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ECCT releases 2018 Position Papers

The European Chamber of Commerce Taiwan (ECCT) today released its 2018 Position Papers. A copy of the chamber's annual publication was officially handed over to the Taiwan government's National Development Council (NDC) at an ECCT Premium Event Lunch held today. A summary of the main theme and overview were presented at the event by ECCT Vice Chairman Olivier Rousselet. This year's theme is "Clearing the Hurdles to Economic Progress". The publication includes separate submissions from 25 of the ECCT's 30 industry and support committees and raises 132 issues, 84 issues unresolved from previous years and 48 new issues.

In his presentation to members and NDC Minister Chen Mei-ling at the launch, Rousselet congratulated the government on making progress on 18% of the issues raised in the 2017 papers and the passage of the Act for the Recruitment and Employment of Foreign Professionals by the legislature on 31 October, noting that as long as the act is implemented as intended it would resolve two issues raised by the ECCT's Better Living committee and another by the Human Resources (HR) committee.

The overview of the papers outlines the following major hurdles that are impeding further economic progress:

Labour law

The government has proposed amendments to the Labour Standards Law (LSL) that, if implemented, would resolve some of the issues raised in the HR committee's 2018 position paper. Previous LSL amendments implemented on 1 January have been widely criticized by both employers and employees as being too rigid. They have reduced the flexibly of employers to manage their workforces in a manner appropriate to their needs and increased their personnel and administrative costs. Employees have also complained about the rigidity of the system because they are deprived of the option to work on certain days and earn overtime pay.

In the modern economy, attracting and retaining the right people is arguably the most important criterion for success. Taiwan is facing critical shortages of both white and blue collar workers in several sectors. To meet the labour needs of the modern economy there is no one-size fits all solution. Every industry has its own particular needs. In this environment, a much greater degree of flexibility is needed in the LSL and/or implementing regulations. The ECCT has recommended abolishing the current 'rest day' restrictions and allowing the option of work on rest days and increasing the monthly maximum number of overtime hours. In addition, to reduce the amount of time spent keeping rigid attendance records and to increase trust and cooperation, the chamber has recommended some flexibility in the method and time unit used for recording working hours. Moreover, the chamber recommends exemptions on working hour rules for employees above a certain level (such as senior managers or those with salaries above NT$200,000 per month), and certain categories of employees depending on the job nature (such as sales, managerial and senior professional staff).

Skills shortage

Solving Taiwan's skills shortage requires both investing in upgrading education and training facilities at home and removing restrictions on people and institutions from abroad. The "Act for the Recruitment and Employment of Foreign Professionals", may resolve several issues facing foreign professionals living and working in Taiwan. However, a number of issues are not addressed in the act and, as things stand, there are still many difficulties facing foreign nationals living and working in Taiwan.

Some procedures to hire foreign nationals remain cumbersome and Taiwan maintains some unreasonable visa and working permit requirements for foreign professionals. The application process for both long-term and short-term work permits for foreign nationals has become more difficult in recent years. In addition, the status of visitors on short-term visits is confusing. Moreover, procedures for visitors from mainland China to apply for work permits and visas are complicated and time-consuming. Taiwan also maintains restrictions on hiring unskilled labour, which, in the short term, can only be resolved by allowing more foreign labourers to work in the service sector.

Another impractical restriction comes in the form of qualification and work experience requirements for hiring foreign employees. The ECCT recommends removing the current hiring restrictions and qualification requirements for foreign employees and allowing companies to hire whomever they deem suitable.

Authorities in Taiwan have made good progress in recent years towards making Taiwan more attractive to foreign residents. However, there remain several areas where foreign nationals are not afforded the same treatment as Taiwan nationals. If Taiwan is to attract the most qualified people, authorities need to make the environment attractive enough to entice foreigners to Taiwan by eliminating all remaining instances of unequal treatment for foreigners.

In terms of education, there are several areas where authorities could help to upgrade the quality of local educational institutions to meet the needs of the changing economy. Schools which consider establishing a presence in Taiwan to teach internet-related engineering or software engineering subjects face a plethora of laws and regulations which discourage prestigious foreign educational institutions from setting up branches in Taiwan. A simple fix would be to exempt private IT, software, engineering or related schools from the tough requirements of the Private Schools Law.

Energy security and transition

According to Taiwan Power Company, only about 6.5% of the total electricity generated in 2016 was from renewable energy sources, including hydro-electric power. If Taiwan is to reach its target of 20% by 2025, concrete action is required on a number of fronts. There is a strong need for legal certainty and consistent policies related to renewable energy, as well as investments in grid and harbour infrastructure for the renewable energy industry.

Too many agencies are involved in the application process for renewables and a lack of coordination among them when formulating policies, leading to timeframes of up to four years or longer. These could be shortened significantly by streamlining the processes. In addition, the necessary investments in grid infrastructure, to quickly allow the adding of renewable energy capacity, have not yet been forthcoming. What is needed is a coordinated cross-ministry approach, working in partnership with private sector players, to resolve all the current difficulties and speed up the roll-out of renewable energy infrastructure. The ECCT's Wind Energy committee has recommended establishing an Energy Industry Supervisory Commission (EISC), vested with the necessary authority to coordinate among various government authorities and collaborate with the private sector to resolve the multiple instances of administrative difficulties and streamline the application process for renewables. An EISC or similar body would help ensure the implementation of renewable energy policies, play a crucial role as a market regulator and deal with issues ranging from regulatory approvals to dispute resolution.

Taiwan poses great potential for off-shore wind development and has attracted developers to apply for a total of 10 gigawatts (GW) of capacity. Recently, Taiwan's Bureau of Energy (BOE) declared that the intended allocated grid capacity for 2025 will be set at 5.5GW, with only 3GW of this allocated to Feed-in-Tariff (FIT) projects while the remaining 2.5GW of capacity will be allocated to projects open to tender in order to achieve cost reductions. However, Taiwan's wind energy market is not mature enough for an open bidding system. Offshore wind projects require large-scale investments in equipment and infrastructure which are not yet present in Taiwan. European experience has shown that a large FIT capacity is needed to facilitate sufficient investment to build and develop a domestic wind energy supply chain. Higher FIT targets lead to more business and investment opportunities for local players, while more development leads to more experience, which in turn leads to lower risks and costs. The ECCT has therefore recommended that more grid capacity (at least the 5.5GW) is allocated to FIT projects. Doing so would encourage large-scale investment while in turn speeding up localization.

Besides removing the impediments listed above, a proven way to spur the development of the wind energy industry is to allow community ownership of wind energy projects. Another simple way to increase capacity is to introduce a "repowering" incentive, whereby old turbines can be replaced with new ones without having to undergo a new permitting process.

Another plank missing from Taiwan's energy security planning is appropriate policies and a blueprint to implement energy storage systems in Taiwan's power grid. Moreover, while the government is promoting environmentally-friendly vehicles, Taiwan currently lacks an adequate charging infrastructure, which will be required to meet the needs of battery-electric vehicles.

Besides renewables, much more could be done to improve energy efficiency, especially in the building sector, which continues to be one of the largest contributors to CO2 emissions worldwide.

Regulatory uncertainty

Taiwan has a well-established legal system and procedures in place for amending laws and regulations. While the Executive Yuan's directive to extend the notice and comment period for drafts of all regulations from 14 days to 60 days has been generally welcomed, there remain instances of important policy changes that are not properly communicated. In particular, there have been several recent instances where decisions were reversed without due cause and other instances where transparency was lacking. With sufficient transparency and opportunities for feedback and discussion, potential problems that could result from proposed new policies, regulations or rulings can be discovered and dealt with early on in the process.

Not following established procedures and international standards risks undermining trust in the government and the international image of Taiwan. This could be avoided if the Executive Yuan ensures that all government ministries and agencies always follow an established process before making decisions.

Local standards and other trade barriers

While progress has been made in recent years towards international harmonisation, there remain instances where Taiwan authorities maintain standards are not aligned with international standards or practices. These technical barriers to trade are detrimental to both local and foreign firms operating in Taiwan. While the government cannot completely protect Taiwan from global macro-economic factors, the best way to defend against external shocks is to create and maintain a regulatory environment that is attractive to investors and harmonised with international standards and best practices.

Taiwan remains a trade-driven and dependent economy and therefore vulnerable to changes in the global trade and investment environment compared to other countries. Both the economies of Europe and Taiwan have thrived because they are open and future prosperity depends on their remaining open. It is therefore in Taiwan's best interests to maintain a liberal approach to trade and for authorities to continue to pursue further trade liberalisation measures. For this reason, the ECCT continues to support a Bilateral Investment Agreement (BIA) between Taiwan and the European Union, which it hopes will also address non-tariff barriers.

Conclusion

The overview concludes that the government has demonstrated laudable efforts to tackle difficult problems and support infrastructure and industry development, which, if followed up by meaningful enabling actions, have the potential to produce significant results. In particular, following the ECCT's recommendations would remove the hurdles to Taiwan's economic development and ultimately lead to greater economic and social prosperity.

Open Door Mission to Brussels

Besides presenting the position papers to the Taiwan government, the ECCT will also use the papers as the basis for briefing the European Commission, the European Parliament and the European Council. To this end, an ECCT delegation comprising board directors, supervisors, committee chairpersons and staff will visit Brussels at the end of December for its annual "Open Door Mission", a series of meetings aimed at providing European officials with a comprehensive update on the current political, investment and regulatory environment in Taiwan.

About the ECCT

With over US$44 billion in direct foreign investments, Europeans remain the largest group of foreign investors in Taiwan. The European Chamber of Commerce Taiwan is the only foreign nationwide business chamber in Taiwan and the principal organisation promoting European business interests in Taiwan. The chamber represents over 850 members from over 400 companies and organisations. Through a network of 30 industry and support committees, the ECCT has been successful in addressing specific concerns and providing concrete recommendations to all levels of government to facilitate improving the business environment. The ECCT's annual position papers comprise issues identified by its committees as hindering the further development of their respective industries and provide recommendations to the government of Taiwan aimed at improving the business environment. They also serve to keep the European Commission and parliament as well as the governments of individual European Union member states informed about Taiwan's business environment.

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