Tsai's First 100 Days Key for Investor Confidence: AmCham

Tsai's First 100 Days Key for Investor Confidence: AmCham
Photo Credit: EPA / 達志影像

What you need to know

A rapid turnaround of Taiwan’s economy is unlikely, but Tsai Ing-wen’s first 100 days in office will be critical for business confidence.

President Tsai Ing-wen (蔡英文) will struggle to turn around the country’s struggling economy immediately, but the tone she sets in her first 100 days will be important for business confidence, the American Chamber of Commerce in Taipei (AmCham) said in a report released on Thursday.

In its latest Taiwan White Paper, AmCham says the Tsai-led Democratic Progressive Party (DPP) has taken office at a time of “serious” challenges with languishing exports, flat wage growth and poor confidence weighing on the economy.

“Achieving a rapid turnaround is unlikely, especially since much of Taiwan’s economic momentum depends on the strength of international trade flows and is mostly beyond its own control,” it says. “But the atmosphere established at the very beginning of a new administration – the proverbial “first hundred days” – can have immense impact.”

The government could help lift business morale from the “current malaise” by setting clear directions and “inspiring but realistic” objectives, AmCham says.

“Such a psychological boost can bring substantive improvement in consumer spending and business’s willingness to consider investment plans.”

Risks and recommendations

Among the paper's headline recommendations, AmCham calls for regulatory and labor reform, improving its chances of joining the Trans-Pacific Partnership (TPP) and addressing energy security issues.

It says the Tsai administration should give early consideration to improving the rule-making process in Taiwan by reforming the Administration Procedure Act (APA).

“When the process of making regulations is transparent and consistent across government agencies, and provides stakeholders with ample opportunity to comment, government and business efficiency is greatly improved.”

AmCham says a “second generation” APA will address many problems, which later “become White Paper issues,” like chemical registration, food-related regulations and the approval process for pesticides. Moreover, it will assist Taiwan’s efforts to join the TPP – earlier this year the multilateral trade pact was signed by Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

Export-dependent Taiwan “cannot afford” to be excluded from the TPP, but will need to confront “sensitive and controversial” issues to be able to join, says AmCham – likely referring to the contentious ban on some U.S. pork products.

AmCham says “outdated" labor regulations need to be removed and relaxing restrictions around foreign white collar workers will lead to more job opportunities.

“Foreign white-collar employees should not be viewed as threats to local job-seekers,” it says. “Having overseas professionals as co-workers will also enable local employees to develop a more international mindset.”

Energy security is perhaps among the most difficult issues the government is facing, and AmCham notes uncertainty around energy supply continues to weigh on investment sentiment. It questions whether energy efficiency and new renewable electricity projects can make up for the loss of the nation's nuclear power stations – almost 20% of Taiwan’s electricity supply comes from nuclear.

“Both major political parties support the phase-out of nuclear power and an ambitious carbon abatement program, but it is uncertain how those goals can be met while closing nuclear plants.”

The full 127-page 2016 Taiwan White Paper can be downloaded here.