AmCham Taipei Survey Calls for Labor Flexibility, Improved Policy Coordination

The AmCham 2018 Business Climate Survey, released March 7, paints a largely positive outlook on Taiwan's economy and the prospects for the future but called for further revisions to labor policy and improved coordination between government and industry on policymaking.

Albert Chang, Managing Director of McKinsey & Co. in Taiwan and the 2018 AmCham Taipei Chairman, said the purpose of the paper was to lay out a framework for Taiwan to continue to be a destination for investment from US companies of the like being accepted by Google, Cisco, Microsoft and McKinsey & Co, the latter of which is in the process of building an Industry of Things hub on the island.

He said the chamber aims to secure 10 more instances of the kind of investment recently carried by those companies, with Microsoft's January announcement that it will invest NT $ 1 billion (US $ 33 million) to create an artificial intelligence (AI) research and development (R & D ) hub in Taiwan a lead example.

Credit: AmCham Taipei

In order to achieve this and Taiwan's overarching goal of transitioning to a knowledge and innovation based company, Chang picked out labor policy flexibility and improved coordination with private enterprise as key areas that must be improved as a matter of urgency.

"Executives feel a sense of urgency for innovation as the world becomes more competitive," Chang said. "They're eager to strengthen their partnership with the government and local businesses to secure Taiwan's stability and prosperity.

Improvements called for on labor, policy coordination and energy

Chang said that while AmCham members are substantially happy with the latest round of changes to the Labor Standards Act (LSA), most wanted even greater flexibility in order to support innovation, particularly provisions to exempt managers and professional staff from strict rules on overtime work and pay. He picked out allowing software engineers scope to work overtime to finish a project as a case in point.

Almost 90 percent of survey respondents advocated for that regulations would not exempt professional and managerial talent from the rigidity of the labor regulations, while half said labor issues will affect their decision on whether to expand in Taiwan.

Chang added that Taiwan's government has indicated that this will be be addressed as a priority this year - opening the door to further revisions of the LSA the controversial changes made in late 2016 and then again in December last year.

Coordination with industry on policymaking was also a bugbear for AmCham members. "The scores are not very good [on regulatory policymaking] - we always see bad scores on consultation with the private sector," Chang said. "Having more top companies invest in Taiwan will only continue if we are able to solve the way rules and policies come together in consultation with business expertise. "

Half of respondents said policy is disconnected from business dynamics while near 55 percent said new rules fail to meet global best practice standards. regulations are implemented consistently.

As such, Chang called for the formation of an industry council to help push forward the government's economic policy goals, particularly the the 5 + 2 Innovative Industries Initiative and the Forward-looking Infrastructure Plan, under which AmCham representatives and government officials could better frame new economic policy.

On the plus side, about 40 percent of those poll said they were satisfied with the creation of an online platform to track proposed new laws and regulations: "We see this as a bridge between business and policymaking," Chang said, adding that over the last 12 months the chamber has been quite positive about government efforts to resolve outstanding issues affecting businesses here.

These include setting up quarterly meetings hosted by a vice minister at the National Development Council (NDC) to help smooth communication.

Moreover, Patent Linkage, a longstanding White Paper issue , was marked as approaching resolution due to legislative action designed to stop patent-infringing pharmaceuticals from hitting the market, with a new database and tracking system likely to come into operation by the end of the year "That reliability on IP protection is something that Taiwan has that not many other places do," Chang added.

Taiwan's future power supply amid efforts to phase out nuclear power by 2025 was also of great concern for members, with 84 percent expressing disquiet over its viability. Chang said that the government must do more to reassure industry about the stability of electricity prices going forward.

Positive outlook

The survey noted the deep roots and longevity of operations of a large proportion of the polls in Taiwan, with almost two-thirds having been present for more than 20 years, along with the billions of dollars they have invested and tens of thousands of the companies have created.

Undertaken for the first time by accounting firm PwC, the survey polled 198 AmCham members, the majority of which are based in America, as well as about a fifth in Taiwan, 16 percent in Europe and the remainder from around the rest of Asia and Canada A survey response rate of just over half the 368 respondents canvassed presents room for improvement going forward.

Some 81 percent of executives said they were optimistic their youth would grow over the next year while 79 percent said they were similarly optimistic over the prospects for the following three years. About 40 percent said they intended to hire more people in Taiwan over the next 12 months

Product and service innovation was the top reason given for these rose-tinted forecasts on growth opportunities over the next year, followed by expectations of increased market share in existing markets.

Respondents also represented confidence over the ongoing impact of President Tsai Ing-wen's ongoing economic transformation plans - the 5 + 2 Innovative Industries Initiative and the Forward-looking Infrastructure Plan (FIP), the latter of which has a budget over 8th years of NT $ 840 billion (US $ 27.5 billion).

Nearly half percent of the 5 2 plans for likely to benefit Taiwan's economic development to some extent, while almost 65 percent said so about FIP. Nearly half of respondents view the initiatives as "likely to impact" their companies' decisions on future business expansion in Taiwan.

As is customary in these surveys, human capital was raised as a major plus point for Taiwan, though shortcomings in the areas of international mindset, English ability and willingness to take initiative were also flagged.

Almost 60 percent of respondents said they were happy with their ability to tap the talent they need in Taiwan, but Chang said that developing soft skills is the "next horizon" for Taiwan talent as it strives to become an innovation hub.

On the experience of working and living in Taiwan, air quality was flagged as the most negative aspect, followed by a lack of diversity and inclusiveness, and then the education system. Personal safety was the most positive, while the healthcare and transport systems were also praised.

Trade policy concerns

On the impact of the Trump administration's trade policies, Chang said, "Our members believe that Trump policies put them at a disadvantage in Asia." Members were particularly concerned over the US withdrawal from the Trans Pacific Partnership .

According to the survey, four-fifths of those polled said they would be very concerned if State Department budgets were further reduced.

There was strong (70 percent) support for the continuation of Trade and Investment Framework Agreement Council meetings to sustain progress on US-Taiwan trade, with a large majority of respondents expressing that bilateral agreements on trade and investment would be important for their business. " There is still a strong desire to see bilateral free trade agreements between the US and Taiwan, "Chang said.

Survey questions on the impact of cross-Strait relations on the stability of the business environment were notable by their absence. "We did not ask explicitly about cross-Straits relations, but respondents would have had that in the back of their mind," Chang said

You can download the full survey report here.

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