and hormonal disruptions in animals and is potentially carcinogenic. In such a situation, Kang says, standard operating procedure is to refer the case back to the local health department for action. But due to the seriousness of the case, Kang recalls that the TFDA instead conferred with prosecutors on how to proceed. He notes that in contrast to health inspectors, who tend to trust the honesty of local manufacturers, the prosecutors told him: “We don’t trust anyone. We need to see the evidence.” After ensuring that suspected products were removed from store shelves, the authorities took a closer look at all the materials used in producing cold drinks and discovered that the Yu Shen Chemical Co. and Pintian Perfumery Co. had been selling DEHPlaced clouding agents to food manufacturers for decades without anybody noticing. Clouding agents are supposed to be made from natural products such as palm oil, which is more expensive and has a shorter shelf life. Eventually DEHP was discovered in an array of food items besides cold drinks, and over 250 products were removed from store shelves, impacting hundreds of producers and tens of thousands of vendors. The wave of products impacted by the scandal sparked an outcry. The TFDA came under fire from some critics for negligence in allowing plasticizers to be used in food and beverage production, although other commentators praised it for having successfully removed the contaminant from Taiwan’s food supply. — By Timothy Ferry

taiwan business topics • february 2015

sell it to makers of biofuels or soap. Sheen notes that until the end of 2014, “there was very little tracking and oversight as to where the waste oil went once collected.” Kuo Lieh-cheng not only evaded oversight from health officials, but also from environmental officials (save for the two visits by inspectors). But Sheen says the Environmental Protection Administration (EPA) has recently “implemented a new policy which requires all individuals or companies who collect waste oil to be licensed.” When the waste oil scandal first broke, Chang Guann initially apologized and declared that it was also a victim of Kuo’s deceit. But the investigation subsequently revealed that Chang Guann since 2008 had imported thousands of tons of cheaper feedgrade lard – intended for animal consumption only – and had mixed it into its food-grade lard, selling the combination throughout Taiwan. Chang Guann was fined NT$50 million and its chairman, Yeh Wenhsiang, was arrested and faces charges of fraud for his role in the scandal. But the case didn’t end there, despite efforts by the government to reassure the public. On September 12, Democratic Progressive Party legislator Tuan Yi-kuang accused the Cheng-I Food Co., manufacturer of 80% of Taiwan’s cooking oils, of also importing feed-grade lard and tallow (lard is rendered pig fat, while tallow is rendered beef fat) from Vietnam and Hong Kong and mixing it with food-grade oils in its domestic factories. Cheng-I is a subsidiary of the Ting Hsin International Group, whose owners, the Wei broth-

餿水油醜聞剛爆發時，強冠一開始是道歉，並聲稱該公司遭郭烈成矇騙，本身也是受害者，但後來經調查發現，強冠從2008年便開始進口數千噸價格較低的飼料用豬油，它原本只能供動物食用，強冠卻將它摻在食品等級的豬油裡，成品銷售到全台灣。強冠因此被罰款5,000萬元，董事長葉文祥也因本案遭到逮捕，被控詐欺。雖然政府試圖安撫民眾，但食安風波並未到此結束。9月12日，民主進步黨籍立法委員段宜康指控，製造約八成台灣食用油的正義食品公司也從越南進口飼料等級的豬油和牛油到台灣，混入食品等級的油品中。正義是頂新集團旗下的公司，由魏家兄弟經營。根據富比世雜誌估計，魏家四兄弟目前資產達86億美元。他們起初是靠著在中國生產領導品牌康師傅方便麵致富，好幾年前買下台灣主要食品品牌之一味全公司，並成為台北101大樓經營者台北金融大樓公司的大股東。最後有多位頂新的主管因正義混油案遭到收押，包括前董座魏應充。魏應充在去

Food SaFety

ers, first made their fortune – now estimated by Forbes at US$8.6 billion – manufacturing China’s market-leading Master Kong brand of instant noodles. Ting Hsin several years ago acquired the Wei Chuan Food Corp., one of Taiwan’s best-known food brands, and the brothers also became a major shareholder in the Taipei Financial Center Corp., which owns Taipei 101. Eventually a number of Ting Hsin executives, including former chairman Wei Ying-chun, were detained for their roles in ChengI’s alleged wrongdoing. Wei was formally indicted on October 30 and faces a possible 30-year prison sentence. Judging by the number of violations and the long period of time over which they occurred, the use of feed-grade oils in the food supply was clearly a major gap in Taiwan’s food-safety system. The import of feed-grade oils is regulated by the COA, but until the recent scandal the government did not track the materials once they were inside the border. In a well-regulated market, says Kang, the authorities would be able to detect when feed-grade product gets diverted to the food industry. “If you bring in 1,000 tons but only use 100, that means 900 must be going into the food chain,” he explains. Taiwan’s tariff schedule exacerbates

the problem. According to Tsai, the import duty on feed-grade lard is only 8%, but for food-grade it is 20%, due to pressure from the domestic pork industry. The differential provides further incentive for less scrupulous merchants to mislabel the shipment. (Curiously, although Cheng-I imported feed-grade lard and tallow, Tsai says it actually paid the full 20% tariff as if the lard were food-grade. Tsai suspects that they must have received a very attractive starting price.) Public condemnation of the Wei brothers was scathing, with the common narrative describing a family of scoundrels who had already been involved in a food adulteration case in the 1980s, made a fortune in China, and then returned to Taiwan to once again endanger the public as they lined their pockets. Industry experts note, however, that while adding feed-grade ingredients to foods intended for human consumption is certainly illegal, it might not be as reprehensible as it seems. In fact, most industry experts describe the “food-grade” versus “feed-grade” label as a distinction without a significant difference, at least in terms of safety. Indirectly, animal feed will likely end up in humans anyway in the form of pork chops and cheeseburgers, and it is generally produced to

年10月30日正式遭到起訴，最多可能遭判刑30年。消費者食品摻雜飼料等級油品的案子發生多起，而且持續相當長的時間，顯示這是台灣食品安全制度很大的漏洞。飼料用油進口的主管機關是農業委員會，但在最近的食安醜聞發生之前，政府並未追蹤油品進口之後的流向。康照洲表示，在管理良好的市場，如果飼料等級的產品混入食品業，當局就會發現。他解釋說：「如果你進口1,000 噸，但只用了100噸，就表示900噸一定是進了食物鍊。」台灣的關稅稅則讓問題更形嚴重。據蔡淑貞說，飼料用豬油進口關稅僅8%，但在國內豬農的壓力之下，食用豬油進口稅率訂為20%。兩者之間的差距讓無良商人更有理由想要謊報進口豬油的種類。（有意思的是，蔡淑貞說，正義進口

的雖然是飼料等級的豬牛油，但卻繳納食用豬油的稅率20%。蔡淑貞認為，正義一定是拿到很好的報價。）外界批評魏家兄弟的聲浪排山倒海而來，常見的說法是這一家黑心商人在1980年代就涉及食安案件，到中國發財之後回到台灣，再次危害大眾的健康，大肆撈錢。但業界專家指出，在食品中添加原本應用於飼料的成分固然不合法，但可能不像表面看來那麼惡劣。事實上，多數業界的專家表示，「食用等級」與「飼料等級」之間的差別至少就安全來說，並不是那麼明顯。人類在食用豬排或起司漢堡時，原本就可能會間接吃下動物飼料，而飼料一般在生產時，也採用同樣的衛生標準。通常差別是在於品質或口味。製造豆漿過程中剩下的渣滓不會危害人體，只是

the same hygienic standards. The difference most often involves matters of quality or taste. Soybean roughage left over from the manufacture of soymilk is not dangerous, it’s just not very appealing to humans, while for lard the difference might be that the fat being rendered comes from the area around the small intestines rather than the more valuable visceral or subcutaneous fat.

Food fraud vs. safety The feed-grade versus food-grade issue also muddies the distinction between food fraud and food safety. As generally defined, food safety consists of systems dedicated to good hygienic practices, and here Taiwan actually seems to perform rather well. Starting in the 1960s, Taiwan embraced principles of good hygiene in its food system and began monitoring the food supply for pesticide residues, heavy metals, and Persistent Organic Pollutants (POPs) such as dioxin. This longstanding monitoring program, conducted by the COA and health authorities, is considered to have been highly successful. As NTU’s Sheen observes, “Taiwan’s food industry has largely been safe and productive, and continues to produce unique, delicious, and safe food.”

對人不是很具吸引力，至於豬油，差別可能在於飼料用的豬油來自小腸一帶，而非來自更有價值的內臟或皮下脂肪。

食品摻假還是食品安全飼料等級與食品等級的問題，也讓食品摻假與食品安全問題之間的差異出現混淆。一般來說，食品安全包含目的在確保衛生條件的制度，而台灣這方面似乎運作良好。從1960年代起，台灣食品業就奉行衛生的原則，開始監控食品供應鍊中殺蟲劑、重金屬與戴奧辛等持久性有機污染物的殘留。農委會與衛生當局這項行之多年的監控體系，被認為相當成功。台大教授沈立言表示：「台灣食品工業一般來說很安全，生產力也高，並且持續生產獨特、美味而安全的食物。」

taiwan business topics • february 2015

cover story Food SaFety

Experts say that what has recently afflicted Taiwan’s food supply is mainly food fraud, or what the industry refers to as “economically motivated adulteration.” According to global food safety auditor NSF International, food fraud is “the deliberate substitution, addition, tampering or misrepresentation of food, ingredients or packaging.” NSF calls it a growing problem globally, not just in Taiwan – one that costs companies and consumers some US$49 billion a year around the world. Food fraud and food safety are certainly related: if the content of the product cannot be known for sure, how can the safety be verified? But in most parts of the world, food fraud and food safety are usually treated as distinct issues that require their own specific rules and safeguards. Conflating the two can lead to miscalculations in terms both of how to prosecute cases and how to prevent new ones. For example, in 2013 the media described the copper chlorophyllin found to have been added to counterfeit olive oils as “toxic”, which is largely untrue. Chlorophyllin – either sodium or copper – is a food colorant derived from the chloroplast of plants. It is used

in Taiwan, but is not approved for addition to food oil – a regulation based not on safety concerns but to prevent the production of fake olive oil. In fact, according to a 2012 paper published in the journal Food Research International, chlorophyllin is being studied for its “possible health benefits” due to its “antimutagenic, anticarcinogenic and antioxidant activities.” Taisun was also implicated in the copper chlorophyllin case – for including the colorant in its grapeseed oil – as chairman Chan acknowledges. He maintains, however, that public safety was never compromised, even by his competitor, the Chang Chi Foodstuff Factory, which took the brunt of the heat in the incident. “Economic crime – that’s how it’s being defined in the rest of the world,” Chan observes. “But in Taiwan it’s presented as a food-safety issue.” Laboratory tests found the oils made from feed-grade materials to be safe for human consumption. Even the oil made in Kuo Lieh-cheng’s pirate waste oil factory in Pingtung was actually deemed safe for consumption. “While lab tests indicated that the contaminated oil itself, before being used in processed food products, contained levels of polycys-

tic aromatic hydrocarbons (PAHs) and some other harmful compounds at levels above those legally acceptable for human consumption, once the oil was incorporated into processed foods, the processed foods did not test above acceptable levels,” Sheen told TOPICS in written correspondence. “In the lab tests, all the processed foods tested passed acceptable levels.” Crucially, “so far there have been no cases of actual sickness or injury directly related to the oil contamination event,” says Sheen. Ensuring that food is safe for consumption often involves testing the end-product for unsafe bacteria or heavy metals, but as the oil scandals demonstrate, testing isn’t always helpful in uncovering the crime. More effective in promoting food safety, say the experts, are approaches aimed at preventing adulteration in the first place by promoting supply chain transparency and ingredient traceability. In fact, the government is currently putting in place just such an array of rules and policies to enhance transparency and traceability in the food chain. Tsai of the OFS says that since December 31, the Ministry of Finance is requiring all firms in the food oil industry with more than NT$30 million in capital to

專家說，台灣食品供應鍊最近出現的問題是摻假，業界稱之為「出於經濟考量的摻雜」。根據全球食品安全監督機構美國國家衛生基金會（NSF International）的定義，食品摻假是「蓄意替換、添加、改變或錯誤呈現食品、成分或包裝。」基金會說，這個問題不是只在台灣出現，而是日形嚴重的全球性問題，每年在全世界對企業和消費者造成的損失達到490億美元。食品摻假與食品安全之間肯定有關聯：如果產品內容無法確知，安全要如何確保？但在全球多數地方，食品摻假與食品安全一般被視為兩個不同的議題，需要有各自特定的規則與防護保障措施。不論是起訴已發生的案件或防範新的案件，如果把這個兩個問題混為一談，有可能導致誤判。例如，媒體在2013年說在摻假的橄欖油當中發現的銅葉綠素有毒，

這個說法大致上是不正確的。不論銅葉錄素或銅葉綠素鈉當中的葉綠酸，都是從植物葉體提煉得來的食品染色劑。它在台灣有使用，但未獲准添加在食用油，而這項限制不是出於安全考量，而是要防止商人製造假的橄欖油。事實上，根據〈國際食品研究〉期刊在2012年發表的論文，由於葉綠酸的「抗誘變、防癌與抗氧化活動」，科學家正在研究它「對健康可能具有的健康益處」。泰山企業董事長詹岳霖承認，該公司也捲入銅葉綠素的案子 -- 在葡萄籽油添加這個染色劑，但他堅稱，消費者的安全從來不是問題，即使是他的競爭對手大統長基食品公司也未危害到民眾的健康。油品摻入銅葉綠素引發的風波，主要是由大統長基承擔。詹岳霖說：「世界各國都說這次的事件是經濟犯罪，但在台灣，它被說成是食品安

全問題。」實驗室的測試結果顯示，使用飼料等級原料製造的油品，人類可以安全食用。即使是郭烈成的地下油品工廠所生產的餿水油，也被認為安全無虞。沈立言以書面方式告訴 TOPICS說：「測試結果顯示，廢油本身在用於加工食品之前，多環芳香烴化合物（PAHs）及其他若干有害的化合物含量超過人體可以安全食用的法定上限，但這種油品做成加工食品後，成品有害成分的含量就並未超標。實驗室的測試結果顯示，所有的加工食品相關成分的含量都在可接受的範圍。」最關鍵的是，沈立言說：「到目前並未出現跟油品摻混事件直接有關的生病或受傷的案例。」要確保食品可以安全食用，經常需要檢測成品，看看有無有害健康的細菌或重金屬，但油品風暴顯示，檢測無助於發掘犯罪行為。專

taiwan business topics • february 2015

Food SaFety

use electronic receipts in all of their business dealings. These electronic records are to be uploaded to the food cloud that is currently being developed with help from the OSF. The food cloud is a joint project among the TFDA, COA, and EPA to give all regulators ready access to data on food processors and their supply chains, as well as any ingredients that might impact the food market. The EPA will track waste oils, for example, maintaining records on the food cloud to prevent waste oil from entering the food supply. The COA, meanwhile, has begun tracking all domestic beef. From the moment a calf is born, it is implanted with a tag that traces it throughout its life. The records – which will be invaluable in the case of any outbreak of madcow disease or other epidemic – include the animal’s registration number, who its parents were, and what kinds of drugs and hormones it has ingested. Tsai says that the food cloud is just one of several initiatives to create an overall environment of food safety. The government is also encouraging industry self-management, as well as creation of a third-party inspection system enabling accredited private auditors to augment the

work of government inspectors. Former TFDA-head Kang worries that these efforts may be insufficient and is pushing for more resources to be provided. “To employ 1,000 inspectors, we would need NT$50 million, but

the food scandals caused us to lose trade and economic opportunities worth 10 or 20 times that amount,” he says, citing the damage to Taiwan’s reputation for food quality in the global marketplace. He adds that the scandals have tremen-

家表示，促進食品安全最有效的做法，在於提升食品供應鍊的透明度與建立原料溯源體系，以便在源頭防止業者摻雜不該有的物質。政府其實已經在頒行一系列的規定與政策，以加強食物供應鍊的透明度與可追溯性。食品安全辦公室的蔡淑貞說，去年12月31日起，財政部規定資本額在3千萬以上的食品業者所有交易都必須開立電子收據。這些電子交易紀錄將納入食品安全辦公室正在建立的食品雲資料庫當中。食品雲是食品藥物管理署、農業委員會與環境保護署的共同計畫，目的在讓各監管部門能迅速取得有關食品加工業者及其供應鍊與食品成分的資訊，例如環保署將追蹤廢油流向，並將紀錄儲存在食品雲，以防止廢油進入食品供應鍊。同時，農委會已開始追蹤所有的國內牛肉。小牛一出生，就會植入

將一輩子跟著牠的標籤。牠的身世紀錄將包括登記號碼、父母親的身分以及曾經施打的藥物與荷爾蒙。萬一發生狂牛病或其他疫情，這些資訊將會非常寶貴。蔡淑貞說，政府在採取好幾項措施，以創造一個食品安全的整體環境，食品雲計畫只是其中之一。政府也在鼓勵業界自我管理，以及建立第三方檢查制度，讓登記有案的民間稽核人員補強政府的稽核工作。前食藥署長康照洲擔心這些措施可能不足，因此呼籲政府投入更多資源。他說：「雇用1,000名稽核人員需要5,000萬元，但食安醜聞害我們失去的商機，是這個金額的10 倍或20倍。」這是指食安風暴在全球市場對台灣食品信譽所造成的損害。他並說，食安風暴大大增加食藥署員工的工作壓力，而且面對大眾的批評與怠忽職守的指控，食藥

署的士氣也大受影響。在近期這幾次食安危機期間，他觀察到「大家都忙瘋了，實驗室的檢測機器已經超過兩個月都沒停過，但食藥署的員工還是被批怠惰及不盡忠職守，有許多人在工作時落淚。」康照洲表示，經過長時間的忽略，台灣需要採取緊急措施，讓監管機制達到標準。他回憶自己在擔任食藥署長期間曾要求增加人力，「以便檢查所有地下工廠，並達到比較合理的狀況」。可惜當時做得不夠，而他認為，即使是現在，相關的努力依然不足。但台大教授沈立言比較樂觀，他認為現在有更多的食安與食品摻假的案例曝光，原因就在於監控與檢查的工作做得比以前好。他說：「比過去有效的檢查已查出業界的一些手法，並帶動當局的調查，而這最終將使食品制度比過去更為安全。」

Edible oil undergoing testing in a Taiwan Food and Drug Administration laboratory. photo : Cna

taiwan business topics • february 2015

Cover story Food SaFety

dously increased the workload for the TFDA staff, even as their morale sags in the face of public criticism and accusations of dereliction of duty. During the recent crises, “everyone worked like crazy – the (lab testing) machines didn’t stop for more than two months,” he observes. “But we were being called lazy and not doing our jobs. People were crying at work.”

According to Kang, Taiwan needs to put emergency measures in place to bring its regulatory regime up to standard after the long history of neglect. As director-general of the TFDA, he recalls, he appealed for more manpower “so we could check all of the underground factories and achieve a more normal situation.” Unfortunately, not enough was done at the time, and in Kang’s view the

efforts are still falling short. NTU’s Sheen, however, offers a more optimistic scenario: that the reason more food safety and fraud issues are coming to light is the result of better surveillance and inspection. “The stronger inspections are uncovering practices and leading to investigations that ultimately make the food system safer than before,” he suggests.

the aDvantages oF inDustry seLF-reguLation The GMP system is designed to bring sufficient expertise to the certification process.

lden Cheng, vice president in charge of production for leading Taiwan tofu-maker Brothers Farm Foods Co., hardly looks forward to the annual Costco audit his company must endure to keep its products on Costco’s shelves. The process takes at least a day to complete and involves a detailed inspection of the entire factory as well as the company books. And it costs money. The inspection team’s travel costs are all paid for by the suppliers, and the company must invest significant sums on the latest technology to meet the Costco requirements. But his firm still does it. Why? Not just to receive orders from Costco, he says, but because the Costco inspection system confirms that Brothers Farms has met the highest standards for both safety and the traceability of its supply chain. As the government has come under withering fire over egregious food scandals that threatened the public health, food makers are left grasping for ways to assure their customers that they are indeed as safe and reliable as claimed in their marketing. A simple government seal of approval is no longer enough for some shoppers – and more importantly for some retailers – as many of the worst recently discovered problems had gone on for years practically under the 24

taiwan business topics • february 2015

noses of government inspectors. Even firms granted the vaunted Good Manufacturing Practices (GMP) certification, a locally owned but internationally recognized food manufacturing standard, were caught up in recent food scandals. For various reasons, private industry may be better equipped and more capable than government agencies in overseeing mechanisms to ensure food safety and prevent fraud. First, the government is short of resources for managing risks in the food supply chain. The Taiwan Food and Drug Administration (TFDA) has only 500 inspectors divided roughly evenly among its three branch offices in Northern, Central, and Southern Taiwan, but these inspectors must give priority to checking imported foodstuffs at the points of entry and to monitoring domestic output in high-risk sectors such as meat and dairy, with little time to directly inspect local factories. Factory inspections are generally left up to the local departments of health, who often lack sufficient expertise or time to pay close attention to details. “The county inspectors don’t have any experience in food safety or the industry,” leading to superficial inspections, observes Brothers Food’s Cheng. “When the government inspectors come, if everything looks okay, then it’s okay,”

he notes. “The retailers’ inspectors are stricter. They have their [regulatory] bible and they follow the rules one by one.” In addition, the private-sector inspectors generally have greater familiarity with the particular industry they are monitoring and so know specifically what to look for when going through a plant. Problems of food safety (chiefly focused on preventing contamination from microbes or pollutants) and food fraud (usually involving economically motivated adulteration) are certainly not unique to Taiwan, as the European horsemeat scandal in 2013 and the more recent listeria food poisoning deaths in the United States illustrate. Food safety issues are serious and often deadly, and so have rightly gained the attention of regulators. But as processing methods have improved and safety standards raised, problems of accidental contamina tion have been eclipsed by issues of deliberate adulteration. According to NSF International, a global foodsafety auditing firm, “the problem of food fraud is huge and growing,” often involving organized crime. As most perpetrators of food fraud know how to take steps to try to evade detection, adulteration is often extremely difficult to uncover simply by testing the finished product. Instead,

Food SaFety

rooting it out requires intimate knowledge of food industry processing methods and supply chains. Taiwan’s local health inspectors are trained to a certain degree in international management standard systems such as ISO (the International Organization for Standardization). But Kenneth Yeh-lin Chan, executive director of the Taiwan Food Industry Development Association (TFIDA), says that inspecting a factory and auditing the manufacturer’s processes, supply chain, and products requires deeper, category-specific training and experience that government inspectors simply don’t have. “If you’ve never made ham in your life, even if you went through ISO training, you wouldn’t know what a manufacturer is doing to cheat in ham,” Chan says. “If they aren’t industry experienced, they wouldn’t know how to inspect.” Chan’s TFIDA is spearheading efforts to promote industry self-regulation as the best way to assure food safety and reliability.

The role of GMP Taiwan’s government has long been aware that it cannot effectively monitor the increasingly complex food industry without the involvement of the industry itself. In addition to putting in place necessary laws and regulations, it has therefore also promoted the international Good Manufacturing Practices (GMP) standards through the governmentfunded, non-profit Taiwan Food GMP Development Association. The association describes GMP as “a voluntary management system that places particular emphasis on the quality, hygiene, and safety of manufacturing processes.” Besides food manufacturing, pharmaceutical makers also employ GMP standards in their production. Food GMP focuses on all elements of the production process, dubbed the “4Ms”: Man, Material, Machine, and Method. The objective is to ensure that workers are well trained; that all materials included in the supply chain are safe and from reputable sources; that the equipment is modern, clean, and safe; and that the whole process pays paramount attention to safety at each critical junction.

According to Bonnie Sun Pan, professor of food science at National Ocean University and head of the GMP association, Taiwan’s GMP-certified companies comprise only a small proportion of the entire food industry, but these companies account for 35% of the industry’s total production value – 60% if partial certification holders are included. Obtaining certification is a complex undertaking, and involves being thoroughly audited by a team consisting of representatives from the Industrial Development Bureau (IDB) under the Ministry of Economic Affairs (MOEA), industry through the GMP association, and scholars having expertise in the specific type of production involved. Samples taken both at the factory and from store shelves are analyzed either by the government-funded Food Industry Research and Development Institute (FIRDI) or the China Grain Products Research and Development Institute (CGPRDI), depending on the kind of product. The costs are subsidized by the IDB, which until recently was responsible for the final confirmation allowing the GMP association to issue the GMP certification. The initial certification is subject to a second, unannounced inspection – and if standards are found wanting, the association will put the factory on suspension until a third inspection, which will result in either final certification or decertification. The process must be repeated annually. According to Pan, the process ensures that “these are Taiwan’s better companies.” Better – but not perfect, as indicated by the several companies holding GMP certification that were implicated in recent food scandals. However, Pan notes that of the more than 150 manufacturers caught up in 2011’s plasticizer case, only nine held GMP certification, and while five of the companies implicated in the more recent waste/feed oil scandals held partial GMP certification, their lard production lines – the products directly involved – were not GMP-certified. Still, the lapses demonstrate that while GMP has made a good contribution to improving overall food safety, more needs to be done. Pan says that the GMP association is in transition right now, and is inviting food wholesalers,

retailers, consumer protection organizations, additives suppliers, and research and development institutes to join “so we can provide a forum for all different parts of the food production chain for everyone to talk, and we can come together set the standards.” TFIDA’s Chan hopes to improve the system by benchmarking Taiwan’s GMP to the internationally recognized Global Food Safety Initiative (GSFI), “an industry-driven initiative providing thought leadership and guidance on food safety management system controls necessary to assure the safety of the food supply chain,” according to GSFI’s website. GSFI serves as a benchmark for global best practices in food safety management. Working with the U.S.-based Safe Quality Food (SQF) Institute, industry and government are developing the next generation GMP standards – called GMP Plus – to build consumer confidence in the food supply. The association is now identifying gaps in the current GMP system, such as weaknesses in distinguishing between food-grade and feed-grade materials. It also plans to allow private accreditation bodies such as FIRDI, as well as international firms such as SGS, to do the inspections of processing plants. The inspectors working for these private accreditors will be trained by SQF and will “be category specific, industry competent, and experienced,” says Chan. Once GMP Plus is effectively benchmarked to GSFI standards and firms are able to meet those standards, processors will be freed from repeated audits by customers seeking additional protection in their supply chains. Pan stresses that GMP certification doesn’t replace local health inspections, but does serve to assure retailers that the food they are stocking is safe and genuine. Chan also emphasizes that the GSFI or GMP logo that may be presented on a label by certified firms is not mainly intended for consumer guidance. “Consumers should not need to have a certification,” he says. “Consumers buying from Costco should expect good, safe products, and should be able to believe in the brands. These certifications are really for retailers, certifying the supply chain.”

taiwan business topics • february 2015

LIVING IN TAIWAN

tHe best of aMerican eDucation at taipei aMerican scHooL TAS has kept pace as policies and programs at the most successful U.S. schools have adapted to meet new educational demands.

BY SHARON HENNESSY, SUPERINTENDENT

Taipei American School is an innovative 21st century learning community. Our mission is to inspire each student to be a confident, creative, caring, and moral individual prepared to succeed anywhere in a rapidly changing world. We provide an American-based education with a global perspective that results in a love of learning, academic excellence, a balanced life, and service to others. – TAS Mission Statement What does an “American-based” education mean? To explain this concept is to explain the TAS mission statement. As you all know, America is a relatively young country, one that has learned to borrow from the best ideas of other countries politically, socially, and educationally. When we talk about American-based education, keep in mind that the best American-based programs combine the rigor and depth of the Asian and European systems with the breadth and openness of the American classroom. But it is not enough to talk about “American-based” or “American-style” education. We should be looking at the most successful of America’s public and private schools in our search to define American-based education as it matters to TAS. Like our students, over 90% of the students who study in the best of Amer26

taiwan business topics • february 2015

Elementary school students get familiar with science skills and concepts as part of the STEAM program. pHoto : courtesy of tas

ica’s public and private schools hope to attend college in the United States, and they recognize that a high level of English-language proficiency will be critical to their success in that stage of their lives. We focus a great deal on Englishlanguage proficiency levels at TAS, not because we think English is the most

beautiful language or because we necessarily see it as the language of the future. We focus on it here because the majority of our students, like the majority of students in the best public and private schools in the United States, want to attend colleges and universities where English is the language of instruction.

LIVING IN TAIWAN

Some students satisfy the public speaking requirement by taking part in theatre productions, such as the performance of Les Miserables shown here.

pHoto : courtesy of tas

English-language proficiency is thus the “key to the educational kingdom,” and we want all of our students to have that key. We believe that this is likely to remain the case for the next decade. At TAS, our experiences teaching English as an Academic Language (EAL) tell us two things: first, it is amazing how quickly children learn and become functionally bilingual, and second, students need a high level of Englishlanguage skills to do rigorous upperschool-level work. Some people wonder how our student population compares with that of the best of the public and private schools in the United States. It is fair to say that TAS students have strong scholastic aptitude along with an impressive work ethic and strong parental support. In that regard, they share much in common with the students in the best of the public and private schools in America. Like their counterparts, TAS students benefit most from a program that has a clear focus on academics but does not stop there. What do the best programs in America look like today? A bit of his-

tory may be helpful. Although there is no “national curriculum” in the United States, you will find that the programs offered in the best public and private schools look remarkably similar. So do their mission statements and their programs of study. At the lower school, you find descriptions of active classrooms where small groups of students are highly engaged in active learning with clear academic goals for language, literacy, math, and science. In middle schools, you find programs that attend to the emotional, the physical, and the academic needs of children passing from childhood to adolescence. And at the upper school, you find remarkably similar academic offerings. Like these schools, TAS is at the forefront of technology innovation in the classroom. Digital learning experiences allow for inquiry and investigation across disciplines. The integration of STEAM (science, technology, engineering, arts, and math) skills is creating new opportunities for our students. The Computer Science and Robotics Department at TAS promotes the integrated study of STEAM

fields. While computer science relies on and develops students’ mathematical and logical thinking skills, our various robotics courses take that to a higher level by progressively requiring students to integrate their knowledge of programming with geometry, mechanics, electronics, problem solving, strategy, and teamwork. TAS student teams regularly participate in and win awards at several international robotics competitions, i n c l u d i n g V E X , R O V, a n d F I R S T FRC. In the VEX Robotics Competition, teams of students are tasked with designing and building a robot to play against other teams from around the world in a game-based engineering challenge. The MATE ROV competitions challenge students to design and build underwater robots to tackle mission tasks based on the real world. The FIRST Robotics Competition (FRC) is an international high school robotics competition where teams of high school students work over a six-week period to build game-playing robots that weigh up to 150 pounds (68 kg). As the Computer Science and

taiwan business topics • february 2015

LIVING IN TAIWAN

Robotics Department has expanded, so has scientific research at TAS. In addition to the advanced research classes in Synthetic Biology and Nanotechnology, there are introductory research classes in biology, chemistry, and physics. In synthetic biology, students combine different bits of genetic material to create new strands of DNA using the same type of equipment found in university labs, including a UV Transluminator (which shines UV light onto DNA sequencing gels) and a DNA Xerox machine called a PCR (which can make up to 64 billion copies of a strand of DNA). Then, they use those strands to alter a bacterium’s traits. Nanotechnology is the study of particles on a very, very tiny scale. Students make nanoparticles using university-grade equipment such as a Carbon Nanotube Furnace and a Planetary Ball Mill. By making a nanoparticle of a material, students can change the properties of that material. For example, students worked to implant carbon nanotubes into various seed coatings to improve germination rates. Last summer, TAS students competed at the third annual iGEM High School Jamboree at the Massachusetts Institute of Technology (MIT). The team, which presented a project focusing on regulating and extending cell life, won various awards and was one of three finalists. In addition, TAS has incorporated public speaking into the curriculum. In all divisions, public speaking is nurtured and practiced on a variety of levels. In the upper school, students must take a course in the Political Science and Forensics Department that satisfies a public-speaking graduation requirement. While some students satisfy the requirement with drama, most students take the year-long Public Speaking class that examines four different types of public speaking: research and informative speaking, persuasive speaking, extemporaneous speaking, and interpretive speaking. The skills they develop in this class are expanded upon in competitive public-speaking programs outside the classroom such as Model United Nations and the Forensics Society. 28

taiwan business topics • february 2015

Important guest speakers, such as Holocaust survivor Noemi Ban, Cambodian Genocide refugee Loung Ung, and anti-discrimination activists Judy and Dennis Shepard, visit the campus to speak on matters of character. The TAS Joanna Nichols Visiting Scholar Program brings relevant, distinguished, and stimulating figures to the school each year to share singular insights and experiences with our students. Princeton University Professor and renowned astrophysicist David Spergel was on campus last month. Other past visiting scholars have included East Asian Historian Benjamin Elman, “Mathemagician” Arthur Benjamin, and Senior Fellow of the University of Southern California’s U.S.-China Institute Mike Chinoy.

Changing priorities There have been many changes in America’s educational priorities in my lifetime. Americans have always looked to their schools to address what are considered to be the most pressing problems of the day. At one point, imparting democratic principles, teaching good citizenship, and sensitizing youth to the importance of racial, religious, and ethnic tolerance all found natural homes within good

American school curricula. The math and science emphasis of the fifties can be seen as the nation’s response to its fears that the Soviet Union would outpace the United States in the space war. The relevancy movement of the sixties and seventies was one outgrowth of the national fatigue with the Vietnam War and with the leaders blamed for it. Academic standards slipped considerably, and the eighties thus saw a hue and cry to restore academic rigor to the nation’s schools. In fact, some of you will recall a 1983 publication A Nation at Risk: The Imperative for Educational Reform, which was the report of the National Commission on Excellence in Education appointed by then Secretary of Education Terrel H. Bell. It warned of a “rising tide of mediocrity,” bred by the low academic standards of the country’s schools, that “threatened our very future as a nation and a people.” By the nineties, the “accountability” movement was in full swing, and the best of America’s public and private schools today have returned to solid academic rigor and academic excellence as a common goal. When we look at those schools considered to be the strongest and the most successful – public and private – you will find clear statements of their commitment to academic excellence, intellectual energy,

LIVING IN TAIWAN At work during a service trip to Cambodia (opposite page) and a research project under way in a science lab. pHotos: courtesy of tas

and transformative educational programs that prepare students for college anywhere in the world. What successful American schools have in common, overall, is an unapologetic, sometimes counter-cultural recognition that we cannot be cavalier about our children’s academic programs, which must have the depth and rigor of the Asian and European systems and the openness and care of the American classroom. I often like to say that in the American-style classroom, we pay attention not only to what information the child is learning, but also to what they are learning about themselves and others through the educational process. While these academic standards are the core of all successful schools, they are not enough. In addition to this demand for a return to academic excellence, Americans in the past decade have provided broad public support of – and demand for – “character-education” programs. Today, character education is considered to be the exception to the rule that change in educational systems must take place slowly. The formation of character, once one of American schools’ most essential tasks, virtually disappeared from many public and private schools in the country by the middle of the twentieth century. It has burst back onto the educational scene, and it is difficult if not impossible to find a good private school that does not include character education or ethics within its mission statement.

As I said at the outset, Americans have always looked to the schools to address whatever is considered to be the most pressing problems of the day. In the past decade and a half, that has meant a return to academic excellence, with accountability for performance and much external, standardized testing, and an insistence that schools help parents address the moral and ethical void that many believe circulates in societies in our times. In other words, the best of the public and private schools in America are fully focused on academic excellence and concern for character. TAS strives to do both, and in striving for academic excellence and moral education, we join the best of the private and public schools in the United States today. That is part of what it means to have the best of an Americanbased education. But, it is not enough. In thinking about the goals we share with these successful schools, I have found that they can be divided into three distinct categories: the Profound (character/ethics); the Pragmatic (academic excellence and rigor); and the Possible. That third set of goals revolves around the urgency of preparing students with a global perspective that prepares them to succeed anywhere in an increasingly borderless, “flat” world. The best academics and the most aggressive character-formation programs may fall short if students do not develop a global perspective. In this area, of course, TAS children have a distinct advantage. In the best or most successful public and private schools in America, efforts are underway to provide multicultural and multilingual environments. Borders have shrunk, the world is “flat,” and the ability to think beyond nationalistic concerns is an essential 21st century tool. The most successful schools in the United States introduce new languages, recruit students from various countries, and introduce exchange programs, summer study camps, and other

ways to bring in what TAS already has quite naturally: a multilingual, multicultural world view. Our peers in the United States must recruit aggressively to bring together students and teachers from a wide variety of backgrounds. The internationalism of our faculty, and the backgrounds of our students, provides enormous advantages to TAS. I want to make it clear that in the best of the American-based educational system, there is deep commitment to the goal of “internationalism” as described above. Our standard-bearer for independent schools, the National Association of Independent Schools (NAIS), recognizes the importance of preparing our children to “compete and collaborate on a global stage.” If the best of American-based education asks us to join the pragmatic (academic) with the profound (character and ethics), and to also welcome the possible (global awareness) as we look over the hedge into the next generation, then we need to embrace goals in all three areas if we truly want to achieve our mission for our students using the best of American-based practices. Academics alone will not suffice. Character education alone will not suffice. Both are critical, and equally so is a student’s ability to apply both to a rapidly transforming world, as a conscientious and responsible global citizen. Only then can we say that the best of the American-style education is in operation at TAS.

— Dr. Hennessy has been the TAS Superintendent and Head of School since 2006. The holder of five graduate degrees (the most recent from Harvard University), she previously held leadership positions in two of the most highly regarded schools in the United States, one public and one private. For many years, she was also an adjunct faculty member at Boston University.

taiwan business topics • february 2015

taiwan business topics â&#x20AC;˘ december 2014

behind the news

can taIWan SoLVE its water probLeM? The island’s ultra-low tapwater fees will present an obstacle to conservation.

BY JENS KASTNER

ocated in Asia’s wet subtropical zone, Taiwan receives 2.6 times more rainfall than the global average – yet it is nevertheless classified by the United Nations as an area of scarce water resources. This paradox is expected to be especially acute this year, as the current severe drought is causing farmers to fear for their spring harvest. Key high-tech sectors that require large quantities of water, including the semiconductor, TFT-LCD panel, and printed circuit board (PCB) industries, are also watching the situation carefully, since they are heavily concentrated in regions likely to be the main targets for water rationing. One potential solution to the water challenge would be the increased use of recycled water, but Taiwan’s extremely low water prices have discouraged investor interest in related infrastructure projects. In some years, Taiwan faces the opposite problem – torrential rains causing dangerous flooding, especially in mountainous areas. But that is not the current situation. “Because typhoons failed to bring sufficient rainfall in the past year, we’ve been controlling outflows from all res-

PARCHED EARTH — The scene at Taoyuan's Shimen Reservoir when affected by drought. photo : cna

ervoirs since September,” reports Lai Chien-hsin, chief secretary of the Water Resource Agency under the Ministry of Economic Affairs (MOEA). He notes that eight areas on the island – Banqiao, Xinzhuang, Taoyuan, Miaoli, Hsinchu, Taichung, Tainan, and Kaohsiung – are currently under Phase-1 water rationing, which entails a reduction in water pressure between 11 p.m. and 5 a.m. Besides controlling water outflow, the Water Resource Agency has also been engaging in cloud seeding using either aircraft or small rockets. Lai says this technique should be able to increase rainfall in the target areas by around 10%, still not enough to make up for the shortage.

Phase-2 restrictions, involving reduced or suspended water supply for irrigation purposes, have been implemented for Taoyuan, Hsinchu, Chiayi, Miaoli, and Taichung, leading to vehement protests from farmers who face the prospect of having to curtail production of certain crops. It takes 2,000 to 5,000 liters of water, for example, to produce a single kilogram of rice, compared to 500 to 2,000 liters of water for the same quantity of wheat. If the situation does not improve, the authorities have the option of imposing Phase-3 controls, covering industrial use, as well as Phase 4, reducing water supply to households. Only critical facilities such as hospitals would be

taiwan business topics • february 2015

behind the news

PREVAILING WINDS — The maps chart seasonal prevailing winds in East Asia. The map on the left shows the winter winds coming south off of the Korean Peninsula, which eventually hit Taiwan from the east. source: http://www.intechopen.coM /

completely spared from the restrictions. According to the Market Intelligence & Consulting Institute (MIC), the likely impact of the drought on Taiwan’s high-tech sector will be much less than for agriculture. In December, the government agreed to increase the amount of water from New Taipei City’s Feitsui Dam made available for high-tech manufacturers in the Hsinchu area. Lai says that all three of Taiwan’s science parks currently have a sufficient supply of water, and the government will next reassess the situation right after the Chinese New Year. MIC also notes that companies have learned a lesson from previous droughts. “After a pretty bad dry spell hit Taiwan’s semiconductor/high-tech manufacturers in 2002, they have been taking all precautions to eliminate the impact of droughts on them,” the MIC semiconductor team told TOPICS by email. “So if the dry spell persists, water rationing will surely still have some effect on semiconductor production but at a lower level compared to a few years ago.” Citing an example of such precautionary measures, MIC says contract chipmaker United Microelectronics Corp. (UMC) has put greater emphasis on water recycling and wastewater 32

taiwan business topics • february 2015

treatment. Other companies, such as Nanya Technology, a manufacturer of dynamic random access memory chips (DRAMs), have built their own water reservoirs to reduce the risk from drought, according to MIC. The main reason for Taiwan’s water problem is the uneven seasonal rainfall distribution through most of the island (the northeast, including Taipei, is an exception). Whereas typhoons usually help fill up Taiwan’s reservoirs in the summer, they hardly ever appear between November and May. During those months, keeping sufficient water levels in the reservoirs depends on the arrival of sporadic cold fronts that typically last seven to ten days. “These cold fronts originate in the dry regions of continental Asia, then pick up some moisture when passing over the East China Sea,” explains Hsia Yue-joe, a professor of natural resources and environmental studies at National Dong Hwa University in Hualien. “But since this passage is short, the moisture stays below an altitude of 1,000 meters and drops mostly on the leeward side of the Central Mountain range, meaning around the Yilan area.” As a result of this phenomenon, central and southern Taiwan respectively receive only 20% and 10% of their

annual rainfall during the period from late autumn to early summer. Hsia cites the steepness of Taiwan’s mountain slopes and the shortness of its rivers as additional factors contributing to water scarcity, since even when rainfall occurs it tends to “escape into the ocean very fast.” But man-made factors also play a significant role. Illegal farms and other illicit economic activity in the mountain areas bring more landslides, washing loose soil into the reservoirs and causing severe sedimentation that reduces the capacity of the reservoirs for storage. The damage done by construction of illegal B&Bs and other tourism facilities in the mountains was shown clearly in the documentary film Beyond Beauty – Taiwan from Above. Mining firms conducting mountaintop excavations are often found to exceed volume caps and control measures. “We’ve already lost one-third the capacity of existing reservoirs due to sedimentation, and by 2030 it will be 50%,” says Lee Hong-yuan, a former Minister of Interior who is now a National Taiwan University (NTU) professor of civil engineering, specializing in water projects. “Removing the sediment is not feasible due to the remoteness of the sites and the sheer

behind the news

quantity of material,” he adds. “As transportation vehicles cannot easily gain access, the removal of one cubic meter would set us back NT$1,000, but we are talking about billions and billions of tons of sediment.”

Contamination and subsidence Pollution exacerbates the challenge. Due to rapid economic development that for decades has not been accompanied by investment in sewage systems, waste water containing industrial toxins as well as agricultural fertilizers and pesticides flow directly into Taiwan’s rivers and lakes, resulting in the widespread contamination of ground water. “We have 90,000 legal factories, thousands of illegal ones, and hundreds of landfills located near rivers, but only 4% of Taiwan’s territory is served by sewage systems,” says Du Yu, chief executive officer of the Chen-Li Task Force for Agricultural Reform, a group of university professors promoting sustainable farming. Because so much ground water has been contaminated, an excessive quantity tends to be pumped in areas where the water is cleaner. The resulting land subsidence destroys infrastructure and also spoils farmland as seawater intrudes on the lowlands during typhoons, leaving fields too salty for plants to grow. Some places in central and southern Taiwan have already sunk to two meters below sea level. In addition, National Dong Hwa University’s Hsia points to a broader systematic issue. “Much of the problem has to do with the Water Resource Agency belonging to the MOEA, meaning that the decision where the sparse resources go is always done out of purely economic considerations,” he says. “In other words, it’s always the industrial parks that get the water at the expense of irrigation.” Hsia elaborates that while water used for irrigation will soak into the ground, water diverted to industrial or urban use will eventually be discharged into the ocean, causing the ground water level to drop in the long run. As an example of what he considers to be a misguided policy, he notes that

the Southern Taiwan Science Park in Tainan was built in the Lee Teng-hui era “against all scientific recommendations” that reflected concern over the uneven water supply in that area. “They discarded all warnings because they wanted to balance economic development in the north and the south, which is purely a political issue,” Hsia says. Structural change may be coming, however. A plan to transfer the Water Resource Agency from the MOEA to a proposed new Ministry of Environment and Natural Resources is currently before the Legislative Yuan, but “will not necessarily be passed in 2015,” says the Water Resource Agency’s Lai. As mentioned above, increased pumping of ground water as a means of alleviating the water shortage is now being restricted because of the impact on land subsidence. The construction of new reservoirs is also not an option, due to the lack of additional suitable sites, nor is it feasible to carry water in pipelines from east to west across the steep Central Mountain Range. NTU’s Lee maintains that the best option is the large-scale recycling of household waste water to make it suitable for industrial purposes. “There are eight projects under construction by the Water Resource Agency, which we hope can eventually recycle 50% of Taiwan’s daily wastewater output of 1.86 million tons,” he says. “Industry consumes 16% of our total water supply, and if we can replace that 16% with recycled water, it’d be a significant step in relieving the shortage.” According to the Water Resource Agency’s Lai, the first of these plants will be completed in Kaohsiung around the end of 2016. It is questionable, however, whether recycled water will be cleared for irrigation and household use. Gene You, an associate professor at the NTU’s Department of Civil Engineering, says that most consumers in Taiwan, as well as in the United States, are uncomfortable with the idea of using recycled water, and that Taiwan’s farmers don’t like the idea either. So while the idea makes environmental sense, You says “the shift to recycled water will require a considerable effort in terms of communication.”

Lee stresses another weighty stumbling block – the cheap cost of water in Taiwan. He argues that as long as Taiwan’s water prices continue to be among the world’s lowest, industries will find little incentive to switch to recycled water, which currently costs NT$17 per cubic meter, compared to only NT$10 for tap water, less than 10% of what most Europeans pay. According to a rough estimate, Taiwanese spend 0.6% of their disposable income for water supply, compared to 1.3% for South Koreans and 2.9% for Japanese. “Only if we increase the tap water rates by two or three times the current prices will the private sector, including foreign companies, be interested in investing in our water recycling plants,” Lee says. “We’ve been talking about this for years already. The politicians always stop the discussion with the argument of ‘not wanting to increase the people’s burden.’” Other than such political considerations, he says, nothing stands in the way of promoting greater use of recycled water, as “its quality is better than water in most irrigation systems.”

Cloud-seeding rockets containing calcium chloride being set off at Mingde Dam in Miaoli.

photo : cna

taiwan business topics • february 2015

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Detailed Findings

2015 Business Climate Survey Summary of Results

Results of the online survey conducted in November and December 2014 by Independent Marketing & Research Limited on behalf of AmCham Taipei. Of the 422 voting representatives (mainly CEOs) from AmCham member companies who were invited to take part, 245 did so for a 58% response rate. The sample covered a wide spectrum of companies by size of employment â&#x20AC;&#x201C; from the very small to the very large. The primary business focus of more than 70% of the respondents is to supply goods or services to the Taiwan domestic market.

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

2015 Business Climate Survey

At the Five-Year Mark, Time for Serious Reflection Message from 2015 AmCham Chairman Thomas Fann

During the past several months, AmCham Taipei conducted its fifth annual Business Climate Survey, inviting the 422 voting representatives from our member companies (generally the CEOs) to answer a series of questions about the business environment in an online questionnaire. I would like to express the Chamber’s appreciation to Gordon Stewart of Independent Marketing & Research for his professional guidance in conducting the survey and analyzing the data. Thanks are also due to the 245 member executives who took the time to complete the survey. The high 58% response rate, which reflects members’ recognition of the importance of this exercise, has produced a solid quantity of data. It is now possible to track AmCham leaders’ view of the business environment over a five-year time span. Overall, the results of the five surveys have been quite consistent. On the one hand, AmCham companies regard Taiwan as a good place to do business, characterized by an industrious and well-educated work force (although some respondents are reporting a shortage of suitable new personnel). Nearly all companies are profitable and are continuing to increase investment and expand employment. The executives are especially positive about the quality of life in Taiwan, describing this society as a safe and friendly environment in which to live and work. But on the other hand, the 2015 survey reflects widespread frustration over certain chronic problems that have remained over the past five years without any substantial improvement – and in some cases have been worsening. Among the continuing chief points of dissatisfaction cited are inconsistent regulatory interpretations, excessive bureaucracy, outdated laws and regulations, inconsistent application of the rule of law, differences between local and internationally accepted standards, insufficient notice before regulatory changes are introduced, and lack of transparency. With regard to inconsistent regulatory interpretations, for example, 21% of the respondents say it has an “extreme impact” on their business while another 39% say it has a “significant impact.” AmCham company leaders hope that the government – both the executive and legislative branches – will pay increased attention to these shortcomings in the interest of enhancing Taiwan’s international competitiveness, with favorable consequences for employment and overall prosperity. Other countries, notably Taiwan’s chief trade rival South Korea, are benefiting from participation in numerous free trade agreements. Since that path has been difficult for Taiwan to follow for political reasons, this country must find other ways to bolster its attractiveness to foreign partners for trade and investment. Regulatory reform should be at the top of the list. During the past year, the Chamber has been encouraged by indications that the government has been reviewing the regulatory process with an eye to bringing Taiwan’s procedures in line with standard international practices. The direction is positive, but so far few major revisions have actually been put in place. The pace will need to be accelerated to enhance Taiwan’s chances for eventual inclusion in the Trans-Pacific Partnership. But whether or not TPP membership materializes, liberalization would improve Taiwan’s ability to compete effectively in global markets. We hope that we may look forward to the vigorous adoption of economic reform initiatives in the coming year, including implementation of the Free Economic Pilot Zone plan, to further strengthen Taiwan’s future economic outlook.

Thomas Fann 2015 AmCham Taipei Chairman

taiwan business topics • february 2015

Executive 2014 business Summary climate survey

Major Takeaways >General Conditions • Of the AmCham executives taking the survey, 69% percent reported that the past year was very or relatively profitable. • Compared with last year’s survey, the number of respondents forecasting growth in revenue and profits in the coming year was about the same (63% vs. 61%), as was the number forecasting increased levels of investment (48% vs. 50%). • 60% of the executives expressed optimism about the five-year business outlook. • More than half of the surveyed companies (56%) increased their employment in 2014, and 49% anticipate further increases in hiring in 2015. • The Taiwan work force continues to be viewed very favorably for being industrious and well-educated, though lagging in creativity, initiative, and international-mindedness. • Taiwan rates very favorably as a safe and comfortable place to live. Food safety is viewed as a problem, however, and the English-language environment needs improvement.

>Areas of Concern • Over the past five annual surveys, the factors cited by respondents as having a major negative impact on their business operations have been largely the same: inconsistent regulatory interpretations, adverse changes in local demand, governmental bureaucracy, inadequate/out-dated laws and regulations, and inconsistent application of the rule of law. • Domestic political unrest was also viewed as a growing problem, as were protectionism and government procurement procedures. • The single category cited as showing marked progress is direct flights to/from mainland China. • Government action (necessarily from both the executive and legislative branches) is requested to deal with the areas of deficiency.

>Trade Pacts • The respondents expressed support for Taiwan’s entry into the Trans-Pacific Partnership (TPP) and for a Bilateral Investment Agreement between Taiwan and the United States. • ECFA is generally perceived as having a positive effect on Taiwan as a whole and on AmCham members’ own businesses. • On the question of whether the Cross-Strait Services Trade Agreement would be beneficial to Taiwan, 60% of respondents said yes, 24% no, and the rest had no opinion

taiwan business topics • february 2015

2015 Business Climate Survey

2014: A decent year for business A substantial 70% of the companies surveyed – the highest percentage since 2011 – said their operations last year were either very or relatively profitable. The 14% describing the performance as “very profitable” was also the highest since the same level was reached in 2011. Most of the remaining respondents reported finishing 2014 at break-even or with a small profit or loss, with only 2% reporting a “relatively large loss” and none experiencing a “very large loss.”

2015 Forecast: More of the same 11% of respondents, the same proportion as last year, said they expect to achieve “substantial growth” in both revenue and profits in the coming year. Those anticipating “modest growth” in both revenue and profits came to 50%, slightly less than the 53% of the past two years. A total of 9% said revenues and profits were likely to see a “modest decline” in 2015.

taiwan business topics • february 2015

Detailed 2014 business Findings climate survey

Near-term Investment: Further momentum 92% of the executives said their companies were likely to invest at least as much in the next 12 months as they did the previous year. 10% (compared to 7% last year) said they expected to make a “substantial increase” in investment, while 40% (41% last year) said there would be a “slight increase.”

Looking ahead five years After a three-year slide, those describing themselves as optimistic or slightly optimistic about business prospects over the next five years amounted to 60% of respondents. From a high of 81% in 2011, that figure had fallen to 65% in 2012, 56% in 2013, and 54% in 2014 before rising in the 2015 survey.

taiwan business topics • february 2015

2015 Business Climate Survey

What impacts their business? “Inconsistent regulatory interpretations” ranked as the number-one factor that respondents said had the biggest impact on their business. “Changes in local demand” was second, reflecting the fact that most AmCham member companies focus chiefly on the local market. Other adverse factors cited among the top 10 were governmental bureaucracy, inadequate/outdated laws, inconsistent application of the rule of law, difficulty recruiting appropriate new personnel, differences between local and internationally accepted standards, insufficient notice before changes to laws or regulations are introduced, lack of transparency, and domestic political unrest.

taiwan business topics • february 2015

Detailed 2014 business Findings climate survey What progress has been made in the past 3 years? Worst to Best ranking Where has progress occurred? Most of the major progress over the past three years, in the opinion of the respondents, was in the area of crossStrait relations. In fact, the only item where the number of respondents seeing significant improvement was in double digits was for direct flights between Ta i w a n a n d m a i n l a n d d e s t i n a t i o n s (19.3%). Many other categories saw little progress over the past three years, or even regressed. Among the areas seen as worsening were political unrest, domestic protectionism, personal taxation, and government procurement procedures.

Issue

Ranking 2012-14 2011-13 2010-12 2009-11 2008-10

Political turmoil in Taiwan Domestic protectionism Personal taxation levels Government procurement procedures Changes in energy costs Governmental bureaucracy Consistency in the application of the rule of law Access to private equity financing Corporate taxation levels Changes in employment expenses Revision of inadequate/outdated laws Changes in raw material costs Changes in financing costs Ability to raise capital locally Changes in tariffs Sufficiency of notice before changes to regulations or laws are introduced Consistency of regulatory interpretations Illegal imports Changes in transport costs Governmental reform/restructuring Ability to recruit appropriate new personnel Corruption Changes in local demand Customs and trade regulations Transparency Ability to secure credit locally Financial industry reform Changes in overseas demand Differences between local and Internationally accepted standards EU - Taiwan government relations Economic Cooperation Framework Agreement (ECFA) Management of currency exchange rate fluctuations Intellectual Property Rights enforcement Ability of PRC personnel to work in Taiwan USA - Taiwan government relations Infrastructure (power, water, telecom, transport, etc.) China - Taiwan government relations Ability of PRC personnel to travel to Taiwan Direct flights to/from mainland China

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

1 6 12 16 8 2 7 26 30 5 11 15 19 22 32 9 4 29 14 13 3 17 10 25 18 20 23 21 28 31 36 24 33 35 34 27 38 37 39

7 10 8

3 7 8

5 25 8

20 6 12 14 9

26 1 10 5 9

26 2 3 6 7

2 17 11 16 1 21 5 22 18

2 11 6 19 4 25 20 16 15

1 9 11 14 4 18 19 17 12

13 15

13 17

13 24

24 27 4 25

24 27 14 22

23 28 16 22

26 23 28

21 23 28

20 21 27

Green = significant progress (top 10th percentile) Red = significant regression (top 10th percentile)

taiwan business topics â&#x20AC;˘ february 2015

2015 Business Climate Survey

The major worries confronting business Respondents were invited to tick all the items they considered applicable. Topping the list of prospective concerns, both cited by 54% of respondents, were 1) an economic slowdown affecting Taiwan’s domestic consumption and 2) a global economic slowdown. Others in the top 10 included uncertainty in Taiwan’s policy toward China (new to the survey in 2015), shortage of human resources, increased domestic political unrest, economic slowdown in mainland China, increased governmental interference, enactment of TPP without Taiwan (also new in 2015), economic slowdown in the USA, and economic slowdown in Europe.

What are the major risks facing your entity in the coming years? 54%

Economic slowdown in Taiwan’s domestic consumption

54%

64%

54% 58%

Global economic slowdown

69%

Uncertainty in Taiwan’s policy towards China

72% 74%

42% 35%

34% 35% 35% 36%

Lack of Human Resources Increased domestic political unrest

32%

22%

40%

32% 33%

30%

Economic slowdown in mainland China

37%

28%

30%

Increased governmental interference

28%

Enactment of TPP without Taiwan as a member

42% 41%

37% 39% 34%

20% 19%

Economic slowdown in USA

34%

41% 40%

27%

18%

Economic slowdown in Europe

25%

35% 36%

17%

18%

Taiwan Dollar (TWD) depreciation

18% 24% 18%

14%

Taiwan inflation rising

13%

20% 26% 22% 19%

18% 16% 15% 10%

Decreased exports

12%

Energy shortage in Taiwan

12%

Taiwan unemployment rising

18% 16% 20%

2015 2014 2013 2012 2011

11%

11% 15% 17%

Taiwan Dollar (TWD) appreciation

22%

3% 2% 2% 2%

Increased imports 0

61% 58%

taiwan business topics • february 2015

80 %

Detailed Findings 2014 business climate survey

What needs to be done The survey asked: “What are the main things the Taiwan and U.S. governments could so in the next 12 months to help business?”

Taiwan Government 1. Reduce political turmoil 2. S i m p l i f y g o v e r n m e n t bureaucracy 3. Resolve inadequate/outdated laws

USA Government

11. R e d u c e e m p l o y m e n t expenses

1. Assist Taiwan to prepare for accession to TPP

12. Negotiate and sign a Bilateral Investment Agreement with the U.S.

2. Negotiate and sign a Bilateral Investment Agreement with Taiwan

13. Liberalize the labor market

3. Conduct more regular follow-up of TIFA items with Taiwan

14. Increase direct foreign investment incentives

4. Send more senior U.S. government officials to visit Taiwan

5. Reduce personal taxation

15. Improve R&D incentives

5. Reduce corporate taxation

6. Devise plan to stimulate local demand

16. Reduce corruption

6. Reduce personal taxation

7. Consistently apply the rule of law

17. Finalize policy regarding the China-Taiwan Services Trade Pact

7. Repeal or reevaluate the Foreign Account Tax Compliance Act (FACTA)

8. Provide sufficient notice before changes to laws or regulations are introduced

18. Negotiate and sign more bilateral trade agreements with other countries

9. Reduce domestic protectionism

19. Pass Free Economic Pilot Zone legislation

4. R e m o v e d i f f e r e n c e s between local & internationally accepted standards

8. Negotiate and finalize an extradition treaty with Taiwan 9. Resolve agricultural disputes with Taiwan

10. Broaden ECFA

Utilization of business incentives Relatively few respondents have taken advantage of incentives provided by various levels of government in Taiwan. For those who had, the most popular incentives were tax incentives for R&D, low-interest loans, government participation in investment, Free Trade Zone incentives, and indirect tax incentives for Science Parks, Export Processing Zones, bonded factories, and bonded warehouse.

Has your company participated in, or taken advantage of, any of the Taiwan government's business incentives?

12%

15%

10% 19%

Yes 73%

2014

No 71%

Don’t know

2015

taiwan business topics • february 2015

2015 Business Climate Survey

AmCham Taipei member companies are hiring

In last yearâ&#x20AC;&#x2122;s survey, AmCham companies signaled an intention to increase employment this year. In practice they surpassed that forecast â&#x20AC;&#x201C; and are expressing the desire to do even more hiring in 2015. In 2014, fully 55% of AmCham increased their employment numbers, compared with only 43% in 2013. Hiring occurred across a broad range of industries, but the top sectors were 1) Legal services, 2) Medical devices, 3) Banking, 4) Manufacturing, 5) HR consulting, 6) Food and beverages, 7) Consumer packaged goods, 8) Insurance, 9) Travel and leisure, and 10) Logisics & distribution. 49% of respondents said they planned to increase their headcount during 2015, with another 42% maintaining 2014 levels. Only 7% anticipate a reduction. Banking led the list of sectors planning increased hiring this year, followed by medical devices; legal services; HR consulting; insurance; hospitality; travel & leisure; securities, mutual funds, and asset management; chemicals; and real estate and rental & leasing.

taiwan business topics â&#x20AC;˘ february 2015

Employment trends 2014 business climate survey

Human Resources remain a big issue Deficiencies in the quantity and quality of available human resources are one of the higher risk factors seen as confronting Taiwan-based businesses in the future. We asked our corporate leaders about their impression of the quality of the available human capital in Taiwan. As in the past, the survey produced what overall is a highly positive picture of the Taiwan work force:

Hardworking Very trustworthy Very loyal Easy to develop/train Extremely well educated Highly productive Show a high degree of EQ Well-rounded Easy to retain Good English skills 0

100

150

200

But also, as with previous surveys, there were some shortcomings as well:

Easy to recruit Of 'World class' standard Show a good deal of creativity Show a great deal of initiative Innovative -50

Areas of shortages Respondents citing difficulties in recruiting appropriate personnel were in such sectors as Education and Training, High-tech Manufacturing, Hospitality, and Logistics and Distribution.

taiwan business topics â&#x20AC;˘ february 2015

TPP/BIA

2015 Business Climate Survey

What should be Taiwan’s position regarding the Trans-Pacific Partnership (TPP)? Taiwan has expressed interest in joining the second round of the TPP, the comprehensive trade pact now being negotiated by 12 countries, including the United States. More than 2/3 of the respondents believe Taiwan is capable of meeting the high standards required for membership, and a resounding 83% would encourage Taiwan to pursue that goal to avoid economic marginalization.

Is Taiwan capable of meeting the high standards required for TPP membership?

Should Taiwan pursue membership of the TPP?

Don’t know 14%

Don’t know 20%

Yes! 68%

No! 12%

2015

Should Taiwan and the U.S. negotiate a Bilateral Investment Agreement (BIA)? Nearly 2/3 of respondents see the lack of a U.S.-Taiwan BIA as a disadvantage for Taiwan; among them, 20% view it as a major disadvantage.

More than half see the absence of a BIA as a disadvantage for their own business, including 12% viewing it as a major disadvantage.

taiwan business topics • february 2015

Yes! 83%

2015

No! 3%

Cross-Strait economic 2014 relations business climate survey

Positive view of ECFA The Economic Cooperation Framew o r k A g r e e m e n t ( E C FA ) s i g n e d between Taiwan and China in 2010 is generally viewed in a favorable light. 21% of respondents saw it as having a “very positive” effect on Taiwan, up from 13% the previous two years, and 13% perceived a “very positive” impact on their own business, compared with just 4% last year and 5% in 2013.

China-Taiwan Services Agreement The Cross-Strait Services Trade Agreement under ECFA was signed in 2013 but has not yet been ratified by the Legislative Yuan. 60% of respondents said that implementing the agreement would be to Taiwan’s benefit.

24%

60%

16%

Yes No Don’t know/ Can’t say

taiwan business topics • february 2015

2015 Business Climate Survey

M&A Activity

Consistent results According to the survey results, over the past five years around 10% of AmCham companies engaged in M&A activity each year. In 2014, some tried and failed (3%) and another 21% considered M&A activity but did not implement a project.

One in five interested in M&A for 2015 In any given year, about twice as many companies say they would definitely or possibly consider M&A in the coming 12 months, compared with those who actually pursue it.

taiwan business topics â&#x20AC;˘ february 2015

M&A Activity 2014 business climate survey

Top Objectives of M&A But when it happens, there are sound business reasons for M&A

Major Challenges for M&A in 2014 Finding an appropriate target was the biggest challenge last year.

taiwan business topics â&#x20AC;˘ february 2015

2015 Business Climate Survey

Living in Taiwan

As in previous surveys, the respondents praised Taiwan as a safe, friendly place to live for themselves and their families, and they also paid tribute to the healthcare system.

But they also noted certain conditions in need of improvement, such as food safety and the English-friendliness of the environment.

taiwan business topics â&#x20AC;˘ february 2015