AmCham Taipei

2015 Business Climate Survey

Full Results – January, 2015

Table of Contents

Chairman’s Message

Executive Summary – Key takeaways

Detailed Findings – Financial Measures

Mergers & Acquisitions (M&A)

Impacts

Human Resources

Trade Agreements

Quality of Life

About the Sample

Contacts

Table of Contents

3

Chairman’s Message

At the Five-Year Mark, Time for Serious Reflection Message from 2015 AmCham Chairman Thomas Fann

During the past several months, AmCham Taipei conducted its fifth annual Business Climate Survey, inviting the 422 voting representatives from our member companies (generally the CEOs) to answer a series of questions about the business environment in an online questionnaire.

I would like to express the Chamber’s appreciation to

Gordon Stewart of Independent Marketing & Research for his professional guidance in conducting the survey and analyzing the data.

Thanks are also due to the 245 member executives who took the time to complete the survey.

The high 58% response rate, which reflects members’ recognition of the importance of this exercise, has produced a solid quantity of data.

It is now possible to track AmCham leaders’ view of the business environment over a five-year time span. Overall, the results of the five surveys have been quite consistent. On the one hand, AmCham companies regard Taiwan as a good place to do business, characterized by an industrious and well-educated work force (although some respondents are reporting a shortage of suitable new personnel). Nearly all companies are profitable and are continuing to increase investment and expand employment. The executives are especially positive about the quality of life in Taiwan, describing this society as a safe and friendly environment in which to live and work.

But on the other hand, the 2015 survey reflects widespread frustration over certain chronic problems that have remained over the past five years without any substantial improvement – and in some cases have been worsening. Among the continuing chief points of dissatisfaction cited are inconsistent regulatory interpretations, excessive bureaucracy, outdated laws and regulations, inconsistent application of the rule of law, differences between local and internationally accepted standards, insufficient notice before regulatory changes are introduced, and lack of transparency. With regard to inconsistent regulatory interpretations, for example, 21% of the respondents say it has an “extreme impact” on their business while another 39% say it has a “significant impact.”

AmCham company leaders hope that the government – both the executive and legislative branches – will pay increased attention to these shortcomings in the interest of enhancing Taiwan’s international competitiveness, with favorable consequences for employment and overall prosperity. Other countries, notably Taiwan’s chief trade rival South Korea, are benefiting from participation in numerous free trade agreements. Since that path has been difficult for Taiwan to follow for political reasons, this country must find other ways to bolster its attractiveness to foreign partners for trade and investment. Regulatory reform should be at the top of the list.

During the past year, the Chamber has been encouraged by indications that the government has been reviewing the regulatory process with an eye to bringing Taiwan’s procedures in line with standard international practices. The direction is positive, but so far few major revisions have actually been put in place. The pace will need to be accelerated to enhance Taiwan’s chances for eventual inclusion in the Trans-Pacific Partnership. But whether or not TPP membership materializes, liberalization would improve Taiwan’s ability to compete effectively in global markets. We hope that we may look forward to the vigorous adoption of economic reform initiatives in the coming year, including implementation of the Free Economic Pilot Zone plan, to further strengthen Taiwan’s future economic outlook.

Thomas Fann - 2015 AmCham Taipei Chairman

9

Executive Summary

Key points

Financial metrics stable

Hiring is up, with more to come

Support for TPP entry and bilateral agreements which will assist Taiwan

China-Taiwan governmental relationship

“Inconsistent regulatory interpretation”

Adverse Changes in local demand

“Governmental Bureaucracy”

“Inadequate/Out-dated laws”

“Inconsistent application of the Rule of Law”

“Domestic political turmoil”

Executive Summary – Key Indicators

Executive Summary - Key Takeaways

More than half (54%) of all our member companies increased their employment numbers either significantly or slightly, during 2014.

This was more than they projected at this time last year.

The great news is they plan to hire still more in 2015.

Executive Summary - Key Takeaways

There is very strong support for Taiwan’s entry into the TPP.

Along with support for:

China-Taiwan Services Trade Pact; ECFA; TIFA; and the establishment of a USA-Taiwan BIA.

14

Detailed Findings

2014: A Relatively Good and Stable Year for Business

The majority (69%) of our business leaders experienced either a “relatively” or “very profitable” year in 2014. A very similar result to last year’s.

2015: More Of the same

The majority of our business leaders are forecasting, and expect, 2015 to be very similar to 2014, in terms of Revenue and Profits.

Short-term investment : Stabilizing

Investment levels are likely to remain unchanged or to increase slightly, in 2015 after recovering during 2013 and improving in 2014.

Unfortunately, or realistically…

…Taiwan is generally viewed as “Not a high priority” back at the global head office. Perhaps this also inhibits greater investment.

We said in previous years that Taiwan needs to better position and market itself to try and gain some more global attention. Changes to: personal taxation rates; improvements to direct foreign investment rules and incentives; research & development incentives; and lowering bureaucratic barriers, may go a long way here.

10%

3%

54%

11%

10%

7%

5%

10%

3%

46%

15%

7%

10%

10%

10%

4%

45%

13%

10%

9%

8%

10%

5%

48%

10%

7%

10%

10%

11%

1%

48%

12%

8%

10%

10%

Don't know/can't say

Looking to reduce investment/disinvest

Not a high priority

In the top 10

In the top 5

In the top 3

#1 Priority

How does Taiwan fit into your global entity’s investment plans?

2014

2013

2012

2011

2010

Looking forward five years…

A majority (60%) are either “optimistic” (18%) or “slightly optimistic” (42%) about their five-year business outlook in Taiwan. The optimists generally outweigh the pessimists by about four to one. This has been a fairly consistent outlook over recent years.

How would you describe your 5-year business outlook for Taiwan?

Merger & Acquisition (M&A) Activity

As economic indicators go, merger and acquisition activity has long been a sign of a maturing equity market and as general indicator of economic activity. From our survey over the last 5 years, Taiwan appears to have a relatively low level of M&A activity.

Still not much happening in M&A

Over the past five years, around 10% of our companies engaged in merger and acquisition (M&A) activity of a Taiwanese entity each year. This year, as in previous years, some tried and failed (3%), and some considered M&A but didn’t pursue it (21%). However, for the vast majority of business leaders (68%), M&A simply isn’t on their radar in any given year.

However, still one-in-five interested in M&A for 2015

It seems that in any given year, there are approximately twice as many who claim they would “definitely” or “possibly” consider M&A in the next 12 months (19%), compared to those who actually get an opportunity to pursue M&A.

Likelihood to consider M&A in the next 12 months

But when it happens there are sound business reasons for M&A

While only a few companies did attempt the M&A route in the past 12 months, their reasons for doing so, as in previous years, show sound business logic such as: To gain synergies (by reducing costs and improving profits), increase local market access, and enlarge their customer base.

These, as they have been over the past 5 years, are the major drivers behind M&A.

Top Objectives of M&A

0% 2% 4% 6% 8% 10% 12% 14% 16%

To eliminate competitionTo acquire key supplier(s)To improve IPO possibility

To acquire business license in a restricted…To acquire key local brand(s)

To acquire management teamTo gain access to Mainland market

To gain taxation advantagesA defensive move to counter competitor(s)

To acquire capacityTo acquire technology

To enlarge customer baseTo gain greater local market access

Ability to gain synergies (reduce costs -…

Primary Objective Secondary Objective Tertiary Objective

Finding an appropriate Target was the single major challenge to M&A in 2014

Followed by negotiating its valuation, and obtaining government approvals.

We note that inconsistency in interpretation of, and a lack of transparency in, government regulations, list prominently in the challenges standing in the way of mergers and acquisitions.

Major Challenges for M&A (2014)

Negotiating the letter of intent

Obtaining permission for target to be sold

Language issues

Transparency of regulations

Post-deal restructuring

Conducting due diligence

Financial issues

Inconsistent regulatory interpretations

Cultural issues

Obtaining government approvals

Negotiation of valuation gap

Finding an appropriate target

Major Challenge Second Third

What impacts their business?

“Inconsistent regulatory interpretation” this year has topped the list of greatest negative impacts on our members’ businesses, followed by “Changes in local demand”. Other consistent (negative) impacts are:

– Governmental Bureaucracy

– Inadequate/Out-dated laws

– Inconsistent application of the Rule of Law

Which of the following impacts your operation in Taiwan, and how much of an impact do they have? 2015 Ranking

2015 2014 2013 2012 2011 Issue

1 2 2 2 3 Inconsistent regulatory interpretation

2 3 1 1 1 Changes in local demand

3 1 3 4 2 Governmental Bureaucracy

4 5 4 6 5 Inadequate/Out-dated laws

5 4 New in 2014 Inconsistent application of the Rule of Law

6 9 5 3 4 Ability to recruit appropriate new personnel

7 7 New in 2014 Differences between local and internationally accepted standards

8 6 6 New in 2013 Insufficient notice before changes before changes to regulations or laws are introduced

9 8 9 10 10 Lack of transparency

10 13 New in 2014 Political turmoil in Taiwan

Which of the following impacts your operation in Taiwan, and how much of an impact do they have? 2015 Ranking Continued.

*Combined in 2011

2015 2014 2013 2012 2011 Issue

11 16 13 7 8 China-Taiwan government relations

12 14 15 11 16 Customs & Trade regulations

13 10 8 8 9 Changes in employment expenses

14 15 11 9 6* Corporate Taxation levels

15 11 12 12 12 Domestic protectionism

16 12 7 5 7 Currency Exchange rate fluctuations

17 17 10 New in 2013 Government reform/restructuring

18 18 18 22 6* Personal Taxation levels

19 24 19 17 22 Corruption

20 23 22 16 19 USA - Taiwan government relations

Which of the following impacts your operation in Taiwan, and how much of an impact do they have? 2015 Ranking Continued.

2015 2014 2013 2012 2011 Issue

21 22 17 14 28 Direct flights to/from Mainland

22 20 16 21 18 Changes in overseas demand

23 21 14 15 15 Intellectual Property Rights infringements

24 30 28 18 14 The Economic Cooperation Framework Agreement (ECFA)

25 19 New in 2014 Changes in Energy costs

26 27 21 20 24 Changes in Tariffs

27 25 25 19 17 Changes in Transport costs

28 26 27 26 25 Government procurement procedures

29 31 20 23 23 Financial Industry reform

30 29 26 27 21 Inadequate Infrastructure (Power, Water, Telecommunications, Transport, etc.)

Which of the following impacts your operation in Taiwan, and how much of an impact do they have? 2015 Ranking Continued.

2015 2014 2013 2012 2011 Issue

31 32 24 25 26 Changes in Raw Material costs

32 28 23 24 New in 2012

Changes in Financing costs

33 35 29 28 27 EU - Taiwan government relations

34 33 New in 2014 Ability of PRC personnel to travel to Taiwan

35 34 30 29 29 Illegal imports

36 36

New in 2014

Ability of PRC personnel to work in Taiwan

37 37 Ability to secure credit, locally

38 38 Ability to raise capital, locally

39 39 Access to Private Equity financing

What impacts their business?

Other Direct Quotations

“Energy costs are way too high” “Media sensationalism and

government fear of media”

“Lack of marketing sophistication, knowledge, and talent by companies operating in Taiwan”

Progress (and the lack of it) in Taiwan

When we view the issues that have made progress over the period 2008-2014 some good strides have been to help business – especially in connection with China. There has also been some progress, in the past, on Taiwan–USA relations, and intellectual property rights enforcement . However, the only item which has consistently been perceived as progressing has been “Direct flights to and from the Mainland”. Sadly, no other issue has made consistent progress over this time horizon.

Progress (and the lack of it) in Taiwan

What is worse, is that many issues have either regressed or stagnated when indeed they need to progress as they have a significant impact on business and the economy. Recently, “political turmoil” has regressed the most. The perception is that domestic protectionism, personal taxation imposts, government procurement procedures and energy costs have also worsened in the most recent 3 year period between 2012-15.

NB. Red indicates significant regress. Green indicates significant

progress.

What progress has been made in the past 3 years? Worst to Best ranking

2012-14

2011-13

2010-12

2009-11

2008-10

1 1 Political turmoil in Taiwan

2 6 7 3 5 Domestic protectionism

3 12 10 7 25 Personal Taxation levels

4 16 8 8 8 Government procurement procedures

5 8 Changes in Energy costs

6 2 3 12 10 Governmental Bureaucracy

7 7 Consistency of the application of the Rule of Law (i.e., well-established and clearly written rules, regulations, and legal principles)

8 26 Access to Private Equity financing

9 30 20 26 26 Corporate Taxation levels

10 5 6 1 2 Changes in Employment expenses

What progress has been made in the past 3 years? Worst to Best ranking

2012-14

2011-13

2010-12

2009-11

2008-10

11 11 12 10 3 Revision of inadequate/Out-dated laws

12 15 14 5 6 Changes in Raw Material costs

13 19 9 9 7 Changes in Financing costs

14 22 Ability to raise capital, locally

15 32 19 18 15 Changes in Tariffs

16 9 Sufficiency of notice before changes to regulations or laws are introduced

17 4 2 2 1 Consistency of regulatory interpretations

18 29 17 11 9 Illegal imports

19 14 11 6 11 Changes in Transport costs

20 13 16 19 14 Governmental reform/restructuring

What progress has been made in the past 3 years? Worst to Best ranking

2012-14

2011-13

2010-12

2009-11

2008-10

21 3 1 4 4 Ability to Recruit Appropriate New Personnel

22 17 21 25 18 Corruption

23 10 5 20 19 Changes in Local Demand

24 25 22 16 17 Customs and trade regulations

25 18 18 15 12 Transparency

26 20 Ability to secure credit, locally

27 23 13 13 13 Financial Industry Reform

28 21 15 17 24 Changes in Overseas Demand

29 28 Differences between local and Internationally accepted standards

30 31 24 24 23 EU - Taiwan government relations

What progress has been made in the past 3 years? Worst to Best ranking

2012-14

2011-13

2010-12

2009-11

2008-10

31 36 27 27 28 The Economic Cooperation Framework Agreement (ECFA)

32 24 4 14 16 Management of Currency Exchange rate fluctuations

33 33 25 22 22 Intellectual Property rights enforcement

34 35 Ability of PRC personnel to work in Taiwan

35 34 26 21 20 USA - Taiwan government relations

36 27 23 23 21 Infrastructure (Power, Water, Telecommunications, Transport, etc.)

37 38 28 28 27 China - Taiwan government relations

38 37 Ability of PRC personnel to travel to Taiwan

39 39 29 29 29 Direct flights to/from the Mainland

The major worries confronting business

A slowdown in consumption within Taiwan’s domestic economy is, unsurprisingly, the greatest worry for our business leaders. Whilst also concerned about the Global economy, there is a newly identified concern surrounding the uncertainty in Taiwan’s policy towards China.

Lack of suitable human resources and the increase in political unrest within Taiwan, in 2013 and 2014, round out the top five concerns.

What are the major risks facing your entity in the coming years?

How could governments help?

The survey asked: What are the main things the Taiwanese and the USA governments could do in the next 12 months to help business?

For the Taiwan government the top issues are the recurring themes of: Reduce Political Turmoil, Simplify Government Bureaucracy, Resolve Inadequate/Out-dated laws, Remove differences between local & internationally accepted standards, and Reduce Personal Taxation.

Main things Taiwan Government Could do to Help. (Ranked in order) Issue 2015 2014 2013 2012 2011

Reduce Political Turmoil in Taiwan 1 1

Simplify Government Bureaucracy 2 2 1 1 1

Resolve Inadequate/Out-dated laws 3 7

Remove differences between local & internationally accepted standards

4 5

Reduce Personal Taxation 5 6 3 3 2

Devise plan to stimulate local demand 6 3

Consistent application of the Rule of Law 7 4

Provide sufficient notice before changes to regulations or laws are introduced.

8 8

Reduce domestic protectionism 9 11

Broaden ECFA 10 9 10 7 7

Reduce Employment expenses 11 24

Negotiate and sign a Bilateral Investment Agreement with the USA

12 14 16 19

Liberalize the Labour market 13 23 5 5 10

Other things Taiwan Government Could do to Help. (in 2015 rank order)

Increase Direct Foreign Investment incentives 14

Improve Research & Development incentives 15

Reduce Corruption 16

Finalize policy regarding the China-Taiwan Services Trade Pact 17

Negotiate and sign more bilateral trade deals with other (non-US) countries 18

Pass Free Economic Pilot Zones (FEPZ) legislation 19

Reduce Corporate Taxation further 20

Maintain reasonable and stable Energy costs 21

Improve Government procurement procedures 22

Tighten enforcement of Intellectual Property rights 23

Reduce Tariffs 24

Improve Inadequate Infrastructure (Power, Water, Telecommunications, Transport, etc.) 25

Implement Financial Industry Reform 26

Educate civil servants on international regulatory best-practices 27

Allow PRC personnel to work in Taiwan 28

Other things Taiwan Government Could do to Help. (in 2015 rank order)

Manage Currency Exchange rate fluctuations 29

Devise plan to stimulate Overseas Demand 30

Allow PRC personnel to travel to Taiwan 31

Introduce stronger Corporate Governance rules 32

Tighten enforcement of illegal imports 33

Conduct more regular follow-up meetings TIFA items with the USA 34

Improve Training Incentives 35

Lower Financing costs 36

Improve ability to secure credit, locally 37

Improve access to Private Equity financing 38

Tighten enforcement of Trade Secrets Protection 39

Reduce Transport costs 40

Improve ability to raise capital, locally 41

Solve Agricultural disputes with the USA 42

Open up the tertiary education market to foreign players 43

How could the Taiwan government help? Additional suggestions…

“Encourage more foreign investment to induce more domestic demand and economic growth in Taiwan”

“Top 1 - Allow PRC travelers to connect at TPE for 3rd country”

“Restructure real estate taxes”

“Address real estate market imbalances”

“Reform Industrial Zoning to allow for more of it. Currently many SME companies use loopholes to build on agricultural land. There is no political will to reform this zoning restriction for light industry because everyone is focused only on tourism development Zoning in Taiwan for light industrial real estate for rent or purchase is far and few between. Government sponsored industrial parks are logistically too far from city centers resulting in commuting and recruiting problems. One example includes the Hsin Chu Science Park which forced the government to spend Billions on infrastructure for Highways, and HSR so human capital can access these faraway industrial parks. General Land Zoning reforms and central planning must take place through national leadership not seen since Chiang Ching Kuo. ”

“Taipei needs another International School for foreign families to attend. TAS and TES are full and unaffordable for many families”

“Well educated in some areas and bad in others. Advertising and brand design are very very low quality educations compared to the UK/EU standard (which is higher than the USA standard).”

“Government (extremely) lacks capability and accountability on solving crisis such as Ding Sing toxic oil issue without strict ‘law enforcement‘ and agility to punish the crime and fix the problem.”

“Taiwan needs a more fully-developed risk analysis market. In our firm, we are unable to develop a more effective practice without experienced personnel, external competition, etc. Particularly lacking in Taiwan is non-financial due diligence/forensic investigations and political/country risk. Greater availability of these services would give our clients greater peace of mind in doing business in Taiwan (and Taiwan companies expanding elsewhere in Asia), and the greater availability of trained talent in this area would help us more fully develop our own advisory service line.”

Main things USA Government Could do to Help. (Ranked in order)

Issue 2015 2104

Assist Taiwan to prepare for accession to TPP 1

Negotiate and sign a Bilateral Investment Agreement with Taiwan 2 1

Conduct more regular follow-up of TIFA items with Taiwan 3 2

Send more senior US Government officials to visit Taiwan 4 5

Reduce Corporate Taxation 5 3

Reduce Personal Taxation 6 4

Repeal or reevaluate the Foreign Account Tax Compliance Act (FACTA)

7

Negotiate and finalize an Extradition Treaty with Taiwan 8 6

Resolve Agricultural disputes with Taiwan 9

How could USA government help? Additional suggestions…

“1. Continue the financial industry regulatory reform 2. Provide incentive to bring talented personnel and investment to Taiwan in financial sector 3. Continue to build a transparent and consistent regulatory environment” “Stop talking about Pork and other ag products -- focus on higher value exports, such as services. Constant irritation on meat imports damages the American ‘brand’ and our business suffers.” “Assist [Taiwan] to build updated Governance of Food Safety and Sanitation”

Taiwan Government Incentives

For the second time we asked our members if they had taken advantage of any incentives provided by the various levels of government in Taiwan. The answer was that the majority had not.

Has your company participated in, or taken advantage of, any of the Taiwan government's business incentives?

Yes 15% Yes 10%

No 73% No 71%

Don't know 12% Don't know 19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015

Taiwan Government Incentives

Of those who had, the most popular incentives were:

– Tax Incentives for R&D – Low Interest Loans – Government Participation in Investment – Free Trade Zone Incentives – Indirect Tax Incentives for Science Parks, Export

Processing Zones, Bonded Factories, and Bonded Warehouses

It should be noted that in some cases, multiple incentives were utilized.

Full Time Equivalent Employees(FTEE)

As noted last year, our members hired more staff and they were forecasting an intention to continue hiring into this year. In reality, they surpassed their forecast and hired more.

Even more pleasing is the fact that they are forecasting more hiring into 2015.

During 2014…

• 55% (versus 43% in 2013) of AmCham companies increased their Full Time Equivalent Employee (FTEE) numbers either significantly or slightly.

• 32% (39% in 2013) maintained their numbers of FTEE

• And only 13% (2103 = 17%) decreased their numbers either slightly or significantly 1.3%(less than 1%)

• Medium- sized (50+FTEE) and very large (2000+FTEE) companies, were more likely to have increased their workforces, in 2014

Changes in FTEE

7%

36% 39%

16%

1% 2%

39%

49%

8%

0% 1%

7%

48%

32%

12%

1% 4%

45% 42%

7%

2% 1% 0%

10%

20%

30%

40%

50%

60%

Increasedsignificantly

Increasedslightly

No change Decreasedslightly

Decreasedsignificantly

DK

2013 Actual 2014 Forecast 2014 Actual 2015 Forecast

Hiring occurred across a broad range of industries…

…However, the top 10 that increased their headcount the most during 2014 were:

1) Legal Services

2) Medical Devices

3) Banking Services

4) Manufacturing – General

5) Human Resource Consulting

6) Food and/or Non-Alcoholic Beverages

7) Consumer Packaged Goods

8) Insurance

9) Travel and Leisure

10) Logistics & Distribution

And hiring is planned to continue to increase into 2015

• The majority (49%) of our members plan to increase their headcount during 2015

• 42%, will maintain their 2014 levels. • Only 7% anticipate reducing their headcounts

slightly • And less than 3% are either unsure or plan to reduce

significantly (1.6%) • Medium- sized (50+FTEE) and very large (2000+FTEE)

companies, are more likely to be planning to increase their workforces, in 2015.

Industries with hiring intentions for 2015

A slightly different mix of business are planning to increase their headcounts during 2015. The top 10 industries include:

1. Banking Services 2. Medical Devices 3. Legal Services 4. Human Resource Consulting 5. Insurance 6. Accommodation and Food Services 7. Travel & Leisure 8. Securities, Mutual Funds, Asset Management 9. Chemicals 10. Real Estate and Rental and Leasing.

Human Resources – Remain a big issue

Deficiencies in the quantity and quality of available human resources are one of the highest risk factors seen as confronting businesses in the future.

We asked our corporate leaders to give us their impressions of the quality of available human capital in Taiwan. First the positives…

Taiwanese Human Resources are seen as …

…Hard-working, very trustworthy, extremely well-educated, very loyal, easy to develop or train, highly productive, generally show a high degree of emotional intelligence quotient (EQ), and generally well-rounded. A very positive profile of the workforce.

Understandably, no major changes where seen in this year’s survey compared to the past three years.

Perception of Human Capital in Taiwan – Positive Net Scores

0 50 100 150 200

Good English skills

Easy to retain

Well-rounded

Show a high degree of EQ

Highly productive

Extremely well educated

Easy to develop/train

Very loyal

Very trustworthy

Hard working

However…

They are not perceived as easy to recruit, nor of being of ‘World-class’ standard; do not display a great deal of creativity, nor initiative, and are perceived as not being innovative.

Perception of Human Capital in Taiwan – Negative Net Scores

-30 -25 -20 -15 -10 -5 0

Innovative

Show a great deal of initiative

Show a good deal of creativity

Of 'World class' standard

Easy to recruit

Trans Pacific Partnership (TPP)

The TPP is s a free-trade agreement currently being negotiated by 12 nations (US, Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru). The aims of TPP are to eliminate, or at least substantially reduce, barriers to trade and investment and to create 'gold standards' to deal with economic issues such as intellectual property. Taiwan’s potential membership to this group prompted the most spontaneous commentary amongst our business leaders. See “Additional comments”

Trans Pacific Partnership (TPP)

TPP - Business leaders are sure that …

• Taiwan is capable of meeting the high standards required for membership into the Trans Pacific Partnership (TPP) with more than 2 out of 3 agreeing that Taiwan is.

• Whilst only around one in three (36%) are convinced that Taiwan will be accepted as a member of the TPP, nonetheless, a resounding majority (83%) of leaders believe that Taiwan should continue to pursue membership with only 3% suggesting that it shouldn’t.

Is Taiwan capable of meeting the high standards required for membership into the TPP?

Yes! 65% Yes! 68%

No! 13% No! 12%

Don't know? 23%

Don't know? 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015

Will Taiwan be accepted as a member?

Yes! 40% Yes! 36%

No! 21% No! 19%

Don't know? 39%

Don't know? 45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015

Should Taiwan pursue membership of the TPP?

Yes! 83% Yes! 83%

No! 2% No! 3%

Don’t know? 15%

Don’t know? 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015

TPP – Additional comments …

“Taiwan needs to bring its regulatory environment to close to TPP standards to be considered” “Taiwan has a long way to go to meet the standards, and to be accepted given its political status.” “Need for government to support local manufacturing industry to increase their competitiveness” “Becoming a member is the most important issue for Taiwan's future both economically and politically”

“USA should stop forcing its IP standards on other markets” “TPP is a crowbar for USA special interests and hurts Taiwan” “China will not allow it” “China seems to try and block Taiwan by pressuring others” “The 12 nations will see China's thinking.” “[Taiwan’s entry will] probably be blocked by China” “This is a political play by China to limit Taiwan acceptance as a member”

“Likely to be dependent on 1. If China 'allows' it and 2. If the US supports Taiwan.”

“China will try to prevent it and has a high chance to succeeding at pressuring other countries to reject Taiwan's bid. Nevertheless, Taiwan must not sacrifice its sovereignty for empty promises of Chinese support.” “All depends on willingness of political leaders in Taiwan to make change happen” “Not able to see the political resolve to make necessary regulatory reform. Only see empty rhetoric from both Blue and Green camps”

China-Taiwan Services Trade Pact

In June, 2013 China and Taiwan signed a services trade agreement with the intent to open areas such as financial services, retail and travel, to greater levels of cross-strait investment. We asked our business leaders what they thought about it and who they believed would gain (or lose) from it. There has been little change in the results over the past two years.

China-Taiwan Services Trade Pact

• 60% of our members think that this will help Taiwan

• Even more (70%) think it might advantage China slightly more than Taiwan, with some believing it would actually hurt Taiwan (22%).

• Few (3%) believed it would hurt China with some believing it may hurt the USA (11%)

• However, the majority were of the belief that it would not hurt the USA (48%).

China-Taiwan Services Trade Pact will assist Taiwan

60% 16%

24%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact will assist China

70%

7%

23%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact will hurt Taiwan

22%

51%

27%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact will hurt China

3%

74%

22%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact will assist the USA

26%

28%

46%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact will hurt the USA

11%

48%

41%

2015

Yes

No

Don't know/can't say

China-Taiwan Services Trade Pact – Additional comments…

“Taiwan should move slowly with China while embracing agreements with other countries.” “Taiwan would be beneficial economically but might be detrimental on a political and societal level given the implications.” “This should not be the priority for Taiwan to pursue international trade agreements.” “The economic impact for all sides is marginal. China's interests are political, and Taiwan (and by extension, the US) will be severely hurt politically by the agreement.”

“The US needs to stop perceiving Taiwan as a bargaining chip in their geopolitical tussle with China in Asia. This will lead to a bifurcation of opinions in both the US and Taiwan on the nature of Taiwan's long-term relationship goals with China, and eventual gridlock in policy. The US should consider Taiwan as a ‘Trojan horse’ strategy to influence the Chinese political system.”

ECFA…Business leaders are (still) bullish on ECFA

The Economic Cooperation Framework Agreement (ECFA), is generally perceived has having a positive effect on Taiwan as a whole, and positive for our members businesses. The effect on the U.S.A., is more neutral with many seeming unsure what, if any, impact it has, or will have, on the U.S.A.

ECFA’s effect on the U.S.A. (NB: New question in 2012)

27%

2%

8%

32%

27%

5%

25%

2%

6%

35%

30%

3%

23%

1%

8%

36%

30%

2%

23%

1%

10%

35%

27%

4%

Don't know/can't say

Very Negative Effect

Some Negative Effect

Neither Positive nor Negative

Some Positive Effect

Very Positive Effect

2015

2014

2013

2012

TIFA - Business leaders glad to see a resumption of talks

The resumption of Trade and Investment Framework Agreement (TIFA) talks in 2013, after a 5 year break, was a welcome relief.

Taiwan, as a country, is seen as receiving the greatest advantage resulting from TIFA talks, followed by the USA, and to then to a lesser extent our members’ individual businesses.

Belief that TIFA talks impact Taiwan

0%5%

10%15%20%25%30%35%40%45%

2015

Belief that TIFA talks impact USA

0%5%

10%15%20%25%30%35%40%45%

2015

Belief that TIFA talks impact my business

0%5%

10%15%20%25%30%35%40%45%

2015

The lack of a Bilateral Investment Agreement (BIA) with the USA…

Is perceived as negatively impacting Taiwan the most. The USA and to a lesser extent their individual businesses, are also believed to be disadvantaged by the lack of a BIA.

Effect on Taiwan of a lack of a Bilateral Investment Agreement with the U.S.A. (NB: New question in 2012)

20%

7%

11%

40%

22%

16%

6%

13%

44%

22%

24%

6%

17%

34%

19%

27%

7%

14%

32%

20%

Don't know/can't say

Not a disadvantage

Slight Disadvantage

Disadvantage

Major Disadvantage

2015

2014

2013

Effect on the U.S.A. of a lack of a Bilateral Investment Agreement with Taiwan (NB: New question in 2012)

25%

14%

22%

27%

12%

21%

10%

20%

39%

9%

26%

9%

23%

31%

10%

30%

13%

22%

27%

8%

Don't know/can't say

Not a Disadvantage

Slight Disadvantage

Disadvantage

Major Disadvantage

201520142013

Effect on my business of a lack of a Bilateral Investment Agreement between Taiwan and the U.S.A. (NB: New question in 2012)

22%

25%

22%

23%

8%

20%

21%

22%

28%

9%

27%

18%

20%

25%

9%

27%

20%

16%

25%

12%

Don't know/can't say

Not a Disadvantage

Slight Disadvantage

Disadvantage

Major Disadvantage

2015201420132012

*Whilst we use the term “Taiwan” it should be remembered that most of our leaders live in the Taipei area and many of their comments will reflect “living in Taipei”.

And finally…”The Living is Nice, Easy, & Safe”

When asked about the quality of life in Taiwan*, corporate leaders strongly agree that Taiwan is a place where: “Taiwanese people are extremely nice”; “My family feels safe”; and “Taiwan is an easy country to live in”.

Understandably, there was no significant change in the rankings in this year’s survey.

The Top Benefits of Living in Taiwan

2015 Ranking

2014 Ranking

2013 Ranking

2012 Ranking

2011 Ranking

Benefits

1 1 1 1 2 Taiwanese people are extremely nice

2 2 2 2 1 My family feels safe in Taiwan

3 3 3 4 3 Taiwan is an easy country to live in

4 4 4 3 4 Taiwan provides quality Health/Medical/Dental services

5 5 7 6 5 Alternative transportation options are usable and provide options to driving my car (i.e., buses, bike lanes, taxis, trains, sidewalks).

6 7 5 5 6 Taiwan delivers reliable electricity.

7 6 6 7 7 Taiwan provides adequate shopping opportunities

8 8 9 9 8 Mobile telephone coverage is excellent

9 9 8 10 10 The Postal service is excellent

Living in Taiwan…The not so great things.

• Given the topicality of food scandals, it is not surprising that food safety reached the number one spot this year of the worst things about living in Taiwan. More typically over the last 5 years we have seen that:

– Taiwan is not an English-friendly environment

– The quality of the drinking water could be improved

– Banking and other financial services are seen as sub-par

The Least Appreciated Aspects of Living in Taiwan #1 =The Worst Aspect

2015 2014 Ranking

2013 Ranking

2012 Ranking

2011 Ranking

Concerns

1 New in 2015 Taiwan provides safe food

2 1 1 1 New in 2012

Taiwan provides an 'English-friendly' environment for me and my family

3 3 4 6 4 Banking and other financial services are excellent

4 2 3 3 3 Taiwan provides quality drinking water.

5 4 7 5 4 The library services provided to our community are current and meet our needs

6 8 9 10 8 The standard of schooling is excellent

7 5 2 2 1 Water runoff from storms is controlled and minimizes flooding

8 6 6 4 2 Taiwan provides quality youth activities

9 13 8 9 6 Taiwan provides quality Police services

10 7 5 8 7 The sewer system in Taiwan works reliably

106

About our sample

Who, When, and How.

• The survey was addressed, via email, to the 422 voting representatives – usually the CEO – among AmCham’s Corporate Sustaining and Company membership.

• The survey invitation was sent out on October 17, 2014, and the last response was accepted on November 30, 2014.

• The 30-question survey was conducted online with each respondent receiving a unique link.

• Certain question choices were randomized - to avoid bias.

• The survey received a total of 245 responses, representing a 58% response rate.

Industry Classifications

• Our respondents identified their industry classification based upon the one which best described their principal business in Taiwan.

• We have reclassified our sample according to the STANDARD INDUSTRIAL CLASSIFICATION SYSTEM OF THE REPUBLIC OF CHINA（Rev.9 , 2011) and used the STATISTICAL YEARBOOK OF THE REPUBLIC OF CHINA 2013, Edited 2014, for the number of businesses.

• Our sample draws from all of the major industrial classifications in Taiwan.

Industry Classifications (Cont’d.)

• Our sample is more skewed towards ‘Manufacturing’, ‘Professional Scientific and technical services’, and the ‘Finance and Insurances’ industries. And it is under-weighted in the ‘Wholesale and Retail Trade’ industry – by virtue of the fact there are almost 645,000 of these businesses registered in Taiwan, representing almost 50% of all business numbers. With these covenants, we believe the sample to be a fairly good representation of business in Taiwan and an extremely good sample of AmCham’s corporate membership.

0.8%

0.0%

29.0%

1.6%

0.0%

1.6%

3.7%

6.0%

7.4%

4.4%

13.8%

2.9%

21.9%

1.5%

1.6%

0.4%

3.6%

0.9%

0.1%

10.8%

0.0%

0.5%

7.8%

49.7%

2.3%

9.3%

1.3%

2.0%

2.3%

3.0%

2.1%

0.1%

2.0%

5.7%

Agriculture, forestry, fishing, & animal husbandry

Mining & quarrying

Manufacturing

Electricity, gas supply

Water supply & remediation services

Construction

Wholesale & retail trade

Transportation & storage

Accommodation & food services

Information & communication

Finance & insurance

Real estate

Professional, scientific & technical services

Support services

Education

Arts, entertainment & recreation

Other services

2014/5 Sample 2014 Taiwan

Type of legal entity

• Unsurprisingly, the vast majority of businesses in this sample are wholly foreign-owned through a combination of subsidiaries, branch offices and wholly-owned full companies.

• A few of those surveyed also have R&D centers and some have regional HQ’s and even global HQ’s, located in Taiwan. Consequently, the results in the next chart show multiple responses and total more than 100%.

Time in Taiwan

• In terms of the time that there has been a physical presence in Taiwan, our sample is split roughly into four ‘ages’:

– 29% are relatively new to Taiwan with less than 15 years here

– 25% have been established between 16-25 years

– 20% have been established for 26-35 years

– And those who are well-established (more than 35 years) at 26%.

Number of Full Time Equivalent Employees (FTEE)

• Our sample covers a wide spectrum of employers - from the very small to the very large.

– 19% employ less than 20 FTEE

– 23% employ between 21 and 75

– 23% between 76 and 250

– 19% between 251 and 750

– 16 % more than 751 (7% of whom employ more than 2000).

Business Focus

• The business leaders surveyed are clearly focused on Taiwan as the primary goal of over 70% of the entities is to supply the Taiwan market with goods or services. This makes their comments and observations especially pertinent to the Taiwan

government. Those selecting “Other” are looking to service multiple markets - other than those specified.

Statistical Testing for Significance

• When comparing the results against previous years surveys we performed a Chi-square test for the comparison of two proportions (from the two independent samples), expressed as a percentage. Note that for this Chi-square test Yates' correction for continuity is applied, and that P-values are two-sided (or two-tailed). When the calculated P value is less than 0.05, the conclusion is that the two proportions are significantly different.

• Throughout the results we have highlighted the difference between the two proportions (at the 95% confidence level) via our commentary when we have detected a significant change.

For more details, contact…

• American Chamber of Commerce in Taipei Suite 706, Worldwide House, 129 MinSheng East Road, Section 3, Taipei 10596, Taiwan

Tel: +886-2-2718-8226 Fax: +886-2-2718-8182

amcham@amcham.com.tw

OR:

Independent Marketing & Research Limited at: gordon@independentmarketing.com.au