Central Bank Digital Currencies, Blockchains, and Digital Cash

Several central banks around the world, including the Bank of England and the central banks of Sweden and Uruguay, have been studying the idea of introducing central bank digital currencies (CBDC) as a means of moving toward a cashless future. According to Wikipedia, “central bank digital currency is different from ‘digital currency’ (or virtual currency and cryptocurrency), which are not issued by the state and lack the legal tender status declared by the government.” As legal tender, CBDC could compete with commercial bank deposits and challenge the existing system in which only a fraction of bank deposits are backed by actual cash on hand.

To help explain the potential percussions for the financial sector, the AmCham Technology Committee sponsored a presentation on June 9 in AmCham Taipei’s Lincoln Room. Antony Lewis, Singapore Director of Research at blockchain software firm R3, spoke on “Central Bank Digital Currencies, Blockchains, and Digital Cash,” addressing the prospective challenges for financial regulators and the potential advantages that the advent of digital cash could bring, including more secure settlement methods.

From left to right: Carl Wegner, Managing Director, R3 / Head of AsiaAntony Lewis, Director of Research, R3 / Central Bank Digital Currency lead; AmCham Technology Committee Co-chair Revital Shpangental Golan, CEO, Anemone Ventures;

我國移轉訂價三層文據架構及應用

AmCham Taipei Tax Committee held a seminar on May 29 at The Sherwood Taipei, featuring Deputy Director-General Hsiu-Ling Sung of the Taxation Administration of the Ministry of Finance, as the speaker.

我國移轉訂價三層文據架構及應用 – this event was conducted in Mandarin.

In response to the international transfer pricing trends of enhancing transparency of tax information and preventing cross-border tax avoidance as well as in line with review standards of international organizations, Taiwan amended its “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing” on November 13, 2017 to incorporate the preparation of Master File and Country-by-Country Report by MNEs with reference to the final reports and recommendations of BEPS Action Plan 13 to accomplish the international requirements for three-tiered transfer pricing documentation.

Furthermore, in order to reduce the compliance cost of multinational enterprise groups in the preparation of transfer pricing documentation, we released the standards of safe harbor for exemption from the submission of a master file and country-by-country report on December 13, 2017, taking into account international practices, our situations, and public views. In the case of a profit-seeking enterprise that does not meet the relevant safe harbor standards, it shall disclose the information of related party transactions and multinational enterprise group as well as prepare local file and transfer pricing report when filing income tax returns, and then submit a country-by-country report before the end of 2018.

When: May 29, 2017 (12 PM – 2 PM)

Where: The Sherwood Taipei

Speaker: 宋秀玲 財政部賦稅署副署長
Hsiu-Ling Sung, Deputy Director-General, Taxation Administration, Ministry of Finance

From left to right: AmCham Tax Committee Co-Chair Cheli Liaw, Partner, Deloitte & Touche; Deputy Director-General, Hsiu-Ling Sung Taxation Administration, Ministry of Finance; AmCham Tax Committee Co-Chair Josephine Peng, Senior Counselor, Lee and Li, Attorneys-at-Law; AmCham Tax Committee Co-Chair Stella Lai, Public Affairs Consultant, Government Affairs Consultant, Dell (Taiwan) B.V. Taiwan Branch

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Cross-border Ecommerce: A Growing Market for Taiwan

Big data has become an essential component for giant e-tailers such as eBay and Amazon. As the consumption of data continues to grow rapidly, companies are investing heavily in big data to provide a new level of strategic marketing and offer better customer experiences.

On May 23, AmCham Taipei’s Innovation Council and Sustainable Development Committee jointly invited Robert Gou, CEO of Viewider, and Ming-Ji Wu, Director-General of the Small and Medium Enterprise Administration (SMEA) of the Ministry of Economic Affairs, to provide insight to global ecommerce trends at a Chinese-language luncheon program entitled, “從eBay與Amazon看電商全球化趨勢及大數據平台” held at the Shangri-La’s Far Eastern Plaza Hotel.

According to Gou, worldwide retail sales are predicted to reach US$4.4 trillion by 2021, indicating tremendous opportunities for online retailers, especially those ready to invest in big data analytics. Big data can help online retailers achieve their goals by identifying markets, recommending pricing strategies, and improving business processes.

Gou highlighted some of the challenges small to medium-sized enterprises (SMEs) in Taiwan face in entering the online retail industry:

  • Language barriers: difficulties to train and recruit talent for handling cross-border trading and dealing with foreign customers due to communications problems.
  • Poor marketing strategies: lack of information and understanding about foreign markets to identify selling strategies, leading to poorly targeted marketing.
  • Shipping and logistics: insufficient understanding of import regulations and delivery methods, and the high cost of outsourcing fulfillment.
  • Payment methods: having a reliable payment processing system that is accepted by customers from different regions.

Director-General Wu discussed the growth of Taiwan’s SMEs – which numbered 1.4 million companies as of 2016 – and addressed challenges they face. In line with the government’s efforts to promote the New Southbound policy and to develop Taiwan as Asia’s Silicon Valley, the government offers various programs to assist entrepreneurs in expanding into global markets. These programs include 1) training, 2) funding, 3) industry promotion 4) market intelligence, and 5) technical expertise and support.

From left to right: Robert Gou, CEO of Viewider; Ming-Ji Wu, Director-General of the Small and Medium Enterprise Administration of the Ministry of Economic Affairs; AmCham Capital Market Committee Co-Chair Nadia Chen, Country Executive, The Bank of New York Mellon Taipei Branch; AmCham Sustainable Development Committee Co-Chair Cosmas Lu, Strategy Adviser, Super Dragon Technology Co., LTD

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Digitalization in the Global Economy

Digitalization and automation are already impacting how the world works with even bigger changes to come. Market analytics firm Bain & Company forecasts that 25% of current jobs will disappear altogether by 2030, and many more jobs will undergo dramatic shifts and require new and different skill sets. To get more insight into how digitalization is reverberating through the employment sphere in Greater China, AmCham Taipei invited Christine Raynaud, CEO of Human Resources firm Morgan Philips Greater China, to speak at a luncheon entitled “Digitalization in Greater China” on May 9 at the Sherwood Taipei Hotel. Last December, Morgan Philips completed a wide-ranging survey of professionals working in Taiwan, China, and Hong Kong, querying them on their experiences of digitilization today and going forward, and the results were suprising.

While more than 60% of survey respondents are already experiencing the impact of digitilization on their jobs, and an even higher number –- over 70% — feel that digitilization will affect their careers, most consider themselves unprepared for these changes. Yet this isn’t a cause for worry for most, as two-thirds of respondents in all age groups consider digitilization an opportunity for career development, higher earnings, and better work-life balance. Interestingly, the same number of respondents –- only 6% — across all age groups see digitilization as a threat.

The crucial point that Raynaud made to guests was that while skilled workers in Greater China consider themselves unprepared, over 60% of Taiwanese and Chinese professionals and 49% of Hong Kong professionals expect to learn how to navigate the digital era through on-the-job training. Opportunities for learning and career advancement play a critical role in employees’ job decision-making, but less than 20% of respondents across all age groups consider that their jobs are actually preparing them adequately. 37% of respondents in Taiwan said that they are not being prepared at all, while 45% said that at least their companies are trying to prepare them.

According to Raynaud, opportunities for digital skills acquisition will likely lead to winners and losers in the hunt for talent in Greater China. Already nearly 20% are planning on changing jobs in 2018 in Taiwan, and 55% are open to new opportunities, and that older workers were as open to new opportunities as younger ones.

In this new digital landscape, good leadership will retain its importance, but will likely be deemphasized as agility, fast decision-making processes, and a more customer-centric approach to business rise in significance.

Raynaud concluded that digital skills are a mindset, and that embracing change and opportunity is the only way to stay ahead of the curve.

From left to right: AmCham Supervisor & Public Health Committee Co-Chair, Joyce Lee, General Manager, Bristol-Myers Squibb (Taiwan) Ltd.; AmCham Taipei President, William Foreman; Speaker Christine Raynaud, CEO, Morgan Philips Greater China; and AmCham Advisor of Advanced Learning Lab, William Zyzo, Managing Director of Z&A Knowledge Solutions

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Development of Fintech and Regulatory Environment

The development of financial technology (fintech) is designed to enhance the competitiveness of the financial sector, but is accompanied by potential risks that give rise to new regulatory challenges.

To enhance members’ understanding of Taiwan’s fintech development strategies, AmCham Taipei’s Asset Management, Banking, Capital Markets and Insurance Committees jointly invited Wellington L. Koo, Chairman of the Financial Supervisory Commission, to explain the government’s policy measures and their relation to global regulatory trends. Nearly 100 Chamber members and guests gathered to attend the event at The Regent Taipei on April 20.

In a presentation delivered in Chinese, Koo provided an overview of the current status of Taiwan’s financial sector and noted that regulators and supervisors around the world are promoting the growth of fintech while seeking to ensure the safety and soundness of the financial system.

Chairman Koo cited the tasks facing regulators around the world as they respond to the fintech revolution:

  • Providing interactive supervision and responding to the changes in technology
  • Encouraging the development of fintech innovation
  • Fostering new fintech startups by offering training and resources
  • Developing consistent standards and assisting new ventures in transnational development
  • Implementing regulatory technology to provide real-time monitoring of financial operators’ operating activities
  • Combining non-governmental forces to build a comprehensive information sharing and security system

Speaker Wellington L. Koo, Chairman of the Financial Supervisory Commission; William Foreman, AmCham Taipei President; Leo Seewald, AmCham Taipei Standing Vice Chairman; and AmCham Taipei Committee Co-Chairs

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Embracing Disruption: Mapping Out the Future

A wave of change has hit the financial services sector. Banks, insurers and wealth management firms will face greater regulatory uncertainty, tightened profit margins, increasingly empowered consumers, and the entrance of disruptive competitors.

To help financial service firms understand the process of digital transformation, AmCham Taipei’s Banking Committee invited Fred Giron, VP and Research Director at Forrester Research, to share his insights at a seminar held at the Chamber’s Lincoln Room on April 11.

In his presentation entitled “The Future of Financial Services,” Giron gave an overview of how digital technologies have changed the way consumers and businesses interact with each other. In a recent survey conducted by Forrester, 50% of North American and European companies said they believe technological changes (digital transformation) will dominate business decision-making in the near future. Giron noted that financial services firms need to digitize their business strategies and choose how they will adapt to the market in order to stay competitive.

From left to right: Speaker Fred Giron, VP and Research Director at Forrester Research and AmCham Taipei President William Foreman

Giron outlined the four rules of digital transformation:

  • Digital experience: deliver experiences that are easy, effective, and emotional
  • Digital operations: reconceive products and capabilities to deliver better outcomes
  • Digital innovation: continuously improve and break through at the digital frontier
  • Digital ecosystems: build platforms and partnerships to accelerate and scale up

The speaker gave several case studies to demonstrate how financial service and insurance companies have digitized their service models. In these examples, successful companies leveraged their assets to generate insights and value for their businesses. He also emphasized the importance of “being the integrator” and creating value-added services that solve customers’ immediate needs rather than merely providing service add-ons.

The Lincoln Room is made possible by the generosity of a number of sponsoring companies:

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Smooth Flying for the Global Economy

Even if a flight is smooth, airlines generally recommend keeping your seatbelt fastened in case of any unexpected turbulence. The life jacket beneath the seat is strictly in case of dire emergency.

So it goes for investing in today’s global economy, said Tai Hui, managing director and chief market strategist Asia for J.P. Morgan Funds in his recent presentation to AmCham members at a presentation entitled 2018 Global Economic Outlook: End of the Road or More Room to Run?

From left to right: Speaker Tai Hui, Asia Chief Market Strategist, Asia, J.P. Morgan Asset Management; AmCham’s Governor & Asset Management Committee Co-Chair Christine Jih, Chairman & Chief Executive Officer, BNP Paribas Investment Partners Taiwan Co., Ltd.; Eddy Wong, Managing Director, Head of JPMorgan Asset Management Taiwan

“You don’t know when the flight will get bumpy, and the investment world is very similar,” Hui said at AmCham’s Asset Management & Capital Markets Joint Committee luncheon on March 27 at the Grand Hyatt. “We have to put our seatbelts on – we cannot be complacent. You wear a seatbelt by having a diversified portfolio” that spreads out risks of sudden downturns.

The global economy is maintaining its growth momentum, with synchronized growth expected around the world following from 2017’s strong performance. Extending his flight analogy, Hui said that markets were climbing in 2017, but now they’ve reached cruising altitude. “It’s not the time to worry about wearing a life jacket,” he reassured investors worried about the recent trade spat between the United States and China or about U.S. President Trump’s imposition of tariffs on a number of imports, including steel.

The factors that lead him to remain bullish on investments in 2018 are inflation figures that remain at or below targets in markets around the world, even in the United States, despite the economy operating at nearly full capacity. Wage growth remains sluggish in the United States, where union activity is at an all-time low and the rising “gig economy” of Uber drivers, etc., has crimped wage hikes. But nearly full employment will nevertheless lead to creeping inflation, and Hui anticipates the U.S. Federal Reserve raising interest rates to tighten up the money supply and keep inflation within bounds. Although rising interest rates are often a cause for concern for investors, Hui noted that “when the Fed raises rates, it’s a vote of confidence in the economy.”

For the same reason that tighter money supply points to a stronger business climate, he also parted with conventional wisdom that equities take a hit during money tightening. And while equities in the United States are not cheap, he told audience members that equities on Asian markets are earning 30% more per share than their American counterparts, an attractive bargain. Still the 20% boost to revenues that U.S. companies are currently enjoying thanks the to the Trump tax plan likewise makes them viable targets, and investors now have a wealth of choices.

Even fixed-income products such as bonds are doing well, he noted.

Key concerns are the risk of protectionism or even a trade war between the United States and China, but Hui said that recent negotiations between the two economic behemoths should reassure investors that they will likely work things out. A trade war would contribute to inflation on both sides of the Pacific to potentially disastrous results.

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A Collaborative Approach to Food Safety

Two experts note how improved indusry-regulator communications helped in the U.S.

Food safety issues have continued to plague Taiwan, despite comprehensive efforts by the regulatory agencies following the waste-oil scandals of 2014 to upgrade and enhance food safety surveillance. At the same time, the food industry complains that many of the regulations and practices put into place to ensure that Taiwan’s food is safe and free of both contamination and fraudulent ingredients are unreasonable and ineffectual, entail great costs for food producers and sellers, and offer minimal benefits to consumers.

Relations between industry and regulators, including the Taiwan Food and Drug Administration, the Council of Agriculture, and the Customs Administration, continue to be testy, with little collaboration or cooperation.

There’s got to be a better way.

On March 12, AmCham Taipei’s Retail Committee, in association with Costco Wholesale Corp. Taiwan, invited visiting U.S. experts to describe a more cooperative approach to food safety at a forum entitled “Effective Advocacy on Food Safety.”  Michael Taylor, a former deputy commissioner of Foods and Veterinary Medicine at the U.S. Food and Drug Administration, and Craig Wilson, vice president of Quality Assurance and Food Safety for Costco Wholesale Corp., discussed how industry, government, and consumer groups in the United States collaborated on creating the comprehensive legal and regulatory framework, the Food Safety Modernization Act (FSMA).

From left to right: AmCham Taipei President William Foreman; Speaker Michael Taylor, Former Deputy Commissioner at Foods and Veterinary Medicine at the U.S. Food and Drug Administration; Craig Wilson, Vice President, General Merchandising Manager of Quality Assurance / Food Safety, Non-Foods Quality Assurance, Environmental Services /Haz Mat and Merchandise Services, Costco Wholesale Corporation

“We saw tremendous alignment of government, industry, and consumers along the goal of making the food supply as safe as we could, and put in place modern standards,” said Taylor, who oversaw the entire process. The FSMA was signed into law by President Obama in 2011 and its implementation continues today.

But getting to that point wasn’t easy, Taylor recounted. He said that an outbreak of E.coli contamination in a popular fast food restaurant chain in the early 1990s, which killed four children and permanently injured more than 500 others, forced the U.S. Department of Agriculture and the beef industry to acknowledge “that you cannot fight the goal of food safety,” said Taylor.

“It triggered a mindset shift,” he explained. While previously industry and government had operated on the assumption that contamination was an inevitable reality and that consumers were responsible for ensuring the adequate preparation of their own food, “it is now widely accepted that its industry’s responsibility to do everything it can to make the food safe for consumers.”

Further outbreaks in the mid-2000s involving leafy green vegetables and other foods also triggered efforts by regulators and industry to collaborate on improving food safety monitoring. An outbreak of salmonella in a wide range of peanut products that killed nine people and severely sickened thousands, however, was the final straw. The food industry actually approached Congress to say: “We need our industry better regulated.”

The result was the FSMA. Signing the law, however, was just the beginning of the process, as the legal concepts needed to be converted into concrete regulations. Once again, “enormous collaboration between industry and government was required to get these regulations right,” said Taylor. “Now we are working to achieve comprehensive compliance.”

Could such an approach work in Taiwan? Neither presenter was willing to state that the model would definitely be applicable to Taiwan’s specific culture or food market. Yet perhaps more open communication between the authorities and the private sector could enable Taiwan to make faster progress in enhancing food safety.

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Labor Inspection Enforcement Seminar

The latest amendments to the Labor Standards Act went into effect on March 1, 2018. This regulation has sparked a great deal of controversy and uncertainty. In order to protect the interests of both companies and employees, corporate HR departments need to be equipped with a full knowledge of the new labor rules and how they will be implemented.

To help provide that information, on February 26 AmCham Taipei’s Human Resources Committee invited Chiang Ming-chih, director of the Taipei City Labor Inspection Office, and Hu Hua-tai, director of the New Taipei City Labor Standards Inspection Office, to explain how the labor inspection system will be carried out and to take questions from the audience. Over one hundred Chamber members and guests gathered at The Sherwood Taipei for this event.

The two directors specified that organizations with the following conditions will be placed at the top of the list for inspection:

  • Having been previously reported for violation of labor laws
  • Using a shift system
  • Having non-standard working hours
  • Hiring hourly-rate or part-time workers

During the panel discussion, the majority of the questions focused on practical issues that arose from past experiences, ranging from the calculation of working hours to wage payment deadlines.

Chiang and Hu strongly urged HR managers to establish an effective internal communication channel and to reinforce employee management as the key to resolution of workplace disputes.

From left to right: AmCham HR Committee Co-chair Seraphim Ma, Senior Partner, Baker & McKenzie; Hu Hua-Tai, director of the New Taipei City Labor Standards Inspection Office; Chiang Ming-chih, director of the Taipei City Labor Inspection Office; AmCham HR Committee Co-chair Vicky Chen, Head of Human Resources, Standard Chartered Bank (Taiwan) Ltd.; and AmCham Taipei President William Foreman.

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Insurance Committee Presentation Focuses on Fintech

According to the World Economic Forum, the growing use of financial technology (fintech) is expected to bring disruptive innovation to the world of finance, increasing efficiency and lowering the costs of financial services. Fintech is already the focus of serious attention in many countries, and Taiwan is no exception.

At a luncheon meeting organized by AmCham Taipei’s Insurance Committee at The Sherwood Taipei on December 14, Jennifer Wang, Vice President and the Distinguished Chair Professor of National Cheng-Chi University, gave attendees an update on current developments in fintech in Taiwan. Since introducing the relevant regulations early this year, the Taiwanese government has been encouraging enterprises, both financial institutions and start-ups in various industries, to participate in this new field. Having more companies involved in the current experimental stage for fintech in Taiwan is seen as enabling the authorities to refine the regulations to make them as effective as possible.

From left to right: AmCham Taipei President Andrea Wu; Speaker Professor Jennifer Wang; AmCham Taipei Insurance Committee co-chairs Dan Ting, Chairman of Hotai Insurance and Linda Tsou from Cigna Taiwan Life Assurance.

Wang, a former Vice Chairman of the Financial Supervisory Commission, said fintech offers hope of bringing the following benefits:

  • Lowering the costs of financial services
  • Collecting big data and financial information to analyze
  • Providing customized financial services based on the collected data
  • Enhancing supervision of the financial sector and preventing financial crimes