2019/8/10 上午11:26 Published by the by Published Commerce Commerce In Taipei American Chamber Of NT$150 August 2019 | Vol. 49 | Issue 8 Issue | 49 Vol. | 2019 August Reverse Reverse 向 Investment Flows Investment ANALYSIS AMCHAM MISSION TO WASHINGTON BACKGROUNDER DISINFORMATION Read TOPICS Online at topics.amcham.com.tw Online at TOPICS Read 號 執 照 登 記 為 雜 誌 交 寄 THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI TAIWAN BUSINESS TOPICS August 2019 | Vol. 49 | Issue 8 中 華 郵 政 北 台 字 第 82019or4.indd 1 ADVERTORIAL Steak from the Range – at The Sherwood’s TOSCANA

high plains of Wyoming are perfect for of TOSCANA diners choose steak for raising cattle, and the state has been their meal. at the center of the U.S. beef indus- Steak is far from the only reason to try since the 19th century. Located in visit TOSCANA, however. The exem- beautiful Powell, Wyoming, only two plary Tuscan décor with its lovely views hours from world-famous Yellowstone of a lush garden offer a classic and National Park, Murraymere Farms was inviting atmosphere for celebrations, established in 1914 on a small land- special occasions, or impressing a client. holding with just a handful of cattle. TOSCANA Executive Chef has crafted Now, the fourth generation of Murrays, a menu that goes well beyond steaks, under the guidance of family scion including classic starters such as Seat- Valerie Murray, continues to farm the tle Chieftain Oysters and French Onion ranch, which has grown to over 2,000 Soup. The Green Salad offers a creative acres with over 900 cattle. The family mix of locally grown greens in a sweet is committed to ethical and sustain- and tangy vinaigrette with a sprin- able cattle husbandry, and the thick kling of corn flakes to give it crunch marbling of fat along with the rich and pizazz. Top off your meal with flavor and texture testify to the care TOSCANA’s signature Black Truffle Ice provided to these Black Angus cattle. Cream dessert, a creamy delight of the he bone-in Murraymere U.S. The farm is so committed to assur- sweet and savory that will leave you Prime steak at The Sherwood ing trust and quality of its 100% Prime well satisfied. T Taipei’s TOSCANA Italian and Choice beef throughout its lifecycle Every weekend TOSCANA puts on Restaurant is served sizzling on a plat- – from “conception to consumption” – a sumptuous Italian-style semi-buffet ter big enough to hold all 24 ounces that it has joined the Wyoming Certified that features a broad selection of Italian plus a rich soup of drippings and melted Beef assurance program based on block- cold cuts, sausages, and other meats, butter. The steak, basted in butter, is chain technology and dubbed “Beef along with fresh seafood and the well- baked twice to lock in the juices, and Chain.” This cutting-edge technology stocked dessert bar, starting from only the sight of the steak and the sound provides buyers and sellers with the NT$3,480 (plus 10% service charge). of its sizzle are enough to get the taste most transparent and up-to-date infor- The 24-ounce bone-in Murray- buds working overtime while the rich mation regarding Murraymere’s beef. mere U.S. Prime steak meal, with its aroma wafts through your senses. The complement of sides and dessert, as first bite fills your mouth with luscious well as TOSCANA’S other fine qual- flavor – juicy, with just a hint of sea ity steak meals, goes from a reasonable salt and black pepper. Less than 3% of NT$3,480. Come on down to The Sher- steaks produced in the U.S. earn the top wood Taipei’s acclaimed TOSCANA “Prime” grade, and upon tucking into a Italian Restaurant to enjoy a truly Murraymere bone-in U.S. Prime steak, memorable meal with special friends in you might question whether you’ve ever your life. To make reservations, please really tasted steak before. call (02) 2718-1188 or visit The Sher- The Sherwood Taipei’s TOSCANA wood Taipei: No. 111, Minsheng East is known primarily for its authentic Road, Section 3, Taipei. Italian cuisine, but in recent years has also become acclaimed for offering the finest in steak options to meet Taiwan’s growing appetite for fine quality beef. Murraymere bone-in and bone- TOSCANA pioneered the dry-aging less steaks are the stars of TOSCANA’s process for steaks in Taiwan, taking the steak menu, where they join such other lead of the culinary arts of steak back options as the classic TOSCANA dry- in 2006 aged steak, which is seared and then Once again TOSCANA is taking roasted on high heat to seal in the juices the lead by offering Wyoming Prime and lock in the flavor, as well as New steak from the independent Murray- York ribeye and several more. The steak mere Farms. The windswept, wide open menu has proven so popular that 60%

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CONTENTS NEWS AND VIEWS 6 Editorial Moving Toward an FTA AUGUST 2019 VOLUME 49, NUMBER 8 邁向自由貿易協定 一○八年八月號 7 President’s View Making the most of a geopolitical Publisher shift William Foreman By William Foreman Editor-in-Chief Don Shapiro 8 Taiwan Briefs Art Director/ / By Ellie Koepplinger Production Coordinator 12 Issues Katia Chen Backsliding on Chiropractic; An Manager, Publications Sales & Marketing Caroline Lee Unintended Consequence; Is

Translation a Dietary Supplement a Food? Kevin Chen, Yichun Chen, Charlize Hung 整脊專業合法地位的倒退；意想不到 的結果；營養補充品是食品嗎？ By Don Shapiro and Anna Yang

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan COVER SECTION P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 INVESTMENT e-mail: [email protected] website: http://www.amcham.com.tw 台 16 Is Taiwan Winning the 台 U.S.-China Trade War? 2718-8226 2718-8182 美中貿易戰局 台灣是否受惠？

Taiwan Business Topics is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are Tech firms are repatriating independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. from tariff-hit China, boosting © Copyright 2019 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original the local economy. But can material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. Taiwan secure a long-term 台 position in global supply 台 台108台66 chains? 台 長 5000 By Matthew Fulco ISSN 1818-1961 21 Uber on the Brink Again business has grown steadily Chairman: Leo Seewald in Taiwan while it has largely dodged Vice Chairmen: C.W. Chin, Petra Jumpers penalties for hosting Secretary: Fupei Wang Amended transportation Treasurer: Al Chang regulations could cripple the unlicensed properties on its 2018-2019 Governors: Anita Chen, C.W. Chin, Petra ride-hailing giant’s Taiwan platform. Jumpers, Leo Seewald, Daniel Tseng, Fupei Wang. business, sending a By Matthew Fulco 2019-2020 Governors: worrying message about the Al Chang, Albert Chang, Seraphim Ma, Jan-Hendrik 26 The Dutch Connection Meidinger, Paulus Mok. investment climate. Remains Firm 2019 Supervisors: Vincent Shih, Terry Tsao, Dylan By Matthew Fulco Tyson. There’s more to buoyant two- way FDI flows than generous COMMITTEES: 24 Airbnb Resilient in Agro-Chemical/ Melody Wang; Asset Management/ Taiwan taxation policies. Christine Jih, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Nadia Chen, Mandy Huang, C.P. The home-sharing company’s By Jens Kastner Liu; Chemical Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Shirley Chen, Abigail Lin; CSR/ Lume Liao, Fupei Wang; Energy/ Randy Tsai; Human Resources/ Vickie Chen, Monica Han, Carmen Law, Seraphim Ma; Infrastructure/ Wayne Chin, Paul ANALYSIS Lee; Insurance/ KT Lim, Linda Tsou, Dylan Tyson; Intellectual Property & Licensing/ Jason Chen, Peter 28 Positive Signals for CEO Dernbach, Vincent Shih; Marketing & Distribution/ Wei Hsiang; Medical Devices/ Jeffrey Wang, Joanne Yao; Mission to D.C. Pharmaceutical/ Petra Jumpers, Rie Nakajima; Public Health/ Joyce Lee, Tim Shields; Real Estate/ Tony The annual delegation found Chao; Retail/ Ceasar Chen, Mark Chen, Peggy Liao; Sustainable Development/ Kenny Jeng, Cosmas Lu, an encouraging atmosphere Kernel Wang; Tax/ Stella Lai, Cheli Liaw; Technology/ for U.S.-Taiwan economic Cynthia Chyn, Hans Huang; Telecommunications & Media/ Thomas Ee, Joanne Tsai; Transportation & relations. Logistics/ (tba); Travel & Tourism/ Gina Tsai. By Don Shapiro

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BACKGROUNDER 33 The Battle Against Disinformation Taiwan is seeking to fight back against fake news with stricter new legislation, media-literacy education, and fact- checking mechanisms. By Jane Rickards

INDUSTRY EXECUTIVE SUITE 37 Meet Joanna Yao of F CUS Baxter A Report on the Retail Sector By Anna Yang

By Jules Quartly

40 Outlets Going for Gold in Expanding Retail Environment TAIWAN BUSINESS As retail sales spike upward, new-style 46 The Changing Nature of outlets and malls cater to millennial Coworking in Taiwan shoppers who want entertainment and By Jeremy Olivier Instagram-friendly backdrops more than bargain-basement prices. SPONSORED CONTENT 43 A Country of Convenience 2 Sherwood Taipei Increases to the minimum wage, lower 49 Seeing Taiwan birth rates, and an aging population Yilan Offers a Slower, Gentler are leading to higher costs and labor Taiwan shortages for retailers. Will automation 51 Ministry of Economic save the day? Affairs

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8 ontnt.indd 2019/8/10 午12:48 E D I T O R I A L Moving Toward an FTA

he AmCham Taipei CEO Mission that visited Washington, that Taiwan would be an ideal partner for a trade agreement. D.C., this June found growing interest among American AmCham believes that the quickest way for Taiwan to get posi- T government officials in seeking ways to strengthen bilat- tive attention in Washington would be to show its determination eral relations with Taiwan. As reported in this issue of TOPICS, to resolve all nagging outstanding trade issues. Taiwan needs to there now appears to be greater understanding and apprecia- better position itself as a country that adheres to high standards. tion in Washington of Taiwan’s strategic value in the Indo-Pacific Taiwan recently took a major first step in that direction as a staunch proponent of democracy and human rights. On the when it opened the way to establishing an effective pharmaceu- economic front, as the United States calls China to task over its tical patent-linkage system to keep infringing drug products from chronic violations of international trading rules and fair play, getting to market. The issue had been a key item on the bilateral Taiwan stands out in clear contrast as a reliable trading partner. trade agenda for many years. Two years ago, Taiwan enacted the In the opinion of many of the political observers that the necessary legislation to create patent linkage, and this summer it AmCham delegation spoke to, the atmosphere has never been finalized appropriate implementation rules that are expected to more favorable for attempting to put the U.S.-Taiwan relationship soon go into force. on an even sounder footing. In Congressional offices and think The Taiwan government deserves commendation for smoothly tanks in particular, it was frequently suggested that the time has carrying out this process. In addition to the direct significance come for Taiwan to push for a free trade agreement (FTA) with for the pharmaceutical industry, the achievement underscores the U.S. as the best way to solidify those ties. Taiwan’s dedication to intellectual property protection in general. Unfortunately, some key officials in the U.S. executive branch Some of the other still-unresolved trade issues – particularly seem to disagree. The CEO Mission was told that Taiwan is those involving food products such as pork and beef – have been currently not included on the list of countries even being consid- more politically sensitive domestically. But even if those issues ered for eventual FTA negotiations, despite its standing as cannot be fully resolved immediately, evident progress in moving America’s 11th largest trading partner. toward a solution could contribute to changing minds about the To be sure, Taiwan is off the radar screen partly because U.S. feasibility of an FTA with Taiwan. trade negotiators are busier than they’ve ever been before. They’re The Taiwan election cycle may complicate the ability to move trying to resolve the U.S.-China trade tensions while also dealing ahead quickly. But AmCham hopes that both the incumbent with a full pipeline of trade deals with the United Kingdom, Euro- government and the opposition will recognize the need for Taiwan pean Union, and Japan. to take full advantage of any potential opportunities while they Considering the vital importance of the U.S. relationship for are available. Given its potential boost for Taiwan both strate- Taiwan’s security and economic prosperity, the challenge for gically and economically, an FTA with the U.S. should be a goal the Taiwan government will be to convince the American side that all elements on the political spectrum can rally around. 邁向自由貿易協定

北市美國商會企業高層代表團今年六月訪問華府時 易協定的理想夥伴。台北市美國商會深信，台灣獲取華府正 發現，美國政府官員對於尋求強化美台雙邊關係的 面關注的最快方式，就是展現其解決所有懸而未決貿易議題 台 興趣越來越高。誠如本刊本期報導所述，華府現在 的決心。台灣必須更明確自我定位為堅持高標準的國家。 似乎更加了解與重視台灣作為民主與人權堅定擁護者在印太 近年來，台灣已朝此方向跨出重大的第一步，為建立有效 地區的戰略價值。在經濟方面，就在美國批評中國長期違反 的藥品專利連結系統闢建蹊徑，以防侵權藥物產品上市。長 國際貿易規則和公平競爭之際，身為可靠貿易夥伴的台灣更 久以來，此議題一直是美台雙邊貿易議程中的重要項目。台 顯突出，形成鮮明對比。 灣2017年底通過建立專利連結所需的立法後，相關施行細則 在美國商會代表團此行拜會的政治觀察家中，有許多人 在今夏拍板定案，預料近期內就會生效。 指出，在推動更穩固的美台灣關係上，目前出現前所未見的 台灣政府順利完成此立法過程，值得讚許。此成就除了對 有利氣氛。尤其是美國國會官員和智庫人士，常聽到有人建 製藥業具有直接重要意義外，也凸顯台灣對智慧財產保護的 議，台灣透過推動和美國簽署自由貿易協定（FTA）作為鞏 整體貢獻。 固彼此關係最佳方式的時機已然來臨。 部分其他仍未解決的貿易議題――尤其是涉及豬肉、牛肉 不幸的是，美國行政部門的部分重要官員似乎不同意此看 之類的食品，在台灣內部仍屬於政治敏感性高的議題。不過 法。美國商會代表團在此行中得到的消息是，儘管台灣是美 即使這些議題無法立刻完全解決，台灣若能指出邁向解決方 國的第十一大貿易夥伴，目前卻連FTA談判最終考慮國家名 案的明顯進展，或可促使美方改變對於和台灣簽署自由貿易 單都未被列入。 協定可行性的想法。 可以肯定的是，台灣未被列入考慮名單，部分原因是美國 台灣選舉季節可能會讓貿易議題能否快速邁進的問題複雜 貿易談判人員正處於前所未有的忙碌中。在試圖解決美中貿 化。不過台北市美國商會希望，尋求連任的民進黨政府以及 易緊張的同時，他們還要處理已排定的英國、歐洲聯盟以及 在野陣營都能夠明白，在所有潛在的機會之窗仍敞開之際， 日本貿易協議等問題。 台灣必須充分把握時機。由於自由貿易協定在戰略和經濟上 鑒於美國關係對台灣安全與經濟繁榮具有不可或缺的重要 都可能對台灣大有助益，台灣政治光譜中的所有陣營應將和 性，台灣政府所面臨的挑戰將是說服美方接受台灣是簽署貿 美國簽署FTA列為團結努力的目標。

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Making the most of a geopolitical shift

f you’re waiting for things to go back to the longstanding irritants – such as disputes over beef way they were a couple years ago, it’s not and pork – to continue to impede progress toward I going to happen. strengthening the U.S.-Taiwan trade relationship. That was one of the key messages we heard It’s in America’s strategic interest to have Taiwan’s during this summer’s CEO Mission to Washington, economy be stable and prosperous. D.C., formerly known as “The Doorknock.” Offi- For Taiwan, this new era calls for bold, uncon- cials in the Trump administration along with ventional thinking that would get the country on Democrats and Republicans in Congress were the shortlist of potential partners for a free trade serious about drastically changing America’s rela- agreement. Our editorial in this issue of TOPICS tionship with China. They all agreed we’re in a provides several suggestions about how Taiwan new era of global trade. can better position itself for an FTA. I returned to Taipei feeling more certain than One of the most obvious things our CEO Mis- ever that what we’re seeing with U.S.-China ten- sion delegation observed in Washington was that sions is the world’s biggest geopolitical schism in it has been a very long time since U.S.-Taiwan over 70 years – since the Cold War started. This relations have been this good. The high level of will likely be the most consequential event of our interest, goodwill, understanding, and curiosity lifetime. about Taiwan issues was inspiring. My greatest concern is that those in Wash- We’ve got to seize this opportunity to advance ington aren’t fully aware of how this historic shift the trading relationship between the two sides. is affecting companies in Asia. Our delegation did This summer’s Washington trip was the last our best to describe how the situation is evolving one for Amy Chang, our senior director of govern- on the ground. ment and public affairs. Shortly after we returned We urged the policymakers to be mindful of to Taipei, Amy retired after serving six spectacular how the ongoing upheaval, tension and uncer- years in one of AmCham’s most challenging jobs. tainty impacts business. Some got it. Others didn’t. There is so much to admire about Amy. Her We’ll need to keep briefing them throughout the passion for her advocacy work. Her grace under year. For more details about our CEO Mission pressure. A fantastic sense of humor and easy messaging, read our trip report in this issue of laughter. Her deep expertise accumulated over TOPICS. an impressive career as a businesswoman and One of my key messages for all the figures we commercial officer with the U.S. Department of met in Washington was that to successfully get Commerce. And finally the loud and happy “Zao through the turbulence of global rebalancing, an!” she would greet everyone with when she the U.S. will need allies. One of America’s best walked into the office every morning. AmCham friends in this region is Taiwan. It’s our 11th big- was so lucky to have her. gest trading partner. A key link in the global supply chain for the tech sector. A stable democracy in a part of the world where democracy has been in retreat. A new era calls for a new perspective. For William Foreman Washington, this means that Taiwan needs to be President, viewed with a wider lens. The U.S. can’t allow American Chamber of Commerce in Taipei

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8 ridnt i.indd 7 2019/8/10 上午11:1 T A I W A N B R I E F S

— BY ELLIE KOEPPLINGER —

MACROECONOMICS ECONOMIC INDICATORS TRADE WAR SENDS Q2 US$ billion US$ billion TO SLUGGISH START Current Account Balance (Q1 2019)p 17.1 22.2 Normally June is a peak season for Foreign Trade Balance (Jan.-June) 19.9 25.6 exports of electronics items, the bulwark New Export Orders (June) 38.5 40.3 of the Taiwan economy. But the value Foreign Exchange Reserves (end June) 467 457 of export orders received in June fell by 4.5% from the level of the same month Unemployment (May) 3.67% 3.63% last year to come to US$38.5 billion, Discount Rate (July) 1.375% 1.375% the eighth straight month to register Economic Growth Rate Q1 2019p 1.71% 3.15% a decline. The hardest hit sector was Annual Change in Industrial Output (May)p -3.05% 7.36% machinery, which saw a 22.3% decrease Annual Change in Industrial Output (Jan.-May)p -2.98% in the value of export orders as custom- Annual Change in Consumer Price Index (May) 0.94% 1.71% ers in China and elsewhere held back on Annual Change in Consumer Price Index (Jan.-May) 0.51% expansion plans due to the uncertainty P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT in the international market. Analysts expect a continued drop in export orders for July. “Affected by the manufacturers are key parts of the Academia Sinica forecasting an unem- U.S.-China trade spat, the global econ- supply chain for major brands such as ployment rate of around 3.7% for the omy is softening and clients give their Apple. rest of 2019. orders with a conservative and hesitant Overall foreign trade figures for approach,” the Ministry of Economic the first half showed exports falling by INTERNATIONAL Affairs (MOEA) said in a statement. 3.4% to US$158.2 billion, while imports At the same time, the Ministry was rose by a miniscule 0.1% to US$138.3 PRESIDENT TSAI VISITS more hopeful about prospects for the billion for a trade balance of US$25.6 FOUR CARIBBEAN ALLIES second half of the year. It said orders billion. But while trade with most major President Tsai Ing-wen visited four could pick up due to rising demand for trade partners was mired in the nega- of Taiwan’s Caribbean allies between fifth-generation (5G) telecommunica- tive column, business with the U.S. was a July 11 and 22 – Haiti, St. Vincent and tions equipment, as well as retailers’ prominent exception. Taiwan’s first-half the Grenadines, St. Kitts and Nevis, preparation for the year-end holiday exports to the U.S. jumped 17.4% and and St. Lucia. She met with senior lead- shopping season, with new smart phone imports 14.3%, reflecting changing trad- ers from each country. During a four- offerings expected to spur sales. Taiwan ing patterns as companies seek to avoid, hour stop in Haiti, Tsai promised to or at least reduce, the impact of the U.S.- “accompany Haiti on its development TAIWAN STOCK EXCHANGE PERFORMANCE China tariff war. path,” though no new projects were

THE LINE SHOWS CHANGES IN TRADE VALUE AND Academia Sinica’s preliminary calcu- announced. Her four days in St. Kitts THE SHADED AREA CHANGES IN THE TAIEX INDEX. lation of Taiwan’s GDP growth rate and Nevis represented the first time a POINTS NT$ BILLION for the second quarter was a relatively sitting Taiwanese President had gone to 13000 225000 12000 200000 weak 1.75%, barely above the 1.71% the island nation. 11000 175000 officially recorded for Q1. The Chung- Tsai’s trip came at a time of height- 10000 150000 Hua Institution for Economic Research ened Chinese pressure on other countries 9000 125000 (CIER) in mid-July issued a forecast of to switch diplomatic recognition to 8000 100000 2.06% for Taiwan’s economic growth Beijing. In 2017, Panama, El Salva- 7000 75000 for the whole of 2019. CIER Presi- dor, and the Dominican Republic cut 6000 50000 dent Chen Shi-kuan said that private diplomatic ties with Taiwan, while 5000 25000 4000 0 consumption and domestic investment Honduras and the Solomon Islands have would be the two main drivers of the signaled that they may soon follow suit. growth, given the decline in exports. The Currently, only 17 countries still main- DATA SOURCE: TWSE labor market has remained stable, with tain formal relations with Taiwan.

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STOPOVERS INCLUDE about U.S. military sales to Taiwan KOREA RETURNS FRAUD NEW YORK, COLORADO by threatening to impose sanctions on SUSPECTS TO TAIWAN Trips to Central or South America American companies that supply weap- South Korea in July repatriated to enable Taiwanese presidents to make ons to Taiwan. Taiwan 22 Taiwanese nationals who politically useful transit stops in the The Abrams tanks are made by had served sentences or been paroled U.S. On this trip, President Tsai spent General Dynamics and the Stinger after being convicted of telecom fraud, two nights in New York en route to the missiles by Raytheon. American compa- despite Beijing’s request that they be sent Caribbean. In a speech to students and nies are generally prohibited from to China because the victims of the scam faculty members at Columbia University, engaging in military sales to China. were Chinese. In similar cases, a number she stressed Taiwan’s democratic devel- Rupert Hammond-Chambers, chair- of other countries have transferred opment and strategic importance, calling man of the Washington-based U.S.- Taiwanese suspects to China. for greater international support for Taiwan Business Council, said that On return to Taiwan, the 22 were “free and democratic Taiwan.” “these tanks and missiles will provide charged by the Taichung District Pros- Taiwan has “been able to successfully the Taiwan army with a modern capa- ecutor’s Office with violating the adapt to the challenges of the U.S.-China bility to deter and complicate the Organized Crime Prevention Act and trade war not despite our democracy, but operational planning of the People's were released on bail pending trial. The rather thanks to it,” she said. She noted Liberation Army (PLA) forces that fraud ring was uncovered through coop- that Taiwan’s democratic system makes coerce and threaten Taiwan. They will eration between the Taiwan and Korean it open to diverse ideas, giving it the flex- also offer new opportunities to engage police. ibility to “break the mold when the mold in cooperation with the United States no longer fits.” in both the deployment and operations CROSS-STRAIT RELATIONS The U.S. stopover on the return phases, and to maximize the effective- leg of the journey brought Tsai to ness of the equipment.” PROTESTS IN HONG KONG Colorado, the first time a Taiwan- Taiwan is still waiting for response OVER EXTRADITION LAW ese president has gone to the Western from the U.S. regarding its request In June, mass protests erupted in state. In Denver she met with Colorado to purchase 66 F-16V jet fighters to Hong Kong in opposition to a proposed Senator Cory Gardner, one of Taiwan’s strengthen its air defenses. extradition law that would have allowed strongest supporters in Congress, and attended a banquet attended by some 700 Taiwanese-Americans. As usual, China complained that it was a violation of the “One China” principle for the U.S. to receive a Taiwanese president, although the U.S. government does not accept that inter- pretation.

$2.2 BILLION U.S.-TAIWAN ARMAMENT SALE China had another reason to voice unhappiness with Washington in July: the U.S. government’s confirmation of a US$2.2 billion arms deal with Taiwan that includes 108 M1A2T Abrams tanks, 250 Stinger surface-to-air missiles, as well as mounted machine guns, armored vehicles, and other equipment. Describ- ing the deal as a “serious violation of international law,” Chinese foreign ministry spokesman Geng Shuang went The massive protests in Hong Kong have been closely watched by people in Taiwan. beyond China’s previous complaints PHOTO: KEVIN WANG

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accused criminals to be sent to China (as well as Taiwan) for trial. The bill was introduced following the murder of a young woman at the hands of her boyfriend while they vacationed in Taiwan. Upon returning to Hong Kong, the man admitted committing the crime, but he could not be tried in Hong Kong courts as the deed occurred in another jurisdiction. After nearly 2 million residents took to the streets to protest, Hong Kong Chief Executive Carrie Lam suspended the bill, but demonstrations contin- ued on the grounds that the bill had not been completely withdrawn. Finally Lam stated on July 9 that “the bill is completely dead.” A rally in Taipei in support of the Hong Kong protestors attracted an EVA Air flight attendants in a sit-down demonstration as part of their strike. estimated 6,000 attendees. In addi- PHOTO: MARTTI CHEN tion, President Tsai Ying-wen strongly condemned the extradition bill in several to China, just months before the event The CTSU came in for sharp public speeches during June. She pledged that was due to take place October 30 to criticism for failing to strongly object to as long as she is President, she will not November 3. The Chinese Taipei Skat- the sudden change in venue. Minister of accept a “one country, two systems” ing Union (CTSU) blamed “invisible Education Pan Wen-chung said he has solution for Taiwan and China. international pressure” as making it asked the organization and the govern- impossible to continue to hold the Asian ment’s Sports Administration to jointly SKATING COMPETITION Open Figure Skating Classic in Taipei. appeal the ISU decision. MOVES TO HONG KONG Although the ISU re-assigned the right Apparently due to pressure from to host the event to the Hong Kong DOMESTIC Beijing, the International Skating Union Skating Union, it said the competition (ISU) has changed the venue of an Asian would actually take place in Dongguan EVA AIR STRIKE CAUSES figure skating competition from Taipei in southern China. HEAVY LOSSES The 17-day strike by EVA Air flight TAIWAN'S JAN. - JUNE 2019 TRADE FIGURES attendants that began on June 20 caused (YEAR-ON-YEAR COMPARISON) the airline nearly US$1 billion in losses. /China apan ASEA TOTA The strike caused some 1,400 flights to be canceled, affecting over 200,000 67.1 61.2 passengers. The strikers demanded higher

30 wages, EVA agreement to a “no-free 27.6 26.8 26.2 163.8 22.1 158.2 21.1 16.3 16.5 11.5 11.3 ride” policy that would exclude non- 138.2 138.3 striking flight attendants from any wage 2019 2018 2019 2018 2019 2018 gains won by the union, and a seat on .S.A Europe EVA’s executive board for a flight atten- dant representative. In part, the EVA 22.1 18.3 18.8 17 17.3 16 15.8 15 flight attendants were inspired by the

2019 2018 2019 2018 2019 2018 China Airlines strike three years ago in which the union’s demands were all met. T: S Billion Exports mports SO RCE: BOFT/MOEA The strike ended when the union agreed to accept higher daily bonuses

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from EVA instead of the increased hourly relations with China. He has been crit- trip, conducted the scam by purchasing wages they had originally bargained for. icized for accepting support from “Red some 9,800 cartons of cigarettes online The union also failed to win a seat on Media” – outlets that are sympathetic to in Taiwan, then storing them in a ware- EVA’s board. Beijing. But following the protests over house at the airport before attempting to extradition in Hong Kong, Han stated circumvent customs inspection by using HAN TO HEAD KMT that he would accept unification with the VIP lane at Taoyuan Airport when PRESIDENTIAL TICKET China “over my dead body.” re-entering the country. President Tsai The Kuomintang (KMT) announced Han’s platform is primarily focused was described as “shocked and angered” July 14 that Kaohsiung Mayor Han on closing the infrastructure gap between about the scandal. Kuo-yu had won the primary election to North and South Taiwan, as well as mini- Peng, a retired air force general, be party’s nominee in the balloting for mizing the wealth gap between these had been Director-General of Taiwan’s President to take place January 11. regions. He has encountered criticism National Security Bureau since 2016. He The primary was conducted through in Kaohsiung for running for president will be succeeded by Minister of Veter- telephone surveys of over 15,000 people. so soon after being elected mayor of the ans Affairs Chiu Kuo-cheng, also a Participants were asked to rate each of southern city last November. Early polls former general. the five candidates against incumbent give incumbent President Tsai Ying-wen a President Tsai Ing-Wen of the Demo- marginal lead. BUSINESS cratic Progressive Party (DPP) and against one another. SMUGGLING CASE COSTS BID FOR 3RD TERMINAL Han won the nomination with 45% SECURITY CHIEF HIS JOB FAILS ONCE AGAIN of the vote, compared to 28% for billion- Taiwan’s intelligence chief, Peng In June, a tender for the contract aire businessman Terry Gou. New Taipei Sheng-chu, resigned when two of his to construct a third terminal for the City Mayor Eric Chu was third with agents were caught attempting to smug- Taoyuan International Airport failed to 17.9%. Gou resigned as chairman of gle over US$200,000 worth of cigarettes attract any bidders for the third time, giant electronics company Foxconn last into Taiwan in connection with President despite efforts by the airport corpo- April in order to focus on his campaign. Tsai’s diplomatic tour to the Carib- ration to offer improved conditions. Han is considered to be more will- bean. The agents, who were assigned As a result, Taiwan’s CECI Engineer- ing than President Tsai to try to improve to the President’s security detail for the ing Consultants Inc. and its partner in designing the terminal, the British archi- tectural firm of Rogers Stirk Harbour + Partners, have reluctantly indicated their willingness to simplify the design, replac- ing the building’s signature wavy “cloud” ceiling. Taipei Mayor Ko Wen-je in July sharply criticized the central govern- ment for underfunding the project, which is viewed as necessary to accommodate increasing passenger traffic at the airport.

TAISUN ANNOUNCES PRODUCTION UPGRADES Food and beverage maker Taisun Enterprise Co. announced plans to invest US$9.65 million to upgrade production lines at its Changhua plant this year to expand its product portfolio, including cold beverages. The expansion will also involve the introduction of new cleaning and soap products made with mesona, an herb in the mint family that is used to Han Kuo-yu, the new mayor of Kaohsiung, is already running for another posi- tion – President. make grass jelly. PHOTO:EASON LAM

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Backsliding on Chiropractic

Flurry of raids are reminder of unresolved status.

n recent weeks, local health department inspectors looking for violations conducted searches of the offices of six I doctors of chiropractic in three Taiwan cities. Although it is not yet clear whether any of the cases will result in prosecutions, the incidents are a reminder of the precarious legal status of the chiropractic professionals providing their services in Taiwan. Due in large part to protectionist objections raised by the medical community, Taiwan remains one of the few countries in the world that has not formally recognized the legitimacy of the chiropractic profession. Those primarily affected are Taiwanese who received their extensive training and licenses abroad, mainly in the U.S., before returning to a state of limbo in their home country. 台 The recent spate of searches harkens back to the period well over a decade ago when chiropractors in Taiwan were subject 台 to frequent raids and other harassment. But the situation began to improve after the Taiwan Chiropractic Doctors Society (TCDS), a member of AmCham Taipei, annually prepared posi- 台 tion papers in the Chamber’s Taiwan White Paper explaining the potential value of the profession for healthcare in Taiwan. An understanding with the authorities appeared to be 台 reached in 2006 when the Department of Health (the precursor to today’s Ministry of Health and Welfare) issued a document 台台 confirming that foreign-accredited chiropractors would be 台 allowed to practice as “back soothers” as long as they refrained 台台 from making any therapeutic claims or engaging in medical advertising. That solution, though an affront to the chiroprac- tors’ professional dignity, at least relieved them of the sense that they were operating under constant threat of suppression. What then led to this summer’s renewed pressures on chiropractic offices? The trigger seems to be discovery by the American Chiropractic Association (ACA) that a Taiwanese group was selling fake ACA certificates in Taiwan and China. The Association posted a fraud-alert video on its website, which TCDS translated into Chinese and publicized further. Immedi- 台台 ately the local fraudsters took the advertising down from their 台 website. 台 It was likely no coincidence that local health departments at that point began to receive citizen complaints that individual chiropractors were breaking the law through improper adver- tising or practicing medicine without a license. Once they receive a complaint, the health authorities are obliged to investigate. (Some of the investigating, however, seemed over-zealous. In one raid, a team of six inspectors spent three hours in the office, going through every cabinet drawer and even the refrigerator looking for evidence. Other chiropractors were instructed to alter the wording on their business cards – deleting reference to a U.S. license – or signboards).

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Even if these cases end with no charges being brought, they demonstrate the need to resolve the problem of according full legitimacy to chiropractic once and for all. As Taiwan 台 approaches the status of being a “super-aged society,” it is in Taiwan’s interest to encourage a profession that can help ease 台 some of the aches and pains of old age without the expense of medication or surgery. — By Don Shapiro

An Unintended Consequence

Current rules discourage hotels from offering attractive special packages. egulations in Taiwan aimed at protecting consumers require hotels to provide a full refund on room book- 定 R ings canceled at least three days before the scheduled arrival. But as AmCham Taipei’s Travel and Tourism Committee has been arguing in the past several years’ Taiwan White Paper, that policy sometime is actually contrary to the customer’s best interest. As a result of the Taiwan regulations, hotels in this market have been discouraged from offering special booking packages – 台台 often on an early-bird basis – that provide guests with attractive 台 discounts on condition that the payments are non-refund- able. The hotels are willing to offer those low rates in exchange 台 for guaranteed occupancy, but the incentive disappears if the ―― customer can cancel at will. “Usually those types of packages are issued for a low season, or sometimes for a really high season where we wish to attract more customers to get more attention,” says Achim v. Hake, 台 general manager of the Sherwood Taipei. Being able to sell rooms well in advance, knowing they will stay booked, makes it easier for the hotels to plan. During peak holiday seasons when rooms are in high demand, last-minute cancellations can put hotels at risk of losing substantial amounts of money. Amendments to the Consumer Protection Act passed in 2017 introduced some slight flexibility to the system by permitting the refund to take the form of credit toward another room within a one-year period, rather than cash. But that change does nothing to alleviate the hotels’ difficulty in coping with vacancies in rooms it expected to be filled. The chance is always present that an unexpected change in plans may cause a consumer to cancel a non-refundable room. But a study done by Expedia shows that cancellations 台 for special packages are less than half as frequent as those for regular bookings. Internationally, consumers are willing to accept the risk of 台 having to cancel a non-refundable booking as a trade-off for the significantly lower room rates. Taiwan is believed to be the only 台 market with regulations requiring a refund.

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“As the Taiwan market seeks to internationalize, we should be in line with the refund policies of other countries – not only to protect the ―― consumer but also for the sake of the hotels, creating a win-win situa- tion,” says an industry executive who asked not to be identified by name. ― — By Anna Yang

Is a Dietary Supplement

a Food? The current definition limits the health benefits that can be claimed. 台 台 s consumers look for ways to maintain or improve their health, the dietary supplements market in most parts of the world has A been growing rapidly in recent years. Taiwan remains a major exception because of the stringent regulations governing this sector. The size of the worldwide market for supplements has more than doubled over the past two decades, growing from US$49.1 billion in 1999 to $127.8 billion in 2017, according to the International Alliance of 台 Dietary/Food Supplement Associations. Japan and China together make 台 up 22% of the global market, yet the strict regulatory structure in Taiwan has kept this market relatively flat. 台台 The crux of the issue is that Taiwan regards dietary supplements as a type of “food in tablet or capsule form,” rather than treating them as a 台 discrete category as AmCham Taipei’s Retail Committee has consistently been suggesting through the Chamber’s annual Taiwan White Paper. Although there is a health foods sub-category, the number of prod- ucts gaining approval has been extremely limited – only 437 since the licensing system was established in 1999 (compared to more than 6,000 台 in Japan). In addition, the regulations fail to recognize that dietary supplements may have health benefits beyond those of general foods. In fact, there are only 13 types of health benefits that dietary supplements are allowed to claim in their advertising or publicity. Evidence obtained from scien- tific tests and clinical trials often cannot be cited because it does not fall within the permissible scope. Under the Food Safety and Sanitation Act, punishment can be imposed for any additional claims on the grounds of 台 their being exaggerative or misleading. The restriction on claims puts consumers at a disadvantage in deciding what products would benefit their health condition, says Alex Lin, head of government affairs for Herbalife Taiwan, Hong Kong, and Macao. “As long as we have sufficient scientific evidence to back it up, we should be able to say what our products do.” 台 The Retail Committee also maintains that creating a separate dietary 台 supplements category would help Taiwanese manufacturers gain more international credibility. “When people in other countries see that Taiwan 台 has defined dietary supplements more clearly, they will have more trust in 台 purchasing from Taiwanese companies,” says Lin. — By Anna Yang ―

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8 i.indd 14 2019/8/10 上午11:4 COVER STORY INVESTMENT Reverse Investment Flows 向

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Is Taiwan Winning the U.S.-China Trade War?

Tech firms are repatriating from tariff-hit China, boosting the local economy. But can Taiwan secure a long-term position in global supply chains?

BY MATTHEW FULCO

or years, it was a foregone conclu- China and the U.S. Fed up with Beijing’s nesses to Return to Invest in Taiwan.” sion that Taiwan’s tech hardware stalled market reforms and theft of Amer- Led by the InvesTaiwan office of the F sector would concentrate produc- ican intellectual property, Washing- Ministry of Economic Affairs (MOEA), tion in China. Starting in the 1990s, ton slapped punitive tariffs first of 10% the program provides assistance and pref- local contract electronics manufactur- and then 25% on hundreds of billions of erential conditions to returning Taiwan- ers began moving capacity across the dollars’ worth of Chinese goods. Many ese manufacturers. By bringing these Taiwan Strait. They followed their Amer- information technology and communi- firms home, the government aims to revi- ican customers, who were lured by cheap cations (ICT) devices manufactured by talize local industry. labor, tax breaks, and later the efficiency Taiwanese firms in China were affected. The program covers land, power and gains reaped from China’s complete Suddenly, China no longer looked like water supplies, financing, labor and taxa- supply chains. an ideal production base. As Taiwan- tion. “Think of it as a one-stop shop The efficiency factor ensured that ese manufacturers scrambled to avoid the to help manufacturers return home many firms stayed put in China even as it tariffs, the Tsai Ing-wen administration smoothly,” says Emile Chang, director- became a costlier place to do business. unveiled a three-year (2019-2021) reshor- general of the Ministry’s Department of The trend seemed unstoppable – until ing incentive program: the “Action Plan Investment Services and chief executive the trade war broke out last year between for Welcoming Overseas Taiwanese Busi- officer of InvesTaiwan.

貿易 中國對美出口遭到關稅制裁，台商紛紛回流，推動台灣 經濟成長，但台灣能否在全球供應鏈長期扮演要角？ 台 台 台台 台 台 台 台台 台 台 台 台

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A similar organization, the Invest supply chain fundamentals, a familiar control, relocating from tariff-hit China Taipei Office established in 2016 by the environment, and rule of law. looks like an increasingly attractive Taipei City government’s Department of Further, the government’s plan option. Tax breaks and swift access to Economic Development, is specifically addresses Taiwan’s longstanding “five financing are additional incentives. focused on attracting investment oppor- shortages” (referring to limitations in the As a result, business opportunities tunities to the capital city. It stresses supply of land, water, electricity, labor, are growing here even as the trade war Taipei’s comprehensive infrastructure, and professional/managerial talent) – casts a shadow over the global economy. safe and comfortable living environment, with special emphasis on land. Accord- Through June, the MOEA had approved numerous universities, and such facili- ing to government data, 435 hectares of 84 applications from companies reshoring ties as the Neihu Technology Park and industrial land are immediately available under the initiative. Their investments are Nangang Software Park. and supply will be increased to about 873 valued at almost NT$435 billion (US$14 For many Taiwanese firms, repatri- hectares before 2021. billion) and are expected to create more ating is feasible because labor costs in As for water and electricity, the than 39,000 jobs, the Ministry says. Taiwan are no longer significantly higher government maintains that it can ensure ICT firms make up the largest share of than in China’s developed coastal regions. an adequate supply of both. With the returnees, particularly makers of high-end At the same time, Taiwan offers strong most pressing of the five shortages under network communication equipment, serv-

台台 台台 台 台 台 台台台 台台 台台 台 台 台 台 台

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ers, and peripheral PC products. Manu- in July. The American market now The Tsai administration’s investment facturers of machine tools, auto parts, accounts for 13.9% of Taiwan’s elec- repatriation scheme is proving more and bicycles are also well represented. tronics exports, a 13-year high, the effective than previous efforts because it “Returning onshore is an important Ministry said. targets raising economic productivity, he option” for Taiwanese telecom manufac- In contrast, China’s exports to the says. “Only companies who are involved turers, says Remus Hsu, a senior network U.S. fell by about 15% annually in the with the 5+2 plan can benefit from the communications industry analyst at the January-March period, PriceWater- incentives,” he notes, referring to a state- semi-governmental Market Intelligence & houseCoopers (PwC) noted in its July led policy to upgrade Taiwan’s indus- Consulting Institute (MIC). These firms Global Economy Watch report. If U.S. trial base, focusing on seven sectors the will need to rejuvenate local produc- import substitution continues, “it is likely government deems innovative. Those tion lines that have been used mainly for to contribute to faster economic growth sectors are advanced technology, biomed- prototyping, he notes. But once they do in Vietnam, South Korea, and Taiwan, in icine, smart machinery, green energy, so, “they can support some production particular,” PwC said. national defense, circular economy, and for export to the U.S, alleviating the over- Darson Chiu, an economist at the high-value agriculture. all impact of the tariffs.” Taiwan Institute of Economic Research Without strict guidelines on the Taiwan’s exports to the U.S. rose (TIER), estimates that the investment returning investment, capital inflows 17.4% in the first half of the year to a Taiwan is repatriating from China could chasing high returns could pour into record US$222 billion on the back of help boost GDP growth by at least one the real-estate sector, overheating the strong demand for electronics used in percentage point this year, “with all other market, Chiu observes. That’s exactly PCs, the Ministry of Finance reported things being equal.” what happened when former President

台 台台 台 台台 台 台台 台 台 供應鏈的調整 台 台 台 台 台 台 台 台

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Ma Ying-jeou invited Taiwanese business- least 70% of repatriated funds be placed attracted by the government’s three- people to repatriate their offshore invest- in productive investments, while 25% can year action plan, says InvesTaiwan’s ments by lowering the gift and estate tax be used for financial investments and 5% Chang. Tech hardware makers, many from 50% to 10% in 2008. Since most of for other purposes. with moderate or heavy exposure to the the money went into the property market, According to the Finance Minis- American tariffs on Chinese goods, will the benefit for Taiwan’s real economy try, the law is expected to attract a be among the main beneficiaries of the was negligible, Chiu says. total of NT$800 billion to NT$900 policy. With that in mind, lawmakers passed billion (US$25.7 billion-$28.9 billion) in In June, MOEA announced that a a bill in July allowing Taiwanese entre- investment. number of hardware makers would preneurs who bring home offshore increase their investments here under the assets to invest under preferential tax Supply chain reorientation government’s plan. They include Univer- rates – but the money cannot be used to sal Microelectronics Co., a maker of purchase property or securitized prop- In the short-term, the Tsai adminis- consumer electronics components, which erty products. The bill requires that at tration expects continued capital inflows will invest more than NT$900 million

台 台 台 台 台 台 台 台 台 台台 台

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to expand its factory in the Taichung also advised their Taiwanese partners to ogy International Strategy Center (ISTI) Nantun Industrial Park; circuit protection prepare to decamp from China, Hsu says. at the Industrial Technology Research components manufacturer Thinking Elec- Pressure to make the move mounted after Institute ITRI). tronics Industrial Co., which will spend the tariffs climbed to 25%. To meet that challenge, Taiwan- NT$1.58 billion to build a new automo- Given the rising tension in the Sino-U. ese manufacturers have adopted four tive electronics and 5G plant in Kaohsi- S. relationship, “the migration of Taiwan- principal strategies including reshor- ung’s Nantze Export Processing Zone; ese telecom manufacturers away from ing, Chang notes. Those focused on the and mobile-phone camera-lens maker China looks set to become a long-term China market itself are redoubling efforts Zhong Yang Technology Co., which will trend,” Hsu adds. to boost sales to Chinese customers. spend NT$770 million to beef up local Research by MIC shows that if the Others are beefing up capacity in emerg- production capacity and develop new U.S. government proceeds with plans, ing markets, mainly Southeast Asia and optical lens products. currently under study, to implement India. Finally, a few are investing directly The Ministry said several other key tariffs on an additional US$300 billion in the U.S. or building plants in Mexico investments were being made by tech worth of Chinese goods, the most seri- to supply American customers. firms that declined to be named publicly. ously affected sector would be mobile Larger companies, who often already One of these, described as following a phones and related products, which have extensive overseas operations, are in top client back to Taiwan, was said to make up 70% of the list. That would a better position to steadily shift capac- be planning to spend NT$3 billion to spell bad news for Taiwanese manufac- ity away from China. Small and medium- upgrade its plant in the Southern Taiwan turers, who would be heavily exposed to sized enterprises, hamstrung by capital Science Park. the levies through their role in Apple’s constraints, are adopting more of a wait- Another firm plans to build a new supply chain. and see approach, ITRI’s Chang says. plant in the Hsinchu Science Park, adding Should those further tariffs by imple- Regionally, one advantage for Taiwan advanced production capacity utiliz- mented, Apple might pass on some of the as a manufacturing location is its devel- ing automated equipment for making its additional costs to its Taiwanese partners, oped country status. In contrast, coun- network communications products, the MIC says. At the same time, the tariffs tries like Vietnam, Indonesia, and India Ministry said. would cause the volume of shipments to have inferior infrastructure, fragmented Analysts say that makers of tele- fall. Those factors’ one-two punch could supply chains, in some cases a shortage of com equipment, given their heavy expo- put a sizable dent in the bottom lines of skilled labor, and poor internet connectiv- sure to the trade war, are accelerating Taiwanese iPhone suppliers. ity relative to Taiwan. Further, given local their departure from China. After the Indeed, in many cases, China’s loss is operational risks (such as strikes), shift- U.S. announced the first round of tariffs not necessarily Taiwan’s gain. While some ing production capacity to such countries in mid-2018, most Taiwanese telecom Taiwanese firms have returned home, “requires careful consideration,” says manufacturers began to relocate portions others are moving capacity to emerging MIC’s Hsu. of their production from China, while regional tech supply chains in Europe, Looking ahead, economists say that also holding out hope that Beijing and North America, and Southeast Asia. robust returning investment will be suffi- Washington would reach a detente, MIC’s Supply-chain fragmentation is occur- cient to offset export declines wrought by Hsu says. Initially the Taiwanese firms ring because no single country can take the trade war – at least for the remain- avoided spending heavily to shift their China’s place. “There’s what we can der of 2019. DBS Bank forecasts that manufacturing facilities, but have had to call an ‘ABC’ (Anywhere But China) while Taiwan’s economy will expand by reconsider as the trade war dragged on. supply chain now, but there is not going a modest 1.9% this year, domestic invest- When the tariffs were at the 10% to be another ‘world’s factory,’ says ment growth should hit a six-year high of level, U.S. buyers were largely will- Jack C. Chang, deputy general director 4.9%, fueled by the capital inflows from ing to absorb the cost increase, but they of the Industry, Science and Technol- returning businesses.

台 台 台 台 台 台 台 台 台 台台

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Uber on the Brink Again in Taiwan

Amended transportation regulations could cripple the ride-hailing giant’s Taiwan business, sending a worrying message about the investment climate.

BY MATTHEW FULCO

ber has struggled in East Asia. The new rules (the so-called “Uber Ing-wen’s goal of building a regional The San Francisco-based ride- clause”) – scheduled to be take effect from startup hub and innovation ecosystem in U hailing giant burned through October 1 following a four-month grace Taiwan. billions of dollars battling China’s Didi period – require “vehicle rental services” “A predictable and transparent regu- Chuxing before bowing out of the like Uber (but not taxis) to charge by the latory environment is critical to attracting Chinese market in 2016. It never gained a hour or day. Upon completion of a trip, foreign investment,” AIT said. “However, foothold in Japan or Korea, and last year rental vehicles must return to the garage some of the requirements in the Draft withdrew from eight Southeast Asian without picking up another fare. Measures could contravene President countries. Uber estimates that complying with Tsai’s objective and jeopardize Taiwan’s Currently, Uber continues to holds the regulations would cause its fare reputation as a safe place to invest and stakes in Didi and Singapore-based Grab, prices to rise fourfold, hitting the compa- innovate.” but it operates a major business of its ny’s bottom line hard. Without a feasi- Willy Wu, general manager of Uber own in just two East Asian markets: ble business model, Uber would likely Taiwan, says that the draft measures Hong Kong and Taiwan. exit Taiwan. That would not be welcome would have a negative effect on Taiwan’s Once again, however, Uber’s ability to news for the company’s 10,000 driv- business environment. He notes that operate in Taiwan is at risk due to strong ers, 3 million regular customers, and 250 local ride-hailing services Call Car Bar pressure from the politically influential rental-car company partners. and Join Me, which entered the market taxi industry. Article 103-1 of the Trans- A chilling effect could also occur on after Uber, would also be affected. “Busi- portation Management Regulations was the wider business climate. In an April ness in Taiwan should be concerned in amended in June, overturning provisions statement, the American Institute in general, not just international compa- in force since 2017 that allowed Uber Taiwan (AIT), which functions as the de nies,” he says. to offer its ride-hailing services through facto U.S. embassy, said that the draft Drivers cite Uber’s flexible hours and rental-car companies. measures run contrary to President Tsai competitive pay as reasons they choose

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to work for the company. One driver in booking apps, and even requiring drivers general manager, adds that Uber made Taipei City, who asked to be identified by to behave more professionally. a number of changes to comply with his surname Hsiao, recently retired from “However, the government has to Taiwanese transport laws, notably agree- the military at age 49. He says he likes evaluate Uber’s impact on the taxi indus- ing to pay taxes and provide passenger- being able to decide his own working try very carefully,” he adds. injury insurance. hours – a nice change from regimented Why then has a case that was military life. Compliance and competition seemingly closed two years ago been Deax Lin, a former steakhouse reopened? The answer appears to be manager, has been driving full-time for Two types of issues – compliance and the competition factor. The taxi indus- Uber for a year. He says that he can competition – have been at the center of try, historically a powerful voting bloc, is earn about NT$60,000 a month after the controversy over Uber’s legal status pressuring the MOTC, Gu says. subtracting his own costs and Uber’s fees. in Taiwan. Regarding compliance, the Taxi companies dislike Uber because “It’s well above average for Taiwan,” he company accumulated more than NT$1 they believe that the ride-hailing says. “It would be hard to earn this much billion in fines from the time it entered company takes customers away from in many other jobs here.” the market in 2013 until early 2017, due them. That’s often true, but the funda- For consumers, the main benefit Uber to the government’s contention that it mentals of the taxi industry were prob- offers is greater choice. “They can choose had registered as a technology company lematic long before Uber arrived in taxis or Uber, whichever they think but was in fact doing transportation Taiwan. There are almost certainly too provides them with better service,” says business. many taxis in Taiwan given market Allen Cheng, a senior industry analyst That issue was fully resolved demand. By MOTC’s estimates, 88,000 at the semi-governmental Market Intelli- through the business model – a tech- yellow cabs are on the road nationwide – gence & Consulting Institute (MIC). He nology company providing services to 30,000 of them in Taipei City, which has says that Uber’s presence in Taiwan has local rental-car firms – that Uber and a population of 2.7 million. Hong Kong, pushed taxi companies to improve service the authorities agreed on in 2017, says with a population of 7.4 million, has just quality to remain competitive, whether Uber’s Wu. 18,000 taxis. Seoul, with a population of by accepting cashless payments, creating Likai Gu, Uber’s former Taiwan 9.7 million, has 23,000 taxis.

An Uber promotional event at a time when it seemed as if new government regulations would resolve the previous impasse over the company's operations in Taiwan. PHOTO: MARTTI CHEN

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Even if taxis no longer have to taxi supply to a saturated market would forward, but “there are massive regu- compete with Uber, the market will cause drivers to compete for the same latory requirements to become a certi- remain saturated unless the government limited number of fares, though the fied taxi company in Taiwan when it decides to undertake sweeping reforms. dispatch companies might be happy comes to licensing, insurance, and fare- That’s not likely in the short term, espe- because they could collect more fees in rate control,” says MIC’s Cheng. “Uber cially as the taxi industry seems more the aggregate. is unlikely to operate as a taxi company concerned with ousting Uber than Uber’s departure would also give without a major change in its business anything else. taxi companies less incentive to further model.” In February, MOTC announced that improve their service. The inconsis- In particular, Uber is concerned it had found that Uber is a taxi service in tency of taxi service quality is one of the that participation in the MPT program everything but name and thus in violation main reasons Uber has been successful would not permit it to have upfront and of the law. The Ministry’s statement said here. On a recent ride, when this writer dynamic pricing, whereby fares are deter- that a lack of clarity about what defines a requested to make a cashless payment, mined by supply and demand at any taxi business has “allowed Uber to offers the driver responded: “When taxi drivers given time and passengers know how services similar to taxis, causing unfair see cash, their eyes light up. When they much they will pay before beginning their competition.” see EasyCard or a credit card, their eyes journey. The company considers these “I am all for the sharing economy, darken.” features integral to its business model, but Uber must follow the law to operate Wu says. legally in Taiwan,” MOTC Minister Lin The long road ahead Certainly some regulatory changes Chia-lung said at an April press confer- would be necessary to allow Uber to be ence. There is no easy solution to Uber’s compliant with local laws and main- His predecessor, Hochen Tan, wrote dilemma. MOTC has advised Uber to tain its core competitive advantages. “A in a May commentary in the English- register as a taxi company to be compli- major overhaul to current taxi regula- language Taipei Times that “since the taxi ant with local laws. That would involve tions or a new definition of micro-trans- industry is full of people living near the investing NT$5 million to set up a taxi portation service will be required,” says [poverty line] and drivers are notorious company, getting the drivers licensed MIC’s Cheng. “Questions about legis- for their strong political opinions, there is (through the same test that taxi driv- lative purposes, definitions of key terms undoubtedly strong motivation for poli- ers take), and applying for a taxi service and economic impact should be discussed ticians to formulate policies designed to operation permit. Uber would then be through a multi-stakeholder process. win their support.” part of Taiwan’s multi-purpose taxi Obviously, this would require a lot of The ruling Democratic Progressive (MPT) program without having to over- effort.” Party (DPP) suffered a major setback in haul its business model, MOTC says. Ahead of the end of a 60-day consul- the 2018 municipal elections and is look- Taiwan set up the MPT program tation period for the proposed regulatory ing to shore up support with the taxi more than two years ago during ongoing changes in late April, the Platform Driver industry ahead of the 2020 presidential efforts to make Uber compliant with local Alliance, a group formed by Uber driv- election, many observers say. regulations. The just over 1,000 drivers ers, announced that it had collected more At the same time, “it’s easy to make enrolled in the program must use metered than 300,000 signatures – the threshold Uber a target because of all the contro- fares but are not legally required to drive for proposing a referendum – in support versies about the company in the past,” a yellow car. Passengers must use an app of Uber and its existing business model in Gu says. to contact the drivers. Taiwan. To be sure, Uber’s combative style The MPT program has yet to catch At the time, the Platform Driver Alli- under former CEO Travis Kalanick on, probably because the positioning ance said that it would propose an rubbed some local officials the wrong of its fleet – neither Uber vehicle nor amendment to the Highway Act that way. Under Kalanick’s leadership, the traditional yellow cab – is unclear. But would allow drivers to legally accept company flouted local regulations first the government is now pressing Uber’s assignments from internet platforms on and asked questions later. 10,000 drivers to join the program by a commercial basis. The group has not Yet Uber has struck a more concilia- taking a test for a commercial driver’s issued any updates of that plan since then. tory tone since establishing the partner- license for non-traditional taxis. The tests For its part, Uber plans to keep its ship with local rental-car companies. “We will be offered through September. operations unchanged through Septem- want an open dialogue with the govern- It appears that the government is ber. After that, it is unclear whether the ment,” says Wu. He urges the govern- trying to ensure that those drivers company will continue to operate in ment to consider how the proposed won't be unemployed come October Taiwan. change to transportation regulations 1, when it will begin issuing fines for Asked about Uber’s future pros- “would impact the lives of drivers, rental- violation of the amended transporta- pects in Taiwan, Uber driver Deax Lin car companies, and passengers.” tion regulations. says, “There’s definitely hope, since the If Uber is forced to exit Taiwan, Gu For Uber, the situation looks increas- government knows that forcing Uber out says that many Uber drivers would likely ingly dire. MOTC’s proposal that it regis- wouldn’t be good for Taiwan’s image.” end up becoming taxi drivers. Adding ter as a taxi firm may seem straight- “I’m an optimistic person,” he adds.

TAIWAN BUSINESS TOPICS • AUGUST 2019 23

8ortor.indd 2 2019/8/10 午12:07 COVER STORY

INVESTMENT

Airbnb Resilient in Taiwan

The home-sharing company’s business has grown steadily while it has largely dodged penalties for hosting unlicensed properties on its platform.

BY MATTHEW FULCO

or years, Airbnb and Taiwan- services operated as a side business in an the segment, which feels like a home- ese regulators have been play- owner-occupied residence. If the owner stay, for the leisure and family markets,” F ing a cat-and-mouse game. Local is absent from a property being used for says Achim v. Hake, long-time general regulations limit short-stay accommo- homestay purposes – as is the case with manager of the Sherwood Taipei, who has dation rentals to licensed hotels or inns, almost all Airbnb rentals in Taiwan – stayed in Airbnb properties in Germany. but most Taiwan properties listed on the then it’s not a homestay and isn’t legal. For its part, the government seems home-sharing platform do not meet that Unlicensed facilities are subject to a maxi- determined to curb Airbnb’s Taiwan busi- requirement. Nevertheless, demand for mum fine of NT$500,000 and must be ness, which it sees as non-compliant with economical lodging is strong enough that shut down. regulations. In March, the Ministry of Airbnb is willing to risk the inevitable Being largely unable to serve the Transportation and Communications fallout with regulators. markets of Taipei, Taichung, Tainan, and (MOTC) proposed to increase the maxi- Previous crackdowns – which brought Kaohsiung, “we are taking a big hit,” says mum fine for operating an unlicensed sharp increases in fines for operating ille- Cheng. The company’s business is good hotel or homestay from NT$500,000 to gal hotels – only temporarily curbed the in rural areas where homestay regula- NT$2 million. number of listings. After a while, the tions are more relaxed, including Hual- Airbnb hopes to open a dialogue with volume start to creep up again. ien, Taitung, Chiayi, and Pingtung coun- the government to resolve the current In practice, regulators can’t easily ties. However, those markets are much impasse, says Singapore-based Marvin punish Airbnb because the company smaller than the urban centers and tend to Ma, Airbnb’s public affairs manager for has no physical presence in Taiwan. The be overlooked by international visitors. Hong Kong and Taiwan. The company company is registered in San Francisco. “If you’re coming to Taiwan from understands that the government faces There are no Airbnb staff members on overseas, especially for the first time, pressure from hoteliers to crack down the ground here. you’re definitely coming to Taipei,” on unlicensed short-term rentals, but it “What are regulators going to do? Cheng says. “You can imagine the frus- believes the best solution is to change Send a notification of a fine to the Airbnb tration of being a vacation-rental plat- the current regulatory framework, which office in California?” says C.K. Cheng, form that’s cut off from the largest tour- was established long before homestays founder of the Taipei-based vacation- ism market in Taiwan.” were a mainstream form of travel accom- rental platform AsiaYo. In contrast, Airbnb's business is thriv- modation. Yet while Airbnb’s business contin- ing, according to the most recent data “We want the government to amend ues to thrive here, the government’s tough compiled by the company. Guest numbers the law so that Airbnb can legally oper- stance on unlicensed hotels and home- increased to 1.61 million last year ate, and we believe that the government stays is having an adverse effect on some from 1.3 million in 2017. Listings have knows it needs to change the regula- local businesses that cannot so easily skirt increased from 15,000 in 2015 to 38,000 tions,” he adds. regulations. as of June. For instance, most vacation rentals In a forecast published in December Overcoming a trust deficit in Taiwan’s large urban areas are empty 2018 based on internal search, booking, apartment units that do not qualify as and wish-list data, Airbnb estimated that A trust deficit seems to be preventing homestays and cannot be legally listed on Taiwan would be its 19th most popular Airbnb and the Taiwanese government AsiaYo’s platform. Taiwanese law defines travel destination globally in 2019. from reaching a solution to the impasse. a “homestay facility” as accommodation “There’s very strong demand for On the one hand, the government insists

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that Airbnb conform to existing regula- the salaries of a large team of staff or points out that other key markets for the tions designed for traditional hotels and high insurance fees like a hotel does. company in Asia, such as Hong Kong and inns, though that may not be suitable for Chen points out that Airbnb has also Thailand, also have no Airbnb office or its business model, a third-party book- strayed far from its original “home- staff members. ing platform connecting property owners sharing” concept in the Taiwan market, One way to resolve the conundrum with guests. where real-estate speculation is common. would be to follow Japan’s model for “The message being sent is that new Professional landlords often have multi- short-term rentals, set up in June 2017 in business models are not welcome, which ple apartment units that they rent out to large part to boost lodging supply ahead isn’t good for Taiwan’s overall business Airbnb guests, just as they would to long- of the 2020 Tokyo Olympics. Under environment,” says AsiaYo’s Cheng. term tenants, he says. Japan’s new law, property owners must The Sherwood’s v. Hake says that The solution to the impasse is for register their short-term rental units with hotels and Airbnb properties are the government to draft new regulations the relevant government authority and “completely different” and should be designed for Airbnb’s business model, can host a maximum of 180 overnight regulated separately. while Airbnb should register in Taiwan stays annually. On the other hand, Chen Ming-ming, and set up an office, he says. Reportedly, regulators two years ago founder and chief executive officer of “As long as Airbnb doesn’t have oper- considered permitting Airbnb and similar online travel activities booking platform ations in Taiwan, it’s doubtful the govern- services to operate legally but dropped the Kkday, says that “from the government ment will be sympathetic to their views,” idea after some hoteliers and inn owners and hotel industry’s standpoint, Airbnb he says. cried foul. Many of the fiercest opponents is competing in an unfair way.” He notes When asked about Airbnb’s lack of of Airbnb had jumped into the hotel busi- that Airbnb can charge lower prices than boots on the ground in Taiwan, public ness during Ma Ying-jeou’s presidency to hotels because it pays no taxes on busi- affairs manager Ma that the company has cash in on the Chinese tourist boom. They ness it does here – transactions occur a “light operating model” that doesn't fell on hard times after Beijing curbed overseas. Nor does Airbnb have to pay always call for a physical office. He the number of group tours to Taiwan to signal its displeasure with President Tsai Ing-wen’s cross-Strait policy. “Some small hotel operators see Airbnb as a direct threat to their busi- ness,” says Ping Lee, head of research at CBRE Taiwan, a property consultancy. She points out that illegal short-term rentals have existed in Taiwan for years, but only attracted heavy regulatory scru- tiny when Airbnb arrived. “Airbnb’s plat- form may have caused the number of such rentals to rise, but Airbnb did not create the problem,” she says. “The government needs to change industry regulations if it wants to ensure compliance.” In the short term, Airbnb will likely continue operating in a legal gray area in Taiwan. The enforceability of fines is limited because authorities often don’t know where unlicensed hotels and homestays are located. Airbnb’s book- ing system conceals that information until after payment is made. And many people would think twice about report- ing a neighbor to the authorities given the potential legal trouble it could bring. Yet a lack of openness to new busi- ness models will ultimately not bene- fit Taiwan’s investment climate, the Sher- wood’s v. Hake says. “Airbnb represents a trend – a new way of traveling, with a lot of market potential. It’s not a good idea to try and Some Taiwan lodging offerings as shown on AsiaYo and Airbnb. shut it down,” he says.

TAIWAN BUSINESS TOPICS • AUGUST 2019 25

8ortor.indd 2 2019/8/12 午:16 COVER STORY

INVESTMENT

The Dutch Connection Remains Firm

There’s more to buoyant two-way FDI flows than generous taxation policies.

BY JENS KASTNER

ack in the 1600s, the Dutch maker Ikea, which is actually headquar- it is also a major destination for Taiwan’s were Taiwan’s first foreign inves- tered in the Dutch city of Delft. outbound FDI. In 2018, it took in B tors, with their legendary Dutch “The FDI statistics cannot paint the US$1.1 billion in Taiwanese investment East Indian Company setting up Fort real picture, as many non-Dutch compa- to make it the largest recipient in the Zeelandia in what is now the Anping nies carry out FDI via the Netherlands,” European Union. district of Tainan. explains Guy Wittich, head of the Nether- Although that figure is less than the Fast-forwarding to the present, the lands Trade & Investment Office (NTIO) investment amount to the UK’s Caribbean Netherlands for the past three years in Taipei. On the other hand, he notes overseas territories ($5.9 billion) and the has been leading the pack as Taiwan’s that Dutch-based ASML was the larg- U.S. ($2 billion), it is considerably more main source of foreign direct investment est contributor of new foreign investment than to Vietnam ($900 million), which (FDI). The 2018 total came to US$3.5 in 2016 “by acquiring its Taiwanese peer has become a magnet for investment by billion, well ahead of the $1.5 billion Hermes Microvision for almost US$3 the Taiwanese manufacturing sector in each from Japan and British Caribbean billion” and remained among Taiwan’s recent years. territories. top foreign investors in 2018. As much as 80% of the overall While the Netherlands has generally Both ASML and NXP are spin- inbound FDI into the Netherlands tends long been among the world’s top sources offs from Dutch electronics conglomer- to be immediately channeled abroad of FDI thanks to its generous fiscal atti- ate Philips, which played a key role in through the use of SPVs. Neverthe- tude toward multinational companies Taiwan’s evolution into a global elec- less, there are currently more than 200 and special purpose vehicles (SPVs), also tronics-exporting powerhouse by being Taiwanese companies operational in known as letterbox companies, a substan- Taiwan’s largest foreign investor in the the Netherlands, compared to over 700 tial share of the money flow is feeding 1980s and 1990s. companies from Japan, about 600 from real economic activity by Dutch compa- Philips was instrumental in the estab- China, and some 100 from South Korea. nies in Taiwan. lishment of what is now Taiwan’s largest Among those on the list of Taiwan- Cases in point are ASML, a manufac- company, Taiwan Semiconductor Manu- ese investors with brick-and-mortar pres- turer of production equipment for semi- facturing (TSMC), serving as the biggest ences are electronics makers Acer, Asus, conductors; NXP Semiconductors, which initial investor. (Philips sold its last Giga Byte, BenQ, Pegatron, TSMC, and focuses on making automotive chips; and TSMC shares in 2008.) MSi; bicycle makers Giant and Merida; DSM, a health, nutrition, and materials While the Netherlands seems headed as well as container shipping line Ever- sciences company. There is also Sweden’s toward making 2019 its fourth consecu- green and airline Eva Air. national flagship company, furniture- tive year as Taiwan’s largest FDI source, According to a May 2019 report by

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professional services firm Ernst & Young dominant sector, the range of Taiwanese- China. As a result, there was a “420% listing the Netherlands’ largest FDI invested companies has been widening, year-on-year increase in the import of sources, Taiwan rose from 11th to 7th notes Dominque Chen, secretary of the Taiwanese e-bikes in April,” he says. place with 14 projects in 2018, compared economic division of the Taipei Repre- Another reason for Taiwanese inves- to seven projects in 2017. India and sentative Office in the Netherlands. The tors’ satisfaction with the Netherlands South Korea saw their number of projects country’s deferred value-added tax (VAT) is the relative lack of labor-manage- double as well, rising to fifth and ninth payment scheme is an important factor ment friction compared to France and places respectively. driving this investment, as it facilitates several other EU countries, Chen says. “The historic reason for strong the smooth importation of goods into the Wage adjustments are generally worked Taiwanese FDI in the Netherlands was EU, he says. Without that option, compa- out amicably with the help of input from Philips’ sourcing from Taiwanese elec- nies would have to pre-pay the import government and academics. tronics contract manufacturers, which VAT amount and then later apply for a The authorities’ active outreach to were the first Taiwanese companies open- refund if the goods are re-exported. The foreign investors is a further plus, says ing presences in the country,” says Dennis application process could take months or Chen, citing a recent series of seminars Bierman, Director of the Netherlands even a year. across the country to inform companies Foreign Investment Agency at the NTIO “Taiwanese companies based in the about changes in the EU’s data-protection in Taipei. Netherlands use this scheme to smoothly rules involving complicated compliance “Three vibrant clusters of Taiwan- ship Taiwan-made imports, such as bicy- requirements. ese companies have been growing around cles and gaming monitors, on to else- “The Taiwanese businesspeople are Amsterdam, Eindhoven, and Rotterdam where in the EU – for example, Germany well-integrated in the society here,” Chen thanks to direct Amsterdam-Taipei flights, and the Czech Republic,” Chen says. says. “They know the Dutch way of the strength of Rotterdam port, ease of He adds that recently the importing doing business and can cope easily with doing business, a competitive tax climate, business has also been aided by the Euro- the regulatory climate. Indeed, in the two and the population’s general English- pean Commission’s decision in January years I have been based here, I haven’t language competence,” Bierman says. to impose anti-dumping as well as anti- heard of the Taiwanese businesspeople Although electronics remains the subsidy duties on e-bikes imported from complaining of any big challenges.”

Your authoritative source on business in Taiwan

I am working on a new book about “ Taiwan. Part of it concerns the economy, and I have drawn in part on articles from

Taiwan Business TOPICS. In doing so, I

am impressed again with the quality of your content and the objective and “ nuanced treatment of Taiwan economic issues that the magazine provides.

Richard C. Bush Senior Fellow and Cheng-Fu and Cecilia Yen Koo Chair in Taiwan Studies, The Brookings Institution,

and former Chairman ofTAIWAN the BUSINESSAmerican TOPICS Institute• AUGUST 2019 in 27 Taiwan.

8ortor.indd 27 2019/8/10 午12:07 CEO MISSION

Positive Signals for CEO Mission to Washington D.C.

The annual delegation found an encouraging atmosphere for U.S.-Taiwan economic relations.

BY DON SHAPIRO

hen an AmCham Taipei del- egation made the rounds W of Washington, D.C., for a week in mid-June, it had three main requests for the U.S. government: • Restore the former practice of holding high-level trade nego- tiations with Taiwan under the Trade and Investment Framework Agreement on a regular, prefer- ably annual, basis. Such “TIFA talks,” have not been held since October 2016. • Resume periodic visits to Taiwan by U.S. Cabinet-level officials to ensure that the bilateral rela- tionship continues to develop in a positive direction. Only one Meeting with Assistant Secretary of Defense Randall Schriver. such visit – that of Environmental Protection Administrator Gina officials, as well as members of Con- knock,” the annual trip was rebranded McCarthy in 2015 – has taken gress and influential scholars,” said this year as AmCham Taipei’s “CEO place since 2000. AmCham President William Foreman, Mission to Washington” to stress its • Include Taiwan among the coun- who led the delegation together with strategic and high-level nature. The tries to be considered by the U.S. Chamber Chairman Leo Seewald. delegation consisted of five execu- as prime potential negotiating “While there were no dramatic break- tives from member companies of the partners for a bilateral Free Trade throughs, the overall atmosphere was Chamber and four members of the Agreement (FTA). much more positive than in the past AmCham staff. “On all of these points, our group few years. We came away quite encour- Regarding resumption of the TIFA had thoughtful and constructive aged.” talks, the AmCham representatives exchanges with key U.S. government Formerly known as the “Door- made the case that these meetings are

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結

美台貿

With Senator Todd Young of Indiana

needed to help push for progress on 美中美 issues of importance to American com- 台美 panies operating in the Taiwan market. 貿易美台 It was noted that in the Chamber’s 2019 貿易 Business Climate Survey, nearly three- 貿易是 quarters of the respondents said it was important for their business for TIFA 美台 talks to be resumed. 台美是 The discussions in Washington about 台美 TIFA gave the AmCham delegation “the 台灣美貿易貿易 feeling that things are moving in the right direction,” Foreman said. But a number 台美 of factors are likely to affect the timing, 美 particularly the status of American trade negotiations with China, since many of 受 the same U.S. personnel cover trade rela- 台美 tions with both China and Taiwan. 美台 If the TIFA process can move for- ward – and especially if it results in significant progress toward resolving 台美台美 outstanding bilateral trade issues – the 台灣 idea of concluding an FTA with Taiwan 是 might gain a more favorable hearing in Washington. At present, the AmCham 是美 CEO Mission was told, Taiwan is not 中貿易美中台灣貿易 being mentioned as one of the countries 是 that the U.S. is likely to consider when 美台是 it is ready to enter into additional FTA 貿易美台貿易 negotiations. 台灣是美 Because of its relatively small staff, 貿易 the Office of the U.S. Trade Represen- 美貿易貿易 tative (USTR), which is responsible for 貿易 trade negotiations, can undertake only 美貿易 a limited number of negotiations at any 美貿易美 given time. It is currently engaged in 否 negotiations with Japan and the Euro- 美美貿易是 pean Union, while preparing for the possibility of interaction with the UK 美台灣貿易中 should Brexit occur. Also uncertain 美中 is whether the U.S.-Mexico-Canada 戰 Agreement (USMCA), the proposed 美中 replacement for NAFTA, will be con- 是台灣美台貿易美

TAIWAN BUSINESS TOPICS • AUGUST 2019 29

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cluded without the need for any further negotiation. Although the official U.S. position is that its decisions on entering into trade agreements are made on their merits without regard to the opinion of third countries, it has long been assumed that China’s almost certain vehement objection would also pose an imped- iment to Taiwan’s inclusion on the list of FTA candidates. Now the pro- longed, increasingly testy tariff war between Washington and Beijing may The delegation exchanged views with AIT/Washington over a breakfast meeting. be changing that calculus, in the view of some informed observers in D.C. Given the cooling in the U.S.-China relationship, numerous sources on Cap- American Chamber of Commerce in Taipei itol Hill and in think tanks suggested to 2019 CEO Mission, Washington, D.C. the AmCham delegation that this might be an ideal time for Taiwan to push for June 17-21, 2019 an FTA with the U.S., so that Taiwan at least starts to be mentioned as part EXECUTIVE BRANCH of the conversation on future American Office of the Vice President trade policy. National Security Council As these observers see it, the Indo- Office of the U.S. Trade Representative Pacific strategy being undertaken by the Department of State Trump administration reflects renewed Department of Defense U.S. determination to play an active role in the Asian region, and there seems to Department of Commerce be growing awareness in Washington American Institute in Taiwan/Washington of the ways in which a secure and pros- perous Taiwan can assist the U.S. in LEGISLATIVE BRANCH that role. By creating another firm tie Senator Todd Young between the two countries and reaf- Senate Foreign Relations Committee staff firming their longstanding friendship, Representatives Steve Chabot, Mario Diaz-Balart, Ted Yoho. a U.S.-Taiwan FTA would be a boost Offices of Senators Marsha Blackburn, Chris Coons, Kevin Cramer, Mike to the island’s self-confidence at a time Crapo, Josh Hawley, James Inhofe, Jeffrey Merkley, when Beijing, under Xi Jinping’s lead- Pat Roberts, Chuck Schumer. ership, seems more intent than ever on Offices of Representatives Gerry Connolly, Mike Kelly, undermining Taiwan’s resolve. Guy Reschenthaler, Kim Schrier, Mikie Sherrill, Albio Sires. Until now, however, that strategic view of the Taiwan relationship has OTHER ORGANIZATIONS BIO Asia C & M International DC International Advisory DPP Liaison in Washington Heritage Foundation McClarty Associates National Foreign Trade Council National Pork Producers Council PhRMA Taiwan Economic and Cultural Representative Office in the U.S. U.S. Chamber of Commerce

30 TAIWAN BUSINESS TOPICS • AUGUST 2019

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often been eclipsed by the continuing stalemate over unresolved trade issues, particularly those involving Taiwanese restrictions on the import of certain U.S. beef and pork products. U.S. trade nego- tiators consider that Taiwan has failed to live up to its commitments as a World Trade Organization member to base its trade decisions on established scien- tific evidence, and they are unwilling to negotiate what they believe should be The prospect for TIFA talks was discussed at the Office of the U.S. Trade Representative. matters of principle. The crux of the beef issue is Taiwan’s prohibition on the import of ground 貿易台灣 beef and offal from the United States. 戰美 The ban was instituted by the Legisla- 台灣美 tive Yuan in 2009 despite a protocol 中 that the Ma Ying-jeou administration 台灣美台灣貿 had signed with the U.S. fully opening 台灣美美台 the market. The legislators voiced con- tinuing concern about the impact of mad 台戰受美台貿易 cow disease. 是台灣美美 The pork issue is Taiwan’s zero-tol- 貿易台灣貿易 erance policy for traces of ractopamine, 貿易美是 a leanness-enhancing feed additive used by most U.S. hog ranchers. Since 2012, 台灣美 Taiwan has accepted a maximum res- 美美 idue level (MRL) for ractopamine in beef 是是 set by the Codex Alimentarius, the inter- national food standards body. It has not 美台灣 accepted the same standard for pork 是美台 because of strong objections from con- 灣受 sumer groups arguing that Taiwan needs 台灣 to impose heavier restrictions because of the large consumption of pork in the Taiwanese diet. 美美局台美美台 Given the long impasse over the beef 貿易 and pork issues, AmCham has proposed 美是美美美 that the two sides commit to resolving 貿 the dispute as part of broader negotia- 美台灣貿 tions for an FTA. So far the American position appears unchanged: beef and pork need to be resolved as precondi- 美中 tions before the U.S. is willing to enter 台灣 into new negotiations for a full-fledged 美台灣美中 trade agreement. On the other hand, 台灣是美貿易台灣 in what has been called the “building 美是美 block” approach, there have been hints that the Americans could consider nego- 中台美 tiating with Taiwan on the equivalent of a chapter or two in the standard FTA. 台灣 “Digital Economy” and “Transparency” are examples of themes that have been 美台灣 suggested. 美貿 As AmCham always does during 美台 its trips to Washington, each meeting 台灣美台

TAIWAN BUSINESS TOPICS • AUGUST 2019 31

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rights, and close collaboration with American industry as a key part of their global supply chains. In its Washington meetings, the del- egation also reported on the highly encouraging progress achieved over the past two years through AmCham’s White Paper process. “We repeatedly made the point that the Taiwan govern- ment has been cooperating very closely with the Chamber to make concrete improvements in the business environ- ment,” Foreman says. “As a result of that serious effort, we set an all-time record in 2018 for the number of White Paper issues resolved, and last year we came very close to duplicating it. We

The CEO Mission was received at the Department of State. believe the U.S. would find the same sincerity on Taiwan’s part as an FTA negotiating partner.” included the presentation of a two-page tant for the U.S. Some of the key points Following the CEO mission, the handout entitled “Why Taiwan Mat- include Taiwan’s rank as America’s 11th AmCham team will report on its find- ters.” It serves to inform – or remind largest trading partner, its open and ings to prominent leaders in the Taiwan – the Chamber’s American contacts of vibrant political system sharing Amer- government as well as to the American the many reasons why Taiwan is impor- ican values of democracy and human Institute in Taiwan.

Members of the Delegation

The 2019 CEO Mission to Washington, led by AmCham Taipei Chairman Leo Seewald and President William Foreman, held a total of 35 meetings. Other AmCham members in the group were Dylan Tyson, president and CEO of Prudential Life Insurance Co. of Taiwan and co-chair of the Chamber’s Insurance Commit- tee; Rie Nakajima, managing director of Merck Sharp & Dohme Taiwan and co-chair of the Pharmaceuticals Committee; Manohar Thya- garaj, president of the BAE Systems Taiwan Office; and Roger Yee, president of Raytheon International Taiwan. Chairman Seewald is chairman/managing director of BlackRock Investment Management (Taiwan).

Besides President Foreman, the AmCham office was represented by Senior Director Don Sha- piro; Senior Director for Government & Public Affairs Amy Chang; and Patrick Lu, Government & Public Affairs Manager.

32 TAIWAN BUSINESS TOPICS • AUGUST 2019

8E.indd 2 2019/8/10 午12:09 BACKGROUNDER

THE BATTLE AGAINST DISINFORMATION

Taiwan is seeking to fight back against fake news with stricter new legislation, media-literacy education, and fact-checking mechanisms.

BY JANE RICKARDS

hen President Tsai Ing-wen you display such arrogance, throwing requires a delicate balance. While fake last year was in an armored the pen in anger?” news represents a threat to democracy, W car visiting areas in An investigation revealed the fake so would excessive controls on freedom southern Taiwan affected by flooding, video to be the work of a software of expression and freedom of the press a Facebook fan page devoted to news engineer who is supporting the Nation- in an effort to crack down on disinfor- accused Tsai of feeling contempt for alist Party presidential candidate Han mation. the victims. The evidence offered was Kuo-yu. Creators of fake news are often local a screenshot of a conversation attrib- Taiwan has fought a long battle for troublemakers or people with a political uted to the car’s driver from messaging democracy. During the authoritarian axe to grind. But Democratic Progres- service LINE Corporation saying the period that ended with the lifting of sive Party (DPP) legislator Karen Yu members of the military accompa- martial law in 1987, public communi- is among those who trace much of the nying Tsai had their firearms loaded cation was strictly controlled. Political disinformation appearing on popular and ready to use against the citizenry. It activists were in a constant struggle with social media sites to “content farms” in turned out the LINE message had been censors and the secret police for the China. “There’s another kind of army doctored. A man was later arrested for right to freedom of public information. from China, a cyber army,” Yu says. spreading fake news. Now Taiwan enjoys what those ear- “Disinformation in Taiwan is a brand Another notorious fake news case lier activists had sought – an abundance new social problem, so we need some featured a video of a seemingly exasper- of information. But that circumstance innovation in our legal system.” ated Premier Su Tseng-chang throwing has only brought a different set of Both Yu and Lo cite the Digital his pen down after signing a condo- problems. Information, many experts Society Project from the V-Dem Insti- lence book at the funeral for a friend’s say, is now becoming the main arena tute in the Department of Political mother in his hometown in Pingtung where Taiwan’s democracy is being Science at the University of Gothen- County. The clip was doctored to make undermined. burg, Sweden, which surveyed experts it seem as though the incident was at “Fake news in the last one or two all over the world. The study found that a funeral for a railway police officer years has become an extremely serious from 2013 to 2018, globally Taiwan stabbed to death by a passenger. social problem in Taiwan,” says Min- suffered the most serious disinformation The altered video, posted online in ister without Portfolio Lo Ping-cheng. attacks spread from outside its borders. July, was reportedly accompanied by a “And it’s not just a social problem. It’s “We see that countries being affected message saying: “This is the funeral of a a political problem and even a national the most about foreign governments’ fallen officer. If you did not want to be security problem.” dissemination of false information but there, you did not have to go. Why did At the same time, it’s an issue that doing the least in their own countries

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are Latvia and Taiwan,” notes a Digital been responding to the perceived New laws on the books Society Project working paper. threat with a raft of legislative amend- Ahead of the coming presiden- ments. Five of over ten amendments to The five amendments passed by the tial and legislative elections in January existing bills proposed to counter disin- legislature mainly involve increased 2020, the flood of disinformation on formation have already been passed by fines for spreading disinformation. It social and traditional media is expected the Legislative Yuan. is left to government agencies and the to increase. Already more than 100 Yu notes that the legislation includes courts to determine if a report is disin- people have been prosecuted since last a strict legal definition of “disinfor- formation. December for creating fake news under mation.” It has to meet the three One of the five new laws is an the Social Order Maintenance Act. conditions of being fake, motivated amendment to the Disaster Prevention Some experts say links to China by malice, and harmful to individuals, and Protection Act stipulating that dis- are difficult to prove. For example, organizations, or social order. seminating false news about a disaster the IP addresses of the disseminators NCCU’s Liu stresses that malice is that causes grievous harm to others is may come from other countries. Some the most difficult element to prove. “It punishable by up to 10 years’ impris- academics also question the degree goes to a person’s or organization’s onment. Similarly, amendments to the to which disinformation, even if it is mindset. There’s no magic way to do Communicable Disease Control Act flowing freely, influences Taiwanese that.” specify penalties of up to NT$1 mil- elections. Lan Chang, Google Taiwan’s head of lion for false media reports having “We jump to the conclusion that communications, adds that perceptions a serious impact on disease preven- these factors heavily influence election of disinformation can be very subjec- tion. Various amendments to the Food results, but the causation has not been tive. For example, one YouTube viewer Administration Act and the Act Gov- established,” says Liu Ting-chi, an asso- might see a video of President Tsai erning Food Safety and Sanitation call ciate professor at the College of Law of Ing-wen saying outrageous things and for prison sentences of up to three years National Chengchi University (NCCU). regard it as satire, while another viewer for spreading rumors about food safety Nevertheless, the government has might take it literally. that harm the public interest or cause

A demonstration against fake news, especially efforts by media sympathetic to China to influence local politics, attracted thousands of pro- testers in Taipei. PHOTO: MARTTI CHEN

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damage to other persons. Government intervention in the pro- standard. Fake news about agricultural prices cess could lead to a “chilling effect” on But social media companies became have been an area of particular con- media organization’s ability to carry out concerned late last year when offi- troversy in Taiwan recently. Newly their journalistic duties. cials from the Executive Yuan indicated enacted amendments to the Agricul- The chilling effect could even that the draft bill might include an addi- tural Products Market Transaction Act extend to deterring the publica- tional requirement calling for digital raise fines up to NT$300,000 for delib- tion of truthful information. “If communications platforms or social erately spreading disinformation that strict fact-checking is enforced by the media to review user reports of disinfor- affect market prices and hurt the public government, a journalist who cannot mation and remove such items without or consumers. independently corroborate information the need for judicial approval. Legislator Yu notes that as farmers from a credible source would prob- Anita Chen, Google Taiwan’s head are an important support base for the ably dump the news,” Liu says, noting of government affairs and public ruling DPP, she suspects that “con- that this factor would particularly affect policy, says this additional require- tent farms” in China have been created breaking news. ment, if enacted, would violate Google’s to try to influence elections by demor- In fact, Liu notes, government policy of being a neutral platform. The alizing farmers through stories that enforcement of fact checking would existing practice is that information claim fruit or vegetable prices have create more problems rather than solve appearing in Google’s products across plummeted. In one example of how dis- them. In ordinary libel cases, the plain- the globe is taken off the internet only information about food prices causes tiff bears the often-expensive cost of in response to a court order or if it vio- chaos, a photograph showing a truck bringing suit and may decide against lates the company’s own guidelines. dumping bananas by a roadside in proceeding. “But if the government In an example of the latter, YouTube Kaohsiung went viral as rumors swirled is involved, it has the power and the Community Guidelines prohibit certain that prices had plummeted to NT$1 per resources, so the chilling effect is even categories of material, including sexu- kilogram, the Taipei Times reported. stronger.” ally explicit content, spam, hate speech, In another much-cited case, TV sta- Ed Huang Ming-hui, associate and incitement to violence. Videos with tion CtiTV, which tends to be friendly professor of law at National Taipei these characteristics are pulled off the toward China, in April was fined NT$1 University, agrees with Liu that the internet by the company. Google News million by the National Communica- best way to counter disinformation also does not allow sites or accounts tions Commission under the Satellite is by providing counter-information, that impersonate other persons or orga- Broadcasting Act for failing to verify rather than legally restricting its circu- nizations or misrepresent themselves. information given by a pomelo farmer lation. In the case of the fake video of “For a government to ask us to during a political talk show before Premier Su throwing the pen, the Exec- remove something without a court airing it. The farmer had claimed – utive Yuan clarified that it was fake order or violating our (own) policies is falsely as it later turned out – that news “and within one day it was not not something that industry views as pomelo prices had plunged so low that an issue,” Liu says. appropriate,” she says. 2 million tons had to be dumped into “The government always has In December last year, the Asia the Zengwen Reservoir. channels to make correct informa- Internet Coalition, which represents Critics said CtiTV was intending tion known,” Liu says. In addition, global internet technology compa- to hurt the DPP ahead of legislative Taiwan has a diverse media land- nies doing business in the Asia-Pacific by-elections on March 16. But some scape that allows for a broad range region, including Amazon, Twitter and academics, such as NCCU’s Liu, crit- of opinions that can counter disinfor- Apple, wrote then-Premier William Lai icized the NCC’s response as being mation. Some major newspapers and complaining about this aspect of the bill excessive and setting a bad example TV stations oppose closer relations and the lack of dialogue with industry for handling press-freedom issues in with China, while others support that over the issue. The group demanded Taiwan. policy direction. that the bill be withdrawn. Liu argues that while allowing the “The AIC is aware that other coun- farmer to vent his frustrations without Need for judicial approval tries, such as Germany, have drawn up checking the facts amounts to highly laws to combat hate speech. However, sloppy journalism, he couldn’t see the Among the handful of proposed without first having a substantial period presence of any malice. The Satellite amendments still undergoing discussion of stakeholder dialogue, modeling Tai- Broadcasting Act only contains a fact- in the Legislative Yuan, one of the most wanese laws imprecisely on foreign checking requirement. controversial is the draft Digital Com- statutes risk far-reaching consequences “It’s a problem because although munications Act. The draft adheres to on the freedom of speech and human fact-checking is an essential requirement the Manila Principles on Intermediary rights of the people of Taiwan,” the for decent news organizations, whether Liability, a set of guidelines on censor- letter said. it should be enforced by government ship and takedown laws established by Minister Lo has given assurances agencies with harsh administrative pen- an international consortium of NGOs that the current draft of the bill does alties is another question,” Liu says. in 2015 and widely accepted as a global not include this requirement and

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adheres to the Manila Principle in Inter- mediary Liability. But he adds that no one knows what form the bill will ulti- mately take when passed, as some legislators believe the current version does not go far enough. In addition, proposed amend- ments to the Civil Servants Election and Recall Act and the Presiden- tial and Vice Presidential Election and Recall Act, which have both undergone a first reading, have also drawn crit- icism from academics and provoked disagreements between the Executive and Judicial Yuans. The draft amendments permit electoral candidates to apply to the judi- ciary to have election advertisements in the media containing false information about them to be removed from circu- lation or face up to NT$2 million in fines. The court has three days to make a decision. “The Judicial Yuan is con- cerned that it doesn’t have the time and capacity to look into false information President Tsai's inspection tour of typhoon damage in the south became the subject of dis- and verify facts,” Professor Liu says. information. “Whether three days’ time is reasonable PHOTO: OFFICE OF THE PRESIDENT, R.O.C is a question.” Regardless of their various opinions, the problem of disinformation, Yu a third-party fact-checking program in all those interviewed for this report reports, while these companies have Taiwan in partnership with the Taiwan agree that improving the public’s media started to extend their global policies FactCheck Center, an NGO certified literacy rather than imposing legal con- for managing disinformation to Taiwan. by the non-partisan International Fact- straints is the best way to counter Facebook, LINE, and Google this year Checking Network. disinformation. Lo notes that media lit- all began collaborating with local fact- Facebook identifies and takes eracy guidelines will be inserted into checking organizations. action against false news through the 12-year education program for the From the government’s perspec- a combination of technology and school year starting this September. tive, the most fruitful outcome was in human review, including feedback There are also plans to incorporate early June when the Executive Yuan from Facebook users, Chen says. “If media literacy courses into higher edu- teamed up with LINE, one of the most the fact-checkers rate a piece of con- cation and teacher training. popular social media companies in tent as false, it will be shown lower on “We need to teach our citizens Taiwan, to set up a rumor-busting page the News Feed – reducing future views how to distinguish true information on LINE Today, the app’s main news by 80%,” Chen says. from false,” says Legislator Yu. feed. LINE has given the government For its part, Google began working Another positive development is a free access to the LINE Today interface with NGO MyGoPen in January and number of non-profit, fact-checking to publish rebuttals to fake news on Taiwan FactCheck Center in February, organizations have been established the page. instituting a system where Taiwanese in Taiwan. One is Fakenews, based in Max Chen, Facebook’s public news items that have been fact-checked Taichung’s Fengyuan District, which policy manager, stressed in an email to are identified online. teaches elderly people media lit- TOPICS that globally Facebook con- Google has also undertaken var- eracy with a philosophy that it’s best tinuously updates and builds technical ious other initiatives. For example, in accomplished through face-to-face rela- systems to make it easier to respond to early June Google Taiwan held a three- tionships, rather than talking about reports of abuse, as well as to detect day, in-depth training course on fact abstractions. It uses such approaches and remove spam and eliminate fake checking and online verification in part- as guessing games conducted during accounts. “In Q1 of this year, we nership with the Taiwan FactCheck mountain climbing. removed 2.2 billion fake accounts glob- Center, where around 30 journalists and In addition, the Taiwanese govern- ally, 98.5% before anyone reported fact-checkers were trained by local and ment has begun communicating with them to Facebook,” he says. international experts from nations such global social media companies about In June this year, Facebook launched as Germany.

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MEET JOANNA YAO OF BAXTER

Joanna Yao has been responsible for the Taiwan market for Baxter Healthcare since 2015 and is a co-chair of AmCham Taipei’s Medical Devices Committee. In June 2018, Baxter appointed her as Cluster VP, Southeast Asia, in addition to her role as General Manager for Taiwan. Below is an edited and condensed interview with her con- ducted for TOPICS by Anna Yang.

What got you interested in a career the healthcare industry.” Interestingly, One’s major doesn’t matter very of business? At what point in your life when I was in middle school my parents much. What you really get the most did you make that decision? kept suggesting that I become a doctor, benefit from is the community of stu- After graduating from college, I but I wasn’t so passionate about dealing dents and teachers. I feel very blessed went into management consulting [with with the patient that directly. Get- because I chose my major quite ran- McKinsey & Co.]. The “official” reason ting into the healthcare industry is still domly, but I chose my school very is that I wanted to learn and get more saving lives but in a more indirect way. carefully. I chose Fudan University, exposure, but another reason was that I one of the best in China, and I feel the didn’t know exactly what I would really What is the most rewarding part of school provided the training and experi- be interested in. Getting into manage- your work? ence I was looking for. ment consulting for two years was a I find it satisfying to lead a team to It’s good to have an MBA, but it’s way to delay my decision. achieve business milestones, but the not necessary. I was in my third year The good thing about that time is really most rewarding part is seeing at McKinsey and they offered me the that it gave me a chance to observe a lot people grow. I move around a lot, and I opportunity for promotion without of senior managers. I was very young, a just received a message from a woman going to the MBA program. But it was fresh graduate, but I was already having who was in one of my very first teams my personal choice, for the sake of meetings with CFO- and CEO-level in Baxter, my China bioscience team. my personal advancement. Going to people. I was always impressed with She just decided to move to another job, Columbia in New York was my first them. They could get to the key point and she said “I really appreciate the time time really getting into Western culture. really quickly, they asked sharp ques- you interviewed me over 10 years ago.” Life is about exposure, experience. The tions, they could make decisions, and When you see how you’ve impacted MBA program really gave me the expe- you could see the real impact of those people’s development, that gives me the rience I wanted. Looking back, those decisions. These were the type of people greatest sense of achievement. two years definitely helped shape where I aspired to be. I am and who I am right now. Somehow, half of my projects were How did your education (B.S. in healthcare-related, which really gave Management Information Systems Did you have a mentor as a student me the exposure to what this industry from Fudan University, MBA from or young professional who had a big is about. Eventually I thought, “Hey, Columbia) help prepare you for your influence on you? I want to do management, maybe in career? Quite a few. At different stages of

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8 oanna.indd 7 2019/8/10 午12:17 TAIWAN BUSINESS

life, you have different types of people who have a great influence on you. Even very early on in primary school, my teacher chose me as the head of the class. I wasn’t sure I could do it, but the teacher gave me a lot of confidence. It’s honestly just very good luck when you get some good teachers that can see what you don’t see in yourself. I had a lot of teachers who pushed me to try something new, not just staying where I felt comfortable. I’ve worked at Baxter for 14 years, and all my managers have been really great supervisors who cared about me as an individual and gave me a lot of you have to trust your team. I’m always else in APEC, ours is always the lowest, good advice. One of the best pieces of amazed by the high quality they can which puts a lot of pressure on industry. advice I ever received was that as you deliver. progress with your career, be as clear as If you had one piece of advice for possible about the direction you want What have you found to be the most young professionals in your industry, to go in. significant characteristics of the busi- what would it be? ness environment in Taiwan? What are When you’re young, be courageous. What do you consider to be your the main ways in which it differs from Try to expose yourself to more different main strengths as a manager? Any other markets? experiences. The more effort you put in weaknesses you plan to work on? Do Taiwan is a very unique place, espe- at the beginning, the more options you you have a certain philosophy of man- cially talking about healthcare and will have later. You won’t be limited by agement that you follow? medical devices. And it has its pros and what other people choose for you, but I care about people. My biggest cons. instead can be more proactive about sense of achievement is from seeing peo- On the one hand, as a citizen in this your choices. ple’s development, so what I focus on is society, you have to appreciate what the This is a great industry because you how I can help the team be successful. Taiwan government has set up for the can really make a difference. At Baxter, I don’t mind giving them construc- whole population. The National Health for example, our mission has never tive feedback. I’m a very direct person. Insurance scheme in Taiwan is probably changed for the past 88 years. It’s very I will share with you when you do among the top three within the whole simple: save and sustain lives. We repeat good things, and for the sake of your world. The government believes that it every day. No matter what job you development I will tell you what you taking care of the health and wellbeing have – finance, HR, sales, marketing, potentially could do differently. of its citizens is one of its most impor- communication, IT – you’re helping In terms of weaknesses, I’m still in tant responsibilities. patients, helping their families. That’s the process of learning how to adapt Also, the Taiwanese government something that’s very special. to different cultures. How do I main- is willing to look at new therapies tain the local country culture but also and new technologies, and is sin- How do you like to spend your lei- the broader Baxter culture? I try to get cerely trying to bring the best of them sure time? What do you find is the best 360-degree feedback, and one of the to Taiwan. But it’s a constant struggle way to get “recharged?” comments I often receive is: “Joanna, in that the budget is always limited. I love to travel. I like to meet dif- you talk so fast, and you ask for every- Taiwan only spends about 6.6% of ferent kinds of people and see different thing so urgently!” They say, “Joanna, GDP on healthcare, but it wants to kinds of scenery. Seeing something in a sometimes you can be very intimidating provide the best, so there are only two photo or even in a V/R is different from – it feels like we can’t meet your expec- ways to achieve this. One is to cut the experiencing it personally. I also do a tations.” service fee, so hospitals and doctors lot of exercise. I used to do yoga. Now So then I reflect that I should listen get less. The other is to cut the price of that I’m becoming a little bit older, I more, be more open, and adopt a pace medical devices and drugs. think I need to do a bit more cardio that the whole team feels like they can The normal citizen is satisfied with as well. Exercise is important, and I move towards. This can be my pace, the NHI program, but if you survey the believe in the science of it. it can be my culture, but being adap- doctors, their satisfaction rate is low. Recharging yourself after you tive will be beneficial over the longer And if you survey the industry players, exhaust yourself physically, you get term. As a manager you should avoid everyone will say the same. If you look a sense of achievement. And because being a control freak. You should be on at the pricing of the same therapy we I love food, I can eat after exercise top of the most important things, but sell here versus how it’s sold everywhere without feeling guilty.

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8 oanna.indd 8 2019/8/10 午12:17 INDUSTRY F CUS

A Report on the Retail Sector

New Trends in Outlets and Convenience Stores

PHOTO: JULES QUARTLY TAIWAN BUSINESS TOPICS • AUGUST 2019 39

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OUTLETS GOING FOR GOLD IN EXPANDING RETAIL ENVIRONMENT

As retail sales spike upward, new-style outlets and malls cater to millennial shoppers who want entertainment and Instagram-friendly backdrops more than bargain-basement prices.

BY JULES QUARTLY IN THIS REPORT

t’s a golden age for outlets and first outlet-style operation in Taiwan, malls in Taiwan, with a number the open-air shopping center with its I of brassy mega projects com- low-density stores and entertainment pleted and more developments on the options began the third phase of its horizon. Despite the rapid growth of operations in May, after first opening online retailing, people still want to in 2015. browse real stores in real time, prefer- Another 60 international brands ring to make shopping more of a fun that are exclusive in Taiwan to Gloria activity than just a necessity. Outlets – such as Burberry, Wedge- Millennial attitudes that prioritize wood, and Bottega Veneta – have • Outlets Going for Gold in Expanding Retail engagement and a pleasant expe- started trading. At the end of the year, Environment p40 rience over a discounted purchase a massive aquarium built by Japan’s price give outlets and malls an edge Hakkeijima Sea Paradise in Yoko- in the fierce competition for dispos- hama is set to make a splash. able income. Family outings, tourism, Gloria Outlets doesn’t serve just and leisure spending are driving the the nearby communities. It also growth of ever larger shopping enter- attracts shoppers from Taipei, about • A Country of Convenience p43 tainment centers. 50 minutes away by car or 35 min- In comparison, according to most utes by express on the MRT Taoyuan experts, traditional department and Airport Line. Furthermore, tourists discount stores are feeling the pinch are being wooed with suggestions for and will need to adapt or die. They a stop at the mall before heading to face a multitude of threats, ranging the airport. from the inexorable rise of online After the instant impact of Mitsui shopping to changing consumer Outlet Park in New Taipei’s Linkou behaviors and the greater appeal of when it opened in 2015, the phased other options. opening of Mitsui Outlet Park Taic- Gloria Outlets near the High hung at the very end of last year has Speed Rail station in Taoyuan, for transformed the city’s port area. The example, is part of the city govern- 44-acre site boasts 170 stores and res- ment’s hugely ambitious Aerotropolis taurants, in addition to a full range of development, based around the inter- leisure facilities and a 60-meter-high national airport. Often cited as the Ferris wheel that faces the ocean.

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8 F.indd 40 2019/8/10 午12:4 A Report on the Retail Sector

Building on this success, Mitsui broke by the Directorate General of Budget, this year. ground in May on a new development, Accounting and Statistics, outpacing CBRE Taiwan, part of the world’s tentatively called the Mitsui Shopping all three of Asia’s other “tigers” (Hong largest commercial real estate services Park Lalaport, in Taipei’s Nangang dis- Kong, Singapore, and South Korea) for company, recorded a sales increase for trict. A brand emphasizing lifestyle, the first time in a decade. Taipei’s retail market of 3.7% year-on- Lalaport is set to be the capital city’s At the same time, consumer con- year in the first two months of the second largest outlet. Scheduled to open in 2021, fidence has been strengthening as quarter of the year, for a combined sales the complex will house 250 stores, a Taiwanese increase their consump- value of NT$629 billion (US$20 billion). five-star hotel, conference facilities, and tion based on last year’s 3% pay rise for Ping Lee, head of research at CBRE extensive recreational and residential public-sector employees and a hike to Taiwan, has been following the evolu- areas. The company is drawing up plans the minimum wage, which went up from tion of retail in Taiwan for many years for another Lalaport in Taichung, and is NT$22,000 to NT$23,100 at the begin- and agrees that consumers have never considering outlets in Tainan and possibly ning of this year. Meanwhile, a Yes123 had it so good. “Yes, this does seem to Kaohsiung. job bank survey suggests that nearly be a golden age,” she says. “You can While Gloria Outlets and Mitsui 54% of companies will be giving their see it in the retail growth figures, which are the major players in the market, a employees an average raise of 3.5% in are showing a healthy 5% year-on-year number of supersized retail developments the second half of this year. increase, due to the grand openings of a – such as the upmarket, Japanese-inspired All of these factors are naturally number of outlet malls and major shop- Breeze Nanshan in Taipei’s Xinyi district having a positive effect on retail sales, ping malls.” – are adopting the combined mall and particularly in the food and beverage Lee notes that these new developments outlet concept. sector, which is what the malls and outlet are particularly attractive to families with Other large projects include the stores are prioritizing because it’s a guar- children. Lihpao Outlet in Taichung, which lever- anteed earner. Annual growth in F&B Compared to department stores, “the ages the attractions of Lihpao Discovery sales hit 5.43% in 2018 and has stayed outlets and new, larger malls are incor- Land and the Malay Bay Water Park; the on track with a figure of 4.93% for the porating entertainment elements” (like Taroko Park shopping center and amuse- first half of this year. cinemas and children’s play areas),” she ment park in Kaohsiung, currently the In terms of total retail sales – which explains. “And no matter whether it’s country’s biggest retail park; and E-Da include motor vehicles, household appli- a shopping mall or department store, Outlet Mall, also in Kaohsiung, which ances, pharmaceuticals and internet they are all trying to increase F&B sales. advertises itself as the first “direct-sell transactions – Ministry of Economic Taiwan people are very willing to spend outlet in Taiwan” for boutique brands. It Affairs data shows a 2.21% growth on food.” also has an outdoor market, theme park, rate for 2018, a considerable improve- Her analysis matches a Euromon- gym, and Ferris wheel. ment over 2017’s anemic 0.88%. As for itor market research report from January, As for the big picture, the economy retail sales at department stores, malls, which characterizes the Taiwan market seems to be picking up after a decade and outlets, which the Ministry’s figures as a “competitive landscape” that has in the doldrums. The economic growth bundle together, the growth rate came to squeezed the traditional department rate for the second quarter accelerated to 1.64% for 2018, but then spurted to a store. “Department stores represent a 2.41% according to the advance estimate rather robust 5.15% for the first half of declining format in Taiwan,” Euromon-

New mega malls and outlets are opening more shopping, dining, and entertainment opportunities for Taiwanese consumers. PHOTO: JULES QUARTLY

TAIWAN BUSINESS TOPICS • AUGUST 2019 41

8 F.indd 41 2019/8/10 午12:4 INDUSTRY F CUS itor concluded. It said the sector has to, as the market is still growing. Second, other tech features will continue to make “faced an ongoing multitude of threats they don’t want to negatively affect their shopping a richer and more immersive and challenges ranging from changing brand. Third, they earn more selling experience. consumer behavior, the economy and the through flagship stores in Taipei or the If department stores are to catch up appeal of other options.” duty-free stores at the airport, Taipei 101, with outlets, they also need to ques- Euromonitor believes department or the Ever Rich Duty Free Neihu Store. tion the old format of location (typically stores need to address a failing strategy “A few years ago, I spoke to local and in the city center), variety of goods, and and rebuild their brands to generate new foreign operators of luxury brands, but in sale offers to attract customers. Instead, interest among consumers, especially the reality, those brands are reluctant to open they need to look at how consumers actu- well-heeled. “Department stores are also stores-in-stores in Asia,” Lee says. “For ally make their shopping decisions. For threatened by other successful competing instance, if Chanel opened at an outlet, instance, the 2018 Omni-Channel Retail channels that generally offer greater there would be an immediate effect on Report shows that while nearly 25% of choice. Those wealthy enough to be able the performance of its store in Taipei City Baby Boomers shop on Facebook, only to shop regularly at department stores and at the duty-free. It’s also different 11.8% of Gen-Z does. Snapchat and Ins- now have a greater choice of options.” here in that there aren’t off-season prod- tagram are the choice of Millennials. It needs to be pointed out that out- ucts, as such, to sell in outlets. That said, As opposed to department stores, out- lets in Taiwan are conceptually different in time, when the market matures a bit, lets are typically located away from city from those in the United States and then maybe the outlet business” here will center locations. Instead of bundling Europe, both in terms of architecture and come to resemble its counterpart in the brands together, they encourage differ- depth of discounts. “Maybe because the West more closely. entiation and rely on individual retailers available land in Taiwan is quite small, and branded stores to be proactive in companies like Mitsui build vertical Constant change attracting customers. Stores within the outlet malls, compared with outlets in the outlet manage their own shop floors, pro- United States or Europe, which are usu- Asked to predict what the future holds motions, the look of the store, and staff ally single-story buildings spread out over for retail over the next three years, Lee training, rather than being micromanaged large parcels of land,” says Lee. says that outlets, malls, and department and controlled by general rules and regu- According to Ichiro Shimomachi, man- stores will all continue to increase the lations as with department stores. aging director of Mitsui Fudosan Taiwan, space allocated to F&B. The current ratio Instead of fighting on price, out- the Taiwan concept of a mall is a “canni- averages 20-30% but it “could eventu- lets compete by providing attractions balization” of the Western idea, with less ally rise to 40-50%, and in fact some of and experiences. Since they are mostly of an emphasis on discounted items, but the new shopping mall are already up to located in suburban areas, they tend to a big focus on attracting families and pro- 40-45%,” she notes. “F&B sales are very be open-air and scenic, with comfortable viding entertainment, plus varied food stable compared with retail.” public spaces, in contrast to cramped and beverage options. Essentially, he says, “Also, department stores may consider department stores. outlets are an upgrade on the department allocating or sacrificing space to trans- As for retailers, they are keen to work store concept, as they are larger, cleaner, form sales areas into public areas that are with outlets because their rent is usu- more activity based, and a destination friendlier to family shoppers. This kind ally linked to sales performance. If sales rather than just a place to shop. of public space makes people feel more are going well, the retailer won’t mind Certainly, many customers are aware relaxed and as a result they are likely to passing on the extra profit. But in hard of the difference between Western and stay all day, increasing pedestrian traffic.” times or during seasonal lows, paying less Taiwan outlets. For instance, “See- Addressing the steady increase in rent is obviously a big bonus. whom,” who is from Taipei, reviewed online sales, Lee says she expects retailers The opposite is the case in traditional local outlets on Trip Advisor, com- to invest more money on online-to- shopping areas like the East District menting: “There are not many discounts; offline (O2O), social media, and tech. along Zhongxiao East Road, where the strictly speaking, it can only be regarded For instance, consumers may be encour- same rent is due whatever the market as a large shopping center.” aged to order online and then pick up the condition, which is partly why the area Also on Trip Advisor, “Get- merchandise at the outlet while meeting has been declining. away810753” said: “The first impression up with friends for lunch and a movie, For retailers, malls and outlets cur- of Taichung Mitsui Outlet is that the or looking for products online but trying rently are the best bet because they are parking lot is big, and the second impres- them out at the mall. attractive to local shoppers and help sion is that it’s really windy. The store is Outlets are “Insta-friendly” too, with bring in traffic to make sales through all mainly based on catering. There is not plenty of areas for customers to take col- the entertainment and F&B options they much to buy and the discount is not very orful photos to upload on social media. provide. This positive cycle is expected to much. Strolling and eating is not the For Taiwanese consumers with a strong continue for the foreseeable future. Mit- same as a desire to shop.” attachment to social media, this connec- sui’s Shimomachi predicts the Taiwan Luxury brands here are less likely to tion has great appeal. Meanwhile, virtual market will only become saturated after provide steep discounts on goods for a reality, augmented reality, proximity mar- 10 outlets are in operation, approxi- number of reasons. First, they don’t have keting solutions, omni-channel retail, and mately double the current number.

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A COUNTRY OF CONVENIENCE

Increases to the minimum wage, lower birth rates, and an aging population are leading to higher costs and labor shortages for retailers. Will automation save the day?

BY JULES QUARTLY

here’s a rather whimsical image of Taiwan floating around online. T Entitled “Actual View of an Average Taiwanese Street,” it shows a few cartoon figures walking around a landscape filled with 7-Elevens and an OK store. “Daedross,” the 23-year-old Belgian who posted the picture on social media site Reddit, said that having lived here as a student, this scene was his abiding impression. He has a point. Taiwan truly is, as he calls it, “a country of conve- nience.” Taiwan has the world’s second highest number of convenience stores per person, after South Korea, according to the Min- istry of Economic Affairs’ statistics 7-Eleven is experimenting with fully automated shops known as X Stores. department. It is even ahead of Japan, PHOTO: JULES QUARTLY whose retail giant Seven & I Holdings Co. is the parent company of 7-Elevens such as PX Mart’s iMart and 24-hour There have even been stories in the around the world. Carrefour Markets. local media that employers in Japan like Figures from the Ministry of Economic Even more significantly, Taiwan, like 7-Eleven and FamilyMart are offering Affairs show that Taiwan has more than Japan, is facing a manpower crunch due employment to Taiwanese jobseekers, 11,100 convenience stores, which repre- to low birthrates and an aging popula- especially if they speak Japanese or have sents a ratio of one store for every 2,125 tion. This trend is having an effect on experience working at a convenience people. Combined convenience store sales staffing at convenience stores, which are store. The television channel SET News for 2017 reached a record NT$320 bil- dealing with labor shortages by closing reported that partly as a result of this lion (US$10.3 billion) and were expected some outlets during the late night, early demographic shift in Japan, the number to be even higher for 2018. morning hours, abandoning the culture of of Taiwanese moving there has dou- Yet despite this rosy picture of a cul- operating 24/7, 365 days a year. bled over the past five years to more than ture of convenience, the future for this After an association of franchise 10,000 people per year. sector of the retail market is unclear. owners appealed for a relaxation of rules The difficulty of staffing conve- Rents are rising, and annual growth in that stipulated all day and night opening, nience stores in Taiwan is compounded the number of stores has slowed to single Seven & I Holdings decided in March to by increases in the minimum wage over digits. Furthermore, supermarkets are set new business hours on a trial basis, the past three years that average out at trying to take a slice of the action with a allowing time to close the store to clean 5% per annum. The lowest legal monthly “hyperlocal” strategy of smaller stores, and restock. wage currently stands at NT$23,100,

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8 F.indd 4 2019/8/10 午12:4 INDUSTRY F CUS representing a hike over the previous year RETAIL SALES from NT$140 to NT$150 per hour. 16 In 2017, amendments to the Labor 14 Standards Law (LSA) mandated a five- 12 day workweek and required employers to 10 pay overtime if additional work is agreed 8 to. At around the same time, a pilot 6 scheme of mandatory health checks was 4 implemented for Taiwan’s approximately 2 1.6 million nightshift workers, further 0

increasing pressure on convenience stores An n u a l Gr o w t h i n Sa l e s ( % ) -2 not to stay open around the clock. -4 Meanwhile, the unemployment rate 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ( H1) in Taiwan has leveled off, standing at To t a l Re n t a l Sa l e s De p t . St o r e s & Sh o p p i n g M a l l s F&B SO RCE: M STR OF ECO OM C AFFA RS 3.74% in June. It is expected to remain at about this level for the near future. The result is few if any extra workers avail- entry to the store, with “Face pay” and ilyMart Co., which had 3,394 stores able to man the tills, especially since “Face go” mechanisms for payment and island-wide. It has chosen to take a dif- the job of convenience store clerk is no checkout. ferent route forward by introducing longer seen as a desirable or stable occu- Among the innovations at the X-Store digital technologies that reduce the work- pation by most young people. are smart voice interactivity, Internet of load or assist service staff, rather than In March, the situation came to a Things (IoT) systems, microwave ovens replacing them completely. head when the operator of 7-Eleven in with scanners, and robot greeters and It rolled out a cashless “My Famipay” Taiwan, President Chain Store Corp., cleaners. Like any race, however, starting app service in March. The electronic pay- announced that 400 of its 5,459 stores first is no guarantee of winning. The ment scheme works with credit cards and would no longer be operating 24 hours actual experience of shopping in the allows users to make purchases by scan- a day. After explaining that franchisers X-Store is more of a novelty than a solu- ning the product and using the smart could apply to reduce hours and thereby tion. Certainly on the occasion when this phone app. Customers can also scan QR save costs, General Manager Huang Jui- writer visited, the “no line, no checkout” codes for prices and additional informa- tien admitted in a Storm Media interview concept to buy a few groceries was more tion about a product rather than look for that, “Quite honestly, some stores haven’t like a “wait-in-line-for-assistance-because- the price label. been that successful because they are the-tech-isn’t-ready-yet” experience. Aside from using smart technology, always open.” Over the course of an hour on a FamilyMart is attempting to diversify its Another factor in the mix is the busy weekday lunchtime, the X-Store on offerings and find new niches in a satu- worldwide trend of automation, with Keelung Road denied access to a number rated market. It has worked with other retail jobs at the highest risk of disap- of people, who got stuck in the doors businesses enable customers to pay bills pearing as robots and automated systems and couldn’t get out. The only couple and send packages; buy fresh foods, take over. The online database Occupa- who did get in took more time to pay frozen seafood and fresh bread. Some tional Information Network (O*NET) for a bottled drink than they would ever stores even provide laundromat services suggests that when the day comes, have done standing in line at a normal in which the client can check an app to retail salespeople will be the first to be 7-Eleven. see if there are unused machines or get an replaced, followed by food preparation An advertisement hyping the speed alert when the laundry cycle is completed. and wait staff, then cashiers and office and convenience of the store featured a Meanwhile, the Taipei-based conve- clerks. In comparison, teachers, nurses, good-looking Caucasian couple, neither nience store chain Hi-Life is banking on sales reps, and software developers are of whom would have been likely to have Taiwan Pay mobile payments to compete more likely to keep their jobs. the Chinese-language skills or local iden- with 7-Eleven and FamilyMart. Hi-Life tity-card number necessary to register for is the third biggest operator in Taiwan’s The X-Store experiment the iCash system. convenience-store space with 1,350 stores Opposite the empty, neon-lit space of and was the first to accept domestic The future seemed to have arrived at the X-Store was a traditional 7-Eleven, mobile payments. It expects non-cash the beginning of last year, when President with hardworking counter staff dealing payments to increase by about 15-25% opened its first unmanned X-Store, at its with hundreds of customers an hour, a year. In addition, it has been exploring headquarters on Dongxing Road in Tai- filling the shelves and handling inquiries. the market for sales through vending pei’s Xinyi district. Another store opened Eighteen months on from the introduc- machines and mini-stores, such as its HiS- nearby on Keelung Road in July the same tion of the automated store, it is clear tore in Taipei City Hall. year. Stocked with more than 900 prod- that a long road lies ahead. OK Mart, the fourth major player in ucts, it is open 24 hours a day. Facial The number-two convenience store the local market, with 902 stores across recognition technology enables “Face in” operator in the country is Taiwan Fam- the country, is also big on mini-stores and

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smart vending machines at its OKmini smart vending machine company Ten- crime because of CCTV surveillance, a outlets, such as the one by its office on Life Corp., Chen Lai-juh, predicted that high-density population, and labor short- Songde Road in Taipei’s Xinyi district. Taiwan would follow the way of Japan, ages, vending machines have come of The company expects to have installed which now has one machine for every 23 age. In addition, large touch screens are vending machines in 1,000 locations by people. The 5 million vending machines making it easier for consumers to receive the end of the year, with the stated aim of bring in total annual sales of more than loyalty points or coupons. The increased achieving maximum results with the least US$60 billion and sell everything from man-machine interactions make it pos- effort and cost. live crabs to sake, porn, and umbrellas. sible for more data to be collected and This business plan dovetails neatly According to Chen, Taiwan’s pre- used to target sales. with a statement last year from Taipei vious focus on unmanned stores, led by The Ministry of National Defense City Government Deputy Secretary- 7-Eleven, has been superseded by the rise clearly thinks the technology is mature General Chen Chih-ming, who said the of the vending machine, which eliminates enough, as it has been working with OK rollout of vending machines to public the need for a sales clerk. “Introducing Mart to install vending machines at army institutions such as schools, hospitals, unmanned technologies is not wrong, bases to sell 200 different kinds of goods, and government offices would intensify but it is too early and too expensive,” he from dried noodles to shaving kits. The over the coming years. said in the interview. “You need to spend payments are cashless and there is a spe- Vending machines are relatively cheap only US$10,000 (NT$311,000) on a cial emphasis on mobile phone payments, to install and maintain. Also, they are smart vending machine that can act as a which the government is promoting now smart enough to provide decent ser- miniature version of the O2O (online to heavily, aiming for 90% penetration vice, especially if there is a choice of offline) business model.” among the general population by 2025. cashless payments. Inventory can be con- Another factor in the equation is how Smart vending machines, according to trolled remotely through IoT so that sales advanced vending machines are now experts like Li Shyh-jane, deputy director data can be easily analyzed. compared with, say, 13 years ago, when of the government-funded Commerce X-Stores, in comparison, still don’t OK Mart worked with the Ministry Development Research Institute (CDRI), seem quite ready in terms of the neces- of Economic Affairs to set up vending are a kind of stopgap between retail now sary technology. It therefore wasn’t too machines at “Smart Unmanned Q-Shops” and the automated future. When vending much of a surprise when 7-Eleven did on Taipei’s Civic Boulevard and Neihu machines become genuinely smart, they an about turn in March and put a tem- district’s Ruiguang Road. This proved will interact conveniently with con- porary halt to plans for a wider network to be an idea ahead of its time, as the sumers, raking in information and of unmanned stores. Like its smaller and sensing technology was immature and crunching the data to create powerful nimbler competitors, 7-Eleven decided to credit card transactions frequently failed. new algorithms. start pushing smart vending machines in The experiment ended after six months. This information can then be used stores and office buildings. It currently TenLife research determined that at to more precisely target customers and plans to install 500 machines by the end least 27% of complaints about vending create uniquely convenient buying expe- of the year. machines were related to coins getting riences. At that point unmanned stores In a recent interview with Com- stuck or the use of fake coins and tokens. become a reality, rather than just the curi- monWealth magazine, the chairman of Now with cashless payments, reduced osity they are today.

Taiwanese consumers can expect to see a lot more vending machines with cashless payment options. PHOTO: JULES QUARTLY

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8 F.indd 4 2019/8/10 午12:4 TAIWAN BUSINESS

THE CHANGING NATURE OF COWORKING IN TAIWAN

Larger established companies are now among the prospective clients, not just startups.

BY JEREMY OLIVIER

n a new trend in the global efit of a large, diverse coworking space “Back then, most Taiwanese people coworking industry, a number of market in Taiwan, such a sea change in weren’t quite sure what coworking was. I major space providers are moving the nature of coworking could present There wasn’t even a Chinese transla- away from the original model of flex- challenges to Taiwan’s smaller operators tion for the word,” says Wu. “So, we ible, communal workplaces mostly in the future. ended up spending a lot of time and geared toward entrepreneurs, remote Taiwan is a relatively new entrant effort the first couple of years educating workers, and startups. The new to the coworking scene. The first Tai- the public and government on what business plan offers comprehensive, cus- wanese coworking spaces began coworking is, and how it’s different tomized workplace solutions that cater opening around 2011. These were from business centers, coffee shops, or to large, multinational operations at mostly smaller venues catering to traditional office space.” much lower costs than renting and out- niche markets like creative enterprises Lack of awareness or understanding fitting traditional office space. and students. That changed in 2012, among government officials was not the In Taiwan, rapid growth in the when Tyler Lin, a software engineer by only issue for coworking operators in coworking field over the past few training, founded CLBC, Taiwan’s first Taiwan. Wu notes that the absence of years, led primarily by locally grown commercially focused coworking space. regulations specifically governing the coworking space operators, has According to Eva Wu of CLBC’s design and safety of coworking spaces attracted the attention of a number of Public Relations Department, at that led to occasional inspections and fines these major industry players, who are time it wasn’t enough just to open for not complying with building codes now targeting the island as they con- a space and start marketing. The meant for traditional office space. It tinue to expand operations across the company essentially had to lay the was a real learning experience for the Asia-Pacific region. groundwork for the market to exist and company, who has since become sought While some acknowledge the ben- expand. to provide guidance to other, newer

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spaces on how to be in compliance. nomadlist.com, a crowdsourced data- for us,” says Kong. “Hence, we saw Despite some initial hiccups, the base of cities popular among digital Taiwan as a potential market for us to efforts of CLBC and other seminal nomads, rates Taipei number 15 out further build our presence across Asia coworking ventures paid off, and the of hundreds of other destinations, Pacific.” market began accelerating in 2015. with individual reviews emphasizing Also moving into Taiwan this year As of now, there are somewhere the city’s friendly people, high internet was the American “community com- between 50 and 60 coworking spaces speeds, safety, and affordability. pany” WeWork, founded in New throughout Taiwan. York City in 2010. Although WeWork The rise in the number of coworking A new direction now has a firmly established pres- spaces on the island likely also corre- ence in China and a number of other lates with central and local government Taiwan’s boom in coworking space Asia-Pacific countries, the company’s policies that have made operations is now expanding beyond the smaller leaders have expressed their excite- easier and more profitable. An example local and regional operators. After ment over the opening of their first is the Tsai Ing-wen administration’s eyeing Taipei for years, major multina- Taiwan locations. Christian Lee, focus in recent years on encouraging tional flexible workspace providers have vice chair of WeWork Asia, empha- the establishment and development of recently begun entering the market. sizes Taiwan’s reputation and growth startups. The growing number of early- Singaporean coworking company potential when explaining the com- stage startups has increased demand JustCo made its Taiwan debut this year pany’s move to the island. “Taiwan for low-cost, low-commitment office with three massive locations opened for is known for its strong high-tech space. A number of Taiwanese spaces business in July. Among them are their capability and information and – including the first government-run flagship location occupying all seven communications technology (ICT) coworking venture, FinTechSpace – floors of the Dian Shih building in Tai- industries. Moreover, Taiwan is a even double as startup incubators and pei’s upscale Xinyi District, as well as a dynamic market that cultivates end- accelerators. whopping 70,000 sq. ft. location in the less creativity and a fertile ground for In addition, many so-called “dig- Hung Tai Financial Plaza. innovative technologies and startups,” ital nomads”– loosely defined as remote In an interview with Taiwan Busi- says Lee. workers and freelancers with no fixed ness TOPICS, Kong Wan Sing, JustCo’s However, for JustCo, WeWork, and location – are choosing Taiwan as a founder and CEO, detailed the compa- other large-scale providers, coworking base for living and working, or at least ny’s recent expansion efforts, funded in is no longer just about providing flex- as a stopover destination. part by a US$177 million investment ible workspace to the original cohort Andy, a software engineer from by GIC, the Singaporean government- of individual professionals, startups, Poland, spends most weekdays working established sovereign wealth fund, and and small and medium enterprises. at the Hive, a Hong Kong-based Fraser Property Limited, an Australian Cary Chang, a manager at JLL Taiwan, coworking space provider that opened diversified property conglomerate. observes that large international com- its first Taiwan location earlier this year, Taiwan is just the latest location panies have increasingly opted for where he maintains a dedicated desk. in that expansion. “JustCo aims to be coworking-style solutions to their office Asked what he likes about working number one in Asia and scale is key space needs, particularly as a cost- remotely in Taiwan, Andy touches on the fact that while it is well-developed and modern, he doesn’t have to break the bank to live comfortably. He’s not alone. The website

CLBC, founded in 2012, was Taiwan's first commercially oriented coworking space. PHOTOS: HSU PAUL JEN

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saving measure. “If a company chooses a traditional office, it will need to pay the fit-out costs, the construction fees, and design fees at the beginning,” notes Chang. Such costs can be staggering, up to NT$80,000 per ping or higher. “Even for a big company, the rent, deposit, and capital expenses required upfront can be very terrifying.” Another factor, Chang says, is that vacancies in Grade A office space in Taipei are diminishing, bad news for the large number of companies looking to move in or move up in what real estate Examples of types of space available from JustCo. Clockwise from top left, a typical suite, services and investment firm CBRE calls meeting room, and “hot desk area.” a “flight to quality.” IMAGES: JUSTCO Coworking setups offer an attrac- tive alternative for companies looking enterprise clients now constitute 40% aiming for two different sets of clients. to further expand their operations, of its total members, and the company The real threat may instead be to pro- an alternative that is now in abun- boasts a roster of tenants that includes viders of serviced offices, since JustCo dant supply. “These large corporates Facebook, BlackRock, and Citi. Mean- and WeWork will be offering a similar are adopting the coworking con- while, JustCo’s Enterprise360 program body of service to similar clients, but cept as they enjoy the cost savings, has attracted General Electric and tax for a cheaper price.” workspace flexibility, community pro- advisory firm Grant Thornton. The CLBC’s Wu concurs. While the large grams, and more,” says JustCo’s Kong. company recently landed its first Tai- chains continue to grow their enterprise “Also, employees will be connected to wanese enterprise client: a multinational client base, “we will continue to focus a community of talented and dynamic pharmaceutical firm with a workforce on providing services to small-scale and individuals where they can harness the of over 400 employees. local clients.” collaborative energy in a co-working Moreover, smaller operators may culture.” Competing visions be able to offer a more individualized This is where the “enterprise solu- level of service and greater flexibility tion,” offered by both JustCo and Given this trend of rapidly to their clients by sheer virtue of their WeWork, comes into play. It aims to expanding coworking chains offering scale. Andy, the Polish software engi- meet increasing demand from large workplace solutions to an ever-growing neer, points out that while he’s had corporates by offering spaces tailored list of large-scale clients, there may more opportunities to network and join specifically to their needs and their appear to be little room for Taiwan’s events at the Hive, the major perk of brands. This may include signage, pri- original and smaller operators to thrive. working at a local coworking space is vate entrances to shared spaces, and After all, such operators do not often the attention to detail. bespoke office design, the costs of which possess the space or resources needed to “If it’s a small space, the owner is are amortized, rather than paid upfront. accommodate larger companies. almost always there, making sure there As a business model, this approach However, JLL’s Chang believes coex- is coffee in the coffee machine and toilet has proven quite effective. WeWork’s istence is possible. “They are basically paper in the bathroom.”

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Official statistics suggest that such notions are not far from the truth. Greater Taipei covers 2,458 square kilo- meters and has a population of seven million. Yilan County’s 2,143 square kilometers are occupied by a mere 459,000 inhabitants. People move here LANYANG MUSEUM to escape the rat race, retire, or give their children a happier childhood. Tourists come to enjoy slow yet civilized lifestyles, a network of leisure farms, Yilan Offers a Slower, and some of the island’s best farm-to- fork dining. The county’s international profile Gentler Taiwan has been boosted by the resound- ing success of a libation named for n the Taiwan of yesteryear, there Efforts at settlement were compli- the area’s original inhabitants. Since it was minimal interaction between cated by the authorities’ ambiguous debuted just over a decade ago, Kava- I places that are now just one hour’s attitude. On the one hand, a growing lan Whisky has won scores of awards drive from each other. Before the 20th Han population needed land on which and is now sold in at least 60 countries. century, the island had few proper to grow food. On the other, officials The distillery is in Yilan’s Yuanshan roads and just one short stretch of rail- recognized that indigenous clans would Township and is open to the public; way. Getting from the island’s north to not take the loss of their ancestral lands admission is free. the south, or from the west to the east, lying down. Yilan County is divided into one often involved boarding a boat. By the first decade of the 19th city (also called Yilan) and 11 town- Taipei and its suburbs are less than century, the Qing Dynasty mandarins ships, the northernmost of which is 35 kilometers northwest of the Lanyang in charge of Taiwan realized that the Toucheng. Those who approach by car Plain, which takes its name from the pioneers were there to stay. Concerned or bus on Highway 2, the coastal route Lanyang River. This impressive body of lest the Lanyang Plain become a from Greater Taipei, will notice that the water irrigates fields of rice, watermel- haven for criminals and fugitives, they narrow strip of flatland that faces the ons, and spring onions as it makes its established a sub-prefectural local Pacific Ocean broadens a little as they way from the Central Mountain Range government. make their way south. to the Pacific Ocean. It was the region’s Until 1875, this corner of the island Hiking enthusiasts can enter the agricultural potential that attracted the was known to speakers of Holo (the northern part of Toucheng Township first wave of Han migrants in the late language spoken by migrants from the via the Caoling Historic Trail. This 18th century. Chinese province of Fujian) as Kat-má- 8.5-kilometer-long path was one of The distance between Taipei and lán, a toponym derived from the name the routes by which the frontiersmen the Lanyang Plain is not great, but of one of the area’s Austronesian tribes, of yore made their way into what is the mountains presented a formida- the Kavalan people. Ever since, it has now Yilan County. The trail meets the ble barrier. Even on the cusp of the been called Yilan. Ask a Taiwanese coastal highway very near Dali Railway 20th century, the uplands’ Austrone- person for their impressions of Yilan, Station, from where local trains can sian indigenous inhabitants did not and they are very likely to use words whisk travelers to Taipei, Yilan City, take kindly to outsiders encroaching on like “unspoiled,” “green,” and “laid and points in between. their territory. back.” Visitors coming by car often stop at

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visitors can rent boards and take lessons from English-speaking instructors. On weekdays, the expanse of black sand is almost deserted. Yilan City, the seat of the Yilan WUSHI HARBOR County government (which maintains a useful multilingual tourist informa- the Beiguan Tidal Park. There are few tion website at https://travel.yilan.tw), better places to appreciate the rugged is a city of manageable dimensions. The contours of the northeastern coast or to population is 96,000, meaning it has all gaze across the ocean to Guishan Island. the necessary amenities with few of the The island, a mere 12 kilometers drawbacks that plague larger munici- offshore, gets its name (which means palities. “turtle mountain”) from its terrapin- Because it was long isolated from like shape. The fisherfolk who lived on the rest of Taiwan, Yilan developed a the island until 1977 were evacuated so particular Holo accent and distinct local a military outpost could be established. customs. One of the latter is Taiwan- Since 2000, when the base was ese opera, a performing art that evolved closed, small groups of ecotourists from traditional Chinese opera (the have been permitted to land on Gui- best-known variety of which, in the shan Island but not stay overnight. For West, is Beijing opera). more information about the island and The Taiwan Theater Museum in other attractions, see the website of the Yilan City is an excellent place to learn

Northeast and Yilan Coast National NATIONAL CENTER FOR TRADITIONAL ARTS about traditional puppetry as well as Scenic Area (www.necoast-nsa.gov.tw). Taiwanese opera. Visitors may be lucky Excursions to Guishan Island, as well Between the harbor and High- enough to catch a rehearsal by a local as dolphin- and whale-watching voyages, way 2 stands a masterpiece by one of amateur troupe, and the collection set out from Wushi Fishing Harbor, a Taiwan’s leading architects. Lanyang of glove and string puppets is sure to short taxi ride from the busiest section of Museum was designed by Kris Yao, beguile. Toucheng and its railway station. who drew inspiration from the tilt of Performances of Chinese opera, nearby rock strata to create a structure acrobatics, and martial arts are also put that looks as if it is emerging from the on at the National Center for Tradi- Earth itself. The museum’s permanent tional Arts in the Dongshan River exhibitions cover every aspect of local Scenic Area. The stores in the complex human history, a good amount of natu- are also a good place to shop for handi- ral history, and also how the fishing crafts as gifts or souvenirs. and logging industries drove regional For all kinds of travel informa- economic development. tion about Taiwan, visit the Tourism None of Taiwan’s most attrac- Bureau’s website (www.taiwan.net.tw), tive beaches are in Yilan County, but or call the 24-hour tourist information Toucheng does boast one of the coun- hotline 0800-011-765 (toll free within BEIGUAN try’s surfing hotspots. At Wai’ao, Taiwan).

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8 T.indd 0 2019/8/1 上午9: ADVERTORIAL

Recent Summit Focuses on Renewable Energy

CSR was a recurring theme at the opening of the Center in 2017, over summit. Industry leaders noted that by 60,000 T-RECs have been issued based collaborating with the government’s on rigorous facility inspections and a green initiatives, domestic and multina- thorough review of documents. As the tional corporations can help Taiwan’s system becomes increasingly digitized, economy grow in a way that is environ- applications for T-RECs are expected to mentally responsible while fully meeting increase rapidly in the coming years. the country’s needs for development. Besides the government speakers, Vice Minister Lin’s speech centered specialists from such private organiza- he importance of renew- around three major goals for the future tions as Google, Apple, and CDP (the able energy development to of energy development in Taiwan: NGO formerly known as the Carbon T Taiwan’s economic future was increasing the supply of renewable Disclosure Project) also shared their spotlighted at the first annual Asia- energy to 20% of Taiwan’s total energy expertise at the Summit. Topics ranged Pacific Renewable Energy Market portfolio by 2025, making sourcing from “Trends in Global Green Energy Summit held July 9 at the Renaissance more convenient through the creation Supply Chains” to “Taiwan’s Renew- Taipei Shilin Hotel. Over 240 partici- of trading platforms and a national able Energy Market Development pants from around the world gathered certification center, and improv- Vision.” to exchange ideas on the future of ing accessibility to renewable energy The Summit brought together partic- renewable energy in Taiwan and the by lowering costs. Both Ministers ipants who have different backgrounds greater Asia-Pacific region. expressed their commitment to inter- and different perspectives, but are The Summit was organized by the national collaboration with renewable united in their shared goal of a creating Taiwan Institute of Economic Research. energy markets around the world. a more sustainable future. The event was the latest in a series of Another important topic discussed “It’s through collaboration that we actions taken by the Taiwan govern- at the Summit was the relatively new can share knowledge, share experiences, ment to affirm its commitment to eco- Taiwan Renewable Energy Certification and accelerate innovation,” said Sam friendly reform. The past several years (T-REC) market. Kimmins, head of RE100, a collabora- have seen the enactment of amendments “A T-REC is a passport for conduct- tion platform for companies committed to the Renewable Energy Development ing international trade,” said Huang to going 100% renewable. “The world Regulations and the Electricity Law, as Chih-Wen, director of the National is certainly changing. We’re building an well as adoption of a national energy Renewable Energy Certification Center, energy system fit for the 21st century.” plan calling for major expansion of since it serves as an “identification Following the resounding success Taiwan’s renewable installations. card” confirming a corporation’s use of the 2019 Summit, the 2020 event is The program featured keynote of sustainable energy sources. Since the scheduled for next spring in Singapore. speeches from Minister without Portfo- lio Kung Ming-Hsin and Vice Minister of Economic Affairs Lin Chuan-Neng, both addressing the increasing demand for renewable energy, especially in the form of solar energy and offshore wind power. “Development of renewable energy is critically important for Taiwan,” said Kung. He welcomed the support for that objective being shown by the business community, citing the trend among international brands in Taiwan to seek greater reliance on green energy as a means of pursuing their Corporate Social Responsibility.

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TAIWAN BUSINESS TOPICS • AUGUST 2019 51

EA artorial.indd 1 2019/8/10 午12:21