2017 taiwan business climate survey full report

2017 TaiwanBusiness Climate Survey

Full Results

Copyright © 2017 Independent Marketing & Research Limited. All Rights Reserved.

For the last seven consecutive years, we have conducted a survey of business leaders in Taiwan.

We intentionally measure many of the same issues year after year; to track changes over time. However, each year we also delete -issues when they become no longer relevant - and add new ones.

This year’s report has several new areas which we explored and has many more opinions directly quoted.

We would like to sincerely thank all those who participated in the study for their time, insights and views.

We hope you find the following report of interest and help.

Please feel free to contact us if you would like any further information or elaboration.

Sincerely,

Gordon StewartIndependent Marketing & Research Limited.

Section 1Executive Summary

Section 2 Detailed Findings

Section 3About the sample

Financial Indicators & Trends

Business Focus Who, When and How

Profitability HQ & Management locations

Industry Classifications

Forecasts Taiwan as a Regional HQ? Type of Legal entities

Employment Current Profitability Time established in Taiwan

Issues with impact Short-term Investment Number of FTEE

Most regressed issue Five-year Outlook Statistical testing

Mergers & Acquisitions Employment & Talent Enquiry/Contact

Support for Trade Deals Mergers & Acquisitions

Quality of Talent Impacts, Issues & Progress

Quality of Living Taiwan Government

Municipal Government

U.S. Government

Trade Agreements

Quality of living

Table of Contents

4

Section 1:Executive Summary

Key Financial Indicators & Trends

In order to track changes and detect trends, for the past 7 years we have asked identical questions relating to Taiwan enterprises’ current and forecast financial performance.

This year’s results are similar to last year’s levels – with no statistically significant changes in the four key indicators of profitability, near-term growth, investment and longer-term growth.

However, the latest five-year trends show a general decline, with only current profitability being maintained.

74%72%

81%

54%

81%

66%

59%

43%

70%

65%69%

52%56%

67%

61%

50%

60%

67%

54%

43%47%

56%

45%49%

Profitable Current Year Forecast for Revenue & ProfitGrowth

Increased Investment Forecast Optimistic about 5-Year BusinessOutlook

Key Financial Indicators

2010 2011 2012 2013 2014 2015 2016 2017

A statistically

significant change

in 2016 vs. 2015

66% 65%

69%67% 67%

2012 2013 2014 2015 2016

CURRENT PROFITABILITY69%

63%61%

54%56%

2013 2014 2015 2016 2017

FORECAST FOR REVENUE & PROFIT GROWTH

52%

48%50%

43%45%

2013 2014 2015 2016 2017

FORECAST INVESTMENT

56% 54%

60%

47%49%

2013 2014 2015 2016 2017

5 YEAR BUSINESS OUTLOOK

Key Indicators: Latest 5-year trend

Key Takeaways: Profitability

Current profitability remains in the “Relatively” to “Very Profitable” zone for more than two-thirds of our companies. This has been the case for seven consecutive years.

Key Takeaways: Forecast

Forecasts for 2017 Revenue & Profitability, Investment, and Business Outlook growth, have stabilized in the past two years. However, the 5-year trend line is still pointing in the wrong direction.

Key Takeaways: Employment

47% of all companies surveyed increased their employment numbers either “slightly” or “significantly”, during 2016. Whilst less than 2015’s increase, it’s still an encouraging reflection of our respondents’ businesses.And, they plan to hire still more in 2017.

Key Takeaways: Issues with Impact

The top issues adversely impacting our business leaders are:

1. Governmental bureaucracy

2. China-Taiwan government relations

3. Lack of clarity in labor laws

4. Inconsistent regulatory interpretation

5. Political turmoil in Taiwan.

Top 10 Impacts on Business

IssueImpact Ranking

SeverityProgressRegress

Recommendation

Governmental Bureaucracy 1

Make the Foreign Investment Approval (FIA) process simpler, clearer and more predictable; make application process for special licenses simpler and clearer; reorganize environmental impact assessment process.

China-Taiwan Government Relations 2

Most regress

Find areas in which Taipei and Beijing can cooperate successfully, e.g., prosecution of violent crimes, prosecution of drug trafficking and money laundering, disaster relief, etc.

Lack of clarity in labor laws 3

Revise labor regulations so rules designed for factories are not forced inappropriately onto other sectors of the economy.

Inconsistent regulatory interpretation 4

Instruct local authorities to document and share their decisions on matters left to their regulatory discretion.

Political turmoil in Taiwan 5

Encourage political groups to express their views through notice and comment on new laws and regulations and at public hearings; discourage physical violence in the Legislative Yuan.

Top 10 Impacts on Business (continued)

IssueImpact Ranking

SeverityProgressRegress

Recommendation

Inconsistent application of the Rule of Law

6

Make FIA process simpler, clearer and more predictable; assure that local authorities do not investigate or punish minor infractions only against foreign-owned companies.

inadequate/outdated laws 7

Most severe impact

Instruct ministries to review regulations routinely after a specified sunset period has passed.

Ability to recruit appropriate personnel 8

Further liberalize the availability of work permits for foreign white collar professionals.

Differences between local and internationally accepted standards

9

Instruct ministries to research regulatory regimes of other major jurisdictions before drafting significant new regulations.

Insufficient notice before changes to regulations or laws are introduced

10 Enforce the Executive Yuan's new

‘notice and comment’ procedures.

Key Takeaways: The Issue that has regressed the most

This year’s survey has seen a drastic reversal of the progress in China-Taiwan government relations.Last year, this rated the third best issue for progress (rated 38 out of 40 in a lack of progress).This year, it rates first out of 45 issues for lack of progress. A concerning trend.

Key Takeaways:Mergers & Acquisitions (M&A)

On average, 1 in 8 of our surveyed companies is involved in M&A each year. The reasons for seeking M&A and for failing to complete the deals are also consistent.

Additionally, 1 in 5 companies every year, “consider” M&A.

Key Takeaways: Support for Trade Deals

There are strong positive attitudes towards and support for: TIFA (the high-level talks between the USA and Taiwan governments); the China-Taiwan Cross-Strait Service Trade Agreement (CSSTA) and its ratification; and the establishment of a USA-Taiwan Bilateral Investment Agreement (BIA).

Key Takeaways:Quality of Talent

.

As in past years, the survey-takers praised the caliber of the Taiwan workforce as being hard-working, trustworthy and well-educated, but found deficiencies in their degree of creativity, initiative, and innovativeness.

Key Takeaways:Quality of Living

Business leaders consider Taiwan to be a safe, nice and easy place to live, with a good healthcare system. The main negative occurred around the safety of pedestrian (Zebra) crossings, and as in previous years, the lack of an English-friendly environment and poor air quality.

19

Section 2:Detailed Findings

Business Focus

The business leaders surveyed in 2017 are clearly focused on Taiwan; as the primary goal of most entities is to supply the Taiwan market with goods or services.

As in prior studies, this makes their comments and observations especially pertinent to the Taiwan government.

Taiwan64%

Greater China2%

Export to the U.S.A.3%

Markets other than Greater China or USA

1%

Multiple markets including Taiwan and Greater China

25%

Other markets or combinations

5%

Business’ primary goal in Taiwan to provide/source goods or services for:

Unfortunately, or realistically…

Taiwan is generally viewed as “Not a high priority” at the global head office level – with less than half of our member companies saying it is in their top ten priority markets. Of those who do rank Taiwan in their top ten, the majority are Taiwan-headquartered companies.

This year we have seen a statistically significant change in the composition of respondents; with fewer saying it is not a high priority. However, this is offset by a significant increase in those saying they “Don’t know/ Can’t say”.

10%

3%

54%

11%10%

7%5%

10%

3%

46%

15%

7%

10% 10%

10%

4%

45%

13%10% 9% 8%

10%

5%

48%

10%7%

10% 10%

11%

1%

48%

12%8%

10% 10%

6% 5%

51%

10%

6%

14%

9%

14%

2%

38%

15%

3%

13%14%

Don't know/can'tsay

Looking to disinvest Not a high priority In the top 10 In the top 5 In the top 3 #1 Priority

How does Taiwan fit into your global entity’s investment plans?

2010 2011 2012 2013 2014 2015 2016

Ownership & Management of Taiwan Entities

Most of our respondent companies have their corporate headquarters in the U.S. (50%), with Taiwan being the second most frequent location at 24%.

For non-Taiwanese companies, the direct supervisor of the Taiwan entity is more likely to be located in: Mainland China (20%), Hong Kong (20%), Singapore (13%), and then the USA (10%), indicating that most managers report into a Regional office rather than directly to the HQ.

In which country is your …Located?

Corporate HQ Direct Supervisor

USA 49.7% 10.1%

Taiwan 24.0% 31.4%

Country in Europe 12.9% 1.8%

Hong Kong 4.1% 19.5%

UK 2.4% 1.2%

Australia 1.7% -

Canada 1.7% -

Japan 1.7% 1.2%

Singapore 1.2% 13.0%

Other 0.6% -

South Korea - 2.4%

China (Excluding HK) - 19.5%

Would Taiwan be a good place for a regional HQ?

When asked to rate Taiwan as a good (or potentially good) place for a regional headquarters, on a scale of

0-100 the average score was only 49.

However, there were very strong and divergent views on this issue, with 10% scoring it a zero, to more than 8% scoring it 90 or greater.

10.0%

2.5% 2.5%

1.9%

5.0%

3.1%

3.8%

7.5%

3.8%

6.9%

6.3%

6.9%

3.1%

3.8%

3.1%

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Freq

uen

cy

Score

Do you believe Taiwan is, or could be, a good place to have a regional headquarters? (Score from 0 to 100)

2016: Another Profitable Year for Business

The majority (67%), of our business leaders, experienced either a “relatively” or “very profitable” year in 2016. A very similar result to prior years. The drop in the proportion who answered “Very Profitable” compared to last year into the ”Relatively profitable” group, is not statistically significant.

Directionally, it seems that most are growing their profitability over 2015.

0%3%

24%

53%

21%

1%3%

24%

58%

14%

1%3%

31%

56%

10%

0% 1%

34%

54%

11%

0%2%

28%

56%

14%

0%3%

29%

52%

15%

1%3%

29%

58%

9%

Very Large Loss Relatively Large Loss Break-even or smallProfit/Loss

Relatively Profitable Very Profitable

How would you characterize your Taiwan business' financial performance in 2016?

2010 2011 2012 2013 2014 2015 2016

5%

21%

30%

35%

9%

Substantial decline

Modest decline

No change in profitability

Modest growth

Substantial growth

0% 5% 10% 15% 20% 25% 30% 35% 40%

How would you characterize your Taiwan business’ profitability this year (2016) versus 2015?

2017: Business similar to 2016

In relation to their 2016 result, the majority of our business leaders are forecasting growth in their revenues and profits, albeit at a more modest level.

0%

6%8%

54%

17%

1%

10%

23%

46%

11%

1%

6%

19%

53%

13%

1%

6%

16%

53%

11%

1%

9%

18%

50%

11%

2%

11%

22%

39%

15%

2%

8%

20%

47%

9%

Substantial decline in bothRevenues & Profits

Modest decline in bothRevenues & Profits

Remain the same Modest growth in bothRevenues & Profits

Substantial growth in bothRevenues & Profits

What is your Taiwan business’ Revenue & Profits forecast for 2017 compared to 2016? (Top responses only)

2011 2012 2013 2014 2015 2016 2017

Short-term investment : Stable

Forecasted levels of investment are likely to remain unchanged from 2016.

1%

3%

20%

36%38%

16%

2% 2%

13%

41%

33%

10%

1% 2%

6%

39%

42%

11%

2%1%

4%

44%

41%

7%

1%2%

5%

42%40%

10%

2%4%

7%

44%

37%

7%

2% 2%5%

46%

40%

5%

Don't know/can't say Substantial decrease Slight decrease No Change Slight increase Substantial increase

What is likely to happen to your entity’s level of investment in Taiwan over the next 12 months?

2011 2012 2013 2014 2015 2016 2017

Looking forward five years…

After a fairly consistent and optimistic outlook over recent years, last year saw a significant (statistically) decline in the level of positivity. This year’s 5-year prediction is very similar to last, with just under 50% of our members saying they are either “slightly” or “optimistic” about the next 5 years of business in Taiwan. This sluggish result should be a major cause for concern for the government.

How would you describe your five-year business outlook for Taiwan?

3%

10%

7%

52%

29%

1%

7%

22%

43%

28%

3%

16%

26%

37%

19%

4%

14%

29%

37%

17%

2%

14%

24%

42%

18%

5%

19%

29%

34%

13%

3%

16%

32%

38%

11%

Pessimistic Slightly Pessimistic Neutral Slightly Optimistic Optimistic

How would you describe your five-year business outlook for Taiwan?

2011 2012 2013 2014 2015 2016 2017

Comments on Outlook

For the first time, we asked our respondents if they would like to comment on their forecasts; just under half chose to. Of these, those expressing optimistic sentiments (42%), narrowly outstripped those with negative (40%). Neutral comments were made by 18%.

Some examples of most frequently used words and representative quotes, follow.

Example Comments on 5-year Outlook

Positive Neutral Negative

“The consumer sector in Taiwan is still on comparable basis very interesting. A consumer that is interested in new products and ideas, and also expects companies to innovate. In certain sectors the relative spending in relation to their disposable income is still on international very low level and I expect those sectors to grow relatively their share whilst at the same time no expectation on overall disposable income to be increased significantly. In other words - a redistribution of the wallet.”

“New areas of business we plan to enter.”

”It was hoped the new administration would bring about greater leadership to develop talent and position Taiwan on a path the greater international presence and develop economic opportunities. To date we have not seen this leadership and as such it would be difficult to offer much more than a neutral outlook.”

“ The business outlook depends on government policy direction and how fast and complete new policies are implemented. At this point it is still too early to tell.”

”1) Uncertainty in infrastructure availability at low costs. 2) Talent loss to mainland China 3) IP and Trade secret protection gap.”

“Uncertainty surrounding the political landscape in Taiwan, both domestically and internationally. The Tsai government drastically needs to improve their game and start implementing sensible and beneficial (to both the broad economy and the Taiwanese people), policies.”

Full Time Equivalent Employees(FTEE)

Full-Time Equivalent Employees (FTEE) are defined by counting part-time employees as a half an employee and adding them to the number of full-time employees.

As in past years, our respondent businesses show continuing growth in employee numbers.

During 2016…

• Almost half (48%) of the companies increased their FTEE numbers either “significantly” or “slightly” during 2016

• 38% maintained their numbers of employees.

• 14% decreased their numbers either slightly or significantly, compared to 17% in 2015

1%

16%

39%

36%

7%

1%

12%

32%

48%

7%

2%

15%

32%

43%

8%

1%

13%

38%

43%

5%

Decreased significantly Decreased slightly No change Increased slightly Increased significantly

Actual Changes in FTEE

2013 Actual 2014 Actual 2015 Actual 2016 Actual

When decreases are taken away from increases in FTEE, and then numerically weighted to take into account the degrees of change, we see that in 2016 there was a net gain in FTEE numbers of 36%. This compares to gains of 38%, 47% and 33% in 2015, 2014 and 2013, respectively.

During 2016…

2013

2014

20152016

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Actual Net Increases in FTEE (weighted)

Hiring forecast to increase in 2017

• 41% of these business establishments plan to increase their headcount during 2017

• 49%, will maintain their 2016 levels

• Only 8% anticipate reducing headcount.

1%

16%

39%

36%

7%

1% 0%

8%

49%

39%

2%1% 2%

7%

42%

45%

4%1%

2%

9%

46%

37%

4%3%

1%

7%

49%

38%

3%

Don't know/Can't say Decrease significantly Decrease slightly No change Increase slightly Increase significantly

Forecast Changes in FTEE

2013 Actual 2014 Forecast 2015 Forecast 2016 Forecast 2017 Forecast

On a numerically weighted basis, 34% of our business leaders are forecasting an increase in employment numbers. This compares with last year’s forecast of 31%.

Forecast growth in 2017

2014

2015

2016

2017

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Businesses forecasting a net increase in FTEE in 2017 (weighted)

Most growth in Full-Time Equivalent Employees forecast for 2017 is reported as coming from SME companies with between 51 and 100 employees. Entities with 6 to 50 employees are also forecasting net growth for 2017.

Large, and even Micro (less than 5 employees), companies are also forecasting growth in employment.

Forecast FTEE

0 5 10 15

5 or less6-20

21-5051-100

101-150151-200201-250251-300301-350351-400401-450451-500501-550551-600601-650651-700701-750751-800801-850851-900901-950

951-1,0001,001-1,5001,501-2,0002,001-3,000

3001-4000More than 4,000

Net forecast increase in FTE for 2017 by number of employees

Industries most likely to be increasing headcount in 2017 (Top 9 Ranked)

Medical Devices

Pharmaceuticals

Management Consulting Services

Health Care Services

Human Resource Consulting

Insurance

Chemicals

Computer Software Programming Services

Engineering and Technical Services

Industries likely to see a reduction in FTEE during 2017

Semiconductor and Other Electronic Component Manufacturing

Retail Trade

Defense

Human Resources

A lack of quality human resources is one of the major risk factors seen as confronting businesses in the future.

We asked our corporate leaders to give us their impressions of the quality of available human capital in Taiwan.

Taiwanese Human Talent are seen as…

Hard-working, very trustworthy, extremely well-educated, easy to develop or train, very loyal, highly productive, generally showing a high degree of emotional intelligence quotient (EQ), and generally well-rounded. A very positive profile of the workforce.

Understandably, no major changes were seen in this year’s survey compared to prior years.

However…

They are also perceived as not displaying a great deal of creativity, not of a ‘World-class’ standard, not being innovative, and not showing a great deal of initiative.

These have been enduring perceptions over the seven years of these studies.

-50 0 50 100 150 200

Shows a great deal of creativity

Of 'world class' standard

Innovative

Show a great deal of initiative

Good English language skills (if required)

Easy to recruit

Easy to retain

Well-rounded

Show a high degree of Emotional Intelligence (EQ)

Highly productive

Very loyal

Easy to develop/train

Extremely well-educated

Very trustworthy

Hard-working

Net Perceptions of Human Resources in Taiwan - 2017

Human Capital - Overall perceptions

Whilst the preceding chart shows the net differences in scores of positive and negatives perceptions, it should be remembered that there are mixed views on the same criterion. The next chart shows these in full.

-50 0 50 100 150 200

Good English language skills (if required for role and/or promotion)

Of 'world class' standard

Show a great deal of initiative

Show a great deal of creativity

Easy to recruit

Innovative

Show a high degree of Emotional Intelligence (EQ)

Well-rounded

Easy to retain

Easy to develop/train

Highly productive

Very trustworthy

Extremely well-educated

Very loyal

Hard-working

Perceptions of Human Capital in Taiwan

Strongly Agree

Agree

Disagree

Strongly Disagree

Some additional comments from our business leaders…

“English skills lagging behind in Asia region.”

“Too many university students with high ambitions leading to lack of skilled workers. Taiwan focus is obviously making university degree easily

achievable, but at the cost of quality. Not every student is well advised to study and some would be great contributors with a more work focused

education.”

“The Taiwanese culture impedes individual thought and creativity. The hierarchical approach to relationships suppresses ideas and non-linear

approaches to the work. Although the Taiwanese are well educated, there is often a lack of ‘street smarts’. There is a tendency for ‘group think’ and

consensus rather than challenging the norm in a positive and productive manner.”

Merger & Acquisition (M&A) Activity

As economic indicators go, merger and acquisition activity has long been a sign of a maturing equity market and as a general indicator of economic activity. From our survey over the last 7 years, Taiwan appears to have a relatively low, but consistent level of M&A activity.

Merger & Acquisition (M&A) Activity

Over the past seven years, around 12% of our companies engaged in merger and acquisition (M&A) activity of a Taiwanese entity, each year.

This year, as in previous years, some tried and failed (3%), and some considered M&A but didn’t pursue it (19%). However, for the vast majority of business leaders (69%), M&A, understandably, simply isn’t on their radar, in any given year.

61%

23%

4%

7%5%

71%

17%

4% 4% 4%

71%

18%

2%5% 5%

72%

17%

3% 4% 3%

68%

21%

3%5%

3%

69%

20%

5%3% 4%

69%

19%

3%7%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Did not pursue or consider Considered, but didn'tpursue

Pursued, but not successful Pursued, and still in theprocess

Pursued and completeddeal

Did your entity pursue, or consider, a merger with or acquisition of a Taiwanese entity in the past 12 months?

2010 2011 2012 2013 2014 2015 2016

When it happens, there are sound business reasons for M&A

While only a few companies did attempt the M&A route in the past 12 months, their reasons for doing so, as in previous years, show sound business logic such as: To gain synergies (by reducing costs and improving profits), enlarge customer base, increase local market access; and to acquire capacity or technology . These, as they have been in past years, are the major drivers behind M&A.

0 2 4 6 8 10 12

To gain taxation advantages

To gain access to Mainland market

To improve IPO possibility

A defensive move to counter competitor(s)

To acquire key supplier(s)

To acquire key local brand(s)

To acquire business license in a restricted industry

To acquire management team

To acquire technology

To eliminate competition

To gain greater local market access

To enlarge customer base

To acquire capacity

Ability to gain synergies (reduce costs - improve profits)

Top Objectives of M&A during 2016

Primary Secondary Tertiary

Major challenges to M&A in 2016

Negotiating the valuation gap was the greatest challenge in 2016. Followed by finding an appropriate target, post-deal restructuring, and conducting due diligence.

We note that a lack of transparency, and inconsistency of interpretation, in government regulations, list prominently in the challenges to be overcome in mergers and acquisitions.

0 2 4 6 8 10 12 14

Negotiating the letter of intent

Obtaining permission for target to be sold

Inconsistent regulatory interpretations

Obtaining government approvals

Transparency of regulations

Language issues

Cultural issues

Financial issues

Conducting due diligence

Post-deal restructuring

Finding an appropriate target

Negotiation of valuation gap

Major Challenges of M&A During 2016

Major Challenge Second Third

One-in-five interested in M&A

On average over the past 4 years, 19% of businesses consistently claim they would “definitely” or “possibly” consider M&A in the next 12 months.

5%

13%

22%

24%

22%

14%

4%

15%

21%

27%

20%

13%

5%

14%

25%

23%23%

11%

5%

14%

28%

26%

17%

9%

7%

16%

22%

27%

17%

11%

5%

17%18%

28%

19%

13%

7%

22%

20%20%21%

11%

Definitely consider M&Aactivity in next 12

months

Possibly consider M&Aactivity in next 12

months

Unlikely to considerM&A in next 12 months

Definitely not considerM&A activity in next 12

months

Don't knowPrefer not to answer

Likelihood to consider M&A in the next 12 months

2017

2016

2015

2014

2013

2012

2011

What impacts their business?

Governmental Bureaucracy, China-Taiwan relations, Labor laws, inconsistent regulatory interpretation and Political turmoil, have topped the list of greatest negative impacts on our members’ businesses.

Which of the following impacts your operation in Taiwan? 2017 Ranking

Issue 2017 2016 2015 2014 2013 2012 2011

Governmental Bureaucracy 1 4 3 1 3 4 2

China-Taiwan government relations 2 12 11 16 13 7 8

Lack of clarity in labor laws 3 New in 2017

Inconsistent regulatory interpretation 4 2 1 2 2 2 3

Political turmoil in Taiwan 5 11 10 13 New in 2014

Inconsistent application of the Rule of Law 6 6 5 4 New in 2014

Inadequate/Out-dated laws 7 1 4 5 4 6 5

Ability to recruit appropriate new personnel 8 7 6 9 5 3 4

Differences between local and internationally accepted standards

9 8 7 7 New in 2014

Insufficient notice before changes to regulations or laws are introduced

10 5 8 6 6 New in 2013

Which of the following impacts your operation in Taiwan? 2017 Ranking - Continued

Issue 2017 2016 2015 2014 2013 2012 2011

Changes in local demand 11 3 2 3 1 1 1

Government reform/restructuring 12 17 17 17 10 New in 2013

Lack of transparency 13 10 9 8 9 10 10

Currency Exchange rate fluctuations 14 9 16 12 7 5 7

Domestic protectionism 16 16 15 11 12 12 12

Changes in employment expenses 17 13 13 10 8 8 9

Personal Taxation levels 18 18 18 18 18 22 6*

Intellectual Property Rights infringements 19 19 23 21 14 15 15

Government procurement procedures 20 25 28 26 27 26 25

Financial Industry reform 21 24 29 31 20 23 23


Issue 2017 2016 2015 2014 2013 2012 2011

Ability of PRC personnel to travel to Taiwan 22 28 34 33 New in 2014

Import & Export procedures 23 New in 2017 Replaces "Customs & Trade regulations"

Changes in overseas demand 24 21 22 20 16 21 18

Import Duties 25 New in 2017 Replaces "Customs & Trade regulations"

Prohibitions or restrictions on foreign investment into Taiwan

26 New in 2017

Changes in Raw Material costs 27 31 31 32 24 25 26

Inadequate Infrastructure (Power, Water, Telecommunications, Transport, etc.)

28 23 30 29 26 27 21

Direct flights to/from Mainland 29 22 21 22 17 14 28

The Economic Cooperation Framework Agreement (ECFA)

30 26 24 30 28 18 14

Restrictions on imports from China 31 New in 2017


Issue 2017 2016 2015 2014 2013 2012 2011

Corruption 32 29 19 24 19 17 22

Corporate Taxation levels 33 15 14 15 11 9 6*

Changes in Energy costs 34 27 25 19 New in 2014

EU - Taiwan government relations 35 34 33 35 29 28 27

Changes in Tariffs 36 30 26 27 21 20 24

Difficulties or uncertainties concerning foreign investment approvals (FIA)

37 New in 2017

Ability of PRC personnel to work in Taiwan 38 35 36 36 New in 2014

Ability to raise capital, locally 39 39 38 38 New in 2014

Illegal imports 40 36 35 34 30 29 29

Changes in Financing costs 41 33 32 28 23 24New in 2012

0 10 20 30 40 50 60 70

Insufficient notice before changes to regulations or laws areintroduced

Differences between local and Internationally accepted standards

Ability to recruit appropriate new personnel

Inadequate/outdated laws

Inconsistent application of the rule of law (i.e., well-established andclearly written rules, regulations, and legal principles)

Political turmoil in Taiwan

Inconsistent regulatory interpretation

Lack of clarity in labor laws

China - Taiwan government relations

Governmental bureaucracy

Top 10 Issues that impact their business and how much

Some Impact Significant impact Extreme impact

0 10 20 30 40 50 60 70

Government procurement procedures

Intellectual property rights infringements

Personal taxation levels

Changes in employment expenses

Domestic protectionism

Protection of local industries

Currency exchange rate fluctuations

Lack of transparency

Governmental reform/restructuring

Changes in local demand

Issues 11-20 that impact their business and how much


0 10 20 30 40 50 60 70

The Economic Cooperation Framework Agreement (ECFA)

Inadequate infrastructure (Power, Water, Telecommunications,Transport, etc.)

Direct flights to/from China

Changes in raw material costs

Import Duties

Prohibitions or restrictions on foreign investment into Taiwan

Changes in overseas demand

Import & Export procedures

Ability of PRC personnel to travel to Taiwan

Financial industry reform



0 10 20 30 40 50 60 70

Illegal imports

Ability of PRC personnel to work in Taiwan

Ability to raise capital, locally

Difficulties or uncertainties concerning foreign investment approvals(FIA)

Changes in tariffs

EU - Taiwan government relations

Changes in energy costs

Corporate taxation levels

Corruption

Restrictions on imports from China



0 10 20 30 40 50 60 70

Access to private equity financing

Slow processing of PRC personnel work permits

Changes in transport costs

Exchange controls

Ability to secure credit, locally

Difficulty of finding appropriately zoned land at reasonable prices

Changes in financing costs

The remaining issues that impact their business


“The introduction of the New Labor Standard Act. Insufficient notice is received before changes to the

regulations”

“MNCs perception of the business environment and macroeconomic outlook”

“Budget and Decision making driven by Asia HQ in PRC”

What impacts their business?Other Direct Quotations

“Extremely counter-productive labor regulations, including 'grade-school-type' of regulation of

overtime”

“High personal income tax, compared to other countries”


“Recent labor laws concerning employee working times and overtime payment regulations are regressive and should be repealed. They might be suitable for hourly paid industries, but not for high-end service, management and consulting industries where work completion rather than hours of physical presence is important. It is a system that promotes the absence of personal responsibility and creates friction between employees and employers -- it creates a punch-card mentality. The regulations are regressive and not at all suitable for an economy that is trying to move away basic hourly paid work to high-end service sector economy.”


When we view the issues that have made progress over the period 2008-2016 time horizon, some good strides were made – especially in connection with China. Unfortunately, there has recently been a major reversal in the progress of government relations between China and Taiwan.

In the following lists, those items in green have shown progress and all other issues have either regressed or stagnated.

Progress and the lack of it on Key Issues

Areas which regressed, or had little progress, in the past 3 years. Worst to Best ranking

Issue2014-2016

2013-2015

2012-2014

2011-2013

2010-2012

2009-2011

2008-2010

China-Taiwan Government Relations 1 38 37 38 28 28 27

Clarity in labor laws 2

Political turmoil in Taiwan 3 1 1 1

Reducing Personal Taxation levels (*combined with Corporate in 2010)

4 2 2 15 11 9 26*

Reducing Governmental Bureaucracy 5 8 5 6 4 11 11

Changes in Employment expenses 6 10 8 4 5 1 2

Changes in Local Demand 7 3 16 3 3 20 20

Continuing The Economic Cooperation Framework Agreement (ECFA)

8 24 30 27 27 27 28

Governmental reform/restructuring 9 4 15 11 15 19 18

Inconsistent application of the Rule of Law (i.e., well-established and clearly written rules, regulations, and legal

principles)10 6 7 9


Issue2014-2016

2013-2015

2012-2014

2011-2013

2010-2012

2009-2011

2008-2010

Reducing domestic protectionism 11 11 3 10 6 3 7

Changes in Overseas Demand 12 13 26 19 12 16 24

Finding appropriately zoned land at reasonable prices 13

Reducing protection of local industries 14

Simplifying government procurement procedures 15 14 6 16 9 7 9

Reducing inadequate/Out-dated laws 16 12 11 12 14 9 5

Consistency in regulatory interpretations 17 7 10 7 2 2 1

Changes in Energy costs 18 27 4 2

Reducing Corporate Taxation levels 19 25 14 32 21 26 26*

Financial Industry Reform 20 28 28 21 13 13 13

Issue 2014-2016

2013-2015

2012-2014

2011-2013

2010-2012

2009-2011

2008-2010

Currency Exchange rate fluctuations 21 29 32 24 17 14 14

Changes in Raw Material costs 22 26 9 14 7 4 4

Lessening restrictions on imports from China 23

Changes in Transport costs 24 21 20 13 8 6 12

Changes in Tariffs 25 18 18 31 19 18 16

Changes in Financing costs 26 15 21 20 10 8 8

Ability of PRC personnel to work in Taiwan 27 35 34 35

Processing of PRC personnel work permits 28 34

Ability to Recruit Appropriate New Personnel 29 5 13 5 1 5 3

Lessening prohibitions or restrictions on foreign investment into Taiwan

30


Issue 2014-2016

2013-2015

2012-2014

2011-2013

2010-2012

2009-2011

2008-2010

Reducing Differences between local and Internationally accepted standards

31 23 27 28

Access to Private Equity financing 32 22 17 25

Improving Transparency 33 17 24 18 18 15 15

Improving Customs and Trade regulations 34 20 25 26 22 17 17

Ability to raise capital, locally 35 30 19 22

Ability to secure credit, locally 36 19 29 23

Loosening Exchange Controls 37

Infrastructure (Power, Water, Telecommunications, Transport, etc.)

38 32 36 29 23 25 22

EU - Taiwan government relations 39 33 31 30 24 23 25

Sufficiency of notice before changes to regulations or laws are introduced

40 9 12 8


Issue 2014-2016

2013-2015

2012-2014

2011-2013

2010-2012

2009-2011

2008-2010

Reducing Corruption 41 31 22 17 20 24 19

Ability of PRC personnel to travel to Taiwan 42 39 38 37

Reducing Illegal imports 43 16 23 27 16 12 10

Reducing Intellectual Property rights infringements 44 36 33 33 25 22 23

Increasing Direct flights to/from the Mainland (Consistently, for the past 7 years, the most progressive issue)

45 40 39 39 29 29 29

USA - Taiwan government relationsNot

asked37 35 34 26 21 21

Areas which regressed, or had little progress, in the past 3 years.

Worst to Best ranking

The major risks confronting business

A downturn or slowdown in Taiwan’s domestic consumption is of greatest concern for our business leaders. In a similar vein, the potential for a slowdown in the global economy is also a fear.

Concerns about government interference and the future of China-Taiwan relations, lead the other major worries confronting business, in 2017.

0% 10% 20% 30% 40% 50% 60% 70%

Increased imports

Other

Taiwan unemployment rising

Cyber security risks to your enterprise

Enactment of TPP without Taiwan as a member

Decreased exports

Instability in the South China Sea

Taiwan dollar (TWD) appreciation

Energy shortage in Taiwan

Economic slowdown in Europe

Taiwan Inflation rising

Taiwan dollar (TWD) depreciation

Economic slowdown in China

Increased domestic political unrest

Economic slowdown in the USA

Lack of human resources

Change or uncertainty in Taiwan's policy towards China

Change or uncertainty in China's policy towards Taiwan

Increased governmental interference

Global economic slowdown

Economic slowdown in Taiwan's domestic consumption

The major risks facing their entity in coming years

Top 10 things Taiwan Government Could do to Help

Issue 2017 2016 2015 2014 2013 2012 2011

Consistent application of the Rule of Law 1 8 7 4

Reduce Political Turmoil in Taiwan 2 2 1 1

Provide sufficient notice before changes to regulations or laws are introduced.

3 6 8 8

Remove differences between local & internationally accepted standards

4 7 4 5

Simplify Government Bureaucracy 5 1 2 2 1 1 1

Resolve Inadequate/Out-dated laws 6 3 3 7

Reduce Personal Taxation 7 4 5 6 3 3 2

Devise plan to stimulate local demand 8 5 6 3

Clarify labor laws 9 New in 2017

Improve Government procurement procedures 10 19 22

More things Taiwan Government Could do to Help (Ranked)

Issue 2017 2016 2015 2014 2013 2012 2011

Improve Research & Development incentives 11 9 15

Educate civil servants on international regulatory best-practices

12 11 27

Increase Direct Foreign Investment incentives 13 12 14

Tighten enforcement of Intellectual Property rights 14 20 23

Provide adequate transition or grace period when implementing new laws and regulations

15 25

Ratify the China-Taiwan Service Trade Pact (CSSTA) 16 26

Negotiate and sign more bilateral trade deals with other (non-US) countries

17 14 18

Reduce domestic protectionism 18 10 9 11

Reduce Employment expenses 19 28 11 24

Liberalize the Labour market 20 16 13 23 5 5 10

Even more things Taiwan Government Could do to Help

Issue 2017 2016 2015 2014 2013 2012 2011

Reduce Corruption 21 24 16

Remove or loosen prohibitions or restrictions on foreign investment into Taiwan

22

Improve Inadequate Infrastructure (Power, Water, Telecommunications, Transport, etc.)

23 17 25

Devise plan to stimulate Overseas Demand (e.g. exports, tourism)

24 15 30

Implement Financial Industry Reform 25 13 26

Broaden ECFA 26 22 10 9 10 7 7

Introduce stronger corporate governance 27

Not in top 30 in prior yearsMaintain reasonable and stable energy costs 28

Allow PRC personnel to travel to Taiwan 29

Loosen restrictions on imports from China 30

How else could Taiwan government help?Additional suggestions

“…improving government procedures, selling off all government owned company shares and eliminating

direct and indirect subsidies to them, open labor imports and eliminate the broker system”.

How is President Tsai’s government performing so far?

For the first time, we asked for feedback on the new Tsai government. We expressly asked about her five priority areas and how clearly this has been communicated to our business community, the progress the government is making, and how relevant these five areas are to them. Given that we launched the survey only 5 months after the government commenced power and we concluded it 7 months into their term - it is still early days.

-37

-22-18

-33 -32

-100

-80

-60

-40

-20

0

20

40

Has President Tsai’s Government…Clearly communicated what this involves?

(Those saying President has, minus those saying the President has not)

Transforming the nation's economic structure Improving the social safety net

Social fairness and justice Regional peace and stability and cross-strait relations

Addressing the diplomatic and global challenges Taiwan faces

-74

-52

-38

-82

-73

-100

-80

-60

-40

-20

0

20

40

Is President Tsai’s Government…Making Good Progress?

(Those saying President has, minus those saying not making progress, or too slow)




33

4

-20

84

-100

-80

-60

-40

-20

0

20

40

How do President Tsai’s five priority areas…Directly impact my business

(Does directly impact my business minus those who say it doesn’t)




“Regional peace and transformation of nation’s

economic structure: the ‘what’ has been

addressed, the ‘how’ is mostly missing”

“[President]Tsai has not had much time to talk

about Taiwan's position because it appears she is

trying to avoid the appearance of saying what Beijing is trying to insist she

says. I think she's doing about as well as she could

be doing for now.”

Other comments

“Five core Industries”

The Tsai government has outlined “five core industries” that they wish to focus on and promote. We asked how relevant to their businesses these were.Overall, the Internet of Things (IoT) and biotechnology were the areas of greatest relevance to the companies responding.

-120

-100

-80

-60

-40

-20

0

20

40

60

80

Ne

t R

elev

ance

The Tsai government outlined "five core industries“How relevant to your business are these?

(Relevant minus irrelevant)

The Internet of Things (IoT) Smart machinery New Energy Biotechnology Defense

Local Government: The six special municipalities

We asked about the interaction and impact the six special municipalities of Kaohsiung, New Taipei, Taichung, Tainan, Taipei & Taoyuan, and specifically, if they directly impacted their businesses. More than a quarter of businesses (27%) claimed that they did.

Yes27%

No52%

Don't know/Can't say21%

In addition to the national government, is your organization directly and significantly impacted by any, or

all, of the 6 special municipalities?

Impact of the 6 special municipalities

When asked which one(s) impacted their businesses, of those who indicated that they were directly and significantly impacted, almost one in three claimed “All six” and unsurprisingly, Taipei municipality received the most mentions.

12%

16%

18%

18%

24%

53%

31%

0% 10% 20% 30% 40% 50% 60%

Tainan

New Taipei

Kaohsiung

Taoyuan

Taichung

Taipei

All six

% OF THOSE WHO SAID THEY WERE DIRECTLY AND SIGNIFICANTLY IMPACTED NB MULTIPLE RESPONSES

The special municipal governments that directly and significantly impact their business

6 negatives associated with the 6 special municipalities

1. Their interpretation of National rules and regulations is NOT clear and consistent

2. Municipal rules exist which are either contradictory to National laws or, exist in areas where no National rules exist

3. They DON’T facilitate and assist my business in their area.

6 negatives associated with the 6 special municipalities

4. Municipal officials appear to be encouraged by their leaders to raise revenue by fining/penalising companies.

5. Municipal officers appear to intentionally avoid consultation with National officials in order to generate fines for their area.

6. They DON’T treat foreign companies fairly and the same as Taiwanese companies.

Only one ‘positive’ statement was mentioned and that is that “They encourage investment in their area.”

-0.70 -0.50 -0.30 -0.10 0.10 0.30 0.50 0.70

Their interpretation of National rules and regulations is clear andconsistent

They facilitate and assist my business in their area

They treat foreign companies fairly and the same as Taiwanesecompanies

Municipal officers appear to intentionally avoid consultation withNational officials in order to generate fines for their area

Municipal officials appear to be encouraged by their leaders to raiserevenue by fining/penalising companies

Municipal rules exist which are either contradictory to National lawsor, exist in areas where no National rules exist

They encourage investment in their area

WEIGHTED AVERAGE AGREEMENT/DISAGREEMENT

Do you agree or disagree with the following statements about the six special municipal governments?

“On municipal level, the interpretation of national laws or regulations requires communication and alignment

between national and municipal offices. Achieving this alignment requires support by Taiwan government

agencies (such as InvestTaiwan), however, we did not encounter an unwillingness on the municipal side. More a

kind of hesitation and avoidance of personal risk of the involved municipal bureaucrats, which requires building "bridges". We could obtain alignment, but it took time, however, we never had the feeling of unwillingness or

looking to place traps to fine our company.”

Direct quotation regarding the 6 special municipalities

“We were surprised to find out that American and other foreign clients were being penalized for not granting national holidays that have not normally been taken by companies for many years now. One client was fined for 5 years of not granting holidays

for "Retrocession Day," "Chiang Kai Shek's Birthday," "Constitution Day," etc. -- holidays that were not

normally given as days off ever since the government itself moved from a 6-day work week to a 5-day work

week.”

Direct quotation regarding the 6 special municipalities

Main things USA Government Could do to Help our Businesses (Ranked)

Issue 2017 2016 2015 2014

Continue to liaise with Taiwan on USA experience regarding regulatory coherence 1 4

Support Taiwan's admission into the TPP 2 1

Assist Taiwan to prepare for accession to TPP 3 2 1

Help establish cooperative exchanges between US and Taiwan regulatory agencies 4 5

Send more senior US Government officials to visit Taiwan 5 7 4 5

Negotiate and sign a Bilateral Investment Agreement with Taiwan 6 3 2 1

Reduce Personal Taxation 7 6 6 4

Reduce Corporate Taxation 8 9 5 3

Ensure that regular meetings are held with Taiwan under the TIFA process 9 8

Repeal or re-evaluate the Foreign Account Tax Compliance Act (FACTA) 10 10 7

Negotiate and sign a bilateral tax agreement with Taiwan 11

Resolve Agricultural disputes with Taiwan 12 11 9

Negotiate and finalize an Extradition Treaty with Taiwan 13 12 8 6

The American Institute in Taiwan (AIT), provides commercial services and agricultural sales for American interests.

For the first time, we decided to find out how many of the surveyed companies had ever used AIT services to assist their business. The majority had not; even those whose corporate HQ is in the USA.

The American Institute in Taiwan

Yes19%

No62%

Don't know/Can't say19%

Has your organisation ever used AIT’s services

Yes24%

No59%

Don't know/Can't

say17%

Only those with a U.S. Corporate HQ

Yes13%

No67%

Don't know/Can't

say20%

Only those Non-U.S. Corporate HQ

“Canada has an excellent trade promotion group in Taiwan. AIT seems too bureaucratic and not aggressive.

There is too much consideration of US-China policies. The few times we have contacted AIT in recent years have not resulted in any support unlike the days when David Dean,

Jim Lily, Charles Cross strongly supported American businesses here. Many of the others seemed more

concerned with not letting Taiwan issues cloud US-China relations. I have high hopes that James Morriarty will

make significant contribution due to his vast experience in Washington, Beijing and Taiwan.”

Direct quotations regarding the AIT

“Frequent change in personnel with inadequate handover requires ongoing education by industry with

regard to advocacy needs.”

Direct quotations regarding the AIT

Trans Pacific Partnership (TPP)

The TPP is a free-trade agreement recently negotiated by 12 nations (USA, Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru). The aims of TPP are to eliminate, or at least substantially reduce, barriers to trade and investment and to create 'gold standards' to deal with economic issues such as intellectual property.



Our survey covered the period October through to December, i.e., prior to and after the U.S. elections. The TPP was still a possibility when some of our respondents completed the survey. It became progressively less likely after early November 2016 and the USA formally withdrew in January 2017. The drop in “Should pursue” scores this year probably reflects the likelihood of a U.S. withdrawal/demise of the whole agreement.


Don’t know, 15% Don’t know, 14%Don’t know, 11%

Don’t know, 23%No, 2%

No, 3% No, 2%

No, 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017

Should Taiwan pursue membership of the TPP?

TPP: Additional comments

“Stop being cowed by the pork industry. Taiwan's superb pork quality can easily compete with US duty

free imports.”

“TPP is a nice to have - it will not drive Taiwan’s growth by itself.”


“Taiwan has already lost most of its competitive advantage; it cannot afford to have its products made more expensive compared to competitors by failing to

accede to TPP.”

“Potentially provides a counter-balance to China's influence, will have a positive impact on trade.”


“Pointless, now.”

“It won't happen. TPP is dead.”

“However, I doubt TPP will happen even for phase 1 countries.”

Yes72%

No5%

Don't know/Can't say

23%

Should the USA government support Taiwan’s accession into the TPP?

“Taiwan is an important trading partner and military ally, and it is important that Taiwan not be left out of TPP, which provides a framework that gives countries in Asia an alternative to economic dependency upon

China.”

“USA should support Taiwan more on everything.”

Additional Comments on U.S. Support for Taiwan’s accession into the TPP

“Not until Taiwan makes substantial legal/regulatory changes.”

“But now too late.”


“Short-term, would prefer if Taiwan got into RCEP as don't believe TPP will happen.”

“Under the one-China policy, USA should defer to Beijing.”


China-Taiwan Cross-Strait Services Trade Agreement (CSSTA)

In June 2013 China and Taiwan signed a services trade agreement (although, this has still to be ratified into law), with the intent to open areas such as financial services, retail and travel, to greater levels of cross-strait investment. We asked our business leaders if they felt that the Taiwanese legislature should ratify this agreement. Most thought that it should.

Yes54%

No8%

Don't know38%

Should the Taiwan Legislature ratify the CSSTA?

“The anti-CSSTA [movement] tells other potential investors that Taiwanese people fear doing business

with China/foreigners.”

“This is probably more important for Taiwan in the short-term than the TPP”

Unprompted comments on the question: Should the Legislature ratify the CSSTA?

“Business exchange between PRC and ROC is already reality, so removing hurdles would open up

opportunities on both sides.”

“Taiwanese businesses need it.”


“This is not in Taiwan's best interest.”

“The Taiwanese people don't want it, it is flawed and gives too much over to China.”


“CSSTA would be economically beneficial to Taiwan, but national security should trump economics. While I personally believe integration with China would be a

net positive for the Taiwanese people, it would be foolish and irresponsible for the government to make such blatant moves in this direction unless the people

support the ultimate outcome.”


The resumption of Trade and Investment Framework Agreement (TIFA) talks in 2013, after a more than five-year break, was a welcome relief. Better still they have been maintained since that time.

We asked what impact these high-level annual talks had on their business and on Taiwan. They are perceived to positively impact the country, more so than their businesses.

TIFA: Business leaders glad to see talks

0%

5%

10%

15%

20%

25%

30%

35%

40%

Don't know/Can't say No Impact Some Impact Significant Impact Extreme Impact

What is the impact of the TIFA process on your business, and on Taiwan?

Effect on my business Effect on Taiwan

The lack of a Bilateral Investment Agreement (BIA) with the USA…

A BIA which would be designed to protect private investment and develop market-oriented policies between the USA and Taiwan. The impact of not having one on their business and on Taiwan was the question we sought to answer this year.

21%

38%

30%

7%

4%

28%

9%

27% 27%

9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Don't know/Can't say No Impact Some Impact Significant Impact Extreme Impact

What impact does the lack of a Bilateral Investment Agreement (BIA) have?

Effect on my Business Effect on Taiwan

*Whilst we use the term “Taiwan” it should be remembered that most of our leaders live in the Taipei area and many of their comments will reflect “living in Taipei”.

And finally…”The Living is Nice, Easy, & Safe”

When asked about the quality of life in Taiwan*, corporate leaders strongly agree that Taiwan is a place where: “Taiwanese people are extremely nice”; “My family feels safe”; and Understandably, there was no significant change in the rankings in this year’s survey.

The Top Benefits of Living in Taiwan (Ranked)

Benefits 2017 2016 2015 2014 2013 2012 2011

My family feels safe in Taiwan 1 3 2 2 2 2 1

Taiwan is an easy country to live in 2 1 3 3 3 4 3

Taiwanese people are extremely nice 3 2 1 1 1 1 2

Taiwan provides quality Health/Medical/Dental services 4 4 4 4 4 3 4

Taiwan provides adequate shopping opportunities 5 7 7 6 6 7 7

Mobile telephone coverage is excellent 6 6 8 8 9 9 8

Alternative transportation options are usable and provide options to driving my car (i.e., buses, bike lanes, taxis, trains,

sidewalks).7 5 5 5 7 6 5

The Top Benefits of Living in Taiwan (Ranked)

Benefits 2017 2016 2015 2014 2013 2012 2011

Internet connectivity is excellent 8 10 11 17 14 8 9

Taiwan delivers reliable electricity 9 8 6 7 5 5 6

Recycling and trash services meet needs 10

Not in top benefits last year

Taiwan's neighborhoods, parks and thoroughfares are clean 11

Taiwan provides quality parks and trails 12 9 12 10 12 12 11

The Postal service is excellent 13 11 9 9 8 10 10

Living in Taiwan…The not so great things.

We asked if people agreed or disagreed with the statement ”Where there is no traffic lights, pedestrian (Zebra) crossings are a safe place to cross the road.”There was the most strongly negative response we have seen in seven years.This public safety issue is something that local governments/policing should address as a priority.

Living in Taiwan…The not so great things.

We asked (for the first time) if Taiwan’s air quality was good. Unfortunately, there was a negative response to this question as well, ranking it the third least desirable aspect of living in Taiwan.

As we have seen over past years:

– Taiwan is not such an English-friendly environment

– Banking and other financial services are seen as far from excellent.

The Least Appreciated Aspects of Living in Taiwan (Ranked worst first)

Concerns 2017 2016 2015 2014 2013 2012 2011

Where there are no traffic lights, pedestrian (Zebra) crossings are a safe place to cross the road

1 New in 2017 – Most negative response in 7 years.

Taiwan provides an 'English-friendly' environment for me and my family

2 1 2 1 1 1New in 2012

Taiwan's air quality is good 3 New in 2017

Banking and other financial services are excellent 4 2 3 3 4 6 4

Taiwan provides quality drinking water. 5 5 4 2 3 3 3

Water runoff from storms is controlled and minimizes flooding 6 4 7 5 2 2 1

The standard of schooling is excellent 7 7 6 8 9 10 8

The Least Appreciated Aspects of Living in Taiwan (Ranked worst first)

Concerns 2017 2016 2015 2014 2013 2012 2011

Taiwan government is approving development that enhances the quality of life in our community

8 8 13 11 10 12 17

Taiwan provides quality youth activities 9 9 8 6 6 4 2

The library services provided to our community are current and meet our needs

10 6 5 4 7 5 4

Taiwan provides safe food 11 3 1 New in 2015

Taiwan provides quality Police services 12 12 9 13 8 9 6

There are plentiful opportunities to enjoy the arts 13 10 11 12 14 12 15

Street surfaces are drivable and safe 14

The sewer system in Taiwan works reliably 15 11 10 7 5 8 7

141

Section 3:About the sample

Who, When, and How.

The survey was addressed, via email, to the 412 voting representatives – usually the CEO – among AmChamTaipei’s Corporate Sustaining and Company membership. The survey invitation was sent out on October 11, 2016, and the last response was accepted on December 21, 2016.The 40-question survey was conducted online with each respondent receiving a unique link. Certain question choices were randomized - to avoid bias.The survey received a total of 173 responses, representing a 42% response rate.

Industry Classifications

Our respondents identified their industry classification based upon the one which best described their principal business in Taiwan.

We have reclassified our sample according to the STANDARD INDUSTRIAL CLASSIFICATION SYSTEM OF THE REPUBLIC OF CHINA (Rev.10, 2016) and used the STATISTICAL YEARBOOK OF THE REPUBLIC OF CHINA 2015, Issued in October 2016, for the number of businesses.

Our sample draws from all of the major industrial classifications in Taiwan but is skewed towards the “Goods-producing” industries.

Sector Total Taiwan Our Sample

Agriculture, forestry, fishing & animal husbandry 0.9% 0.6%

Goods-producing industries 19.5% 35.3%

Services-providing industries 79.6% 64.2%

“Goods-producing” industries include: Mining & quarrying, Manufacturing, Electricity & gas supply, Water supply & remediation activities, and Construction.

Services-providing industries include: Wholesale & retail trade, Accommodation & food service activities, Transportation & storage, Information & communication, Financial & insurance activities, Real estate activities, Professional, scientific & technical activities, Support service activities, Public administration & defence; compulsory social security, Education, Human health & social work activities, Arts, entertainment & recreation, and ‘Others’.

Industry Classifications (Cont’d.)

Industry Classifications (Cont’d.)

Our sample is also more skewed towards ‘Manufacturing’, ‘Professional Scientific/Technical services’, and the ‘Finance and Insurances’, industries.

It is under-weighted in the ‘Wholesale and Retail Trade’ industry. The Wholesale and Retail trade account for some 650,000 of all the businesses registered in Taiwan; representing over 49% of all business numbers and many employ few people and have little turnover.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2017 Sample vs. Total Taiwan

Sample Taiwan

Breakdown of Industry Classifications

Our sample is more heavily skewed towards the Medical Devices, Management Consulting, Chemical and Pharmaceutical industries.

NGO

Securities, Mutual Funds, Asset Management

Semiconductor and Other Electronic Component Manufacturing

Arts, Entertainment, and Recreation

Automotive

Education and Training

Risk Management

Accounting Services

Foods and/or Non-Alcoholic Beverages

Media

Retail Trade

Sourcing and Procurement

Health Care Services

Consumer Packaged Goods

Engineering and Technical Services

Insurance

Travel and Leisure

Banking Services

Finance

Human Resource Consulting

Legal Services

Chemicals

Pharmaceuticals

Management Consulting Services

Medical Devices

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Industries in our 2017 Sample

Accommodation and Food Services

Agriculture, Forestry and Fishing

Alcoholic Beverages

Communications Equipment Manufacturing

Component Manufacturing - General

Construction

Information Technology

Lobbying Services

Management of Companies and Enterprises

Navigational, Measuring, Electro-medical, and Control instruments…

Real Estate and Rental and Leasing

Telecommunication Services

Testing, Inspection, Certification Services

Transportation and Warehousing

Waste Management and Remediation Services

Wholesale Trade

Aerospace

Computer Software Programming Services

Conglomerate

Defense

Energy

Logistics and Distribution

Manufacturing - General

Market Research Services

NGO

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

Industries in our 2017 Sample (continued)

Type of legal entity

Three out of four (74.5%) of businesses in this sample are either a Branch office, a Subsidiary, or a Taiwan-incorporated company.

1.2%

1.2%

1.7%

2.3%

5.2%

5.2%

8.7%

21.4%

21.4%

31.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

NGO

Not for Profit

Representative Office

Other

Partnership

Joint Venture

Independent agent

Taiwan incorporated company

Subsidiary

Branch office

2017 Sample Profile by Legal Entity

Time in Taiwan

In terms of the time that there has been a physical presence in Taiwan, our sample is split roughly into four ‘ages’:

– 28% are relatively new to Taiwan with less than 15 years here

– 24% have been established between 16-25 years

– 21% have been established for 26-35 years

– And those who are well-established (more than 35 years) at 27%.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Length of Physical Business Presence in Taiwan

Number of Full Time Equivalent Employees (FTEE)

Our 2017 sample covers a wide spectrum of employers - from the very small to the very large. However, our sample generally represents larger employers than found in the Taiwan business population. For example:

– 10% of our sample employ 5 or less FTEE. This compares to 79% of all Taiwanese business entities who are micro employers.

– more than 97% of Taiwanese employees are employed by SME’s versus our sample of only 55%.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Number of FTEE

Statistical Testing for Significance

When comparing the results against previous years surveys we performed a Chi-square test for the comparison of two proportions (from the two independent samples), expressed as a percentage. Note that for this Chi-square test, Yates' correction for continuity is applied and that P-values are two-sided (or two-tailed). When the calculated P value is less than 0.05, the conclusion is that the two proportions are significantly different. Throughout the results, we have highlighted the difference between the two proportions (at the 95% confidence level) via our commentary when we have detected a significant change.

For more details, please contact…

Gordon Stewart, Managing Director,

Independent Marketing & Research Limited via: [email protected]

mailto:[email protected]

2017 taiwan business climate survey full report

Economy & Finance