TAIPEI AMCHAM SHARES BUSINESS CONCERNS WITH

C O N F I D E N T I A L AIT TAIPEI 001115

SIPDIS

SIPDIS

STATE PASS USTR
STATE FOR EAP/TC,
USTR FOR ALTBACH, WINTERS, STRATFORD AND WINELAND,
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON
USDA/FAS FOR SHEIKH/MIRELES
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS,
AND SAN FRANCISCO FRB/TERESA CURRAN

E.O. 12958: DECL: 03/31/2016
TAGS: ETRD ECON PREL PGOV TW
SUBJECT: TAIPEI AMCHAM SHARES BUSINESS CONCERNS WITH
DIRECTOR YOUNG


Classified By: AIT DIRECTOR STEPHEN M. YOUNG For Reasons 1.5 b/d


1. (SBU) SUMMARY. During an initial meeting with Director
Young on March 28, AmCham leaders provided AIT Director with
a sneak preview of their White Paper for 2006. AmCham has
seen little progress this year and expects to hit the same
themes as last year's paper. AmCham members see the Chen
government as disjointed and uncoordinated; some argue the
ruling DPP party is anti-business. END SUMMARY.


2. (SBU) AIT Director Young met with the Board of Governors
and committee chairs of the American Chamber of Commerce in
Taiwan on March 28. AmCham give him an advance briefing on
its annual White Paper (due out in May) that discusses its
concerns with the business environment in Taiwan and makes
specific proposals for improvement. AmCham believes that
little progress has been made over the past year in
addressing the concerns it raised in last year's White Paper
and, thus, expects the 2006 White Paper to be quite similar
in content. The report will cover human resources;
government procurement; transportation regulation; and
financial sector reform.

Human Resources
--------------


3. (U) AmCham assesses that there is a general shortage of
technical and professional staff in Taiwan and that the U.S.
firms on the island are all competing for the same pool of
talent. AmCham would like to see Taiwan open the door a
little wider in admitting foreign talent, including allowing
PRC passport holders to work for both foreign and Taiwan
firms operating on the island.


4. (SBU) The Director raised this issue with Vice Premier
Tsai Ing-wen in a separate meeting later the same day. Tsai

SIPDIS
responded that when she was Chair of the Mainland Affairs
Council (MAC) she had instructed Taiwan agencies to allow PRC
passport holders to visit Taiwan on a business visa. In
response to the Director's comments, she instructed her staff
to set up a meeting with AmCham to discuss this issue.
(Note: AIT provided Tsai's staff with AmCham contact
information. End Note.)


5. (U) Some AmCham members told the Director that they have
observed a "brain drain" of Taiwan talent to the Mainland.
They said that whereas in the past, many of Taiwan's most
talented graduates had gone abroad to the U.S. and Europe to
study and work, now they were heading to China to work
because of the high growth potential in the Chinese economy.

Government Procurement
--------------


6. (SBU) AmCham told the Director that corruption in the
ruling Pan Green party makes it impossible for U.S. firms to
compete for major construction projects.

Transportation
--------------


7. (SBU) AmCham's Transportation Committee reported that
Taiwan's transportation industries remain highly regulated,
thus making Taiwan's cost structure high relative to its
neighbors in the region. The committee cited an "obsession"

with security regulations as one factor in the high cost
structure. Airline representatives noted that foreign
carriers continue to pull out of the Taiwan market, citing
Air New Zealand as the most recent example. One member noted
that the a large number of AIRCRAFT purchased by China Air
and EVA at considerable expense to serve expected
cross-Straits routes have now been deployed on other regional
routes. This has increased competition in the region and
thus reduced fares and profitability for
international carriers.

Financial Reform
--------------


8. (SBU) The AmCham Banking and Capital Markets Committees
reported that Taiwan's Financial Supervisory Commission
(FSC),now almost two years old, wants to open up and
deregulate Taiwan's financial markets, but a lack of
coordination within the government has made progress slow.
They said that they have seen the FSC put forth a proposal
only to have the MAC or the Ministry of Finance quickly
overrule it. The Committees assess that Taiwan financial
institutions cannot move forward and become regional
financial centers in this environment. Further, they said
that Taiwan is losing ground to Japan, Singapore and Korea in
the financial sector. Arguing that "Taiwan is no longer
relevant in the asset management business," one
representative noted that "my job here is to train people to
work elsewhere in Asia and to train the local regulators."
An insurance representative complained that the FSC Insurance
Bureau is pressing all foreign insurance firms to list on the
Taiwan Stock Exchange.

DPP Anti Business?
--------------


9. (SBU) Following the prepared reports described above;
there was a general discussion among the AmCham members
present about the policy environment in Taiwan. The majority
of the comments were quite negative about the situation
facing the business community in Taiwan. One general theme
was that the business community believes that the government
does not have a strong overarching economic policy. The
clear implication was that under the KMT, the government had
provided clear direction on implementing sound economic
policies. AmCham sees this government as simply reacting to
crises, overly politicized, and out of touch with the
economic desires of the business community and needs of the
larger population. In this regard, they suggest, the DPP has
evolved into a party uninterested in, if not antagonistic
toward, business.


10. (C) Comment: Whether some of AmCham's concerns over the
management of cross-Strait trade and other issues are
accurate is less important that that a clear dialogue with
the Taiwan governing bodies be allowed to thrash through
these topics. We have already urged Vice Premier Tsai and
the Chairman of the Mainland Affairs Council (MAC) to reach
out to AmCham on these subjects and will continue to serve as
a bridge where possible. End Comment.
YOUNG