Thursday, June 10, 2010

Taipei’s Metro

With the second highest population density in the world after Bangladesh, Taipei’s Rapid Transit System (TRTS) is up to the challenge of transporting the city’s 2.6-million residents.

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 suicides reveal inconvenient truths

On June 1, Foxconn, the world’s largest contract electronics manufacturer and maker of the iPhone, iPod and iPad, announced a comprehensive 30 percent wage increase for all its production-line workers in China. This bold announcement was followed by another six days later, that the minimum wage at its factory in Longhua, Shenzhen, would more than double from RMB900 (US$132) to RMB2,000 (US$293) starting in October. The company’s actions have sent shockwaves through the foreign investor community in China, according to the Commercial Times. The company has been making news for another reason recently, the alarmingly high number of employee suicides at its Shenzhen campus.

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.

Former top advisor assesses the first two years of Ma's administration

On May 28, Dr. Su Chi, the former secretary-general of Taiwan’s National Security Council was the guest speaker at a luncheon discussion at the Center on Democracy, Development, and the Rule of Law (CDDRL) at Stanford University. The event was part of a larger seminar on “Trends in the Strategic Triangle: US-China-Taiwan Relations in the Coming Decade.” The informal luncheon was hosted by Professor Larry Diamond, director of CDDRL and was on the topic “Assessing the first two years of the Ma Ying-jeou Presidency: A Conversation with Dr. Su Chi.”

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.

Young Taiwanese scientists lead the way

This year, seven Taiwanese high school students took home prizes from the Intel International Science and Engineering Fair (Intel ISEF) held in San Jose, California. In total, an impressive 87.5 percent of Taiwan’s entries won prizes, the highest percentage of any participating country.

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.

Can US learn from Taiwan’s health insurance system?

On May 15, the Silicon Valley Taiwanese American Industrial Technology Association (TAITA-SV) held its annual conference in San Jose, California. The association chose to focus this year’s theme on “Health Care Reform – Changes and Opportunities” by inviting speakers knowledgeable about health care reforms in Taiwan and the United States. Dr. Yeh Ching-chuan, the founding CEO of the Bureau of National Health Insurance (NHI), Taiwan’s universal health care system, noted that Taiwan spends one seventh of what the US spends on health care but with the same or better results.

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.

Taiwan condemns Pyongyang

In an interview with the Doha, Qatar,-based Al-Jazeera TV network on May 28, President Ma Ying-jeou condemned North Korea’s breach of peace and its use of violence in the Cheonan Incident. President Ma also urged the international community to take joint measures in order to maintain peace and stability in the region. Tensions on the Korean Peninsula have escalated since May 20, when Seoul accused Pyongyang of torpedoing one of its naval patrol ships in March and killing 46 crewmen.

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.

Taiwan ranked world’s 8th most competitive economy

Based on a newly released forecast from the International Monetary Fund (IMF), Taiwan’s economic growth rate is ranked No. 1 among the four Asian Tigers in 2010, and is expected to remain at the top from 2013 to 2015. According to Christina Liu, the new chairperson of the cabinet-level Council for Economic Planning and Development, Taiwan will continue to be at the top of the pack by embracing an open market policy.

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.

New tax cut to create social injustice or to upgrade economy?

Under Taiwan’s newest law, the “Industrial Innovation Act,” business income taxes will be cut from 25 to 17 percent. On April 30, the amendment passed its third round of reading in the Legislative Yuan. It is estimated that the tax cut will cause total government income to fall by up to NT$34.3 billion (US$1.07 billion), reported the United Daily News.

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.”

What’s next?

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.

Made-in-Taiwan uniforms to kick off World Cup

As the quadrennial FIFA World Cup tournament kicks off in South Africa tomorrow, Taiwan will be appearing not among the 32 contending teams, but as a maker of their uniforms. Nine of the competing teams will be donning uniforms made of recycled materials completely made-in-Taiwan (MIT). So even without a national soccer team playing, Taiwan’s textile-technology will still be present to flex its muscles on the fields.

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.

Artists battle scientists, government over fragile wetland

In a show of force, prominent members of Taiwan's literary and artistic circles banded together with well-known writer Chang Hsiao-feng in opposing the government's plan for a 25-hectare block (62 acres) of land in Taipei City. The army depot known as “202 Arsenal” is slated to become the National Biotechnology Park (NBP). The government allotted the land to Academia Sinica in 2007 and construction at the park was scheduled to begin on June 1.

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.

Chinese singers seek stardom in Taiwan

Recently, Chinese singer Hu Xia claimed first place on the final episode of “Super Star Avenue,” Taiwan’s popular singing contest. He was the first Chinese singer to win on Taiwan’s equivalent of “American Idol” and “Britain’s Got Talent” where contestants compete hoping to win a record deal. Other Chinese performers are also coming to Taiwan to try their luck on another music contest, “Super Idol.”

Hosted by Matilda Tao, “Super Star Avenue” first aired on the Taipei-based China Television Corporation (CTV) in January 2007. Each six-month season works toward finding the next singing superstar. Lin Yu-chun, now considered Taiwan’s “Susan Boyle” rose from obscurity after appearing on “Super Star Avenue.” Even though Lin did not win, this April he was invited to sing on the Ellen DeGeneres Show and Lopez Tonight in the US. He has since signed a contract with Sony Music Entertainment.

In the latest season, a vocal group nick-named the “Three Handsomes” – Mo Sao-srai, Jiang Yifan and Li Guangbo from China’s Shandong, Heilongjiang and Hubei provinces respectively, made it to the finals.

According to the United Daily News, these young Chinese men, with an average age of 20, moved to Taiwan for over six months and stayed in a small motel in Taipei. All the arrangements were made by the production company. Li said, “I was told that Taiwan is a beautiful island. I was eager to come here and see what it is like. But it is hot and humid.” These four singers from China experienced “the warmest ever winter in their lives.”

Living in a place different from their native land and living on very little money was tough. They survived with thanks to a large group of Hu’s fans who supplied them with abundant summer fruits, snacks, Taiwanese specialties, and even stomach and throat relievers. Hu has no regrets, despite a diet of cheap braised pork and rice, and the time-consuming visa process; the men hope to release records in Taiwan. The group even said that they would like to find Taiwanese brides, because “the girls here are particularly kind.”

Another popular talent show is “Super Idol.” Around since October 2007, the show is hosted by Li Chin. The show is less restrictive in terms of the age of its participants, their professions, and does not limit itself to filming only in Taiwan.

A recent contestant was 27-year-old Li Yasa of Shanghai, China, who released an album in Taiwan a few years ago. At that time, she did not come to Taiwan to promote the album. This time around, she temporarily relocated to Taiwan for six months and found an apartment while appearing on “Super Idol.” Since she came from a well-to-do family, her relocation was not a financial burden.

Another contestant was Duan Xuming, originally an actor from Harbin province, China. He married a Taiwanese businesswoman, Liu Si-ling, who runs the well-known bridal salon “Paris, France.” Under her encouragement, Duan participated in the “Super Idol” contest.

Contestants have also included Kim Kiji, an overseas Chinese artist from South Korea, and a freshman in the advertising department at National Chengchi University. He stumbled across the “Super Idol” contest by chance, and he had a hard time getting used to the food and the humid weather in Taiwan. Language was also a big barrier for him. Having a limited Chinese vocabulary, he could not understand what the judges were saying. Nevertheless, he sees Taiwan as a “land full of opportunities. More and more people like Taiwan. I want to be a singer and have albums made in Taiwan,” he said.

Others hoping to capitalize on the popularity of the shows include 29-year-old Zhao Taixiang from Burma. With two albums already released in Burma, he hopes the added exposure will result in an album deal in Taiwan. In the meantime, he is coping with the keen competition in Taiwan and earning a living by working in a pub. Someday, he hopes to return to Burma as a star.

Former overseas Chinese contestants who have shown promise on the shows have included Wong Jinglun, Ai Chen and Fu Chunying. They have all successfully started their singing careers and released albums in Taiwan.

At 28, Ai came from Malaysia in 2002 to take part in “Super Idol.” After several failed attempts, he finally won in January 2010. Another fellow Malaysian, 26-year old Fu also participated in “Super Idol.” She won second place after Ai. Fu noted, “Taiwan and Malaysia are home for me. But it bothers me that laundry takes so long to dry in this humid Taipei weather.” Even coming sixth place can mean a significant break-through. Just ask Wong, who appeared during the third season of “Super Star Avenue.” The 27 year-old Singaporean still signed a contract with Warner Music Taiwan, and has since released two albums in two years. He is now working to build his fan base in China.

Taiwanese food goes global

For decades, Taiwan has been famous for manufacturing computer chips and hardware. Now, the island is also cultivating its soft power over the Chinese world through its specialty foods.

At the Shi-lin Night Market in Taipei, you will see groups of tourists from Japan, Hong Kong and Southeast Asia seeking out local Taiwanese food delicacies. Every day, a long queue of foreign visitors lines up outside of Ding Tai Fun Dumpling House to sample its famous soup dumplings. Advertised on travel web sites from Singapore and Malaysia, you will see tour options for groups to visit Taipei to sample Taiwanese snack food. Taiwanese specialties such as beef soup noodles, soup dumplings, pineapple cake and pearl milk tea have won the taste buds of 1.9 billion Chinese and Southeast Asians. And in major cities throughout California, bubble tea shops are as equally populated as Starbucks.

Instant noodles remain one of Taiwan’s favorite foods. Early success stories have included Master Kong, a brand name of Taiwan’s Tingyi Holding, now the largest instant noodle manufacturer in China. The company specializes in making instant noodles, baked goods and soft drinks. Another Taiwanese company in China is Want Want, which specializes in rice cakes and drinks. They have been in the Chinese market since the 1980s.

In Southeast Asia, where the consumer market numbers 600 million people, Namchow (Thailand) Limited, established by Namchow Group (Taiwan) in 1991, is a successful manufacturer and distributor of rice crackers, rice snacks and instant noodles. Also started in the same year, Vedan set up a company in Vietnam to make and market instant noodles, soft drinks, nutrition products and cosmetics.

Resurgence of home cooking

With a renewed interest in home cooking throughout the Taipei area, Taiwan's gourmet industry is taking another step toward maturity.

City’super, a supermarket originally from Hong Kong, arrived in Taiwan and started offering cooking lessons in 2004. Ever since, City’super has cultivated a customer base that is highly health conscious and inclined towards home cooked gourmet meals.

And it is not simply an elite population who are eager to learn the art of cooking. Cooking classes throughout Taipei are often packed to capacity. Even during a working Friday afternoon, between 50 and 70 eager students fill the cooking classroom of the Xinyi Eslite Bookstore.

Given Taiwan’s abundant snack food culture that provides an endless variety of inexpensive convenience foods, why would anyone want to study cooking? Taiwan’s growing health consciousness plays a part, according to the Commonwealth magazine. The magazine mentioned Yang Su-ling, who works in Taipei, and grabs a quick lunch before returning to work again. Like others who are becoming more health conscious, Yang enjoys cooking for herself.

Another reason behind the craze is the desire of Taiwanese people to cultivate closer familial bonds, and cooking together is one of the best opportunities to interact with one’s children. Founded more than 11 years ago, Choi's Home School of Culinary Arts started children's classes two years ago, after seeing a desire for parent-child interaction in the kitchen.

Promoting Taiwan’s gourmet foods

Parents who use cooking to further cement family ties can also plant a seed that will take culinary roots. This can be seen as more kids consider pursuing a career in the culinary arts. It is also a clear indication that the profession is gradually gaining social acceptance according to the magazine.

This March, Taiwanese pastry chef Wu Pao-chun won the title of Master de la Boulangerie in the bread category of the Bakery Masters Competition in Paris. Wu was able to beat 24 contestants from 17 countries. Within eight hours, Wu was required to bake bread such as baguettes and sandwich loaves and something typifying Taiwan. Among the ingredients of Wu’s winning bread were Taiwanese millet wine, dried lychees and organic roses.

Meanwhile, Taiwan will launch a project to promote Taiwanese gourmet food into the global market place, according to a report from the Economic Daily News. Funded by the National Development Fund and private investors, the project will form an “international Taiwanese gourmet food promotion company” to set up state-owned restaurants overseas.

Seeing the merits of promoting Taiwan through its specialty foods, the paper said a specialized government institution will standardize a variety of Taiwanese dishes and train chefs to further promote Taiwan through foods. Other collaborating institutes will be established to expand the business horizons of Taiwanese cuisine by opening chain restaurants, participating in business fairs and holding promotional activities for Taiwanese culinary arts.

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About Me

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.