Each year in this Taiwan White Paper, AmCham Taipei takes stock of current and prospective economic conditions in Taiwan and offers suggestions on how the business climate could be further improved. As we went through that exercise this year, one salient fact stood out about 2020: In a world that has largely been turned upside down by the coronavirus pandemic, Taiwan has provided an inspiring example of leadership and civic responsibility.
On behalf of our member companies and their employees, the Chamber would like to express our appreciation to the Taiwan government for the skillful, decisive manner with which it has handled the COVID-19 crisis – and to the Taiwanese public for responding to the challenge as models of good citizenship. AmCham Taipei is proud to be part of this conscientious community that has made Taiwan one of the safest places (if not the safest location) to be in the world today.
PREPARING FOR RECOVERY
Even in Taiwan, however, the coronavirus has taken a heavy toll on the economy. The travel-related and entertainment sectors have been particularly hard hit. And when the world economy is suffering, Taiwan is bound to share the pain because of its heavy reliance on international trade. Long-established supply chains, already undergoing restructuring before the pandemic due to the U.S.-China trade tensions, are now under further pressure in the wake of the coronavirus and its ramifications.
As the world economy seeks to put itself back together over the coming months, it will be vital for Taiwan to show the same resolve it demonstrated in containing the pandemic. Many companies – both multinational and domestic – will be reevaluating their business plans and making fresh decisions on where to place their new investments. The COVID-19 crisis presents Taiwan with a new opportunity to get back in the game.
Promoting its many existing advantages – social stability, talented workers, sound legal system, and high-tech manufacturing experience – will be important. Taiwan has never done an effective enough job in marketing its highly positive attributes. But even more crucial will be exhibiting the flexibility and openness to new ideas that the revamped world economy will require.
Time and again through the years, Taiwan has shown its staying power. Despite numerous political setbacks and exclusion from most international organizations, Taiwan’s economy has continued over the decades to be one of the top performers in the region. Most recently, many knowledgeable commentators expected that the heavy involvement of Taiwanese companies in China and frequent cross-Strait travel would cause Taiwan to be a major casualty of the U.S.-China trade tensions. The same fear was raised when the coronavirus first appeared in Wuhan. Instead, Taiwan has reaffirmed its resilience, and its economy shows sign of benefiting from the return of many Taiwanese-invested manufacturing operations in China.
WHERE TO BEGIN
The concrete suggestions broached by AmCham Taipei’s various committees in the annual Taiwan White Paper are a practical guide to the needs of business enterprises in Taiwan based on their on-the-ground experience. How well government responds to those requests is taken by potential investors as a key indicator of the attractiveness of the business climate.
In the past several years, AmCham Taipei has been gratified by the diligence of most government agencies, coordinated by the National Development Council, in seeking solutions to the White Paper issues. In 2018, the Chamber’s committees rated a record 11 issues from the previous year’s White Paper as having been entirely resolved. This year we are pleased to report that this record has again been equaled.
Among the 11 are some breakthrough developments. The Pharmaceutical Committee, for example, applauded the full implementation of Patent Linkage legislation, ensuring effective protection for pharmaceuticals against intellectual property infringement. This item had appeared in the White Paper for more than a decade. The Banking Committee welcomed rules changes to facilitate green financing, and both the Cosmetics and Insurance Committees cited the incorporation of risk-management principles in regulatory procedures.
At the same time, there were many more issues where progress was insufficient. AmCham Taipei hopes that next year’s White Paper will see the setting of a new record of accomplishment, sending a signal to investors that Taiwan is committed to providing a favorable environment for business to create jobs and spur innovative development.
ENSURING ENOUGH TALENT
One of the areas needing priority attention is how to cultivate a more internationalized workforce – welcoming more talent from other countries while helping Taiwanese develop a more international mindset. To help enhance Taiwan’s ability to compete as a center for business excellence, AmCham Taipei is participating in the Talent Circulation Alliance. This initiative was the brainchild of a member of the Chamber staff, Amy Chang, our now retired senior director of government affairs. It was started last year by the American Institute in Taiwan in conjunction with Taiwanese government and non-government organizations. The aim is to strengthen the competitiveness of professional and technical talent in Taiwan.
This year’s White Paper contains a chapter spelling out the TCA’s recommendations, while a special supplement outlining the TCA objectives in more depth is being distributed as part of the White Paper package. The key TCA proposals include:
Designate the Office of the Vice Premier to develop and implement a National Strategy for talent development and circulation, since high-level coordination will be needed among the many relevant ministries and agencies.
Complete the drafting of a New Economic Immigration Act to help make optimal use of foreign talent already in Taiwan.
Promote more academic exchanges and the wider use of foreign teachers.
Encourage the free circulation of startup talent.
Increase the participation of women in Taiwan’s professional life.
As the TCA section emphasizes, “talent is the prerequisite for realizing virtually all of Taiwan’s economic policy objectives,” including transitioning to an innovation-based economy and becoming a digital nation.
ENERGY AND REGULATIONS
To accommodate expansion by domestic companies, including those “reshoring” production capacity from China, as well as the increased foreign investment it hopes to attract, Taiwan needs absolute certainty that it can maintain an adequate energy supply in the coming decade, despite its plan to terminate nuclear power generation by 2025. Although the government has repeatedly given assurances that the targets will be met, manufacturing industries that are heavy energy consumers continue to question whether renewables will be able to fulfill the allotted 20% of electricity demand according to schedule.
As the Energy Committee stated in its paper, “we are worried by signs that the pace of decreasing the reliance on coal and nuclear energy is happening rather faster than the rate at which new gas and renewable capacity is being developed – and in some instances the move away from coal and nuclear is irreversible.” The Committee urged the government to provide a detailed roadmap for renewable energy development and to convene regular meetings with industry to discuss progress and contingency plans.
Regulatory matters are also a frequent subject of attention in the White Paper. At a time when Taiwan hopes to develop its biomedical sector under the government’s “5+2 Innovative Industries” program, several AmCham Taipei committees in the healthcare sphere have raised questions about the long-run viability of those industry sectors given the extremely low pricing often offered through Taiwan’s National Health Insurance Administration. In this year’s White Paper, the Medical Devices Committee called for a “more predictable and sustainable pricing and reimbursement process to encourage the faster introduction of new technologies, despite the existence of financial constraints.” The Pharmaceutical Committee warned that cost-containment measures were obstructing patient access to new drugs. The committee also cautioned that “insufficient budget for new drugs and new indications will result in a less attractive investment environment for the biomedical industry in the long-term.”
More broadly, both the Digital Economy and Technology Committees expressed concern that Taiwan’s ability to take full advantage of newly arising business opportunities based on digital platforms may be held back by a lack of understanding and appreciation on the part of regulators. They urge increased communication between government officials and the private sector to narrow the gap in digital awareness.
WIDENING THE VISION
Attending to White Paper issues should be just the start. Beyond making improvements on the margins, Taiwan needs to seize opportunities presented by the post-pandemic revamping of the world economy to pursue new strategic initiatives. Since proposals that were previously impractical may now be feasible, AmCham Taipei encourages everyone with bold new ideas to raise them for discussion.
An example was a recent suggestion by veteran U.S. economist and management consultant William Reinfeld, who has been following events in Taiwan since the 1970s. He proposes that Taiwan capitalize on its success in controlling COVID-19 by developing a world-leading pandemic-control industry.
“At this time, most of the world is preoccupied with managing the present crisis and planning for likely resurgences,” Reinfeld notes. “Across the board there are shortages of equipment, systems and capabilities to test, treat and trace the virus. The unmet needs in most of the world are enormous.
“Taiwan, on the other hand, has successfully avoided major impacts and has created a wide range of products, systems, technology, know-how and R&D in what can be broadly defined as Pandemic Controls. These facts, together with its strong foundation in many of the relevant industries and institutions, opens a unique window of opportunity for Taiwan from which it could derive enormous immediate economic returns, develop new industries and growth opportunities and draw global recognition in its role in controlling pandemics.”
Another thought-provoking idea currently receiving revived attention is for Taiwan to use a portion of its large foreign-exchange reserves (currently worth over US$480 billion) to create a sovereign wealth fund to invest in worthwhile opportunities internationally. Such funds have become increasingly popular among countries around the world, and Singapore’s success with its Temasek Holdings and GIC Private Limited shows that it is not necessary to be a huge economy to reap the benefits of operating a sovereign wealth fund.
Among those benefits would be to gain international commercial influence to help counteract the pressure of Taiwan’s increasing political and economic isolation. A fund that holds just a few percent of a corporation’s stock is sure to have the ear of the company’s board and top management. The investments could also lead to new business opportunities in Taiwan domestically, while making possible greater financial growth and diversification.
In this evolving new international economic environment, Taiwan needs to be willing to take bold steps to carve out a more secure position than it previously enjoyed. Its strategic position will be bolstered by the international respect and goodwill it earned through its handling of the coronavirus, as well as the apparent increased willingness of the U.S. to help enable Taiwan to participate more actively in the international community.
Given the broad bipartisan disillusionment in the U.S. with the state of relations with China, American policymakers can be expected to give less weight to Beijing’s potential reaction to initiatives toward Taiwan. As Washington pursues its strategy of building up its presence in the Indo-Pacific region and seeking to protect the interests of American companies, the U.S. government is likely to become increasingly aware of its need for trusted allies in the region – and the extent to which Taiwan is highly suitable for the role.
In the Messages to Washington section in the next several pages, AmCham Taipei urges the U.S. government to further strengthen its economic relationship with Taiwan, and in particular to consider negotiating a bilateral trade agreement. At the same time, it is incumbent on Taiwan to do everything feasible to remove any existing misunderstandings and ease the way toward an FTA to serve the economic and strategic interests of both countries.