US embassy cable - 05TAIPEI4395

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, Cross Straits 
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 
--------------- 
 
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