Friday, July 9, 2010
Well before science discovered the many health benefits of drinking tea, the Taiwanese people were drinking tea to satisfy their thirst or when spending time with friends. These days, tea has been shown to combat all sorts of ailments (cancer, heart disease, lower cholesterol, burn fat, prevent diabetes), converting more Americans to the taste of tea.
Taiwan’s teas can be classified into three broad categories: non-oxidized tea (green tea), fully oxidized tea (black tea) and semi-oxidized tea (including Pouchong tea, Oolong tea, Tie Kuan Yin tea). Among the three, Oolong tea is the most unique and popularly cultivated on the island. There are 20,700 hectares (51,150 acres) of tea plantations in Taiwan, with a total output of 20,300 metric tons (22,377 American short tons) of tea per year. Taiwan tea was originally cultivated for export, but in the 1980s, that began to change. Now only 10 percent is exported and the rest is cultivated for domestic consumption.
With the rise in Taiwan’s living standards, drinking in tea houses has become popular as a leisure activity, a place to rest, drink tea and socialize. The quantity of tea consumed per person per year in Taiwan has increased from 577 grams in 1980 to 1,500 grams in 2000.Taiwan’s tea industry has also undergone plenty of changes, with the popularization of cold and sweet tea drinks, and in particular, with the introduction of bubble teas. Originating at the Spring Water Ice Tea House (Chun Shui Tang) in Taichung, Taiwan, bubble tea is a frothy drink that includes small tapioca pearls, tea, condensed milk and syrup. Introduced in 1988, bubble tea has become a well-known Taiwanese drink. Its popularity has spread from Taiwan to Hong Kong, China, Southeast Asia, Japan and the United States. Today, tea houses serving bubble tea can be readily found on both the US east and west coasts.
Ten Ren Tea establishes strong brand image
In the United States, one of the biggest tea importers is Ten Ren Tea. Founded in 1953 in Taiwan, the business has grown steadily to include snack foods, ready-made drinks, ginseng and loose teas. Ten Ren Tea was started by Lee Rie-ho, whose father also grew and sold tea. The family has been in business for four generations now, since Lee’s grandfather began growing tea. Under Lee, the business grew to become Taiwan’s biggest tea company with 74 stores. It also includes the Lu Yu Tea Art Center that works to preserve Taiwan’s tea culture.
In 1980, Ten Ren established it first US store in Los Angeles. Lee's brother and sister-in-law, Ray and Lily Lii, would open a San Francisco store two years later. Located in San Francisco's Chinatown, the store continues to be a strong presence. A New York City store would follow in 1984, set up by Lee's nephew and wife, Mark and Ellen Lii. Today, Ten Ren has a solid brand recognition and operates 61 stores in the United States, Canada, Japan and Malaysia.
Family buisness prospers
In its San Francisco store (http://www.tenren.com/), the bulk of Ten Ren’s early earnings were not from tea sales - as would be expected from a tea company - but rather from selling ginseng. Known throughout Asia for its health benefits, quality ginseng was being grown in Wisconsin, but very few pharmacies or health stores sold American ginseng in the early 1980s. When Ten Ren began stocking it, the store became a regular stop for tour buses carrying Singaporean, Malaysian and Chinese tourists.
With the growing popularity of bubble teas in the late 1990s, the company began to add tea stations to its stores, preparing hot and cold teas to-go. These tea stations now account for a large percentage of each store’s profits in the United States.
The flavor or scent of a traditional tea is very much a matter of personal preference, he explained, and is related to where the customer is from. While Taiwanese tea-drinkers enjoy Oolong teas, people from Beijing prefer Jasmine tea. Somebody from Hangzhou would probably drink Dragonwell (Long Ching), but if they come from Fujian, then they might select a Green, Jasmine or Iron Buddha (Tie Kuan Yin) tea.
The scenting of a quality Jasmine tea is dependent on the layers of Jasmine flowers used. The tea could be scented several times and use up to five pounds of Jasmine flowers simply to make one pound of Jasmine tea, Henry said.
“Each cousin has different recipes”
Tea is a beverage that has been around since 350 AD, and yet according to the Henry Lii, “the tea industry is still in its infancy.” He sees it as a business with great growth potential. One of the biggest factors is the research on green tea, especially over the past five years. “Lots more people are showing an interest. Tea bags used to be all people knew, but they are working on trying more,” Lii said. Ten Ren Tea also makes a range of snack foods, many of which include tea as an ingredient.
The younger generations in this family business are also making their mark. The “cousins,” as Lii calls them, have opened new stores selling Taiwanese food and tea. In Southern California, they include the 11 Tea Station restaurants (www.teastation.us) and three Cha for Tea restaurants (www.chafortea.com). Unlike Ten Ren, the majority of its business is food, not drinks. According to Lii, “Each of my cousins sort of manager an area and each one of us will have our own recipes and menus which are different from one another.”
However, to Lii it is clear that the most growth potential in the family tea business comes from Ten Fu, Ten Ren’s sister company in China. Also founded by Lee Reiho who early on recognized the vast potential of the Chinese market, Ten Fu now has 987 tea stores. Lee has also established several production facilities throughout China along with two museums. The company is currently working to open a Ten Fu Tea College in China.
Other businesses compete for American markets
Another Taiwanese business offering a refreshing treat for Americans is 85° Celsius (http://www.85cafe.com/85cafe.us/html-us/about.htm), so named because this is the perfect temperature at which to enjoy a cup of coffee. The company opened its first bakery two years ago in Irvine, California, and has been phenomenally successful. In order to be a customer at 85°C, one must have the patience to wait in the long line that normally stretches out of its front door. The bakery offers inexpensive baked goods with a Taiwanese twist.
Like other Asian bakeries, 85°C sells baked goods with taro and red bean paste fillings. But, unlike other bakeries, they also sell a wide selection of gorgeous cakes and a few products unique to their stores, such as a dark bun made from squid ink, and also sea salt coffee. You can still get a regular Tapioca Milk Tea, but also specialty drinks such as Coffee Jelly Milk Tea and drinks for more adventurous taste bud. The bakery tries to keep the price of its buns at around one dollar yet still uses top quality ingredients.
The first 85°C bakery opened in Taipei in 2004 and quickly expanded around the island. Currently there are 325 85°C cafes in Taiwan. The Irvine store served as the test store of the US market, and to help the team iron out any kinks. The bakery is already planning to open more stores, with rumors of an IPO due later this year.
If Ten Ren Tea epitomizes high quality tea, then Quickly (http://www.quicklyusa.com/) dominates the market at the other end with its tea-flavored drinks. With 2,000 locations in Asia, Africa, Europe and North America, Quickly has introduced Tapioca Milk Teas to the world in a big way. Started by Nancy Yang in Taiwan, the Quickly corporation in California has gradually expanded to include Asian-style fast food and Wi-Fi internet access. Instead of using steeped tea in their products, the drinks are usually made from powdered mixes. This allows Quickly to sell their tapioca teas at almost half the cost of other tea stations.
There can be little doubt that a taste for Taiwanese snacks in all their guises is rubbing off on today’s American foodies. Gone, thankfully, are the days when the only choice was Lipton’s hot or cold. Yet in a market where there are literally hundreds of products from hundreds of tea companies competing for the American tea dollar, Taiwan’s Ten Ren dynasty with its four generations of experience is continuing to show a drive and entrepreneurship that will give the best of them a run for their money.
The landmark agreement, the first between Taiwan and China since the division in 1949, will allow Taiwanese products to be more competitive in China. The speed of the negotiations and the strong official involvement has made the agreement unique, according to the Taipei-based China Times. After the implementation of more agreements and economic exchanges, both sides are expecting the agreement to strengthen mutual cooperation.
The United Daily News said in an editorial that the ECFA, the largest economic reform project since Taiwan joined the World Trade Organization (WTO) nine years ago, is of great significance to Taiwan’s economic development.
Taiwan benefits greatly in early harvest list
In the early harvest list of the ECFA, Taiwan has 539 items entering China with zero tariffs, worth US$13.83 billion, while China has 267 items entering Taiwan without tariffs with an estimated value of $2.86 billion. The main beneficiaries in Taiwan’s list are the petrochemical industry, machinery manufacturers, the textiles industry and the automotive components industry. The deal also covers products from some more traditional industries, in particular covering 17 vulnerable industrial products and 18 agricultural and fishing products, which the island will be allowed to export to China without needing to reciprocate. Taiwan will likely save US$1 billion in tariffs each year, which will significantly increase the appeal of Taiwanese products.
In the service arena, Taiwan has won six preferential market access conditions for its financial industries, and its banking industry will receive relatively more favorable conditions than the banks of Hong Kong. In addition, China will open up five locations where more Taiwanese investors can set up wholly Taiwanese-owned hospitals. Provisions of the deal will also make concessions to Taiwan’s aircraft repair and maintenance industry which is an important starting point from which to enter the Chinese aviation service market.
Not only will Taiwanese products be more appealing, but setting up business in Taiwan will be more attractive to Chinese companies according to Global View monthly. Polaris Investment Trust associate manager Chen Jun-ying said with the ECFA’s tariff reduction of Taiwanese products into Chinese markets, even some Chinese companies will consider moving their factories to Taiwan, given that shipping costs by sea are lower than by inland transportation from the factories in western China to coastal cities.
Taiwan: a springboard to China for multinationals
President Ma said at a press conference on July 1 that the signing of the ECFA is not only significant for Taiwan, but also important for cross-strait relations, the Asia-Pacific region and the whole world. First, the ECFA will help Taiwan break out of economic isolation and marginalization. Secondly, the deal is a major step toward mutually beneficial economic and trade cooperation across the Taiwan Strait, and can provide an institutionalized framework to create more business and employment opportunities in Taiwan. Thirdly, the ECFA is a big step to accelerate the integration of the Asian economy. The Asia-Pacific region and the international community will pay more attention to the value of Taiwan. And, more and more foreign enterprises will consider the island as a springboard to enter the Chinese market.
The president said, “Taiwan's development absolutely cannot, and will not depend on the Chinese mainland solely, and must diversify and control the risks to achieve the goal of global planning and positioning. We have the geographical advantage to attract foreign businesses to invest in Taiwan.” He added, “Taiwan can become a platform for multinational companies to invest in mainland China. Meanwhile, mainland China’s investment in Taiwan could also become a channel for it to enter the world market in the future.”
AmCham takes a fresh look at Taiwan
According to a survey by Global Views monthly, 87.5 percent of foreign enterprises in Taiwan said the ECFA will increase Taiwan’s competitiveness and 82.1 percent believe the ECFA will elevate Taiwan’s economy.
American Chamber of Commerce (AmCham) chairman Alan Eusden congratulated Taiwan on the signing of the ECFA with China. He credited the ECFA for providing a rare opportunity for businesses and research institutes to “take a fresh look” at Taiwan. While the ECFA might lessen Taiwan’s isolation in the global market, Eusden believes that the island's most serious challenge is in trying to maintain its competitiveness through pursuing trade talks with the US and other countries.
According to a report released on June 29 by the Taiwan branch of Credit Lyonnais Securities Asia, an investment and brokerage firm, most corporations do not believe that the signing of the ECFA will significantly impact profits, but the agreement will place Taiwan’s enterprises on an equal footing with those of the ASEAN countries, and as such is bound to be good for Taiwan’s economy as a whole. The report emphasized that the effects of signing the ECFA are expected to gradually become apparent after 12 months, or even have an impact on Taiwan’s 2012 presidential election.
In a speech on June 22, Japanese strategy master Kenichi Ohmae said Taipei enjoys three economic advantages that will help the island become an Asia-Pacific hub. This includes the current 370 direct flights a week across the Taiwan Strait, the drop of corporation tax to 17 percent, and now, the signing of the ECFA.
In a special article in Global Industry and Commerce monthly, Liu Zhen-tao and Li Yin-bo, professors at the Taiwan Institute of Tsinghua University (Taiwan), said that the current model of “placing orders in Taiwan – production in China – export to Europe and America” is disadvantageous to both sides of the strait because the dominant powers are controlled by Japan, the US and Europe. Hit by the global financial turmoil, both Taiwan and China have been impacted. Therefore, the division of labor should be changed to “placing orders in both Taiwan and China - cooperation in industry and R&D – and integration of domestic and overseas sales channels.” Based on this view point, the signing of the ECFA will have long-term strategic significance to promote mutually beneficial win-win cross-strait cooperation.
In 2006, the first batch of Taiwanese businesses returned due to newly adopted industrial policies and environmental standards in China, leading the government to crack down on high-pollution, low-technology industries. This prompted a number of Taiwanese businesses to close their small-scale plants and return to Taiwan.
In 2008, the Ma administration eased trade and investment restrictions with China and promoted the first and the second listing of Taiwanese Depository Receipts (TDR), which attracted more Taiwanese businesses to return home, and boosted the local stock market. In this wave of returning businesses, some overseas Taiwanese firms have made direct investments and have taken control of failing companies in Taiwan.
Coping with the end of China’s cheap-labor era
This year, businesses have returned to Taiwan due to changes in the labor market in China and further wage rises in the country. Initially, factories experienced a shortage of labor in the coastal provinces, then, this problem spread inland. Taiwanese firms could not find sufficient manpower despite offering higher wages. Then a spate of suicides at the Taiwanese-owned I-Phone manufacturer Foxconn led the company to announce a 122 percent wage increase last month. These wage increases have heavily impacted Taiwanese firms and the Chinese labor market as a whole.
According to the Taipei-based China Times, the Beijing government has decided that its export-oriented economy shall give way to one of increasing domestic consumption following the global financial tsunami. Beijing wants Chinese citizens to be wealthy enough to generate a vibrant domestic market. Thus "wage increases" have become a key policy goal of the Chinese government. Since the beginning of 2010, all provincial and municipal governments in China have announced plans to raise the minimum wage, with increases ranging from ten percent to over 40 percent. And, this wage adjustment will continue every year from now on. It is increasingly evident that the era of China as the "world’s workshop" with an abundant supply of cheap labor is coming to an end.
Idea of “special economic zones” considered
The China Times, in an editorial, pointed out, that due to rising labor costs and labor market change in China, coupled with relaxed cross-strait relations and the opening up of direct air links, more overseas Taiwanese businesses are returning home to invest. Taiwan's government has also prepared a plan that it hopes will attract NT$40 billion (US$1.25 billion) of returning Taiwanese investment a year. This returning overseas Taiwanese investment will no doubt enhance the island’s economic structure and hopefully create a higher value-added economy that will also promote the general well-being of Taiwanese citizens. What the government wants to avoid, is Taiwan becoming a processing zone for large-scale high-pollution, low-value exports. The paper said the government should encourage the creation of pollution-free tourism, cultural and creative businesses, and financial services, as well as high value-added R&D and marketing centers, and the emerging green technology energy industry.
The United Daily News also commented in an editorial, that Taiwan has been the main supplier to the "world’s workshop," yet the island have been buried in an economic slump in recent years. Only Taiwan’s export processing businesses in China have helped maintain Taiwan’s domestic economic growth. The industrial environment in China has changed, affecting not only overseas Taiwanese businesses, but also the fundamentals of the whole Taiwanese economy, to which the government should not turn a blind eye, cautioned the paper.
Taiwan’s cabinet-level Council for Economic Planning and Development is reported to be assessing the risks and feasibility of implementing "special economic operations zones" in Taiwan. The purpose of setting up special zones is to duplicate the successful cases of export processing zones and science parks in the past, starting a third wave of economic transformation. This new generation of "economic operations zones" is intended to attract investment from returning overseas Taiwanese businesses and multinational corporations, and to reduce the high unemployment rate in Taiwan.
South Korea outperforms Taiwan since 2004
According to an Economic Daily News report, Taiwan was the leader of the four Asian Tigers from 1980 to 1987, when Taiwan’s average annual economic growth rate and export growth rate ranged from 8.2 to 16.3 percent. However, from 2002 to 2009, Taiwan's economic performance was ranked at the bottom of the four. In 2009, Taiwan's per capita GDP was US$16,423, less than half of Singapore's US$37,293. Taiwan’s exports totaled US$2,037 million, only 56 percent of South Korea’s. Taiwan’s unemployment rate also compared unfavorably at 5.7 percent, two and a half times that of Singapore’s 2.3 percent.
Among the four Asian tigers, Taiwan and South Korea have similar industrial development patterns, both promoting the manufacturing sector, while Hong Kong and Singapore are city-state economies, with more service-oriented economies.
Before the Asian financial crisis in 1997, Taiwan surpassed South Korea in economic growth, industrial development, and living standards. However, since 1997, South Korea has outperformed Taiwan by building up super brand names like Samsung, LG and others. In 2000, South Korea’s per capita GDP was only 77 percent of Taiwan’s. The two were tied in 2004. But in 2007 the Koreans enjoyed a 26 percent higher GDP than the Taiwanese.
Other factors behind South Korea’s rise
The Commonwealth monthly reported that the relative exchange rate has contributed greatly to South Korea’s growth. In the past ten years, 80 percent of South Korea’s per capita income increase came from its exchange rate rise, while only 20 percent was the result of real economic growth. However, Taiwan's central bank has been more careful, fearing its small and medium sized enterprises could not afford similar fluctuations as experienced by the Korean Won.
Ten years ago, Taiwan’s total export volume was similar to that of South Korea. But in 2009, South Korea’s exports were 80 percent higher than Taiwan’s. South Korea also invested a higher percentage of its GDP in research and development, upgrading its brand names and increasing its exports around the world.
The Commonwealth pointed out that Taiwan's electronics exports in 2009 were 27.8 percent, higher than those of South Korea. But South Korea has diversified industries of shipbuilding, automobiles, semiconductors, wireless communications, machinery, LCD displays, steel, and petrochemicals. Its diversification strategy has lessened the country’s economic risk while maintaining a market expansion capability better than in Taiwan.
Taiwan hopes for ECFA boost
In an interview with the NOWNews network, Liu said that the signing of the Economic Cooperation Framework Agreement (ECFA) with China will give Taiwan an advantage of enjoying investment protection in China. In addition, Taiwan has reduced its business income tax to 17 percent, much lower than South Korea’s 22 percent, which will make Taiwan more attractive to international companies. This is Taiwan’s big advantage over South Korea. According to the Directorate-General of Budget, Accounting and Statistics, Taiwan’s economic growth rate for the first quarter of 2010 is forecasted to be 13.27 percent, marking the largest quarterly increase since the fourth quarter in 1978. In a recent revision, the annual growth forecast is predicted to be 6.14 percent. Liu said the ECFA will not only impact cross-strait relations, bilateral trade and tariff concessions, but will also strengthen Taiwan’s competitiveness against South Korea, especially since the investment protection agreement which Korea and China will not take effect for another two years. This is Taiwan’s advantage over South Korea, in addition to lower business income tax. According to Liu, another advantage is that the Taiwanese have a better understanding of China than the South Koreans. With all these advantages, Liu believes that international enterprises would likely align themselves with Taiwan rather than South Korea.
In the Taipei-based China Times, Huang Chih-peng, Taiwan’s director-general of the Foreign Trade Bureau under the Economics Ministry, noted that almost 20 percent of the early harvest list deals are with competitive industries from Taiwan, Japan and South Korea. With the agreement, Beijing has agreed to cut tariffs on 539 Taiwanese products entering China. This cut will likely translate into a US$13.84 billion advantage, said Huang.
“President is old fashioned”
Yang Yi-mei, a 23-year-old former NTU student, is one of these girls. She got her big break after starring as the “Black Widow” in a television commercial. Her performance generated a large following of male gamers attracted by her substantial assets, sized 34G.
According to the Taipei-based China Times, Yang is proficient in both Chinese and English, and has studied in the United States. She has hosted over a hundred events, including trade shows and corporate events. With her 34G-26-35 measurements, she was dubbed one of the “NTU Thirteenth Sisters” while in school. After appearing topless in a commercial for a video game, she earned the nicknamed “Black Widow.” In May, she signed a contract with a management company that hopes to broaden her appeal by having her write a book and study Cantonese in order to enter the lucrative Hong Kong entertainment market.
In response to Li’s criticism, Yang said each student has to freely develop his or her own potential. She stressed, she knows what she is doing and is capable of making good decisions.
A student at NTU’s veterinary graduate school, Lydia, works as a program host for the ETTV channel. She also disagrees with the president’s comments. “Dr. Li is too old fashioned,” she said “Good looks are bestowed by God. Everyone should take full advantage of heaven’s gift. You need to develop professional skills to stand out in the world of entertainment. The president should not give the entertainment industry such a low grade,” she said.
Performer Pink Yang, also an NTU graduate, said one can be outstanding in any trade, and, encourages younger students who are interested in a career in entertainment to join her to learn more, especially if they have the right attitude – that of enriching oneself. With the exception of variety show host, Nancy Kou, singer and music producer, Huang Shu-chun, and actress, Bowie Tseng, there were few NTU graduates working in the industry when Yang started out in the early 2000s. Now there are a growing number of artists graduating from NTU. While the NTU alumni can look out for one another how you develop your potential is down to the individual, according to Yang.
Sex appeal won't necessarily bring self-fulfillment
In view of the current sexualization of women in Taiwan’s media, and in society in general, commentator Chan Wei-hsiung wrote in the United Daily News, that Li understands the nation’s annual investment in each NTU student does not come cheap. Each public university student receives a subsidy of up to US$6,250 per year, and as one of the most prestigious schools in Taiwan, NTU graduates should select higher level professions so they can further contribute to society. This is a logical expectation from the point of view of collective well-being.
Most of those who disagree with Li argue based on an individualized point of view, quoting the Chinese saying, “You are a hero as long as you stand out, regardless of origin of being low or high,” according to Chan. Show girls can make contributions to society and the school should respect the free development of each student. This is a pluralist claim, which opposes any priority over personal choice by an external authority, said Chan. Since the democratization of Taiwan in the 1990s, individual claims have become the mainstream of social thought.
However, Chan questions, can an opposition to collectivization really achieve personal freedom? In earlier times, nudity was a big issue. But nowadays, nudity is more commonplace, so our desires as consumers can only be peaked by the juxtaposition of nudity with a product. As an example, the pairing of a new sports car or computer with a young woman wearing next to nothing can deepen the sense of pleasure for the consumer. Chan believes Li does not understand the economic aspects of the phenomenon. Still, as the same young women scramble to defend their individual freedoms in a commercialized world now, in time they may face the consequences of their choices, said Chan.
Freedom vs. beauty?
The United Daily News points out in an editorial that young women have the right to capitalize on their bodies and their appearance as a means of making a living or even just enjoying themselves. But it is worth noting that the phenomenon reflects a gender bias that can be detrimental to women and which establishes unrealistic role models and definitions of what is beauty.
Also, in a survey by 101 Human Resources Bank cited in the China Times, on average, nine out of ten college students do work on the side while in school. In an average week they may spend 16.4 hours working and 18 hours studying. So working is also a central part of the college experience. Financially, models at trade fairs earn the highest hourly pay of NT$500 (US$15.6), compared with other jobs held by college students, so in that sense who can blame them.
Inevitably these days, any profession that promises both money and fame is bound to attract young people. However, rising stars cannot simply rely on their good looks. If marketability is linked with a model revealing her impressive cleavage or other parts of her body, the whole of society would be in trouble, and not just the values of NTU students.
Writing in the China Times, Wu Dian-rong is in total agreement with a fellow female commentator Tsao You-fang who said that a “beautiful woman’s life is determined by others, and the less pretty woman’s life is self-navigated.” Beauty is disturbing for those of us spectators who are always worried about it being squandered, resulting in a wasted life. Wu lamented that talking about people who are not pretty but who are more in control of their own fate seems “a bit like saying that the poor enjoy more freedom to wander in the park.” Such self-control and freedom probably do not comfort us, according to Tsao. Still no matter the added degree of control, most women would probably be beautiful than free, concludes Wu.
On May 4, Taiwan opened its first tourist representative office in Beijing, and three days later China followed suit by opening a tourist office in Taipei. This was the first time since the division in 1949 that Taiwan and China set up a regular tourism institution on the other side, marking a new milestone in the development of cross-strait relations.”
So far, Chinese visitors have been thrilled by Taiwan and have been keen to share their impressions of the island.
In the Want Daily, Meng Fanjia, a Chinese man with a Taiwanese wife, recalled his first impressions of visiting the Temples of Confucius in Taipei and Tainan. “It was really amazing to see two groups of elementary school students on a field trip, learning about Confucius’ teachings at the temples. The Confucian Temple in Beijing is quiet and deserted. However, the temples in Taiwan are not just tourist attractions or places to worship the ancient great teacher, but are also classrooms to pass on Confucian teachings to the next generation …there are at least two cases where I have witnessed Taiwan’s education and the passing on of traditional culture.”
According to Taiwanese tour guide Li Chien-chen, Taipei’s Presidential Office and the Chiang Kai-shek Memorial Hall are among the most popular spots for Chinese tourists. Talking to the Taipei-based China Times, he said that Chinese visitors like to have their pictures taken in front of the Presidential Office, which is just like Beijing’s Zhongnanhai – headquarters of China’s leaders. Li often joked with his clients that “President Ma Ying-jeou is working in the fifth floor. Do you see him waving at you? I called him just now, but he is busy and can’t meet you in person.”
Another observation in the Want Daily was by Zeng Qiqi, a woman from Zhejiang province, China, who said, “in Taiwan, I hear them talking in standard Mandarin. There is no communication problem even in remote areas. Our 60-year-old driver, who is originally from Guangdong province, speaks without any Cantonese accent. After all, there have been decades of separation across the Taiwan Strait. However, even speaking the same language, the people of China and Taiwan use different expressions for modern objects like laser, rapid mass transit, lunch box, information technology, digital camera, and mobile phones, etc.”
In the same paper Chinese tourist Tang Jin said that “the Taiwanese have a better quality education and are civilized. They talk quietly, even in public places such as in stations and restaurants, while the Chinese always talk loudly and shout at each other.”
According to Taiwan's Bureau of Tourism, more than 1.2 million Chinese tourists have visited the island since 2009. Many of them grew up hearing about Taiwan, so the visit allows them to finally see Taiwan for themselves. This was the case for an elderly woman in a wheelchair. She came from Beijing so she could see Sun Moon Lake and Mountain Ali, which she had studied in elementary school. She could even sing the Taiwanese popular folk song “The Girl from Mount Ali.”
Zhang Yuping, originally from Sichuan province, China, has a Taiwanese husband. The couple has a one-year-old son. In speaking to NOWNews, she said that the Taiwan television soap dramas are more appealing. She watches them daily and finds the style of programming very different on the two sides of the Taiwan Strait. The Chinese programs are more conservative with many restrictions, while those in Taiwan are more diverse and lively. This is true for political talk shows too, which are open and bold, very different from those in China, Zhang said.
Gao Xingjian, the first Chinese person to win a Nobel laureate, told the Central News Agency that each time he visits Taiwan, he sees something new. Although he now lives in France, Gao considers Taiwan to be a treasure in the Chinese world, something dynamic and rare.
According to the Taipei-based China Times, the number of single mothers has more than tripled, from 1.4 percent to 4.39 percent annually over the last 30 years. More women are having children outside marriage said Chian Chih-chie, deputy secretary-general of the Women’s Awakening Foundation, and the government could solve the problem of low birth rates by granting more social welfare maternity benefits to single mothers who are currently not covered. This would not only be fair, but would also serve as an added incentive, she said.
Not only are less people getting married, but they are getting married later. In a recent study announced on June 27, the Interior Ministry found that the average age of marriage in Taiwan in 2009 was 31.6 years old for men and 28.9 for women, an increase of half a year compared with the 2008 averages.
The decline in the number of people getting married can also be attributed to the economic recession, higher unemployment and the fact that last year happened to be a traditional Taiwanese “lonely phoenix year,” which is said to be a bad year to get married.
In a survey conducted by the China Times, only about 60 percent of respondents were married and as high as 40 percent were not. An in-depth statistical analysis also showed that 90 percent of men between the ages of 20 and 29 were not married, and as many as 71 percent of women in the same age group were unmarried. This is troubling since the 20s are the best age for conceiving children.
Remaining single or marrying later in life is also becoming more acceptable, according to the Central News Agency. Professor Wang Yun-tung of the Department of Social Work at National Taiwan University said that traditional values dictated that women had to be married by a certain age. But, as society has changed, so have its values. Wang believes that Taiwan is a diversified society, and with the rise of individualism, young Taiwanese do not feel the pressure to get married. Couples living together without the benefit of marriage are no longer stigmatized as before. Marriage is not indispensable, so more people wait to get married or remain unmarried.
Yao Shu-wen, chief executive of the Modern Women's Foundation, believes that there are other reasons that less people got married in 2009, outside of it being a “lonely phoenix year.” Contributing factors include the high divorce rate and a lack of belief in the institution of marriage, said Yao. And, women who have worked hard in their careers are reluctant to marry later for fear of losing their independence.
The United Daily News reported that when making the remarks about single mothers, Chien also pointed out that children born outside of marriage should enjoy the full benefits of legitimacy. In France, social workers visit the homes of girls of child bearing age. As soon as they become pregnant, young women in France are entitled to government subsidies regardless of their marital status. After children are born in Taiwan, the government should extend more help and allowances to help reverse Taiwan’s low birth rate.
Thursday, July 8, 2010
The exhibition is on loan from Taipei’s Shung Ye Museum of Formosan Aborigines and is co-sponsored by UC Berkeley’s Center for Chinese Studies, and Taiwan’s Ministry of Foreign Affairs and Council for Cultural Affairs.
The exhibition is open weekdays from 9 AM to 5 PM and is free of charge.
Thursday, June 10, 2010
Designed by three American firms in 1985, construction of the TRTS began in 1988 with the engineering and the electric subway cars manufactured by European, Canadian and Japanese contractors. The first routes began operations in 1996, instantly relieving Taipei residents of overcrowded streets and buses. The expansion of the system into the suburbs has delivered a better quality of life for all residents in Taipei.
The system has five principal color-coded lines and 80 stations, and stretches for 191.3 kilometers (119 miles). As with the Bay Area Rapid Transportation (BART) system, ticket prices on Taipei’s metro are determined by the distance traveled, with prices ranging from NT$20 (US$0.63) to NT$65 (US$2.00). Passengers with bicycles are charged an additional NT$80 (US$2.50) each.
Frequently scheduled trains, together with the orderly behavior of passengers has enabled the system to convey roughly 2.16 million passengers to their destinations each day. The system has consistently received high satisfaction scores, as high as 95 percent, according to a recent survey.
Foxconn, which falls under the umbrella of the Hon Hai Precision Industry Group, is headquartered in Taipei, Taiwan. After the 11th employee suicide at its 300,000-worker Longhua site, Terry Gou, the chairman of Hon Hai, invited over two hundred local and foreign journalists to inspect the facility. This initiative proved effective as the journalists could find little to criticize at the plant. Yet, the very night that Gou returned to Taiwan, the 12th suicide took place prompting him to fly back to Shenzhen immediately.
Gou: “I carry 12 crosses on my back”
At the annual shareholders’ meeting on June 7, Gou said he has ceased the practice of paying the high death benefits, which might be considered by some as an inducement to commit suicide. Foxconn previously paid out almost ten times its employees’ annual wages in death benefits, reported the United Daily News. Gou also stressed, “I carry 12 crosses on my back” and said he takes full responsibility for any management flaws.
In reference to an investigative report by Taiwan’s Suicide Prevention Association, Gou said three of the 12 workers attempting suicide had previous mental disorders, and their actions were in no way related to the work environment or to work pressure. The Foxconn management has been shocked that half of the suicide attempts occurred in quick succession in May, a fact that may be attributed to the so-called “Werther Effect” of copy-cat suicides. After Gou flew to Shenzhen to take personal command of the factory, dozens of suicides were apparently prevented, according to the United Daily News.
Not a “sweatshop,” only a “pressure cooker”
The Taiwanese media has written widely about Foxconn’s management style and Gou’s personality in particular. Yang Ren-kai, a veteran journalist who used to work at Hon Hai said, if Foxconn is a "sweatshop," Chinese journalists who have snuck into the factory by hiding their identity would have broken the story.
Yang wrote in the Journalist magazine that “Terry Gou is downright masochistic…Gou is the axis of Hon Hai, with all the people revolving around him… Gou is an absolute workaholic. He gets up usually around 7 a.m. and enters his office around 8 a.m., he is busy all day, until around 1 or 2 a.m. before returning home… Gou knows of course how to rally his subordinates; however, he has a superior sense of self-motivation. He started Hon Hai from scratch, and has long been fighting to keep his business afloat during hard times. This is all part of his survival instinct.”
Xin Huai-nan, a former senior executive at Hon Hai, said in an interview with the Hong Kong-based Sing Tao Daily that “Gou does not run a sweatshop, and Foxconn is not a “sweatshop,” but it might be a “pressure cooker.” “Hon Hai's culture dictates that it must be superior to its competitors. There are three elements that are crucial – the company must produce better products, with shorter lead times and at a lower cost.” Gou asks his staff to achieve all three. That is why Foxconn is like a “pressure cooker.”
Originally established in Taipei in 1974, Foxconn has held the top spot for a Chinese exporting enterprise according to Fortune magazine’s Global 500 for the last seven years. It employs in excess of 800,000 people in China. The entire employee population at its Longhua complex, including 3,700 Taiwanese workers, is greater than the population of one medium-sized city in Taiwan.
Managing that many employees is not easy and requires strict control, according to David Sun, co-founder of the flash memory maker Kingston Technology, speaking in an interview with the United Daily News. “It is not easy to run a factory, let alone to manage hundreds of thousands of employees, he said. Ray Chen, general manager of Compal Electronics, stressed, “I hope Foxconn can properly deal with this crisis as soon as possible. Otherwise this could lead to a chain of events affecting other Taiwanese and foreign enterprises in China.” In their view, this is not just a Foxconn issue, but is symptomatic of the changing economic and social environment in China.
Is rigid management a necessary evil?
The United Daily News said, China has been playing the role of “manufacturing base” in the global supply chain for almost three decades now. Many Taiwanese people have moved to China to set up operations to create large contract manufacturing businesses. They impose strict discipline when managing tens of thousands of employees to achieve fast delivery and quality production for global brand leaders. As well as the in-demand iPhones, iPods, and ipads, the latest computer models for HP and Dell are also made at Longhua. Even Acer Computer depends on these manufacturers to make its notebook computers in a bid to increase their global market share.
How to manage such a huge group of low-paid workers and achieve maximum performance in a short space of time has proved problematic for foreign businesses in China, but it works to the advantage of the Taiwanese firms. However, the Foxconn suicides are showing that even Taiwan businesses are powerless. Gou lamented, “What can I do except to apologize? I have done my best to seek advice from psychologists, feng-shui masters, Buddhist monks and the media, even announcing a 30 percent pay rise.”
Gou is not without his supporters though. Reporter Wang Zhong-fang wrote in her blog, “The recent criticism by the local media of Foxconn’s management style seems correct on the surface but not altogether correct. Those who have not worked in China do not really understand the situation there. Implementing a strict system is a “necessary evil.” Without such a system or discipline, the management of tens of thousands of workers would descend into chaos, with no production at all…” Wang also compared Chinese workers to their Taiwanese counterparts working in clean rooms at science parks in Taiwan. Asking why don’t they commit suicide? In either case, if these employees dislike their jobs, they can always quit, she wrote.
Generation Y factor
The labor conditions at Foxconn, at least on a physical level, are far better than the requirements stipulated in China’s official regulations, and certainly do not qualify as being a sweatshop. However, other factors could contribute to the high suicide rate; chief among these is the low regard given to the formation of personal relationships, which is reflected in the institutionalized management style. Additionally, most of the workers are young and away from their families and hometowns for the first time, so they might be emotionally vulnerable as well.
Most of today’s Taiwanese business leaders, including Terry Gou, were born into the first wave of baby boomers in the post-war period and grew up in poverty. In order to improve their lives and those of their families, they worked extremely hard to succeed. China is entering a stage where the generations born in the 1980s and 1990s are starting to work, noted the Commercial Times. The thinking of this generation is very different from those of their parents. The tried and tested Taiwanese business management models do not necessarily apply to this generation.
In speaking to the Taipei-based China Times, a senior manager at Foxconn said that young employees come to work with unrealistically high expectations. Whether they are pampered children from a one-child household, or hard workers away from their hometown and family for the first time, they are frustrated when reality does not meet their expectations.
Alienation and a lack of social mobility
The United Daily News also pointed out that China has learned from Taiwan’s experience to become the world’s workshop with an export-oriented economy, but the economic take-off in Taiwan in the 1970s differs from the current one in China. In Taiwan initially there were gaps between the cities and the countryside, but it was not as extreme as in China. In the early 1970s, Taiwanese workers in export processing zones went home at night, so their work pressure had an outlet for release and this allowed for the continuation of a normal family life. The Chinese workers, however, migrate to the cities from all over the country. There is no easy outlet for them to let off steam and forget about the pressures of work and life.
Furthermore, Taiwanese workers enjoyed equal educational opportunities, and social mobility is a real possibility. As long as they work hard, they have the opportunity to start their own business or succeed doing other things. While in China, the migrant workers are unable to register their households in the cities that they move to. The younger generations are excluded from equal educational opportunities. They feel hopeless because it is difficult for them to rise out of poverty regardless of how hard they work.
Preparing for the manufacturing shift
The reality is that the issues raised by the Foxconn suicide incidents signal a fundamental structural problem in China’s economic development pattern.
According to the Taiwan Electrical and Electronic Manufacturers’ Association chairman Arthur Yu-cheng Chiao, speaking in an interview with the United Daily News, Foxconn’s wage rise will mean higher production costs in China over the next three to five years and Taiwanese electronics manufacturers will be forced to leave. When this happens, the association will help them move to India, Indonesia, Vietnam and other countries, he said. Taiwanese manufacturers must expand their industrial scope and invest in new industries. Those firms that stay in China will have to enhance production automation.
Taiwan’s Economic Minister is already preparing for this critical moment in China’s transformation. In an interview with the Central News Agency on June 8, Minister Shih Yen-hsiang said the government will encourage Taiwanese businessmen to return to Taiwan to invest, and to help Taiwanese entrepreneurs transfer their investments to South East Asia, especially Indonesia. The government is urging investors to make technology-intensive manufacturing process in automated factory in Taiwan and move labor-intensive industries in Southeast Asia. The tragic Foxconn deaths serve as a stark early warning to Taiwan's government and businesses to be ready to face these inconvenient truths.
Key problems facing the Ma administration
Su began by listing the problems that have dogged the Ma administration since assuming office in May 2008. “Economically, we were hit by the tsunami, the worst since 1929. We were surprised and ill prepared… Then in September 2008, the US economy had a heart attack. We were able to save Taiwan’s banking sector, but could not save our export sector,” he said. This in turn cast doubts on President Ma and his ability to turn things around.
Politically, public trust in government and democracy was at an all-time low. Former President Chen Shui-bian was convicted of embezzling official funds and was detained in jail. The Taiwanese people used to celebrate their democracy, but by the end of 2008, it was hard to celebrate. The opposition party also played a part in manipulating Taiwanese fear of China, according to Su.
In dealing with these issues, the Ma administration has focused on instilling trust, both internal and external, noted Su. Many Taiwanese people felt that the government had betrayed them and it was incumbent on the government to rebuild that trust within the country. Externally, Taiwan also needed to build a good relationship with the US and to prove itself trustworthy again, he said.
Rebuilding trust with the US
Taipei did not want to put the US in the position of again having to mediate between the two sides across the Taiwan Strait, where Washington needed to tell China “I love you” and then reassure Taiwan, but “I love you too,” said Su.
Much to the amusement of the audience, Professor Tom Christensen of Princeton University interjected that the State Department likely did not use “love”, maybe “like.”
Now Taipei is able to communicate directly with Beijing, sparing Washington the need to be the go-between. Since Ma took office, Taiwan’s international standing has improved, stressed Su.
Also, in the early days of the administration, Ma’s government strived not to make promises it could not keep. Ma himself was “surprise-free and low key,” said Su. This meant no hanky-panky, but being predictable where the administrations would consult each other fully. The Ma administration has also not rushed to claim victory at every round, said Su.
Professor Diamond noted the similarities between President Obama and President Ma. The former is noted for being “No Drama Obama,” while the latter is “surprise-free and low key.”
Focus on pragmatism
The Ma administration has focused on pragmatism, according to Su, approaching issues in a pragmatic fashion and not from an ideological standpoint. If it could be done, it would be done. It has not been a matter of what should be done. If it couldn’t be done, then it wasn’t attempted, said Su. As an example, a direct flight to Shanghai took 80 minutes. It made sense to allow direct flights between the two countries, but not direct flights to Taichung since it would be across Taiwan’s central line and not defense savvy, he said.
Pragmatically, the Ma administration sees Taiwan in geographic terms and in terms of US, China and Japan, said Su. Taiwan may represent only 1 percent of the world’s GDP (US - 25%, China - 7% and Japan - 7%), but nobody else is as close to the top three. Besides, Su joked, “we speak better Chinese and Japanese than the Koreans.”
“We have gone from being enemies to being good neighbors with China,” said Su. Eventually, maybe the two countries can be good friends, but Beijing has to show Taipei that they are trustworthy also, he said.
If the FTA-like Economic Cooperation Framework Agreement (ECFA) is signed between Taiwan and China, then fear of China will decrease and economic relations across the Taiwan Strait will be closer. However, people should not expect things to get easier as Taiwan and China become more integrated economically, said Su. The ECFA is shaping up and that by itself is getting more difficult, because both parties are now talking about specifics and fighting to gain ground on the early harvest list. It is the nature of things, Su concluded.
Intel ISEF is the world’s largest science fair competition with over 50 countries participating this year. This May, over 1,700 pre-college students competed in 17 categories. The first prize in chemistry went to Jacqueline Hung and Lin Chi-chieh from the Taipei Municipal First Girls’ Senior High School for their experiments with iron selenide and its electrical superconductive properties at minus 273 degrees Celsius without suffering any energy loss.
Also in May, a group of young Taiwanese students competed in Malaysia at the 2010 International Invention, Innovation and Technology Exhibition (ITEX). Organized by the Malaysian Invention and Design Society, the exhibition concluded with Taiwan again outperforming other countries. With the theme of “Green Innovation,” the ITEX had 680 entries from eight countries on display at the Kuala Lumpur Convention Center. Taiwan’s 88 participants were made up of university and high school students, as well as individual inventors. Out of the 47 entries, Taiwan took home 18 gold, 22 sliver, 4 bronze and three special awards.
The results of both international competitions are very encouraging for Taiwan as it seeks to be an innovation leader as well as a hi-tech manufacturing center.
Founded in 1995, the NHI is about to undergo a second-generation of reforms to combat rising costs. The new system will be in place by 2012 and will alter the premium structure currently in place. Before NHI, nine million of Taiwan’s twenty-two million residents were uninsured. Now, 99 percent of the population is insured. The program has consistently earned high satisfaction ratings, ranging from 60 to 80 percent during the last 15 years. It has helped to increase Taiwan’s life expectancy by four years and improved the health of Taiwan’s less fortunate.
Taiwan’s single-payer system is run by the government with mandatory enrollment. The premiums come from employers and the government, with the user also paying a share. The single payer system fosters social equity by protecting low income groups. Moreover, by pooling general administrative costs it also substantially reduces tax costs. As an example, if the US health care administration could be as efficient as Taiwan’s the US would save US$110 billion and cover the 50 million Americans currently without health insurance.
According to Yeh, the virtue of the US system lies in its research and development, which is two to five years ahead of Taiwan’s. This has enabled the US to more quickly adopt new drugs and technology. The US also has excellent medical education. Even so, health care should be an universal right and not a luxury. Taiwan’s system offers uniform benefits and equal access, but also reduces costs and improves efficiency, for instance by using a single database, containing costs and providing a higher level of quality control.
In conclusion, Yeh said the US system is marked by “inefficient insurance,” whereas Canada’s system is marked by “inefficient delivery.” Taiwan’s system is a matter of “inefficient government,” but out of the three, he considers it the better alternative.
On May 29, President Ma condemned North Korea and supported the joint efforts of the Republic of Korea, the United States, Japan and other countries in seeking to reduce tensions through the United Nations. And, Taiwan is concerned that the use of violence or any provocation will undermine regional peace.
At another occasion that day, President Ma said the Korean Peninsula and the Taiwan Strait were once considered the two dangerous flash points in the region. With significantly improved relations between Taiwan and China, few would consider this area as a tipping point now. However, the Korean Peninsula is still perilous, said President Ma.
As a precaution, Foreign Minister Timothy Chin-tien Yang is ready to evacuate the 30,000 overseas Taiwanese in South Korea if tensions explode between the Koreas. As a contingency measure, a C-130 Air Force transport plane is on standby just in case evacuation is needed said the Ministry of Defense. During the riots by the Red Shirts in Thailand, a C-130 plane was also ready for any evacuation missions.
In addressing what possible impact the crisis on the Korean Peninsula might have on Taiwan, Christina Liu, the new chair of the cabinet-level Council of Economic Planning and Development, told the Legislative Yuan that it would cause “more harm than good.” With very similar industries in common, if South Korea were to be embroiled in a war, international companies would likely turn to Taiwanese manufacturers to fulfill orders instead. As for the negative impact, Liu said, no matter which Asian country has a problem, international capital would withdraw from the region completely. The recent drops of both the stock markets and foreign exchange in Taiwan reflect this dual trend. Also, in today’s economic structure, it is much quicker to shut off capital flows and switch orders.
According to Chen Tian-yj, an economics professor at National Taiwan University, increased tensions on the Korean Peninsula would bring absolutely no benefits to Taiwan. In a world of globalization, we are all closely connected, he said. Instability in any region would impact international trade, especially since South Korea is a large economy and Taiwan is an important trading partner.
Chen is also skeptical about companies switching orders from Korea to Taiwan. He said once war breaks out between the two Koreas, international capital would flee to safer areas. Unless absolutely necessary, orders withdrawn from Korea would not come to Taiwan. Once a war breaks out, not matter who wins, no one will benefit, he said.
Liang Kuo-yuan, president of the Polaris Research Institute in Taipei, said with the global economy still not fully recovered, any uncertainty would simply “rub salt into the wounds.” With the continued debt crisis in Greece and the tensions on the Korean Peninsula, he expects the global stock markets to continue to reflect these tumultuous times.
The IMF predicted in April that Taiwan’s economic growth rate would be 6.5 percent, topping the other three economies, Hong Kong, Singapore and South Korea. Although Taiwan used to lead in growth, it has not done so over the past few years. After the global financial tsunami, the world economic order has witnessed a reshuffle so that the island is again outperforming its rivals.
Taiwan’s GDP for the first quarter of 2010 reached over 10 percent, the highest single quarterly figure in 20 years. The director-general of Budget, Accounting and Statistics also said that the GDP forecast will be revised from 4.72 to 5.3 percent.
Many other organizations have upgraded Taiwan’s GDP forecast, including Global Insight, a leading economic and financial intelligence publication, which has upped its February forecast from 5 percent to 5.3 percent.
The United Daily News reported government officials as saying that all indicators of production, export, expenditure and investment show a better forecast than the numbers released in February. First quarter exports reached US$92.17 billion, about 50 percent higher than the same period in 2009. The index of first quarter industrial production rose to 47.12 percent, the highest recorded for a single quarter.
There were 435 cases of overseas investment approved in Taiwan during the first quarter, almost a 26 percentage point jump from the same period in 2009. The total amount of overseas investment was US$1.6 billion, 50 percent higher than the same period in 2009.
In addition to economic growth, Liu noted that Taiwan has worked hard to increase employment, solve its structural unemployment, stabilize commodity prices, and balance income distribution. This has reflected positively in Taiwan’s competitiveness ranking as well.
Taiwan is now the eighth most competitive economy in the world according to the 2010 World Competitiveness Yearbook published by the Swiss-based Institute for Management Development (IMD). This is a huge jump from its 2009 standing of 23rd place. Rising corporate competitiveness and government efficiency have contributed to the island’s ascent. Currently, Singapore is ranked first, followed by Hong Kong and the US, which placed first in 2009.
Regarding Taiwan’s competitiveness ranking, Suzanne Rosselet, Deputy Director of the World Competitiveness Center at IMD, told the Central News Agency that it is really incredible to see Taiwan jump from 23rd to 8th. This shows Taiwan has a high degree of confidence in economic development. Also, based on the “first in first out” theory - meaning the first to enter the crisis should also be the first to exit - Rosselet suspects Taiwan will lead East Asia out of the woods.
After the recession of 2008, Taiwan’s recovery has benefited from China's continued rapid growth, which has helped boost Taiwan’s competitiveness ranking. According to Rosselet’s analysis, the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China will further improve overall economic prospects.
But in the mid-to long-range, the promotion of economic industrial development, and the expansion of the tax base, will increase the tax income according to the ruling Kuomintang (KMT) legislative caucus. Under their estimates, the tax cut will create government revenues of NT$69 billion (US$2.15 billion).
Island of inequality?
However, in a recent Commonwealth monthly article, the projections were less rosy. A recent cover story, “Taiwan to become island of inequality?” criticized the new tax cuts. “The salaries and wages earned by Taiwan's 9 million workers account for 72 percent of the reported income on which individual income taxes are paid in Taiwan, a far higher ratio than the 56 percent in the United States and the 49 percent average across wealthy Organization of Economic Cooperation and Development (OECD) countries. In Taiwan, there are 7.54 million households, but only 5.38 million, or 71.3 percent, pay taxes.”
“The taxes that many people pay are totally disproportionate to their incomes,” says economist Ma Kai. “Many households' accumulated wealth relies on gains from property and stock transactions, the vast majority of which go untaxed.”
According to the 2009 World Competitiveness Yearbook put out by the Institute for Management Development (IMD), corporate income taxes paid by Taiwan's enterprises account for only 3 percent of the GDP, lower than the ratio in the other Asian Tigers (South Korea, Singapore and Hong Kong), China, Japan and the United States. Reported corporate pre-tax earnings, which account for only 18 percent of all taxable income reported in Taiwan, amount to barely 20 percent of the business income listed in Taiwan's national income statistics.
In Taiwan, the more a company earns, the lower its tax burden. Commonwealth found in looking at the 2009 financial statements of publicly listed companies, the 10 companies that made the most money only paid an average marginal income tax rate of 9.97 percent. The magazine's survey clearly indicates that the unfairness of the tax system is one of the greatest sources of public anger.
Asked about the government's policy to lower the corporate tax rate from 25 to 17 percent, 43 percent of respondents believed it was unfair, while 70 percent felt that the tax reforms of the past two years have been increasingly favorable to businesses and wealthy households.
Big tax cut to create GDP increase
Since coming to power in 2008, the Ma Administration has rolled out a number of tax breaks for companies and the wealthy. This new business income tax cut package became the biggest tax cut measure in Taiwan’s history. It was passed at a time when the country's finances are in their worst shape in eight years.
However, high taxes will scare away money, said Huang Yo-hui, associate professor of the National Taipei College of Business. As an island economy, Taiwan can’t afford to impose high taxes. The tax cut is an adjustment in the right direction over the long term because it will promote international competitiveness, attract foreign investment, and encourage a return of overseas Taiwanese businessmen. Ultimately, it will cultivate more tax resources.
According to the estimate of the Ministry of Economic Affairs, Taiwan’s business income tax rate is lower than that of China (25%) and South Korea (22%), similar to that of Singapore (17%) and Hong Kong (16.5%). With the new cuts, Taiwan will create an environment of fairness, efficiency, simplification and international competitiveness, thus reducing the tax cost of businesses.
Based on the experience of American tax cuts where every dollar cut in tax creates a GDP increase of US$1.5 to US$2.5, Taiwan’s business income tax cut will create a total of NT$69 billion (US$2.15 billion) GDP.
Wang Jiann-chyuan, vice president of the Chung-Hua Institution of Economic Research, said the upgrade to research and development will be a big incentive for businesses in the mid- to down-stream of the supply chain. For example, the NT$30 billion (US$930 million) R&D investment government spent in 2008 brought in NT$500 billion (US$15.62 billion) from private business towards the GDP. Wang added “This is key to the national transformation, and the upgrade of R&D in the service sector will be the lifeline to future employment for young people.”
It is also the right time for government to revitalize the green tax system, said Commonwealth. Tax cuts at the start will be followed by tax increases later. Huang Yo-hui cited an example of the green tax, which is a consumption tax taking advantage of the resources of society. Once you use it, you have to pay taxes, especially for the businesses that consume the most energy. After enjoying the tax cut benefits, it is necessary for the business to pay more tax later.
The United Daily News said it is predictable that the rich will pay less tax because business income taxes are down and the government’s revenue will soon be greatly reduced. But the government should monitor how businesses spend the funds due to the decline of corporate tax. If companies pay less tax and spend the reserved money on research and innovation, human capital and increased employment, it would be the best starting point to create a win-win situation for government, business and the population as a whole.
On the other hand, the side effects of the decline in business taxes must also be guarded against, said the paper. With more retained earnings, the company holds a lot of cash in hand, resulting in the pressure of how to use the funds. Due to the expansion of capital, companies will face the pressure of breaking the bottleneck of business profit. These two pressures may lead enterprises to repeat the mistakes of diversified merger and acquisition (M&A) a common phenomenon in the United States in the 80’s and 90’s, causing companies to lose focus on business operations, and creating the M&A bubble.
Over the past decades, Taiwan has used tax cuts as an incentive to encourage business investment; but times have changed, said the paper. Society is moving faster, with issues of high unemployment, low birth rates and so on. The government has to establish a stable system of social welfare and economic security, which is an integral part of the investment environment. It is not enough just to have a tax cut.
Over 13 million polyethylene terephthalate (PET) bottles were used to produce the 2010 World Cup jerseys for the teams and retailers. On average, eight plastic bottles can be recycled into one jersey. Not only are they environmentally green, it weighs 13 percent less than traditionally shirts. Each one is fashioned from 144-thread-count fibers, which helps keep the players drier by allowing sweat to evaporate quicker. This not only shows Taiwan’s technological superiority, but also demonstrates the island’s advances in “green” products.
According to the Taiwan Textile Research Institute (TTRI), PET bottles are reprocessed and extruded into polyester fiber, which in turn are turned into fabric for the shirts. Dyeing techniques are also crucial as coloring standards for FIFA soccer jerseys are quite strict. The jerseys were dyed in an environmentally friendly fashion in keeping with the Global Green Standards. In this regard, the jersey’s high quality reflects Taiwan’s leading technology and cost-effective production.
After years of vigorous efforts by the TTRI in research and development, Taiwan’s continued innovations has made steady breakthroughs in dyeing and textile-fiber-production technology. As such, Taiwanese textiles have become a favorite choice of renowned international sports brands. According to the TTRI, nine national teams (Brazil, The Netherlands, Portugal, United States, South Korea, Australia, New Zealand, Serbia and Slovakia) will be wearing uniforms made by Taiwanese manufacturers.
The jerseys, cut to fit the world’s best soccer players, will provide unmatched airflow and pliability. It speaks to Taiwan’s outstanding achievements in textile-manufacturing technology and serves as a testament to the island’s commitment to protecting the environment, conserving energy and reducing carbon emissions.
Preserving the city’s last piece of green land
In the United Daily News, Chang, a writer and former professor of Chinese Literature at Soochow University in Taipei, has urged President Ma Ying-jeou to abandon the project and to preserve the “last piece of green land” in the city. President Ma took Chang’s supplication seriously and inspected the allotted land on May 10. Along with other government officials, Ma decided that it was not wetland as Chang and other environmentalists had claimed.
Instead, President Ma attempted to persuade Chang to agree to the government’s development plan. Upon hearing this, the 70-year old Chang was seen on TV, dropping to her knees and bowing her head three times, begging the president to change his mind.
Although only a small portion of the 185 hectares of the former arsenal will be used for construction of the NBP, the 25-hectare wetland is considered the most choice of the whole piece. Chang stressed that once the concrete structure is built, it will destroy the ecological balance of the area.
On May 16, in a compromise, cabinet spokesman Johnny Chiang said that the government will suspended construction at the park, and will form a monitoring group to conduct environmental assessments over the next six months to find a balance between ecological conservation and development.
Academia Sinica: surprised and frustrated
According to the United Daily News, the Academia Sinica President Wong Chi-huey said, “I can understand the sense of distrust expressed by environmental groups." Taiwanese society previously had no respect for environmental protection. He hopes this incident will establish a new pattern of taking environmental protection into account in future economic developments.
However, Wong noted that the development of Taiwan’s biotech industry is a race against time. Putting its national resources behind growing its biotechnology, South Korea has successfully developed four new drugs that have been approved by the U.S. Food and Drug Administration. Taiwan, on the other hand, has no drugs in development due to the difficult integration of all parties involved. If Taiwan cannot create a biotech brand, it will forever remain only as an original equipment manufacturer (OEM).
Although Taiwan might have excellent basic research and experience in human trials, it lacks the transition process to new drug development. The establishment of the NBP is designed to create those missing links. Wong said there were several cities and counties that approached him to offer land for a national biotechnology park, but he declined their offers thinking that the NBP would benefit from being close to Academia Sinica, National Taiwan University, National Yang Ming Medical University and other major hospitals in the Taipei metropolitan area.
The Central News Agency reported, Academia Sinica thinks the wetland Chang Hsiao-feng is striving to preserve is not located within the planned biotech research park, but the media and other groups have focused their attention and attacks on Academia Sinica. All this has left Wong feeling surprised and frustrated.
As an internationally recognized chemist, Wong has worked at the biotech research unit of Scripps Research Institute in La Jolla, California and was recruited by former Academia Sinica President Lee Yuan-tse to come to work in Taiwan. Many people feel sorry for Wong who is regarded as Taiwan's best contender for a Nobel Prize, but now, also considered an ecological foe.
Has Taiwan learned its lesson?
Because of its proximity to the capital, Nangang was selected as the site for the “202 Arsenal” when it relocated from China to Taiwan in 1949. As the production site of sensitive munitions, the arsenal was considered a high-risk military facility. In maintaining security, the depot was exempt from development and became isolated from the outside world. Military control, plus a low level of construction has kept the depot fairly unspoiled.
The “202 Arsenal” occupies a total area of 185 hectares. About 25.31 hectares are designated for the planned NBP site, in which only 9.6 hectares will be developed and the other 15.71 hectares will be preserved in its original green state. On the other 160 hectares of land, 15.8 hectares are used by Taiwan’s national army as a base for its Patriot missiles, and the remaining area (including the wetland Chang proposes to preserve) is currently not tied to any plans, reported the United Evening News.
With regard to the current dispute for the NBP, the United Daily News editorial said it is sad that Taiwan has paid a heavy price for not yet learning to discuss issues of environmental conservation and development and it has resulted in not being able to attract long-term foreign investment. Ever since the beginning of the large-scale environmental protests movement (the Anti-DuPont incident in Lugang, Changhua County) in 1985, the emphasis has been on using emotional warfare to get the other side to surrender. This is not a wise approach for dealing with such issues.
However, another writer Sang Ping-zai expressed a different view in the United Daily News. “I saw something great from this dispute. That is, the government reacted immediately to the cause Chang Hsiao-feng stated. Even President Ma entered into the dialogue. Both sides are rational. Whatever the outcome, both sides are honest and focused on the issue.”
This response differed from the past, Sang noted, “There have been numerous social movements where…the government did not want to talk to the other sides, blaming them for their political motivations…” "This time, Ma’s administration took a high-profile response to Chang Hsiao-feng, as Chang is a famous female writer who has a good reputation in society. The most important thing is that she is not considered a political figure. There is no need for political concern for the Ma’s administration,” said Sang
Environmental protection vs. technology
In the editorial, the United Daily News added, “Biotechnology is the fourth industrial revolution, and a high value-added knowledge industry. It is a brand new industry to transform the island and give birth to a new Taiwan.
The Economic Daily News also says the “202 Arsenal” is a rare and precious area of land and swamp in Taipei. But there are many other similar places with little land value in Taiwan. From the perspective of economic development, employment opportunities have been concentrated in the north, not in the south, resulting in a serious imbalance. Therefore, the government should place more effort on finding other locations in central and southern Taiwan for biological science and technology parks to replace the “202 Arsenal.”
Kaohsiung City Mayor Chen Chu said that if Taipei does not want the biotech park, Kaohsiung welcomes it with open arms. She noted that it takes only 90 minutes from Taipei to Kaohsiung by high-speed train. There are many universities in Kaohsiung so there is no shortage of talent.
Stricken with cancer but still fighting to preserve one of Taipei’s last large green spaces, Chang has gained the support from Taiwan’s literary and arts community. In a statement on May 16, the group said they wanted to follow the example of the Na’vi tribe in the Hollywood movie Avatar to fight to preserve the land. Chang and her supporters have demanded that Academia Sinica and the consortium leave the green site, and have asked President Ma to preserve the 185-hectare green space as Taipei's Central Park. They urged the people to work together to help save the last piece of green space in Taipei.
Can environmental protection and technology development co-exist side by side? The successful development of biotech parks in Boston, San Francisco and San Diego seems to indicate so. In the meantime, Wong is still hoping that the discussion of the National Biotechnology Park will return to a more rational footing.
- The Press Division of the Taipei Economic and Cultural Office (TECO) in San Francisco represents the Government Information Office (GIO), Executive Yuan, Republic of China (Taiwan). GIO maintains nine Press Divisions in the United States, including the San Francisco office. The Press Divisions are in charge of promoting Taiwan's public relations and cultural exchanges. This blog is updated by the Press Division, TECO in San Francisco.
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