Topics 2013 April Issue by AmCham Taipei

CU S

Te A le Re co p IN DU S mm ort o ST ectounic n th RY r atio e ns

THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics Securing Sufficient Energy Supply

TAIWAN BUSINESS TOPICS

讓台灣能源供應無虞

April 2013 | Vol. 43 | Issue 4 中華郵政北台字第號執照登記為雜誌交寄 5000 4_2013_Cover.indd 1

NT$150

April 2013 | Vol. 43 | Issue 4 www.amcham.com.tw

ISSUE SPONSOR

2013/4/24 6:14:41 PM

CONTENTS NEWS AND VIEWS

4 Editorial a p ril 2 0 1 3

A Successful APCAC Conference

vOlumE 43, N umbEr 4 一○二年四月號

Publisher

5 Taiwan Briefs

發行人

Andrea Wu

By Jane Rickards

吳王小珍

Editor-in-Chief

8 Issues

總編輯

Don Shapiro

沙蕩

Patented Drugs: Questions of Definition; Clearing the Runway for Chartered Jets; Update on Myanmar

美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Staff Writer

採訪編輯

Jane Rickards

專利藥品：定義的問題；開拓私人包機發展空間；緬甸傳真

李可珍

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

2013年亞太區美國商會年度大會圓滿落幕

曹玉佳

Translation

翻譯

Yichun Chen, Frank Lin, Sonia Tsai 陳宜君, 林治平, 蔡函岑

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱：台北市美國商會工商雜誌發行所：台北市美國商會臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182 Taiwan Business TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2013 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號印刷所：帆美印刷股份有限公司經銷商：台灣英文雜誌社台北市108台北市萬華區長沙街二段66號發行日期：中華民國一○二年四月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

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

COVER SECTION

12 Securing Sufficient Energy Supply

產業升級 By Timothy Ferry

This article is the third in a series looking at what President Ma Yingjeou last year identified as the Five Pillars crucial for Taiwan’s future economic development. With plans underway for a national referendum on whether construction should be halted at Taiwan’s fourth nuclear power plant, the issue of what approach Taiwan should take to satisfy its future energy needs has become even more politically sensitive than before. Analysis of the various options shows how tough a choice Taiwan will be facing.

2013-2014 Governors: Alan T. Eusden, Thomas Fann, William Farrell, Edgard Olaizola, Stephen Tan, Fupei Wang, Bill Wiseman.

19 A Question of Trust discussion of a wide range of important topics.

2012 Supervisors: Susan Chang, Cosmas Lu, Gordon Stewart, Carl Wegner, Julie Yang. COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Winnie Yu; Banking/ Victor Kuan; Capital Markets/ Jane Hwang, C.P. Liu; Chemical Manufacturers/ Luke Du, John Tsai; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou; Human Resources/ Richard Lin, Seraphim Mar; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Scott Meikle; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, Tse-Mau Ng; Pharmaceutical/ David Lin, Edgard Olaizola, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin, Dan Silver; Real Estate/ Tony Chao; Retail/ Prudence Jang, Douglas Klein; Sustainable Development/ Kenny Jeng, Davis Lin; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, John Ryan, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Trade/ Stephen Tan; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, David Pacey.

17 Can U.S. Shale Gas Save the Day?

Reporting by Emily Chen, Timothy Ferry, Lianna Faruolo, and Jane Rickards

AMCHAM EVENTS SPECIAL REPORT

32 A Special Hsieh Nien Fan

23 2013 APCAC Spring Conference “A 2020 Vision for U.S.Asia Partnership”

The two-day event hosted by AmCham Taipei brought together American Chambers from around the region for

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apri l 2013 • Volume 43 n umber 4

iNDuSTrY

iSSuE Sp ONSOr

CuS

Telecommunications:

Technology-Enabled business Opportunities 34 Constructing the “Taiwan Cloud Valley”

With government assistance, local industry is positioning itself to take advantage of cloud-related hardware and software business opportunities. By Emily Chen

36 Trending in Taiwan: Mobile Apps By Emily Chen

39 Getting Ready for 4G

The auction of spectrum later this year will bring Taiwan – belatedly, many say – into a new era of mobile telecom service. By Alan Patterson

40 Complications to Delivering LTE 43 The Internet of Everything How over-the-top services have changed the mobile ecosystem and will continue to influence the mobile economy to come. By Jason T. Wang

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A Successful APCAC Conference

iven its small staff and busy schedule, AmCham Taipei last year took on a major planning and organizational challenge when it volunteered to host the 2013 Spring Conference of the Asia Pacific Council of American Chambers of Commerce (APCAC). The Chamber was motivated to do so chiefly for the chance to help reintroduce Taiwan to the regional multinational business community as a vibrant location for doing business. Twenty years ago when Taipei last served as the host city for the conference, Taiwan was widely admired as one of the four fast-growing Asian Tigers. But in the years that followed, Taiwan was largely eclipsed by the awakening of the massive Chinese market, and its isolation from efforts at regional economic integration also took a toll. In inviting APCAC back to Taiwan, AmCham Taipei wished to draw attention to Taiwan’s re-emergence as a dynamic center for business following its 2010 signing of an Economic Cooperation Framework Agreement (ECFA) with China, opening the way for additional agreements with other countries. President Ma Yingjeou has also proclaimed Taiwan’s aim to eventually enter into the Trans-Pacific Partnership now being negotiated by the United States and 10 other countries. The 2013 APCAC Spring Conference took place March 21 and 22 at the Grand Hyatt Taipei, drawing participation from 18 American Chambers throughout the region, as well as the U.S. Chamber in Washington. The overwhelming consensus of the more than 200 delegates – nearly half of them from overseas – was that the event was a resounding success. Among the aspects that most impressed the participants was the accessibility and business-friendliness of the Taiwan government. Presi-

dent Ma addressed the APCAC Gala Dinner (which doubled as AmCham’s Hsieh Nien Fan), introducing his government’s Economic Power-Up Plan to “strengthen our industries and help them transform themselves” – and then going around the room to personally greet the attendees. Premier Jiang Yi-huah and numerous other high-level officials were also in the audience. Also impressive was the caliber of representation from the Taiwan government and private sector taking part in the conference as panelists, moderators, and luncheon speakers. The attendees, for example, heard from Taiwan’s most distinguished industrialist, Founding Chairman and CEO Morris Chang of Taiwan Semiconductor Manufacturing Co. (TSMC), as well as Deputy Economic Affairs Minister Francis Liang and former Health Minister Yeh Ching-chuan. Aside from the conference itself, the delegates from abroad had the chance to be exposed to the warmth and hospitality of the Taiwanese people, the excellence and variety of the local cuisine, and the vitality and modernity of the XinYi District near the Grand Hyatt and towering Taipei 101. Another goal in hosting the conference was to further draw the attention of the U.S. government to Taiwan’s potential for growth as a trading and investment partner. That objective was also achieved, with participation in the event by two senior State Department officials from Washington, D.C. and five representatives from the Commerce Department from around the region. AmCham Taipei would again like to take the opportunity to thank the numerous sponsoring companies from among our membership, whose generous support made it possible to attain a high standard in holding this prestigious event. The names and logos of the sponsors can be found in this issue on page 23.

2013年亞太區美國商會年度大會圓滿落幕

在

人員有限、工作滿檔等重重資源限制之下，台北

功，而讓與會貴賓印象深刻的一點，是台灣政府對於與企業界

市美國商會去年仍積極接下策畫主辦2013年亞

接觸的態度開放，致力提供友善經商環境。總統馬英九蒞臨

太區美國商會年度大會（2013 A P C A C S p r i n g

APCAC 大會的晚宴（同時也是台北市美國商會的謝年飯晚

Conference）的重大挑戰。台北市美國商會的主要動機，是

宴）致詞，介紹台灣政府的經濟動能推升方案，說要「強化我

希望藉由主辦大會，再次讓亞太區域內的跨國企業認識台灣

們的企業，幫助它們轉型」。隨後馬總統到各桌向與會貴賓親

充滿活力的經商環境。

自致意，行政院長江宜樺與多位高層官員均陪同出席。

亞太區美國商會年度大會前一次在台北舉行，距今已20

台灣的產官學界都有重量級人物參與這場盛會，也讓海外貴

年，當時台灣經濟蓬勃發展，被譽為亞洲四小龍之一。然而

賓留下深刻印象。這些重要人士分別擔任專題討論的與談人、

之後中國逐漸崛起，其廣大的市場讓台灣相形失色；區域經

主持人，或在午宴中發表演講，其中包括台積電董事長暨執行

濟漸趨整合之際，台灣未能參與，更是雪上加霜。台北市美

長張忠謀、經濟部次長梁國新，以及前衛生署長葉金川。

國商會爭取APCAC年度大會再次於台北舉行，是希望吸引

參與這場盛會的外國貴賓，也藉此機會體驗台灣人民的熱

國際企業的目光，看見台灣自2010年與中國簽署經濟合作架

情與好客，品嚐美味多樣的道地佳餚，並感受君悅飯店和台

構協議（ECFA）後，商業活動已有活絡，而且ECFA也為

北101所在地信義計畫區的活力與現代化。

台灣與其他國家簽署經貿協定開啟了大門。總統馬英九並且

主辦這場盛會的另一個目標，是期望讓美國政府看到台灣

宣示，台灣最終希望參與美國正在和另外10個國家協商洽簽

作為美國貿易投資夥伴的成長潛能。美國國務院兩位資深官

的跨太平洋戰略經濟夥伴協定（TPP）。

員，以及商務部駐亞太地區的5位代表與會，顯示這項目標亦

2013年亞太區美國商會年度大會於3月21 、22日假台北君

圓滿達成。

悅飯店舉行，吸引亞太地區18個美國商會的代表在此齊聚，

在此，台北市美國商會再次由衷感謝會員企業的慷慨贊助

華府美國商會代表更不遠千里而來，共襄盛舉。二百多位與會

與支持，讓這場盛會賓主盡歡、圓滿落幕。贊助企業名單與

者將近一半來自海外。大家一致認為，2013年度大會圓滿成

企業標識，請參閱本期雜誌第23頁。

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— jane ri ckards —

MACROECONOMICS

economic indicaTors

reCOVerY in siGHt, aCCOrDinG tO aDb The Asian Development Bank in mid-April became the latest institution to join the chorus of economic institutions saying Taiwan will enjoy reasonably robust growth this year. In its Asian Development Outlook 2013: Asia’s Energy Challenge, it predicted Taiwan’s GDP will grow this year by 3.5%. The report cited an improving outlook in developing Asia and the Eurozone for IT products – export-dependent Taiwan’s bread and butter. This development in turn is expected to spur more private investment and private consumption in Taiwan. Government plans to encourage investment in the hightech manufacturing sector and reduce barriers to foreign investors are also expected to cause private investment to pick up, the report said. It also cited a program for encouraging Taiwanese investors to return from China, and noted that the service sector will be boosted by Chinese tourist arrivals. In other GDP forecasts, the Yuanta Polaris Research Institute in April projected 3.65% GDP growth for Taiwan sTock exchange index & value

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

8250

135

8000

120

7750

105

7500

7250

7000

6750

6500

6250

6000

March chart source: twse

unit: ntD billion

Current Account Balance (2012 Q4) Foreign Trade Balance (Mar) p Foreign Trade Balance (Jan-Mar) p New Export Orders (Feb) Foreign Exchange Reserves (end Mar)

15.96 3.2 4.63 29.04 401.89

Unemployment (Feb) Overnight Interest Rate (Apr 1) Economic Growth Rate (2013) forecast Annual Change in Industrial Output (Jan-Feb) p Annual Change in Consumer Price Index (Feb) Annual Change in Consumer Price Index (Jan-Feb) note: p=preliM inary, r=reviseD

Taiwan this year on the back of an improving global economy, and the 2.9% announced by Merrill Lynch was on the low side compared with what most other institutions are predicting. Exports in March were relatively healthy, growing 3.3% year on year to reach US$27.23 billion, the Ministry of Finance said. Total imports at US$24.03 billion rose 0.2%, with the trade balance favorable at US$3.2 billion. The relatively low import growth figure for March could indicate that manufacturers are anticipating weaknesses ahead in the recovery, as import demand in Taiwan generally relates to production activity. Problems that could drag down an anticipated recovery this year include an unexpected slowdown in the first quarter in China, Taiwan’s biggest overseas market, to 7.7%. There are also worries that the declining value of the Japanese yen against the U.S. dollar – by 21% over the last six months, according to Bloomberg – may hurt the global competitiveness of Taiwan’s electronics exporters as they compete with Japanese companies. The ADB said Taiwan’s main challenge is to develop the ability to

4.24% 0.387% 3.59% 3.24% 2.97% 2.04%

Year Earlier 12.10 5.7 33.9 393.87 4.25% 0.450%

0.25% 1.31%

sources: Moea, DGbas, cbc, boFt

respond quickly to external shocks in the global economy. “As regional supply chains have developed over the past decade, the economy of Taipei, China [the bank’s nomenclature for Taiwan] has become more interdependent with those of the rest of emerging Asia, which absorb 66% of its exports, the lion’s share going to the PRC.” The ADB’s simulations show that a depreciating yen and slowdowns in the Eurozone would have little effect on Taiwan, but that a slowdown in emerging Asia would have a significantly greater impact on the island’s economy. “These results, while indicative, point to the need for Taipei, China to continue to maintain enough policy flexibility to respond to the changing external environment, especially through monetary and fiscal initiatives,” the ADB said. Taiwan’s Central Bank at the end of March decided to leave discount rates unchanged at 1.875%, citing moderate global recovery and expectations that inflation will be subdued. While the ADB is forecasting inflation in Taiwan of 1.6% for this year, the Central Bank is putting the figure at 1.37%, noting that international raw material and commodity prices are stabilizing amid improving economic sentiment.

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DOMESTIC Ma aiDe DetaineD On COrrUPtiOn CHarGes With his popularity ratings already slumping substantially, President Ma Ying-jeou’s public image took a further beating in late March after one of his key aides in the ruling Kuomintang was detained over charges of taking NT$1 million (US$33,500) in bribes in relation to a major urban development project, the Taipei Twin Towers. Lai Su-ru, a prominent Taipei City Councilor and director of Ma’s office as party chairman, acknowledged taking the money but denied it was a bribe. The scandal, the second corruption case involving one of Ma’s aides since he took office in 2008, has kept Ma’s satisfaction ratings at a lowly 14%, according to the TVBS opinion poll center.

broke out in nearby eastern China, killing nearly 15 on the mainland as of press time. It was the first time for the H7N9 virus, found in birds, to be detected in humans, indicating that people have no natural immunity to the disease. However, there is no evidence so far that the strain can be transmitted from human to human, although the virus is still evolving and scientists do not yet know how dangerous it may become. Taiwan’s Central Epidemic Command Center started monitoring conditions on the island and quarantined scores of people. Although Taiwan placed no bans on travel to China, the center cautioned against touching or feeding birds on the mainland and added that travelers there should also ensure that any poultry and eggs they consumed are properly cooked.

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

taiwan PrePares fOr new birD fLU strain

taiwan, JaPan siGn fisHeries aGreeMent

Taiwan in early April braced itself against a new strain of bird flu that

Japan in mid-April agreed to give Taiwan fishing rights in its waters

near the Japanese-controlled Senkaku archipelago, known in Taiwan as the Diaoyutai, amid strident objections from China. In the newly inked bilateral agreement, Japan agreed to let Taiwanese boats fish in a part of its exclusive economic zone near the islands. However the agreement does not cover waters within the sensitive 12 nautical mile radius of the disputed islet chain. Beijing, which claims the islets as its own and also objects to foreign countries negotiating agreements with Taiwan that treat it as a sovereign state, expressed serious concern. Japan, Taiwan, and China all claim the islets. Tensions rose sharply after the Japanese government bought the islands from private owners in September, to the extent that Beijing and Tokyo scrambled fighter jets, raising fears that a miscalculation could cause a broader clash.

Ma Meets witH tHe new POPe President Ma in mid-March attended the inauguration of the new head of the Roman Catholic Church, Pope Francis. “It was a very warm

WATCHING FOR FEVER — With concern rising in Taiwan over outbreaks of H7N9 avian flu in China, health officials at the port on the offshore island of Jinmen check the temperatures of incoming travelers from the mainland via the “Mini Three Links” ferry. photo : cna

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considered that the regulators viewed 5% as the cap. The rules still need to be finalized by the Executive Yuan. An official quoted by Bloomberg said the government wishes to see them take effect as soon as possible. The move is seen as a boon for Taiwan’s overcrowded and sluggish banking sector.

sHarP-HOnHai tie-UP nOw in QUestiOn A deal in which Taiwan’s Hon Hai Precision Instruments would invest US$800 million in embattled Japanese electronics giant Sharp appears rocky after a deadline for the investment agreement passed in late March without payment from Hon Hai. The deal would have allowed the Taiwanese company, Apple’s top contract electronics manufacturer, to buy nearly 10% of Sharp, but progress appeared to have stalled in recent months as shares in the unprofitable Japanese company nosedived. Despite missing the deadline, a Sharp spokeswoman said the two companies would continue to discuss tie-ups, and Hon Hai issued a statement saying it remained committed to purchasing the 9.9% stake in Sharp. However, two people familiar with the talks told Bloomberg News that the companies have been unable to resolve differences about control and no agreement is expected in the near term.

REACHING AGREEMENT — Chairman Liao Liou-yi of Taiwan’s Association of East Asian Relations (left) and Chairman Mitsuo Ohashi of Japan’s Interchange Association signed a pact on fishing rights for Taiwanese vessels. photo : cna

Taiwan will relax rules to allow

110.46 46.79

76.65 130.36

74.85 138.45

2012

2013

2012

2013

2012

2013

72.62 66.59

2012

2013

2012

2013

Imports

2012

2013

Europe 66 73.29

U.S.

TOTAL

680.02 726.36

114.02 41.96

ASEAN

651.16 709

Japan

106.78 285.12

HK/China

67.6 72.74

CHina tO inCrease staKes in taiwan banKs

Taiwan's JanuarY To march Trade Figures (Year on Year comParison)

56.21 75.27

BUSINESS

Chinese banks to buy bigger stakes in local banks and to permit more Chinese firms to invest in its financial industry, the Financial Supervisory Commission announced in early April. Mainland banks will be able to buy as much as a 10% stake in listed financial holding companies, 15% in unlisted local banks and financial holding companies, and up to 20% for banks that are a subsidiary of a financial holding company. There were previously no specific limits for these investments, but it was generally

100.78 272.5

meeting,” Ma later told Amcham’s annual Hsieh Nian Fan dinner. “I also told him that all the contributions of Catholic priests in Taiwan have been a strong moving force for our society… and I hope we’ll continue to cooperate.” The Vatican is the sole European nation among Taiwan’s 23 diplomatic allies. China, which regards Taiwan is its province, with no right to establish diplomatic relations, says a precondition for its establishing ties with the Vatican is for the Holy See to sever its ties with Taiwan. The Vatican and China do not maintain formal relations, and have had bitter disputes over which of them should have the authority to ordain bishops in China. Although Ma scored something of a diplomatic coup with his Vatican visit, Beijing gave a relatively mute response. Taipei and Beijing have unofficially declared a diplomatic truce since Ma took office, owing to the Taiwan president’s softer China stance.

Exports

Unit: US$BN Source: BOFT

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Issues

Patented Drugs: Questions of Definition Clarity is needed in implementing the Second Generation National Health Insurance Law

專利藥品：定義的問題

“

The devil is in the details” is a colorful English idiom that often rings true. What appears at first to be a proposition that should engender easy agreement among various stakeholders often breaks down when the parties involved delve into the specifics. A current example of that phenomenon is a section of the new Second Generation National Health Insurance Law that took effect from the beginning of this year. The statute’s Article 46 provides for the Bureau of National Health Insurance (BNHI), which operates Taiwan’s single-payer national healthcare program, to reduce the reimbursement price paid to hospitals for a patented drug to a reasonable level for five years after the drug goes off-patent. Since in most markets such “just off-patent” drugs naturally experience a price drop, the multinational research-based pharmaceutical companies who make these original drugs have been open to the idea of incorporating such a mechanism in the NHI system. Now that the law is being implemented, however, attention is being turned to the details – and to some potential problems that might arise. Some of the questions are matters of definition that are not clearly treated in the law. What, for example, is the meaning of “patent” in this context? BNHI has suggested that only patents on chemical compounds (the active ingredients in the drugs) would be regulated under Article 46. The industry, with support from its legal counsel, contends that coverage should extend to all patents granted by the Taiwan Intellectual Property Office, including process and formulation patents in addition to those on compounds. They are all equally valid forms of intellectual property, the companies maintain. The reason for seeking a broader definition is the hope that Article 46 will be aligned with measures to better protect the intellectual property of drugs under patent. The chief such measures are “patent linkage” to check for possible violations before infringing products reach the market and “data exclusivity” to restrain generics for a limited period of time from relying on the data submitted by the original manufacture to obtain registration approval without any clinical investment. Another issue is the definition of “just off-patent.” BNHI has disclosed that it is considering applying Article 46 retroactively to reduce the prices of pharmaceuticals whose patents have expired within the past five years. Considering that the use of various other price-cutting mechanisms have already made the reimbursement prices of drugs in Taiwan among the lowest in the world, the industry views retroactivity as having a potentially devastating impact on its business – causing even more drugs to be withdrawn from the market 8

二代健保法上路法規定義應更明確

「

魔鬼就在細節裡」這句生動的英文諺語往往很有道理。原先看起來各方應該很容易達成共識的計畫，常因深究其細節而導致協商無法完成。 2013年初上路的二代健保法有一部份條文，正巧印證了這句諺語。二代健保法第46條規定，藥品專利逾期後五年內，主管全民健康保險業務的健保局付給醫院的藥品費用應降至合理水準。在多數市場中，甫逾專利藥品之藥價會自然下滑，因此生產專利藥品的開發性跨國藥廠，對於健保制度納入此一藥價調降機制，抱持開放的態度。然而，二代健保法上路後，大家開始關注各項細節，以及未來可能浮現的隱憂。部份問題和健保法中某些定義不夠明確有關。舉例而言，在二代健保的背景下，何謂「專利」？健保局表示，二代健保法第46條只規範化合物成分（藥品中的有效成分）的專利。擁有眾多法律顧問的製藥產業主張，二代健保法此規範應涵蓋台灣智慧財產局核發之所有專利；除了化合物專利外，也應包括製程與配方專利。製藥廠商主張，這些都是不同形式的智慧財產。尋求更寬廣定義的原因，是希望二代健保法第 46條能夠符合更有效保障專利藥品的智慧財產措施。這類措施主要包括「專利連結」：在侵權產品上市流通前做好把關，檢查是否有違法情形；以及「資料專屬性」：在一段時間內禁止學名藥廠商利用原藥廠的專利資料生產藥品；以及避免學名藥廠在無需進一步投資臨床相關作業成本的情況下，直接取得藥品登記證明。另一個問題在於「逾專利期藥品」的定義。健保局透露，正在評估是否針對過去五年已逾專利期之藥品，追溯適用健保法第46條調降藥價。有鑒於其他降價機制已使得台灣政府對藥品的給付遠低於其他國家，製藥產業認為，若「逾專利期藥品」的定義可溯及既往，恐對產業造成更嚴重衝擊，導致

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as unprofitable and discouraging multinational companies from placing increased investment in Taiwan due to the unpredictability of the regulatory environment. Given that the new law came into effect in January 2013, the manufacturers believe the price cut should be applicable only to drugs that go off-patent from 2013 onwards. Further, there is disagreement over what would be a “reasonable” level of price reduction. AmCham Taipei’s Pharmaceutical Committee has proposed that BNHI consider setting a bottom line on price cuts through a transparent process of dialogue with the industry to reach consensus. Those devilish details. —– By Don Shapiro

更多藥品因難以獲利而退出市場；跨國藥廠也將因相關法規環境難以預測，減低擴大在台投資意願。由於二代健保法自2013年一月起正式施行，藥廠認為價格調降只應適用於2013年以後逾專利期的藥品。此外，藥價究竟該調降多少才算是合理價格，各方也有不同看法。台北市美國商會製藥委員會籲請健保局考量設定藥價調降底線，可透過與製藥產業透明對話，以達成共識。這些都是魔鬼般的細節。 —撰文／沙蕩

Clearing the Runway for Chartered Jets A reinterpretation of the Civil Aviation Law may be called for

n most markets around the world, the option of utilizing private aircraft on a chartered basis is available for top-level executives or wealthy individuals, including celebrity entertainers or athletes, who do not wish to put up with the inconvenience, frequent delays, and lack of privacy of taking regular commercial flights. This business-aviation industry has been growing particularly rapidly in recent years in other Asian countries. In Taiwan, however, the Civil Aeronautics Administration (CAA) of the Ministry of Transportation and Communications (MOTC) has blocked the business from developing by prohibiting U.S. or other foreign-registered charter jets from entering Taiwan to pick up passengers for outbound flights to international destinations. Companies that have applied to the authorities for permission to operate here have been turned away. The CAA’s justification for this ban has been Article 81 of the Civil Aviation Act, which states: “No foreign aircraft or foreign civil air transport enterprises may carry passengers, cargo and mail between two points in the Republic of China with or without remuneration, or operate as a general aviation enterprise in the Republic of China,” except for non-profit flights (such as those by humanitarian organizations) or in cases where treaties or agreements signed with other countries stipulate otherwise. But members of the travel industry consider that position to be based on a mistakenly broad interpretation of the wording of the law. A careful reading of the statute, they say, indicates that it only bars foreign-registered aircraft from operating entirely within Taiwan, without any language explicitly preventing them from flying in to pick up passengers heading to other locations overseas. In situations of this kind, Taiwan is often highly concerned with

開拓私人包機發展空間民用航空法可能需要重新詮釋

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球多數航空市場中，高階主管或是富裕人士（如知名影星或運動員等）如果不想忍受搭乘一般客機的種種不便或班機常會延誤、缺乏隱私等情況，可以選擇租用私人包機。商務包機產業近年在亞洲其他市場的成長特別迅速。然而在台灣，交通部民航局管理作法讓這個產業難以發展，因為規定禁止在美國或其他國家註冊的包機進入台灣載運旅客，飛往國外目的地。向主管機關申請在台經營這類業務的公司，最後都鎩羽而歸。民航局搬出民用航空法第八十一條，當做這項禁令的依據：「外籍航空器或外籍民用航空運輸業，不得在中華民國境內兩地之間按有償或無償方式載運客貨、郵件，或在中華民國境內經營普通航空業務。」從事非營利性之飛航活動（如人道組織）或與他國另有條約或協定者則不在此限。然而，旅遊業者認為，民航局採取的立場，是對民用航空法的條文做了過於寬鬆的解釋。業者表示，細究該項法規便會發現，它只規定外籍航空器不能完全在台灣境內營運，而並未明文禁止外籍航

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reciprocity – whether Taiwan is being asked to provide certain rights or privileges that other countries do not grant to Taiwanese citizens or enterprises. But under U.S. law, there is no provision prohibiting ROC-registered aircraft (or other foreign-registered aircraft for that matter) from picking up passengers for international flights leaving the United States. Opening up the business-aviation market in Taiwan would bring economic benefit in a number of ways. Most directly, it would spur the growth of related industries such as aircraft maintenance, ground handling, aircraft catering, hospitality, and tourism. It could also help Taiwan attract more wealthy visitors for purposes of prospective investment, medical care, and patronage of the island’s yacht-manufacturing boatyards. As a matter of regional competitiveness, it is also noteworthy that neighboring markets such as Hong Kong and China have no restriction on U.S.-registered charter jets carrying passengers in and out. Given its central geographical location within the Asian region, Taiwan would be ideally situated to become an aviation hub for business-charter services as long as other conditions – starting with a reinterpretation of Article 81 – as long as other conditions are right.

空器入境載運旅客前往海外地點。在類似的情況下，台灣高度關注的往往是互惠原則，也就是其他國家在要求台灣提供某些權利或特權時，是否對台灣的民眾和企業提供同樣的待遇。但是，美國法律並未禁止台灣籍飛機（或其他外籍飛機）搭載旅客出境，飛國際航線。台灣若開放商務包機市場，可望帶來多重的經濟效益。最明顯的效益就是帶動相關產業同步成長，如飛機維修、地勤服務、航空餐飲、飯店住宿、觀光旅遊等。此外，市場的開放也有助於吸引更多富裕的旅客，不論是來台投資、醫療旅遊、或是光顧遊艇製造業者的船廠。值得注意是的是，就區域競爭力而言，香港、中國等鄰近市場並不限制美國籍的包機載運旅客出入境。台灣地處亞太地區的中心位置，只要其他條件到位，絕佳的位置將有助發展成為商務包機服務的航空樞紐。重新詮釋民用航空法第八十一條，應是好的起步。

—撰文／沙蕩

—– By Don Shapiro

Update on Myanmar The new Foreign Investment Law has taken effect, and infrastructure improvements are underway.

hen an article on Myanmar as a new frontier for potential investment for both Taiwanese and U.S. companies was published in the October 2012 issue of Taiwan Business TOPICS, Myanmar’s new Foreign Investment Law (FIL) had just been enacted. Since then, business conditions have been solidified with the implementation of the FIL’s investment safeguards, the removal of media censorship, and the launching of construction projects for new rail lines and highways. (The fate of a proposed Thai-Myanmar deep-sea port at Dawei is less certain). The easing of sanctions by Western countries against Myanmar’s military regime has also brought about a loosening of the financial system. Investors can now repatriate earnings, and businesses may utilize letters of credit and wire transfers. The Myanmar Payment Union, comprised of 17 banks, has introduced debit card service and a nationwide ATM network. There are currently 19 private domestic banks operating in Myanmar. In addition, 23 foreign banks maintain representative offices permitting them to engage in liaison activities and monitor loans and offshore transactions. Foreign companies are allowed to lease – but not to own – land 10

緬甸傳真新外國投資法生效基礎設施逐漸改善

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北市美國商會T O P I C S雜誌2012年10月號曾刊出文章，提及緬甸是台灣與美國企業可能投資的新天地。當時緬甸才剛制定新「外國投資法」。自那時以來，隨著外資法的投資保障落實，新聞檢查制度廢除，以及新鐵路與公路

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and other immovable property. For land, the lease may cover an initial 50 years, plus two ten-year extensions. Improved land-use rights are one consideration for foreign investors in entering into joint ventures with a local company. Cooperation in a joint venture also brings some other advantages under the FIL, including exemptions from income tax for up to five consecutive years (and thereafter on profits re-invested within one year), up to 50% income tax relief on earnings from exported products, and lower customs duties for imported machinery, equipment, and materials needed for the first three years' commercial operation. The corporate income tax rate has been reduced from 30% to 25%. The Myanmar Company Act stipulates a minimum capital requirement for a joint venture of US$50,000 for a branch office, representative office, or service company, and US$150,000 for a manufacturer. For a 100% wholly owned subsidiary, the FIL requires minimum capital of US$300,000 for the service sector and US$500,000 for manufacturing. In the case of joint ventures, the amount of foreign capital and foreign equity ratio can be defined by the contract between the foreign and domestic entities. Land use for joint ventures located in industrial or special economic zones is subject to an initial term of up to 30 years. Restricted business activities include marine fishing, agricultural enterprises, industries harmful to the ecosystem, those involving hazardous waste and chemicals, and unapproved medical technologies. Employment of local personnel is now governed by the Settlement of Labor Dispute Law of 2012 and Social Security Act of 2012. Before employees may be terminated for cause, they need to be formally warned three times. Typical reasons for termination for cause are theft, carrying weapons in the workplace, absence without leave for more than five days, and drunkenness on the job. There is no minimum wage in the private sector except for specified industries such as cheroot rolling. Normal working hours are eight hours a day, six days a week. The aviation industry is booming because of the increase in foreign visitors, both for tourism and business. Seven domestic airlines serve the market. The 6,650 kilometers of navigable inland waterways are another important channel of transportation. The country also has 148,700 kilometers of roadways, but only 33,000 kilometers are paved. Upgrading and resurfacing of an additional 4,500 kilometers is due to be completed by 2015. Also under construction on the same schedule are 127.4 kilometers of rail connections between Kalay and Tamu and 141.8 kilometers connecting Lashio and Ruili. In this fast-changing market, the Directorate of Investment and Company Administration stresses that it welcomes businesses that provide “inclusive development of the entire people, providing necessary vocational training to Myanmar citizens.”

—– By David DuByne (the author is an American businessman, currently resident in Taiwan, who is opening a trading office in Yangon).

建設計畫展開，緬甸的商業環境已趨穩定。（擬在大偉—又譯土瓦—興建的泰緬深海港的命運則較不確定）西方國家放寬對緬甸軍事政權的制裁措施，也使金融制度變得較為寬鬆。投資人如今可以回收獲利，也能使用信用狀和電匯款項。由17家銀行組成的緬甸銀聯已推出金融卡服務，也建立全國提款機網路。緬甸目前有19家民營國內銀行。此外，有23家外國銀行設立代表辦事處，能夠從事聯絡活動，以及監督貸款和境外交易。外國公司獲准租用，但不能擁有土地和其他不動產。就土地而言，租期最初可達50年，還可以延長 10年兩次。土地使用權獲得改善，是外國投資人與當地公司發展合資事業的考量因素之一。根據外資法，合作設立合資事業還可以享有其他好處，包括最長可連續五年免課所得稅，其後一年內以獲利再投資也免稅，出口產品的獲利也可享50%所得稅優惠，商業營運最初三年如須進口機器、設備和材料，可享有較低關稅。公司營業所得稅稅率已由30%降至25%。緬甸公司法規定，合資事業最低資本額為5萬美元，包括分公司、代表辦事處或服務業公司，製造商則是15萬美元。對於擁有100%所有權的分公司，外資法規定服務業的最低資本額為30萬美元，製造業為50萬美元。成立合資事業時，來自外國的資本金額和外資持股比率，由外國與當地業者以合約訂定。合資事業若設在工業區或特別經濟區，土地使用權的最初期限可達30年。受限制的商業活動包括海洋捕撈、農業企業和危害生態環境的事業，還有涉及有害廢棄物與化學品以及未獲准醫學技術的事業。聘雇當地人員如今受到2012年勞動爭議處理法和 2012年社會安全法的規範。因故終止聘雇關係前，必須先正式提出警告三次。因故終止聘雇的典型理由是竊盜、在工作場所攜帶武器、不假曠職超過五天和工作時酒醉。民營企業沒有最低薪資規定，但捲製雪茄菸等特定行業例外。正常工時是每天工作八小時，每週上班六天。航空業蓬勃發展，原因是外國訪客增加，包括觀光和商務客。現有七家國內航空公司服務市場。可供航行的內陸水道長6650公里，是另一個重要運輸管道。全國道路長度有14萬8700公里，但只有3萬 3000公里鋪設了路面。另有4500公里道路將升級和重鋪路面，預定2015年完工。列入興建計畫的還有吉靈到達武間127.4公里的鐵路，以及臘戌到瑞麗間 141.8公里的鐵路。緬甸投資與公司管理理事會強調，這個快速變化的市場歡迎企業促進「廣納全民的發展，以及提供緬甸人民所需職業訓練」。

—撰文／/杜大為（美國商人，現居台灣，將在緬甸仰光開設貿易公司）

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Coverstory Cover story

Securing Sufficient Energy Supply 讓台灣能源供應無虞 BY TIMOTHY FERRY

撰文 / 法緹姆

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EnErgy

CONTRAST — A solar energy installation with the chimneys of a fossilfuel power plant visible in the background. photo :t im Ferry

This article is the third in a series looking at what President Ma Ying-jeou last year identified as the Five Pillars crucial for Taiwan’s future economic development. With plans underway for a national referendum on whether construction should be halted at Taiwan’s fourth nuclear power plant, the issue of what approach Taiwan should take to satisfy its future energy needs has become even more politically sensitive than before. Analysis of the various options shows how tough a choice Taiwan will be facing. TOPICS雜誌最近規劃了專題報導，探討馬英九總統所提台灣未來經濟發展五大支柱，這是系列第三篇。針對核四應否停建交由全民公投的計畫正在進行中，台灣應採取甚麼方法滿足未來能源需求的問題，在政治上甚至變得比以前更為敏感。針對種種選項的分析顯示台灣面臨的選擇相當

ublic unease about the potential safety of Taiwan’s fourth nuclear power plant (NPP), now nearing completion of construction in New Taipei City’s Gongliao Township, is causing the government to have to weigh some thorny questions. Assuming nuclear experts provide assurances that the facility is safe, should the plant still be put into operation if a large segment of the population remains unconvinced? If, on the other hand, the plant is mothballed, will Taiwan have sufficient energy supply to meet its needs without vastly increasing carbon emissions or incurring exorbitant costs that will drag down the economy? The project, known as the Longmen (“Dragon Gate”) plant, has been controversial since it was first proposed in the 1980s and began construction in the late 1990s, and Japan’s Fukushima 3-in-1 disaster of earthquake, tsunami, and reactor meltdown two years ago fueled calls to scrap the plant. Now nearly a decade behind schedule, it has cost the state-owned Taiwan Power Co. (Taipower) US$10 billion – more than double the original budget. In addition, a series of mishaps and irregularities – fires in the wiring, fines by the regulator for design changes made without approval, even rodent infestation – have all cast doubt on the safety of the plant and quality of the construction. “There’s a lot of skepticism regarding the use of nuclear energy per se and the safety of this plant in particular,” notes Raymond Wu, managing director of

艱難。

民

眾對核四潛在安全問題的疑慮，促使台灣政府必須權衡一些棘手問題。位於新北市貢寮區的核四廠現已接近完工。假設核能專家對核四安全提供的保證無法讓大部分民眾信服，那麼應否仍讓這座核電廠運轉？反之，如果擱置核四，台灣能否在不會大量增加碳排量或導致發電成本大增拖垮經濟的情況下，擁有充足能源供應？命名為龍門核電廠的這項計畫，自從在1980 年代首度提議興建、1990年代末期動工以來，一直具有爭議，而且兩年前日本福島第一核電廠發生地震、海嘯和爐心熔毀齊發的災難，更助長廢除核四的呼聲。如今核四的興建進度已落後近十年，讓國營的台電公司損失100億美元―― 是原始預算的兩倍以上。此外，一連串的不幸和弊端（電線走火、未經許可就更改設計而遭到主管機關罰款，甚至老鼠肆虐）都讓外界質疑核四

的安全和工程品質。台北誠豐研究暨諮詢中心總經理、同時也是台灣公共事務專家的吳瑞國指出：「核能利用本身就有許多爭議，而核四的安全尤其受到質疑。」上月全台各地有數十萬抗議者參加反核示威，以此紀念福島核災屆滿兩週年。發生在日本的爐心熔毀事件，為核能的危害提供活生生的見證― ―台灣反核人士指出，福島和龍門之間具有相似之處，包括鄰近地質斷層和海洋，以及採用類似的反應爐技術，令人憂慮。台灣媒體在三月初進行的民調發現，半數以上受訪者反對讓核四完工與運轉。儘管台灣政府一再保證，除非專家確認安全，否則不會批准核四運轉，不過這項爭議讓四面楚歌的政府和迅速成長的反核運動陷入對立。政府提議在今年底前舉辦公投，詢問核四工程應否停建，作為解決此事的最終辦法。不過批評者認

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CLASH — Pro-nuclear KMT legislators with bamboo hats and signs reading “The people decide” face DPP lawmakers holding bird cages as a symbol of what they call an overly restrictive referendum proposal. photo : cna

the e-telligence Research and Consulting Group in Taipei and an expert on Taiwan’s public affairs. Last month, hundreds of thousands of demonstrators turned out at anti-nuclear protests across Taiwan to mark the second anniversary of the Fukushima disaster. The reactor meltdown in Japan offered vivid testimony as to the hazards of nuclear power – and oppo-

nents of nuclear energy in Taiwan note ominous similarities between Fukushima and the Longmen site, including proximity to geologic faults and the open sea, as well as similar reactor technology. Public opinion surveys conducted by local media in early March found that more than half of the respondents opposed the completion and operation of the fourth NPP.

為，由於公投法所要求的門檻高到不切實際（至少需50%的投票權人參與投票，結果才具有法定約束力），這場公投將不會公正反映民意。他們主張降低門檻或修改公投問題的用字遣詞，讓核四唯有在公投通過這個議題後才能運轉。陳水扁政府時期的環保署長、現任台北醫學大學國際衛生講座教授的陳重信指出，台灣過去十五年舉辦的六次公投，沒有一次達到這個門檻。他說：「因此政府推動公投。」他聲稱，政府設計讓公投注定達不到門檻，從而讓工程合法進行。陳重信認為，若公投無法阻止核四，就不應將結果視為民意支持繼續興建核四。他指出，這項計畫始終充滿瀆職和可能貪污的疑慮，政府未能取信於民。吳瑞國指出，就某種程度而言，台灣對核能的質疑與全球民意趨勢並無太大差別。不過他也將核能之類複雜公共政策議題被政治化，歸咎於台灣「高度政治化環境」，以及執政的國民黨和在野民進 14

Although government leaders have made repeated assurances that the plant will not be approved for operation unless its safety is confirmed by experts, the controversy has pit a beleaguered administration against a burgeoning anti-nuclear movement. As a means of finally resolving the matter, the government is proposing to hold a referendum before the end of this year that would ask whether or not construction of the Longmen plant should be halted. Critics argue, however, that since the required threshold under the referendum law is unrealistically high – at least 50% of registered voters need to participate for the results to become binding – the exercise will not be a fair expression of public opinion. They advocate lowering the threshold or rewording the referendum question so that the plant could become operational only if the issue passes. Winston Dang, minister of the Environmental Protection Administration (EPA) under the Chen Shui-bian administration and now International Health Chair Professor at Taipei Medical University, notes that none of the six referendums held over the past 15 years in Taiwan has ever passed the threshold. “That’s why the government is pushing it,” he says, claiming the authorities have purposely set up the referendum in a way that is bound to fall short and thereby legitimatize proceeding with construction.

黨之間的對立。他說：「理性辯論空間不斷遭到壓縮，核能議題變得非常、非常棘手。」不過台灣所需的正是理性辯論，才能同時確保人民安全和經濟優勢。考量到台灣高度倚賴進口能源和建造能源基礎設施所需時間漫長，台灣必須迅速建立機制，能在成本和安全程度都在合理範圍的前提下，妥善確保未來數十年能源供應充足。台灣有 500萬人住在25平方公里的核四安全疏散區內，風險頗高，對於可能發生核災的疑慮似乎不分黨派。核四反對者堅稱，台灣擁有22%的儲備發電量，所以不需要核四。核能擁護者承認目前電力過剩，但也指出這不會長久持續。台灣目前的既有發電量約40G W，高峰期需求不到34G W，才能將多達 22.7%的電力作為儲備，超出政府的15%最低要求。不過發電量會受到老舊火力發電廠在未來數年除役的影響。這其間的能源需求預料會緊密配合經濟成長而不斷增加，平均每年增加2.8%。若沒有核四補

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But if the referendum fails to stop the plant, Dang says that should not necessarily be taken as public support for continuing construction of the facility. He cites suspicions of incompetence and possibly corruption throughout the project, and says the government “lacks credibility.” To a certain extent, Taiwan’s questioning of nuclear energy just tracks global public opinion, Raymond Wu notes. But he also blames Taiwan’s “highly politicized environment” and intense rivalry between the ruling Kuomintang (KMT) and opposition Democratic Progressive Party (DPP) for politicizing complex public policy issues such as nuclear energy. “Under such an environment where the space for rational debate is diminishing, it makes the issue of nuclear energy very, very difficult,” he says. Rational debate, though, is exactly what is needed for Taiwan to both ensure the safety of its citizens and the strength of its economy. Considering the country’s heavy dependence on imported energy and the long lead times needed to build energy infrastructure, Taiwan needs to quickly establish how it can best ensure a sufficient supply of energy at reasonable cost and with a reasonable degree of safety for the coming decades. The stakes are high, with five million people living within the 25-square-kilometer evacuation zone of the Longmen plant, and concern about the possibility of a disaster

CONTROVERSY — Taipower’s plans to expand its coal-fired Taichung Power Plant by building two more units has run into stiff opposition from environmentalists. photo : cna

appears to transcend party lines. Opponents of the plant contend that since Taipower has a 22% reserve capacity in power generation, Taiwan doesn’t need the fourth NPP anyway. Proponents of nuclear power acknowledge the current surplus but note that it won’t last long. Taiwan currently has about 40 gigawatts of installed capacity and peak demand of under 34 gigawatts, allowing a substantial 22.7% capacity to be

充發電量，最快在2015年，台灣的儲備電力會降到 10%以下，低於法定下限，讓台灣面臨限電風險。

龍門vs.福島支持者主張，核四發生核災的機會微乎其微，因為龍門和福島兩地具有重大差異。首先，行政院原子能委員會指出，地質調查顯示，台灣的斷層遠比引發福島毀滅性地震和海嘯的500公里斷層短。斷層短意味地震威力較小，儘管另外值得注意的是，台灣有許多斷層延伸到海洋，這部分的地質調查還未完成。無論如何，福島核災的分析研究顯示，福島核電廠挺過地震，災難是隨後的海嘯造成。由於海床的深度和可能發生的海嘯規模直接成等比，毗鄰核四的海床比福島沿岸淺許多，許多科學家因此作出結論，龍門不會發生福島規模的海嘯。

held on reserve, exceeding the government’s minimum requirement of 15%. But capacity will be affected as older coal-fired plants are retired in the coming years. Meanwhile, energy demand is expected to continue rising, in tandem with GDP growth, at an average rate of about 2.8% a year. Without the added capacity of the fourth NPP, as early as 2015 Taiwan’s reserve capacity would fall below 10%, under the legal limits and

核能支持者認為，台灣發生福島類型災難的風險很小，而若沒有核四，台灣未來面臨電力短缺、物價上漲和經濟停滯的機會相當高。因為台灣是一個島嶼，電力網絡並未和其它電網連結，無法向其它來源購買或借用電力，而且提高電力供應的選項幾乎付之闕如。考量到大部分類型的發電基礎設施建造至少得十年才能完工，台灣到2023年時可能面臨電力供給不足的情況。國際證券投資業者里昂證券在最近發表的報告中，概述台灣未來發電的四種可能情況。第一種是擁抱核能，不只繼續讓核四完工和運轉，還將既有三座核電廠的使用年限延長，並將總發電量提高 440M W；此外，未來若要達成任何每日最低發電量的要求，只能利用火力發電。第二種選項是取消興建核四，但其它情況和第一種相同，擴大既有三座核電廠的發電量，並增加火力發電。第三種是取消核四，讓其它核電廠依照目前計畫運轉40年後除

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Longmen vs. Fukushima Supporters of the plant, arguing that the chance of a disaster at the fourth NPP is remote, point to key differences between the Longmen and Fukushima locations. First, the Atomic Energy Council notes, geological surveys indicate that Taiwan’s faults are much shorter than the 500-kilometer fault responsible for the devastating Fukushima earthquake and tsunami. Short faults mean less powerful earthquakes, although it’s also noteworthy that many of the island’s faults extend into the sea, where geological surveys have not yet been completed. In any case, analysis of the Fukushima disaster indicates that the power plant survived the earthquake and was done in by the subsequent tsunami. Since the depth of the seabed is directly proportionate to the size of a potential tsunami, and the seabed adjacent to the fourth NPP is much shallower than that off the coast of Fukushima, many scientists conclude that a tsunami on the scale of Fukushima could not happen at Longmen. As against the minute risk of a Fukushima-type disaster occurring in Taiwan, the supporters of nuclear energy say, without the fourth NPP the chances are high of Taiwan facing a future of power shortages, price hikes, and economic stagnation. Since it is an island whose elec-

trical power network is unconnected to other grids, Taiwan lacks the luxury of buying or borrowing power from other sources. It also has few options for increasing power supply. Considering that building most types of power-generation infrastructure takes at least a decade to complete, by 2023 Taiwan could face conditions in which electricity demand exceeds supply. In a recently released report on Taiwan’s power situation, the international brokerage and investment firm CLSA outlines four possible scenarios for the future of Taiwan’s energy generation. The first would embrace nuclear energy by not only going forward with the completion and operation of the fourth NPP, but also extending the lives of the existing three power plants and expanding their capacity by a total of 440 megawatts; in addition, only coal-fired capacity would be used for any future baseload (minimum daily power) requirements. The second option would cancel the Longmen plant but otherwise look the same as the first by expanding capacity at the existing nuclear plants and increasing coal. The third would cancel Longmen, decommission the other nuclear plants after 40 years of operation according to the current schedule, and rely on coal as the replacement fuel. The fourth scenario also calls for phasing out nuclear but replacing it with LNG. The ramifications of the four options

役，然後倚賴煤炭作為替代發電燃料。第四種情況也是要求逐步放棄核能，但以液化天然氣取代。這四種情況衍生的後果截然不同。例如支持核能的第一種情況似乎是未來成本最低廉的方式，但會遭遇嚴重的政治阻礙。第三種情況（以火力發電取代核電）也有問題，因為台灣承諾要減少碳排量。馬英九總統已設定充滿雄心的目標，矢言在2025年前將台灣的碳排量減至2000年水準――減少50%，許多觀察家認為這超出台灣的能力，無法達成。台灣的每年人均碳排量（約12噸）居亞洲之冠，而且這裡是鋼鐵、石化和半導體等高能源需求產業進行重要業務的地方，儘管有99%的能源需求仰賴進口。為了確保提供工業現成的低廉能源供應，台灣在多年前選擇主要仰賴火力發電，如今有49%的電力都來自煤炭。由於發電業是台灣大部分碳排量的來源，因而成為各項減碳計畫的主要目標。 16

differ greatly. For example, the pro-nuclear approach of the first scenario appears to be the cheapest way forward but would encounter serious political obstacles. The third scenario – replacing the nuclear capacity with coal-fired power – is also problematic due to Taiwan’s commitments to reducing carbon emissions. President Ma Ying-jeou has set an ambitious target by vowing to reduce Taiwan’s carbon emissions to year2000 levels by 2025 – a 50% cut that many observers already consider beyond Taiwan’s ability to achieve. Taiwan’s annual per capita carbon emissions – some 12 tons – are the highest in Asia, and the island is home to substantial operations in such energyhungry industries as steel, petrochemicals, and semiconductors, despite importing 99% of its energy needs. To ensure a ready supply of cheap energy to power its industrial sector, Taiwan years ago opted largely for coal, and the fuel now generates nearly 50% of its electricity. As the power sector is responsible for the majority of Taiwan’s emissions, it is the main target for carbon abatement programs. Installed power capacity in Taiwan (including power generated by Independent Power Producers (IPPs) but excluding industrial cogeneration) is comprised approximately 37% of LNGfired plants, 25% coal-fired, 12% nuclear, 8% oil-fired, 8% renewable energy (mostly hydro-electric power

台灣發電廠的總裝置容量（包括民營電廠生產的電力，但不包括企業汽電共生廠的電力）之中，液化天然氣火力發電占了大約37%，燃煤火力發電占 29%，核能發電占12%，燃油火力發電占8%，再生能源（大都是來自水壩的水力發電）占8%，抽蓄水力發電（使用多餘電力將水抽到高處，然後讓水流向低處發電）則占7%。不過，這些不同電力來源的效率和成本大不相同。因此，舉例來說，液化天然氣發電雖然占裝置容量的較大比重，由於進口和貯存天然氣的成本很高，2011年只占了台灣發電量的 26%。另一方面，無碳的核能發電雖僅占裝置容量的 12%，由於效率較高，卻生產台灣使用電力的19%。台電過去幾年締造世界名列前茅的最高設備使用率（超過90%），因而獲得多個國際獎項，獲肯定是有能力而且負責任的核電營運業者。

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CAn U.S. SHAlE GAS SAvE THE DAY?

uclear’s opponents contend that the shale-gas revolution sweeping the United States promises to create a future of cheap, cleaner LNG that Taiwan can take advantage of. The United States is now a global leader in extracting LNG from previously unexploited shale resources deep underground through a process known as hydraulic fracturing – or fracking. This surge in shale gas has caused LNG prices to plummet in the United States, and talks are underway about exporting the resource to other nations. The current price for LNG in the United States is around US$3 per million Btu (mmbtu), far below the US$15/mmbtu that Taipower currently pays its Australian suppliers. Others are more skeptical about the prospective benefits for Taiwan, however. International financial analyst firm CLSA views US$3/mmbtu as unlikely as an export price, assuming the United States even permits shale gas to be shipped abroad. It sees US$4-6/mmbtu as a more realistic price. With the additional cost of liquefaction at US$3/mmbtu, and the costs of shipping from the Gulf of Mexico at US$6/mmbtu, the total adds up to US$13-15/mmbtu, offering little advantage over current prices. Further, due to the long-range nature of energy-supply contracts, Taiwan needs to lock into LNG contracts in the next couple of years to make up projected shortfalls in energy supply in 2023. With the United States still debating whether or not to export shale gas, it is impossible to predict the likelihood or timing of sourcing opportunities. Storage infrastructure is the real sticking point with LNG. To remain liquefied, the fuel needs to be cryonically stored at extremely cold temperatures (around minus 162° C), necessitating costly storage terminals. Taiwan has extremely limited storage capacity considering the proportion of LNG in the power mix, enough to keep reserves of only a week, compared with months of coal supply and an indefinite amount of nuclear power. This limitation compromises the nation’s energy security in the face of natural disaster or international crisis, which remains a concern considering Taiwan’s location and still precarious relations with China. Taiwan currently has two LNG storage

photo :tim Ferry

pHOTO : Ap

depots, in Taichung and Kaohsiung’s Yong-an district, with combined capacity of 12 million tons per year. The first is already used at full capacity and the second will be at full capacity when an additional 2,880 megawatts of LNG-fired power-generating capacity comes online between 2016 and 2018 at Tungshiao in Miaoli County. The total capacity is being expanded somewhat to 15 million tons by 2018, but Taiwan doesn’t expect its third LNG terminal, in Taoyuan, to be completed for at least a decade. Considering the infrastructure constraints, “right now it’s impossible to increase the use of LNG by much,” says economist Huang Yi-Ju of the Taiwan Institute of Economic Research (TIER). LNG is generally not considered suitable for base-load use – the minimum power that is always operating – due in part to its relatively high costs but also because of its flexibility. Unlike coal-fired or nuclear power, which cannot be brought on- and off-line at will, LNG plants can be easily fired up and then fired down to meet peak demands, such as hot afternoons when air conditioners are being widely used. In addition, heavy maintenance requirements mean that LNG plants rarely run at higher than 50% capacity, although the level can be pushed to 70% if needed. Taiwan’s LNG plants currently operate at less than 50% capacity, compared with 85% capacity for its coal plants and over 90% for nuclear.

Using LNG as base-load capacity – always on power – would be costly and, while producing lower emissions than coal, would nevertheless enlarge Taiwan’s already swollen carbon footprint if used to replace nuclear. CLSA advocates increased use of coalfired power. It notes that even with the costs of carbon credits and offsets factored into the equation, coal is still a cheaper and more reliable source of energy. Compared with coal-fired plants, gas-fired capacity saves CO2 emissions at a cost of NT$3,500-5,000 per ton, but the same amount of carbon credits would entail only NT$150-800 per ton, an 80% savings advantage for coal-fired generating capacity. TIER economists and pretty much everyone else reject this idea out of hand. Rather than expanding its use of coal, Taiwan has been allowing its coal-fired power plants to reach retirement without extending lifespans or adding capacity, since coalfired power has become nearly as politically unpalatable as nuclear. CLSA says that with added LNG in the mix but without additional coal, Taipower will need to increase rates to its customers by 30% for the utility to break even. CLSA acknowledges that this steep an increase is politically unlikely, and therefore expects deepening losses at Taipower. — By Timothy Ferry

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Cover story from dams), and 7% pumped hydro (the use of excess power to pump water up a slope, then generating power as it flows down). These different power sources vary widely in efficiency and cost, however. As a result, LNG generated only 26% of Taiwan’s power output in 2011 due to the high cost of importing and storing the gas, for example, despite accounting for a much higher proportion of installed capacity,. Carbon-free nuclear power, on the other hands, constitutes 12% of installed capacity but generates 19% of Taiwan’s

electricity, owing to its high efficiency. Taipower has achieved some of the highest capacity utilizations in the world for the past several years (over 90%) and has earned a number of international awards as a capable and responsible nuclear power operator. Scrapping the fourth NPP and retiring the existing three NPPs on schedule over the coming decade would force Taiwan to replace all of this carbon-free power with other sources of energy. To do so while simultaneously reducing CO2 emissions, if possible at all, would be a huge challenge.

若是廢除核四，而且依預定時間在今後10年讓現有的三座核電廠退役，將迫使台灣以其他能源取代所有這種無碳發電。要這麼做，而且同時減少二氧化碳排放量，即使有可能，也是很大的挑戰。要選擇可能的替代方案，液化天然氣比燃煤有效率，能夠提供穩定的電力，而且碳排放量只有煤炭的1/3。此外，液化天然氣發電廠相對容易興建，也比較容易獲得擔心汙染問題的民眾接受。台灣大部分民營電廠都採用液化天然氣發電設施，它們將生產的電力賣給台電，滿足約15%的台灣能源需求。不過，液化天然氣也有一些缺點，嚴重影響以其取代核能的吸引力。（請見邊欄「美國頁岩氣能化解危機嗎？」）目前液化天然氣遠比煤炭或核電昂貴。根據台電的數據，燃煤發電每度成本是1.68 元，核能僅需0.69元，液化天然氣則高達每度3.2 元。台電如今則只對工業用戶收取每度2.76元費用，家庭用戶則是每度2.6元，導致持續虧損。香港里昂證卷的報告估算，若以液化天然氣取代 18

As a possible alternative, LNG is far more efficient than coal, generating reliable power with only a third of coal’s carbon emissions. In addition, LNG power plants are relatively easy to construct and are more acceptable to a public wary of pollution. Most of Taiwan’s IPPs – which generate about 15% of Taiwan’s energy needs, selling their output to Taipower – operate LNG facilities. But LNG has a number of drawbacks severely limiting its appeal as a replacement for nuclear power (see the sidebar, “Can U.S. Shale Gas Save the Day?”). LNG is currently far more expensive than either coal or nuclear power. According to Taipower figures, while the utility spends NT$1.68 per kilowatt-hour generating energy from coal and only NT$0.69 for nuclear, the cost rises to NT$3.2 for LNG. The utility meanwhile charges only NT$2.76 per kilowatt-hour on average for industrial users and NT$2.6 for residential users, resulting in continuing losses for the company. The CLSA report calculates that replacing nuclear capacity with LNG would require at least 30% rate hikes for Taipower to break even. According to the Taiwan Institute for Economic Research (TIER), such a huge increase would have a substantial negative impact on Taiwan’s economy, spurring inflation and decreasing growth, employment, and investment.

核能發電，必須調漲電價至少30%，台電才能夠損益兩平。根據台灣經濟研究院的看法，如此大幅調漲電價，將對台灣經濟造成重大負面影響，會刺激通貨膨脹，削弱成長、就業和投資。

再生能源牌這項辯論的真正「外卡」是再生能源，這正是支持與反對核能雙方陣營完全分歧之處。擁核派指出，再生能源面臨重大障礙，完全不可能取代可靠的核能。他們說，即使台灣的所有屋頂、休耕農地、其至連道路和鐵路路基都鋪上太陽能板，雖然可以因此增加10GW的裝置容量，相當於台灣目前總裝置容量的超過25%，然而發電量將只占現今台灣用電需求的6%。在此同時，成本也將令台電難以負荷，因為目前支付給太陽光電廠商的保證躉購費率（FiT）每度超過8至10元，遠高於市場電價。民主進步黨政策會執行長吳釗燮反駁說，逐步廢

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A QUESTIOn OF TRUST

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lack of reliable, transparent information from a credible source is hampering efforts to find a resolution to the fourth Npp dilemma, says Raymond Wu, managing director of e-telligence Research and Consulting Group in Taipei. “I don’t think there’s enough information available yet to the public at large for people to be informed and to make a decision,” he says, noting that most of the information available is dense, technical, and largely useless to non-energy experts, himself included. Other information currently being circulated is of uncertain origin, and therefore not trustworthy, Wu adds. Most significantly, the source of much of the information – Taipower – lacks credibility with a large portion of the public. The company’s track record has been pilloried in the local media, undermining confidence in the state-owned utility. “For the pro-nuclear energy camp, this is an issue they need to address,” says Wu. Credibility issues have long followed Taipower throughout the course of planning and building the fourth Npp. Originally conceived in the 1980s, the project was first delayed by media reaction to the Chernobyl disaster in 1986 that turned public opinion – already doubtful due to the Three-Mile Island nearmeltdown in 1979 – largely against nuclear energy. Nevertheless, the project was revived and ground broken in 1999, only to be halted once again in 2000 by then-president Chen Shui-bian under the Dpp’s Nuclear-Free Homeland policy. The Council of Grand Justices reversed the order on the grounds that the executive branch had overstepped its authority, and the KMT-dominated legislature reinstated the project once again. Unfortunately for Taipower, the ultimate owner of the fourth Npp, the damage had already been done. Cancelling the project broke contracts with key suppliers and project managers and launched Taipower into a decade of litigation. Construction was plagued by further delays and cost overruns, which the Atomic Energy Council blamed on poor communication between Taipower and its suppliers and contractors, but which critics have taken as evidence of ineptitude if not corruption. Former Dpp legislator and Minister of Environmental protection Winston Dang says

COMMUNICATION — Taipower gives journalists a tour of the Longmen power plant, which is still under construction, as part of efforts to convince the public of its safety. photo : cna

that recent allegations of corruption in the Ma administration have caused some people to “start to suspect why the plant has cost so much money.” The project was originally budgeted for US$5.4 billion, but recent tallies put the number closer to US$10 billion – and the project is still not finished. Joseph Wu, executive director of the Dpp’s Committee on policy Research and Coordination, says that because of this background, “a lot of people doubt the credibility of the government in building a safe plant.” The pricing scandals of last summer further eroded trust in the utility. Taipower was forced to back off proposed rate hikes when it was discovered that it had overpaid private energy suppliers in what was portrayed in the media as an act of collusion. The incident gave many people the impression that “there’s not enough transparency, not enough responsibility or accountability in the process,” says Wu. “That’s why people are not going to automatically accept information provided by Taipower at face value.” Wu says that restoring trust in Taipower is vital to making sure the public understands the true implications of the decisions being made. As a result, he urges the government, Taipower, and supporters of nuclear power to do a better job of reaching out to the public, either through the media or through events on university campuses. He also suggests reaching out to concerned civic groups and even the opposition to discuss the issues. “Why can’t we have a dialogue in a rational

and reasonable format?” he asks. One way for the government to restore confidence in Taipower and nuclear energy, he suggests, would be to find a spokesperson, “some known personality,” who could outline the steps that have been taken to assure nuclear safety, as well as nuclear energy’s advantages as a stable and inexpensive source of energy. The Dpp’s Wu notes that many celebrities and opinion leaders have already expressed their opposition to the fourth Npp, and the issue has become so toxic that even some members of the KMT leadership – including New Taipei City mayor Eric Chu and Taipei City mayor Hau Lung-pin – have questioned the Longmen plant. Interestingly, former president Lee Tenghui – now godfather to the pan-Green opposition and anathema to the KMT – recently came out in support of nuclear power in Taiwan. In comments to the media, he stated that while nuclear energy does entail risks, Taiwan has no domestic energy resources and so cannot afford to give up entirely on nuclear power. He added that while the concept of a Nuclear Free Homeland is well-intentioned, it prevents Taiwan from researching alternative nuclear power technologies, including fusion. Could Lee be the prospective spokesperson for nuclear energy? With all the twists and turns the fourth Npp has taken over the years, this would be just another irony. — By Timothy Ferry taiwan business topics • april 2013

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COSTLY — Liquefying and then transporting and storing LNG at super-cold temperatures add substantially to the expense of using the fuel, despite its other advantages.

photo : cna

The renewable energy card The real wildcard in the debate is renewable energy, and here is where the pro- and anti-nuclear camps totally diverge. Nuclear’s supporters note that renewable energy faces huge obstacles that make it impossible to serve as a replacement for reliable nuclear energy. Even if Taiwan covered almost all rooftops, fallow farmland, and even roadsides and rail beds with solar panels, they say, the resulting additional 10 gigawatts of installed capacity would amount to over 25% of Taiwan’s current total capacity, yet it would generate only 6% of Taiwan’s energy needs. At the same time, the cost would be crippling for Taipower, as the guaranteed Feed-in-

Tariff (FiT) paid to solar-power producers is currently over NT$8-$10 per kilowatt-hour, far above market rates. Jaushieh Joseph Wu, executive director of the DPP’s Committee on Policy Research and Coordination, counters that the gradually phasing out of nuclear power would give Taiwan enough time to slowly ramp up renewable energy. And with costs for solar and wind energy steadily falling, he says, renewable energy is “going to be more competitive with other sources of energy, especially if we are doing it on a mass scale.” The gradual phasing out of nuclear energy in Taiwan will give the island time to increase the use of other types of energy, Wu continues. So far Taiwan has made only limited

除核電將讓台灣有足夠的時間，慢慢提高再生能源的比重。他又說，隨著太陽與風力能源成本持續下滑，再生能源「將比其他能源更有競爭力，尤其是如果我們的規模夠大」。吳釗燮接著表示，台灣逐步廢除核能，將有時間增加使用其他種類的能源。台灣在建造再生能源的基礎設施方面，至今進展仍有限，而且風力發電廠的場址據說已充分開發。除了水力發電以外的再生能源，如今占台灣裝置容量的約3%。不過，這些能源的發電量只占上述比重的一小部分，原因是太陽與風力發電的效率不佳（在有太陽光或風吹時才能夠發電）。台灣的風力發電廠效率還不錯，約在15%至35%之間，而太陽能板將陽光轉變為電力的效率則不到20%，只在有陽光時能發電。反核人士堅稱，台灣從未全力以赴發展再生能源。博智顧問有限公司是德國經濟辦事處的服務及執行單位，總經理孔榮指出，台灣雖然接受再生能 20

progress in building renewable-energy infrastructure, and wind farm sites are said to be already fully exploited. Renewable energy other than hydroelectric now accounts for about 3% of installed capacity. But the amount of electricity generated from these sources is only a fraction of that number due to the inefficiency of solar and wind power (electricity is only produced when the sun is shining or wind blowing). Taiwan’s wind farms operate with relatively good efficiency in the 15-35% range, while solar panels have conversion efficiencies of less than 20%. Nuclear’s opponents contend that Taiwan has never fully committed to renewable energy. Raoul Kubitschek, general manager of DEinternational

源的觀念，而且甚至為太陽能發電訂定了具吸引力的躉購費率，這項計畫卻未妥為落實，大體上沒有達到預期效果。台灣制定政策時曾和德國專家商討過，表面上營造了類似的環境。然而，雙方有重大的不同，這也說明了為何德國的太陽能裝置容量超過30GW，而再生能源生產了所需電力的25%，相形之下，根據台灣能源局的數據，台灣風力發電裝置容量所占比重為1.07%，太陽能則為0.15%，但二者合起來所生產電力還不到台灣需求的1%。在德國，消費者每為能源付出一歐元，大約有五分用於補助再生能源。但是在台灣，這些經費來自政府基金，與終端使用者切割開。由於台灣政府已面臨龐大預算赤字，政府也許不願意為了進一步使用再生能源而增加支出。此外，德國的電力公司依規定必須根據政府訂定的躉購費率，付費購買再生能源供應商提供的電力。然而據孔榮表示，台灣的情況是每部裝置都要

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EnErgy

Taiwan, a service company affiliated with the German Trade Office Taipei, notes that while Taiwan embraces the notion of renewable energy and has even set an attractive FiT for solar, the program has not been implemented well and has largely fallen flat. Ta i w a n c o n f e r r e d w i t h G e r m a n experts in setting its policy, and on the surface has created a similar program. There are key differences, however, that explain why Germany has over 30 gigawatts of installed solar-power capacity and generates 25% of its energy needs from renewable energy, compared with Taiwan’s 1.07% installed capacity in wind and .15% in solar, together generating less than 1% of Taiwan’s energy, according to data from Taiwan’s Bureau of Energy. In Germany, about five cents out of every euro spent by consumers on energy goes to help subsidize renewable energy. But in Taiwan, the money comes from a government fund, separated from end-users. With the Taiwan government already operating at a steep budget deficit, the government may be reluctant to increase expenditures through further use of renewable energy. Also, power companies in Germany are required to pay for power produced by renewable energy suppliers at the government-set FiT rates. In Taiwan, though, according to Kubitschek, each installation is subject to a lengthy negotiation process that slows projects and

deters investment. Due to high prices for FiTs, “taking renewable energy is not fun for utilities,” in either Germany or Taiwan, admits Kubitschek. The difference is that in Germany they don’t have a choice. The German government has created a regulatory environment that motivates installations both big and small to enter the power generating sector, notes Kubitschek, but in Taiwan “they create red tape that slows down the uptake.” Taiwan installed roughly 50 megawatts of solar capacity last year, bringing the total to 100 megawatts – “not much,” in Kubitschek’s estimation. With Taiwan’s favorable FiTs, he says, the industry should have grown much more. Yet another factor in Taiwan is that electricity prices are unusually sensitive to political pressure, with cheap energy considered by many consumers to be almost a right, as evidenced by the controversy last summer over a proposed second round of power hikes by Taipower. The utility said the rate hikes were needed to restore the company’s financial health after many years of operating in the red. Then news leaked that accused Taipower of colluding with its IPPs (many of them companies it has invested in) to pay above-market rates. The taint of scandal forced the utility to back off the rate hike and left the lingering impression of corruption. The scandal also allowed the DPP

經過漫長談判程序，這拖慢了工程進度，也嚇跑了投資。孔榮承認，由於躉購費率價格高昂，不論是在德國或台灣，「採用再生能源，對電力公司來說都不是好玩的事」。差別在於，在德國，他們沒有選擇餘地。孔榮指出，德國政府已營造了規範好的環境，促使大小設施都進入發電業，但在台灣，「他們創造的是官樣文章，拖慢了進展」。據孔榮估計，台灣去年新增的太陽能發電裝置容量大約是50M G，使得總裝罝容量增加到 100MG，「並不多」。他表示，台灣的躉購費率相當有利，太陽光電業應該有更大成長。不過，台灣另有一項變數，就是電價對政治壓力異常敏感。在許多消費者心中，享有低價能源幾乎是理所當然。去年夏天台電擬議的第二階段電價調漲引發爭議，可為明證。台電曾表示，經過多年營運虧損後，必須調漲電價，以利公司財務恢復健全。但後來有消息傳出，指控台電串通民營電廠

to lay into Taipower for raising rates, despite the fact that most international environmentalists say the country’s energy is really too cheap and needs to be priced higher to encourage conservation. Instead, the opposition party continues to call for replacement of cheap nuclear with more expensive energy sources like LNG and renewables, even as it criticizes the government for inevitable price increases. The public’s lack of confidence in Taipower provides the cover.

Industry vs. services The dire warnings offered by supporters of nuclear power of power shortages and economic stagnation hinge on the assumption that energy demand will continue to track GDP growth, but this is not necessarily a given. President Ma has made “decoupling” energy demand from GDP growth through gains in efficiency a priority for his administration. Taiwan recently launched a number of programs aimed at moving Taiwan’s heavy industries towards high-margin, less energy-intensive business models. The DPP seeks to one-up the president by questioning the need for heavy industries in Taiwan at all. “Heavy industries are no longer the backbone of Taiwan’s economy,” Joseph Wu says, while highenergy-using IT fabs continue their migration to the mainland. With greater efficiencies in manufacturing processes

（其中多家有台電投資），支付它們高於市場行情的電價。負面消息迫使台電暫緩調漲電價，也使民眾對其作為是否廉正守法存疑。這起醜聞也使民進黨得以痛批台電漲價計畫，儘管大部分國際環保人士都表示，台灣的電價確實太便宜，必須要調高價格，鼓勵節能。但反對黨雖然為了難以避免的漲價批評政府，仍繼續主張採用較昂貴的液化天然氣和再生能源，取代相對廉價的核能。

工業對服務業支持核電派提出了電力短缺和經濟停滯的可怕警告，這植基一種假設狀況，就是能源需求將持續隨國內生產毛額（GDP）的成長狀況變動，但這卻並非必然。馬總統希望透過提升效率，讓能源需求與經濟成長脫鉤，將此列為他政府的優先要務。台灣

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Cover story and a general move towards the service sector, he doubts that Taiwan’s energy demand needs to rise as much as claimed by Taipower. According to CLSA, 20% of Taiwan’s power demand comes from residential consumers, 20% from commercial operations, and 60% from industry. Reducing Taiwan’s industrial size would likely have a big impact on energy demand but would also have a profound impact on the economy, which relies on manufacturing-forexport for some 70% of GDP. Could Taiwan compete on services instead of industry? Few take the de-industrialization option seriously, although hopes are high that energy intensity – the amount of energy required to power a portion of GDP – will come down in the long term. Looking ahead to the referendum, CLSA forecasts that it will fail to get the necessary 50% of eligible voters, but will come close. And as only those opposing the plant are likely to show up to vote (supporters will likely stay home to keep the tally from reaching the threshold), CLSA considers that as many as 95% of the votes actually cast will be in favor of halting construction. This result, the report says, could give the government cover to shut down the plant and put an end to an ugly and divisive issue. That outcome would be

devastating for Taipower’s balance sheet, forcing it to write off the US$10 billion spent on Longmen, and presumably making it necessary for the utility to be recapitalized at taxpayer expense. But without the fourth NPP, what would Taiwan do to continue to power its economy? CLSA recommends more coal, but this approach will also run into polit-

最近推出多項計畫，目的是推動台灣重工業轉向高毛利而低度能源密集的營運模式。民進黨想比總統更勝一籌，質疑台灣是否根本需要重工業。吳釗燮表示，隨著高耗能的資訊科技製造廠持續移往大陸，「重工業已不再是台灣經濟的骨幹」。若是生產製程能更有效率，加上大舉轉向服務業發展，他懷疑台灣的能源需求會像台電所聲稱的大幅增加。里昂證卷研究指出，台電的需求有20%來自住宅用戶，20%來自商業用戶，60%來自工業用戶。縮減台灣的工業規模，可能對能源需求大有影響，但也會對經濟有重大衝擊，目前國內生產毛額有約70% 靠的是出口製造業。台灣能夠捨工業而在服務業上競爭嗎？雖然大家都希望長期而言，最終能夠降低能源密集度，也就是單位GDP所需消耗的能源，但少有人會把去工業化的選項當真。放眼核四公投，里昂證券預測結果將無法達到必 22

ical resistance on environmental grounds. LNG is costly, and if Taiwan wants to have enough capacity by 2023, it needs to start building ports and receiving terminals now. Renewables remain under-utilized, but it’s questionable how effective they would be in providing sufficient power. In other words, the nuclear conundrum continues.

須有50%合格選民投票的門檻，但將很接近。由於只有反對核四的民眾可能現身投票（因為支持者可能選擇留在家裡，以期投票人數無法達到門檻）。里昂證券估計，實際投下的票數中，將有多達95% 贊成停建核四。其報告說，這個結果可能讓政府有藉口關閉核四，終結這個充滿爭議的議題。如此結果將重創台電的財務情形，迫使公司勾銷花費在龍門的100億美元，據推測這可能使台電必須以納稅人的血汗錢進行資本重整。不過，沒有了核四，台灣要如何持續提供經濟發展所需的電力呢？里昂證券建議多使用燃煤，但這個作法也將因環保顧慮面臨政治阻力。液化天然氣發電成本較高，而且如果台灣希望在2023年前有足夠裝置容量，必須現在就開始興建港口和接收站。再生能源仍然未充分使用，但它們是否能有效提供充足電力，也還是問題。換言之，核能發展的兩難局面將持續下去。

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2013 APCAC SPring ConferenCe

U.S. Economic and Commercial Priorities in the Asia-Pacific

A “A 2020 Vision for U.S.-Asia Partnership”

n March 21-22, the American Chamber of Commerce in Taipei had the honor of playing host to the 2013 Spring Conference of the Asia Pacific Council of American Chambers of Commerce (APCAC). “It was the first time in 20 years for Taipei to be the venue for this annual event, and we did our best to show what Taiwan can do,” says AmCham Taipei President Andrea Wu. “We were quite gratified by the results, and many APCAC members told us it was the best Spring Conference they had experienced.” More than 200 delegates registered for the event, including 80 from outside Taiwan. Of the 28 American Chambers in the Asia Pacific that belong to APCAC, 18 sent representatives to the conference. Also attending were officials from the Washington-based U.S. Chamber of Commerce and from the Canadian Chamber of Commerce in Ottawa. Opening remarks were delivered by AmCham Taipei Chairman Alan T. Eusden, APCAC Chairman Steven R. Okun, and American Institute in Taiwan Director Christopher J. Marut. In a show of U.S. government support, two high-level officials attended from the State Department – Senior Official for APEC Atul Keshap and Special Representative for Commercial & Business Affairs Lorraine Hariton – as well as a Department of Commerce delegation led by Daniel Harris, regional director for East Asia and the Pacific of the U.S. Commercial Service, joined by senior commercial officers based in Singapore, Guangzhou, Tokyo, and Taipei. After the serious work of the conference, the delegates enjoyed a private tour of the National Palace Museum and a tasty dinner at the Silks Palace restaurant at the museum, with musical performances afterward. With help from PR sponsor Ogilvy Public Relations, the event received wide coverage by the Taiwan media.

tul Keshap, U.S. Senior Official for Asia Pacific Economic Cooperation (APEC), relayed Secretary of State John Kerry’s message that the Asia Pacific is critical to achieving the Obama Administration’s priority of creating jobs and opportunities for the U.S. economy. He said that U.S. exports to APEC countries came to about US$895 billion in 2011, supporting as many as six million jobs back home. Keshap said that one of the U.S. top priorities is to conclude negotiations, currently underway with 10 other countries, for establishment of the Trans-Pacific Partnership (TPP). So far, 16 rounds of negotiations have been held, and the White House would like to conclude the agreement by the close of 2013 if possible, said Keshap. He also cited the importance to the United States of various regional programs such as the Lower Mekong Initiative, which aims to enhance cooperation in the areas of environment protection, health, education, and infrastructure development with Burma, Cambodia, Laos, Thailand, and Vietnam. With regard to the relationship with China, Keshap cited an OECD study showing that by 2060, the Chinese economy could represent 23% of global output. “The U.S. welcomes a strong, prosperous, and successful China that plays a key role in world affairs and adheres to international standards,” he said. The Administration hopes to increase U.S. export access to the Chinese market, continue Chinese investment in the United States, and ensure a level playing field for U.S. investors seeking to invest in China. A second State Department official, Lorraine Hariton, Special Representative for Commercial and Business Affairs, noted

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that the so-called U.S. pivot to Asia is not only about the U.S. political and security agenda, but also “absolutely about our economic agenda.” In line with that priority, in February 2012 the State Department invited high-level officials from federal agencies and business executives from over 100 global economies at the first Global Business Conference in Washington, DC. Hariton said the Department will hold international conferences about infrastructure and tourism this year and hopes to later host one on energy policy. President Obama’s National Export Initiative is committed to doubling U.S. exports between 2010 and 2015, Hariton said, adding that the State Department is committed to supporting

U.S. firms and ensuring a level playing field in export markets. She also introduced the Department’s Advocacy Center, which assists American businesses in seeking to win bids for foreign government procurement. Last year, the Center helped 53 companies win US$87 billion worth of contracts, supporting 370,000 American jobs, she said. Another program, Direct Line, connects U.S. ambassadors with American businesses, particularly small- and medium-sized businesses, looking for new markets. In the past eight months, more than 2,000 companies have signed up and over 40 Direct Line teleconferences have taken place. Hariton said she views American Chambers of Commerce as the gov-

Introducing the U.S. Commercial Service

n 1980 Congress established the U.S. Commercial Service under the Department of Commerce, with the mandate of promoting U.S. exports and assisting American businesses abroad find potential market opportunities, understand local dynamics, and utilize available resources. A panel led by moderator Daniel Harris, regional director for East Asia and the Pacific of the U.S. Commercial Service, explained how the Commercial Service is meeting its aims in the Asia-Pacific region. Gregory Wong, Principal Commercial Officer at the U.S. Consulate in

Guangzhou, focused on the dynamics of accessing China’s emerging secondand third-tier cities – and the role of the Commercial Office in assisting American businesses with that task. With over 30 cities having populations over 4 million, these growing markets have a huge potential to provide new customers for U.S. companies. Wong also explained how China’s growing network of high-speed railways, which is expected to connect over 40 million people in less than 45 minutes by 2016, will significantly increase the interconnectivity of second- and third-tier cities,

ernment’s active partners in promoting business and “our eyes and ears” in the region. — By Emily Chen

thus easing the way for American businesses to successfully tap into these huge emerging markets. Andrew Wylegala, Senior Commercial Officer of the U.S. Embassy in Japan, said that despite Japan’s challenges of an aging population and a 214% debt-to-GDP ratio, there are reasons for an optimistic forecast regarding the Japanese market and the potential growth opportunities there for American businesses. Japan remains a world leader in R&D as a proportion of GDP, innovation and entrepreneurial development, and investment in renewable technologies and their application. Prime Minister Abe’s policies geared toward market liberalization and deregulation are expected to lead to larger pools of talented labor and an agenda in which growth and innovation are top priorities. Wylegala also cited Japan’s enthusiasm to join the Trans-Pacific Partnership as a strong indicator of its commitment to regionalism. A number of industries, such as energy and defense, represent areas in which American partnerships will be crucial for successful growth. Patrick Santillo, Senior Commercial Officer at the U.S. Embassy in Singapore, opened remarks by identifying Singapore as an important regional hub and partner for American business. Singapore, the fourth largest market for U.S.

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exports at a total value of US$70 billion, represents a larger market share for U.S. goods than India and Mexico combined. Santillo noted that the U.S. government is promoting a National Export Initiative (NEI), a program that aims to double U.S. exports between 2010 and 2014. In

line with the NEI, the Commercial Service is looking for closer collaboration with U.S. companies to expand their business in the Asia-Pacific region. Helen Hwang, Section Chief of the Commercial Section at the American Institute in Taiwan, emphasized her

office’s “matchmaking service,” utilizing a database with information on hundreds of thousands of companies to help American businesses find suitable partners in Taiwan. — By Lianna Faruolo

The Need for Multi-Skilled CEOs Spurs Cross-Border Searches CEOs of multinational companies in the future will need broad experience in multiple markets, and preferably foreign language abilities, said Trina Gordon, president and CEO of executive search firm Boyden World Corp., in the first-day luncheon keynote speech. Gordon, who was named one of the “50 most influential headhunters in the world” by Businessweek magazine in 2008, said top global talent will increasingly be found outside Western countries in nations ranging from Vietnam to Ghana. Globalization, a shift in economic momentum to Asia, the digital economy and social media, and changing demographics are propelling rapid economic change and have an enormous influence on how organizations investing in managerial talent view the future, Gordon said. Since CEOs now need to be more multi-skilled than ever to manage new emerging markets, cross-border searches for executive talent have grown sharply, she said. The Associa-

tion of Executive Search Consultants surveyed around 200 companies and found that cross-border or international headhunting had grown 67% for European companies and 62% for AsiaPacific companies in 2011. “People in our business when partnering with global organizations are finding that geographic borders are slipping away,” Gordon said. “More and more of client needs and corporate business needs, both emerging and multiregional, are cross-border.” “This growth is really coming from multinational expansion, but it is also the rise of in-country technology telecoms from Thailand, it is the financial services sector in Vietnam, and it is the automotive industry and consumer demand from Korea,” Gordon said. American companies traditionally export products to Asia but the next wave of American exports will be in services, Gordon noted. American service firms, such as global legal advisory firms, will need to compete against their Asian counterparts on their own turf

and this will heighten the need for top managers who understand the local culture and business practices, along with complex Asian bureaucracies. Despite the shift away from using American expatriate managers who only have experience in their home markets in these roles, Gordon said that talented American graduates who study a language such as Chinese will be in high demand. While companies should work to nurture leadership talent, she added, individuals have a responsibility to challenge themselves to acquire the broad set of skills needed. Being a proponent of innovation is fundamental. And that also means “raising your hand for challenges that may seem a little bit uncomfortable.” — By Jane Rickards

Panel I: The Greening of Energy, Industry, and Buildings

rom globe-spanning behemoths to small local firms, participants in the Green Technology forum at APCAC 2013 expressed a shared commitment to corporate responsibility and environmental sustainability. Moderated by Kenny Jeng, product 26

stewardship manager for DuPont Chemicals and Fluoroproducts, AsiaPacific, the panel included Peter Li, general manager of GE’s Power and Water division for China; Karen Guo, Dow Asia-Pacific’s sustainability leader; and Ying-Chao Kuo, founder and prin-

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cipal architect for Bioarchitecture Formosana. All agreed that technologies and business models oriented at sustainability are good not only for the world, but also for the bottom line. “Setting ambitious sustainability goals helps us advance our performance both financially and environmentally, and results in positive impacts up and down our value chains,” Kenny Jeng quoted DuPont Chair and CEO Ellen Kullman as saying. Jeng said DuPont applies “science to find solutions to some of the world’s big challenges,” such as feeding the world, reducing dependence on carbon-emitting fossil fuels, and keeping communities and the environment safe. The company dedicates 86% of its R&D “engine” to advancing this mission, with positive results. Jeng reported, for instance, that DuPont has pioneered strains of corn that can thrive under increasingly prevalent drought conditions (drought already causes US$8 billion in crop damage worldwide each year and the situation is expected to worsen). DuPont advances in materials science have also led to innovative textiles and thermoplastics sourced from renewable materials. Manufacturing these materials also require significantly less energy while emitting far fewer green-

house gases (GHG). In addition, DuPont is on the leading edge of biofuels that reduce GHG emissions and dependence on fossil fuels. DuPont set aggressive voluntary corporate sustainability goals for 20152020 and is already well on the way to reaching them – and some have already been exceeded. Dow’s Guo says her company has also set aggressive sustainability targets for 2015, including reducing energy intensity by 25%, decreasing GHG emissions, and developing breakthrough products that promise to help solve the world’s challenges. Dow’s establishment of a Sustainability External Advisory Council (SEAC) in 1991 was a global first. This body includes members from environmental NGOs and academic and other experts in the field of sustainable development. With a presentation entitled “Power the World…Responsibly,” GE’s Li discussed a number of ambitious goals that promise to reduce the company’s environmental footprint while also opening up business opportunities around the world. GE’s goals include doubling R&D to US$10B between 2010 and 2015, reducing energy intensity by 50%, and cutting water consumption by 25%. With “global energy demand

expected to grow 50% by 2025,” Li said it is crucial to find alternatives to dwindling fossil fuels. Water is another resource in shortage. Li noted that globally GE’s technologies provide 10% of the world’s clean water, one million megawatts of electricity, and half of all electric turbines used in wind-energy systems. Kuo, founder and principal architect of Bioarchitecture Formosana, observed that sometimes the pursuit of sustainability leads not to innovative technologies, but rather to innovative uses of traditional materials. For example, his firm’s acclaimed design for the Beitou Public library makes extensive use of renewable wood and incorporates natural sunlight and tree cover to reduce energy consumption from lighting and air conditioning. He stressed that individual actions, not just the policies of big businesses and government, have a bearing on sustainability. In the case of the Beitou Library, he was especially impressed by librarians who would open all the windows wide in the morning to allow the cool air to circulate, and then later close the windows and blinds to trap the cool air inside, delaying the need to turn on the air conditioning for several hours. — By Timothy Ferry

Panel II: How FTAs and RTAs are Changing the Economic Landscape

ith free trade agreements proliferating across Asia, the Trans Pacific Partnership (TPP), a proposed U.S-led free trade bloc covering parts of East Asia, the Americas and Pacific nations, will be an enormous boost to American businesses in the region, the panelists in this session concluded. The consensus was that chamber members should encourage the 11 TPP negotiating countries to complete the agreement quickly, and that it would be in Taiwan’s interest to join as soon as possible. The TPP is the best available vehicle for American companies in the region to address many problems they are facing, ranging from coordinating supply chains to regulatory coherence, said panelist Tami Overby, Vice President for Asia at the

U.S. Chamber of Commerce. She said that tearing down trade barriers would boost economic growth in all TPP member countries. “The evidence is clear: The deeper countries integrate their economies, whether a rich or poor country, the more economic growth we all share,” she observed. The panel was moderated by former American Institute in Taiwan director William Stanton. Another panelist, David Skilling, director of the Landfall Strategy Group, noted that in the past decade the world has seen strong growth in FTAs, with an Asian country or countries involved in about half of those signed since 2001. There are now 70-plus FTAs or RTAs in Asia, with a further 80-some in the pipeline.

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Besides the TPP, another proposed regional trade bloc is the China-led Regional Comprehensive Economic Partnership (RCEP) that covers the 10 ASEAN nations, Australia, India, Japan, South Korea, China, and New Zealand – but does not include the United States. As FTAs and RTAs are negotiated by governments, there is now a “more explicit political dimension to trade,” Skilling said. In that vein, the moderator raised the question of whether tensions might arise in the future between a China-led RCEP and the U.Sbacked TPP, but the panel did not come to any clear conclusion. Overby stressed that the TPP is not aimed at excluding China or any other countries. She noted that any Asia Pacific nation should be able to join

it, provided it is willing to conform to the TPP’s “high-standard trade architecture” ranging from wide-ranging elimination of tariffs to criminal penalties for the theft of trade secrets. RCEP offers comparatively less stringent liberalization standards. Japanese Prime Minister Shinzo Abe’s recent announcement that Japan is interested in joining the TPP was a “game changer,” Overby said. With Japan’s participation, the TPP would cover nearly 40% of the world’s GDP and include two of the world’s largest economies. Overby said much hard work lies ahead. A consensus among participating countries is needed on various U.S.-proposed items, such as high-standard IPR protection. She said AmCham members in Asia could help to persuade Asian

governments and business organizations that completing the TPP is in their national interest. She noted that both of the main political parties in the United States support free trade and that Congress can be expected to back the TPP. Francis Liang, Taiwan’s deputy minister of economic affairs, said Taiwan is keen to join the TPP and that this step could help with America’s rebalancing efforts in Asia. He noted that Taiwan, which until now has been shut out of Asia’s network of free trade agreements due to Chinese pressure, is currently preparing to sign FTAs with Singapore and New Zealand. Liang said Taiwan still needs some time to prepare itself by instituting various domestic reforms. — By Jane Rickards

Panel III: Aging Societies and Medical Technologies

he issue of rapidly aging societies represents a critical issue for policymakers around the world, but nowhere more so than in East Asia. Most East Asian states face an aging population, with Taiwan and Korea at the forefront and China close behind. Moderator Yeh ChingChuan, a former Minister of Health in Taiwan, led panelists William Bishop, Alok Mishra, and Dr. Wang Lu-Hai in a discussion about the impacts of aging societies and the market potential for medical devices innovation and technology to help address the challenge of aging populations. Bishop, director of Corporate Affairs at Nippon Becton Dickinson Company, identified Japan’s unique position as the first country to face the challenges presented by an aging population and its ability to now assist other countries that will soon be in the same position. 28

Japan’s population aged 60 and above now constitutes over 40% of its overall population and controls over half of the country’s wealth. This situation has led to a dramatic shift in consumer demand, and subsequent adjustment by the business community to meet the different consumer and health needs of the elderly population. Japan has successfully fostered cooperation among its world-class high tech, medical, and consumer products industries and is now looking to apply their findings to advanced countries and other markets within the Asia-Pacific region. Mishra, vice president of Strategic Business Systems at Johnson & Johnson Medical Asia Pacific, identified the critical need for states in the region to build the capacity to meet the needs of aging populations. With a projected one billion people aged 60 and older in Asia by 2050, Mishra said, countries in the region will face growing challenges associated with increasing access to affordable healthcare. Innovative solutions will be needed, such as remote medical monitoring to enable doctors to

care for patients without the need for a visit to a clinic or hospital stay. Mishra noted that the significant growth potential of the healthcare market is driving demand and innovation. Healthcare products and services accounted for over 10% of global GDP in 2010 and the figure is expected to rise significantly over the coming decades. U.S. companies, as global leaders for innovation and development in this field, will enjoy expanded business opportunities, Mishra said. Wang, Acting Vice President of the National Health Research Institutes, emphasized that the government’s promotional initiatives are increasing collaboration among the medical technologies industry, high-tech industry, and the academic community. Thanks to such initiatives, innovation to address the changing needs of the medical-care industry has increased, and the business community has a more thorough understanding of the growth potential of the market. —By Lianna Faruolo

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Panel IV: Forces at Work: Realigning Asia’s Supply Chains

he Supply Chain session was moderated by Bill Gerhardt, Supply Chain Solution Builder at McKinsey & Co., with panel participation by Kurt A. Hollasch, director of Manufacturing Strategy and Supply C h a i n f o r C o r n i n g D i s p l a y Te c h nologies; Kenneth A. McMahon, managing director, Taiwan Sales and Japan Global Account Management for FedEx Express; and Craig Moss, chief operating officer of the Center for Responsible Enterprise and Trade (CREATe.org). “Supply chains are moving beyond costs because markets have matured,” said Gerhardt. McKinsey interviewed 6,000 executives at 600 companies in recent years and discovered that rapid changes involving innovation, lastmile delivery, consumer differentiation, talent scarcity, volatility, changes in government regulations, and greening have created a “new normal” that companies now need to understand and master to be successful in supply chain management (SCM). Hollasch shared lessons in SCM from Corning, one of the world’s largest glass substrate manufacturers. Corning’s manufacturing operations are located in Asia, because “cost and quality considerations have driven us to be physically near our customers,” he said. “Close proximity to receiving process feedback [about] the quality of our glass allows us to fine-tune our process to maintain high yield.” With extremely strict quality con-

trol in manufacturing glass substrates for products ranging from smartphones to televisions, Corning builds its supply chain around key customers in China, Japan, Korea, and Taiwan. The company has also established Supply Management Services subsidiaries in Singapore and Switzerland to support cost reduction, supply continuity and enablement, and improved execution. Hollasch concluded with four recommendations for supply chain growth in Asia: the adoption of rigorous safety and environmental standards, strong IP law and enforcement, enactment of tax policies favorable to capital investment, and development of global supply chain talent. Moss discussed how CREATe, a global nonprofit organization, works with multinational clients to protect IP and reduce corruption in the global supply chain. Both issues are impacted by weak rule of law and can be improved by process-based management systems, he said. According to CREATe’s research, 75% of an organization’s asset value is now tied to IP. Moss said that the value of counterfeit and pirated materials now stands at approximately US$1.7 trillion, and trade-secret protection is one of the greatest challenges restricting international trade and investment. In Moss's view, organizations need to switch from an audit-based approach to a systems-based approach of holistic due diligence in supply chain compliance, with a focus on management systems, IP protection, environmental and labor

conditions, and corruption. Instead of pushing the responsibility of quality control and compliance onto suppliers and using audits to expose inadequacies, organizations should proactively manage process improvement and use audits only to collect data. McMahon cited three forces shaping supply chain realignment across Asia: direct distribution, integration of reverse logistics, and decentralization. Direct distribution has become a standard mode of transaction as customers and retailers demand faster and more customized product delivery, he said. Firms need to optimize their direct distribution model to avoid obsolescence, ensure flexibility, and minimize risk. Companies also need to consider bestin-class solutions through “reverse logistic” strategies to minimize the cost of handling returned products, while maximizing opportunities to create positive, memorable customer experiences. In light of lessons learned from recent natural disasters, the trend towards decentralization of supply chains in Asia has been driven by new risk management strategies, said MacMahon. Companies are now creating contingency plans to prevent supply chain disruption. Since multi-sourcing introduces added complexity and variables, it is important to use a logistics provider with broad capacity, diverse geographic experience, and the ability to foresee and adapt to changing conditions on the ground. — By Emily Chen

TSMC's Morris Chang Evaluates Taiwan’s Tech Sector

nnovative technologies and products that lead to the creation of value in a company are the keys to success for Taiwanese technology companies, said

Morris Chang, founding chairman and CEO of the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co. (TSMC), in his keynote taiwan business topics • april 2013

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address for the conference’s second-day luncheon. Chang, who was named Business Man of the Year by Forbes Asia in 2012, also said Taiwan should reform its education system to create an environment that encourages innovation. Surveying Taiwan’s main high-tech industries, Chang singled out integrated circuit (IC) design – also known as the fabless semiconductor industry – along with the IC foundry industry as two areas where Taiwan is particularly strong. The fabless industry is R&Dintensive but not capital-intensive, while the IC foundry sector is both, he noted. Chang cited MediaTek as the top company in the fabless sector, and his own TSMC as dominating in the foundry segment. Taiwan’s mobile handset industry, whose flagship company is smartphone maker HTC, also requires innovation without capital intensity, and potentially represents a “new rising star.” Despite strong international competition, the outlook is “tough but hopeful.” On the other hand, the Dynamic Random-Access Memory (DRAM) industry

is an “unfortunate loser,” Chang said. “Its past business model was wrong. It was characterized by very little R&D, very little innovation, and specialized in mainly commodity products with high capital-intensity.” As a result, the number of DRAM companies in Taiwan has dwindled, and the outlook is unclear. Taiwan’s Light Emitting Diode (LED) industry, which is R&D- and innovation-intensive and moderately capital-intensive, is in rather good health, Chang said, but still faces a hard struggle ahead owing to competition from the United States, Japan, and Europe. Companies from those areas were earlier entrants to the market, and have set up what Chang termed a “patent minefield” that latecomers such as Taiwan have to navigate. The computer (PC and Notebook) industry in Taiwan has not been very innovative, but now needs to reinvent itself amid strong global competition, Chang said. A hard struggle also lays ahead for the display industry, as Korean companies have technological superiority and Taiwanese companies

lack the vertical integration of Korea’s chaebols. He called the outlook for Taiwan's solar industry “uncertain,” given the keen competition from China and the United States, which have offered incentives to the industry. “Educational (reform) is one big thing the government can do to encourage innovation,” Chang said, criticizing the obsolete Taiwanese focus on rote learning and memorization instead of cultivating independent thinking. Of Taiwan’s 160-some universities, he said, two or three should focus on training future leaders, just as U.S. Ivy league universities nurture talent. A further 10-20 could focus on nurturing innovation and value creation, while the rest would mainly train graduates to be productive contributors to the economy. He also noted that Taiwanese industrial policy should focus on creating a physical and cultural infrastructure that encourages innovation, openness, and fair competition. “Emphatically, there should not be industrial policy that picks winners and losers,” he said. — By Jane Rickards

Panel V: Protection of Innovation and Creativity in the New Era

oderated by Scott Meikle, president of Inotera Memories and Micron Tech Asia Pacific Taiwan, the intellectual property panel began with a lawyer’s viewpoint from David Su, director of Planning and Commercial Projects in the Taiwan Semiconductor Manufacturing Co. (TSMC) legal division. “Innovation is not just free-form invention or generation of technical solutions,” he noted. “Innovation has to be based on creating value – creating things that customers will buy.” Su explained that IP is a critical force behind creating a company’s value, since it establishes an exclusive space for firms to create new product lines and busi30

nesses. It also protects the competitive edge of existing products and businesses, preserving the ability to charge a premium for a product or service. Su argued that developing an IP ecosystem is the most important factor in the success of IP protection. “Protecting IP requires a deliberate effort to create a system and structure” within a company, said Su. “Usage of your IP has to be fully consistent with your business strategy… [to] produce the result that you would like to accomplish at the corporate level.” As such, TSMC has a clear, top-down directive from the chairman emphasizing the importance of IP protection in corporate strategy and culture.

Next, Joe Welch, Senior Vice President of Government Affairs at Asia News Corporation shared IP-related challenges facing the multimedia industry. As distribution networks continue to innovate, offering paid subscribers access to content anytime and anywhere, the problem of copyright infringement has grown worldwide, he said. A study by Asia News Corp. found that 11 of the top 50 countries where users infringe on TV show copyrights are located in Asia. According to the Alexa ranking, which lists a country’s most visited websites, Taiwan’s top 100 most visited web addresses include five websites that illegally distribute TV and movie content.

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Welch noted that this poses a serious challenge to the business of legitimate multimedia companies. Malaysia, India, Indonesia, and South Korea are the only countries in Asia that have so far implemented site-blocking of illicit websites due to copyright infringement. Governments can order broadband providers to block internet service provider (ISP) addresses associated with rogue websites – this has proven to significantly reduce and nearly eliminate access. Thus, there is a need for the industry to engage with national governments to improve the

development and enforcement of IP laws, concluded Welch. Lastly, Jason Collins, Vice President of Emerging Technology and Commercialization at Alcatel-Lucent, shed light on how companies can employ IP protection that facilitates open innovation. Collins said that innovation is optimized in an open environment where researchers can bounce ideas off of one another and collaborate to create new things. “More sharing is better, within a context of good protection,” he expressed. Collins launched the “ng Connect Program” at Alcatel-Lucent which

engages an ecosystem of diverse companies – each with their own advanced IP portfolio – to collaborate on “orchestrated innovations” in “next generation end user experience.” The goal is to create value in a way that each company could not have done individually. Collins said the legal framework is a key differentiator: after converting a lengthy legal agreement into a simple click-through, online non-disclosure agreement about protecting each other’s IP, the program’s participants jumped from 50 to 200 companies. — By Emily Chen

Policy Recommendations to Washington

epresentatives from each of the five panels held during the two-day conference presented ideas for APCAC’s reference in preparing the Council’s annual report this summer for the U.S. administration and members of Congress. Among the highlights: • The session on Free Trade Agreements and Regional Trade Agreements stressed the need for active U.S. government support to American business operating in the Asia Pacific. High-level American leaders are strongly encouraged to meet with American chambers of commerce wherever they go in Asia, for example, and they should also bring a delegation of business executives with them when visiting other countries. In addition, the 11-country negotiations for the proposed Trans-Pacific Partnership need to be completed as early as possible, and it is important to ensure that U.S. partners in free trade agreements faithfully honor their commitments. • The session on the greening of energy, industry, and buildings urged the U.S. government, as well as the authorities in Taiwan and other Asian countries, to 1) develop longterm strategies and sustainability goals for energy, natural resources, and conservation, 2) develop policies with strong incentives for motivating enterprises to develop innovative solutions on new renewable energies and natural resource conservation, and 3) develop effective means of communicating to the public and all stakeholders involved the importance of energy efficiency and conservation, in order to change people’s mindsets and behavior. • On aging societies and rapid changes in medical technologies, the panel suggested that other countries study how

Japan copes with the experience of being the first superaged society, with Taiwan and Korea around 10-15 years behind. These countries will all face the challenge of supporting an elderly population with taxes from a shrinking youthful population. Innovation and high-tech solutions are needed in many areas, for example creating household devices that are simple and easy for elderly people to use. Working to achieve regulatory harmonization among Asian countries and with the United States would greatly help U.S. companies’ competitiveness in this field. • Regarding regional supply chains, governments are feeling increasing pressure to protect intellectual property rights, and supply chains across Asia are becoming increasingly complex and vulnerable to corruption and contamination by counterfeit goods. Better policies are needed to encourage whistleblowers. Multinationals also want to see the predictable enforcement of regulations in Asian countries and greater transparency. The United States should fully support Taiwan in its efforts to become an innovation center for greater China. • The session on protection of innovation and creativity stressed the need for greater international cooperation in protecting trade secrets, copyrights, and patents, as well as the need for nations to create a regulatory infrastructure or platform that fosters creativity and innovation for a global knowledge economy. In developing its own policies, in addition, the United States should pay attention to how Asian countries are responding quickly to rapid changes in technology. — By Jane Rickards

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A Special Hsieh Nien Fan As AmCham Chairman Alan T. Eusden noted in his welcoming remarks at the event, AmCham’s annual Hsieh Nien Fan, the banquet to express the Chamber’s appreciation to Taiwan government officials and other friends of the Chamber for their support over the past year, is always a special occasion – but this year’s Hsieh Nien Fan was more special than ever. The banquet on March 21 in the Grand Ballroom of the Grand Hyatt Taipei served not only as the 45th annual Hsieh Nien Fan but also as the gala dinner of the APCAC Spring Conference. The nearly 600 attendees included APCAC delegates, AmCham members and guests, as well as 80 government officials and other local dignitaries. The master of ceremonies was Thomas Fann, an AmCham Governor and president of the Ford Lio Ho Motor Co. President Ma Ying-jeou, despite having just returned from a trip to Europe to attend Pope Francis’s inauguration, continued his tradition of delivering the keynote address, then staying for dinner and to toast each table. The president’s speech covered Taiwan’s efforts to be a key player in the Asia-Pacific regional economy, its improvement in relations with China through the Economic Cooperation Framework Agreement (ECFA) and

other means, and the Economic Power-Up Plan the government has adopted to gradually turn Taiwan into a “free trade island.” Ma also emphasized Taiwan’s steps to improve trade and economic relations with the United States, including the successful restoration of mutual trust after previous disputes over restrictions on the entry of U.S. beef into the Taiwan market. Also speaking was American Institute in Taiwan Director Christopher J. Marut, who touched on the two decades of U.S.-Taiwan cooperation on environmental protection and praised the “serious and spirited debate” underway in Taiwan on “what Taiwan needs to do in order to sustain its remarkable economic development.” He also mentioned three areas vital to the prosperity and growth of the Asia Pacific region over the coming decade: trade integration (including the Trans-Pacific Partnership now being negotiated by 11 countries), energy security, and regional stability. Besides the President, other government officials in attendance included Premier Jiang Yi-Huah, National Security Council Secretary-General Jason Yuan, Ministers of State Simon Chang and Lin Cheng-jer, Council of Agriculture Minister Chen Bao-ji, Council of Economic Planning & Develop-

ment Minister Kuan Chung-ming, and numerous vice ministers. Also participating were two U.S. State Department officials: Atul Keshap, the U.S. Senior Official for Asia Pacific Economic Cooperation, and Lorraine Hariton, Special Representative for Commercial & Business Affairs. Attendees enjoyed a sumptuous meal featuring a choice of roasted U.S. beef tenderloin or cod fillet, accompanied by Jacob’s Creek Sparkling Chardonnay Pinot Noir, Jacob’s Creek Shiraz Chardonnay 2010, Jacob’s Creek Shiraz Cabernet 2012, and Royal Salute 21-Year-old Blended Scotch Whisky. Making the event possible was the generosity of the Hsieh Nien Fan/ APCAC sponsors: Platinum Sponsor Citi Bank; Wine & Liquor Sponsor Royal Salute Scotch Whisky by Pernod Ricard; Gold Sponsors Corning Display and Standard Chartered Bank; Silver Sponsors 3M, HSBC, JTI, and Micron; Bronze Sponsors Air Products, Alcatel-Lucent, American Express, Johnson & Johnson, and Philip Morris; and General Sponsors Baker & McKenzie, Dun & Bradstreet, Ford Lio Ho, General Electric, Grand Hyatt Taipei, IBM, McKinsey & Co., Morgan Stanley, Procter & Gamble, Synopys, and the Tobacco Institute of the Republic of China.

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INDUSTRY

CUS

A Report on the Telecommunications Sector

Technology-Enabled Business Opportunities

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CUS

Constructing the “Taiwan Cloud Valley” With government assistance, local industry is positioning itself to take advantage of cloud-related hardware and software business opportunities.

BY EMILY CHEN

IN THIS SURVEY

• Constructing the “Taiwan Cloud Valley” p34

• Trending in Taiwan: Mobile Apps

p36

• Getting Ready for 4G

p39

• Complications to Delivering LTE

p40

• The Internet of Everything

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Cloud computing” has become a frequent buzz phrase in recent years, often associated with consumers who use it to store and access digital content or to enterprises outsourcing to cloud service providers. But what else is ahead for the cloud industry and how does Taiwan stand to gain from a global shift to cloud computing? Simply put, cloud computing is the combined use of hardware and software to deliver computing services over the internet, rather than through direct connection to a server. Individual or enterprise end-users interact with cloud software (known as Software as a Service, or SaaS for short) through web browsers or applications. Cloud-based software is built on top of cloud platforms (Platform as a Service, or PaaS), which are enabled by specific cloud-computing infrastructure (Infrastructure as a Service, or IaaS). In the past, companies that worked with large amounts of data had to make substantial capital expenditures on in-house data centers or servers. Cloud computing allows companies to save costs in infrastructure investment and information

technology (IT) know-how by leasing virtual data centers from cloud-computing operators, such as Amazon Web Services. Companies can essentially outsource their IT needs to cloud operators, improving business efficiency by freeing up IT costs for other needs. Ta i w a n ’ s g o v e r n m e n t a n d businesses have their sights set on creating a “Taiwan Cloud Valley” as a hotbed for cloud infrastructure, platform, and software developers. “ We b e l i e v e t h a t c l o u d c o m puting is an irreversible trend. It represents a very important opportunity for Taiwan,” says Chiueh Tzicker, general director of the Cloud Computing Center for Mobile Application at the Industrial Technology Research Institute (ITRI). “For other countries, it probably doesn’t mean that much, other than making society more efficient. But for Taiwan, it is strategically important, simply because [Taiwan] has played such an important role in making the hardware OEM and ODM for the IT industry.” OEM and ODM refer to original equipment or original design manufacturers, who work on contract to industrial cus-

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A Report on the Telecommunications Sector

tomers whose brand names go on the finished product. Taiwan companies have historically churned out the world’s largest quantities of notebook PCs, tablet devices, motherboards, and other IT hardware. Taiwan currently produces more than half of the world’s server systems, according to the Market Intelligence & Consulting Institute of Taiwan’s Institute for Information Industry (III). Homegrown ODM and OEM companies such as Quanta, Inventec, Wistron, MiTAC, and Foxconn have led the way. Faced with falling profit margins, such firms have begun diversifying into new business lines – including cloud computing – to remain competitive. The island is also home to production of central processing units, digital storage equipment, and network devices. Because Taiwan is already a leader in manufacturing the hardware components of cloud computing, local industry is considered to be uniquely positioned to conduct R&D in cloud operating systems and application software. “The country has been talking about how to develop software [and] add value to the hardware business for almost two decades, so we think that this is a very important opportunity,” Chiueh says. “Taiwan’s government is trying to take advantage of the advances in cloud computing, to see if they can change the landscape of the hardware- or manufacturing-oriented industry, and add some value to the entire food chain of the computer industry.”

source: sam Johnston

In 2009, the Ma administration pledged to invest NT$24 billion (US$828 million) in the cloud-computing industry between 2010 and 2014, with the goal of generating NT$1 trillion (US$34 billion) in value, creating 50,000 job opportunities, and allowing 10 million people to benefit from intelligent cloud services. The government and IT manufacturing industry hope that adding new software technology to existing ICT hardware capabilities will increase the profit margins of Taiwanese companies. For example, companies such as Asus,

source: techie state

Acer, and HTC could take advantage of back-end cloud computing infrastructure by pre-installing cloud-enabled applications on the front-end of devices. This approach could offer users easy access to music, photo, and video storage or shared applications without paying an extra fee, and it would free up memory space on internal hard drives.

Collaboration is key The Cloud Computing Association in Taiwan (CCAT), formerly known as the Taiwan Cloud Computing Consortium, was founded in 2010 by five of Taiwan’s most influential IT-related organizations: the publicly funded R&D powerhouses ITRI and III, Chunghwa Telecom, the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA), and the Information Service Industry Association, known as CISA. CCAT’s 120 or so members include telecommunications operators, hardware manufacturers, software developers, service providers, and system integrators. Together, they are developing integrated cloud solutions to serve both the public and private sectors. The goal of CCAT is to position Taiwan as a one-stop shop for the global cloud computing supply chain.

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INDUSTRY

CUS “We’re trying to find ways to uniquely position Taiwan for cloud solutions,” notes Albert Chen, CCAT’s executive secretary and Corporate Chief Technology Officer of Inventec. “We are building the whole ship together.” The association, which is laying the groundwork for Taiwan Cloud Valley, inaugurated a demonstration center last year showcasing over 30 IaaS, PaaS, and SaaS solutions developed in Taiwan. This year, CCAT will establish a cloud-computing business incubator to support cloud-oriented startup companies with technical resources, mentorship from larger companies, access to networks of angel investors, and international marketing channels.

Cisco's Unified Computing System (UCS) stacks. photo : cisco

Trending in Taiwan: Mobile Apps

f you glance around a crowded MRT car or café in Taipei and notice that the majority of people around you are completely absorbed by small, glowing screens (or catch yourself among this majority), you may wonder how digital devices have become so addictive that many people can no longer imagine life without them. Nearly 42% of Taiwanese own smartphones or tablet PCs, according to a survey about wireless internet usage by the Taiwan Network Information Center (TWNIC). Of the survey respondents with such devices, 47% use equipment running on Google’s Android operating system, while 30% use Apple’s iOS. Another finding was that 72% of these respondents have used wireless internet and 76% have used mobile internet via 3G or 3.5G. The TWNIC survey was based on phone interviews conducted with a randomized selection of 1,108 citizens across 22 cities and counties in Taiwan from August to October 2012. Two years ago, the Taipei city government introduced free public wi-fi in MRT stations and trains, buses, libraries, hospitals, shopping centers, and business complexes. Individuals can register online in an easy three-step process, free of

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charge, and visitors to Taiwan can bring their passports to register at tourism centers throughout Taipei. The network will expand to major streets and residential areas in the future. The average mobile web user in Taiwan consumes six hours of media per day, including about 98 minutes spent using mobile devices, according to mobile advertising firm InMobi. Among TWNIC’s respondents who owned smartphones or tablet PCs, approximately 67% had downloaded apps. Among them, 71% downloaded games apps, 54% “community” or social networking apps, 30% “utility” or productivity apps, and 26% transportation apps. Only 19% of TWNIC’s interviewees who downloaded apps had purchased

paid apps. For those who spent money on apps, 49% downloaded games, 23% social networking apps, and 15% utility tools. Of paid app users, in addition, 60% spent less than NT$60 (about US$2) to purchase premium apps. Half of the top 10 paid Android apps in Taiwan are Disney-created games, such as Temple Run. Four of the top paid iOS apps are games from China, Japan, and Taiwan. The most popular paid productivity apps in both Google’s Android PlayStore and Apple’s AppStore include U.S.-developed CWMoney expense tracker. The top paid productivity app in the PlayStore is a Taiwan-developed map navigator called Papago!, which costs NT$688 (US$24) and has over 10,000 downloads. In June 2011, the Taipei city govern-

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Currently, Amazon Web Services (AWS) and Google Cloud Platform dominate the world market as cloudcomputing vendors. However, CCAT believes that telecom carriers are poised to overtake this role in developing countries, and the Hong Kong-registered Asia Cloud Computing Association (ACCA) sees that trend as especially true in the Asia Pacific, where the diversity of languages and cultures is best served by local service providers. Other factors favorable for cloud computing to take off in Asia are the large number of small- and medium-sized enterprises (SMEs) in the region with limited IT skills, as well as the high concentration of mobile-device users. SMEs

will increasingly turn to cloud computing to leapfrog traditional IT hardware investments, predicts ACCA. Globally, Forrester Research estimates that the cloud-computing market will explode from US$40.7 billion in 2011 to US$241 billion in 2020. To supplement the cloud-related IT hardware produced by Taiwan’s OEM and ODM companies, ITRI joined forces with Inventec, Wistron, and Chunghwa Telecom to develop Cloud OS – a cloud operating system capable of running a virtual server center. The Cloud OS can be paired with containerized data centers, also developed by ITRI, which are individual shipping containers each packed with over a thousand servers. The “con-

tainer computers” or “mobile data centers” are meant to standardize cloudcomputing hardware in a cost-efficient and customizable form. Chiueh, who also serves as Secretary General of CCAT, says that the pairing of Cloud OS with container computers is the world’s first “all-in-one” software and hardware cloud-computing package. The Cloud OS integrates all of the management software needed to run a virtual server center, including hardware management, virtualization management, software deployment, data storage and management, and security. This integration saves service providers the cost and hassle of acquiring software from multiple sources to get a cloud-computing

ment began requiring Apple and Google to offer a seven-day free trial for all paid applications downloaded locally, in accordance with the Consumer Protection Act. Apple complied with the new rule, but Google stuck to its original policy of allowing app refunds only within 15 minutes of purchase. It was then fined NT$1 million (US$35,000), after which Google blocked the sale of paid Android apps in Taiwan for 20 months until it won an appeal to the Taipei High Administrative Court and the fine was dismissed early this year. Three of Android’s top 10 free downloads are social networking and messaging apps, including Facebook, the Japanesedeveloped Line, and China-based WeChat. Half of the top 10 free iOS apps are games from Japan, Korea, Taiwan, and the United States. The top free iOS app by number of downloads is currently a restaurant coupon program (台灣美食優惠券大全集) – developed by Taiwan’s Phind Corp. – in which users can purchase special deals from fast food establishments including Starbucks and KFC. “Hopefully, in the future consumers will see that mobile apps offer a better way to consume, share, and interact with media,” suggests James Hill, business developer for the Taiwan-developed Cubie Messenger. “There will be no reason to rely on traditional forms of

media that, in the case of many Taiwanese consumers, leave a lot to be desired. Currently, as with other markets, the majority of apps downloaded in Taiwan are games and social networks. It will be interesting to see utility apps and other management apps reach ubiquity.” Cubie is a mobile messaging app that enables users to draw creative sketches within chat boxes and has an embedded YouTube search option for sharing videos with friends. Founded in Taipei about one year ago, Cubie has experienced viral growth, with approximately 15,000 downloads per day and 800 million messages processed per month, primarily in Taiwan, Hong Kong, Japan, Southeast Asia, and Saudi Arabia. “In most developed markets, mobile has surpassed TV and other traditional media in terms of time spent consuming media,” observes Volker Heistermann, founder of Yushan Ventures, a start-up incubator and venture capital firm. He believes the next trend in Taiwan’s mobile apps will be the rise of online purchases. “Consumers are now transacting on their mobile devices. Commerce is extending past digital goods and now includes physical goods, services, and mobile payments.” “Mobile commerce growth is still lagging behind countries like the U.S., Germany, and Japan, but Taiwan has a

great ecosystem supporting e-commerce based around 7-Eleven convenience stores,” says Heistermann. “It's arguably the best e-commerce ecosystem in the world. Mobile payments and gaming are going to drive consumer behavior and app usage.” — By Emily Chen

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data center up and running. Taiwan’s objective is to position Taiwanese companies to be the go-to data center solution providers for telecom carriers in emerging markets. “We are envisioning a world in which [for companies] like Chunghwa Telecom or Taiwan Fixed Network to run an AWS-like service, it could be as simple as buying a bunch of servers, installing this software, and offering the service the next day,” explains Chiueh. “We think this is going to be a game changer, simply because it will greatly lower the bar for people who want to enter the business of IaaS or AWS-like service, not just for Taiwan but for all emerging markets.”

Honing the cloud technologies Chunghwa Telecom (CHT), Taiwan’s biggest telecom carrier, currently serves approximately 1,800 Taiwanese SME customers that rent about 4,000 virtual machines for cloud computing. Through CHT’s HiCloud portal, enterprises can sign up for cloud computing services and rent out virtual machine servers right away, based on volume or time, says Lin Chung-Shuo, director of CHT’s Cloud System Department. The firm’s internally-developed PaaS, HiCloud Mall, provides third-party independent software vendors with a place to develop and sell SaaS directly to enterprise users. HiCloud Mall serves as a cloudcomputing application marketplace for Taiwanese SMEs, akin to Apple’s AppStore or Google’s Play Store for individual consumers. Over 100 vendors have offered more than 700 cloud apps that so far have been employed by 10,000 client accounts, according to CHT. Software vendors, including IBM and Microsoft, offer applications through HiCloud Mall ranging from logistics and accounting to sectorspecific apps for healthcare and retail. CHT has established centers across Taiwan for R&D, testing, operations, and user experience to advance its IaaS, PaaS, and SaaS technologies. Lin says that AWS is the Taiwan carrier’s closest competitor, offering more advanced services at a cheaper rate due to economies of scale, but CHT is learning from AWS and quickly catching up. He notes

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The ITRI cloud data center consisting of shipping containers packed with servers running a cloud operating system. photo : itri

that in Taiwan the local carrier has the advantages of bandwidth, responsive customer service, and the HiCloud Mall. Overseas, the company aims to consult foreign telecom carriers on best practices for implementing enterprise cloud computing solutions. Last September, the Taiwan authorities unveiled a NT$7 billion (US$237.3 million) plan to build 10 “government clouds” to stimulate the country’s cloudcomputing industry and streamline administrative procedures across agencies. The Research, Development and Evaluation Commission of the Executive Yuan and the Ministry of Economic Affairs will separately oversee the development of clouds for services in the area of agriculture, disaster relief, education, environment, food safety, geographic information, healthcare, policing, transportation, and culture. The government also launched the Cloud Open Lab last September as a forum for cloud infrastructure providers, such as CHT and other data center operators, to test software applications developed by independent vendors and system integration service providers. Bidders for government cloud projects can test their systems and software in the Cloud Open Lab first, and then use the results to bid for procurements. About 165

projects by domestic and foreign companies are active in the lab at this time. “In the long run, we hope we can build different kinds of applications,” says Minister Without Portfolio Simon Chang. “When you’re coming up with applications, it needs to be tied with daily life. You need to be creative, and once those systems are delivered, we hope some of the components can be replicated and reused in working with other countries.” A former Google executive, Chang says that “behind all of these plans and initiatives, the main point is really to upgrade the industry to be ready for the cloud-computing model.” TCloud, a subsidiary of security specialist TrendMicro, has placed two of its flagship cloud solutions on the Cloud Open Lab. The first, dubbed “ElasterStack,” is an on-demand “cloud in a box” that enables data-center operators to offer customers virtual machines, storage, and network resources. The second is the TCloud Computing BigData Platform, which facilitates the management and analysis of massive quantities of data. TCloud’s customers may include telecom carriers, banks, and news services that use a BigData Platform to analyze mobile users’ behavior and preferences to improve business processes and customize product offerings,

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says Hsieh Yingyu, a TCloud quality assurance engineer. 2013 could be a critical year for the cloud-computing industry in Taiwan, now that enterprises have had three years to become familiar with cloud services, says Luis Chang, product manager of Cisco’s Data Center Solutions. Local companies may have been initially skeptical about the reliability and security of cloud computing, electing to first see how the migration from traditional in-house servers to cloud computing panned out for other firms. Some enterprises chose to adopt a private cloud (not shared with other companies’ data centers) or

hybrid cloud (public and private clouds each used for separate purposes) before considering a full migration to a public cloud, which is the most cost- and energy-efficient, says Luis Chang. “I think 2013 will be the year that most of our enterprise customers leverage CHT or other service providers’ public cloud,” he continued. As customers gain confidence in cloud technology, they will also begin to move more mission-critical applications – such as enterprise resource planning systems – to a public or private cloud. Cisco has provided networking solutions for cloud computing in IaaS, PaaS, and SaaS in collaboration with

other vendors. “From our experience, other than the United States, the cloud market in most parts of the world is still in a ‘wait and see’ period,” observes ITRI’s Chiueh. But he expressed satisfaction that progress is taking place. “It’s about awareness and visibility. People are starting to buy into this idea of outsourcing IT departments. They are more willing to first put not-so-critical services on the cloud, then their more critical services, and probably eventually commerce-oriented services. I don’t think there’s a magical timeline, but the entire market is moving in a positive direction.”

Getting Ready for 4G The auction of spectrum later this year will bring Taiwan – belatedly, many say – into a new era of mobile telecom service.

BY ALAN PATTERSON

he Taiwan government says it will issue four or five licenses for high-speed next-generation mobile telecom services no later than October this year, putting spectrum on the auction block that is currently being used for 2G (second-generation) services whose licenses are expiring over the next few years. The new services – which will use the 4G technology called Long-Term Evolution (LTE) – will greatly increase the speed of data downloads. Depending on the spectrum used, as well as the density and positioning of base stations, it could be more than twice as fast as 3G, making it easier to deliver bandwidthconsuming services such as photo and

video sharing popularized by social platforms like YouTube and Facebook. The service providers are likely to recoup their investment in licenses and network equipment more quickly than they did with 3G, assuming the regulator allows them to raise their prices for data packaging, because Taiwan’s mobile subscribers are now using their handsets heavily for data-intensive services. When 3G started in Taiwan more than a decade ago, customers primarily utilized the high-speed service for voice, which contributed little to profitability for local telcos, according to a research report prepared last year by Macquarie Securities. Now observers see a more compelling need for 4G in Taiwan. “The

top three players – Chunghwa Telecom, Far EasTone, and Taiwan Mobile – have to adopt 4G” to serve the demand for data service, says a Taipei-based analyst who requested anonymity. “Far EastTone and Taiwan Mobile will benefit the most from the rollout of 4G. The two companies have understood well how their subscribers use wireless data. Chunghwa Telecom (CHT) has been more of a follower.” CHT, which declined a request for an interview, is regarded as less than enthusiastic about the move to 4G because it occupies most of the 2G spectrum that the Taiwan government will need for the 4G auction. CHT typically is also slower than its smaller rivals to innovate due to

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its silo-ed organizational structure and large internal bureaucracy, according to analysts. Taiwan’s top-three telcos are all in a similar position. Each company holds a license for a 900 megahertz (MHz)-band spectrum for 2G that won’t expire until 2017, yet the same spectrum is due to be auctioned for 4G LTE use later this year. The first LTE services in Taiwan are expected to be launched sometime in 2014. “The existing 2G operators can use the spectrum until June 2017,” says Vice Chairperson Yu Hsiao-Cheng of the National Communications Commission (NCC). “That’s the worst-case scenario. But if they want to shrink the portion of the spectrum they are using for 2G and increase 4G ahead of that schedule, that’s fine.” CHT is the main user of the 900 MHz spectrum for 2G, followed by Taiwan Mobile and Far EasTone. More than a quarter of Taiwan’s wireless subscribers still use 2G. The Taiwan government is in a some-

what awkward position because it is CHT’s largest shareholder, while at the same time responsible for regulating the island’s telecom industry. CHT was a government-run monopoly until it was privatized in 2005; today, the company is still 35% owned by the Ministry of Transportation and Communications (MOTC). Another government body, the NCC, an independent statutory agency under the Executive Yuan, is the industry regulator. The NCC is considered fairly free of political intervention, however, according to analysts familiar with Taiwan’s telecommunications industry. According to the Macquarie Securities research report, CHT faces the most pressure to free up the 900 MHz spectrum. “Chunghwa knows they can sit on the 900 MHz spectrum for up to four years,” says an analyst who follows the industry. “That’s a big challenge for the regulator.” While the NCC cannot force operators to release the 2G spectrum for 4G, it plans to offer some inducements. “We hope to provide some incentives for

these companies to free up or switch the use of the spectrum for 4G,” says Wang Der-Wei, deputy director of the NCC’s Telecommunications Administration Department. A discounted rate for 4G licenses compared with 2G would be one such inducement, he says. Some of Taiwan’s telecom operators and market analysts have observed that the government has been slow in carrying out the move to 4G. Many technologically advanced nations such as the United States and Taiwan’s largest rival in the electronics industry – South Korea – have already gone to 4G for some time. Yet local operators have been held back by government policies, according to Far EasTone President Yvonne Li, quoted in a December 2012 China Post report.

Allocating spectrum The question of how best to allocate the spectrum has been complicated by Taiwan’s earlier commitment to the WiMAX technology standard that operators and industry analysts have come to

Complications to Delivering LTE

ith the impending launch of LTE, carriers are expected to increase the number of cellsites by as much as 30% island-wide. But Taiwan’s cityscapes of narrow and often crooked roadways, as well as buildings of widely varying heights, make deployment of wireless base-stations an engineering nightmare. More than 90% of the wireless coverage in Taiwan is enabled through rooftop antennas. While the carriers are under pressure to provide customers with reliable wireless service, the number of viable rooftop sites is steadily shrinking, due to unfounded concerns over the side effects of electromagnetic radiation, complaints from citizens who find the gaggle of antenna arrays and cables unsightly, and intervention by local politicians using the issue to seek voter support or cam-

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paign donations. For years, the carriers and their wireless network rollout partners have dealt with the challenge by resorting to implementing “gray-sites” in the most wirelessunfriendly neighborhoods. These sites may or may not be registered in the public database of the National Communications Commission (NCC) or have the required local government building permits. The problem is not new, but it will only get worse, industry sources say, since advancing wireless technology requires ever smaller cell sites. During the early years of Taiwan’s wireless industry, when the carriers all owned and directly operated the wireless network rollout companies, cases frequently occurred of employees or their relatives renting out their own property to house base stations. But the carriers

started discouraging the practice after finding that these sites were also serving one or more of their competitors. Today, the situation is much more complex, even involving the influence of organized crime. Increasingly, telecom companies are relying on third-party contractors to handle site acquisition and maintenance support in an effort to drive down operating costs. For new base stations, carriers have begun to pay a single fee to a given contractor to locate, build, and bring on-line a base-station site. As carriers seek to squeeze margins and shorten rollout times, the fees being offered have dropped so low as to make it difficult for the contractor to earn a profit. With fewer sites available and rollout times shorter, site acquisition companies are under pressure to use any method available to secure a prime base-sta-

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consider all but dead, as well as by what market analysts consider to be the generally poor spectrum management by the NCC in the past. The Taiwan government committed to WiMax at too late a stage and with too little spectrum (only 10 MHz apiece) for the initial six licensees to capitalize on its advantages, industry experts say. Subsequently, the rise of LTE undermined WiMAX’s economic viability, but the government’s earlier bet on WiMAX left Taiwan without sufficient spectrum to develop mainstream LTE, Taiwan Mobile President Cliff Lai said in an interview with the Chinese-language Business Next magazine last year. Calling Taiwan’s choice of WiMAX a mistake, Lai said it was now incumbent on the government to develop LTE as soon as possible. Unlike the 3G auction, which provided the three largest operators with equal allocations on the same 2100 MHz band, the 4G auction will release spectrum on the 700 MHz band for the first time, in addition to spectrum on the 900 MHz and 1800 MHz bands. From

a technical point of view, the 700 MHz spectrum is considered the best because signals transmitted on those frequencies can easily pass through the earthquakeresistant, steel-reinforced concrete buildings that are the norm in Taipei, says one of the analysts interviewed. “You’ll see the biggest bids made for that portion,” he notes. Since the NCC has the challenge of maintaining a competitive marketplace after the 4G auctions are completed, it wishes to ensure that the licensing process is not monopolized by the top-three companies, according to another analyst. The government expects to auction a total of 27 slots in the three spectrums, with no company allowed to buy more than seven slots, notes NCC Vice Chairperson Yu. CHT, Far EasTone, and Taiwan Mobile are expected to buy a total of 21 slots, leaving six slots for one or two smaller competitors. “If one of those smaller companies takes all six slots, there will be a total of four competitors in the 4G business,” Yu says. The two smaller companies likely

to bid for 4G spectrum are Asia Pacific Telecom and Vibo, both startups that entered Taiwan’s telecommunications industry with the opening of the 3G business. “4G is the future, so it’s impossible for us not to participate,” says Vibo Senior Vice President Andrew Wong. “The question is in what form. It’s likely that Vibo will enter this business with another partner.” He says Vibo has already been in talks with potential collaborators. Financially, Vibo is the weakest of the five competitors in Taiwan’s 3G business, according to analysts, and as such will be unlikely to obtain a significant chunk of the 700 MHz spectrum. Wang concedes that the company, which has about 1.7 million subscribers, has yet to make money in 3G. “From a shareholding perspective, 46% of Vibo is owned by the Kimpo Group and 43% by Compal Electronics,” says Wong. “If we give up on 4G, that means we don’t want to stay in the mobile business.” The Kimpo Group, one of Taiwan’s largest electronics conglomerates, con-

tion site, whether a rooftop or a topstory apartment window. Depending on the amount of space available, a gray site could accommodate as many as five carrier base-station antennas, greatly increasing the profitability. Criminal gangs have reportedly spotted a moneymaking opportunity and moved into the business, opening the telecom industry to a situation similar to what the cable industry faced in Taiwan during the 1990s. The NCC declined to comment on how many illegal base stations may exist in Taiwan. “Operators want to provide better service and coverage,” says NCC Chairperson Yu Hsiao-Cheng. “If they do it the official way, they get approval from the management committee of a building. Some base stations do not have our approval. We are continuing to do inspections and dismantling.” Unlike the situation in most developed countries, the NCC public database does not identify the ownership and specific

locations (only the street and district) of registered base stations. The database also limits the maximum number of search results for a given area to one hundred. As a result, it is difficult for citizen watch groups to assess whether a site is legal or not. The permit system at the local government level is also not accessible to the public. It is unavoidable that some illegal base stations exist, says Deputy Director Wang Der-Wei of the NCC’s Telecommunications Administration Department. “If people report them, we will investigate,” he says. Wang notes that it is also possible to monitor the situation by reviewing equipment imports and checking them against officially installed base stations. All base-station equipment must be imported because Taiwan does not manufacture them, Wang says. He adds that there is no scientific research indicating that base stations are a threat to public health. While the NCC has taken steps to

encourage multiple carriers to share a base-station site, the rate of co-location has been low, as carriers each seek to maintain their competitive advantage with respect to coverage. As of February 2013, only around 13,000 3G sites were shared, out of what is believed to be a total of around 40,000. Critics say the public interest calls for the NCC and the carriers to be more transparent about the location and ownership of the base-station sites. They also urge the central and local governments to facilitate the construction of multi-carrier towers and the installation of microsites and in-building repeaters within densely urban areas by streamlining the approval and complaintresolution processes. And they ask the various levels of government to protect a carrier’s right to install a base-station in areas in which consumers have been complaining about poor reception. – With reporting by Alan Patterson.

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sists of seven listed companies and has a total of 80,000 employees. Compal Electronics, one of the world’s largest makers of notebook PCs, is a Kimpo subsidiary. As profitability remains a difficult goal for some operators, one focus of the 4G auction will be the cost of bids for the largest amount of spectrum ever offered in Taiwan. T h e Ta i w a n g o v e r n m e n t r a i s e d NT$49 billion (US$1.65 billion) from the sale of 3G licenses, says the NCC’s Yu. The Legislative Yuan has given the NCC a target of NT$35 billion for the sale of 4G licenses, he adds. Another issue is that of backhaul – the wired portion of the network connecting the base station with the telecom’s central office. As consumers take advantage of LTE wireless capabilities, the backhaul bandwidth for each base station will need to be increased. If past growth patterns hold true, carriers will need to nearly double capacity each year. Those competitors without their own nationwide trunk lines will see profits eroded because of their need to lease capacity from the big three carriers. After the licensing is finished, operators are expected to invest about NT$148.4 billion (about US$5 bil lion) in the rollout of 4G infrastructure, according to the NCC. Of that amount,

about NT$60 billion in equipment will come from Taiwan companies, and the rest from global suppliers, including Airspan Networks, Cisco Systems, and PureWave Networks.

Death knell for WiMAX? It is likely that the winners of the 4G auction will shun WiMAX, which the Taiwan government once touted as a 4G technology standard. Taiwan’s WiMAX industry started in December 2005 when the Taiwan government kicked off its Mobile Taiwan (M-Taiwan) Project, a four-year program with a total budget worth the equivalent of US$212 million. As part of the project, the government set a target of total WiMAX production value from Taiwan of NT$130 billion (US$4.4 billion) by 2013. Taiwan has yet to reach half of that amount, while in the meantime the competing LTE standard has taken off. “We’re forecasting the global LTE market to almost double in 2013, easily passing the US$10-billion mark for the first time,” says Stéphane Téral, principal analyst for mobile infrastructure at Infonetics Research. “We do cover WiMAX, but don’t speak too much about it because it’s a dead technology, dropping from its peak at US$1.7 billion in 2011 to US$1.1 bil-

TAIWAN 2G SERvICE PROvIDER STATISTICS (JANUARY 2013) Company

Subscribers

Market Share Minutes of outgoing calls

Chunghwa Telecom

3,497,051

59.8%

250,434,185

Taiwan Mobile

1,194,020

20.4%

69,740,525

FarEasTone

1,161,361

19.8%

122,946,371

Total

5,852,432

443,121,081

TAIWAN 3G SERvICE PROvIDER STATISTICS (JANUARY 2013) Company

Subscribers 6,797,438

29.8%

795,610,849

Taiwan Mobile

5,826,482

25.5%

628,870,801

FarEasTone

5,724,750

25.1%

806,460,435

Asia Pacific Telecom

2,800,539

12.3%

583,751,261

Vibo

1,682,496

7.4%

195,484,726

Total

22,831,705

source: ncc

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Market Share Minutes of outgoing calls

Chunghwa Telecom

3,010,178,072

lion last year worldwide,” says Téral. “Developed countries with major rollouts, including the U.S., Russia, and Japan, helped to drive growth over the last couple of years, but this is not sustained over the long term as major operators are changing tack to TD-LTE.” Developing countries such as India, Taiwan, Indonesia, Brazil, and Mexico have become higher-growth markets for WiMAX, according to Téral. However, these will not necessarily drive majorscale network deployment, and so the decline of WiMAX infrastructure revenue is irreversible, she says. The government’s previous auctioning of spectrum to WiMAX service providers has limited the amount of spectrum available for LTE. That shortage and the proposed terms for the upcoming auction – which will cover spectrum of varying quality – are likely to make for an uneven playing field for the telecom operators. In addition, the licensing of 900 MHz spectrum for 4G that is also licensed for 2G until June 2017 adds considerable uncertainty to how soon the spectrum will be freed up for 4G services. In the 4G auction, the three largest players are likely to snap up the licenses for the 700 MHz spectrum, leaving narrower slots in the less desirable 900 MHz and 1800 MHz bands to the smaller and less profitable operators. Such an outcome is likely to make longterm viability for the smaller operators a continuing issue. Also at issue is the MOTC’s stake in CHT, which calls into question the government’s commitment to open competition, even if regulator NCC is evenhanded. Analysts covering the telecom sector say the role of CHT, and the perception that the company is not a technology leader, may turn out to be an obstacle to a smooth rollout of 4G services – and to subsequent growth in promising new areas such as cloud computing and e-commerce. A bumpy start for 4G could be taken as yet another sign that Taiwan is falling behind in a race for technology prowess with its largest rival in the electronics industry, South Korea, at the same time as a rapidly-developing China is close on Taiwan’s heels.

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The Internet of Everything How over-the-top services have changed the mobile ecosystem and will continue to influence the mobile economy to come. BY JASON T. WANG

he growth of Over-the-Top content (or in industry parlance, OTT) has changed the mobile economy forever. Carriers who once maintained monopoly control over the services and content on mobile handsets are now faced with players like Apple and Google that have created a new mobile economy in which the carriers must bear the cost of maintaining the network but are largely excluded from some of the key sources of revenue. The shift toward a data-centric mobile economy leaves non-integrated carriers (carriers without both fixed and mobile network assets) in a poor situation. Carriers are also faced with a difficult challenge: how to rebuild their relationships with content providers and solution developers to create a unique user experience for their customers. How all this came about requires a short historical review. The telecom carriers once single-handedly controlled the content on the handset. They maintained their own marketplace for products like ringtones, themes, and phone-modelspecific applications. Within these “walled gardens,” the carriers took as much as 60% of the revenues earned by a software developer’s application. Given the low returns and high degree of market fragmentation, only well-funded developers could afford to participate, especially when the carriers would take up to six months to pay back the developer. And even then, their offerings had to limited to the simplest of services and the broadest of branded content. The mobile economy with respect to data services simply did not exist beyond short messaging. With the advent of the iPhone and the iOS developer platform, Apple changed the economics of software development for the mobile economy. It gave developers the lion’s share of the revenues (70%), paid on a monthly basis, provided an easy-to-use software development kit (SDK), a single powerful mobile computing platform, and a global market of handsets to develop for. In one fell swoop, Apple transformed the industry by consolidating a fragmented regional-based mobile economy into a single global market for software developers and content providers to build their business on. A few years later, Google joined the fray, resulting in an end to Nokia’s dominance and the rise of handset makers, such as HTC, who embraced Android. With the growth of data services in the form of apps, the likes of Google and Apple have enabled a global pool of developers to create software for just

about everything. Android and iOS make it possible for content creators to deliver content “over-the-top” without the need for carrier approval. Today, we can instant message our friends and family from out handsets and tablets through social apps like Whatsapp, Line, Blackberry, or iMessage. We can make voice calls using Skype, Voxer, and Google hangouts. We can even sync out content from our TV set at home to our tablet while on the road. Application developers have created all kinds of software for our mobile phones to fit our individual lifestyles. Unfortunately for the carriers, these over-the-top services are now starting to cannibalize a traditionally voice-centric business. The rise in data-enabled social messaging applications, for example, is taking a toll on carrier metrics. Minutes of Use have declined around the world (with perhaps the exception of the Middle East). Skype, Voxer, and other voice-over-IP-enabled apps work surprisingly well as a result of improved coding-decoding technology and session-handling software to help manage the vagaries of mobile transmission. Short-messaging revenues have declined or flattened globally as well. With users apparently separating their different levels of friends and acquaintances by social messaging application, one can easily find consumers who have Whatsapp, Line, and iMessage all on their handsets. The carriers are also missing out on the growth in smartphone-enabled lifestyle services. Over the past two years, we have seen tremendous investment by venture capitalists and angels to bring lifestyle applications and devices into the market. We now see wrist-worn smart sensors with embedded pedometers, heart beat sensors, and call management features a la Dick Tracey. Products like Jawbone Up, Basis Watch, and the crowd-funded Pebble have show remarkable success in getting consumers to pay subscription fees in addition to acquiring a device that is smartphone enabled. With the launch of its flagship Galaxy S4 and S Health sensors, Samsung has taken it further by integrating what is essentially aftermarket enhancements into the phone and making it part of the core product offering. The smartphone has truly become a hub for the digital lifestyle. Most importantly, the carriers are losing the battle in home entertainment and multi-screen delivery of content. Multiscreen entertainment – the delivery of linear or VOD (Video on Demand) content to the TV, phone, tablet, or computer – has evolved quickly. Consumers in the United States and Europe can

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time-shift and place-shift their content, and the National Football League has effectively become its own broadcaster, delivering live games with exclusive content to handsets in the United States. The telecom carriers, particularly those without integrated fixed and mobile networks, are unwilling to pay the content licensing fees for multi-screen and lack expertise in content acquisition. Instead, the carriers prefer to shift costs onto their partners or wait to see how the market evolves. This strategy is clearly failing. Even Apple’s set-top box, despite having U.S.centric content, has performed so well in Asia that Apple is now licensing more regional content to bolster its Asian content ecosystem. While lacking a content play, HTC and Samsung are selling set-top boxes that allow consumers to share video and photo content to the TV at home or to networked devices. Notably, some integrated carriers like Taiwan’s Chunghwa Telecom and Hong Kong’s PCCW have built IPTV platforms, but their content delivery architectures are saddled with costs from legacy systems and are just at the beginning stage of transition to Android- and iOS- based multi-screen TV. Cable operators are in an even worse position. Like their telecom brethren, they are locked into contracts with major hardware vendors who are not as nimble as the fast-movers of Silicon Valley. Moreover, their cable networks are operating at near capacity because the government requires them to deliver both analogue and digital signals on their networks. Moreover, their legacy systems make it difficult or extremely expensive to deliver IP to second-screen devices without a major overhaul. For Taiwan to innovate rather than “just catch up” requires a significant shift in regulatory policy to foster new industrial innovation rather than merely play the role of consumer protection. Taiwan can take a few lessons from Korea, whose regulatory structures have made it possible to build content into a major

export industry, even into the Mandarin and English-language markets. At the same time, Taiwanese enterprises must rethink their business operations, deploying investor capital to create ecosystems that build on existing consumer behavior rather than fight it by maintaining “walled gardens.” Otherwise, they will be perceived by consumers as utilities rather than industry innovators. Over-the-top services are here to stay. Enabled by iOS and Android’s global scale, developers no longer need the carriers as they once did. It is a reality all carriers must face. Apple and Samsung, for example, continue to enjoy strong sales of devices in markets such as China and India despite the significant premium relative to prices for domestic devices. Both manufacturers control a minimum 25% market share. There is even discussion of a third ecosystem to compete with Apple and Google as Microsoft restructures its XBOX and Windows Mobile operations to be more globally nimble and mobile focused. We expect Windows Mobile to break the 5% threshold before the end of the year with the help of strategic partners Nokia and HTC. In addition, we are only seeing the beginning of a new generation of gaming and second-screen services from Microsoft. These developments have all been enabled by an advertisingand device-driven revenue model that is considerably more scalable than what existed previously. The question now to the carriers in Taiwan is how will they innovate in the face of this new data-driven market and make sure that they get a slice of the new economy?

— Jason T. Wang is managing partner of Cypress River Advisors, a cross-border strategic advisory firm specializing in monetizing the convergence of the telecom and media sectors.

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International Spotlight Shines on Taipei

ver the past decade, international tourism has been one of Taiwan’s booming industries. Some of the island’s attractions now get thousands of sightseers each day, yet others remain relatively undiscovered. Taiwan's Tourism Bureau is trying to remedy this through its “International Spotlight” project. Alerting potential tourists to attractions beyond Taipei 101, the National Palace Museum, and Sun Moon Lake promises to bring a win-win outcome – less pressure on the top sights, economic benefits spread more evenly, and visitors who are able to enjoy a more well-rounded and authentic travel experience. The “International Spotlight” has already shone on East Taiwan. The bucolic character of Hualien and Taitung, together with the artistic, musical, and culinary traditions of the East’s aboriginal and Hakka minorities, have made those counties a favorite destination for both foreign and Taiwanese travelers. Another segment of the project focused on the appeal of Central

Taiwan, a region that includes the historic town of Lukang, the restaurants and museums of the city of Taichung, and some of Taiwan’s most scenic uplands. Now the spotlight is returning to Taipei, Taiwan’s vibrant capital and home to 2.67 million people. The scope of this year’s Taipei edition of “International Spotlight” has been expanded from two neighborhoods to three. Daan District, in particular the area nicknamed Kang Qing Long (because the main streets are named Yongkang, Qingtian and Longquan), is again one of them. Beitou, a suburb synonymous with hot springs, makes another appearance in the program. Joining them is Dadaocheng, a riverside community where merchants dealt in tea and other commodities long before Taipei emerged as Taiwan's leading city. Kang Qing Long is an excellent place to forget the pressures of daily life. The streets are narrow, the buildings low-rise. Around every corner there is an inviting teahouse or secondhand bookstore. Plus, options for good food abound. A branch of

the internationally acclaimed dumpling restaurant Din Tai Fung can be found a few meters from the northern end of Yongkang Street. Nearby eateries serve Vietnamese, Greek, Italian, and other cuisines, as well as Taiwanese favorites such as beef noodles and seafood. Thanks to the opening of Dongmen Station on the Orange Line of Taipei's mass-rapid transit system, Kang Qing Long is even easier to reach than before. Dadaocheng’s spiritual center is Baoan Temple. This house of worship is dedicated to Baosheng Dadi, the god of medicine. Before his death and later deification more than 1,000 years ago, he worked as a physician in Fujian, the mainland Chinese province closest to Taiwan. Fujianese settling in the Taiwan of yore cherished the island's fertile soils, but suffered from malaria and other diseases. Seeking Baosheng Dadi’s protection, they founded this temple in 1742. Among the treasures inside are seven large murals executed by Pan Li-shui (1914-1995) one of Taiwan's most acclaimed folk artists.

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Baosheng Cultural Festival, which grew out of rituals held to mark Baosheng Dadi’s birthday on the 15th day of the third lunar month (usually in late April) is an annual carnival of traditional theater and musical performances, handicrafts, fireworks, and even fire-walking. To appreciate another set of beliefs that has influenced Taiwanese culture, visitors should leave some time for the Taipei Confucius Temple, just 100 meters or so from Baoan Temple. In addition to being one of Taiwan’s three most important Confucian shrines, it houses excellent displays about rites held to honor China’s greatest sage each September 28. Dihua Street, a short taxi ride away, is a hub of traditional commerce. Vendors spread out their goods on tables and appeal to passers-by through megaphones. The dried fruits, medicinal herbs, and other products are a visual treat, but sightseers should not forget to look up and take in the street's gorgeous baroque architecture. Some of the tea sellers in this part of Taipei have been in business since the 19th century. Foreign visitors baffled by other Taiwanese temples will appreciate the bilingual labels inside the street's XiaHai City God Temple. The roles of the various heavenly personalities are clearly explained. The city god, for instance, can bestow prosperity, happiness, and good weather. Many younger worshipers, however, prefer the Old Man Under the Moon. Each day, scores of men and women make offerings to

this matchmaking god, hoping he will set them up with a life partner. In the nearby Lin Liu-hsin Puppet Theater Museum, visitors can learn about and enjoy performances of Taiwanese hand-puppetry, a traditional form of entertainment often seen during temple festivals. Located in the third district being featured, Beitou, is a geothermal hotspot abutting Yangmingshan National Park. Called Xinbeitou (“new Beitou,” to distinguish it from the older parts of Beitou near the Danshui River), the area is one of Taiwan’s earliest tourist destinations. Its scalding mineral-enriched waters spew from the hillside to feed both public pools and hotel bathtubs. The place name Beitou is derived from the language of the Ketagalan people, the Austronesian tribe that dominated the Taipei basin until the 18th century. They called this area “Paktaaw,” meaning “witch,” possibly because of the spooky clouds of steam that rise from Hell Valley, Xinbeitou's most memorable natural feature. This bubbling-hot pool is a cloudy shade of green on account of the water's mineral content. Xinbeitou offers a wide choice of mid-range to ultra-luxury hotels, plus shaded sidewalks that make it perfect for exploring on foot. For an inexpensive hot-springs experience, head to Longnai Tang, a Japanese-era bungalow with two small indoor pools (one for men, one for women). Senior citizens soak here on winter afternoons; office workers come just before dinner.

To l e a r n a b o u t t h e g e o l o g i c a l processes that created these spas, visit the Beitou Hot Springs Museum. The design of this hundred-year-old building was based on one of Japan's most famous bathhouses, and the original bathing pool (no longer used) can be seen downstairs. It is one of very few buildings in Taiwan with stained-glass windows. Another building in this neighborhood deserves more than a quick glance: Beitou's public library, which is an exceptionally elegant structure and also one of Taiwan's most environmentally friendly. The library's vast windows cut electricity consumption because natural light means less interior lighting is needed. When opened for ventilation, the windows reduce the need for fans and air-conditioning. One part of the roof is covered by photo-voltaic cells to convert sunlight into electricity. Another part is covered by soil, which cuts heat loss during the winter; during summer, the plants taking root here block some of the sun's heat. The roof also gathers rainwater used to flush the library’s toilets. For more information about these neighborhoods, their shops and restaurants, visit the Chinese-Japanese-English website www.tteacafe.tw. For general travel information about Taiwan, visit the Tourism Bureau's website (www. taiwan.net.tw), or call the 24-hour tourist information hotline 0800-011-765 (toll free within the country).

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