Dealing with Disasters: Taiwan Business TOPICS September 2014

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號執照登記為雜誌交寄

www.amcham.com.tw

Taiwan Business

Topics

ISSUE SPONSOR

NT$150

September 2014 | Vol. 44 | Issue 9

Published by the American Chamber Of Commerce

In Taipei

• Special Report: Conference on TPP• Industry Focus: Finance

災害處理災害處理

DEALING WITH DISASTERS

9_2014_Cover.indd 1 2014/9/3 5:33:27 PM

4 taiwan business topics • september 2014

NEWS AND VIEWS

C O N T E N T S

SEpTEmbEr 2014 vOlumE 44, NumbEr 9一○三年九月號

Publisher 發行人

Andrea Wu 吳王小珍

Editor-in-Chief 總編輯

Don Shapiro 沙蕩

Associate Editor 副主編

Tim Ferry 法緹姆

Art Director/ 美術主任/Production Coordinator 後製統籌

Katia Chen 陳國梅

Manager, Publications Sales & Marketing 廣告行銷經理

Caroline Lee 李佳紋

Translation 翻譯

Jay Chen, Yichun Chen, Agnes Chiu, Jackie Lin

陳正杰,陳宜君,邱意豪,林文婷

Chairman/ Thomas FannVice Chairmen/ Scott Meikle / William J. Farrell Treasurer: Cosmas Lu Secretary: Fupei Wang

2013-2014 Governors:Thomas Fann, William Farrell, Ajit Nayak, Neal Stovicek, Stephen Tan, Fupei Wang, Bill Wiseman.

2014-2015 Governors: William E. Bryson Jr., Sean Chao, Rodney Van Dooren, Douglas Klein, Cosmas Lu, Scott Meikle, Dan Silver, Ken Wu.

2014 Supervisors: Anita Chen, Midee Chen, Joseph Lin, Louis Ruggiere, Vincent Shih.

COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Derek Yung; Banking/ Victor Kuan; Capital Markets/ Miranda Liaw, C.P. Liu, Shirley Tsai; Chemical Manufacturers/ Michael Wong; CSR/ Lume Liao, Fupei Wang; Customs & International Trade/ Stephen Tan; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Cosmas Lu; Human Resources/ Richard Lin, Seraphim Mar, Vickie Chen; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Arthur Cozad, Joseph Day, Dan Ting; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Vincent Shih; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, Tse-Mau Ng, Dan Silver; Pharmaceutical/ Margaret E. Driscoll, David Lin, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin; Real Estate/ Tony Chao; Retail/ Wern-Yuen Tan, Prudence Jang, Ajit Nayak; Sustainable Development/ Kenny Jeng, Kernel Wang; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, Scott Meikle, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, Achim v. Hake.

American Chamber of Commerce in Taipei

129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, TaiwanP.O. Box 17-277, Taipei, 10419 TaiwanTel: 2718-8226 Fax: 2718-8182 e-mail: [email protected]: http://www.amcham.com.tw

名稱：台北市美國商會工商雜誌發行所：台北市美國商會

臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182

Taiwan Business TOPICS is a publication of the American Chamber of

Commerce in Taipei, ROC. Contents are independent of and do not

necessarily reflect the views of the Officers, Board of Governors,

Supervisors or members.

© Copyright 2014 by the American Chamber of Commerce in Taipei,

ROC. All rights reserved. Permission to reprint original material must

be requested in writing from AmCham. Production done in-house,

Printing by Farn Mei Printing Co., Ltd.

登記字號：台誌第一零九六九號

印刷所：帆美印刷股份有限公司

經銷商：台灣英文雜誌社台北市108台北市萬華區長沙街二段66號

發行日期：中華民國一○三年九月

中華郵政北台字第5000號執照登記為雜誌交寄

ISSN 1818-1961

6 Editorial A Valuable Reminder 台灣經濟的一帖良藥

7 Taiwan Briefs By Jane Rickards

SPECIAL REPORT12 Maintaining Taiwan’s Trade

RelevanceAmCham co-organizes a conference to help foster Taiwan’s participation in key regional trade groups. By Don Shapiro

TAIWAN BUSINESS

27 Wanted: a New Home for Petrochemicals In the wake of the Kaohsiung disaster, a proposal is being dis-cussed to set up a specialized industrial zone for petrochemical plants.

By Jens Kastner

ANALYSIS

30 In Search of Economic EqualityHigh property prices, the influx of money earned in China, and other factors mean the inequal-ity gap in Taiwan is more pro-nounced in terms of wealth than of income.

By Timothy Ferry

COVER SECTION

16 Dealing with Disasters 災害處理 Taiwan has done quite well in

recent years in mitigating the con-sequences of natural disasters such as typhoons, but the recent chemi-cal explosion in Kaohsiung drove home the need to pay greater attention to major industrial acci-dents and other catastrophes. What should Taiwan be doing to ensure that it is better prepared to handle future challenges in disaster management?

By Don Shapiro

21 Attending to Air Safety26 Preparing for Pandemics 26 The Private Sector Role

coVer pHoto: ap/ waLLY santana

9 Contents.indd 4 2014/9/3 5:39:11 PM

Standard Chartered is a leading international banking group, with more than 86,000 employees and a 150-year history in some of the world’s most dynamic markets. We bank the people and companies driving investment, trade and the creation of wealth across Asia, Africa and the Middle East, where we earn around 90% of our income and profits. Our heritage and values are expressed in our brand promise: Here for good.

Standard Chartered PLC is listed on the London and Hong Kong Stock Exchanges as well as the Bombay and National Stock Exchanges in India.

In Taiwan, after three incorporations between 2006 and 2008, Standard Chartered Bank (Taiwan) Limited now has 88 branches across the country, with 80% of the branches located outside Taipei to offer full coverage of service to individual and corporate clients in Taiwan. Currently nearly 4,000 staff in Taiwan offer clients with innovative and all-round service and products. Since its estab-lishment in 1985, the Bank has reached various milestones in business, including being one of the first in the industry to complete cross-border RMB lending deal for Taiwanese corporates in Kunshan, China, as well as the largest lender to SMEs among international banks.

The Bank also established various milestones by its solid sustainability agenda. In 2014, the first Taipei Standard Chartered Charity Marathon success-fully attracted more than 36,000 runners, including 200 visually impaired partici-pants, to run for a reason. Standard Chartered also held an annual “FT-Standard Chartered Economic Summit” since 2013, providing a platform for constructive dialogue regarding Taiwan’s economy. In 2014, the “FT-Standard Chartered Economic Award” was also launched to recognize the contribution of corpo-rates, particularly SMEs, the backbone of economic growth, in the areas of eco-nomic growth, corporate social responsibility and entrepreneurships.

For further information please visit www.sc.com.tw.

Driving investment, trade and the creation of wealth across

Asia, Africa and the middle East

Standard Chartered

COvEr SpONSOr

By Jamal Maddox and Philip Liu

36 A Housecat Among Tigers? Taiwan’s underperforming capital markets

now enjoy a more favorable regulatory environment, but some question whether that be enough to overcome some weak fundamentals.

38 A Visit to the Taiwan Stock Museum

40 A Weak Venture Capital Industry Deters Startups

The National Development Fund plans to partner with leading foreign VC firms to provide more support in Taiwan for new enterprises.

43 Does Taiwan Need a Sovereign Wealth Fund?

Advocates maintain that an SWF would help bring about better performance for the five public pension funds.

taiwan business topics • september 2014 5

september 2014 • Volume 44 number 9

AMCHAM EVENT

46 2014 CSR Forum Focuses on Social Enterprises

By Philip Liu

INDuSTrYF CuS

Special Report on the Financial SectorStocks, venture Capital, and

Sovereign Wealth

9 Contents.indd 5 2014/9/3 5:39:13 PM


經濟學家威爾遜任職於美國華盛頓特區，是傳統基金會

智庫的資深研究員，他呼籲大家正視台灣目前所面臨

的經濟挑戰，並以含有引用大量資料的分析框架作為

佐證。事實上，對於定期關注台灣經濟情況的人而言，這份報

告的主要重點並不陌生。

此份報告值得撥冗一讀，全文網址請參考：http://report.

heritage.org/bg2930。簡而言之，根據報告結論，過去幾十年

來台灣的經濟成長力道嚴重減緩。雖然經濟成長減弱在一般成

熟經濟體之中頗為常見，然而在台灣，由於服務業因生產力不

足所苦而積弱不振，使得台灣經濟成長減緩的現象更加顯著。

相比之下，香港及新加坡已具有國際水準的服務業，在製造業

無可避免地面臨萎縮之際適時填補了製造業的缺口，對經濟發

展可謂貢獻良多。威爾遜過去曾任安永會計師事務所的首席經

濟學家，他指出在過去十年來，台灣在世界貿易中所佔比例已

經衰退了三成。

此外，在外國直接投資(FDI)中，「外資對台投資」與「台

灣對外投資」比例的嚴重失衡亦加重了台灣的經濟壓力。2000

至2012年間，台灣對外投資總額高達1,650億美元，是外資對

台投資總額的四倍以上；此外，由於台灣是世界上人口迅速老

化情形非常嚴重的國家，可預見在接下來的幾十年之中，勞動

人口將不斷減少，無疑將使經濟力不足的問題雪上加霜。

威爾遜同時指出，台灣經濟過度依賴中國大陸的特性，更放

大了其他問題的嚴重性，不僅使台灣在政治與經濟上日益邊緣

化，更使台灣面臨成為中國大陸「經濟附庸屬體」的危機。這

幾年來，中國大陸不但已經是台灣的主要出口市場國，去年更

超越日本、成為台灣最大的進口來源國。此外，自2002年至

今，每年台灣對中國大陸的投資金額都佔對外投資總額的六成

以上。台灣在海峽兩岸的大量投資，使中國大陸在台灣製造業

的供應鏈中，成為至關重要的核心。

目前亞太地區自由貿易協定與區域貿易協定日益普及的趨

勢，也值得注意，各國紛紛締結貿易夥伴的現象，更凸顯台灣

被孤立在外的處境，使投資人對台灣未來經濟發展的信心大打

折扣。

「台灣現在迫切需要的，是在國內營造一個更符合自由貿

易氛圍的改革方案。」威爾遜以此作為總結。針對改善台灣經

濟，他提出許多具體的建言，例如鼓勵科技軟體研發進而刺激

國內軟體業及服務業發展、確保能源穩定供給、加強投資保護

措施吸引外資對台投資、促進國內消費進而降低台灣依賴對外

貿易的程度、多與他國簽訂區域自由貿易協定，並提高台灣處

於「危險新低」的低生育率。

其實，若將上述的「經濟處方箋」與本商會過去每年在年

度《台灣白皮書》中所提出的諸多建議兩相對照，可以說英雄

所見略同。平心而論，台灣政府在政策方向上已經做出許多努

力，然而，威爾遜的報告仍是重要的金玉良言，提醒大家正視

台灣經濟所面臨的嚴峻挑戰，以及將其導回正軌使經濟穩健發

展的刻不容緩。

Although the key points presented are not new to those regu-larly following economic conditions in Taiwan, a recent paper by economist William T. Wilson, a senior research

fellow at the Washington, D.C.-based think tank The Heritage Foundation, helps call attention to Taiwan’s current economic chal-lenges by providing a data-heavy analytical framework.

The full paper, which can be found on the Heritage website at http://report.heritage.org/bg2930, is worth reading. But to summarize, Taiwan’s economic growth has been decelerating for the past several decades. While that phenomenon is common to maturing economies, it has been especially pronounced in Taiwan due in part to the weakness of the service sector, which is domes-tically oriented and “plagued by low productivity.” In Hong Kong and Singapore, in contrast, the internationally competitive service sectors have contributed significantly to economic develop-ment, taking up the slack as the role of manufacturing inevitably contracts. Wilson, a former chief economist for Ernst and Young, notes that Taiwan’s share of world trade has actually declined by 30% over the past 10 years.

Adding to the pressure on the economy has been the disparity between inbound and outbound foreign direct investment (FDI). Between 2000 and 2012, Taiwan’s outbound investment of US$165 billion was more than four times the level of incoming investment. At the same time, since Taiwan is one of the fastest-aging coun-tries in the world, a shrinking workforce in the decades ahead will further take a toll in terms of economic dynamism.

Taiwan’s economic over-dependence on China exacerbates the other problems, increasing both political and economic vulner-

ability and threatening to turn Taiwan into China’s “economic vassal,” says Wilson. Not only has China been Taiwan’s major export market for some years already, but last year the mainland passed Japan to become the largest source of imports into Taiwan. And every year since 2002, Taiwan has sent a least 60% of its outbound FDI to China. The huge amount of Taiwanese invest-ments across the Strait “has made China central to the supply chains of Taiwanese manufacturers.”

Another noteworthy trend is the proliferation of free trade agree-ments and regional trade agreements in the Asia Pacific – a trend that so far has largely left Taiwan increasingly isolated on the side-lines, undermining investor confidence in future economic prospects.

“What Taiwan critically needs is a domestic reform agenda with a strong free-market disposition,” Wilson concludes. He suggests adopting such policies as encouraging more IT software R&D to boost the local software and service industries, ensuring a balanced mix of energy sources, enhancing investment-protection measures and doing more to promote inward FDI, reducing reliance on foreign trade by promoting domestic consumption, undertaking more FTAs with other countries in the region, and raising Taiwan’s “dangerously low birth rate.”

That prescription matches many of the suggestions that AmCham Taipei has previously recommended in its annual Taiwan White Paper. And in fairness, the Taiwan government is already taking steps in many of those policy directions. Still, Wilson’s report is a valuable reminder of the severity of the challenges confronting the Taiwan economy and the urgency of getting it back on the path of strong and balanced growth.

A Valuable Reminder

台灣經濟的一帖良藥

E d i t o r i a l

9_Editorial.indd 6 2014/9/3 4:53:51 PM

t a i w a n b r i e f s


— by jane rickards —

M A C R E C O N O M I C S

taiwan: trenDinG UPwarD

Taiwan’s economic outlook is gleam-

ing brighter, with various economic

institutions raising their GDP forecasts.

The official statistics agency, the Direc-

torate General of Budget Accounting

and Statistics (DGBAS), in mid-August

raised its GDP forecast for this year to

3.41%, up from an earlier forecast of

2.98%, citing Taiwan’s booming tour-

ist industry. It also predicts that global

demand for semiconductors –Taiwan’s

specialty – and other electronic compo-

nents will grow in the second half of

the year. Manulife Asset Management

is even more optimistic, putting this

year’s GDP growth at 4.1%. Arriving at

the same figure, Barclay’s says Taiwan’s

economic performance in the second

quarter of this year was better than

expected (the DGBAS has the economy

growing at a healthy 3.74% pace in the

second quarter). DBS Bank is projecting

GDP growth of 3.5%.

Why are these institutions raising

their economic forecasts for Taiwan at a

time when other North Asian countries

are downgrading their economic projec-

tions and rolling out stimulus measures

to prop up growth? Reuters reports that

economic prospects for export-depen-

dent Taiwan will be bolstered this year

by the launch of new tech products,

particularly Apple’s widely-anticipated

iPhone 6, which is expected to be intro-

duced in the fall. According to DGBAS,

Taiwanese suppliers – at least 20 compa-

nies – will be manufacturing the bulk

of the components and accessories for

the device. More broadly, DGBAS is

expecting worldwide demand for semi-

conductors to improve, largely for use in

mobile devices such as new-generation

smartphones. The upcoming Christmas

buying season in Western countries is

also expected to help sustain Taiwan's

economic momentum. Although DGBAS

views the world economy this year as

improving overall, it also notes that

international competition is heating

up and that instabil i t ies in emerg-

ing markets may act as a constraint on

Taiwan’s export growth.

For the month of July, Taiwan’s

exports grew by 5.8% year-on-year to

reach US$ 26.77 billion, while imports,

at US$24.16 billion, rose 9.5%. Elec-

tronic products, which accounted for

31.7% of all exports in July, amounted

to US$8.4 billion, up 16.7%, one of the

largest increases among Taiwan’s export

categories. Exports of semiconduc-

tors reached US$6.22 billion, a record

monthly high.

July export growth to Taiwan’s larg-

est markets, the United States and China,

at 2.4% and 6.5% year-on-year respec-

tively, was relatively subdued, but this

could improve as the tech cycle picks up.

Exports to Europe and the ASEAN-6

nations leaped by 8.9% and 9%, respec-

tively. Export orders, a sign of shipments

to come in the next few months, came

to US$38.18 billion for growth in July

of 5.7% year-on-year. The industrial

production index posted an increase

of 6.08% in July. Economists said the

recent Kaohsiung gas explosions will

have little impact on the economy.

Unemployment remained low and

steady. The unemployment rate rose by

0.10 percentage points to 4.02% for

July, DGBAS said. Seasonally adjusted,

the rate fell by 0.02 percentage points to

3.95%. DGBAS is predicting low infla-

tion, forecasting a 1.64% rise in the

consumer price index (CPI) this year.

C R O S S - S T R A I T

MaC DePUtY sUsPeCteD Of LeaKs tO CHina

Chang Hsien-yao, former princi-

pal deputy minister of the Mainland

Affairs Council (MAC) and one of the

lead negotiators with China in several

key cross-Strait trade pacts, was put

under investigation by the Taipei District

PLUGGING LEAKS — Chang Hsien-yao, former MAC deputy minister, reports to prosecutors investigating him on suspicion of leaking information to China during trade talks.

photo: cna

July

THE RED LINE SHOWS CHANGES IN TURNOVER AND THE SHADED AREA CHANGES IN THE TAIEX INDEX.

7500775080008250850087509000925095009750

30

45

60

75

90

105

120

135

150

165

Taiwan sTock exchange index & value

Unit: nt$ billiondata source: twse

9_Briefs.indd 7 2014/9/3 4:57:15 PM



Prosecutors Office on suspicion of leak-

ing state secrets. Chang had initially

resigned on August 16, with his depar-

ture explained by the government as

being for family reasons. But Chang later

sent text messages to reporters saying

he had been forced out by MAC Minis-

ter Wang Yu-chi. MAC then stated

that Chang had been “removed and

subjected to an administrative inves-

tigation,” due to suspicions related to

his work. As secretary-general and vice

chairman of the semi-official Straits

Exchange Foundation, positions which

he held simultaneously with his MAC

position and from which he has also

resigned, he was instrumental in nego-

tiating the highly controversial cross-

Strait services pact. MAC then notified

the Investigation Bureau of the Ministry

of Justice about its suspicions, but the

Bureau concluded there was insufficient

evidence to proceed. However, the case

was taken up by the Taipei District Pros-

ecutors Office, which imposed both a

travel ban and curfew on Chang. Chang

has cooperated with prosecutors while

strenuously protesting his innocence

on television and in press conferences,

insisting that he is being framed. As

Chang was highly instrumental in the

cross-Strait services agreement, some

pundits are saying the case puts the pact

in jeopardy.

Chang’s case follows the resigna-

tion in July of Minister of Labor Pan

Shih-wei, who stepped down after a

local magazine reported that he had

been engaged in an extra-martial affair.

Pan not only denied the report as a

“malicious fabrication,” but blamed

unnamed officials in the ministry for

spreading the rumors in an attempt to

undermine him.

D O M E S T I C

PenGHU PLane CrasH LeaVes 48 DeaD

A TransAsia Airways passenger jet

crashed when it was preparing to land

on the outlying island of Penghu in late

July, killing 48 people. Two of the dead

were French nationals. The plane, an

ATR 72 turboprop, with 54 passengers

and four crew on board, crashed into a

residential area near the Magong Airport

runway. Ten survivors were injured and

taken to the hospital. The plane, which

departed from Kaohsiung, was flying in

a thunderstorm in the wake of Typhoon

Matmo, but authorities from the Civil

Aviation Administration (CAA) said

the weather was still suitable for flying.

Taiwan’s Aviation Safety Council has

launched a formal investigation, but as

of press time had reached no definite

conclusions.

enOrMOUs Gas bLasts rOCK KaOHsiUnG

A series of explosions erupted in

Kaohsiung, Taiwan’s second largest city,

at the end of July, killing at least 30

people and injuring more than 300 in

Taiwan’s worst-ever industrial accident.

The force of the midnight blast in the

city’s downtown Cianjhen and Lingya

districts tossed cars in the air, destroyed

four kilometers of roads, and set residen-

tial blocks ablaze. Flames that erupted

from manholes reached heights of 15

stories. By the next morning, most of the

blazes had been extinguished and over

DISASTER ON PENGHU — The scene of the TransAsia Airways flight that crashed into a residential neighborhood July 24 in stormy weather, killing 48 passengers, with 10 survivors hospitalized.

photo: ap/wally santana

economic indicaTors

Unit: US$ billion Year Earlier

Current Account Balance (QII 2014) 16.47 14.03

Foreign Trade Balance (Jan.-July) 18.78 17.91

New Export Orders (July) 38.182 36.116

Foreign Exchange Reserves (end July) 423.66 409.1

Unemployment (July) 4.02% 4.25%

Discount Rate (July) 1.875% 1.875%

Economic Growth Rate (Q1 2014)p 3.14% 1.44%

Annual Change in Industrial Output (June) 8.63% -0.52%

Annual Change in Industrial Output (Jan.-June) 4.48%

Annual Change in Consumer Price Index (June) 1.61% 0.74%

Annual Change in Consumer Price Index (Jan.-June) 1.21% 1.31%

sources: moea, dGbas,cbc, boFtp=preliminary

9_Briefs.indd 8 2014/9/3 4:57:15 PM



12,000 people were displaced from their

homes and forced to live in shelters, the

Central News Agency reported.

A few hours be fore the b las t s ,

Cianjhen residents reported smell-

ing powerful chemical odors . The

Kaohsiung City Government said the

explosions were caused by leaks from

an underground pipeline carrying the

highly flammable gas propylene, which

is used in the manufacture of plas-

tics. Amid growing public anger, the

city’s Environmental Protection Bureau

faulted petrochemical company LCY

Chemical Corp. for not reporting a

sudden and abnormal drop in pres-

sure in the pipeline that supplied LCY

with the gas. LCY said in a statement it

would accept any responsibility it needs

to bear if final investigations show that

it was at fault. “We more than anyone

want to know the cause,” the statement

said. In late August, LCY Chairman

and CEO Bowei Lee was questioned

for six hours by prosecutors, then listed

as a potential defendant in the case.

He was released on NT$20 million

(US$667,000) bail.

In the immedia te a f t e rmath o f

the incident, the public was alarmed

that no government agency seemed to

have a record of the location of pipe-

lines running through the city, and

that neither the Ministry of Economic

Affairs (MOEA), which regulates the

petrochemical industry, nor the Kao-

hsiung City Government appeared to

be taking responsibility. MOEA Minis-

ter Chang Chia-juch resigned several

days later and was replaced by Deputy

Minister Woody Duh. But the Kao-

hsiung District Prosecutor’s Office,

which is investigating the explosions, is

also looking into whether some blame

lies with the city government for allow-

ing parts of the pipeline in question to

be exposed to a rainwater culvert, lead-

ing to corrosion. Four city government

officials have also resigned.

The explosions raised fears about

the integrity of the extensive network

of underground pipelines in Kaohsiung,

which has been a petrochemical process-

ing center for decades. President Ma

Ying-jeou has directed the government

to carry out an inventory and inspections

of all underground pipelines in Taiwan.

The government is also mulling relocat-

ing the entire Kaohsiung petrochemical

industry to a separate zone away from

heavily populated areas. Premier Jiang

Yi-huah said in late August that the plan

could not be finalized before the central

government had solicited more opinions

from both Kaohsiung residents and the

city government.

twO KiLLeD in Gas eXPLOsiOn in XinDian

In mid-August , two people – a

16-month-old boy and his grandmother

– were killed in a gas explosion, which

occurred in a high-rise residential build-

ing in New Taipei City’s Xindian district.

Dozens were also injured. The New

Taipei City Fire Department said the

explosion occurred in an apartment on

the building’s third floor, after leaking

natural gas caused a fire. Firefighters

were unable to pinpoint whether the leak

came from the natural gas pipe leading

into the apartment, which would be the

responsibility of gas company Shin Shin

Natural Gas, or instead occurred in a

section of the pipe inside the apartment.

While prosecutors were investigating,

Shin Shin cut off its supply of natural gas

to the apartment block for a few days

after the explosions and checked the

pipelines for breaches.

DPP reViewinG its inDePenDenCe CLaUse

The national congress of the opposi-

tion Democratic Progressive Party (DPP)

at the end of July debated a formal

proposal from 40 senior DPP members

to freeze a longstanding clause in the

party charter calling for an independent

Republic of Taiwan – an independent

nation wholly separate from China.

Debate was fierce, and a handful of die-

hard independence supporters protested

outside the venue. DPP chairwoman

Tsai Ing-wen deflected tensions by shelv-

ing the controversial proposal, saying

the party’s central executive committee

would discuss it in the future.

Supporters of the freeze argue that

since Taiwan is already in fact an inde-

pendent entity, there is no need to seek

a change in name or status. The debate

highlighted how Beijing’s opinion is

becoming increasingly influential in

Taiwan as cross-Strait economic inte-

gration increases. Beijing has threatened

to respond to a formal declaration

of independence by Taiwan with an

THE AFTERMATH — Workers clean up the site of a gas explosion in a residential building in Xindian that left two dead, including an infant. An investigation is ongoing.

photo: cna

9_Briefs.indd 9 2014/9/3 4:57:16 PM



invasion. Although Tsai, a likely pres-

idential candidate, is constrained by

hardliners, analysts think the DPP will

eventually adopt a more pragmatic

cross-Strait policy in the lead up to the

presidential elections in 2016 in order

to calm fears among swing voters and

show it is willing to effectively manage

relations with China.

I N T E R N AT I O N A L

COnDOLenCes reCeiVeD OVer Disasters

After the recent deadly gas explo-

sions, American Institute in Taiwan

Director Christopher Marut offered

condolences on the part of the United

States, saying “the people of the United

States stand with the people of Taiwan

during this difficult time.” Japan, the

United Kingdom, and the European

Union also offered their condolences.

In addition, the United States, Japan,

F rance , and the Un i t ed K ingdom

expressed condolences to the fami-

lies of the victims of the plane crash in

Penghu. I am “deeply saddened,” said

the newly arrived Japanese de facto

ambassador Mikio Numata, in a letter

to his Taiwanese counterpart in Japan.

Numata heads the Interchange Associ-

ation, an unofficial organization that

manages Japan’s relations with Taiwan.

In a related development, the United

States is hoping to expand coopera-

tion with Taiwan on security issues and

values its cooperation with Taiwanese

law enforcement agencies, AIT’s Politi-

cal Section Chief William Klein said at

an international conference on Home-

land Security in Taipei.

B U S I N E S S

CreDit aGriCOLe, nOMUra issUe bOnDs

Japanese financial company Nomura

Holdings and Credit Agricole of France

in mid-August sold their f irst U.S.

dollar-denominated bonds in Taiwan,

in line with an effort by the Finan-

cial Supervisory Commission (FSC) to

diversify international bond issuance.

Nomura’s British business unit, Nomura

Bank International, issued US$325

million in 30-year zero coupon bonds

in Taiwan, which amounted to the first

bond issue in Taiwan from a Japanese

institution in years. Credit Agricole

sold US$270 million of 20-year securi-

ties. The sales came after the Legislative

Yuan in May enacted a law to exclude

locally issued foreign currency bonds

from caps on insurers’ overseas invest-

ments. Bloomberg also reported that

Taiwan corporations have sold renmin-

bi-denominated Formosa bonds worth

RMB4.3 billion (US$699 million) since

the legislature changed the rules in May,

compared with RMB1.5 billion in the

previous four months.

fsC raises LiMit On rMb bOnD issUes

The FSC said in early August that it

had raised the limit on Chinese yuan-

denominated bonds to be issued in

Taiwan this year, amid government

ambitions to make Taiwan an offshore

yuan market, Reuters reported. Regu-

lators said the upper limit on issuance

of Formosa Bonds would be raised to

20-25 billion yuan, up from earlier

plans to set the limit at 10-15 billion

yuan. “We welcome Chinese banks to

sell Formosa bonds,” said FSC chair-

man William Tseng.

GOVernMent taKes OVer strUGGLinG insUrers

The FSC in mid-August placed two

struggling insurers – Global Life Insur-

ance Co. and Singfor Life Insurance Co.

– under government receivership and

said it would protect all policyhold-

ers involved. FSC chairman Tseng told

reporters that the Commission had “no

choice but take the drastic step” for the

sake of “market order and stability.”

The two companies both had seriously

negative net worth and had failed to

come up with effective plans to improve

their finances despite FSC prodding.

The semi-official Insurance Stabili-

zation Fund has been appointed the

official receiver, with support from the

Taiwan Insurance Institute and Central

Deposit Insurance Corp. “Buyers” for

the two insurers will be sought within

nine months through negative public

auctions, a process estimated to require

funding of about NT$50 billion.

20142013

20142013

20142013 20142013

2014201320142013

U.S.

HK/China Japan TOTALASEAN

Europe

Exports Imports UNIT: US$ BillionSOURCE: BOFT/MOEA

71.3

28.3

68.9

25.5

24.5

11.2 19

.833

.9

15.1 16.2

18.2 19

.8

16.8

15.8

18.2

16.9

157.

8 175.

7

161.

4 180.

2

18.4

33.5

11.1

25.8

Taiwan's Jan.-aug. 2014 Trade Figures (Year-on-Year comParison)

9_Briefs.indd 10 2014/9/3 4:57:16 PM


As Taiwan readies itself to s eek membersh ip wi th in the nex t f ew

years in two emerging regional trade groups – the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Part-nership (RCEP) – what lessons can it learn from the experience of other countries around the region?

To help provide an answer, AmCham Taipei and the Taiwan WTO and RTA Center of the Chung-Hua Ins t i tu t ion for Economic Research (CIER) joined forces on August 28 to hold a one-day conference on “Preparing for TPP/RCEP Mem-bership: Experience from Asia Pacific Economies.” The event, held in the CIER auditorium, was supported by the Bureau of Foreign Trade and Ministry of Foreign Affairs, and attracted some 200 attendees, including government officials, business-persons, scholars, and university students.

In opening remarks, CIER President Wu Chung-shu stressed the vital importance to Taiwan of gaining entrance into the two organizations, saying “the cost of exclusion would be unbearable for us,” given the Taiwan economy’s high dependence on international trade. Echoing that senti-ment, Vice Minister of Economic Affairs Cho Shih-chao told the audience that to prevent Taiwan from falling victim to trade isolation, preparing for participation in these regional trade bodies is now “the priority task of our government.” He noted that under an action plan adopted early this year, the government has already completed an analysis of adjustments

that will need to be made in pol-icies and regulations to bring Taiwan in line with standard international practices. “Com-municating with the public and industry to bring about a posi-tive consensus” on the merits of joining these trade organizations “will be an integral part of the process,” he added.

O n b e h a l f o f A m c h a m Taipei, Chairman Thomas Fann expressed the Chamber’s sup-port for Taiwan’s involvement in all free-trade initiatives, but with particular interest in seeing Taiwan join the U.S.-led TPP. As a result, he said, AmCham was pleased to play a part in orga-

nizing the conference, using its contacts with other American Chambers around the region to bring in speakers from Japan, Korea, Singapore, Malaysia, and the Philippines.

In a presentation on Japan’s experience and strategies in joining the TPP negotiations, Bruce J. Ellsworth, vice chair of the Healthcare Committee of the American Chamber of Com-merce in Japan (ACCJ) and senior director of government affairs and policy for Johnson & Johnson, stressed the key role undertaken by ACCJ in helping pave the way for that devel-opment. Part of the effort was aimed at building support for TPP domestically within Japan. The chamber collaborated closely with the Keidanren, the leading Japanese business fed-eration, and other major industry organizations to issue media statements and hold trade symposiums. For several years, TPP was also a main theme of the annual “Diet Doorknock” visits made by ACCJ to members of the Japanese parliament.

AmCham co-organizes a conference to help foster Taiwan’s participation in key regional trade groups.

Maintaining Taiwan’s Trade Relevance

BY DON SHAPIRO

Special RepoRt

AmCham Chairman thomas Fann, head of the Ford Motor joint venture in taiwan, reiterated the Cham-ber's support for taiwan's entry into the tpp.

9 conference.indd 12 2014/9/3 5:14:35 PM


S p e c i a l R e p o R t

Recognizing that initially there was strong opposition within the U.S. Congress to bringing Japan into the TPP – but that many of the objections were based on misinformation – ACCJ also engaged in an active outreach in Washington, D.C., visiting members of Congress and senior U.S. officials. The Washington-based U.S.-Japan Busi-ness Council similarly spread the word on why the inclusion of Japan in the TPP would be in the best interests of the United States and its business community.

Listing “Lessons for Taiwan’s Preparation,” Ellsworth noted that just as ACCJ helped make the case for Japanese participation in TPP to members of the U.S. Congress, AmCham Taipei would be in a position to do the same for Taiwan. But he emphasized that while American chambers can be effective in Washington, it is incumbent on Taiwanese industry and political leaders to “take the lead in showing the benefits of TPP participation domestically.” All trade agreements inevitably disadvantage some sectors of the economy, but their voice should not override the greater good for the wider economy.

As one of the lessons for Taiwan’s reference, Ellsworth also cited the confidence-building measures that Japan employed to overcome suspicions in some quarters in the United States that TPP negotiations would be useless because of several longstanding, unresolved bilat-eral issues that had caused considerable acrimony. Even before it was assured of entry into the TPP negotiations, for example, Tokyo agreed to reduce restrictions on imports of U.S. beef and to substantially increase the import quota for automobiles. Further, Japan’s entrance into the negotiations was based on the understanding that “everything is on the negotiating table.” It was clear that any attempt by Japan to exclude certain sensitive issues from the agenda would lead to strong resistance in the U.S. government and Congress.

Perspectives from Korea

Korea is usually viewed as Taiwan’s chief rival in export markets, and one reason for the anxiety about Taiwan’s inability to enter into many bilateral or multilateral free-trade agreements (FTAs) is that

台北市美國商會共同舉辦研討會，協助推動台灣參與重要區域性貿易組織

維持台灣的貿易地位

撰文／沙蕩

在台灣準備爭取在未來幾年加入兩個正在成形的區域性貿易組織─跨太平洋夥伴協定（TPP）和區域全面經濟夥

伴協定（RCEP）的當下，區域內其他國家的經驗有何可供借鏡之處？為了找尋答案，台北市美國商會和中華經

濟研究院WTO及RTA中心在8月28日共同舉辦一天的研討會，主題為「前進TPP/RCEP：亞太各國參與經濟整合經驗之借鏡」。會議在中華經濟研究院蔣碩傑國際會議廳舉行，經濟部國際貿易局和外交部為指導機關，有大約200人與會，包括政府官員、企業界人士、學者與大學學生。中華經濟研究院院長吳中書在開幕致詞

時，強調台灣必須加入這兩個組織，並說台灣經濟高度仰賴國際貿易，「若被排除在外，後果將不是我們所能承擔」。經濟部次長卓士昭呼應這個說法，指出避免貿易孤立的嚴重後果、做好參與這些區域貿易組織的準備，目前是「我國政府的優先要務」。他說，政府已經根據今年初通過的行動方案，彙整完成要使台灣政策與法規符合國際規範所必須進行的調整。他並說，針對加入這些貿易組織的好處「與民眾和產業界溝通以形成積極共識，將會是這個過程不可少的一部分」。台北市美國商會會長范炘表示，商會支持

台灣參與任何貿易自由化的努力，尤其希望台灣加入美國主導的TPP。他說台北市美國商會因此很高興共同主辦這次研討會，並運用與區域內各國美國商會的關係，邀請日本、韓國、新加坡、馬來西亞和菲律賓的貴賓與會致詞。擔任日本美國商會（ACCJ）醫療委員會副

主席的嬌生集團政府事務暨政策資深主任艾斯沃茲，在會中介紹日本參與TPP談判的經驗與策略。他強調ACCJ扮演為日本參與TPP談判鋪路的關鍵角色。ACCJ所做的努力包括建立日本國內對參與TPP的支持度，例如與日本主要工商團體「經團連」及其他主要企業組織密切合作，發表媒體聲明，並舉辦貿易研討會。而且有好幾年，TPP是ACCJ對日本國會議員進行年度「國會敲門」拜訪時的重要議題。ACCJ體認美國國會內部有反對日本加入

Taiwan is noT YeT in eiTher CirCle

rCeP

Korea

China

Thailand

Philippines

Indonesia

India

Cambodia

Myanmar

Japan

Singapore

Malaysia

New Zealand

Brunei

Australia

Vietnam

Canada

Chile

Mexico

Peru

United States

TTP



14 taiwan business topics • august 2014

Korea has been so successful in that regard that it is establishing itself as what is being referred to as a “regional FTA hub.” It has concluded bilateral FTAs with the United States, European Union, and ASEAN, and its FTA negotiations with China are currently in progress. Although Korea was not among the original 12 negotiating parties in the TPP, it seems assured of a place in the next round. For Taiwan, on the other hand, inclusion in the second round remains a distinct possi-bility but is hardly assured, in large part for political reasons.

Introducing Korea’s FTA strategy at the conference was Amy Jackson, a former U.S. trade negotiator who is now president of AmCham Korea. As key factors in Korea’s FTA successes, she iden-tified the generally strong support from the Korean public (which understood the value of foreign trade by seeing how well Korean companies like Samsung and Hyundai were performing in world mar-kets), the heavy commitment to trade liberalization from the highest levels of government, and the proactive way in which the concerns of domestic constituencies negatively affected by FTAs were addressed. Billions of dollars were spent on measures such as direct subsi-dies, retraining programs, and projects to help certain groups raise their competitiveness – for example, promoting development of a wine industry to benefit grape farmers who were being undersold by imports of table grapes from Chile.

As with Japan and the TPP, Jackson said that the United States was encouraged to pursue an FTA with Korea by Seoul’s willingness to accept a “high-quality” agreement in which all issues would be on the table, at least initially, and by Korea’s acceptance of the need for confidence-building measures to “clear the underbrush” of sticky issues that might otherwise bog down the negotiations.

Jackson mentioned that during the negotiation process, there was often more tension between the executive branch of the Korean gov-ernment and the National Assembly than between the Korean and U.S. governments. At that time, Korea had no equivalent to the Trade Promotion Authority (TPA) that the U.S. Congress usually grants the President in a process that allows the legislators to set certain guidelines and engage in consultations with the executive branch to influence the final shape of the negotiated agreement. She said that such legislation has since been passed, and is very helpful in clarifying the interaction between the two branches of government on trade matters. In Taiwan, similar legislation is being considered in the after-math of controversy over the way in which the cross-Strait trade in

TPP的強大聲浪，而且許多反對的理由出於錯誤的資訊因此ACCJ也在華府積極活動，拜訪國會議員與資深官員。總部設在華府的美日商業協會，也同樣努力說明將日本納入TPP符合美國與美國企業界的最佳利益。

艾斯沃茲根據日本的經驗，為台灣準備參與TPP談判提供若干心得。他指出，就如同ACCJ向美國國會議員爭取支持日本加入TPP，台北市美國商會可以為台灣做同樣的事。但他強調，雖然美國商會可以在華府發揮效力，台灣的企業界與政壇領袖必須「帶頭向國人說明參與TPP的好處」。貿易協定必然會衝擊到經濟的某些產業，但他們的聲音不應蓋過整體經濟所能得到的龐大利益。

美國部分人士認為，與日本進行TPP談判會白費功夫，因為美日之間有許多長期懸而未決的問題，兩國在這方面對立嚴重。艾斯沃茲提到，日本經驗可供台灣借鏡的一點，在於日方採取若干建立信心的措施，以化解這類疑慮。比方說，日本在確定可以加入TPP談判之前，便同意減少美國牛肉進口的限制，並大幅提高美國汽車進口配額。此外，日本加入TPP談判時有個諒解，那就是「任何議題都可以協商」。日本很清楚，如果它試圖把若干敏感議題排除在議程之外，美國行政部門與國會都會強力反對。

韓國觀點

韓國通常被視為台灣在外銷市場的主要競爭對手。台灣對於未能簽署許多雙邊或多邊自由貿易協定（FTA）具有焦慮感，原因之一就是韓國在這方面已相當成功，而且在逐漸成為「區域FTA樞紐」。韓國已經與美國、歐洲聯盟及東南亞國家協會已簽署FTA，跟中國簽署FTA的談判也在進行。韓國雖然不是最早開始談判TPP的12個國家之一，但似乎確定可以加入下一回合談判。台灣參與第二回合談判的可能性相當高，但是否實現還很難說（其中很大部分是政治因素使然）。

在會中介紹韓國FTA策略的是艾咪‧傑克森。她是美國前任貿易談判代表，目前擔任韓國美國商會會長。她說，韓國在與外國成功的簽署多項FTA其關鍵因素包括國內民眾普遍支持（韓國民眾眼見三星、現代等企業在全球市場的表現，因此瞭解外貿的價值）、政府最高階層堅定推動貿易自由化，以及政府主動因應FTA造成的負面衝擊。政府投入數十、數百億美元採取直接補貼、重新訓練等措施，並推動計畫協助特定行業提高競爭力，例如推動發展釀酒業，以幫助農民面對從智利進口食用葡萄的低價競爭。

跟日本參與TPP的情況一樣，傑克森說，美國樂意與韓國簽署FTA因為韓國願意接受「高品質」的協定--也就是任何議題都可以上談判桌，至少在初期是如此。此外，韓國也接受

AmCham taipei Vice Chairman Scott Meikle, the Micron representative in taiwan, stressed how tpp membership could help diversify taiwan's trade and investment to avoid over-concentration on any market.




有必要採取建立信心的措施，願意「清理戰場」，並先排除可能使FTA談判陷入泥淖的棘手問題。

傑克森提到，在談判過程中，韓國行政部門與國會之間的緊張，往往比韓美兩國政府之間的緊張還要嚴重。當時韓國不像美國國會給予總統貿易促進授權（TPA），同時讓議員可以訂定若干規範，並與行政部門進行諮商以引導最終協議的內容。她說，後來韓國訂定了類似授權法律，對於釐清行政與立法部門在貿易方面的互動關係有很大幫助。在台灣，兩岸服務貿易協議談判的方式引發爭議之後，各方也在考慮制定類似法律。

馬來西亞美國商會代表奇異公司的狄恩說明，馬來西亞由於高度仰賴出口，被認為是兩個最能因為成為TPP會員而獲利的國家之一（另一個是越南）。但馬來西亞在野黨與部份執政黨反對加入TPP，一旦談判結束，國會是否批准協定已因政治因素而蒙上不確定的陰影。

新加坡美國商會前任會長、私人資金公司KKR集團的歐肯對RCEP等較傳統的自由貿易協定與TPP之間的差異做說明；前者基本上只管降低關稅，TPP則自詡為「黃金標準，是21世紀的自由貿易協定」。TPP內容不僅涵蓋關稅、通關程序等跨國界議題，還規範超越國界的議題如資訊的自由流通、法規程序的透明度與一貫性，以及智慧財產權的保護、勞動條件與環保等議題。

代表台北市美國商會提出報告的，是商會副會長、華亞科技股份有限公司總經理梅國勳。他強調，「加入TPP將使台灣對外貿易更加平衡」。台灣目前出口有39.6%是以中國／香港為市場，而18%的進口總值來自中國大陸與香港。至於台灣加入TPP的準備工作，梅國勳說，自今年初以來，政府在解決法規面若干存在以久的問題方面已有顯著進展。他說，台灣還需要做許多努力，才能使法規面的做法符合國際標準，但台北市美國商會年度《商業景氣調查》顯示，商會的多數會員相信，台灣將會達到成為TPP會員必須做到的高標準。

會議最後時段，在政務委員鄧振中的主持下，現場的學生有機會向台上的講員表達對TPP與RCEP的看法。學生發言的一個共通之處，在於傳達錯綜複雜的感覺：一方面體認加入TPP/RCEP對國家的重要性，一方面同情因來自海外的競爭增強而可能陷入困境的農民和技能較弱的工人。講員回覆說，類似韓國採取的轉型輔導措施，將可減緩貿易自由化的衝擊。

另一項可以回覆這類質疑的說明是，政府的社會福利支出要靠稅收，而稅收多寡要看經濟繁榮的程度。台灣若能完全融入區域與全球經濟，享有高度繁榮的機會會遠高於因孤立而競爭力逐漸下滑的情況。

services agreement was negotiated. The representative from AmCham Malaysia, Stuart Dean of Gen-

eral Electric, reported that because of its high export dependence, Malaysia is considered to be one of the two countries (Vietnam is the other) that would benefit the most from TPP membership. Never-theless, with both the opposition party and one faction of the ruling party raising objections to TPP participation, political factors make it uncertain whether the parliament would ratify the agreement once negotiations are concluded.

Steven R. Okun of the private equity firm of KKR, a former chairman of AmCham Singapore, explained the distinction between a more conventional trade agreement such as RCEP, which basi-cally covers tariff reductions, and the TPP, which bills itself as a “gold standard, 21st-century free trade agreement.” As such, TPP deals not only with at-the-border issues such as tariffs and customs proce-dures, but also across-the-border issues like the free flow of data, and behind-the-border issues such as the transparency and consistency of regulatory procedures, as well as intellectual property protection, labor and environmental conditions, and other matters.

Representing AmCham Taipei, Vice Chairman Scott Meikle, who heads the Micron joint venture in Taiwan, emphasized how “entry into TPP would facilitate more balanced trade” for Taiwan, which currently relies on China/Hong Kong for 39.6% of its exports and 18% of its imports. In terms of Taiwan’s readiness to join TPP, Meikle noted the significant progress the government has made since the beginning of this year in resolving some longstanding regulatory issues. Although he said much remains to be done to bring regulatory practices in line with international norms, AmCham’s annual Business Climate Survey shows that most members are confident that Taiwan is capable of meeting the high standards required for TPP membership.

In the final session of the conference, moderated by Minister Without Portfolio John Deng, students in the audience were given an opportunity to share their views on TPP/RCEP with the panel of speakers. A common theme was the expression of mixed feelings: rec-ognition of TPP/RCEP’s importance for the nation, coupled with sympathy and concern for the farmers and lesser-skilled workers who might be disadvantaged by increased competition from abroad. Mem-bers of a panel responded that trade adjustment assistance measures such as Korea instituted would cushion the blow.

What could also have been mentioned is that the government’s ability to afford social-welfare expenditures depends on tax revenue, which in turn is a function of the level of economic prosperity. A Taiwan fully integrated into the regional and global economy is much more likely to enjoy such prosperity than one that is insulated and increasingly uncompetitive.

Key lessons for Taiwan for TPP entry

•Everythingmustbeonthenegotiatingtable

•SeekConfidence-buildingMeasures(CBMs)withtheUnitedStates

•Establishbuy-infromthepublic,industrygroups,otherstakeholders

•Buildstronglinesofcommunicationwiththenationallegislature

•Deviseeffectiveassistancemeasuresfordisadvantagedsectors

•TakeadvantageofsupportfromtheAmericanChamber


Cover story

災害處理災害處理

Dealing with Disasters

Cover story

photo: ap


9_CoverStory.indd 16 2014/9/3 5:21:34 PM


D e a l i n g w i t h D i s a s t e r s

In early August 2009, Taiwan was pounded by super typhoon Mora-kot, the most devastating storm in

the island’s history. Morakot dropped a record 2,777 millimeters of rainfall on the mountains of southern Taiwan, setting off massive mudslides, including one that destroyed the entire aboriginal village of Siaolin, burying more than 400 residents alive. The tragedy, compounded by the government’s slowness in mount-

ing a coordinated rescue and relief effort, shocked the nation. In the aftermath, Premier Liu Chao-shiuan resigned to shoulder responsibility.

The calamity of Morakot, however, spurred the authorities to put a far better-organized program in place for attending to natural disasters, especially typhoons. Detailed plans for early evac-uation procedures were worked out, and improved information and communica-

超級颱風莫拉克在2009年8月初重創台灣，是

台灣史上最慘重的風災。南部山區降下破

紀錄的2,777毫米雨量，引發多起大規模土

石流災害，包括高雄原住民部落小林村慘遭滅村，

400多位居民被活埋。由於這起悲劇，加上政府協

調搜救和賑災效率緩慢，引發全國輿論譁然，行政

院長劉兆玄因此下台以示負責。

不過莫拉克風災促使當局針對天災，尤其是颱

風，制定更加妥善的應變計畫，包括擬出提早疏散

民眾的詳細程序，以及改善資訊和災情通報系統，

以確保小林村悲劇不再重演。台灣政府官員和救難

專家現在顯然都有信心，台灣降低颱風可能災害的

防範措施在亞洲名列前茅。

不過沒有人能預測下一場災害的災情。就在數週

前，高雄市發生丙烯輸送管線連環氣爆事故，將數

公里長的馬路炸得柔腸寸斷，再次震驚全台。至少

有30人不幸罹難，另有300多人受傷。相關單位對

事故處理似有不當之處，再次引爆民怨。氣爆發生

在7月31日將近午夜時刻，不過在事故發生前3小

時，已有居民通報聞到瓦斯外漏味道，消防隊和其

他第一線相關人員獲報後趕到現場，但在尋找漏氣

來源的過程中，並未封鎖周遭區域。

同樣引發爭議的是，中央和高雄市府官員在事

發多日後，顯然都不知道高雄市區地下輸送管線的

情況與位置，而且管線的主管權責和維修監督歸屬

也混淆不清。目前相關單位正針對事故分頭進行調

查，待報告公布後，本刊將會報導調查結果。

不過這起事故可能促使各界未來更密切關注工

安意外。國家災害防救科技中心主任秘書利維森表

示：「過去二十年來，我們的重心主要放在所謂的

天災，因此在這方面有許多防範措施和技術。」「

不過高雄氣爆事故提醒我們，在現代社會中，可能

發生我們過去從未想到的事。損失約30條人命固然

令人悲痛，但也讓我們有機會修改和強化災害應變

系統。」

不論是天災或人禍，台灣未來可考慮採取哪些編

制或方法上的變革以減輕災情，本刊特地邀請各類

專家提供建言。曾擔任內政部長的台大土木工程學

Taiwan has done quite well in recent years in mitigating the consequences of natural disas-ters such as typhoons, but the recent chemical explosion in Kaohs iung drove home the need to pay greater attention to major industrial accidents and other catastrophes. What shou ld Ta iwan be do ing to ensure that it is better prepared to handle future challenges in disaster management?

台灣近年來致力降低颱風等天災

帶來的災情，成績相當不錯。不

過最近的高雄氣爆事件顯示，台

灣須更加留意重大工安事故等災

難。究竟台灣該怎麼做，未來才

能更妥善因應災害管理挑戰？

BY DON SHAPIRO 撰文 / 沙蕩

TRAGIC TYPHOON — Family members mourn the loss of loved ones in the catastrophic Typhoon Morakot of 2009. Record rainfall set off lethal mudslides.




Cover story

tion systems adopted, in hopes of ensur-ing that no community in Taiwan would ever again meet the fate of the inhabit-ants of Siaolin. Today government offi-cials and emergency response specialists appear confident that Taiwan is among the best prepared countries in the region for mitigating the potential catastrophic effects from typhoons.

But no one can predict what form the next disaster will take. Taiwan was once again horrified just weeks ago by a series of chemical pipeline explosions that ripped apart several kilometers of road-way in the city of Kaohsiung. At least 30

people were killed and more than 300 injured. And once again the public was outraged by the seeming ineptness with which the incident was handled. When residents of the neighborhood reporting smelling gas during the evening of July 31, firefighters and other first responders were called to the scene to try to find the source of the leaks. Yet during the three hours between their arrival and the explo-sions just before midnight, no attempt was made to seal off the area.

Al so t roubl ing in the days that followed was the apparent ignorance of officials at both the municipal and central

government levels regarding the nature and location of the chemical pipelines underneath the city streets, and the confu-sion over where responsibility should lie for regulating the pipelines and ensuring their proper maintenance. Multiple inves-tigations are now underway, and Taiwan Business TOPICS will cover their find-ings as they are released over the coming months.

One likely outcome of the incident, however, will be intensified attention in the future to industrial disasters. “Over the past 20 years we focused mainly on so-called natural hazards, so we have a lot of preparation and technology in that area,” says Li Wei-sen, secretary-general of the National Science and Technology Center for Disaster Reduction (NCDR). “But the Kaohsiung explosion was a reminder that in a modern society, things can happen that we previously never real-ized could happen. Although it is very sad that some 30 lives were lost, now we have the chance to revise and strengthen our system.”

TOPICS approached various experts for suggestions about organizational or methodological changes that might be considered to diminish the destructive consequences of future disasters, whether caused by nature or human action. At

系教授李鴻源認為，首要之務應是在行政院之下

建立擁有龐大權力的部會，功能類似美國的聯邦

緊急事故管理總署（FEMA）。2005年卡崔娜颶風

（Hurricane Katrina）重創紐奧良（New Orleans）

時，FEMA因為救災應變過於遲鈍而飽受抨擊。不

過當時該署的領導人是由政治任命產生，並未擁有

豐富的緊急事故處理經驗，而且該署劃歸新成立的

國土安全部（Department of Homeland Security）管

轄，但那時美國最重要的國家要務是反恐，其它事

務相對受到忽略。據媒體報導，在卡崔娜風災過後

多年，FEMA才重新建立專業導向，並證明該署在

協調危機迅速應變上具有非常重要的地位。

台灣目前最類似FEMA的機構，就是行政院在莫

拉克風災後設立的災害防救辦公室。不過李鴻源認

為該單位缺乏資源和授權，無法在指揮災害應變上

扮演必要的領導角色。他指出：「台灣在莫拉克風

災後確實展開一些組織重整，但災害防救辦公室的

規模太小，只有二十人左右，而且沒有權力直接向

各部會下達指令，只能向各部會表示：『我們會提

供協助，幫忙進行檢討，可以派遣專家到貴部會提

供指導。』這樣根本不夠。災害防救辦公室缺乏指

揮災害應變所需的人力、設備和權力。」

李鴻源表示，他在內政部長任內曾建議設立仿效

FEMA的機構，擁有約150人的編制。不過當時中央

政府正在進行廣泛的組織再造計畫，希望精簡政府

層級以提高效率，各官員都忙著設法裁減各層級的

政府單位，不會考慮反其道而行的擴大官僚體系作

法。

[也不採納由美國商會化學製造商委員在白皮書

中建議政府整合負責化學品控管的相關單位，包括

勞動部、環保署、環保署協助成立的毒災應變諮詢

中心（ERIC）、農委會及衛生福利部都分別負責控

管化學品。我們認為若將這些單位整併成單一的政

府單位可以更有效地管制化學品。]

替代方案

李鴻源表示，台灣若認為FEMA模式不可行，還

可考慮仿效日本，指派一名內閣成員擔任災害管理

國務大臣。日本的國務大臣通常相當於台灣的政務

委員，但災害管理國務大臣可指揮170名下屬，不

同於台灣政務委員常常只擁有少數手下。李鴻源指




the top of the list, says former Interior Minister Lee Hong-yuan, now a professor of civil engineering at National Taiwan University, should be establishment of a high-powered government depart-ment under the Executive Yuan that would be similar to the Federal Emer-gency Management Agency (FEMA) in

the United States. Although FEMA’s repu-tation suffered after its clumsy response to Hurricane Katrina in New Orleans in 2005, during that period the agency was led by political appointees without much emergency response experience. In addition, the organization was then hamstrung by being placed under the new

Department of Homeland Security at a time when the fight against terrorism was the overwhelming national priority. In the years since then, FEMA has reportedly regained its professionalism and proven to be an invaluable force in coordinating quick reaction in a crisis.

Currently the closest equivalent in

In aviation, accident rates are normally cal-culated per million departures, often over

a ten-year period. By that measure, Taiwan has done well in improving its air safety. From a figure of 4.1 between 1993 and 2002 for turbo-jet aircraft accidents serious enough to destroy the hull of the plane, the rate has dropped – almost steadily – to 0.58 for the period 2004-2013. “We’ve gone from very high to below the world average, which Boe-ing puts at 0.8,” says Thomas Wang, managing director of the Taiwan’s Aviation Safety Coun-cil (ASC), the independent investigation body under the Executive Yuan.

Of course, accidents still occur, as the Taiwan public was reminded last month when TransAsia Airways flight 222 from Kaohsiung crashed during bad weather while trying to land at Magong Airport on Penghu. Of the 54 passengers and four crew members on board, only 10 survived. The incident, which was among the worst in Taiwan aviation his-tory, is now being investigated by the ASC. But as Wang points out, that can be a lengthy process. “Every accident is a combination of a lot of different factors, and we have to determine the most probable cause,” he says, noting that is rare for an investigation to be completed in less than a year.

In the case of the Penghu crash, “we do have both the voice and data recorders, so we have a general idea of what happened, but we don’t yet know why or how,” Wang says. “We don’t why a very experienced pilot went in so low, so we have to look at many different factors, including weather, any malfunction in the aircraft or navigation aids, and of course pilot behavior or fatigue.” The 24-member ASC staff includes pilots, record-ing engineers, former traffic controllers, and experts in such fields as aircraft maintenance, meteorology, and behavioral science.

Since its establishment in 1998, it has investigated 103 occurrences and issued 739 safety recommendations to the Civil Aero-nautics Administration (CAA) or other orga-nizations. “The government agency has to reply to us within 90 days – either to accept and start working on the recommendation or to provide a good reason to reject it,” says Wang. “If the reason is strong enough, then we close the case. If not, we track the prog-ress every six months until the recommenda-tion is acted on.”

The ASC also relies on a confidential reporting system to collect information about potential risks or near-misses from airline or airport employees. It receives about 20 such anonymous reports a year. “Sometimes pilots or others don’t want to report to their airline or the CAA, which could result in punish-ment,” says Wang. “But the way to learn is from mistakes. Luckily nothing happened, but if you share the information, other people could be helped.”

Regular attendance at conferences and seminars sponsored by organizations such as the International Transportation Safety Asso-ciation, and liaison with counterpart agencies in other countries, is another important chan-nel for the ASC. “The most cost-effective way to improve aviation safety is to go through this kind of information exchange,” Wang observes. He notes, however, that Taiwan’s exclusion from membership in the Interna-tional Civil Aviation Organization (ICAO), a specialized agency of the United Nations, is a distinct disadvantage. Although Taiwan can access ICAO reports when they are made public, members may have been familiar with the contents much earlier through participa-tion in meetings. “Also we have no opportu-nity to submit our comments or share our experience with others,” says Wang.

At the 2013 ICAO Assembly in Montreal, Taiwan representatives were able to attend as “guests” but not as formal observers, despite U.S. support. Efforts to gain offi-cial observer status at future meetings are expected to continue.

— By Don Shapiro

REMOVING THE WRECKAGE — Stormy weather trailing Typhoon Matmo was the likely cause of the plane crash that killed more than 40 people on Penghu in July.


Attending to Air Safety



Cover story

Taiwan to FEMA is the Executive Yuan’s Office of Disaster Management, which was set up following Typhoon Morakot. But Lee regards the office as lacking both the resources and the authority to take the necessary leadership role in direct-ing the response to a disaster. “Yes, there was some reorganization after Morakot,” he says, “but the agency is still too small – less than two dozen people – and it doesn’t have the capability to give direct orders to the various ministries. They can only tell the ministries ‘I will help you, I will conduct a review for you, I can send experts to your ministry to give you some guidelines.’ That’s not sufficient. They don’t have the manpower, the equipment, or the clout to do the job.”

While serving as Interior Minister, Lee says, he recommended the creation of a FEMA-style agency with about 150 personnel. But at that time the central government was undertaking a broad restructuring plan designed to streamline the hierarchy in the name of efficiency. Officials were busy looking for ways to reduce the number of government units at each level, and were in no frame of mind to consider a move in the opposite direc-tion that would enlarge the bureaucracy.

[Also disregarded at that time was a recommendation by the Chemical Manu-

facturers Committee in AmCham Taipei’s Taiwan White Paper that the government reorganization include the integration of all agencies responsible for aspects of chemical regulation into a single depart-ment. Such responsibilities have instead been spread among numerous govern-ment entities, including the Ministry of Labor, Environmental Protection Admin-istration (EPA), the EPA-sponsored Emer-gency Response Information Center (ERIC), the Council of Agriculture, and the Ministry of Health and Welfare].

An alternative approach

If the FEMA model is considered impractical, Lee says, Taiwan could a l so cons ider emulat ing the Japa-nese approach, which is to designate a member of the Cabinet as the Minister of State (a position normally referred to in Taiwan as a Minister Without Port-folio) for Disaster Management. But unlike Taiwan’s ministers without portfo-lio, who normally have just a handful of staff members under them, the Japanese Minister of State for Disaster Manage-ment has 170 personnel reporting to him. “Like FEMA, he has the necessary manpower, resources, and expertise at his disposal, as well as the mandate to super-

vise all the ministries in handling disas-ters,” Lee notes.

“If there is no clear organization in charge, it means that all the vari-ous disciplines will be divided among the different ministries,” he contin-ues. “That means the Ministry of Inte-rior is in charge of crises related to earth-quakes and typhoons, the Ministry of Economic Affairs is in charge of floods and industrial accidents, transportation belongs to the Ministry of Transporta-tion and Communications, nuclear inci-dents belong to the Atomic Energy Coun-cil, and so on. The problem is that while each ministry may know its own scope of business quite well, none of them has enough support or knowledge when it comes to disaster management, because disaster management is a very special expertise.”

Because that expertise is in short supply in Taiwan, Lee feels strongly that any newly created disaster management agency will need to ensure that it has a good “coach” with abundant experience. “In terms of standard operating proce-dures, we can borrow a lot from Japan and the United States, but we’ll have to modify and localize the SOPs because the scale is different,” he says. “That will take some time, so meanwhile we’ll

出：「若能像FEMA，就可擁有所需的人力、資源

和專業人才供其調度，還有權力監督各部會的災害

處理。」

他接著表示：「若沒有明確的負責單位，就代表

各部會將各自為政。」「這意味內政部負責地震和

颱風相關的災害，經濟部負責水患和工安事故，交

通意外是交通部的事，核災則屬於原子能委員會等

等。問題是各部會可能相當了解自己的業務範疇，

但在進行災害管理時卻都缺乏足夠的奧援或知識，

因為災害管理是非常專門的學問。」

李鴻源堅決認為，由於台灣缺乏這方面的專業知

識，因此新成立的災害管理機構須要有經驗豐富的

優秀「教練」從旁指導。他說：「就標準作業程序

而言，日本和美國有許多我們可以借鏡的地方，但

因為機構的規模並不相同，我們必須加以修改，並

將之在地化。」「這會花一些時間，所以我們在這

段期間需要外面的人來擔任教練。」此人未必得熟

悉台灣的狀況，只須擁有足以協助指導台灣團隊的

背景，確保新機構能按部就班建立。李鴻源建議，

可延攬FEMA或日本的退休官員擔任教練角色。

李鴻源還強調，必須指派研究機構支援新成立

的災害管理機構執行任務。他以自己擔任內政部長

時須全權負責颱風災害處理的經驗為例，指出：「

我接任部長，因此成為颱風救災總指揮，我們花了

三年時間才建立所有的標準作業程序，並為台灣

7,385個村落備妥各村的災害疏散地圖。」「不論

是多偏遠的村落，我們的目標是要確保各村都有能

力在災害中至少獨力存活七天，因為強颱來襲後，

可能得等四、五天，才能派遣直升機進入災區。我

很幸運，能請求國科會（即現在的科技部）旗下的

兩個研究機構協助蒐集所有資料，為我進行全部

的分析和沙盤推演，我們才得以擬出一套行動計

畫。」

他強調，災害管理須有具備學術背景和實務經

驗的兩類專家一起參與，這至關重要。他說：「研

究是一回事，把它轉化為行動計畫又是另一門學

問。」在蒐集和分析必要資料的第一階段，須借助

研究機構，然後由實際執行者決定如何轉化實施。

李鴻源認為，第二重要的要務是人員須接受紮實

的訓練，包括經常舉行演習，以確保行動計畫在執

行時能真正行得通。演習還能確認各小組成員對各

自負責的任務是否夠熟練，以及來自不同單位的人




In the spring of 2003, the sudden spread of the virulent SARS (severe acute respiratory

syndrome) virus unnerved not only the Tai-wan public but also the medical community. With 346 confirmed cases and 73 deaths, Taiwan was the third-most affected location by the epidemic after China and Hong Kong. By the time the outbreak was over, more than 130,000 people had been placed under quarantine, and with normal life severely dis-rupted, some US$1.5 billion in economic loss had been incurred.

But just as Typhoon Morakot was a wake-up call for Taiwan in terms of ability to cope with torrential storms, the wrenching expe-rience in battling SARS brought realization of the need to devote more attention and resources to the handling of pandemics. Com-missioned by the Taiwan government a decade later to conduct a study of how well it had risen to the challenge, a team from the Center for Biosecurity at the University of Pittsburgh Medical Center concluded that “compared to many other countries, Taiwan has made great strides in strengthening its preparedness for infectious disease outbreaks.”

In a brief ing to TOPICS , Dr. Cynthia Chin-hui Yang, director of the Division of Preparedness and Emerging Infectious Dis-eases under the Centers for Disease Con-trol (CDC), itself a part of the Ministry of Health and Welfare, outlined some of the key changes undertaken following the SARS expe-rience. A major early step was the creation of her division, which is responsible for assuring that Taiwan has clear procedures in place – as well as sufficient personnel, facilities, equipment, and drugs and vaccines – if it ever needs to face another major epidemic.

During SARS, recalls Yang, who was then chief of infectious disease control at Renai Hospital, “we discovered that we had a shortage of negative pressure rooms [isola-tion wards] and we were running out of masks.” In addition, public communication was handled poorly, leading to a proliferation of wild rumors and unfounded media reports, generating widespread panic.

Now CDC oversees a network of des-ignated communicable-disease hospitals throughout the island to assure a sufficient

supply of negative pressure rooms, well-trained staff, and a large inventory of personal protective equipment (PPE) such as gowns and masks. “CDC maintains a one-month stockpile of PPE and the hospitals themselves store enough for one month, so we know that if an epidemic starts we have at least two months’ time to order more,” says Yang.

To improve public communications, CDC also established a public affairs division to regularly prepare accurate, up-to-date infor-mation on disease conditions in Taiwan to pass to the media and post on the internet. And it set up a national command center within its office building to direct operations and coordinate among government agencies in the event of a serious epidemic. For the most severe outbreaks, the center would be commanded directly by the premier. In the two cases in which the center has since been activated, however, the command was at a lower level: by the vice premier for the H5N1 variety of avian flu in 2009 and under the CDC director-general for H7N9 last year.

“Current l y we ’ve se t up an emer-gency operation team for Ebola,” says Yang. “Because Taiwan has less connection with Africa and the Middle East, we don’t think we need a full-fledged command center as yet, but the situation bears watching.”

Another change since the SARS epidemic is that Taiwan has gained observer status in the World Health Assembly and has access to World Health Organization information through what is called an International Health Regulation “focal point,” jargon for a line of

communication. As a result, Taiwan health officials can have much more confidence than they could a decade ago that they are fully informed about health-related developments around the globe.

Something that hasn’t changed is the habit of many Taiwanese to seek healthcare at major medical centers, rather than going first to a general practitioner or neighbor-hood cl inic. When an epidemic strikes, that concentration of people can speed the spread of the disease. But at least the big hospitals now separate febrile and non-febrile patients during flu season, often even providing separate entrances for fever patients, and they have tried to reduce the crowding in emergency rooms.

For the future, one growing epidemiologi-cal challenge may be climate change, since certain diseases that were once considered seasonal, like dengue fever, may now be found year round. But healthcare profession-als consider that an even bigger threat may be financial. Due to the government’s harsh fiscal pressures, the CDC budget has been decreasing in recent years by about 10-15% annually. To ensure that money is always readily on hand to cover public-health emer-gencies, CDC has proposed amending the Communicable Disease Control Act to estab-lish a special fund. The Executive Yuan has reportedly been unconvinced of the necessity for such a fund, given that contingency fund-ing can be appropriated when needed.

— By Don Shapiro

Preparing for Pandemics

PROTECTION — During the SARS scare in 2003, passengers on Taipei’s MRT were required to wear face masks to help guard against the virulent respiratory disease.




Cover story

need to have someone from outside who can serve as a coach.” While that person won’t necessarily be familiar with the situation in Taiwan, he or she would possess sufficient background to help guide the Taiwan team and ensure that is on the right track in setting up the new organization. For the coaching role, Lee suggests recruiting a retired official from FEMA or the Japanese government.

Lee also stresses the need for the new disaster-management agency to have research institutes assigned to support its mission. He cites his experience while serving as Interior Minister in having overall responsibility for dealing with typhoon response. “When I took over as minister and therefore as the commander for typhoons, it took us three years to establish all the standard operating procedures and to prepare disaster evac-uation maps for every single one of the 7,385 villages in Taiwan,” he says. “Our goal was to make sure that every village, no matter how remote, has the capac-ity to survive by themselves, indepen-dently, for at least seven days, since after a big typhoon it may be four or five days before a helicopter can fly in. Luckily I was able to call on two research institutes under the National Science Council (now the Ministry of Science and Technology)

to help collect all the information and do all the analysis and scenarios for me so we could turn it into an action plan.”

He emphasizes the crucial impor-tance in disaster management of having the involvement of two types of special-ists – those with academic backgrounds and those with practical experience. “Research is one thing; putting it into an action plan is another type of exper-tise,” says Lee. Research institutes are needed for the first stage of gathering and analyzing the necessary informa-tion, which would then be turned over to actual practitioners to determine how it can be translated into action.

Next on Lee’s checklist is the need for solid training, including frequent drills to ensure that the action plan is really workable in practice. Those exer-cises will also confirm whether team members are sufficiently proficient in their assigned tasks and whether person-nel from different agencies are able to communicate and coordinate effectively. “Unfortunately, this has been one of our weak points up to now,” says Lee. “Our various disaster response squads don’t practice enough. They don’t have the chance to learn how to work together as a team.” As a result, when an actual disaster occurs, the ability to engage in

smooth coordination is lacking and valu-able time can be lost.

Instant command posts

A crucial part of that training, says Gu Tswen-juh, Taiwan representative of the International Association of Emer-gency Managers (IAEM), should be the concept of establishing an immediate unified command post at the site of any disaster. That system ensures that there is always someone in charge on the scene, eliminating any confusion over who is qualified to issue orders and preventing the waste of time trying to track down higher-ups for instructions. “Accord-ing to the pr inciples of emergency management, there must be one instant commander at the site – and it doesn’t matter what his rank is,” says Gu. “The head of the first unit to reach the scene should take that role, and if someone with higher authority arrives later, they can just transfer the command. But there must be a decision-maker at all times. You can’t just let the time pass, or make mobile phone calls back and forth until tragedy occurs.” Of course, clear rules must be place to establish the hierarchy for who should assume the command if more than one agency has responded.

員能否有效溝通和協調。他表示：「不幸的是，這

至今仍是我們的弱點之一。」「各災害應變小組的

練習不足，沒有機會學習如何貫徹團隊合作。」因

此當災難真的發生時，就缺乏順利協調的能力，錯

失寶貴的救災時間。

直接指揮者

國際危機管理協會（International Association of

Emergency Managers，簡稱IAEM）的台灣區代表辜

存柱表示，在災害管理訓練中非常重要的一點，就

是在災害現場建立直接統一指揮者的觀念。這能確

保現場永遠有人負責，避免造成誰才有資格發號施

令的混淆狀況，以及試圖尋找上級指示所浪費的時

間。他說：「根據災害管理原則，不論位階大小為

何，現場一定要有直接指揮的人。」「第一個抵達

現場的單位領導人應接下這個角色，如果後來有更

高位階的人抵達，可以移交指揮權。但務必隨時都

要有一個決策者，不能任由時間流逝或打手機來回

聯絡，直到悲劇發生才後悔莫及。」當然，若不只

一個機構獲報趕到現場，應有明確規定由誰負責指

揮的層級制度。

台灣海軍上校退役的辜存柱還強調，台灣必須培

養通過嚴格災害管理訓練的廣泛人才庫。1999年

九二一大地震造成中台灣近2,500人死亡，還在軍

中服役的他首度接觸此一領域，奉國防部指派擔任

美國搜救隊的聯絡官。10年後發生莫拉克風災，台

灣對救災似乎仍亂無章法，令他相當沮喪。他認為

憑自己在軍中的指揮與管控經驗，或許可貢獻一己

之力，強化台灣在這方面的能力。

辜存柱做了一些基本研究後，發現IAEM不但在美

國的災害管理者訓練和認證上扮演重要角色，在其

它國家也日益重要。他參加該協會課程，成為台灣

目前唯一通過認證的災害管理人員，不過目前至少

另有6人正在接受IAEM的資格檢定。現在辜存柱全

力在台灣推廣IAEM的會員和認證資格，藉此有效促

進台灣對災害管理重要性的了解，並培育一群同時

精通理論與實務的災害管理人才。

申請者若欲通過IAEM認證，須在大學上完一定時

數的一般管理課程，然後參加IAEM或其它獲認可機

構提供的災害管理線上課程，通過筆試，繳交以某

方面災害管理為主題的論文，並出示曾參加相關會




議或救災活動的專業參與證據。

辜存柱表示：「完成課程後，

就知道如何撰寫救災作業計畫書，

甚至更重要的是知道如何調整計

畫，以滿足災害現場的實際狀況

需求。」他認為，不論是消防員、

警察等第一線救災人員或負責災害

管理的政府官員，抑或民間企業，

尤其是石油與天然氣、化學和半導

體等產業的安全幹部來說，災難管

理都是非常珍貴的技能。他說：「

一旦發生事故，必須要有已具備所

需知識和訓練的人能迅速採取行

動。」

災害管理人才即使能適才適所，

但能否持續有效對外溝通和取得所

需資訊，也是一項無止盡的挑戰。

國家災害防救科技中心主任秘書利

維森指出，他的服務單位劃歸在科

技部之下，「不像全世界大部分的

其它對口單位通常隸屬民防或消防

Gu, a retired ROC naval officer, also emphasizes the need for Taiwan to develop a wide pool of talent that has gone through rigorous training in emer-gency management. His f irst expo-sure to the field came while he was still in the military, at the time of the severe September 21, 1999 earthquake that killed nearly 2,500 people in central Taiwan, when the Ministry of National Defense assigned him to serve as liai-son officer with search and rescue teams sent from the United States. A decade later, when Typhoon Morakot struck, Gu was dismayed that Taiwan st i l l seemed woefully unprepared for disaster response, and thought that with his mili-tary experience with command-and-con-trol systems, he might be able to contrib-ute to enhancing Taiwan’s capabilities in that area.

Doing some basic research, he discov-ered the important role that IAEM plays in the United States – and increasingly in other countries – in training and certi-fying emergency managers. Gu went through its program and is currently the only Certified Emergency Manager in Taiwan, although at least six others are in the process of qualifying. He is now doing his best to promote IAEM member-ship and certification as an effective plat-

DEVASTATION — The Jiji (921) earthquake of September 1999 left 2,415 people dead and 11,305 injured, with more than 50,000 buildings destroyed and prop-erty damage assessed at NT$300 billion (US$10 billion).




Cover story

部門」。他表示，災防中心的目標是「將科學和技

術導入災害管理中」。他屬下的工作不是趕到災害

現場，而是蒐集資訊，「試圖針對未來24到72小時

內可能發生的狀況與所須採取的行動，向災害管理

指揮官提供全面性的答案」。

數據和通訊

利維森指出，過去數年來，國家災害防救科技中

心持續投注大量精力整合資訊系統，因此災害應變

中心的總指揮只要透過一個螢幕，就能看到全部所

需的相關數據。體認到中央與地方政府在處理莫拉

克風災的過程中，突顯出協調不力這一致命問題，

因此國家災害防救科技中心努力改善各政府層級間

的溝通管道，並確保在道路被沖毀、室內電話和行

動電話訊號中斷，及直升機還不適宜進入危險災區

的情況下，偏遠村落與外界的通訊仍然能夠維持暢

通。[李鴻源指出現在每個村落都配備了一套衛星電

話系統，並有獨立的備援設備，確保與台北的聯繫

不會中斷。]

因應大數據時代來臨，國家災害防救科技中心致

力推動讓所有數據都能公開供外界存取。因台灣與

Google的合作進而Google在台灣的用戶可利用Google

快訊（Google Alert）查看由政府提供的危機地圖，

上面顯示19種即時數據。利維森說：「日本是美

國之外第一個提供這類服務的國家，而台灣是第二

個。」「我們也並非獨厚Google，我們歡迎任何私

營部門的應用程式開發商，和我的辦公室聯繫來免

費取得相同的資訊。或者若你是保全公司，希望保

護你的客戶，也可以上我們的網站[www.ncdr.nat.

gov.tw]免費取得訊息。」

這個網站包含有災害潛勢地圖，依國家、市或

縣，及區這三個不同等級來警示水災和土石流可能

帶來的威脅。利維森表示：「我們的主要職責之一

是讓民眾了解潛在的風險。」但是他希望這是以雙

向溝通的模式存在，甚至是形成一種社會運動。他

說：「情況隨時在變，我們的資訊不可能100%正

確，因此我們希望市民能經常留意他們身邊的環

境。」只要他們看到、聽到或聞到任何有危險之虞

的異狀，都應儘快通知相關單位。

國家災害防救科技中心的另一項任務是保護國家

重要的基礎設施，利維森說：「我們的橋樑、發電

form for increasing awareness in Taiwan of the importance of emergency management, as well as developing a corps of personnel adept at both the theory and practice of emergency manage-ment.

To become certified, applicants must have completed a certain number of hours of univer-sity courses in general management. They must then take online courses on disaster manage-ment offered by IAEM or a recognized equiv-alent institution, pass a written examina-tion, submit an essay on some aspect of disas-ter management, and show evidence of profes-sional involvement such as attendance at rele-vant conferences or participation in disaster-re-sponse activity.

“When you’ve gone through that program,” says Gu, “you know how to write up an emer-gency operation plan – and even more impor-tantly, you know how to adjust the scenario to adjust to actual conditions you encounter on the scene.” He considers that it is an invalu-able skill not only for first-responders such as firefighters and police and for government offi-cials responsible for disaster management, but also for safety officers in private-sector compa-nies, especially in such industries as oil and gas, chemicals, and semiconductors. “When some-thing happens, you need someone who can take quick action because he already has the neces-sary knowledge and training,” says Gu.

PATH OF DESTRUCTION — The powerful chemical gas explosions in Kaohsiung ripped apart streets, killing at least 30 people and injuring more than 200 others.





廠和水庫無時無刻不受到自然災害的威脅。」「我們必須

知道會產生什麼影響，」包括不同系統之間聯動所產生的

二次效應，例如，若發生停電，其他重要運作會受到什麼

樣的衝擊？為了進行評估，該中心採用一套脆弱度審查流

程，與美國國土安全部已發展出的系統相似。利維森解

釋：「即便發生大規模的自然災害，我們也必須確保政府

能維持必要運作，否則可能引發社會動亂或經濟損失。」

莫拉克風災促使台灣進行重大改造，以減輕自然災害帶

來的影響，尤其是水災與土石流的危害。部份觀察家批評

這些努力還遠不足夠，但不可否認的是我們已看到了具體

進展。現在的問題是高雄氣爆事故是否會同樣震撼台灣民

眾和政府，進而促使大家採取具體措施，加強安全以預防

工安和其他人為災害。

辜存柱對這一點頗為樂觀，他指出中國文化裏所灌輸

的歷史意識，不斷教導大家要記取過去的教訓，並從錯

誤中學習。但是李鴻源也提到人類的另外兩種特性──

記憶力及注意力不足（尤其是在面臨媒體資訊的超載時

代），加上政府官員總是認為萬事都在他們的掌控之

下，因此不需要進行重大改變。他呼籲媒體和民間持續

向政府施壓，以催生更有效率的應急管理機構、程序和

人員訓練計畫。

Even with the right people in place, the ability to maintain efficient communica-tions and access to information remains a constant challenge. NCDR Secretary-general Li Wei-sen notes that his orga-nization comes under the Ministry of Science and Technology, “unlike most of our counterpart organizations around the world, which are usually under the civil defense agency or the fire department.” The Center’s goal, he says, is to “intro-duce science and technology into disaster management.” Rather than rushing to the site of a disaster, the job of his staff is to collect information and “try to provide a comprehensive answer to the commander about what’s going to happen in the next 24 to 72 hours and what kind of action will be needed,” says Li.

Data and communication

NCDR has put a lot of effort in the past several years into integrating infor-mation systems, Li notes, so that the disaster-center commander can look at one screen and see all the relevant data he needs. Recognizing that a big problem during Typhoon Morakot was coordina-tion between the central and local govern-ments, it has also sought to improve those

lines of communication – as well as ensur-ing that communication with remote villages can be maintained even when roads are washed away, land-line and mobile telephone signals are disrupted, and it is still too dangerous for helicop-ters to fly in. [Lee Hong-yuan notes that every village is now equipped with a satel-lite telephone system, as well as sepa-rate backup equipment, to ensure that communication with Taipei is not cut off.]

In the age of big data, NCDR has also sought to promote open access to data. As a result of cooperation with Google, subscribers to Google Alert can now view a crisis map showing 19 types of real-time data supplied by the government. “Japan was the first country outside the United States to provide this kind of service, and Taiwan is the second,” says Li. “And this is not reserved for Google. We invite any private sector app devel-oper to request the same information from my office for free. Or if you are a security company wishing to protect your clients, you can also extract information from our website [www.ncdr.nat.gov.tw] for free.”

The website contains hazard maps on the threat of floods and mudslides on three different scales: national, city

or county, and district. “Letting people know about potential risks is one of our main jobs,” says Li. But he hopes it will be a two-way communication, even a kind of social movement. “Conditions are constantly changing, so it’s impossi-ble for our information to be 100% accu-rate. We hope citizens will constantly pay attention to the environment around them,” he says, and to let the proper authorities know when what they are seeing, hearing, and smelling raises concerns about possible risks.

Yet another mission of NCDR is the protection of critical national infrastruc-ture. “Our bridges, power plants, and reservoirs are always under threat from natural hazards,” says Li. “We have to know what the impact will be” – includ-ing the secondary impact due to interac-tion between systems. For example, in case of a power blackout, what would be the effect on other crucial operations? To make that assessment, the Center utilizes a vulnerability screening process similar to what was developed by the U.S. Depart-ment of Homeland Security. “We need to ensure that even after a large-scale natu-ral disaster we can still maintain neces-sary government operations,” Li explains. “Otherwise, it could lead to social disor-

How to Improve Taiwan’s Disaster Management• EstablishaTaiwanFEMA• Hireagoodcoach• Assignresearchinstitutes• Holdfrequentdrills• Adoptan“instantcommandpost”system• Cultivatecertifieddisastermanagementexperts


Cover story


While governments inevitably play a central role in emergency management through effective regulations, inspections, and

post-emergency response, much of the responsibility for disaster pre-vention and mitigation must also lie with the private sector.

Certain companies have earned a reputation for excellence in developing and maintaining a safety culture. Visitors to any DuPont facility, for example, find that the first order of business is to receive a reminder about safety procedures, including the location of emer-gency exits. Another indication of the company’s seriousness about safety is that its employees are subject to outright dismissal for lapses in adhering to safety rules such as the wearing of personal protective equipment. “That’s not just a slogan,” says DuPont Taiwan’s safety spe-cialist, Kenny Jeng. “There have been cases, including in Taiwan, where people have been fired.”

Given DuPont’s extensive expertise in the field, the Taiwan subsid-iary has numerous times aided the Taiwan government by calling on the parent company’s safety specialists to help provide know-how and advice and to share best practices. Such collaboration goes back many years with the department responsible for toxic-substance manage-ment at the Environmental Protection Administration (EPA), and with the Emergency Response Information Center (ERIC) established under the Industrial Technology Research Institute to provide technical sup-port in the event of a chemical accident. “Over the years, Taiwan has become much more capable and competent to deal with toxic emer-gency response,” says Jeng.

However, Jeng points out that the Taiwan government does not have a specialized agency such as the U.S. Chemical Safety Board, an independent federal agency dedicated to investigating chemical acci-dents to “identify the cause or causes so that similar events might be prevented.” [Editor’s note: there is also no equivalent in Taiwan to the role of the National Transportation Safety Board, whose scope for accident investigation extends to pipelines]. As a result, the main responsibility for investigation of chemical incidents in Taiwan is in the hands of prosecutors who generally lack the technical background to understand all aspects of the event.

Some of the safety procedures initiated by DuPont Taiwan have since been incorporated by the EPA into its regulatory system. An example is the extensive set of rules governing the trucking of hazard-ous chemicals. Each day DuPont sends four or five trucks filled with chlorine gas, which is highly flammable, from its supplier in Kaohsiung

to the DuPont plant in Guanyin, Taoyuan County that uses it in the production of titanium dioxide. The vehicles are built to ultra-strong U.S. Department of Transportation specifications, and the drivers undergo rigorous training, supplemented by refresher courses. They are instructed, for example, to maintain a consistent speed below the speed limit and to try to avoid changing lanes.

In addition, the trucks are constantly monitored by GPS and oper-ate during daylight hours only. Emergency response teams composed of personnel from DuPont, the chlorine supplier, and the transport company are stationed at intervals along the way in case of any prob-lem, but Jeng notes that “because we insist on the highest standards, no chlorine leak has ever taken place along the route.”

Another chemical company respected for its safety culture is BASF, headquartered in Germany, which operates numerous production facilities in Taiwan. According to BASF Taiwan Managing Director Eng-leong Goh, the company’s dedication to safety can best be seen from the strong authority accorded to its Environmental, Health and Safety (EHS) division, which acts independently of the individual busi-ness units responsible for operations. “Before we even start to build a plant, the process safety has been thoroughly reviewed,” he notes. In fact, at every stage of a new project – from concept planning through detailed planning to construction, start-up, and then operations and maintenance – the EHS officers must give the green light before the project can move forward.

In the case of acquisitions, if it is found that safety standards do not meet BASF requirements, operations are halted until the plant can be brought up to the proper level. And at all facilities, the CEO himself joins the EHS officers in conducting regular “safety walks” to look for any potential hazards.

Goh also stresses the corporate policy of encouraging employees to report and openly discuss any “safety incidents or even near-misses so that we learn from them” and hopefully prevent even more severe future incidents. “We promise our colleagues that no one will be pun-ished as a result of such reporting, because the worst thing that can hap-pen is that problems get hidden out of fear of being penalized,” he says.

In addition, in each country in which BASF operates it forms a crisis-management team consisting of all business-unit heads, plant managers, and the EHS chief, and instructs the team to conduct regu-lar practice drills. “We hope we’ll never have to put that training to use in a real situation,” says Goh, “but if that day ever comes, we’ll know just what to do.”

— By Don Shapiro

The Private Sector Role

der or disruptions in the economy.” The Typhoon Morakot t ragedy

spurred Taiwan to make major improve-ments in its ability to diminish the conse-quences of natural hazards, especially floods and mudslides. Some observers would contend that those efforts did not go far enough, but substantial progress has indisputably been achieved. Now the question is whether the Kaohsiung chemical explosions will likewise jolt

the Taiwan public and government into taking concrete steps to ensure height-ened safety from industrial and other man-made disasters.

Expressing relative optimism on that score, Gu notes that the history-minded-ness imbued in Chinese culture creates a proclivity to take past events to heart and try to learn from them. But Lee Hong-yuan reflects on two other tendencies – people’s short-term memory and atten-

tion span (especially in a media-heavy age of information overload), plus the penchant among government officials to consider that they have matters well under control, making it unnecessary to undertake pronounced changes. He there-fore urges the media and civil society to keep up the pressure on government to put in place even more effective emergen-cy-management institutions, procedures, and personnel-training programs.



Even to seasoned observers, any link between the sixth round of meetings of the Cross-Strait Eco-

nomic Cooperation Committee, held by Taiwan and China in Beijing on August 5, and the chemical pipeline explosions that six days earlier had devastated parts of downtown Kaohsiung was certainly not readily discernable. But Taiwan’s Chinese-language Want Daily nonetheless hooked the two events together in a plausible manner.

The pro-unif ication newspaper quoted members of the Taiwanese and Chinese delegations as saying that the impact of the Kaohsiung disaster on Tai-wan’s petrochemical industry will be a shot in the arm for the proposed Gulei Integrated Refinery and Petrochem-ical Park in China’s Fujian province. According to that school of thought, the Gulei project could provide a new haven for Taiwan’s petrochemical industry, which was already finding itself less welcome in Taiwan even before the Kaohsiung disaster.

“Members of the cross-Strait teams for industrial cooperation have in pri-vate revealed that there is a tacit agreement that Taiwan’s petrochem-ical industry will relocate to Gulei,” the Want Daily report read. “They expect that [related] new cooperation deals

will come into being at the Cross-Strait CEO Summit in November.” The CEO Summit brings together hundreds of Taiwanese and Chinese business leaders with government representat ives, albeit on semi-official missions, given the absence of official diplomatic ties between the two sides.

The Gulei project, and the Tai-wanese investment in it, has been given the final regulatory nods by Taiwan’s Ministry of Economic Affairs (MOEA)

and Chinese Premier Li Keqiang in Jan-uary and late July respectively. With a projected investment of about US$15 billion, the project is being planned by a consortium of eight Taiwanese petro-chemical companies led by USI Corp., a major producer of polyethylene, and China’s Sinopec, a state-owned enter-prise that is the mainland’s largest oil and gas company.

The Ta iwanese pe t rochemica l industry had its origins in the Japa-

T A I W A N b u s I N e s s

In the wake of the Kaohsiung disaster, a proposal is being discussed to set up a specialized industrial zone for petrochemical plants.

Wanted: a New Home for Petrochemicals

BY JENS KASTNER

UNWELCOME? — Taiwan’s petrochemicals industry faces heightened scrutiny and criti-cism in the wake of the Kaohsiung explosion that killed 31 and severely damaged an entire urban neighborhood.

photo: cna

9 chemical.indd 27 2014/9/3 5:10:15 PM



nese colonial era, when Imperial Japan established refineries in the south of the island so that its ships and aircraft could refuel en route from Japan to Southeast Asia. After Taiwan’s transfer to the Kuomintang (KMT) government in the late 1940s, these facilities were taken over, overhauled, and expanded. They became crucial pillars for Tai-wan’s overall economic development, as their upstream products – including propylene (also known as propene), the gas that caused the Kaohsiung explosions – feed the middle and down-stream chemical plants that churn out everything, from plastic packaging and insulation to footwear and automotive antifreeze.

But although the petrochemical industry in past decades directly or indi-rectly contributed as much as 60% of Taiwan’s GDP, growing income levels and higher living standards on the island led to greater public con-cern about environmental and health issues. As a result, the authorities found it ever more difficult to approve expan-sion plans for the local petrochemical industry. The critical point came in 2011, when after years of holdups in the construction schedule due to envi-ronmental impact assessments, the Ma Ying-jeou government was finally forced by public opposition to cancel the Kuokuang project of state-owned oil company CPC Corp., Taiwan.

CPC had planned to put a whopping US$20 billion into that complex for naphtha cracking and associated petro-chemicals, to be located along the coast of Taiwan’s Changhua County. When it became clear that further substantial expansion of the upstream petrochem-ical sector would be impossible in Taiwan, CPC and its partners sought to develop a naphtha-cracking project in Malaysia, but this too was abandoned last year, owing partly to economic con-siderations and partly to opposition by Malaysian environmentalists.

When the Kaohs iung d i sa s t e r occurred, apparently due to leaks in an LCY Chemical Corp. pipeline car-rying highly flammable propylene gas, the future of the petrochemical industry in Taiwan became even murkier. Inves-

tigations are sti l l under way as to where culpabi l i ty for the tragedy should lie. Among the many questions to be answered are: Who should bear responsibility for the maintenance and inspection of the pipeline? How did it happen that a storm-sewer culvert was installed alongside the pipeline, causing the corrosion that led to the leak? Since the pipeline was laid decades ago when the surrounding area was relatively undeveloped, what was the decision-making process for the later granting of building permits nearby? On the day of the explosion, why did the pumping of propylene through the pipeline continue even after indications of low pressure were discovered?

In the absence of immediate answers, the often testy relationship between the citizens of Kaohsiung and the pet-rochemical industry has grown even testier. “This accident is very sensitive for the relationship between the Tai-wanese people and the petrochemical producers, as the misgivings are now no longer mainly about pollution but also operational safety,” says J.H. Shieh, executive manager of the Petrochem-ical Industry Association of Taiwan (PIAT). “There are pipelines all over the country to transport gas and chem-ical liquids, not only in Kaohsiung. But if a company now wants to do any new construction, it will be very difficult to get approval because government offi-cials panic due to public pressure.”

Shieh believes that the Kaohsiung City government overreacted in the aftermath of the disaster by banning the use of all chemical pipelines in the vicinity. The alternative method of transporting such chemicals by truck is not only much more dangerous but also unreasonably costly, he maintains.

“The downstream plants in Kao-hsiung tell us that their raw material inventory is already down to 30%,” says Shieh. “So in order to avoid supply shortages and even a production halt, they must rely on those trucks, which should always be an emergency measure only and never something that lasts this long.” In fact, an accident occurred just over a week after the implementation of the new policy when a tanker truck,

fortunately an empty one on its way to pick up chemicals because of the ban on use of the pipelines, collided with a Kaohsiung commuter bus, killing the truck driver and injuring 18 people.

Greener pastures

Shieh says the basic problem, for which the authorities have still not provided an answer, is how the pet-rochemical industry can survive in Taiwan. When President Ma termi-nated the Kuokuang project, he notes, the decision was presented as marking the beginning of a new era in which only small-scale, high value-adding, low energy-consuming, and low polluting chemical production would be allowed in Taiwan. Effectively that would mean an end to the expansion of large-scale operations for the production of chem-ical commodities.

“In other words, even though the petrochemical area in Kaohsiung was built 30 years ago, including the rusty pipelines that exploded, no new proj-ects can gain approval,” Shieh says. “The authorities are now saying that the damaged p ipe l ine mustn ’t be repaired on site – that it should be removed altogether. But if that is the case, how could the industry possibly feasibly transport basic materials from the harbor to the plant sites?”

To Academia Sinica economist Hu Sheng-cheng, head of the government’s now-defunct Council for Economic Planning and Development (CEPD) during the presidency of the Chen Shui-bian, the Kaohsiung accident poses even bigger questions for the Taiwan economy. He notes that petrochemi-cals currently account for 22.3% of the island’s output in the manufacturing sector and provide some 400,000 jobs.

“Taiwan cannot afford to have no petrochemical industry, not least because importing the feedstock would make it too expensive for other key industries, causing them to lose competitiveness,” Hu says. “But if you cannot guarantee safety, there will be no public support and a lot of protests, and that will make the industry move abroad.”

Hu notes that as an outcome of the

9 chemical.indd 28 2014/9/3 5:10:15 PM



Kaohsiung blasts, the giant Formosa Plastics Group has already abandoned plans for fifth-phase expansion at its naphtha cracker complex in Mailiao in Yunlin County. It also appears “that the industry has become more eager to invest in Gulei” since the inci-dent, he adds.

Bert Lim, president of The World Economics Society, a Taipei-based think tank, also cautioned against overre-action on the part of government and society. While he doesn’t regard the Gulei project as a particularly attractive choice for Taiwan’s top-tier petrochem-ical companies “because the conditions for investment and operation are not so good for them there,” he expects that the general trend for the industry to look for greener pastures outside Taiwan will now accelerate.

“Formosa Plastics Corp. has been thinking of moving their headquar-ters to the United States, while the Changchun Group [CCP], our largest p roducer o f r e s in , an impor tan t branch of petrochemical derivative, has decided to relocate its main oper-ation center to Singapore, which has

two large petrochemical parks,” Lim says. “Some smaller firms might move to Gulei, but it would be an economic disaster for Taiwan if we allowed the petrochemical industry to cut off from the supply chain here. Two-thirds of the chemical raw materials used by our electronics, information and communi-cations, biotech and healthcare sectors as well as machinery and car makers come from there.”

Searching for solutions

Although the Information Bureau of the Kaohsiung City Government esti-mates that Kaohsiung-based chemical companies together lose NT$1 billion a day due to the ban on the use of pipe-lines, as TOPICS went to press it could not project how long the prohibition will remain in place. According to sec-tion chief Helmut Chung in the Bureau, the affected companies will be able to survive “as they have already earned a lot of money.”

Chung says that while he is unaware of the current status of the Gulei project, it is not surprising that China

would try to step up efforts to attract Taiwanese factories. At the same time, he emphasized that Kaohsiung does not wish to lose this important industry, which has been a mainstay of the local economy. “We hope that the petro-chemical companies feel that they are taken care of by the Taiwanese people, so that they will stay here,” he told TOPICS. “The Kaohsiung city govern-ment does its best to create a win-win situation in cooperation with the central government.”

On April 16, in fact, Executive Yuan spokesman Sun Lih-chyun confirmed that the Executive Yuan is considering a proposal to ensure greater safety con-ditions by setting up a special zone for petrochemical companies in the Kao-hsiung area by 2017. Endorsing that concept, Hu Sheng-cheng says that “in order to reduce hazards from pipelines or other forms of transportation, pro-duction must be moved to specially designated zones for which perks and other incentives should be crafted by the authorities.”

According to a report in the Chi-nese-language United Daily News, the government’s plan calls for reclaiming 400 hectares of land from the waters off the city’s Siaogang Distr ict at an estimated cost of NT$50 billion (US$1.67 billion). Bert Lim recalls that Vice President Wu Den-yih, when he was the KMT mayor of Kaohsiung, proposed such a project. However, it was never acted on by the central gov-ernment, then under the Democratic Progressive Party to which current mayor Chen Chu belongs.

“Although Siaogang is indeed a good location, it will really be a tall order to relocate all chemical compa-nies from downtown Kaohsiung to such a suburban area,” Lim cautions. “And that will take time, perhaps a decade, because of the political strug-gles that would certainly accompany the initiative.”

Perhaps as a foretaste of what may lie ahead, on August 19 dozens of Siaogang residents held a demonstration outside a CPC activity center in Kaohsiung to pro-test any plans to move the petrochemical operations to their district.

DISASTER STRIKES — Firefighters were on-scene for three hours before the Kaohsiung explosions, and six died, putting a spotlight on Taiwan’s ability to handle emergencies in the chemicals industry.


9 chemical.indd 29 2014/9/3 5:10:16 PM


The issue of economic inequality rose to the fore of public consciousness in Taiwan with the student-led seizure of the Legislative Yuan this past spring in

what was dubbed the Sunflower Movement. The main target of the demonstration was the Cross-Strait Agreement on Trade in Services that the government had signed with China. The protestors viewed the further opening of the economy to China as a threat to Taiwan’s security, but they went beyond that issue to object that the Agreement would benefit wealthy industrialists at the expense of Taiwan’s lower classes. The incident forced Taiwan to address the smoldering issue of growing inequality in economic well-being and, perhaps more importantly, opportunity.

Senior Economist Gordon Sun of the Taiwan Institute of Economic Research (TIER) sees the driving force behind the protests as student frustration over the low salaries and limited opportunity for advancement available to today’s uni-versity graduates. “They earn just NT$22,000 per month and don’t have a chance for a raise in salaries unless they go abroad to work. But they often don’t have enough English ability or foreign-company experience, so they can’t com-pete with young people from Singapore or Hong Kong,” he explains. “Ultimately they don’t have opportunities,” he says, given the stagnant economy at home and difficulty breaking into the international arena.

But in terms of global comparisons based on income, Taiwan ranks as a fairly equitable society. According to the Gini coefficient of inequality, in which “0” stands for perfect equity and “1” is absolute inequity, Taiwan scored a reason-able .336 in 2013, according to the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan’s offi-cial source for government statistics. While Taiwan comes in higher than Sweden’s Gini coefficient of .27, as calculated by the OECD in 2011, it fares better compared to the OECD’s figure for the United States of .39, and far better than the CIA World Factbook’s China score, the equivalent of .47.

From another perspective, in 2013 the top 20% of income-earners in Taiwan accounted for 39.96% of total earnings, while the bottom fifth earned 6.57%, according to the DGBAS. In the United States, by contrast, the top 20% earned 51% of total income, versus just 3.2% for the bottom 20%, as calculated by online statistics provider Statista Inc. Further, DGBAS statistics show that between 2012 and 2013, incomes in Taiwan rose 2.02% overall, while those at the bottom gained 2.69% and those at the top only 1.9%.

At the same time, however, incomes in Taiwan have been nearly flat for a decade or more, even as housing prices have skyrocketed and luxury cars crowd the streets. Mounting inequality is a common theme on TV talk shows and news reports, and Tsai-lung “Honigmann” Hong, deputy director of the opposition Democratic Progressive Party’s Committee on Policy Research and Coordination, asserts that “the trend is clearly worsening – the income gap is widening.”

How can these contradictory views of Taiwan’s equality be reconciled?

First, for several reasons the index may not capture the true measure of inequality in a society. Statistically, two countries with very different income distributions can have similar Gini coefficients. For example, if the top 50% of a society has all of the income and the bottom none, the coefficient would stand at .5, while if the bottom three-quarters had 25% of the income, and the top quarter had 75%, the ratio would also be .5.

How the Gini coefficient is calculated presents even more confusion. The Gini can either measure “market income,” which refers to income before taxes and subsidies, or “dis-posable income,” which measures income after taxes and the redistribution through social-welfare benefits that economists refer to as transfers. Taxes and transfers can have a strong impact on the Gini coefficient; for example, the OECD gave Japan a reasonably equitable Gini coefficient of .34 in 2009, but by market-income calculations rated it at a highly unequal .49. The Gini metric can also look very different depending

A N A LY S I S

High property prices, the influx of money earned in China, and other factors mean the inequality gap in Taiwan is more pronounced in terms of wealth than of income.

In Search of Economic Equality

BY TIMOTHY FERRY

9 inequality.indd 30 2014/9/3 5:28:20 PM


A N A LY S I S

on whether it measures per capita or household income. The Taiwan government says it follows the same calculating models as the OECD, basing the Gini coefficient on house-hold, disposable income.

The China factor

In addition, according to local economists, the Gini does not take into account some key features of the Taiwan economy. One is the China factor. The billions of dollars of Taiwanese investments in China generate huge returns. Sun notes that a lot of untraceable and undeclared money returns to Taiwan, contributing to the maintenance of affluent life-styles for one segment of the population, while even more is parked in overseas accounts, often in Singapore or Hong Kong. “That’s why we feel the inequality is higher than before, but the Gini figure hasn’t changed much. China invest-ment skews the figures,” he observes. “Many people around us are rich, but you don’t know where their income comes from.” He adds that efforts to enter into tax agreements with China to close those loopholes have been held up by the failure to pass the cross-Strait services pact.

Another factor responsible for the under-measurement of inequity is the domestic underground economy. Wang Jiann-chyuan, senior economist of the Chung-Hua Institution for Economic Research (CIER), notes that many of the street ven-dors that are so emblematic of local culture do not declare their full earnings. Of course, unofficial markets are common in many countries, and the size of Taiwan’s underground economy remains uncertain.

Adding to the complexity of the subject is the distinction between wealth and income. The Gini is an equation that can be used to measure inequality in a number of situations, but as it is used in global comparisons, it gauges inequality in income. For economists, “income” is defined as the flow of payments received over a specified period of time. In Taiwan, income is calculated per year and includes payroll wages, sub-sidies, property income from rent, etc., as well as transfers from government or enterprises. Wealth, on the other hand, is the accumulated store of possessions, including assets, prop-erty and land, equities, and pensions, among others. In many countries, relative equality in income belies relative inequality in wealth, with property being a crucial difference.

Tax policies have a considerable impact on Taiwan’s prop-erty market. Following the lead of Singapore and Hong Kong, Taiwan lowered its capital gains tax during the Chen Shui-bian administration, while the inheritance tax was lowered from 50% to 10% in 2008 after the Kuomintang returned to power. These cuts have encouraged the return of capital to Taiwan for investment in property, pushing up demand.

Most economists agree that money from China – either from Taiwanese who have earned their money on the main-land, or directly by Chinese purchasers – has had a big impact on the property market. Paltry returns on business investments in the wake of the financial crisis and lingering weakness in export destinations make investing in industry

less attractive, and stock market gains are now subject to cap-ital gains taxes, pushing investors to seek returns elsewhere. Low property tax rates, low interest rates, and fairly easy access to mortgages also fuel demand for property.

“So most of the money goes to the property market,” says CIER’s Wang. With low interest payments and property tax bills, Wang explains, “there’s no penalty for sitting and waiting,” so many speculators buy more than one property and wait for the market to rise.

All of these factors have driven up housing prices to the point where Taiwan has the highest property prices in the world relative to average incomes. According to a study released in April by the Ministry of Interior’s Construction and Planning Agency, the average housing price-to-income ratio in Taipei at the end of last year was 15.01, meaning that the average cost of the purchase is equal to more than 15 years of income for the typical homebuyer.

The situation has important implications for Taiwan’s wealth gap. Wang says homeowners in Taiwan in fact own 2.66 properties on average. He notes that during the 2009 downturn, a number of poorer families lost their homes; as wealthier people bought them up, a further concentration of wealth resulted. But while this concentration of wealth does not register in Gini coefficients or many other metrics of inequality, it may have serious consequences for a society.

Social unrest

According to social scientists, higher economic inequity leads to greater social unrest, and many see the Sunflower Movement as an example. The need to address inequity thus becomes a matter of national security, but actually ame-liorating the situation requires deep changes in a country’s economy and perhaps even its culture.

SUNFLOWER MOVEMENT — Student protesters cheer after end-ing their 24-day occupation of the Legislative Yuan on April 10. Economists say that rising inequality increases the risk of social unrest.

photo: ap/Chiang Ying-Ying


A N A LY S I S


Low starting incomes for new graduates is one issue that is not easily solved, as it is subject to the basic laws of eco-nomics. Taiwan has one of the highest proportions of college-educated people in the world and most of them expect a white-collar job upon graduation. Unfortunately, that leads to a surplus of highly educated candidates – and by the immu-table laws of supply and demand, a lowering of the value of each. Wang notes that over the past decade, the number of students earning bachelor’s degrees doubled, master’s-degree earners tripled, and doctoral degrees quadrupled.

Even as college graduates complain about the shortage of suitable employment opportunities, many job vacancies in Taiwan for skilled labor and technicians go unfilled. “There are a lot of jobs that pay better than office jobs, such as in manufacturing or mechanics,” Wang observes. “But you may need to work overtime, and maybe only get one day off a week, and you need to lower your social position.” He says graduates would rather take jobs in the service sector that pay less but offer air conditioning.

Globally, economists promote education as a means to ameliorate inequality in the hyper-competitive international marketplace, yet Taiwan is facing a contradictory phenom-enon: a surplus of degree-holders exerting downward pressure on the pay scale, increasing inequality.

Hsieh Chia-yi, a senior HR specialist at the National Development Council (NDC), confirms “the very serious mis-match” in which “students’ degrees and talent cannot meet the needs of industry.” The Council has therefore estab-lished programs aimed at steering students toward more practical degrees. Under the Economic Power-Up Plan initi-ated in 2012, for example, the NDC is fostering coordination between industry and academia to cultivate talent who will

graduate with needed skills, enabling then to earn more than the normal NT$22,000 starting salary.

A more permanent solution might be to reduce the number of universities, making entrance more competitive and grad-uating fewer – but better trained – students. The number of universities expanded dramatically in the 1990s with policy shifts by the Chen administration designed to provide young people with more opportunities. A number of these schools now have difficulty recruiting enough students, but with many universities solidly entrenched in their markets, and with others reluctant to give up their valuable real estate, the situation remains difficult to amend.

Introducing changes to the tax code is another option. Currently, many of Taiwan’s business tax incentives go to the ICT sector, which tends to be capital-intensive and light on employment, exacerbating wealth disparity. Economists Sun and Wang suggest that the government adopt an indus-trial policy that encourages industries other than ICT, with a particular emphasis on SMEs, which are responsible for half of the employment in Taiwan. Tax policies could also be adjusted to raise more revenue from the wealthy to help sup-port social welfare programs for poorer families.

The NDC notes that social assistance for low-income groups is already a keystone of government policy. The gov-ernment currently provides up to NT$14,000 per month as a cash subsidy for low-income people, as well as allow-ances for the elderly, handicapped, and farmers. In addition, the government waives school fees and provides free meals for underprivileged children. In 2011, amendments to the Social Assistance Act raised the poverty line to enable more needy families to receive help, almost doubling the number of people eligible for assistance.

Taiwan income distribution per quintile (%)

U.S. income distribution per quintile (%)

Lowest 20%

2007 2008 2009 2010 2011 2012 2013

Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% Highest 20% Average (NT$)

SOURCE: DGBAS

SOURCE: DGBAS, 2013 SOURCE: Statista Inc. 2012

Unit:: 1,000NT$

20

240

460

680

900

1120

1340

1560

1780

2000

6.57

12.38

17.49

23.6

39.96

3.28.3

14.4

23

51

ANNUAL HOUSEHOLd INcOME dISTRIBUTION BY qUINTILES (20%)



A N A LY S I S

All of this social spending has caused social welfare to rise from about 8% of the central government budget 20 years ago to 20% today. But the NDC views these measures as essential to ensuring the well-being of Taiwan’s citizens and to reduce inequality. “If we don’t do it, the gap will be even wider,” says Hsieh. The income disparity between the top 20% of the population and the bottom 20% stands at 7.53 times before taxes and transfers, but falls to 6.08 times when taxes and transfers are factored in.

Perhaps the best way to reduce inequality would be to expand the economy. As one way of accomplishing that, the DPP’s Hong suggests that Taiwan “expand our startup enterprise ecosystem.” He says that offering incubation and other benefits, as well as resolving some longstanding regu-latory issues that have created an unfavorable environment for startups, would provide young people with more career opportunities.

With over 65% of GDP generated by services, the service sector should come in for particular attention. According to CIER’s Wang, one way to expand demand for services is to import consumers – that is, to promote tourism. There is gen-eral agreement that Taiwan has done remarkably well in that regard in the past few years.

Another approach is to expand overseas markets, which of course is what the Cross-Strait Agreement on Trade in Ser-vices was intended to accomplish. CIER’s Wang notes that service-trade agreements are fraught with risk, as they involve trade not in goods but in people, information, and money, “so it affects our national security.” But he also observes that the Sunflower protests attracted support not only from people spe-cifically opposed to the trade pact, but also from many other sources – backers of Taiwan independence, those with anti-China sentiments, opponents of backroom/black box dealings by government, critics of President Ma, and (probably the big-gest contingent) those generally disaffected by the current economic/political situation. That mix is perhaps indicative that inequality and a lagging economy are stirring social unrest.

Wang faults the administration for failing to effectively communicate the benefits of the services pact to the public, but also says that the government policy suffers from serious deficiencies. For example, the government plan calls for com-pensation to industries such as printing that may be harmed by the pact, but that aid is after the fact. More helpful, he sug-gests, would be assistance in helping the printing industry upgrade its technology and business models to become more competitive.

The issue of inequality will likely remain highly conten-tious, with different economists and politicians interpreting the data in any number of ways. What role should access to cheap consumer goods, cheap healthcare, or cheap rental housing play in measuring inequality? How does inequality impact crime rates, access to good nutrition, educational opportunities, and the overall quality of life? Pundits and pol-iticians will weigh these factors by varying standards, and perhaps the only certainty is that the issue is not likely to dis-appear anytime soon.

It’s a Global Problem

Taiwan is certainly not unique in facing a troubled economy with seemingly fewer opportunities and

greater inequity. Although the United States is consid-ered among the most unequal developed nations in the world, member states throughout the OECD are expe-riencing a rise in inequity. Thomas Piketty, the French economist and author of the current bestselling book Capital in the 21st Century, observes that economic inequity in developed countries is at levels last seen in the Gilded Age in the late nineteenth century.

The causes are numerous and perhaps inevitable. Globalization plays a significant role, as labor now com-petes globally, with businesses free to roam the planet in search of the cheapest workers. In fact, while inequality is growing within countries, on a global scale inequality is actually diminishing, as more jobs move away from high-cost markets to cheaper frontier markets.

Many economists regard technology as an even big-ger factor in spawning inequality. Automation – mostly in blue-collar jobs but also increasingly in white-collar positions – has enabled manufacturing operations to expand without increasing employment, transforming many industries from labor-intensive to capital-inten-sive activities.

In Taiwan’s case, the rise of China as an industrial center powered by cheap labor posed an extreme chal-lenge to Taiwan’s manufacturing sector starting in the 1990s. Companies responded either by shifting manu-facturing to China or automating factories retained in Taiwan. Some 40% of Taiwan’s exports are from ICT production, which is readily automated.

In addition, the contract-manufacturing model that most Taiwan industry has followed in the absence of strong local brands leads to a focus on cost-cutting that keeps wages low. Senior economist Gordon Sun of the Taiwan Institute of Economic Research observes that as governments, Taiwan’s included, seek to drive exports to increase GDP growth, they have ignored the fact that “the link between GDP and wages is broken.”

Sun’s observations are aligned with Piketty’s analysis that integral to capitalism is a faster return on capital and investments than on incomes. Factory owners and other investors therefore accumulate more of the benefits while incomes stagnate.

The cure remains elusive. Given the inevitability of capital besting income growth, Piketty recommends redistribution measures such as global taxes on income and wealth, to prevent the rich from simply moving from high tax regions to low tax regions. But that solu-tion would require some sort of global agreement that no one regards as realistic. The search continues.

— By Timothy Ferry


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Stocks, Venture Capital, and Sovereign Wealth

A Special Report on the Financial Sector

INDUSTRYF CUS


9 IF.indd 35 2014/9/3 5:32:21 PM


INDUSTRYF CUS

IN THIS SURVEY

• AHousecatAmongTigers? p36

• AVisittotheTaiwanStockMuseum p38

• AWeakVentureCapitalIndustryDetersStartups p40

• DoesTaiwanNeedaSovereignWealthFund? p43

A Housecat Among Tigers?

By some measures, Taiwan’s capital markets have not per-formed all that poorly. Several

important indicators reveal significant gains in recent years, such as the dou-bling of market capitalization on the Taiwan Stock Exchange (TWSE) since 2003 and the average 44% return for investors between 2003 and 2013.

However, context is key when evaluating Taiwan’s financial sector. The island is just 200 kilometers away from the explosive China market, a short flight from rapidly developing Southeast Asia, and within four hours by air of Korea’s booming tech-driven economy. Many Taiwanese compa-nies have made the most of this prime location. In particular, original design/equipment manufacturers (ODMs/OEMs), the driving force behind Tai-wan’s economy, are well-integrated into Asia’s economic landscape; Hon Hai Precision (also known as the Foxconn Technology Group), for example, is China’s largest private employer, while numerous domestic manufacturers have set up shop in Southeast Asia.

Given that background, the per-formance of Taiwan’s f inancia l markets must be judged vis-à-vis the

Asia-Pacific. Make this comparison and a rather disappoint ing pic-ture emerges. According to a report by Goldman Sachs, market capital-ization growth in the region’s other exchanges, excluding Japan, skyrock-eted in the past 10 years by nearly 309%, far outpacing the TWSE. The discrepancy between Taiwan and its neighbors raises a significant ques-tion: have the nation’s capital markets “missed the boat” on Asia-Pacif-ic’s emergence as a key region in the global economy?

TWSE President Michael Lin acknowledges the shortcomings of his bourse, conceding that it is “quite right” to describe Taiwan’s capital markets as lethargic and lag-ging behind counterparts in other emerging markets. But he stresses that his exchange is currently in the midst of several important policy changes that he hopes will narrow the gap.

Lin credits changes last year in the leadership at the Financial Supervi-sory Commission (FSC), the TWSE’s regulatory body, as opening the way for regulatory liberalization at the stock exchange. He describes FSC Chairman Wil l iam Ming-Chung Tseng, who succeeded the staunchly

Taiwan’s underperforming capital markets now enjoy a more favorable regulatory environment,

but some question whether that is enough to over-come some weak fundamentals.

BY JAMAL MADDOX

9 IF.indd 36 2014/9/3 5:32:22 PM



conservative Chen Yuh-Chang last Sep-tember, as a force for positive change. Lin says that Tseng has “embraced a more open policy” that will enable the TWSE to take several steps to strengthen its competiveness, including the planned release of various new products.

Among the new offerings are inverse and leveraged exchange traded funds (ETFs) that are scheduled to be intro-duced during the second half of this year. These funds are considered high-risk products, and investors will be required to sign a “Risk Disclosure Statement” acknowledging their awareness of that fact. But as high risk can bring high reward, Lin sees an opportunity to attract the interest – and the capital – of experi-enced domestic and foreign investors.

The previous FSC administration frowned on such products out of con-cern for consumer protection, ignoring industry’s contention that sophisticated and professional investors who are accus-tomed to carefully assessing risk should be differentiated from retail investors. Their concerns were not without basis; leveraged ETFs consist of a mixture of derivatives, such as options and future contracts, and debt that magnify returns on an index, while inverse ETFs use a similar combination of complex financial instruments to mimic the inverse of the performance of an index or benchmark. While leveraged ETFs may multiply profit, they are just as likely to amplify negative returns. Moreover, both lever-aged and inverse exchange traded funds do not always yield the intended result. The funds tend to track daily move-ments in the market and rarely mirror annual performance, a characteristic that demands sophisticated analysis on behalf of investors.

Aiding economic development

Another new product , launched August 25, is the TWSE RAFI® (Research Affiliates Fundamental Index) Taiwan High Compensation 100 Index. In intro-ducing this fund, Lin notes that the stock market in this country plays a distinctive role, not necessarily shared by most of the world’s major exchanges, in that the “Taiwan government [and] people expect

the TWSE” to contribute to the health and growth of the real economy. The new initiative, for example, is designed to support the government’s goal of raising employee compensation. Once institutional investors use the index as a benchmark for index funds and ETFs, Lin says, it will encourage companies listed on the index to award employees with opportunities for higher pay and incen-tivize the appropriation of more returns to employees.

Borrowing a metaphor from the “Abenomics” policies of Japanese Prime Minister Shinzo Abe, Lin says that FSC Chairman Tseng has also shot “three arrows” in an effort to ease Taiwan’s rel-atively strict trading regulations. The first, enacted in September 2013, removes the previous “uptick rule” that required borrowed securities eligible for margin trading – stocks purchased on money borrowed from a broker – to be sold at a price higher than the previous day’s closing price. Under this new measure, the rule waiver now applies to over 1,200 stocks. According to the TWSE, the daily average value of margin transactions on the stock exchange has since risen by NT$ 1.64 billion (US $54.7 million).

The most recent of these “arrows” allows day-trading, a common prac-tice on the world’s major exchanges in which traders may buy, sell, or short-sell securities during the same trading

day instead of having to hold them for longer periods of time. On June 30, the FSC made 200 stocks listed on three of indexes – the TWSE Taiwan 50 Index, the Taiwan Mid-Cap 100 Index Constit-uent, and the GTSM Gretai 50 Index – eligible for sell-first, buy-later day trades. In theory, these changes will allow for more speculative activity by traders and investors, increasing the TWSE’s compar-atively lackluster turnover velocity. The easing of day-trading restrictions will also give brokers more latitude in set-tling and clearing their trades by relaxing securities borrowing procedures, an issue that often frustrates foreign institutional investors.

Another new development was the inauguration in May of the Formosa Stock Index, which enables investors to track the performance of both the TWSE and the Gre-Tai Securities over-the-counter market in one index. FSC Chairman Tseng said that by providing a comprehensive picture of Taiwan’s trading environment, the initiative should allow investors at home and abroad to make better-informed decisions.

Lin has high aspirat ions for the TWSE, expressing his desire to make it “one of the most active fund-raising cen-ters [and] one of the most active trading centers in Asia.” But despite Lin’s confi-dence about narrowing the performance gap between Taiwan’s capital mar-

FSC Chairman Tseng Ming-chung, center, Taiwan Stock Exchange Chairman Lee Sush-der, fourth right, and other officials mark the inauguration of the Formosa Stock Index in May.

photo:cna

9 IF.indd 37 2014/9/3 5:32:22 PM

INDUSTRYF CUS


kets and the rest of Asia-Pacific, many industry insiders and analysts are more cautious, highlighting serious structural issues with Taiwanese corporations and the nation’s economy. They question how well Taiwan’s capital markets can be expected to perform when underlying weaknesses exist in the domestic industry and economy.

Kinger Lau, chief China strategist at Goldman Sachs, notes some basic shortcomings affecting Taiwan’s Informa-tion Technology industry, for example. Although this sector is usually pointed to as one on the strong points in the Taiwan economy, Lau considers that insufficient indigenous R&D and branding capabil-ities are hindering earnings and stunting growth potential. Comparing the similar export-driven economies of Taiwan and Korea, Lau says that while “Taiwan and Korean tech companies have been able to generate similar topline sales growth,” the Korean companies have achieved far higher profit margins.

In a report he issued in May, Lau cites several data points that account for this phenomenon. Between 1995 and 2011, for example, Korean firms received eight times as many “triadic patent families” –

corresponding patents recognized in the three jurisdictions of the United States, the European Union, and Japan – than their Taiwanese counterparts. More-over, Taiwan, relies much more heavily on licensing technology from abroad. For Taiwan, net cross-border payments for patent royalties annually comes to an outflow equal to about 0.8% of GDP, compared with Korea’s 0.4% – and the 0.5% on the income side of the ledger for the United States.

While agreeing that Taiwan industry is comparatively weak in research and branding, Katherine Hu, head of Global Research at Merrill Lynch Securities Taiwan, does not view that condition as necessarily derailing Taiwan’s economic momentum. She notes that Taiwan cor-porations have lagged behind Korean rivals l ike Samsung for many years already, and also questions whether the path the Korean tech giants have fol-lowed is a guarantee of ultimate success. “What if Samsung becomes the next Nokia?” she asks. “You never know.”

Instead, Hu calls for deeper struc-tural changes to Taiwan’s economy, many of them centered on deregula-tion. In her opinion, the establishment of

Free Economic Pilot Zones would attract investment and professional talent from overseas, as well as opening the door to medical tourism. Through deregulation, she says, Taiwan could spur the develop-ment of new industries and revive overall economic momentum.

In turn, that economic growth would create opportunities for higher returns on Taiwan’s capital markets. “We need to see a more long-term structural change for the sake of the overall domestic economy,” says Hu. “That’s going to be fundamental to raise the level of Taiwan stock index and foster the overall devel-opment of the capital market.”

Riding the renminbi

Amid differences of opinion on the cause of Taiwan’s f inancial-market underperformance and its potential rem-edies, all commentators seem to agree on one thing: The Taiwan economy is in a unique position to benefit from the internationalization of the Chinese yuan by transforming itself into an off-shore RMB center. Although Hong Kong retains first-mover advantage, Goldman Sachs’ Lau notes that Taiwanese finan-

The Taiwan Stock Museum occupies space once used by the Taiwan Depository and Clearing Corp.

photos: JamaL maDDoX anD taiwan stock museum

A small orange sign in front of a nondescript office building marks the entrance to the Taiwan Stock Museum, a repos-

itory of Taiwan’s financial heritage. Despite the unremarkable setting, the museum is worth a visit for anyone with even the slightest interest in economic history.

After taking an elevator to the third floor and passing through a bright orange hallway, visitors enter a semi-circular room ornamented with artifacts outlining the history of stocks and bonds. Featured is a reproduction of the world’s first stock certificate, issued on the Amsterdam Stock Exchange in 1602 by the Dutch East India Company. It shares the wall with a duplicate of China’s first stock certificate and Taiwan’s first bond, issued by a Qing Dynasty-era administrator to fund the construction of a railroad. The Museum also has a duplicate of the oldest surviving stock certification from Taiwan, dating from the 1880s.

A real bank vault door – of the same type as used at the U.S.

A Visit to the Taiwan Stock Museum

9 IF.indd 38 2014/9/3 5:32:23 PM


Federal Reserve – separates this gallery from the main exhibit area. The reinforced steel behemoth, over six inches thick, is a stark reminder of the museum space’s previous incarnation. Before 2011, it was used by the Taiwan Depository and Clearing Corp. (TDCC) to house millions of stock certificates repre-senting trillions of dollars’ worth of securities. Now visitors can take a well-curated journey through the development not only of Taiwan’s stock market but of its export-driven economy. Near the entrance rests an early model of a Giant bicycle, along with other examples of the low-tech goods that for decades typ-ified the Taiwanese economy. At the end of the passage are PCs from the 1990s, undoubtedly filled with the semiconductor technology that catapulted Taiwan’s economy to international renown as one of the four Asian Tigers.

The curators have transformed one remnant of the museum’s past into a central part of the exhibit. Across from a display case featuring stock certificates sit two mobile shelves containing stacks upon stacks of authentic securities certificates. The floor next to the shelves is exposed, revealing a thick layer of solid steel plating. Security was, for obvious reasons, a primary con-cern for the nation’s chief stock depository.

The inauguration of the museum on December 24, 2012 marked an important milestone. One year earlier, the island

became the 13th nation in the world to switch to a completely paperless securities deposit system. While the TDCC’s secure vault may now be obsolete, it serves as a fitting tribute to Tai-wan’s financial development.

The Taiwan Stock Museum is located at 365 FuXing North Road, Taipei 105; (02)-2514-1300; Open Monday to Friday, 9 a.m.-4:30 p.m.; Tours by appointment only.

— By Jamal Maddox


cial institutions are already reaping large dividends from an influx of RMB deposits, even though those institutions are facing a much more heavily regulated environment than their Hong Kong coun-terparts. “Taiwanese banks were one of the region’s best performing financial sec-tors in the equity space last year because of RMB opportunities,” says Lau. In one report, he points to the fact that Taiwan’s banks outpace the region in terms of non-interest income (account service charges, deposit and transaction fees, etc.) as a percentage of total operating revenue, indicating an increase in revenue oppor-tunities for the nation’s banks.

Taiwanese companies’ substantial presence in China also contributes to the island’s advantageous position. Taiwan-based OEMs and ODMs have invested massive amounts of capital in China due to favorable labor costs and other con-ditions. This phenomenon presents a prime opportunity for the banking sector in Taiwan, says Merrill Lynch’s Kath-erine Hu. If Taiwan were to become an offshore renminbi center, she says, com-panies with operations in China could turn to Taiwanese financial institutions for loans at far lower borrowing costs

than available in China’s tightening credit market. With the benefit of that finan-cial advantage, those companies would be able to “grow when their competitors are getting weaker,” argues Hu.

Echo ing th i s s en t iment , Lau o f Goldman Sachs says that in an environ-ment of very intense competition, “in order for Taiwan to be successful, we must identify niche markets, and one of them will be financing and helping companies to expand their investment in China.”

For that to occur, however, Beijing’s current strict controls on the repatria-

tion of currency will need to be relaxed for Taiwanese financial institutions. Although the Cross-Strait Services Trade Agreement (CSSTA) signed last year under the Economic Cooperation Frame-work Agreement (ECFA) would bring about just such relaxation, the CSSTA has become a contentious issue in Taiwan domestic politics and is still tied up in the Legislative Yuan, which would need to approve it. One solution, suggests Hu and others, would be to decouple cur-rency repatriation discussions from the CSSTA and ink a separate agreement.

The most valuable stock certificate in Taiwan history, a Chung-hwa Telecom issuance in the year 2000 worth NT$281.4 billion.

photo: JamaL maDDoX

9 IF.indd 39 2014/9/3 5:32:25 PM

INDUSTRYF CUS


A Weak Venture Capital Industry Deters Startups

The National Development Fund plans to partner with leading foreign VC firms to provide more support in Taiwan for new enterprises.

In recent years, Taiwan has been largely excluded from the post-dotcom-bubble

explosion in successful software startups, record-setting IPOs, and young billionaire program-mers. The reason, it appears, is not merely that the bulk of the innovation and dynamism in the global technology sector is now coming from the software side of the business, rather than the hardware manufacturing that has long been Taiwan’s forte. Rather, many observers have concluded, the absence of a vibrant startup scene can be traced to deficiencies in one increasingly important aspect of the business life cycle: ven-ture capital. Instead of receiving support from an active network of VCs, would-be entrepreneurs face a financing infrastruc-ture that is not inclined to recognize and accommodate promising ideas and busi-ness plans at their earliest stages.

It wasn’t always so. In the decade pre-ceding the dotcom crash in 2001, local VC firms supported a booming informa-tion technology landscape, replete with prominent IPOs and acquisitions worth hundreds of millions of dollars. The industry certainly has not disappeared. According to the Taiwan Venture Capital Association (TVCA), more than 190 VC firms were operating in Taiwan in 2013,

with billions of NT dollars under man-agement.

Yet, for a variety of reasons, Tai-wanese “venture capitalists” are generally no longer playing the standard role of venture capitalists, which is to engage in the earliest stages of the startup financing cycle. Besides preferring the less-risky later stages of investment, Taiwanese investors seem far more comfortable with traditional business models – for example, thinking in terms of production capacity rather than beta launches. Eval-uating the market potential of software – and virtual products in general – requires a unique skillset that most local invest-ment firms have yet to develop.

Jamie Lin, the head of AppWorks, a Taipei-based startup accelerator, attri-butes this gap to a lack of local investors and entrepreneurs with experience working for successful software com-panies. Few Taiwanese software and internet companies weathered the dotcom crash, he notes, and the “alumni” of the

firms that did well during the dotcom boom did not move into Taiwan’s venture capital industry.

The situation in the United States was entirely different, says Lin. After the dotcom crash, he notes, prominent survivors like Google or Amazon provided valu-

able role models, as well as a network of talented alumni – including many who went into the VC industry, sometimes founding their own firms. They were well-placed to make smart investment decisions, says Lin, “because they them-selves have been there, done that.”

James Hill, business development manager at mobile messaging app Cubie Messenger, emphasizes the importance of having successful companies and startups in cultivating a favorable startup environ-ment. “We don’t have company success stories that will kickstart more invest-ment in software, which leads to more entrepreneurs,” he says. “That’s how the whole wheel gets going.” An outlier in Taiwan, Cubie Messenger has gained traction internationally – it currently has over six million users across Asia, and has secured US$1 million from Asian and American venture capitalists.

Government promotion efforts also often seemed out of sync with current conditions. “I can remember looking at

BY JAMAL MADDOX

9 IF.indd 40 2014/9/3 5:32:25 PM



the foreign investment literature on a government website, and it’s still talking about opening factories,” despite the fact that “nobody is opening factories” in Taiwan, Hill recalls. “The rules for physical businesses don’t apply to dig-ital companies and products, so the rules need to be updated to match how the economy is moving.”

Government programs

The government has devised some programs to try to create a more wel-coming a tmosphere in Ta iwan for entrepreneurship. The Executive Yuan, for example, last month approved a plan proposed by the National Development Council (NDC) that aims to reinvigo-rate the venture capital market while also encouraging a shift away from Tai-wan’s traditional focus on the hardware

side of the electronics industry. The project would create a sizeable fund that would be used to invest into prominent overseas venture-capital funds, on the understanding that the money would go into investments in promising startups in Taiwan in software and other fields.

The goal, says the NDC, is to help fill the gap created by local VC firms’ tendency to focus only on late-stage investment. In addition, the program will seek to bring industry expertise and knowhow to Taiwan by partnering with foreign VC firms, to tap into their expe-rience within early-stage investments. Hopefully the foreign VCs introduced to opportunities in Taiwan through the partnership with NDC’s National Devel-opment Fund (NDF) will wish to be active in this market in the future. The NDF board is set to meet in mid-Sep-tember to finalize the implementation

details, such as the amount of money it will earmark for the fund.

The plan is for the NDF to invite part-nership proposals from VC firms wishing to invest in local startups. The NDF would serve as a limited partner, a role devoid of management authority and limited according to the size of its investment.

After the NDF conducts a prelimi-nary screening and evaluation of each firm’s broader investment strategy and industry focus, it will send the proposals – along with its own positive or negative assessment – to a committee composed of government officials, industry execu-tives, and academics, which will conduct its own separate evaluation and selection process. The members of the committee will be appointed later this year, but their identities will not be made public to shield them from outside pressures. The investment committee’s decision, how-

Proposed Organizational Chart, National Development Fund Management Committee

National Development Council Minister (Convener)

Minister of Economic Affairs (Vice Convener)

Other high-level government officials

Outside experts and scholars

Accounting Dept.Audit Dept.Business Dept.

Deputy Executive DirectorDeputy Executive Director

Venture Capital Evaluation Committee Investment Evaluation Committee

Management Committee (11)

Convener(National Development Council

Minister)

Vice Convener(Minister of Economic Affairs)

Executive Director

General Affairs Dept.

9 IF.indd 41 2014/9/3 5:32:25 PM


INDUSTRYF CUS

ever, is not final. The ultimate decision on whether to contribute to a VC fund will lie with a management committee con-sisting of outside experts and academics, as well as an array of high-ranking gov-ernment officials.

Among the objectives of the pro-gram is to foster emerging, knowledge-based industries, de-emphasizing the prevalent current model of contract manufacturing. One of the focuses in the beginning stage will be innovative software/hardware hybrid startups to leverage Taiwan’s unparalleled expertise in hardware production and rapid proto-typing to gain a competitive edge. In the future, more emphasis will also be placed on pure software.

Private investment

AppWork’s Lin has his own perspec-tive on how startups can be promoted – and having secured US$11 million in funding for his accelerator from local investors, he has managed to succeed where others have failed. Currently he is in the process of closing a US$50 million deal with several of the largest investment and holding companies in Taiwan.

AppWorks operates in the same way as its Silicon Valley peers. In exchange for an equity stake, Lin provides fledg-ling startups with office space and seed funding. He disagrees with those who argue that there is no capital available in Taiwan for early-stage startups, drawing an analogy to student scholarships. “When you ask students about schol-arships, most of them will say ‘Schools don’t give scholarships.’ But there are scholarships available, and a very few students are able to figure how to get them. It’s the same in this business.”

Lin expresses some doubts about how

effective the NDC’s program will be. In his opinion, leading foreign VC firms are unlikely to see much benefit in partnering with the NDF; the ones showing interest may just be those struggling to raise cap-ital due to underperformance. The best firms don’t need assistance in finding investment opportunities, says Lin; if they see a promising Taiwanese project, they can simply invest with their own funds. He also questions whether foreign VC firms are necessarily more capable than local investors.

Some in the industry, however, are more opt imist ic about the govern-ment’s efforts. Among them is Alvin Woon, a partner at TMI Holdings, a Tai-wan-based, early-stage seed-investment boutique with success in the area of soft-ware/hardware hybrids. TMI’s portfolio includes the entertainment studio Roam & Wander, which publishes iPad and iPod kids’ games and produces app-en-abled toys. Woon says he welcomes the entry of foreign VCs into the market, contending that competition “would be good for everyone.”

The NDC is not the only government entity aggressively promoting startups in Taiwan. The National Science Council (now upgraded to become the Ministry of Science and Technology), in collabora-tion with the non-profit National Applied Research Laboratories (NARLabs), launched the From IP to IPO (FITI) pro-gram in March 2013. The initiative seeks teams of entrepreneurs composed of uni-versity students, professors, and research fellows. Over the course of a “4-stage, 6-month fostering process,” successful teams receive funding at each stage to support the development of their product. Teams that make it through all four stages receive a grand total of NT$2.9 million (US$97,000).

Moreove r, the o rgan i z e r s have recruited a large group of prominent Tai-wanese investors and venture capitalists, drawn mainly from Silicon Valley, to pro-vide mentorship and business advice to the participating teams. These mentors take their role quite seriously; some have even started a “Taiwan Venture Capital Angels” club in Silicon Valley.

The four to six teams that make it through all four stages of the program are, in theory, well-prepared to become full-fledged startups. But the program doesn’t end there. Alumni are given free access to resources such as national laborato-ries and cloud-computing infrastructure. While the program is aimed mainly at hardware and biotechnology, it has pro-duced one promising software startup, a cloud virtualization tech company named VMFive, which went on to win Tech-Crunch Beijing’s startup competition.

Supporting the ecosystem

In attracting investors, tax policy can play a key role. C.Y. Huang, presi-dent of private equity boutique firm FCC Partners and founding chairman of the Taiwan Mergers & Acquisitions and Pri-vate Equity Council (MAPE), recalls how tax incentives helped Taiwan’s venture capital industry get off to a robust start decades ago. (Then a student at Stanford Business School, Huang interned during the summer of 1986 at the recently estab-lished Taipei office of world-renowned VC firm Hambrecht and Quist Asia Pacific, the first “Silicon Valley”-style VC firm in Taiwan). In venture capital’s first decade in Taiwan, says Huang, a distin-guishing characteristic was the shared dedication by government and private industry to funding innovation.

Besides the government’s decision to

9 IF.indd 42 2014/9/3 5:32:25 PM



Does Taiwan Need a Sovereign Wealth Fund?

Advocates maintain that an SWF would help bring about better perfor-mance for the five public pension funds.

Policymakers in Taiwan are mulling over the idea of creating a sov-ereign wealth fund (SWF), as a

number of other countries have done in an effort to increase the return on govern-ment investments. But since no consensus has been reached at this point on the wisdom of the move, the painstaking pro-cess of laying the legal groundwork for such a fund has yet to begin.

Citing the benefit of improved invest-ment performance through greater economy of scale and integrated invest-ment operations, Finance Minister Chang Sheng-ford proposed in late 2012 that five major public funds be combined to form a SWF, relaxing many of the current restrictions on the operations and per-sonnel of those funds in the process.

As of May this year, the five funds had a total value of NT$7.3 trillion (US$243.9 billion). The largest is the

Labor Pension Fund with NT$1.77 trillion (US$59 billion), followed by Postal Savings Fund with NT$5.4 tril-lion (US$180 billion), the Public Service Pension Fund with NT$576.8 billion (US$19.2 billion), the Labor Insurance Fund worth NT$571.7 billion (US$19 billion), and the National Pension Fund with NT$180 billion (US$6 billion).

The proposal has since elicited sup-port from various sources, especially those who view it as a mechanism to overcome problems such as scandals and low investment returns that have plagued the existing five funds. Those funds now come under the jurisdiction of different ministries: the Labor Insurance Fund and Labor Pension Fund under the Ministry of Labor (MOL), the Public Service Pen-sion Fund under the Ministry of Civil Service of the Examination Yuan, the National Pension Fund under the Min-

istry of Interior, and the Postal Savings Fund under the Ministry of Transpor-tation and Communications. Further complicating the picture is that the Labor Pension Fund and the Labor Insurance Fund are managed by the MOL’s Bureau of Labor Funds (under the oversight of a supervisory committee), while the Ministry of Interior has commissioned another MOL agency, the Bureau of Labor Insurance, to look after the invest-ments of its National Pension Fund.

Chang Che-shen, the minister of civil service, concedes that the govern-ment officials in charge of public funds are often overly conservative and lack practical experience in fund-investment operations. The ministry’s management committee for the Public Service Pension Fund, for instance, now has a staff of only 88 personnel, including 27 in the financial section responsible for fund investments.

establish the famous Hsinchu Science-based Industrial Park, Huang credits a tax incentive promulgated in 1983 as paving the way for Taiwan’s booming venture capital scene a few years later. The policy provided a 20% tax deduction for investments in professional venture capital funds approved by the Ministry of Finance, as long as the investment was held at least two years. The scheme low-ered the risk facing would-be investors from 100 cents on the dollar to 80 cents, not an insignificant consideration in an inherently uncertain industry.

The repeal of the incentive in 1999 contributed to the gradual decline of the industry, says Huang. He supports reinstatement of a similar incentive in order to encourage the venture capital industry. It would alter the calculations for risk-averse Taiwanese VC firms and individuals, providing a larger margin of error for those willing to test their luck in early-stage startup financing.

While the government may be reluc-tant to provide additional tax incentives at a time of tight public finances, there is wide agreement that another change

in policy announced late last year would provide a boost to startups and their potential venture-capital investors. Last December the Financial Supervi-sory Commission announced that it was revising a rule that the par value of all stock certificates must be NT$10. This regulation was often seen as a major impediment for investors in startups to “exit” through an initial public offering. Under the new policy of “flexible par value,” new companies can set whatever par value they wish, provided that the value is the same for all shares.

BY PHILIP LIU

9 IF.indd 43 2014/9/3 5:32:26 PM


INDUSTRYF CUS

Their ultra-cautious approach to investing has dampened the overall performance for the fund, Chang says. Although he sees the need to reform the system to enhance investment performance, he sug-gests transforming the fund’s management committee into a government-owned cor-porate body, rather than combining it with other public funds into a SWF, as the finance minister proposed.

In pursui t of h igher inves tment returns, the government units overseeing the five major public funds have farmed out a large portion of their investment activity to private-sector fund man-agers. As of early 2014 , the outstanding amount of contracted investments for the Labor Pension Fund, the Labor Insur-ance Fund, and the Public Service Pension Fund stood at NT$460 billion (US$15.3 billion).

The outcome has been disappointing, however. According to a report published by the Control Yuan in July 2013, in the 10-year period from 2003 to 2012, the Labor Pension Fund, the Public Service Pension Fund, and the National Pension Fund incurred losses totaling NT$14.4 billion (US$480 million) from their con-tracted investments. The Postal Savings Fund had a better performance, gaining NT$11.2 billion (US$373 million) from such investments, while the Labor Insur-ance Fund registered gains of NT$5.2 billion (US$173 million).

Overall, the contracted investments generated a mere NT$2 billion (US$67 million) in income for the five funds during the 10-year period, for an annual rate of return of 0.72%, lower than the interest rate from one-year bank deposits. The professional fund managers even underperformed the portion of the funds retained under the direct management of public functionaries. The five public funds generated about NT$111.5 bil-lion (US$3.7 billion) in income from their own investments, for an average rate of return of 8.55%, beating the market average of 7.29% during the period.

Some negative experience

Moreover, several scandals came to light, with fund managers accused of illicit activity to line their own pockets. In October 2013, for instance, the chief investment officer of Jihsun Investment Trust and the assistant vice president of Yuanta Polaris Investment Trust allegedly purchased a large amount of listed shares at low prices through dummy accounts before using discretionary-account oper-ations to sell them to the Labor Pension Fund. The result was a loss of NT$700 million (US$23.3 million) to the fund.

That case followed one at ING Antai Investment Trust in 2011 in which the fund manager allegedly went through dummy accounts to purchase a huge

quantity of shares of Ablerex Electronics before its listing on the GreTai Securi-ties Market (over-the-counter market). He then sold the shares to the Labor Pen-sion Fund and the Labor Insurance Fund at inflated prices after the share listing, thereby causing the two funds to take total losses of NT$170 million (US$5.7 million).

Following up on Chang Sheng-ford’s proposal, Kuomintang legislator Sun Ta-chien in May 2013 suggested to the Legislative Yuan’s finance committee that the operation of the public pension funds be placed under unified management as a first step in transforming them into a SWF. He expressed confidence such a unit would greatly enhance the investment performance of the funds through more flexible policies enabling the hiring of a professional team with high compensa-tion and handsome incentives, as well as a liberalized investment strategy. He cited the excellent performances of foreign SWFs, such as the 10% rate of return achieved by South Korea’s SWF and the 8% in Singapore.

Minister Chang’s proposal has even won the backing of officials of Taiwan’s Central Bank of China (CBC), who had opposed a previous suggestion to set up an SWF whose investment funds would come from the nation’s foreign-exchange reserves, as some other countries have done. Taiwan’s forex reserves, which

Country Fundname Assets(US$ Billion) Establishment Basis

Norway Government Pension Fund-Global 878 1990 Oil

UAE-Abu Dhabi Abu Dhabi Investment Authority 773 1976 Oil

Saudi Arabia SAMA Foreign Holdings 737.6 n/a Oil

China China Investment Corp. 575.2 2007 Non-commodity

China SAFE Investment Company 568 1997 Non-commodity

Kuwait Kuwait Investment Authority 410 1953 Oil

China-Hong Kong Hong Kong Monetary Authority Investment Portfolio 326.7 1993 Non-commodity

Singapore Government of Singapore Investment Corp. 320 1981 Non-commodity

China National Social Security Fund 201.6 2000 Non-commodity

Singapore Temasek Holdings 177 1974 Non-commodity

Qatar Qatar Investment Authority 170 2005 Oil & gas

Major Sovereign Wealth Funds

source: sovereign weaLth FunD institute

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amounted to US$423.4 billion as of the end of June, now come under the man-agement of the CBC.

In March 2013, Central Bank Gov-ernor Perng Fai-nan told the Legislative Yuan’s finance committee that the inte-gration of the public funds could “greatly alleviate the financial problem of the pension programs,” even increasing investment returns by one percentage point. And at a seminar organized by Aca-demia Sinica in January this year, Deputy CBC Governor Yen Tzung-ta voiced sup-port for establishment of an SWF, so as to alleviate pressure on the CBC to generate profits from forex operations.

“It’s abnormal for a national trea-sury to rely on profits contributed by the central bank from utilization of forex reserves as a major income source,” notes Cheng Cheng-mount, president of Taiwan Academy of Banking and Finance.

While favoring creation of a sover-eign wealth fund, the CBC continues to object to using forex reserves as the basis for the SWF. It stresses the importance of preserving the safety and liquidity of forex reserves in order to meet urgent needs, as opposed to the objectives of an SWF in pursuing maximum returns, often at higher risk. “The utilization of forex reserves inevitably generates lower returns, due to the need to avoid high risk, while an SWF can often enjoy higher returns due to its capacity for higher risk,” says Deputy Governor Yen.

Seventy percent of Taiwan’s forex reserves actually belong to foreign inves-tors who converted their foreign-currency funds into NT dollar for investments in Taiwanese stocks and bonds. Should for-eign investors choose to repatriate their investments, a major chunk of the forex reserves would disappear overnight. Instead of utilizing forex reserves, Yen Tzung-ta suggests financing the SWF by issuing government bonds, similar to the practice of China and Singapore.

Background in oil

Advocates point to rapidly growing presence of SWFs in recent years in global financial markets, notably for stocks, bonds, and real estate. The SWF concept was initiated several decades ago by oil-

producing states in the Middle East in order to better utilize their oil income and assure the well-being of their next gener-ations. By now there are some 75 SWFs worldwide, with total assets of US$6.6 trillion, including US$4 trillion for oil-re-lated funds. According to the Sovereign Wealth Fund Institute, other main sources of funds are the transfer of forex reserves, bond issuance, and the appropriation of government budget surplus.

The largest SWF is Norway’s US$878 billion Government Pension Fund Global (GPFG), followed by the Abu Dhabi Investment Authority of UAE-Abu Dhabi with US$773 billion, SAMA Foreign Holdings of Saudi Arabia with US$737.6 billion, China Investment Corp. with US$575.2 billion, SAFE (State Adminis-tration of Foreign Exchange) Investment Company of China with US$568 bil-lion, Kuwait Investment Authority with US$410 billion, and the Hong Kong Monetary Authority Investment Portfolio with US$326.7 billion.

Other SWFs in Asia including two in Singapore – the Government of Singapore Investment Corp. with US$320 billion and Temasek Holdings with US$177 bil-lion – and the Korea Investment Corp. with US$72 billion.

GPFG has been highly regarded for its investment principle of commer-cialism, professionalism, independence, and transparency, as well as its high eth-ical standards, maximum 3% stake in invested companies, and ban on manipu-lation of stock prices.

In a report released in March this year, the Taiwan Academy of Banking of Finance urged the government to jump onto the SWF bandwagon, arguing that such funds have become a strategic weapon of emerging economies, enabling a nation to double its national assets by effectively utilizing domestic funds.

Considerable barriers remain, how-ever, for SWF to become a reality in Taiwan. Given the continuing reser-vations of many finance experts, the government has yet to make a decision on whether to proceed. “SWF is not a pan-acea, as evidenced by the heavy losses of foreign SWFs, including Temasek and the Abu Dhabi Investment Authority, during the global financial tsunami in 2009,”

says Norman Yin, professor of finance at National Cheng Chi University. SWFs around the world incurred total losses estimated at over US$600 billion during the global financial crisis. Opponents also note that unlike most foreign SWFs, which are based on oil income, Taiwan’s public funds are directly related to the livelihood of large numbers of retirees. The funds should therefore emphasize the protection of principal, rather than seeking handsome investment returns at high risk.

Even if a consensus could be reached, it would still be impossible to set up an SWF in a short period of time due to the time-consuming process needed to prepare the legal groundwork. The inte-gration of public funds into a SWF, for instance, would entail the enactment of a new law as well as revisions to numerous related existing laws.

“It would be very difficult to com-bine the existing public funds, as they have different legal bases, serve different groups, and have different government units in charge,” explains Li Wo-chiang, professor of finance at Tamkang Univer-sity. He also lists such other difficulties as the recruitment of a sufficient number of specialists, and the drafting of regulations to ensure operational transparency and isolation from political interference.

Before an SWF comes into being, insiders urge the government to improve the opera t ions o f publ i c funds by allowing greater flexibility in investment decisions, providing more incentives for the officials in charge, and intensifying the recruitment and training of talent.

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Entitled “Creating Shared Value w i t h S o c i a l E n t e r p r i s e s , ” AmCham Taipe i ’s 2014 CSR

Forum focused on how companies seeking to enhance their Corporate Social Responsibility programs can ben-efit by partnering with a new form of entity, “social enterprises.” Such enterprises are defined as business orga-nizations whose charters commit them to seeking improvements in human and environmental well-being, rather than maximizing profits for external share-holders.

At the forum, held August 14 at Shan-gri-La’s Far Eastern Plaza Hotel, guest speaker Joyce Yen Feng, the Cabinet’s minister without portfolio in charge of social-welfare policy, told the attendees that the government has decided to promote the development of social enter-prises as a way of providing assistance to underprivileged segments of the pop-ulation. She said that an action plan for creating an environment conducive to the development of social enterprises has won the backing of Premier Jiang Yi-huah. The plan calls for drafting and enacting relevant legislation, establishing an effective platform for implementation, the provision of financial support, and the training of personnel to work in this field. In addition, the action plan will seek to raise public awareness of the role of social enterprises and help the enterprises to market their service, said Feng.

The initiative is part of the Execu-tive Yuan’s program – for which a three-year budget of NT$900 mil l ion-$1

billion (US$30 million-$33 million) will be appropriated – to encourage young people to found startup companies. Startups that fulfill the conditions for being social enterprises may enjoy tax exemption but will be required to retain at least 30% of their earnings, according to Feng.

The idea of social enterprises has been catching on in Taiwan over the past few years, following the lead of Hong Kong and Singapore in this region, but they are still a new phenomenon, with an esti-mated 45 such businesses currently in operation here. Given the newness of the concept and the likelihood that the action plan will give the movement a major boost, Feng declared that “2014 is year one for social enterprises in Taiwan.”

Another speaker, Lee Ji-ren, professor of international business at National Taiwan University, noted that “social enterprises have come into being, espe-cially in emerging markets, in order to solve social problems that have defied solution by capitalist methods.” He added that “the essence of social enterprise is innovation, enabling it to find unique ways” to bring in revenue to fund its activ-ities aimed at addressing social issues.”

As an example of social enterprises, Lee cited farmers’ markets that enable growers to sell their crops, often organic produce, directly to consumers at a premium price, thanks to customers’ trust in the products’ quality in such face-to-face transactions. By eliminating middlemen, the farmers are also able to earn a higher profit.

He also mentioned a recent case

2014 CSR Forum Focuses on Social Enterprises

BY PHILIP LIU

a m c h a m e v e n t

Minister Without Portfolio Joyce Yen Feng

Prof. Lee Ji-ren

Tim Chiang

Sunny Yi-han Lin

Helene Chow

supported by:

pr sponsor:

9 CSR.indd 46 2014/9/3 5:26:38 PM


a m c h a m e v e n t

invo lv ing h i s own s tudents . The government bui l t new houses for Aboriginals in a mountain village in Taoyuan County after a severe typhoon destroyed their homes, but the govern-ment funds were insufficient to cover furnishings for the new dwelling. Using surplus materials donated by Sunny Hills, a leading maker of pineapple cake, the students raised NT$1 million (US$33,000) for the villagers in three months by producing and selling some 4,000 cakes over a number of e-com-merce websites. “The essence of the case is to create value by transferring useless or excess resources,” said Lee.

The forum also featured case studies of local social enterprises that have collaborated with AmCham member companies. DBS Bank Taiwan, for example, has been pioneering the pro-motion of social enterprises in Taiwan since 2010, in line with the policy of its headquarters in Singapore. It has provided worthy social enterprises with grants, preferential banking ser-vices, and financial and management consulting services, and has also coop-erated with Fu Jen Catholic University to hold more than 30 workshops on social enterprises.

A major recipient of assistance from DBS has been Social Enterprise Insights, established three years ago by three founders, originally on a volunteer basis before its incorporation last September, as a website to spread information on social enterprises in Chinese language. Co-founder and CEO Sunny Yi-han Lin said the group has now extended its operations to organizing events and training talent for social enterprises.”

So far, some 4,000 people have taken part in workshops and other events organized by the company. This year its second annual forum on social enterprises attracted 1,300 attendees, up from 800 last year. The company has also published a Chinese-language book on social enterprises, The Power of Good, which so far has sold over 10,000 copies.

Another case study introduced Elive International Service, which orga-nizes volunteer missions to help people in less-developed areas improve their

living environment. “I was originally a lawyer, preoccupied by the quest for wealth and fame in the business world of Hong Kong,” said Helene Chow, Elive’s founder and executive director. “Then I joined a volunteer mission to India, and during the return flight to Hong Kong I decided to quit my job and dedicate myself to the cause of international volunteerism.” The name Elive stands for “empowering lives through innovative volunteerism.”

The company has dispatched mis-sions to such destinations as Cambodia, India, Burma, Nepal, Thailand, Inner Mongolia and Yunnan in China, and Taitung County in Taiwan. These pro-grams, usually dedicated to building houses and sanitation facilities, are expected to draw some 1,000 volun-teers this year, up from just 60 four years ago. The enterprise's revenue mainly comes from volunteers who pay fees for participating in missions.

In addition to individual volunteers, Elive also accepts group participation. In the summer of 2013, 25 public cer-tified accountants from Deloitte & Touche went to Cambodia to construct houses. Otto Tu, a Deloitte partner in his fifties, said that originally he went with the group “expecting just to offer some logistical support to our young staffers,” but “in the end I couldn’t resist joining them in doing the actual construction.” This year his daughter, who just graduated from college in the United States, also joined a volunteer

mission. “I wanted her to step out of the comfortable life she’s been given and learn to cherish what she has,” said Tu.

A third example was Dialogue in the Dark, founded in Germany in 1988 and introduced to this country by the Taiwan Foundation for the Blind in 2011. The organization mainly pro-vides sensitivity training programs to corporations. “In a typical workshop, corporate staffers play games under the guidance of instructors in a pitch-dark room, which heightens one’s sense of hearing and touch,” noted Tim Chiang, president of Dialogue in the Dark. “Finally, the lights are turned on and attendees are surprised to find that all instructors are blind.” According to surveys, more than 40% of attendees become more empathetic through the exercise, as well as more appreciative of what they have, said Chiang.

In other workshops, participants experience the life of the blind or senior citizens in various field scenarios, including aboard ship or in a market-place. So far some 200 such workshops have been held in Taiwan, and the com-pany can design customized workshops for its clients, which have included a number of Chamber member-compa-nies. National Sun Yat-sen University has incorporated the Dialogue in the Dark workshop into the curriculum of its EMBA program.

The 2014 CSR Forum was sup-ported by JTI, and the PR sponsor was Ogilvy Public Relations.

The speakers and moderators pose together with AmCham President Andrea Wu (cen-ter) and Chairman Thomas Fann (far right).

9 CSR.indd 47 2014/9/3 5:26:38 PM


s e e i n g ta i w a n

The 2014 edition of the Taipei International Travel Fair (ITF), Asia's largest and most impor-

tant travel-related trade show, will open its doors to the public on November 7 and run until November 10.

Each year’s ITF is eagerly looked forward to, not only by industry profes-sionals but also by the general public, which has d i scovered i t to be an outstanding place to snag excellent deals on accommodations and tour packages.

Whether you are a seasoned trav-eler who has been everywhere and done everything, or a youngster whose passport bears just a few stamps, it is an opportunity to seek inspiration and gather an abundance of concrete information first-hand from industry professionals.

The ITF’s success is obvious from attendance data. The event, first held in 1986, has seen a steep increase in visi-tors from 172,280 in 2006 to a record 315,240 last year. Of those attend-ees, 57.6% were aged 20 to 39, while 28.2% were 40 to 59 years old.

According to a survey of 2013 visi-

tors, 31.2% came mainly to purchase tourism products (not only conven-tional vacation packages but also cruises, travel books, and magazines) while 29.2% said collecting ideas and information was their number-one goal.

On- f loor sa les to ta led around NT$1.5 billion (about US$51 million). According to the fair's website (www.taipeiitf.org.tw), the 2013 event was the main subject of more than 3,900 media reports, of which 635 were on television.

From the perspect ive of t rave l businesses, nothing proves the ITF’s e f f e c t i venes s a s a way o f r each -ing consumers better than the annual stampede for booths. Responding to requests for more space, this year’s ITF will feature 1,459 booths, the highest number ever.

More than 900 tour companies, resorts, trade associations, and official tourism bodies are expected to attend. Together, they reflect both the vaca-tion preferences of Taiwan’s people and what the island has to offer visitors from overseas.

Japan has been a favorite destination for Taiwanese travelers since the 1895-1945 period, when Taiwan was in fact a Japanese colony. Also, a great many Japanese people visit Taiwan each year, attracted by its proximity, reasonable prices, superb mountain scenery, and reminders of the colonial era. Of the 8.02 million foreign visitors to Taiwan in 2013, 1.42 million came from Japan. It is hardly surprising, then, that Japa-nese exhibitors usually take more than 100 booths at each fair.

The United States also has a major presence at every ITF, as do Malaysia, Hong Kong, and South Korea. In addi-tion, tourism across the Taiwan Strait is now a massive two-way undertaking. In 2013, 2.87 million mainland Chinese visited Taiwan, while more than 3 million Taiwanese went to China. The ITF is therefore both an opportunity for mainland destinations to promote them-selves within Taiwan, and for Taiwan’s individual cities and counties to catch the eye of mainland Chinese tour companies looking to refresh the itiner-aries they offer.

H o w e v e r, t h e I T F i s n o t j u s t concerned with East Asia and North America. Well-traveled Taiwanese are eager to explore the world beyond, and the 2013 ITF welcomed first-time exhib-itors from Argentina, Chile, Egypt, and the Seychelles. In all, representatives from 60 countries took part in the fair.

Taiwan’s Tourism Bureau leads the

T T B A D交通部觀光局廣告

Stoke Your Wanderlust at the 2014 Taipei International Travel Fair


9_SeeTW.indd 48 2014/9/3 5:02:15 PM



charge in efforts to draw more foreign visitors, but other government agen-cies lend a hand at the ITF. Promoting agro-tourism and the island’s grow-ing network of leisure farms is now one of the principal responsibilities of the Council of Agriculture (COA).

The COA’s Forestry Bureau super-vises 18 Taiwan’s nat ional forest recreation areas, reserves where tour-ists can enjoy arboreal splendor and stunning biodiversity. The best known of these is Alishan, 1,400 hectares of woodland more than 2,000 meters above sea level. If all goes accord-ing to plan, the century-old narrow-gauge railway linking Alishan with the lowlands should be operating again by early 2015.

The Forestry Bureau is also respon-sible for maintaining many hiking trails. Taiwan is an undisputed para-dise for those who love trekking and adore nature. Every region of the island has hiking paths varying in length and difficulty.

Entertainment is also a key part of the ITF. Each day of the fair features several stage performances, enabling singers, musicians and other entertain-ers from around the world to showcase their countries’ characteristic cultures and national spirit. The full sched-ule will not be confirmed until closer to opening day, but visitors can be sure that several of the performances will highlight Taiwan’s ethnic diversity.

Previous editions of the fair have featured Maori dancers from New Zealand, Mongolian singers, Austrian classical musicians, and dancers from Guam, Brunei, India, and the Caribbean

island of St. Kitts and Nevis. Online promotions begin on October

1 and will continue until November 10, the fair’s final day.

The day before the ITF opens, the Tourism Bureau will host the fair’s B2B Travel Mart. As in previous years, this event aims to match specially-invited buyers with suppliers of local travel products such as accommodations.

As in recent years, the 2014 ITF will be held in Hall 1 and Hall 3 of the Taipei World Trade Center. The Center is located in the heart of the capital’s glitzy Xinyi District, adjacent to one of the city’s best-known tourist attractions, Taipei 101, until recently the tallest building in the world.

Hall 1 will house the general tour-ism zone, plus the B&B and restaurant zone. Hall 3 will be given over to hotels and resorts.

This year’s ITF will run from a

Friday to the following Monday, with an opening ceremony at 10 a.m. on November 7. Members of the public will be admitted on that day from noon until 6 p.m. On November 8 and 9, the ITF will run from 10 a.m. to 6 p.m. On November 10, the final day, it will operate from 10 a.m. to 7 p.m.

Ticket pr i ces remain s tab le a t NT$200 for adults and NT$150 for senior citizens, handicapped visitors, and children less than 150 centimeters tall. Children under 120 centimeters will not be admitted, nor will pets.

For more informat ion, inc lud-ing details of nearby accommodation options and free shuttle buses to the venue, visit the fair’s website, the website of Taiwan’s Tourism Bureau (www.taiwan.net.tw), or contact the Taiwan Visitors Association, the not-for-profit organization running the event, at +886-2-2597-9691.


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