2012 Vol.42 No.02

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THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics

The Nuclear Conundrum 台灣核能發展的兩難

TAIWAN BUSINESS TOPICS February 2012 | Vol. 42 | Issue 2 中華郵政北台字第 號執照登記為雜誌交寄 5000 2_2012_Cover.indd 1

NT$150

February 2012 | Vol. 42 | Issue 2 www.amcham.com.tw

ISSUE SPONSOR

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AdvertoriAl

KOUMA Sushi

The Sherwood’s Cozy Oasis for the Finest Japanese Cuisine

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egarded by The Sherwood Taipei as its “hidden gem,” the quietly elegant KOUMA Sushi restaurant is tucked away in a corner of the hotel’s B1 level. But the location has become a popular destination for discriminating business diners in Taipei and other connoisseurs of fine Japanese food, made with the freshest ingredients and served in impeccable style.

KOUMA, which means “Little Horse” in Japanese, is the nickname of The Sherwood’s managing director, Mark Liu, who often uses the restaurant for his personal entertaining.

To maintain the highest standards, he has brought in skilled Chef Wachi Isao, known for his creativity, to oversee the operation. Chef Wachi previously worked at New York’s trendy Japanese restaurant BondSt, patronized by such celebrities as Beyoncé and Leonardo DiCaprio. He then returned to Tokyo to join Kanda, the Michelin threestar restaurant, before coming to The Sherwood last year.

“My goal here at KOUMA is really simple – to make it an authentic Japanese restaurant in town,” says Wachi. “Too many have been trying

KOUMA 鮨小馬

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to ride on the burgeoning popularity of nouvelle or fusion Japanese cuisine.

This is not to say fusion is no good, but I hope by keeping the traditional style of Japanese cuisine I can enable more local people to appreciate the basic philosophy behind Japanese cooking – that is, to accentuate the natural taste and flavor of the ingredients.”

About 80% of the fresh ingredients used at KOUMA are from local markets. “I especially like the high quality and wide variety of the fresh fruits and vegetables in Taiwan,” says Wachi. “Only when there is a particular kind of fish or seafood that is impossible to find in Taiwan do I make purchases from Japan.”

KOUMA provides a comfortable and intimate setting consisting of three VIP private rooms ideal for business groups, plus the 12-seat counter that enables guests to watch their food being prepared and interact with their chef.

Wachi says he enjoys that aspect of his job the most. “The greatest satisfaction and pride that comes from being a chef is when you get to put a smile on your customer’s face,” he says. When patrons sit at the sushi bar, “the chef has more opportunity to precisely cater to your preference, raising the level of satisfaction and the overall dining experience,” he notes.The restaurant offers a range of gourmet set menus that enables diners to sample a variety of delicately prepared dishes, or diners can opt to order Omakase, leaving the selection (after consultation about

food preferences) up to the chef. The menus change monthly to reflect the choicest ingredients available during that season of the year. April and May, for instance, will be the time to present Taiwan’s prized toro (Bluefin tuna).

But each menu will provide a chance to showcase Chef Wachi’s creative genius, as exemplified by the Seared Flounder Sashimi currently being offered. Each of the three slices is seasoned differently to bring out the flavor of the flounder in different ways: one with sea salt, another with Chinese pepper leaf, and the third with a bit of pomelo.

Imported wines are available, but instead of asking customers to puzzle over a winelist, KOUMA believes in having the chef make recommendations of what will pair most effectively with the food being ordered.

Since business at the restaurant is brisk, The Sherwood’s General Manager, Achim v. Hake, advises customers to reserve the private rooms three days in advance and seats at the counter the day before. He notes that KOUMA has attracted a devoted following among members of both the local and expatriate business communities, with executives from many major corporations as regular customers. They have learned that “Little Horse” can mean big dining pleasure.

Address: B1 Level, The Sherwood Taipei (111 Min-Sheng East Road, Sec. 3, Taipei) Phone: (02) 2718-6666 Ext. 3327 Operation Hours: 11:30 a.m.-14:30 p.m.; 18-22 p.m.

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CONTENTS NEWS AND VIEWS

6 Editorial

Putting an End to the Beef Dispute

FE b rua ry 2 0 1 2 vOlumE 42, N umbEr 2 一○一年二 月號

化解美牛爭議 事不宜遲

7 Taiwan Briefs Publisher

Andrea Wu

By Jane Rickards

發行人

11 Partial Cabinet Reshuffle 13 Issues

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro Art Director/

沙蕩

Government Reorganization is Happening – in Stages; How to Slim Taiwan Down; Protecting Healthcare Workers

美術主任 /

Production Coordinator

Katia Chen Staff Writer

Jane Rickards

後製統籌

陳國梅 採訪編輯

李可珍

行政院組織改造分階段；幫台灣人 告別肥胖；規範針具使用保護醫護 人員展開

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

Zep Hu

翻譯

胡立宗

COVER SECTION 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 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 2012 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號 印刷所：帆美印刷股份有限公司 經銷商：台灣英文雜誌社 台北市105敦化北路222巷19之1號1樓 發行日期：中華民國一○一年二月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Bill Wiseman Vice Chairmen/ William E. Bryson / David Pacey Treasurer: Carl Wegner Secretary/ William J. Farrell 2011-2012 Governors: William E. Bryson, William Farrell, Christine Jih, Steven Lee, Neal Stovicek, Carl Wegner, Bill Wiseman.

2012-2013 Governors: Richard Chang, Sean Chao, Michael Chu, Alexander Duncan, David Pacey, Ashvin Subramanyam, Lee Wood, Ken Wu. 2012 Supervisors: Douglas Klein, Richard Lin, Catherine Teng, Fupei Wang, Jon Wang.

COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Winnie Yu; Banking/ Victor Kuan; Capital Markets/ William Bryson, Jane Hwang, Jimin Kao; Chemical Manufacturers/ David Price; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Stephen Tan; Human Resources/ Richard Lin, Seraphim Mar, Ashvin Subramanyam; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Mark OÆDell, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Scott Meikle; Manufacturing/ Albert Li; Marketing & Distribution/ Christopher Fay, Wei Hsiang, Gordon Stewart; Medical Devices/ Nelson Hsu, Daniel Yu; Pharmaceutical/ David Lin, Edgard Olaizola, Jun Hong Park; Private Equity/ William Bryson, Steve Okun; Real Estate/ Tony Chao; Retail/ Prudence Jang, Douglas Klein; Sustainable Development/ Eng Leong Goh, Kenny Jeng; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, R.C. Liang, John Ryan, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Trade/ Stephen Tan; Transportation/ Michael Chu; Travel & Tourism/ Pauline Leung, David Pacey.

16 The Nuclear Conundrum

評估兩岸經貿利基

By Timothy Ferry 撰文／法緹姆

Last year’s disaster in Japan increased the already substantial public sentiment in Taiwan against the continued use of nuclear energy for power generation.

But removing the nuclear option from the energy mix would confront Taiwan with a number of other hard choices – particularly given the Ma administration’s commitment to drastically slash Taiwan’s carbon emissions over the next 13 years.

Coal-fired plants are heavy emitters of CO2, LNG is clean but expensive and difficult to store, and renewable energy sources lack the scale and reliability to fill the role now played by nuclear power.

As construction of the fourth nuclear plant at Longmen finally draws nearer to completion, Taiwan’s policymakers will have some difficult decisions to make.

26 Is Renewable Energy the Answer?

ANALYSIS

29 Taiwan Still Matters

The first in a series of articles to appear in Taiwan Business TOPICS in the coming months, exploring Taiwan’s continued significance for the United States and the Asia-Pacific region.

By Richard Halloran

cover photo : ti m o t hy fer ry

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f ebruary 2012 • Volume 42 n umbe r 2

ISSUE SPONSOR

TAIWAN BUSINESS

32 Eyeing India

Taiwan is paying increasing attention to India as a site for trade and investment.

The future potential may be huge, but the two countries still need to learn much more about each other.

By Jane Rickards

2012 BUSINESS CLIMATE SURVEY

39 The results of AmCham’s latest survey of its voting members.

CORRECTION In the article “Destined to be Restaurateurs” in the January (Wine & Dine) issue of Taiwan Business TOPICS, an incorrect address was given for the Coda restaurant run by Andrew Lunman. The correct address is No. 23, Lane 283, Roosevelt Road, Section 3, Taipei. The telephone number is 2365-2769 and the web address is www.coda.tw/.

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Putting an End to the Beef Dispute

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ust days before the scheduled visit to Taipei of U.S. Under Secretary of Commerce for International Trade Francisco Sanchez, the American Institute in Taiwan (AIT) announced that the trip would not take place at this time due to “unforeseen circumstances.” The media has interpreted the postponement as linked to the ongoing controversy over Taiwan’s restrictions on the import of certain U.S. beef products, and although AmCham is not privy to any inside information on the reason for Sanchez’s change in plans, the media explanation certainly seems to be the most likely.

The purpose of the Sanchez visit was not to discuss the beef issue but rather to help advance President Obama’s National Export Initiative, promote the new SelectUSA program to increase overseas investment into the United States, and publicize the many attractions of the United States for foreign tourists. As the highest ranking Commerce Department official to come to Taiwan in a decade, Sanchez’s presence would also have been a concrete affirmation of the continuing solidity of the bilateral relationship.

It would be understandable if the “unforeseen circumstances” were the likelihood that the positive messages of the visit for U.S.-Taiwan economic cooperation would be lost amid angry protest demonstrations staged by hog farmers and others.

But postponement of the visit points up the increasingly deleterious impact that failure to resolve the beef dispute may have on Taiwan’s relations with the United States. Many influential members of Congress and executive-branch officials, including some who were previously among Taiwan’s closest supporters in Washington, are furious over this government’s handling of the issue. They ask only that Taiwan rely strictly on the scien-

tific evidence, rather than be swayed by politically motivated populist sentiment, in determining whether controlled use of the leanness-enhancing feed additive ractopamine poses any risk to human health.

As AIT has stated: “Over the past 10 years, millions of people in more than 100 countries around the world have consumed billions of kilograms of U.S. beef with no reports of any illness or other effect linked to ractopamine. Clearly, this is strong evidence that U.S. beef and ractopamine are safe.”

Despite the guise of being portrayed as a health concern, the real issue is one of protectionist measures sought by a particular domestic industry to keep out foreign competition. As an economy whose lifeblood is international commerce, Taiwan cannot afford to let its overall trade policy be determined by one relatively small sector. If the domestic livestock industry is impacted by allowing in more U.S. beef and pork, other policy instruments are available to provide assistance to the farmers who are affected.

At a time when other countries are actively negotiating bilateral free trade agreements or forming multinational trading arrangements such as the nascent Trans-Pacific Partnership, Taiwan will find itself increasingly isolated economically if it takes a narrowly protectionist stance rather than fully embracing free and fair trade.

It will be a test of the Ma Ying-jeou administration’s political adroitness and skill at public communication to find a way to put an end to the beef issue before it further damages relations with the United States and Taiwan’s ability to take its rightful place within the international trading community.

化解美牛爭議 事不宜遲 在美國商務部主管國際貿易事 務的次長桑傑士（F r a n c i s c o Sanchez）預定於三月初抵達台 灣訪問的前幾天，美國在台協會表示，由 於一些「突發狀況」，訪台行程必須延 期。部份台灣媒體將此解讀為與台灣禁止 部份美國牛肉產品進口的爭議有關。儘管 台北市美國商會不瞭解桑傑士次長調整行 程的實際原因，媒體的觀點似乎也離實情 不遠。 桑傑士次長訪台應是為了宣傳歐巴 馬總統的「國家出口計畫」(N a t i o n a l E x p o r t I n i t i a t i v e)、推廣旨在吸引 更多外資進入美國的「選擇美國」 （SelectUSA）計畫，以及向外國人介紹 美國的眾多觀光景點，並非為了美牛爭 議。若能成行，桑傑士將是過去十年來美 國商務部訪台的最高階官員，充分象徵台 美經貿關係的穩定。

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「突發狀況」所指的或許是台灣養豬 業者等團體準備動員抗議，可能使桑傑 士訪台營造的台美經貿合作友善氣氛被忽 略。這種考量應該情有可原。 但是訪台行程延後也凸顯出美牛爭議 遲遲無法解決對台美關係的嚴重影響。許 多美國國會重要議員與行政部門官員，其 中包括先前對台灣相當友好者，對台灣政 府處理美牛議題的作法都非常難以接受。 他們也呼籲台灣政府在決定有限度使用瘦 肉精成份萊克多巴胺是否可能傷害人體健 康時，能以科學證據為準，避免受摻雜政 治企圖的民粹情緒影響。 美國在台協會指出，過去十年來，數 百萬人吃了數十億公斤的美國牛肉，卻不 曾出現過因為吃了餵食萊克多巴胺的動物 肉品而生病或產生任何反應的報告。有明 確科學證據足以證明美國牛肉和萊克多巴 胺是安全的。

美牛議題表面上看來是一個單純的健 康衛生議題，但問題重點應該與特定產業 高舉保護主義防堵外來競爭有關。國際貿 易是台灣經濟命脈，台灣整體貿易政策不 宜以規模相對較小的單一產業為主要衡量 指標。國內畜產業者若因為美國牛肉、豬 肉進口受到衝擊，政府其實可以推出其他 政策措施來協助受到影響的農民。 現在許多國家都在積極尋求簽訂雙邊 自由貿易協定或加強多邊貿易關係，這 包括近期的跨太平洋夥伴協議（TPP）。 台灣若守著保護主義立場，不全力支持自 由、公平貿易，台灣在國際經貿舞台上終 將被孤立。 如何透過老練明快的溝通方式向社會 大眾說明美牛議題，化解歧見，以避免美 牛爭議持續傷害台美關係及台灣在國際經 貿舞台的地位，是馬英九政府的重要挑 戰。

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— BY JANE RI CKARDS —

MACROECONOMICS LOSING SPEED As Europe’s sovereign debt crisis continues to take its toll on exportd e p e n d e n t Ta i w a n , t h e i s l a n d ’s economic growth has slowed. The government statistics agency, the Directorate General of Budget, Accounting and Statistics, reduced its Taiwan GDP forecast at the end of January from an earlier estimate of 4.19% to 3.91% for this year. “Various possible hazards of the world economy might hamper the pace of global growth,” the DGBAS said in a statement, adding that it still expected exports to show modest growth.

The statistics agency estimated that GDP grew by 1.9% last quarter, a contraction from the previous quarter. Its revised figure for GDP growth in 2011is 4.03%, compared with the 4.51% pace forecast earlier.

The private Taiwan Institute of Economic Research (TIER) also projects slower growth, in late January dropping its GDP forecast for this year from an earlier 4.22% to 3.96%. TIER President David Hong told local media that weakening in the world’s biggest economies would erode exports, which Taiwan stock exchange index & value

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

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VICTORIOUS — President Ma Ying-jeou won reelection to a second term in the January 14 balloting. photo : cna

would lead to cuts in Taiwan’s manufacturing output, income, and private consumption. TIER is estimating that export value will rise 3.41% this year, a lower figure than the 4.77% it estimated in November.

Exports in January at US$21.08 billion were down by 16.8% from the same month of last year, the Ministry of Finance said, while imports of US$20.66 billion were down by 11.9%, for a favorable trade balance of US$420 million. As cash-strapped Western consumers tightened their belts, exports of electronic products showed the greatest drop – 23.2% – from the same month a year ago.

However, officials were quick to point out that the slowdown was also attributable to the Chinese Lunar New Year break, which this year fell in January, decreasing the number of working days in the month. At US$31.48 billion for January, export orders, a leading indicator, were down 8.63% from the same month last year, the Ministry of Economic Affairs said. The Industrial Production Index also showed an annual decrease of 8.15% in December.

The situation may spur the govern-

ment to look for ways to stimulate domestic consumption and could signal that the Central Bank is likely to leave interest rates untouched when it meets in March. But not all the news has been gloomy. At 4.18%, the DGBAS said, the December unemployment rate was an improvement on November’s 4.28% (seasonally adjusted it was 4.22% compared with 4.32% a month earlier), amid local media reports that many workers placed on unpaid leave at the end of last year are being re-hired. Bloomberg also reported February 13 that the New Taiwan dollar rose to a fivemonth high of NT$29.495 against the U.S. dollar, with overseas funds buying stocks on optimism that Taiwan will prove relatively resilient to a global slowdown.

I N T E R N AT I O N A L U.S. CONGRATULATES MA ON ELECTION WIN The United States congratulated President Ma Ying-jeou on his re-election, after Ma and his running mate, former Premier Wu Den-yih, won

Unit: NT D billion

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has been nominated for inclusion in the U.S. Visa Waiver Program, having met all the basic criteria. Still pending is an American review of Taiwan’s homeland security and immigration procedures, and a final step may be for Taiwan to differentiate its regular passports more clearly from the “compatriot passports” it issues to some overseas Chinese who lack the right to residence in Taiwan. It appears likely that Taiwan could formally qualify for visa waiver status in the second half of this year. Given the Taiwanese love for overseas travel and willingness to spend money, the move could boost America’s retail and travel sectors.

DEFEATED — DPP presidential candidate Tsai Ing-wen was praised for a gracious speech conceding loss of the election. photo : cna

the presidential poll with 51.6% of the vote to the Democratic Progressive Party candidate Tsai Ing-wen’s 45.6%, and at 64 seats retained a solid majority in the 113-seat legislature. “Taiwan has again demonstrated the strength and vitality of its democratic system,” the White House said in a statement. The United States wishes to work at expanding trade and investment ties with Taiwan, it said, stating that Taiwan’s improving relations with China in an environment free from intimidation is also of profound importance to America. “We hope the impressive efforts that both sides have undertaken in recent years to build cross-Strait ties continue,” the statement added. Victoria Nuland, a State Department spokeswoman, also congratulated Ma, saying “the people of Taiwan should be proud of this latest milestone for their democracy.”

TAIWAN NEARS ENTRY INTO U.S. VISA WAIVER The American Institute in Taiwan announced in December that Taiwan

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TAIWAN DIPLOMAT DEPORTED FROM U.S. In a first-ever event for Ameri c a n d i p l o m a c y, J a c q u e l i n e L i u , former director-general of the Taipei Economic and Cultural Office in Kansas City, was sentenced, jailed, and then deported back to Taiwan mid-February, after she was accused of underpaying and overworking two Filipina housekeepers at her suburban home. Liu, 64, who pleaded guilty under a plea agreement in November to one count of fraud in foreign labor contracting, appeared in a U.S. court in mid-January wearing an orange prison jumpsuit and shackled at the wrists and ankles, the Associated Press reported, after being held for two months at a detention center. Liu told the court she was “extremely regretful” for her actions. Prosecutors noted Liu was the first foreign official to be charged with fraud in foreign labor contracting in America (although others have been charged with violating other laws relating to mistreatment of domestic workers). The plea agreement also called for Liu to pay US$80,044 in restitution to the two women. Upon her return to Taiwan, Liu was suspended from duty while the watchdog Control Yuan examines the case. The Ministry of Foreign

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Affairs also accused her of “serious administrative lapses” in her handling of the women’s labor contracts.

DOMESTIC U.S. BEEF ISSUE GETS REVIVED ATTENTION Seizing the most politically opportune time – immediately after a presidential win with four years to go before the next election – President Ma announced he would tackle a long-simmering dispute between the United States and Taiwan on restrictions on American beef imports containing ractopamine, a leannessenhancing feed additive. Meeting with visiting American Institute in Taiwan chairman Raymond Burghardt in early February, the president signaled that his new Cabinet would adopt a fresh approach to the dispute, which is deterring the U.S. from conducting regular trade and investment

DEPORTED — Taiwan diplomat Jacqueline Liu on her return after facing fraud charges in the U.S. photo : cna

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talks with Taiwan or contemplating any new major bilateral economic initiatives. Various cabinet ministers later made similar remarks, signs that Taipei is placing importance on resolving the row, and interagency discussions are currently taking place among the Council of Agriculture, Department of Health, and Ministry of Economic Affairs.

Though ractopamine, widely used by American ranchers, has long been a banned substance in Taiwan, inspectors had not previously tested for its presence until around a year ago. This wrinkle has only added to trade tensions that surfaced in 2009 when the Taiwan government signed a protocol with the United States to liberalize beef imports, only to have the Kuomintang-controlled legislature pass amendments to the food safety law contravening some of the provisions of the agreement.

The U.S. objects to Taiwan’s zerotolerance policy on ractopamine on the grounds that no scientific evidence exists that the reasonable levels of the compound are harmful to human health. It is asking Taiwan to set a Maximum Residue Level for allowable amounts. But any easing of the ractopamine ban is running into opposition from farming groups (especially hog raisers, who unlike beef ranchers in Taiwan have more of a domestic industry to protect) and from some consumer associations that take a purist attitude on questions of food safety, especially after several episodes in recent years involving melamine and plasticizers in foods and beverages.

DPP LOOKING FOR NEW CHINA POLICY The opposition DPP is soul-searching regarding the reasons for its defeat in the recent presidential election, with calls from some within the party to adopt or move closer to an informal consensus that Taiwan and China are part of one China but

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PRE-LINSANITY — New York Knicks basketball star Jeremy Lin already had a local following when he answered questions from fans at a Taipei sporting goods store last summer.

photo : cna

may disagree on its meaning. The formula, known as the “1992 consensus,” would represent a major shift distancing the party from its pro-independence roots. With cross-Strait business vital for the island’s economy, Beijing insists that Taipei governments accept the 1992 consensus as a precondition for negotiations.

Frank Hsieh, the DPP’s 2008 presidential candidate, for example, has advocated a “constitutional consensus” based on the fact that the constitution of the Republic of China (Taiwan’s formal name) extends the national territory to include mainland China. Others argue that more technical issues relating to campaigning and domestic politics were mainly responsible for the DPP defeat. Despite the loss, the party still managed to increase its representation in the Legislative Yuan from 27 to 40 seats.

Complicating the issue further, the hardline pro-independence Taiwan Solidarity Union won almost 9% of the legislative vote, which experts said may prevent the DPP from moving further to Taiwan’s political center.

LINSANITY STRIKES HARD IN TAIWAN He may have risen to sudden stardom in the United States, but for the

Taiwanese, Jeremy Lin, the first player in the National Basketball Association of Taiwanese descent, has become a local hero and source of national pride. Lin has been on the front page of every newspaper, an estimated three million Taiwanese have watched each one of his games, local malls have taken to broadcasting Knicks games in public spaces, and teenagers adore him. Even politicians have urged Taiwanese to follow Lin’s example, with Premier Sean Chen praising Lin’s teamwork and former president Lee Teng-hui lauding Lin’s uncompromising spirit. Although Lin was born and bred in America, his parents are from Taiwan. His father’s home county, Changhua, is considering designating him as an honorary citizen. Analysts say the “Linsanity” phenomenon is especially fervent in Taiwan owing to its diplomatic isolation, with many Taiwanese feeling their nation does not get the international recognition it deserves. China has also claimed Lin as its own, noting that his maternal grandmother is from Zhejiang.

Also a source of national pride has been Taiwan-born fashion designer Jason Wu, whose creations came to fame in 2009 when Michelle Obama wore his dress to the Inaugural Ball.

Wu is currently making headlines

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overseas for his budget collection for Target and creations at this year’s New York Fashion Week.

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Calls to boycott the China Times newspaper erupted in late January and early February, after its chairman,Tsai Eng-meng, said in an interview with the The Washington Post that he did not believe that the 1989 Chinese massacre of hundreds of student and civilian protesters in Beijing’s Tiananmen Square had occurred. Tsai heads the Want Want Group that controls three Taiwan newspapers, including the China Times, along with a television station, various magazines, and a cable network. Citing footage of a lone protester standing in front of a People’s Liberation Army tank, Tsai said that the fact that the man wasn’t killed showed that reports of a massacre were not true. In addition, Tsai – Taiwan’s third richest person according to Forbes – said in the interview that unification between Taiwan and China was inevitable and he hoped to see it happen.

Wang Dan, an exiled student leader of the Tiananmen protests now living in Taiwan and an eyewit-

ness to the bloody massacre that was condemned by Western governments, initiated the boycott calls, saying on his Facebook page that he would never again buy or read the China Times. Later academics and civic leaders, along with online groups, echoed the boycott calls. Tsai attempted to dampen the outrage by stating that his remarks had been distorted and taken out of context, while the Post stood by its story.

BUSINESS INSURER AVIVA MAY STAY AFTER ALL British insurance company Aviva has scrapped a plan to sell most of its stake in its ailing Taiwanese joint

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

ASEAN

TOTAL

2.4 2.8

1.8 2.47

2.47 2.66

2.15 2.37

Europe

2011

2012

2011

2012

Imports

20.66 21.08

2012

23.5 25.3

2.52 3.74

3.37

2011

2012

U.S.

10

2.6 4.2

2011

1.3

4.4 1.59

3.2

3.8

7.5

10.2

Japan

2012

Exports

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Unit: US$ Billion Current Account Balance (2011Q3) 10.21 Foreign Trade Balance (Jan) 0.4 New export orders (Dec) 31.48 Foreign Exchange Reserves (end Jan) 390.30

Unemployment (Dec) 4.18% Overnight Interest Rate (Feb 1) 0.398% Economic Growth Rate (2011Q3) 3.45% Change in Industrial Output y-on-y (Dec) -8.15% Change in Industrial Output y-on-y (Dec-Jan) 4.62% Change in Consumer Price Index y-on-y (Dec) 2.03% Change in Consumer Price Index (y-on-y(Jan-Dec)2.42% 1.42%

WANG DAN ASKS FOR CHINA TIMES BOYCOTT

2011

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Economic Indicators

CROSS-STRAIT

HK/China

r

2011

2012

Unit: US$BN Source: BOFT

Year Earlier 8.99 1.80 36.57 387.11 4.67% 0.260% 9.80% 18.18% 26.38% 1.25% 0.96%

SOURCES: MOEA, DGBAS, CBC, BOFT

venture as the Financial Supervisory Commission (FSC) opposes its leaving the market, Reuters reported in early February. The company, which would have been the latest in a string of foreign insurance companies to leave the Taiwan market, was initially denied FSC permission in 2010 to sell its entire 49% stake in a joint venture with local First Financial. It then submitted a plan last year to sell 40% of the stake in two stages and keep 9% percent, but reportedly no progress has been made.

EVERGREEN FOUNDER TO DONATE FORTUNE Chang Yung-fa, Taiwan’s 12th richest man according to Forbes magazine and founder of Taiwan’s Evergreen Group, a conglomerate of shipping, transportation, and associated service companies, in early February said he would bequeath his assets to charity and not to his children. Forbes last year estimated the fortune of 84-yearold Chang and his family to stand at US$1.6 billion. “Money is something that should be circulated around the world and not enjoyed exclusively by one individual,” he told the local media. Chang also said that young people should depend less on their parents, and instead fight for their future themselves and learn to shoulder responsibility.

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Partial Cabinet Reshuffle — BY JANE RI CKARDS —

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bilities such as helping steer export-dependent Taiwan through uncertainties created

by Europe’s sovereign debt crisis or designing reforms to the tax system that are socially equitable are likely to be the reasons why President Ma Ying-jeou picked his newest members of his Cabinet in a partial reshuffle announced early February.

Ma wants to combat public perceptions that emerged ahead of January’s closely-contested presidential poll that income disparities are rising as a result of his policies, says analyst Raymond Wu, the managing director of e-telligence, a political risk consultancy. Ma “would like to change perceptions that social and economic inequality has worsened in Taiwan,” he says of the reshuffle, noting that tax reform will be a priority for the new team.

Another partial Cabinet reshuffle is likely in early May when Ma is inaugurated. Wu says that the latter reshuffle could see changes to Cabinet personnel who deal with major national policies such as cross-Strait relations and foreign affairs. “How extensive this second reshuffle will be is still in the works,” he says, noting that national policymakers such as Mainland Affairs Minister Lai Shinyuan and Foreign Minister Timothy Yang retained their posts in February’s partial reshuffle as part of a message of “seamless transition” that Ma wishes to send both within Taiwan and to the international community. The desire is to demonstrate that improved cross-Strait relations are staying predictably on course in the wake of the election and during the interim period before the president’s inauguration, Wu says.

Among the key changes in the revised Cabinet are:

Vice Premier Jiang Yi-huah

Premier Sean Chen Moving up from the position of Vice Premier, Chen, 62, is a finance expert. With undergraduate and master’s degrees in law from National Taiwan University, he spent a year in his youth at Germany’s Frankfurt University as a visiting scholar.

He began his career at the Taipei Bank and Farmer’s Bank and rose to be chairman of the Taiwan Stock Exchange in 2002-2004 and the Taiwan Cooperative Bank in 20042007. From 2008 to 2010, he was chairman of the Financial Supervisory Commission. Wu says Chen’s background in the economy is needed to help with a slump in exports caused by worsening European economic conditions.

Forty-one-year-old Jiang, the new Vice Premier, had been an academic all his professional life until Ma’s government asked him to be Minister of the Executive Yuan’s Research, Evaluation and Development Commission in 2008, and then Minister of the Interior in 2009. Jiang holds a doctorate in political science from Yale University. He’s also been a visiting scholar with Britain’s Cambridge University in 2000 and at Columbia University’s Weatherhead East Asian Institute in 2001, in addition to high-level appointments at Taiwanese universities, such as the associate deanship of academic affairs at National Taiwan University from 2006 to 2008. Wu says the choice of Jiang to the relatively high post of Vice Premier may reflect Ma’s new emphasis on narrowing gaps in social and economic inequalities, as Jiang’s experience as Interior Minister would help with key issues relating to social welfare.

CEPD Minister Yiin Chii-ming A Minister without Portfolio prior to the reshuffle, Yiin, 59, has more than 30 years of experience as a government official working on economic policies and is wellconnected with domestic industries.

Starting his career with the Council for Economic Planning and Development (CEPD) in 1978, he later served as director general of the Ministry of Economic Affairs (MOEA) Industrial Development Bureau in the 1990s and deputy MOEA minister from 1998 to 2005. He was also MOEA minister from 2008 to 2009. His accumulated experience will help in charting the nation’s economic future, says Wu, including efforts at diver-

Jiang Yi-Huah taiwan business topics • february 2012

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sifying exports and upgrading the industrial structural.

Minister of Finance Christina Liu The daughter of Shirley Kuo, Taiwan’s first ever female minister, Liu, 56, was CEPD minister immediately before being appointed to her new post. She holds a degree from the Department of Finance at National Taiwan University and also a doctorate in economics from the University of Chicago, where she was a lecturer from 1983 to 1986. Among many positions, she was a member of the Legislative Yuan from 2002 to 2007 and a chief economist for Chinatrust Financial Holding from 2009 to 2010.

Minister-without-Portfolio Simon Chang Chang, formerly the regional director of Hardware Operations in Asia for Google, comes from the private sector and is expected to give a boost to Taiwan’s information and commu-

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Minister of Interior Lee Hong-yuan, previously the public construction minister; Minister of Agriculture Chen Bao-ji, an academic whose last post was Dean of the College of Bioresources and Agriculture at National Taiwan University, as well as Minister without Portfolio Kuan Chungming, who is U.S.-educated and was formerly director of the Institute of Economics at Academia Sinica. The new Minister of the Public Construction Commission, Chern Jenn-chuan, who serves concurrently as a Minister without Portfolio, was formerly the commission’s deputy minister.

Key decision makers retained in their posts (at least for now) include Minister of Foreign Affairs Timothy Yang, Defense Minister Kao Hua-chu, Central Bank Governor Perng Fainan, MOEA Minister Shih Yen-shiang, Minister of Transportations and Communications Mao Chi-kuo, Mainland Affairs Minister Lai Shin-yuan, and Environmental Protection Administration Minister Stephen Shen.

nications technologies (ICT) policies.

Holding a Master of Science degree from Stanford University and a doctorate in Civil and Environmental Engineering from Cornell University, Chang was also Vice President of the e-Enabling Services Business Group for Acer from 2000 to 2010, a NT$3 billion Acer unit for providing ICT management services to business.

In a system in which most Cabinet members have risen through the civil service, Chang’s private sector experience can provide fresh blood to the bureaucracy and help make officials aware of business perspectives on policies, Wu notes.

Another new faces involved in economic policies is Cabinet Secretary Lin Yi-shih, formerly executive director of the Kuomintang’s Central Policy Committee. With over a decade of experience as a legislator and friends in different political parties, he is well suited to liaising with the Legislative Yuan as well as various ministries, Wu says. Among other new appointees are

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2012/3/4 7:14:59 PM

Issues

Government Reorganization is Happening – in Stages The first waves are already occurring, but some authorizing legislation is still pending.

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aiwan began to carry out its planned reorganization of the Executive Yuan from January 1 this year, in line with goals to make government more streamlined and efficient. But the implementation – originally expected to take place this year – will need to proceed in stages, as passage of nearly half of the necessary pieces of legislation was delayed due to debates by lawmakers over the functions of the ministries or councils facing changes.

The deadline for completing the reengineering – as set by the parent law passed in 2010 – remains unchanged as December 31, 2014. In the end, the number of Cabinet-level organizations will be cut by about one quarter, from 37 to 29.

The Legislative Yuan passed the first series of organic laws in June last year, followed by another batch in October, and a third in December.

In the latest round of legislative action on January 20, it enacted new organic laws covering the Ministry of Finance, Ministry of Education, and the Directorate-General of Budget, Accounting and Statistics (DGBAS), bringing the total of approved organic laws to 15, with the legislation for 14 ministries still pending “It’s going to happen – it’s just a matter of timing,’’ said Sung Yu-hsieh, deputy minister of the Cabinet’s Research, Development and Evaluation Commission (RDEC), which spearheaded the reengineering plan, in an interview. “The delay of the legislation is not totally bad, as it actually gives us and all the ministries involved more time to prepare for the changes, and the early changes can give us more experience in how to handle the changes and prevent us from making major mistakes.’’

The Executive Yuan itself and five of its ministries and councils – the Ministry of Justice, Hakka Affairs Council, Central Bank of the Republic of China (Taiwan), National Palace Museum, and Central Election Commission – commenced operation under the new system from the beginning of this year. DGBAS, the Fair Trade Commission, and the Directorate-General of Personnel Administration followed from February 6.

The new Ministry of Culture, which will take over the duties of the Council for Culture Affairs plus the broadcasting, publishing, and motion picture division of the Government Information Office, four departments originally under the purview of the Ministry of Education, and the RDEC’s government-publication affairs office, is scheduled to begin operation on May 20. Next, the Financial Supervisory Commission is slated to start operating under its new organic law on July 1, in consideration that the terms of the incumbent commissioners will expire on June 30.

As for other agencies that have completed the legislative process, including the Ministry of Foreign Affairs, Overseas Compatriot Affairs Council, National Communications Commission, and Aviation Safety Council, the Cabinet will set implementation dates in future based on an evaluation of their readiness.

The government will urge the Legislative Yuan to speed up action for the remaining 14 ministries or councils so that the cabinet reorganization can be completed prior to expiration of the authorizing statute at the end of 2014, Sung says. Besides the Ministry of Culture, other functions due to be

行政院組織改造 分階段展開 第一波已經完成，但少數部會仍在等 待組織法的修正

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灣今年元旦開始實施行政院組織改 造，以簡化組織與提升效能。但原本 預期一步到位的部會重整，卻被迫分 階段落實，主因是立法委員對各部會整併後 的職能仍有歧見。 依照2010年修正通過的行政院組織法等母 法，部會整併仍將於2014年12月31日完成。 組織重整之後，中央部會將減少1/4，由37個 重組為29個。 立法院2011年6月通過第一波的部會組織法 案，接著10月又完成第二波修法，12月則為 第三波。今年1月20日，立院再通過財政部、 教育部、行政院主計處的組織法案。已經完 成的組織法案總數雖達15個，但仍有14個部 會的組織法尚未完成。 行政院研考會負責組織改造相關規劃，其 副主委宋餘俠在訪問中強調，「組織改造勢 在必行，只是時間或早或晚」。他說，「修 法步調慢一點不見得是壞事，因為相關部會 可以有更多準備時間，而已經整併的部會讓 我們得以從過程中學習，避免未來發生嚴重 錯誤」。 行政院院本部以及五個部會，分別是法務 部、客委會、中央銀行、故宮博物院與中選 會，已經在今年元旦落實新制。行政院的主 計處、公平會、人事行政總處（原行政院人 事行政局）則於2月6日上路。 新設的文化部預定5月20日成立，整合的職 能包括行政院文建會、新聞局的廣電出版等 處、教育部的四個司處，以及研考會的政府 出版品。至於行政院金管會，考量現任委員 任期至6月30日，將自7月1日開始依新的組織 法運作。 至於組織法規已經完成的其他部會，包括 外交部、僑委會、國家通訊傳播委員會、行 政院飛安委員會，政院將依準備狀況制定改 組實施日期。 宋餘俠表示，政院將敦促立院加速審查剩 餘14個部會的組織法，使組織改造能在2014 年年底前完成。除文化部外，農業、環境資 源、勞工、科技、衛生福利等事務也將提升

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Issues elevated to ministry status include Agriculture, Environment and Natural Resources, Labor, Science and Technology, and Health and Welfare. In addition, the Ministry of Economic Affairs will be revamped to become the Ministry of Economic and Energy Affairs.

The entire reengineering process is further expected to decrease the number of tertiary agencies (usually called bureaus or administrations) from the current 140 to 110, and the number of fourth-level agencies from 583 to 521. In all, that would leave the executive branch with a total of 660 administrative units, 100 less than before.

Of the 110 tertiary organizations, 70 will perform line functions, while the remainder will be affiliated institutions engaged in such staff functions as testing, inspection, research, and training.

More than 300 government officials joined the early retirement program activated from June last year with the aim of reducing executivebranch employment from 164,400 to 160,000. The program is expected to cut payroll costs by about NT$2.1 billion (US$71 million) a year.

—– James Peng

How to Slim Taiwan Down Food companies are preparing to do their part to combat the problem of overweight and obesity.

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he World Health Organization (WHO) and governments around the world have recently been paying increasing attention to health problems associated with Non-Communicable Diseases (NCD), including those related to overweight and obesity – conditions that pose risk for developing diabetes, heart disease, and other life-threatening ailments. Taiwan has been no exception, with several different pieces of legislation currently under consideration to regulate the advertising and labeling of food products in an effort to promote healthier dietary practices.

The seriousness of the problem became clear in a 2001 survey cited by the WHO showing that 26.8% of boys and 16.6% of girls in Taiwan between the ages of 6 and 18 are overweight. The Taiwan military has also reported higher body mass and lesser physical fitness among new recruits in recent years.

In Taiwan, as throughout the region, the food industry has sought to demonstrate its intention as a responsible stakeholder to work closely with the authorities to devise the most effective methods for dealing with the problem. In line with that effort, Food Industry Asia, a Singapore-based organization that refers to itself as “the voice of the food industry in Asia,” joined with AmCham Taipei’s Retail Committee to hold a workshop on how members of the industry can play a pro-active role in contributing to solutions through self-regulation. Fourteen multinational and domestic companies participated in the workshop, which will be followed by additional meetings designed to work out a concrete action plan.

Currently before the Legislative Yuan are proposed amendments to the Satellite Broadcast Act and the Telecommunications Act that would authorize health officials to regulate the advertising of unhealthy foods on 14

為部級單位。此外，經濟部也將改組為經濟 及能源部。 組織改造後，三級行政單位也將由現在的 140個縮減為110個，四級則由583個減至521 個，使行政部門現有660個各級單位減少100 個。 110個三級單位中，70個為業務單位，其餘 則為考測、督導、研究、訓練等幕僚單位。 自去年6月，已有300多位公務員選擇優 退。政府的目標是使行政部門的總員額由 164,400減少至160,000，因此減少的人事費 用為每年21億新台幣。 政府組織改造的目標除了要使行政流程更 為順暢，也要使台灣的經濟競爭力維持在全 球前十名。瑞士洛桑國際管理學院（I M D） 2011年將台灣列為全球競爭力的第6位，優於 2010年的第8名、2009年的第23名。許多專 家認為，調查結果應該已經考量組織改造後 所可能展現的成果。 —撰文／彭智明

幫台灣人告別肥胖 食品業者願盡一己之力，協助防治體 重過重與肥胖問題

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界衛生組織（WHO）與全球各國已越 來越注意非傳染性疾病（N C D）所引 發的健康威脅，因為體重過重與肥胖 等現象可能引發糖尿病、心臟病與其他高風 險疾病。台灣政府也不例外，正在起草的幾 項法案，將規範食品的廣告與包裝，以鼓勵 更為健康的飲食習慣。 WHO引用的一份2001年的報告正凸顯台灣 所面臨的嚴峻情勢：6歲至18歲的青少年中， 26.8%的男孩與16.6%的女孩體重屬於肥胖。 台灣軍方也指出，近年入伍的青年體重更高 且體能更差。 在台灣以及亞洲其他國家，食品業者都希 望展現負責任的態度，與當地政府合作開發 最有效的應對方案。總部設於新加坡、強調 足以代表亞洲食品產業的亞洲食品產業協會 （FIA），近日與台北市美國商會的零售委員 會合作，舉辦研討會以擬定業者自律方案， 以展現業界對抗肥胖問題的積極意願。本次 會議計有14 家國內外業者參與，未來還將有 多次會議以建立具體行動方案。 將由立法院審議的衛星廣播電視法與電信 法修正案，將規範不健康食品的電視廣告。 雖然多數社會團體都認同修法方向，但可能 引發爭議的關鍵在於如何以科學角度界定不 健康食品。

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Issues television. Although most social groups would agree with that objective, the difficulty may be coming up with a scientifically satisfactory definition of what constitutes an unhealthy food.

Also under consideration is a National Nutrition Act that would set more rigorous labeling and packaging regulations. These might include a requirement to place nutritional labeling on the front of the package and to provide the nutritional information according to serving size. Again certain practical questions will need to be addressed, such as defining the appropriate serving size and how to apply the rules to imported products distributed in a large number of markets.

A proposal to institute a “junk food tax” – aimed mainly at packaged items such as cookies, sweets, candy, instant noodles, potato chips and bottled beverages containing sugar – also has support among some lawmakers.

While acknowledging its responsibility to help counter overweight and obesity, the food industry also notes that the problem must be addressed from a holistic point of view that takes more than food ingredients and advertising into consideration. Public education to promote a healthy lifestyle – eating a balanced diet, in moderation, combined with adequate physical activity – also needs to be carried out more vigorously.

另外，國民營養法草案也將更嚴格規範食 品標示與包裝。相關規定包括，必須於產品 正面標示營養成份，以及依照產品份量標明 成份資訊。同樣地，一些規定可能引發執行 上的困難，例如如何界定適當份量，以及如 何要求市面常見的進口產品標示相同資訊。 同時，部分立法委員也支持對垃圾食品課 稅，此類產品主要為餅乾、甜品、棒棒糖、 速食麵、洋芋片與含糖罐裝飲料。 食品業者不會規避對抗過重與肥胖的責 任，但希望政府能以更全面的角度看待問 題，而非僅聚焦於食品成份與廣告行為。業 者認為，有必要加強宣導均衡節制的飲食與 適度的體能運動等健康生活方式。 —撰文／沙蕩

—– By Don Shapiro

Protecting Healthcare Workers Passage of a “needlestick prevention” law is being hailed as an important advance.

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embers of the medical device industry in Taiwan have applauded the Legislative Yuan’s enactment in December of a law requiring the use of safety needles and syringes in medical institutions to reduce the risk of inadvertent infection of healthcare workers, especially nurses, laboratory technicians, and janitorial personnel. With passage of relevant amendments to two articles of the Medical Care Act, Taiwan became the second country in the world after the United State to adopt national “needlestick prevention” legislation.

The law was sponsored by Democratic Progressive Party lawmaker Twu Shing-jer, who is himself a physician and a former health minister. It requires hospitals and health clinics to adopt the use of safe engineering devices within five years or face fines of up to NT$50,000 (US$1,667) for each violation.

Twu said that most medical institutions in Taiwan have been using needles that are supposed to be recapped before disposal. When that is not done, or done improperly, healthcare workers are put at risk of needlestick injuries and the possibility of exposure to blood-borne pathogens responsible for such conditions as Hepatitis B, Hepatitis C, and AIDS. More than 8,000 needlestick injury cases are reported annually in Taiwan.

The AmCham Medical Device Committee was active, together with other domestic NGOs and research institutions, in support of Dr. Twu’s initiative.

—– By Don Shapiro

規範針具使用 保護醫護人員 修法規範醫療院所使用安全針具，可 減少針扎事件造成的負面後果

2011

年底，立法院通過醫療法部份 條文修正草案，規範醫療機構 必須全面提供安全針具，避免工作人員（包 括護士、醫檢、清潔人員等）意外受針扎後 引發感染。不少醫療器材業者對此表示讚 許。醫療法修正第56條及第101條條文也使台 灣成為繼美國之後世界第二個立法規範避免 針扎風險的國家。 此項修法是由時任立法委員的涂醒哲推 動，他本身是醫師，也曾擔任衛生署署長。 修法之後，醫療機構五年內必須按比例逐步 完成全面提供安全針具，屆期未改善者，處 新臺幣一萬元以上、五萬元以下罰鍰，按次 連續處罰。 涂醒哲曾表示，一般針具使用之後，必須 把針頭套回針帽，但台灣許多醫療院所對此 並未妥善處理，醫護人員因此暴露在被針扎 受傷、感染的風險中，甚至增加罹患B型肝 炎、C型肝炎及愛滋病的機率。每年台灣就有 八千多個針扎通報案例。 台北市美國商會醫療器材委員會與許多民 間團體、研究機構一樣，支持涂醒哲醫師的 這項修法行動。 —撰文／沙蕩

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Cover story Cover story

The Nuclear Conundrum 台灣核能發展的兩難

BY TIMOTHY FERRY

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撰文／法緹姆

photo : timothy ferry

2012/3/4 7:39:01 PM

Last year ’s disaster in Japan increased the already substantial public sentiment in Taiwan against the continued use of nuclear energy for power generation. But removing the nuclear option from the energy mix would confront Taiwan with a number of other hard choices – particularly given the Ma administration’s commitment to drastically slash Taiwan’s carbon emissions over the next 13 years. Coal-fired plants are heavy emitters of CO 2, LNG is clean but expensive and difficult to store, and renewable energy sources lack the scale and reliability to fill the role now played by nuclear power. As construction of the fourth nuclear plant at Longmen finally draws nearer to completion, Taiwan’s policymakers will have some difficult decisions to make. 去年的日本核災使台灣內部明 顯的反核聲浪再現高峰。但完全不 用核能發電卻將使台灣面臨多項考 驗，特別是馬政府已經承諾將在未 來13年內大幅降低碳排放總量。燃 煤發電的二氧化碳排放量太高，液 態天然氣雖然乾淨但卻昂貴又難以 儲存，而再生能源規模太小，也不 夠穩定，難以取代核電的角色。位 於龍門的核四廠即將完工，台灣政 府勢將面臨不少嚴峻抉擇。

energy

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he view of the Longmen Nuclear Power Plant from Fulong Beach is blandly commercial. Nothing about the facility, which is nestled between the shore and a line of low hills on New Taipei City’s scenic North Coast, announces “nuclear”: no distinct cooling towers breathing plumes of steam into the air, no containment dome, and no security zone or warning signs along the beach.

Instead, the power plant – still under construction – rises in two massive structures, high windowless green walls creating twin boxes that resemble a pair of giant warehouses. A tall chimney in the rear of the plant is painted a comforting sky blue, with puffy clouds.

But it will undoubtedly take more than benign architecture and painted clouds to calm the jitters of a population unnerved by the devastation of last year’s earthquake and tsunami in Japan. The Fukushima Dai-ichi nuclear power plant meltdowns caused the long-simmering debate in Taiwan over nuclear power to boil over once again, and with the incident unfolding as Taiwan was heading into a presidential election campaign, the issue was assured of reaching new intensity.

So intense, in fact, that the fate of the fourth nuclear power plant – whether it would ever be allowed to become operational – hinged on the outcome of the

福隆海水浴場望去，龍門核能發電廠 （即第四核能發電廠）並不顯眼。位在 新北市東北角風景區山海之交的核四 廠，外觀看不出任何與核電有關的跡象：沒有 散發煙霧的冷卻塔，沒有反應爐的圍阻體，沿 海也不見避難區或警告標示。 仍待興建的核四廠只有兩座大型建築，高聳 的綠牆沒有窗戶，仿佛是一對巨型倉庫。電廠 後方的煙囪，外層漆上藍天與白雲。 儘管如此，地震海嘯所引發的日本核災仍 深植民眾心中。福島第一核電廠爐心熔毀的事 故，使台灣長年以來的擁核反核激辯再度沸 騰。而核能電廠的存廢再度成為總統大選焦 點。 核能引發的正反對立如此激烈，甚至使核 四是否能夠商業運轉，全部取決於選戰結果。 援引日本核災教訓，反核的民主進步黨提出「 2025非核家園」，主張如果類似狀況發生在 台灣，對經濟與環境的傷害將難以估算。民進

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election. The opposition Democratic Progressive Party (DPP), long opposed to nuclear power, released a policy paper entitled “2025 Nuclear Free Homeland Initiative” that drew direct parallels between the disaster in Japan and conditions in Taiwan. The paper declared that the cost to the economy and environment of a similar disaster in Taiwan “is too high a price to pay.” DPP presidential candidate Tsai Ing-wen then vowed to eliminate all nuclear power from the island, including mothballing the Longmen plant before it ever goes online.

President Ma Ying-jeou, seeking reelection to a second term as the Kuomintang (KMT) candidate, followed suit with declarations of intentions to curtail the use of nuclear power in Taiwan. He pledged to retire the three currently operating plants at the end of their scheduled lifecycles over the next decade and vowed to allow the new fourth plant to start up only under the strictest assurances of safety. “We would rather sacrifice nuclear energy than risk causing a nuclear crisis,” Ma said at a press conference at the Presidential Office last November.

So while Ma’s victory in the January 14 balloting may have given the Longmen plant another shot at life, it did little to alter the basic direction of Taiwan’s energy policy. Nuclear power has long

黨主席蔡英文當時承諾，當選後將逐步停用核 電，包括封存核四廠。 當時尋求連任的馬英九總統隨後主張逐步降 低核能發電的比例。他承諾會在未來10年讓核 一至核三廠按時程除役，並強調核四必須符合 最嚴格的安全標準才能進行商轉。馬英九去年 11月在總統府記者會中表示，必須確保核能安 全。 因此，儘管代表中國國民黨的馬英九在1月 14日勝選，讓核四有機會死裡逃生，但台灣能 源政策的大方向並未改變。核電早就引起台灣 內部兩極對立，日本震災只是壓死駱駝的最後 一根稻草。「環境基本法」第23條彰顯的非核 家園精神，或許終有成真的一天。 然而，終結核能發電卻不利減少二氧化碳排 放量，特別是馬政府已經承諾2025年前大幅降 低碳排放量。馬英九2008年競選總統時曾經承 諾大幅降低碳排放量，以改變台灣人均碳排放 量高居全球首位的現象；而他上任後也的確大

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Cover story been contentious in Taiwan, and the earthquake in Japan may have just been the final blow. The “goal of becoming a nuclear free country,” as stated in Article 23 of Taiwan’s Basic Environment Act, might become reality.

At the same time, however, withdrawing carbon-free nuclear power from Taiwan’s energy options will drastically complicate the Ma administration’s stated determination to slash CO2 emissions over the next decade and a half. Ma campaigned in 2008 on a promise to sharply reduce carbon emissions, currently among the highest in the world on a per capita basis, and he followed through during his first term with passage of landmark legislation and policy directives.

The Ma government has committed itself to an ambitious – some critics say impossible – target of cutting annual CO2 emissions to 216 million metric tons, a level last seen in 2000, by 2025. As current trajectories would bring Taiwan’s emissions to 415 million metric tons by 2025, the government policy is thus calling for a huge 48% reduction in CO 2 emissions.

In many countries, substantial savings in carbon emissions could potentially be achieved by instituting greater efficiencies in the manufacturing sector. But Taiwan’s energy efficiency in manufacturing is

already among the highest in the world, Bill Wiseman, managing director of McKinsey Taiwan, noted last October in a presentation at a Clean Energy Forum in Taipei co-sponsored by Taiwan’s Environmental Protection Administration, the American Institute in Taiwan, and AmCham Taipei. The carbon reductions that the government is seeking would therefore have to come disproportionately from the power-generation sector.

Taiwan’s electricity demand is forecast to grow at a pace of around 3% annually over the next decade. The Load Forecast of the state-run Taiwan Power Co. (Taipower) puts power consumption by 2025 at 308 billion kilowatt-hours, compared w i t h t o d a y ’s 2 4 0 b i l l i o n . Ta i w a n ’s current installed capacity is 40 gigawatts for the energy grid, with another eight gigawatts of cogeneration capacity at manufacturing sites. To meet Taiwan’s anticipated future power demand, Taipower says total installed capacity is projected to increase to 62.5 gigawatts by 2025. How will Taiwan manage to eliminate most if not all nuclear power while at the same time slashing carbon emissions – both by 2025?

Industrialists worry that the combination of anti-nuclear and anti-carbon policy directives leaves Taiwan with no viable options for its future energy mix.

Heavy reliance on coal-fired power plants

力推動減碳政策與法案。 雖然部分人士認為根本不可能達成，但馬政府還是 承諾2025年前將年度碳排放量降低至2.16億公噸，即 2000年時的水準。依照近年增加幅度推估，2025年 的總量將達4.15億公噸，因此政府的目標等同大幅減 少48%的碳排放。 許多國家的先例顯示，製造業的效能提升可以大幅 減少碳排放量。但在去年10月由行政院環境保護署、 美國在台協會（AIT）與台北市美國商會合辦的能源 論壇上，商會會長、麥肯錫台北分公司總經理魏世 民早已指出，台灣製造業的能源效能已達全球最高標 準。換言之，減碳只能從能源供應面著手。 台灣未來10年的用電成長率約為每年增長3%。台 電推測，2025年的用電量將達3080億度，遠高於現 在的2400億度。台灣電力公司目前的裝置容量約為 4000萬瓩，民間業者氣電共生則為800萬瓩。為滿足 未來的供電，台電表示總裝置量應該在2025年前增 加為6250萬瓩。因此問題非常明顯，台灣如何能夠 減少，甚至是完全排除核電，卻又能在2025年前使 18

would have to be ruled out because of the impact on the nation’s carbon footprint. Taiwan currently generates 50% of its power from coal, and the island’s per capita emissions are among the highest in the world –12 tons per person, compared with only four tons in China and seven tons in highly industrialized Germany.

In recent years, a number of projects to further expand coal-fired power generation have been held up in lengthy environmental reviews.

Besides nuclear and coal, Taipower has a third source of baseload capacity – liquefied natural gas. But LNG presents immense other problems, including high cost – which could undermine Taiwan’s manufacturing competitiveness – as well as challenges in transportation and storage.

Energy concerns are particularly acute for Taiwan, as the island has few natural resources and must import 99% of its energy needs. With ensuring a reliable energy supply always a key policy consideration, nuclear energy has the benefit of being considered a “semiindigenous” fuel since it is so compact that roughly a year’s supply is on the island at any given time. In comparison, Taiwan has only about a week’s supply of LNG on hand.

Highly efficient, nuclear power makes up less than 10% of Taiwan’s total

碳排放減半？ 業界擔憂，推動非核與減碳同時進行，將使台灣沒 有可行的發電來源。高度依賴火力發電將使碳排放大 增，因此必定被排除。台灣50%的供電來自燃煤，而 人均12公噸的碳排放量已是全球最高，相較之下，中 國的人均碳排為4公噸，高度工業化的德國也才7公 噸。近年來，不少火力電廠的新建案都卡在冗長的環 境影響評估程序。 核能與煤炭之外，台電的另一個基載電力來源是液 化天然氣（LNG）。但天然氣的問題除了運輸與儲存 困難，價格過高也將影響產業競爭力。 能源供應之所以如此棘手，主要還是因為台灣缺乏 天然資源，而99%的能源都靠進口。考量能源穩定供 給，核能發電確實可以被視為半自主能源，因為發電 原料體積相對非常小，不論何時存放量都足夠一年使 用。相對於此，天然氣的儲量大概只夠一週使用。 高效能的核電雖然只占台灣裝置發電量10%，但卻 供應了17%的所需電力。台電現有6座反應爐，金山 的核一、萬里的核二、墾丁的核三各有2個機組。

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energy

installed generating capacity but supplies 17% of the energy consumed. Taipower currently operates six reactors, two each at three sites – the Jinshan Nuclear Power Plant (#1) and Guosheng Nuclear Power Plant (#2), both in New Taipei City, and the Maanshan Nuclear Power Plant in Pingtung County.

A key measure of energy security is what is known as the electricity reserve margin, which is the additional power capacity needed to ensure that baseload power – the amount required to meet minimum daily demand – remains sufficient during times of fuel shortages or just routine maintenance. Taipower is mandated to maintain at least 16% spare capacity, and actually has nearly 25%.

Opponents of nuclear power argue that this means Taiwan has sufficient power capacity even if demand continues to grow. “We have lots of electricity generation,” says Gloria Hsu, professor of atmospheric sciences at National Taiwan University and an outspoken critic of the government’s policies on energy and the environment. “In 2000, we had less, but we were fine. So we don’t need more capacity.”

Although current levels of spare capacity are still comfortably in the safe zone, the situation is rapidly deteriorating, according to an analysis by McKins e y Ta i w a n c i t e d i n B i l l Wi s e m a n ’s

Total Installed Capacity 0.495 (1%)

5.14 (10.5%) 4.57 (9.4%)

Gigawatts Thermal (LNG, Coal, Oil)

38.66 (79.1%)

Hydro Nuclear Renewables (Wind, Solar)

Total: 48.88 Gigawatts

power generation 2010 1,048.3 (0.4%)

41,628.7 (16.85%) 7,255.1 (2.9%)

Gigawatt-hours Thermal (LNG, Coal, Oil) 197,113.4 (79.8%)

Hydro Nuclear Renewables (Wind, Solar)

Total: 247,045.4 Gigawatt-hours Source: Bureau of Energy “Energy Yearbook 2011”

能源供應的另一個重要因素是備用容量，亦即確 保基載電力供應的額外發電容量，因此為了維持每日 基本需求，備用容量必須足以在發電原料短缺或機組 維修時投入使用。依規定，台電最低備用容量至少要 16%，實際上約為25%。 反核人士認為，這代表就算需求持續增加，台灣的 供電仍然遊刃有餘。敢於批評能源與環境政策的台灣 大學大氣科學系教授徐光蓉說，「台灣的發電量已經 夠用」，「2000年時的發電量比現在還低，但大家 還不是過的好好的，所以我們根本不需要更多發電容 量」。 但麥肯錫公司的魏世民去年曾經指出，雖然現在的 備用容量確實足夠，但狀況正在快速改變。越來越高 的用電需求代表基載電量必須更多，降低備用容量的 比例。如果核四不能商轉，最快在2015年時，台電的 備用容量就會降到只有10%。 缺電困境可能很快就會出現，因此麥肯錫的魏世民 認為，「台灣未來可能被迫分區輪流供電，而放棄核 電只會讓狀況更糟」。

核災陰影 至少在初步印象上，日本核災與台灣核電環境確實 有些令人擔憂之處。台灣所有的核電廠都在活動斷層 帶的五公里之內，而且全部都為方便原料運補而設在 海邊，因此非常可能遭到海嘯侵襲。而核一與核二所 用的奇異（GE）沸水式反應爐，與福島的五具反應爐 設計相同。 台灣與福島最大的差別在於週邊人口數量。福島電 廠週圍的人口密集很低，日本政府最後疏散電廠方圓 20公里以內的9萬居民。但核一與核二半徑30公里內 居住超過500萬人，如果發生類似災變，新北市部分 地區、甚至是整個台北都會區都必須疏散，台灣政府 是否真的有能力辦到？ 台電與行政院原子能委員會都曾竭力說明福島與台 灣的條件不同。台電在電子郵件回覆中強調，國內反 應爐的安全防護遠高於福島。例如日本依照美國預防 龍捲風的習慣，將備用柴油發電機設置在地下室，但 台灣至少有5具獨立柴油發電機，且設於海嘯侵襲高

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CATASTROPHE — A satellite photo showing the damage sustained at the four reactors of the Dai-ichi plant in Fukushima, Japan.. photo : wikipedia

presentation last fall. Increasing demand will mean that more capacity is needed for baseload power, reducing the amount available as reserve margin. As early as 2015, if the fourth nuclear power plant has not come online, as seems likely, Taipower’s reserve margin will drop to just 10%, critically below government mandates.

Power shortages could be just a few years away. “Taiwan is going to start

having rolling brownouts at some time, and if they take nuclear offline, it’s only going to get worse,” notes Wiseman.

Fears of nuclear disaster At least superficially, certain parallels between the disaster in Japan and the circumstances of Taiwan’s nuclear plants seem compelling. All of Taiwan’s nuclear power plants are located within five kilo-

度以上的屋頂層。 原能會核能管制處處長陳宜彬也強調，台灣的緊急 冷卻池設在機組上方，萬一發生爐心融毀，不論電廠 是否有電，都可以直接灌入反應爐。這代表台灣不太 可能出現福島的類似狀況。 此外，東京電力株式會社（TEPCO）大量外包，但 台電幾乎全為自己的員工，對訓練與素質的管控程度 更高。原能會的陳宜彬表示，日本電廠人力明顯不 足，福島的800位員工需要負責6具反應爐，但台電 每個核電廠都有至少600人，因此台電應有足夠人力 因應危機。 至於斷層帶的問題，福島與台灣的重要差別在於斷 層帶的長度。日本震災的斷層帶長達5百公里、且芮 氏地震規模超過9。2004年南亞地震的斷層帶更長達 1千公里。 台灣的斷層帶據信遠短於上述案例，部分地區只有 40公里，且全部都短於1百公里。原能會的陳宜彬指 出，因此，台灣的地震規模最高可能只有7左右，而 核電廠的抗震力都高於此。但最新地質探勘發現，核 20

meters of active fault lines, and all are located near the coastline for ease of loading fuel – but that also makes them potentially vulnerable to tsunamis. Also, two of the three plants – Jinshan and Guosheng – house General Electric Boiling Water Reactors of the same design as the five reactors that melted down in Fukushima.

One important difference between conditions in Taiwan and the Fukushima

電廠附近的多個斷層可能延伸至海底，代表先前對斷 層長度的量測不夠精準。政府已經計畫展開新一波的 探勘。 此外，日本核災最主要的原因並非地震而是海嘯。 擁核人士主張，台灣不太可能發生海嘯。原能會的陳 宜彬表示，台灣核電廠週邊海域的水不夠深，不太可 能引發福島電廠所碰到的大規模海嘯。反核人士並不 認同，因此爭議仍將持續。 原能會的陳宜彬強調，許多對台電的批評都沒有根 據。比如說，核電機組的發電量都達到裝置量的90% 以上，也是全球可靠度與品質管制最佳的前3名。 此外，到訪的美國高層官員也讚許台灣對日本核 災的快速反應。美國能源部副部長伯納曼去年12月 在台大的演講中指出，台灣政府已經迅速、全面的檢 測過核電機組。他說，「台灣已經完成措施與機制的 第一階段評估，以確保機組可以防範地震、山崩與海 嘯」。 伯納曼在停留期間也稱許核二廠的安全意識、負責 態度與危機管理能力。

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power plant, however, is proximity. The Dai-ichi plant is located outside the city of Fukushima, surrounded by a lightly populated area. Nevertheless, Japan ultimately evacuated 90,000 residents within a 20-kilometer radius. By contrast, more than five million people live within a 30-kilometer radius of the Jinshan and Guosheng power plants in New Taipei City. A similar disaster in that area could entail evacuating parts of New Taipei City and even Taipei itself. Could Taiwan withstand the possible evacuation of its capital city?

Taipower and the Atomic Energy Council (AEC) take pains to emphasize the differences between the Fukushima and Taiwan situations. In an email, Taipower representatives note that safety provisions at Taiwan’s reactors significantly exceed those at Fukushima. For example, the Fukushima plant placed its emergency diesel generators in the basement, following U.S. protocol to guard against tornadoes. When the tsunami hit the plant, the generators were flooded and useless. Taiwan’s plants have at least five independent diesel generators built into their roofs, above the level at which

a tsunami could hit.

In addition, notes Chen Yi-bin, the AEC director of Nuclear Regulation, Taiwan’s emergency cooling pools are built above the plants, in a position to passively dump onto a melting core, whether or not the plant is generating power. That would eliminate one of the major problems faced at Fukushima.

Further, the Japanese utility TEPCO relied heavily on contract labor, unlike Taipower, which directly employs most of its staff, giving it greater control over the training and quality of its personnel. Chen adds that the Japanese plant was understaffed, with 800 workers at Fukushima handling a six-reactor power plant. Taipower, by contrast, has at least 600 employees at its two-reactor plants, suggesting that Taipower would have sufficient manpower to handle a crisis.

As for the location of all three currently operating nuclear plants as well as the Longmen site within kilometers of active fault lines, a key difference between the Fukushima situation and Taiwan is the length of the faults. The quake that hit Japan turned out to be over 500 kilometers long and scored a 9 on the Richter

scale. The 2004 earthquake that devastated Sumatra and the Indian Ocean extended over 1,000 kilometers.

Taiwan’s faults are believed to be much shorter, only 40 kilometers in some places, and all less than 100 kilometers. As a result, the most severe earthquakes to strike Taiwan would measure only in the low 7s on the Richter scale – and Taiwan’s plants are built to withstand more than that, assures the AEC’s Chen. As Taiwan’s latest geographic survey reveals, however, several faults in close proximity to the nuclear plants may extend under the ocean, meaning that their length hasn’t been accurately measured. Further surveys are planned.

In addition, as became quickly apparent in the aftermath of the Japanese disaster, the real cause of the meltdowns wasn’t the earthquake itself but the ensuing tsunami. That phenomenon, say nuclearenergy advocates, is also unknown in Taiwan. The AEC’s Chen notes that the depth of the seafloor in front of all of Taiwan’s nuclear power plants is too shallow to produce a tsunami with anything like the power of the one that destroyed

Taiwan’s abatement strategy needs to focus on power generation – it’s over half of the total abatement opportunity Power sector abatement potential as percentage of total abatement potential in different regions % Share of total abatement potential in 2020

55

Taiwan

45

41

Japan

59

39

South Africa

61

Russia

29

71

Germany

29

71

28

United States China

19

72

Energy Other

81

Note: Other sectors include Agriculture, Buildings, Forestry, Road Transport, Waste, Cement, Chemicals, Iron/Steel, and Petroleum/Gas SOURCE: McKinsey & Company

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Cover story Taiwan's Nuclear Plants

Nuclear Plant #1 (Jinshan) Operation: 1978.12 and 1979.7 Retirement: 2018.12 and 2019.7 Installed capacity: 1.27 GW

Nuclear Plant #2 (Guosheng) Operation: 1981.12 and 1983.3 Retirement: 2021.12 and 2023.3 Installed capacity: 1.97 GW

Nuclear Plant #4 (Longmen) Operation: N/A Retirement: N/A Installed capacity: 3.5 GW

Nuclear Plant #3 (Maanshan) Operation: 1984.7 and 1985.5 Retirement: 2024.7 and 2025.5 Installed capacity: 1.9 GW

photos: wikipedia

但許多反核者並不認同伯納曼的說法。台大的徐光 蓉就認為，日本的核電產業優於台灣，不論是反應爐 製造還是管理能力，但日本還是發生核災。她說，台 電怎麼會認為自己優於日本，一旦發生類似狀況，台 電才更可能出問題。 核四是否商轉的爭議，其實反映出福島核災之前台 灣內部早就已經相互對立。核四在1980年代就已經 提案，但經過10多年的爭論後，才在2000年動工， 但民進黨政府沒多久就宣布停工。就算大法官會議認 定行政院決議停工逾越憲法明定職權，但傷害已經造 成。合約已經失效，工程師與專家都已經轉往其他新 建案或是離職。合約爭議進入仲裁，而施工直到1年 半後才恢復。 核四復工後，原設計至少1千個項目需要改變。多 數更動只是常見的例行公事，但法規要求全數更動都 需獲得奇異公司同意。但是奇異現在已經與日立合作 管理核電業務，因此原能會表示，台灣、日本、美國 間的三方文書往返，導致設計變更需要好幾個月才能 完成。雖然台電一度獲准自行更動設計，但當台電未 22

獲准許便更動更多設計時，政府便對台電兩度開罰， 分別是2008年的400萬新台幣，以及2011年11月的 1500萬新台幣，後者為「核子反應器設施管制法」的 最高罰鍰。 反核人士認為，台電遭罰的前例只凸顯台電不是 欺瞞就是無能。其他與核四有關的問題也引發媒體關 注：原本的零件據稱換用品質較差者以節省成本，核 電廠非核心廠區發生火災，甚至是鼠類肆虐。 原能會的陳宜彬承認施工過程的確出現疏失。火災 部分，他表示是因為冷卻系統還未裝設就進行線路測 試，因而引發短路。他說，類似狀況顯示台電對類似 大型建案的經驗不足。在原始包商史東韋伯斯特公司 （Stone & Webster）撤離工地後，台電甚至一度以自 己的工程師進駐以維持施工進度。台電最後找上具有 核電廠施工經驗的美國依柏斯公司（EBASCO），以 合資方式興建核四。 核四原訂2005年商轉，但現在已經晚了7年，而經 費高達93億美元，比原本多了50億美元，但商轉的日 期仍然未定。

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Fukushima Dai-ichi. Opponents are scarcely reassured, and the issue will likely remain contentious.

AEC’s Chen asserts that much of the criticism of Taipower has been unfounded. He notes that the utility has operated its nuclear power plants at over 90% capacity and has scored among the top three power companies in the world for reliability and quality.

Further, visiting U.S. dignitaries were recently impressed by Taiwan’s response to the crisis in Japan. In an address at National Taiwan University last December, U.S. Deputy Secretary of Energy Daniel B. Poneman credited the Taiwan authorities with making swift and comprehensive inspections of all the nuclear power plants. He noted that “they have completed a first assessment phase of measures and mechanisms instituted to make sure the nuclear generating units are able to withstand earthquakes, landslides and tsunamis.”

During his stay, the deputy secretary also lauded the culture of safety consciousness, accountability, and crisismanagement preparedness that he found when visiting the Guosheng plant.

This view doesn’t carry weight with nuclear’s many critics. “Japan has a better nuclear industry than Taiwan,” Gloria Hsu says, referring to the scale of Japan’s nuclear industry both in manufac-

PROTEST ON THE BEACH — Anti-nuclear demonstrators call for the scrapping of plans to put the Longmen plant into operation.

photo : cna

turing reactors and in managing power plants. But they still experienced a huge disaster. “How can (Taipower) have such confidence that they are better than the Japanese?” She feels that another disaster is only that much more likely to happen under Taipower’s watch.

The political football that the fourth nuclear power plant has become reflects the deep ambivalence towards nuclear power that had developed long before

奇異的發言人懷特（Chris White）在電子郵件中表 示，公司方面仍對核四具有高度信心，「奇異與台電 的合作成果豐碩，也很期待核四完工，以大幅提高台 灣的發電容量」。他也表示，「核四一旦開始商轉， 將是福島事故後全球第一個商轉的反應爐」。

對立嚴重 核能議題，企業界普遍支持，但環保與社福團體強 烈反對，而社會的看法一般也與政黨傾向符合。台灣 現役的3座核電廠全部都在戒嚴的1970與1980年代興 建。核能一度占全台發電量的一半，而台電也曾雄心 勃勃希望建造更多發電機組。但美國1979年發生三 哩島核子事故後，全球核能工業急轉直下，加上台灣 經濟已經自兩位數成長轉型，能源需求成長趨緩降低 發電容量擴充的必要性。 原能會的陳宜彬是麻省理工學院畢業的核子物理 專家，他回憶當時表示，政府高層認為台灣將由能源 密集的重工業，如鋼鐵、水泥，轉型為低耗能的高科

the Fukushima disaster. After a decadelong debate when the Longmen project was first proposed in the 1980s, construction finally started in 2000, only to be shut down by the new DPP administration of Chen Shui-bian months later.

The project was then reinstated when the Constitutional Court found that the executive branch had overstepped its authority in halting a project already authorized by the legislature. But the

技業。但是，台灣雖然成功發展高科技業，如半導體 業，但其耗能程度卻一點也不亞於重工業。新增的電 力需求因而多數改由火力發電補足。經濟部能源局統 計顯示，火力發電總量為880萬瓩，占全台裝置容量 4890萬瓩的18%。 核電廠的壽限一般而言為40年。核三廠1984年開 始商轉，因此照時程推算，核一應於2018年除役， 核二應於2019年除役。如果政府決定核電廠不延 役，所有核電廠將於2025年除役。 不論核四是否商轉，如果現有核電廠逐步除役， 台灣應如何填補核能發電所遺留的空缺，仍然沒有答 案。台灣的基載電力現在是由核能負責，而考量基載 電力必須持續供應，因此未來的供應源必須便宜且可 靠。再生能源並不適合做為基載電源，因為只有起風 或日照時才能發電。天然氣則太過昂貴，運輸與儲存 的難度太高也使其難以大量存放。 麥肯錫的魏世民表示，「台灣到底該怎麼辦？不是 選擇天然氣就是煤炭」，「但沒有人喜歡住在火力電 廠旁邊，但天然氣的進口量又不夠」。

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Cover story damage had been done. Contracts had been broken, and engineers and other specialized professionals had already been transferred to other projects or let go. Contract disputes went to arbitration and work on the plant did not resume for a year and half.

As the project proceeded, at least a thousand changes needed to be made to the original design. Most of the changes were routine and not unusual, but regulations required that they all be approved

by GE, which now handles its nuclear business through its joint venture with Hitachi. For reasons that may reflect the complexity of communicating among the various firms involved in Taiwan, Japan, and the United States, approval of the changes took months instead of days, according to the AEC. For a time, the regulator granted Taipower permission to make changes on its own so as not to hold up the project, but when the utility made even more modifications without permission, it resulted in Taipower being fined twice, once in 2008 for NT$4 million (US$133,000), and again in November, 2011 for NT$15 million, the stiffest fine stipulated in the Nuclear Reactor Facilities Control Act. Among critics of nuclear power, the episode reinforced suspicions that Taipower was either duplicitous or incompetent. Other issues relating to the Long-

men plant construction also gained media attention: allegations that inferior parts had been substituted for ones called for in the design to save money, a fire in a non-critical portion of the plant, and even rodent infestation.

T h e A E C ’s C h e n c o n c e d e s t h a t mistakes occurred. Of the fire, he notes that circuits were tested before proper cooling systems had been installed, resulting in short circuits. He says such events reflect Taipower’s inexperience in handling such a big project. For a period, Taipower even took over as its own architect-engineer after Stone & Webster, the original service provider, quit the scene.

Taipower has since arranged for help from Ebasco, a leading U.S. architectengineer with nuclear experience, through its Taiwan joint venture.

Long overdue The plant, originally scheduled to begin operations in 2005 is now seven years overdue – and at US$9.3 billion, nearly US$5 billion over budget– with no specific date set for when the plant is likely to begin service, if ever.

Chris White, a GE spokesman, says the company continues to have full confidence in the plant. “We enjoy a very productive relationship with Taipower and look forward to completing this

During his Taiwan visit in December, U.S. Deputy Secretary of Energy Daniel B. Poneman praised Taipower's safety-oriented culture. photo : cna

24

project, which will greatly increase the nation’s energy production capabilities,” he said in an email. He also noted that that “when Longmen loads fuel, it will be the first reactor [in the world] to go into operation post-Fukushima.”

Nuclear power – generally supported by the business community but bitterly opposed by environmental and socialwelfare groups – polarizes society along familiar political fault lines. All three of Taiwan’s currently operating nuclear power plants were built during the martial law era of the 1970s and early 1980s. At one time, they delivered half of Taiwan’s power supply, and Taipower had ambitious plans to build many more nuclear units. But the near-meltdown at Three Mile Island in 1979 set the entire global nuclear industry reeling, and slower growth in energy demand as the Taiwan economy matured away from double-digit GDP growth removed much of the pressure to expand power capacity.

The AEC’s Chen, an M.I.T.-trained nuclear physicist, recalls policy makers at the time forecasting a shift in Taiwan’s economy from energy-intensive heavy industries such as steel and cement into low-energy “high-tech” industries. But it turned out that the high-tech sector that Taiwan successfully developed, notably semiconductors, is also a voracious consumer of electrical power. Most of the

他認為，台灣的選項並不多，因此核能發電仍 有必要。 另一個問題是馬政府的減碳政策。台美合資 的吉興工程顧問公司曾經設計過台灣許多火力電 廠，其董事長陳立誠認為減碳是不可能的任務。 他表示，就算在最好的狀況下，意即核四商轉與 核一至核三延役，而且核一至核三全部新增一組 反應爐，台灣每年仍會排放2.8億噸二氧化碳，難 稱成功減碳。他表示，台灣的能源需求與碳排量 都會只增不減，排除零碳排的核能只會讓問題更 糟。 台電認同上述推估，並強調要達成減碳目標， 台灣還需要購買碳額度，意即付款在其他國家減 少二氧化碳總量，例如保護雨林。 吉興的陳立誠擔憂，台灣能源政策一旦大轉 彎，排除核能與便宜的煤炭，選擇貴又沒保障 的天然氣與再生能源，要不是拖垮台電的財務狀 況，就是電費大漲拉低台灣產業競爭力。 吉興的陳立誠認為昂貴的天然氣無法擔任基載

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needed new capacity came from building additional coal-fired plants. According to the Bureau of Energy (BOE), coal currently accounts for 8.8 gigawatts or 18% of Taiwan’s total installed capacity of 48.9 gigawatts.

Generally the authorized lifespan of a nuclear plant is 40 years. According to this schedule, the Jinshan #1 reactor should undergo decommissioning in 2018 and the second reactor in 2019. If their lifespans are not extended, all of Taiwan existing plants will be decommissioned by 2025.

Whether or not Longmen ever goes into operation, if the existing nuclear plants are phased out, how Taiwan can replace nuclear power’s significant chunk of the energy mix remains an open question. Nuclear power is currently utilized to provide baseload capacity, which – because it is always online – must be cheap and reliable. Renewable energy sources are unsuitable for baseload use, because they only generate power when the wind is blowing or the sun is shining.

LNG, for its part, is highly expensive, and difficulties with transportation and storage make it hard to maintain in large inventory.

“What are we going to do?” asks McKinsey’s Wiseman. “You’re either going to have to go gas or coal. Nobody wants another coal furnace in their back-

yard, and we don’t have enough import capacity for liquefied natural gas.”

“We’re running out of options,” he says, suggesting that nuclear power needs to remain in the mix.

Another piece of the puzzle is the Ma administration’s program for carbon abatement – an objective termed “mission impossible” by L.C. Chen of GIBSIN Engineers, a U.S.-Taiwan joint venture that designed many of Taiwan’s coalfired power plants. He notes out that even under a best-case scenario (which would include Taipower’s plans not just for a fourth nuclear plant but to extend the life of the existing reactors and to build an additional three reactors – one at each of the three existing plants), Taiwan would still emit some 280 million metric tons of CO2 annually, missing its carbonreduction targets substantially. Taiwan’s power demand will continue to grow, he says, along with emissions. Eliminating carbon-free nuclear power will only worsen the problem.

Taipower agrees with this assessment, noting that to meet these targets, Taiwan will need to buy offset credits – basically paying to reduce carbon somewhere else, such as by protecting a rainforest.

L.C. Chen fears that radically shifting Taiwan’s energy policy away from nuclear power and reliable cheap coal towards far more expensive and less

電力供應。能源局統計顯示，台灣已經設置1000萬 瓩的天然氣發電機組，占總裝置電量的1/5。天然氣 雖然能源密度比煤炭高，碳排也只有煤的1/3，但還 是比不上零碳排的核能。此外，天然氣難以運輸與儲 存，因為它必須存放在低溫環境中才能維持液態。台 灣的天然氣儲存設施不足，因此存量只夠1週使用。 一旦供給出現問題，台灣將難以滿足基載電力需求。 高價的天然氣同樣會加劇台灣的財政負擔。天然 氣發電成本是每度新台幣3元，高於平均的2.7元。一 如往年，台電2010會計年度再度申報稅前虧損180億 元。 但支持廢核減碳並行的人士仍然相信其可行性。民 進黨在其政策說明中強調，核能並非無可取代，台灣 可以利用替代能源，改善發電效率、節省用電、推動 產業再造與電力市場自由化。

減碳選項 麥肯錫的魏世民指出，其公司對台灣減碳策略的分

secure options – LNG and renewable energies – could lead to financial ruin for Taipower or such steep electricity rates that the competitiveness of Taiwan industry would be undermined.

He argues that costly LNG is unsuitable for use as baseload power. Taiwan already has 10 gigawatts of LNG-fired installed capacity – over a fifth of total installed capacity – according to the BOE. LNG has a higher energy density than coal and emits just a third of the emissions. But unlike nuclear power, which emits no greenhouse gases, burning LNG to generate power still entails carbon emissions. Further, LNG is difficult to ship and store because it must be kept in subzero cryonic tanks to remain in a liquefied state. As Taiwan has only limited infrastructure for LNG storage, the island is only able to maintain a oneweek supply. If LNG supplies were ever compromised, Taiwan would be at risk of losing a substantial source of essential baseload power.

LNG’s higher costs would also stress Taipower’s already beleaguered budget. It costs the utility over NT$3 per kilowatthour to generate power from LNG, more than the NT$2.7 it charges on average to consumers. In the 2010 fiscal year, Taipower once again registered a pre-tax loss of some NT$18 billion (US$540 million), following years of similar deficits.

析顯示，所有「減碳選項」中，能源產業占55%，為 全球比例最高。其他國家的主要選項，如紐西蘭是農 業，美國則是運輸。他認為，台灣的減碳策略太過偏 重能源面，因為「要不是產業耗能太多，就是因為火 力發電占50%污染太高」。 政府一直致力於提高能源使用效率，以使經濟成長 與能源需求脫勾。一般來說，經濟成長的高低，與能 源消耗及碳排放量成正比。但如果更少的能源就可產 生更高的經濟成長，能源政策的空間就能更大。事實 上，政策似乎已經展現部分成果。行政院經濟建設委 員會發現，2009年的經濟衰退中，能源消耗的跌幅 大於經濟成長率，而2010年，經濟成長率雖然高達 10.9%，但耗能增幅僅6.4%。 製造業似乎是個更可能達成節能目標的選項，因 為許多產業，如玻璃、半導體、鋼鐵、水泥等，都 是高度能源密集。降低相關產業的耗能也許能明顯 降低整體電力需求與碳排放量。不過，麥肯錫的魏 世民表示，「事實上，台灣的工業用戶已經是全球 最為節能的一群了」。雖然進一步改善並非全無空

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Cover story Yet supporters of eliminating nuclear power while reducing CO2 emissions insist that the dual policy directions are achievable. In its policy paper, the DPP asserts that Taiwan can obviate the need for nuclear power by “using other alternative energy sources, improving the power generation efficiency, energy conservation, industrial restructuring, and the liberalization of the electricity industry.”

Abatement opportunities McKinsey’s Wiseman notes that in the company’s analysis of how Taiwan could reduce its carbon emissions – he calls them “abatement opportunities” – 55% come from the power sector, the highest proportion in the world. In other countries, the main opportunities might come from agriculture (as in New Zealand) or transportation (the United States).

The potential reductions in Taiwan are skewed so much towards the power sector, he says, because “a) our industries use so much and b), because the mix (50% coal) is so dirty.”

The government has long aimed at promoting greater energy efficiency as part of the solution, decoupling Taiwan’s GDP growth and energy demand. Normally economic growth and energy consumption (and thus CO2 emis-

sions) largely rise or fall in synch. But if more growth could be wrung out of less energy, it would greatly ease the burden on energy policy. In fact, efforts in this direction seem to be having some effect.

Energy consumption dropped more than did economic growth during the 2009 recession, and in 2010, when GDP rose by 10.9%, energy demand increased by only 6.4%, according to the Council for Economic Planning and Development.

The industrial sector would appear to be an obvious target for achieving such energy savings. Many industries in Taiwan – glass, semiconductors, steel, and cement, for example – are highly energy intensive. Reducing their energy appetite would go a long way towards cutting overall energy consumption and emissions. But, notes McKinsey’s Wiseman, “it turns out that Taiwanese industrial users of electricity are some of the most efficient in the world.” Although further improvement could still be made, the upshot is that industrial efficiency is not the low-hanging fruit it might be in older economies.

Opponents of nuclear power take a different tack altogether – arguing that Taiwan needs to redirect its economy away from energy-intensive industries and towards services. “Why do we need a steel industry?” asks Gloria Hsu. “We are

not a low-tech society. We should focus on services.”

Supporters of that position note that Taiwan’s industrial sector consumes 60% of the power but contributes only 35% of the GDP. Services, meanwhile, comprise 65% of the economy but consume only 19% of its power. Still, few of Taiwan’s opponents of nuclear energy would advocate scrapping Taiwan’s industrial base.

At least two things can be agreed upon by opposing camps in this debate.

The first is that Taipower’s rates are too low, since successive governments have been unwilling to ask consumers to pay higher fees. As the utility racks up massive deficits, in the end it is still the taxpayer who foots the bill, but charging customers a realistic tariff would enhance the sustainability of the company while also encouraging efficiency and innovation.

The second point of agreement is the enormity of the challenge facing policymakers as they grapple with the question of how to balance the twin objectives of carbon reduction and energy security.

Many would concur with the observation of nuclear-opponent Peter W.S. Chang, a professor at Taipei Medical University: “I wouldn’t want to be in the decisionmakers’ shoes” on this issue.

間，但比起更早工業化的國家，台灣再度提高能 源效率的機會有限。 反核者的看法則完全不同，他們認為台灣應該 由能源密集產業轉型為服務業導向。台大的徐光蓉 說，「我們為什麼需要鋼鐵廠？我們並不是落後社 會，我們需要專注發展服務業」。 支持這種看法的人強調，台灣的製造業用掉 60%的電，但對國內生產毛額（G D P）的貢獻只 有35%；相對的，服務業占經濟總值65%，卻只要 19%的電。不過，只有少數反核人士認為台灣不需 要製造業。 對核能發展立場相左的兩個陣營，至少有兩大觀 點是一致的。首先是電價太低：歷任政府都不敢調 高電價，導致台電連年虧損，而最後還是要由消費 者的稅金彌補。然而，電價合理化後，至少能強化 台電財務體質，並刺激效能提升與節電創意。 其次是政府顯然難以在減少碳排與能源安全間 取得平衡。反核的台北醫學大學教授張武修說，在 減碳與能源安全問題上，他也不願扮演決策者的角 色。他的說法應該能夠獲得許多人的認同。 26

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energy

Is RENEwABLE ENERGY THE ANswER?

I

f nuclear power is really going to be phased out of Taiwan’s energy mix, how will Taiwan maintain an adequate electricity supply to assure continued growth?

For many, especially those concerned with environmental issues, the ready answer is “renewable energy.” Taiwan has a Renewable Energy Development Act (REDA) on the books, enacted by the Legislative Yuan in 2009 after some delay, intended to provide funding and resources to foster Taiwan’s domestic capacity in renewable energy.

But making up for nuclear’s 17% share of Taiwan’s energy supply will be a huge challenge. And with energy demand continuing to grow along with the economy, Taiwan may well be facing an energy shortage in a few years even if nuclear power is not phased out.

How much can renewable energy actually contribute to Taiwan’s electricity generation?

Estimates vary all the way from 2% to 30%.

The government calls for renewables to eventually take up to 16% of installed capacity, while the opposition Democratic Progressive Party’s policy paper, “Nuclear Free Taiwan,” sets a target of 6% of total power generation.

The difference between installed capacity and actual power generation comes down to each energy source’s capacity factor. The term refers to the potential energy generated by any source – coal, nuclear, wind – compared with its actual output. Nuclear is a highly efficient energy source, and Taiwan’s three nuclear power plants have operated at over 90% of capacity for the past three years.

Wind power, by contrast, operates at a much lower capacity. To justify the investment, a windmill needs to generate power at an average of at least 30% of its capacity annually – which Taiwan’s windmills generally do, according to the Bureau of Energy (BOE).

Penghu’s windmills reportedly can generate at 40% to 50% of capacity during stormy winter months.

But the problem is that they only generate power when the wind blows, and even the

usually blustery coast of Changhua County experiences the odd quiet day.

Taiwan began developing wind power early last decade. But with a limited supply of land that is both unpopulated and with sufficient wind resources, Taiwan has already maxed out its on-land wind power at only 470 megawatts – about 1.5% of the Taiwan grid’s total installed capacity of 40 gigawatts. In terms of contribution to Taiwan’s total power generation, the proportion is even smaller – less than 0.42%, according to the BOE. The question of capacity factor is crucial in developing solar power as well. Solar photovoltaic (PV) cells convert only about 15% of the sunlight that reaches them into power, even in sun-baked deserts. And with night-time and stretches of poor weather also factored in, solar PVs can count on only around 1,000 hours a year of actual power generation.

Thus, to obtain the same amount of power generation from solar energy as from a nuclear reactor, a vast amount of land needs to be exploited.

Yet the development of solar energy continues to enjoy broad support around the world, including at the Green Energy Labs of Taiwan’s Industrial Technology Research Institute (ITRI). Vice President and General Director Alex Tong confidently asserts that “solar PV is the future for renewables.”

The key advantages are the zero cost of fuel and the low maintenance costs due to the lack of moving parts. Also, for an island that must import 99% of its energy, solar represents an indigenous energy supply. “It depends on the efficiency you’re looking for,” notes Tong. “If you’re looking at land use, it’s not very efficient. But as long as the costs come down,” solar has a promising future, he says. Equally importantly, he adds, if Taiwan is to reduce its carbon footprint and phase out nuclear, “we don’t have a lot of choices.”

Critics contend that the government has not done enough to promote the development of renewable energy, however. Prog-

ress has occurred – the 495 megawatts of installed capacity from renewables (almost entirely wind) are a big jump from the virtually nothing of 10 years ago. But many want to see Taiwan setting more ambitious targets for renewable energy penetration.

Bill Wiseman, managing partner of McKinsey & Co. in Taiwan, suggested at a Clean Energy Forum last fall that the government’s call for 3.5 gigawatts of installed solar PV capacity mounted on rooftops throughout the country is too conservative. McKinsey envisions a total of 4.7 gigawatts for rooftop mountings alone, and notes that abandoned farmland could be utilized as well to gain another 4.1 gigawatts. Even more capacity could be installed along roadsides and on idle industrial land to bring the total to 10.1 gigawatts, the McKinsey study found.

Such recommendations raise eyebrows among some energy-industry insiders, who consider them impractical. One source notes that 10 gigawatts would equal a quarter of the Taiwan grid’s total installed capacity, but would annually generate only about 15 billion kilowatt-hours of power, around 5-6% of last year’s total consumption. He says that at the current feed-in tariff – the amount Taipower pays for a renewable energy such as solar – this 6% of energy supply would cost NT$120 billion (US$4 billion), nearly 25% of Taipower’s entire NT$500 billion annual revenue.

The holy grail The cost of generating power from renewable energy is also hotly contested.

Grid parity – the point where the cost of producing energy from renewables becomes equivalent to that of conventional fuels – remains the holy grail. It is generally considered to be about US$1 per kilowatt-hour.

Grid parity, however, doesn’t consider such factors as the external costs of burning coal in terms of carbon emissions and impact on human health. Half of the power con-

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Cover story

HOPE OF THE FUTURE — Scientists at ITRI are convinced that solar cells will become an important source of energy for Taiwan, but perhaps based on a material other than silicon. photo : wikipedia

sumed in Taiwan is generated by coal, and the level of emissions is among the highest in the world.

As a result, the price that Taiwan pays to generate power from coal – around NT$1 per kilowatt-hour, compared with NT$8 for solar power – might not reflect the true costs of coal. Some suggest that coal should be priced at double its actual fuel costs to reflect these external costs.

With regard to solar, ITRI’s Tong says: “We may not have reached grid parity yet, but we will within 10 years.” At the same time, he notes that the technology “might not be silicon.”

Silicon is the raw material used in the production of both semiconductors – an industry Taiwan dominates – and solar wafers. But silicon has a number of drawbacks. As a resource, it has experienced dramatic fluctuations over the past decades, with periods of scarcity that cause its price to surge, followed by periods of abundance, as today, that drive prices down.

Silicon also has technological limitations that hold the energy-conversion rate to only 28

around 15%. Combined with the other issues affecting solar energy – the vulnerability to weather conditions and the fact that at least half of any day is in darkness – that limitation means that silicon-based solar power is far less efficient even than wind.

Tong suggests that refinements in production techniques, plus new technologies and compounds being explored by ITRI, will perhaps pave the way for a new kind of solar cell. Like all semiconductor technologies, solar is advancing dramatically, and new processes will likely bring solar to grid parity.

But what does it say about Taiwan’s confidence in the solar industry when the country is the world's second-largest maker of solar cells – with a more than 14% global market share – while solar energy accounts for only .005% of its domestic energy grid?

In an email reply to questions from TOPICS, Taipower representatives concede that “in light of policy and technology costs, at the present stage the main direction is focused on developing land wind power and a moderate solar system.” Perhaps Taiwan’s decision makers and industrialists recognize

that future solar technologies will be more advanced and prefer to wait before making significant investments.

Offshore wind is another area where Taiwan has seemed to lag, but also where ITRI’s Tong feels the technology needs to evolve further before substantial investments are made. He says, for example, that advances in materials could sharply reduce the weight of the turbines, resulting in smaller masts planted on the seabed.

But Tseng Weiwei, Senior Project Manager at the Taiwan Generations Co. (TGC), says she sees the opposite trend developing, with turbines getting larger and able to generate significantly more energy. TGC has been in existence since 1998, but has yet to actually generate any power. Instead, it has spent the past few years conducting wind, oceanographic, geotechnical, and electrical studies along the Changhua coastline, where it expects to develop a site. The company has completed a lengthy Environmental Impact Assessment and received the necessary permissions from an array of government agencies. It has also entered into strategic partnerships with such organizations as National Cheng Kung University’s Research Center for Energy Technology and Strategy (RCETS).

TGC is currently bidding on three pilot projects offered by BOE under the “Grant Scheme for Offshore Wind Power Systems,” with each project consisting of two turbines with an expected 2 megawatts of power capacity each. A total of 600 offshore wind turbines are expected to be installed in the Taiwan Strait by 2030.

Still, “even doing our best,” Taiwan could never supply more than 30% of its energy needs from renewable energy, says ITRI’s Tong. And this 30% would entail installing 30 gigawatts of solar alone (compared with the total current grid capacity of 40 gigawatts). It would involve placing solar installations on up to 40,000 hectares of “wasteland,” such as land that has been contaminated with heavy metals, as well as on rooftops and idle industrial land.

Tong regards such a massive initiative as unlikely, but notes that in the race against time to assure Taiwan’s energy supply, all options need to be considered.

— By Timothy Ferry

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Taiwan Still Matters The first in a series of articles to appear in Taiwan Business TOPiCs in the coming months, exploring Taiwan’s continued significance for the United States and the Asia-Pacific region.

Chairman Ileana Ros-Lehtinen of the House Foreign Affairs Committee presiding over hearings on U.S.Taiwan relations last year. photo : courtesy of house foreiGn affairs coMMittee

BY RICHARD HALLORAN

S

hortly after Prime Minister Neville Chamberlain sought to appease Adolf Hitler by agreeing to the Nazi occupation of the heavily German-speaking border region of Czechoslovakia called the Sudetenland in 1938, the British leader went on the radio to justify his actions by claiming he had averted a war. “How horrible, fantastic, incredible it is,” he said, “that we should be digging trenches and trying on gas masks here because of a quarrel in a faraway country between people of whom we know nothing.”

Today in America, voices not unlike that of Neville Chamberlain are heard suggesting that the United States abandon democratic, self-governing Taiwan because the island is caught up in a faraway quarrel with a powerful neighbor that claims its territory as its own. In contrast, other influential Americans assert that U.S. support for Taiwan serves the best interests of both. That support, however, does not mean those Americans are content with every aspect of Taiwan’s contributions to its own defense.

Among the more prominent exponents of withdrawing U.S. support for Taiwan to improve relations with China have been: • Charles Glaser, a political scientist at George Washington University, who wrote in the March/April 2011 issue of Foreign Affairs that since Beijing insisted that its sovereignty over Taiwan was non-negotiable, the United States could avoid the threat of nuclear war by abandoning Taiwan. “Given such risks,” he wrote, “the United States should consider backing away from its commitment to Taiwan. This would remove the most obvious and contentious flash point between the United States and China and smooth the way for better relations between them.” He argued: “Not all adversaries are Hitler, and when they are not, accommodation can be an effective policy tool. When

an adversary has limited territorial goals, granting them can lead not to further demands but rather to satisfaction with the new status quo and a reduction of tension.”

• Former senior U.S. diplomat Chas Freeman, whose remarks last spring at a conference organized by the China Maritime Studies Institute of the Naval War College in Rhode Island echoed Neville Chamberlain: “For Americans, the Taiwan issue presents an unwelcome choice between potential long-term military antagonism with China and the perpetuation, despite rapid crossstrait economic and social integration, of Taiwan’s de facto political separation from the mainland.” He concluded that “given the huge stakes for the United States in our strategic interaction with China, this choice might well strike someone looking afresh at the situation as oddly misguided.”

“China’s willingness to tolerate amazingly different politico-economic orders on what is nominally its territory has been amply demonstrated in both Hong Kong and Macau,” he maintained. “Its proposal to Taipei offers far greater autonomy than either of these citystates enjoy. Is it worth a war with China to prevent such an outcome? If not, why are we behaving as if it were?”

• Paul Kane, identified only as a former international security fellow at Harvard and an ex-Marine, who had an op-ed piece entitled “To Save Our Economy, Ditch Taiwan” in The New York Times in November. He urged President Obama to negotiate with China to write off the US$1.14 trillion in U.S. debt to Beijing. In return, the United States would end military assistance to Taiwan.

“This would be a most precious prize to the cautious men in Beijing, one they would give dearly to achieve,” Kane argued – without quoting anyone in Beijing to reintaiwan business topics • february 2012

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force his contention. “America has little strategic interest in Taiwan, which is gradually integrating with China economically by investing in and forming joint ventures with mainland Chinese firms. The island’s absorption into mainland China is inevitable.” Kane’s essay attracted wide attention because of its appearance in the Times.

• Retired Admiral William Owens, onetime Vice Chairman of the Joint Chiefs of Staff, whose September 2009 op-ed piece in the Financial Times called for a halt in U.S. arms sales and revision to the Taiwan Relations Act (TRA) of 1979, adopted by Congress after President Jimmy Carter switched U.S. diplomatic ties to Beijing from Taipei.

Describing it as “outdated legislation,” Owens said the TRA “is the basis on which we continue to sell arms to Taiwan, an act that is not in our best interest.” He did not advocate termination of the U.S. commitment to Taiwan, however. “We must always protect the democracy and freedoms Taiwan has developed – but weapons sales do not do this,” he argued, without explaining what other measures would be more effective.

On the other side have been strong American voices seeking to refute the arguments of those who would abandon Taiwan for the sake of bettering relations with China. An early rebuttal came from two Washington, D.C.-based scholars, Nancy Bernkopf Tucker of Georgetown University and Bonnie Glaser of the Center for Strategic and International Studies (CSIS), in an article written last fall for the Washington Quarterly. Noting that “Taiwan has been characterized as a strategic liability, an expensive diversion, and most often, an obstacle to more important U.S.-China relations,” they suggested that “the big questions are whether sacrificing Taiwan would improve those relations, whether conditions are ripe for such a determination, and in what ways a change would affect other U.S. interests, including American friends and allies in the region.” They said that “careful examination of these variables leads us to conclude that the United States should neither abandon nor reduce its commitments to Taiwan, but strengthen them.”

Sorting through the commentary on this issue reveals five main reasons for such a conclusion: • Democracy: American political leaders of both major parties have long promoted the spread of democracy. It would be unconscionable for the United States to withdraw backing for the nascent but maturing democracy in Taiwan, as seen in the 75% voter turnout in the January elections.

• Credibility: If the United States abandoned Taiwan when confronted by Chinese power, the alliances with South Korea, Japan, the Philippines, Thailand, and Australia would be damaged beyond repair. “The first thing Japan would do,” a respected Japanese analyst said, “would be to hop onto the Chinese bandwagon.” A Korean diplomat expressed the same sentiment about his country.

• Geography: Taiwan sits astride the northern opening to the South China Sea through which passes more shipping than goes through the Panama and Suez Canals 30

combined. Having a potentially aggressive China control that strategic position would give it a chokehold on East Asian economies.

• Law: The TRA requires Washington “to consider any effort to determine the future of Taiwan by other than peaceful means, including by boycotts or embargoes, to be a threat to the peace and security of the Western Pacific area and of grave concern to the United States.”

To ignore this law would be to invite serious legal action and political controversy.

• China: While the leaders of China have often demanded an end to U.S. support for Taiwan, they have never given any indication that such a move would cause them to end their campaign to drive the United States out of Asia and restore the Middle Kingdom’s domination of the region.

Forceful arguments for continued U.S. support for Taiwan were expressed last year during hearings on “Why Taiwan Matters” before the House of Representatives’ Committee on Foreign Affairs. The chairman, Rep. Ileana Ros-Lehtinen (Republican of Florida), opened a June session by calling Taiwan a “shining example of liberty” that Beijing fears and is seeking to eliminate. “It is for this very reason,” she contended, “that Congress, through the Taiwan Relations Act, must strive to help preserve a Taiwan that reflects the aspirations of its people.”

“There is a new spirit of appeasement in the air,” the chairman said. “Some in Washington policy circles are suggesting that the time has come to recognize the reality of a rising China and to cut our ties to Taiwan. This would be a terrible mistake which would have far-reaching ramifications on how the U.S. treats its democratic allies.”

Rep. Howard Berman of California, the committee’s senior Democrat, underscored the significance of Taiwan’s democracy at the hearing. “Our relationship with Taiwan was initially defined by a shared strategic purpose of containing the spread of communism in Asia,” he said. “With the end of the Cold War, Taiwan’s political evolution from authoritarianism to one of the strongest democratic systems in Asia has transformed the U.S.-Taiwan relationship from one based essentially on shared interest to one based on shared values.”

June Teufel Dreyer, a scholar at the University of Miami in Florida and an authority on Taiwan, testified that for Taiwan to be absorbed into China would not be in the U.S. national interest, for two reasons. “The first is strategic and the second is that it is a betrayal of the very principles that the United States was founded on.” Citing her study of Chinese defense journals, Dreyer said “Taiwan is not discussed here as terra irredenta, some sacred, long-lost part of China that has to be recouped. No. It is regarded as a springboard for the Chinese military to break out of the island chains around China and into the open Pacific, from which point China can gain control of the sea lanes of communication. And, of course, these are vital to commerce and the transport of energy. They give whoever controls them a stranglehold on whoever does not control them.”

“The United States,” she continued, “was founded on the

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“Although some have recently sugprinciple that human beings have the right gested that our effort to build a ‘positive, to self-determination. It is so stated in our cooperative, and comprehensive’ relaDeclaration of Independence; it was reittionship [with China] would come at the erated in Woodrow Wilson’s Fourteen expense of our relations with Taiwan,” Points; and, most recently, it was stated he noted, “we categorically reject this emphatically by President Obama when assertion – and our track record confirms speaking about the Middle East. Yet we this. Positive and constructive relations explicitly have denied this right to the with China are not only consistent with people of Taiwan. This is a disgrace.” our robust and diverse relationship with R a n d a l l S c h r i v e r, w h o s e r v e d a s Taiwan, they are also mutually supDeputy Assistant Secretary of State for porting.”

East Asian and Pacific Affairs in the These expressions of support, howGeorge W. Bush administration and is ever, do not mean that Americans are now a consultant in Washington, said totally satisfied with certain aspects of in his testimony that U.S. relations with Secretary of State Kurt Campbell relations with Taiwan, notably in defense.

Taiwan are “too often seen as an issue to Assistant (left) and Deputy Assistant Secretary of manage in the context of U.S.-China rela- Defense Peter Lavoy (right) testified at Some privately question whether the Taiwanese are willing to do what is nections.” He noted that some Americans the House committee hearing.

Photo : COURTESY OF HOUSE FOREIGN AFFAIRS essary to defend themselves. They point have been “calling for reducing or elimCOMMITTEE to President Ma Ying-jeou’s military inating arms sales, changing the TRA, budget, which has hovered just above 2% of gross national perhaps abandoning Taiwan. I think this is a very bad idea; product despite his promise to raise it to 3%. The Ministry and, in fact, I would go in the opposite direction.” of National Defense (MND) is seen as stodgy, and leaders of Rupert Hammond-Chambers, President of the U.S.-Taiwan the armed forces show little flexibility in operations. Some Business Council, told the committee that “the relationship wonder whether Taiwan will be able to recruit sufficient volbetween the U.S. and Taiwan is suffering significantly from a unteers into its armed forces once conscription is ended. lack of ambition and a lack of leadership.” Arguing that the Perhaps most important, American officials worry that whatUnited States has an enormous interest in seeing Taiwan conever they tell MND will leak to Beijing. “We’re just never sure tinue on its present positive trajectory, he called Taiwan “a how good their security is,” said a U.S. official. dynamic democracy” that has combated intellectual property While serving as Assistant Secretary of Defense for Asia piracy and established an impressive track record on human in the Obama administration, Wallace “Chip” Gregson said rights and freedom of the press. In addition, Taiwan plays “Taiwan must look to its qualitative advantages through a leading role in regional security and international disaster focusing on innovation and asymmetry.” More specifically, relief. “Taiwan’s policies and actions,” he said, “clearly reflect he urged Taiwan to build “a talented and educated corps of and support American foreign policy priorities in Asia.” junior officers and non-commissioned officers.” Gregson, a Georgetown University’s Nancy Bernkopf Tucker underretired marine lieutenant general, said the island’s restricted scored three points about security: “First, the Taiwan Strait space for training could be mitigated with computers. But he is the only place in the world where two nuclear armed great cautioned that “true and lasting security cannot be achieved powers could go to war, if not by intent then by miscalcusimply by purchasing the next gleaming piece of advanced lation, misunderstanding, or accident. Second, Taiwan’s hardware.” geostrategic position astride the sea lanes of supply and comThose are questions of how Taiwan can best defend itself, munication are critical to Japan and for the U.S. Navy’s not whether it deserves to be defended. All in all, the parfreedom of navigation. Third, Taiwan is a test of China’s allel between Taiwan today and Czechoslovakia before World intentions and behavior….It is also a test of U.S. reliability War II – the Nazis invaded the rest of that country a year after and credibility. However frightening or seductive China is, they took the Sudetenland – continues to be a caution. Someappeasing it by sacrificing Taiwan would not be good policy. time after Chamberlain washed his hands of “a quarrel in a But I believe the U.S. will not abandon Taiwan, despite Chifaraway country between people of whom we know nothing,” nese threats and the potential benefits involved.” the redoubtable Winston Churchill, who was to succeed In October when the committee held a second hearing, Chamberlain as prime minister, was heard to mutter: “The Kurt Campbell, Assistant Secretary of State for East Asian government had to choose between shame and war. They and Pacific Affairs, testified: “Building a more robust and chose shame and they will get war.” diversified relationship with Taiwan is reflective of our broader approach to the Asia-Pacific; this relationship also —Richard Halloran, a freelance writer in Honolulu, advances many of our economic and security interests in the was formerly with The New York Times as a foreign corregion. In particular, our management of U.S.-Taiwan relarespondent in Asia and then military correspondent in tions will have a great impact on the way our partners view us Washington, D.C. across the Asia-Pacific region.” taiwan business topics • february 2012

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TAIWAN busINess

Eyeing India Taiwan is paying increasing attention to India as a site for trade and investment. The future potential may be huge, but the two countries still need to learn much more about each other.

Dress-up at the 2011 Diwali Ball held by the Indians' Association of Taipei. photo : courtesy of p riya LaLwani purswaney

BY JANE RICKARDS

W

ith US$7.57 billion in two-way trade last year, economic relations between Taiwan and India – ranked by the World Bank as the world’s fourth largest economy in terms of purchasing po wer p arit y – are sti ll r elat ively meager, but the prospects for expansion are considered enormous. The lure of the huge Indian market as Taiwan seeks to diversify its exports is spurring expectations that the size and nature of the relationship will be changing rapidly in the years ahead.

The experience of Taiwan businesses such as VIA Technologies, a major fabless integrated circuit company, provides concrete evidence of that potential.

Richard Brown, VIA’s marketing vice president, points to India’s nearly 1 billion mobile phone subscribers as a sign of strong business opportunity. “Currently, India is 5% of VIA’s international business,” he says. “We expect the figure to be 15-20% in five years.”

When Brown first traveled to the subcontinent around 10 years ago, internet usage was limited. VIA’s early 32

projects focused on computer systems aimed at hooking poverty-stricken rural communities up to the internet for the first time. VIA’s devices in India were cheap, resistant to extreme weather conditions such as heat and dust, able to cope with power shortages, and could even run on a car battery.

Now, reports Brown, although VIA is still engaged in similar projects, the Taiwanese company is also responding to a burgeoning Indian middle class with a hearty appetite for consumer electronics. Internet connectivity and awareness have grown tremendously in the past five years, Brown says, although power shortages and low connectivity are still a problem, especially in rural areas where over two-thirds of India’s population is located. While Western demand for personal computers is currently slumping, there is “amazing growth” in India for PCs and particularly cheap tablets, says Brown.

“Compared with five years ago, a lot of people in India can spend US$100 on a device and are willing to experiment with technology,” Brown says. “There’s

a fundamental change and it is a very exciting market.”

Around 125 million Indians use the internet, a growth of 25% over just the past year. VIA is currently working with the Aakash project on the design of the next generation of the inexpensive tablet computer promoted by the Indian government. VIA also works in partnership with Indian communication companies such as Tata Communications and Reliance, for example selling them low-priced Android-based tablets.

For Taiwan, the huge number of consumers and increasingly affluence in India presents a major attraction.

Despite continuing problems in India of poverty, illiteracy, and inadequate healthcare, the McKinsey Quarterly forecasts that this newly industrialized country with a population of 1.2 billion will become the world’s fifth largest consumer market within two decades, with India’s middle class expected to grow from about 5% of the population to more than 40%. India’s GDP growth remains robust compared with the stag-

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nant, cash-strapped Western economies who traditionally buy Taiwanese electronic exports. The Indian economy is forecast to grow by 6.9% this year, following 8.4% last year.

Another reason for increased attention to India is Taiwan’s need to reduce its economic reliance on China, says Kristy Hsu, associate research fellow with the Taiwan WTO Center at the semi-official Chung-hua Institution for Economic Research. China and Hong Kong together take around 40% of Taiwan’s exports. This dependency, Hsu argues, poses major political as well as economic security risks. “From the perspective of economic security, we must diversify,” she says. “In terms of population and market potential, India is the only country that can compete with China’s markets.”

Pradeep Kumar Rawat, director of the India-Taipei Association, the Indian representative office in Taiwan, notes that while the two sides need to undertake more research, the “economic complementaries are obvious” between the two countries. Taiwan’s strengths in IT hardware and global marketing and India’s in software are well-known.

In addition, the two nations are at disparate levels of economic development where they can benefit from collaboration with one another. India lacks Taiwan’s sophisticated expertise in manufacturing consumer goods for the world market, and is keen to learn from the island’s experience. It hopes to attract more Taiwanese manufacturing

investment, which so far is relatively scant, so that technical and managerial skills are passed on to India.

For its part, export-driven Taiwan needs throngs of customers, and its factories require cheap labor and land.

“There’s a lot of room for cooperation,” notes Tsai Meng-chia, associate professor of International Business at National Chengchi University.

Consistent growth Bilateral trade has grown steadily since the two sides first exchanged representative offices in 1995, with trade in recent years growing by double digits – last year by 17.1%. Taiwan’s Ministry of Foreign Affairs ranks India as Taiwan’s 15th largest trading partner, while Taiwan is India’s 28th largest. Indian exports to Taiwan last year came to US$3.14 billion, an increase of 10.7%, and imports from Taiwan were US$ 4.43 billion, up 22%, according to the India-Taipei Association. Taiwan’s main exports to India include diesel oil, printed circuit boards, LEDs, and semiconductors, while imports from India include cotton, naphtha, corn, and copper.

Still, notes CIER’s Hsu, who is helping research the feasibility of an India-Taiwan FTA-style agreement for the Taipei government, commerce between India and Taiwan accounts for only 1.28% of the island’s overall trade, though both sides seem keen to improve that performance. “My guess

is that bilateral trade will double in five years,” Rawat says. “US$15 billion in bilateral trade should be easy in the next five years, and if the global economy rebounds, we should reach US$20 billion.”

Regarding Taiwanese investment in India, Hsu estimates the accumulated value at around US$1.3 billion – a figure higher than official Taiwanese a n d I n d i a n f i g u r e s , a s Ta i w a n e s e investment frequently comes from a third country such as Singapore or China. Meanwhile, Indian investment in Taiwan stands at around US$50 million.

A US$178 million project in the Western State of Gujurat, announced in January by the China Steel Corporation (CSC), will be one of Taiwan’s largest investments in India. The operation will manufacture electric steel, used to make motors and compressors for air conditioners and vacuum cleaners. K.C. Lieu, general manager of CSC’s corporate strategy department, notes the growing demand for electrical appliances in India. The country currently imports two-thirds of its electrical steel and accounts for a high 18% of CSC’s total electrical steel exports. “If we can produce it on location, we can give our local consumers even better service,” Lieu says.

CSC also sees an advantage to developing a manufacturing base closer to the Middle East and Africa. “The geographic position is also good, so we can develop other markets,” Lieu says.

Left, last year's celebration in Taipei of Holi, the Indian festival of colors, and right, Indians resident in Taipei dance as part of the observance of the Navratri festival.

Photo : courtesy of Jeffery Wu, India Music Center (IMC)

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T A I W A N b u s in e s s

Photo : courtesy of Jeffery Wu, IMC

Photo : courtesy of Jeffery Wu, IMC

Photo : courtesy of Priya Lalwani Purswaney

Left to right, the Indians' Association of Taipei marks India's Independence Day, its members take turns making offerings during the Navratra festival, and children of Indian families in Taiepi attend weekly classes on Hindu culture.

But, unlike CSC, most Taiwanese companies that have ventured into the Indian market have established representative offices or appointed distribution agents rather than engaging in production there. VIA, for example, does not manufacture in India; Richard Brown notes that devices like motherboards have thousands of different components, making it difficult to justify moving a full operation to India as the economic scale there is still too small.

Lee Deng-ker, director of the Center for India Studies at National Chengchi University, says before 1995 TaiwanIndian relations were impeded by a lack of even informal diplomatic channels.

That gap gave Japanese and Korean competitors a head-start in the market, so that the more than 100 Taiwanese companies now in India need to work hard to catch up. Rawat adds that while Japan and Korea have more business than Taiwan in India, Taiwan has moved into some sectors where Korea is absent, such as shoe and garment manufacturing.

Some of Taiwan’s leading tech companies have flocked to southeastern Chennai (the former Madras), the capital of Tamil Nadu state, which has a special economic zone and forms an ICT triangle with the cities of Bangalore and Hyderabad. There are plans for a second Taiwan representative office there, in addition to the de facto embassy in New Delhi. The Taiwan External Trade Development Council 34

(TAITRA) and Taiwan’s Institute for Information Industry also maintain offices in Chennai. Nokia’s biggest plant worldwide is in Chennai, and some of Nokia’s Taiwanese partners, such as mobile phone keyboard maker Liteon, have set up shop there to do OEM production for the Finnish company.

Taiwan’s top tech brands such as Acer and ASUS are relatively well-known in India, says Hsu, with ASUS launching its first exclusive store in India in New Delhi last April.

Other Indian success stories, says Hsu, include Taiwan’s Continental Engineering Corp., which through its Indian subsidiary CEC International Corporation India has obtained many prestigious BOT and engineering contracts, including construction of the New Delhi rapid transit system. Its Indian contracts, Hsu estimates, collectively amount to NT$15 billion (US$500 million). Another successful case is a joint venture in which Taiwan’s SYM Motors has partnered with Mahindra to manufacture motor scooters. Automobile and scooter manufacturing is another ripe area for Taiwan-India collaboration, says Lee, along with pharmaceuticals.

Meanwhile, the Indian business presence in Taiwan has been largely limited to software and ICT companies. Tata Consultancy Services, a subsidiary of the huge Tata Group and India’s largest technology service company in terms of revenues, maintains an office here, as do such promi-

nent companies as Wipro Limited and Tech Mahindra. Their presence is relatively new, says Rawat, and it is too early to evaluate their Taiwan success.

Meanwhile, Taiwan and India in 2005 started a bilateral ministerial-level economic dialogue for the first time and in July signed a customs mutual assistance agreement and a double taxation agreement to facilitate further economic links.

There is frequent talk of how to combine India’s software expert i s e w i t h Ta i w a n e s e I T h a r d w a r e strengths, although not much has materialized. CIER’s Hsu says that the Taiwan government and private sector are exploring the possibility of software and R&D outsourcing to India, and Rawat also notes that the Taipei Computer Association at the end of last year signed a human resources agreement with India. “The object is to bring about a certain conformity in training for IT,” Rawat says, to enable Indian and Taiwanese tech companies to collaborate more easily.

There is also considerable room for such cooperation in communications technology, Rawat adds, given India’s new appetite for ICT and Taiwan’s strengths in delivering data wirelessly through Wifi and WiMAX. Taiwan and India in 2007 also signed a Scientific and Technical Cooperation MOU. Items of cooperation have since included nano electronics, energy storage systems, tropical diseases, and seismic science.

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T A I W A N b u s in e s s

Numerous forums have been held to enable Taiwan and Indian business leaders to meet and exchange information.

Photos: COURTESY OF INDIA-TAIPEI ASSOCIATION

FTA feasibility CIER and its counterpart, the Indian Council for Research on Economic Relations, in January last year signed an MOU to undertake a twoyear study of the feasibility of signing a free-trade-style agreement, which India calls a CEPA (Comprehensive Economic Partnership Agreements). Rawat stresses that India desires a comprehensive agreement with Taiwan that would cover full liberalization of trade in services as well as goods. “From India’s point of view, any agreement which is only trade in goods is very difficult for us,” he says.

Hsu says India’s interest in a CEPA with Taiwan is based on the massive investment Taiwan has sunk into China, in expectation that Taiwan can do the same with India. It also hopes that Taiwan’s various manufacturing skills that are currently relatively absent in India can help jumpstart new sectors of Indian economic activity needed for a rising middle class, such as consumer electronic production.

Political pressure from China is not seen as a major obstacle to any future Taiwan-Indian trade agreement, interviewees said, provided that the nomenclature avoids depicting Taiwan as a sovereign state. If anything might stall progress on a trade pact, says Hsu, it is that India is currently busy negotiating or looking into the possibility of agreements with a number of other trading partners. In particular, it has been in

negotiations with the E.U. since 2008.

Hardships that deter Taiwanese business from paying greater attention to the India include unfamiliarity with Indian culture. India is vast, with a federal system and rambunctious democracy.

Infrastructure is poor in some areas.

Ethnic groups and languages, along with market conditions and investment regulations, differ widely from state to state, so it’s important for Taiwanese to know which regions to go to. “The challenge is understanding the dynamics of the local market and finding the right partners to work with,” says Brown, citing the need for different distribution partners in each region. “India requires patience. It requires a very longterm view of what is happening in the market. Also you need the right pricing and the right technology. That takes a lot of experience.”

In addition, say non-Indian interviewees, the Indian government is less proactive than countries such as China or Vietnam about soliciting foreign investment. India can even appear indifferent to foreign companies. “There’s not the same level of hand-holding with government officials that you have by China,” Brown says. Lee of National Chengchi University also cites the way India strictly regulates investment in some sectors such as retail, healthcare, and education, amid stiff political resistance to relaxing foreign ownership laws, a situation that limits needed foreign investment flows.

To e n c o u r a g e c o n s i d e r a t i o n o f

India by small and medium Taiwanese enterprises that might individually be deterred by having to set up shop in an unfamiliar environment, there has been some preliminary discussion by officials in the two countries of setting up a Taiwanese special economic zone or some kind of manufacturing cluster in India to increase efficiencies and enable Taiwanese companies to deal with Indian authorities collectively.

The biggest problem impeding the expansion of economic connections, says Rawat, is a lack of awareness and information in Taiwan about India. But the situation may change with growing cultural ties. Ministry of Foreign Affairs statistics put the numberof Indians residing in Taiwan at about 1,700, including 100 engineers and 408 students enrolled in such programs as natural sciences, electronics technology, and Chinese language. (Around 68 Taiwan students are in India, reports Lee.) Last year the two sides signed an education cooperation agreement under which India recognizes Taiwanese university qualifications and Taiwan offers around a score of scholarships each year for postgraduate degrees. India also has declined to host Beijing’s Confucius Institutes and instead has looked to Taiwan as a resource regarding Chinese culture. It has asked for least 5,000 instructors to teach Chinese language in Indian high schools, reports Hsu, but Taiwan’s Ministry of Education is having difficulty coming up with so many teachers. taiwan business topics • february 2012

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s e e i n g ta i w a n

Spotlight On Central Taiwan photo s : co urt es y o f is ee tai wan fo un dat i o n

C

e n t r a l Ta i w a n i s t h e t h i r d region to be featured in the Ta i w a n To u r i s m B u r e a u ’s “International Spotlight” program, a project which aims to show tourists and potential tourists that there is a great deal more to Taiwan than Taipei 101, the National Palace Museum, Taroko Gorge and the island’s other wellknown, much-visited attractions.

The first region to benefit from the program was Eastern Taiwan.

The bucolic character of Hualien and Taitung, together with the artistic and culinary traditions of the East’s indigenous and Hakka minorities, have made those counties a favorite destination for both foreign and Taiwanese travelers.

The second International Spotlight has been shining on two especially characterful neighborhoods in Taipei: Beitou and its hot springs; and the Kang Qing Long district, where narrow streets are filled with teahouses, restaurants and

secondhand bookstores.

The International Spotlight on Central Taiwan, launched in August 2011, is a three-year-long promotional campaign with the headline slogan “Live it. Taste it. Central Taiwan.” The campaign covers Greater Taichung, the counties of Changhua, Nantou, Yunlin and Chiayi, as well as Chiayi City.

Since the merger of Taichung City and Taichung County at the end of 2010, this perennially vibrant metropolis has boasted a population of 2.63 million as well as a tremendous range of natural and cultural attractions. It offers more than enough restaurants, museums and nightlife to satisfy any holidaymaker.

Viewed as a whole, Central Taiwan is incredibly diverse. It can be said that everything which can be found in Taiwan — scenery, ethnic groups, cuisines — can be found in the central part of the island. The coastal town

of Lugang has a stupendous density of historic and cultural attractions, while Sun Moon Lake is famed for its pretty scenery and temperate climate.

The region’s interior boasts several of Taiwan’s highest mountains - peaks well over 3,000m high — as well as unspoiled indigenous communities.

Getting to Central Taiwan from overseas no longer involves a twohour bus, train or car journey from the airports at Taoyuan and Kaohsiung. In fact, it is not even necessary to use the high-speed railway, because Taichung Airport now has frequent direct flights to and from Hong Kong, Shanghai, and several other cities on the Chinese mainland, as well as scheduled and charter services to and from Vietnam, Japan, and South Korea.

The first stage of the Central Taiwan campaign included a LOHAS-themed itinerary for Taichung. LOHAS, an acronym for “lifestyles of health and

交 通 部 觀 光 局 廣 告 ttb ad

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s e e i n g ta i w a n sustainability,” is a marketing term that describes a relatively young, affluent and well-educated demographic, the members of which are concerned not only with personal comfort and wellbeing, but also the environment and social justice. Europe’s Slow Movement is an expression of similar ideals.

Such people seldom follow the sightseeing-and-shopping herd, preferring to seek out enriching experiences, unique locales and authentic flavors. Because many Taiwanese feel their lives are stressful and hurried, they are receptive to LOHAS concepts.

Downtown Taichung is renowned for its international dining scene and splendid teahouses. There are restaurants of every kind near the National Taiwan Museum of Fine Arts, where 24 galleries of Western art, traditional Chinese ink paintings, and modern sculpture will keep you occupied (and your mind off work) for hours.

A teahouse chain based in the city, Chun Shui Tang, is said to be where pearl milk tea (also known as “bubble tea”) was invented. Pearl milk tea — a blend of black tea, tapioca balls (the chewy “pearls”), syrupy sweetener and cream — has been one of Taiwan’s most successful culinary exports and is now enjoyed as far away as Singapore, London, and Florida. This refreshing beverage is usually drunk cold.

The International Spotlight on Central Taiwan is organized by Taiwan’s Tourism Bureau in conjunction with the iSee Taiwan Foundation. The latter is a not-for-profit organization that specializes in packaging and promoting Taiwan’s attractions so that more people on the island and overseas can appreciate Taiwan’s beauty through tourism, with the goal of increasing economic and employment opportunities.

The foundation has dubbed Taic h u n g “ L a M è r e Te r r e , ” m e a n i n g Mother Earth in French, and it has

been busy designing original programs that introduce various aspects of Taichung. These creative itineraries are open to both locals and foreigners.

Some are regular events; for instance, sessions at Chun Shui Tang in which visitors are taught how to make their own pearl milk tea are held two mornings per week. For details of this and other activities, plus information about transportation and how to make a reservation, go to iSee Taiwan Foundation’s Chinese-English-Japanese website, www.lohaspot.com.tw. Alternatively, go to www.facebook.com/LOHAS.Spot Other events have been one-offs, led by local experts such as scholars, renowned chefs or influential bloggers who provide unique insights into Taichung’s history and cuisines. These excursions often last an entire day and are completely free of charge.

Several more programs are being devised for 2012. Details will be posted on iSee Taiwan Foundation’s website soon.

The foundation has compiled a very useful list of what it calls “LOHAS Spots” — restaurants, coffee-shops, teahouses and stores in Taichung that are among the best in their fields. In addition to practical tips such as addresses, opening hours and minimum charges, the website provides some backstory for each business.

The site also has details of “LOHAS Workshops” where tourists can learn hands-on how to make essential-oil soaps or assemble violin-shaped clocks, plus coupons and details of special offers at some of the featured businesses.

For LOHAS visitors who do not like to rush from place to place, the city’s

Art Gallery Green Parkway (so named because of its proximity to the Fine Arts Museum) is a perfect focal point. Not only is there a diverse mix of attractions nearby, but the neighborhood’s leafy and spacious character make it ideal for those who would rather leave their cars behind and walk or ride bicycles. In the early morning it is a place for exercise. During the day, senior citizens mix with soon-to-be-married couples posing for their wedding photos. At night, the ambiance makes for a romantic stroll.

The Parkway is just one part of the Calligraphy Greenway, a zone filled with greenery and public art. During the hotter months, people visit the Greenway to enjoy its shade and flowers. In the summer of 2010, some 300,000 plants were woven into a tapestry-like garden 100 meters long and 60 meters wide. Taichung is blessed with mild winters, so even in the coldest months the Greenway is an appealing place to linger.

For anyone tired of the same-old tourist runaround, or seeking a therapeutic LOHAS vacation full of delight and discovery, Central Taiwan offers fresh and exciting options. To learn more about Taiwan’s amazing attractions, visit the ROC Tourism Bureau’s website (www.taiwan.net.tw). If you are already in Taiwan, call the free tourism hotline at 0800-011-765.

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Two Solid Years for Profitability

2010 Was a Good Year for Business

2012 Business Climate Survey

Almost 3 out of 4 respondents say 2010 was either “very profitable” (20.5%) or “relatively profitable” (53%). No one reported suffering a “very large loss,” and the few who experienced a “relatively large loss” (2.6%) were mainly younger, developing companies. Entities established in Taiwan for more than 30 years were almost twice as likely as others to report a “very profitable” performance in 2010.

[Question 6 chart]

And 2011 is Expected to be as Good, or Even Better

Asked for their forecast for the coming year, almost 80% of respondents projected an increase in profits over 2010 – with 17.1% anticipating “substantial growth” in both revenue and profits, and 53.8% expecting “modest growth” in both categories. Another 7.7% forecast “substantial growth in revenue and modest growth in profits,” while 2.6% expect “modest growth in revenue and substantial growth in profits.”

[Question 7 chart]

Results of the online survey conducted between December 2011 and January 2012 by Independent Marketing Pty Limited on behalf of AmCham Taipei. Of the 387 voting representatives (mainly CEOs) from AmCham member companies invited to take part, 232 did so for a 60% response, a substantial increase from the 33% in 2011.

The sample covered a wide spectrum of companies by size of employment - from the very small to the very large. The primary business focus for nearly 74% 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

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2012 Business Climate Survey

Basic optimism, but spotlighting areas needing improvements Message from 2012 AmCham Chairman Bill Wiseman

AmCham Taipei’s 2012 Business Climate Survey invited the 387 voting representatives from the Chamber’s member companies (mainly CEOs) to answer about 20 questions in an online questionnaire. I would like to express AmCham’s gratitude to the 232 members who took the time to participate in the survey – and our congratulations to Christina Chen of Namchow Chemical, the respondent who won the lucky draw of a stay at the Silks Place hotel at Taroko Gorge.

This year’s 60% response rate is extremely high for an exercise of this kind. We believe that more members decided to participate this time after seeing how last year’s results helped AmCham shape its policies and advocacy positions to reflect the needs and interests of the membership more effectively.

In general, the results of the 2012 survey were closely aligned with those of 2011. Members expressed optimism about the economy and business prospects in Taiwan, with nearly half citing plans to increase investment in the coming year. If views of the business outlook are slightly less rosy than a year ago, the driving factor seems to be global macroeconomic uncertainty and its expected impact on Taiwan's economy.

Once again, the survey results show that the Taiwan government deserves commendation for a number of achievements, including progress in cross-Strait economic relations, adjustment of the corporate tax rate to make Taiwan more competitive within the Asian region, and further strengthening of IPR protection.

But the survey also pinpoints areas where further efforts are needed to remove what are currently perceived as serious obstacles to economic growth: • Human Resources. Shortages of talent are developing in certain sectors, while constraints remain on hiring professionals from abroad. More also needs to be done to cultivate creativity and initiative-taking in the Taiwan workforce.

• Bureaucratic inefficiencies. Among the problems cited are inconsistent regulatory interpretations, inadequate or outdated laws, and lack of transparency.

• Tax structure. Although the corporate tax rate has been reduced, the high personal income tax rate discourages foreign experts from accepting assignments in Taiwan. The incentive system for encouraging R&D also needs review.

High-level government officials have indicated to AmCham that they recognize these problems and are working on finding solutions. We offer the findings of the survey as reference for the government as President Ma Ying-jeou prepares for his second term.

In closing, I would like to extend the Chamber’s hearty thanks to Gordon Stewart of Independent Marketing Pty Limited for his invaluable guidance in the planning and execution of this project.

Bill Wiseman 2012 AmCham Taipei Chairman

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2012 business climate survey

EXECUTIVE SUMMARY

Key Indicators

*Note! Statistically significant change from 2011

Major Takeaways • AmCham’s business leaders say that 2011 was a reasonably good year for business, with 71.9% reporting that their operation earned a profit.

• Many companies expect to increase their investment in Taiwan during 2012. But undoubtedly due to increased uncertainties in the global economy, there is some softening or leveling-off in their forecasts for longer-term investment levels and in their prospects for growing revenues and profits in the short-term. The good news is that the shift is toward a “Neutral” or “Remain the Same” position, rather than a negative one.

• Bureaucratic obstacles continue to be a common and persistent theme impacting business. It is cited throughout this survey, as it was last year, as being a major barrier to success and the number one concern that companies would like the Taiwan government to tackle aggressively.

• External relations: The business leaders surveyed believe it would be advantageous to see a broadening and speeding-up of the ECFA process, a re-engagement with the U.S. on TIFA talks, and the negotiation of bilateral investment and taxation agreements between Taiwan and the U.S. • Outside of macro-economic risks, issues surrounding Human Resources are of the most concern to our business leaders. These relate to the quantity, quality, and costs associated with employment. As in last year’s survey, Taiwan workers rate very highly for being hardworking, trustworthy, productive, and loyal, but less so for initiative and creativity.

• The responding companies were involved in relatively little M&A activity last year, with problems finding an appropriate target cited as the single major barrier. But 22% of all entities in the survey would “possibly” or “definitely” consider M&A activity in the next 12 months.

• The respondents continue to be extremely positive about the quality of life in Taiwan, particularly citing it as a safe and hospitable environment. Heading the list of least appreciated aspects of living in Taiwan was the degree to which it is “English-friendly.”

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2012 Business Climate Survey

Detailed Findings 2011: A Relatively Good Year for Business Almost three out of four (72%) of our business leaders said that their business in Taiwan was either “relatively profitable” or “very profitable” in 2011. It was a very similar response to the one received last year about 2010.

■ How would you characterize your Taiwan business's financial performance last year?

14.3%

Very profitable

20.5%

Relatively profitable

53%

57.6%

23.8% 23.9%

Break-even or small profit/loss 3.0% 2.6%

Relatively large loss

2012

1.3% 0.0%

Very large loss 0

10

20

30

40

2011 60 %

50

2012: More of the same…

The majority of our business leaders expect 2012 to be another relatively good year. But only 58% of respondents (down from 81% last year) are forecasting an increase in the level of revenue and profits. Most of the others expect conditions to “Remain the Same” for 2012, rather than anticipating a decline in either revenue or profits.

is is your Taiwan business’ Revenue & Profits 2012 compared 2011?

■ What What your Taiwan business' revenue andforecast profits for forecast for 2012tocompared with 2011?

11%

Substantial growth in both Revenues & Profits Substantial growth in Revenues & modest growth in Profits Modest growth in Revenues & substantial growth in Profits Modest growth in both Revenues & Profits

1.75%

7.7%

17.1%

*Note!

0.4% 2.6% 45.2%

Remain the same Modest growth in Revenues & no change in Profits Modest growth in Revenues & modest decline in Profits No change in Revenue & modest decline in Profits Modest decline in Revenues & modest growth in Profits Modest decline in both Revenues & Profits Modest decline in Revenues & substantial decline in Profits Substantial decline in Revenues & modest decline in Profits Substantial decline in both Revenues & Profits

3.1% 2.6% 1.8% 2.6% 0.9% 0%

53.8%

22.4% *Note!

7.7%

0.4% 0% 6%

9.6%

0.4% 0% 0.4% 0% 1.3% 0% 0

2012 10

20

30

40

50

2011 60 %

*Note! Statistically significant change from 2011

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2012 business climate survey

Short-term investment: Softening?

The survey shows some flattening in planned investment levels - with only 43% of respondents saying they plan to increase their entity’s level of investment in 2012 either “slightly” or “substantially.” Compared with the 54% reporting such intentions last year, the change is bordering on a statistically significant drop.

■ What is likely to happen to your entity’s level of investment in Taiwan over the next 12 months?

10%

Substantial increase

16.4% 32.9%

Slight increase

37.9% 40.7%

No change

36.2% 12.6%

Slight decrease

5.2% 2.2% 3.4%

Substantial decrease

1.7% 0.9%

Don't know/can't say

2012

0

10

20

30

2011

40

50%

Looking forward five years…

While the vast majority (70%) are still “optimistic” or “slightly optimistic” about their five-year business outlook in Taiwan, there has been a statistically significant drop in this score compared to a year ago. Many more respondents have adopted a “Neutral” position, suggesting growing cautiousness regarding future business prospects.

■ How would you describe your five-year business outlook for Taiwan?

27.6% 29.3%

Optimistic

42.7%

Slightly optimistic

51.7%

21.6%

Neutral

6.9% 7.3% 9.5%

Slightly pessimistic 0.9% 2.6%

Pessimistic 0

2012 10

20

30

40

50

2011 60

%

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2012 Business Climate Survey

What impacts their business?

Not surprisingly, given their Taiwan market focus, respondents said that changes in local demand have the single greatest impact on their businesses.

Among other factors cited are several areas in which the Taiwan government can have a direct and substantial influence.

These include inconsistent regulatory interpretations (the second most frequently cited factor), conditions hampering companies’ ability to recruit appropriate personnel, government bureaucracy, inadequate or outdated laws, and lack of transparency.

Following the government’s reduction in corporate tax rates last year, “Corporate taxation levels” fell from 6th to 9th place among factors cited as having an impact on business operations. Of rising concern (from 7th place to 5th) was “Currency exchange rate fluctuations.”

■ Which of the following impact your operation in Taiwan, and how much of an impact do they have?

Top Ten Responses Overall 2012

44

Ranking 2011

Ranking Issues

1

1

Changes in local demand

2

3

Inconsistent regulatory interpretations

3

4

Ability to recruit appropriate new personnel

4

2

Governmental bureaucracy

5

7

Currency exchange rate fluctuations

6

5

Inadequate/out-dated laws

7

8

Cross-Strait relations

8

9

Changes in employment expenses

9

6

Corporate taxation levels

10

10

Lack of transparency

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2012 business climate survey

Much more needs to be done

The survey asked about the main things the Taiwan government could do in the next 12 months to help business. The top replies: • Simplify government bureaucracy • Increase incentives for foreign direct investment • Lower personal taxation and further reduce corporate rates.

■ What are the top things the Taiwan government could do to help your entity in the next 12 months?

Simplify Government Bureaucracy Increase Direct foreign Investment Incentives Reduce Personal Taxation Reduce Corprate Taxation Further Improve Research & Development Incentives Liberalize the Labor Market Broaden ECFA Speed-up ECFA Re-engage in TIFA Talks with the USA Increase Direct Flights to/from the Mainland Introduce Stronger Corporate Governmence Rules Tighten Enforcement of Intellectual Property rights Negotiate and Sign More Bilateral Trade Deals with Other (non-US) Countries Reduce Tariffs Improve Training Incentives Negotiate and Sign a Bilateral Investment Agreement with the USA Tighten Enforcement of Illegal Imports Tighten Enforcement of Trade Secrets Protection

No. 1 No. 2 No. 3

Negotiate and Sign a Bilateral Tax Agreement with the USA Open up the Tertiary Education Market to Foreign Players 0.0

20

40

60

80

100

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2012 Business Climate Survey

The major worries confronting business Asked about the major risks facing their entity in the coming years, most respondents cited the threat of economic slowdowns, whether globally, domestically, or in other major markets such as China and the United States. “Economic slowdown in Europe” was added this year as an option and ranked as the fifth greatest concern.

Aside from economic slowdowns, Human Resources remains the largest concern for business leaders.

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

Global economic slowdown 54.3%

Economic slowdown in domestic consumption Economic slowdown in Mainland China

27.1%

35.6%

Lack of Human Resources

35.2% 35.5% 34.2%

28%

Increased domestic political unrest TWD depreciation Taiwan Inflation rising TWD appreciation Taiwan Unemployment rising Decreased exports

10.3%

1.8% 1.9% 3.7% 3.7%

Increased imports Other 0

24.2% 17.8% 21.5% 18.7% 17.4% 21.5% 16.4% 19.6% 14.6%

63.6%

39.7%

Economic slowdown in Europe* Increased Governmental interference

73.5%

40.6%

28%

Economic slowdown in USA

69.2%

32.4% 32.7%

2012 10

20

30

40

50

60

2011

70

80 %

* new issue this year

Human Resources – A big issue Deficiencies in the quantity and quality of available human resources are one of the highest risk factors seen as confronting businesses in the future.

We asked our corporate leaders to give us their impressions of the quality of available human capital in Taiwan.

■ How would you describe the quality of available Human Capital in Taiwan?

Hardworking Very Trustworthy Extremely Well-educated Highly Productive Very Loyal Easy to Develop/Train High Degree of Emotional Intelligence (EQ) High Level of Initiative Well-rounded Easy to Recruit Easy to Retain High Degree of Creativity Of 'World-class' Standard -100

-80

-60

Strongly Disagree

46

-40

Disagree

-20

Agree

0

20

40

60

80

100

Strongly Agree

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2012 business climate survey

ECFA

Business leaders are (still) bullish on ECFA but…

Last year when asked what impact they felt ECFA would have on their business and on Taiwan as a whole, the business leaders’ response was overwhelmingly positive. A year later, however, many seem to have adopted a more neutral position with regards to that impact.

In terms of the perceived impact on the U.S. (a new question this year), many seem unsure what, if any, impact there will be.

■ ECFA’s Effect on My Business 8.7%

Very Positive Effect

15% 38.4%

Some Positive Effect

42.1%

40.6%

Neither Positive nor Negative

27.1% 2.8%

Some Negative Effect

6.5%

0.9% 1.9%

Very Negative Effect

2012

7.3% 7.5%

Don't know/Can't say 0

10

20

30

2011

40

50

■ ECFA’s Effect on Taiwan

30.1%

Very Positive Effect

40.2% 45.7%

Some Positive Effect Neither Positive nor Negative

11%

2.8% 1.8% 4.7%

Some Negative Effect

48.6%

2.7% 1.9%

Very Negative Effect Don't know/Can't say

1.9% 0

2012

8.7% 10

20

30

40

2011 50

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2012 Business Climate Survey

TIFA/BIA/BTA

■ Do you believe that the lack of Trade and Investment Framework Agreement (TIFA) talks between Taiwan and the U.S. is having a negative impact on your business?

8.2%

Yes, a major disadvantage 23.3%

Yes, a disadvantage Yes, a slight disadvantage

21.9%

Not a disadvantage

25.1%

Don’t know/Can’t say

21.5% 0

10

20

30

40

50 %

More than half (53.4%) of respondents view the lack of TIFA talks as being a disadvantage for their business.

■ Do you believe that the lack of a Bilateral Investment Agreement (BIA) between Taiwan and the U.S. is having a negative impact on your business?

Yes, a major disadvantage

7.8%

Yes, a disadvantage

22.8%

Yes, a slight disadvantage

22.4%

Not a disadvantage

26.5%

Don’t know/Can’t say

20.5% 0

10

20

30

40

50 %

About the same proportion of respondents (53%) see the lack of a Bilateral Investment Agreement as disadvantageous for their business.

■ Do you believe that the lack of a Bilateral Tax Agreement (BTA) between Taiwan and the U.S. is having a negative impact on your business?

Yes, a major disadvantage

9.6%

Yes, a disadvantage

21%

Yes, a slight disadvantage

20.1%

Not a disadvantage

24.7%

Don’t know/Can’t say

24.7% 0

10

20

30

40

50 %

Slightly over half (50.7%) of respondents consider the lack of a Bilateral Tax Agreement as a disadvantage for their business.

48

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2012 business climate survey

M&A

■ Did your entity pursue, or consider, a merger with or acquisition of a Taiwanese entity in the past 12 months?

4% 4%

4.5%

3.5%

7.2% 3.6% Yes, and it was completed

17.3%

Yes, and it is still in process

23.4% 71.2%

Yes, but the effort failed

61.3%

Considered but did not pursue No, did not consider

2011

2011

■ In the next 12 months, would you consider M&A activity?

4.6% 12.8% 18.3%

Definitely Possibly

19.2%

Unlikely 17.4%

Definitely not Don’t know

27.9%

Prefer not to answer

22% of respondents said they would "definitely" or "possibly" consider M&A activity in the coming year.

■ For a mergers/acquisitions attempted in the past 12 months, what were the greatest challenges?

Negotiation of valuation gap Finding an appropriate target Conducting due diligence Post-deal restructuring Cultural issues Financial issues Negotiating the letter of intent Transparency of regulations Obtaining permission for target to be sold Obtaining government approvals 0

5

Major Challenge

10

Second

15

20

Third

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2012 Business Climate Survey

Living in Taiwan

The respondents regard Taiwan as a safe, friendly place to live for themselves and their families.

The Top Ten Benefits of Living in Taiwan 2012 Ranking

2011 Ranking

Benefits

1

1

My family feels safe in Taiwan

2

2

Taiwanese people are extremely nice

3

3

Taiwan provides quality Health/Medical/Dental services

4

6

Taiwan delivers reliable electricity.

5

4

Taiwan is an easy country to live in

6

5

Alternative transportation options are usable and provide options to driving my car (i.e., buses, bike lanes, taxis, trains, sidewalks).

7

7

Taiwan provides adequate shopping opportunities

8

9

Internet connectivity is excellent

9

10

10

8

Mobile telephone coverage is excellent The postal service is excellent

But some things could be improved...

The Least Appreciated Aspects of Living in Taiwan 2012 Ranking 1

50

2011 Ranking New in 2012

Concerns Taiwan provides an 'English-friendly' environment for me and my family

2

1

Water runoff from storms is controlled and minimizes flooding

3

3

Taiwan provides quality drinking water

4

2

Taiwan provides quality youth activities

5

4

The library services provided to our community are current and meet our needs

6

4

Banking and other financial services are excellent

7

15

8

7

The sewer system in Taiwan works reliably

9

6

Taiwan provides quality police services

10

8

The standard of schooling is excellent

Street surfaces are drivable and safe.

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2012

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