After the Chinese Group Tour Boom 中國團體旅遊熱潮之後

2018/12/9 下午6:55 Published by the by Published Commerce Commerce In Taipei American Chamber Of NT$150 December 2018 | Vol. 48 | Issue 12 | Issue 48 Vol. | 2018 December After the Chinese Chinese After the Boom Tour Group 中國團體旅遊熱潮之後 SPECIAL REPORT 2019 ECONOMIC OUTLOOK 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 December 2018 | Vol. 48 | Issue 12 中華郵政北台字第 5000 12_2018_Cover.indd 1

CONTENTS NEWS AND VIEWS 6 Editorial Don’t Move Backwards on IPR DECEMBER 2018 VOLUME 48, NUMBER 12 7 Taiwan Briefs By Don Shapiro 10 Issues Publisher Higher Rating in World Bank William Foreman

Editor-in-Chief Survey Don Shapiro

Art Director/ / By Don Shapiro Production Coordinator Katia Chen Manager, Publications Sales & Marketing COVER SECTION Caroline Lee

Translation After the Chinese Group Tour Kevin Chen, Yichun Chen, Charlize Hung Boom 中國團體旅遊熱潮之後 By Matthew Fulco 撰文／傅長壽

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 14 Taiwan’s Hotels Grapple with 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Oversupply Tel: 2718-8226 Fax: 2718-8182 旅 e-mail: [email protected] website: http://www.amcham.com.tw Although market demand is flat, additional new hotels continue to 050 2718-8226 2718-8182 be constructed. 21 Airbnb on the Brink in

Taiwan Business Topics is a publication of the American Taiwan Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Changes in regulatory approaches Officers, Board of Governors, Supervisors or members. are expected to cut deeply into © Copyright 2018 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original the home-sharing platform’s material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. Taiwan business. 10866 23 Taiwan Seeks to Attract 5000 Muslim Tourism ISSN 1818-1961 Both economic and political considerations are behind the Chairman/ Albert Chang Vice Chairmen/ Leo Seewald, Vincent Shih move to reduce the island’s Secretary: Fupei Wang Treasurer: C.W. Chin dependence on visitors from

2017-2018 Governors: China. Albert Chang, William Farrell, Revital Golan, Tim Ju, Seraphim Ma, Leo Seewald, Vincent Shih.

2018-2019 Governors: Anita Chen, C.W. Chin, Edward 18 Developing a More Global Shober, Joanne Tsai, Daniel Tseng, Fupei Wang. MICE Perspective 2018 Supervisors: Petra Jumpers, Joyce Lee, Timothy 國 Shields.

COMMITTEES: Taipei has its attractions as a Agro-Chemical/ Melody Wang; Asset Management/ site for international events, but Christine Jih, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Nadia Chen, Mandy Huang, C.P. Liu; Chemical it needs a fresh mindset to win Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Shirley Chen, Julien Jacquet, Abigail Lin; CSR/ Lume Liao, business in the ultra-competitive Fupei Wang; Energy/ Randy Tsai; Human Resources/ Asia market. Vickie Chen, Richard Lin, Monica Han, Seraphim Ma; Infrastructure/ Wayne Chin, Paul Lee; Insurance/ Dan Ting, Linda Tsou, Dylan Tyson; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Vincent Shih; TAIWAN BUSINESS Marketing & Distribution/ Wei Hsiang; Medical Devices/ Raghavendra Shenoy, Joanne Yao; Pharmaceutical/ Petra 26 Improved Outlook for Office Jumpers, Wendy Lin, Lai Li Pang; Public Health/ Joyce Lee, Sophia Lee, Tim Shields; Real Estate/ Tony Chao; Retail/ Furniture Makers Ceasar Chen, Mark Chen, Prudence Jang; Sustainable Development/ Kenny Jeng, Cosmas Lu, Kernel Wang; Tax/ The U.S.-China trade war and Stella Lai, Cheli Liaw, Josephine Peng; Technology/ Cynthia Chyn, Revital Golan, Hans Huang; Telecommunications demand for sit-stand desks are & Media/ Thomas Ee, Joanne Tsai; Transportation & Logistics/ (tba); Travel & Tourism/ Pauline Leung, Achim v. helping drive growth for Taiwanese Hake. manufacturers. By Jens Kastner

4 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 contents.indd 4 2018/12/9 下午9:01 DECEMBER 2018 • VOLUME 48 NUMBER 12

BACKGROUNDER 28 Accessibility for Taiwan’s Disabled: A Work in Progress Attitudes and facilities have improved, but much more still needs to be done. By Steven Crook

AMCHAM EVENT 42 Bringing Hawaii to Taipei: 35 SPECIAL REPORT The 2018 American Ball The Big Question Mark for 2019: What’s Ahead in the U.S.-China Trade War? SPONSORED CONTENT Forecasts for Taiwan’s economic growth next year currently range between 24 Cadence: 30 Years of 2.18% and 2.5%. Innovation Driving the By Jane Rickards 撰文／李可珍 Semiconductor Industry 32 The Taoyuan Aerotropolis is Set to Take Off

44 Seeing Taiwan Life in the Slow Lane: Dalin and Fenglin

TAIWAN BUSINESS TOPICS • DECEMBER 2018 5

12 contents.indd 5 2018/12/10 下午12:59 E D I T O R I A L Don’t Move Backwards on IPR

aiwan took a major step forward a year ago in protecting leaders held it up as a great example of how the country values and intellectual property rights when legislators passed a law to protects intellectual property. T establish a “Patent Linkage” system for safeguarding patents Now, if Taiwan becomes the first country in the world to adopt on pharmaceuticals. a Patent Linkage system while not protecting biologics, it would call Distressingly, the government now appears to be preparing to take that commitment to IP rights into serious question. Instead of Taiwan a big step backward by limiting the coverage of that law. Rules being becoming a regional leader in the biomedical sector as it has envi- proposed by the Ministry of Health and Welfare for implementing the sioned, its competitiveness would be put at risk, not only as a base for legislation would be restricted to protecting patents of conventional international companies but also for its own innovative enterprises. drugs (derived from chemical sources) from infringement by generics. Pressure to limit the Patent Linkage coverage has come from the While requiring biologic drugs (derived from biological sources) domestic drug industry. But that stance is short-sighted. Without a to register their patent information, the rules would do nothing to steady stream of biologic drugs entering the market, the opportunity prevent “biosimilars” from infringing on the patents of biologics. will be reduced for future development of “biosimilars” – less costly Emasculating the legislation in this way would be a huge blow to imitations of biologics that are different from generics in that they’re the industry. Within just a few years, biologics – which can include not exact copies. vaccines, blood products, and gene therapy – are expected to account AmCham Taipei has been one of numerous business organizations for more than half of the worldwide pharmaceutical market. that have strongly urged the Taiwan authorities to reverse course. Even more significantly, excluding biologics from the patent That message has come not only from the other major international protection would be a major setback to Taiwan’s efforts to position chambers of commerce in Taiwan, but also from: itself as a tech-savvy, knowledge-based economy – especially in the • PhRMA (Pharmaceutical Research and Manufacturers of growing field of biomedicine, a key piece of the Tsai administration’s America) “5+2 Innovative Industry” strategy. • The U.S.-based Biotechnology Innovation Organization (BIO) The Patent Linkage system alerts manufacturers of patented drugs • Japan Pharmaceutical Manufacturers Association about a generic product that might enter the market before the patent • International Federation of Pharmaceutical Manufacturers and on the original drug expires. The warning gives companies time to Associations (IFPMA) headquartered in Switzerland. mount a legal defense for products they’ve spent millions researching, After more than 10 years of fighting for Patent Linkage – and developing, and marketing. having celebrated what last year appeared to be a significant step For more than 10 years, AmCham Taipei – through the Taiwan forward – AmCham Taipei appeals to the Taiwan authorities to White Paper and other channels – has urged Taiwan to implement stay on the right path of ensuring full and fair IPR protection. Don’t Patent Linkage. The issue has also been a key item in U.S.-Taiwan squander the widespread international goodwill that Taiwan gained a trade talks. After the law was passed last December, Taiwanese year ago with passage of Patent Linkage.

年前，立法院修訂藥事法，建立「專利連結」制度，以保促政府建立專利連結制度。這也是美台貿易談判的重要議題。去年障藥品專利權，讓台灣對於智慧財產權的保護向前邁進一 12月通過修訂藥事法時，台灣政府領袖表示，這項修法是台灣重視大步。並且保護智財權的明顯例證。但令人失望的是，政府如今似乎準備倒退一大步，要限制這項如果台灣成為全球第一個引進專利連結制度卻不納入生物製劑的修法的適用範圍。根據衛生福利部草擬的「專利連結」立法施行細國家，這將使得台灣保護智財權的承諾遭到嚴重質疑。台灣不僅無則，這項法律將只用來保障（以化學原料製造的）傳統藥品的專利法如本身預期成為區域內生醫產業的領導者，它做為跨國企業據點權，使其不受學名藥的侵犯。與國內創新企業本身的競爭力都會受到不利影響。生物製劑（以生物而非化學成分製成的藥品）雖然需要登記專利要求限制專利連結適用範圍的壓力，來自台灣內部的學名藥製資訊，但施行細則將無法防止「生物相似藥品」侵犯生物製劑的專造廠商，但這樣的立場是短視的。除非經常有生物製劑藥品進入市利。場，生物相似藥品未來發展的機會將會減少。所謂生物相似藥品是以這種方式讓法律弱化，對業界來說將會是個重大打擊。在短短成本較低的生物製劑仿製品，跟學名藥的差別在於生物相似藥品與幾年之內，可能包括疫苗、血液產品與基因療法在內的生物製劑，專利藥的成分並非完全相同。預料將攻下全球製藥市場一半以上的產值。台北市美國商會是眾多強力敦促台灣政府改弦更張的企業機構之更重要的是，台灣在努力成為以知識為基礎的高科技經濟體，一。發出這項呼籲的不僅有台灣其他主要國際商會，還包括：特別是要發展正在蓬勃發展的生醫產業，而且這也是蔡政府五加二美國藥品研究暨製造商協會產業創新計畫的重要一環。若將生物製劑排除在專利保護的範圍之總部設在美國的生物技術創新組織外，將會重剉台灣在這方面的努力。日本製藥工業協會如果有學名藥可能在原本專利藥品的專利權到期之前上市，生產總部設在瑞士的國際藥品製造廠暨協會聯盟相關專利藥品的廠商可以透過專利連結制度獲得通知。這個通知讓台北市美國商會為專利連結奮鬥了10年以上，而且去年剛為了似藥廠有時間準備司法訴訟，保護他們投下龐大經費研發與行銷的產乎是很重要的進展而高興，如今要籲請台灣政府繼續走在正確的道品。路上，確保智財權獲得完整而公平的保護。台灣去年通過建立專利過去10多年，台北市美國商會透過《台灣白皮書》與其他管道敦連結制度，獲得國際各界的善意回應，不應虛擲。

6 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Editorial.indd 6 2018/12/9 下午6:56 T A I W A N B R I E F S

— BY DON SHAPIRO —

POLITICS

KMT STAGES COMEBACK IN LOCAL ELECTIONS The opposition Chinese National- ist Party or Kuomintang (KMT) won mayoral seats in three closely watched major constituencies – Kaohsiung, Tai- chung, and New Taipei City – in local elections held November 24. In Taipei City, incumbent independent Mayor Ko Wen-Je was reelected by a narrow 3,000- vote margin, prompting the runner-up in the three-way race, the KMT’s Ting Shou-chung, to file suit asking for the balloting to be invalidated due to alleged irregularities. TURNING GREEN TO BLUE — A charismatic speaker, KMT candidate Han The election leaves the ruling Demo- Kuo-yu won the mayoral race in what had long been the DPP stronghold of cratic Progressive Party (DPP) in charge Kaohsiung. PHOTO: CNA of only six of Taiwan’s 22 cities and coun- ties, down from the previous 13. The KMT the past has generally been sympathetic Kuo-yu phenomenon.” Despite the three increased its share from six to 15. to the DPP, faulted the party leadership terms he served as a KMT legislator KMT officials reportedly were them- for ham-handed implementation of revi- before becoming general manager of the selves surprised by the size of the party’s sions to working-hour legislation and Taiwan Agricultural Products Market- win, but many commentators described for being too cautious in pushing social ing Corp., Han successfully repackaged the results as less a KMT victory than reforms such as same-sex marriage. himself as an outsider to politics. a resounding DPP defeat. “The elec- Other analysts, however, suggested that Although his campaign speeches stressed tions were a poll on how DPP central the party might have devoted too much lofty aspirations more than policy government is performing, and the attention to social issues, while voters substance, his plainspoken rhetoric voters found the government want- were more concerned with the state of brought him a wide following, particu- ing,” concluded Bruce Jacobs, professor the economy. larly among younger people. In contrast, emeritus of Asian studies at Australia’s Nearly all expert observers cautioned the DPP candidate, Chen Chi-mai, was Monash University, who was in Taiwan that the election results should not be viewed as stiff and distant. Han has now to observe the elections. Jacobs, who in read as reflecting sentiment on cross- established himself as a national figure Strait relations, which did not figure who will have an influential role within TAIWAN STOCK EXCHANGE PERFORMANCE prominently in these races. his party. THE BLUE LINE SHOWS CHANGES IN TRADE VALUE AND In Taichung, Legislator Lu Shiow- THE SHADED AREA CHANGES IN THE TAIEX INDEX. SOME NEW FACES, SOME yen upended incumbent mayor Lin POINTS NT$ BILLION 13000 225000 RE-ELECTED INCUMBENTS Chia-lung’s bid for a second term. The 12000 200000 The revival in the KMT’s fortunes worsening air quality in the Taichung 11000 175000 was led by the strong performance of area was considered to be a prime factor 10000 150000 its mayoral candidate in Kaohsiung, in the outcome. In New Taipei City, Hou 9000 125000 Han Kuo-yu, who took nearly 54% of You-yi, former head of the National 8000 100000 the vote in what had long been a DPP Police Agency, kept the mayor’s office 7000 75000 stronghold. Some observers speculated in KMT hands by defeating the DPP’s 6000 50000 5000 25000 that voters had “DPP fatigue,” since that Su Tseng-chang. Su previously served in 4000 0 party had held the mayor’s office for numerous high-level government posi- O 20 years. But the more common expla- tions, including the premiership from nation for the outcome was the “Han 2012 to 2014, but ran well behind in DATA SOURCE: TWSE

TAIWAN BUSINESS TOPICS • DECEMBER 2018 7

12_Briefs.indd 7 2018/12/9 下午8:58 T A I W A N B R I E F S

this campaign. Among the few bright spots for the DPP was Taoyuan, where Cheng Wen-tsan was elected handily to a second term.

TSAI STEPS DOWN AS DPP CHAIRPERSON In line with traditional Taiwanese political expectations, President Tsai Ing-wen assumed responsibility for her party’s electoral setback by announcing her resignation as chair of the DPP. Also submitting resignations were Premier Lai Ching-te and Presidential Office Secretary-General Chen Chu, but Tsai STEPPING DOWN — President Tsai announced that she is giving up her posi- asked them to continue in their posts. tion as DPP party leader due to the “disappointing” election elections. Keelung Mayor Lin You-chang, who PHOTO: AP won reelection in the November balloting, will serve as interim party chair CROSS-STRAIT can Institute in Taiwan, James Moriarty, until a new leader is elected next year. referred to the dangerous “attempts by Meeting with the party’s Central Stand- ELECTION MEDDLING external powers” to disseminate false ing Committee, Tsai apologized for the BY BEIJING ALLEGED information to affect the elections. DPP’s “disappointing” showing and A few weeks before the balloting, pledged to provide more decisive leader- Premier Lai reported at an inter-ministe- DOMESTIC ship going forward. rial meeting at the Executive Yuan that The next presidential election is China was attempting to influence the REFERENDUM EXTENDS only 15 months away, in March 2020. election by spreading disinformation USE OF NUCLEAR ENERGY Although KMT supporters were encour- through social media, cyberattacks, and In one of the 10 referendums that aged by the election results to hope to providing financial support to certain were also on the November 24 ballot, a regain the presidency and a legislative candidates. The Director-General of substantial majority voted to overturn majority in 2020, observers noted that the National Security Bureau made a an article in the Electricity Act requir- Taiwan’s national elections are usually similar report to two Legislative Yuan ing Taiwan to terminate all nuclear decided on very different issues from committees. During a visit to Taiwan, power generation by 2025. Executive local contests. the U.S.-based chairman of the Ameri- Yuan spokesperson Kolas Yotaka said that in accordance with that result, the TAIWAN'S JAN. - OCT. TRADE FIGURES government would no longer regard (YEAR-ON-YEAR COMPARISON) 2025 as the deadline for phasing out HK/China Japan ASEAN TOTAL nuclear power. Minister of Economic Affairs Shen Jong-chin said that a 105 revised national energy plan would be 115.4 48.2 48.7 45.8 42 formulated within two months. He also 279.7 37.1 34.6 29 258.9 25.9 19.2 17.2

239.6 said that the Ministry would suspend 213 2018 2017 2018 2017 2018 2017 applications to the Atomic Energy Commission for decommissioning the .S.A Europe existing nuclear plants according to their original schedules. 32.5 29.2 28.7 30.3 26.4 25.5 24.8 24 Another referendum lent support

2018 2017 2018 2017 2018 2017 to anti-gay-rights organizations’ efforts to block the legalization of same-sex NIT: S Billion Exports Imports SO RCE: BOFT/MOEA marriage. However, the constitutional court’s May 2017 ruling that same-

8 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_Briefs.indd 8 2018/12/9 下午8:58 T A I W A N B R I E F S

sex couples have the right to marry still ECONOMIC INDICATORS stands. The court gave the legislature two Current Account Balance (Q3 2018)p 14.04 21.71 years to pass the necessary legislation. Foreign Trade Balance (Jan.-Oct.) 40 46 The voters defeated a referendum New Export Orders (Oct.) 48.99 46.6 that would have required Taiwan sports Foreign Exchange Reserves (end Oct.) 460.2 447.8 teams to compete in the Olympics and other international contests under name Unemployment (Oct.) 3.75% “Taiwan” rather than “Chinese Taipei” Discount Rate (Nov.) 1.375% 1.375% as now. Given China’s tough stance on Economic Growth Rate Q2 2018p 2.55% 2.28% the issue, it was clear that passage of Annual Change in Industrial Output (Oct.)p 8.25% 2.67% the resolution would deny Taiwanese Annual Change in Industrial Output (Jan.-Oct.)p 4.30% athletes the ability to take part in many Annual Change in Consumer Price Index (Oct.) 1.17% -0.33% international events. Annual Change in Consumer Price Index (Jan.-Oct.) 1.60%

P=PRELIMINARY SOURCES: MOEA, DGBAS,CBC, BOFT NEW RAILROAD SAFETY MEASURES ADOPTED will be made during a comprehensive forum, held in mid-November in Papua In the wake of the deadly train acci- upgrade to be completed next year. New Guinea. On the sidelines of the dent in Yilan in October, the Ministry of meeting, the 87-year-old Chang met Transportation and Communication has INTERNATIONAL with U.S. Vice President Mike Pence, announced a series of measures to fix who was representing President Donald the problems believed to be responsible TSMC’S CHANG REPRESENTS Trump at the annual gathering. He also for the accident in which 18 people died TAIWAN AT APEC SUMMIT reported having “friendly and candid” and some 200 were injured. In the inci- Choosing to emphasize Taiwan’s interactions with about a dozen lead- dent, a Puyama Express derailed while high-tech prowess, President Tsai ers, including Chinese President Xi going into a curve at twice the allowed selected Morris Chang, the iconic Jinping and Singaporean Prime Minis- speed. Design flaws have already been founder and retired chairman of the ter Lee Hsien Loong. Despite Taiwan’s corrected in all similar trains to ensure Taiwan Semiconductor Manufactur- full membership in APEC, China’s oppo- that the dispatch control room can prop- ing Co. (TSMC), to represent her at the sition has prevented the president of erly monitor the onboard speed-control 2019 leadership summit of the Asia- Taiwan from attending the meeting him systems, the Ministry said. Other changes Pacific Economic Cooperation (APEC) or herself.

BUSINESS

FORBES LISTS GOU AS TAIWAN’S RICHEST In its annual survey of Asia’s wealth- iest individuals, Forbes magazine named Terry Gou, founder and chairman of Hon Hai Precision Industry Co. (also known as Foxconn), as Taiwan’s richest with a fortune worth US$7.3 billion. The Wei brothers of Ting Hsin Inter- national Group were ranked second with combined assets of US$7.2 billion, and Chairman Tsai Hong-tu of Cathay Financial Holding Co. was third with US$7.1 billion. Brothers Daniel and Richard Tsai of the Fubon Group were ranked fourth – a fall from first place MISSION ACCOMPLISHED — Morris Chang meets the media after returning from representing Taiwan at the APEC leadership forum in Papua New Guinea. in last year’s survey – with family assets PHOTO: CNA estimated at NT$5.7 billion.

TAIWAN BUSINESS TOPICS • DECEMBER 2018 9

12_Briefs.indd 9 2018/12/9 下午8:58 ISSUES

Higher Rating in World Bank Survey

Taiwan rose to 13th place in the 2019 Doing Business report.

aiwan moved up two notches from last year to rank No. 13 in the World Bank’s recently released 2019 Doing Busi- T ness survey. It passed Estonia, Finland, and Australia but came in behind the United Arab Emirates, which soared all the way from last year’s 21st place to No. 11. Doing Business differs from most international competitiveness surveys in that it tracks the practical impact of specific regulations, especially as they affect small and medium-sized enterprises operating in the largest business city in the economy (in Taiwan’s case, Taipei). The survey, which includes 190 countries and economies, measures and scores the 10 categories of “processes for business incorporation, getting a building permit, obtaining an electricity connection, transferring property, getting access to credit, protecting minority investors, paying taxes, engaging in international trade, enforcing contracts, and resolving insolvency.” 0 In conducting the survey, Doing Business relies on a network of local partners, including legal experts, business consultants, accountants, freight forwarders, government officials, and other professionals. For the third consecutive year, New Zealand topped the list, followed by Singapore and Denmark. Taiwan’s chief trading rival, South Korea, slipped from fourth to fifth in the ranking, changing places with Hong Kong. Others that came in ahead of Taiwan – or “Taiwan, China” as the World Bank insists on calling it – 00 were Georgia (#6, improved from #9 last year), Norway (#7), the United States (#8), United Kingdom (#9), Macedonia (#10), and Sweden (#12). China continued its rise up the ladder, improving from #78 last year to #46 in the current ranking. The 2019 edition is entitled “Training for Reform,” and notes that increased training opportunities for public officials are associated with streamlined business regulations and a higher Doing Business score. The report says that “such training improves experts’ productivity and capacity to serve customers, who in turn become better informed about new regulatory requirements or processes.” The report also stresses the importance of public communications in improving the regulatory environment, saying that “effective public communication of business regulatory reform 0 not only constitutes good practice, it also improves compliance from the private sector and holds the public sector accountable for regulatory violations.” 0

10 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 issues.indd 10 2018/12/9 下午6:06 ISSUES

In recent years, AmCham Taipei’s annual Taiwan White Paper has similarly emphasized the need for more training programs for working- and mid-level civil servants in dealing with stakeholders, and for greater attention to public communications regarding proposed regulatory changes. Of the 10 categories in the Doing Business survey, the one in which Taiwan achieved the best score was “Dealing with construction permits,” where it ranked second in the world, behind only Hong Kong. Getting permission to build a warehouse in Taipei, the survey found, entails 10 procedures that typically take 82 days and cost 0.4% of the warehouse value. In contrast, the average for high-income OECD countries is 12.7 procedures over 153.1 days at a cost of 1.5%. Doing Business credited the improved efficiency with regard 0 to construction permits largely to the creation of a single-window counter in the Taipei City Construction Management Office. It also cited significant progress during the period under review (June 0 2017 to May 2018) in the area of minority investor rights, noting 0 strengthened protection by “enhancing ownership and control 5 structures in listed companies.” 5 As was the case last year, the category in which Taiwan performed the worst was “Getting credit.” In fact, Taiwan’s ranking in this area has declined, falling from 90th place last year 005 to 99 in the latest edition. The “Getting credit” exercise looks at two sets of issues – the effectiveness of collateral in facilitating lending and the strength of the credit reporting system, especially the “coverage, scope and accessibility of credit information available through a credit registry or a credit bureau.” It was the latter aspect in which Taiwan’s score was particularly low. 0 Also good results in WEF survey

Taiwan also ranked in 13th place this year in the global competitiveness survey carried out annually by the World Economic Forum (WEF), retaining its position from last year. The survey measures 140 countries and economies based on such components as the enabling economic environment, human capital, markets, and innovation ecosystem. The United States was ranked No. 1, followed by Singapore, Germany, Switzerland, and Japan. 0 Within the Asia Pacific, Taiwan’s score was exceeded only by Singapore, Japan, and Hong Kong. As a result of such factors as its low inflation and government debt, as well as its steady GDP growth, Taiwan was one of 31 economies that attained a 100% score in the category of Macroeconomic Stability. 00 Taiwan also gained a high ranking (fourth place) in innovation, although the WEF noted that its expenditure on R&D as a percentage of GDP has not been increasing. WEF also observed that the Asia Pacific’s “innovation hubs – Japan, [South] Korea, and Taiwan – could improve on the so-called ‘softer’ drivers of innovation to attain the level of ‘super innovators’ such as Germany, the U.S. and Switzerland.” — By Don Shapiro

TAIWAN BUSINESS TOPICS • DECEMBER 2018 11

12 issues.indd 11 2018/12/9 下午6:06

COVER STORY TOURISM

After the Chinese Group Tour Boom 中國團體旅遊熱潮之後

TAIWAN BUSINESS TOPICS • DECEMBER 2018 13

12_CoverStory.indd 13 2018/12/9 下午6:14 COVER STORY

TOURISM

Taiwan’s Hotels Grapple with Oversupply

Although market demand is flat, additional new hotels continue to be constructed.

BY MATTHEW FULCO

thousand new hotel rooms have the first three quarters of the year, the been added in Taipei during number of international visitors rose A2018 – and many more new by a somewhat healthier 3.6%, and the hotel projects are in the pipeline both in volume of Chinese tourists showed a the capital city and around the island. positive growth rate of a slim 1.87%. Unfortunately, they are coming onto the With cross-Strait political relations in a market just as the growth rate in inter- deep freeze, Chinese group tours can’t national tourism is softening due to the be expected to come back in droves decline in visitors from China. anytime soon. After a steep increase in recent years Chinese tourists, primarily indepen- from 3.8 million international tourist dent travelers, account for 15% of busi- arrivals in 2008 to 10.7 million last year, ness at Shangri-La’s Far Eastern Plaza in last year’s growth rate slowed to just Taipei. That five-star property has never 0.46%. The number of Chinese visitors catered to Chinese group tours, but it fell from a peak of over 4 million in 2015 is not immune to fluctuations in the to 2.7 million due to Beijing’s restrictions tourism market that they have caused. on visits to Taiwan by tour groups. “Weakening demand affects the market The situation so far this year has as a whole, regardless of where it comes Japanese tourists doing duty-free shop- showed just modest improvement. In from,” says Randy Zupanski, general ping. PHOTO: DON SHAPIRO

旅 5 旅 0 0000 005 00 0000 5 00500 0

14 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_CoverStory.indd 14 2018/12/9 下午6:14 TOURISM

manager of the Far Eastern Plaza and a rooms. Hotels are a good option, Chen 400-room Hilton Taipei Sinban Hotel in 40-year veteran of the hospitality indus- says, because even if the venture loses the Banqiao District of New Taipei City. try. “It drags down room rates.” money, if it occupies a prime location the In Taipei City, the 104-room Renais- The growing discrepancy between property value will steadily appreciate. sance Shihlin, a brand in the Marriott hotel-room supply and demand is “A lot of owners are thinking, ‘I portfolio, opened in August. In October, largely a function of the lengthy time- want to eventually sell the building for a the Leofoo Group and Marriott launched frame needed for a hotel project to go big profit, and I can always convert the the 465-room Courtyard by Marriott through planning and construction. hotel into something else – office space Taipei in the city’s Nangang District near Harvey Thompson, general manager of or luxury residences –when the market the Nangang Exhibition Center, Nangang the W Taipei, says that many owners and recovers if I think it will make me more Software Park, and Neihu Technol- operators “committed themselves when money,’” says C.K. Cheng, founder and ogy Park. (At the same time, Leofoo has numbers were growing strongly” in the chief executive officer of AsiaYo, an announced the closing at year-end of its period between 2012 and 2015. “They online booking platform for licensed 288-room Westin Taipei on Nanjing East still have to open the hotels, even though vacation. “Some people are just trying to Road due to unwillingness to accept a the market doesn’t look as promising make a fast buck,” says Cheng, a former rent increase). anymore.” investment banker. A second Courtyard by Marriott with That’s a key reason, but not the only Building hotels as part of a real-estate 227 guest rooms – a project of Cathay one. “Some property developers have speculation strategy might earn the devel- Hospitality Management located at the their eyes on capital gains,” says Chen oper a handsome profit, but dumping corner of Minsheng and Jianguo Roads Ming-ming, founder and chief executive more supply onto an already crowded – is scheduled to open this month. And officer of travel-activities platform kkday. market won’t benefit the hotel industry. before the end of the year, local brand Given the low-interest rates of 1.5-1.6%, As occupancy rates fall, room rates will go Caesar Park Hotels and Resorts plans developers can obtain attractive lending down, hitting all the hotels’ bottom lines. to open a new property in the Neihu terms from banks. In addition, some local Still, new properties are continuing to District. hospitality management companies, like open as if the Chinese tourism boom had Meanwhile, Hyatt announced in May Cathay Hospitality and Fubon Hospital- never ended. In Jiaoxi, the Yilan County that in 2021 it would open two hotels ity, are part of large financial conglomer- resort town known for its hot springs, – a Park Hyatt and an Andaz – in the ates that that own prime plots of land in four new properties – Maison de Chine same building, the Taipei Sky Tower in downtown Taipei. Jiaosi, Hotel Valletta, Yamagata Kaku the Xinyi District. Those projects will In the past, property developers might Hotel & Spa, and Kilin Jiaoxi – have add to that neighborhood’s concentra- have built luxury apartments on that opened in the past year. In September, tion of high-end hotels. The Taipei Sky land. But Taipei has even more empty Hilton – returning to the Taiwan market Tower will be within walking distance of luxury apartments than it does hotel after a 14-year absence – opened a three existing five-star hotels – the Grand

5 0 00 0 500

TAIWAN BUSINESS TOPICS • DECEMBER 2018 15

12_CoverStory.indd 15 2018/12/9 下午6:14 COVER STORY

TOURISM

Hyatt, W, and Meridien. entry of a Park Hyatt will be good for More sustainable development Loyalty Lobby, a hospitality-industry Taipei City’s brand. “Park Hyatt is a news website, quoted one of the investors premium brand,” he says. “Having it Some hoteliers are taking a more in Taipei Sky Tower as saying that Hyatt here shows that Taipei can be a destina- cautious approach to expansion. Benja- aims to tap demand for accommodations tion for high-end travelers.” At the same min Liao, chairman of the Forte Hotel that are more interesting than a conven- time, Thompson says, the addition of Group, which manages 10 properties in tional hotel but more reliable than home 500 new rooms in the two Hyatt hotels Taiwan, says that the company has no sharing. will put pressure on the W and other immediate plans to open new hotels. “We The W’s Thompson says that the properties nearby. have always pursued an organic growth strategy,” he says. “We already have a good number of hotels and it’s very expensive to open new properties.” Currently, hotel occupancy rates for the whole of Taiwan are about 61%, according to research by property-services firm CBRE. They are highest in Hsin- chu (73%), Taipei (71%), and Taoyuan (68%), which all benefit from steady business-traveler demand. In eastern Taiwan, which has been battered by the drop in Chinese visitors, occupancy rates are much lower – just 45% in Hualien and 49% in Taitung. In Chiayi in the south- west, just 39% of hotel rooms are filled. Eastern Taiwan formerly benefited from Chinese tour groups’ 8-day, 7-night trips, says Joe Y. Chou, director general of the Taiwan Tourism Bureau. “The typical Chinese tour group would always visit both Hualien and Taitung,” he says. But with the sharp drop in Chinese arrivals, “many hotels in eastern Taiwan are changing their business models.” In some cases, that means abandon- ing the hotel business. Ping Lee, head of The Taipei Sky Tower, joining Taipei 101 in the city's skyline, will house two different research at CBRE Taiwan, says that the Hyatt hotels. fall in Chinese tourism has caused some

5 5 000 000500

16 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_CoverStory.indd 16 2018/12/9 下午6:14 TOURISM

properties in eastern Taiwan that focused Chine Hualien, Formosan Naruwan enjoys Taiwan’s mountain scenery and on Chinese tour groups to shut down. Hotel and Resort Taitung, and the tasty, inexpensive food. To be sure, eastern Taiwan attracts other Grand Hotel Kaohsiung are regularly “It’s a beautiful place and I love all tourists – especially domestic visitors – offering discounts of up to 70% on the different snacks,” she says. “I prefer but there is no obvious replacement for certain rooms. to come in winter when the weather isn’t the Chinese. Meanwhile, the archipelago of so hot.” “Eastern Taiwan is lovely, but it’s Kinmen, governed by Taiwan but just off Li Chen, a Liaoning native based in remote – it’s not very accessible for the the coast of mainland China, has been an Hong Kong, has been to Taiwan three typical FIT [free independent traveler], exception to the decline in Chinese tour- times as well. Besides the food and says kkday’s Chen. He notes that Hong ism. In the first half of the year, 250,000 friendly people, he cites the traditional Kong is the only city outside of Taiwan Chinese visited Kinmen, compared to Chinese culture as a draw. “It’s a kind of with direct air links to Hualien. “So the 230,000 Taiwanese, making it the first Chinese culture you don’t see elsewhere growing tourism markets – South Korea, time that visitors from China exceeded in Greater China – something older and Southeast Asia – they usually just come those from Taiwan. more authentic,” he says. to Taipei.” Both geographic proximity and poli- In addition to Chinese FITs, the The strong earthquake that struck tics play a role in Kinmen’s attractiveness Southeast Asian tourist market is show- Hualien County in February has also to Chinese tourists. The ruling Demo- ing stable growth, attributed by indus- depressed tourism there, if only tempo- cratic Progressive Party (DPP) does not try analysts to a relaxation of visa poli- rarily. When this writer visited Hualien control the Kinmen local government cies and more direct air links between in March, I had the beaches to myself. and is not an influential force in local Taiwan and ASEAN destinations. About Locals told me that some people were politics. Since the election of President 1.2 million Southeast Asian tourists scared to visit because of the earthquake, Tsai Ing-wen in 2016, Beijing has sought visited Taiwan in the first half of 2018, which left 17 dead and 285 injured. to court local governments unsympa- up 20% year-on-year. The Philippines In October, the Tourism Bureau thetic to the DPP. (60%) and Vietnam (39%) posted the announced it would offer NT$90 million Another relative bright spot is that strongest growth, the Tourism Bureau in subsidies for lodgings and transporta- Chinese FIT travel to Taiwan contin- says. This was the first full year in which tion to independent travelers in the final ues to be stable. Through September, visa waiver was in effect for Filipino two months of the year to support tour- more than 2 million Chinese tourists travelers, and there has been discussion ism in eastern and southern Taiwan. visited Taiwan, primarily independent of extending the program to Vietnam Ranging from NT$1,000 to NT$1,500, travelers. and Indonesia. the subsidies are available to indepen- Taiwan Business TOPICS spoke Overall, however, hoteliers remain dent travelers who visit Hualien, Taitung, to several Chinese FITs about their cautious about their 2019 forecasts. parts of Yilan (not the hot-springs reasons for visiting Taiwan. Hattie “The impact of all the new room supply resorts), Kaohsiung, and Pingtung. Shi, a Shandong native who works in in 2018 isn’t going to be fully felt until Some hotels in those areas are also Shanghai at a private school, has visited 2019, because many of the new proper- offering big discounts to drum up Taiwan three times, including one trip ties opened late this year,” says Shangri- business. Reportedly, the Chateau de all around the island. She says that she La’s Zapinski.

5 00 0 00 0 00 0 0 0

TAIWAN BUSINESS TOPICS • DECEMBER 2018 17

12_CoverStory.indd 17 2018/12/9 下午6:14 COVER STORY

TOURISM

try is the airport,” says Achim von Hake, general manager of the Sherwood Taipei. Developing a More Global “They’re going to base their first impres- sions of the country at least in part on that.” MICE Perspective Van Hake and other veterans of the hospitality industry interviewed Taipei has its attractions as a site for international by Taiwan Business TOPICS urge the Taiwanese government to work more events, but it needs a fresh mindset to win business in closely with international hospital- the ultra-competitive Asia market. ity experts to develop Taiwan’s meetings, incentives, conferences and exhibitions (MICE) business. While giving BY MATTHEW FULCO Taipei high marks for its exhibition facilities, accommodations, and general visi- tor-friendly attitude, they say that a more rriving at Taoyuan Airport, trav- international airports), smiling multi- international perspective is needed to win elers normally pass through lingual staff are out on the floor of the business in the highly competitive Asia A immigration, customs, and the arrivals area, directing people to shuttle MICE market. baggage claim smoothly. But upon enter- buses, the subway, or taxis. The buses are MICE business is important because it ing the arrivals area of Taipei’s primary in immaculate shape and most go directly boosts the overall tourism sector, not just international airport, the experience to major Tokyo hotels. To be sure, Tokyo meeting venues. MICE travelers spend gets bumpier for non-Chinese speak- overall has a serious language barrier – money in restaurants, on transportation, ers. Without Chinese-language skills, it probably more so than Taipei – but the and in retail stores. When events involve can be tricky taking a taxi or bus into journey from the airport to the city has cultural attractions such as museums, the Taipei. Many of the buses are old and been designed to be seamless. theater, or live music, that segment of the have moldy interiors, and they rarely take For business travelers, who often are economy benefits too. passengers directly to their hotels. on tight schedules, that makes all the Benjamin Liao, chairman of the Forte In contrast, at Tokyo’s Haneda difference. “The first thing people see and Hotel Group which includes the flag- Airport (the smaller of the city’s two experience when they arrive in a coun- ship Howard Plaza, notes that Taipei

國國 0 0000

18 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_CoverStory.indd 18 2018/12/9 下午6:14 TOURISM

has been particularly successful in hold- pore-based Pacific World, a leading desti- MICE destinations in the Asia-Pacific ing world-class exhibitions, such as the nation management company for events, based on bookings in Cvent, a cloud- long-running Computex trade show held found that Hong Kong, Thailand, and based enterprise event management every June for the tech sector, as well as Vietnam hosted the most events in Asia company. In 2017, the company booked Taipei Cycle, one of the world’s largest in the first half of the year. Singapore US$14.7 billion in business through bicycle trade fairs. The city also showed hosted the largest events in Asia during its supplier network, supporting about it can handle large-scale sporting events that period. 715,000 events globally. Cvent ranks when it hosted the Taipei Universiade in Taipei did not even make the top 10 Singapore – whose Changi Airport is August 2017. With 10,000 participants, the Universiade was the largest event the Taiwanese capital has held to date. Biotech is another promising area. In July, Taipei hosted BioTaiwan – Asia’s largest biotech exhibition – at the Nangang Exhibition Hall, attracting a record 600 exhibitors and 1400 booths. In October, the Taipei International Food Exhibition (hosted by the Taiwan External Trade Development Coun- cil) won the Outstanding Trade Exhibi- tion Award from the Asian Federation of Exhibition and Convention Associations (AFECA). According to the government’s Meet Taiwan website, the exhibition won the award because it provided ‘a complete industrial supply chain, marketing model, and internationalization.” However, Taipei still trails many of its neighbors as a MICE destination. The Taipei International Convention Center, part of the Taipei World Trade Center, Research published in August by Singa- with Taipei 101 in the background. PHOTO: WIKIMEDIA

000 05 0 5

TAIWAN BUSINESS TOPICS • DECEMBER 2018 19

12_CoverStory.indd 19 2018/12/9 下午6:14 COVER STORY

TOURISM

consistently lauded as one of the world’s promotion efforts. “There’s not a central- ers together,” he says. He notes that in San best – as Asia’s top MICE destination ized MICE program, so there’s not a clear Francisco, where he previously worked, followed by Sydney, Bangkok, and Kuala message about the strengths of Taipei as a the city government and hospitality Lumpur. Rounding out the top 10 are MICE destination,” he says. industry have successfully cooperated to Hong Kong, Shanghai, Melbourne, New A centralized MICE program would promote the city as a MICE destination. Delhi, Tokyo, and Mumbai. hopefully be able to improve the quality Taiwan’s forte in the MICE sector has “How do we get people to come and accuracy of English-language promo- been the exhibitions side. Specialists in here?” asks Harvey Thompson, general tional materials. A June press release the market say it is far from reaching its manager of the W Taipei. “We can’t just by the Taipei City government about a potential in the other three components: say we’re cost competitive because Thai- campaign to attract business from South- meetings (for corporate training, product land and Malaysia are much cheaper.” east Asia describes the Philippines, Singa- launches, and other purposes), incentive Thompson suggests that Taipei bench- pore, and Malaysia as “three Southeast travel to reward high-performing employ- mark itself against other Asian cities who Asia lands being visited on this excur- ees, and conventions. They stress that excel at MICE to figure out how it can sion” – the trip Taipei City officials took wooing those types of events requires a improve. He believes that international to those countries. much more intensive and targeted sales hospitality consultants could also be The website publishing the press and marketing effort than Taipei has so helpful in boosting Taipei’s competitive- release, globalnewswire.com, lists Taipei’s far managed. ness as a MICE destination. location as “Taipei, Taiwan, Province More active promotion by the city In an interview with Taiwan Busi- of China.” That might confuse meet- government – cooperating closely with ness TOPICS, Tourism Bureau Direc- ing planners (besides failing to reflect Taiwan’s Professional Conference Orga- tor-General Joe Y. Chou said that the national policy). nizers (PCOs) – would also help a lot, government is working to attract MICE Randy Zupanski, general manager of says Jason Yeh, founder and CEO of the business, move upscale to larger events, Shangri-La’s Far Eastern Plaza Taipei, GIS Group, a leading meeting solution and persuade MICE travelers to stay for says that visa issues for Chinese business- provider. Working with a two- or three- longer. By 2020, Taiwan aims to grow its people are a key factor affecting Taipei’s year lead time, PCO firms research which MICE business by 10%, he said, adding MICE business. “When you’re having a international associations will be hold- that in 2017 the market grew 3-5% year- big MICE event in Asia, China is often ing international conventions, prepare a on-year. involved,” he says. “When groups are bid, and lobby to gain support for their also looking at Bangkok, Shanghai, and proposed venue. Need for coordination Hong Kong, they’re going to consider if While Taipei has abundant exhibi- the visa process will be problematic for tion space, Yeh urges the government to The Sherwood’s von Hake says that the Chinese participants.” invest in building new and larger facil- one of the challenges Taipei faces is that Zupanksi suggests that Taipei City ities dedicated to conferences. He says different government bureaus and offices work together with hotels to promote that Taiwan was considered “a pioneer don’t typically coordinate their MICE MICE. “We need to bring the stakehold- in the Asia market several decades ago”

20 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_CoverStory.indd 20 2018/12/9 下午6:14 TOURISM

when the Taipei International Convention for the existing infrastructure. marketing is having interesting stories Center was opened in 1989 as part of the While many event organizers abroad to tell, hoping that the event attendees Taipei World Trade Center. But compared are not familiar with the Taiwan market, will spread the word by relating those to what other cities in the region can now the island has some significant advan- stories after returning home. “You want offer, the Taipei facilities are regarded as tages if marketed properly, she says. “It’s them to talk about how neat it was to too old and too small, he says. a new destination” at a time when many have Peking duck while enjoying the view Kitty Wong, president of destination conference-goers may be tired of the from the top of Taipei 101, or to discover management company K&A Interna- usual locations. “And it’s a safe destina- how delicious a bowl of Taiwanese beef tional, urges Taiwan to do more to attract tion” at a time when security is a growing noodles can be,” she says. the many smaller conventions and confer- consideration. ences, not just to concentrate on very Wong, a past president of the World — With additional reporting by large events which may pose challenges PCO Alliance, says the key to MICE Benjamin Parker

Airbnb on the Brink in Taiwan

Changes in regulatory approaches are expected to cut deeply into the home-sharing platform’s Taiwan business.

BY MATTHEW FULCO

A bed-and-breakfast in Kinmen. PHOTO: MATTHEW FULCO

ome sharing is a great way to the Taiwan market. Ironically, despite its example and legalize home sharing – but experience Taiwan. During my focus on close contact between host and with strings attached. H two trips last year to Kinmen, guest, the inn is not listed on Airbnb, In 2015, Taiwan passed an amend- the Taiwan-governed archipelago off the known for “home-sharing.” ment to the Tourism Development Act coast of China’s Fujian Province, I stayed In fact, many of Airbnb’s listings that more clearly defined hotels and in the same bed and breakfast, Shang- appear to be vacant studio or one- raised fines on operators of illegal short- heryuan. In between sightseeing excur- bedroom apartments in downtown Taipei term tourist accommodations to as much sions, I chatted with my host Chen Shu- City. The owners, who live elsewhere and as NT$500,000. Yet in practice, relatively chen, a Taichung native, about everything rent the apartments out for a few nights few fines have been issued, according to from where to catch the best view of the at a time, are not engaged in “home shar- sources who follow the industry. Xiamen skyline to the mercurial fog that ing” any more than any landlord who One challenge for regulators is that sometimes descends over the islands. leases a property to a long-term tenant. an Airbnb listing is not required to list When the fog is thick, flights are Therein lies the regulatory dilemma: its exact address. A guest often only cancelled. Her advice: choose flights early How to support innovation – of which learns that information after paying and in the day so you can hop on a later one the sharing economy is a prime example contacting the host directly. “Someone if there is a cancellation. – without being unfair to existing stake- living in a building would have to report Chen’s culinary prowess even made holders such as hotels? one of their neighbors to the authori- me reconsider my misgivings about Taiwanese law does not typically ties, and not everyone wants to take that youtiao, the deep-fried Chinese dough permit private residences to be rented responsibility,” says Lawrie, a long-term sticks. She paired them with the best fish out for less than 30 days at a time. Since Taiwanese Airbnb host who asked to be congee I’ve ever tasted. If there ever is a 2015 the government has been promis- identified only by his English name. campaign to make carbs great again, she ing to crack down on illegal hotels, but In December 2015, the Taipei City should be involved. progress has been slow. Given substantial government ordered Airbnb to remove Shangheryuan is a licensed bed and demand in Taiwan for short-term accom- 95% of its 4,200 short-term home rental breakfast listed alongside major hotels modations, some analysts expect that listings. That scared some additional on several travel booking sites serving the government will follow the Japanese people off of Airbnb.

TAIWAN BUSINESS TOPICS • DECEMBER 2018 21

12_CoverStory.indd 21 2018/12/9 下午6:14 COVER STORY

TOURISM

But the fear must have subsided. reasons, such accommodations have been tions to better accommodate home shar- There are currently hundreds – if not banned worldwide, and “internet plat- ing. “It would be beneficial to consumers thousands – of Taipei apartments avail- form operators should abide by Taiwan’s if home sharing [including empty apart- able for short-term rentals on Airbnb. regulations on hotels and short-stay rent- ments] was legalized here – there’s a huge Certainly many visitors to Taipei are als,” the Bureau added. demand for it,” says C.K. Cheng, founder seeking comfortable downtown accom- In July, local media reported that the and chief executive officer of AsiaYo, a modations for a lower price than a Tourism Bureau cut the utilities at an Taipei-based booking site for licensed comparable hotel room and don’t care unlicensed property in Kaohsiung’s Zuoy- vacation rentals. about interaction with a host. “It’s attrac- ing District after the owner failed to heed tive to guests but not fair to hotels that an order to cease operations. Japanese model have much higher costs and must abide Lawrie points to Taiwan’s low salary by strict regulations,” Lawrie notes. levels as the reason many people seek to Taiwan reportedly is looking at Japan’s Airbnb did not respond to requests supplement their earnings with income home-sharing act, passed in June, as a for information, but an August report in from Airbnb rentals. A typical Airbnb possible model. Under that law, individual Tech Node said the company’s Taiwan listing of a whole apartment in down- rooms can be rented out for a maximum business has surged since 2015. Citing town Taipei could bring in NT$30,000- of 180 days a year, and hosts are required company data, it said 1.3 million foreign $40,000 a month, which can make a to verify the identity of their guests and tourists – 12% of the total – used Airbnb big difference for someone earning just keep a guest registry. Ahead of the law Taiwan listings in 2017. NT$40,000 (the approximate median coming into effect, about 40,000 Airbnb But some industry experts raise salary) from a full-time job, he says. listings (80% of the total) that would lack doubts about the future prospects. Chen One Airbnb host based in north- permission to operate under the new legis- Ming-ming, founder of the Taiwan-based ern Taiwan, speaking on condition of lation vanished from the platform. travel-activity platform kkday, notes anonymity, said he has listed a central Cheng lauds Japan’s move to regulate that the hotel industry, which is already Tainan property on Airbnb since 2014 to home sharing. “Sure, there will be some suffering from a supply glut, has stepped fill gaps in occupancy by a regular tenant. transitional pain, but now the govern- up pressure on the government to crack “Demand is strong enough to make it ment can monitor the industry,” he says. down on Airbnb. Traditional tour opera- worth listing,” he says. That will strongly reduce safety and tax tors also oppose Airbnb as its customers The host admits that the property isn’t problems, as well as conflicts between bypass them and book their own accom- licensed as a hotel. “Can anything on guests and hosts or guests and residents modations. Airbnb be licensed in Taiwan?” he asks. of a building, he adds. Not all hoteliers oppose Airbnb. The technical answer is “yes.” But An August Bloomberg commentary “There’s no direct impact on our busi- most of those licensed bed-and-breakfasts, said that the new regulations are profes- ness,” says Harvey Thompson, general like Kinmen’s Shangheryuan, already are sionalizing Airbnb in Japan. “Gone are manager of the five-star W Taipei. Rooms partnering with other travel-booking sites the stock photos of tourist sites and at the W, ranging from NT$10,000 that have been established in this market blurry smartphone pictures that leave you to $15,000 a night, are positioned for longer than Airbnb and are less likely wondering what the place actually looks for the premium market. In contrast, to work with unlicensed operators. like,” the article said. “Every listing now most Airbnb Taipei listings are in the At the same time, Lawrie acknowl- also displays a registration number with NT$2,000-$6,000 range. Still, residents edges that real-estate speculation has the local government and they will keep a of apartment buildings may be disturbed played a large role in Airbnb’s success in copy of your passport.” by the coming and going of Airbnb Taiwan. “Some people in Taiwan still see With the 2020 Tokyo Olympics guests, Thompson points out. real estate as a way to get rich fast,” he approaching, Japan had good reason to says. “It’s a part of our culture that’s not boost accommodation options for visi- Tourism Bureau crackdown easy to change.” tors. The country already faces a short- In practice, the hosts able to post the age of hotel rooms amid an unprece- This June, the Tourism Bureau most lucrative earnings from Airbnb list- dented tourism boom. Indeed, by some launched a campaign against unlicensed ings most likely already possess substan- accounts Japan is the world’s fastest accommodations which will reportedly tial assets. For instance, a host with growing tourism destination. In 2017, include comprehensive inspections of five Airbnb listings in Taipei’s Xinyi 28.7 million foreign tourists visited suspected illegal hotels. “While tourists and Daan districts could earn up to Japan, an increase of 334% since 2010, may want inexpensive accommodations, NT$150,000-$200,000 a month, Lawrie according to the United Nations World there are many problems associated with says, but would have needed the capital Tourism Organization. illegal hotels and short-term rentals,” to acquire the properties in the first place. In contrast, Taiwan’s tourism boom, including safety issues, tax avoidance and The most desirable apartments are in fueled by a surge of Chinese tourists disruptive behavior of guests in residential modern high-rises, where units rarely sell during Ma Ying-jeou’s presidency, is buildings, the Bureau said in an emailed for less than NT$15-20 million. over, at least for now. Since 2015, over- response to a request for comment from Some in the tourism industry urge all Chinese tourism has fallen by about Taiwan Business TOPICS. For those the government to revise hotel regula- 40% from a high of 4 million arriv-

22 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12_CoverStory.indd 22 2018/12/9 下午6:14 TOURISM

als. The primary reason for the decline is different situation. And while Airbnb two years. He expresses hope that Airbnb Beijing’s tightened restrictions on group often depicts itself as an insurgent in a can return to its roots as a home-shar- tours to Taiwan (the independent traveler battle with an entrenched incumbent, the ing platform that allows people with an market from China remains robust). Even hotel industry, there is another party that adventurous spirit to connect. After all, if tourism from other markets is stable or benefits from short-term rentals: the real- not everyone is comfortable staying with growing, it is difficult to make up for the estate sector. Given sufficient demand, a stranger in that person’s home or host- precipitous fall in the number of Chinese property owners can earn more from ing a stranger. And there’s no way to group tours. Last year, Taiwan’s inbound renting out apartments to short-term make a connection with an absent host. tourism revenue decreased about 8% to guests than to long-term tenants. “If you ask me, home sharing just US$12.3 billion. Lawrie says he expects the Taiwan might be the best way to make new Compared to Japan then, Taiwan’s government to crack down hard on unli- friends,” he says. “It’s how I met my wife. tourism market is currently in a very censed short-term rentals over the next She was my Airbnb guest.”

yet in the survey. In October, the Taiwan Halal Center won a Malaysia Tourism Taiwan Seeks to Attract Council Gold Award for its successful promotion of a Muslim-friendly environ- Muslim Tourism ment and facilities. Established in 2017, the center helps Taiwanese firms receive halal certification and cooperates with partners who Both economic and political considerations are behind the move have relevant expertise in Indonesia, to reduce the island’s dependence on visitors from China. Malaysia, Thailand, the Philippines, and Turkey. Overall the center has helped 954 Taiwanese businesses and over 13,000 aiwan is aiming to attract more says Joe Y. Chou, director general of products earn halal certification, accord- Muslim visitors from Southeast the Tourism Bureau. He notes that the ing to a November report in Taiwan T Asia in a bid to diversify its flag- government is assisting restaurants and Today, which is published by the Ministry ging tourism market, which has suffered 4- and 5-star hotels to qualify for halal of Foreign Affairs. from overdependence on China. Once status (certifying that they meet the stan- Hotels, meanwhile, increasingly are the source of 40% of Taiwan’s 10 million dards for what is permissible under catering to the needs of Muslim guests. annual visitors, China has restricted Islamic law in terms of dietary require- Shangri-La’s Far Eastern Plaza Taipei group tours to the island since the pro- ments) and has created a dedicated Hotel can accommodate Muslim guests independence Democratic Progres- section on the official tourism website thanks to its halal kitchen – food and sive Party (DPP) won the presidency in listing Muslim-friendly accommodations drink for Muslim guests is required to 2016. Without the influx of Chinese visi- and restaurants, as well as the locations be prepared separately from that served tors, Taiwan’s tourism market has cooled of the eight mosques in Taiwan. to other guests – and facilities suitable dramatically, recording anemic 0.46% A visit to the website shows that for prayer. “Malaysia is a good market growth in 2017. resources for Muslim visitors in English for us,” says general manager Randy The DPP, wary of Beijing’s desire are comprehensive, but that the Indone- Zupanski. to annex Taiwan, has sought to reduce sian and Malaysian-language information The Amba hotels, which also have Chinese leverage over the island’s is relatively sparse. halal kitchens, have “always been economic affairs. As part of the New In July, a government-produced Muslim-friendly,” says general manger Southbound Policy, a recasting of former promotional film featuring Taiwan’s top Dino Chiang, who manages the Amba President Lee Teng-hui’s Go South initia- tourist attractions and Muslim-friendly Songshan hotel in Taipei City (there are tive, Taiwan is wooing tourists from travel environment premiered in Brunei also Ambas in Zhongshan and Ximend- Southeast Asia. While the Vietnam and and Malaysia. The film shows the high- ing). Huang notes that halal certification the Philippines are the fastest-grow- lights of the summer trip to Taiwan of requirements are stringent and it is neces- ing markets, Taiwan is also seeking to Malaysian actress Mira Filzah, who was sary to reapply yearly to maintain the attract visitors from Indonesia, Malay- joined on the visit by Malaysian social- accreditation. sia, and Brunei. media influencers Aisha Liyana, Sharifah Overall, he believes that Taiwan is Considering that it has only a small Rose, and Yasmin Redzuan. doing well in its efforts to attract Muslim domestic Muslim population, Taiwan The government’s efforts are bearing tourists. “Our Muslim guests have may not seem like an obvious holi- fruit. In the Global Muslim Travel Index commented how impressed they are with day destination for adherents of Islam. published in April, Taiwan was ranked the facilities catering to them in Taiwan,” Yet the government has worked assidu- as the No. 5 Muslim-friendly country he says. ously to make Taiwan Muslim-friendly, among non-Muslim nations, its best score — By Matthew Fulco

TAIWAN BUSINESS TOPICS • DECEMBER 2018 23

12_CoverStory.indd 23 2018/12/9 下午6:14 ADVERTORIAL

Cadence: 30 Years of Innovation Driving the Semiconductor Industry

very year new consumer elec- lenge the limits of technology, such as collaboration with them, he has come to tronic products are introduced heterogeneous integration and “More appreciate the importance of cultivating E to the market. The driving force than Moore,” Brian finds that while talent and fostering the commitment of behind them is advanced semiconduc- consumer electronics product cycles the Taiwan team as a basis for establish- tor technology that can make product are unchanged, more complex and effi- ing trust and goodwill. design more powerful and longer last- cient chip designs are needed – which As IC design and semiconductors are ing. Founded in 1988, Cadence is the requires improving performance and already highly capital-intensive indus- only electronic design automation (EDA) productivity to deal with more difficult tries, the threshold for newcomers to company that offers seamless design problems. join has increased dramatically. More- flow solutions for integrated circuits Cadence makes investments in R&D over, the number of transistors on a (ICs), packages and circuit boards from 40% of its total revenue every chip has been increasing, boosting the covered by system design. The company year. By using machine learning, analy- complexity of the process and rais- has continued to drive semiconductor sis and optimization techniques, it has ing the importance of doing a good job innovation for more than 30 years. taken a leading position in the industry from front-end design so as not to risk Headquartered in Silicon Valley, in the development of electronic design chip failure. For example, Cadence’s Cadence employs more than 7,200 processes, and in the future will utilize partnership with TSMC entails close people globally. The company chiefly machine learning to optimize chip collaboration between experts from provides software tools and intellectual design. both sides to bring about good results. property (IP) for designing ICs, systems Recently, Cadence was selected by Looking ahead at the future of semi- on a chip (SoC) and printed circuit the Defense Advanced Research Proj- conductor development, Brian expresses boards (PCBs), covering analog, digital, ects Agency (DARPA) to support the optimism about two important trends. mixed-signal design, verification, pack- Intelligent Design of Electronic Assets The first is 5G, which he says will aging, PCB design and other areas. (IDEA) program with a US$24.1 change the basic needs of human Before the merger of ECAD and million fund. The Cadence-led team communication. The faster commu- SDA to form Cadence in 1988, ECAD includes Carnegie Mellon University nication speed will not only make it had already begun to serve the Taiwan and NVIDIA. This is one of six new more convenient to navigate by mobile market. In the more than three decades programs within DARPA’s Electron- phone, but will also raise demand for since then, Cadence has developed a ics Resurgence Initiative (ERI) to use audio and video services. broad customer base in Taiwan and advanced machine learning techniques The second area is automotive elec- has established very close collaboration to develop a unified platform for a fully tronics. Brian says that this sector is still with partners such as TSMC and Arm. integrated, intelligent design flow for a relatively closed market in Taiwan. According to Cadence Taiwan systems on a chip, systems in a package, Despite leading the world in manu- General Manager Brian Sung, mobile and printed circuit boards. facturing, the country still needs to phones continues to be the sector with As a result of its favorable view cooperate with large U.S. or interna- the highest demand for semiconduc- of Taiwan’s talent and geographical tional companies to jointly develop tors. With increasing demands for advantages, Cadence has been gradu- standards for the Internet of Things. high performance computing, machine ally expanding its R&D team in Taiwan Shenzhen, for example, has become learning, artificial intelligence, and in recent years. The company’s R&D a good IoT industry base. In the IoT in-vehicle systems, he notes that more manpower in Taiwan has increased by era, Taiwan may need to form a subtle and more companies are now focus- more than 110% over the past four relationship of cooperation and compe- ing on the concept of “heterogeneous years. It is worth mentioning that the tition with other markets. integration.” This approach involves Conformal design team has gradually Starting in 2015, Cadence has been the use of new software and tools to increased, and the core technology of recognized as one of the “100 Best integrate different wafers through R&D has also begun to be led by the Companies to Work For” by Fortune packaging or other technologies. Taiwan team. magazine for four consecutive years, The process is similar to construct- Brian notes that Taiwan’s large- thanks to all the employees who are ing a building, and requires refined scale OEM electronics factories and IC committed to helping create great prod- construction methods and design. design houses have rich experience in ucts that can change human life, and With the rise of new ideas that chal- manufacturing. During the process of to promote a high-performance culture

24 TAIWAN BUSINESS TOPICS • DECEMBER 2018

Cadence.indd 24 2018/12/9 下午6:17 ADVERTORIAL

within the company. Those are the its periods of revolutionary change. ing to help out, enabling mutual trust to practices and values that everyone from Forming a company culture is gradually develop. basic employees to leaders at all levels like playing on a basketball team, “When people teach others, they must take to heart. Brian says, noting that chemistry and also grow,” says Brian. The key is Brian says that an atmosphere of mutual trust are essential. In his first to require all colleagues to work mutual trust is necessary for talent to six months with the company, he has together to overcome challenges. Brian achieve a high level of creativity. If the devoted the most time to this area, and encourages teams to think like their team’s leaders make an effort to create he has taken the initiative to seek advice customers and to first understand that trust, it will be easier to promote a from his teams, lower his posture, and other people’s ideas before putting “people-oriented” culture when the semi- avoid any misunderstandings. The forward their own ideas on how to conductor industry goes through one of teams have therefore been very will- solve problems.

體

5 0 00 05 0 00 0 0 0

TAIWAN BUSINESS TOPICS • DECEMBER 2018 25

Cadence.indd 25 2018/12/9 下午6:17 TAIWAN BUSINESS

IMPROVED OUTLOOK FOR OFFICE FURNITURE MAKERS

The U.S.-China trade war and demand for sit-stand desks are helping drive growth for Taiwanese manufacturers.

BY JENS KASTNER

aiwan’s furniture industry experienced a big boost in the 1990s T through orders from IKEA – then suffered as the Swedish giant turned to suppliers in China, Vietnam, and other lower-cost countries. Tai- wanese makers of wooden furniture generally responded by moving production to Vietnam, both for the cheaper labor and to be closer to the abundant supply of inexpensive Southeast Asian wood. For makers of office furniture, it has been quite a different story. Their products – mostly made of metal and plastics – need less labor input and the production process can benefit significantly from automation. According to the Taiwan Furniture Manufacturers’ Association (TFMA), Taiwan’s exports Emma Lee of Kelly International shows off one of the company's adjustable-height desks.

of metal office furniture grew by a PHOTO: JENS KASTNER strong 36% in 2017 to reach US$108.6 million, whereas outbound shipments January 1, 2019. That increase has now European fair for office furniture, held of wooden office furniture dropped been postponed. But if it is imposed in late October in Cologne, Germany, by a steep 23.8% to come to a mere later, it would add a significant US$30 she said that “factories in Vietnam US$5.3 million. to the typical ex-factory price of about and Taiwan are also getting a tailwind The main export markets for Tai- US$120 for an ofﬁce chair. because furniture-making in China is wan’s office furniture are the United “The U.S. market has grown a lot under pressure from rising wages, social States, Japan, and China, in that order. in the past three years amid robust insurance contributions, and taxes.” The United States is all but certain to economic growth there, and we are For the Taiwanese furniture-makers, maintain its top spot, given that office expecting many more U.S. orders, as the move to Vietnam has not been furniture is on the Trump administra- U.S. President Donald Trump’s new tar- without challenges. For example, the tion’s list of Chinese goods that were iffs on Chinese competitors translate Chinese nationals that these operations made subject to additional 10% tariffs into increased sourcing from Taiwan as typically rely on to fill mid-level posi- in September. According to the Trump well as Taiwanese-owned factories in tions often quit to establish their own administration's original plan, a further Vietnam,” said TFMA secretary Ariel competing factories once have gained 25% in tariffs was to become effective Su. Interviewed at Orgatec, the leading enough inside business knowledge.

26 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Jes.indd 26 2018/12/9 下午6:19 TAIWAN BUSINESS

Another worrying trend is the such international service providers as certifications in line with China’s anti- increasing price of industrial land in BIFMA, SGS, and TÜV. Because of the pollution drive. Taiwan. As a result, many family-run use of nylon and Taiwanese steel, Lu In addition, a Chinese regulation furniture-making businesses have been says, his chairs can easily pass a “24/7” now stipulates that the load value of considering closing down, selling their back-tilt test in which a robotic arm each export container may not exceed land and investing the proceeds in sec- pushes on the back of the chair around US$60,000, a rule presumably aimed at tors they see as more promising. This 300,000 times. countering tax evasion. “Taiwan does phenomenon is likely to become even BIFMA office-chair certification also not have such a value ceiling for export more pronounced in the medium term. involves dropping weighted bags onto containers, which means that it is better The price of industrial sites is predicted the chair to test its strength; loading for us to produce high-value items in to climb further as some Taiwanese weights on the front edge of the chair our Taiwan factory, as opposed to our manufacturers, including members of to test whether it tips over; seeing China factory,” explained Emma Lee, the cash-rich electronics sector, relo- whether a person can balance on the Kelly’s sales manager. The U.S.-China cate from China due to the U.S.-China chair’s armrest; moving the wheels over trade war is also causing the company trade war. obstacles for prolonged periods of time; to consider shifting more orders from At this year’s Orgatec, Taiwan was and exposing the chair to smoldering the China factory to Taiwan, she said. represented by 32 exhibitors, making cigarettes. “On the other hand, finding workers it the non-EU country with the most Third-party testing is a prerequisite in Taiwan is not easy, and the rigid booths. The Taiwanese exhibitors noted for winning public procurement con- overtime regulations introduced last enviously that while less than 5% of tracts, which typically are particularly year are also a problem,” she added. their costs for participating in the trade lucrative due to the large quantities Seat-Well Enterprises Co., another show were subsidized by the Taiwan involved. Of course, private-sector cli- company focusing on sit-stand solu- External Trade Development Council ents also find it easier to sell chairs that tions, has also recently decided to shift (TAITRA), competing Chinese exhib- are third-party certified. most of its production from Guangdong itors received subsidies under Chinese to its Taichung plant in order to satisfy trade-promotion programs covering Taking a stand against sitting customers’ request for shipping from 70-80% of their expenses. Taiwan to avoid the higher U.S. tariffs. Lawrence Lu, a manager at Chiayi- The busiest Taiwanese booth at Seat-well develops its products in based office-chair manufacturer Chueng Orgatec seemed to be that of Chang- cooperation with Scandinavian part- Shine Co., said that a key objective hua-based Kadeya Enterprise Co., a ners. It manufactures the plastic parts of attending Orgatec was to allow maker of sit-stand furniture for offices and foam for the seats itself, while the company’s designers to get more and classrooms. All the exhibited sourcing other components, such as familiar with current trends in Euro- pieces, such as lecture and pupils’ desks, height-adjustment mechanisms and pean design. A major take-away this are easily height-adjustable, enabling wheels, from outside suppliers. Thus year is the European preference for the user to either sit or stand. moving production across the Taiwan roundness – in contrast to the American The booth was managed by Kadeya Strait mainly entails transferring the emphasis on angularity. Another dif- General Manager Jesse Liau, for- molds into which the plastic is injected. ference between the two markets is the merly IKEA’s legal representative in “One major challenge in relocating seat width, with U.S. customers typi- Taiwan. “People all over the world are to Taiwan is the shortage and high price cally demanding a few extra inches. now thinking that constant sitting is of land,” said Amy Hsu, Seat-well’s “Changing designs isn’t difficult, but unhealthy, and this translates into rap- general manager. “The other major you must see such things in real life – idly increasing demand for sit-stand drawback is that there are far fewer simply looking at product photos on solutions,” Liau said. “Even some suppliers in Taiwan to choose from the web while sitting in your office in public schools in the U.S., UK, and Ger- compared to China.” Taiwan is no substitute,” Lu said. “The many are already using sit-stand desks.” Owen Yang, general manager of other vital aspect to our overseas com- Kadeya continues to manufacture Changhua-based Shopin Lock Co., petitiveness is the materials we use, entirely in Taiwan, since it is difficult whose padlocks and spare key boxes are and this clearly differentiates us from to source high-quality steel, castings, made 100% in Taiwan, says the U.S.- Chinese and Southeast Asian compet- coatings, and electric components in China trade war has already given the itors.” Chueng Shine’s office chairs Vietnam, Liau says. company’s business a shot in the arm. In are made of nylon rather than less Another exhibitor, Taipei-based fact, Shopin has had to turn down sev- durable plastic, as well as steel sourced Kelly International Corp., specializes eral orders in recent weeks for lack of from the Kaohsiung-based China Steel in sit-stand desks that it calls work- additional production capacity, he said. Corp., which he considers superior to stations. Kelly’s operations in China “We expect the period of high U.S. steel made in China. have been complicated in recent years demand to last either two or six years, The level of quality, he says, is evi- by rising labor costs and stricter labor depending on whether Donald Trump denced by the performance of Chueng regulations, as well as the need for an will win a second term in 2020,” Shine’s chairs in third-party testing by increasing number of environmental Yang said.

TAIWAN BUSINESS TOPICS • DECEMBER 2018 27

12 Jes.indd 27 2018/12/9 下午6:19 BACKGROUNDER

ACCESSIBILITY FOR TAIWAN’S DISABLED: A WORK IN PROGRESS

Attitudes and facilities have improved, but much more still needs to be done.

BY STEVEN CROOK

aiwan is a crowded place. The City’s Xinwu District. Recently Rind- than ideal. “In Terminal 1, there are population per square kilo- fleisch-Wu traveled to several places in no benches or chairs between the secu- T meter is nearly 20 times that Taiwan with a friend who can walk, rity checkpoint and gate A5. People of the United States, and the cities but not for significant distances, and who usually don’t need a wheel- are crammed with parked vehicles who finds stairs difficult. “Nearly every- chair might need a rest between these and snack vendors. Although acces- where we went there were toilets for the points. Similarly, in the departure hall sibility for wheelchair users has disabled and wheelchair ramps,” she of Terminal 2 there are hardly any improved in recent years, for the hun- says. “In places managed by govern- chairs. This is something that really dreds of thousands of Taiwanese who ment agencies, one can always borrow a needs improvement.” are unable to step around or over wheelchair.” A similar problem exists at the Feng- obstacles, simply trying to reach the However, she rates conditions at shan TRA Station, which was recently supermarket or the dentist can still be Taoyuan International Airport as less rebuilt when the central Kaohsiung an arduous experience. Given the rapid aging of the Taiwan population – by 2026, 21% of the people will be over the age of 65 – the need for better accessibility will only be increasing sharply in the years ahead. Uta Rindfleisch-Wu, a German who has lived in Taiwan since the early 1980s, credits Taiwan with having “come quite far” in terms of access for the physically challenged. Ramps have been retrofitted to thousands of buildings, for example. Elevators large enough for mobility scooters can be found at almost all Taiwan Railways Administration (TRA) stations, and TRA staff have been trained to assist those who need help. Rindfleisch-Wu, whose daughter has cerebral palsy, is a consultant at the The spacious lobby of the brand-new railway station in Fengshan, Kaohsiung, lacks any seating whatsoever. Therapeutic Riding Center in Taoyuan PHOTO: STEVEN CROOK

28 TAIWAN BUSINESS TOPICS • DECEMBER 2018

backgrounder.indd 28 2018/12/9 下午6:27 BACKGROUNDER

stretch of railroad was moved under- the disabled can accomplish everything ground. Inside the station, no seating is they need to do. “The fact that they talk available until one has passed through about ‘barrier free’ rather than ‘acces- the ticket barrier. sibility’ reflects a general reluctance on On the plus side, physically chal- the part of the government and other lenged people face less discrimination people to comprehensively meet the than was traditionally the case. In the needs of the disabled,” says Yu. past, Buddhist notions of rebirth and At least 16 different central-gov- accumulated merit caused some Tai- ernment agencies have powers and wanese to assume that disability was responsibilities relating to accessibility, a punishment for violating moral says Ali Chen, TAFAA’s ofﬁce manager. axioms in a previous existence, but The lack of coordination among dif- such views are no longer very common. ferent agencies can be frustrating. The As National Taipei University soci- sociologist Chang cites the example ologist Chang Heng-hao noted in a of ramps that were installed so wheel- 2014 paper in the international journal chair users can enter parks, only for Review of Disability Studies, until the the ramps to later be blocked to pre- 1980s people with disabilities were vent motorcyclists from riding on the often referred to as cánfèi (殘廢). The sidewalk. Merchandise at the top of this ramp makes it unusable for wheelchair users. first character means “disabled,” while

the second implies “worthlessness” PHOTO: CARRIE KELLENBERGER or “uselessness.” Now the preferred terms are cánzhàng (殘障, “disabled sent an automated acknowledgement and impaired”) or zhàng’àizhě (障礙者, but failed to follow up; the latter did “people with disabilities”). not respond at all. Still, according to activists, the overall situation in Taiwan remains Legislation passed mixed at best. “As a result of protests and grass- Although Taiwan is not a member roots action, the government has of the United Nations, it enacted leg- amended various regulations, resulting islation – which came into effect in in a great improvement in terms of December 2014 – in line with the UN’s access at scenic spots, cultural venues, Convention on the Rights of Persons restaurants, and hotels,” says Sylvia with Disabilities (CRPD). The con- Li-chi Yu, a social worker and project vention and the 2014 law enshrine the manager at the Taiwan Access for All right of “persons with disabilities to live Association (TAFAA). The organiza- in the community, with choices equal to tion, which was founded 14 years ago, others [so they can enjoy] full inclusion campaigns to change attitudes and seek Wheelchair users can board HSR trains and participation in the community.” through especially wide doorways. adoption of a comprehensive approach But since then, implementation of the PHOTO: TAIWAN HIGH-SPEED RAILWAY CORP. to accessibility throughout Taiwan. law has come in for criticism. “In the The negative side, Yu says, is that past few years, the government has not “disabled people themselves are seldom Government agencies also often increased its accessibility budget sub- invited to participate in the planning appear reluctant to discuss issues sur- stantially, and they haven’t transferred – and even though ‘accessibility’ is usu- rounding accessibility. When the most of the institutionalized services to ally listed as a priority when projects Ministry of Health and Welfare’s the community as the CRPD requires,” are launched, when it comes to the Social and Family Affairs Adminis- says Chou Yueh-ching, a professor at ﬁnal inspection, it’s typically one of the tration (SFAA) recently organized a National Yang-Ming University’s Insti- most neglected criteria. Oftentimes, the contest for elementary school students, tute of Health and Welfare Policy. Chou facilities end up being unsightly and encouraging them to read and write argues that programs such as residential impractical.” responses to picture e-books designed services and daycare centers for disabled The terms “barrier free” and “acces- to boost awareness of disability and people “have developed in such a way sible” are often used interchangeably, the rights of the disabled, this writer as to create large institutions and insti- but whereas the former typically requested an interview. SFAA instead tutional services that run counter to the denotes an environment equipped with referred me to the Construction and spirit of the CRPD.” the elevators, wider gates, and ramps Planning Agency of the Ministry of the Last year, a panel of five foreign that wheelchair users require, the latter Interior or the Ministry of Transporta- experts reviewed issues relating to dis- implies a broader approach to ensuring tion and Communications. The former ability and accessibility in Taiwan

TAIWAN BUSINESS TOPICS • DECEMBER 2018 29

backgrounder.indd 29 2018/12/9 下午6:27 BACKGROUNDER

through the lens of the CRPD, receiving TAFAA’s Chen lists 16 commonly found pared to 70 centimeters elsewhere on input from disabled people’s groups and obstructions, including fire hydrants, the train, and the entrance to the car- other civil society organizations, as well transformer boxes, mailboxes, U-Bike riage is at the same height as the as from government units. The com- stations, and temporary pipes that drain platform. Each car no. 7 (and each HSR mittee urged the government to phase water from construction sites. station) has an accessible toilet with out residential institutions and provide “There’s a very serious gap between an automatic door, grab bars, a help “persons with disabilities adequate sup- major cities and rural areas. Taipei does button, and enough space so a wheel- port to live and actively participate in best in terms of accessibility – about chair can turn around. the community and prevent their isola- 80% of public transportation in the cap- The THSRC points out that many tion and segregation.” ital is accessible – but the other special bullet trains in Japan have just two Chang, the sociologist, says “there’s municipalities are some way behind,” barrier-free seats. In Taiwan in 2017, been good progress in making public says TAFAA’s Yu. Neither the TRA nor the barrier-free seat utilization rate transportation in Taipei accessible, but the High Speed Rail are as wheelchair- was 34.8%. Between 2015 and 2017, in the private sector, especially in the friendly as they should be, she says. 214,668 passengers with physical or workplace, little has changed.” The big- In addition, “there are no acces- mental disabilities or reduced mobility gest single factor hindering progress, sible long-distance buses or accessible were given assistance when taking high- he says, “is that people still see accessi- taxis,” Yu says. “And Rehabuses [mini- speed trains. bility as a charity issue, and a goal they buses with a ramp at the rear of the bus should work toward out of pity for the to load passengers in wheelchairs] must Many would benefit disabled, not because disabled people usually be booked a week in advance, have a right to access.” because the number of vehicles is inade- TAFAA’s Yu argues that enhancing “It’s easy to find facilities that sat- quate.” accessibility would make life easier for isfy the regulations for accessibility, but In written answers to questions, several segments of the population, which – in practical terms – are use- the Taiwan High-Speed Railway Corp. including those pushing baby strollers, less,” says Chang. He urges Taiwan (THSRC) said “the company’s bar- tourists encumbered with luggage, to adopt the principles of “universal rier-free seating design is designed to and residents who are ambulatory but design,” which makes buildings, prod- exceed the requirements of Taiwan’s impaired. ucts and environments accessible to all Person with Disabilities Rights Pro- Carrie Kellenberger falls into the people, regardless of age, disability or tection Act.” On each train, car no. 7 last of those categories. A former chair- other factors. has an accessible compartment for two woman of the Canadian Chamber of Wheelchair users generally require electric wheelchairs and two folding Commerce in Taiwan, Kellenberger a corridor 0.9 meters wide, and a min- wheelchairs; each space has a “help” has lived in Greater Taipei since 2006. imum of 1.5 meters is needed in order button that passengers can use to call In early 2009, she was diagnosed with to comfortably turn around completely, for assistance. Ankylosing Spondylitis, a form of but even where ﬂat sidewalks exist, the Car no. 7 is boarded via doorways arthritis that affects the spine. available width is often too narrow. that are 105 centimeters wide, com- “The first time I used a wheelchair and a cane was shortly after my 2009 diagnosis,” recalls Kellenberger, who with her husband runs Reach to Teach Recruiting. “That’s when I started learning how unfriendly public transportation is in Taipei, and how very little the general public knows about invisible illnesses. After that year, I improved a bit and only had to use mobility aids for severe ﬂare-ups.” Her health took a turn for the worse in 2015, and the diagnosis was Fibromyalgia and ME (Myalgic Encephalomyelitis). “It wasn’t long after that that my ability to stand or walk for long periods of time declined, and it has continued to get worse every year,” says Kellenberger. “My mobility had become extremely compromised. I can’t ‘push’ myself in my wheelchair A wheelchair user is lifted onto an accessible bus. because of extreme muscle weakness in PHOTO: STEVEN CROOK my arms, shoulders, and back. Also, I Subscriptions

30 TAIWAN BUSINESS TOPICS • DECEMBER 2018

backgrounder.indd 30 2018/12/9 下午6:27 BACKGROUNDER

can’t sit up straight when seated unless I Even when basic accessible facili- disabilities.” have a chair with a back and arm rests. ties have been installed, she laments, Kellenberger mentions a popular res- It takes great effort to hold my body “they’re sometimes derelict, unusable taurant in the heart of Taipei that “gave upright in a seated position on a bench, because goods are piled up in front or me a hard time every time I went there, for example.” inside, or rendered pointless by sub- so I stopped giving them my business Her condition necessitates frequent sequent alterations that, for example, in January 2018 because the waitress hospital visits, but driving there is not block access to an accessible toilet.” refused to seat me on the first floor even an option because parking is so diffi- In some hotels, accessible guest-rooms after we told her I was sick and couldn’t cult. “I wonder why it’s so difficult for are used for other purposes, and thus take the stairs.” disabled patients to get parking passes. unavailable to travelers who need them. Another complaint is that “people We’ve asked many times and we’ve been Kellenberger makes a similar obser- park their cars and scooters or dump laughed at,” she says. vation. “I’ve noticed places which old furniture on the sidewalks,” which Kellenberger says going anywhere have a ramp leading to an access door, forces disabled people to “walk on the in Greater Taipei can be extremely but they’ve locked the door. I’ve seen street with their cane or use their wheel- frustrating. “I plan every detail of my some really dumb things that make me chair on the road, among the cars and outing before I leave the house,” she furious. Unfortunately, most places of motorcycles.” says. “I think about how much walking business in Greater Taipei aren’t acces- Kellenberger urges the government I’ll need to do to get out of my building sible to me. Additionally, if I ask for to carry out more awareness campaigns and into the venue I’m going to. I’ll call disabled seating and I don’t have a vis- directed at the general public. Unlike ahead to find out if the venue has stairs. ible mobility aid with me, businesses standard behavior in North America or If it does, we don’t go.” tend not to believe me.” Europe, “people often don’t give way Calling ahead or exchanging infor- Taipei is often held up as the most to those of us who need to use the dis- mation with other wheelchair users is accessible city in Taiwan, but Kellen- ability elevators, nor do they move out very common, says TAFAA’s Yu. “Offi- berger disagrees. “The city governments of the way when they see someone with cial websites seldom carry the kind of in Taipei and New Taipei could take a cane or a wheelchair,” she says. information disabled people need,” she a cue from what Kaohsiung has done. “The MRT has introduced a sticker notes. “Confirming details ahead of Of all the cities I’ve been to in Taiwan, you can put on your wheelchair or bag time reduces the risk of setting out for a Kaohsiung is the most accessible. It’s the to show that you’re disabled or have place only to find, when they get there, place that’s put the most thought into an invisible illness, but nobody pays that it’s inaccessible.” making places accessible to people with attention.”

TOPICS can be found in the Eslite, Kingstone, Caves and Hess bookstores in Taipei, Taichung and Kaohsiung. But why wait until we’re on the stands? Make sure of getting a copy by filling in the subscription form below.

Fill out this form and post or fax to 886-2-2718-8182 with your payment or receipt. AmCham will begin your subscription upon receipt of payment.

Taiwan q1 year = NT$1,500 q2 years = NT$2,700 Elsewhere in Asia q1 year = US$75 q2 years = US$140 HK/PRC q1 year = US$68 q2 years = US$130 USA/Europe q1 year = US$90 q2 years = US$170

Name: ______Membership ID#: (if applicable)______

Company: ______Telephone: ______

Mailing address:______

Email Address: ______

qBill to Account (members only) qAMEX qMaster qVISA qCheck qTelegraphic Transfer

Credit card number: ______Cardholder’s name: ______

Expiration date: ______Total amount (NT$/US$): ______

Signature: ______Date: ______

• Please make checks payable to: American Chamber of Commerce in Taipei • Please direct telegraphic transfers to: American Chamber of Commerce in Taipei • Acct. #: 018-1-093665-6 Standard Chartered Bank, Tunpei Branch (Please fax your transfer receipt to AmCham.) Subscriptions

American Chamber of Commerce in Taipei Tel : 886-2-2718-8226 E-mail: [email protected]

backgrounder.indd 31 2018/12/9 下午6:27 ADVERTORIAL

THE TAOYUAN AEROTROPOLIS IS SET TO TAKE OFF

The Aerotropolis is more than a beautiful plan; it is the key to driving the Taiwan economy to new heights.

Taoyuan City Mayor Cheng Wen-tsan

aoyuan is the gateway to and high value-added industrial sectors, opportunities for Taoyuan. Taiwan and a key aviation hub the Aerotropolis will not only serve as a To this end, the Taoyuan Aerotrop- T for the Asia-Pacific region. In distribution center for Taiwan’s technol- olis Corp. held a “Start the Future” an era of increased global competi- ogy industries, but will also represent a industry forum on October 26 at tion, airport-centered economic activity technologically incredible smart city for Taoyuan’s Monarch Hotel to launch has become one of the main engines the future. the project, with industry represen- of urban development. Taoyuan is an According to the development plan tatives and expert scholars invited to airport city, and its Taoyuan Aerotrop- for the Taoyuan Aerotropolis’s plan- deliver presentations and share their olis project is moving forward to spur ning zone, the total land area for the insights as panelists. The event success- momentum of an “airport city econ- Taoyuan International Airport and fully attracted more than 290 attendees, omy” and help drive Taiwan’s economic designated area in the vicinity comes enabling them to understand the latest resurgence. to 4,565 hectares. Together with other trends in industry planning. The Taoyuan Aerotropolis project, surrounding land, the overall scope VIP guests included Director-General which will involve total investment of covers an even larger area. Wu Hsin-hsou of the Ministry of the more than NT$500 billion and create The prime motivation for the Interior’s Construction and Planning economic value of at least NT$2.3 tril- Taoyuan Aerotropolis is to assist Agency, Acting President Hsiao Po-jen lion, passed its urban planning review industry in meeting its needs – quite of the Institute for Information Industry, on March 27 and has now been offi- different from the spirit behind tradi- Deputy Taoyuan Mayor Wang Ming-de, cially launched. tional land development projects. Over Taoyuan Aerotropolis Corp. Chair- Under the principle of giving priority the coming two years, the Taoyuan man Yu Chien-hwa, Asia Silicon Valley to industrial investment, in April 2020 City government will first work out a Development Agency Executive Director the Taoyuan Aerotropolis will begin land acquisition plan based on existing Cheng Cheng-mount, StarLux Airlines accepting applications for investment in investor interest and two-way commu- President Glenn Chai, DHL Taiwan Vice the priority sector of its industrial zone. nication with land-holders. For the first President Lu Jia-dong, Taoyuan Inter- Preference is being given to six indus- phase, the Taoyuan City government national Airport Corp. Deputy General tries: cloud computing, international will also earmark an 83-hectare prior- Manager for Operations Tan Chao-bi, logistics, aviation-related, biotech, ity investment area within the industrial National Chiao Tung University Pres- smart mobility, and green energy. With zone. This will expedite the construc- ident Mau-chung Frank Chang, and its development of low pollution, low tion process for the needed public other dignitaries from industry, govern- water-usage, low energy-consumption, infrastructure and to create more job ment, and academia.

Taoyuan Aerotropolis Corp. Chairman Yu Chien-hwa

32 TAIWAN BUSINESS TOPICS • DECEMBER 2018

Taoyuan.indd 32 2018/12/9 下午6:30 ADVERTORIAL

Speaking during the forum on the topic of “Seizing the Advantages of Hub Trans- portation and Sharing the Prosperity of Civil Aviation in the Asia-Pacific,” Star- Lux President Chai stressed Taiwan’s position as a hub in the center of the Asia- Pacific region, the area of fastest growth in the world for both passenger and cargo volume, and the most appropriate location for transshipment between Southeast Asia and the North American market. At present 00 there is still room for growth in the propor- tion of transit passengers among arrivals at the Taoyuan airport. In addition, StarLux plans to recruit 300 employees by the end of this year and to expand its employment to 8,000 by 2030. Chai said the airlines hope the government can help resolve land issues and complete infrastructure construction as soon as possible to accelerate development of the Taoyuan Aerotropolis. Those steps will drive the growth of industry in the area 5 surrounding the airport; create job opportunities and tax and tourism revenues; and 0 enable Taiwan to position itself as the Asia Pacific operations center, he said. DHL’s Lu, speaking on “Using Inno- vative Technology and Personalized Processing to Create a New Look in Inter- national Logistics,” noted that in 2015 55 cross-border transactions accounted for 15% of e-commerce business, but that by 2020 the figure will reach 22% globally. This market growth presents a huge challenge for the government in terms of 0 customs clearance and for the private sector in logistics capability. To help meet these 0 challenges, DHL Taiwan has adopted innovative practices utilizing green-energy- based, smart logistics for the sake of sustainable operations. The mid-term goal is to have 70% of the company’s vehicles running on green energy by 2025, with zero carbon emissions by 2050. For example, electric cargo bikes have been introduced in 00 DHL’s own logistics park, and the relevant 00 government regulations have been loosened to permit truly green, smart logistics. Taoyuan Aerotropolis enjoys a unique geographical position and is optimistic 05500 about Taiwan's future aerospace advantages. The Aerotropolis plans to re-integrate Taiwan into the international arena through 050 the combination of soft and hard advan- 050 tages, combined with smart innovation and an excellent hardware environment – thus spurring economic innovation and new opportunities for business growth.

TAIWAN BUSINESS TOPICS • DECEMBER 2018 33

Taoyuan.indd 33 2018/12/9 下午6:30

F CUS

SPECIAL REPORT

The Big Question Mark for 2019: What’s Ahead in the U.S.-China Trade War?

Forecasts for Taiwan’s economic growth next year currently range between 2.18% and 2.5%.

BY JANE RICKARDS

PHOTO: XUE XUE INSTITUTE TAIWAN BUSINESS TOPICS • DECEMBER 2018 35

12 Forecast.indd 35 2018/12/9 下午8:56 SPECIAL REPORT

Following a dinner meeting during the G20 summit in Buenos Aires, only the U.S. side disclosed its understanding of agreed-upon terms for cooling the tariff war. PHOTO: AP

重點 he Taiwan economy is for this year and 2019, adjusting it expected to undergo a mod- downward to 3.7% from the 3.9% T erate slowdown next year as projected three months earlier. It was overseas demand falters for its infor- the first decrease in the IMF’s forecast mation technology and other high- since July 2016. tech products. But if that prospect is On the positive side, economists somewhat disappointing, the consola- note that 2019 is expected to be a tion is that Taiwan is likely to escape transition year for Taiwan’s high-tech suffering harsh collateral damage industries. Among the new technol- from the U.S.-China trade war. ogies nearing the take-off point for After a roaring start of over 3% mass production are devices related growth in the first half of this year, to 5G mobile communications and the economy started to slacken in the the internet of things (IoT), as well as third quarter, slowing to 2.27% year- robotics and automotive electronics. on-year, the government said. At the same time, however, In November, the government pro- demand is weakening for tradi- jected that Taiwan’s GDP growth for tional consumer electronics. Liang the full year will come to 2.66%. It Kuo-yuan, chairman of the Yuanta- forecast growth of 2.41% next year, Polaris Research Institute, notes a drop from the earlier estimate of that the market for smart handheld 2.55%. devices is almost saturated. World- Other views of next year’s eco- wide, iPhone sales have been falling nomic prospects range from a high of since 2016. “This is undoubtedly 2.5% from Standard Chartered Bank weighing down the speed of export down to 2.18% from the Chung- growth of Taiwan’s electronics com- Hua Institute for Economic Research ponents,” he says. (CIER). Given the importance of Taiwanese Economists generally agree that companies in the Apple supply chain, the global economy is softening, the domestic economy tends to benefit which will directly impact export- whenever Apple products are doing dependent Taiwan’s sales of its particularly well. Such Taiwanese sup- electronics, machinery, and other pliers as Catcher, which makes casings manufactured goods. The Interna- for iPhones, and Largan, which makes tional Monetary Fund in October their lenses, are key pillars in Taiwan’s revised its forecast for global growth electronics sector.

36 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Forecast.indd 36 2018/12/9 下午8:56 2019 Forecast

This year the new products that Apple Hoping for the best In fact, in the worst-case scenario of rolled out, such as the iPhone8 and the U.S. slapping 25% tariffs on all Chi- iPhone 8 plus launched in September, did In the absence of Chinese confirma- nese imports, he calculates that it would not generate nearly as much excitement tion of the progress stated by the White shave 1.8 percentage points off Taiwan’s as in previous years. “If Apple isn’t going House, analysts generally expect that the economic growth. That would leave Tai- to come up with a killer product, what trade war is likely to be prolonged. But wan’s 2019 growth at a mere 0.7%, as can Taiwanese companies rely on?” asks as long as no new U.S. tariffs are imposed Standard Chartered forecasts a GDP Angela Hsieh, vice president for research on goods from China, economists such as growth rate of 2.5% next year. at Barclays, the investment bank. Ma Tieying of Singapore-based bank DBS (The situation could become even Compared with previous years, in say the impact on the Taiwanese economy worse. DBS warns in a report that mis- addition, the international environ- should be modest, as consumer elec- handling of the tariff war could plunge ment is now fraught with downside risks tronics are largely excluded. the entire global economy into recession.) due to the tariff skirmish under way Standard Chartered economist Tony Phoo says his relatively optimistic between the United States and China. If Phoo points out that the two combatants view is based partly on the assumption heavy tariffs on Chinese-assembled prod- in the trade war – the United States and that export-oriented Taiwanese manufac- ucts depress demand, it could cut deeply China – are both among Taiwan’s largest turers in China will be able to relocate into the business of Taiwanese suppliers trading partners. The United States takes to Southeast Asian nations or back to providing the components for those about 11.5% of Taiwan’s exports, while a Taiwan without serious disruption in products. massive 42.5 % goes to mainland China their operations. The Trump administration in Sep- and Hong Kong. “That will keep them relevant in the tember announced tariff increases of But he also notes that the U.S. is much global supply chain and they will con- 10% on US$200 billion worth of Chinese more important market for Taiwan than tinue to service demand in the U.S. as imports, threatening at the time to raise the direct trade ledger would indicate. well as China,” he says. them to 25% by the end of the year. The Many of Taiwan’s shipments to China Phoo also notes that China and the September announcement was on top of consist of components and materials for U.S. are still continuing to grow at a rela- previous tariffs on US$50 billion of Chi- assembly into finished products destined tively robust pace. The IMF puts China’s nese imports imposed since July. Unlike for the American market. economic growth at 6.6% for this year earlier rounds, the September list targeted “While U.S.-China trade relations and 6.2% for 2019, while the comparable consumer goods, including luggage and are not likely to improve any time soon figures for the U.S are 2.9% and 2.5%. furniture. – and may get worse before they get Demand by consumers in both countries China hit back with tariffs on US$60 better – we do not see a major impact on should continue to be strong, he says. billion worth of American goods, trig- demand,” Phoo says. “No one expects a Barclays’ Hsieh also suggests that the gering a further threat from President scenario whereby the economy slips into “impact of the direct tariffs won’t be as Trump to slap a 25% duty on the recession.” big as everyone thinks.” She is paying remaining US$267 billion worth of Chi- He sees the 10% level of U.S. tariffs more attention to the non-tariff issues in nese goods destined for the U.S. market. on Chinese goods as manageable, though the U.S.-China trade dispute, such as the In an interview with the Wall Street conceding that 25% on a broader range alleged rampant Chinese theft of Amer- Journal, Trump said this list could of goods could be “a little tricky.” ican companies’ intellectual property. include laptops and Apple iPhones. At the G20 summit in Buenos Aires at the beginning of December, Trump and Chinese President Xi Jinping reportedly agreed to a ceasefire in the tariff battle. According to a White House statement, the 10% tariffs on the US$200 billion worth of Chinese products would remain in place, but no additional tariffs would be imposed for 90 days while the two countries continued to negotiate. The White House said the two sides also agreed to immediately start talks on structural changes in the Chinese economy to remedy problems such as forced technology transfers, intellectual property violations, cyber intrusions, and other matters. If no agreement is reached within the 90-day period, the United States would raise the tariffs to 25%.

TAIWAN BUSINESS TOPICS • DECEMBER 2018 37

12 Forecast.indd 37 2018/12/9 下午8:56 SPECIAL REPORT

In one recent case, a U.S. jury indicted boosting production overseas, including lations on the employment of foreign United Microelectronics, Taiwan’s Taiwan and Southeast Asia, says Liu workers. second-largest contract chipmaker, on Meng-chun, a CIER economist. “The government has made it very charges of helping a Chinese company, “A few companies have indicated they clear that they only welcome high-end Fujian Jinghua, steal trade secrets from intend to come back to Taiwan, but this production processes,” Phoo says. “They American memory chip maker Micron. won’t happen overnight,” says Barclay’s will assist other producers to move to Shortly afterwards, UMC moved to dis- Hsieh. She notes that rather than leave ASEAN in line with the New Southbound sociate itself from Fujian Jinghua, halting China altogether, large-scale Taiwanese Policy.” all joint R&D activities. companies are likely to reduce capacity Many observers expect U.S. companies in China and increase it at their existing Looking south to bring further legal cases against Chi- facilities in Taiwan, especially for higher- nese competitors on IPR issues. If Taiwan value production. Smaller Taiwanese For companies considering relocating is viewed as a safer location for protection companies with bases only in China will to Southeast Asia, Vietnam appears to of proprietary information, it could ben- lack that flexibility. be the favored choice. Labor there is efit by picking up orders that previously Rick Lo, chief economist and senior inexpensive, Taiwanese find it to be a cul- went to China. United Microelectronics’ vice president at Fubon Financial Holding turally comfortable environment, and it involvement in the Micron case so far Co., refers to “market talk” that several has a warm trading relationship with the appears to have been viewed as an aberra- major tech companies are in the pro- U.S. Another top choice for companies tion and hasn’t impaired Taiwan’s overall cess of boosting production capacity in seeking to relocate or boost production reputation for safeguarding IPR. Taiwan. The reports are unconfirmed, he outside China is the Philippines. The Taiwan government is setting out says, since most companies in that posi- Citing Vietnamese media sources, the welcome mat for technology-inten- tion will keep their plans confidential so Reuters reported that Taiwan’s Foxconn, sive companies – whether multinational as not to upset China. the world’s biggest electronics manufac- or Taiwanese – who might seek refuge To attract Taiwanese businesses turer, is considering setting up a factory in from the trade wars by shifting produc- to return, the Executive Yuan in late Vietnam to mitigate any impact from the tion from China to the other side of the November approved a three-year plan, deterioration in U.S.-China trade relations. Strait. Already a number of Taiwanese reportedly to take effect on January 1. Even before the trade war ignited, companies are reducing their output in Under the plan, companies utilizing smart there was already a trend for Taiwanese China to avoid facing U.S. tariffs – and technology would enjoy relaxed regu- companies, particularly low-end manu-

38 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Forecast.indd 38 2018/12/9 下午8:56 2019 Forecast

facturers, to move to Southeast Asia due For Taiwan to be included in RCEP, index fell below that mark in October, to rising Chinese labor costs, including say experts in cross-Strait affairs, it influenced by credit-tightening mea- employers’ compulsory contributions to undoubtedly would have to go even fur- sures from the U.S. Federal Reserve. various kinds of social insurance. How- ther toward accepting the notion of Some US$4.7 billion flowed out of the ever, the shortage of skilled labor in “one China” than did the “1992 con- Taiwan stock market in October alone, Southeast Asia is an impediment that sensus” endorsed by former President according to Singapore’s DBS. may slow the shift of supply chains out of Ma Ying-jeou. Losses in stock trading may have China, says CIER’s Liu. Also noteworthy, says Charles Finny, made many Taiwanese consumers feel The U.S.-China tariff spat has been a former New Zealand representa- more cautious about spending. The psy- reflected in Taiwan’s recent trade perfor- tive in Taipei and an experienced trade chological effect could persist for some mance, economists say. In a frontloading negotiator, is that the World Trade Orga- time, said the economists interviewed for effect, exports have increased in recent nization’s Appellate Body, which serves this report, as the Fed is likely to continue months as companies rushed to ful- as the organization’s supreme court, with its tightening policies. fill orders from China for components is close to breakdown. Amid Presi- Also having a significant impact in and intermediate materials ahead of dent Trump’s railing against the WTO depressing private consumption, some anticipated higher U.S. tariffs. Imports cor- as a “disaster,” the U.S. government economists suggest, have been the gov- respondingly increased for equipment and said earlier this year that it would block ernment’s pension reforms that went into raw materials to process those exports. the reappointment of one of the four effect in July this year. The Tsai adminis- Exports in October rose 7.3% year- remaining judges at the WTO. tration defends the cuts to the generous on-year to reach US$29.57 billion. From Finny says that a non-functioning retirement packages of nearly 500,000 January to October the growth was 8%. Appellate Body would make it much teachers, civil servants, and military At US$26.21 billion, imports grew in harder for Taiwan to settle trade disputes personnel as necessary to forestall bank- October by a whopping 17.6%, with compared with other nations that can uti- ruptcy in the pension system. year-to-date growth of 12.5%. lize the dispute resolution mechanisms But the impact on consumption may Because of the frontloading, “the embodied in their free trade agreements. have been felt by more than the almost increase in exports this year is a ‘pseudo “If I were a Taiwan policymaker, half a million people directly affected, as effect,’” cautions Liu. He says that I would be very disconcerted,” Finny many of these government personnel are exports early next year will consequently recently told a business group in Taipei, also supporting family members such as show unusually low growth – one reason since Taiwan “is more dependent on the aged parents. why economic growth is expected to slow WTO to be the arbiter of trade disputes.” Describing the drop in private con- somewhat in 2019. sumption in the third quarter as a Export orders – which in October Domestic conditions “shock,” Barclay’s Hsieh says “we didn’t stood at US$48.99 billion, up 5.1% over know private consumption could be that the same month last year – recently have On the home front, weaker-than- weak.” CIER forecasts private consump- showed slowing momentum, reports expected private consumption in the tion growth of 1.81% next year, down Barclay’s Hsieh, even though Western third quarter was a key reason behind the from 2.31% this year. consumers will soon start their Christmas recent decision by the government’s Direc- The drop in private consumption was shopping. torate General of Budget, Accounting considered particularly surprising in that “This is extremely unusual,” she says. and Statistics (DGBAS) to lower the GDP wages have increased more rapidly under “Usually the second half of the year is the forecast for the year to 2.66% from the President Tsai than during the previous peak season for the tech cycle.” 2.69% announced in August. KMT administration. Standard Char- Another factor affecting Taiwan’s DGBAS says that private consumption tered estimates that monthly income grew competitiveness in the international trade grew by 1.8% year-on-year, moderating 4.1% in the first nine months of the year, arena is its virtual exclusion from the from 2.29% in the second quarter. Sim- on track for the fastest growth since 2010. world’s network of bilateral and multilat- ilarly Barclay’s Hsieh says the drop in (This improvement did not seem to make eral free trade agreements. Given recent private consumption in the third quarter an impression with voters, who gave the news of progress toward concluding the caused her to lower her GDP forecast this ruling Democratic Progressive Party a China-backed Regional Comprehensive year from 2.8% to 2.6%. drubbing in recent municipal elections.) Economic Partnership (RCEP), the issue In particular, DGBAS cited a decrease A rise in wages is usually attribut- is taking on increased relevance. in car sales and sluggish growth in travel able to rosy economic performance, Reportedly, the 10 Southeast Asian and financial services in the third quarter. prompting more hiring. But the domi- states involved in the pact are determined Another explanation offered by some nant factor in Taiwan this year may have to conclude RCEP by 2019, although economists attributes the decreased been the tightening of the labor market hitches could arise since India is said consumption to a drop in consumer con- as Taiwan’s society ages, leaving fewer to be less enthusiastic. After the United fidence due to a decline in the stock working-age people in the employment States backed out of the Trans-Pacific market. pool. Seasonally adjusted unemployment Partnership in early 2017, RCEP gained After remaining above 10,000 – at 3.69% – was at a two-decade low in added significance within the region. points for most of this year, the Taiex August, Standard Chartered says, before

TAIWAN BUSINESS TOPICS • DECEMBER 2018 39

12 Forecast.indd 39 2018/12/9 下午8:56 SPECIAL REPORT

inching up to 3.7% in October. Before seasonal adjustment, October’s unemployment figures stood at 3.75%, according to the DGBAS. Phoo says the tighter labor market should boost house- hold incomes in the short term. In the longer term, economists say, Taiwan will need to attract skilled migrants. Two China-related trends have also been denting consumption over the last few years – and are likely to continue until at least 2020. The first is the relatively low salary levels in Taiwan compared with many other industrial- ized countries. Including bonuses, non- agricultural workers currently earn an average of only NT$50,635 (US$1,640), according to CIER. The result has been a severe brain drain, as talented profes- Protesters opposing cuts in pension payments for government employees demonstrate in sionals flock to other nations, particularly front of the Legislation Yuan. China, in search of higher pay. It also PHOTO: CNA means that many of the biggest potential consumers are offshore. momentum decelerating, oil prices are Yuan has already amended the act and The second factor relates to tourism. falling. DBS predicts that oil prices will sent it for review to the legislature, where Although the government has managed to remain stable in 2019. it is expected to pass. marginally increase the overall number of For the first 10 months of this year, The government may also seek to international travelers by attracting vis- the Consumer Price Index rose by a mild shore up the economy next year through itors from Southeast Asia and elsewhere 1.6% year-on-year. The Central Bank fiscal stimulus. DBS notes in a report that to make up for a sharp drop in Chinese projects CPI growth for this year to be government debt has fallen from a peak tourists that began with the election of 1.5%, before flattening to 1.05% next of 39% of GDP in 2012 to 36% in 2017, President Tsai, these visitors tend to spend year. Given slowing growth and the lack well below the legal ceiling of 50%. The considerably less than Chinese tourists. of inflationary pressures, the Central report also calls attention to the fact Barclay’s Hsieh estimates that Tai- Bank is expected to keep the discount that public spending in Taiwan tends to wan’s tourist revenues last year fell 7.8% rate unchanged at 1.375% next year. increase before presidential elections as year-on-year due to the reduction in Chi- Government policies aimed at the ruling party seeks to broaden support. nese tourist “big spenders.” attracting businesses to return to Taiwan The next presidential election will be in should have a positive effect on the March, 2020. Additional initiatives economy, says Standard Chartered’s DGBAS estimates that fixed cap- Phoo. He cites the central government’s ital formation will increase by 5.4% Government efforts to boost private goal of adding more than 500 hectares next year, driven by continuing invest- consumption next year should benefit of land for industrial use by the end of ments by the semiconductor industry from several new initiatives. One is the 2020. According to media reports, this and the government’s promotion of its adoption of a new category of income plan will include making use of idle land Forward-looking Infrastructure invest- tax deduction covering certain family in existing industrial parks, as well as ment program. The program is currently expenses. The change is expected to building new such parks in cooperation in the first of two four-year stages, benefit 1.49 million taxpayers, reports with local governments. each with a budget of NT$420 billion Standard Chartered. “Land supply is one of several fac- (US$13.8 billion). In addition, from January the hourly tors – along with manpower, water, and Economists say there hasn’t yet been minimum wage will be raised from electricity supply – that have deterred substantial contribution to the economy NT$140 to NT$150, an increase of Taiwanese investors from relocating back from the government’s “5+2 Inno- over 7%, while the minimum monthly to Taiwan,” Standard Chartered said in a vative Industries” program covering wage will increase from NT$22,000 to statement. seven industries and projects: smart NT$23,100, a 5% increase. Electricity supply is now likely to be machinery, Asia Silicon Valley, green Despite the increase in the minimum less of a concern for business after voters energy, biomedicine, national defense and wage, inflation is not expected to be an agreed in a November referendum to aerospace, new agriculture, and the cir- issue, especially since there is no sign scrap a clause in Taiwan’s Electricity Act cular economy. Of the seven, only smart that international commodity prices will dictating that all nuclear power genera- machinery is currently generating sub- be rising steeply. With global economic tion must cease by 2025. The Executive stantial revenues.

40 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Forecast.indd 40 2018/12/9 下午8:56

AMCHAM EVENT

Bringing Hawaii to Taipei: The 2018 American Ball

Aloha Hawaii” was the theme of and young corn, pumpkin chowder, and Versum Materials; Décor Sponsor the dazzling 2018 American Ball, cucumber granite passionfruit jelly, Standard Chartered Bank; Silver Spon- “ co-organized by AmCham Taipei roasted U.S. beef tenderloin, and des- sors BlackRock, Corning, Invisalign, and the American Institute in Taiwan sert of a chocolate sphere with coconut and Prospect Hospitality Co. Ltd. (AIT). On the evening of November cream and fresh pineapple. The dinner (McDonald's Restaurants); and General 3, AmCham members and their guests was accompanied by Robert Mondavi Sponsor The Tobacco Institute of the entered the beautifully decorated Winery Woodbridge Cabernet Sauvi- Republic of China (TIROC), with a spe- (thanks to the Feng Ze Design Center) gnon and Chardonnay (from Sergio cial thanks to the Primasia Conference Grand Ballroom of the Grand Hyatt Valente) and Johnnie Walker Double & Business Center (PCBC). Taipei and immediately imagined them- Black (from Diageo). “Blue Hawaii” and Attractive raffle prizes added to the selves transported to America’s favorite other cocktails were available at the bar. excitement of the evening. The grand vacation spot. Before and during dinner, the ball- prize, by United Airlines, was two After a cocktail reception featuring goers enjoyed spirited Hawaii-inspired round-trip business-class tickets to any a welcome drink of Robert Mondavi entertainment routines devised by the destination in the United States. The Winery’s Woodbridge Sparkling Brut VMJ dance group. Once the music second prize was four nights’ stay for courtesy of Sergio Valente, Master of started – provided by talented Sherwyne two at either the Club Med Kani (Mal- Ceremonies Ed Shober opened the fes- Pereira and his band, as well as DJ Rick dives) or Club Med Sahoro (Japan). tivities. AmCham Chairman Albert Kraft – the dance floor was packed for Other gift sponsors were the Grand Chang and President Bill Foreman, the rest of the evening with gyrating, Hyatt Taipei, eslite hotel, Ever Rich accompanied by AIT Director Brent enthusiastic revelers. D.F.S. Corp., Hawaii Island Real Estate/ Christensen and Deputy Director Ray The event was made possible by the Clark Realty Hilo, Hotel Eclat Taipei, Greene, then greeted the attendees on generosity of a number of sponsoring Howard Plaza, Landis Taipei, Mandarin behalf of the host organizations. companies. These included Grand Oriental Taipei, Mellow Fields Taipei, Showing its usual creativity, the Prize Sponsor United Airlines; Wine Palais de Chine, Procter & Gamble, Grand Hyatt served a gourmet five- & Liquor Sponsors Diageo and Sergio Regent Taipei, Shangri-La’s Far Eastern course meal that featured a cucumber Valente; Gold Sponsors Amgen, Grand Plaza Hotel, Sherwood Taipei, Westin red quinoa salad with Ahi poke Hyatt Taipei, HSBC, Taiwan Sotheby’s, Tashee Resort Taoyuan, and W Taipei.

GRAND PRIX SPONSOR WINE & LIQUOR SPONSORS GOLD SPONSORS DECÓR SPONSOR SILVER SPONSORS

SPECIAL THANKS TO

42 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 Anniversary.indd 42 2018/12/9 下午6:45 AMCHAM EVENT

TAIWAN BUSINESS TOPICS • DECEMBER 2018 43

12 Anniversary.indd 43 2018/12/9 下午6:45 SEEING TAIWAN

and Nanzhuang in Miaoli County in Taiwan’s northwest, Dalin in the southern county of Chiayi, and Fenglin in east Taiwan’s Hualien County. Since early 2017, the four have been sharing their expertise through the Cittaslow Taiwan Territorial Area Coordinating Committee. This group- ing not only endeavors to promote the traditional products and cultures of the four towns, but also to boost their international profile, while helping other parts of Taiwan obtain Cittaslow accreditation. There is no hard and fast defini- tion of a slow city, yet according to the Cittaslow website (www.cittaslow.org),

THE FIELDS OF FENGLIN only towns with fewer than 50,000 residents may apply, and they should not be the seat of a county or regional government. The alliance seeks to identify and Life in the Slow Lane: work with “strong communities that have made the choice to improve the quality of life for their inhabitants… towns where [people] are still curious of Dalin and Fenglin the old times.” Candidate communities should n Western Europe, one of the most to hear of someone who has turned his have a wealth of “theaters, squares, intriguing cultural developments or her back on an excellent career in cafes, workshops, restaurants and spir- Iof the past three decades has been finance or the high-tech sector, to return itual places...untouched landscapes the Slow Movement. What began as to the town where they grew up. These and charming craftsmen,” says the a reaction to the spread of fast-food returnees are helping to revitalize some Cittaslow manifesto. They should also restaurants grew into the global Slow of Taiwan’s most appealing “slow” be places “where people are still able to Food Movement. Proponents of slow communities. recognize the slow course of the seasons lifestyles have since applied similar To date, four townships in Taiwan and genuine products respecting tastes, philosophies to almost every facet of have been recognized as “slow cities” health and spontaneous customs.” human existence. Living slow is not by Cittaslow International, the Italy- Fenglin (the first location in Taiwan the same as renouncing ambition, they based alliance that now connects more to join Cittaslow) and Dalin have these say. Rather, it’s a way to get more out than 200 communities in 30 coun- characteristics in spades. The latter of what you do, valuing each experi- tries and territories. The four are Sanyi thrived throughout the 1950s, thanks to ence and savoring each moment, instead of thinking about what has to be done next. On the face of it, Taiwan is not the kind of society where slow ideals might take root. Most Taiwanese people love bustle. In Mandarin, describing a place as renao (“hot and noisy”) is entirely positive. Night markets and temple parades are renao and eternally popular. At the same time, as Taiwan’s economy matures and the population ages, more and more people are realizing that material wealth and immediate grat- ification do not guarantee long-term health and happiness. It is not unusual A FORMER SUGAR FACTORY TURNED INTO A RECREATIONAL AREA

44 TAIWAN BUSINESS TOPICS • DECEMBER 2018

12 ST.indd 44 2018/12/10 下午12:24 SEEING TAIWAN

the proximity of three army bases and the sugar industry. At one point, sugar accounted for 73% of Taiwan exports. On their days off, sugar company employees and soldiers poured into the center of Dalin, spending money in shops, restaurants, and the five movie theaters. By the early 1990s, however, the sugar industry was on its last legs, the army was downsizing, and the movie theaters were closing down, one by one. Thanks to local activists adept at the use of social media, in recent years one of these theaters has been revived as a venue for film screenings and other events.

At the same time, many of Dalin’s HOT-AIR BALLOONING IN DANONG DAFU farmers have switched from growing sugar to rice, pineapples, and orchids. Fiber-rich bamboo shoots, many of sized balls of glutinous rice flour boiled which are grown pesticide-free, are and served in a light syrup, typically another agricultural specialty. They can eaten around the time of the winter be enjoyed in soups and other dishes solstice), pumpkin “cake,” and radish served at eateries throughout the town- “cake.” ship. The Dalin Farmers’ Association At the town’s Four Generations works with Nanhua University (located Farmers restaurant, no menus are in the town) to promote local organic provided. Instead, each dish that is produce. served reflects the seasonal availability Fenglin is not only a slow-city of produce and embodies the culinary pioneer within Taiwan, but also the creativity of the local family that oper- past winner of a Cittaslow Local Econ- ates this acclaimed eatery. cious and unusual frozen treats. Some omy Award for a range of projects that Fenglin makes an excellent base for of the 30-odd flavors – among them has brought the area’s food producers a long-stay vacation. Trains to Hua- azuki bean and taro – are seasonal. and local consumers closer together. lien City take less than 45 minutes. For Many find the sugarcane-juice popsicles The Cittaslow website lauds Feng- those keen to explore beyond the town- especially refreshing. lin for introducing slow-food cookery ship’s boundaries by bicycle, a number The tiny community of Lintianshan courses in two local elementary schools, of attractions lie within 20 kilometers. is even closer to Fenglin. After World and highlights the availability of tradi- One is Danong Dafu Forest Recre- War II, when Taiwan’s timber industry tional foods such as tangyuan (grape- ation Area. For much of the postwar was in full swing, almost 400 families period, this 1,250-hectare tract of lived here. Several of the Japanese-style land was covered with sugarcane homes and offices have been renovated, plantations. Since 2001, it has been and now house souvenir stores and assiduously afforested. In addition to historical displays. more than a million trees, the woodland For English-language information features 20-plus plant species native to about Dalin, see https://dalin.cyhg.gov. Taiwan. Yellow-throated martens and tw/en/. Fenglin lies within the East Rift other wildlife have also been seen here. Valley National Scenic Area, and the During the sugar industry’s heyday, area’s multilingual website (https://www. cane was processed at the Hualien erv-nsa.gov.tw) has useful background Sugar Factory, 13 kilometers south information about the region. For of central Fenglin in Guangfu Town- general travel information about Taiwan, ship. The factory ceased operations visit the Tourism Bureau’s website (www. more than 15 years ago, but it has been taiwan.net.tw), or call the 24-hour tour- preserved and opened to the public. It ist information hotline 0800-011-765 FENGLIN has also acquired a reputation for deli- (toll free within Taiwan).

TAIWAN BUSINESS TOPICS • DECEMBER 2018 45

12 ST.indd 45 2018/12/10 下午12:24