Terminating Nuclear Power P.O

2020/1/29 下午10:26 ISSUE SPONSOR 終止核電 February 2020 | Vol. 50 | Issue 2 | Issue 50 Vol. | 2020 February Published by the by Published Commerce Commerce In Taipei American Chamber Of Terminating Terminating NT$150 NT$150 Nuclear Power Nuclear INDUSTRY FOCUS INDUSTRY REAL ESTATE BACKGROUNDER PET INDUSTRY 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 February 2020 | Vol. 50 | Issue 2 中華郵政北台字第 5000 2_2019_Cover.indd 1

CONTENTS NEWS AND VIEWS 6 President’s View The election is over. It’s time for a FEBRUARY 2020 VOLUME 50, NUMBER 2 fresh start. 一○九年二月號 By William Foreman 7 Editorial Publisher Taiwan Deserves Congratulations William Foreman 為台灣民主喝采 Editor-in-Chief Don Shapiro 8 Taiwan Briefs Deputy Editor Jeremy Olivier By Jeremy Olivier Art Director/ / 12 Issues Production Coordinator Katia Chen Reviewing the Recent Legislative Manager, Publications Sales & Marketing Term Caroline Lee 第九屆立法院會期回顧 Translation Kevin Chen, Yichun Chen By Eric P. Moon/Soundline Con- sulting

American Chamber of Commerce in Taipei COVER SECTION 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan Terminating Nuclear Power P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 終止核電 e-mail: [email protected] website: http://www.amcham.com.tw 撰文／法提姆 By TIMOTHY FERRY 050 15 Nuclear Decommissioning 2718-8226 2718-8182 Stuck in Limbo Taiwan Business Topics is a publication of the American Chamber of Commerce in Taipei, ROC. 核電廠除役進退兩難 Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. A dispute between Taipower © Copyright 2020 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission and New Taipei City over to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. interim spent-fuel storage is

complicating the shuttering of nuclear power plants. 10866 5000 18 Searching for a Permanent ISSN 1818-1961 Storage Solution Chair: C.W. Chin 21 End of One Era, Start of there also other energy forms Vice Chairs: Fupei Wang, Timothy Shields Secretary: Seraphim Ma Another that deserve attention? Treasurer: Al Chang Decommissioning will keep 2019-2020 Governors: 24 Financing Offshore Wind Al Chang, Albert Chang, Seraphim Ma, Jan-Hendrik Taiwan’s nuclear sector busy Power Meidinger, Paulus Mok. for decades and potentially Most of the funding for this 2018-2019 Governors: Mark Chen, C.W. Chin, offer global opportunities. Timothy Shields, Gina Tsai, Fupei Wang, Angela Yu. portion of Taiwan’s energy 2020 Supervisors: Mark Horng, Stephen Tan, Terry 22 Taiwan’s Alternative development is coming from Tsao. Energy Options international banks, with much COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Taiwan is making big moves in of it guaranteed by foreign Eric Lin, Angela Yang, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Mandy Huang, Eric Jai, solar and offshore wind, but are export credit agencies. C.P. Liu; Chemical Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Shirley Chen, Abigail Lin; Defense/ Manohar Thyagaraj; Digital Economy/ Max Chen, Renee Chou, Tai Chi Chuan; Energy/ Randy Tsai; Human Resources/ Christine Chen, Carmen BACKGROUNDER 27 Taiwan’s Booming Pet Law, David Tsai; Infrastructure/ Wayne Chin, Paul Lee; Insurance/ KT Lim, Mandy Shih, Linda Tsou; Economy Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Vincent Shih; Marketing & Distribution/ More and more young Taiwanese Wei Hsiang; Medical Devices/ Louis Ko, Jeffrey Wang, Joanne Yao; Pharmaceutical/ Justin Chin, Rie are choosing to own and raise Nakajima, Shuhei Sekiguchi; Public Health/ Joyce pets instead of having children, Lee, Sophia Lee, Tim Shields; Real Estate/ Tony Chao; Retail/ Ceasar Chen, Mark Chen, Peggy Liao; causing a surge in the pet-care Sustainable Development Goals/ Kenny Jeng, Lume Liao, Cosmas Lu, Fupei Wang, Kernel Wang; Tax/ market and opening the door for Heidi Liu, Cheli Liaw; Technology/ Cynthia Chyn, Stella Lai, Angela Yu; Telecommunications & Media/ a wide variety of new products Thomas Ee, David Shin, Joanne Tsai; Transportation & Logistics/ (tba); Travel & Tourism/ Gina Tsai, Jason and services. Yeh, Fiona Yuan. By Jeremy Olivier

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TAIWAN BUSINESS 31 Multi-level Marketing’s Deep Display Technologies Roots in Taiwan Despite some negative public attitudes, this business practice has been highly popular with local consumers and would-be entrepreneurs.. By Steven Crook

INDUSTRY F CUS Real Estate A Look at the Property Market 36 Taiwan Weathers the Global Market Cold Front By Jamie Chang/Jones Lang Lasalle 39 Housing Prices in Taipei: Leveled Off but Still High Government measures to cool the residential property market have been successful, but prices remain high in the most desirable markets, putting homeownership out of reach for many Taiwanese. By Matthew Fulco 41 Flexible Working Space Fever Hits Taipei The race is on to position serviced offices as hip co-working spaces, but questions remain about the sustainability of market demand. By Matthew Fulco 43 Taiwan’s Offices Get 21st Century Upgrade A growing number of companies in Taiwan – local and international alike – are moving toward more flexible configurations in their office spaces. By Jeremy Olivier

EXECUTIVE SUITE 46 Meet John Demers of Atlas Copco By Jeremy Olivier including next-generation sizes and reduced thickness.

SPONSORED CONTENT Today, we’re leveraging our fusion assets, glass science 48 Seeing Taiwan: The Glory of expertise, and optical physics capabilities to drive the next Taiwan’s Snow Mountain Range round of display innovations – better images, ubiquitous

2 contents.indd 5 2020/1/29 下午10:26 PRESIDENT'S VIEW

The election is over. It’s time for a fresh start.

The negative image is partly due to the media, which mostly cover sudden events, such as mur- ders, natural disasters, and disease outbreaks. Journalists often fail to fully appreciate gradual stories that develop over decades, such as the maturing of Taiwan’s democracy. I couldn’t help but feel extremely proud of the

STOCK IMAGE way Taiwan conducted this last election. Turnout was high. The casting and counting of ballots were y teenage daughter is interested in Tai- efficient. Candidates who lost gave classy conces- wan’s political culture, so I took her to sion speeches. M President Tsai Ing-wen’s election victory But much more needs to be done to build on celebration. Amid the cheers, chants, and the occa- the democratic success in Taiwan – and the U.S. as sional air horn, I heard something that I’ve never well. I’ll never forget how former U.S. Defense Sec- noticed before at a political event in Taiwan. It was retary James Mattis replied when asked to identify the sound of people speaking Cantonese. A lot of America’s biggest threat. He said it was “divisive- Hong Kongers were in the crowd. ness inside this country – the lack of respect, the I had read that many young people from Hong lack of listening to one another and accepting that Kong were coming to Taiwan to experience the people who disagree with us might be right once in election. I guess we can call them political tourists. a while.” For them, Taiwan’s democracy is inspiring. The In both the U.S. and Taiwan, politicians need to country is cool. pragmatically work to build a consensus between This seemed ironic to me as I recalled my expe- the major political parties. They must stop dwelling rience being transferred from Taiwan to Hong on divisive issues and focus the debate on how to Kong in 2005. The city was booming then, and best strengthen the society and economy. most people didn’t seem to care about politics. The post-election period is a perfect time for a They were more focused on proﬁting off mainland fresh start. Let’s do it. China’s blistering hot economy. At the time, when Hong Kongers learned that I had most recently lived in Taipei, they frequently said, “Oh, you must be so happy to be in Hong Kong now!” They viewed Taiwan to be an unstable, dangerous place. People were always dying in mud- slides, earthquakes, and tour bus crashes. Fistﬁghts William Foreman broke out in the legislature. Relations with the President, other side of the Strait were tense. American Chamber of Commerce in Taipei

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2 presidents view.indd 6 2020/1/29 下午10:23 E D I T O R I A L Taiwan Deserves Congratulations

t a time when democratic values are under siege in Although Taiwanese have voted for township, city, and many parts of the world, Taiwanese citizens last county leaders since the 1950s and national legislators since A month demonstrated their continued firm commit- the 1970s, it was only in 1996 that the first direct popular ment to a free and open political system. In the January 11 election was held for president and vice president. elections for president, vice president, and national legisla- Over the decades, the public has sometimes found the tors, nearly 75% of eligible voters cast their ballots. In the workings of democracy to have its frustrations. Infighting U.S., in contrast, the highest turnout in the past half-century among political parties, as well as the checks and balances was 58.2% in 2008 (the lowest was 49% in 1996). between branches of government, often complicate the deci- Journalists and scholars from around the world who sion-making process for public policies. came to observe the elections were impressed not only with But the Taiwanese are rightfully proud of their demo- the size of the turnout, but also with the decorum exhibited cratic accomplishments and determined to sustain them. No by the candidates and their followers. Despite the height- other system can provide the respect for the individual and ened emotions aroused in the course of the campaigns, no encouragement for creative thinking that a modern society untoward incidents marred the electoral process. Losing requires. candidates graciously acknowledged their defeat and For their part, multinational businesses operating in accepted the fairness of the vote count. Taiwan also appreciate Taiwan’s democratic advances as Also impressive was the efficiency of the polling places making for a more stable and positive investment environ- in managing the casting and tabulation of the votes. Final ment. The development of democracy, for example, has results were available within about five hours after the polls institutionalized the rule of law and the principle of an inde- closed. That achievement was especially notable considering pendent judiciary. Both domestic and foreign companies can that each voter cast three separate ballots: for president/vice feel more confident that they will not be subject to arbitrary president, district legislator, and political party preference to and unpredictable decisions by administrators or unfair treat- determine the allotment of national-slate legislators. ment by the courts. The election was widely covered by overseas news orga- AmCham Taipei congratulates the winning candidates in nizations, providing a rare opportunity for Taiwan to last month’s elections and, even more importantly, commends capture the attention of the international media and to show the Taiwanese people on another successful demonstration of how deeply democratic practice has taken root in Taiwan. their devotion to a democratic system of government.

主價值觀在全球許多地方遭受群起攻訐之主實踐在台灣紮根的程度有多深。台灣人自1950年際，台灣人民上月展現他們對自由開放政治代起就投票選舉鄉鎮縣市長，1970年代開始票選立民體制的持續堅定承諾：在1月11日舉行的正法委員，但直到1996年才首次舉行正副總統直接普副總統和立法委員選舉中，有將近75%的合格選民選。行使投票權。反觀美國，過去半世紀內的最高投票率過去數十年來，民眾有時會發現民主運作受挫。政是2008年的58.2%（最低則是1996年的49%）。黨惡鬥，加上政府各部門之間的制衡，常導致公共政令前來觀察此次台灣大選的世界各地新聞從業人員策決策過程更加複雜。和學者留下深刻印象的，除了投票率之高，還有候選不過台灣人理當為自身的民主成就感到驕傲，並人及其支持者所展現的風度。儘管選戰過程中群情激堅決維護這些成就。其他體制都不能提供對個人的尊昂，卻未發生意外事件讓選舉過程留下汙點。落敗的重，也無法鼓勵現代社會所需的創意思維。候選人大方承認敗選，接受計票結果的公平性。至於在台營運的跨國企業，也都讚賞台灣的民主進同樣令人印象深刻的還有各投票所管理投票和開票步造就更穩定和正向的投資環境。例如，民主的發展的效率。最終結果在投票截止後約5小時內就出爐；讓法治和司法獨立原則制度化。國內外企業都更有信鑒於每位選民都投下正副總統、區域立委，以及決定心，不會遭到政府獨斷和不可預測的決策打壓，也不不分區立委分配席次的政黨票等3張不同選票，此成會受到法院的不公平對待。就尤其引人矚目。台北市美國商會除了恭喜贏得上月大選的各候選此次大選受到海外新聞機構廣泛報導，為台灣提供人，更重要的是讚揚台灣人民再次成功展現對於民主一次難得的機會，不僅獲得國際媒體關注，也證明民政府體制的擁戴。

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— BY JEREMY OLIVIER —

MACROECONOMICS the Taiwanese economy. The Direc- drop in export orders for January. torate-General of Budget, Accounting Total foreign direct investment (FDI) 2019 ENDS WELL FOR and Statistics calculated full-year GDP approved by Taiwan’s government in TAIWAN ECONOMY growth at 2.73%, boosted by the vigor- 2019 decreased by around 2.14% from Prior to the recent national elec- ous 3.38% growth achieved in the the previous year, the Central News tions, Bloomberg reporter Tim Culpan fourth quarter. Although exports were Agency reported, but still represented compiled and analyzed economic down by a slight 1.4% year-on-year to the fourth highest amount on record. data that spanned the terms of all of amount to US$329.3 billion, sales to the Investment Commission-sanctioned FDI Taiwan’s democratically elected pres- U.S. increased by a hefty 17.2% over last year totaled US$11.2 billion, down idents. His January 8 op-ed, titled “A 2018 to reach US$46.3 billion. Overall, from US$11.4 billion in 2018. The high- Taiwanese Election That’s Not All Taiwan registered a 2019 trade surplus est annual amount of FDI recorded was About China,” argued that economic of US$43.5 billion, a decrease of 9.25% US$15.3 billion in 2007. considerations, rather than just cross- from the same period in 2018. Strait relations, would play a major part The Ministry of Economic Affairs DOMESTIC in how Taiwanese voted. He noted from reported in January that Taiwan’s export the data that strong economic perfor- orders, a leading economic indicator, rose LANDSLIDE ELECTORAL mance under the Tsai administration in by 5.3% year-on-year in the last month WIN FOR PRESIDENT TSAI the areas of stock market returns, GDP of 2019, reversing a 14-month decline. Incumbent presidential candidate and wage growth, and unemployment Nevertheless, export orders received by Tsai Ing-wen of the Democratic Progres- levels would help to ensure a smooth Taiwanese companies fell by 5% for sive Party (DPP) on January 11 won a victory for the incumbent. the year as a whole, with trade tensions landslide victory against her Chinese Thanks to knock-on effects from between the U.S. and China cited as the Nationalist Party (KMT) opponent, the U.S.-China trade dispute, 2019 primary factor. The Lunar New Year Kaohsiung Mayor Han Kuo-yu, defeat- proved to be a relatively good year for holiday is expected to cause a further ing him by almost 20 percentage points.

President Tsai and other DPP leaders celebrate the party's resounding victory in the January 11 elections.

PHOTO: MARTTI CHEN

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Tsai, who garnered a record-break- ECONOMIC INDICATORS ing 8.17 million votes (57.13%), in her US$ billion US$ billion victory speech stressed unity in the face Current Account Balance (Q3 2019)p 12.48 14.04 of mounting challenges from China. Foreign Trade Balance (Jan.-Dec.) 43.48 49.4 She also reiterated her commitment to New Export Orders (Dec.) 43.8 43.4 maintaining peaceful, stable cross-Strait Foreign Exchange Reserves (end Nov.) 474 461 relations and reminded Beijing that “peace, parity, democracy, and dialogue Unemployment (Nov.) 3.73% 3.70% are the keys to positive cross-Strait Discount Rate (Dec.) 1.375% 1.375% interactions and long-term stable devel- Economic Growth Rate Q3 2019p 3.0% 2.47% opment.” Annual Change in Industrial Output (Nov.)p 2.15% 2.59% The election cycle took place amid Annual Change in Industrial Output (Jan.-Nov.)p -0.87% growing concern about attempts by Annual Change in Consumer Price Index (Nov.) 0.6% 0.30% China to influence the election results Annual Change in Consumer Price Index (Jan.-Nov.) 0.51%

through disinformation campaigns and P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT other means. The election was also noteworthy for the high voter turnout, estimated at 74.9%, much higher than millions of dollars into the campaigns of Frozen Garlic, observes that compared the record-low 66.27% turnout in the Beijing-preferred candidates. to previous elections, third-party candi- 2016 national elections. Restrictions on Han made his concession speech dates had a much stronger showing in exit polls make it difficult to gauge voter shortly after the election results were 2020. At the district level, both the New demographics, but reportedly a very high called, stating that “Taiwan's democ- Power Party and the Taiwan People’s number of young people turned out to racy, freedom and rule of law are the Party’s candidates performed well, while vote. Due to the lack of absentee voting most valuable treasures we have.” He independents and third parties received in Taiwan, tens of thousands of voters will continue his term as mayor of over 30% of the party list vote. returned home from abroad to take part Kaohsiung. “The two big parties [KMT and DPP] in the elections. still sit atop the political structure, but Commentators attributed Tsai’s DPP RETAINS their coalitions are a lot less solid than victory to Taiwan’s stronger economic LEGISLATIVE MAJORITY they might appear,” notes Batto. “This performance over the past year, as well The DPP retained majority control of is especially true for the DPP, which as the increasingly violent situation in Taiwan’s Legislative Yuan in the January succeeded in pulling together a massive Hong Kong, which stoked public fears balloting, although it lost seven seats, presidential coalition from several forces about pursuing closer relations with while the opposition KMT gained three. who don’t really all want the same China. In addition, opponent Han Kuo- In addition, the Taiwan People’s Party, things.” yu’s campaign was marred by a series of established last year by Taipei mayor Ko public gaffes and minor scandals, includ- Wen-je, won five seats, while the New KMT CHAIRMAN RESIGNS ing reports of extramarital affairs and Power Party clinched three seats, and the FOLLOWING ELECTION luxury property deals that were at odds pro-independence Taiwan Statebuilding Wu Den-yih on January 11 with his purported “everyman” image. Party took one seat. Five independent announced that he would resign as Han was also hurt by voter resentment candidates were also elected. KMT chairman, shortly after the party’s of his decision to run for president so In Taiwan, 73 of the 113 legisla- crushing loss in both the presiden- quickly after being elected mayor of tive seats are filled by candidates elected tial and legislative elections. Wu, along Kaohsiung in November 2018. from geographical constituencies, while with other top-ranking party members, Many voters were also wary of Han’s six seats are reserved for representatives stepped down from their posts to take attitude regarding cross-Strait rela- from aboriginal constituencies and 34 responsibility for the defeat. Lin Rong- tions. Their concerns were intensified legislators are selected from party lists on te, a long-time party member who by reports from Australia that a self- the basis of proportional representation. served on the KMT’s Central Standing professed Chinese spy claimed to have The DPP and KMT each obtained 13 Committee (CSC), will fill in as interim worked with a Chinese businessman seats from the party list vote. chairman. His proposal to limit the age to influence the Taiwan elections. The Academia Sinica researcher Nathan of CSC members to 60 years or younger efforts purportedly included funneling Batto, who runs the Taiwan politics blog has been met with opposition from other

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committee members who believe that all Minister of Defense. Sun had entreated Wang through text ages should be represented. The flight recorders from the downed messages and video calls to retract asser- In the meantime, several prominent UH-60M Blackhawk helicopter have tions that he had funneled money to party members have announced their been analyzed by Taiwan’s Air Force Han Kuo-yu’s mayoral campaign in candidacy for the chairmanship in the and sent to the manufacturer, U.S.-based 2018. The pair allegedly provided Wang election scheduled for March 7. Chang Sikorsky Aircraft, for further analysis. with a script stating he had in fact been Ya-chung, a former aide to 2016 KMT President Tsai Ing-wen appointed bribed by the DPP to make the claims to presidential candidate Hung Hsiu-chu Navy Commander Admiral Huang Shu- swing the election in that party’s favor. and president of the party-affiliated Sun kuang to be Shen’s successor. Huang has In return for his cooperation, Wang was Yat-sen School, was the first to announce held such posts as head of the Office of said to have been promised safe passage his intention to run. His announcement the Deputy Chief of the General Staff and residence in Taiwan or China. was followed by that of Blue Sky Action for Operations and Planning and Chief Calling a press conference in Taipei Alliance Chairman Wu Chih-chang and of Staff of the Navy Command Head- the day after the allegations emerged, then by former KMT vice chairman Hau quarters. Tsai denied all of revelations in The Lung-bin, an ex-mayor of Taipei. Age’s report. DPP lawmakers have KMT OFFICIAL ACCUSED called for an investigation, arguing TAIWAN’S MILITARY CHIEF OF INTIMIDATION that Tsai’s alleged actions constituted DIES IN ACCIDENT According to Australian newspaper a violation of the recently passed Anti- Chief of the General Staff Shen The Age, self-proclaimed Chinese spy Infiltration Act. Yi-ming was among eight military William Wang Liqiang, who is attempt- officers killed January 2 when their ing to defect to Australia, was warned ANTI-INFILTRATION helicopter made a crash-landing in that he could face repatriation to China ACT ENACTED mountainous terrain shortly after take- and death unless he publicly recanted Taiwan’s Legislative Yuan on Decem- off from Taipei on the way to visits his allegations. The newspaper said ber 31 passed a major bill aimed at troops stationed in Yilan County in that its sources linked Wang to KMT reducing or eliminating political interfer- the island’s northeast. Shen, who was Deputy Secretary-General Alex Tsai ence by hostile foreign forces – primarily 62, assumed Taiwan’s top military post and a Chinese businessman named Sun China. The Anti-Infiltration Act was last year after previously serving as Tianqun. approved by a DPP majority during a commander of the Air Force and Deputy The Age reported that Tsai and tense runup to the national elections in early January. Under the Act, any individual found to have interfered in Taiwan’s democratic process at the behest of a hostile foreign actor is subject to fines and possible prison time. The legislation prohibits lobbying efforts, fundrais- ing for referendums, or campaigning for a political candidate for any public office on behalf of an infiltrating individual or organization. It is aimed largely at “red media,” outlets that maintain ties to China and may be responsible for spreading disinformation. Fines for violating the provisions of the law range between NT$500,000 and $5 million, and certain infractions carry an additional prison term of up to three years. Violators who confess will be considered for reduced punishment. The military funeral for Chief of the General Staff Shen Yi-ming. PHOTO:MARTTI CHEN Representatives of the opposition KMT, as well as the People’s First Party

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and Taipei Mayor Ko Wen-Je’s Taiwan TAIWAN'S JAN. - DEC. 2019 TRADE FIGURES People’s Party criticized the bill as being (YEAR-ON-YEAR COMPARISON) too far-reaching. Several questioned whether the act would target Taiwan- /China apan ASEA TOTA

ese who regularly conduct business or 138 334 329.3

exchanges with China. In response, the 132.2 286 285 58.1 Mainland Affairs Council gave assur- 58.4 55.1 54 44 44 35.4 ances that the law will target only 35 23.2 23 intentional illicit behavior and will not apply to individuals who have been 2019 2018 2019 2018 2019 2018 manipulated by foreign actors. .S.A Europe 46.2 39.4 37 35 35 33.1 31.2 INTERNATIONAL 30

EU SIGNALS SUPPORT 2019 2018 2019 2018 2019 2018 FOR TAIWAN T: S Billion The European Parliament, the EU’s Exports mports SO RCE: BOFT/MOEA legislative branch, on January 16 passed two resolutions with provisions express- ing support for Taiwan’s participation per kWh, citing the high cost of mainte- for the reduction. in international organizations. The two nance for such operations. As previously Other renewable energy sources such resolutions, titled the “Common Foreign announced, FiT rates for offshore wind as biomass, hydro power, and biode- and Security Policy” and the “Common energy are set at NT$5.0946 per kWh, a gradable waste will experience FiT rate Security and Defense Policy,” also call for decline of 7.64% from last year. increases of 1% to 4%, respectively. The peaceful resolution of cross-Strait issues Representatives of the offshore wind rate for geothermal power generation and the maintenance of the status quo industry balked at the decrease, with will remain the same. across the Taiwan Strait. Further, they one stating that the cut fails to take into express concern regarding election inter- account the huge cost of constructing MEDIATEK PARTNERS ference by foreign autocratic regimes and offshore wind farms. MOEA responded WITH INTEL ON 5G the spread of disinformation in Taiwan that the industry has not provided a Major Taiwanese chipmaker Medi- and elsewhere in the region. convincing argument to maintain or aTek announced last November that increase the current FIT rate, and that it will partner with U.S. multinational BUSINESS the rapid pace at which the local supply technology giant Intel to develop 5G chain is coming together will compensate solutions for personal computers. The TAIWAN FEED-IN two companies will cooperate to produce TARIFFS RAISED TAIWAN STOCK EXCHANGE processors to power modems for use in Taiwan’s Ministry of Economic Affairs PERFORMANCE notebook PCs. The products are to be

(MOEA) in late December announced THE LINE SHOWS CHANGES IN TRADE VALUE AND launched in 2021. changes in the feed-in tariff (FiT) rate THE SHADED AREA CHANGES IN THE TAIEX INDEX. Although the two companies are to be offered for various categories of POINTS NT$ BILLION nominal rivals in the tech industry – 13000 225000 renewable energy in 2020. The rate for MediaTek designs chips mainly for 12000 200000 solar photovoltaic power generation, 11000 175000 mobile phones, while Intel focuses on which includes the cost of solar panel 10000 150000 PCs – Intel has been experiencing short- recycling, will be cut to NT$3.9408- 9000 125000 ages of both personnel and of processors $5.7788 per kilowatt-hour, depending on 8000 100000 for its core clients. Analysts say they the duration of the power purchase agree- 7000 75000 assume that the partnership is intended ment, a drop of 0.34-2.44% from the 6000 50000 to counter Qualcomm’s recent release 5000 25000 2019 level. of a 5G-enabled notebook with Lenovo 4000 0 For small onshore wind farms, in 2019, but caution that the current MOEA increased the rate from market for 5G PC modems has yet to

NT$7.7916 (US$0.26) to NT$7.7998 DATA SOURCE: TWSE really take off.

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Reviewing the Recent Legislative Term

he recently concluded 9th Term of the Legislative Yuan was the first time the Democratic Progressive Party held majority T control of the lawmaking body and thus also the first time that the DPP controlled both the legislature and the executive branch. What was the result in terms of legislative performance? Of the 6,252 bills proposed during the eight sessions of the 9th

Term, 2,002 – or 32% – were passed. In the 8th Term, which was PHOTO: WIKIPEDIA controlled by the Chinese Nationalist Party or Kuomintang (KMT) during the presidency of Ma Ying-jeou, 5,515 bills were proposed and 1,883, or 34%, were passed. The 9th Term was therefore busier (with 737 more bills proposed than in the previous term) but legislators were slightly less efficient in terms of passage (32% versus 34%). All in all, it was a relatively productive term for the DPP. This report examines selected areas of legislation of particular relevance to AmCham members. Commercial disputes & trade secrets 5 00 In March 2019, the Judicial Yuan proposed a new Commercial Litigation Act (CLA), which was then approved by the Legislative 555 Yuan on December 17. Together with passage of amendments to the IP Court Organization Act, also in December, it authorizes establishment of a new Intellectual Property and Commercial Court (IPCC), expanding the jurisdiction of the existing Intellectual Property Court to include the adjudication of complex and specialized commercial disputes, if certain criteria are met. It is expected to be at least two years before detailed regulations are completed and the IPCC actually begins operations. On December 31, legislators also passed amendments to the Trade Secrets Act that will allow prosecutors to issue gag orders preventing people who have been exposed to trade secrets from disclosing proprietary information outside of investigatory or judicial proceedings. Along with the establishment of the IPCC, this step 0 is expected to improve the efficiency and effectiveness of commercial and IP dispute investigations and proceedings, while also increasing protection of trade secrets for businesses. Medical devices On December 13, the draft Medical Device Management Act was approved by the legislature after a nearly two-year process. The new act establishes a legislative basis for the management of medical devices, which until now were governed by the Pharmaceutical Affairs Act. Although no implementation date is prescribed in the

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legislation, the government is expected to complete the implementation rules in a timely manner, as the simplified licensing procedures and other aspects of the Act are considered integral to the government’s efforts to promote development of the medical device industry.

Internet governance

The draft Digital Communications Act (DCA) submitted to the legislature in November 2017 never made it to the third and final reading in the 9th Legislative Yuan. The DCA would have established a legal framework for internet governance in Taiwan, bringing the treatment of online activities in line with existing laws and regulations covering related “offline” activities – for example, the application of notice and takedown requirements to digital service providers. The DCA passed review by the Transportation Committee in 2018. But due to some legislators’ concerns about data localization and intermediary liability, it never garnered the cross-party caucus support needed to send it to the floor for second and third readings. If the government still intends to pursue the measure, the existing 0 draft or some new iteration of it will have to be resubmitted to the 10th Legislative Yuan. Customs 0 The Ninth Term also failed to pass proposed amendments to the Customs Import Tariff schedule – introduced in November 2019 and endorsed in spirit by the Ministry of Economic Affairs – that would have lowered tariffs on imported large auto parts used by domestic manufacturers and assemblers. When Taiwan entered the WTO, tariffs were reduced on imported automobiles but not on auto parts, putting Taiwan’s domestic industry at a relative price disadvantage. A similar bill is expected to be reintroduced in the 10th Term and passed with relative ease. 0 Administrative restructuring The 10th Legislative Yuan likely will see a flurry of administrative restructuring initiatives, taking up some unfinished business, including the long-planned upgrade for the Center for Drug Evalu- ation and an upgrading of the Tourism Bureau. Proposals are also expected for the establishment of two new entities – a dedicated digital authority and a personal information protection authority. The draft Act for Establishment of the National Drug Review Center, which would elevate the administrative status of the Center for Drug Evaluation, was submitted to the legislature in March 2017 as a “priority bill.” At the time, Minister of Health and Welfare Chen Shih-chung had high hopes for the new center, saying he hoped it would come into being in 2018 and eventually make it possible to reduce drug-license application times by two months. But following committee review, the bill saw little progress.

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The new center appears to remain a priority for the DPP, but the 0 fact that it remained in legislative purgatory for so long raises questions about its fate in the 10th Term. Prospects are brighter for legislation to upgrade the Tourism Bureau to a Tourism Administration, still under the Ministry of 0 Transportation and Communications, which effectively means more budgeting and staffing. A bill to this effect failed to pass in the 9th Term because it was coupled with a more complex bill related to broader restructuring of the Ministry that never garnered cross- party consensus. But there is bipartisan support for the administrative upgrade, which is considered essential to transforming the tourism industry and enabling the Tourism Bureau to take on the mission of promoting Taiwan tourism in new markets to replace waning PRC arrivals – a shift that will need more resources than available to the existing Tourism Bureau. President Tsai Ing-wen has also promised to establish, within four years, a “digital development authority” to direct digital infrastructure development, coordinate the allocation of government resources for digital-economy industry development, and manage digital markets. According to the President, the areas of focus of the new authority will include information technology, cybersecurity, and telecommunications. While we expect that 10th Term legislators will start delving into the establishment of this new digital authority, the complexity and scale of the undertaking is likely to make it a long-term process. The Personal Information Protection Act (PIPA) has long served as Taiwan’s legal framework for the usage and processing of person- ally identifiable information collected by private and public-sector entities. One notable difference between PIPA and the EU’s General Data Protection Regulation (GDPR) is that Taiwan does not have a single data-protection authority, as required by GDPR. Instead, data protection is regulated by the government agencies responsible for individual industry sectors. The next legislative term is expected to see introduction of legislation to establish a new data-protection entity, and there will be pressure to pass it quickly in order for Taiwan to achieve what the GDPR terms “data adequacy.”

Looking ahead Given the DPP’s continuing absolute majority in the legislature and the fact that President Tsai will not be running in 2024, the DPP can be expected to take full advantage of its consolidated 0 power position to drive an ambitious policy agenda. Although the procedural and political maneuvers available to Taiwanese opposition parties mean that no outcome can be taken for granted, the DPP appears well positioned for relative success with its legislative agenda over the next four years.

— By Eric P. Moon, Senior Consultant at Soundline Consulting, a member of the Jet-Go Consulting Group. Soundline is a public affairs agency that tracks and analyzes legislative and regulatory developments in Taiwan for clients across a wide range of industries and provides them with strategic communications advice.

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NUCLEAR DECOMMISSIONING STUCK IN LIMBO 核電

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A dispute between Taipower and New Taipei City over interim spent-fuel storage is complicating the shuttering of nuclear power plants.

台電與新北市未能就核廢料暫存方式達成共識，使得核電廠除役的問題複雜化

BY TIMOTHY FERRY

CHINSHAN PLANT PHOTO: : TAIPOWER

fter the second reactor of north and Maanshan in the south – as can safely store spent fuel for up to 40 the Chinshan nuclear power their licenses expire. years. Although Taipower built a dry A plant reached the end of its A dispute between New Taipei City cask storage facility on the Chinshan 40-year licensing period last July, the and the state-owned Taiwan Power Co. site, the New Taipei City government plant became the first of Taiwan’s three (Taipower) over the storage of spent has withheld the soil and water permits nuclear power facilities to enter the nuclear fuel is threatening to delay necessary for it to operate, contending stage of decommissioning. The step is in the process, however. The onsite cool- that the construction deviated from the line with the Tsai Ing-wen administra- ing pools at the Chinshan plant, where official plan without approval from the tion’s goal of transforming Taiwan into spent fuel has been stored for decades, city’s planning board. a “nuclear-free homeland” by 2025. have reached maximum capacity. As The city government insists that the Over the next 25 years, the plant – a result, the spent fuel in the reactors’ issue is one of meeting construction and located within New Taipei City along cores cannot be unloaded, as there is safety regulations, particularly with the island’s northern coast – is to be nowhere to store it. regard to soil and water conservation, decontaminated, its equipment disman- In the U.S. and many other and has no wider policy implications tled and disposed of, and its build- nations, spent fuel that has sat in cool- related to nuclear energy. ings demolished. The ultimate aim is to ing pools for at least a year is trans- “Soil and water conservation is the restore the site to greenfield conditions, ferred for temporary storage to “dry responsibility of the builder, and any with no trace of radioactivity. The same casks.” These huge drums – typically major construction should take care procedures would apply to the other six meters tall and 2.5 meters in diame- of it,” says Fire Commissioner Huang two nuclear plants – Kuosheng in the ter and weighing 100 tons when filled – De-ching. “How can we tell the public

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that they didn’t take care of the soil and will not be stored permanently in New mainland China. But final approval is water conservation requirements, but we Taipei City,” Hou told Taiwan Business dependent on passage of a local referen- let them go ahead with the project?” TOPICS. “They need to tell us clearly dum, which both county governments The New Taipei City government says where they will permanently store it, but have blocked from taking place. that the issues it has raised are all fixable they cannot say.” Meanwhile, the stalemate continues. and that it is waiting for Taipower to take Permanent storage of spent fuel is a Both of Chinshan’s 636-megawatt care of them so that the soil and water global issue that so far has gone with- (MW) reactors were shut down before permits can be granted and the cask-stor- out a solution (see the related story). reaching the end of their licensures. Unit age system approved. “If construction is In Taiwan, the Ministry of Economic 1 went offline on December 28, 2014, done according to the regulations, we will Affairs is the agency responsible for well before its scheduled closure on approve it according to the regulations,” selecting a site for a permanent reposi- December 5, 2018, when the handle on says Huang. tory. It has identified two potential loca- a fuel rod assembly broke during refuel- Taipower representatives describe tions: in mountainous Daren township in ing. The Atomic Energy Council (AEC) the situation quite differently, however. Taitung County on Taiwan’s east coast approved the repairs, but the strong anti- They say that the city is determined not and the uninhabited Hsiaochiou islet in nuclear public sentiment at the time kept to accept dry-cask storage within its the Kinmen archipelago off the coast of the reactor from restarting. boundaries and is therefore raising technical demands that are impossible to implement. “If these matters could be easily fixed, why wouldn’t Taipower take care of them?” asks Edward H.C. Chang, director of Taipower’s Department of Nuclear Backend Management. “The technical side is not the major problem. The political side is the major problem. They want to tell the public that New Taipei City is not going to be the place for dry-cask storage.” New Taipei City Mayor Hou Yu-ih is maintaining the policy initiated under his predecessor, Eric Li-luan Chu, of refusing to allow dry-cask storage within the city limits without a solid plan in place for permanent disposal of the spent fuel. “What the city government Frequent anti-nuclear protest demonstrations have influenced government wants is assurance that the spent fuel energy policies. PHOTO: MARTTI CHEN

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Unit 2 ceased operations on June 3, ing of Chinshan’s reactors in itself should the reactor cores is still usable. While less 2017, nearly two years ahead of sched- present no safety concerns. radioactive than spent fuel, it will remain ule, when a transmission tower at the site Managing residual heat is an issue, hot longer. In the event that all power to collapsed. The unit was never restarted. though. Because the reactors remain the plant is lost, Taipower would have In any case, it would have been neces- fueled, they must be maintained as if in only one hour to invoke its Ultimate sary to shut both reactors prematurely, a temporary shutdown, which requires Response Guidelines and flood the core as the lack of storage capacity prevented extra personnel and active cooling with seawater from mobile pumps on the removal of spent fuel for replacement systems. The fuel in the reactor presents standby. with fresh fuel. The reactor cores remain a greater risk than if stored in the spent- Fuel is cooler and less reactive when fueled to this day. fuel cooling pools, due to the smaller size stored in a cooling pool, providing more In this situation, control rods contain- of the reactor cores’ coolant systems, says leeway in any emergency. Removing the ing boron and other elements inhibit- Yeh Tsung-kuang, director of the Nuclear fuel from the reactor and placing it into ing nuclear reactions are inserted into the Science and Technology Development cooling pools would increase safety, while reactor core along with the fuel assem- Center at National Tsing Hua University. removing the spent fuel from the cooling blies. Experts say that the continued fuel- In addition, two-thirds of the fuel in pools and placing it into dry-cask storage

SEARCHING FOR A PERMANENT STORAGE SOLUTION

ermanent storage in deep geological repositories is the current inter- P national standard for final disposal of nuclear waste, but in practice this solution has so far proven extremely difficult to accomplish. The U.S. government has de-funded its deep geological repository at Yucca Mountain, and most nations have yet to begin development of similar facilities. Finland is the closest to successfully completing deep geological repository. Its Onkalo site is now in the final approval stage, and should begin accepting nuclear waste early in this decade. Executives from U.S. startup Deep Isolation visited Taiwan last fall with an innovative solution that could serve as either interim or permanent storage. Deploying technologies developed in the An example of dry-cask storage in the U.S. oil and gas industry, it would use direc- PHOTO: NRC tional drilling approximately 1 kilometer deep and then another kilometer hori- may be wary of being first in the world to that solutions can be found. zontally. The spent fuel would then be implement it. “The election is over and the noise lowered down the borehole inside steel In the meantime, Taiwan is continuing is quieting down, so maybe now will be canisters. a search for its own site for a deep geolog- a better time to solve the issue,” says Developed by University of California ical depository. The Atomic Energy Coun- Edward H.C. Chang, director of Tai- at Berkeley physicist Richard Muller, the cil hopes to have a site ready by 2055. power’s Department of Nuclear Backend solution is based on proven technologies. For now, however, the focus is on Management. The canisters can even be retrieved. The developing interim solutions for the company has yet to utilize the technology spent fuel in the cooling pools. Both New — By Timothy Ferry in an actual case, though, and Taipower Taipei City and Taipower are optimistic

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The Kuosheng nuclear power plant in New Taipei City's Wanli is due to be fully retired in 2023. PHOTO: WIKIPEDIA

would be even safer. decommissioning to proceed, the fuel fuel to prevent heat-up to high temper- “All spent fuel should be transferred must be removed from the spent-fuel atures from radioactive decay, shield from wet to dry storage within five years pools. Taipower’s solution of choice workers and the public from the radia- of discharge from the reactor core,” remains dry-cask storage, which glob- tion emitted by radioactive decay in the which can be achieved with existing tech- ally is the most common form of interim spent fuel and provide a barrier for any nologies, the Union of Concerned Scien- storage for spent fuel. It is endorsed by releases of radioactivity, and prevent crit- tists notes in its report, Safer Storage of the U.S. Nuclear Regulatory Commis- icality accidents,” according to a report Spent Nuclear Fuel. sion as well as the anti-nuclear Union of by the U.S. National Academies of Concerned Scientists as a safer option Sciences, Engineering, and Medicine on Decommissioning program than storage in spent-fuel cooling pools. the safe storage of nuclear spent fuel. Typically, dry casks are steel cylinders With assistance from the U.S. nuclear AEC acceptance last July of Taipow- that are either welded or bolted closed, engineering firm NAC International, er’s plan for decommissioning the Chin- providing a leak-tight confinement of the Taipower completed the construction of shan plant followed approval by the spent fuel. Each cylinder is surrounded by dry-cask storage facilities at the Chin- Environmental Protection Administration additional steel, concrete, or other mate- shan site in 2013, but due to New Taipei of an environmental impact assessment. rial to provide radiation shielding. City’s objections it was never commis- A key point, however, is that for Dry casks are intended to “cool the sioned. City government representatives

5 除役計畫

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The mothballed Lungmen nuclear power plant will likely never be completed. Like the Chinshan and Kuosheng plants, it is located in New Taipei City. PHOTO: WIKIPEDIA

say that the area’s dense population and Tsing Hua University’s Yeh, however, eating into the Backend Fund, established active geology make it a poor candidate disagrees that interior dry-cask stor- to pay for the costs of decommissioning. for long-term storage of spent fuel. age offers any major advantage. He The fund is financed by a tax on every In any case, additional storage capac- notes that the Fukushima Daiichi nuclear kilowatt-hour of electricity generated by ity will be needed, as the current facility power plant had interior dry-cask stor- nuclear power. can accommodate only 1,680 fuel assem- age. The tsunami destroyed the building The most recent figures released by blies, while 7,000 will eventually need to in which the casks were stored, while the Taipower showed that the fund had be stored. One possible solution to the casks themselves remained undamaged. accumulated NT$233 billion (US$7.79 city government’s objections would be “Now they are no longer doing interior billion), while the total cost of decom- interior dry-cask storage, in which the dry-cask storage,” he says. missioning all the nuclear plants has casks are themselves placed inside a stor- Taipower also notes that interior been estimated at NT$335 billion age facility. dry-cask storage raises issues with heat (US$11.2 billion). “The public feels that interior dry- buildup within the structure. “New Taipei City has been dealing cask storage is safer than external dry- As negotiations between the city and with this for so long, the central govern- cask storage,” notes Fire Commissioner utility continue, the cost of maintaining ment needs to face this issue,” says New Huang. the Chinshan reactors in standby mode is Taipei City Mayor Hou.

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Chinshan Nuclear END OF ONE ERA, START Power Plant

Kuosheng Nuclear OF ANOTHER Power Plant

Lungmen Nuclear Power Plant Decommissioning will keep Taiwan’s nuclear sector busy for decades and potentially offer global opportunities.

hen unit 2 at the Maanshan the Fukushima disaster in 2011 raised nuclear power plant near widespread doubts about the safety W the southern tip of Taiwan of nuclear power. While public atti- reaches the end of its license on May 17, tudes toward nuclear energy have modi- 2025, all nuclear power generation on fied somewhat in recent years as concern Taiwan will cease. about climate change has grown, the At the peak, the six operating reactors respected World Nuclear Industry Status had been responsible for close to 20% Report (WNISR) 2019 notes that the of Taiwan’s total power generation. An industry appears to have reached its Maanshan Nuclear additional two-unit facility, the contro- historic peak and is now in decline. Power Plant versial Lungmen nuclear power plant, Yeh Tsung-kuang, director of the was nearly completed when the proj- Nuclear Science and Technology Devel- ect was abandoned in 2014 after years of opment Center at National Tsing Hua on-again, off-again construction. University (NTHU), sees that decline The rise and fall of Taiwan’s nuclear reflected in enrollment numbers in ing or in the process of decommissioning. sector reflects global trends. Taiwan’s nuclear engineering programs. “The Only 19 reactors had been fully decom- commercial use of nuclear power dates number of students is getting less and missioned, however, and just 10 had back to the 1970s, the heyday of the less,” he says, since students believe that been returned to greenfield status. While global nuclear industry. The Middle “it’s not a career with a bright future.” the entire process takes an average of 19 East oil embargo had wreaked havoc on Yet the decline of nuclear power years, it can be completed in as little as global energy markets and countries were holds the promise of substantial business six years or as long as 42 years, according desperate for alternatives. The number of opportunities related to nuclear power to the report. nuclear-power reactors in the world rose plant decommissioning. A further 183 units will shut down from 90 in 1970 to 253 by 1980, accord- WNISR 2019 notes that as of July 1, in the 2020s and 127 units in the 2030s, ing to the International Atomic Energy 2019, 181 reactors worldwide had been WNISR 2019 estimates. Agency (IAEA). closed, with 162 of the units – Taiwan’s The result is a global market that A series of incidents culminating with Chinshan plant among them – await- New York-based Kenneth Research valued at US$387 billion in 2016, with growth to US$891 billion by 2023, based on a compound annual growth rate of 12.71%. India’s Mordor Intelligence sees similar annual growth of 12.1% between 2019 and 2024, while Seattle-based Coherent Market Insights more conservatively puts CAGR between 2019 and 2027 at 7%. Decommissioning a nuclear power plant is a complex and costly endeavor. After typically operating for 40 years, the reactor vessels are heavily contaminated with radiation and must be decontaminated either mechanically or chemically. Spent fuel in the cooling pools must be removed and transferred to interim storage, and all structures must be decontam- The Maanshan nuclear power plant on the Hengchun peninsula in southern Taiwan inated and demolished. As each nuclear will be retired in 2025. power plant was custom-built, the decom- PHOTO: WIKIPEDIA

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missioning must likewise be site-specific. as was done with Chernobyl. Taiwan is to enter this space. “Decommissioning was rarely consid- opting for immediate dismantling. “Taipower has been assigned the task ered in the reactor design, and the Prominent players in the nuclear to develop its own decommissioning tech- costs for decommissioning at the end decommissioning business include nology, including decontamination,” he of the lifetime of a reactor were usually Bechtel, General Electric, Magnox, says. “They want to make it a local tech- discounted away, and thus, subsequently, Sellafield, Hitachi, Babcock, CH2M nology so they can export it to other largely ignored,” says WNISR 2019. Hill, AECOM, and Westinghouse Elec- countries working on decommissioning.” There are three different strategies tric. Taipower is reportedly in discus- Despite the opportunities, Yeh says for the decommissioning process: imme- sions with several of them for decom- it is difficult to interest students in this diate dismantling, deferred dismantling, missioning services. So far a tender has field. “Most young people don’t like and entombment. In the first, the plant been opened only for consultants to help doing decommissioning or waste disposal is dismantled within months or years of develop an engineering plan. because it’s kind of like taking care of shutting down. In deferred dismantling, Market researchers note that the garbage,” he observes. “We’ve been tell- spent fuel and other waste are removed, global market is fragmented and highly ing students that decommissioning takes after which the plant is kept in “a state of challenged by governmental and social so long that it’s possible to get an entire safe enclosure for 30-100 years followed factors, leaving space for possible new career out of it, but it’s very difficult to by dismantling,” according to an OECD technologies and players. NTHU’s Yeh, convince them.” report. In entombment, the entire plant who works closely with Taipower, sees is encased in a thick layer of concrete, opportunities for Taiwanese technology — By Timothy Ferry

TAIWAN’S ALTERNATIVE ENERGY OPTIONS

Taiwan is making big moves in solar and offshore wind, but are there also other energy forms that deserve attention?

STOCK PHOTO BY TIMOTHY FERRY

s Taiwan progresses toward its difficulties account for much of the lack policy [emphasizing solar and offshore goal of 20% of power gener- of development of alternative energies, wind] is the most realistic,” he says. A ation from renewable energy but some of the holdup is policy related. Nevertheless, advocates for geother- sources, the shortcomings of solar and The government’s 2025 deadline for mal, biofuels, and ocean energy argue wind are becoming increasingly evident. the elimination of nuclear power is fast that Taiwan should also be looking more Solar power requires vast swathes of approaching, and Taiwan will need to seriously at other options that could land, a precious commodity in Taiwan, replace not only its nuclear power but eventually offer great potential. and offshore wind is costly and environ- also a significant amount of coal-fired mentally disruptive. Both are also inter- power generation. It therefore requires Geothermal mittent, generating large amounts of proven sources of renewable power that power when conditions are good but at can be deployed in large scale within a A geothermal power plant operates times dropping to zero. short timeframe. similarly to a nuclear or coal-fired steam Some experts suggest that Taiwan’s “This is a big change and the time is generator but with magma buried deep concentration on solar and wind power very tight,” notes Lee Chun-li, deputy beneath the earth’s surface as its heat is causing it to neglect other forms of director general of the Bureau of Energy source. Unlike intermittent wind or solar renewable energy – including geothermal, under the Ministry of Economic Affairs. resources, geothermal power can oper- biofuels, and ocean power – that could Considering the challenges facing ate continuously and serve as baseload offer even greater advantages. Technical Taiwan’s energy supply, “the current power. However, geothermal reservoirs

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are accessible from only a small portion of the earth’s surface. Located along the seismically active Pacific Ring of Fire and replete with hot springs, Taiwan would seem a likely candidate for geothermal power development. The island has a long history of exploring geothermal power, having first considered its potential in the 1970s during the two international oil crises. But while such other countries as New Zealand and the Philippines took firm measures to develop the sector, Taiwan opted for nuclear power instead, largely abandoning geothermal. Geologic surveys conducted by the government over the years have found that the geothermal potential in Taiwan could be as high as 32 gigawatts (GW) of The small Chingshuei geothermal power plant in Yilan County. installed capacity, which would be suffi- PHOTO: WIKIPEDIA cient to supply most of Taiwan’s power needs. The administration’s goal for geothermal is modest, though. It plans extend beneath several private proper- drilling technology), together with ITRI. to have only 200 megawatts (MW) of ties. If a geothermal plant were to be built The largest of these projects, at Datun capacity in place by 2025 – less than 1% on one plot of land, no regulation would Mountain, will account for 150MW of of the total renewable power target. prevent a neighbor from doing the same, the total 200MW goal for 2025. Li Yi-heng, a senior researcher at the causing depressurization and loss of Industrial Technology Research Institute resource. Bioenergy (ITRI)’s Energy & Environment Research The Taiwan Geothermal Associa- Laboratories, attributes the limited reli- tion, an organization established mainly Over the years Taiwan’s research insti- ance on geothermal to Taiwan’s geology. by academics, is pushing for passage of tutes and universities have developed The island’s complex geological forma- a Geothermal Act modeled on similar various technologies to derive fuels from tions and vertical faults pose a major laws in the United States, New Zealand, organic feedstocks, and several biofuel obstacle. Further, the most readily acces- and elsewhere. The aim is to clar- startups have been launched. Some have sible geothermal resources are adjacent ify ownership and generate more inter- succeeded by focusing on higher value to volcanoes, but Taiwan has only one est in the sector. In the meantime, ITRI products. For example, ITRI spinoff volcano – at Datun Mountain in northern and academic institutions in Taiwan are Butyfix moved away from producing Taiwan. collaborating with research organiza- butenyl into higher-value chemicals. “It is actually riskier and more diffi- tions from abroad to study possibilities Others have concentrated on sales cult to explore for geothermal reser- for exploring and developing geothermal outside of Taiwan. Chant Oil, which voirs here than in Japan, the Philip- power in Taiwan. produces biodiesel made from waste pines, or Indonesia – all countries that To offset the risks, the Taiwan kitchen oil, sells its product directly to use more geothermal energy,” Li says. As Geothermal Association sought a 15% European consumers. Sunho Biodiesel with oil exploration, exploratory wells increase in the Feed-in-Tariff for 2020, Corp., founded by George Chou, must be drilled to confirm the location of but the government denied the request. formerly with Taiwanese infrastructure the reservoir. Drilling costs can be up to The current FiT for geothermal is set at developer CTCI Corp. and research insti- US$4 million for a two-kilometer-deep NT$5.19 per kilowatt-hour, higher than tute ITRI, likewise is looking abroad well, with only about a 30% success rate. for other renewables but still insufficient for business opportunities, especially in Most of Taiwan’s potential geothermal to stimulate investment, according to Lee Southeast Asia. “We don’t think there is a reserves are also located within Aborig- Chao-shing, professor at the Institute of chance to do biodiesel business in Taiwan inal lands or national parks or beneath Applied Geosciences at National Taiwan in the near future as there is no policy slope lands – all areas that are off limits Ocean University and a leading member support,” says Felicia Boendadjaja, a to development. of the Association. technical assistant at Sunho. In addition, Taiwan lacks clear rules The several small ongoing exploration Manuel Zehr, cofounder of Formosa governing ownership of the resource once projects are being carried out by state- Business Support Co., a consultancy it is discovered. Most developable land is owned enterprises Taiwan Power Co. and specializing in the renewable energy held in small, privately owned units, and CPC Corp. Taiwan (the oil company is sector, agrees. “There’s no future here any underground reservoir would likely the only firm in Taiwan with deep-well (for biofuels) since Taiwan’s landmass is

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STOCK PHOTO

limited and gasoline is dirt cheap thanks is not enough to overcome inertia in the So far, however, no cost-effective ocean to subsidies to CPC,” he said by email. sector, which remains underdeveloped. energy solution has been developed. “It makes more economic sense to grow Taiwan has excellent conditions for tea plants than produce biofuel.” Marine energy ocean energy, according to Tzang Shiaw- Taiwan canceled its biodiesel program yih, professor of Harbor and River Engi- in 2014 after complaints from consum- The ocean is a wide frontier for neering at National Taiwan Ocean ers that the fuel damaged their engines. renewable energy. Scientific publica- University. He notes that the powerful Previously, Taiwan had mandated the use tion World Ocean Review, in fact, says Kuroshio Current is closer to Taiwan than of B2 fuel – 98% petroleum diesel mixed that the energy contained in the turbu- it is to Japan or the Philippines. with 2% biodiesel. But high humidity and lence of the world’s oceans is “300 times Several companies in East Asia are the low sulfur content of conventional more energy than humans are currently seeking to tap into this potential powerful diesel resulted in microbial infestation of consuming.” energy source, including startup Minesto. the fuel, which plugged up engines. An array of technologies is being used The Swedish company is applying for a Taiwan does generate some electricity to try to tap this energy. They range from permit to launch a pilot project in collab- through biomass, but it is done by burn- large machines that harvest tidal power – oration with National Taiwan Ocean ing organic waste in incinerators. such as the 1.2MW SeaGen tidal stream University. The government is advocating the use generator in the UK – to flat, thin mate- Tzang says that other research proj- of anaerobic “digestors” to derive meth- rials that can harvest energy from the ects are also being explored, but that the ane from organic waste, with the meth- tiniest ripples on the water’s surface. sector is suffering from a lack of funding. ane then burned to drive turbines. Taip- Other technologies seek to harvest ocean “We need more government support,” ower will pay NT$2.6/kWh for power currents and waves, while some even he says. The problem is that the research generation from biomass incineration, derive energy from the difference in salt efforts would only bear fruit in the long but NT$5.1/kWh for power from anaer- content between freshwater and saltwa- term, he explains, but “the government obic digesters. The higher FiT, however, ter, called osmotic power. wants to replace nuclear power now.”

FINANCING OFFSHORE WIND POWER

Most of the funding for this portion of Taiwan’s energy development is coming from international banks, with much of it guaranteed by foreign export credit agencies.

STOCK PHOTO BY TIMOTHY FERRY

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aiwan’s ambitious program to ress. Largescale infrastructure projects cial-scale wind farm in Asia,” Macqua- promote offshore wind power as in Taiwan have typically been financed rie representative Ida Cheung noted by T a major energy source – installing directly by the government or, in the email. “Macquarie’s Green Investment over 700 turbines in the Taiwan Strait by case of electrical-power projects, by Group was able to leverage its global 2025 – will require an estimated invest- the state-owned monopoly, the Taiwan experience and networks in offshore wind ment of US$20 billion. Lacking expe- Power Co. Of the proposed 5,700MW to guide both local and international rience in the industry, Taiwan is rely- (5.7 gigawatts) of offshore wind capac- financing institutions through this ‘first- ing heavily on the participation of global ity, however, Taipower is taking charge of in-market’ process…which has paved the players by making a firm policy commit- only 410MW, with the rest being devel- way for the offshore wind industry in ment, offering attractive subsidized rates, oped by the private sector. Taiwan.” and adopting new financing models. Banks that have participated in Last month’s reelection of Presi- the funding of the various projects dent Tsai Ing-wen of the Democratic include ANZ Banking Group, BNP Progressive Party, a strong propo- Paribas, Crédit Agricole Corporate nent of renewable energy, reinforces and Investment Bank, DBS Bank, that government commitment. The ING Bank, MUFG Bank, Société losing candidate, Han Kuo-yu of the Générale, Standard Chartered opposition Chinese Nationalist Party Bank, and Sumitomo Mitsui Bank- (Kuomintang), had expressed skep- ing Corp. Copenhagen Infrastruc- ticism of offshore wind power and ture Partners, which has a Danish would likely have slowed down the pension fund as a major investor, industry’s development if elected. has also put billions of euros into “The election is a mandate to Taiwan offshore wind. see the energy transition through Much of these loans and invest- to a conclusion, and we expect the ments are backed by national export sector to move forward significantly credit agencies (ECAs), public enti- this year,” says Taipei-based Raoul ties that provide government-backed Kubitschek with international energy loans, guarantees, and insurance to consultancy Renewables Consulting support their countries’ export sales. Group. Reportedly, among the prominent In 2019 alone, global inves- ECAs active in Taiwan’s offshore tors pumped some US$5 billion into The Formosa-1 offshore windfarm as seen wind market have been Denmark’s from the coast of Miaoli County. Taiwan for offshore wind financing. EKF, Germany’s Euler Hermes, the PHOTO:TIMOTHY FERRY The first commercial-scale offshore Netherlands’ Atradius, and South wind farm was formally commis- Korea’s K-Sure. Through the ECAs, sioned last November. The US$636 What is known as limited or “non- in other words, foreign governments are million, 128-megawatt (MW) Formosa-1 recourse” project financing has been taking a big stake in Taiwan’s offshore project in the Taiwan Strait off the coast the key to mobilizing private capital for wind initiatives. of Miaoli County in north-central Taiwan offshore wind investment by distribut- is jointly owned by Danish power devel- ing risk. According to the Investopedia Hesitancy by local banks oper Ørsted, Macquarie Capital’s Green definition, “non-recourse finance is a Investment Bank, Japanese consortium type of commercial lending that entitles Taiwan’s own financial institu- JERA, and local industrial firm Swancor the lender to repayment only from the tions, especially the state-owned banks, Holdings. profits of the project the loan is fund- have mostly stayed on the sidelines. The In adjacent waters, construction began ing and not from any other assets of the exceptions include Cathay United Bank, during the same month of the even larger borrower.” Taipei Fubon Commercial Bank, EnTie US$2 billion, 376MW Formosa-2 wind- In this scenario, the project is desig- Commercial Bank, Taiwan Life Insur- farm project, owned by Macquarie and nated a “special purpose vehicle” and the ance, E.SUN Commercial Bank, CTBC Swancor. Last May, German energy SPV serves as the entity for borrowing Bank, and KGI Bank. But industry insid- developer wpd.AG and Japanese consor- funds and generating cash flow. The risk ers estimate that 90% of the financing tium Sojitz reached agreement to develop is on the SPV rather than specific inves- has come from international investors. a US$3.14 billion, 640MW windfarm off tors, and the collateral is the tangible “Local banks lack expertise in the Yunlin County in south-central Taiwan. asset of the wind turbines plus the Power offshore wind sector and are not famil- Innovative project financing models Purchase Agreement (PPA) that guaran- iar with the non-recourse financing struc- that were pioneered in the European tees the rate to be paid for the generated ture,” explained a representative of offshore wind sector but were unknown power over a 20-year period. Fubon Financial Holding Co. who asked in Taiwan before the Formosa-1 project “Formosa-1 was the first limited- not to be identified by name. have been crucial to the industry’s prog- recourse project financing of a commer- Mark Liu, Global Country Head

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 25

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ENERGY

of commission for a substantial period. Considering that the Taiwan Strait is in an earthquake and typhoon zone, such downtime is a real possibility. Yates and Leybourne note that Taipower may have “signed side letters with projects which give sufficient certainty that projects will receive the PPA price,” as that has been a common practice in other markets. Edgare Kerkwijk, board member of the Asia Wind Energy Association, notes that the banks that have entered the market have “taken quite an optimistic view with regards to the lending terms.” He sees the likelihood of “issues with grid capacity and availability which will lead to disputes regarding the interpreta- tion of the PPA.” Step-in rights allow lenders to take over a struggling SPV and are consid- President Tsai and other dignitaries attend the inaugural ceremony for the Formo- ered crucial to managing risk. Under sa-1 offshore windfarm. PHOTO:TIMOTHY FERRY Taiwan law, however, if an SPV fails, the lender only has the right to auction off in Taiwan of investment bank Société offshore wind are as high as NT$6.27 per the physical assets. The valuable PPA isn’t Générale, says that his company has kilowatt hour (kWh), while the 2020 FiT included, potentially enabling Taipower tried to help local banks get up to speed. for ground-mount solar fell to NT$3.93/ to renegotiate it for better terms at the “We’ve given a lot of training to the local kWh. As wind and solar energy availabil- expense of the lenders. banks. We even run seminars, pay visits ity is difficult to predict, the system runs The biggest challenge for the indus- to them, and offer some in-house train- the risk of generating too much power at try, however, is thought to be the 7.6% ing courses in regard to project financing, certain times. cut in the FiT announced at the end of focusing on offshore wind.” Still, “they In regional markets such as Europe, last year. The rate was reduced to NT$5/ feel uncomfortable financing these larger excess power can be dispatched to other kWh for a 20-year PPA, or NT$5.8 for projects,” he says. locations, but Taiwan’s isolated power the first 10 years, falling to NT$3.8 for While the election of Tsai Ing-wen has grid doesn’t have that option. To prevent the second decade. The reduction brings mitigated the political risk to the indus- overwhelming the system, some gener- Taiwan closer in line with other markets try, other issues may give local banks ators would have to be blocked from where rates are being cut to reflect falling some pause, even if international inves- transmitting their power. Considering the CapEx costs. tors don’t seem bothered. According to substantial difference in FiT rates, Tai- In Taiwan, government pressure for a study by British scholars Charles Yates power would have an incentive to trans- more local content by the industry has and Mark Leybourne, “the standard mit cheaper solar over expensive offshore kept CapEx costs from falling (some Taipower PPA does not provide investors wind power. insiders say CapEx costs will actually with enough confidence that the reve- With installed solar capacity totaling increase). The future economics of the nue from offshore wind projects is low- less than 3 gigawatts (GW) and offshore industry are therefore uncertain. risk.” The main issues pertain to curtail- wind 128MW, grid congestion is not Following the rate cut, the Taiwan ment of generation during times of grid yet an issue. Also, solar power is gener- Offshore Wind Industry Association congestion and step-in rights in the event ated during the day while there is gener- stated that “the actual development of project failure. ally more wind at night. Nevertheless, cost of the wind farm before 2025 has Many renewable energy markets if Taiwan were to achieve its goals of not changed, and there should be no have “priority dispatch rules” that obli- 5.7GW of offshore wind and 20GW of reason for the adjustment of the rate.” gate power transmission networks to solar power, it could have a significant The Association noted that despite the prioritize renewable energy in the inter- impact on the project revenues over the progress, the offshore wind industry in est of promoting sustainability and secu- course of a 20-year PPA. Y.D. Chang, Taiwan is still in its infancy, with much rity of supply. Although Taiwan’s Renew- wpd’s manager for public affairs, said by of the necessary infrastructure still to able Energy Development Act gives such email that the company has insurance be completed. It said that since devel- priority to renewable providers, it doesn’t coverage for such an eventuality. opers signed contracts with suppliers distinguish between solar and offshore A further issue is that the Taipower on the basis of the higher 2019 FiT, the wind energy. PPA contains no provisions to extend the reduction has put their business plans in Taiwan’s feed-in-tariff (FiT) rates for duration when a damaged turbine is out doubt.

26 TAIWAN BUSINESS TOPICS • FEBRUARY 2020

2 CoverStory.indd 26 2020/1/29 下午9:58 BACKGROUNDER

TAIWAN’S BOOMING PET ECONOMY

More and more young Taiwanese are choosing to own and raise pets instead of having children, causing a surge in the pet-care market and opening the door for STOCK PHOTO a wide variety of new products and services.

BY JEREMY OLIVIER

ather than having children, an itor’s Hong Kong office. “Manufacturers spiritual relationship with their pets, and increasing number of young are now focusing on specialty foods for have more respect for animals now.” R Taiwanese are opting to raise elderly dogs that contain vitamins or For Henley-Su, the idea for starting pets. A Council of Agriculture survey ingredients recommended by veterinar- her businesses came less from spot- found that there were more than 2.5 ians. For cats, wet food is being opted ting a market opportunity than it was million pet cats and dogs in Taiwan in for instead of dry food, as it is better a natural outgrowth of her interest in 2017 – almost double the number in for kidney health in cats who might not building a good relationship with her 2006. drink enough water.” own pets – two cats, whom she admits As a result of the declining birth The pet-care boom has been spurred she views basically the way parents rate and increasing pet ownership, this by a shift from more traditional ideas view their children. Her experiences year the number of pets in Taiwan is of pet ownership to a desire among first as a high school student in rescuing expected to surpass that of children aged Taiwanese to form a closer relation- and raising an abandoned cat and later 15 years or younger for the first time. ship with their pets, as has long been volunteering at an animal welfare NGO The dramatic rise in pet owner- the case among pet owners in Western for a decade imbued her with a passion ship in Taiwan has sparked a surge in countries. That shift has led to the for animal advocacy and for learning the island’s pet-care industry. Market appearance in the Taiwan market of a how to make pets feel safer and calmer research provider Euromonitor Inter- range of new products – such as high- in any situation. national, in its June 2019 report Pet tech, microchip-enabled feeding dishes While building the clientele for her Care in Taiwan, observes a steady and snuffle mats that allow dogs to find pet photography business, J. Su Photo, increase in pet-related retail purchases treats hidden inside – as well as such Henley-Su realized that many of the in Taiwan each year since 2015. Last specialized services as pet behavior owners she interacted with were expe- year, Taiwanese pet owners spent a advisers, photographers, masseuses, riencing difficult behavioral issues with projected US$713.9 million on pet hotels, and personal caretakers. A pop- their cats, similar to those she had pre- food alone, compared with US$494.5 ular recent trend in Taiwan is to hire viously faced with her own. “I started million in 2015, a more than 40% pet psychics, or “whisperers,” who to realize that resolving these issues increase. Spending on other pet prod- claim to be able to communicate with is what mattered the most to these ucts – including healthcare-related pets and relate what they are thinking owners, rather than having beautiful retail items – rose from US$283.2 mil- to their owners. photos of their pets,” she says. lion in 2015 to a projected US$402.9 “People are starting to realize that Inspired by her client’s stories, she million last year. it doesn’t matter what the animal did some research and found a certi- “We are seeing a growing trend in looks like or what breed it is,” says Jill fication program from a U.S.-based sales of healthcare-related products, par- Henley-Su, a certified cat behavior con- organization called International Asso- ticularly foods, in recent years,” says sultant and pet photographer based in ciation of Animal Behavior Consultants. Christina Chien, an analyst at Euromon- Taipei. “Rather, they’re focusing on the After becoming certified as a behavior

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 27

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consultant specializing in felines, she Su’s. Although she began her career as shops she partners with. Regarding cur- founded Pet Buddy, through which she a graphic designer, the sudden death rent pet-product trends in Taiwan, Liu works with clients on how to improve of her rescue dog pushed her to recon- observes that there has been a shift their cats’ behavior and consequently sider what she wanted to do with her away from cheap toys with no deter- the pet-owner relationship. She is now life. Liu started by learning TTouch, minable benefits for the pets. Instead, one of only a handful of pet behavior a type of circular touching technique creative products and services aimed consultants in Taiwan. Though the con- designed to help animals relax, through at improving animal wellbeing are cept is still relatively new, word-of- an instructor in Japan. Two years ago, becoming more popular. Goods like the mouth recommendations and a few she went on to study animal massage snuffle mat target common problems local media appearances have helped through a U.S. institution, and now such as separation anxiety and exces- boost her client list over the past two incorporates both methods in a holistic sive barking in dogs. years. approach that she says reduces stress Chien of Euromonitor makes a Pet Buddy’s clients cover a range and muscle pain in pets. She provides similar observation, noting that as Tai- of demographics – younger and older, her services through her main company, wanese pet owners are putting more single and married, and both middle- HooHoo Animal. emphasis on their relationship with and upper-income. She also notes that Many of Liu’s clients own older pets their animals, products designed to she is “the most LGBT-friendly cat con- who have mobility issues due to tight increase interaction are on the rise. sultant in the industry.” One common muscles in their hindquarters. While Given the more independent nature thread, however, is that the vast she mainly focuses on dogs, she has of domesticated cats, toys that allow majority of the pet owners are child- also worked with cats and rabbits, and owners to engage in play with their cats less. They have chosen to raise a pet in notes that some masseuses will even ser- are increasingly in demand. lieu of a child, and a substantial por- vice hamsters and other small pets. The tion of each month’s income tends to go owners that Liu works with are mostly Pet-sitting or caretaking? toward their pets. in a relatively high income bracket and Pet owners who opt for private generally do not have children. “How- Since a large portion of Taiwan’s behavior consultation, says Henley-Su, ever, one thing all of my clients have in new pet owners are young professionals also tend to be those who possess at common is that they care a lot about with at least a reasonable disposable least a basic level of understanding of the comfort and happiness of their pets, income, the question often arises as to pet care and are sensitive to their pets’ rather than merely giving them food what to do with their companions while needs. The same goes for those who and a place to sleep,” she adds. they’re at work or on vacation. Some seek out the services of Natasha Liu, a Liu’s other business, HS Enterprise companies and organizations do have Taipei-based pet masseuse and agent for Co., focuses on importing specialty pet-friendly policies, particularly in specialty pet products. pet products – in particular, a made- Taipei, but these are still rare elsewhere Liu’s beginnings in professional in-Korea snuffle mat for dogs, and on the island. pet care are quite similar to Henley- selling those products through pet In the rush to fill the void, dozens of boutique pet hotels have popped up throughout Taiwan in recent years. These differ from the traditional kennel in that they generally hire trained staff, provide 24-hour care, and contain common areas for pets to play and socialize. Such pet hotels generally charge between NT$1,200 and NT$1,500 (US$40 to$50) per day for boarding. But even upscale pet hotels come with their own issues, including the spread of illness as well as personality clashes between animals of different temperaments, which may lead to sit- uations that staff members are not equipped to handle. Some animals, says freelance pet caretaker Nina Cheng, are just not fit to be boarded away from home in unfamiliar places. Cheng and her business partner and hus- Cat behavior consultant Jill Henley-Su works with clients to develop and strengthen their relationship with their cats. band, Da Shu, therefore occupy a role PHOTO: JILL HENLEY-SU that is increasingly in demand by well-

28 TAIWAN BUSINESS TOPICS • FEBRUARY 2020

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informed pet owners: pet caretakers providing on-site services. Cheng and Da Shu live in New Taipei City’s Tamsui District, but due to a constantly expanding client list, they frequently travel across both Taipei and New Taipei Cities throughout the week. Their business model – services tailored to individual pets’ habits and needs, but less expensive than boarding them at kennels or pet hotels – became so popular through word-of-mouth and effective social- media marketing that a few local news outlets ran stories on the couple. “We’ve been offering on-site caretaking for seven years now, and promoting ourselves online the whole time,” Cheng says. “We’ve found that owners really appreciate this kind of service; rather than worry about their pet when they’re away, they can simply go online, ﬁll in a form, and we come and provide our services at the requested date and time.” Beyond the new products and services now available in Taiwan, pet owners also have to deal with the high cost of healthcare for their animals. Although most estimate that their biggest expense is food – pet masseuse Liu spends around NT$5,000 (US$170) PHOTO: NATASHA LIU monthly on food for her dog – pet- related spending skyrockets if medical Starting from mid-2018, however, says, Fubon is the only non-life insur- attention is required. Henley-Su of Pet several additional insurance companies ance company offering reimbursement Buddy says that when her cats became have entered the market, offering plans for allergic reactions to vaccines and ill last year, the amount she and her with expanded coverage and lower pre- blood transfusions. husband spent on pet care rose to miums. The first of these plans was Chen says that based on the com- around NT$60,000 (US$2,000) per offered by Fubon Insurance, a sub- pany’s analysis, the overwhelming month, most of it on medical treatment. sidiary of Fubon Financial Holdings. majority of those who have taken out The cost generally rises for elderly ani- Executive Vice President Victor Chen pet insurance are female. Jill Henley-Su, mals. Caretakers Nina Cheng and Da notes the company began offering its Natasha Liu, and Nina Cheng all say Shu say that their 12-year-old cat’s accident and sickness insurance to help that while they are aware of the recent recent dental treatment set them back relieve the financial burden pet owners increased availability of pet insurance NT$25,000 (US$835). face in getting the medical care their in Taiwan, they have not given insuring There is no convenient, inexpen- animals need. their pets much more than a passing sive single-payer insurance option for Fubon’s accident insurance covers thought. Very few of their clients have animals, for whom some medical opera- all types of pets of all ages, doesn’t done so, either. tions can cost twice as much as for their require a medical report or examina- Liu says that the concept is still very human counterparts. In 2012, a couple tion, and places no restriction on which new, and that it generally takes around of local non-life insurance companies animal hospital or clinic can be visited. two to three years for such trends to began offering injury and medical treat- Pet owners aren’t responsible for extra fully catch on in Taiwan. Henley-Su ment insurance for pets, but the cost of deductibles when claims are settled. says she is doing due diligence on the these plans was high and the scope of For the sickness insurance, on the idea of pet insurance, and in the mean- coverage quite limited. Dogs aged nine other hand, pets must be seven years time is maintaining an emergency fund years or older, or cats over the age of old or younger when first insured, in a bank account in case another med- 11, were denied coverage, as were those though they can continue to be insured ical issue arises. She recommends that with certain pre-existing conditions. until they are 16. In addition, Chen other pet owners do the same.

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 29

pet.indd 29 2020/1/29 下午10:27 Are You Reading a Borrowed Copy?

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MULTI-LEVEL MARKETING’S DEEP ROOTS IN TAIWAN

Despite some negative public attitudes, this business practice has been highly popular with local consumers and would-be entrepreneurs.

BY STEVEN CROOK

ew businesses face greater rep- in the previous year of NT$83 bil- industry. The sales ﬁgure of NT$83 bil- utational challenges in Taiwan lion (US$2.75 billion), ranking Taiwan lion represented a 6.31% decrease from F than the multi-level marketing tenth in the world, ahead of some larger the previous year, the ﬁrst decline in 10 (MLM) industry, also known as net- economies, including the UK. Dietary years. At the same time, the figure of work marketing or direct selling. Past supplements accounted for 60.7% of 3,049,000 Taiwanese participants in unethical practices by a minority of the revenue, followed by beauty-care MLM programs represented an increase companies have caused the industry to items (15.7%) and cleaning products of 6.6% from a year earlier. Of those be heavily regulated, and many con- (5.4%). participants, 962,000 were newcomers sumers are leery of the business model, Although the industry in Taiwan for to the industry, indicating considerable identifying it with a pyramid scheme ( many years was regulated under the distributor turnover. or “mice club” in Chinese). Fair Trade Act, a dedicated Multi-Level Typically the MLM enterprises “In terms of both public attitude and Marketing Supervision Act (MLMSA) includes two types of participants – the regulatory environment, conditions was passed in 2014. The law recognizes those who simply wish to buy the in Taiwan are unfriendly,” says Ceasar that the business model is based on products and those who want to build a Chen, general manager of Herbalife individual participants’ enlisting of new business by selling to others. Herbalife’s Nutrition Taiwan, an MLM company entrants into the enterprise – thus cre- Ceasar Chen suggests that Taiwanese specializing in nutritional supplements. ating multiple levels of sales personnel. are drawn to MLMs for the same Yet despite those disadvantages, But whereas pyramid schemes pri- reason the island’s economy is domi- MLM has done extremely well in oritize the recruiting of “downlines,” nated by SMEs. “The entrepreneurial Taiwan. A 2018 survey by the Fair whose sales and recruiting efforts gen- spirit is very strong here,” he says. Trade Commission, the industry regu- erate income for the “uplines” who “Many people would rather be a boss lator, found that slightly over 3 million brought them into the company, the than work for a company.” Taiwanese – equal to about 13% of MLMSA outlaws that kind of orga- the total population – had at least one nizational structure. Article 18 of the A bit of background MLM business connection in the pre- law stipulates that the major income of vious year. In the U.S., where the MLM enterprises must come from “pro- Shirley Chen, general manager of MLM concept is believed to have origi- moting and selling goods or services at Amway Taiwan, notes that the industry nated, the proportion of the population reasonable market price,” rather than has been impacted by a small number engaged in the sector is less than half relying mainly on earnings from the of “unscrupulous operators who don’t the Taiwan level. introduction of new participants. abide by business ethics, even though The survey of 346 direct-selling The 2018 survey found conflicting “some of them aren’t actually direct- companies also showed total sales evidence regarding growth in the selling companies but are mistakenly

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 31

MLM.indd 31 2020/1/29 下午10:15 TAIWAN BUSINESS

regarded as such.” She stresses that “what we want is a clean and fair market environment.” Amway began operations in Taiwan in 1982. At that time, “local media and the public were not very friendly toward foreign direct-selling companies,” Shirley Chen says. But “the concentrated cleaning products and nutritional supplements we brought into Taiwan aroused the awareness of local consumers to environmental protection and the concept of health foods.” Taiwan is now one of Amway’s top six markets, with around 360,000 registered Taiwanese members and Amway Business Owners (ABO). At the same time, the growth of e-commerce has been a challenge – and has likely been a major factor in the recent slide in MLM revenues. “All A moment of levity at an Amway training session. e-commerce and traditional retailers are PHOTO: AMWAY our competitors,” says Shirley Chen. “Amway Taiwan launched an e-com- also made millions from training ses- 100,000 members are business builders. merce platform in 2012. We’re still sions and rallies. Most of the others enjoy the discounts optimizing various one-stop mobile ser- Among the Taiwanese who prefer and other benefits of memberships but vices and integrating mobile aids that MLM to a conventional career do not sell. Compared to other MLMs help ABOs develop their businesses.” is Hsinchu resident Tiffany Yeh. in Taiwan, Herbalife distributors are Last September, Amway also intro- Returning from graduate school in somewhat younger, more likely to be duced a new compensation policy that Missouri in 1992, Yeh took a job at female, and more likely to be “active” allows ABOs to earn a higher income the Industrial Technology Research (defined by the FTC as ordering prod- in the initial stage of their business. “To Institute. That same year, a cousin ucts at least once per month), he says. meet the needs of today’s gig economy introduced her to Nu Skin Enterprises, Herbalife’s products fall into three and part-time entrepreneurship, we which had just established its Taiwan categories: weight management, healthy provide more than 100 free training branch. aging, and sports nutrition. “Right courses to help ABOs learn product and Impressed with both the company’s now, sports-related products account business administration knowledge,” skin-care products and its philosophy, for just a few percent of our revenue in Shirley Chen says. Yeh signed up as a representative right Taiwan,” says Ceasar Chen. “But long Eddy Chai, a native of the Malay- away. Twelve years later, she quit her term, we can see the potential.” sian state of Sarawak, speaks highly of job to focus on Nu Skin sales full time. Because selling such products the Amway experience that started him Making lots of money was not her main requires knowledge and ongoing sup- on his MLM career. While running a goal, she says. Rather, she savors the port, “we equip our distributors with restaurant in British Columbia in the flexibility and freedom of working for nutritional information,” he says. late 1970s, he was invited to become a herself and enjoys the satisfaction of “We don’t discuss medical claims or distributor by a customer’s son. Soon “helping my downlines develop their the treatment of diseases, but we do afterward he made his way to Taiwan, businesses.” talk about how a balanced, nutritious where Amway was preparing to launch. Asked how many hours per week diet can prevent diseases. We need dis- “I was making NT$70,000 to $80,000 she puts into Nu Skin, Yeh ﬁnds it dif- tributors who care, who can build per month [in the early 1980s],” he ficult to come up with the answer. relationships and create communities. says, noting that this was then far more Defining where socializing ends and This is what we call the ‘distributor dif- than the average salary in Taipei. work begins is not easy, she points out. ference.’” Shirley Chen says that of Amway’s “Sometimes, when I’m with friends, In Taiwan, as elsewhere, “nutri- global top 10 ABOs, four are from they buy products or ask me question clubs” are central to Herbalife’s Taiwan. The best known is Holly Chen, tions about doing Nu Skin,” says Yeh. strategy. Close to 1,000 have been an ex-teacher proﬁled in the Wall Street “Overall, I think I spend more time established across the island. Typical Journal on February 15, 2012. Esti- retailing than recruiting.” attendance is 15 to 20 people, each mates of her MLM earnings have been Ceasar Chen says that at Herb- paying a small amount to enjoy a Herb- as much as US$8 million a year. She has alife only 30% of the approximately alife shake. Often, there is a workout

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session they can join. Distributors of the person who brought him or her attracting ‘slash youth’ [those pursuing receive advice and posters from the into the company. a combination of different occupations] head office, but need to find and rent In 2008, Chai left Forever Living and the number of under-35s among venues, pay utility bills, and promote and set up an MLM enterprise called newly joined ABOs has increased to their clubs. Diamond Lifestyle Corp. where he nearly 40%.” “We educate our distributors continues to be the CEO. While the Whether it is because they lack sales- that if you want to build a sustain- company is doing well in Vietnam and manship or lose interest – or, as some able business, nutrition clubs are the the Philippines, Chai says, it has yet to critics allege, the industry draws people most effective DOM [daily operation make notable progress in Taiwan. “Sad in with unrealistic tales of breathtaking method],” says Ceasar Chen. to say, we haven’t found ‘the general’ – financial success – only a minority of the key person who will make us boom Taiwan’s MLM member-representa- Domino effect here,” he laments. tives make any money for themselves. According to Shirley Chen, the The FTC survey found that just 27.15% Eddy Chai, who between 1987 and number of Taiwanese involved in received payments in 2018, with the 2008 served as Forever Living’s man- Amway has remained relatively con- average payment paid over the year aging director in Taiwan, advises people stant in recent years at around 360,000. coming to just NT$46,427. thinking of joining an MLM to care- “Some 60% of them are ABOs who Not all who fail to get rich through fully examine its marketing and rewards can sell or buy Amway products and MLM turn their back on entrepreneur- policies. Few network marketing com- sponsor others to be ABOs or members. ship. Chai is convinced that some people panies offer plans that are both fair and They receive bonuses and non-cash who cut their teeth doing network mar- viable over the long term, he says. awards once they reach a certain level,” keting learn skills that they put to good Attractive rewards may encourage a she says. “The other 40% are con- use in later ventures. He notes that three distributor to recruit downlines, but if sumer-members who aren’t allowed to former distributors he worked with now the latter cannot make money for them- sponsor downlines or receive bonuses.” run their own listed companies, two in selves, sooner or later they are likely to Only around 20% of ABOs actively Malaysia and one in Taiwan. give up, Chai says. If revenue from the sell products and recruit downlines, but Shawna Wang, president of downlines dries up, the distributor him- Chen says Amway Taiwan continues doTERRA Taiwan & Hong Kong, says self may well quit, in turn producing the to attract fresh blood. “Our mobile that over 90% of the company’s well- “domino effect” of reducing the income and social commerce strategies are ness advocates (WAs) in Taiwan are

doTerra Taiwan training event PHOTO: DOTERRA

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STOCK IMAGE

“general consumers who do not initially and we’ve made some progress.” requirement seriously and sometimes see doTERRA business as their career.” It takes at least 18 months to bring seeks clarification before giving permis- Rather, “they join because of health a new product to market in Taiwan sion via email. “Why should we be at benefits they’ve gained from our prod- because the testing and labeling require- a disadvantage competing with retail ucts. They consist mostly of mothers ments are so complex. Ceasar Chen, companies that don’t need to do this?” who choose a natural way to health to who is co-chair of AmCham’s Retail he asks. protect their family members.” Committee, says the authorities have Amway’s Shirley Chen is the current doTERRA sells essential oils and been receptive to suggestions that the chair of Taiwan Direct Selling Asso- related products. The company’s process be streamlined. ciation (TDSA), whose 50 member Taiwan branch, its first outside the U.S., Another difficulty, says Amway’s companies account for an estimated “has recorded double-digit growth for Shirley Chen, is that the tax code is 50% of the total revenue of Taiwan’s nine consecutive years and has so far unfair to ABOs without downlines, MLM industry. Since its founding accumulated approximately 170,000 because in reality they are merely con- in 1990, the group has worked “to WAs,” Wang says. She notes that the sumers of Amway products. She also enhance professionalism, dispel peo- expansion has been achieved despite urges amendment to the MLMSA to end ple’s doubts about direct selling, and some regulatory hurdles. “Many pop- the current prohibition on the use of enhance trust between companies and ular U.S. products aren’t allowed here, electronic contracts with sales represen- their distributors.” Member compa- because of restrictions on the applica- tatives. “Compared to paper documents, nies follow a code of ethics which Chen tions of and ingredients used in essential e-documents are easier to preserve,” she describes as “stricter than existing oils. These rules became stricter after says. “Besides, the use of e-documents national standards.” the Cosmetic Hygiene and Safety Act matches the current trends of digitiza- Acknowledging that more than 300 took effect this July.” tion and environmental protection.” MLMs active in Taiwan have yet to join “Regulations in Taiwan concerning She also advocates abolition of the the TDSA, Ceasar Chen says: “Getting nutritional products are very strict, special reporting system that requires more companies to participate would and sometimes we can’t be as specific MLM companies to file with the be the first milestone we need to achieve as we’d like about the function of a authorities when launching new prod- if we’re to overcome the industry’s neg- product,” which sometimes causes con- ucts. “Our products already have to ative legacy. Through TDSA, we can fusion for consumers,” says Herbalife’s obey labeling regulations and ingredient prevent problems and regulate our- Ceasar Chen. requirements, so we hope the author- selves, so companies won’t do anything He cites lutein, a carotenoid found ities can treat us and FMCG [fast- that harms the MLM industry.” in spinach and yellow carrots, as an moving consumer goods] companies TDSA has worked with the govern- example. “Here, we can’t promote it as the same,” she says. “This would avoid ment-backed Multi-Level Marketing beneficial for the eyes, but in the U.S. needless duplication of administrative Protection Foundation (MLMPF) to and other markets we can,” he says. processes and provide a fairer develop- establish a mechanism to handle dis- Vendors who break the law are subject ment environment for the industry.” putes between direct-selling companies to relatively modest fines, which some Alex Lin, Herbalife Nutrition’s gov- and participants. For its part, the FTC – smaller companies factor in as a cost of ernment affairs manager, explains that which did not respond to an interview doing business. “Herbalife cannot risk the law also requires MLM companies request – devotes considerable attention the damage [to our reputation], so we to report in advance to the FTC every to the direct-sales industry. Of the 72 act more conservatively,” says Ceasar promotion, public event, or amendment fines it imposed between January and Chen. “But we’ve discussed with the to company rules affecting distribu- November 2019, 41 were against MLM authorities what claims we can make, tors. The government agency takes this companies.

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A Look at the Property Market

PHOTO: MATTHEW FULCO TAIWAN BUSINESS TOPICS • FEBRUARY 2020 35

2 IF.indd 35 2020/1/29 下午10:17 INDUSTRY F CUS

TAIWAN WEATHERS THE GLOBAL MARKET COLD FRONT

BY JAMIE CHANG ASSISTANT RESEARCH MANAGER JONES LANG LASALLE

everal major global economic tenant type, and management, etc. and political factors – namely, – are also taken into account when S the U.S.-China trade dispute, defining classes. The city fringe Brexit, the protests in Hong Kong, largely consists of industrial offices in as well as volatile oil and commodity the Neihu and Nangang districts. IN THIS REPORT prices – cast a shadow in the past The Taipei Grade A office market year over global demand, trade, and consists mainly of four submar- industrial production. In Taiwan, kets: Xinyi, Dunhua North, Dunhua the presidential election and cross- South, and Non-Core Central Busi- Strait relationship added uncertainty, ness District (See Fig. 1). Each potentially dampening the economic submarket has distinguishable char- outlook. acteristics and is therefore attractive • Taiwan Weathers the Global Market Cold Despite the various concerns, to different types of corporate ten- Front p36 however, the domestic leasing and ants. As most Grade A buildings investment market showed robust are reaching full occupancy, lease growth in 2019. New market transactions in recent quarters have entrants signing leases and ten- been small to mid-scale. Quarterly • Housing Prices in Taipei: Leveled Off but ants relocating in order to upgrade demand in terms of net absorption Still High p39 or expand have heightened leasing (also referred to as net take-up) was demand and fostered rent growth. recorded at 5,498 ping/18,171 sqm The investment market has thrived, in 4Q19. Among the four submar- with developers acquiring land par- kets, Xinyi and Non-Core CBDs are • Flexible Working Space Fever Hits Taipei cels, businesses purchasing self-use nearly full. p41 real estate for operations, domestic Therefore, tenants have focused insurers engaging in investments, and their inquiries on space surrendered local corporations buying hotels. The from previous relocations in Dunhua total land investment volume even set North and South. The annual net • Taiwan’s Offices Get 21st Century Upgrade a new historical record. take-up in 2019 was 29,642 ping, p43 a decrease of roughly 50% year-on- Leasing year from the supply peak in 2018 (Fig. 2). The overall vacancy rate Jones Lang LaSalle (JLL) divides dropped 4 percentage points (PPS) to offices into three major classes: 2.1% on an annual basis, reaching a Grade A, Grade B, and industrial historical low. office buildings on the city’s fringe. Due to the lack of ample vacan- Grade A and Grade B offices tend cies, many corporate tenants have to be located within major business postponed their relocation plans to districts in Taipei City. But building await available stocks or acquire characteristics – such as the building self-occupied units/buildings. The façade, floor area, ceiling height, majority of the demand in 2019 came

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mainly from the tech, biotech/pharmaceutical, retail, co-working, and finance Figure 1. Taipei Office Submarkets industries. Rent growth continued to be fueled by low supply and newly signed leases. As JLL forecasted at the beginning of 2019, the annual rent growth reached around 3%. The average rent at year-end was Non-Core recorded at NT$2,806 per ping/month, an increase of 2.9% year-on-year (Fig. 3). Dunhua North As vacancies became scarce, most building owners also lowered the rental Non-Core CDB incentives in terms of the rent-free period. The decrease was significant, Dunhua South Xinyi dropping from 0.8 to 0.7 months/year, and it is likely to decrease further as the vacancy rate continues to dip and there is no additional supply in the next four to five years. The strong office demand spills over to other grades of offices as Grade As continue being filled up. The JLL market survey also indicated that tenant relocations pushed the vacancy of industrial offices in the city fringe, i.e. Neihu and Nankang, to drop annually by 0.2 per- Figure 2. Taipei Office Supply and Demand centage points to 3.3%. Since most Ping building owners retained the same rent 70,000 25%

level, the average rent edged up only 60,000 moderately by 0.2% y-o-y to NT$1,416 20% per ping/month. 50,000 15% Plans call for up to 150,000 ping of 40,000 new supply to enter the industrial office 30,000 pipeline in the city fringe. This area is 10% likely to attract tech and gaming compa- 20,000 5% nies, new start-ups, and firms intending 10,000 to establish data centers or back offices. 0 0% Grade B offices experienced the same 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F trend as industrial offices. For the first New Supply (LHS) Take-up (LHS) Vacancy Rate (RHS) half of 2019, tenants were drawn to the Grade A market, while the surrendered Grade B space started to see demand in the second half. The vacancy rate Figure 3. Rent vs Vacancy decreased 1 percentage point to 3% at year-end. The average rent edged up by a $3,200 20.00% mere 0.2% to NT$1,774 per ping/month 18.00% as building owners with vacancies offered $3,000 compatible prices to attract leases. 16.00% $2,800 Future Outlook: JLL’s latest Global 14.00% 12.00% Market Perspective discovered that the $2,600 effects of various global trade and geo- 10.00% $2,400 political concerns are gradually being 8.00%

reflected in the real estate market. Since NTD/ping/month $2,200 6.00% business sentiment around the globe gen- 4.00% $2,000 erally tends to be more cautious and 2.00% $1,800 0.00% conservative, many companies have post- 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20F poned their relocation or expansion Rent Vacancy plans. Leasing demand recorded a drop

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 37

2 IF.indd 37 2020/1/29 下午10:18 INDUSTRY F CUS of 4% year-on-year in 3Q19. This trend is forecast to continue, Figure 4. Major Direct Real Estate Investment Volume with global volumes expected to end the year down around 5% in 2019, with a further slowing of 5-10% anticipated in 140 2020. The upcoming large global office 120 supply influx is likely to boost vacancies 95.8 100 and dampen rent growth. The aggregate rental growth for prime offices across 80 major markets is seen as remaining pos- 60 NTD/Billion itive, ending 2019 at around 2.8%. As 40 supply options increase globally in 2020, 20 growth is expected to moderate further 0 to around 1.5%. 2012 2013 2014 2015 2016 2017 2018 2019 Domestically, following the office supply and demand peak in 2018, the Q1 Q2 Q3 Q4 leasing market has moderated, with new leases mostly committed to small- to mid- sized units. Demand remains robust, focused on land parcels or buildings sit- CBDs to develop residential or office largely supported by new market entrants' uated within major urban centers, and buildings for sale and/or lease. Besides the demand for space and current tenants' industrial properties acquired for self-use. top deals, most plots of land were pur- intention to upgrade their buildings and/ Since the tightening of office supply, chased by businesses seeking to develop or areas/amenities. However, the tightened investors have been actively purchasing self-occupied headquarters or manufac- office supply has forced many to delay partial or en-bloc buildings for oper- turing facilities. relocation or building upgrade plans. ations or investments. It is also worth JLL’s records indicate that domestic Strong demand and low market noting that the impact of businesses' insurers invested NT$39.1 billion in real vacancy have dampened rent growth. In reshoring back home is gradually estate in 2019. The top 10 insurers have particular, there are no large-scale prime/ being felt. Several deals were made by only allocated 10-20% of the available Grade A building additions planned for returning manufacturers purchasing funds in real estate investment. The avail- the next three years, so rent growth is factories or plots of land to expand pro- able funds permitted by the Financial likely to be more significant. The growth duction in Taiwan (Fig 4). Supervisory Commission for insurers to is projected to be around 3.5% in 2020. The major transaction types last invest in real estate reached NT$6.1 tril- Office demand will still center around the year involved industrial facilities (48%), lion, a year-on-year increase of 11%. finance, hi-tech/IT, gaming. and biotech/ offices (36%) and hotels (15%). Due Since domestic funds are abundant pharmaceutical industries to the current shortage in office space but there is only a limited supply on the Upcoming industrial office building supply, many have entered pre-sale deals market of investable properties with completions in the city fringes are set on buildings currently under construc- ideal returns, institutional investors – to reach 170,000 ping. Some demand tion. The largest transaction was by a besides remaining observant for direct is likely to be drawn from the Grade A domestic financial institution buying property acquisitions – have also been market, particularly lessees in aged build- a forthcoming office tower in the city keeping an eye on land development ings. Moreover, businesses demanding fringe. The second and third major deals projects, leaseholds, foreign properties, office space have been actively seeking involved hotels – CitizenM Taipei in the public infrastructure, or alternative prop- pre-lease opportunities in the past two Ximending area of Taipei and the 85 Sky erty niches such as logistics, industrial, or years. Since there have been no new addi- tower in Kaohsiung. medical buildings. tions, some of them are beginning to Government leasehold projects and inquire about pre-sales of self-use units. developers’ stocked-up land parcels con- Future Outlook tinued driving land transactions in the Investment Market fourth quarter. Major land transactions in JLL's latest Global Market Perspective 4Q19 totaled NT$61.4 billion, pushing showed that the slowdown in the global Investment volume amounted to the annual volume to NT$221.3 billion economy is starting to filter through to NT$26.3 billion in the final quarter of to set a new historical record. The most real estate market activity, with a slight 2019. Corporate purchasers and insti- significant transaction was the sale of the moderation in investment and leasing vol- tutional investors closed deals before former Living Mall in Taipei CBD. The umes expected, albeit from record levels. the end of 2019, pushing the total for purchaser intends to redevelop the plot The capital available for deployment into the year to NT$95.8 billion. It was the with four office towers. real estate is near an all-time high, and second highest volume since the Euro- Other major deals were made by investors continue to target the sector, pean debt crisis rebound in 2015. insurers and developers acquiring land although their greater caution and selec- Investment activities in 2019 mostly parcels or development rights in major tivity indicate that global investment

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activity is likely to be marginally lower nesses returning home from China have erty sectors, public projects, joint- for the full year. affected the real estate market. Supply venture developments, foreclosure The third quarter saw an uptick in shortage has driven corporate occupiers auctions, and cross-border proper- activity in global real estate markets as and/or investors to actively seek pre- ties. We anticipate that the market year-on-year sales transaction activity lease or pre-sale opportunities, engaging momentum is likely to be sustained not rose by 13% to US$205 billion, bringing in developments on freehold or lease- only by institutional investors but also activity through the end of 3Q19 to hold lands. by businesses reshoring operations back US$550 billion, which is 1% better than Moreover, since properties with ideal to Taiwan as a result of the trade dispute the same period the year before. Polit- locations and decent returns are scarce, between the U.S. and China. ical and economic uncertainties remain domestic investors will remain active in Governments at all levels in Taiwan prominent, with issues such as Brexit and seeking and grasping investable opportu- have also been working on the simpli- the U.S.-China trade tensions still unre- nities. Local insurers have been actively fication and improvement of the urban solved. In this environment, final figures acquiring and seeking both strata or en- renewal application and review process. are expected to show investment in global bloc deals. Additionally, we have also After all, urban renewal is imminent and commercial real estate in 2019 to have seen domestic insurers acquiring land vital, especially for major municipal cen- moderated by about 0-5% to roughly parcels to develop offices both in and ters, as it not only quenches the thirst for US$750 billion. outside the Taipei CBD. supply but also improves the safety and On the domestic front, the lack of Abundant funds have also driven well-being of occupants and dwellers, as office supply, aging buildings and busi- investors to look into alternative prop- well as rejuvenating the urban image.

HOUSING PRICES IN TAIPEI: LEVELED OFF BUT STILL HIGH

Government measures to cool the residential property market have been successful, but prices remain high in the most desirable markets, putting homeownership out of reach for many Taiwanese.

BY MATTHEW FULCO

he Taiwan government has in the nation’s capital is a whopping 59% of factors unique to the city. That makes spent years trying to cool a red- of household income, whereas prop- addressing the problem challenging for T hot residential property market. erty analysts recommend that a mortgage policymakers. Curbing sales to foreign Measured in terms of controlling price burden not be higher than 30%. buyers – a standard tactic for cooling growth, the policies have borne fruit. In terms of the price-to-income ratio, overheated property markets around the The problem is that the measures to housing in Taipei is costlier than in world – will do no good. tame speculation came late, after about a London, New York, Tokyo, and Singa- The fundamental problem is one decade of surging prices. pore. In Asia, only Hong Kong, where a of supply and demand. As Taiwan’s Between 2005 and the end of Tai- home costs the equivalent of 21 years of capital, Taipei attracts people from wan’s residential property bull market in annual income, according to investment throughout the country, yet housing 2014, average housing prices rose 70%, bank UBS, is more unaffordable than supply is tight. The slow pace of urban according to a 2015 Brookings Insti- Taipei. renewal cannot meet demand, and there tution report. Outpacing the national Unlike those other cities, Taipei is is little public housing. Because of Tai- average, prices doubled in Taipei. not a hub for global capital, nor is it a wan’s susceptibility to earthquakes, The typical Taipei apartment costs favorite playground of the global super buildings above 50 meters must meet 14.5 times the median annual house- rich. Remarkably, domestic demand is rigorous safety standards, making resi- hold income, according to Ministry of entirely responsible for Taipei’s sky-high dential skyscrapers a rarity. the Interior data. The mortgage burden housing prices, driven by a confluence Finally, Taipei itself is relatively small

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 39

2 IF.indd 39 2020/1/29 下午10:18 INDUSTRY F CUS at 270 square kilometers – 114 of which belong to Yangmingshan National Park. By comparison, the area of Singapore is 722 square kilometers, Hong Kong Island is 1,106, and Tokyo 2,188. At the same time, Taiwanese have a deep-seated cultural preference for homeownership. The homeownership rate of 85% is among the highest in developed countries. “Renting isn’t viewed favorably in our culture,” says Ping Lee, head of research for property consultancy CBRE in Taiwan. “Taiwanese believe owning a home is essential for stability and building wealth. If you want to get married, you need to have a house.” For those with money to invest, residential real estate has long been a preferred option in Taiwan, particularly in The housing supply in Taipei is tight. Urban renewal has proceeded slowly, and there is little public housing. Taipei’s central business district. That’s PHOTO: MATTHEW FULCO not for lack of other investment options, as Taiwan has highly developed capital according to data compiled by property tax is 15%. markets. However, “Taiwanese would developer Cathay Real Estate. In Taipei, The new taxes have been effective, prefer to put their money in property they rose 50%. as Taiwan’s property market has cooled rather than the bank or the stock market, Many countries implemented loose considerably since 2014. In 2016, trans- or anything else,” Lee says. monetary policy alongside low interest actions fell to 182,287 units, the lowest For many years, low interest rates, rates after the global financial crisis, since record-keeping began in 1991. Price coupled with the promise of quick appre- prompting speculative investment in real growth is relatively flat at 1-2% annually. ciation, lured speculators to the housing estate. “In Taiwan the incentive to invest Demand has gradually rebounded, market. Further, the central govern- has been even stronger due to the sudden likely reaching 300,000 transactions in ment relied on the property market to drop in estate and gift taxes after amend- 2019. This time, though, speculators are help boost the economy during the past ments to the relevant laws in 2009,” the scant, analysts say. According to prop- two downturns, the first following the Chinese-language Economic Daily News erty broker Sinyi Realty, property deals bursting of the dot-com bubble in 2001 noted in a 2013 commentary. across Taiwan rose about 10% year-on- and the second during the 2008-2009 year in December on the back of brisk global financial crisis. Between a rock and a hard place demand for apartments priced between “Taiwan’s government successively NT$7 million and NT$20 million (about introduced measures to revitalize the Eventually, the Taiwanese govern- US$232,000-$664,000). In Taipei, those real estate market,” says Liu Pei-chen, ment moved to cool the red-hot property units are popular with first-time buyers a research fellow and real estate expert market. To curb speculative investment, and are considered relatively affordable, at the Taiwan Institute of Economic in 2014 it introduced a hoarding tax on although they tend to be small. Research (TIER). The policies went well owners of more than one house. The tax “The market has settled down,” says beyond lowering the interest rate for rates for non-owner-occupied residen- Tsing Ching-te, research manager at Sinyi mortgages. In the early 2000s, the gov- tial properties range from 1.5% to 3.6%. in Taipei. “It’s easier for sales to close ernment halved the land value-added tax, But observers note that local government now that buyers aren’t asking for big dis- introduced real estate securitization, and authorities usually levy the minimum counts anymore.” Previously, buyers held extended the period of validity for con- 1.5% so as not to irk constituents. out for better deals in expectation that struction licenses. Amendments to the Income Tax Act prices would keep falling, he adds. In 2009, the Ma Ying-jeou admin- that took effect in January 2016 impose a For people working in Taipei who istration slashed the gift and estate capital gains tax of up to 45% on profits want more space for their money, New taxes from 50% to 10% in a bid to from property sales. The maximum 45% Taipei City is an option. Unfortunately, encourage the repatriation of overseas levy is imposed on individual owners the most desirable districts of New capital. In practice, Taiwanese business- residing in Taiwan who sell their property Taipei, such as the parts of Banqiao and people brought the money home and within one year of purchase. If a property Xindian closest to Taipei, are not much parked it in the housing market. Mean- is sold between two and 10 years after its cheaper than the city itself. Overall, the while, average housing prices in Taiwan purchase, the tax falls to 20%. For prop- mortgage burden for New Taipei City climbed 34% between 2008 and 2012, erties sold after more than 10 years, the is about 48%, according to government

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data – lower than Taipei City’s 59%, but someone else. Many Taiwanese would the proportion is 6.5%, 6.1%, and 3% still high. hesitate to live in such a property, says respectively, she adds. Housing is more affordable in Sinyi’s Tseng. If the government reaches its target, Taoyuan, about an hour from Taipei by Meanwhile, analysts note that taxes Taiwan will have about 85,000 public car, where the mortgage burden is just alone will not solve the housing problem, housing units by 2024, mostly in the 30%. since levies can arrest the surge in northern part of the country. Elsewhere Some scholars are urging the gov- housing prices, but cannot bring them in Taiwan, housing is generally more ernment to encourage renting over down sharply. affordable – though the mortgage burden homeownership. They point to wealthy, Even if the government could dras- in Taichung is approaching 40%. advanced countries where the homeown- tically reduce housing prices, it would At a September press conference, ership rate is low as proof that the idea hesitate to take that step, CBRE’s Lee Taipei mayor Ko Wen-je announced that is feasible. In Switzerland, the rate is just says. “The wealth of almost all Tai- the city intends to build 50,000 public 42%, and in Germany 52%. wanese families is tied up in real estate, housing units. He said that the construc- Sources interviewed by Taiwan Busi- not just the rich,” she observes. tion process would take up to seven years, ness TOPICS expressed skepticism about Instead, the government plans to build longer than originally planned. Currently promoting rental housing in Taiwan. more public housing to provide afford- 9,000 units are under construction. “Homeownership demand in Taiwan able housing at fixed prices for those who In his remarks, Ko emphasized the will stay strong until the end of time,” meet eligibility criteria. TIER’s Liu notes need to resolve Taiwan’s affordable says Jamie Chang, assistant manager at that the aim is to increase the propor- housing crisis before it foments social Jones Lang Lasalle Taiwan, a property tion of public housing from the current strife. He drew a comparison between consultancy. He notes that about 87% 0.08% of total housing units to 2.34% Taiwan and Hong Kong. In the former of Taiwanese today say they want to be by 2024. British colony, “high rent and housing homeowners, despite the meteoric rise in “0.08% is a relatively low level inter- prices are causing class struggle, a wid- prices since the mid-2000s. nationally, far lower than neighboring ening wealth disparity and accumulating For their part, landlords hesitate to Hong Kong, South Korea, Japan, and resentment among young people,” Ko rent homes to older people. They worry Singapore,” she says. Nearly 29% of said. Unless the problem is solved, “Hong that if a tenant dies in an apartment they Hong Kong’s housing stock is public. Kong’s problem today could become Tai- own, they won’t be able to rent it out to In South Korea, Japan, and Singapore, wan’s tomorrow.”

FLEXIBLE WORKING SPACE FEVER HITS TAIPEI

The race is on to position serviced offices as hip co-working spaces, but questions remain about the sustainability of market demand.

BY MATTHEW FULCO

he Executive Centre in Taipei’s too – individual offices and meeting boom has arrived in Taipei. It’s the Nanshan Plaza feels like a lounge rooms – but it’s set farther back down sharing economy for the corporate world: T on the club floor of a five-star the corridor. The showcase here is the Bland cubicles are out and chic com- hotel. Office workers dressed to impress nifty appointments and extra services. munal facilities are in. The market is chat casually, seated on quirky designer TEC’s clients, many which are in the red-hot, accounting for 20% of Taipei’s furniture. Floor-to-ceiling windows offer technology and financial sectors, “want commercial leasing in 2019 and helping sweeping city views. A dedicated barista more value and flexibility from their to drive office vacancy to an 18-year low whips up Earl Grey lattes at the coffee- office space,” says Carrie Chuang, the of 3.3%, according to real-estate services and-tea bar. company’s City Head. consultancy CBRE. There is conventional office space, Indeed, the global co-working space Vying with TEC for control of this

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 41

2 IF.indd 41 2020/1/29 下午10:18 INDUSTRY F CUS market are Regus, another established creative, motivative, collaborative, and defer the payment of furnishings, which serviced-office provider, as well as the mobile working style.” would be impossible in a traditional U.S. startup WeWork and Singapore’s Corporate expansion and demand office where office furniture must be pur- JustCo, which entered Taiwan last year. for flexible working spaces drove chased up front. Co-working spaces “Last year flexible working spaces average monthly office rental rates up allow their clients to pay for furnishings started to have a major impact on the 3.7% annually to NT$1,902 per ping on a monthly basis as part of a “member- Taiwan market,” says Ping Lee, CBRE (US$18.85 per square meter) in the third ship fee,” Lee observes. Taiwan’s head of research. “The incum- quarter of 2019, according to real-estate bents are adopting their business model, services consultancy Colliers. Rent in the Uncertain prospects creating what they call ‘enterprise solu- Xinyi district, where TEC, Regus, and tions’ to stay competitive with the new WeWork all have locations, increased to While some big corporates are using entrants.” NT$2,395 per ping. Grade A buildings in flexible working spaces, the concept is While flexible-working spaces initially Xinyi were even costlier at NT$3,350 per still associated more with plucky tech targeted startups and freelancers, their ping, roughly 75% higher than the Taipei entrepreneurs. The reason is simple: Most market demographic is broadening to average. large firms still prefer dedicated office include big corporations. The interest of One reason large firms are warming spaces of their own. Although costs can Fortune 500s and other large firms in co- to flexible working spaces is that they be higher, they are less burdensome for working spaces here has led the operators can be cheaper than traditional long- established companies than for startups to seek out the capital’s top office build- term leases under new global accounting or freelancers. At the same time, big com- ings, such as Taipei 101 and Nanshan standards. Effective January 2019, Inter- panies can design their own facilities Plaza. TEC’s tenants in Nanshan include national Financial Reporting Standard in a contemporary way that appeals to Google and the Dutch bank ING. (IFRS) 16 requires that property leases be younger workers. “A we have seen in all major mar- placed on-balance sheet by recognizing a Cultural preferences are an issue, too. kets in the world, a new working style is lease liability and “right-of-use” asset. Jamie Chang, an assistant manager at coming to Taiwan,” says Shingo Nish- Renting a co-working space, however, property consultancy Jones Lang LaSalle ioka, chief executive officer of Regus can be declared as an expense and not a in Taipei, notes that “hot desking” – the Japan and Taiwan. “Companies expect liability. “Companies are attracted to the practice of not assigning workers to spe- more flexible, cost effective, and produc- cost savings,” says CBRE’s Lee. cific office desks – has yet to gain traction tive workspaces for their employees. At Co-working spaces offer ways to in Taiwan, despite its popularity with the same time, workers expect a more spread out costs, too. Companies can some companies in the West (see the

Nanshan Plaza in the Xinyi District is The Executive Centre's latest location. PHOTO: MATTHEW FULCO

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accompanying article in this section for chipmaker, have huge campuses of their A office space in Taipei. more on office design trends). own. TSMC’s corporate headquarters are Regus plans to open another center Flexible working spaces are suitable in the Hsinchu Science Park. in Neihu by the end of the year. “We are for certain large firms when there’s a cul- In the financial sector, the big players very keen to find more partners to work tural fit, Chang says. “Some large tech are also major players in the real-estate with – landlords, developers, inves- companies want to inspire cutting-edge sector. Firms like Cathay Financial and tors – with whom we can accelerate creativity in their workers, so an uncon- Fubon Financial own a large amount of our growth speed in the future,” says ventional office space is desirable. But prime real estate that they can use for Regus’s Nishioka. many companies aren’t like that.” their own office space. Multinational companies will con- In fact, Taiwan’s largest firms are Some observers remain optimistic tinue to drive demand for serviced offices unlikely to choose flexible working about the future of flexible working and co-working spaces, says CBRE’s spaces. Local tech giants like Taiwan spaces in Taiwan. TEC’s Chuang expects Lee. “While the cost here in Taipei is Semiconductor Manufacturing Co. that the market will continue to grow this not cheap, it’s reasonable by global stan- (TSMC), the world’s largest contract year based on strong demand for Grade dards,” she says.

TAIWAN’S OFFICES GET 21ST CENTURY UPGRADE

A growing number of companies in Taiwan – local and international alike – are moving toward more flexible configurations in their office spaces.

BY JEREMY OLIVIER

he open or flexible office design is a different kind of collaboration and office was reoriented into a more flex- not a new concept in Taiwanese involvement.” ible seating arrangement. During the first T workplaces, but it has been According to Moser, the old style of few years, the company used a system of catching on with rapid enthusiasm in work could mostly be performed in a employee lockers and trolleys but con- recent years. Multinational corporations single workplace with similar tasks done tinued to experiment and tweak parts of with a presence in Taiwan – particularly day in, day out. Now, however, office the design until another complete over- large tech companies – originally led the designs must accommodate what she and haul was undertaken last year. charge on renovating office spaces to fit her colleagues call “adaptable work,” “The new design is more about changing work norms. But now more and in which both employees and manage- helping facilitate socialization among our more local firms and non-tech compa- ment must constantly react and adjust to younger employees – those born between nies are realizing the importance of good different circumstances in the course of 1990 and 2000 – who make up more office design to encouraging interaction everyday work. This is not an issue lim- than 60% of the company,” says Barbara and creativity among their employees. ited to Taiwan, but as the island moves Liang, P&G’s director of communica- “We need to look at changes in the further towards a digitalized, knowledge tions for Hong Kong and Taiwan. “These way in which knowledge work is per- work-based economy, it is a point of con- employees tend to have a shorter atten- formed,” says Moira Moser, founder and sideration for managers and business tion span and want to maximize their chairman of the international design firm owners across all industries. productivity during those timeframes, so M Moser Associates. “Much of that is For major consumer goods corpora- we designed the new office to allow them being driven by AI taking over the more tion Proctor and Gamble, the decision to to pick and choose which team they want mundane and repetitive kinds of work, redesign its Taiwan office to a more trans- to work with for the day.” so that more of our clients’ employees parent, flexible form came early. In 2006, Liang notes that one of the con- are being tasked with or asked to following a renovation of the regional siderations for the latest redesign was develop innovative ideas – and that takes headquarters in Singapore, the Taiwan to incorporate elements that Taiwan

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2 IF.indd 43 2020/1/29 下午10:18 INDUSTRY F CUS employees find attractive – for example, a from their staff. beforehand also helps mitigate some of childcare facility and massage room. The “When we poll employees on what the tough challenges associated with idea to include these elements was not they want from the new office, we’re redesigning an office. Liang says that simply based on management’s assump- seeing them say ‘I want my company to employees were put in the position of tions, she says, but rather was the result care about me. I need this design to sup- “counselor” for P&G’s 2019 renova- of a design thinking workshop that P&G port me,’” says Liu. “We don’t give them tion, rather than making it a wholly top- Taiwan held before the blueprints were a simple solution at the beginning or say down, management-led transition. When even drawn up. All staff members were this design will solve everything. Rather, issues not originally foreseen arose post- asked to brainstorm ideas for aspects that we’re always trying to understand what installation, the company responded with would contribute to overall employee they want or need from the workplace, corrective action. wellbeing. then delivering a space that can respond Currently popular office designs also “What we found actually surprised to those needs.” work to break down the rigid office hier- us,” says Liang. “For them, it wasn’t From a design specialist’s perspective, archies that are endemic to Taiwan’s about fancy decorations, it was about getting that feedback can also make the traditional business culture. Whereas cor- having a natural, organic, green environ- job less complicated and more interesting, porate real estate previously was designed ment.” says Mao Wang, business development to separate employees from management Based on the employees’ suggestions, director at the Taiwan office of the design and encourage privacy, new offices sit- P&G decided to use recycled materials firm SL+A International Asia. uate everyone in the same type of space. from its in-store displays to build the new “This model actually generates more Private offices for senior managers and meeting rooms, which also cut down on ideas,” Wang says. “Because we’ve been opaque meeting rooms have given way capital expenses for the new design. looking at office design through our to non-assigned seats, phone booths Not every Taiwanese company is narrow lens for so long, it’s always nice for one-on-one interactions, and fish- interested in collecting employee feedback to hear from someone who is not in the bowl-style multipurpose spaces for larger and suggestions for their office rede- industry, or from an interior design back- meetings or brainstorming sessions. signs, says Nancy Liu, workplace strategy ground, when they come up with new Considering how structured the work- director at M Moser Taipei, but those and different ideas.” place culture in Taiwan can be, it might that do generally elicit positive reactions Communicating with employees come as something of a shock to visit the Taiwan office of biopharma multinational Amgen on a typical workday. The visitor will find General Manager Joyce Lee seated together with several colleagues in a brightly lit room lined with adjustable work desks. She notes with pride that she doesn’t maintain her own office; like the other employees, she stores all of her work materials in a locker. As the company has gone virtually paperless, the amount of such materials is quite limited to start with. In addition to the more conventional workspace area, the aesthetically pleasing, comfortably open office also contains areas with softer lighting, a semi-open meeting space adjacent to several large windows, a cafeteria section with hand-carved wooden tables, and a full kitchen. Dozens of meeting rooms of all sizes are available; some require team members to register electronically to use them, while others can be accessed freely. One factor in the design’s success, according to Head of Human Resources Diana Chang and Head of Corporate Affairs Stephanie Chiu, is that Amgen Taiwan’s more transparent, less bureau- cratic management style was already ingrained in the company’s culture when When Proctor and Gamble redesigned its Taipei office, it relied heavily on input from its employees. the current office was launched. PHOTOS: P&G

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Experience has shown that newer entrants to the business community, especially those who have a progressive workplace culture and are not encum- bered by historical baggage, are more likely to succeed with a non-hierarchical office plan. However, in a long-established local company without that type of culture, making such a sea change may very well encounter pushback, particularly from those in higher-level positions within the organization. “Compensation is such an important part of the work that we do,” says John Sellery, group managing director at M Moser. “That enclosed office and that L-shaped desk were actually part of an employee’s compensation. It was part At Amgen Taiwan, no one has a private office, not even the general manager. of their entitlement and their identity.” PHOTOS: AMGEN Taking that entitlement away can then alter an employee’s perception of them- an essential part of the relationship. losopher Jacques Diderot’s notion of the selves and their career. “One of our clients had lots of pri- “fourth wall” – referring to the need Sellery emphasizes the importance vate meeting rooms in their old office, for stage actors to put a mental barrier of “change management” in ensuring a so we did a very comprehensive analysis between themselves and the audience – to smooth transition to more open office of their meeting room usage there,” says explain why employees were much less designs. George Chen, head of JustCo Taiwan. likely to interact with their colleagues in “An organization may realize that “Our team found that usage was not the new settings. they need to go from a 1990s orientation 100%, so we then worked to convince “People in open offices create a to a 2030s one overnight, or they’re going the client that fewer meeting rooms at fourth wall, and their colleagues come to to be obsolete,” he says. “As designers, their JustCo office would be sufficient. respect it,” the report said. “If someone it’s not hard for us to come up with the We also designed the office with a lot of is working intently, people don’t inter- physical solutions. The real challenge phone booths and common spaces and rupt her. If someone starts a conversation is how to help our client organizations told them for those non-private meetings, and a colleague shoots him a look of make the transition, so that they can use they were free to come down and use the annoyance, he won’t do it again. Espe- that new solution effectively.” co-working space.” cially in open spaces, fourth-wall norms Wang of SL+A agrees that change This arrangement could save the com- spread quickly.” management is an integral part of the pany money, Chen explains, and enable it The designers at M Moser acknowl- designer’s work, not just in assuaging to hold casual meetings with vendors or edge that merely creating an open office the concerns of managers who will be clients more productively in the comfort- will not necessarily foster internal com- losing their private offices, but also able, café-style JustCo common areas. munications. The solution really has to the employees who will have to adjust be tailor-made to fit each company’s par- to working in the same spaces as their The open office conversation ticular needs and corporate culture, says bosses. Moser. “One of the major concerns from the Despite the advantages of flexible For some companies, says Wang of clients is that they will have these nice or open office designs, recent studies SL+A, that means only some open areas social areas, but people will be afraid to have also shed light on their potential and more “third places,” those spaces use them during working hours,” Wang downsides. An article in the Harvard outside of the home and the workplace says. “So, we have to educate them that Business Review titled “The Truth where certain types of work can best be it’s okay to use those spaces. The reason about Open Offices” reported on a performed. we built them is because the way people study of the effect of open office floor- In Taiwan, where the non-traditional work now is different.” plans on collaboration within and office is still a relatively new concept for Making good use of the new space is between departments in an organiza- many of the island’s companies, the large a major target of the change management tion. The finding was that while such investment needed for researching, mod- process. For JustCo, the Singaporean co- arrangements were intended to foster eling, and implementing a bespoke office working company that opened a few and encourage collaboration between design is hard for many clients to accept. locations in Taiwan last year, advising employees, face-to-face interaction at Nevertheless, it seems to be a trend their enterprise clients on efficient, pro- these organizations actually fell by 70%. showing no signs of slowing down any- ductive use of their customized offices is The report cites the 17th century phi- time soon.

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 45

2 IF.indd 45 2020/1/29 下午10:18 EXECUTIVE SUITE

MEET JOHN DEMERS OF ATLAS COPCO

Atlas Copco Taiwan General Manager John Demers didn’t do much international travel during his early years growing up in Canada, but he now considers himself a long-term expat and can’t imagine life any other way. He is happy to bring his robust knowledge of industry and his well-formed management skills wherever they are needed – although he admits he and his family love living in Taiwan. Demers took some time out of his busy schedule running Atlas Copco’s operation in Taoyuan’s Yangmei District to talk with Taiwan Business TOPICS’s Jeremy Olivier about Taiwan’s industrial equipment sector and a career that has spanned two decades and five countries. Below is an abridged version of the interview.

Your university degree was in owned company that dealt with things wife and I had just had our first baby mechanical engineering (from Canada’s like conveyers, elevators, and robotics boy. It was a difficult decision, but in University of New Brunswick). How systems. It was really fun to get in the end, we decided to accept the offer did that experience shape your eventual there and get my hands dirty. While at because we knew we’d regret it if we career? that company, I met some people I was didn’t. Once we started, we couldn’t While engineering is rooted in sci- eventually able to follow over to Atlas stop. From Belgium, we went on to ence, it’s a very practical, hands-on ﬁeld Copco. I was lucky in that the com- Algeria, then to the southern U.S., and – particularly mechanical engineering. I pany’s core values really aligned with we’ve now been in Taiwan since 2014. think the type of behaviors I cultivated my own. They put a heavy emphasis If the company were to call in my degree program were very useful on innovation, on interaction, on their tomorrow and tell me that they needed in the work I would eventually go on commitment to all of their stakeholders, me to move on and ﬁll a role in another to do, especially being able to develop and on being very, very sustainable. country, I would be okay with that, a solid idea of what needs to be done I can’t say that I wouldn’t make but part of me is actually quite happy before rushing into something. At the the same decision again, but I can living in Taiwan. My family really likes same time, I don’t overanalyze deci- imagine a scenario in which I started it here. It’s safe, modern, clean, friendly, sions; there is a balance where most of working for a company that is a little and it’s close to so many cool places we the decisions you make end in success, less focused on those values, and maybe can visit. but the ones that don’t, you can learn being turned off of the whole industry from and move on. You can’t be so cau- sector because of it. What are the most significant char- tious that you become paralyzed, and acteristics of the industrial equipment this is something valuable I took with You have held management-level market in Taiwan? What are the main me into my management positions. roles in several countries worldwide. ways it differs from other markets? Did you actively seek out the opportu- Taiwan is a very mature, very What attracted you to the industrial nity to go abroad? advanced market, especially in relation equipment industry? Would you make Perhaps not actively at first. Before to other countries in the region. You the same choice if you were starting taking my first assignment in Belgium, can tell from discussions we have with over? I had never traveled much outside of our customers here that they have been Honestly, it was a bit of fortune. Canada and the U.S. At the time I was exposed to global trade and manufac- I went from university straight into offered that position, I had just bought turing for many years. From plastics industry, working for a smaller, family- a new house and a new car, and my in the 1970s, to semiconductors in the

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80s, and screens in the 90s, industry cess would be a bit simpler and more to be motivated. Some of the managers players generally know exactly what streamlined. It ended up taking longer that I work with are very self-motivated. they want when they contact us. than we wanted to move into the new My job then is to make sure they don’t This can be a challenge, though, in facility. get down on themselves too much. that they are somewhat hesitant to take When I was in the U.S., motivating risks and move on to a setup that could Do you have a particular style as a my team was all about recognizing and possibly be more effective, more pro- manager? What do you consider to be celebrating their accomplishments. In ductive, more reliable. They have a your main strengths? Any weaknesses? Taiwan, though, the managers I work system that’s worked for 15 to 20 years, I’m someone who enjoys being with are a bit more conservative and and have found a comfort zone in that. involved with my management team. don’t brag about their successes. For I was surprised at this hesitance to Rather than dictating or directing, my me, finding subtle ways of making sure change things up because a lot of these style is to help every one of my contrib- that the rest of the team knows when companies are from high-tech indus- utors find where they need to be. I do someone has done something well or tries. These industries know how to provide guidance, and I will point out something that others can learn from create market-changing products, but possible setbacks along the way, but has been an effective approach. the prevailing attitude is that change is I have learned that letting people find We as managers have to be able to difficult, and that it's something to be their own solutions and path to success identify potential in our team, to find managed. is more effective. who has the lung capacity to run a full That’s not to say that I’m completely race, and put them in positions where The shortage of available land in hands off. I also like to be kept updated, they are able to hit the finish line. Now, Taiwan has been described as a chal- and talked to, in order to see where the not everyone’s going to be able to lenge for the economy. Atlas Copco team is and how to close gaps when reach their given potential at the same recently moved into a new plant in we’re behind or make good use of extra time, so it’s very important not to put Taoyuan’s Yangmei District. Was it dif- time and resources when we’re ahead. In everyone in a certain category – this ficult to find the new site? the end, though, our managers are nor- is not a one-size-fits-all concept. You It was. We are an asset-light com- mally mature enough that they can tell need to talk to your team members and pany. We typically lease, rather than me when and where they need me. figure out where each of them is in their buy, property for our facilities. In most In terms of weaknesses, I do have career and where they ultimately want markets where we operate, it’s an equa- some blind spots. I tend to lean toward to go. It’s time consuming, but that’s tion that’s worked, but in Taiwan it the ideas that I agree with, and set our job. was a much bigger challenge. In order aside other ideas that perhaps do not to make this move, we had to find an stand up to challenges. I have to remind What are the most challenging and owner with a piece of land who was myself sometimes that I might be over- most fulfilling aspects of expat life? Any willing to build an exterior shell for us looking or dismissing very good ideas, that are particular to Taiwan? that we could add our interior to and but that the colleagues that raise them I have been an expat now for 12 make our own. That’s not easy to find perhaps don’t know how to defend years, and I can honestly say that the here. Most landowners are looking to them. What would be best is to work most challenging aspect of the life we sell, or build something to lease longer together with those colleagues to really lead is the initial absence of a sup- term, or they want you to build the put that idea to the test, and see if it port structure when we arrive in a new whole facility yourself. works out in the long run. place. Our first move abroad was right The other issue was the rather after our first son was born. We had complicated process of applying for reg- What do find is the best way to uprooted ourselves from a system of istration and permits from the local motivate your team? How do you culti- friends and relatives that could sup- government. We had assumed that vate talent and leadership potential? port us and help with childcare when since we were moving from Longtan to The first thing you need to do is to needed. It takes a while to adapt to a Yangmei – both in Taoyuan – the pro- find out if you have a team that needs new place in general, and having that circle of friends and contacts is important to making the adjustment. Luckily, we have learned to make great friends quickly in each place we’ve lived, so the adjustment period now is minimized. One thing I would say about Taiwan’s expat community is that it’s relatively smaller than in a place like Shanghai, Hong Kong, or Sin- gapore – so it’s a very close community. We get to know one another quite well and form some great relationships.

TAIWAN BUSINESS TOPICS • FEBRUARY 2020 47

John Demers.indd 47 2020/1/30 下午5:59 SEEING TAIWAN

within some type of conservation zone. The Xueshan Mountain Range, which stretches across a good part of north Taiwan, is one of the seven themes. The range takes its name from Xueshan (“Snow Mountain”), also known as Mount Xue or Mount Shei. At 3,886 meters (12,749 feet) above sea level, it is the second-highest mountain in Taiwan and in East Asia, surpassed only by Mount Jade (3,952 meters/12,966 feet), some 109 kilometers to the south. As a hiking challenge, it is first rate. Conquering Xueshan involves several hours’ walking on steep but alluring trails, and at least one night in a basic but adequate mountain lodge. Permits must be obtained in advance; the process is explained in Chinese and English on the website of Shei-Pa

SNOW MOUNTAIN RANGE National Park (www.spnp.gov.tw). Shei-Pa National Park derives its name from that of Xueshan and another iconic peak, the 3,490 meter (11,450 The Glory of Taiwan’s feet) Mount Dabajian (sometimes spelled Mount Dapachien). The latter, which has a distinctive barrel shape, appears on Taiwan’s NT$500 bill. Snow Mountain Range Hikers heading for Xueshan usually approach it from Yilan County in the ny traveler with the good undertake arduous treks can fully expe- northeast. Those planning to tackle fortune of a window seat when rience the splendor of alpine Taiwan. Mount Dabajian, or other parts of the A flying through clear skies into Nevertheless, exploring the island’s national park, can enter the mountains Taiwan will catch alluring glimpses of mountainous interior is still worth- from the northwest – in which case it the island’s dramatic topography. while for those who prefer to get makes sense to begin or end your expe- Rugged mountain landscapes more around by car or bus, and who have dition with a night in Sanyi. than 1,000 meters above sea level just two or three days to spare. This bucolic township is one of just account for 32% of Taiwan’s land To promote international interest in four places in Taiwan that have been area. A similar proportion is taken up Taiwan’s incredible sierra scenery, the by hills and other uplands at eleva- forest ecosystems that make the island tions of between 100 and 1,000 meters. a biodiversity hotspot of global impor- Depending on the definition of eleva- tance, and the indigenous people who tion, between 258 and 286 peaks are have dwelt in the highlands for centu- higher than 3,000 meters – and a hand- ries, Taiwan’s Tourism Bureau has ful come very close to 4,000 meters. declared 2020 the “Year of Mountain Only a tiny part of the population Tourism.” lives more than 1,000 meters above sea As part of its efforts to help poten- level, and there are very few human tial visitors grasp the scale of high- residents above 2,500 meters. Taiwan altitude Taiwan and get the most out is therefore a land of both crowded of their vacations, the Tourism Bureau lowlands and pristine uninhabited has devised seven recommended routes, wilderness. each focusing on a particular national Hiking enthusiasts are right park or mountain range. Of Taiwan’s when they say that only those will- nine national parks, five protect upland ing to carry several days’ supplies and areas. In total, a fifth of the country falls MOUNT DABAJIAN

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it is expected to be a weekend in the middle of November. If you do attend, expect to have strands of silvergrass tied around your head or arm (and also around your camera) to protect you from mischievous spirits. The community around Xiangtian Lake – 738 meters above sea level and 90 scenic minutes by car from Sanyi – is an important center of Saisiyat culture and the location of a bilingual museum devoted to the paSta’ay festival and other tribal lore. Greatly outnumbering the Saisiyat part to reveal superb views of peaks are the 92,000-strong Atayal people. near and far. With an annual average The latter tribe has outposts throughout temperature of 13 degrees Celsius, it the northern half of Taiwan, including provides a reliable escape during peri- Wulai District in New Taipei City. ods of sweltering heat in the plains. Because of modern communications This part of Taiwan is home to and the tribe’s proximity to lowland one of the island’s smaller indige- lifestyles, certain Atayal customs have nous Austronesian ethnic groups. The disappeared. For example, when eating Saisiyat tribe has fewer than 6,800 outdoors, Atayal people no longer members, yet they have succeeded in sprinkle a few morsels of food on the preserving and bringing to national ground to appease forces of the super- attention their unique paSta’ay festi- natural. However, a band of artists and SANYI val. The event has a grim backstory. At cultural activists have injected vigor its core are rituals held to appease the and innovation into the tribe’s age-old accepted as members of Cittaslow Inter- spirits of a rival tribe that the Saisiyat weaving traditions. national, an Italy-based alliance that exterminated in the distant past. It is An excellent place to read up on embraces the global “slow movement” not intended as a show or performance Taiwan’s Austronesian cultures in of communities that are “respectful for tourists, but respectful guests are English and Chinese is the Digital of citizens’ health, the authenticity of allowed to observe and are often invited Museum of Taiwan Indigenous Peoples products and good food, [and] fascinat- to join the dance circle. (www.dmtip.gov.tw). For all kinds of ing craft traditions.” The ceremony is held every two travel information about the coun- Renowned for its artisan wood- years in the tenth month on Taiwan’s try, visit the Tourism Bureau’s website carvers, Sanyi benefits from good road traditional lunisolar calendar. The (www.taiwan.net.tw) or call the 24-hour and rail connections to Taiwan’s major exact date of the 2020 edition will not tourist information hotline, 0800-011- cities. Taichung is just 40 minutes away be announced until the summer, but 765 (toll free within Taiwan). by train. Driving to Taipei takes two hours. Guanwu National Forest Recre- ation Area is both the starting point for those hiking to Mount Dabajian and an ecotourism destination in its own right. About two hours by car from Hsinchu – the nearest major city and High-speed Railway station – Guanwu is 907 hect- ares of temperate forest through which nature lovers can hike on well-maintained, clearly signposted trails. The place name gives Chinese-speaking tourists a strong clue as to what to expect. Guanwu can be translated as “watching the fog,” and visitors often find themselves enveloped in mists that PASTA'AY FESTIVAL

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2 ST.indd 49 2020/1/31 上午10:09 恭喜發財

Taiwan Business TOPICS wishes our readers a healthy, happy, and prosperous Year of the Rat

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