US embassy cable - 04TAIPEI3839

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, Cross Strait Economics 
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