US embassy cable - 04TAIPEI3605

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003605 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 11/12/2014 
TAGS: ECON, EINV, ELAB, CH, TW, Cross Strait Economics 
SUBJECT: CROSS-STRAIT ENTRY PERMITS - REDUCING TAIWAN'S 
COMPETITIVENESS 
 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.4 (B/D) 
 
Summary 
------- 
 
1.  (U) Summary: A persistent complaint of multinational 
firms in Taiwan is the difficulty of bringing PRC employees 
to Taiwan for meetings, training, research, or other 
temporary assignment.  Some firms have learned how to work 
the system and bring a relatively large number of Mainland 
employees to Taiwan on a regular basis.  However, many firms 
complain that the process requires too much documentation, 
takes too long, and does not meet the needs of multinational 
firms even when it works.  The Taiwan government has taken 
some steps to improve the process and has more changes on the 
drawing board that will address some of the problems but not 
all of them.  As in other areas of cross-Strait commerce, 
many firms have found a way to get what they need within the 
limitations of a flawed system.  Nevertheless, if the Taiwan 
government doesn't get serious soon about liberalizing this 
and other obstacles in its cross-Strait economic relations, 
the trend toward marginalization will continue.  (End 
summary.) 
 
 
Perennial Problem Becoming More Important 
----------------------------------------- 
 
2.  (U) Multinationals with offices in Taiwan have long 
complained about the restrictions Taiwan imposes on PRC 
employee travel to Taiwan.  This problem was highlighted in 
the American Chamber of Commerce in Taipei's annual white 
paper in 2004 as well as previous years.  The European 
Chamber of Commerce highlighted this issue in its White Paper 
issued in October 2004.  Multi-nationals point out that these 
impediments make it hard to do business in Taiwan, 
particularly for firms trying to manage greater China or East 
Asian operations from a Taiwan headquarters.  As more firms 
invest in the Mainland and the PRC labor market grows more 
competitive, the need to bring PRC employees to Taiwan, 
especially for training, grows more important. 
 
It Can be Done 
-------------- 
 
3.  (C) Despite the difficulties, some multinational firms 
have learned to navigate the system and bring Mainland 
employees to Taiwan on a regular basis.  Taiwan's Ford 
subsidiary, for example, brought about 100 employees to 
Taiwan last year for training and will bring about the same 
number this year.  United Airlines on the other hand, brought 
two employees over in 2003 for training and since decided it 
was too difficult and time consuming to do so again. 
Motorola brings a handful of Mainland employees to Taiwan 
each year but uses a consulting firm to process the Taiwan 
entry permits for them.  In all, multinationals in Taiwan 
brought 816 Mainland visitors in the first ten months of 2004 
compared to 381 during all of 2003.  Taiwan firms, which are 
subject to more restrictions than multinationals, brought 971 
visitors through October this year and 227 in 2003.  By 
comparison, thousands of Taiwan businessmen fly to and from 
the PRC every day. 
 
Too Many Documents 
------------------ 
 
4.  (U) The Taiwan government requires an inordinate number 
of documents for entry permit applications for PRC nationals 
employed by Taiwan-owned firms or multinationals operating on 
the Mainland.  For professional employees (who must have 
worked for the multinational or Taiwan-owned firm for at 
least three months) coming to Taiwan for a short visit, an 
application and at least nine other documents are required. 
The documentation required to show the legitimacy of the 
inviting company and its investment in the PRC is 
particularly burdensome.  The firm must provide copies of the 
Taiwan company license; Taiwan income tax report for the 
previous year; letter of authorization to invest in the PRC 
and notification of investment )- for Taiwan firms )- or 
documentation showing that the firm's Taiwan presence is a 
foreign investment )- for multi-nationals; PRC business 
license; and PRC business authorization certificate. 
Clearly, Taiwan officials are aware of the burdensome nature 
of the process.  When AIT officers ask simple questions about 
how the process works, the response generally includes an 
offer to help facilitate the process if AIT would like to 
refer cases to Taiwan agencies. 
 
It Takes Too Long 
----------------- 
 
5.  (C) The Taiwan government claims that for routine cases 
entry permits can be issued to PRC employees of multinational 
firms in ten working days once all the documents have been 
gathered.  However, multi-national firms report that the 
Taiwan government rarely meets the ten-day approval goal. 
Taiwan offers a "one-stop" window for entry permit 
applications at the Bureau of Immigration.  However, the 
Bureau of Immigration must then distribute the application to 
the agencies that must also approve it, namely the Mainland 
Affairs Council (MAC) and local police in the jurisdiction 
where the visitor will stay.  According to Robert Wang, 
government programs executive for IBM Taiwan, the Bureau of 
Immigration will not ensure that other agencies meet the 
ten-day time limit.  Wang reported that the process is often 
delayed by local police visits to the inviting company or 
even the home of the sponsoring individual.  IBM brought 
about 30 employees to Taiwan in 2003 and will bring more by 
the end of 2004.  In Wang's experience, approval of the entry 
permit usually takes about a month. 
 
6.  (C) In addition, after Taiwan approves the entry permit, 
the inviting firm must then apply for a PRC exit permit. 
Businesses in Taiwan report that the PRC exit permit 
application cannot be submitted without the approved Taiwan 
entry permit, so the two cannot be processed simultaneously, 
substantially lengthening the entire process.  Businesses 
report that approval of the PRC exit permit takes up to a 
month.  According to Y.M. Yen, Employee Services Manager of 
Ford Lio Ho Motor Company, Taiwan's Ford subsidiary, even a 
firm that has considerable experience navigating this process 
like Ford needs at least two months to prepare the paperwork 
and obtain the entry and exit permits.  For a firm new to the 
system it can take six months. 
 
Too Many Limitations 
-------------------- 
 
7.  (U) Unfortunately, even after the time and trouble 
involved in getting an entry permit, multinational firms 
still complain that what the Taiwan government offers doesn't 
meet their needs.  First, Taiwan generally only issues single 
entry permits for stays of short duration.  For most business 
travelers the entry permit allows a two-month stay extendable 
up to a total of four months.  For intra-company transfers or 
technological research, longer stays are allowed.  However, 
in nearly all cases, Taiwan will only issue a single-entry 
travel document, which is renewable in some cases.  This is 
particularly burdensome for visitors staying for longer 
durations, but causes problems for short-term travel as well. 
 It does nothing for executives and senior technical and 
marketing staff who need the ability to travel frequently. 
 
8.  (U) In addition, except for transferees and researchers, 
Taiwan will not issue travel documents for spouses or other 
family members who wish to accompany the visitor.  Businesses 
find this limitation especially problematic for longer-term 
trainees who may be staying in Taiwan for up to four months. 
Furthermore, even for long-term visitors, Taiwan has no 
system in place at this time to provide work permits.  This 
can prevent long-term visitors from opening a bank account, 
renting an apartment, obtaining a driver's license, etc. 
Finally, the number of entry permits issued to employees of a 
single firm each year is limited for some firms.  Many 
multinationals, depending on the size of their presence in 
Taiwan, are not subject to a quota.  All Taiwan-owned firms 
have a quota based on the amount of capital the firm has 
invested in Taiwan.  The maximum quota is 30 visits per year, 
a minuscule fraction of the number of trips employees of any 
of these companies take to the PRC in a year. 
 
Reformed Already, More on the Way 
--------------------------------- 
 
9.  (C) The Taiwan government has made some effort to 
simplify the process of applying for Taiwan entry permits and 
reduce the time required for approval.  A package of 
simplifications was approved in 2002.  MAC Department of 
Economic Affairs Director Fu Don-cheng told AIT that another 
set of reforms is awaiting Executive Yuan approval and should 
be implemented within the next two months.  He would not 
provide a copy of the proposed changes, but said they 
included simplification of the application form, lengthening 
the maximum stay for most short term visitors to six months, 
allowing spouses and one other relative to accompany 
short-term visitors, and expanding the quota that Taiwan and 
some foreign-owned firms are subject to.  He said the 
proposed reforms should be available within the next two 
weeks.  We will report on the proposed changes septel when 
they are released.  In addition, the Ministry of Economic 
Affairs recently announced that PRC employees of high-tech 
firms with special skills will be able to apply for permanent 
residency after a two year stay in Taiwan.  The Council of 
Labor Affairs is also working on a proposal to grant work 
permits to PRC employees on long-term temporary assignment in 
Taiwan that should be implemented sometime next year. 
 
Comment 
------- 
 
10.  (C) As in other areas of cross-Strait commerce, many 
firms have found a way to get what they need within the 
limitations of a flawed system.  The market has also stepped 
in to help them as demonstrated by the availability of 
consulting services to assist in obtaining entry permits. 
Nevertheless, the entry permit process for Mainland visitors 
is another example of how Taiwan's cross-Strait restrictions 
reduce Taiwan's competitiveness.  Others include lack of 
direct air links, import bans, prohibited categories of 
investment, and currency exchange restrictions.  These 
impediments make Taiwan firms less competitive when it comes 
to taking advantage of business opportunities in the 
Mainland, and discourage foreign firms from conducting 
greater China business from Taiwan.  Many observers believe 
that multinationals are increasingly bypassing Taiwan 
altogether as a small market on the fringe of China.  As a 
result, Taiwan firms that want to remain competitive in 
regional and world markets face growing pressure to move 
management and other operations to the Mainland along with 
manufacturing.  If the Taiwan government doesn't get serious 
soon about liberalizing this and other obstacles in its 
cross-Strait economic relations, the trend toward 
marginalization will continue.  (End comment.) 
PAAL