CROSS-STRAIT ENTRY PERMIT REFORMS STILL NOT ENOUGH

UNCLAS SECTION 01 OF 02 TAIPEI 003839

SIPDIS

SENSITIVE

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: N/A
TAGS: ECON EINV ELAB CH TW
SUBJECT: CROSS-STRAIT ENTRY PERMIT REFORMS STILL NOT ENOUGH

REF: AIT TAIPEI 3605

Summary
--------------


1. (SBU) Taiwan's Executive Yuan (EY) recently announced a
package of reforms that expands the range of firms that are
permitted to apply for entry permits on behalf of their
employees and loosens the restrictions on which employees
qualify. However, while the reforms extend the length of
stay in Taiwan for some visitors, they reduce the maximum
stay for others. Moreover, the new system lowers the annual
quotas further limiting the number of entry permits approved
each year for some companies. Most important, the new
regulations do not address businesses' concerns about heavy
documentation requirements, the time required to process an
application, and the lack of multiple-entry permits and work
permits. Taiwan needs further liberalization of entry
requirements to facilitate cross-Strait trade and investment
and take full advantage of the opportunities available to
Taiwan businesses. These limited reforms will not suffice.
(End summary.)


2. (U) On November 17, Taiwan's Executive Yuan announced a
new set of reforms for the system governing Taiwan entry
permits for PRC employees of Taiwan and multinational firms
for short-term travel. Taiwan's purpose in reforming the
system was to expand the range of firms and employees
eligible for entry permits in order to enhance cross-Strait
business in response to complaints by Taiwan and
multinational firms with major operations in the Mainland.
The Mainland Affairs Council (MAC) plans to implement the new
rules in late December or early 2005.

A Few Steps Forward
--------------


3. (U) The new regulations slightly lower the financial
requirements for Taiwan firms applying for entry permits on
behalf of their employees. Currently, only firms with more
than NT$ 10 million in revenue and USD 300,000 worth of
investment in the PRC may apply. The revenue requirement
will remain unchanged, but the new regulations do not require
any particular level of investment in the PRC. For branch
offices of foreign firms in Taiwan, the current system
permits only those firms that purchase USD 3 million worth of
products in Taiwan to apply for entry permits. The new
regulations lower that requirement to USD one million and
eliminate it for financial services firms.


4. (U) The new system also allows firms to apply on behalf of
a broader range of employees. Under the current regulations,
Taiwan will approve permits only for certain categories of
employees who have been employed by the firm for at least
three months. The new system eliminates the minimum period
of employment requirement. It also makes some minor changes
in the categories of employees who can qualify but still
limits them to managers, technical personnel, and other
specialists.

And a Couple of Steps Back
--------------


5. (U) Although the Taiwan government has increased the
length of time certain visitors are permitted to stay in
Taiwan, for others the maximum stay has been reduced.
Currently, visitors coming for training, to provide certain
technical services, and to inspect purchased goods before
shipment are limited to an initial stay of two months with
the possibility of extension. Those visitors will be
approved for an initial stay of three months under the new
regulations. However, several other categories of visitors
who are allowed a two-month visit under the current system
will be limited to 14 days under the new one. These include
visitors coming for meetings, to give speeches, and to attend
exhibitions.


6. (U) Furthermore, the new regulations will reduce the
annual quota of visitors for some firms. Under the old
system, Taiwan firms with NT$ 10 million to NT$ 30 million in
annual sales were permitted to bring up to 30 visitors to
Taiwan per year. The new regulations will reduce the limit
on approved visitors to 15 for those firms. Firms with
annual sales of more than NT$ 30 million will continue to be
allowed up to 30 visitors per year.

High, Perhaps Inflated Expectations
--------------


7. (U) MAC predicts that the new reforms could increase the
number of Mainland visitors coming to Taiwan for work-related
travel to up to 140,000 per year. This would mark an
increase of nearly ten times current levels. According to
MAC, the predicted increase in numbers would primarily be due
to the increase in the number of firms eligible to invite
Mainland employees. (Note: Reftel mistakenly reported that
the total number of Mainland employees of Taiwan and
multinational firms traveling to Taiwan for short-term
business-related activities was about 1,800 in the first ten
months of 2004. The actual number is almost 16,000 according
to MAC data. Although significantly higher than previously
reported, if correct, this number, is still only a very small
fraction of the number of Taiwan businessmen traveling to the
PRC every year. By way of comparison, we estimate, based on
Ministry of Transportation and Communications and airline
data, that as many as 17,000 people fly between Taiwan and
the PRC every day. A substantial portion is made up of
Taiwan businessmen. End note.)

Taiwan Losing Advantage
--------------


8. (SBU) Roberto Guidetti, General Manager of Proctor and
Gamble Taiwan, on November 30, called on the Council for
Economic Planning and Development (CEPD) to liberalize the
entry permit process further. At a meeting between AmCham
members and CEPD's chairman Hu Sheng-cheng where AIT/T was
present, Guidetti said that Taiwan has a strong advantage in
the greater China region as a location for personnel
training. He explained that because of high turnover of
personnel on the Mainland due to firms offering ever-higher
compensation packages, Taiwan has the most stable workforce
in greater China. This stability makes Taiwan the natural
choice among Taiwan, Hong Kong and Shanghai for hosting
Proctor and Gamble training sessions. Without rapid further
liberalization of entry requirements, however, Taiwan's
advantage in this area will erode and more business
opportunities will move to the Mainland.

Comment ) Still Not Enough
--------------


9. (SBU) Taiwan authorities have told AIT/T on several
occasions that a significant reform of cross-Strait entry
permits would become effective early next year. This package
is apparently what they had in mind, but it appears they have
oversold the benefits and the potential impact of the new
regulations. They will do little to help multinational
firms. As reported reftel, various U.S. multinationals told
AIT/T that the Taiwan government needs to reduce
documentation requirements, shorten the time required to
process an application, approve multiple-entry permits, and
allow PRC employees on long-term assignment to obtain work
permits. The new regulations do not address any of these
concerns. The expansion of firms eligible to apply for entry
permits, and employee eligibility represent minor fixes in a
system with major problems. Furthermore, the new regulations
actually worsen some problems. MAC's prediction of a
possible tenfold increase in the number of visitors seems
very unlikely. MAC officials have told us that the Council
of Labor Affairs continues to work on new regulations that
will allow work permits for some of these long-term visitors.
Nevertheless, the Taiwan government needs to do much more to
liberalize the system governing entry permits for Mainland
visitors if it truly intends to facilitate cross-Strait trade
and investment and take full advantage of the opportunities
available to Taiwan businesses. End comment.
PAAL