amcham taipei business climate survey
DESCRIPTION
Results of the online survey conducted in November and December 2014 by Independent Marketing & Research Limited on behalf of AmCham Taipei. Of the 422 voting representatives (mainly CEOs) from AmCham member companies who were invited to take part, 245 did so for a 58% response rate. The sample covered a wide spectrum of companies by size of employment – from the very small to the very large. The primary business focus of more than 70% of the respondents is to supply goods or services to the Taiwan domestic market.TRANSCRIPT
Detailed Findings
2015 Business Climate Survey
Summary of Results
Results of the online survey conducted in November and December 2014 by Independent Marketing & Research Limited on behalf of AmCham Taipei. Of the 422 voting representatives (mainly CEOs) from
AmCham member companies who were invited to take part, 245 did so for a 58% response rate.
The sample covered a wide spectrum of companies by size of employment – from the very small to the very large. The primary business focus of more than 70% of the respondents is to supply goods or
services to the Taiwan domestic market.
American Chamber of Commerce in Taipei
Suite 706, Worldwide House129 MinSheng East Road, Section 3, Taipei 10596, Taiwan
Tel: +886-2-2718-8226 Fax: +886-2-2718-8182www.amcham.com.tw
C O N S U L T A N T
S P O N S O R
2 2015 TAiwAN BUSiNeSS CLimATe SUrvey
2015 Business Climate Survey
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 atten-tion 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 participa-tion 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 even-tual 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 Tai-wan’s future economic outlook.
Thomas Fann2015 AmCham Taipei Chairman
At the Five-Year Mark, Time for Serious Reflection
Message from 2015 AmCham Chairman Thomas Fann
2015 TAiwAN BUSiNeSS CLimATe SUrvey 3
2014 Business Climate SurveyExecutive Summary
Major Takeaways
>General Conditions• OftheAmChamexecutivestakingthesurvey,69%percentreportedthatthepastyearwasveryorrelativelyprofitable.• Comparedwithlastyear’ssurvey,thenumberofrespondentsforecastinggrowthinrevenueandprofitsinthecomingyear
wasaboutthesame(63%vs.61%),aswasthenumberforecastingincreasedlevelsofinvestment(48%vs.50%).• 60%oftheexecutivesexpressedoptimismaboutthefive-yearbusinessoutlook.• Morethanhalfofthesurveyedcompanies(56%)increasedtheiremploymentin2014,and49%anticipatefurther
increases in hiring in 2015.• TheTaiwanworkforcecontinuestobeviewedveryfavorablyforbeingindustriousandwell-educated,thoughlaggingin
creativity, initiative, and international-mindedness.• Taiwanratesveryfavorablyasasafeandcomfortableplacetolive.Foodsafetyisviewedasaproblem,however,andthe
English-language environment needs improvement.
>Areas of Concern• Overthepastfiveannualsurveys,thefactorscitedbyrespondentsashavingamajornegativeimpactontheirbusiness
operations have been largely the same: inconsistent regulatory interpretations, adverse changes in local demand, govern-mental bureaucracy, inadequate/out-dated laws and regulations, and inconsistent application of the rule of law.
• Domesticpoliticalunrestwasalsoviewedasagrowingproblem,aswereprotectionismandgovernmentprocurementpro-cedures.
• Thesinglecategorycitedasshowingmarkedprogressisdirectflightsto/frommainlandChina.• Governmentaction(necessarilyfromboththeexecutiveandlegislativebranches)isrequestedtodealwiththeareasof
deficiency.
>Trade Pacts• TherespondentsexpressedsupportforTaiwan’sentryintotheTrans-PacificPartnership(TPP)andforaBilateralInvest-
ment Agreement between Taiwan and the United States.• ECFAisgenerallyperceivedashavingapositiveeffectonTaiwanasawholeandonAmChammembers’ownbusinesses.• OnthequestionofwhethertheCross-StraitServicesTradeAgreementwouldbebeneficialtoTaiwan,60%ofrespondents
said yes, 24% no, and the rest had no opinion
4 2015 TAiwAN BUSiNeSS CLimATe SUrvey
2015 Business Climate Survey
2014: A decent year for business
A substantial 70% of the companies surveyed – the highest percentage since 2011 – said their operations last year were either very or relatively profitable. The 14% describing the performance as “very profitable” was also the highest since the same level was reached in 2011. Most of the remaining respondents reported finishing 2014 at break-even or with a small profit or loss, with only 2% reporting a “relatively large loss” and none experiencing a “very large loss.”
2015 Forecast: More of the same
11% of respondents, the same proportion as last year, said they expect to achieve “substantial growth” in both revenue and profits in the coming year. Those anticipating “modest growth” in both revenue and profits came to 50%, slightly less than the 53% of the past two years. A total of 9% said revenues and profits were likely to see a “modest decline” in 2015.
2015 TAiwAN BUSiNeSS CLimATe SUrvey 5
2014 Business Climate SurveyDetailed Findings
92% of the executives said their companies were likely to invest at least as much in the next 12 months as they did the previous year. 10% (compared to 7% last year) said they expected to make a “substantial increase” in investment, while 40% (41% last year) said there would be a “slight increase.”
Looking ahead five years
After a three-year slide, those describing themselves as optimistic or slightly optimistic about business prospects over thenextfiveyearsamountedto60%ofrespondents.Fromahighof81%in2011,thatfigurehadfallento65%in2012,56%in2013,and54%in2014beforerisinginthe2015survey.
Near-term Investment: Further momentum
6 2015 TAiwAN BUSiNeSS CLimATe SUrvey
2015 Business Climate Survey
“Inconsistent regulatory interpretations” ranked as the number-one factor that respondents said had the biggest impact on their business. “Changes in local demand” was second, reflecting the fact that most AmCham member companies focus chiefly on the local market.
Other adverse factors cited among the top 10 were governmental bureaucracy, inadequate/outdated laws, inconsistent appli-cation of the rule of law, difficulty recruiting appropriate new personnel, differences between local and internationally accepted standards, insufficient notice before changes to laws or regulations are introduced, lack of transparency, and domestic political unrest.
What impacts their business?
2015 TAiwAN BUSiNeSS CLimATe SUrvey 7
2014 Business Climate SurveyDetailed Findings
Where has progress occurred?
Most of the major progress over the past three years, in the opinion of the respondents, was in the area of cross-Strait relations. In fact, the only item where the number of respondents seeing significant improvement was in double digits was for direct flights between Taiwan and mainland dest inat ions (19.3%). Many other categories saw little progress over the past three years, or even regressed. Among the areas seen as wors-ening were political unrest, domestic protectionism, personal taxation, and government procurement procedures.
Issue
1 1
2012-14 2011-13 2010-12 2009-11 2008-10
2 6 7 3 53 12 10 7 254 16 8 8 85 8 6 2 3 12 107 7 8 26 9 30 20 26 26
10 5 6 1 211 11 12 10 312 15 14 5 613 19 9 9 714 22 15 32 19 18 1516 9 17 4 2 2 118 29 17 11 919 14 11 6 1120 13 16 19 1421 3 1 4 422 17 21 25 1823 10 5 20 1924 25 22 16 1725 18 18 15 1226 20 27 23 13 13 1328 21 15 17 2429 28 30 31 24 24 2331 36 27 27 2832 24 4 14 1633 33 25 22 2234 35 35 34 26 21 2036 27 23 23 2137 38 28 28 2738 37 39 39 29 29 29
Ranking
Political turmoil in Taiwan
Domestic protectionism
Personal taxation levels
Government procurement procedures
Changes in energy costs
Governmental bureaucracy
Consistency in the application of the rule of law
Access to private equity financing
Corporate taxation levels
Changes in employment expenses
Revision of inadequate/outdated laws
Changes in raw material costs
Changes in financing costs
Ability to raise capital locally
Changes in tariffsSufficiency of notice before changes to
regulations or laws are introducedConsistency of regulatory interpretations
Illegal imports
Changes in transport costs
Governmental reform/restructuring
Ability to recruit appropriate new personnel
Corruption
Changes in local demand
Customs and trade regulations
Transparency
Ability to secure credit locally
Financial industry reform
Changes in overseas demandDifferences between local and Internationally
accepted standardsEU - Taiwan government relations
Economic Cooperation Framework Agreement (ECFA)
Management of currency exchange rate fluctuations
Intellectual Property Rights enforcement
Ability of PRC personnel to work in Taiwan
USA - Taiwan government relations
Infrastructure (power, water, telecom, transport, etc.)
China - Taiwan government relations
Ability of PRC personnel to travel to Taiwan
Direct flights to/from mainland China
What progress has been made in the past 3 years? Worst to Best ranking
Green = significant progress (top 10th percentile)Red = significant regression (top 10th percentile)
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2015 Business Climate Survey
The major worries confronting business
Respondents were invited to tick all the items they considered applicable. Topping the list of prospective concerns, both cited by 54% of respondents, were 1) an economic slowdown affecting Taiwan’s domestic consumption and 2) a global economic slowdown. Others in the top 10 included uncertainty in Taiwan’s policy toward China (new to the survey in 2015), shortage of human resources, increased domestic political unrest, economic slowdown in mainland China, increased governmental interference, enactment of TPP without Taiwan (also new in 2015), economic slowdown in the USA, and economic slowdown in Europe.
Increased domestic political unrest
Lack of Human Resources
Uncertainty in Taiwan’spolicy towards China
Global economic slowdown
Economic slowdown inTaiwan’s domestic consumption
Increased governmental interference
Economic slowdown in Europe
Enactment of TPPwithout Taiwan as a member
Taiwan Dollar (TWD) depreciation
Economic slowdown in USA
Taiwan inflation rising
Economic slowdown inmainland China
Taiwan unemployment rising
Decreased exports
Energy shortage in Taiwan
Taiwan Dollar (TWD) appreciation
Increased imports
54%
54%
42%
35%
32%
30%
30%
20%
19%
18%
17%
14%
13%
12%
12%
11%
2%201320142015
20122011
0 10 20 30 40 50 60 70 80 %
58%54% 64%61%
58% 72%74%69%
34%
40%
37%
37%39%34%28%
34% 41%40%27%
25%
18%
20%
18%16%
15%10%
12%
11%
3%2%2%2%
15%17% 22%
18%16% 20%
26%22%19%
18%18% 24%
35%36%
42%41%28%
22% 32%33%
35%35%
36%
What are the major risks facing your entity in the coming years?
2015 TAiwAN BUSiNeSS CLimATe SUrvey 9
2014 Business Climate SurveyDetailed Findings
Utilization of business incentives
Relatively few respondents have taken advantage of incentives provided by various levels of government in Taiwan. For those who had, the most popular incentives were tax incentives for R&D, low-interest loans, government participation in investment, Free Trade Zone incentives, and indirect tax incentives for Science Parks, Export Processing Zones, bonded factories, and bonded warehouse.
Has your company participated in, or taken advantage of, any of the Taiwan government's business incentives?
Yes
No
Don’t know
2014 2015
15%10%12%
19%
71%73%
What needs to be done
The survey asked:“What are the main things the Taiwan and U.S. governments could so in the next 12 months to help business?”
1. Reduce political turmoil
2. S i m p l i f y g o v e r n m e n t bureaucracy
3. Resolve inadequate/out-dated laws
4. R e m o v e d i f f e r e n c e s between local & interna-tionally accepted standards
5. Reduce personal taxation
6. Devise plan to stimulate local demand
7. Consistently apply the rule of law
8. Provide sufficient notice before changes to laws or regulations are introduced
9. Reduce domestic protec-tionism
10. Broaden ECFA
11. R e d u c e e m p l o y m e n t expenses
12. Negotiate and sign a Bilat-eral Investment Agree-ment with the U.S.
13. Liberalize the labor market
14. Increase direct foreign investment incentives
15. Improve R&D incentives
16. Reduce corruption
17. Finalize policy regarding the China-Taiwan Services Trade Pact
18. Negotiate and sign more bilateral trade agreements with other countries
19. Pass Free Economic Pilot Zone legislation
1. Assist Taiwan to prepare for accession to TPP
2. Negotiate and sign a Bilateral Investment Agreement with Taiwan
3. Conduct more regular follow-up of TIFA items with Taiwan
4. Send more senior U.S. government offi-cials to visit Taiwan
5. Reduce corporate taxation
6. Reduce personal taxation
7. Repeal or reevaluate the Foreign Account Tax Compliance Act (FACTA)
8. Negotiate and finalize an extradition treaty with Taiwan
9. Resolve agricultural disputes with Taiwan
Taiwan Government USA Government
10 2015 TAiwAN BUSiNeSS CLimATe SUrvey
2015 Business Climate Survey
AmCham Taipei member companies are hiring
In last year’s survey, AmCham companies signaled an intention to increase employment this year. In practice they surpassed that forecast – and are expressing the desire to do even more hiring in 2015.
In 2014, fully 55% of AmCham increased their employment numbers, compared with only 43% in 2013. Hiring occurred across a broad range of industries, but the top sectors were 1) Legal services, 2) Medical devices, 3) Banking, 4) Manufacturing, 5) HR con-sulting,6)Foodandbeverages,7)Consumerpackagedgoods,8)Insurance,9)Travelandleisure,and10)Logisics&distribution.
49% of respondents said they planned to increase their headcount during 2015, with another 42% maintaining 2014 levels. Only 7% anticipate a reduction. Banking led the list of sectors planning increased hiring this year, followed by medical devices; legal ser-vices; HR consulting; insurance; hospitality; travel & leisure; securities, mutual funds, and asset management; chemicals; and real estate and rental & leasing.
2015 TAiwAN BUSiNeSS CLimATe SUrvey 11
2014 Business Climate Survey
Human Resources remain a big issue
Deficiencies in the quantity and quality of available human resources are one of the higher risk factors seen as confronting Tai-wan-based businesses in the future. We asked our corporate leaders about their impression of the quality of the available human capital in Taiwan.
As in the past, the survey produced what overall is a highly positive picture of the Taiwan work force:
But also, as with previous surveys, there were some shortcomings as well:
Areas of shortages
Respondents citing difficulties in recruiting appropriate personnel were in such sectors as Education and Training, High-tech Manufacturing, Hospitality, and Logistics and Distribution.
Employment trends
HardworkingVery trustworthy
Very loyalEasy to develop/train
Extremely well educatedHighly productive
Show a high degree of EQWell-roundedEasy to retain
Good English skills
50 100 150 2000
Easy to recruitOf 'World class' standard
Show a good deal of creativityShow a great deal of initiative
Innovative
-50 0
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2015 Business Climate Survey TPP/BIA
What should be Taiwan’s position regarding the Trans-Pacific Partnership (TPP)?
Taiwan has expressed interest in joining the second round of the TPP, the comprehensive trade pact now being negotiated by 12 countries, including the United States. More than 2/3 of the respondents believe Taiwan is capable of meeting the high standards required for membership, and a resounding 83% would encourage Taiwan to pursue that goal to avoid economic marginalization.
Is Taiwan capable of meeting the high standards required for TPP membership?
Should Taiwan pursue membership of the TPP?
2015
No! 12%
Don’t know20%
Yes! 68%
2015
No! 3%Don’t know14%
Yes! 83%
Nearly 2/3 of respondents see the lack of a U.S.-Taiwan BIA as a disadvantage for Taiwan; among them, 20% view it as a major disadvantage.
More than half see the absence of a BIA as a disadvantage for their own business, including 12% viewing it as a major disad-vantage.
Should Taiwan and the U.S. negotiate a Bilateral Investment Agreement (BIA)?
2015 TAiwAN BUSiNeSS CLimATe SUrvey 13
2014 Business Climate SurveyCross-Strait economic
relations
Positive view of ECFA
The Economic Cooperation Frame-work Agreement (ECFA) s igned between Taiwan and China in 2010 is generally viewed in a favorable light. 21% of respondents saw it as having a “very positive” effect on Taiwan, up from 13% the previous two years, and 13% perceived a “very positive” impact on their own business, com-pared with just 4% last year and 5% in 2013.
China-Taiwan Services Agreement
The Cross-Strait Services Trade Agreement under ECFA was signed in 2013 but has not yet been rat-ifiedbytheLegislativeYuan.60%ofrespondentssaid that implementing the agreement would be to Taiwan’s benefit.
Yes
No
Don’t know/ Can’t say
16%60%
24%
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2015 Business Climate Survey M&A Activity
Consistent results
According to the survey results, over the past five years around 10% of AmCham companies engaged in M&A activity each year. In 2014, some tried and failed (3%) and another 21% considered M&A activity but did not implement a project.
One in five interested in M&A for 2015
In any given year, about twice as many companies say they would definitely or possibly consider M&A in the coming 12 months, compared with those who actually pursue it.
2015 TAiwAN BUSiNeSS CLimATe SUrvey 15
2014 Business Climate SurveyM&A Activity
Top Objectives of M&A
But when it happens, there are sound business reasons for M&A
Major Challenges for M&A in 2014
Finding an appropriate target was the biggest challenge last year.
16 2015 TAiwAN BUSiNeSS CLimATe SUrvey
2015 Business Climate Survey Living in Taiwan
As in previous surveys, the respondents praised Taiwan as a safe, friendly place to live for themselves and their families, and they also paid tribute to the healthcare system.
But they also noted certain conditions in need of improvement, such as food safety and the English-friendliness of the environment.