CROSS-STRAIT ENTRY PERMITS - PROGRESS AND PROBLEMS

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 004395

SIPDIS

DEPT FOR EAP/TC
DEPT PASS AIT/W

E.O. 12958: DECL: 10/26/2015
TAGS: ECON ELAB CH TW
SUBJECT: CROSS-STRAIT ENTRY PERMITS - PROGRESS AND PROBLEMS

REF: A. 04 TAIPEI 3605

B. 04 TAIPEI 3839

C. TAIPEI 2653

D. TAIPEI 2869

Classified By: AIT Acting Director David J. Keegan, Reason 1.4 d

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


1. (C) The American Chamber of Commerce in Taipei (Amcham)
has been taking concrete steps to work with Taiwan
authorities to improve the system for approval of entry
permits for Mainland employees of firms located in Taiwan.
Taiwan's Council for Economic Planning and Development has
taken the lead in responding for the Taiwan government in a
methodical and attentive manner. U.S. firms report that
there has been some progress, and processing times for
entry-permit applications have become much shorter.
However, these efforts are not sufficient to address many
of the problems in Taiwan's labor market or to fully
capitalize on Taiwan's potential to take advantage of the
PRC's wealth in human capital. End summary.

Amcham Priority
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2. (U) Late last year Taiwan announced a package of reforms
that loosened restrictions on the ability of firms in
Taiwan to bring Mainland employees to Taiwan for short-term
stays (ref B). Many in the business communities viewed
these changes as inadequate. In its 2005 White Paper, the
American Chamber of Commerce in Taipei (Amcham) made
various personnel issues, including entry permits for
Mainland employees, its primary focus. (ref C)

Taking Concrete Steps
--------------


3. (U) Since releasing the White Paper, Amcham has taken
some concrete steps toward resolving this problem. On
August 12, Amcham's Human Resources Committee sponsored a
breakfast meeting with a speaker from Taiwan's Investment
Commission (IC). The IC plays a coordinating role in
processing entry-permit applications from businesses in
Taiwan. Attendance at the event was high, with more than
60 Amcham members participating. Attendees were given
ample opportunity to raise questions. Questions focused
primarily on the length of time needed to get approval,
which many blamed on the number of agencies involved in the
process.


4. (C) In order to provide a more practical basis for
discussion with the Taiwan government on this issue, Amcham
ran a test case for the application process. Amcham
President Tom Johnson oversaw the test. His firm, San Fu
Gas Co., which is 74 percent owned by U.S. firm Air
Products and Chemicals Inc., submitted applications for
three Mainland Air Products employees to come to Taiwan for
a short visit. Amcham closely tracked the process to see
where difficulties might emerge and whether the Taiwan
government can approve the permits within the projected two
weeks. Amcham has informed the Council of Economic
Planning and Development (CEPD) about this experiment.
CEPD generally coordinates Taiwan government responses to
the concerns of the business communities on issues like
this one that involve multiple Taiwan agencies. Taiwan
government agencies were able to approve the entry permits
in just three and a half working days. Johnson told AIT/T
that Amcham might run another test case without informing
CEPD ahead of time.


5. (C) These two steps are important because they have
helped focus the dialogue between Amcham and the Taiwan
government. Too often in the past, Amcham and other
business organizations have only offered nonspecific
complaints about the excessively complicated application
process and long delays in getting the entry-permits
approved. In response, CEPD has promised that the process
should only take 10 working days without providing enough
evidence that this was true most of the time.

CEPD Responding
--------------


6. (U) There are indications that the Taiwan government
is taking these complaints from the business community
more seriously and is attempting to respond. The package
of reforms announced late last year was a significant
step. CEPD has been working with other Taiwan agencies
to make sure that all of the offices that have a role in
entry-permit approval are aware of the relaxed
requirements and streamlined procedures aimed at speeding
up the process. It has repeatedly expressed interest in
learning from the business community where problems occur
in the process.


7. (C) CEPD has also worked methodically to coordinate
Taiwan government responses to the whole range of human
resources-related concerns highlighted by Amcham in its
2005 White Paper. CEPD Center for Economic Deregulation
and Innovation Executive Director Heng Tso gave AIT/T a
spreadsheet detailing CEPD's efforts. The lengthy document
identifies every specific recommendation made by Amcham and
summarizes the responses of every Taiwan government agency
involved. The document shows that not every issue will be
resolved quickly but does list many concrete steps toward
addressing these problems.

Signs of Progress
--------------


8. (C) In addition to the quick approval of the San Fu Gas
Co. applications, other U.S. firms in Taiwan have reported
that the reform efforts have been at least partly
successful in making it easier and faster to bring Mainland
employees to Taiwan. IBM Taiwan Government Programs
Executive Robert Wang told AIT/T in early October that
while the entry-permit approval process could previously
take about three months, now the total time required was
down to about three weeks. He also noted that IBM was no
longer subject to previous restrictions on the number of
entry permits for Mainland employees that it could obtain
in a year. Similarly, Ford Lio Ho Motor Co. Employee
Services Manager Y.M. Yen reported to AIT/T that the total
processing time for his firm was down from about two months
to three to four weeks. Procter & Gamble has brought PRC
managers to Taiwan on four separate occasions. The head of
P&G's legal department Michael Mou told AIT/T that on each
occasion the processing time has been shorter than the
last. Most recently, the entry permits were approved by
Taiwan authorities within two weeks.

Comment - More Fundamental Change Needed, but Unlikely
-------------- --------------


9. (C) Amcham and CEPD have developed a constructive
approach for addressing some of Amcham's specific human
resources-related recommendations. For Mainland entry
permits, they have had some success in improving the
system. However, Taiwan still faces major challenges in
maintaining a labor supply that encourages investment on
the island. Many firms have commented that Taiwan must
relax rules on employment of foreign labor if it wishes to
attract investment, especially in manufacturing. In
addition, Taiwan continues to face shortages of skilled
workers for high-tech industries (ref D). Relaxation of
the basic restrictions on employment of Mainland personnel
may be the only effective way to resolve these problems.
Further streamlining the application procedures and
additional steps to marginally expand eligibility for these
entry permits will not be enough.


10. (C) UBS Asia Pacific Economics Head Jonathan Anderson
recently told an Amcham group that he would be pessimistic
about Taiwan's economic prospects "until you hear more
Mainland Chinese voices on the streets of Taipei."
Taiwan's geographic and cultural proximity to the PRC are
its greatest advantages in today's global economy. Until
it can use those strengths to more effectively take
advantage of the PRC's wealth in human capital, it will be
unable to realize its full economic potential.


11. (C) Nevertheless, more fundamental reform in this area
will not occur until there is a political consensus in
Taiwan to advance the pace of cross-Strait economic
liberalization. In CEPD's spreadsheet summary of responses
to specific Amcham recommendations, the shortest reply is
to Amcham's suggestion that Taiwan should encourage
businesses to recruit technical talent from the PRC. The
Mainland Affairs Council was the only agency to respond.
Its relatively terse but revealing answer ends with "any
additional moves for further opening on this front will
depend on the overall cross-Strait situation." End
comment.
KEEGAN