Encouraging progress has been made on a number of fronts over the past half year.
At this half-way point in the AmCham Taipei annual advocacy cycle that begins with issuance of the Taiwan White Paper in early June, Taiwan Business TOPICS customarily reviews the status of White Paper issues over the previous six months. This year, the following AmCham committees reported significant progress on at least some of their concerns:
At a meeting at the Council of Agriculture (COA) last month, representatives of the Ag-Chem Committee expressed appreciation for government efforts that have brought a substantial reduction in the volume of counterfeit pesticides on the market. The committee also thanked Minister Chen Bao-chi and his staff for adopting the White Paper suggestion to simplify the review standards for overseas field trials. For example, previously registration for new active ingredients required the inclusion of two comprehensive field trial reports for residual chemical levels, plus one validation trial report, with the stipulation that at least one of the completed field trials be conducted in Taiwan. Recently a new policy was announced requiring the submission either of one field trial report from Taiwan or three from overseas. The change was seen as welcome recognition of the internationally accepted test standards under which overseas trials and reports are conducted.
In addition, the COA has agreed to accelerate the review process for new pesticides capable of taking the place of existing products that are less environmentally friendly.
Two of the Committee’s three issues have been resolved through the assistance of the Financial Supervisory Commission (FSC) in communicating with other agencies. The aim of the first issue was to enable Taiwan’s onshore mutual funds to avoid missed investment opportunities caused by a one-day lag time in placing orders for U.S. securities due to the time difference. The FSC had consented to permit Taiwan funds to delegate investment decisions to a third party overseas as long as the regulatory authority of the third party is willing to exchange information with the FSC for regulatory supervision purposes. Following extended communication between the FSC and the U.S. Securities and Exchange Commission, the SEC agreed that upon application, it would provide the necessary letters of undertaking to satisfy the FSC’s requirements.
The second Asset Management issue was to “allow foreign-currency discretionary investment management accounts to invest in the foreign-currency share class of NT$-denominated onshore funds.” In this case, the FSC discussed the matter with Taiwan’s Central Bank of China and obtained the CBC’s agreement.
One of the five key White Paper issues from this committee involved counter-guarantee arrangements between a Taiwan bank subsidiary and its overseas parent bank or affiliates to facilitate service to the bank’s overseas customers. Such counter-guarantees had been treated as governed by Articles 32 and 33 of the Banking Act, which prohibit related-party transactions so as to lessen the risk of conflict of interest. Citing the practice of financial authorities elsewhere in the region, the committee’s position paper argued that counter-guarantees are not related-party transactions in the usual sense and should not be covered by the restrictions. During the summer, the FSC accepted that logic and issued a ruling exempting counter-guarantees from the existing related-party transaction regulation. The committee now regards the issue as fully resolved. As it had stated in the White Paper, it believes the change will help Taiwan develop as a major Asian financial center and attract more investment and financial product and service know-how from international banking groups.
Customs & International Trade.
Importers in the past sometimes encountered a problem of inconsistent assignment of commodity classification codes by the Customs Administration and other government agencies such as the Bureau of Standards, Metrology and Inspection (BSMI) of the Ministry of Economic Affairs. At times, customs clearance of cargo was held up because the application was based on a code assigned by BSMI or another agency but the Customs inspectors had a different opinion about the proper classification. At a meeting with representatives of the committee on November 11, the Customs Administration gave assurances that it has stepped up its coordination with other government agencies to prevent such discrepancies, and in fact AmCham Taipei member companies report that no recent incidents of lack of harmonization of product classifications have occurred.
For more than a decade, AmCham Taipei has urged the government to make it easier for companies to recruit overseas talent by eliminating the requirement that prospective foreign employees have two years of work experience and receive a monthly salary of at least NT$47,971. In late November, it was reported that the Ministry of Economic Affairs had recommended a similar course of action as part of Taiwan’s preparation for applying to join the Trans-Pacific Partnership (TPP) trade grouping. According to media reports, the Ministry of Labor is expected to announce a lifting of the regulation once it receives clearance from the Executive Yuan.
The White Paper of 2014 urged the government to “designate a dedicated agency to be responsible for government procurement implementation,” replacing the Bank of Taiwan, which had inherited the responsibility due to some historical circumstances but which was not well-suited to carry it out. Earlier this year authority for software procurement, the main problem area, was passed to the Industrial Development Bureau under the Ministry of Economic Affairs, which has more professional expertise for software evaluation.
The FSC’s Insurance Bureau is actively considering revising current regulations to explicitly permit insurance companies to use financial derivatives to hedge their liability risks. Until now, such dynamic liability hedging had been limited to separate account type products and has not been extended for use by general account products. At a meeting with representatives from the AmCham Insurance Committee, other industry associations, and the Taiwan Insurance Institute on November 16, the IB shared a draft revision of the regulations. The industry welcomes the prospective change as facilitating the introduction of innovative retirement products as Taiwan faces new challenges presented by its rapidly aging population.
The licensing approval process for imported Class-II medical devices contains a provision for simplified review if the product holds Certificates of Free Sale (CFS) from both the United States and European Union. The Certificate confirms that the product is marketed in that jurisdiction or is eligible for export, and that the manufacturer has no unresolved enforcement actions pending with the regulator. The Committee has argued that requiring a CFS from either the United States or European Union should suffice, rather than from both. Otherwise, the simplified review is unavailable to prospective applicants whose products are sold in only one of those markets. The Taiwan Food and Drug Administration has now agreed to consider revising the current practice and may set up a task force to study the matter.
A longstanding White Paper issue, the need for a Patent Linkage system to ensure that generics do not receive product approval and reimbursement prices while the original drug still holds a valid patent, has been moving closer to final resolution. The Taiwan government has not only agreed to implement Patent Linkage, it has been actively preparing to set up a system to carry it out. Completion of the process will also remove a major concern on the part of U.S. trade negotiators that has been high on the annual agenda of the bilateral Trade and Investment Framework Agreement (TIFA) talks.
The committee cited the FSC’s rule that Taiwan’s insurance companies may invest in domestic commercial property only if the property can generate a minimum rental yield of 2.875% a year, and noted that the restriction makes it difficult for insurers to find appropriate investment opportunities in Taiwan. In late November, the FSC announced that the minimum yield was being lowered to 2.555%. While welcoming the change, the committee suggested setting different levels for different areas of the island.
“We’re extremely gratified that the White Paper process once again is bringing some favorable results,” says AmCham Taipei President Andrea Wu. “There is still another half-year to go in the current advocacy cycle, and the Chamber office and our committees are continuing to communicate with the relevant government officials. We look forward to further substantive progress in the months to come.”