The government has acted on a number of the suggestions made by AmCham committees in their 2009 position papers.

By Don Shapiro

The November issue of Taiwan Business TOPICS, coming half-way in AmCham’s advocacy cycle between editions of the Taiwan White Paper, presents an appropriate time to review the status of the issues in the most recent White Paper. 

This year the most significant progress has involved improvements in the cross-Strait economic relationship. The two sides have already concluded Memoranda of Understanding that will pave the way for the mutual opening of markets in the three financial sectors of banking, insurance, and securities, and they are preparing to begin negotiations on a broad Economic Cooperation Framework Agreement (ECFA). In addition, a number of specified business sectors have been opened to Chinese investment.

These steps – which follow previous initiatives to expand cross-Strait direct flights and promote tourism from the mainland – are in line with the position taken for many years in the White Paper that Taiwan needs to take advantage of its geographical proximity and cultural/linguistic connections with China to tap into the opportunities offered by the world’s fastest-growing economy. The alternative, as the Chamber often stated, was to see Taiwan become increasingly marginalized from the regional and global economies. But if Taiwan can serve as a convenient base from which to serve other Greater China markets, it will have more attractiveness for multinational investors.

Negotiating ECFA is also a way to protect Taiwan’s existing markets in China, providing relevant products with competitive tariff treatment, as the PRC enters into regional trade agreements. It also offers the hope, though not the guarantee, that Taiwan may eventually be able to participate in such regional trade groupings. Such questions of continued access to the China and regional markets were Issue Number One in the 2009 White Paper position paper of the Chemical Manufacturers Committee. They have been of concern to the automotive industry as well.

Also related to cross-Strait liberalization were revised rules on entry into Taiwan by Chinese business travelers that went into effect last June, in line with some of the requests in Issue 1 of the Human Resources Committee position paper. Among the changes, for example, the permissible length of stay for visitors from China coming for business or to attend conferences or trade shows was lengthened from 14 days to one month. In addition, the procedures for applications by prospective mainland visitors have been simplified, with the time needed for business applicants shortened from one month to 10 days.

Below is a sampling of other White Paper issues that received positive action in the past half year, including many that were outlined in the detailed “Response to the 2009 AmCham Taiwan White Paper” that the government provided at the end of August:

• Banking. In an easing of the often-onerous regulatory reporting process, the Central Bank is no longer requiring the daily submission of hard copies of foreign-exchange transaction documents if banks choose to upload such documents via electronic transmission. In addition, in apparent recognition of the importance of adhering to free-market principles, there has been no further discussion in the legislature of imposing interest rates caps on lending.
• Chemical Manufacturers. The Environmental Protection Administration confirmed that it is considering amending the Soil and Groundwater Pollution Remediation Act so that the burden of fee collection for the remediation fund is shared more broadly by industry, rather than falling mainly on the chemical sector.
• Infrastructure. The Public Construction Commission and Ministry of Economic Affairs Department of Investment Services have established English-language websites with information on projects open to foreign bidders under the WTO’s Government Procurement Agreement, which Taiwan joined last July.
• Insurance. An amendment to the Insurance Law to exclude foreign-currency investments supporting traditional insurance policies denominated in that currency from the 45% foreign investment limit has been submitted to the Legislative Yuan.
• Intellectual Property. The White Paper has frequently noted that court sentences for IPR violations are often so light as to be meaningless as a deterrent. Under instructions from the Ministry of Justice, the Taiwan High Court Prosecutors Office is currently drawing up sentencing standards for IPR cases for prosecutors’ guidance. In addition, the Taiwan Intellectual Property Office has dropped plans for two proposed Copyright Act amendments that the White Paper raised questions about, and the Ministry of Education has stepped up efforts to hold college administrations responsible for illicit peer-to-peer file-sharing or Internet downloading on their campuses. 
• Pharmaceuticals. The industry has expressed its appreciation to the Bureau of National Health Insurance for the productive ongoing dialogue on how to properly reward innovative drugs through the price reimbursement system.
• Retail. Four categories – tableware and kitchenware of china or porcelain, ceramic tableware and kitchenware, stemmed drinking glasses, and large uninterrupted power supplies – have been removed from the list of items banned from import from China. In addition, the Department of Health reaffirmed that it is moving, in line with international practice, toward adopting a system of post-market surveillance rather than pre-market approval to assure  the safety of cosmetics products.  
• Tax. A White Paper issue of several years’ standing was resolved when the MOF issued a ruling clarifying the definition of “Taiwan-source income” as it applies to payment to overseas entities for services performed entirely offshore. Another ruling, regarding double taxation, clarified that when an employment contract calls for tax equalization as one of the job benefits, the employer can claim the amount of payment as an expense.
• Transportation. The MOF Department of Customs Administration accepted that express cargo companies would no longer have to attach paper invoices on export shipments, as long as they can store digital invoices and provide Customs with printouts when requested.

“AmCham is gratified that the government has continued to take the White Paper recommendations extremely seriously and has made progress in a number of areas,” says Chamber President Andrea Wu. “We look forward to further close interaction with government agencies in hopes that even more issues can be resolved before the next edition of the White Paper is ready for publication.”

In particular, Wu cited three areas needing further government attention so as to enhance Taiwan’s investment competitiveness: 1) reconsideration of the unrealistically aggressive schedule set for reduction of Greenhouse Gas emissions, 2) expeditious environmental impact approval for important pending projects, including proposed new power plants to guarantee adequate electric power supply in the coming decade and the Kuokuang petrochemical complex to assure sufficient future supplies of downstream feedstocks, and 3) elimination of the two-year working experience requirement for foreign employees of non-tech companies.

By Don Shapiro