Topics 2013 May Issue

CU S

A Fi Re DU nan por ST cial St on RY ect the FO or

IN

THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics Questions About Higher Education

TAIWAN BUSINESS TOPICS

高教難題怎解

May 2013 | Vol. 43 | Issue 5 中華郵政北台字第 號執照登記為雜誌交寄 5000 5_2013_Cover.indd 1

NT$150

May 2013 | Vol. 43 | Issue 5 www.amcham.com.tw

2013/5/14 4:55:25 PM

CONTENTS NEWS AND VIEWS

4 Editorial may 2 0 1 3

Becoming a Startup Island

vOlumE 43, N umbEr 5 一○二年五 月號

讓新設公司在台灣蓬勃發展

5 Taiwan Briefs Publisher

By Jane Rickards

發行人

Andrea Wu

9 Issues

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro

Progress Toward Offshore Casinos; Boosting Foreign Investment; Promoting Duty-Free Shopping

沙蕩 美術主任 /

Art Director/ Production Coordinator

後製統籌

Katia Chen

陳國梅

Staff Writer

邁向離島博弈；促進外來投資；提倡 免稅購物

採訪編輯

Jane Rickards

李可珍

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

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

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

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

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

COVER SECTION

13 Questions About Higher Education

高教難題怎解

By Jane Rickards

This report is the fourth installment examining what President Ma Yingjeou has described as the Five Pillars needed to support Taiwan’s future economic development. Earlier articles dealt with trade liberalization, industrial transformation, and energy security. Challenges facing Taiwan’s universities include their over-capacity at a time when student enrolments are due to start to fall, a perceived decline in the quality of the education being offered, and whether the institutions are prepared to meet the needs of a knowledge-based society in an increasingly globalized world.

18 No Opportunity for Foreign Universities 23 A Small Student Invasion from China

TAIWAN BUSINESS

24 USTR Report on U.S.-Taiwan Trade Issues

A reprint of the Taiwan portion of the 2013 National Trade Estimate Report on Foreign Trade Barriers issued by the Office of the United States Trade Representative in March.

cover photo : courtesy of nccu

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m ay 2 0 1 3 • Volu m e 4 3 n u m be r 5

LIFE IN TAIWAN

30 A Healthcare Blend of East and West

INDuSTry

F

CuS

Traditional Chinese Medicine maintains its identity, significance, and use despite the general shift toward Western medicine.

42 In the Stock Market, More Internationalization

BEHIND THE NEWS

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

33 Brain Trusts for the Political Parties

By Timothy Ferry

Both investors and financial institutions are welcoming the new opportunities presented by the opening of the RMB market.

By Philip Liu

By Joe Seydewitz

The KMT and DPP both operate think tanks to provide crucial policy support.

38 The Latest Craze: Renminbirelated Business

By Philip Liu

Financial Services:

looking Toward China

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Becoming a Startup Island

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ith Taiwan products encountering increasingly stiff competition in international markets, economists and government officials are searching for ideas on how to inject new vigor into the country’s manufacturing industries, particularly in the technology sectors. Although it would be part of a longer-term solution rather than a quick fix, AmCham Taipei suggests that Taiwan make a determined effort to create an environment conducive to cultivating new startup companies.

That is currently not the case. Instead, many entrepreneurial-minded Taiwanese decide to register their companies in California and other locations where they find it much easier to arrange for funding and get into operation quickly. The loss to Taiwan is immeasurable. A steady stream of new companies entering the market makes it possible for an economy to constantly refresh itself with new energy and new, innovative ideas and technologies.

In its annual recommendations in the Taiwan White Paper, AmCham’s Technology Committee has made the promotion of start-ups its number-one priority. In the 2012 edition, for example, the Committee stressed ways in which changes in existing laws and regulations could reap solid benefits in making Taiwan more attractive to startups.

Thankfully, concrete progress has occurred on one of those suggestions – easing the foreign-investment approval process in order to reduce the time and expense needed to get a foreigninvested startup into business. Just this month, the Legislative Yuan passed a bill exempting most projects valued at US$1 million or less from submitting a foreign-investment application; when the new system takes effect, the investors will need only to report the project to the authorities rather than undergo an eval-

uation. Hopefully the dollar-value ceiling will be raised in the future, but the US$1 million level is still enough to benefit many new emerging companies.

While easing the investment-approval process is a good start, there is much more that could be done. A few other examples: • Revise the Company Law with an eye to addressing the specific needs of emerging high-tech companies and their investors. Such changes would include making it easier for the company to issue preferred stock to the founders and to incentivize employees by offering them shares in the company.

• Liberalize regulatory restrictions on venture-capital funds in Taiwan to enable them to qualify more easily for funding from the government and state-owned banks. The requirement that a venture fund be organized with a board of directors should also be removed.

• Revise current policy and practice to encourage more investment by government-backed funds in companies at the startup phase, not just when they are already well-established.

Decades ago, the early stages of Taiwan’s economic development benefited greatly from the entrepreneurial drive of its citizens. They built the dynamic small and medium enterprises for which Taiwan became famous, and many of those companies have since grown into major corporations.

Today, however, the barrier to getting into business is much higher, because of both cost and regulatory factors. By cutting red tape and easing access to funding, the government has a chance to develop Taiwan into the startup – and therefore innovation – center of the region and put the economy on a new and vital track.

讓新設公司在台灣蓬勃發展 於台灣產品在國際市場遭遇的競爭越來越激烈，經 濟學家和政府官員正設法為製造業（尤其是科技產 業）注入新活力。這可能需要長期才能達成，並非 一蹴可幾，不過台北市美國商會建議台灣堅決致力創造有助 於培養新設企業的環境。 目前並無這樣的環境。相反的，許多有意創業的台灣人決 定將公司登記在加州等較容易籌到資金且能迅速展開營運的 地點。台灣因此蒙受的損失無法衡量。新公司源源不絕投入 市場，才能讓經濟不斷獲得全新能量和嶄新的創新構想與技 術而恢復活力。 美國商會科技委員會在《台灣白皮書》的年度建議中，將 促進創投列為頭號要務。例如在2012年白皮書中，本委員會 強調，修改既有法律規範可帶來極大的好處，讓台灣對新設 企業更具吸引力。 慶幸的是，其中一項建議已獲致具體進展――簡化外資批 准程序，以減少外資創投業者展開營運所需的時間與花費。 就在本月，立法院通過法案，金額100萬美元或以下的大部 分計畫不必提出外國人投資申請；新制生效後，投資人將只 須申報計畫，無須接受更多評估。希望此一美元限額未來能

由

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提高，不過100萬美元水準仍足以讓許多新設企業受惠。 簡化投資批准程序是好的開始，不過還可以做得更多。茲 舉例如下： • 著眼於滿足新興高科技公司及其投資者的特定需求， 修改《公司法》，包括讓公司更易於發放優先股給創 辦人，以及透過配發公司股票激勵員工。 • 放寬對創投基金在台灣的法規限制，使其更容易獲得 向政府和公營行庫籌措資金的資格。要求創投基金須 有董事會的必要條件也應撤除。 • 修改現行政策和慣例，鼓勵政府支持的基金對創業階 段的企業進行更多投資，而非僅限於公司成功建立 後。 數十年前的台灣經濟發展初期，曾大大受惠於民眾的創業 動力。他們建立充滿活力的中小企業，讓台灣聲名遠播，其 中許多企業後來成長為大型企業。 不過由於成本和規範的因素，如今的經營障礙高出許多。 透過簡化繁文縟節和放寬籌資管道的方式，政府有機會讓台 灣發展成為區域的新設企業（進而是創新）中心，使經濟步 上嶄新且生氣蓬勃的軌道。

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— jane ri ckards —

MACROECONOMICS

economic indicaTors

an UnweLCOMe sUrPrise Economists were expecting a steady recovery globally during 2013.

So when Taiwan, a bellwether for consumer tech demand around the world, announced that first quarter GDP growth had come in at an unexpectedly low 1.54%, it was not a good economic omen, either for the island or the international economy.

In reporting the first quarter results in late April, the Directorate General of Budget, Accounting and Statistics noted that the 1.54% was not only a major contraction from the previous quarter’s 3.7%, but was also below the agency’s earlier forecast for the first quarter of 3.1%.

In a sign that this deceleration could be a trend, exports in April fell 1.9% year-on-year to US$25.05 billion and imports dropped 8.2% to US$22.77 billion, with a favorable trade balance of US$2.28 billion.

Growth in exports to most major markets was sluggish compared with the same month a year ago – up only 0.2% to China/Hong Kong, 0.6% to the ASEAN-6, and 1.9% to Japan.

But there was negative growth by a Taiwan sTock exchange index & value

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

8250

135

8000

120

7750

105

7500

90

7250

75

7000

60

6750

45

6500

30

6250

15

6000

0

April chart soUrce: twse

Unit: ntD billion

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

15.96 2.27 6.9 40.73 405.19

Unemployment (March) Overnight Interest Rate (May 2) Economic Growth Rate 2012 (Q4)p Annual Change in Industrial Output (Jan-Mar) Annual Change in Consumer Price Index (March) Annual Change in Consumer Price Index (Jan-Mar) note: p=pReliminaRy, R=ReviseD

full 19.3% in shipments to Europe, which takes almost a tenth of Taiwan’s total exports. The decline in Europe was much steeper than the 12.3% of the previous month, indicating that continuing problems in the Eurozone were contributing to Taiwan’s economic gloom. The United States, which receives a little over a tenth of Taiwan’s exports, was the one fairly bright spot, showing growth of 4.9%. For the first quarter as a whole, Taiwan’s exports totaled US$72.64 billion, up only 2.4% from the same period in 2012, far from the government’s earlier forecast of 4.71% growth.

The downward trend was also borne out by data from the Ministry of Economic Affairs on export orders, a leading indicator, which came to US$35.84 billion in March, a decline of 6.6% from the same month last year. The industrial production index also posted an annualized decrease of 3.28% in March. The slump appeared to be across the board, as manufacturing decreased by 3.24%, mining and quarrying by 6.98%, electricity and gas supply by 3.64%, and building construction by 6.09%.

China, Taiwan’s biggest export

4.17% 0.386% 3.72% 0.78% 1.39% 1.81%

Year Earlier 12.10 0.72 6.5 36.7 395.07 4.17% 0.509% 1.21% 1.31% 1.25%

souR ces: moea, DGbas, cbc, boFt

market, showed signs of flagging economic momentum when it posted a lower-than-expected economic growth figure of 7.7% for the first quarter. Reuters cited a series of Purchasing Managers Indexes signaling tepid Chinese economic activity in April. Factories in China are saddled with excess capacity due to weak demand, putting downward pressure on producer prices and in turn eroding profits.

In the light of the worse-than-expected export figures, J.P Morgan Chase lowered its forecast for Taiwan’s GDP growth for this year to 2.7%, down from an earlier forecast of 3.3%. It noted that Taiwan’s export sector appears to have lost some momentum in the first half of the year, but predicted that the global economy will improve after mid-year, which would provide support for Taiwan’s exports and industrial sector.

However, the British-based banking group Barclays stuck to a 2013 forecast for Taiwan of 4%, higher than that of other institutions, saying it still expected investment to rebound and consumption to improve as the year went on. Economists also note a downside risk to Taiwan’s future

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economic performance in the possibility of an avian flu epidemic. Taiwan’s economy contracted during the SARS scare of the previous decade, as companies and individuals cut back on travel out and entertainment.

The most positive note in the economic indicators released in April was that the unemployment rate fell from February’s 4.24% to 4.17% in March (seasonally adjusted, the figures were 4.16% and 4.18% respectively), showing that the economic sluggishness at least has not affected employment.

DOMESTIC first birD fLU Case seen OUtsiDe CHina A t t h e e n d o f A p r i l , Ta i w a n confirmed a case of H7N9 bird-flu infection in a 53-year-old Taiwanese

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man who had recently returned from a trip from China. It was the first case of the deadly virus discovered outside the mainland. The man tested positive for the strain of avian flu after a business trip to the eastern Chinese city of Suzhou. There was no evidence that he had come into contact with birds. As of press time, doctors said the man’s condition was improving. Meanwhile, the death toll in China stood at 31.

The World Health Organization said there is no evidence so far that the killer flu strain is easily transmittable between humans, but added there is no guarantee it won’t mutate and start a pandemic.

Lin Yi-sHiH’s sentenCe eVOKes CritiCisM Former Cabinet secretary-general Lin Yi-shih in late April was sentenced by the Taipei District Court to seven years and four months in prison for

GONE — The Formosa Clouded Leopard, one of Taiwan’s endemic species, is reported by zoologists to have become extinct. photo : wikipeDia

accepting NT$63 million (US$2.13 million) in bribes from a contractor.

The case marked the first time for a high-ranking official in the Ma Yingjeou administration to be sentenced in a graft scandal. The lightness of the sentence was severely criticized by the media and public. Several of Lin’s relatives who were also on trial were declared not guilty of money laundering, and while the court found that while Lin had violated several laws, it ruled that technically he did not violate the anti-corruption act, which would have led to a harsher sentence.

taiwan LeOParD eXtinCt, saY ZOOLOGists

GOING TO PRISON — Following his sentencing, former Executive Yuan secretarygeneral Lin Yi-shih is accompanied by his wife as he reports to the police station to be taken into custody. photo : cna

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Following a 13-year search for the animal, a joint U.S. and Taiwanese team of zoologists in late April determined that the Formosan Clouded Leopard, a subspecies endemic to Taiwan, is extinct. The team began searching for the tree-dwelling great cat in 2001 in primary forests in Dawushan, Jade Mountain, and

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Taroko National Park, using infrared cameras and scent traps in the mountains. The team concluded that the leopard became extinct due to poaching and destruction of its natural habitat.

new ait bUiLDinG CaUses DisPUtes Wearing hard workmen’s hats and waving placards, Taiwanese construction workers in late April protested outside the American Institute in Taiwan (AIT) on XinYi road, saying that U.S.-based Weston Solutions, contracted by the U.S. government to build a new compound in the Taipei suburb of Neihu for the de facto U.S. embassy, had defaulted on payments o w e d t o Ta i w a n e s e s u b c o n t r a c tors of more than NT$470 million (US$15.9) million. The demonstrators demanded financial relief from the U.S. State Department, but AIT said it was a dispute between Weston and its subcontractors that should not involve the U.S. government. Local media reported that the three Taiwanese subcontractors – Wei Chuan Arch Contracting Co., Cherng-Her Construction Co., and Area Energy – said the payments from Weston had stopped since mid-2011 and around 100 workers were owed two months’ salary as a result.

POLiCe brUtaLitY CHarGeD in PrOtests aGainst winD tUrbines PrOJeCt Over 20 protesters engaging in peaceful sit-in demonstrations against a wind-turbine construction project in Miaoli by German wind power company Infravest GmbH were roughly beaten by police with batons, in some cases thrown to the ground, and arrested in handcuffs, provoking an outcry against police brutality from legislators and human rights activists in early May. The protesters said they were not objecting to green energy on

NIMBY — Renewable energy projects, not just nuclear and fossil-fuel power plants, may face community resistance, as shown by this protest in the Miaoli County town of Yuanli to block construction of wind turbines. photo : cna

principle, but out of concern that noise from the wind turbines might affect their quality of life, as their homes are only 250 meters away from the facility. InfraVest later offered to negotiate with the residents to reduce the number of turbines in the project and jointly explore other ways to reduce the impact on residents’ lives.

I N T E R N AT I O N A L U.s. inDiCts 2 taiwanese fOr seLLinG MaCHines tO nOrtH KOrea A Taiwanese businessman and his Illinois-based son were charged in Chicago in early May for seeking to bypass a U.S. ban on the export of certain types of sophisticated machinery to North Korea, the Associated Press reported. Tsai Hsieh-tai, 67, who had long been suspected by the U.S. authorities of having ties to North Korea, and with his son Tsai Yueh-

hsun, 36, were charged with one count each of conspiracy to defraud the United States in the enforcement of laws prohibiting the proliferation of weapons of mass destruction. Tsai Hsieh-tai, who also goes by the name of Alex Tsai, was arrested in Estonia and U.S. authorities are seeking his extradition. The son was arrested near Chicago. Alex Tsai had fallen under the suspicion of U.S. authorities at least as far back as 2008, when he was convicted in Taiwan of forging shipping invoices and illegally shipping restricted materials to North Korea, the U.S. Department of Treasury said in a press release. The pair face prison terms of up to 20 years.

BUSINESS neXt tV sOLD tO era Next TV, a loss-making Taiwan subsidiary of Hong Kong-based Next Media owned by outspoken Beijing

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JOininG tPP tO bOOst taiwan’s eXPOrts Joining the Trans-Pacific Partnership (TPP), a U.S.-backed regional free trade agreement covering 11 nations from the Americas and East Asia, would boost Taiwan’s exports by around US$10.6 billion a year, a Bureau of Foreign Trade official said at the end of April. BOFT division chief Tai Wan-jung added that he thought the greatest beneficiary of Taiwan’s participation in TPP would be the industrial sector, especially the textile, chemical and plastics, rubber products, leather, and automobile parts and components sectors. Around 24.4% of Taiwan’s total foreign trade last year was with the 11 TPP members.

CHina MObiLe-far eastOne DeaL CaLLeD Off China Mobile, the world’s largest mobile operator, said in late April

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Taiwan's JanuarY To april Trade Figures (Year on Year comparison)

2012

2013

2013

9.63 8.92

2012

2013

2012

2013

Imports

2012

2013

Europe 9.24 10.13

U.S.

2012

TOTAL

680.02 726.36

2013

10.24 18.47

14.57 6.17

2012

10.37 17.63

15.5

ASEAN

651.16 709

Japan

5.67

HK/China

8.7 10.11

critic Jimmy Lai, in mid-April was sold to Era Communications for NT$1.4 billion (US$46.7 million). The move came after a pro-China business consortium backed away from purchasing Next’s entire stock of Taiwanese media holdings, including the island’s most popular newspaper, Apple Daily, following numerous street protests alleging that a proChina media monopoly might develop in Taiwan if this media takeover was allowed to take place. The reason why Lai initially wanted to sell his Taiwan media assets to the consortium in their entirety was because his television arm was losing money.

According to a Next Media statement, Next TV’s audited net liabilities as of March 31, 2012 were NT$3.37 billion. Era, which formally takes over Next TV June 1, is now being probed by the Taipei City Government’s labor authorities for failing to provide 60 days’ notice for its mass layoffs of 40% of the station’s workers.

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Exports

that it had terminated an agreement to buy 12% of Taiwan mobile carrier Far EasTone for NT$17.8 billion (US$596 million) after it failed to overcome regulatory hurdles. The announcement of China Mobile’s intention to buy a stake in the Taiwan company came in 2009, a year after President Ma Yingjeou’s more China-favorable team took office and shortly after Beijing said it would allow Beijing companies to invest in Taiwan. Had it taken place, it would have been the first direct investment by a state-owned PRC company in Taiwan. The two carriers said they might resume talks if the island’s ownership rules ease.

CPC bUYs sinOPeC staKe in MYanMar enerGY DeaL China’s Sinopect Group, Asia’s largest oil refiner, said in late April that it had agreed to sell its 30% stake in an oil and gas block in Myanmar to Taiwan’s CPC Corp.

– one of a series of deals between Chinese state-owned energy enterp r i s e s a n d Taiwan’s national oil company, Reuters reported. Sinopec gave no financial details of the transaction, which is awaiting approval from regulators, nor did it give any

Unit: US$BN Source: BOFT

estimate of the size of the reserves.

Sinopec acquired full exploration rights over the block, which sprawls over 12,000 square kilometers near Myanmar’s second-largest city of Mandalay, in 2004 from Myanmar Oil and Gas Enterprise. Chinese staterun CNOOC also agreed in March to supply CPC with liquefied natural gas, Reuters said.

resiGnatiOn aMiD insiDer traDinG PrObe The head of China operations for Mediatek, one of the island’s leading fabless semiconductor companies, resigned in early May as prosecutors probed alleged insider trading connected to a US$3.8 billion takeover of its main rival, MStar Semiconductor Inc. Prosecutors said that just before Mediatek’s board approved a deal to buy MStar last June, four officials from the two companies bought shares of MStar. Following the announcement of the transaction, MStar shares surged by more than 10%. Mediatek officials said that the company’s China head, Lu Hsiang-cheng, one of the four under investigation, resigned for personal reasons. He has posted NT$1 million (US$33,333) in bail.

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Issues

Progress Toward Offshore Casinos Questions remain regarding the regulatory structure and tax policy.

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oves to establish integrated resorts with casino gambling on Taiwan’s offshore islands took another step forward early this month when the Executive Yuan approved the draft of a proposed Tourist Gambling Site Management Act to serve as the basis for regulating the industry. The draft now goes to the Legislative Yuan for deliberation.

Under the Offshore Islands Development Act passed in 2009, integrated resorts with casinos may be established on one of the offshore islands – but not on Taiwan proper – if the local population gives its assent through a referendum.

So far, such a referendum has been passed only on the island group of Matsu, off the coast of China near the city of Fuzhou.

AmCham’s Travel and Tourism Committee has supported the opening of casino gambling as a means of promoting tourism and infrastructure development on the offshore islands – on the condition that a well-designed regulatory structure is put in place to ensure that investment in the industry is limited to reputable and experienced operators. While pleased with the progress the draft legislation is making, the Committee has several remaining concerns about the regulatory environment that will take shape.

One of the concerns is the status of the proposed regulatory body within the government hierarchy. The Ministry of Transportation and Communications (MOTC) has taken the lead in laying the groundwork for casino gambling, and it is expected that the regulatory agency will come under the MOTC’s jurisdiction. But just where in that structure is still in question. The Committee recommends that the agency be organized as a bureau, the level immediately under a ministry, and be led by a director-general reporting directly to the minister.

It also recognizes, however, that support exists for placing the regulatory function within the MOTC’s Tourism Bureau, thus moving it one layer down in the hierarchy. If that is done, the Committee suggests, the regulatory body should be led by a dedicated deputy director-general, who would still report straight to the minister. Otherwise, the Committee believes, the regulator will not be sufficiently independent of the tourism authority, which may have different priorities than gaming regulation.

Another concern relates to the inclusion in the draft law of an article authorizing imposition of a 20% tax on casino

邁向離島博弈 主管機關法規架構和稅賦政策的問題依然存在

在

台灣離島建立博弈渡假村的進展，本月初又向前 邁進一步。行政院通過「觀光賭場管理條例」草 案，作為規範博弈產業的基礎，現已交由立法院

審議。 根據2009年通過的「離島建設條例」，博弈渡假村可 興建於離島―而非台灣本島―只要當地居民透過公投同 意。目前只有鄰近中國福州市外海的馬祖群島通過此類 公投。 台北市美國商會旅遊與觀光委員會支持開放博弈作為 促進離島觀光和基礎建設開發的方法―前提是有妥善規 劃的法規管理架構，以確保唯有聲譽良好和有經驗的經 營者可投資博弈產業。本委員會對草案立法的進展感到 欣慰，但對於尚未成形的監管環境仍有數項擔心之處。 其中之一是研議的主管機關在政府層級中的地位。 交通部領導為博弈業奠定基礎，預料主管機關將由交通 部管轄，不過層級仍在考慮中。本委員會建議將之設立 為局，層級直接在部之下，由局長領導，直接向部長報 告。 不過商會旅遊與觀光委員會也了解，有人支持將該主 管機關設在交通部觀光局之下，該機關的層級因此降低 一級。果若如此，本委員會建議，該主管機關應由專責 的副觀光局長領導，仍直接向部長報告。否則本委員會 相信，在可能還有博弈監管以外要務須處理的觀光權力 體系中，博弈主管機關將不夠獨立。 另一項問題和草案中納入授權對賭場顧客贏錢課徵 20%稅款的條文有關。儘管該條例納入至少20年暫緩課 徵贏錢稅的但書，但本委員會也相信，建立開徵此稅的 法律基礎，會令潛在的投資者因為管理條例中的這項無

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customers’ gross winnings. Even though the bill calls for placing a moratorium of at least 20 years on implementation of that tax, the Committee believes that establishing the basis for such a tax would deter potential investors from bidding on licenses for integrated-resort project because of the element of unpredictability it introduces.

Further, such a tax on winnings would deviate from the established principle in major Asian gaming jurisdictions such as Singapore and Macau to tax the casino operators rather than the customers.

Instead of increasing tax revenue, the Committee maintains, it would likely discourage international casino operators from coming into this market at all.

To ensure the creation of a viable and reputable casino industry, the Committee is urging the Legislative Yuan to remove the winnings tax from the casino gaming bill.

法預測因素，放棄申請博弈渡假村計畫的許 可。 此外，贏錢稅違反新加坡和澳門等主要 亞洲博弈地區所建立的原則―向賭場業者課 稅，而非顧客。本委員會堅信，此舉無法增 加稅收，反而可能讓國際賭場業者完全打消 進軍此一市場的念頭。 為了確保建立能持續成長且聲名遠播的博 弈產業，美國商會旅遊與觀光委員會敦促立 法院將觀光賭場管理條例中的贏錢稅刪除。

—撰文／沙蕩

—– By Don Shapiro

Boosting Foreign Investment Taiwan receives much less private equity attention than would be expected.

I

n recent years, Taiwan has received good rankings in various international competitiveness surveys, yet it has continued to lag seriously behind almost all other countries in the region in the amount of foreign direct investment being attracted. A major reason has been the absence of new investment projects in Taiwan lately by international private equity (PE) companies, even as those funds have been increasingly active in making large-scale investments in neighboring countries.

The accompanying charts show the surprising extent to which Taiwan has been underperforming in attracting PE investment during the past several years. In size of GDP, Taiwan ranks seventh in the region, rather high up on the list. But unlike most markets, whose PE investment volumes are roughly equal to the size of the economy, Taiwan is second from the bottom – behind Sri Lanka and ahead only of Pakistan – as a destination for PE funding.

Over the past several months, AmCham has been exploring the possible reasons for the investment gap and holding a series of meetings with the relevant government agencies to discuss potential solutions. From what the Chamber has learned, PE companies have become reluctant to pursue projects in Taiwan after several prominent investment cases failed to receive regulatory approval after lengthy consideration and without clear explanations for the decisions. AmCham has therefore been urging the authorities to establish a more transparent and predictable process, so that PE firms will be willing to undertake the substantial expense – 10

促進外來投資 台灣獲私募股權公司青睞程度不如 預期

最

近幾年，台灣在各項國際競爭力調查 獲得的排名很不錯，然而吸引到的外 國直接投資金額，卻一直嚴重落後區 域內幾乎所有其他國家。主因是國際私募股 權公司雖然越來越積極在鄰近國家進行大規 模投資，近來在台灣卻缺乏新的投資計畫。 附表顯示，過去幾年台灣吸引私募股權 投資的表現不佳，程度令人吃驚。就國內生 產毛額的規模而言，台灣在這個地區排名第 七，算是名列前茅。但是就私募股權公司投 資的標的而言，台灣卻排名倒數第二，只勝 過巴基斯坦，還不如斯里蘭卡，這種情況與 大部分市場不同，它們的私募股權公司投資 額與經濟規模大致相當。 過去幾個月來，台北市美國商會一直探討 造成這種投資落差的可能原因，並且與相關 政府單位合作舉行系列會議，討論可能的解 決方式。根據美國商會所悉，私募股權公司 所以不願意在台灣推動投資計畫，是因為先 前有幾項重大投資案受挫，主管機關長期審 查後仍未核准，而且也沒有明確說明決定理 由。 台北市美國商會因此敦促台灣政府，建立 更透明和可預知的程序，如此一來私募股權 公司才會願意承擔推動投資案的龐大開銷， 因為畢竟要考量投資風險評估的支出，以及

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considering the cost of due diligence and payment of fees to consultants, accountants, and lawyers – of putting together an investment application.

In the discussions with government agencies, AmCham also became aware of some concerns about the possible impact of a company’s being delisted from the stock exchange as part of the PE investment process.

One of the signal benefits of Private Equity investment is that it can help a company undergo crucial reforms and restructuring to make itself more competitive in the long-run, but that transformation cannot take place while public shareholders are scrutinizing the level of quarterly profits.

Some government officials have appeared uneasy that delisting a company means less information available to the regulators, but in most developed markets delisting – which is usually temporary and leads to later relisting – is an accepted practice. “We’re continuing our discussions with the government,” says AmCham President Andrea Wu. “The exchange of views we’ve had so far has been very helpful for both sides in developing better mutual understanding.”

支付給顧問、會計師和律師的費用。 台北市美國商會在與政府機關的討論中也 得知，他們有些擔心因為私募股權公司進行 投資，導致企業由股票市場下市，可能會造 成衝擊。私募股權公司進行投資的顯著好處 之一是，可以協助接受投資的公司從事重要 改革和重整，使公司更具有長期競爭力，但 是這種轉變無法在股東緊盯每季獲利水準的 情況下進行。 公司下市意味主管機關較難取得營運資 訊，有些政府官員似乎對此感到不安，但在 大多數已開發國家市場，下市是種獲得接受 的作法，而且通常只是暫時性，而且會促成 以後重新上市。台北市美國商會執行長吳王 小珍表示：「我們將繼續與政府討論。我們 交換意見所得，非常有助雙方增進彼此了 解。」

—– By Don Shapiro

—撰文／沙蕩

Source: Public recordS Search

Source: aSia Venture caP ital Journal

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Promoting Duty-Free Shopping Allowing more downtown centers would be a welcome innovation for tourists.

T

ourism is currently one of the best-performing sectors of the economy, and its prosperity is spurring increased consideration as to how this country can make itself even more attractive for international travelers to visit, and how to generate more tourism revenue. As part of that discussion, Taiwan needs to examine ways to offer more and better shopping opportunities for visiting tourists.

Compared with other countries in the region, the volume of duty-free shopping in Taiwan is quite small. A major reason is that duty-free stores are limited to locations within the international airport terminals, plus two “pre-sale” centers in Taipei run by the airport duty-free concessionaire operating under a license from the Ministry of Finance’s Customs Administration. Customers placing their orders at the pre-sale centers must pick up their goods in the secure area of the international airport after they have technically exited the country.

In South Korea, in contrast, there are six duty-free stores in downtown Seoul run by four operators, and their annual sales came to about US$2.2 billion in 2011. That compares with the US$300 million in sales that year through the two pre-sale centers in Taipei. The size of Korea’s downtown duty-free market is thus about seven times larger than Taiwan’s, even though it has only about 1.6 times as many international visitors.

AmCham Taipei’s Travel and Tourism Committee has taken up the issue of what appears to be a de facto monopoly situation for downtown duty-free stores. Prospective applicants for a downtown duty-free store license must obtain the airport authorities’ approval for access to a pick-up counter in the airport. So far, the airport authorities have granted such access to a single operator and denied it to additional applicants.

Besides benefiting the tourism industry, development of the downtown duty-free market would also be good for the economy, the creation of job opportunities, and the government’s tax revenues. Again citing the Korean example, the travel retail market in that country now ranks number one in the world, and has a well-established downtown duty-free market supported by the presence of neutral pick-up counters across all of the international terminals. In 2011, Korea had 9.8 million inbound visitors, compared with Taiwan’s 6.1 million.

The selection through a bidding process and subsequent contract with a concessionaire to have the exclusive right to operate airport duty-free stores should not be confused with the issue of granting other companies access to a pick-up counter to support downtown duty-free pre-sales. And space availability at the airport need not be an obstacle. If space is insufficient to provide dedicated counters to multiple successful applicants for downtown duty-free licenses, the airport authorities could provide a single location for shared pick-up counters in each of the international terminals.

Avid shoppers among Taiwan’s visitors would be grateful for the change in policy. Instead of a rushed few minutes to complete their purchasing before their flight is called, they could choose one of a number of locations downtown to shop at leisure – then later collect their merchandise as they get set to board the plane.

—– By Don Shapiro 12

提倡免稅購物 在市區多設免稅商店的新做法，將受 到觀光客歡迎

觀

光產業是台灣當今表現最好的產業之 一。它的蓬勃發展，促使政府思考如 何吸引更多外國旅客來台，提高觀光 收益。在討論這個問題的時候，台灣需要探討 如何以各種方式，為到訪旅客提供更多、更優 質的購物機會。 相較於亞洲其他國家，台灣的免稅商品銷售 額相當小，主要原因在於免稅商店只能設在國 際機場航廈內，以及國際機場免稅商店取得財 政部關務署許可，在台北市內經營的兩家預售 中心。國際旅客在台北市內免稅商店預購的商 品，只能等到在國際機場出關後，再到特定地 點提貨。 南韓首爾市中心共有六家免稅商店，分別由 四家業者負責經營，2011年的營業額約達22 億美元。相較之下，2011 年台北兩家預售中 心的營業額僅3億美元。換言之，儘管造訪南 韓的外國旅客只有台灣的1.6倍，首爾市中心 的免稅商店營業額卻高達台北的7倍。 台北市美國商會的旅遊與觀光委員會對這個 議題進行瞭解，發現台北市兩家免稅商店等同 於獨占事業。想要申請在台北市內經營免稅商 店的業者，必須向機場當局取得使用航站內取 貨櫃台的許可，但目前機場當局只准一家業者 使用這個櫃台，其他業者不得其門而入。 在市區增設免稅商店除了可以讓觀光業獲 利，對於提振台灣經濟、創造就業機會和增加 政府稅收都有助益。再以南韓為例，它的旅遊 零售市場目前居世界首位，市區免稅商店制度 完善，每座國際機場都有非特定業者的取貨櫃 台。2011年南韓的外來旅客人數為980萬，台 灣的外來旅客人數為610萬。 政府透過招標和簽約過程，讓特約業者取得 機場免稅商店獨家經營權的做法，跟同意其他 公司使用機場取貨櫃台以支持市區免稅商店營 業的問題，不應該混為一談。機場空間是否足 夠的問題，也不該成為障礙。如果空間不夠， 無法讓每一家取得市區免稅商店經營許可的業 者設立各自專屬的取貨櫃台，機場當局可以在 每個國際機場航廈的單一地點設立共用櫃台， 方便各家業者的顧客領取免稅商品。 若台灣的免稅商店政策能夠修改，對於喜愛 購物的外國旅客將是一大福音。他們不用在登 機前幾分鐘匆忙採購，而可以在市區的多家免 稅商店中選一家悠閒購物，然後在登機前再提 領商品。 —撰文／沙蕩

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education

Questions About Higher Education 高教難題怎解

BY JANE RICKARDS

photo : nccu

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撰文 / 李可珍

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W This report is the fourth installment examining what President Ma Ying-jeou has described as the Five Pillars needed to support Taiwan’s future economic development. Earlier articles dealt with trade liberalization, industrial transformation, and energy security.

Challenges facing Taiwan’s universities include their over-capacity at a time when student enrollments are due to start to fall, a perceived decline in the quality of the education being offered, and questions about whether the institutions are prepared to meet the needs of a knowledge-based society in an increasingly globalized world. 這篇文章是檢視馬英九總統增進台灣經濟競爭力五大支柱 的第四篇。前三篇討論的主題是貿易自由化、產業轉型和 能源安全。 台灣的大學所面臨的挑戰，包括招生名額供過於求，而註 冊學生人數即將開始下滑、民眾認為大學教育品質不如從 前，以及在這個日益全球化的世界，台灣的大學院校是否 有能力因應知識社會的需求。

台

灣的大學院校似乎在面臨危機，因為大學 院校數目達到162所，原本就超過需求， 而如今學生人數預估將會大幅減少。 根據教育部的預測，隨著台灣平均年齡逐漸升 高，未來10年大學新生人數將會減少三分之一， 但由於在法規面和政治面存在高難度的障礙，至 今並無關閉大學的具體計畫。沒有充分運用的大 學院校占據大片土地，同時，政府想要吸引海外 台商返國投資，卻苦於沒有足夠土地可用來拓展 產業。 同樣令人擔憂的是，台灣欠缺天然資源，經濟 的發展靠的是人才。經濟學者和政府官員一致認 為，台灣要在日趨激烈的區域及全球競爭環境中 保持優勢，必須自我提升，轉型成為靠創新來驅 動的知識經濟。政治大學校長、國立大學院校協 會理事長吳思華指出，教育是這個轉型的關鍵。 但多數專家懷疑台灣教育體系所培養出來的學 生，能有足夠的創新力。 14

ith its already-excessive 162 colleges and universities, even as projections call for a steep decline in the student population, Taiwan seems headed for a crisis among its institutions of higher education.

The Ministry of Education (MOE) projects that freshmen enrollment will fall by onethird over the coming decade as Taiwan’s society ages, but so far no concrete plans have been drawn up for university closures in the face of formidable regulatory and political obstacles. While under-used college campuses occupy huge tracts of land, a shortage of space for industrial expansion has been frustrating government efforts to induce Taiwanese companies abroad to return to the island for investment.

Equally worrying, Taiwan is a country of few natural resources that relies on brainpower for its economic development. To stay ahead of its rapidly improving regional and global competition, economists and government officials agree, Taiwan must upgrade itself to become a knowledge-based economy driven by innovation. Education is the key to that transformation, notes Wu Se-hwa, president of National Chengchi University (NCCU) and chairman of the Association of National Universities in Taiwan. Yet most experts doubt that students are being trained to be sufficiently innovative.

Although educators stress that schooling should be a rich and broad-ranging experience, and not just about preparation for the job market, the economic value of the education is also important. Companies are increasingly

教育界人士強調，學校教育應該是個豐富而 多元的經驗，不該只是讓學生做好進入職場的準 備，不過，教育的經濟價值也很重要。企業越來 越不想聘用剛從大學院校畢業的青年。台灣失業 率略高於4%，但據台灣經濟研究院估計，剛進入 職場的大學畢業生失業率高達20%。 批評人士說，台灣的學生在技能和獨立思考兩 方面都有所不足。專家說，改善這個情況最好的 辦法，是讓各大學享有更多自主權。政府的嚴格 管制，被認為是各大學院校同質性過高的原因， 而且它也使得各學校國際化程度不足，無法在全 球經濟體系中競爭。吳思華說：「我們需要讓各 大學有足夠的資源來發展，而且要讓它們各自發 展，不必下指導棋。」 大約20年前，台灣只有大約16%的高中畢業生 能通過聯考的窄門升上大學，但教育在1990年代 出現大幅改革，高等教育機構的數目快速成長。 這項改革是出自一分理想，希望讓大學教育普及

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reluctant to hire those who are fresh out of college, and the Taiwan Institute for Economic Research (TIER) calculates the unemployment rate for new graduates at a whopping 20%, compared with a little over 4% for the general population.

Critics say that Taiwan’s students are deficient both in technical skills and in the ability to engage in independent thinking. The best way to improve the situation, experts say, would be to grant the universities more autonomy.

Currently, tight government controls are seen as causing universities to be too homogenous, as well as insufficiently international to compete in a global economy. “We need to give the universities adequate resources to develop, and to let them develop in their own way without guidance,” Wu says.

Until about two decades ago, only around 16% of high-school graduates succeeded in passing the stiff entrance exam in order to go on to attend a university. But wide-ranging educational reforms starting in the 1990s – based on the ideal that university education should be available to all and no longer a privilege for the intellectual elite – brought rapid expansion in the number of tertiary institutions. From 124 in 1992, the number of universities, colleges, and junior colleges rose to today’s 162, comprising a total of 71 traditional universities and 91 technical colleges or polytechnic institutions. Roughly one-

third of them are public and two-thirds private.

But while this expansion was taking place, the budget allocated by the MOE “did not increase in the same proportion,” notes Chen Dung-sheng, a National Taiwan University sociology professor and education policy committee convener for the New Frontier Foundation, a Democratic Progressive Party think tank. The result was what economists term “diploma deflation” – an erosion in educational standards and an over-abundance of bachelor’s degree holders on the job market.

Taiwan’s 2013 education budget is NT$200.4 billion (US$5.68 billion), of which 44% or NT$88.1 billion is devoted to tertiary education, says Huang Wen-lin, director-general of the MOE’s Department of Higher Education.

She cites a 2008 OECD study showing government spending on education standing at about 0.8% of Taiwan’s overall GDP, lower than the OECD average of 1.3%, but slightly higher than South Korea’s 0.7% or Japan’s 0.6%. According to the same study, spending on higher education as a proportion of the government budget was 4.5% in Taiwan, relatively high compared to the OECD average of 3%. The comparable figure for Japan was 1.8% and for Korea 2.2%.

But the real rub lies in tuition fees, which have been frozen for years as a result of public pressure on politicians.

於全民，不再是知識菁英階層的特權。1992年，台灣 有124所大學、學院和專科學校，到今天增為162所， 包括71所傳統大學和 91所技術學院和專科學校。有三 分之一的學校是公立，三分之二是私立。 台灣大學社會學教授、民主進步黨智庫新境界文教 基金會教育政策委員會召集人陳東升指出，大學院校的 數目增加了，但教育部編列的預算「並未依相同比例成 長」。結果是經濟學者所謂的「文憑貶值」─教育水準 降低，就業市場上擁有學士文憑的求職者太多。 教育部高等教育司司長黃雯玲說，台灣2013年教育 預算為新台幣2004億（56億8,000萬美元），其中881 億用於高等教育，比例為44%。她引用經濟合作暨發 展組織（OECD）的調查說，台灣政府在教育方面的支 出約占台灣整體GDP的0.8%，低於OECD國家的平均值 1.3%，但比南韓的0.7%和日本的0.6%略高。這項調查 也顯示，高等教育支出在台灣政府總預算所占比例為 4.5%，高於OECD的平均值3%。日本的比例是1.8%，南 韓為2.2%。

Students pay around NT$30,000 annually at public universities, which in Taiwan tend to be the most academically rigorous, and roughly NT$110,000 at private universities. (In contrast, tuition is around US$37,000 at elite Harvard University, and almost US$7,000 for in-state residents attending Missouri State University.) Ironically, students from families in higher socio-economic brackets are more likely to get into the academically elite but lower-tuition national universities, while those enrolled in the higher-cost private schools are often less academically inclined and come from working-class backgrounds.

About 37% of overall public university funding comes from the government budget and only 18% from student fees, says TIER economist Gordon Sun. With private universities, he says, students contribute around 54% of the funds and the government 15.7%. The remaining sources include endowment income and business activity, but the idea of universities relying on alumni and philanthropists for donations and engaging in investments has not taken root in Taiwanese culture the way it has in the United States. The government's financial role means that it still retains much control over university policies, even for private institutions. Whether public or private, tertiary educational institutions are not allowed to set their own tuition rates, for example. Most economists would endorse

學費收入零成長 然而，真正的問題在於，政府官員在民意壓力下，多 年來都不敢調漲學費。台灣最好的大學是公立學校，每 年學費約新台幣3萬元，私立大學學費則約新台幣11萬 元 （美國一流的哈佛大學學費約37,000美元，而密蘇 里州居民若就讀本州的州立大學，要繳近7,000美元學 費）。諷刺的是，一個學生如果來自社會和經濟背景較 好的家庭，比較可能進入學術水準很高但學費較低的國 立大學，而進入昂貴私校就讀的，往往是來自勞工家庭 背景而且比較不想唸書的學生。 台灣經濟研究院的經濟專家孫明德指出，公立大學 總經費約有37% 來自政府預算，學費收入只佔18%，而 私立大學的學費收入約佔學校經費的54%，政府補助佔 15.7%。其他經費來源包括捐款和商業活動，只是大學 仰賴校友和慈善家捐款或投資收益的概念尚未在台灣生 根，這點跟美國的情形不同。政府提供校方經費補助， 也就讓政府對學校的政策保持相當的影響力，即便是私

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Students from both Taiwan and mainland China were among the doctoral degree recipients at National Chengchi University. photo : nccu

changing that regulation to enable individual universities to increase fees to provide themselves with more resources.

Despite certain weaknesses in its educational program, Taiwan undoubtedly is still among the leaders in science and technology research. According to Thomson Reuters Essential Science Indicator data for 2001 to 2010, Taiwan is currently ranked 18th in the world in terms of research papers for all fields, behind Japan, India, and South Korea in the Asian region. In terms of citations worldwide, Taiwan is ranked 22nd. Both rankings are considered a good showing

given the relative size of the population.

Yet in terms of the overall quality of education, at least as measured by international rankings, Taiwan is not faring as well as its Asian neighbors. According to the Times Higher Education World University Rankings 2012-2013, prestigious National Taiwan University (NTU) – in 134th place, a move up from 154 the previous year – was the only Taiwanese university ranked among the world’s top 200. Japan’s University of Tokyo, with a ranking of 27, was considered the best in Asia. This was followed by the University of Melbourne at 28, the University of

立大學也不例外。不論是公立或私立大學，台灣的高等 學府都不能自行訂定學費。多數的經濟學家認為應該修 訂法規，讓各大學提高學費收入，才有更多資源可供運 用。 儘管台灣教育體制存在若干缺點，但台灣的科學與技 術研究實力依然名列前茅。湯森路透2001 至2010年的 重要科學指標數據顯示，台灣各領域的研究論文數目全 球排名第18，在亞洲地區僅次於日本、印度及南韓。就 引用次數而言，台灣在全球排行第22名。以台灣的人口 來說，這兩項表現都可圈可點。 但是，就整體教育品質而言，至少從國際排名看來， 台灣的表現落後亞洲鄰國。根據英國泰晤士報高等教育 專刊公布的2012-2013世界大學排行榜，著名的台灣大 學排名從前一年的154進步到134，是台灣唯一擠進全 球兩百大的學府。日本東京大學全球排名27，被認為是 亞洲最好的大學，其次是位居全球第28的墨爾本大學、 排名29的新加坡大學和排名35的香港大學。北京大學 排名46，也比台大好很多。日本共有五所大學擠進百 大，勝過亞洲其他國家，香港有四所。台灣其他國立名 校如清華大學和交通大學，都沒能進入前一百名。 泰晤士報高等教育專刊在給各校評分時，30%是看學 習環境，30%看研究量、收入和名聲，30%看論文受到 引用的次數和研究經費。另外，創新占2.5%，教師、學 16

Singapore at 29 and University of Hong Kong at 35. China’s Peking University at 46 received a significantly better ranking than NTU. In all, Japan had five universities in the top 100, the highest number for any East Asian country, followed by Hong Kong with four. Taiwan’s other stellar universities, such as National Tsing Hua University and National Chiao Tung University, did not make the list.

In calculating these scores, 30% is based on a university’s learning environment, 30% on research volume, income, and reputation, and 30% on citations and research funding. A small weighting of 2.5% is given to innovation, and 7.5% to the international character of staff, students, and research.

Another way of looking at educational quality is in terms of student-faculty ratios, which generally reflect the availability of funds. The average ratio for public Taiwanese universities such as elite NTU is 18:1, comparable to U.S. state universities such as Pennsylvania State University at 17:1 and Missouri State University at 19:1, but well behind elite private American universities such as Yale (5:1) as well as England’s Oxford (11:1).

For private universities, the MOE says,

生和研究的國際化程度占7.5%。 評鑑教育品質的另一個做法，是看學生和教師的比 率，而這個比率一般反映一所學校的經費是否充裕。台 灣的台大等公立名校平均比率為18:1，跟美國州立大學 差不多，例如賓州州立大學是17:1，密蘇里州立大學是 19:1，但比起美國和英國的一流私立大學則遜色許多， 例如耶魯的比率是5:1，牛津是11:1。教育部說，台灣 私立大學的教師與學生比率為24:1。台大特聘教授陳東 升則說，有些私立大學的比例達到 30:1，甚至40:1。 台灣各大學最嚴竣的挑戰預料將在未來三到十年出 現，因為入學人數將會降低。教育部高教司長黃雯玲 說，大學學生人數過去十年大致穩定，但教育部預估， 目前約27萬的新生註冊人數到2016年將大幅減少，比 例超過10%（減少28, 356名學生）。到了2023年，大 一學生人數將比目前減少三分之一以上，降到178,059 人。黃雯玲說：「有點可怕。」

出路不明 政府在2011年修法，讓大學院校可以整併，但到目 前只有少數案例（例如國立屏東教育大學與國立屏東商 業技術學院整併成為國立屏東大學、台北市立教育大學 與台北市立體育學院併為台北市立大學）。對於大學廢 校的問題，政府沒有既定政策或法律可以規範。相關的

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the average figure is 24:1. NTU’s Chen says that at some private universities, the figure can be as high as 30:1 or 40:1.

The toughest challenge for Taiwan’s universities is expected to arise in the coming three to ten years as enrollments fall. MOE’s Huang notes that student numbers have remained roughly constant over the past decade, but the ministry is predicting a big dip in freshman enrollment by 2016, a drop of more than 10% (28,365 students) from the current figure of 270,000. By 2023, the size of the freshman class will have dropped by over one-third to reach 178,059. “This is scary,” Huang says.

No exit Although laws were amended in 2011 to permit mergers among tertiary institution, so far few have taken place, and there is no set policy or legislation dealing with the question of university closures.

Relevant laws would need to be amended by the Legislative Yuan, but politicians have been reluctant to touch what would be a sensitive social issue.

T h e r e a s o n f o r t h e c o n t r o v e r s y, explains Wu Hui-lin, a research fellow at

the Chung-Hua Institution of Economic Research (CIER), is that individuals or business groups establishing private colleges – which were required to take the form of not-for-profit organizations – were permitted to purchase government land at artificially low prices in order to encourage education. Since then, land prices have skyrocketed, but in the event of a sale, it is unclear who would have legal claim to the proceeds.

Wu Hui-lin says the prospect of strong public disapproval caused by perceptions that stakeholders might profit unfairly has led to a situation in which school land effectively cannot be sold. Similarly, there are no clear regulations governing the allocation of assets should two private universities merge.

In addition, notes NTU’s Chen, zoning issues arise if land designated for educational purposes is converted to other use. It would also be difficult politically to close universities located in less-developed areas, as they are a source of employment and other income for those regions, as well as a cause for local pride.

“If you close them or merge them, it will cause political fights,” he says. “Legislators will lobby the government or boycott

法律需要立法院修訂，但政治人物不想碰觸這個敏感的 社會議題。 中華經濟研究院研究員吳惠林說明，私立大學院校必 須是非營利機構，政府為了鼓勵私人和企業團體辦學， 讓他們以優惠價格購買公有土地，而這就是問題所在。 台灣土地價格飆漲，如果大學廢校並將土地出售，利潤 歸誰並無明確的法律規範。民眾如果認為利益關係人會 利用出售校地獲取不當利益，就會強烈反對，吳惠林 說，因為擔心出現這個情況，導致校地無法買賣。同樣 的，如果有兩所私立學校整併，資產要如何分配，也沒 有清楚的規範。 此外，陳東升指出，如果要關掉的大學院校位在發展 程度較低的地區，會有政治上的困難，因為這些學校既 能為當地爭光，也是地方就業和收入的來源。他說：「 如果廢校或整併，會引發政治角力。立法委員會遊說政 府，或杯葛教育部的預算。」政府也可能面臨學生激烈 的抗議。 台灣經濟研究院的經濟學者孫明德說：「政府要推 動大學院校整併、轉型或廢校，難度都 都非常高。」 但他說，台灣可以考慮仿效日本，讓大學宣告破產，但 設立一個制度，讓破產大學的學生可以轉到其他學校就 讀。他預測，在學生人數降低的時候，如果不採取減校 的措施，教育品質會進一步滑落。

the budget of the Ministry of Education.”

The government could also be faced with angry student protests.

“It’s very hard for the government to push for a policy of mergers, institution transformation, or closure,” says economist Sun. But he says Taiwan could consider emulating Japan, which permitted universities to go bankrupt and set up a system to help place their students in other institutions of higher learning.

If nothing is done to reduce the number of universities while student enrollment declines, educational quality will decline even further, he predicts.

Some observers have suggested that the answer is for Taiwan’s universities to recruit more foreign students, but others question whether that option is really feasible. Wong Chi-huey, president of Academia Sinica, is among those who consider that Taiwan is not internationally connected enough to attract large numbers of students from abroad.

Besides the question of over-capacity in Taiwan’s higher-education sector, another issue is whether the MOE’s system for appraising universities is causing them to be too much alike instead of developing unique features. “We have

有些觀察家曾說，問題可以藉著招收更多外國學生來 解決，但也有些人質疑這個辦法的可行性，包括中央研 究院院長翁啟惠在內。他們認為，台灣與國際接軌的程 度不足，無法吸引眾多外國學生前來就讀。 台灣高等教育除了有供過於求的現象，另一個問題在 於教育部的評鑑制度是否導致大學院校同質性過高，未 能發展出各自的特色。翁啟惠說：「我們有太多學術類 的大學。我們培養出太多背景相似的大學畢業生，這點 不符合我們經濟發展的需要。」 台灣政府為了提高高等教育水準所採取的措施，包 括在2005年成立教學卓越計畫，它的目的在於改善教 學品質，同時增加學生的就業率。另外，從2006年開 始，政府每五年撥款新台幣500億元給12所最好的大 學。教學卓越計畫的做法，是由各校提交詳細的計畫向 教育部爭取經費。高教司長黃雯玲說，八年來，教育部 已對教學卓越計畫提供新台幣342億元的經費，每年有 50到60所學校得到政府補助。 為監督各校辦學情況，教育部成立高等教育評鑑中 心，評鑑委員包括教育部官員、大學院校代表、外界學 者和其他專家。各校要獲得上述兩項計畫的補助，課程 和其他活動都必須獲得評鑑委員認可。台灣經濟研究院 的孫明德說，各校為了獲得補助，必須符合教育部訂定 的全面性關鍵績效指標，因此各大學院校「全都一個

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No oPPoRTuNITY FoR FoREIgN uNIvERSITIES

O

ne way to spur internationalization of Taiwan’s higher education system would be to encourage foreign universities to enter the local education market. Singapore, Hong Kong, and even China are taking this approach, but Taiwan still adopts a protectionist stance.

Restrictive regulations in Taiwan in effect prevent foreign higher educational institutions from establishing branches, satellite campuses, or independent degree programs on the island. “The authorities don’t want to change and I think are under pressure from local universities,” says Robert Lin, co-chair of AmCham’s Education and Training Committee. “They’re being over-protective of local players.”

The main barrier is the Ministry of Education’s stipulation that university campuses in Taiwan must be located on a plot of land at least five hectares in area, says Lin, who is also the director of the Taiwan representative office for Baruch College of the City University of New York (CUNY). With land being so expensive and scarce, he says, there have so far been no takers.

Instead, some foreign universities operate more limited programs by teaming up with a local partner, as Baruch University has done with Minchuan University for an Executive Master of Science Degree from CUNY in such fields as finance, marketing, information-system management, and human resources management and global leadership. Lin notes that the regulations governing these partnership arrangements are vague, with no clear requirement regarding the number of local faculty members that need to be involved in a joint degree or cooperative program. But Lin says most prestigious American universities like their teaching to be done in-house to maintain educational quality. “They would like to use their own faculty as much as possible,” he says. “Many foreign institutions don’t want to have local 18

professors teaching their courses.”

The government also sets limits on the recognition of foreign degrees, but again the regulations are vague, says Lin. Students attending joint-degree programs taking place in Taiwan have problems receiving recognition for credits that were not earned at the foreign institution’s main campus. “The Ministry of Education would only recognize a U.S. graduate degree if the student physically studies in a U.S. campus for at least eight months and for a Ph.D. degree at least 16 months,” says Lin. He believes that making it easier for foreign institutions to set up various kinds of campuses in Taiwan would help increase the quality of higher education and also help the nation boost its global competitiveness.

“The government wants to protect local universities as there are fewer and fewer students, but they forget that if there’s a better higher-education system here, we have more chance to attract students from abroad.”

Lin adds that as the number of Taiwanese going overseas to study continues to drop, allowing foreign institutions to set up their own campuses or independent programs could help provide Taiwan students with a means of obtaining an international education without leaving their own country.

Huang Wen-lin, director-general of the Ministry of Education’s Department of Higher Education, notes that in accordance with Taiwan’s accession to the World Trade Organization, foreign educational institutions wishing to set up independent programs or campuses in Taiwan must do in compliance with the laws governing private tertiary institutions here. Making it easier for foreign universities to set up shop in Taiwan would thus involve an entire overhaul of the relevant laws, “and that would be an enormous undertaking,” she says.

— By Jane Rickards

too many academic-style universities,” says Academia Sinica’s Wong. “We cultivate too many college graduates who have similar backgrounds and that cannot meet the needs of our economic development.”

Among the government initiatives for encouraging improvement in Taiwan’s higher education are the “Excellence in Education” program established in 2005 to raise teaching quality and prepare students to be more employable, and a project started in 2006 that allocates NT$50 billion every five years to Taiwan’s top 12 universities. For the “Excellence in Education” program, institutions compete against one another by submitting detailed proposals for funding. Over the past eight years, MOE has injected NT$34.2 billion into the program, Huang says, with 50 to 60 tertiary institutions each year receiving a government grant.

To monitor educational standards, MOE set up a higher-education appraisal center, with the appraisal committee consisting of MOE officials, university representatives, independent scholars, and other experts. For both programs, the committee must approve the universities’ curriculums and other activities. The

樣，不同的只是名字」。 陳東升指出另一個不合理的現 象，在於大學訂定課程時，負責 規畫的人士依規定有三分之二是 教師，三分之一是業界專家。他 說：「例如說，要哲學系邀業界人 士參與，就很沒道理。」翁啟惠也 說，大學院校聘請教師的習慣，也 助長了各校的同質性，因為各校都 採用同樣的標準，例如出版和論文 獲得引用的數量，而比較不注重教 學技巧。」 高教司長黃雯玲對這些批評回 應說，評鑑制度實施才七年，教育 部知道有這些批評，因此在去年開 始，讓上述兩項計畫績效最好的大 學院校自我評鑑，而不是由教育部 來做。她說，到目前有60所學校已 經申請自我評鑑。

擁抱世界 另一個問題是，台灣的教育環境

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requirement that the universities meet across-the-board key performance indicators set by the ministry makes them “aside from their names, all the same,” says TIER’s Sun. Citing another anomaly, Chen says that when course curriculums are being devised, the guidelines call for two-thirds of the curriculum committee to come from faculty and one-third from industry. “It makes no sense for the philosophy department, for example, to invite people from industry to take part,” he notes. Wong adds that university hiring practices in recruiting professors add to the tendency for similarity among institutions, since they all look at the same criteria – such as the number of publications and citations – with less stress on teaching skills.

Huang responds to such points by noting that the appraisal system is only seven years old, and that MOE, aware of these criticisms, last year started to permit top-performing tertiary institutions in both of the above-mentioned programs to self-evaluate rather undergo an appraisal from the ministry. So far, she says, 60 institutions have applied for the right to do so.

Embracing the world Another question is whether Taiwan is sufficiently internationalizing its educational environment. Huang says the number of Taiwanese going abroad to study has remained fairly flat in the past decade at 26,000 to 38,000 each year, although the number studying in the United States has fallen from roughly 30,000 to the current 24,818. Meanwhile, the numbers going abroad to study from such nations as China, India, and South Korea are soaring.

“Taiwan is an island, so theoretically we should be familiar with international affairs and have lots of contact with international events, but in recent years students have become quite conservative,” says NCCU president Wu. “They don’t care about international events or how the world has changed.”

He blames the situation on Taiwan’s diplomatic isolation and economic marginalization. While poor foreignlanguage ability is a factor for many students, he says, “what is more important is that students just don’t have any interest.” Another key reason is the high expense of studying abroad, and the fear

是否已充分國際化。教育部黃雯玲司長表示，過去10年 台灣出國留學人數相當平穩，每年都在2萬6000至3萬 8000人之間，只是前往美國留學人數已由以往的大約3 萬人下降到如今的2萬4818人。在此同時，前往中國、 印度和南韓等國家留學人數激增。 政大的吳思華校長說：「台灣是個小島，理論上我 們應該熟悉國際事務，並多多接觸國際活動，但近年來 學生變得相當保守。他們不關心國際事件或世界如何變 化。」 他將這種情況歸咎於台灣外交孤立和經濟邊緣化的處 境。雖然對許多學生來說，外語能力欠佳也是個因素， 但他表示：「更重要的是，學生根本毫無興趣。」另一 個重要原因是出國留學費用高昂，而且恐怕不會帶來什 麼直接的經濟效益，因為回到台灣後，起薪還是很低， 只有大約2萬6500元。吳思華建議，大學應加強提倡學 生參與國際活動，包括參加交換計畫，實習和擔任志 工，此外也可以鼓勵學生出國，接受一個學期的大學教 育。 就相反方向的國際參與而言，台灣經濟研究院發現， 台灣共有將近2萬5500位外國學生，其中55%在此地的 語言中心學習中文。台灣各大學外籍學生所占比率只有 1.9％，遠低於英國的11.2%，還有澳洲的18.7%。（教 育部統計的「外國」學生人數大致相似，但若包括來自

that it will bring little direct economic benefit, since they will still receive a low starting salary of about NT$26,500 on returning to Taiwan. Wu Se-hwa suggests that the universities do more to promote student participation in international activities, including exchange programs, internships, and volunteer work, and encourage students to take a semester of their undergraduate education abroad.

In terms of international involvement in the other direction, TIER has found that of the nearly 25,500 foreign students in Taiwan, 55% were here to study Chinese in language centers. Only 1.9% of the student body at Taiwanese universities are foreigners, compared with 11.2% for Britain and 18.7% for Australia. (MOE calculates the number of “foreign” student as about the same, but puts the figure at 43,957 when overseas Chinese from Hong Kong and Macau – but not the mainland – are included.)

The presence of more foreign students on campus, says Wu Se-hwa, would be of enormous benefit to local students in increasing their international awareness.

He notes that Taiwan is an attractive study destination in many ways, offering relatively inexpensive tuition and excel-

香港與澳門的僑生，人數則為4萬3957人，大陸學生不 包括在內。） 吳思華表示，校園內出現更多外國學生，對本地學生 大有助益，可以增加他們的國際意識。他指出，在許多 方面而言，台灣是個有吸引力的求學地點，學費相對便 宜，而且提供頂尖中文教學。 中研院長翁啟惠表示，如果政府進一步放寬規定，讓 外國學生畢業後能留下，繼續發展事業，台灣對外國學 生將更有吸引力。他建議，對於希望取得台灣公民身分 的外國人，台灣應允許他們不必放棄原有護照。如此一 來，外籍教職員可以享有和台灣公民相同權益，例如公 立大學教授的優厚退休方案。 教育人員說，分析台灣大學教育的特色時，也務必 要注意此地學生比美國學生被動的傾向，他們習於聽命 行事，而非採取主動。這種傾向據信部分肇因於讓孩子 從小就上補習班的作法，這使得他們比較沒有時間遊玩 和發展創造力。台大的陳東昇教授表示，台灣學生青少 年時少有機會探索他們真正的愛好，以及思考自己的未 來，因此比較不積極，等到進了大學，常出現學習倦怠 現象。他說：「他們這時只想享受人生。」 陳東昇又說，教師常抱怨學生學習興趣低落，學生 同樣常有怨言，認為教師施教方式不夠有趣，而這可能 是因為教師得要發表研究報告，感受很大職業壓力。這

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Taiwan could make itself more attractive for foreign students, says Academia Sinica’s Wong, if the government were to further ease rules to enable them to stay and continue their careers after graduation. He also recommends that Taiwan allow foreigners wishing to take Taiwan citizenship to do so without having to give up their original passport. Foreign faculty members could then enjoy the same benefits as Taiwanese citizens, such as the generous retirement packages for professors at public universities.

Analysis of the character of university education in Taiwan must also take note of the tendency of students here to be more passive than their American peers – adept at following instructions but not in taking initiative, educators say. This tendency is believed to result in part from the practice of enrolling children in bushibans (cram schools) from an early age, giving them less time to play and develop their creativity. With little opportunity through their teen years to explore their real passions and think about their future, students are less motivated and experience study burnout when they reach university, notes NTU’s Chen.

“They just want to enjoy life,” he says.

While lecturers frequently complain that the students are uninterested in learn-

ing, Chen adds, students complain just as frequently that the lecturers fail to present the material in an interesting way, possibly because overworked teachers feel so much career pressure to publish research.

Improving the teacher-student relationship is critical for improving Taiwan’s higher education, the sociologist notes.

Experts interviewed also expressed concern about the growing trend for onechild families, saying that this could lead to children who are spoiled or lack social skills and the ability to deal with competition. Wu Se-hwa worries that today’s students are less involved in campus group activities. NCCU is therefore promoting dormitory life as a form of education. “In the past, a university dorm was just a place to sleep,” he says, but now the school administration is trying to turn it into a center for intellectual and social interaction on the model of U.S. liberal arts colleges.

Promoting innovation Another shortcoming, experts say, is that Taiwanese college students generally are not given enough training in problem-solving or developing independentthinking skills. After spending their high school years cramming in bushibans, students attend university courses that

位社會學者指出，改善師生關係攸關改善台灣的高等教 育。 台灣只有一個孩子的家庭越來越多，接受訪問的專家 也對這種趨勢表示憂慮，認為這可能導致孩子被寵壞， 或是缺乏社交技能與因應競爭的能力。如今學生較少參 與校園社團活動，吳思華校長就對此感到擔憂。因此， 政大提倡以住宿生活為教育的一環。他表示，「以往大 學宿舍只是睡覺的地方」，但如今校方想效法美國大學 文學院的模式，把宿舍轉變為知識交流與社會互動的中 心。

提倡創新 專家表示，台灣的大學生還有另一項缺點，就是在解 決問題和培養獨立思考能力方面，通常未獲足夠訓練。 他們高中的時間都耗費在補習班，等到成了大學生後， 所上課程偏重準備書面測驗，以及將學術上的事實與數 據整理成論文。 台灣如今能居於高科技重鎮的地位，台灣積體電路 公司執行長張忠謀是重要先驅，他最近在2013年亞太 20

focus heavily on preparing for written exams and compiling academic facts and figures into theses.

In a recent speech at a conference of the Asia Pacific Council of American Chambers of Commerce (APCAC), Morris Chang, CEO of Taiwan Semiconductor Manufacturing Co. and a pioneering force behind Taiwan’s current status as a high tech powerhouse, labeled the admission processes for star high schools and universities as “obsolete” for their focus on rote learning and memorization. “If we reform the education system, it would go a long way towards encouraging innovation,” Chang said, stressing that innovation will be increasingly critical for the island’s economic success.

Instead of every university trying to become an NTU, Chang proposed that just two or three should be elite institutions aiming to train future leaders of society, while 10 to 20 would stress innovation and value creation, and the rest would be content to train graduates to be productive contributors to the economy.

While globalization and the digital economy provide many new opportunities for the young, NCCU’s Wu Se-hwa says he would like Taiwanese students to develop a greater sense of entrepreneurship. He notes that Skype, developed in Estonia, now has over 600 million users

區美國商會年度大會演說時，對於台灣明星高中和大學 的入學考試一味重視死記和背誦，直稱已經「過時」。 他說，「如果我們改革教育制度，將大大有利於鼓勵創 新」，他強調創新對台灣的經濟成功將越來越重要。張 忠謀並建議，不應該每所大學都想成為台大，只有兩或 三所大學應該成為頂尖學府，目的是訓練出社會未來 的領袖人物，而應有10至20所大學著重創新和創造價 值，其餘大學則只要訓練畢業生具備生產力，能對經濟 有所貢獻。 政大的吳思華校長表示，雖然全球化和數位經濟提供 年輕人很多新機會，他希望台灣的學生能培養更強的創 業精神。他指出，愛沙尼亞研發出來的通訊軟體Skype 如今有超過六億用戶，因此微軟公司以85億美元高價收 購。他又說，台灣學生也擁有必要的技術能力，同樣能 研發新的軟體程式，但他們需要創意和創業衝勁，才能 成功落實這類計畫。 台灣大學教育另一個常遭詬病之處是，課程過分注重 理論，而不重視實用技能，而且企業界和學術界之間的 溝通與合作不足，因此新聘用的畢業生仍然需要接受不 少訓練，才能為職場帶來價值。一個原因是大約在10年

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and was purchased by Microsoft for US$8.5 billion. Taiwanese students have the necessary technological skills to similarly develop new software applications, he says, but they need creativity and entrepreneurial drive to carry out such projects successfully.

Another frequent criticism of Taiwan’s university education is that courses concentrate too much on theory as opposed to practical technical skills, and that insufficient communication and collaboration takes place between industry and academia, so that newly hired graduates still need substantial training before they bring value to the workplace.

One reason is that many of the technical institutes, polytechnical universities, and junior colleges that made a distinct contribution to Taiwan’s economic development over past decades by teaching practical industry-related subjects were allowed to upgrade to the status of a university around 10 years ago, becoming academic in orientation and less in touch with industry.

MOE is now working to reverse this trend. For example, it is promoting the establishment of technical development centers in the polytechnical universities and technical colleges, and is encouraging their involvement in developing new industries – such as green energy, preci-

sion instruments, and digital materials – in line with the government’s industrialdevelopment policies.

Responding to criticism, the MOE has also added key performance indicators to its appraisal system for universities in general, encouraging them to be attuned to industry’s needs. It is also encouraging executives with industry experience to serve as adjunct lecturers in all tertiary institutions. Internship programs with industry are also far more widespread than they were a few years ago.

A cross-ministerial task force involving agencies such as the Council of Labor Affairs and Ministry of Economic Affairs (MOEA) now evaluates universities’ plans for new departments to see if they meet the real needs of industry or society. Ministries such as MOEA can also call for the creation of a new university department when they identify a new need. One of the results was Taipei Medical University’s creation of a master’s degree in long-term care for the aged.

At the higher levels of scientific research, says Academia Sinica’s Wong, unnecessarily tough regulations to prevent conflict of interest have discouraged cooperation between academia and industry, whereas it is common in the United States and other countries for companies to help fund academic

前，許多技術學院、工業大學和專科學校紛紛獲准升格 為大學，它們過去幾十年傳授與企業有關的實用科目， 對台灣的經濟發展貢獻卓著，如今則變成學術取向，與 企業較為脫節。 教育部如今力求扭轉這種趨勢。舉例來說，該部正推 動在這些科技大學和技術學院設立技術發展中心，而且 鼓勵它們參與發展新的產業，諸如綠色能源、精密儀器 和數位材料，這也符合政府的產業發展政策。 教育部也針對批評作出回應，在大學評鑑制度中增添 關鑑績效指標，鼓勵它們配合企業的需求。教育部也鼓 勵有企業經驗的高級主管在所有大學院校兼任講師。如 今企業實習計畫也遠比幾年前更為普遍。 如今有個跨部會的專案小組，包括勞工委員會和經濟 部等部會都參與，負責評估各大學增設新科系的計畫， 審查它們是否符合企業或社會的真正需求。經濟部等部 會發現有新的需求時，也可以要求大學增設新科系。成 果之一就是台北醫學大學設立的長期照護碩士學位學 程。 中研院的翁啟惠院長則表示，在較高層級的科學研究 方面，為了防範利益衝突，有些不必要的嚴格規定，這

research they think could be useful. “The government worries that researchers or professors may have some kind of underthe-table arrangement,” he says, “but if we have a good disclosure system, we could disclose the relationship.”

While academia should still focus on basic rather than applied research, Wong adds, universities could still make important discoveries more accessible to industry. “Now we stop at the publication stage,” he notes. Wong suggests introducing a translational research function – a middle step between basic science and commercialization that often involves multidisciplinary collaboration – into the universities.

Academic pay scales are yet another issue that has received attention. Several years ago, faculty members complained about regulations stipulating that academics of a given rank should all receive the same pay, regardless of differences in talent or performance. Although much more flexibility has since been introduced into the system to allow those with good performance to receive better compensation, the average academic salary of around NT$100,000 a month has remained basically unchanged for the last two decades, says TIER’s Sun says.

The result has been a brain drain of top professorial talent, since universities in

妨礙了學術界與企業界的合作，而這種合作在美國與其 他國家都很常見，讓企業能夠協助找出它們認為可能有 用的學術研究。他說：「政府擔心研究人員或教授可能 有些檯面下的交易，但如果我們有好的揭露制度，就可 能揭發這種關係。」 翁啟惠又說，雖然學術界仍應專注於基本研究，而 非應用研究，大學還是可以作出讓企業界覺得比較平易 近人的重要發現。他指出：「我們止於發表階段。」翁 啟惠建議，在大學引進所謂轉譯研究功能，這是基礎科 學與商業化之間的中介步驟，通常涉及各種學科間的合 作。 大學教師的薪資等級也是個受到注意的問題。幾年 前，大學教員曾抱怨法規死板，規定一定等級的教師都 領取相同薪資，不論個人才華或表現有何不同。台經院 的孫明德說，儘管其後薪資制度已增加很大彈性，讓表 現優良的教師獲得較好待遇，但過去20年來，大學教師 平均月薪在10萬台幣左右的情況基本上維持不變。這導 致頂尖專業人才外流，因為香港和澳門等地大學可能付 出高四倍薪資。 應屆大學畢業生的就業機會和薪資水準也是個問題。

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INTERNATIONALIZATION — Educators believe Taiwan's universities and local students would benefit from having more foreign students enrolled to contribute different perspectives. photo : nccu

places like Hong Kong and Macau may pay as much as four times more salary.

Job openings and salary levels for new graduates are also a problem. TIER puts the unemployment rate for fresh graduates at 20%, with CIER citing unemployment figures for all 20-30 yearolds at 12%. According to TIER, starting salaries for new entrants to the workforce came to an average of NT$26,577 in 2011, a nominal increase of 1.8% since 2003, but in fact a decline if inflation is factored in. The TIER research on 2012 hiring patterns shows that for the approximately 298,000 university graduates, only 99,000 suitable jobs were available. That equals 0.33 jobs per university graduate, compared with 1.22 for polytechnical university and techni-

cal college graduates and 1.51 for technical and ordinary high school graduates.

Employers said they most preferred to hire technical high school graduates.

Students from Taiwan’s top universities find employment relatively easily, but TIER notes that the basic skills of many university graduates are often insufficient for the workforce – often not even up to the standard of senior high college students of the past. Further, students, especially those enrolled in private institutions, often graduate carrying heavy debt from their student loans, but feel that without a diploma their job prospects would be much worse, says Sun. The large debt load also adds to the political difficulty of raising tuition, due to strenuous opposition from parents

台經院估計，應屆畢業生的失業率約20%，中經院則估 計，所有20至30歲年輕人的失業率約12%。 根據台經院，2011年職場新人的起薪平均在2萬6577 元，名目金額比2003年增加1.8%，但如考量通膨因素， 實際上反而減少了。台經院有關2012年聘雇模式的研究 顯示，大學畢業生約有29萬8000人，但只有9萬9000個 合適的工作。這相當於每個大學畢業生只有0.33個工作 機會，相形之下，科技大學和技術學院畢業生有1.22個 工作機會，高工和一般高中畢業生更有1.51個機會。企 業主表示，他們最希望雇用高工畢業生。 台灣頂尖大學的學生就業相當容易，但台經院指出， 許多大學畢業生的基本技能經常不足以因應職場所需， 往往還比不上以往專科生的水準。孫明德說，學生畢業 時常因助學貸款而揹上沈重負債，尤其是就讀私立學院 的學生，但他們覺得如果少了張文憑，求職希望會更 糟。龐大的學貸負擔也增加了提高學費的政治難度，原 因是家長和學生都反對。台大陳東昇教授說：「這成了 惡性循環。」 22

and students. “It becomes a vicious cycle,” says NTU’s Chen.

The jobless situation is partially due to Taiwan’s economy hollowing out after businesses moved to China and Southeast Asia. But the 1111 Job Bank, in written reply to questions from TOPICS, notes that many students have excessively high expectations and are unwilling to start at the bottom of the ladder.

But without practical skills and experience, they are not yet capable of taking on middle management or high-level jobs. Considering the additional cost needed to train them, employers are unwilling to take them on.

The 1111 Job Bank and TIER’s Sun both also cite employer complaints about a lack of knowledge of professional behavior and work ethics among fresh graduates. A 1111 Job Bank study found that employers’ biggest complaints about fresh graduates were their inability to deal with pressure (54.07%), followed by an uncooperative attitude (32.06%) and poor work attitude (25.36%).

According to the 1111 Job Bank, students can make NT$10,000 a month by working part time, so instead of being tied down to a full-time job for NT$20,000-plus, many prefer to continue studying until the job market improves, forming a group that has been dubbed “freeters.” Although MOE data shows that enrollment in under-

台灣目前的失業情況，部分肇因於企業移往中國和東 南亞，造成經濟空洞化。不過，1111人力銀行書面答覆 本雜誌問題時指出，許多學生對工作期待過高，不願意 由基層做起。不過，由於缺乏實用技能和經驗，他們還 無法承擔中級管理職位或是高層工作。考量訓練他們的 額外支出，企業主因此不太願意進用新人。 1111人力銀行和台經院的孫明德都提到，企業主抱 怨應屆畢業生對專業行為和工作倫理缺乏了解。1111 人力銀行一項研究報告發現，企業主對應屆畢業生抱 怨最多的是抗壓性差（54.07%），其次是配合度差 （32.06%）和工作態度差（25.36%）。 根據1111人力銀行，學生打工每月可獲1萬元收入， 因此與其被薪資僅2萬元出頭的工作綁住，許多人寧可 繼續求學，等待就業市場情況改善，成了所謂的「飛特 族」。教育部的資料顯示，在2011年止的10年間，就 讀大學人數增加1.1倍，碩士班學生增加1.78倍，博士 班學生更增加1.8倍，顯示許多學生延後進入職場。在 此同時，科技大學和專科學校每年的畢業生人數則減少

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graduate programs has increased by 1.1 times during the decade ending in 2011, masters’ degree candidates have increased by 1.78 times and doctoral students by 1.8, indicating that many students are deferring entering the workforce. Meanwhile the number of graduates each year from technical universities and colleges has decreased by 70%.

MOE’s Huang says holders of doctorates find employment in industry less easily in Taiwan than in the United States, and instead are traditionally employed in academia. But with the number of university students projected to drop dramatically, there will be far fewer university teaching jobs, creating a situation of serious mismatch in supply and demand for postgraduates.

Economists Sun of TIER and Wu Hui-lin of CIER both look to deregulation as a solution to many of the problems facing higher education in Taiwan. The change would give the universities freedom to operate as they choose in finding ways to respond to changes in the market. To offset the impact of higher tuition, scholarships and subsidies would be provided for those in need. And a mechanism will need to be found to enable some of the schools currently in operation to go out of business.

了70%。 教育部黃雯玲司長指出，台灣 擁有博士學位的人想在企業求職 沒有美國容易，傳統上只能受聘 於學術界。不過，由於大學生人 數預估將大幅減少，大學教職也 將銳減，造成博碩士供需嚴重失 衡的情況。 台經院經濟專家孫明德和中經 院專家吳惠林雙雙認為，要解決 台灣高等教育面臨的許多問題， 得寄希望於解除管制。這個改變 將讓大學自由選擇營運方式，找 出方法因應市場變化。為緩和高 學費的衝擊，可提供清寒學生獎 學金或補助。還需要找出一項機 制，讓一些目前仍在營運的學校 能夠關門。

A SMAll STuDENT INvASIoN FRoM ChINA

C

oco Lee, a 21-year-old, wears blunt-cut bangs, ripped jeans, and a T-shirt with a graffiti design. Her friend Anna Yang wears trendy sunglasses pushing hair off her face. It would be easy to mistake the girls for Chinese-American or Taiwanese university students.

But the third-year university students come from the People’s Republic of China – long Taiwan’s sworn enemy—and are on a six-month exchange program at Taipei’s Soochow University. The girls say that while most Taiwanese students are curious and friendly, a few called Lee a “Communist bandit.”

“It’s not that we feel we’re any different from them. They think they’re different from us,” says Lee (not her real name), a fashion-design student at Chongqing’s Southwest University.

Yang (also a pseudonym) is a political-science major at Shanghai’s East China Normal University, an incubator for China’s top researchers, public servants, and political leaders. She says that a few courses at her home university are devoted to ideological topics, such as Deng Xiaoping’s thoughts and Marxism. But otherwise, there’s not much difference between Taiwanese and Chinese university political-science courses, she says.

“Calling us Communist bandits is 1970s thinking,” Yang maintains. Of all the ways Taiwan has to fill out its thinning university population and raise revenues for its institutions of higher education, the admission of mainland students has proved to be the most controversial. Huang Wen-lin, director-general of the Ministry of Education’s Department of Higher Education, notes that shortterm exchange programs for mainland students were running for several years without much fuss.

But a public stir was aroused a public stir two years ago when the Legislative Yuan amended laws to allow mainland students to enroll in Taiwanese university degree program for the first time. Legislative debate on these amendments led to bitter physical tussles between ruling party and opposition lawmakers, with the Democratic Progressive Party (DPP) strongly resisting the move out of fear that the mainlanders would take jobs from young Taiwanese after graduation.

In return for relaxing its opposition, the DPP exacted the stiff restrictions on mainland students that are still in force today. They are not eligible for scholarships, are not permitted to work while studying, and must return home immediately after graduation, for example.

After the law was passed, 928 mainlanders were admitted into degree courses in 2011, followed by 936 in 2012. The total number of mainland students in Taiwan last year reached 20,601, including exchange students and those on short-term study programs. In comparison, the student population from countries other than China was 43,957.

The economic woes of some of Taiwan’s universities might disappear if the trickle of mainland degree-takers could be expanded, but the idea is politically unpopular, even though education experts invariably say Chinese students would have a beneficial effect on Taiwanese campuses by enhancing internationalization. But they caution that Chinese students should be treated the same way as other foreign students, without either discriminatory restrictions or especially positive treatment. “Personally I would like to see more diversity, including more students from mainland China,” says Academia Sinica President Wong Chi-huey. At National Chengchi University, president Wu Se-hwa says he aims to more than triple the number of Chinese students from today’s approximately 60 to 200.

Taiwan Institute of Economic Research economist Gordon Sun suggests that the government is focusing too much on China as a source of foreign students. He estimates that only about 30% of the applicants to universities in Malaysia are admitted, meaning that the remaining 70% could be a source for recruitment for Taiwan schools. Other Southeast Asian nations are also seen as potential markets. Given Taiwan’s aging population, Sun also suggests that mainland students be permitted to work in Taiwan after graduation.

Both Yang and Lee say while China is authoritarian at the top levels, there is a degree of openness at the grass roots. As for whether Chinese students like themselves will be influenced by Taiwan’s democratic political system, the two say that people in China are generally aware of China’s problems, particularly corruption, but that an overhaul is difficult as China is such a large place.

“I feel the mainland needs to change, but it doesn’t know how to change,” Yang says. “So it encourages us young people to go overseas and learn about other systems.”

— By Jane Rickards

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USTR Report on U.S.-Taiwan Trade Issues The Office of the United States Trade Representative (USTR) in March released its annual National Trade Estimate Report on Foreign Trade Barriers. The Taiwan portion of the report is reprinted below.

Also in March, the Trade and Investment Framework Agreement (TIFA) Council talks were held successfully in Taipei between a U.S. delegation headed by Deputy USTR Demetrios Marantis and a Taiwan team led by Deputy Minister of Economic Affairs Cho Shih-chao. The Council set up two bilateral working groups, on Technical Barriers to Trade (TBTs) and investment issues, which will report back quarterly on their progress. Many of the issues listed in the report below will be taken up by one of the working groups; other issues will be addressed by separate channels.

This year’s TIFA Council talks were particularly significant in that they were the first to be held since 2007. The normally annual discussions were suspended for more than five years because of U.S. government displease with Taiwan’s policies restricting certain beef imports. The problem was partially resolved last year, enabling the TIFA process to be resumed, but issues remain regarding such products as ground beef and offal. Another source of friction is Taiwan’s continued ban on the import of pork containing traces of the feed additive ractopamine.

TRADE SUMMARY

The U.S. goods trade deficit with Taiwan was $14.5 billion in 2012, down $1.0 billion from 2011. U.S. goods exports in 2012 were $24.4 billion, down 5.9 percent from the previous year. Corresponding U.S. imports from Taiwan were $38.9 billion, down 6.1 percent. Taiwan is currently the 16th largest export market for U.S. goods.

U.S. exports of private commercial services (i.e., excluding military and government) to Taiwan were $10.4 billion in 2011 (latest data available), and U.S. imports were $6.8 billion.

Sales of services in Taiwan by majority U.S.-owned affiliates were $9.5 billion 24

in 2010 (latest data available), while sales of services in the United States by majority Taiwan-owned firms were not $2.0 billion.

The stock of U.S. foreign direct investment (FDI) in Taiwan was $15.8 billion in 2011 (latest data available), down from $21.8 billion in 2010. U.S. FDI in Taiwan is mostly in the manufacturing, wholesale trade, and finance/ insurance sectors.

IMPORT POLICIES

Tariffs W h e n Ta i w a n b e c a m e a W T O Member in January 2002, the author-

ities implemented tariff-rate quotas (TRQs) on small passenger cars and 24 agricultural products. Taiwan subsequently eliminated TRQs for 8 agricultural items and currently, 16 agricultural products are subject to TRQs. On January 1, 2007, in accordance with its WTO commitments, Taiwan made additional tariff cuts and increased TRQ amounts on the remaining products. Beginning in January 2011, Taiwan fully eliminated TRQs on small passenger cars. In addition, the commodity tax on small passenger cars dropped from 35 percent to 30 percent. This tax is waived for electric cars until 2014 in an effort to

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promote energy conservation.

Taiwan maintains Special Safeguards (SSGs) for a number of agricultural products covered by TRQs. SSGs, which are generally permitted under Article 5 of the WTO Agreement on Agriculture, allow Taiwan to impose additional duties when import quantities exceed SSG trigger volumes or import prices fall below SSG trigger prices. Because Taiwan previously did not import many of these products, SSG trigger volumes are relatively low. Over the last few years, Taiwan has applied SSG provisions in several agricultural product categories, including poultry meat, certain types of offal, and milk.

U.S. industry continues to request that Taiwan lower tariffs on many goods, including large motorcycles.

imporT ConTrols The Economic Cooperation Framework Agreement includes early harvest lists of 267 goods permitted to enter Taiwan from the PRC with tariff reductions and exemptions. The early harvest lists were implemented in three stages that achieved the goal of eliminating tariffs on all of the 267 items as of January 1, 2013. Taiwan still retains import bans on approximately 2,000 products from the PRC.

agriCulTure and fish produCTs Beef and Pork Despite administrative measures implemented in September 2012 that led to improved market access for U.S. beef, the United States remains concerned about Taiwan's other trade practices affecting U.S. meat exports, including beef offal and pork. For details, please see the 2013 USTR Report on Sanitary and Phytosanitary Barriers.

Rice Upon accession to the WTO in 2002, Taiwan committed to lifting the ban on rice imports and opened up an import quota of 144,720 metric tons (MT) on a brown rice basis under a “special treatment” regime. Taiwan's

The reopening of the Taiwan market to U.S. beef products last year paved the way for resumption of the TIFA process. photo : cna

annual WTO TRQ is divided into two portions - 35 percent or 50,652 MT for private sector imports and 65 percent or 94,068 MT for public sector imports. The amount allocated to public sector imports is divided by both country of origin and tender type (i.e., the simultaneous buy-sell [SBS] scheme and normal tenders.)

Taiwan shifted its rice importation from a special treatment regime to a complex TRQ system that includes a ceiling price mechanism. After the United States and other WTO members raised objections to Taiwan's quota allocation, Taiwan subsequently agreed that its import quota would be allocated based on a country-specific quota (CSQ) regime, with the U.S. quota accounting for the largest share at 64,634 metric tons valued at approximately $45 million at current world prices.

In 2007 and 2008, Taiwan rejected all bids for U.S. rice under Taiwan's WTO CSQ, arguing that high U.S. bids had exceeded Taiwan's ceiling price.

The United States has continued to urge Taiwan to fill the 2007 and 2008 shortfalls (approximately 80,000 metric tons on a brown rice basis). However, since 2009, Taiwan has fully met its obliga-

tions for purchase of U.S. rice.

The United States remains concerned about the 2012 decision by Taiwan authorities to unilaterally shift a larger percentage of the U.S. CSQ to SBS tenders, though Taiwan filled its quota in 2012. Since the SBS places bear all costs of importing, storing and distributing the rice on private importers, relatively low default penalties create a situation where successful bidders could simply walk away from a purchase for any reason, leaving the quota unfilled. The United States continues to engage Taiwan on these issues and reiterates that Taiwan has a commitment to fill its quota.

Automobiles and Motorcycles Although the Ministry of Transportation and Communications (MOTC) opened most expressways to large motorcycles with engine displacement of 550cc or more in 2007, the MOTC has not allowed motorcycles with engine displacement of over 550cc on the highways based on the results of a feasibility study made by Directorate General of Highways (DGH) in 2009. The Legislative Yuan on November 8, 2011 passed an amendment to the “road traffic man-

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agement and penalty act” which would allow motorcycles with engine displacement over 550cc to travel on highways during specific time periods and on certain road segments as determined by local authorities. MOTC has not yet approved any section of highway for 550cc or larger motorcycles.

Industry has raised concerns over emissions and fuel-consumption standards imposed on automobiles and motorcycles. On automobiles, this includes Environmental Protection Administration diesel auto emissions testing methods and procedures that are based on the Japanese model with reference to European Union (EU) models.

The Taiwan Environmental Protection Agency plans to simplify testing methods and will announce new procedures later in 2013. The motorcycle industry has also raised concerns with Taiwan authorities about proposed stricter emissions standards currently under review, which would require emissions certificates for each motorcycle sold.

Distilled Spirits Differential taxation for domestic and imported distilled spirits has been a contentious issue between Taiwan and a number of its important trading partners in the past, and it was the subject of negotiations during Taiwan's WTO accession process. Actions taken by Taiwan in 2010 have again raised concerns for the United States and other trading partners, including the European Union.

Specifically, on September 16, 2010, Taiwan implemented a significant tax reduction on domestic mijiu rice wine.

This tax reduction resulted from the amendment of Taiwan's “Enforcement Rules of the Tobacco and Alcohol Tax Act” which created a new subcategory of “cooking rice wine” that covers mijiu rice wine, a domestically produced distilled spirit. Prior to this amendment, the enforcement rules required that “cooking alcoholic products” must contain a minimum salt content of more than 0.5 percent of total volume, ensuring that such products would be distinguished from other 26

distilled spirits and not consumed as a beverage. The 2010 amendment categorized cooking wine into two subgroups, one group with a salt content requirement, and the other under “cooking alcoholic products” for products with alcohol content no greater than 20 percent, labeled “exclusively used for cooking.” Based on these specifications, mijiu rice wine under these categories is taxed at NT$9 ($0.30) per liter, a much lower tax rate than what is applied to non-cooking alcoholic products, NT$2.5 ($0.08) per liter per degree (percentage) of alcohol content.

The United States and other trading partners continue to express their strong concerns to the Taiwan authorities that steps should be taken to ensure that the domestic mijiu rice wine will not compete with, or substitute for, like imported alcoholic beverages, and that imported alcoholic beverages would not be taxed at a higher rate than like domestically produced alcoholic beverages.

EXPORT SUBSIDIES

Taiwan provides incentives to industrial firms in export processing zones and to firms in designated “emerging industries.” Taiwan has notified the WTO of these programs. The Ministry of Finance in October 2011 resumed tax rebates for customs duties on certain components and raw materials that are imported into Taiwan and then used to produce goods for export. The rebate applies to 1,269 products in categories including electronics, textiles, machinery, chemicals, and plastics.

INTELLECTUAL PROPERTY RIGHTS PROTECTION

Taiwan generally provides effective intellectual property rights (IPR) protection and enforcement. Rights-holders continue to express concern, however, regarding infringement of copyrighted material on the Internet, illegal textbook copying on university campuses and nearby businesses, inadequate protection for the packaging, configuration, and outward appearance of products (trade dress), end-user piracy of software, signal theft of cable television,

trade secret theft and misappropriation, and the continued availability of counterfeit pharmaceuticals in Taiwan.

The importation and trans-shipment of counterfeit products and online copyright infringement and file sharing are also problems, as well as the collusion of some Taiwanese companies in supplying components to factories in China producing “Shanzhai” counterfeits (e.g., mobile phones, netbooks, and other electronic devices) and the transfer of proprietary technology by company employees to mainland businesses. The United States also continues to encourage Taiwan to provide an effective system to address patent-related issues expeditiously in connection with applications to market pharmaceutical products.

The Legislative Yuan amended the Taiwan Copyright Law in 2009 to require Internet service providers (ISPs) to undertake specific and effective notice-and-takedown actions against online infringers to avoid liability for the infringing activities of users on their networks. The law's provisions, however, failed to indicate clearly what constituted an infringement, how notifications should be handled, and other procedural matters. Rights-holders and ISPs, despite extensive negotiations, have not yet reached consensus on how to implement the law effectively.

In May 2011, the Legislative Yuan passed an amendment to the Trademark Law which extends the scope of goods eligible for protection as trademarks, broadens the conditions for which infringement is deemed to have occurred, and strengthens customs enforcement mechanisms for trademarked goods. The amendment to the law took effect on July 1, 2012.

Over the past several years, there have been a number of high profile cases of serious theft of trade secrets which have raised questions about the effectiveness of Taiwan’s industrial espionage laws. In order to address these concerns, on January 11, 2013, Taiw a n ’s L e g i s l a t i v e Yu a n p a s s e d a n amendment to Taiwan's Trade Secrets Act significantly increasing the criminal and civil penalties for corporate intel-

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lectual property theft, including up to 10 years imprisonment for trade secrets stolen and transferred to other countries. The United States will review the provisions and monitor implementation of the law as amended, and will engage Taiwan authorities as required.

SERVICES BARRIERS Banking serviCes In some cases, financial regulators have required foreign banks to convert their branch operations to subsidiaries.

These types of requirements limit a financial institution’s choice of juridical form. In addition, foreign banks continue to be concerned with requirements to establish onshore data centers.

pay Television serviCes The Cable Radio and Television Law restricts foreign investment in pay television services to a total equity share of 20 percent for direct investment, or 60 percent for direct plus indirect investment. In addition, continuing caps on monthly cable television fees and previous limitations that prevented cable franchises from servicing more than one district have hampered the Taiwan public's access to a broader range and higher quality of programming. These relatively low subscriber fees and franchise restrictions have reduced the cable industry's incentives to invest in expensive digitalization of Taiwan's largely analog cable system, which is more susceptible to signal theft.

The National Communications Commission (NCC) announced in July 2012 relaxed restrictions on cable television operators, which permitted new cable television operators to enter the market. Taiwan is divided into 51 cable television districts serviced by 63 cable operators. Prior to July 2012, operators could only service a single district.

Since July, however, operators have been permitted to expand to additional districts under certain conditions, including the requirement to provide digital cable. Firms new to Taiwan's market are also required to provide at least $6.8 million in capital investment. At the end of September 2012,

Taiwan's cable digital television (DTV) penetration rate was 18.16 percent, but 100 percent of Taiwan’s cable subscribers will receive digital service by 2014 under the new policy.

TeleCommuniCaTions serviCes The National Communications Commission (NCC) is an independent agency modeled after the U.S Federal Communications Commission. It regulates Taiwan's telecommunications and broadcasting sectors and supports the development of these industries. In 2008, the NCC began accepting and reviewing license applications when submitted, rather than on a quarterly basis. In addition to authorizing NT$35 billion (approximately $1.1 billion) of broadband network construction that has been ongoing since 2003, the NCC in July 2007 issued 6 regional licenses to Worldwide Interoperability for Microwave Access (WiMax) operators. WiMax operators began services in 2009, but immediately faced operational difficulties because of low consumer interest, with consumers reluctant to switch from existing 3G and 2G services. Furthermore, WiMax technology now faces a strong challenge from the competing 4G wireless data standard, Long Term Evolution.

As a result, Taiwan's six WiMax operators had only 136,000 users by the end of September 2012. Taiwan's WiMax operators are merging and plan to upgrade their technology to the competing 4G standard, Time-Division Long-Term Evolution (TD-LTE).

The NCC has been ineffective in integrating telecommunications and broadcasting regulations, causing Taiwan's telecommunications industry to fall behind in an era of digital convergence. For example, current regulations prevent Taiwan's principal fixed line phone company, Chunghwa Telecom (CHT), from running multimedia-ondemand programs. In addition, existing fixed line operators report that they still face difficulties in negotiating reasonable interconnection arrangements at technically feasible points in the network of the dominant carrier, Chun-

ghwa Telecom (CHT).

To enhance efficiency in decision making and administration, the Legislative Yuan passed an amendment to the NCC Organization Act in December 2011, which authorized and subsequently led to the appointment of Chairman and Vice Chairman positions in the NCC in July 2012. Goals under the reformed structure include: (1) to offer a free and fair digital convergence platform; (2) to issue licenses with advanced technology for 4G operations; (3) to reduce mobile termination rates and intermediation costs among telecom carriers; and (4) to enact antimonopoly legislation to regulate the concentration of media content owned by a specific owner or group.

INVESTMENT BARRIERS

Taiwan prohibits or restricts foreign investment in certain sectors, including agricultural production, chemical manufacturing, bus transportation, and public utilities. In June 2012, national treatment was accorded in beer and wine production, pharmaceutical manufacturing, and harbor service operations. Shipping companies registered in Taiwan are subject to a foreign ownership limit of 50 percent. Foreign ownership of Taiwanregistered merchant ships is limited to a 50 percent stake for ships engaged in both domestic and international shipping, increased from a previous 33 percent limit for domestic shipping. For vessels operating between Taiwan and the PRC, there is no foreign ownership restriction as long as a Taiwan-registered company registers the shipment.

The total direct and indirect foreign ownership limit on wireless and wire line telecommunications firms is 60 percent, including a direct foreign investment limit of 49 percent. Separate rules exist for CHT -- the legacy carrier still partially owned by the Ministry of Transportation and Communications.

CHT controls 97 percent of the fixed line telecommunications market. For CHT, the cap on direct and indirect foreign investment is 55 percent, including a direct foreign investment limit of 49 percent. The total direct and indirect

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foreign ownership limit on cable television broadcasting services is 60 percent, which includes a 20 percent limit on foreign direct investment.

Foreign ownership in satellite television broadcasting services, power transmission an distribution, piped distribution of natural gas, high speed railways, airport ground handling firms, air cargo terminals, air catering companies, and air cargo forwarders is limited to 49 percent of the total shares issued.

Taiwan maintains extensive barriers against mainland Chinese investments, but is reviewing ways to liberalize these rules gradually.

porTfolio invesTmenT Foreign portfolio investors are required to register and can do so via the Internet. Up to 30 percent of funds remitted for purposes of portfolio investment may be held in money market or other similar instruments.

Funds for futures trading, however, must be remitted to Taiwan specifically for that purpose and are segregated from funds remitted for equity investment. The cap on the balance of a foreign investor's NTD omnibus account resulting from profits gained from futures trading in Taiwan is NT$300 million ($10 million). If the balance exceeds the limit, the foreign investor is required to convert the excess NT dollars into U.S. dollars within five working days.

Except for investors from the PRC, offshore foreign portfolio investors may trade in Taiwan's stock market regardless of their size. Since April 2009, Taiwan has allowed PRC-based qualified domestic institutional investors (QDIIs) to engage in portfolio investment and futures trading in Taiwan.

Chinese investors may invest in the following Taiwan securities: shares of listed companies; beneficial certificates; public sector bonds; financial bonds; corporate bonds issued by public companies; asset-backed securities; and call warrants. Taiwan regulators are considering raising the QDII investment quota above the current $500 million ceiling.

A PRC-based institutional investor that engages in futures trading can only do 28

The heads of the TIFA Council delegations: Deputy USTR Demetrios Marantis, left, and Deputy Minister of Economic Affairs Cho Shih-chao. photo : cna

so using foreign currencies.

Foreign hedge funds have been permitted to trade in Taiwan's stock market since 2003, but they are subject to Taiwan authorities' close surveillance. Foreign individual investors are subject to an investment limit. Onshore foreign individuals and institutional investors are also subject to annual inward and outward limits of $5 million and $50 million, respectively.

OTHER BARRIERS pharmaCeuTiCals The United States has been encouraging Taiwan to adopt a system of actual transaction pricing in order to address the significant gap between the amount that the Taiwan government reimburses for a pharmaceutical product and the price actually paid to the provider of that product. The gap distorts pharmaceutical trade and prescription patterns in Taiwan. These distortions are compounded by another aspect of the Taiwan health care system tha t pe rmits doc tor s to both pr e scribe and dispense pharmaceuticals.

Research-based pharmaceutical companies see separating these functions as essential to resolving the long-term pricing problem.

Taiwan implemented its national

health insurance program in 1995 based on the National Health Insurance Act (NHIA). Biennial Price Volume Surveys (PVS) conducted by Taiwan’s Bureau of National Health Insurance (BNHI) have long been a major concern to the United States. The practice involves BNHI conducting a comprehensive market survey and, based on these results, implementing a series of reimbursement price reductions for products that appear to have been subject to significant discounts or gaps, as mentioned above. This nontransparent PVS process has created significant uncertainty in Taiwan's market, as it has often resulted in sudden, sharp reductions in reimbursement rates for many patented pharmaceutical products. Seven price volume surveys have been conducted since the establishment of Taiwan's national health insurance system, resulting in pharmaceutical prices in Taiwan that are currently estimated on average to be approximately 28 percent of the price of original industry-developed products marketed in the United States. Low reimbursement rates, negative rates of return and targeted pricing referencing Taiwan’s reimbursement prices by other countries in the region are all factors that increasingly are prompting drug firms to consider a delayed entry or complete withdrawal

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of their products from Taiwan.

In January 2010, Taiwan announced a new reimbursement scheme for pharmaceutical products designed to encourage the research and development of new drugs, increase product quality, and reduce the widening gap between reimbursement rates and market prices. U.S. industry remains concerned over the very strict criteria for defining breakthrough drugs, which reduce incentives to bring new technologies and innovative products to Taiwan. The United States encourages Taiwan to continue to consult with relevant stakeholders in implementing policies that will facilitate the private sector's development of innovative products and improve patients' access to such products.

On January 4, 2011, Taiwan lawmakers passed an amendment to the NHIA to reduce the program's NT$50 billion (approximately $1.6 billion) deficit, as well as introduce more equitability and efficiency into the health insurance system. One of the core elements of the 2011 health system reforms was a Drug Expenditure Target (DET). Under the DET, medical and pharmaceutical industries and BNHI were to negotiate an annual target for pharmaceutical expenditures with the previous year as a baseline, plus a nominal growth rate to account for increasing costs and demand. Proponents of these reforms hoped that they would reduce incentives that create the price gap between reimbursement rates and actual prices paid for the pharmaceutical products, improve the predictability of reimbursement rates, improve reimbursements for breakthrough drugs, and adjust reimbursement mechanisms to more adequately match reimbursement rates to the value of innovative and generic pharmaceutical products.

Following extensive consultations with stakeholders, the Ministry of Health established a mechanism to implement the DET for a two-year trial, effective January 1, 2013. The United States urges Taiwan to consult closely with industry stakeholders in implementing the DET in order to improve the mech-

anism and expand its coverage.

Taiwan formally established the Taiwan Food and Drug Administration (TFDA) on January 1, 2010 to replace the Bureau of Pharmaceutical Affairs.

The TFDA is comprised of the agencies responsible for food and drug policy, license issuing, and product testing.

Healthcare product manufacturers, including producers of pharmaceutical products and medical devices, must first apply to the TFDA for registration license approval and then to the BNHI for reimbursement in order to launch products in market. Under new drug review and registration procedures developed with U.S. industry input designed to fast-track drug approvals, a firm can apply to BNHI for drug reimbursement based on an approval letter issued by TFDA prior to obtaining a drug registration license.

The United States continues to urge BNHI and TFDA to expedite the process to shorten the current three-year to four-year licensing and reimbursement approval period.

mediCal deviCes The medical device industry welcomed the introduction of a balanced billing mechanism in the amended NHIA, which allows partial patient self-pay for higher-end devices or new technologies. Application approval is required for all devices, including those that might not qualify for reimbursement. Patients will be required to pay in full for those devices that are not listed on BNHI’s reimbursement list. BNHI plans to set up clear self-payment guidelines to allow patients earlier access to new devices, so that they are available prior to an issued reimbursement price.

However, the mechanism provides BNHI the right to implement price limitations on certain transactions and to cap the total amount of optional patient self-payment. U.S. trade officials and industry have raised concerns that arbitrary limitations could negatively affect Taiwan consumers of advanced medical devices and have urged BNHI to set clear self-payment guidelines that allow for maximum flexibility and choice.

1. The medical device industry (like

the pharmaceutical industry) has proposed suspending the PVS, arguing that it lacks transparency and does not reduce budgetary waste as intended. The medical device industry has expressed concern over reimbursement policies that specify a single purchase price for all medical devices that treat a given indication. This policy does not take into account differences in quality and effectively subsidizes lower-cost devices while underpaying for more advanced, higher quality devices, thereby discouraging the introduction of these devices into the Taiwan market.

Both pharmaceutical products and medical devices are governed under the Pharmaceutical Affairs Law. In response to industry concerns, TFDA has agreed to establish a separate charter governing medical devices in the near future.

2. TFDA officials continue to coordinate with industry to improve the medical device registration process. This year TFDA agreed that medical device companies can be considered "legal manufacturers," in that they have legal liability for their products no matter the manufacturing location and therefore can be deemed responsible for post-market surveillance of their products.

TFDA, in coordination with Taiwan Customs, announced in March 2012 that both the location of a legal manufacturer and country of origin (COO) listed on labels are acceptable for customs clearance if firms have provided the names of legal manufacturers and assembly companies and the name of the COO of key components in the original registration documents.

The Department of Health is also revising its testing and registration guidelines for in-vitro diagnostic drugs to adopt a more flexible procedure. The new guidelines are expected to allow importing companies to follow either U.S. or EU procedures, which could reduce excessive documentation and redundant testing for products made in Europe by U.S. companies.

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life in taiwan

A Healthcare Blend of East and West Traditional Chinese Medicine maintains its identity, significance, and use despite the general shift toward Western medicine.

BY JOE SEYDEWITZ

T

hree years ago while exercising my right to push myself way too hard in the gym, I ruptured a lower ligament disk doing box jumps – an exercise where one quickly jumps from a flat-footed position up to a bench, back down to the floor, back up to the bench, and so on. The pain was excruciating, and it got steadily worse as the fluid from the ruptured disk oozed down my sciatica nerve canal. My doctor routinely compared the injury to squeezing the jelly from a donut.

For weeks while seeing Western medicine orthopedic surgeons seeking opinions, I dealt with severe numbness and constant sharp pain from my lower back down my left leg to the foot.

I limped from doctors’ offices to MRI scans to pharmacies, all the while biting my lip trying to endure the pain. Considering the severity of this injury, it never occurred to me that traditional Chinese medicine (TCM) might be a viable option, yet I live in a place where there’s a TCM clinic on nearly every city block. Might a blend of Western and Chinese medical treatment have been the ideal way to treat my problem?

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Though practiced worldwide, TCM is still a bit of a mystery to Westerners as to how it can effectively remedy health problems. Long before I moved to Taipei from the United States, I had become familiar with acupuncture, qi, and the concept of the body’s meridians. I had received acupuncture for various muscle pains at a ramshackle little clinic on Milwaukee’s east side, and kept my mind open to the concept of ying and yang.

Yet I never truly understood how Chinese medicine works. TCM speaks a different language from that of Western medicine. The West talks of “cures,” while TCM focuses on “balance.” The West looks to “fix” a problem in a particular area, while TCM thinks of the body as an interconnected network – each part working in unison with and affecting the others.

“We view the body as a system,” says Tony Lee, managing director of Taiwan-based Sheng-Pu Pharmaceutics Co., a manufacturer of herbal medicines. “Everything works together to create balance, and we view qi, ying yang, and the like as a holistic

approach.” This paradigm has led Sheng-Pu to develop an herbal drug that effectively improves the function of the liver, which is considered in Chinese medicine to be one of the five key organs in our body.

The internet is awash with information about the origin of TCM. Nearly all sources agree that in the earliest times, the Chinese believed that illnesses stemmed from evil spirits or angry ancestors. According to Chinese lore, the legendary ruler Shennong, said to have lived some 5,000 years ago, taught both agriculture and herbal medicine to the Chinese people. Stone and bone needles found in tombs from the Shang dynasty (14th-11th centuries BC) indicate the origins of acupuncture.

During those formative years, Chinese medicine became rooted in the concept that the body is made up of different organs, and that each organ performs a distinctly different function to ensure good health. Illness therefore is a breakdown of these functions.

Eventually this notion evolved into an understanding that the human body and the universe conform to natural laws

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rather than reflecting the influence of spirits, demons, and ancestors.

Correlative thinking, writes Nigel Wiseman in his 2005 paper Introduction to Chinese Medicine, led early physicians to associate five key earthly categories – wood, fire, earth, metal, and water – with five corresponding key bodily organs. Wood is coupled with the liver, fire with the heart, earth with the spleen, metal with the lungs, and water with the kidneys. These groupings (the “Five Phases”) have become a critical platform for understanding concepts like qi, and yin-yang, as well as to explain the observational approach utilized in TCM. Where Western medicine analytically divides organisms into smaller and smaller parts using microscopes and physiological tests, TCM holistically relies more on observations by the naked eye, based on visible relationships to the universe.

One such observation relates to the liver and our eyes. “It is reflected in the fact that many eye diseases are explained in terms of liver pathology and treated through the liver,” writes Wiseman, a professor of TCM at Taiwan’s Chang Gung University. For example, excess liver heat can cause painful, burning, and bloodshot eyes.

People with compromised liver health such as fatty liver disease, hepatitis, cirrhosis, or alcohol-induced liver inflammation are also at risk of poor eye health and even loss of vision. The previously mentioned Sheng-Pu Pharmaceutics has developed an herbal drug, Yang Gan Wan (養肝丸;YGW or Pro Liver Pill), that – consistent with TCM theory – aids in improving liver function by reducing the organ’s heat, supporting blood circulation, and improving the flow of qi, to name a few of the effects.

“Explaining health and sickness by natural laws,” writes Wiseman, “arose in ancient Greece at roughly the same time as in China. Thus, there are strong similarities between the medical traditions of the East and West.” For example, both disciplines hold that the lungs constantly expand and contract, that the digestive tract absorbs nutrients from food, and that the kidney is

responsible for urine production. On the other hand, “despite these similarities, the Chinese description of human physiological and pathological processes differs markedly from that of biomedicine,” Wiseman explains. For example, Chinese medicine considers the liver to be responsible for storing blood and ensuring the smooth flow of qi around the body, whereas Western medicine regards the liver basically as the body’s chemical factory. In addition, early Chinese physicians attributed disease to environmental conditions like wind, heat, cold, and dampness, while Western medicine focuses on the role of bacteria and viruses.

“Herbal medicine has been used in China for more than two thousand years and is now being gradually accepted worldwide, particularly in Asia, Europe, and North America,” says Rubin Wang in an article published by online journal Chinese Medicine.

“Herbs are used a little differently in the East and West. In the West, people tend to use a single herb in therapies and try to identify active ingredients and therapeutic mechanisms, whereas in Chinese medicine it is common to use mixtures of various medicinal herbs which contain a range of pharmacologically active compounds working additive ly/s yne r gis tic ally to tr e at patients or to reduce harmful effects of some chemical compounds.”

Western doctors generally recognize the potential benefits of treating certain ailments with Chinese medicine, but sometimes do so with a degree of caution. “TCM and Western medicine should be able to work together at times,” says Taiwan Adventist Hospital orthopedic surgeon Tsai You-Shih, while adding that “I wouldn’t necessarily trust TCM to treat a serious medical problem.” My ruptured disk, for example, required a far more invasive and immediate approach than TCM generally provides.

Dr. Tsai suggests, however, that Chinese-medicine herbs could be used to create local heat around a herniated disk, thereby alleviating some of the discomfort before, during, and after Western treatment. He recommends, though, that those using Chinese medicine prior to surgery need to inform their doctor because herbal remedies can sometimes cause effects like aggressive bleeding, which can make surgery harder and messier.

Gaining recognition Nevertheless, some traditional Chinese medicines are gaining credibility in the Western arena. That has been the case, for example, for Sheng-Pu Pharmaceutics with its popular YGW liver medicine after the University of Southern California agreed to test the

Besides herbal remedies, acupuncture is another important element in traditional Chinese medicine. photo : Joe seyDewitZ

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In Chinese medicine it is common to use mixtures of various medicinal herbs containing a range of pharmacologically active compounds. photo : Chris s towers

drug. “The liver is the source of all nutrition; everything goes through the liver,” says Sheng-Pu’s Lee. “The USC study not only demonstrates YGW’s effectiveness combating liver damage, but it also helps us understand the science behind how it works.” The study was ultimately recorded in the authoritative Journal of Hepatology, published by the European Association for the Study of the Liver, giving YGW further recognition in the West.

With the help of Sheng-Pu and many other local companies, Taiwan’s biotech industry has begun to blossom. This industry consists of three major sectors: “emerging biotechnologies” (covering advanced fields such as nanomedicine and genomic medicine), biopharmaceuticals, and biomedical devices.

An Industry Analysis & Investment Opportunities report from the Ministry of Economic Affairs cites Taiwan’s knowledge and expertise in TCMs as one of several strengths that gives the domestic industry a potential edge over its Asian biotech competitors. “Traditional medicine is an important part of Taiwanese culture and this is reflected 32

in the strength of Taiwan’s medicinal industry,” Vice President Wu Den-yih remarked last year in a speech to the Chinese Medicine Association of the Republic of China.

While TCM definitely plays a key role in health and well-being here in Taiwan, it surprisingly lags well behind Western medicine in terms of the frequency of use by the Taiwan public, even though TCM is included in the National Health Insurance (NHI) s y s t e m . Ta i p e i , f o r e x a m p l e , h a s approximately 32 Western-medicine doctors per 10,000 people, as compared to only three TCM physicians.

Western medicine has been perceived by most Taiwanese as more modern and scientific than TCM. But those who favor traditional remedies see them as positive alternatives to ingesting more chemicals or undergoing surgical operations.

A 2002 study led by Dr. Su Yi-chang of the College of Chinese Medicine found that 10.4% of people in Taiwan had visited practitioners of TCM in the previous one month, compared with 39% for Western medicine. One reason

for the discrepancy may be that Western medicine services cover a broader range of treatments, including dentists, eye doctors, and surgeons.

Some figures indicate that the popularity of TCM may be rising. According to Department of Health data, the number of licensed TCM clinics in Taiwan has increased from 2,165 in 1997 to 3,411 in 2011.

The researchers noted that only licensed TCM physicians qualify for reimbursement from NHI. Becoming a licensed Chinese-medical physician is not an easy task, as students are required to study both Western and traditional Chinese medicine before taking the licensing exam. They are also required to perform a one-year internship in both disciplines. The course of study is offered by three institutions in Taiwan: the College of Chinese Medicine in Taichung, I Shou University in Kaohsiung, and Tzu Chi University in Hualien. Each of these programs attempts to integrate the Eastern and Western medical philosophies, with a goal of providing graduates with a balanced healthcare education.

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Brain Trusts for the Political Parties The KMT and DPP both operate think tanks to provide crucial policy support.

BY TIMOTHY FERRY

A

Promoting “research into national policy over the widest range of topics”

s Taiwan’s democracy has matured, think tanks linked to political parties have emerged as key components in the intense competition for the hearts and minds of voters.

Both major parties in Taiwan have gained from maintaining their own think tanks – staffed by scholars and former government officials – to advance political and policy goals.

Campaign strategies and policies formulated within the Kuomintang (KMT)-affiliated National Policy Foundation (NPF), for example, were instrumental in the party’s return to power in 2008 and President Ma Yingjeou’s reelection to a second term in 2012. More than 35 of the think tank’s fellows were nominated for government positions.

The Democratic Progressive Party (DPP)-linked New Frontier Founda-

tion (NFF) helped draft much of the party’s platform in the 2012 presidential election. While it wasn’t enough to spur candidate Tsai Ing-wen to victory, the campaign bolstered many of the core DPP principles (such as opposition to nuclear energy and promotion of a more equitable society) that have recently pushed the ruling party onto the defensive.

Think tanks act primarily as “idea factories,” sponsoring research on specific problems and disseminating the results. Although political parties in the United States do not operate their own think tanks directly, there are liberal

think tanks that tend to be closer to the Democrats and conservative ones with more links to Republicans.

On the NPF website, the foundation’s chairman, former vice president and KMT presidential candidate Lien Chan, states that the purpose of the think tank is “research into national policy over the widest range of topics, on the basis of which impartial, objective, and nonpartisan policy recommendations are made, in the interest of sustainable development of the country.” In an interview with TOPICS, NPF president Tsai Cheng-wen says the organization serves to “help legislators to elaborate policy and draft laws.” Citing another objective that reflects the intimate relationship between the think tanks and their sponsoring political parties, he adds that “we have to prepare the strategy and tactics of the party in the

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The vice president of the DPP's New Frontier Foundation, Legislator Bi-khim Hsiao, in the organization's lobby. photo : cna

political arena, especially the platform.”

Both parties came to see the value of party-affiliated think tanks following electoral defeats. In the wake of its unprecedented loss in the 2000 presidential elections, the KMT responded by forming the NPF, in part to serve as a repository for policy expertise. The defeat meant the party risked losing its suddenly out-of-power and unemployed “technocrats and experts,” says Tsai Cheng-wen, a former minister without portfolio and political science professor.

The foundation he now heads was formed “to gather the elites of the party so they wouldn’t disperse,” he explains.

In 2008, following its own defeat at the polls, the DPP responded in kind by establishing the NFF to further the party’s goals. Bi-khim Hsiao, a veteran DPP insider and currently legislator at large, serves as vice president of the think tank (the president is DPP Chairman Su Tseng-chang). When the DPP went into opposition in 2008, the party was in danger of losing the contribution of experts with eight years of government experience. “We felt that such experience was very valuable and 34

we couldn’t just let it go,” she says.

Hsiao describes the primary mission of the think tank as “conducting research and broadening the DPP’s policy scope to back up legislators in providing more thorough policy.”

The party-affiliated think tanks serve another special role in Taiwan’s politics: expanding cross-Strait ties and communication. For the DPP, the NFF is one of the few mechanisms at its disposal for communication with mainland China, as the party is shut out from direct dealings with the Chinese Communist Party (CCP).

The CCP holds that the DPP must acknowledge the “One China” position as a precondition for interparty talks, which “is something my party is not willing to accept,” Hsiao notes.

The existence of the NFF provides a platform for interacting with Chinese scholars or experts on cross-Strait relations. “We are in favor of dialogue and exchange of ideas, and this is a place where that can happen,” she notes.

Hsiao adds that the foundation maintains an open door for contact with Chinese scholars for exchanges to help

them gain better a understanding of the DPP and its policy thinking.

“Unfortunately,” she admits, “not many Chinese scholars have taken up our offer.” Nevertheless, she regards the party’s effort as a very important initiative, since “dialogue always leads to better understanding.”

The KMT faces no such constraints in dealing with the CCP, but nevertheless still often finds think-tank to thinktank relations to be the most convenient channel. Meetings between the NPF and Chinese think tanks paved the way for vastly improved cross-Strait relations and groundbreaking undertakings such as the Economic Cooperation Framework Agreement (ECFA).

The NPF actually traces its roots back to 1993 when Tsai Cheng-wen says he was approached by then-premier Lien Chan to form what he calls Lien Chan’s “personal brain trust” – the Lien Cheng-tung Cultural and Educational Foundation named after Lien Chan’s father, a onetime KMT interior minister. For its part, the NFF was founded in 1998 as a private organization, but had become largely moribund before being transformed into a party think tank in 2008. Staffed mostly by former party officials, the foundation is reported to have an annual budget of about NT$24 million (US$812,000).

Taking a long-term view Central to the mission of a think tank is to advance ideas that perhaps are highly theoretical or politically unpalatable, but for which there may be opportunity to influence the policy debate over the long run by substantiating the ideas with solid research and publicizing them through op-ed columns and conferences. The NFF’s Hsiao says this long-term view is essential for keeping policy formulation on track.

“Our party’s policy department is often preoccupied with immediate political needs,” she says, while “the think tank can take the long-term perspective.”

The DPP’s recently unveiled 10-year policy goals, for example, were the brainchild of the foundation.

At the KMT’s NPF, Tsai says that

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keeping a low profile and advocating political ideas “without a lot of noise or attention” is crucial to fulfilling the foundation’s mission. “We don’t need credit,” he says. “Our focus is to do what is right for our government and our people.” Having the independence to draw conclusions and advocate policies that counter what the party currently supports is considered vital to the think tanks’ effectiveness.

On occasion, this dynamic puts the think tank and the party at odds, with the think tank promoting what it sees as long-term solutions, while the party grapples with short-term political pressures.

Taiwan’s surging real estate market presents an example. Early into President Ma’s first term, tensions over skyrocketing housing prices, especially in Taipei, boiled over into mass protests and media criticism. Between 2004 and 2010, real estate prices shot up by 81% on average, with mortgage payments biting off ever greater chunks of citizens’ disposable income. By 2010, online surveys conducted by the Legislative Yuan indicated that high housing costs were the single biggest gripe among Taiwanese.

In response, the government has levied a “luxury tax” on real estate – a common response, as Singapore, China, and Hong Kong have all taken similar steps to discourage speculation and cool down the market. In Taiwan, owners must pay 15% of the sale price in tax if they sell the property within one year, and 10% if they sell within two years.

The tax seems to have worked, causing prices to stabilize.

In its 2012 publication Taiwan Development Perspectives, however, the NPF says the luxury tax has in fact had limited impact and fails to address other factors that also affect prices – such as investment from China and investors adopting longer time horizons to reap returns. The report forecasts that price hikes are likely to return after a shortterm dip, and says a better strategy would be to impose property taxes to raise the cost of owning real estate. But the foundation concedes that this idea is politically problematic and unlikely to

The Taiwan Policy Foundation emerged from what was originally the "personal brain trust" of Chairman Lien Chan. photo : cna

be adopted any time soon.

Taiwan Development Perspectives is not intended to persuade the common man about the merits of paying higher taxes, particularly after the Ma administration angered many by imposing a tax on capital gains and raising electricity rates. Rather, it is intended to introduce the idea on a more rarefied level to see if it can gradually muster support.

Despite back-to-back wins for the presidency, the KMT cannot assume that it has regained a lock on power. In Taiwan’s highly competitive political environment, the DPP will be seeking to make a comeback, and will be looking to input from policy experts at the NFF to help it present a formidable challenge to the KMT on a number of key issues.

One such issue will be the role of nuclear energy in Taiwan following Japan’s Fukushima disaster, with a controversial referendum set for later in the year. Social inequality is another issue for which the DPP has set the agenda, holding that the rich are getting richer while wages are stagnant and housing costs have skyrocketed.

“The DPP is more socialist,” says NPF’s Tsai, “while the KMT is more libertarian.” He notes that despite its pro-business leanings, the KMT-led government “has adopted a lot of laws to reduce the gap” in wealth distribution.

However, these policies have also irritated several core constituencies. He cites the decision to rescind the income tax exemption for military officers and public school teachers as an example.

These two groups had been exempt from paying income tax since 1955, but in response to public demands for more equitable tax laws, the government is requiring these two groups to begin paying income tax from this year.

Both party think tanks are gearing up for the 2014 legislative and 2016 presidential elections. The NPF’s Tsai expects the DPP to go after the KMT on the issues of corruption, competence, and the highly sensitive question of nuclear power. On the DPP side, Hsiao says her think tank and her party are currently mainly looking abroad. “It’s important that we observe how campaigns in other countries take place and that we learn from their experiences,” she says.

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A Report on the Financial Sector

Looking Toward China

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The Latest Craze: Renminbi-related Business Both investors and financial institutions are welcoming the new opportunities presented by the opening of the RMB market.

IN THIS SURVEY

BY PHILIP LIU

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• In the Stock Market, More Internationalization

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ith a cross-Strait currency-clearance mechanism having been put in place, Ta i w a n ’s f i n a n c i a l i n s t i t u t i o n s kicked off renminbi-related business on February 6, triggering an RMB investment craze on the island.

Taiwan is expected to develop into the world’s second offshore RMB center, after Hong Kong, providing a shot in the arm for Taiwan’s languid financial sector.

The cross-Strait currency-clearance mechanism is the fruit of a memorandum of understanding signed by Taiwan and China last August. Under the MOU, the Shanghai branch of the Bank of Taiwan and the Taipei branch of the Bank of China have been designated as the cross-Strait currency clearance banks.

Subsequently, Taiwan’s Central Bank gave the green light for financial institutions here to launch RMBrelated business activity just before the lunar new year. In response, the 487 domestic banking units (DBUs) in Taiwan initiated various RMB-re-

lated services, including deposits, loans, currency conversion, and remittances.

At present, Taiwanese are allowed to purchase up to 20,000 yuan a day (about US$3,226) and remit up to 80,000 yuan (US$12,900) daily to bank accounts in China. The procedure takes only a couple of hours, compared with one full day previously when it was necessary to go through an intermediary bank in Hong Kong, which also entailed higher costs. The money can be remitted to any account in China, whereas in the case of Hong Kong, the name on the recipient account in China must be same as the name on the remitting account in Hong Kong.

In order to quickly build up their pools of renminbi to support the new areas of business, Taiwanese banks – especially the private ones – rushed to solicit RMB deposits by offering extraordinarily high interest rates, though on a short-time basis. First Commercial Bank, Chinatrust, and Bank SinoPac, for instance, offered

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A Report on the Financial Sector

interest rates of 2-2.38% on one-year renminbi time deposits, compared with only 1.3% for one-year NT-dollar time deposits.

Attracted by the hefty returns, plus the prospects for further appreciation of the yuan, customers rushed to convert NT dollars into renminbi and also brought renminbi cash, obtained from traveling in or doing business with China, for deposit in their new renminbi accounts. Deposits at domestic banks reached 10 billion yuan (US$1.6 billion) by March 4 – just 14 business days after the new policy came into effect – and are expected to hit 100-150 billion yuan (US$16-24.2 billion) by the end of the year, according to Standard Chartered Bank.

In Hong Kong, where transactions may be conducted in renminbi, RMB deposits account for 9.12% of total deposits, compared with 50.7% for Hong Kong dollars and 30.5% for U.S. dollars. A recent study by Cathay Financial Holding finds that 45.8% of those interviewed in Taiwan expressed willingness to invest in renminbi assets, although 85.4% of them have yet to own renminbi deposits.

James Chen, president of Chinatrust Bank, predicts that renminbi deposits in Taiwan will eventually top 600 billion yuan (NT$3 trillion or nearly US$100 billion), one-tenth of the current total deposits of NT$32 trillion. Chen notes that such a huge RMB fund will need proper outlets, making the extent to which the Chinese government allows Taiwanese banks to invest in RMB-denominated wealth-management products a critical issue.

Since termination of their initial shortterm RMB-deposit campaigns at the end of February or early March, most banks have scaled back the interest rates for RMB deposits by 0.3-0.6 percentage points. Yuanta Bank, for instance, initiated a new RMB-deposit program on March 21, effective until the end of June, offering 3.05% annual interest on threemonth renminbi time deposits, 0.45 percentage points lower than the previous level. The latest interest rates for one-month, six-month, and 12-month renminbi time deposits at the bank stand at 1.08%, 1.68%, and 2.08%, respec-

tively, down 0.3-0.6 percentage points from the initial levels.

The scramble for RMB deposits with high interest rates did not end entirely, however, as Mega Bank, the leading forex-business bank, joined the fray by doubling interest rates for six-month RMB time deposits to 2% per annum on March 13, following an earlier waitand-see stance. Bank of Taiwan, the leading domestic bank, has kept a distance from the scramble, maintaining its interest rate for one-year RMB time deposits at 1.1%.

Insurance products Life insurance firms have also jumped onto the RMB bandwagon by rolling out renminbi-denominated insurance policies, most of which are of investment type, chiefly linked to RMB-denominated ETFs (exchange traded funds, tied to China’s stock price indices) in Hong Kong. These are annuity policies, allowing buyers to collect annuity payments following the maturity of the policy. At present, 10 renminbi-denominated insurance policies are available on the market; as of mid-March, the total premium income of such policies had exceeded the equivalent of NT$100 million (US$3.3 million), somewhat lower than original expectations.

F i r s t - Av i v a L i f e I n s u r a n c e , f o r

example, has rolled out an RMB-denominated variable annuity insurance policy, an investment-type policy linked to three RQFII (renminbi qualified foreign institutional investor) ETFs in Hong Kong. The minimum first premium for the policy is set at 10,000 yuan, with the minimum for follow-up premiums at 2,000 yuan, suitable for purchase by ordinary investors, so long as they possess RMB bank accounts. Allianz Insurance also offers an RMB-denominated variable annuity insurance policy, linked to four RQFII ETFs in Hong Kong, with a minimum first premium of 60,000 yuan and follow-up premiums at 20,000 yuan.

Cardif Assurance Vie is offering both RMB-denominated variable traditional life insurance and variable annuity insurance policies, linked to two RQFII ETFs in Hong Kong, with a minimum first premium of 20,000 yuan and follow-up premiums at 4,000 yuan. Unlike most insurance firms, Cardif does not collect an advance fee. The other insurers generally collect 1-2.5% of the first premium for payment to channel operators.

Another critical renminbi business is RMB-denominated bonds, which have been dubbed Formosa bonds. Chinatrust rolled out the first renminbi bonds in Taiwan on March 12, selling a total of 1 billion yuan (US$161 million) worth.

The three-year term and 2.9% per annum interest rate compares with the 3% for

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Hong Kong’s “dim sum bonds.” With its minimum investment of 1 million yuan (US$161,300), the bond mainly targets institutional investors.

Deutsche Bank followed suit with a plan to issue 1 billion yuan in RMB bonds in the first half of this year – part of a broader plan to issue US$1 billion in foreign-currency bonds in two years.

The RMB bond, which carries a threeor five-year term with annual interest rate of 2.3-2.5%, is suitable for investment by individuals, since the investment threshold has been set at only 10,000 yuan (US$1,613). Moreover, individual investors for Deutsche Bank’s RMB bonds will be exempt from tax on their interest income, which is regarded as income outside Taiwan, while investors in the Formosa bonds issued by Chinatrust will be subject to 15% tax on their interest income.

The Formosa bonds will inject fresh blood into the island’s bond market, which has been growing steadily in recent years. The outstanding amount of corporate-bond issuance topped NT$1,364.12 billion (US$45.5 billion) as of the end of 2012, up from NT$941.39 billion (US$31.4 billion) at the end of 2009, representing average annual growth rate of 15%. Meanwhile, the outstanding amount of financial-bond issuance hit NT$990.41 billion (US$33 billion) at the end of 2012, up from NT$737.07 billion (US$24.6 billion) at the end of 2009, for average annual growth of 11%.

Jennifer L. Wang, the newly appointed vice chairperson of the Financial Supervisory Commission (FSC), points out that promotion of Formosa bonds has become a major policy of the FSC this year. She describes the FSC’s short-term goal as seeing Formosa bonds surpass the scale of dim sum bonds, which had total worth of 268.8 billion yuan (US$43.4 billion) as of the end of March, and in the longer term to become a major investment target for Taiwan’s pension funds and institutional investors. Wang stresses that Taiwan needs financial products with annual investment returns of above 3%, which is critical for long-term institutional investors such as life insurance companies and pension funds.

Tung Chao-chin, chairman of Chinatrust Bank, says that Formosa bonds should overtake dim sum bonds within

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three years, due to the huge investment power of the numerous Taiwanese-invested enterprises operating in China.

He notes that Taiwanese manufacturing firms, especially in the hi-tech sector, in the future will raise renminbi funds by issuing Formosa bonds in Taiwan instead of dim sum bonds.

The promotion of Formosa bonds will be a major task of the GreTai Securities Market this year, says Wu Fengshan, chairman of the over-the-counter exchange, in order to diversify the investment and fund-raising channels on the market. GreTai this year reportedly plans to list five Formosa bonds with a total value of 5 billion yuan (US$806 million). Investors in Formosa bonds can enjoy interest rates higher than NT-dollar-denominated corporate bonds and may benefit from the anticipated further appreciation of the renminbi.

Wu says he expects the Formosa bonds to encourage more high-quality domestic and foreign corporations to issue international bonds in Taiwan, stimulating the development of the international bond market in Taiwan. After Formosa bonds have become established as a wealth-management financial product with cross-Strait characteristics, GreTai will encourage the issuance of RMB-denominated ETFs, Wu adds.

Wealth management As they gradually build up their pools of renminbi funds, Taiwanese financial institutions are also launching various RMB-denominated wealth-management products, such as RMB mutual funds – either new funds or the addition of an RMB category to existing foreign-currency funds – as well as structured notes.

C h i n a t r u s t B a n k , Ta i p e i F u b o n Bank, E. Sun Bank, Jih Sun Bank, Singapore Development Bank, and DBS Bank successively debuted RMB-denominated structured notes in mid-March, all boasting 100% protection of principal, with yield rates ranging widely from zero to 11%. On March 18, for instance, Chinatrust Bank rolled out four structured notes, with a 12-month term and a maximum yield rate of 5%, hinging on the presumed exchange rate of US$1=RMB 6.235 upon the maturity of the products, compared with the actual rate then

of US$1=6.235. If the exchange rate does not drop below 6.235 upon the maturity of the structured notes, investors will be entitled to a 5% yield rate; otherwise, the yield rate drops to a mere 0.5%. Investors are guaranteed to retrieve 100% of principal, so long as they do not revoke their contracts in advance.

The minimum investment for the structured notes – a combination of time deposits and derivatives such as options (linked to stocks, stock-price indices, interest rates, currencies, or commodities) – is set at 20,000 yuan (US$3,226).

Within two weeks following the launch of the structured notes, Chinatrust’s sales for the product had exceeded 200 million yuan (US$32.3 million).

Fuh Hwa Securities Investment, Fubon Asset Management, and Hua Nan Investment Trust have all submitted plans for issuing RMB-denominated mutual funds to the FSC for approval, and such products are expected to be on the market in the second quarter.

Some local banks also have introduced RMB-denominated ETFs and dim sum bonds from Hong Kong for sales in Taiwan. Investment thresholds for renminbi ETFs range from 20,000 yuan (US$3,226) to 100,000 yuan (US$161,130) and thus attract mainly richer investors. Mega Bank, for instance, has put forth 10 RMB-denominated wealth-management products, including Chinese government bonds, dim sum bonds issued by China’s state enterprises and financial institutions, and four renminbi ETFs. Meanwhile, CBC Governor Perng Fai-nan reports that the Central Bank is in talks with its Chinese counterpart, People’s Bank of China (PBC), about concluding a currency-swap agreement, which is critical for Taiwan to develop into an offshore renminbi center. PBC Deputy Governor Yi Gang notes that with the cross-Strait currency-clearance framework already in place, PBC is willing to discuss the signing of a currency-swap agreement with Taiwan.

Under such an agreement, PBC would provide CBC with a quota for freely converting NT dollars into renminbi, thereby assuring a steady supply of renminbi and avoiding exchange-rate risks, as well as lowering the cost of raising renminbi funds for Taiwanese enterprises.

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A Report on the Financial Sector

Perng has expressed the hope that under the agreement China could provide Taiwan with a currency-swap quota no less than the 360 billion yuan (US$58.1 billion) given to South Korea, and preferably comparable to the 400 billion yuan (US$64.5 billion) for Hong Kong.

So far, PBC has signed currency-swap agreements with 18 nations or regions worldwide, with the total swap quota reaching 1,816.2 billion yuan (US$293 billion). Perng notes that following the signing of the currency-swap agreement, the CBC will be able to include renminbi in the portfolio of its huge forex reserves, which stood at US$401.9 billion at the end of March, through the purchase of China’s government bonds.

Analysts note that Taiwan possesses several advantages for developing into an offshore renminbi center. In an interview with the Taiwan media in late March, Jaspal Singh Bindra, chief executive officer of Asia at Standard Chartered PLC of Standard Chartered Bank (China), points to the higher acceptance of renminbi among Taiwanese compared with Singaporeans and the higher savings rate in Taiwan than in Hong Kong, as well as the higher interest rates for

renminbi deposits, as factors that can enable Taiwan to become not only an offshore RMB center but also a global RMB wealth-management center. Among the potential advantages Taiwan enjoys as an offshore RMB center, he notes, are the huge trade volume with China, massive investments in China (estimated to be at least US$125 billion), and large numbers of Chinese tourists visiting Taiwan (over 2.58 million last year).

Lin Lung-cheng, vice president of E. Sun Bank’s corporate financing department, says that given the huge US$75billion annual surplus in Taiwan’s trade with China and Taiwanese enterprises’ ability to utilize renminbi for trade settlement with Chinese counterparts, corporations and individuals in Taiwan will have a huge need for RMB-denominated wealth management. That will provide fertile ground for domestic financial institutions to develop various RMBdenominated products, he notes.

In view of the high lending rates in China (typically above 6% per annum), L i n i s a l s o u p b e a t a b o u t Ta i w a n ’s chances to become a major offshore RMB-lending market. He says that after people in Taiwan have accumulated a

certain level of RMB assets, Taiwanese banks can engage in the lucrative business of RMB loans, provided that Beijing relaxes its policy to allow Taiwaneseinvested enterprises, foreign-invested enterprises, and even Chinese enterprises to borrow RMB offshore.

Many observers expect the development of an offshore renminbi center and RMB-related businesses to inject new energy and profitability into the Taiwanese banking industry. In a domestic market of limited scale, the 38 Taiwanese banks (with their 3,416 branches), plus 30 foreign banks, have been suffering from slim margins due to overbanking.

Although domestic banks took in record profits of NT$240.2 billion (US$8 billion) last year, their return on assets was a mere 0.68%. Mainly because of the banking sector, the output value of Taiwan’s financial industry amounted to only 6.67% of GDP in 2012, down from 8.23% in 2001. In contrast, the proportion of GDP was 16.25% in Hong Kong and 11.11% in Singapore in 2011. If the opening of RMB business has the impact that is expected, Taiwan’s financial-sector performance will look much better in the years ahead.

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INDUSTRY

F

CUS

In the Stock Market, More Internationalization Taiwan-invested companies in China will soon be welcome for listing on the local bourse.

BY PHILIP LIU

W

ith the thawing of cross-Strait relations, the Taiwan government has decided in principle to encourage China-registered enterprises – limited to Taiwanese-invested companies at the initial stage – to list their shares on the Taiwan Stock Exchange (TSE). The authorities view the policy as a fresh approach in their efforts to internationalize the domestic stock market and develop Taiwan into a regional funding center.

The policy was established last August under the guidance of then-Premier Sean Chen, who believed that share listings of Chinese enterprises (dubbed T shares) would give a strong boost to the development of the local bourse, similar to the contribution that similar shares (dubbed H shares) have made to Hong Kong’s stock market. “The policy allowing listing of T shares on Taiwan’s stock market is settled,” Chen Yuh-chang, chairman of the Financial Supervisory Commission (FSC), confirmed to the media last December following a Cabinet meeting discussing ways of vitalizing the stock market.

Insiders believe that many Chinese enterprises will be interested in listing their shares in Taiwan, in view of the long queues waiting for share listing on China’s stock exchanges in Shanghai and Shenzhen. Moreover, smaller-cap enterprises can obtain higher visibility on the Taiwan exchange, considering that super-large-cap firms tend to dominate the market in China and Hong Kong. In addition, listing costs in Taiwan typically come to NT$40

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million-$60 million (US$1.3 million-$2 million), compared with the equivalent of US$2.2-2.7 million in Hong Kong and US$3.1 million in Shanghai.

The policy of welcoming listings from companies in China is in line with the government’s effort in recent years to encourage foreign enterprises, notably Taiwanese-invested enterprises with registration in a third country, to come to Taiwan for either primary share listing via IPOs (initial public offerings) or secondary listing via issuance of TDRs (Taiwan depository receipts).

Following the 2008 kickoff of the policy allowing foreign enterprises to list shares on the local bourse, six foreign firms (mostly Taiwanese-invested enterprises with registration in a third country) did so in 2010, 12 in 2011, and eight in 2012, for a total of 26. In addition, 46 foreign firms have applied to the Taiwan Stock Exchange (TSE) for assistance in carrying out plans for an IPO. Meanwhile, 31 overseas firms, 40% of them Taiwanese-invested firms with registration in a third country, had issued TDRs and listed them on the local bourse for trading as of the end of 2012.

The FSC has also allowed “red-chip stocks” in Hong Kong – the stocks of mainland Chinese enterprises registered abroad – to issue TDRs in Taiwan, and last year the Commission announced that foreign enterprises with mainland Chinese investors would be permitted to list their shares on the stock market regardless of the size of the Chinese stake in the company (previously there

was a 30% cap). Further, the FSC is studying the idea of allowing H-share companies and even mainland Chinese enterprises listed on the Shanghai or Shenzhen Stock Exchange to issue TDRs here.

The FSC plans to talk with its counterpart across the Strait, the China Securities Regulatory Commission (CSRC), regarding the listing of T shares, since Chinese enterprises would need CSRC approval to list their shares abroad, and the regulator’s cooperation is also indispensable for related financial verification later on.

In another recent development, the TSE has been promoting the internationalization of the ETF (exchange-traded fund) market by assisting securities firms to develop more ETFs linking foreign stock price indices such as the S&P 500.

The TSE is also allowing overseas Chinese and foreigners to invest in offshore ETFs listed on Taiwan’s stock market, and introducing foreign ETFs to the local bourse for trading.

As of the end of 2012, there were 21 ETFs available on the local stock market, including three offshore ETFs linking to China or Hong Kong stock price indices. Their total trading value reached NT$269.2 billion (US$9 billion) in 2012, 1.3% of the total trading value of the stock market, compared with just 0.17% in 2003 when the first ETF debuted.

The ETF share, however, is still a far cry from that of more developed markets, such as the 20% in the United States, 7.23% in South Korea, and 4.67% in

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A Report on the Financial Sector

ANNUAL TRADINg voLUme AND vALUe Year

Stocks

Volume

TDRs

Value Daily Av. Volume Daily Av. Volume

Warrants

eTFs

Units

Value

Units

Value

Units

Value

2007

887,185,870

33,043,848,421

3,591,846

133,780,763

11,052,523

91,926,426

259,796,293

253,177,629

2,440,392

125,371,874

2008

778,910,094

26,115,407,562

3,128,153

104,881,155

4,266,113

28,610,911

300,077,746

275,815,536

5,905,137

232,039,461

2009

1,088,769,001

29,680,470,925

4,337,725

118,248,888

9,526,961

128,488,924

93,589,745

106,425,468

5,979,934

197,837,265

2010

817,567,480

28,218,675,690

3,257,241

112,425,003

17,608,811

261,905,819

204,090,311

204,945,028

5,527,373

199,576,486

2011

650,941,011

26,197,407,640

2,635,389

106,062,379

11,082,101

142,183,965

296,822,458

284,679,372

9,269,020

360,761,572

2012

530,705,509

20,238,166,009

2,122,822

80,952,664

4,600,438

35,183,963

246,200,568

231,313,946

9,296,995

269,235,955

value:nt$1,000 volume: 1,000 sHaRes/units souRce: taiwan stock excHange coRp.

Hong Kong. Insiders say there is tremendous potential for expanding the role of ETFs in Taiwan, particularly since Taiwanese people have invested NT$2.37 trillion (US$79 billion) in offshore mutual funds, 17% of which are ETFs. ETFs are considered especially well-suited to individual investors, who account for 40% of the Taiwan m a r k e t ’s t r a d i n g v a l u e , i n v i e w o f the volatile nature of the local stock market, which is characterized by rallies in different industry categories at different times. When investing through ETFs, investors only have to judge the overall long-term direction of the market, avoiding the challenging task of stock selection. In addition, the tax rate for ETF transactions is only 0.1%, onethird that for stocks.

Rise of warrants Along with ETFs, warrants have become another major stock derivative traded on the TSE. In 2012, domestic securities firms issued 17,790 warrants, 1,168 more than in 2011.

Warrants account for 1.3% of the total trading value of the local stock market on average (the peak was 2.49%), and their trading value is expected to grow sharply this year, following the regulator’s approval of intraday trading, or buying and selling of the same stock in one day.

A warrant is the right to buy (call warrant) or sell (put warrant) a certain amount of designated shares at desig-

nated prices on designated dates. There are also callable bull/bear contracts (CBBC) and warrants available on the local market, based on overseas stock price indices. Warrants are issued by securities firms, who also serve the role of market makers. Due to its risk-hedging function making it suitable for investment in both bear and bull markets, the trading value of warrants once topped 40% of the total on Hong Kong’s stock market, at a time when the market there was experiencing extreme fluctuation.

Returning to cross-Strait activity, the FSC in recent years has been trying to solicit investments in the local stock market by China’s qualified domestic institutional investors (QDIIs), in order to boost investment activity in the market. On April 1, the FSC signed an MOU with the China Banking Regulatory Commission under which China’s banking QDIIs will be able to buy Taiwanese stocks, joining China’s securities QDIIs in having that privilege. In the MOU, the two sides also agreed to double the stock investment ceiling in Taiwan for China’s QDIIs, including securities and banking QDIIs, to US$1 billion. The move is expected to further enhance the share of foreign investors in the local market, which now stands at 35%, trailing the 40% for individual investors but higher than the 15% for fund managers and 10% for securities dealers.

The further internationalization of Taiwan’s stock market is expected to boost its scale and its role in the devel-

opment of the nation’s economy. As of the end of 2012, there were 809 firms listed on the Taiwan Stock Exchange, with total market value of NT$21.4 trillion (US$713.3 billion). By way of comparison, in 1996 the corresponding figures were 382 firms and NT$7.5 trillion (US$250 billion). But in 2012, listed firms raised only NT$214 billion (US$7.1 billion) in funds from the stock market, lower than the NT$244 billion (US$8.1 billion) in 1996, and trading value dropped to NT$20.2 trillion (US$673 billion), down from 1996’s NT$12.9 trillion (US$430 billion).

In recent years, individual investors have gradually retreated from the stock market, following the hefty losses suffered in the 2008 global financial tsunami when the local stock market’s trading value plunged by 21% from the 2007 level, and the resumption of capital gains taxation on stock investment in 2012, which brought a further 22% decline in trading value.

Within the region, the market value of Taiwan’s stock market was overtaken by Singapore last July to become the lowest among the four “Asian Tigers.” The P/ E ratio in Taiwan stood at 23.62 at the end of 2012, compared with 12.92 for Korea, 10.78 for Singapore, 10.5 for Hong Kong, 12.3 for Shanghai, and 24.9 for Tokyo. For the first time ever, turnover in the Taiwan stock market in 2012 dropped below the 100% mark. It was still much higher than the 42% in Hong Kong and 48% in Singapore, but lower than Korea’s 138%.

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s e e i n g ta i w a n

The Ideal Place to Mark the Summer Solstice

I

n previous years, it was primarily Taiwan’s graduating students who looked forward to the end of June to let off steam. But starting this year, the rest of the population need no longer feel left out – and indeed, foreign tourists are also well advised to choose this as a good time to experience a wide range of the island’s culture – as Taiwan will launch a Taiwan Fun on the Tropic of Cancer 235 festival of artistic, musical, culinary, and sporting activities to mark the summer solstice, falling on June 21.

The solstice, which is based on astronomical observations by ancient peoples around the globe, is celebrated in innumerable countries and in a myriad ways. Bulgarians, for example, get up before dawn to be blessed with good health by seeing the sun rise over the horizon; Iranians splash water on one another, many northern Europeans light bonfires, and others run or swim naked as a fertility rite. Whatever colorful and

imaginative ways are found to celebrate this occasion, it is unlikely that Taiwan’s more reserved citizens will engage in this last activity.

It is high time that Taiwanese got involved in other aspects of this day, however, as not only has the summer solstice been marked on the Chinese calendar for several millennia, but also Taiwan’s geographic location is uniquely suited to participation in this event.

To understand why this is so, one first needs to know a little astronomical science, a little history, and a little geography. It is often said that China traditionally uses a lunar calendar, and therefore that Taiwan, China, Japan, and other East Asian countries celebrate a Lunar New Year. But this explanation is not entirely true. Such a purely lunar calendar would annually drift several days from marking a true year (the time taken for the earth to orbit the sun; about 365.24 days). Long ago, therefore, Chinese astronomers learned

to add run yue (閏月; “leap months”) roughly seven times every 19 years to keep the lunar calendar in check with the solar one.

This arrangement created the lunisolar calendar in use to this day, consisting both of lunar months and 24 solar periods of about 15 days each, which were of more practical use to farmers’ planting and harvesting needs. Since they draw on identifiable astronomical observations, some of these divisions have international equivalents. One such is xia-zhi (夏至; summer solstice), marking the moment, usually on or near June 21, when the angle of the earth’s tilt in relation to its orbit means the overhead sun reaches its northernmost point. In the northern hemisphere, this is also the day of the longest time between sunrise and sunset, and the line directly beneath the sun’s passage overhead is the Tropic of Cancer (Bei-Hui;北回歸線), roughly 23.5 degrees latitude above the equator.

And so for the geography. With the Tropic of Cancer running slap bang through the middle of Taiwan – from Hualien County on the Pacific east coast, through Nantou, Chaiyi, and Yunlin Counties and Kaohsiung and Chiayi cities, to the Penghu archipelago in the Taiwan Strait to the west – Ta i w a n i s o n e o f o n l y 1 6 c o u n -

交 通 部 觀 光 局 廣 告 TTB AD

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s e e i n g ta i w a n

tries worldwide lying directly on this almost-37,000-kilometer-long line.

Also, since the International Date Line runs down the middle of the Pacific Ocean, Taiwan is the first country to observe the rising sun on the morning of the summer solstice, and of course the first to see it set.

Furthermore, while Taiwan’s southern and northern climates can roughly be divided into tropical and subtropical, the island in fact has greater environmental variation than any of the other 15 countries on the Tropic of Cancer. In Taiwan, the Tropic passes from sea-level coastal climes through the East Rift Valley, low hills, high mountains and near-4,000-meter peak of Yushan (玉山; Mt. Jade), then back down through the plains to the west coast, and finally offshore to the windswept Penghu Islands.

Also, according to the BBC documentary “Tropic of Cancer,” Taiwan has better education, a higher standard of living and quality of health, more consumer electronics, better transportation infrastructure, and is more democratic and free than the 15 other countries – China, Myanmar, India, Bangladesh, the U.A.E., Saudi Arabia, Egypt, Libya, Niger, Algeria, Mali, Mauritania, Western Sahara, Bahamas, and Mexico – all of which makes Taiwan the ideal destination for celebrating the summer solstice.

In addition to passing through the above-mentioned seven counties and cities in Taiwan, the Tropic also inter-

sects five national scenic areas – East Coast, East Rift Valley, Alishan, Southwest Coast, and Penghu – providing remarkable travel and leisure resources.

And with the world’s first train station and school named after the Tropic of Cancer – the Beihui Railway Station and Beihui Elementary School – Taiwan also offers some interesting commemorative photo opportunities.

Given the Taiwanese enjoyment of good food, there are also innumerable culinary treats available along the Tropic of Cancer. These include the seafood and cactus-flavored ice of Penghu, the oysters and clams of Yunlin and Chiayi fishing ports, turkey-on-rice in Chiayi City, jelly figs and “railway

lunchbox” of Alishan, locally grown teas in the East Rift Valley, and flyingfish jerky on the east coast.

Without skillful astronomical observation, sightseers would cross the Tropic without knowing it, so commemorative structures were erected beside main roads on both east and west coasts. These immediately became tourist attractions in their own right, and over the years signboards with astronomical, scientific, geographic, and cultural information were added to further visitors’ knowledge about the Tropic of Cancer, its southern hemisphere equivalent, the Tropic of Capricorn, and the summer and winter solstices, now more correctly known as the northern and southern solstices.

Taiwan Fun on the Tropic of Cancer 235 includes events throughout June leading up to the solstice itself. The program includes sunrise- and sunsetwatching on the coasts, high-altitude running and cycling events at Alishan, cultural events in the East Rift Valley, a gathering of astronomical enthusiasts in Chiayi, and a music festival in Penghu.

For more details of these and other events, as well as general travel information about Taiwan, visit the website of Taiwan’s Tourism Bureau (www.taiwan. net.tw), or call the 24-hour tourist information hotline 0800-011-765 (toll-free within Taiwan). taiwan business topics • may 2013

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