Aiming at Building Defense Industries 以發展國防工業為目標

Home , Dahan River, Mark Chen, Shihmen Dam, Tucheng District

2019/11/7 下午11:58 ISSUE SPONSOR Published by the by Published Commerce Commerce In Taipei American Chamber Of November 2019 | Vol. 49 | Issue 11 Issue | 49 Vol. | 2019 November NT$150 以發展國防工業為目標 Aiming at Building at Building Aiming Defense Industries Defense INDUSTRY FOCUS INDUSTRY HEALTHCARE BUSINESS TAIWAN CONSUMER ELECTRONICS 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 November 2019 | Vol. 49 | Issue 11 中華郵政北台字第 5000 11_2019_Cover.indd 1

CONTENTS NEWS AND VIEWS 6 Editorial Recognizing Foreign Investors NOVEMBER 2019 VOLUME 49, NUMBER 11 表揚外資企業的貢獻一○八年十一月號 7 President’s View Bad time for the White House to Publisher name and shame companies William Foreman Editor-in-Chief By William Foreman Don Shapiro 8 Taiwan Briefs Deputy Editor Jeremy Olivier By Jeremy Olivier Art Director/ / 12 Issues Production Coordinator Katia Chen Slight Slippage in World Bank Manager, Publications Sales & Marketing Survey; Encouraging Family Offices Caroline Lee 世銀經商環境評比；鼓勵成立家族投 Translation Kevin Chen, Yichun Chen, Charlize Hung 資部門 By Don Shapiro and Niralee Shah

American Chamber of Commerce in Taipei COVER SECTION 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan Aiming at Building Defense P.O. Box 17-277, Taipei, 10419 Taiwan Industries Tel: 2718-8226 Fax: 2718-8182 e-mail: [email protected] 以發展國防工業為目標 website: http://www.amcham.com.tw 撰文／法提姆 By TIMOTHY FERRY 050 2718-8226 2718-8182 16 Growing Pains in Taiwan’s

Taiwan Business Topics is a publication of the American Defense Sector Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the 台灣國防產業成長期的煩惱 Officers, Board of Governors, Supervisors or members. © Copyright 2019 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original Supporters say the acquisition material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. of new F-16 Vipers is key not

just to defending Taiwan’s 10866 airspace, but also to integrating 5000 the local manufacturing sector ISSN 1818-1961 into global supply chains. Sweeter offers and 21 More Frequent Weapons heightened outreach have Chairman: C.W. Chin raised recruitment numbers Vice Chairman: Albert Chang Deals Secretary: Fupei Wang as Taiwan’s military rapidly Treasurer: Al Chang 23 The Challenge of Doing transitions to an all-volunteer 2018-2019 Governors: Anita Chen, C.W. Chin, Daniel without Conscription Tseng, Fupei Wang. force. 徵兵制取消後的挑戰 2019-2020 Governors: Al Chang, Albert Chang, Seraphim Ma, Jan-Hendrik Meidinger, Paulus Mok.

2019 Supervisors: Vincent Shih, Terry Tsao, Dylan Tyson.

COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Mandy Huang, C.P. Liu; Chemical Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Shirley Chen, Abigail Lin; CSR/ Lume Liao, Fupei Wang; Digital Economy/ Max Chen, Renee Chou, Tai Chi Chuan; Energy/ Randy Tsai; Human Resources/ Vickie Chen, Monica Han, Carmen Law; Infrastructure/ Wayne Chin, Paul Lee; Insurance/ KT Lim, Linda Tsou, Dylan Tyson; Intellectual Property & Licensing/ Jason Chen, Peter TAIWAN BUSINESS BACKGROUNDER Dernbach, Vincent Shih; Marketing & Distribution/ Wei Hsiang; Medical Devices/ Louis Ko, Jeffrey Wang, Joanne Yao; Pharmaceutical/ Rie Nakajima; Public Health/ Joyce 26 Treading New Ground In 29 Taiwan Moves Forward Fast Lee, Sophia Lee, Tim Shields; Real Estate/ Tony Chao; Consumer Electronics On 5G Retail/ Ceasar Chen, Mark Chen, Peggy Liao; Sustainable Development/ Kenny Jeng, Cosmas Lu, Kernel Wang; Tax/ The recent IFA show in Berlin gave A spectrum auction is set for Stella Lai, Cheli Liaw; Technology/ Cynthia Chyn, Stella Lai, Angela Yu; Telecommunications & Media/ Thomas Taiwanese companies an opportu- next month, with connectivity Ee, Joanne Tsai; Transportation & Logistics/ (tba); Travel & nity to showcase new products. scheduled for mid-2020. Tourism/ Gina Tsai. By Jens Kastner By Jeremy Olivier

4 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 contents.indd 4 2019/11/8 下午1:17 NOVEMBER 2019 • VOLUME 49 NUMBER 11 INDUSTRY F CUS A Special Report on the Healthcare Industry Precision Medicine, Clinical Trials, and Medical Devices

36 A Healthier Society Through Precision Medicine The Taiwan Precision Medicine Initiative offers the opportunity to dramatically improve the nation’s medical landscape and advance the lucrative biomedical sector with an ambitious DNA mapping project. By Jules Quartly 39 Stiff Competition for Taiwan’s Clinical Trials Taiwan and other regional players are finding it difficult to compete on the same scale as China when it comes to hosting clinical trials. By Jules Quartly 41 Medical Device Makers Look for Progress on Regulatory Issues By Don Shapiro 42 Making a Mark in Medical Device Manufacturing Profiles of New Deantronics and the SHL Group By Don Shapiro

AMCHAM EVENT 33 Fostering Innovation through Community Development 45 Exploring Solutions to Taiwan’s Aging Society

EXECUTIVE SUITE 46 Meet Dylan Tyson of Prudential By Jeremy Olivier

SPONSORED CONTENT 48 Seeing Taiwan: The Hakka Heartlands of Greater Taoyuan

TAIWAN BUSINESS TOPICS • AUGUST 2019 5

E-CGA-030-19-Oct-28

11 contents.indd 5 2019/11/8 下午1:17 E D I T O R I A L Recognizing Foreign Investors

ach autumn, the Ministry of Economic Affairs holds a Taiwan Central and Southern Taiwan Science Parks. Research centers Business Alliance Conference to promote Taiwan’s advantages are located in Taipei’s Neihu District and within the Industrial Eas a location for foreign investment and to spotlight new busi- Technology Research Institute (ITRI) in Hsinchu. The compa- ness opportunities. This year’s program, held October 7 at the Taipei ny’s Taipei office serves as Corning Display Technologies’ International Convention Center, included a new wrinkle. For the regional headquarters. first time, the Ministry presented an “Economic Contribution Award • Dell Technologies. The Dell Taiwan Design Center, with more for Foreign Companies in Taiwan,” recognizing long-term interna- than 1,000 staff, is one of the company’s most important R&D tional investors that “have made major contributions to Taiwan’s centers around the world. It works closely with Taiwanese economic growth and prosperity.” partner companies in the R&D of products from laptops to AmCham Taipei is proud that of the 10 companies given this servers, as well as on recycling solutions in support of circular prestigious award, seven are members of the Chamber. We commend economy goals. Dell reports that its cumulative purchases from MOEA for calling public attention to the incalculable value that Taiwan have exceeded US$20 billion in value. foreign companies bring to this economy in terms of employment, • Merck. Headquartered in Germany, Merck is an example of training, R&D, management techniques, market development, and the international nature of AmCham Taipei’s membership. The the introduction of innovative technologies. leading multinational pharmaceutical company utilizes Taiwan The Chamber congratulates the seven winners for their achieve- as a major R&D center in Asia, and has cooperated with ITRI ments: to establish a Biopharma R&D and Training Program. • Apple Inc. Over the years, Apple has developed deep ties with • Micron Technology. With over 8,000 employees, Micron Taiwan-based industrial supply chains. It works closely with describes itself as the largest foreign company in Taiwan. The 77 core suppliers to develop new products and engage in memory and storage product manufacturer operates advanced electronic product design and R&D activity. Apple also collab- fabrication facilities in Taichung and Taoyuan, a backend orates with its network of suppliers to upgrade product quality facility in Taichung, and a sales and technical support office in and conduct talent training programs. Taipei. It has helped build Taiwan into the world’s number-one • Applied Materials Taiwan. The supplier of equipment, services, DRAM hub cluster. and software partners with its Taiwan customers to advance • Synopsys Inc. A leading specialist in design software tech- state-of-the-art semiconductor and display manufacturing. nology for the electronics and semiconductor industries, The company maintains two Display Manufacturing Centers Synopsys maintains its Asia Pacific operations headquarters in and R&D Labs in Tainan, an Asia Continental Distribution Taiwan, as well as a 550-engineer R&D team. Together with Center in Taoyuan, and a Global Technical Learning Center in five Taiwanese universities, it this year launched the AIoT Hsinchu, as well as four sales and service offices. Design Lab for industry-academia cooperation. • Corning Display Technologies Taiwan. Corning has invested AmCham Taipei takes pleasure in noting that outstanding compa- more than NT$150 billion (about US$5 billion) in Taiwan, nies such as these have found a nurturing investment environment in including large glass substrate manufacturing plants in both the Taiwan, and that their contribution has received public recognition.

業

濟部每年秋天都會舉辦一場台灣全球招商論壇，藉以技術研究院（ITRI）內。而位於台北的辦公室則作為台灣宣傳台灣作為外國投資企業投資地點的優勢，同時發康寧顯示玻璃的區域總部。經掘新商機。今年的論壇，已於10月7日假臺北國際會議戴爾台灣創意設計中心擁有超過1000名員工，是中心舉行，也帶來新意。今年是經濟部首度頒發「十大傑出貢戴爾在全球最重要的研發中心之一，與台灣夥伴企業緊密獻外商獎」，表揚長期國際投資者「為台灣的經濟與產業成長合作，研發產品從筆電到伺服器都有，並致力於回收解決所做的卓越貢獻」。方案以實踐循環經濟的目標。戴爾報告，在台累計採購金令台北美國商會自豪的是，獲得表揚的10家企業，有7家是額已超過200億美元。商會會員。商會盛讚經濟部引發大眾關注外國企業在就業、培總部位於德國的默克，是台北美國商會會員資訓、研發、管理技術、市場開發和引進創新技術方面為經濟帶格國際化的典範。領先的跨國製藥公司利用台灣作為亞洲來了無法估計的價值。主要研發中心，並與工研院建立生技製藥產程研發暨培訓台北美國商會在此恭賀七家獲取殊榮的得獎企業：合作計劃。多年來，蘋果公司與台灣產業供應鏈建立了深厚的擁有8,000多名員工，美光形容自己是台灣最關係。蘋果與77家核心供應商緊密合作，開發新產品，大的外資企業。記憶體儲存產品製造商，在台中和桃園設並從事電子產品設計和研發活動。蘋果還跟自家供應商建有先進的製造廠，在台中設有後端工廠，在台北設有銷售立網絡合作，來提升產品品質及展開人才培訓計劃。和技術支援辦公室。也是幫助台灣成為動態隨機存取記憶設備、服務和軟體的供應商與台灣客戶合體（DRAM）集線器全球第一的功臣。作，促進最先進的半導體和顯示器製造。台灣應用材料在是電子半導體產業設計軟體技術的領先專家，台南設立兩座顯示器設備製造中心和研發實驗室，在桃新思科技將亞太地區營運總部設在台灣，還有一支由550 園設立亞洲零組件物流中心，在新竹設立全球技術培訓中名工程師組成的研發團隊。今年，新思與台灣五所大學心，還有四個銷售服務據點。啟動人工智慧物聯網（AIoT）設計實驗室，展開產學合康寧已在台投資超過1500億新台幣作。（約50億美元），包括台灣中部和南部科學園區的大型台北美國商會很高興這些傑出企業在台灣找到良好投資環玻璃基板生產廠。研發中心位於台北市內湖區和新竹工業境，也很高興這些企業的貢獻獲得大眾的認同。

6 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 Editorial.indd 6 2019/11/8 上午12:00 PRESIDENT'S VIEW

Bad time for the White House to name and shame companies

to “de-couple” from China. He argued that it’s actually the Chinese Communist Party that’s de-coupling China from the wider world. The portion of Pence’s speech that inspired the most head- lines was his criticism of specific companies, which he accused of abandoning U.S. values as they kowtow to the “lure of China’s money.” To be fair, this is the hardest time to be doing business in this part of the world. Boards are struggling to find ways to respond to unprecedented levels of pressure. Rather than hen it comes to U.S.-China relations, the Trump naming and shaming multinational companies, the govern- administration speaks with several voices – often ment should be conscious that those corporations need help. W conveying conflicting messages. Many in the I’m urging the Trump administration to do three things: business world have been left feeling confused about the pres- 1. Be consistent. It’s difficult for companies to craft a policy, ident’s overall strategy. But one voice has been clearer and strategy or messaging for these complex times when the more consistent than many others, and it belongs to Vice White House often fails to be consistent and predictable President Mike Pence. on core issues of its foreign relations. U.S. foreign policy He gave a major speech about China last month – exactly too often seems to flip-flop from tweet to tweet. a year after his first one on the subject. The speech was tough 2. Lead by example. An excellent way for the Trump on Beijing, but overall the criticism was fair and construc- administration to show that it adheres to U.S. values is to tive. At the same time, the speech reveals an ongoing lack of send more high-level officials on visits to Taiwan. It was awareness by the White House about simple things it needs to once common practice for Cabinet-level officials to come do to assist businesses during these challenging times. here. Only one has made the trip in the past two decades. The part of the speech that pleased me the most was 3. Work with allies. What was striking about Pence’s speech the nice shout-outs for Taiwan as “one of the world’s great was the lack of any effort to rally U.S. allies to work trading economies.” Pence reminded the international com- together to counter China’s pressure. I can’t help but munity that engaging with Taiwan “does not threaten peace.” wonder whether the administration has come to regret The well-crafted lines are evidence that the administration having walked away from the Trans-Pacific Partner- is staffed with people who understand and appreciate Taiwan. ship. Sticking with the TPP would have made the U.S. an I also appreciated Pence’s recognition of how China’s important member of a bloc designed to counter Chinese spectacular economic success has been partly driven by U.S. dominance in the Pacific Rim. It’s not too late to reverse investment. Indeed, Taiwan also played an outsized role in the decision. supercharging the Chinese economy. In addition, the vice president emphasized that the U.S. does not seek confrontation with China, nor does it want to contain the country’s development. What the U.S. is seeking is “a level playing field, open markets, fair trade, and a respect for our values,” he said. William Foreman In my view, one of the most important lines was Pence’s President, strong assertion that the Trump administration is not looking American Chamber of Commerce in Taipei

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 7

11 presidents view.indd 7 2019/11/8 上午12:02 T A I W A N B R I E F S

— BY JEREMY OLIVIER —

MACROECONOMICS

2019 OUTLOOK POSITIVE AS EXPORTS INCREASE Taiwan finished out the third quarter with year-on-year export growth exceeding 2%, bringing it ahead of the other three Asian Tigers for the first nine months of 2019. The figure indi- cates real export growth after adjusting for inflation. The Ministry of Finance notes that this growth rate has increased steadily over each quarter this year, with a 0.7% increase for Q1, 3.8% for Q2, and 4.8% for Q3, a testament to the Taiwan economy’s resilience in the face of international trade tensions and unfa- vorable global economic conditions. Other regional economies, includ- President Tsai Ing-wen, Vice President Chen Chien-jen, and other cabinet mem- ing those of South Korea, Hong Kong, bers wave to the crowd at this year's National Day celebration in Taipei. and Singapore, have not fared as well, PHOTO: EDWARD LAU reporting year-on-year decreases in outbound sales for the same period. Export orders dropped yet again in fell 28.7%, and base metals, which expe- but pointed to the slowdown in China’s September, this time by 4.9% from a year rienced an 18.9% decline. economic growth as a concern. earlier, but rose by a high 13.7% from The Ministry of Economic Affairs August – mostly residual growth from in October reported that foreign direct INTERNATIONAL the peak season for the global electron- investment for January through Septem- ics industry. Machinery exports dropped ber totaled US$7.8 billion, up 9.4% FOREIGN DIGNITARIES 12.1% from September the previous from the same period last year. Inward ATTEND NATIONAL DAY year, reflecting decreasing demand and a investment from China – a total of Observance of the 2019 National sluggish global economy. Other heavily US$87 million – fell a sharp 54.6% Day – also known as Double Ten affected sectors include chemicals, which year-on-year. Outbound investment because it occurs on October 10 – (excluding China) decreased 36.8% from featured Taiwan’s new immigrant TAIWAN STOCK EXCHANGE PERFORMANCE the first nine months of 2018, while communities and attendance by a large outward investment to China fell 57% number of foreign dignitaries. More than THE LINE SHOWS CHANGES IN TRADE VALUE AND THE SHADED AREA CHANGES IN THE TAIEX INDEX. year-on-year for the same period. 6,000 Taiwanese living abroad returned POINTS NT$ BILLION After projecting annual growth for for the celebration, the highest number 13000 225000 the Taiwan economy this year of 2.06% in three years. A parade in Taipei 12000 200000 in July, the Chung-hua Institution for included 23 floats highlighting such 11000 175000 Economic Research (CIER) on October national symbols as Taiwan’s “Bravo the 10000 150000 9000 125000 18 increased its forecast to 2.33%. CIER Bear” mascot. 8000 100000 cited the increasing amount of return- In her National Day address in 7000 75000 ing Taiwanese investment and the shift front of the Presidential Office, Presi- 6000 50000 of orders from China to Taiwan as major dent Tsai Ing-wen once again rejected 5000 25000 elements contributing to its revised fore- the possibility of a “one country, two 4000 0 cast. Yeh Chung-hsien, vice president of systems” arrangement for Taiwan, CIER, said these factors will continue to citing the ongoing protests in Hong

DATA SOURCE: TWSE impact Taiwan’s growth through 2020, Kong as underscoring the failure of this

8 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_Briefs.indd 8 2019/11/8 上午12:04 T A I W A N B R I E F S

model. Tsai emphasized the resilience in Asia” and featured panelists and DOMESTIC of the Taiwanese people in the face of speakers from Taiwan, the Philippines, international isolation and stated that Vietnam, Malaysia, Indonesia, South BRIDGE COLLAPSE IN “as President, standing up to protect Korea, and Kyrgyzstan, among others. EASTERN TAIWAN national sovereignty is not a provocation The government-backed Founda- The Nanfang’ao Bridge, a suspen- – it is my fundamental responsibility.” tion was set up to help promote Taiwan’s sion bridge in Yilan County on Taiwan’s Meanwhile, in Pingtung County, New Southbound policy of strengthen- northeast coast, collapsed on October the longest-ever Double Ten fireworks ing relations with neighboring countries 1, killing six Indonesian and Filipino display drew immense crowds – over in the Indo-Pacific. In opening remarks, migrant fisherman stationed aboard 320,000 attendees, according to local President Tsai signaled Taiwan’s desire boats berthed under the bridge. The government estimates. The show lasted to engage in more regional partnerships, collapse – thought to be the result of around 40 minutes and included a total but noted that doing so has become corrosion of the suspension cables – also of 16,280 fireworks. increasingly difficult in the face of injured several other foreign laborers Chinese pressure on other countries to and the driver of an oil tanker truck that SENATOR TED CRUZ limit or cease dealing with Taiwan. was exiting the bridge. VISITS TAIWAN Among the speakers was former The bridge, which was completed in U.S. Senator Ted Cruz, a member of Canadian Prime Minister Stephen 1998, is the only steel single-arch bridge the Senate Foreign Relations Commit- Harper, the first Canadian Prime Minis- in Taiwan. According to the Taiwan tee and an outspoken supporter of ter, former or current, to visit Taiwan. International Ports Corp., it performed Taiwan, visited the island in mid-Octo- China’s foreign ministry issued an angry routine annual maintenance on the ber as one stop on a tour of countries in complaint. Other speakers included bridge and inspections were carried out the Asia-Pacific region. During his visit, former White House Press Secre- every four years, most recently in 2016 Cruz attended this year’s Double Ten tary Sarah Huckabee Sanders, who by the Chien Hsin University of Science celebrations, making him the first Amer- said President Trump is committed to and Technology. Critics, however, have ican senator to do so in 35 years. He strengthening relationships with all of questioned whether the inspections also met with President Tsai at the Pres- the U.S.’s allies in the region, and Sandra were evaluated by an independent third idential Office, where the two discussed Oudkirk, U.S. Senior Official for APEC, party, which is supposed to be standard several issues related to the U.S.-Taiwan who emphasized the U.S. vision of a procedure. relationship, and held a joint news “free and open Indo-Pacific” that can be The collapse and its aftermath conference with Minister of Foreign accomplished by fostering “robust trade have also shed light on the conditions Affairs Joseph Wu at the Shangri-La Far relationships rooted in the principles of of migrant fisherman in Taiwan. The Eastern Plaza Hotel. fairness and reciprocity.” victims had been housed in extremely Cruz also made time to sit down for lunch with AmCham Taipei Chair- man Leo Seewald and President William Foreman. They were joined by Brent Christensen, director of the American Institute in Taiwan. The group discussed business opportunities for U.S. companies in Taiwan, cross-Strait relations, and Taiwan’s economic outlook.

FORUM FOCUSES ON ASIAN PARTNERSHIPS The third annual Yushan Forum: Asian Dialogue for Innovation and Progress, organized by the Taiwan- Asia Exchange Foundation, was held on October 8 and 9 at the Grand Hyatt

Taipei. This year’s event was entitled Aerial view of the collapsed Nanfang'ao Bridge in eastern Taiwan. “Deepening Progressive Partnerships PHOTO: MARTTI CHEN

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 9

11_Briefs.indd 9 2019/11/8 上午12:04 T A I W A N B R I E F S

CROSS-STRAIT

MURDER SUSPECT SAID WILLING TO RETURN Hong Kong resident Chan Tong- kai, the chief suspect in the murder of his pregnant girlfriend while they were on vacation in Taiwan last February, has reportedly expressed willingness to return to Taiwan for trial. Canon Peter Douglas Koon of the Hong Kong Angli- can Church, who visited Chan in prison several times, said Chan decided to face justice after converting to Christianity. Koon said he would accompany Chan to Taiwan. This year's LGBT Pride Parade in Taipei drew over 200,000 attendees from However, Taiwan’s Mainland around the globe. PHOTO: MARTTI CHEN Affairs Council said that it would not lift the entry ban currently in place for Chan unless Hong Kong authorities cramped conditions on the boats they including representatives of around 30 agreed to share more information and were working on. In addition, the corporations. evidence on the case. National security temporary housing provided to the survi- The theme of this year’s parade – the concerns could also prevent Koon from vors was deemed inadequate, with some first Pride event to be held since Taiwan entering Taiwan due to his member- sleeping on top of cardboard placed on became the first country in East Asia ship in the National Committee of the the floor. to adopt marriage equality – was call- Chinese People’s Political Consultative ing on Taiwan to further embrace LGBT Conference. TAIWAN BASEBALL TEAM members of society. Event organizers MAC’s position regarding Chan’s TAKES HOME GOLD and representatives of local LGBT orga- possible return was criticized by Kaoh- Taiwan’s national baseball team nizations noted that there are still many siung Mayor Han Kuo-yu, the Chinese made history at this year’s Asian Base- barriers to full equality for sexual minor- Nationalist Party presidential candidate, ball Championship, winning the gold ities in Taiwan, such as recognizing the who argued that the policy amounted medal for the first time since the compe- marriage of certain transnational gay to “castrating [Taiwan’s] sovereignty.” tition began in 1983. The Taiwan team and lesbian couples. In response, MAC announced that if the beat Japan 5-4 in the final game, held at the Taichung International Base- ECONOMIC INDICATORS ball Stadium. Also for the first time, US$ billion US$ billion both Taiwan and China, the bronze Current Account Balance (Q2 2019)p 17.56 17.73 medal winner, qualified to compete in Foreign Trade Balance (Jan.-Sept.) 32.7 36.5 the Olympic Final Qualifying Tourna- New Export Orders (Sept.) 45.5 47.9 ment next year, along with silver medal Foreign Exchange Reserves (end Aug.) 468 460 winner Japan.

Unemployment (Aug.) 3.89% 3.87% LARGE LGBT PRIDE Discount Rate (Oct.) 1.375% 1.375% PARADE HELD IN TAIPEI Economic Growth Rate Q2 2019p 2.4% 3.29% Over 200,000 participants, a record- Annual Change in Industrial Output (Aug.)p 2.28% 1.11% breaking number, marched in Taipei’s Annual Change in Industrial Output (Jan.-Aug.)p -1.06% 17th annual LGBT Pride Parade on Annual Change in Consumer Price Index (Aug.) 0.4% 1.54% October 23. Attendees came from Annual Change in Consumer Price Index (Jan.-Aug.) 0.53% around the globe, and over 200 teams P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT of participants joined the march,

10 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_Briefs.indd 10 2019/11/8 上午12:04 T A I W A N B R I E F S

Hong Kong authorities decide to relin- TAIWAN'S JAN. - SEPT. 2019 TRADE FIGURES quish their jurisdiction and formally (YEAR-ON-YEAR COMPARISON) extradite Chan to Taiwan through mutual judicial assistance, Taiwan will /China apan ASEA TOTA handle the case. 102.4 Chan fled Taiwan before law-enforce- 95.5 248.5

ment authorities could identify him as 242.3 42.7 43.5 40.7 40.4 33.2 31.8 212 209.6 25.7

a suspect in the murder, but was appre- 25.6 17 hended in Hong Kong on charges of 17.2 money laundering connected to use of 2019 2018 2019 2018 2019 2018 his girlfriend’s credit card. An arrest .S.A Europe warrant was eventually issued in Taiwan,

but the lack of an extradition treaty 34 28.9 26.4 26.1 25.5 23.6 24.2 22.3 between Taiwan and Hong Kong made returning him through official channels 2019 2018 2019 2018 2019 2018 impossible. T: S Billion Chan, who accepted a plea deal on Exports mports SO RCE: BOFT/MOEA the money laundering charges, was released from prison in Hong Kong on October 22. His case spurred the intro- to this issue, legislators on October 15 risks connected with implementing cloud duction by the Hong Kong government pressed the Ministry of Labor to clarify computing systems. of a now-shelved extradition bill that the responsibility of food delivery plat- sparked the massive wave of protests forms to insure their drivers. UBER AGREES TO currently engulfing the territory. The Sharing Economy Association, NEW CONDITIONS Taiwan, to which the food delivery plat- After months of negotiation between BUSINESS forms belong, on October 20 met with Uber and local officials, the U.S.-based government officials and industry experts tech company has agreed to adapt its FOOD DELIVERY PLATFORMS to discuss potential solutions to several business operations to comply with FACE NEW SCRUTINY safety issues. The next day, the Asso- government policy regarding automobile Food delivery online service provid- ciation announced the drafting of self- transportation operators. An amend- ers Foodpanda and Uber Eats are in hot disciplinary rules that would apply to all ment to relevant government regulations water after it was found that the compa- of its members. that was passed in June barred Uber nies either did not adequately report from offering taxi services to the public the fatal crashes of two of their deliv- TREND MICRO ACQUIRES through partnerships with car rental ery drivers, or did not do so in a timely AUSTRALIAN STARTUP businesses. Instead, the company has manner. Two incidents in early October Taiwanese security software company agreed to begin working with local taxi involved a 20-year-old Uber Eats driver Trend Micro in October announced fleets, serving as a technology platform in Taoyuan and a 29-year-old Foodpanda acquisition of the Australian startup under the government’s multi-purpose driver in Taipei respectively. Cloud Conformity, a software platform taxi plan, which permits transparent, The crashes and subsequent responses that helps monitor and protect clients’ metered pricing administered through by the companies have raised questions cloud infrastructures, while ensuring mobile apps. In addition, vehicles oper- about the employment status of their compliance with international regulatory ating under the plan do not have to be drivers. Most food delivery platforms hire standards. painted yellow. drivers as independent contractors rather Trend Micro hailed the acquisition Current Uber drivers are allowed a than employees, enabling them to avoid as adding complementary capabilities to grace period to obtain a taxi operator's providing labor or health insurance and its already comprehensive cloud secu- license and plates for their vehicles, after other benefits. Drivers are expected to rity services. Its CEO, Eva Chen, cited which anyone found in violation of the complete delivery of each order within a Cloud Conformity’s status as Amazon provisions could face fines of between limited amount of time, leading to numer- Web Services’ “technology partner of NT$9,000 and NT$90,000. The govern- ous traffic accidents since the platforms the year” for 2019 as giving it excel- ment has pledged to provide assistance were launched in Taiwan. In response lent insight into the particular issues and with the application process.

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 11

11_Briefs.indd 11 2019/11/11 下午12:56 ISSUES

Slight Slippage in World Bank Survey

Low rating for credit conditions brings down Taiwan’s overall ranking.

Ease of Doing Business – Top 20

2020 Rank Economy 2019 Rank 1 New Zealand 1 2 Singapore 2 3 Hong Kong 4 4 Denmark 3 5 Rep. of Korea 5 6 United States 8 7 Georgia 6 8 United Kingdom 9 9 Norway 7 10 Sweden 12 標 11 Lithuania 14 12 Malaysia 15 13 Mauritius 20 14 Australia 18 15 Taiwan 13 0 16 U.A.E. 11 00 17 North Macedonia 10 18 Estonia 16 19 Latvia 19 20 Finland 17 50 0 oor performance in one category — regarding legal rights in obtaining credit — has dragged down Taiwan’s overall rating in P the World Bank’s recently released 2020 Doing Business survey of 190 countries and economies. In the latest edition, Taiwan fell back 0 two places from last year to rank number 15, the same position it held in 2018. The annual survey scores practical conditions in 10 categories: applying 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. In eight of those categories, Taiwan ranked within the top 40 economies. It did best – ranking sixth in the world – in the area of “dealing with construction permits,” which measures the time and cost involved in applying to build a warehouse. Other categories in which Taiwan did especially well were “Getting electricity,” where it ranked ninth, and “Enforcing contracts,” eleventh. As has been the case in previous years, the category in which Taiwan performed the worst was “Getting credit,” particularly the portion

12 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 issues.indd 12 2019/11/8 上午12:05 ISSUES

dealing with the effectiveness of collateral and bankruptcy laws in facil- 00 itating lending. Many of the items in this category involve the presence 0 or absence of a “floating charge” system that enables a creditor to have a securitized interest in a fund of moveable assets in a company. Legal experts say that this approach is more prevalent in common law jurisdictions than in civil law jurisdictions such as Taiwan, yet Taiwan received a lower rating in the category than other civil law countries in the region, such as Japan, South Korea, and China. In fact, Taiwan’s ranking in this area has steadily declined, falling from 90th place in 2018 to 99th last year and 104th in the latest edition, as other economies have passed it moving up the ladder. Unlike most international competitiveness surveys, Doing Business focuses on the practical impact of specific regulations, especially as they affect small and medium-sized enterprises operating in the largest busi- 5 ness city in the economy (in Taiwan’s case, Taipei). In conducting the survey, Doing Business relies on a network of local partners, including legal experts, business consultants, accoun- 0 tants, freight forwarders, government officials, and other professionals. For the fourth consecutive year, New Zealand received the highest ranking worldwide, followed by Singapore. Rounding out the top of 0 the list were Hong Kong (#3), Denmark (#4), South Korea (#5), and the United States (#6). Others that came in ahead of Taiwan were Georgia 00 (#7), the United Kingdom (#8), Norway (#9), Sweden (#10), Lithuania (#11), Malaysia (#12), Mauritius (#13), and Australia (#14). China continued its rise, improving from #78 in 2018 and #46 last year to #31 in the current ranking. The 2020 edition of Doing Business is entitled “Tackling Burden- some Regulation” and emphasizes the vital role of government policy in enabling companies to operate effectively. “The objective is to encourage regulation that is efficient, transparent, and easy to implement so that businesses can thrive,” the report states. It notes that “the economies that rank highest on the ease of doing business are not those where there is no regulation, but those where governments have managed to create rules that facilitate interactions in the marketplace without needlessly hindering the development of the private sector.”

— By Don Shapiro

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 13

11 issues.indd 13 2019/11/8 上午12:05 ISSUES

Encouraging Family Offices

Taiwan has an opportunity to attract more of these investments. ell over a century ago, the Rockefellers pioneered the idea of establishing a professionally staffed “family W office” to manage private investments on behalf of members of the family. Since then, many ultra-wealthy family groups have followed suit. In recent years, according to an article in Forbes this August, the family-office structure has seen a rapid rise in popularity as the super-rich seek out the most efficient ways to handle their assets. Given the dramatic increase over the past decade in the amount of wealth that family offices manage, these offices are now able to engage in transactions of a scale previously reserved for private equity and other larger firms. In AmCham Taipei’s 2019 Taiwan White Paper, the Private Equity Committee called the attention of the Taiwan financial authorities to this trend. “Many traditional hedge fund operators have closed their funds in order to open family-office types of 0 investment vehicles,” the Committee noted. “Given Asia’s ability to attract capital from around the world, some of these family offices are moving into the region, most often to Singapore and Hong Kong. Taiwan, with its large number of family-owned enterprises is also seeing a similar trend domestically as well-to-do families open offices to manage their wealth and make investments.” Unfortunately, however, the legal and regulatory environment in Taiwan has not been as conducive as it could be for investments from high-net-worth families. Industry sources cite the high taxes on investment returns as a major disincentive. Another is a rather inflexible regulatory system that fails to account for the broad range of functions that a family office typically provides. Besides simply offering investment advice and financial services, such offices often also deal with legal issues, tax advice, and estate and succession planning. Generally speaking, the investment philosophy of family offices differs from that of hedge funds and many other institutional investors in that they tend to invest for the long-term, and they increasingly prefer investments that have some environmental or social impact. As a result, experts believe that their involvement in the Taiwan economy would be particularly beneficial at a time when this country needs sustained capital to build up such strategic industries as biomedicine, green energy, and artificial intelligence. In its White Paper submission, the Private Equity Committee urges Taiwan’s regulators to develop an environment that will attract international family-office funds to invest in Taiwan, as well as assist Taiwanese family offices to operate more effectively.

— By Niralee Shah

14 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 issues.indd 14 2019/11/8 上午12:05 COVER STORY

Aiming at Building Defense Industries 以發展國防工業為目標

PHOTO: CNA TAIWAN BUSINESS TOPICS • NOVEMBER 2019 15

11_CoverStory.indd 15 2019/11/8 下午1:32 COVER STORY

DEFENSE

his August the U.S. government formally offered Taiwan the F-16 T fighter jets that it had requested Growing Pains in Taiwan’s more than a decade ago. It would be the first U.S. sale of military aircraft to Defense Sector Taiwan since that of an earlier version of the F-16 in 1992. The F-16 Viper offer features advanced radar, guidance, and electronic Supporters say the acquisition of new F-16 Vipers is key not warfare systems as well as Sidewinder just to defending Taiwan’s airspace, but also to integrating the missiles and other munitions, and would local manufacturing sector into global supply chains. be a tremendous boost to Taiwan’s international security. “The F-16 will not only enable greater interoperability with U.S. forces, but will also provide Taiwan with BY TIMOTHY FERRY the most up-to-date technology,” says Ross Darrell Feingold, an American political risk analyst based in Taipei. At the same time, the usefulness of the F-16V must be weighed against the advances China has made in its military tactics and technologies. China’s military budget for 2019 is reportedly US$175.4 billion (about 13 times that of Taiwan), and “Taiwan persistently remains the PLA’s main “strategic direction,” according to a recent U.S. Defense Department report. China has some 1,500 short-range ballistic missiles trained on Taiwan. It also stations an estimated 250 bomb- ers and 600 fighter-jets in southern and eastern China within range of Taiwan. In the event of an invasion, Taiwan’s critical infrastructure, particularly airports and airforce bases, would undoubtedly be President Tsai (center) observes military exercises simulating repulsion of an invasion. among the early targets. PHOTO: OFFICE OF THE PRESIDENT

國防業支持者說，新型F-16V戰機入手，不僅對於捍衛台灣領空具有關鍵影響，對於使本地製造業與全球產業鏈接軌也極為重要。 0 5 500 5000

16 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_CoverStory.indd 16 2019/11/8 下午1:32 DEFENSE

“Looking at how Chinese capabilities have changed over the past 25 years and the way ballistic missiles have grown dramatically in number and accuracy, by the time Taiwanese airplanes are ready to take off, the runways will have been destroyed,” says Drew Thomp- son, the Pentagon’s director for China, Taiwan, and Mongolia from 2011 to 2018. Even straight stretches of high- way would be targeted in such an attack, predicts Thompson, who is currently a visiting senior research fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore. As a preemptive strategy, Taiwan An F-16B at a Taiwan air force base. PHOTO: WIKIPEDIA has begun lessening its emphasis on big, costly, and easily targeted weapons such as fighter jets and frigates. Instead, it landing operations. rity Research (INDSR), a Taipei-based is moving towards a more “asymmet- Given such a broad shift in strategy, think tank dedicated to researching issues ric” approach – utilizing multitudes of some critics have questioned the need to in Taiwan’s defense and security. low-cost, mobile defense systems. These purchase the expensive F-16Vs, which are Nevertheless, a strong case can be include sea and land mines, mobile set to be paid for with a special budget made for the value of new advanced missile launchers, submarines, and small approved by the Legislative Yuan in aircraft. Taiwan’s skies need to be fast-attack boats. September. The US$8.2 billion total cost, patrolled even in peacetime, and a modern The Overall Defense Concept, as this which includes long-term logistics, main- air force is a powerful deterrent against strategy is known, was unveiled in 2017 tenance, and training, is equivalent to aggression. Perhaps even more impor- by Admiral Lee Hsi-ming, then Taiwan’s nearly 80% of the entire annual national tantly, the sale “is a visible reminder of Chief of the General Staff. In remarks defense budget for 2019. U.S. support for Taiwan,” says former to the 2019 U.S.-Taiwan Defense Indus- “The purchase of costly, high-profile Pentagon official Thompson. “It’s a signal try Conference in Maryland on Octo- systems from the U.S. undermines that the U.S. is not cowed by Chinese ber 7, Vice Minister of National Defense Taiwan’s defense as they add relatively retaliation, which is exceptional because Chang Guan-chung described the little in terms of actual defense capa- most countries do defer to China.” approach as adopting affordable, effec- bilities, but consume a large portion of Moreover, many in Taiwan’s govern- tive defense systems in order to protect the budget,” says Hung Jiu-min, a post- ment and industry see the acquisition military personnel and facilities, defend doctoral fellow at the recently formed as the ticket to greater integration of littoral zones, and counteract beach- Institute for National Defense and Secu- Taiwan’s defense and aerospace industries

00 5 00 0 0 0 0

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 17

11_CoverStory.indd 17 2019/11/8 下午1:32 COVER STORY

DEFENSE

into American – and therefore global – weapons systems. Such investment is expected to help defense-industry supply chains. The National Chung Shan Institute generate jobs and stimulate economic of Science and Technology (NCSIST) growth in Taiwan. The country faces a Taiwan’s indigenous defense has been tasked with developing two number of significant challenges beyond high-profile weapons systems: the T5 the threat of invasion by China, among Taiwan has an impressive track Indigenous Defense Fighter/Trainer (in them a rapidly aging population, stagnant record in developing its own weapons conjunction with the Aerospace Indus- wages, and a brain drain. The develop- systems, including the Hsiung Feng III trial Development Corp.) and the Indige- ment of a highly capable – and hopefully supersonic anti-ship missile, TC-2 Air-to- nous Defense Submarine (with state-affil- profitable – indigenous defense indus- Air missile, and Ray-Ting 2000 mobile iated shipbuilder CSBC Corp.). The T5 try is regarded as a way to help mitigate rocket launcher. Now, under its 5+2 project is expected to cost the equiva- these challenges. Innovative Industry plan, the Tsai admin- lent of US$2.2 billion and the submarine In a recent paper, Hung of the INDSR istration has set the ambitious goal of project an estimated US$16.4 billion. predicts that every dollar invested in transforming the defense industry into NCSIST is also working on a range of Taiwan’s indigenous defense will see one of Taiwan’s economic drivers. It has missiles, drones, smart sea mines, and more than double the returns in terms of earmarked billions of U.S. dollars for other weapons systems deemed crucial to economic output. investment in the development of new the island’s defense. The spillover of technology and industrial capacity into civilian sectors is also anticipated. “Indigenous military programs could transform key military technologies into civilian technologies and provide a stimulus to spur the growth of new industries and new applications, particularly in the area of aerospace, electronics, and information technology,” says Hung. National Tsing Hua University estimates that the indigenous defense sector will create as many as 59,000 new jobs by 2025. Leu Tzong-shyng, head of the aeronautics and astronautics department at National Cheng Kung University, says that job growth directly linked to the T5 project is already apparent in Taiwan’s aerospace sector. “Aerospace job open- The Hsiung Feng III anti-ship missile developed by NCSIST. ings have reached their highest point PHOTO: NCSIST recently,” Leu notes. “Aerospace students

台灣的自主國防 0005 5 05 5 5000

18 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_CoverStory.indd 18 2019/11/8 下午1:32 DEFENSE

with expertise in certain critical areas are of direct compensation or technology Hung Jiu-min of the INDSR agrees being recruited by defense-related R&D transfer, investment in local industry, or with this assessment, citing Taiwan’s centers and companies.” even tourism promotion. “The obliga- well-developed aerospace industry and tion that comes with the sale of military experience manufacturing the T5 Indige- Pushing for global integration equipment can be shaped into supply nous Defense Fighter/Trainer. “With the chain access if the two parties observed F-16 or any fighter jet, the story is not While the 5+2 investment will act as feel that the accrued benefit works,” finished when you buy it, and the main- a useful economic stimulus, development Rupert Hammond-Chambers, president tenance and repairs cost a lot of money,” of Taiwan’s defense R&D sector is still of the U.S.-Taiwan Business Council, says Hung. hampered by limited market size. Taiwan explained in an email to Taiwan Busi- He notes that implementation of plans to produce only 66 T5 fighter/ ness TOPICS. Chang’s suggestion could enable Taiwan trainers, and only six to eight subma- The F-16 first entered service in 1979. to provide maintenance and repair rines, not nearly enough to achieve econ- According to the manufacturer, Lockheed services to other countries with F-16 omies of scale. Martin, 4,588 units have been delivered fleets as well. With proper certification, The only way to overcome this obsta- over the years, with over 3,000 still in Taiwanese companies potentially could cle is to access global markets – a consid- service in at least 25 nations. Taiwan’s air also begin manufacturing spare parts. erable challenge for the diplomatically force has 142 F-16A/B aircraft currently In 2011, the Obama administration isolated island. Taiwan’s diminishing in operation, making it one of the larger approved a US$5.3 billion program to international space and Chinese pressure fleets of F-16s. upgrade Taiwan’s existing fleet of F-16A/ would likely give other countries pause in Lockheed Martin calls the F-16 the B aircraft to the F-16V standard. The purchasing Taiwanese defense systems. “world’s largest fighter aircraft ecosys- program, dubbed “Rising Phoenix,” is Although as much as 82% of the tem,” noting that there are 3,900 suppli- being managed by the AIDC and could world’s defense markets is dominated by ers around the world of needed parts, enable Taiwan to “export the technol- U.S., Russian, and European companies, components, and services. Taiwan hopes ogy to other customers that use the F-16 Taiwan is hoping that the global nature that the new F-16Vs will give it an oppor- now,” says NCKU’s Professor Leu. “The of the F-16 market will provide opportu- tunity to join that ecosystem as a first Taiwanese aerospace industry could take nities for domestic enterprises to become step into the global market. this opportunity to be part of the supply integrated into the supply chain. Big At the recent U.S.-Taiwan Defense chain for operations and maintenance customers of weapons systems have long Industry Conference, Deputy Defense and spare parts manufacturing for the been empowered to demand “offsets,” Minister Chang suggested that “U.S. global F-16 fleet.” which the U.S. Department of Commerce industry take a step further to work with Although Phoenix Rising encoun- describes as “a range of industrial Taiwan companies in building depot- tered substantial delays this year, attrib- compensation arrangements required by level maintenance capacity in Taiwan.” uted to a shortage of personnel at AIDC, foreign governments as a condition of the He cited the lower maintenance costs, the company reports that after the recent purchase of defense articles and services higher maintenance efficiency, and better hiring of 200 engineers, the program is from a non-domestic source.” operational sustainability as reasons for back on track. The Ministry of National Offsets can be provided in the form this integration. Defense announced that it expects the

5 推動國際接軌 5 5 05 0005 00

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 19

11_CoverStory.indd 19 2019/11/8 下午1:32 COVER STORY

DEFENSE

upgrade of 20 aircraft to be completed declined since 2012. Taiwan’s order of 66 Taiwanese firms should “partner with in 2019, with the entire fleet upgraded units of the aircraft is by far the biggest in the leading global defense contractors as by 2022. years and is expected to keep the Green- they assess potential global programs in ville factory and its subcontractors busy major markets like the U.S. – and become Persistent doubts until at least 2027. Still, Taiwan presum- part of the bidding teams for specific ably would have some space to demand programs.” This approach would require Despite Taiwan’s aspirations, U.S. an offset. that Taiwanese become involved in the government and industry insiders feel that Despite Taiwan’s diplomatic isola- bidding process two to four years ahead greater integration of Taiwan into the tion, industry insiders do not see politics of the contract award. supply chain for the F-16 – or any other as necessarily precluding the chance for it Such participation in the global current weapons systems – is unlikely. to sell parts and components for military defense market would entail heavy invest- A major reason is that the U.S. author- systems to other countries. There will be ment not only in industrial capacity, but ities have their own domestic economic other challenges, however. also global marketing. There is “legit- priorities. “This is a U.S. jobs program “It’s going to be based on price, it’s imate concern over whether [Taiwan- from their perspective, which creates a going to be based on terms, it’s going to ese firms] have the marketing ability to disincentive to transfer some of the tech- be based on commercial factors,” says sell systems in, say, South America or nology to Taiwan,” says Thompson. Thompson. AIDC may have some private Europe,” says political-risk analyst Fein- Taiwan needs to manage its expectations shareholders, but it and NCSIST “are still gold. “Are they willing to master the regarding entrance into the F-16 ecosys- run like government entities,” he notes. language, pay for the translation? Do tem, because part of the U.S. rationale “So the question is, can they actually be they want to go to the trade shows, to put for the sale was to support the Lockheed competitive in an international market?” in the effort?” Martin factory in Greenville, South Caro- Hammond-Chambers of the U.S.- Thompson adds that Taiwanese lina, he notes. Taiwan Business Council suggests that defense firms are going to hear a lot of Orders for the F-16 reportedly had in order to boost that competitiveness, “noes” before they hear any “yes.”

0 5 0 05 00 0 0 疑慮未解

20 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_CoverStory.indd 20 2019/11/8 下午1:32 DEFENSE More Frequent Weapons Deals

aiwan currently leads the world NOTIFIED TAIWAN ARMS SALES 1990-2019 in terms of its procurement of 10.72 T U.S.-made arms, with a total of US$10.7 billion in sales already approved this year by the U.S. Department of State under its Foreign Military Sales (FMS) 7.71 program. The US$8 billion F-16V acqui- 6.46 6.39 sition accounts for the bulk of this 5.85 amount, while an agreement for 108 M1 Abrams battle tanks accounts for another US$2 billion. 3.72 There has also been a change in the 2.18 way the deals are being approved. In 1.87 1.78 1.72 1.52 1.25 1.30 1.36 recent decades, U.S. administrations had 1.03 1.08 0.64 0.78 0.37 waited until accumulated requests from 0.15 0.17 0.27 0.28 0.33 Taiwan could be bundled into a single package. The rationale was to reduce the 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018 SOURCE: FMS Data from the Defense Security Cooperation Agency (www.dsca.mil) UNIT: US$ Billion, FMS number of times the U.S. government Kan, Shirley A. “Taiwan: Major U.S. Arms Sales Since 1990” CRS Report RL30957, January 5, 2015 would have to respond to Chinese objec- tions. But in what appears to be a sign of strengthening U.S.-Taiwan relations, individual sales are now being approved on a case-by-case basis. “We’re seeing a routinization of weapons procurement,” said a U.S. official familiar with Taiwan’s defense sector who requested anonymity. “It’s a normaliza- tion of the process. It’s treating Taiwan the same as we do anyone else.” General Dynamics’ M1A1 Abrams is considered the world’s most advanced battle tank. Taiwan is purchasing it to PHOTO: WIKIPEDIA replace its current fleet of M60A3 Patton U.S. Army Abrams tank installed with TUSK explosive reactive armor package. and CM-11 Brave Tiger tanks, which have been in service for more than two decades. Production of the M1A1 will be performed at several locations throughout the U.S. Taiwan expects to execute the contract in November, although the first batch of tanks won’t be delivered until 2022. Taiwan is negotiating a separate deal with Lockheed Martin, maker of the F-16, to procure 120-millimeter cannons and shells for the new M1A1 tanks. It hopes to obtain technology transfer offsets from the U.S. defense giant, so that Taiwanese firms could produce these armaments under license in the future. The Raytheon Company of Waltham, PHOTO: WIKIPEDIA Massachusetts, is also involved in An F-16 carrying an array of different types of missiles. numerous deals with Taiwan’s defense

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 21

11_CoverStory.indd 21 2019/11/8 下午1:32 COVER STORY

DEFENSE

sector. Last May it was awarded several contracts, including one for the US$355 million upgrade and refurbishment of its AGM-88B High Speed Anti-Radia- tion Missiles (HARM), which are part of the F-16’s armaments, as well as the missile array’s control system. Raytheon also won a nearly US$50 million contract to refurbish radar systems for Taiwan’s naval vessels. Last year, British Aerospace Systems (BAE) was contracted via the FMS PHOTO: WIKIPEDIA program to supply 36 amphibious assault Taiwan has requested the purchase of M109A6 Paladin self-propelled howitzers vehicles to Taiwan for around US$83.5 from the U.S. million. Purchase and delivery of the vehicles are expected to be completed by July 2020. Taiwan’s Minister of National Defense Yen Teh-fa told legislators in September that the ministry is request- ing acquisition of BAE’s M109A6 Paladin self-propelled howitzer to further enhance its defense capabilities. U.S. firms are also deeply involved in Taiwan’s two highest profile weapons development programs, the T5 trainer aircraft and the indigenous submarine.

BAE Systems last year was awarded an almost $84 million contract to produce 36 Assault Amphibious Vehicles for Taiwan.

capable of being called up in times of crisis. Not least, it instills a broad sense The Challenge of Doing of duty to defend the country. Universal conscription “provides not without Conscription just for building up your armed forces but also for some sort of national education and building social cohesion and patriotism,” notes Drew Thompson, a Sweeter offers and heightened outreach have raised former Director for China, Taiwan, and recruitment numbers as Taiwan’s military rapidly transitions Mongolia in the U.S. Department of to an all-volunteer force. Defense. Taiwan, in contrast, has opted to tran- sition to an All-Volunteer-Force, join- ing the U.S., Japan, and most Western BY TIMOTHY FERRY nations. Russia retains conscription, as ost nations facing an impla- does China. cable, existential military In Taiwan’s democratic environment, M threat – examples are Israel, phasing out the draft has been politically South Korea, and Finland – require mili- popular. Young people and their parents tary conscription, at least for all adult tend to resent a lengthy interruption for males. The policy not only helps ensure national service that keeps new graduates adequate levels of active-duty personnel from moving on with their careers. but also creates a deep pool of reserves In addition, a professional military

22 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_CoverStory.indd 22 2019/11/8 下午1:32 DEFENSE

Recruiting message on the website of the national armed forces recruitment center.

offers a number of advantages. Rather expensive, however. “If you want high- “The goal this year was an 85% volun- than being forced to accept all conscripts quality personnel you have to spend the teer force, but we can reach 87.5% – regardless of ability or intelligence, the money,” says Admiral Pu Tze-chu. A exceeding the goal,” he says. Recruitment military can select quality personnel. graduate of both the Republic of China into the Reserve Officers’ Training Corps Longer service durations – in Taiwan Naval Academy and the U.S. Naval War programs in Taiwan’s universities rose four years for recruits, compared to only College, he has been in charge with over- 128% this year, he adds, while recruit- four months for conscripts, down from seeing the recruitment drive since step- ment into the three military academies is 11 months prior to 2012 – makes it ping down as Vice Minister of National similarly up by 111%. possible to retain skills and obtain more Defense in 2018. The reason for the recent success? return from investment in training. Pu says that recruitment efforts have “It’s the incentives, the salary,” says Pu. An All-Volunteer-Force is also more been bringing improved results in 2019. Taiwan has raised monthly salaries

隨著台灣軍隊迅速轉為全志願役，國防部祭出更優渥的條件並擴大外展服務，募兵人數因而增加。 0 0 0 5 5

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 23

11_CoverStory.indd 23 2019/11/8 下午1:32 COVER STORY

DEFENSE

for recruits from NT$29,625 (US$970) doctoral-level programs. defense budget by 18.8% for the coming in 2013 to NT$34,340 (US$1,125). In The Ministry of National Defense has year – from NT$346 billion in 2019 Purchasing Power Parity terms, new also sweetened the deal for ROTC cadets. to NT$411.3 billion in 2020. Defense recruits now earn the equivalent of Along with free tuition and an NT$5,000 now takes 16.4% of the entire national US$2,058 a month – well ahead of volun- textbook subsidy, they receive a monthly budget, equivalent to 2.3% of GDP, both teers in the U.S. Army, who start at just stipend of NT$12,000. After graduat- higher levels than in recent years. US$1,514. ing from an ROTC program or military Despite expectations that person- Privates can also earn substan- academy, lieutenants start their military nel would eat up nearly 50% of the tially more per month (as much as careers earning NT$48,990 (US$1,604), defense budget by 2020, manpower costs NT$50,000) if they are skilled in cyber- the equivalent of US$2,937 in PPP terms. have been held to about 40% – but at warfare or up to NT$20,000 if they That compares to US$3,580 for first lieu- the expense of force size. The total mili- serve on Taiwan’s outer islands. Hous- tenants in the U.S. Army. tary population has declined from some ing and medical care are mostly free, These incentives have “definitely” 290,000 troops prior to 2013 to a current and opportunities are available for put pressure on military budgets, says official figure of around 215,000, which higher education, including master’s and Admiral Pu. Taiwan has raised its is considered the minimum active force level required for national defense. That number may be overly optimis- tic. “There are actually only 188,000 in total,” longtime defense expert Wendel Minnick recently wrote in The National Interest. “And if you exclude civilian employees, noncombat personnel, those on leave, and cadets, the actual number of warfighters is 152,280” – 81% of the “authorized strength levels needed for fending off an invasion.” Maintaining even that scale will be a challenge given Taiwan’s ultra-low birth- rate. There were only 181,601 births in Taiwan in 2018, which will leave it with fewer than 92,000 18-year-old males to recruit from by 2036. The defense ministry is already encouraging the recruitment of women and aims for them to eventually account for 30% of total personnel, New recruits prepare to start training. but recruitment will remain a challenge. PHOTO: WIKIPEDIA

0000 05 005 0050 05 0 5 0 5 5 5000 50 00 00 50 0 0

24 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11_CoverStory.indd 24 2019/11/8 下午1:32 DEFENSE

Role of the reserves

Another issue that troubles analysts is the strength of the reserve force. Offi- cially Taiwan has 1.7 million reservists available for duty in case of a national emergency. The quality of these reserve forces has been called into question, however. Nominally, all of Taiwan’s conscripts continue to be reservists until they are 45 years old. But in practice, only around 40% actually report for duty when called up. In addition, reservists receive on average of only 20 days of training over eight years, according to a report by Project 2049, a Washington DC-based research center. Moreover, as conscription is reduced, “they will need to rely on a professional At a ceremony at an air base in Taitung, the Air Force honored a group of female fighter pilots. reserve to support a professional army,” PHOTO: CNA observes Thompson. With force reduc- tions, “the numbers won’t be there.” More often, their roles in the military will in the international community,” Taiwan Thompson adds that the role of the reflect their civilian roles. Basically we defense expert and Project 2049 research Taiwan reserves is unclear. “The role use them as manpower.” fellow Ian Easton said by email. of the reserves historically was go to Rethinking the responsibility of the ROTC students never claim that they the beach and slow [the enemy] down reserves could be politically unpalatable, are seeking a military career out of love while the regular army fills the gaps,” he however, as it would likely entail greater of country, says Chiao Chuan-chin, asso- says. But the current reserve force may obligations from its millions of members. ciate vice president for academic affairs lack sufficient training to be effective in Interestingly, the role of patriotism at National Tsing Hua University and combat. is rarely invoked publicly in discussions head of its ROTC program. “They might “Our military needs to reconsider how over military recruitment. “My impres- feel that in their hearts, but they will it uses the reserves because the training sion is the Taiwanese people are as patri- never say it. They will think that we [the frequency is not enough,” admits Admi- otic and nationalistic as anyone else, and admissions committee] would assume ral Pu. “We don’t train them for specific perhaps more so because of the mani- they are lying, just saying what we want jobs such as operating a missile launcher. festly unjust way their country is treated to hear.”

後備役的角色 0 50 0 0 0

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 25

11_CoverStory.indd 25 2019/11/11 下午12:57 TAIWAN BUSINESS

TREADING NEW GROUND IN CONSUMER ELECTRONICS

The recent IFA show in Berlin gave Taiwanese companies an opportunity to showcase new products.

Smart service robots. PHOTO: NEW ERA BY JENS KASTNER

aiwan’s consumer electronics contrast to the lackluster 2.2% overall community, the company has taken providers have begun exploring revenue growth in the same period. The an active role in esports competitions T new market segments in company’s experience aligns with the across the world. It organized the 2019 the face of slowing global economic prediction from market research firm Asia Pacific Predator League, held in growth, decreased replacement demand, Newzoo that the global esports market Bangkok in February, which attracted persistent concerns over the U.S.-China will generate revenues in excess of US$1 over 4.3 million views online. trade war, and stiff competition from billion in 2019, a major milestone, In September, Acer introduced China. The 2019 edition of IFA, one of thanks to projected year-on-year growth Planet9, an online esports platform the world’s largest consumer electronics of 26.7%. that provides hobby gamers with tools exhibitions, which was held in Berlin in “While mainstream applications for to develop their skills. This platform September, provided a glimpse into the notebooks and tablets, such as home allows the gamer to hire a profes- progress some of these companies are internet browsing, have seen sluggish sional coach and form a team for joint making. growth, the gaming market is booming, training sessions. Coaches are chosen Acer, known primarily for its con- and esports has become a major topic based on game statistics, language, sumer notebooks and tablets, showed of interest,” said Manuel Linnig, Acer’s rating, and hourly rate. They can assist off a few new additions to its line of director of public relations for Europe, the gamer by creating a tailor-made gaming-oriented computing products the Middle East, and Africa, who spoke course, which includes features such as designed to please some of the world’s with Taiwan Business TOPICS at this screen-sharing, video or voice chat, and most demanding gamers. The compa- year’s IFA show. “The games are get- VOD uploading for playback. ny’s Predator brand, launched in 2016, ting better quickly, so the hardware has Acer has also begun shifting its focus includes gaming notebooks, desk- to catch up,” he said. “Acer is leading in marketing its notebooks. Instead of tops, and displays that boast ultra-low the pack on this front, as reﬂected in its aiming at the average user, it is increas- response times and ultra-high resolu- spot as one of the top two gaming hard- ingly gearing its approach toward tion. They also contain extra-efficient ware providers in 24 countries.” creative professionals such as designers, cooling technology to facilitate long Linnig noted that the final round of photographers, and engineers – users hours of gaming despite the energy-gob- an esports tournament today can easily requiring mobile devices that can bling graphics. draw a live audience of 60,000, in addi- handle compute-intensive workloads. Acer has made big strides in the tion to 300 million online viewers. “Our ConceptD Pro series notebooks gaming sector in recent years. The com- To elevate Acer’s position as a global are about as powerful as the gaming pany’s revenues from gaming products esports brand and create an army of notebooks, but the details differ,” says grew by 70% year-on-year in 2018, in brand lovers in the close-knit gaming Linnig. “For instance, an engineer needs

26 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

Tech.indd 26 2019/11/8 上午12:06 TAIWAN BUSINESS

to see color nuances much more clearly “Traditionally, mobile devices innovation and has its own brands. than a gamer.” haven’t been a real option for gamers, as In 2017, New Kinpo established Rival computer electronics provider they don’t provide sufficient computing New Era AI Robotic, which focuses Asus has also been investing heavily in power to match the real experience,” on artificial intelligence solutions and gaming. Its ROG brand (an acronym said Brian Tang, a senior manager robotic development. The compa- for “Republic of Gamers”) initially at Asus. “The ROG brand is able to ny’s products include service robots focused on gamer-friendly monitors, support all kinds of mobile gaming sce- for use in retail, hotels, healthcare, notebooks, desktops, and accessories, narios, be it at home or on the go, and and banking. The products feature but in 2018 the company launched its the mobile gaming market is growing autonomous indoor navigation, voice ROG mobile phone series. ROG phones quickly with these developments.” interaction, mobile advertising, real- boast higher refresh rates, which means Tang noted that while gamers in time customer assistance, and facial less motion blur and faster response the West usually started their gaming recognition for targeted marketing and times. They also use 6000mAh bat- careers on video game consoles such as people counting. Some of the robots are teries, which have almost twice the PlayStation or Xbox, gamers in China capable of carrying items weighing up capacity as those in conventional smart- and Southeast Asia arrived on the scene to 100 kilograms in space-constrained phones for extra-long battery life. later and went straight into mobile places like ofﬁce corridors and elevators. The ROG II, released this past gaming, skipping the console stage. In Taiwan, New Era AI’s robots have July, features pressure-sensitive cor- been introduced at eight Chunghwa ners that double as bumper buttons for Not just gaming Telecom branches, where they help cus- games, expanding game control beyond tomers review their account status, the screen. The phone also includes IFA also presented a chance to take make bill payments, and set up roaming a detachable fan to keep it cool for a closer look at the New Kinpo Group’s services for travel outside the country. extended gaming. ROG announced in transformation from one of the world’s The company’s robots also assist Mega July that it will be the ofﬁcial hardware largest ODM manufacturers of elec- Bank customers at the bank’s four sponsor for the EXP Esports Gaming tronic calculators, printers, SSD/HDD flagship branches with opening bank Series, created by ESPN in collabora- storage, set top boxes, and household accounts, checking interest rates, and tion with game designer Electronic Arts. appliances to a conglomerate that drives perusing the latest news. And some

Predator is Acer's series of computer products for esports aficionados.

PHOTO: JENS KASTNER

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 27

Tech.indd 27 2019/11/8 上午12:06 TAIWAN BUSINESS

units are in use in Taiwanese hospitals, transferring sanitized surgical instruments from supply room to operation room and providing legally compulsory post-surgery information to patients. To date, 200 units have been sold. “Our competitive advantage is in providing open systems, which allow users to program the robots according to their unique requirements,” said Ian Sun, sales department supervisor at New Era AI Robotic. Cal-Comp Big Data, another of New Kinpo’s subsidiaries, was also present at IFA to show off its new product, HiMirror, a device to help users decide which cosmetics products are most effective. The device comprises three layers: a touch screen laid on top of a mirror laid on top of an LED layer. Its PHOTO: JENS KASTNER high-focus camera sends close-ups of the user’s pores, wrinkles, dark circles, “I use my HiMirror weekly, which its users’ skin, Taiwanese startup Relajet and other skin conditions to a cloud gives me a very clear timeline of how is providing innovative solutions for database. There, the user’s data is com- my skin condition has changed over a people who are hard of hearing. The pared with thousands of other users of six-month period,” said Ho Cin-Yee, company is made up of Taiwanese the same age and gender, enabling an director of sales and marketing for engineers formerly employed by chip- evaluation report to be created. HiMirror. “It then helps me to evaluate designer MediaTek and designs chipsets HiMirror comes with Beauty Box, whether the money I’ve been spending that separate human voices from sur- a cloud application that recommends on certain products is worth it.” rounding noises, as well as individual the best products and leads the user to Nevertheless, Ho explained that the voices from each other. The target appli- the online shopping sites that sell them. nature of the device presents a challenge cations for these chipsets are hearing It also features HiTube, which super- to retailers, who are uncertain whether aids and voice recognition machines. If imposes YouTube cosmetics tutorials HiMirror belongs in the fashion or cos- used in a hearing aid, a smartphone app onto one corner of the mirror, allowing metics department, the drugstore or the allows the user to choose which partic- the user to replicate the tutor’s routine electronics store. ular sound to isolate. with ease. While HiMirror uses AI to improve “If you are in a place with lots of children, you can easily turn down the volume of their voices so that you only hear your wife’s voice, or you can do it the other way around,” said Tim Hsieh, business development manager at RelaJet Tech. “We achieve this level of separation by teaching our chipset to distinguish sounds. To do this, we feed it with thousands of different voices and noises,” he added. Hsieh noted that RelaJet Tech is anticipating a major sales boom brought on by a looming change to U.S. laws on medical prescriptions, which is expected to significantly expand the American hearing aid market. The U.S. Food and Drug Administration plans introduce regulations in 2020 allowing the sale of over-the-counter hearing aids. This development will make such devices more widely available to people with A presentation at the Taiwan Pavilion at the recent IFA show in Berlin. PHOTO: JENS KASTNER mild-to-moderate hearing loss.

28 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

Tech.indd 28 2019/11/8 上午12:06 BACKGROUNDER

TAIWAN MOVES FORWARD FAST ON 5G

A spectrum auction is set for next month, with connectivity scheduled for mid-2020.

BY JEREMY OLIVIER

n the global race to implement the to another in a computer network. The and cybersecurity, planning for the next generation of telecommunica- result will be a vastly improved expe- release of 5G spectrum in a way that I tions technology, Taiwan is poised rience for mobile users and a major will best serve overall interests, and to be an early adopter. The Tsai admin- advance in the overall digital infra- revising laws and regulations to meet istration, as part of its effort to promote structure. the needs of the 5G environment. Taiwan’s digital economy, has pushed Due to keen competition among gov- “The first phase of the plan is to get for the rapid build-out of a 5G network. ernments and industrial players, 5G the network up and running on a com- A spectrum auction is due to take networks are likely to proliferate rap- mercial basis,” says Tsai Sze-hong, place in early December, slightly earlier idly. Globally, over 30 5G networks Executive Secretary of the Office of Sci- than originally planned in order to keep are currently in operation. Ericsson ence and Technology. “The spectrum we pace with other adopting countries. The equipment powers 19 of these net- are providing during this phase is specif- preparatory period for spectrum bidders works across four continents, all of ically focused on potential 5G operators was also shortened from two months to which went live following the launch and will be apportioned through a bid- 45 days. of the first network in April. The pace ding process overseen by the National Taiwan is now on course to begin of expansion has exceeded most peo- Communications Commission.” enjoying nationwide 5G connectivity ples’ expectations, says Dann Yao, vice Since 5G utilizes a very broad by the middle of next year, on a similar president and chief technical officer at range of radio frequencies, the auc- timeline as Singapore and Hong Kong. Ericsson Taiwan, leading him to predict tion scheduled for next month will However, some stakeholders – telecom that the uptake of 5G will be faster than offer bandwidth from three dif- operators in particular – have criti- it was for 4G. ferent frequency bands: 270MHz cized aspects of the government’s plan, The process of establishing a national from the 3.5GHz mid-band spectrum, including the timeframe and its fairness 5G network requires both the public 2,500MHz from the 28GHz high-band, and clarity with regard to certain issues. and private sectors to take a number and 20MHz from the 1,800MHz band. 5G is set to be a game-changer, of complex steps. To clarify the objec- NCC Commissioner Guo Wen-chung making possible the ultra-rapid trans- tives and set actionable goals for each says that the mid- and high-bands mission of massive amounts of data participant, the Executive Yuan’s Office were chosen based on the approach measured in gigabits per second, as of Science and Technology issued the taken by other countries, mainly South opposed to the peak rates of hun- Taiwan 5G Action Plan in May 2018. Korea and Japan. He cites two rea- dreds of megabits per second with 4G The plan identifies five main areas sons for including the third band. “In connections. It will also enhance the crucial for 5G development: estab- our previous auction for 4G spec- operability of such existing applications lishing testing sites for vertical 5G trum, this band was not sold off and as autonomous vehicles and VR due to applications, creating an environment remains there,” Guo explains. “In its low “latency” – the amount of time conducive to innovative 5G applica- addition, it can be used as a kind of needed for data to get from one point tions, perfecting core 5G technologies support to improve coverage. In the

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 29

5G.indd 29 2019/11/8 下午1:18 BACKGROUNDER

The Ministry of Economic Affairs’ Taiwan Business Alliance conference in October included a panel on 5G development. PHOTO: MOEA

future, telecom operators can use the portation and Communications. the battery life of those devices. 3.5GHz band for downloading and the “Also, whereas the introduction of The greater interconnectedness, 1,800MHz band for uploading.” 4G was mostly focused around B2C openness, and flexibility of a 5G eco- In Taiwan, where mobile devices applications, the Ministry and the NCC system give rise to some serious security seem to be ubiquitous, the introduc- believe that B2B uses will be the focal concerns. Whereas previous generations tion of 5G networks will likely be point in the early stages of 5G,” Hsiao of mobile networks relied on hard- warmly welcomed by consumers. On notes. “However, these functions will ware for most network functions, such a per capita basis, Taiwan is one of coexist and complement each other in functions become virtual software capa- the biggest consumers of mobile data the new environment.” bilities with the introduction of 5G. in the world. Estimates vary on usage, In light of the more varied applica- In addition, a large amount of the but Ericsson's Yao says the average tions possible with 5G, the government 5G computing is performed “at the exceeds 20 gigabytes per user per plans to set aside a certain frequency edge” – in mobile or IoT devices – as month – more than double the level of range for the development of related opposed to the centralized architectures 4G data consumption in South Korea. vertical applications. For example, one associated with 4G and earlier genera- Taiwan enjoys almost universal cov- of the major non-consumer-oriented tions. This factor opens both individual erage of mobile connections thanks to benefits of 5G that both government users and entire networks to major the island’s patchwork of existing 2G, and business are looking forward to security threats, especially if the soft- 3G, and 4G networks, plus some of the is its impact on development of the ware produced by vendors is poorly world’s highest mobile and fixed wire- Internet of Things. While IoT has made constructed. If steps are not taken early less broadband speeds. huge progress under the current 4G in the construction phase to reduce While a key reason for the move to ecosystem, the limited capacity has these vulnerabilities, attempts to miti- 5G is to meet Taiwanese consumers’ resulted in slower response times for gate them could be “like attempting to voracious appetite for broadband data, connected devices. plug holes in an inﬁnite wheel of Swiss the purpose of the rollout is wider At the same time, the continuous cheese,” as a senior U.S. Department of than with past generations of mobile exchange of data that occurs with IoT Homeland Security ofﬁcial put it. technology. “The primary uses of 4G applications puts a big strain on cur- Confronting this reality, the Taiwan revolved around human communica- rent networks and drains battery power government has made cybersecurity a tion, with some machine communication quickly. But 5G’s low latency facili- priority issue in its plan to begin devel- also possible – but with 5G a large por- tates real-time communication between oping the nation’s 5G network. One of tion of the network is dedicated to the devices, improving their safety and reli- the directives under the Executive Yuan’s machine side,” says Hsiao Chia-an, a ability. It will also bring enormous 5G Action Plan is to create a unified section chief at the Ministry of Trans- savings in network energy usage and national policy on cybersecurity. An ini-

30 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

5G.indd 30 2019/11/8 下午1:18 BACKGROUNDER

tial step is a requirement that successful devices will need to be produced in system, in which expensive proprietary bidders in the upcoming spectrum auc- order to work seamlessly with the net- hardware and software from compa- tion submit a cybersecurity plan when work. Since consumers will expect nies like Ericsson and Nokia are used to they apply for operating permits. their new 5G-compatible phones to build out the entire network, an open The relevant regulations have been work with any carrier, Taiwan’s major infrastructure would incorporate the amended to specify 17 items to be cov- telecom operators have very little time products and services of many different ered in such a plan. These include a to overcome obstacles to the inter- vendors. description of the applicant’s cyber- changeable use of devices. Cisco Regional Manager Jeffrey security policies and objectives, the Rachel Liu, deputy secretary-gen- Wang says that the O-RAN approach formation of a cybersecurity promotion eral of the Taiwan Telecommunication would not only provide greater oppor- unit within the applicant’s organiza- Industry Development Association, tunities for Taiwan’s local vendors, tion, and an evaluation of the major which represents Taiwan’s top five but would save up to 50% on both risks that the future network may face. telecom operators, says the organi- establishment of the network and the The Executive Yuan’s Tsai notes that zation’s issues stretch back to the operating expenses needed to run it. regulators responsible for certain indus- implementation of 3G and 4G in Although the authorities did not accept tries will also be tasked with adopting Taiwan. “Telecom operators have never the idea because of time constraints, cybersecurity standards for their partic- had a government agency specifically Wang says he hopes the O-RAN model ular areas. tasked with providing administra- may be adopted in the future. He tive guidance to us,” she says. “We describes the approach as an interna- Industry backlash are therefore a special self-regulating tional trend. “It’s like moving from a industry.” mainframe to a PC – an open world,” Vocal criticism of the government’s The situation has not changed much he says. plan has come from Taiwan’s telecom with the current 5G plan, she says. Meanwhile, in a controversial pro- operators. They say they have felt pres- “The government is offering a number posal in late September, the Ministry sured into adopting the new technology of subsidies and benefits to telecom of Economic Affairs sought to open quickly despite the high costs of pur- equipment and vertical application pro- discussion on setting aside the 3.7 to chasing spectrum, buying and installing viders. However, there is no agency or 3.8GHz mid-band range for the exclu- the necessary hardware and software, department that has looked at this from sive use of vertical application providers and launching the new networks. our perspective, to see what our strate- in developing their products and ser- “The general consensus is that it’s a gies and advantages are in the buildout vices. The announcement drew the ire bit rushed,” says Taiwan Mobile Pres- of 5G.” of the major telecoms, but also received ident Jamie Lin. “Because the whole Another side effect of the short- criticism from legislators and the NCC. process has been sped up, I don’t think ened timeline for introducing 5G is Opponents argue that the proposal is it provides administrators with enough that there is less opportunity to con- unfair in that the qualifying enterprises time to determine how to use regulatory sider innovative alternative solutions could obtain spectrum without going tools to achieve an optimal number of to the way networks are currently through the same bidding process as 5G network deployments.” structured. Cisco Systems Taiwan, for telecom operators. Lin also notes that the lower end of example, has proposed using open net- “We are not advocating for the the mid-band spectrum (3.3 to 3.4GHz) work infrastructures – also known as raising of anyone’s fees for buying spec- being auctioned off in the ﬁrst phase is O-RAN or open radio access networks trum,” says Liu of TTIDA. “We are unique to Taiwan for 5G use, meaning – as the basic architecture for Taiwan’s merely asking that all future users of that special equipment and mobile 5G networks. In contrast to the current that spectrum be treated equally.”

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 31

5G.indd 31 2019/11/8 下午1:18 BACKGROUNDER

The NCC’s Guo attributes the nega- energy usage. In a 4G ecosystem, the it has over some other countries, where tive reaction in part to the high-demand transfer of increasingly large amounts they may encounter a bottleneck after for the mid-band spectrum, which has a of data will eventually become unten- erecting a certain number of base sta- wider scope of coverage than high-band able, he says. Although major capital tions due to a less-developed network,” but contains fewer frequencies. The expenses for equipment and installation says Tsai. He notes that expanding proposal is still being deliberated and are required upfront, 5G networks will optical networks would be a much will not be part of the spectrum release signiﬁcantly reduce the cost and energy more expensive proposition than simply this year. expended in the long-term, he argues. building the base stations. One of the biggest concerns leading Despite the areas of apprehension In 2014, Taiwan set a world record to hesitation on the part of telecom among some industry players, most for the speed of adoption of 4G, despite operators is the high cost of building members of the industry are still opti- being a bit late to the game (4G net- out their own 5G networks. “The mistic about the coming changes. There works were first introduced in 2010). equipment is going to be three times is consensus that Taiwan is an ideal Ericsson’s Yao expresses optimism that more expensive than 4G equipment – place to implement 5G, though some adoption of 5G in Taiwan will be on US$150,000-$300,000 per 5G base disagree regarding the timeline for that par with or faster than that of 4G. “At station as opposed to US$50,000- implementation. the beginning of the 4G launch, there 100,000 per 4G station,” says Taiwan One of the main reasons for the opti- was very limited coverage, but the price Mobile’s Lin. “In addition, the net- mism is Taiwan’s world-renowned ICT of that coverage was much higher,” works will consume three times more sector, which gives the country a built-in Yao notes. “However, people signed on power than 4G per base station and supply chain for establishing and oper- like crazy. Within half a year, 40% of will require three times more base sta- ating the 5G network and all the various mobile users had moved over to 4G.” tions to provide coverage to the same vertical applications enabled by it. This experience – coupled with area.” Lin estimates that a national 5G Taiwan also has a well-developed South Korea’s very rapid increase in 5G network will consume nine times the optical fiber network to facilitate 5G coverage after the launch of limited net- electricity currently used for the 4G communication. According to the Exec- works in April this year – has Yao and network. utive Yuan’s Tsai, the coverage rate for others convinced that Taiwan will be For his part, Yao of Ericsson cites Gigabit Ethernet connections in Taiwan able to enjoy widespread 5G connec- what he considers to be some miscon- is a high 70%. “The denseness of Tai- tivity following the launch of national ceptions about 5G’s potential costs and wan’s optical network is an advantage networks in mid-2020.

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]

5G.indd 32 2019/11/8 下午1:18 AMCHAM EVENTS Fostering Innovation through Community Development

aiwan is currently facing issues such as shrinking example for other communities. population, aging society, low birth rates, and an Other speakers at the forum were Gu Yu-jun, professor of T imbalance in urban and rural development. In order environmental studies at National Dong Hwa University and to address these issues, the Taiwanese government has a volunteer worker and promoter of the Wu Wei Wu, and Lin launched the Regional Revitalization Program. Yi-ying, program leader of Taichung Township Long-term Every year, AmCham Taipei’s Corporate Social Respon- Care, who serves as an advocate for improving long-term care sibility Committee hosts a forum to enhance members’ issues for the indigenous population in Taiwan. understanding of topics relating to social programs and envi- Lin shared her experience working to improve long-term ronmental concerns. To raise awareness about the Regional care issues for elderly members of the Atayal ethnic group. Revitalization Program, the committee held a forum entitled Besides serving as a volunteer caregiver, Lin also provides “Fostering Innovation through Community Development” at training courses for local residents interested in becoming a the Grand Hyatt Taipei on October 2. The event was spon- caregiver. She stressed the psychological rewards of seeing sored by JTI Taiwan. patients recover and helping improve the living conditions of This year experts from the Lovely Taiwan Foundation, Tai- indigenous families. chung Township Long-term Care Foundation, and Wu Wei In a panel moderated by AmCham’s CSR Committee Wu, a learning center for socially and economically disad- Co-chair Fupei Wang, the speakers discussed some of the vantaged children and teenagers in remote villages in Hualien challenges non-proﬁts face due to the relatively small size of County, were invited to discuss current trends regarding cor- the Taiwan market – from obtaining funding to choosing the porate social responsibility and how the private sector can right partners – as well as difficulties posed by various laws help promote regional revitalization. and regulations. They urged the authorities and the private Li Ying-ping of the Lovely Taiwan Foundation recalled sector to work closely together to integrate resources to pro- that following the 2009 typhoon that devastated moun- mote social innovation and economic development. tainous areas of Taitung County, villagers originally were hesitant to accept assistance from the foundation, viewing it solely as an organization that hosts music festivals and other events. After talking with residents, the foundation came up with the idea of creating a platform to promote local culture, music, and arts and crafts. Together with the community, the foundation worked to raise funds to convert a dormitory facility for Taiwan Railway employees into what became the “Tiehua Music Village.” Over the years, Tiehua Music Village has attracted international attention, especially after a number of famous artists and musicians performed at the park. In its approach to regional regeneration, Tiehua Music Village sets an excellent

TAIWAN BUSINESS TOPICS • NOVEMBER 2018 33

CSR.indd 33 2019/11/8 上午12:07

INDUSTRY F CUS

A Special Report on the Healthcare Industry

Precision Medicine, Clinical Trials, and Medical Devices

PHOTO: JULES QUARTLY TAIWAN BUSINESS TOPICS • NOVEMBER 2019 35

11 IF.indd 35 2019/11/8 下午1:15 INDUSTRY F CUS

A HEALTHIER SOCIETY THROUGH PRECISION MEDICINE

The Taiwan Precision Medicine Initiative offers the opportunity to dramatically improve the nation’s medical landscape and advance the lucrative biomedical sector with an ambitious DNA mapping project.

BY JULES QUARTLY IN THIS REPORT

The best doctor cures the ill- vides information that can help make • A Healthier Society Through Precision ness that is still obscure, the effective diagnoses and provide cus- Medicine p36 “ good doctor cures the ill- tomized treatments. ness that is about to break out, and “TPMI offers the opportunity the ordinary doctor treats the dis- to establish risk models that pre- ease that is fully manifested,” recites dict common disease risks, including • Stiff Competition for Taiwan’s Clinical Dr. Chen Yuan-tsong. He clearly rel- cancer and early screening or tai- Trials p39 ishes repeating advice that was first lored management before the disease recounted some two millennia ago in is manifested,” relates Chen, who the Esoteric Scripture of the Yellow recently received the Presidential Sci- Emperor – and which has been a fun- ence Prize and an NT$2 million • Medical Device Makers Look for Progress damental tenet of Chinese medicine award from President Tsai Ing-wen on Regulatory Issues p41 ever since. for his lifelong contribution to sci- With the rapid development of ence in Taiwan. genetics-led medicine and inception Though not directly involved of the Taiwan Precision Medicine Ini- in TPMI, Chen is a big supporter • Making a Mark in Medical Device tiative (TPMI), which is attempting and speaks highly of his colleague Manufacturing p42 to profile the genetic makeup of 1 at Academia Sinica, Dr. Kwok Pui- million Taiwanese, a prevention- yan, a distinguished research fellow rather-than-cure approach is more and director of the Institute of Bio- relevant than ever, says Chen. medical Sciences, who is driving the An Institute of Biomedical Sci- project forward. Chen views TPMI as ences research fellow at Taiwan’s offering the opportunity to transform Academia Sinica and a professor an “ordinary doctor” into a “good of pediatrics at Duke University in doctor and best doctor” on a nation- the United States, Chen is one of wide basis. the world’s leading authorities in “Not only does the project have the emerging field of genomics. His immediate and long-term health ben- research involves the investigation of efits for Chinese people, but it also our entire genetic makeup and pro- has an impact on the local industry

36 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 IF.indd 36 2019/11/8 下午1:15 A Special Report on the Healthcare Industry

in healthcare, semiconductors, precision instruments, computers, and medical AI,” Chen said by email from the U.S. TPMI is still in its infancy. It was launched at the start of this year to help Academia Sinica and the country’s fore- most medical centers reach the goal of profiling the genetic makeup of 1 million citizens. The study has two main aims. First, markers – a gene or DNA sequence with a known location on a chromosome found in each individual’s genetic profile – are used by researchers to create a predictive model of how medicines will affect the individual, thereby making them more effective and preventing dan- gerous side-effects. This development has huge ramifications, not just for patients, FAQS but for doctors and the pharmaceutical industry as well. What can precision medicine do for Taiwan? Secondly, the study will aid * Increase the efficacy and safe use of medications researchers in identifying genetic risks * Facilitate early diagnosis and health promotion for diseases in Taiwan by looking at * Provide personalized healthcare the relationship between individuals’ genetic profiles and the clinical infor- What does the Taiwan Precision Medicine Initiative (TPMI) do? mation of the 1 million participants. * Data gathered by TPMI will improve disease risk prediction and help Identifying genetic factors that increase doctors tailor healthcare according to an individual's genetic profile disease risk will enable physicians to for disease prevention, early disease screening, most appropriate know in advance what disease to look treatment, and best quality of life. for, reducing the amount of guesswork in diagnosis. Does TPMI help people of all ages? Early screening can thus be carried out for those at high risk of lung, liver, * Precision Medicine is applicable to everyone. Disease preventive and colon cancer, which are the nation’s measures are most effective when taken before clinical symptoms deadliest diseases. Doctors will be able to appear, so even young people who are healthy will benefit from the suggest treatment plans not only to cope TPMI. with the disease, but to prevent the disease from manifesting itself in the first How can I join TPMI? place. Like the best Chinese doctor of Contact the hospital you most frequently visit, go to the TPMI website yore, medical examiners will be able to and complete an application form, or phone (02) 2782 3770. suggest lifestyle changes to prolong lives without the need for intervention and

expensive drugs. SOURCE: TAIWAN PRECISION MEDICINE INITIATIVE (TPMI.IBMS.SINICA.EDU.TW)

Great records Kwok said his field of study was fun- ly’s medical history. “But the way we can Originally from Hong Kong but damentally transformed by the Human analyze DNA now will allow us to be primarily trained in the U.S. at the Uni- Genome Project, an undertaking that more precise about what we have inher- versity of Chicago and Washington mapped the entirety of the human ited from our parents and ancestors.” University, Dr. Kwok currently splits his genome, in 2003. The ability to obtain such precise time about evenly between his roles in “Now with DNA technology and information is the main purpose of pre- Taiwan and as professor medicine at the research there is a path forward to cision medicine. “We still need to think University of California, San Francisco. finding all the genes that cause illness about the environment and other factors, At Academia Sinica, he oversees research and disease,” says Kwok. He says that he like pollution and toxins,” Kwok says. that develops and applies tools for ana- wants to integrate genetics into his clin- “But you really have to start with your lyzing genetic traits. ical practice because he currently has to biology.” Speaking over Skype from the U.S., rely on patients’ knowledge of their fami- He characterizes TPMI’s work as

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 37

11 IF.indd 37 2019/11/8 下午1:15 INDUSTRY F CUS building a database, gathering and com- government money may be needed fur- The U.S. in 2015 introduced its own piling a lot of information using AI, and ther down the line. The projected costs Precision Medicine Initiative to develop optimizing healthcare plans on a tar- are about US$5 million-$7 million a year. targeted therapeutics. As a result, the geted and individualized basis. He says “The funding has been promised,” number of companies running biomarker this is impossible to do in the U.S. or UK says Kwok. “But there is a chance of that or genetic tests has risen dramatically, because they are too genetically diverse not coming through. We are engaging especially for chronic disease. Elsewhere, and “the signal we are trying to look for philanthropists and industry just in case.” up to 40 countries have introduced their is confused or confounded.” He notes that crowdfunding might also own version of such an initiative, but “Taiwan is kind of perfect because it be considered. the ante is being set by China. America’s is so homogeneous, with about 96% of US$215 million investment is dwarfed the population being Han Chinese,” says A perfect fit by China’s mega precision medicine pro- Kwok. “Also, Taiwan is really strong gram, which was launched in 2016 and medically and has a long history of elec- TPMI and its precision medicine is said to be funded by the government to tronic medical records, starting from approach would appear to be a good fit the tune of US$9 billion over 15 years. around 1986.” He notes that e-records for Taiwan and its evolving economy. Bio- Although TPMI was launched to are not so commonplace in the U.S. medicine is considered to be a “priority leverage Taiwan’s resources to aid the In addition, Taiwan’s comprehensive sector” in the central government’s 5+2 domestic population, eventual coopera- national health insurance scheme and Innovative Industries program, which tion with China’s initiative is an eventual strong background in R&D make it the focuses on upgrading the nation’s tradi- possibility. ideal place to conduct a precision medi- tional manufacturing base and moving “It’s a public health need and oppor- cine study. The target is to collect genetic up the value chain to have a say in the tunity,” says Kwok. “If extended to the profiles from at least 4% of the island’s world’s most lucrative new markets. rest of the 2 billion Chinese around the population of 23.8 million – which comes Transforming Taiwan into a hub for world, it could be a big market opportu- out to just under 1 million. So far, genetic medical R&D is an enticing prospect nity.” profiles from 100,000 people have been because it leverages the country’s excel- But at this stage, collaboration with gathered, with the goal of 1 million likely lent healthcare system and deserved China was considered impractical. For to be reached in 2022. reputation for technological prowess. one thing, China lacks good electronic Getting a DNA sample is far easier According to the Executive Yuan’s medical records and its medical system is and less invasive than other procedures, Department of Information Services, not as advanced, which makes it hard to such as drawing blood. Individuals the government approved the Biomed- get quality data. For TPMI, accuracy is wishing to join TPMI can contact their ical Industry Innovation Program in paramount. local hospital. After their genetic profile November 2016 to “bring even greater “Once we have a critical mass of data, becomes part of their medical record, it health and wellness to the people of it can be extrapolated to China and else- can be used by physicians to help diag- Taiwan, and establish the nation as a where,” Kwok says. Evidence of the nose and treat illnesses. capital of biomedical research and devel- health benefits and market opportunities Furthermore, the individual’s ano- opment in the Asia-Pacific region.” that TPMI brings to the table is apparent nymized electronic medical record and The government’s ambitious aim is to from the case of the UK Biobank, he genetic profile will be added to a central create a trillion NT dollar biomedicine notes. Starting in 2006, the scheme has research database called the “TPMI Data industry by 2025. As of 2018, according recruited 500,000 volunteers and has Lake,” used to help researchers identify to a report from PwC Taiwan, strong become a powerful tool for scientists to disease risk variants for common diseases. government support in terms of financial discover why some people develop certain Kwok notes several advantages that investment had contributed to bringing diseases and others do not. TPMI has over other testing methods. the production value of Taiwan’s biomed- As Kwok makes clear, TPMI offers For one, at NT$1,200 per procedure ical industry to NT$514.1 billion (about massive potential public-health benefits (paid by the program), it is cheaper than US$16.6 billion). as life expectancy increases and soci- performing a blood test. It is also more According to California-based market eties such as Taiwan’s become super-aged. informative and, given the stable nature intelligence, research, and advisory Diseases such as Alzheimer’s and cancer of the results, it only needs to be per- company BIS Research, the global pre- cannot always be successfully treated, but formed once. Kwok adds that using cision medicine market is expected to their onset can be delayed. TPMI to screen for diseases is much more grow from an estimated US$78.85 bil- Developing precision medicine tools cost effective than treatment, and that lion in 2018 to about US$216.75 billion at an early stage makes solid financial its implementation will mean healthier by 2028, a healthy compound annual sense. It will open up a new era of med- patients, lower medical costs, and a higher growth rate of 10.64%. icine for researchers so that patients and level of biomedical research in Taiwan. “Growth in the precision medicine doctors can pool resources and develop As for funding, Kwok says Academia market is propelled by an increasing tailored or individual-care plans that Sinica is currently meeting the costs, but demand for personalized treatment” and optimize health outcomes. “This is the the amount needed for the next three technological innovation, the BIS report future, so we need to get on with it,” years it is not yet fully assured, so more states. Kwok concludes.

38 TAIWAN BUSINESS TOPICS • OCTOBER 2019

11 IF.indd 38 2019/11/8 下午1:15 A Special Report on the Healthcare Industry

STIFF COMPETITION FOR T’ TR

Taiwan and other regional players are finding it difficult to compete on the same scale as China when it comes to hosting clinical trials.

BY JULES QUARTLY

ver the years, Taiwan has developed a strong reputation in the Asia-Pacific Clinical Trials by Country 2016-2018 O field of healthcare. It is now looking to leverage its advantages to 600 position itself as a regional biomedical 489 hub and a viable location for conducting 500 401 391 clinical trials for promising new drugs. 400 376 358 366 The research investment represented 335 90 339 350 318 313 299 by clinical trials is considered an effec- 300 tive way to increase the involvement of 205 213 200 174 the world’s leading pharmaceutical companies in the local market, helping to 100 75 77 73 spur development of a domestic biomed- 0 ical industry. China Australia South Korea Japan Taiwan Singapore Taiwan’s strengths in this area include solid IPR protection, well-run hospitals, 2016 2017 2018 SOURCE: CHERN HERNG-DER excellent health professionals, and favor- able government policies, which have tained growth in the number of clinical it came to good clinical practice, and contributed to creating a positive infra- trials registered during that period. political interference, complex and con- structure for biomedical industry startups. China’s lead in this area is not sur- fusing regulatory requirements, and Unfortunately, Taiwan seems to be prising, given the enormous size of its underdeveloped medical systems made losing ground to regional rivals when market. Its population of 1.4 billion carrying out trials extremely burdensome. it comes to clinical trials. Despite being makes China a natural target for mul- In addition, the time it took to autho- known as a reliable and cost-effective tinational pharmaceutical companies rize clinical trials could be exceedingly environment for such trials, it is facing looking to expand operations and boost long, preventing Chinese testing centers stiff challenges from competitors – partic- profits. In fact, China is already the from being incorporated into the world- ularly from China. world’s second largest market for phar- wide release of many drugs. In a presentation this August, Dr. maceuticals after the U.S. Its growth has Over the past four years, however, Chern Herng-der, executive director been bolstered by an expanding middle the Chinese authorities have made it a of Taiwan’s Center for Drug Evalua- class, the increasing urbanization of the priority to address some of these long- tion (CDE) under the Ministry of Health population, and ever greater healthcare standing issues. The country’s drug and Welfare, outlined the change in the demands as its citizens live longer and its evaluation agency continues to increase competitive landscape for clinical trials society ages. the number of personnel and drug in the region between 2016 and 2018. Despite China’s obvious advan- reviewers on its staff. In addition, China As shown in the accompanying charts, tages, many companies in previous has adopted a U.S.-style approach to Chern’s talk to the Taiwan Society of years doubted the cost-effectiveness of clinical trial applications, which has Regulatory Affairs for Medical Products conducting clinical trials there when con- decreased the time needed to authorize a noted that of the six countries surveyed, sidering the quality of the data. The trial from a year to about 60 days. China showed the strongest, most sus- country’s hospitals often fell short when While China used to be seen merely

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 39

11 IF.indd 39 2019/11/8 下午1:15 INDUSTRY F CUS as a location for manufacturing generic Enterprise for Clinical Trials), established qualified to carry out clinical trials. But drugs, that perception is also changing. in 2007. Chern notes that KoNECT noting the success stories of some of Tai- The country is now aggressively pro- did so well in applying the informa- wan’s regional neighbors, he urges further ducing new or novel drugs and is tion gleaned from Taiwan’s experience efforts to develop the environment here involved in half of all enrolled cancer that it eventually overtook Taiwan in the for clinical trials. trials of CAR-T cell therapies. number of clinical trials conducted. Horng refers approvingly to Australia’s The improvements in China’s regula- According to the Asia-Pacific contract generous tax incentive system for clinical tory system and manufacturing capacity research organization Novotech, South trials, which has proven very attractive have had a dramatic overall effect on the Korea was until recently conducting to pharmaceutical companies. One such number of clinical trials being sponsored “more industry-sponsored drug studies incentive gives companies undertaking there, but have also impacted its regional than any other Asian country” and was certain R&D projects a 43.5% refundable competitors, as Chern’s figures indicate. one of the top 10 global clinical investi- tax credit, which can be applied to dif- In Taiwan, for example, only 51 gator sites. ferent phases of clinical trials. clinical trials were held in the first six South Korea’s stellar performance He also points to South Korea’s push months of 2019, as opposed to 172 in prompted Taiwan to up its game in 2011 to become both a regional and a global China during the same period. by establishing the Taiwan Clinical Trial leader in clinical trials. The Korea Drug “Attracting companies to conduct Consortium (TCTC) to raise standards Development Fund, for example, is a clinical trials in Taiwan is getting increas- for clinical trials and facilitate the com- multi-million-dollar investment program ingly difficult,” Chern says. He attributes mercialization of biomedical products. that runs from 2011 to 2020. Under the this trend to the draw of China, and According to TCTC’s online introduc- fund, three health-related ministries are notes that “unless Taiwan can improve tion, the organization’s goal is to become investing the equivalent of US$30 mil- its competitiveness through proactive, a center of excellence for new medical lion to $60 million annually to finance a across-the-board strategies,” the island’s device clinical trials in the Asia-Pacific national novel drug development project. once-promising effort to promote clinical region and to foster the growth of Tai- Horng says that while Taiwan needs trials could face an uncertain future. wan’s biomedical sector. to face the reality that it won’t be able “The TCTC has three primary mis- to compete on the same scale as China A fresh start sions,” says Director Wu Ming-shiang. moving forward, Taiwan could never- These are to “reduce the duration of clin- theless enhance its competitive edge by Taiwan first introduced a clinical trial ical trials based on creating advanced adopting more attractive policies for system in 1993, and the quality of the platforms, attract international phar- companies conducting clinical trials. trials steadily improved over the years, maceutical companies to conduct trials “Taiwan could take a bigger slice helped by an effectively coordinated set of in Taiwan, and help Taiwanese biotech of the pie,” Horng says. It may never relevant laws and regulations, Chern says. companies in the commercialization of be head of the pack, he adds, but if the Taiwan became an early regional new drugs and medical devices.” regional market for clinical trials con- leader, partly because China was so far Dr. Mark Horng, Bristol-Myers tinues to expand, “Taiwan’s slice of the behind the curve. The Taiwanese clinical Squibb’s country medical lead and pie will also be worth relatively more, trials system at that time was so suc- interim general manager, praises Tai- which is a strong business proposition.” cessful that it served as a model for South wan’s medical infrastructure, reasonable Korea’s KoNECT (Korean National costs, and large number of hospitals Recognizing innovation

Boon Huey Ee, general manager of Clinical Trials Comparison - First Six Months of 2018 & 2019 Merck Biopharma Taiwan & Hong Kong, describes herself as upbeat about 200 Taiwan’s long-term prospects as a base 180 172 for conducting clinical trials, provided 164 160 155 148 more is done to ensure that Taiwan stays 140 competitive and increases its appeal to 123 120 the major pharmaceutical companies, the main drivers of investment. 100 96 97 90 84 She cites a recent Biopharmaceutical 80 Competitiveness Index survey, compiled

60 51 by business consultancy Pugatch Con- 40 silium. In it, Taiwan ranked number two 28 20 15 among “newcomer markets,” overtaking Israel and coming in behind only Singa- 0 China Australia South Korea Japan Taiwan Singapore pore. Ee regards that as a strong position for Taiwan to be in, and she speaks Jan. - June 2018 Jan. - June 2019 SOURCE: CHERN HERNG-DER highly of the clinical trials her company

40 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 IF.indd 40 2019/11/8 下午1:15 A Special Report on the Healthcare Industry

has sponsored in Taiwan. She suggests some changes to improve with government ministries and the local “Taiwan has always been included Taiwan’s image as a good place to con- biomedical industry would encourage in Merck’s global clinical studies,” she duct clinical trials and to better facilitate collaboration and contribute to the devel- says. “Our experience here has been good interaction between the government and opment of Taiwan’s biopharma ecosystem. in terms of scientific research, qualified pharmaceutical companies. CDE’s Chern says the Taiwan author- researchers, speed of patient recruitment, One is to provide more incentives to ities are well aware of China’s recent and quality of the studies performed.” reward innovation when new drugs are gains in attracting clinical trials and Ee also emphasizes the improvements launched in Taiwan. “There are some intend to start making changes based on made to Taiwan’s regulatory system and incentives available, but these are mostly the experiences of neighboring countries. IP protection over the years but says that directed at local companies,” Ee says. He cites four main factors determining market access and pricing are issues that “Those for multinational companies per- the competitiveness of clinical trials: still need to be overcome. “We have to haps do exist, but they need to be better “quality, timeliness, cost, and market,” ask whether the Taiwan government is promoted and the details clarified.” all of which Taiwan can excel at. Tai- doing enough to address and recognize Another key step would be to get wan’s “scientific capabilities and excellent innovation and whether it’s behind the major pharmaceutical companies more infrastructure” could make it a “global level of competitiveness required to be a involved in the rules-making process. powerhouse in the biopharma arena,” world leader,” Ee says. Providing a platform for them to work Chern says.

MEDICAL DEVICE MAKERS LOOK FOR PROGRESS ON REGULATORY ISSUES

BY DON SHAPIRO

s 2019 draws to a close without next year, the bill would need to be rein- sidered that responsibility for regulatory the achievement of several troduced in the following session. compliance should lie not with the pro- A hoped-for advances in regulatory Although enactment of the law is duction site but rather with the brand procedures for medical devices, multina- expected to lead to revisions in more than entity that is accountable for design and tional companies in the sector are looking two dozen different regulations, the new conducts the marketing of the product. to the new year for some significant statute’s acceptance of the concept of In those jurisdictions, the “legal man- breakthroughs. “legal manufacturer” is considered as the ufacturer” rather than the physical Topping the wish list is passage of the most important change for the industry. manufacturer is the one held respon- draft Medical Devices Act, which would Under existing regulations, Taiwan sible for performance quality, as well as create dedicated legislation to govern has considered the responsible party for product safety and efficacy. the industry in Taiwan for the first time. a medical device to be the factory where A shift to that principle would Until now, medical devices have been reg- it was produced. Increasingly, however, enhance Taiwan’s harmonization with ulated under the Pharmaceutical Affairs actual production is outsourced to a con- modern international regulatory practice Act, whose provisions – aimed chiefly at tract manufacturer, often in a different and would help rationalize the regulatory drugs – are not always appropriate for country. process, resolving many of the difficulties devices. One difference is that medical “More and more, the big multinational companies currently face in meeting legal devices, unlike pharmaceuticals, are clas- medical device companies have been requirements. sified and managed according to their reducing their manufacturing footprint,” Another of the Taiwan-based mul- level of risk. Another is the diversifica- says Michael Blomeyer, president of New tinational industry’s hopes for 2020 is tion among types of devices and the rapid Deantronics Taiwan, a medical device revitalization of the U.S.-Taiwan bilat- speed of technological change. contract manufacturer. He notes that they eral trade negotiation platform known The executive branch forwarded its prefer the flexibility of easily adding or as TIFA – short for the Trade and Invest- bill to the Legislative Yuan on December dropping product lines to reflect changes ment Framework Agreement. Generally, 15, 2017, and it passed a first reading in technologies and markets. those TIFA talks take place once a year, two weeks later. But the measure was not In contrast to Taiwan’s longstanding but because its agenda this year has been voted on further. If not passed during the interpretation, the U.S., European Union, overwhelmed with trade issues with current legislative term that ends early and other advanced countries have con- China, the Office of the U.S. Trade Rep-

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 41

11 IF.indd 41 2019/11/8 下午1:15 INDUSTRY F CUS resentative has not had time to schedule in medical devices means that many prod- have been proposed. In particular, Amer- trade talks with Taiwan. ucts have a life-cycle of only a few years ican companies have asked TFDA to Whenever those talks finally resume, before they become obsolete.” accept what is known in the industry as however, medical device issues will One of the key issues on the USTR the Medical Device Single Audit Program assuredly have a prominent place on the list involves Taiwan’s mandatory manu- (MDSAP) audit report as a substitute for agenda. Whether the product is made in facturing facility registration known as the U.S. FDA EIR. the U.S. or elsewhere, American com- Quality Systems Documentation. QSD So far, no solution acceptable to both panies account for the lion’s share of registration is required for products governments has been found. In the the estimated US$2.5 billion worth of to enter the market and re-registration meantime, industry hopes that at least medical devices annually imported into must be completed every three years the current simplified model will remain Taiwan. thereafter. in place while discussions continue. Early every year, USTR lays out its Although the Taiwan Food & Drug Another issue raised by USTR relates range of outstanding issues with each Administration (TFDA) has provided for to the partial patient self-pay mechanism U.S. trading partner in a document called a simplified application process designed known as balance billing, which Taiwan’s the National Trade Estimate Report to help cut through the red tape, manu- National Health Insurance Adminis- on Foreign Trade Barriers. The Taiwan facturers have still found the process to tration has adopted for certain high- portion of the 2019 edition released be onerous. TFDA has agreed to accept end devices or new technologies. USTR this March includes a lengthy section copies of the U.S. Food and Drug Admin- notes that American stakeholders “have detailing ways in which U.S. medical istration’s Establishment Inspection expressed concern that the current bal- device manufacturers have been disad- Report (EIR) on a U.S. manufacturing ance billing system does not effectively vantaged by Taiwan’s time-consuming site in lieu of the QSD. distinguish among devices of differing procedures for product license approvals But TFDA requires that the EIR have levels of technological sophistication and and pricing reviews. been issued within the past three years, effectiveness.” Due to regulatory hurdles, new med- whereas the U.S. FDA conducts its facility Besides passage of the Medical Device ical devices are often launched in Taiwan inspections based on risk assessment Act and resumption of TIFA talks, the long after they have been on the market rather than a set timetable. AmCham Medical Device Committee in other countries. “Time-to-market is As a result, USTR notes, “only a has urged more frequent consultation especially crucial in the medical device small fraction of U.S. products qualify between the Taiwan authorities and business,” says Joanna Yao, a co-chair of for Taiwan’s simplified review using industry representatives to work out AmCham Taipei’s Medical Devices Com- EIR documentation.” Various alterna- mutually satisfactory arrangements on mittee. “The rapid progress in technology tive methods of resolving the problem outstanding issues.

MAKING A MARK IN MEDICAL DEVICE MANUFACTURING

Most of AmCham Taipei’s member companies in the medical device field are sales and marketing arms of the world’s major multinational, especially American, brands. The profiles below introduce two member companies that are exceptions in that their forte is manufacturing, with Taiwan as their main base. As private companies they don’t disclose their financial information, but their success is evidenced by their steady expansion, including the recent addition of large new manufacturing sites. They are both also prime examples of the entrepreneurial spirit.

New Deantronics CEO Jane Liu BY DON SHAPIRO

42 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 IF.indd 42 2019/11/8 下午1:15 A Special Report on the Healthcare Industry

how to perform medical procedures using their devices. For the New Deantronics business model of OEM/ODM production, however, Taiwan has provided a fer- tile environment. When the company moved into its current facilities in New Taipei City’s Tucheng District nearly two decades ago, it had about 100 employees. The headcount has since grown to 850, including some 200 workers from the Philippines, and will soon be increasing even further as a result of expansion projects. New Deantronics CEO Jane Liu and President Michael Blomeyer (far right) look over a scale “The future is looking very prom- model of the company's proposed new plant in Nevada. ising,” says Blomeyer. The company’s PHOTO: ECONOMIC DEVELOPMENT AUTHORITY OF WESTERN NEVADA R&D team is working on projects involving new technologies such as ther- NEW DEANTRONICS TAIWAN LTD. – makes a wide variety of devices, including apeutic ultrasound and nano-optics that One Woman’s Vision products for general surgery, neuro- have the potential to be breakthrough surgery, cardiology, orthopedics, and areas for medical diagnosis and treatment. When CEO Jane Liu graduated from aesthetics, and offers sterilization services To ready itself for the next stage college in Taiwan with a law degree in to enable shipments direct to the custom- of growth, this summer the com- 1980, her family discouraged her from er’s warehouse. Increasingly the company pany completed construction of a new pursuing a legal career as inappro- also helps customers with product design 45,000-square-meter plant in Chiayi priate for a woman. So, she headed for and development. County in south-central Taiwan. Inclu- the U.S., where she earned an MBA in “We have no sales force – zero,” says sion of an EO gas sterilization facility will marketing from the University of San company president Michael Blomeyer, a enhance the company’s ability to supply Francisco (“it seemed like something former HP Medical Products executive customers with ready-to-market products. practical”) and began researching what who has been with New Deantronics for New Deantronics has also acquired industry to go into. close to 20 years. “We have no desire to 20 acres of land near Reno, Nevada, and A chance to serve as a translator at a try to compete with our customers. We plans to start construction late this year medical device trade show in Oakland could never duplicate the kind of distri- or early next year on an R&D and man- “showed me how interesting the health bution power they have.” ufacturing facility of its own design that industry is,” Liu recalls. She launched her He notes that it would be difficult will involve an estimated US$40 million own small operation making components to build an international medical-device investment in construction and equip- for electrosurgery products in 1985, but brand in Taiwan because of the limited ment and create some 200 jobs. Six newly two years later concluded that survival market size. The major multinational hired Americans are currently undergoing would require the jump to producing fin- companies in the field bear the expense training in Taiwan for management roles ished products. of training surgeons all over the world on in Nevada. That’s when she decided to move the company back to Taiwan. “People here are very good at manufacturing – metal products, plastics, IC chips, electronic components – so I could find everything I needed. When I came back, I contacted all these traditional industries and I was just amazed at their skills.” “Taiwan also offers excellent engineering and overhead is cheaper,” Liu says. “Maybe we no longer have cheap labor here, but we do have very competitive engineering. And we have a strong sense of ethics, so the customers trust us.” Over the years, New Deantronics’ contract-manufacturing customer list has grown to include most of the leading brands in the medical device field. It Members of the New Deantronics team.

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 43

11 IF.indd 43 2019/11/8 下午1:15 INDUSTRY F CUS “About six or seven years ago, we decided that we should also have a facility in the U.S.,” says Blomeyer. “We realized we had to get closer to our customers, and the customers are getting more concerned about risk mitigation – not wanting to concentrate all their production in one location, especially one outside the U.S. Instead of letting that business go to our competitors, we decided to set up a plant in the U.S.” At the same time, New Deantronics is showing its dedication to its Taiwan base. Within the Tucheng facility it is acting as an incubator for two Taiwanese startups with high-potential new technologies. Liu notes that the doctors and scholars coming up with promising new ideas need help with the business side of their ven- tures, including “productizing” their idea and meeting all regulatory requirements. “With our experience and connections, Scenes from SHL's newly opened office and manufacturing facility. The Liufu complex is the we can provide some guidance. It’s a way company's 10th, and largest, production site in Taoyuan. for us to give back to society.” PHOTO: SHL

products has included a Red Dot Product SHL Group. “It will make it possible for SHL GROUP — Design award in 2009 for its Precision us to pursue two business models,” he Swedish-Taiwanese collaboration Pen Injector ® and a Medical Design notes. “The fully automatic processes Excellence Award this year for one of its will enable us to turn out much bigger As a young amateur pugilist, Roger autoinjectors. volumes to meet our customers’ needs. Samuelsson first visited Taiwan in 1983 Early this month, SHL held a cele- At the same time, at our other sites we out of curiosity to see the place where his bration observing the 30th anniversary can take orders for smaller batches, for boxing equipment was made. Armed with of its founding and the official opening example for clinical trials. We’ll be in a a degree in mechanical engineering from of its 10th manufacturing site in Taiwan position to be very flexible.” his native Sweden, he returned a few – all of them located in the north-cen- Among the energy-efficient features at years later to start a business sourcing a tral city of Taoyuan. Participating in the the Liufu site are a centralized monitoring wide range of merchandise for European ribbon-cutting ceremony at what is called system to automatically adjust energy importers. the company’s Liufu site were Legislative consumption and the ability to use heat Eventually Samuelsson decided on Yuan speaker Su Chia-chyuan and Vice given off by the electric molding machines medical device manufacturing as the field Minister of Economic Affairs Wang Mei- for power generation. to specialize in. Together with co-founder hua. Taoyuan Mayor Cheng Wen-tsan Besides the design and manufacturing Martin Jelf, he saved up to buy a few dropped by later to join the VIP attendees in Taiwan, SHL Medical has established pieces of machinery and installed them for lunch. a headquarters in Zug, Switzerland, and in borrowed space inside a supplier’s fac- The new facility, which contains maintains design and development centers tory. From that humble beginning, SHL (a 63,000-square-meters of modern office in Stockholm, Sweden and in Deerfield, shortened version of the original name of and manufacturing space, is being Florida in the U.S. An acquisition in 2004 Scandinavian Health Ltd.) has grown into installed with fully automatic, high- led to the establishment of SHL Health- what is now a global leader in the design, output production equipment – including care, which makes pressure mattress development, and manufacturing of drug- specialized automation machinery of systems, patient lifting slings, and med- delivery devices, such as autoinjectors, SHL’s own design and manufacture. ical soft goods in China. The group also pen injectors, and inhaler systems. Eventually the site will house more than includes a third company, SHL Technolo- SHL currently has nearly 5,000 100 state-of-the-art electric injection- gies, which is based in Taoyuan as well. employees worldwide, including 4,400 molding machines. Further expansion in Taiwan is in Taiwan. The company’s high level The investment in the Liufu site, planned. “We’ve already added 600 of quality and service has enabled it to including the cost of construction and people so far this year, and we expect to attract a majority of the world’s top 25 equipment, will come to nearly US$200 add another 1,000-1,500 next year,” says pharmaceutical companies as customers. million, says Ulrich Faessler, CEO of Faessler. “Next year’s plan also calls for International recognition for SHL’s SHL Medical, the main company within building a warehouse.”

44 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 IF.indd 44 2019/11/8 下午1:15 AMCHAM EVENT Exploring Solutions to Taiwan’s Aging Society

n 2018, Taiwan’s Ministry of the Interior reported that 14% I of the island’s population was over the age of 65. That rate is rapidly increasing and is expected to reach 20% or higher by 2026, which could make Taiwan the world’s first “super-aged society.” Such a prospect is alarming, given the vast amount of energy and resources that would be needed to provide adequate care for the growing number of elderly. In order to address this pressing issue, AmCham Taipei hosted the 2019 Taipei Healthy Aging Forum, held at the Grand Hyatt Hotel on September 27. The forum brought together representa- framework that includes holistic, inte- tives from the public and private sectors, grated approaches to long-term care as well as civil society organizations, to for Taiwan’s elderly. Dr. Yeh Yen- discuss the various challenges associated Po, director of Changhua County’s with an aging society and how to effec- Department of Health, introduced the tively confront these challenges. program that his department has imple- In his keynote speech at the forum, mented, which incorporates improving Taipei Mayor Ko Wen-je, a former and promoting long-term care services, trauma surgeon, noted that Taiwan’s encouraging healthy living practices, rate of aging is one of the highest in the and increasing community involvement. world. Within 24 years, the number of This program has created a more aging- Taiwanese over the age of 65 jumped friendly environment in Changhua and and technology can improve the quality from 7% to 14% of the general popu- can serve as a model for other cities and of health services for the elderly. lation. Ko emphasized the importance counties across the island. The forum included two discussion of accurate government statistics in for- Another topic that speakers panels moderated by Dr. Kang Jaw- mulating good elder-care policy, as well addressed was the issue of frailty, the Jou, vice president of National Yang- as the need to reform Taiwan’s pen- physiological decline that the body Ming University, and Professor Jennifer sion system so as to reduce the length undergoes as a result of aging, and how Wang, COO of GLORIA and chair of of time that retirees are dependent on it is affected by a number of environ- National Cheng-Chi University’s Risk public resources. mental and social factors that can be Management and Insurance Depart- Most of the event’s speakers focused controlled by strong healthcare policies. ment, respectively. Panelists included on the dire need for a public health Participants from industry stressed the Dr. Wang Ying-yue, director general of important role of public-private part- the Ministry of Health and Welfare’s nerships in creating effective long-term Health Promotion Administration; Dr. care solutions that utilize predictive, Mark Tennyson, executive director preventive approaches, rather than the and regional head of Value, Access and current model of procedural interven- Policy for Amgen JAPAC; and Tim tion. Vincent Shih, assistant general Shields, general manager and CEO of counsel at Microsoft and general man- Cigna Taiwan Life Insurance. AmCham ager of Microsoft Greater China’s Taipei President William Foreman pro- Corporate, External, and Legal Affairs vided brief closing remarks. Leadership team, gave a presentation The forum’s platinum sponsor was that described how the use of big data Amgen. Cigna was the silver sponsor.

TAIWAN BUSINESS TOPICS • NOVEMBER 2018 45

longevity.indd 45 2019/11/8 上午12:08 EXECUTIVE SUITE

MEET DYLAN TYSON OF PRUDENTIAL LIFE INSURANCE

During his career of more than two decades at Prudential, Dylan Tyson has racked up a number of significant achievements. He was presented with the opportunity four years ago to be transferred to Korea and then Taiwan, and brought his family along for the experience. Dylan is now wrapping up his assignment as President and CEO of Prudential Taiwan, and will soon be traveling back to the U.S. to head the company’s annuities business. He sat down with Taiwan Business TOPICS Deputy Editor Jeremy Olivier to discuss his time in Taiwan and the life insurance business. An abridged version of the interview is below.

What did you major in in college? do things differently: to start a career, in Korea. Around 40% of Prudential’s Did your studies prepare you for a to invest in learning, and to become a earnings is derived internationally, so career in financial services? leader. I wanted to help create an orga- the overseas offices are an incredibly I was a history and psychology nization that was good for society and important part of the business. I was major, which I think prepared me very where people could have fun working. excited to try something that I believed well for my eventual career. The world Prudential fit the bill for me in that way. would be richly rewarding on a per- is a very complicated place, and to be It’s a deeply good company, and it’s a sonal and professional basis. a leader you need to think analytically company that understands that in order about situations. Of course, you have to foster the next generation of leaders What were the pros and cons of the to supplement that foundation with in a complex industry, you have to give expat experience? Was there a big dif- technical expertise in your field, and them the right experience. Given this, I ference in living and working in Korea insurance involves a number of complex would definitely make the same choice and Taiwan? concepts. However, the common thread if presented with the opportunity to One of the biggest advantages of is the ability to engage in that analysis start over. being here is the ability to remove and to figure out how the different parts yourself from your normal frame of ref- must come together to deliver the right Your last two assignments have been erence, to experience things at a level results. My liberal arts education was overseas. Did you actively seek out the that is just not possible as a tourist. I helpful in that regard. opportunity to go abroad? found that I’ve developed an apprecia- I started expressing my openness tion for this part of the world, and my What attracted you to the insurance to an international assignment pretty time here has helped me challenge some industry? Would you make the same early in my career, although nothing of those unexamined assumptions that I choice if you were starting over? came of it at that time. But in 2015 I and other Americans sometimes hold. I After graduating from school, many was presented with the opportunity to also think that being able to come here of my friends chose to go into fields that take over the position of Executive Vice and experience all of this with my family didn’t really appeal to me. I wanted to President and Chief Strategy Officer and to take advantage of how easy it

46 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 Dylan.indd 46 2019/11/8 上午12:08 EXECUTIVE SUITE

is to travel around this region has years. Taiwan should be thinking really helped broaden our horizons. about these things in crafting its On the flipside, there are some public policy. negative aspects of being an expat here. You’re presented with this tre- You devoted time to AmCham mendous learning opportunity, but activities as a committee chair, super- sometimes that can feel quite over- visor, and member of the CEO whelming. Sometimes you just want Mission to Washington. How worth- comfort – to not have to think too while was the Chamber experience? hard about small transactions or AmCham Taipei is a great interactions. I think this can be example of an exceptionally run overcome, but you have to have organization with tremendously a sense of humor for when things passionate people on staff who don’t go right. are taking care of important tasks One of the biggest differences every day. Although Prudential had between Taiwan and Korea is the it makes getting results very simple and been involved with the Chamber for weather, which took some getting used creates a lot of positive energy. some time before I arrived in Taiwan, to. Also, in Taiwan our operation is I think it’s particularly important to I decided to dive in and take an active led very prominently by women, while insist on the idea that tomorrow can be role almost immediately. The experi- Korean companies tend to be more better than today – that there are a mil- ence has allowed me to not only engage male-dominated. You can see this dif- lion little things we can do to improve, more deeply with my own industry ference pretty clearly in a company’s that people are incredibly powerful, – during my time in the insurance ranks and who the star performers are. that our job as leaders is to put people committee, we would have quarterly However, both places ascribe to in places where they can make a dif- engagement sessions with the gov- Confucian ideals and both are very safe. ference – for the company, for their ernment, which was important to Also, the local people are very gracious families, and for society. developing and maintaining strong rela- to foreigners. Their kindness and gen- tionships – but it also helped me look erosity, as well as their willingness to What are the most significant char- across industries. provide help when needed is something acteristics of the life insurance market The culmination of my experience that my family and I will always appre- in Taiwan? What are the main ways it at AmCham was the CEO Mission ciate about our time here. differs from other markets? to Washington, where in four action- I believe that Taiwan is trying to packed days we met with numerous What do you regard as your main move towards a stronger protection politicians and officials, pushing for- strengths as a manager? Do you have a regime. The government’s top-down ward the things that are important for certain philosophy of management that leadership is helping focus the industry the Chamber’s members. you follow? on the importance of protection, and AmCham’s role of leveraging its Where I think I’m best is being able there’s no question that life insurance relationships to promote the many com- to look at the different pieces of the is an incredibly important market here. mercial opportunities between Taiwan business and figure out how they can Taiwan has led the world in terms of and the U.S. is something that needs to fit together. Determining what changes its insurance penetration ratio for over be recognized. Organizations don’t run need to be made in order to make the a decade, and life insurance premiums well without strong leadership, and I’ve pieces work better, to generate a uni- as a percentage of GDP are higher here been very fortunate to come in and play fying sense of how the company should than they are in any other country. some small role in working with people be run. I enjoy very much working with However, that doesn’t mean that Tai- toward common goals. smart people, and so it’s important for wanese people are necessarily well- me to be in a place where I’m learning protected yet. There is still work to What advice would you give to a lot from those around me, where I’m do, and at Prudential we are working someone considering an assignment to able to test ideas, and where I can help towards that goal. But it’s an imperative Taiwan? put together a plan to make the com- that applies to the whole industry. Come! Don’t give it a second pany better. Something that is not unique just thought. Taiwan is an amazing place My management philosophy is that to Taiwan’s insurance market, but to a with a rich culture and so many new if you trust that people are ultimately number of East Asian countries, is the things to learn and experience. The very intelligent, understand what their issue of longevity. People in Taiwan are warm, welcoming society that you get hopes and dreams are, and then match living longer and healthier lives. This is to be part of, and the ability to be out- that with what the business needs – put- definitely a blessing, but it also creates side of your home country, changes you ting people in areas where they’re doing challenges, such as making sure people and makes you see things in a different what they love and where the work is have a protected lifetime income and light. For me, coming here has been the well aligned with the company’s goals – that they’re able to plan for their later privilege of a lifetime.

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 47

11 Dylan.indd 47 2019/11/8 上午12:08 SEEING TAIWAN

The Hakka Heartlands of Greater Taoyuan

LI_TENG-FANG_HISTORICAL HOME

n terms of economics and popu- nic group. Extremely hardworking while the atmospheric interior combines lation, Taoyuan has become one and exceptionally skilled at working both Taiwanese and Japanese motifs. I of Taiwan’s key municipalities. marginal land, the Hakkas were able Naturally, the on-site restaurant serves a Improved transportation infrastructure to transform parts of Longtan and range of top-notch Taiwanese teas. has reduced commuting time to central Daxi into tea plantations. The tea factory has become one Taipei, about 27 kilometers away, Aficionados of tea and industrial of Daxi’s most popular attractions, attracting an influx of families. Major heritage may want to head straight to but in visitor numbers it is still some projects like the Taoyuan Aerotropolis the Daxi Tea Factory, about 12 kilome- way behind Daxi Old Street and Cihu are helping this bastion of manufactur- ters southeast of the historic heart of (“Lake Mercy”). The Old Street, offi- ing reinvent itself. Daxi. The factory, built halfway through Taoyuan is the location of Taiwan’s the 1895-1945 period of Japanese colo- principal international airport. The nial rule, was given an award-winning municipality is now connected to Taipei makeover less than a decade ago. by mass rapid transit trains, as well The design of the factory’s exterior as by the high-speed railway and the was inspired by that of a landmark tea- conventional Taiwan Railway Admin- processing factory in Darjeeling, India, istration (TRA) rail network. Getting from the airport to Taipei, or to the island’s sunny south, has never been easier. At the same time, spending a day or two in Taoyuan before exploring TEA MUSEUM further afield is an increasingly attractive option. Just one in ten of the 2.24-million people living in Taoyuan reside in the three districts furthest from the ocean. Fuxing, home to the indigenous Atayal tribe, is the most mountainous of the three. Longtan and Daxi, both dominated by the descendants of Hakka settlers, are in the foothills. Like most Taiwanese, Hakka people are of Han Chinese ancestry. Because they speak their own dialect and follow a unique set of customs,

they are regarded as a distinct subeth- DAXI OLD STREET

部

48 TAIWAN BUSINESS TOPICS • NOVEMBER 2019

11 ST.indd 48 2019/11/8 上午12:09 SEEINGSEEING TAIWANTAIWAN

cially called Heping Road, was known as “Lower Street” before World War II. Together with nearby Zhongyang Road (formerly “Upper Street”), it formed a business hub of regional importance. Daxi (which means “big stream”) gets its name from the Dahan River. For much of the 19th and part of the 20th centuries, camphor, coal, tea, and other commodities came and went by boat. But even before the construction

of Shihmen Dam in the late 1950s dras- SCULPTURE MEMORIAL PARK IN CIHU tically reduced the river’s depth, truck drivers were beginning to outnumber Travelers setting out from Daxi may stevedores. wish to head for Sankeng Old Street in The highlights of Heping Road are Longtan district. Like Daxi, the area’s the merchants’ Baroque-style shop- prosperity at one time was tied to the houses. These ornate buildings, most of Dahan River. The neighborhood retains which are around a century old, incor- both the ambiance and cuisine of a porate Greek, Roman, and Taiwanese traditional Hakka settlement. Shops elements. No two are exactly the same. here sell such delicacies as Hakka-style Several shops in Daxi’s old quar- mochi and buns. Home-cooking enthu- ter specialize in dougan (dried tofu), siasts should buy a bottle or two of and at least two of them employ meth- homemade kumquat sauce. ods devised almost a century ago by Longtan Red Bridge, around two TAOYUAN MAYOR CHENG WEN-TSAN EYES LOCAL Madame Huang Chiu-Lu. She was kilometers south of Sankeng Old Street, DELICACIES AT DAXI. the first in the town to add star anise has spanned Tiekeng (“Iron Pit”) Creek and cumin to tofu before pressing and for nearly a century. It is now a popular are body of water is dominated by drying it, and she came up with a vari- photo-stop for those exploring the area Nantian Temple, an impressive hall of ant which gains its firmness from by bicycle, as well as for tourists head- worship devoted to Guan Gong, Guan- simmering in a brown-sugar syrup. Yet ing for Shihmen Reservoir. yin Bodhisattva, the Jade Emperor, and this food artisan would have been the Longtan is also where you will other deities. first to admit that one key factor was find one of Taiwan’s oldest and most Longtan’s lake, Sankeng Old Street, beyond her control. The unequalled unusual theme parks. Window on China and Shihmen Dam are served by buses “egg-white” tint of Daxi tofu can be opened its doors to the public in the from Taoyuan's Zhongli district, while attributed to the softness of water early 1980s, when the government of Daxi is easy to reach by bus from drawn from local wells. Taiwan still prohibited Taiwanese citi- central Taoyuan. TRA express trains Just outside the town, the Lee Teng- zens from visiting China. Despite – or are often the quickest way of getting to fang Historic Residence is a superb because of – the travel ban, many people Zhongli or central Taoyuan. The #710 example of mid-19th century architec- were intensely curious about China, and electric bus connects Daxi with Yongn- ture. The scion of a Hakka merchant this park’s 1:25-scale replicas of Beijing’s ing Metro Station in the Taipei suburb family, Lee Teng-fang attained great Forbidden City, the fortified circular of Tucheng. prestige by passing the examina- Hakka clan-houses of Fujian, and other For all kinds of information useful tions through which men qualified for landmarks on the mainland pulled in when planning a trip to Taiwan, visit civil-service appointments in the Qing hordes of day-trippers. the Tourism Bureau’s website (www. Empire then ruling Taiwan. Photogra- After the travel ban was lifted a few taiwan.net.tw). The 24-hour tourist phy buffs adore the mansion where he years later, the park diversified. It now information hotline (0800-011-765) is once lived. includes a Mini Taiwan featuring exqui- toll-free within Taiwan. Cihu is where the remains of Chiang site models of the island’s most famous Also worth referring to is the offi- Kai-shek, Chinese Nationalist leader buildings; replicas of famous sights in cial website of the Taoyuan City and Taiwan’s president until his death Asia, Europe, and the U.S.; an amuse- Government (https://www.tycg.gov. in 1975, lie in state. The nearby Sculp- ment park; and even a protected habitat tw/eng/). The visitor service centers at ture Memorial Park is an intriguing devoted to the rhinoceros beetle. airports, high-speed railway stations, repository of more than 200 statues If you speak Chinese, you will know and other locations are happy to of Chiang retired by schools and local that Longtan means “Dragon Lake.” provide maps and leaflets and answer governments throughout the country. The island in the middle of this 14-hect- your questions.

TAIWAN BUSINESS TOPICS • NOVEMBER 2019 49

11 ST.indd 49 2019/11/8 上午12:09

E-CGA-030-19-Oct-28