VZCZCXRO7183
RR RUEHCN RUEHGH RUEHVC
DE RUEHIN #0605/01 0750703
ZNR UUUUU ZZH
R 160703Z MAR 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 4484
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SECTION 01 OF 02 TAIPEI 000605
SIPDIS
SENSITIVE
SIPDIS
STATE PASS USTR
STATE FOR EAP/TC
COMMERCE FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
USTR FOR STRATFORD, ALTBACH
E.O. 12958: N/A
TAGS: ELAB ECON EINV CH TW
SUBJECT: TAIWAN SLOWLY OPENING DOOR TO PRC EMPLOYEES
REF: A. 05 TAIPEI 3839
B. 05 TAIPEI 2869
C. 05 TAIPEI 4395
D. 04 TAIPEI 3605
1. (SBU) Summary: Taiwan has made gradual but notable
progress in making it easier for firms in Taiwan, both
foreign and local, to bring Mainland employees to Taiwan
for business activities. Requirements have been lowered
and processing times have been reduced. The next step
will be to treat business visitors from China more like
visitors from any other location. This should be
combined with broader efforts to allow companies to
employ workers from outside Taiwan. These efforts could
help Taiwan address labor shortages and take advantage of
its potential as a regional center for greater China.
End summary.
2. (U) Among cross-Strait policy recommendations, one of
the highest policy priorities of the foreign business
community in Taiwan has been further reform of entry-
permit requirement and procedures for Mainland personnel
traveling to Taiwan for business. It has repeatedly been
included in both the American Chamber of Commerce's
(Amcham) annual White Paper and the European Chamber of
Commerce's Position Papers.
Small Steps Adding Up
---------------------
3. (U) In the last few years, there have been several
small but important steps in the liberalization of cross-
Strait personnel flow during the Chen administration.
They include the following:
-- Capital Requirements. The requirement for firms
wishing to invite Mainland employees for research and
development activities was lowered in October 2003 from
capitalization or annual revenue of NT$30 million to
NT$10 million. In November 2004, the requirement was
relaxed to allow new firms with capitalization of NT$5
million (about US$ 150,000) to invite Mainland employees
for any short-term business activities.
-- Length of Stay. In February 2002, the maximum length
of stay for research activities was extended from three
to six years. In September 2002, the maximum length for
employees of multinational firms coming to Taiwan for
work or training was extended from four months to three
years with the possibility of multiple extensions of one
year each.
-- Number of Visitors. The ceiling for the number of
Mainland employees invited for research and development
activities was eliminated in October 2003. The ceiling
for other activities was set at 15 for smaller firms and
30 for larger ones in November 2004. The upper ceiling
was raised to 50 in September 2006 with the option for
higher numbers on a case-by-case basis.
-- Scope of Eligible Visitors. In January 2003, Taiwan
announced that companies in Taiwan could invite potential
buyers from the Mainland. In November 2004, the
requirement that Mainland employees invited by a firm
must have worked for the firm for a certain amount of
time was eliminated.
-- Guarantee Requirement. In August 2002, the
requirement that multinational firms identify a local
guarantor for invited Mainland employees was eliminated.
-- Processing Time. In February 2002, Taiwan announced
that the processing time would be reduced from two months
to ten days and only five days in emergency cases.
-- Quality of Life. In October 2004, Taiwan announced
that Mainland personnel with long-term residence permits
were allowed to open accounts in Taiwan banks. In
November 2004, rules on Mainland spouses of foreign
professionals were also relaxed. Taiwan announced in
November 2006 that children of Mainland employees in
Taiwan on intra-company transfers were allowed to attend
TAIPEI 00000605 002 OF 002
Taiwan schools.
Producing Results
-----------------
4. (U) Each of these measures is small but taken together
they have had significant results. The number of entry-
permits issued to PRC passport holders coming to Taiwan
for commercial purposes increased 32.6 percent to reach
33,605 in 2006. This followed a 47.3 percent increase in
2005. In August, approximately 400 Mainland employees of
Microsoft were able to come to Taiwan for a conference.
Amcham told AIT that its members report fewer problems
than two or three years ago in obtaining the entry
permits they need for their employees.
5. (SBU) One of the most important changes has been
reduction in processing time. Despite the commitment in
2002 to reduce processing time to 10 day, as recently as
2004, Amcham members reported that it generally took a
month. Improvement started to appear in 2005. As
reported ref A, Air Products Asia Inc. conducted a test
case for Amcham in fall 2005 in which all of the
applicants were processed in less than four working days.
Taiwan officials were aware of the test case, which may
have affected the outcome. However, Air Products Vice
President Tom Johnson recently confirmed for AIT that
Taiwan is now consistently processing cases more rapidly.
He said applications from his company generally take
eight to ten days. Microsoft Taiwan Government Relations
Manager Hope Ong told AIT that Taiwan Authorities were
very accommodating in arranging visas for the conference
reported in para. 4 above.
Larger Problems Persist
-----------------------
6. (U) Despite recent progress, Taiwan can still do more
as part of a broader effort to remove restrictions on
hiring practices. U.S. and other foreign businesses
complain that Taiwan places too many restrictions in
general on bringing in foreign personnel for long-term
assignments. As unemployment declines, concerns about
labor shortages in Taiwan have risen. A survey of
manufacturing companies conducted by Taiwan's Council of
Labor Affairs in August 2006, estimated a shortage of
more than 80,000 workers in Taiwan. More than a quarter
of firms who responded to the survey reported problems
due to labor shortage. The largest shortage was in
unskilled labor, where firms reported a gap of 57,000
workers. However, Taiwan's high-tech companies also
complain of shortages of highly skilled workers. The
Executive Yuan's Science and Technology Advisory Group
(STAG) estimates that demand for workers among Taiwan's
high-tech industries -- especially semiconductors,
digital content, flat-panel displays and information
services -- will outpace supply by 8,550 employees in
2007 and 10,450 in 2008.
Comment: A New Approach
-----------------------
7. (SBU) Through gradual and sometimes piecemeal
liberalization of restrictions on entry-permits for
Mainland employees, Taiwan has made considerable progress
in making it easier for firms to do business here. At
this stage, Taiwan would be well served by treating
employees from the Mainland more like personnel from any
other foreign location. This would help Taiwan realize
its potential as a regional business center for an
integrated greater China market. Combining this approach
with a more aggressive effort to ease restrictions on
hiring foreign workers in general could improve labor
market conditions in Taiwan, enhancing its attractiveness
as an investment destination.
YOUNG