2018 Taiwan Business Climate Survey (BCS)

2018 Taiwan
Business Climate Survey
Summary of Results
Copyright © 2018 Independent Marketing & Research Limited. All Rights Reserved.

For the last eight consecutive years we have conducted the Taiwan
Business Climate Survey.
This year’s study saw over 200 key business leaders - many with
job titles such as Chairman, President, CEO, and Managing
Director - give their views and opinions.
We would like to sincerely thank all those who participated for
their time, insights, and comments.
We hope you find the following summary of interest and help.
Please feel free to contact Gordon Stewart if you would like to
access the full report and data, or for any further information or
elaboration.

Section 1 Executive Summary Section 2 Detailed Findings
The Sample Ownership & Management
Financial Indicators & Trends Business Focus
Issues with Impact Taiwan as a Regional HQ?
Labour Law Current Profitability
Employment 2018 Forecast
Future Risks Short-term Investment
Taiwan Governments Five-year Outlook
Mergers & Acquisitions Employment & Talent
Quality of Living Mergers & Acquisitions
Impacts, Issues, Progress & Major Risks
Taiwan National Government
6 Special Municipal Governments
Quality of Living
Table of Contents

A little about their businesses
The respondents to this survey represent a very diverse group of
businesses with their headquarters spread between North American,
European and Asia Pacific locations.
There is also great diversity across industries (52 in total), the length of
time the business has been in Taiwan (most frequently 21-25 years
with an average time of slightly more than 25 years), types of business
structures, and their size. Size is chiefly determined by the number of
full-time employee equivalents (FTEE) - and included enterprises with
FTEE from 5 or less, to more than 10,000.

North America
38%
Europe
25%
Asia Pacific
37%
Location of Corporate HQ

Industry Classifications
(Showing 26 of 52 = 81% of sample)
Retail Trade 6.3% Alcoholic Beverages 2.6%
Education and Training 5.2% Automotive 2.6%
Foods and/or Non-Alcoholic Beverages 5.2% Energy 2.6%
Medical Devices 5.2% Engineering and Technical Services 2.6%
Pharmaceuticals 5.2%
Media services
(other than broadcast media)
2.6%
Chemicals 4.2% Internet Industry 2.1%
Government agency 4.2% Real Estate and Rental and Leasing 2.1%
Semiconductor and Other Electronic
Component Manufacturing
3.7% Component Manufacturing - General 1.6%
Consumer Packaged Goods 3.1% Human Resource Consulting 1.6%
Finance 3.1% Logistics and Distribution 1.6%
Health Care Services 3.1% Manufacturing - General 1.6%
Legal Services 3.1% Securities, Mutual Funds, Asset Management 1.6%
Management Consulting Services 3.1% Sourcing and Procurement 1.6%

0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Length of Physical Business Presence in Taiwan

0.5%
1.0%
2.0%
2.0%
3.5%
4.0%
4.5%
5.0%
6.5%
16.9%
29.9%
39.8%
STATE OWNED ENTERPRISE (SOE)
NGO
NOT FOR PROFIT
GOVERNMENT AGENCY
INDUSTRY ASSOCIATION
PARTNERSHIP
INDEPENDENT AGENT
JOINT VENTURE
REPRESENTATIVE OFFICE
SUBSIDIARY
TAIWAN-INCORPORATED COMPANY
BRANCH OFFICE
2017 Sample Profile by Legal Entity
Totals exceed 100% as more than one response applicable

15.6%
10.6%
14.0%
12.9%
8.4%
6.2%
3.9%
3.4%
2.2%
1.7%
1.1%
2.8%
2.2%
0.6%
1.1%
0.6%
1.1%
0.6%
0.0%
0.0%
0.6%
0.0%
10.6%
5 OR LESS
6-20
21-50
51-100
101-150
151-200
201-250
251-300
301-350
351-400
401-450
451-500
501-550
551-600
601-650
651-700
701-750
751-800
801-850
851-900
901-950
951-1,000
MORE THAN 1,000
2017 Number of FTEE
See next slide for more detailed breakdown

5.6%
0.0%
0.6%
0.6%
0.6%
0.6%
1.1%
0.6%
0.0%
1.1%
1,001-2,000
2,001-3,000
3,001-4,000
4,001-5000
5,001-6,000
6,001-7,000
7,001-8,000
8,001-9,000
9,001-10,000
MORE THAN 10,000
2017 Breakdown of those with more than 1,000 FTEE

Key Financial Indicators & Trends
To track changes and detect trends, for the past 8 years we have asked
identical questions relating to Taiwan enterprises’ current and forecast
financial performance.
This year’s results are similar to last year’s levels – with no statistically
significant changes in the four key indicators of profitability, near-term
growth, investment, and longer-term growth.
However, the latest five-year trends generally show a gradual decline,
with only current profitability being maintained.
Please note: Yellow arrows indicate a statistically significant change over the prior year’s result.

Key Takeaways: Profitability
Current profitability remains in
the “Relatively” to “Very
Profitable” zone for more than
two-thirds of our companies. This
has been the case for eight
consecutive years.
Taiwan-headquartered companies
appeared to have had a
(statistically significant) less
profitable 2017 than foreign-
owned companies.

74%
72%
66%
65%
67% 67%
68%
PROFITABLE CURRENT YEAR
Key Financial Indicator – Profitability
2010 2011 2012 2013 2014 2015 2016 2017

Key Takeaways: Forecasts
Forecasts for Revenue & Profitability,
Investment, and Business Outlook
have stabilized in the past few years.
However, the 5-year trend line is still
pointing in the wrong direction.

81%
54%
81%
59%
43%
70%
69%
52%
56%
61%
50%
60%
54%
43%
47%
56%
45%
49%
52%
48%
52%
FORECAST FOR REVENUE & PROFIT GROWTH INCREASED INVESTMENT FORECAST OPTIMISTIC ABOUT 5-YEAR BUSINESS OUTLOOK
Key Financial Indicators – Forecasts by year
2011 2012 2013 2014 2015 2016 2017 2018
A statistically
significant decline
in 2016 vs. 2015

65%
69%
67% 67% 68%
2013 2014 2015 2016 2017
CURRENT PROFITABILITY
63%
61%
54%
56%
52%
2014 2015 2016 2017 2018
FORECAST FOR REVENUE & PROFIT
GROWTH
48%
50%
43%
45%
48%
2014 2015 2016 2017 2018
FORECAST INVESTMENT
54%
60%
47%
49%
52%
2014 2015 2016 2017 2018
5 YEAR BUSINESS OUTLOOK
Key Indicators: Latest 5-year trend

Key Takeaways: Issues with Impact
A total of 58 issues were identified
as impacting entities.
The top issues hurting businesses
relate mostly to the ‘bureaucracy’
and actions of the Taiwan
government, along with the status
of PRC-Taiwan government
relations.
Specifically, the new labour laws
have created financial and
management burdens that simply
add to existing recruiting
problems.

Top 10 Issues the Impact Business
(Ranked: 1= Most severe/Most regressed to 58 = Best/Most progress)
Issue Impact Severity Regress
Taiwan Governmental Bureaucracy 1 2 11
Lack of clarity in labour laws 2 3
1 Regressed
the most
Lack of flexibility in labour laws 3 1 most severe 2
Inconsistent regulatory interpretation 4 5 21
PRC-Taiwan government relations 5 10 3
Inadequate/Out-dated laws 6 6 13
Differences between local and internationally accepted standards 7 4 28
Ability to recruit appropriate new personnel 8 12 10
Increasing cost of labour (including labour & national health insurance, pension
& retirement benefits)
9 9 4
Domestic protectionism 10 7 6

Key Takeaways:
Taiwan Labor Act
.
Several changes to the labour laws
in late 2016/early 2017 have had a
profound impact, resulting in
increased management effort and
costs of compliance.
Many entities incurred additional
costs exceeding NT$600,000. As
would be expected, companies
with large numbers of employees
(more than 1,000) fell into this
group. However, so too did many
other smaller sized companies -
including those with only 21-50
employees.

2%
4%
7%
8%
12%
14%
15%
60%
OTHER (PAID ADDITIONAL OVERTIME, GAVE ADDITIONAL LEAVE,
FROZE EXPANSION, ENCOURAGED WORK/LIFE BALANCE)
REDUCED FULL-TIME EMPLOYEE NUMBERS VIA REDUNDANCIES
REDUCED FULL-TIME EMPLOYEE NUMBERS VIA NATURAL ATTRITION
INCREASED FULL-TIME EMPLOYEE NUMBERS
SHORTENED WORKING DAYS (E.G., CLOSED ON WEEKENDS/HOLIDAYS)
INCREASED THE NUMBER OF PART-TIME/TEMPORARY WORKERS
EMPLOYED
SHORTENED WORK HOURS
NO MAJOR CHANGES. HOWEVER, MOST STILL EXPERIENCED
INCREASED COSTS
How entities responded to new labour laws/regulations*
*multiple responses - total exceeds 100%

76%
29%
27%
21%
12%
7%
Additional overtime
fees
Additional HR
consultants' fees
Additional legal fees Additional HR staff fees Additional accounting
fees
Other (additional
unused annual leave &
salary compensation,
additional unnecessary
admin)
Compliance with the new labour laws/regulations caused:

18%
21%
12%
7%
43%
≤NTD 150,000 NTD 150,001- 300,000 NTD 300,001 - 450,000 NTD 450,001 - 600,000 > NTD 600,000
Estimated additional cost of compliance with the new
labour laws/regulations

Key Takeaways: Employment up. But…
41% of all companies surveyed
increased their employment
numbers either “slightly” or
“significantly” during 2017.
Whilst a positive result, this is the
lowest level of growth in 5 years.

1%
16%
39%
36%
7%
1%
12%
32%
48%
7%
2%
15%
32%
43%
8%
1%
13%
38%
43%
5%
3%
14%
41%
36%
5%
DECREASED SIGNIFICANTLY DECREASED SLIGHTLY NO CHANGE INCREASED SLIGHTLY INCREASED SIGNIFICANTLY
Actual Changes in FTEE
2013 Actual 2014 Actual 2015 Actual 2016 Actual 2017 Actual

Forecast changes in employment: Growth. But…
slowing
Employment growth is still forecast for 2018. However, an increase in
the number of companies saying they will “Decrease Slightly” their
FTEE numbers in 2018, points to a potentially lower rate of net
employment growth for this year.

1% 0%
8%
49%
39%
2%1% 2%
7%
42%
45%
4%1% 2%
9%
46%
37%
4%3% 1%
7%
49%
38%
3%3% 2%
13%
40%
37%
5%
DON'T KNOW/CAN'T
SAY
DECREASE
SIGNIFICANTLY
DECREASE SLIGHTLY NO CHANGE INCREASE SLIGHTLY INCREASE
SIGNIFICANTLY
Forecast Changes in FTEE
2014 Forecast 2015 Forecast 2016 Forecast 2017 Forecast 2018 Forecast

Net changes in employment: Growth slowing
When those who say they will reduce headcount are removed from
those who have, or will, increase their employee numbers, the
weighted results show a slowing in the rates of growth – both in actual
employed numbers and levels of forecast growth.

Net changes in employment
33%
47%
38%
36%
26%
2013 2014 2015 2016 2017
PERCENTAGE ACTUAL NET INCREASES IN
FTEE (WEIGHTED)
35%
42%
31%
34%
31%
2014 2015 2016 2017 2018
BUSINESSES FORECASTING A NET
INCREASE IN FTEE (WEIGHTED)

Taiwanese Human Capital are seen as…
0 0.2 0.4 0.6 0.8 1 1.2
WELL-ROUNDED
SHOW A HIGH DEGREE OF
EMOTIONAL INTELLIGENCE (EQ)
EASY TO RETAIN
HIGHLY PRODUCTIVE
EASY TO DEVELOP/TRAIN
VERY LOYAL
EXTREMELY WELL-EDUCATED
GOOD TEAM PLAYERS
VERY TRUSTWORTHY
HARD-WORKING
Positive Perceptions of Human Capital in Taiwan
Weighted average
-1.2 -1 -0.8 -0.6 -0.4 -0.2 0
SHOW A GREAT DEAL OF
CREATIVITY
INNOVATIVE
OF 'WORLD CLASS' STANDARD
SHOW A GREAT DEAL OF INITIATIVE
GOOD ENGLISH LANGUAGE SKILLS
(IF REQUIRED FOR ROLE AND/OR
PROMOTION)
EASY TO RECRUIT
Negative perceptions of Human Capital in Taiwan
Weighted average

Key Takeaways: Top Risks
An economic downturn, either at
the global or local level,
uncertainty/lack of flexibility in
Taiwan's labour laws, increased
government regulation and
compliance costs, and uncertainty
in the PRC-Taiwan relationship are
the greatest risks identified by
business leaders.

Key Takeaways: The Taiwan Government
Of the 22 items presented in
President Tsai’s year-end address
on December 31, 2016, the two
issues deemed most applicable to
our leaders were perceived to
have regressed the most.
Namely: “Amendment to the
Labor Standards Act” and
“Maintain peaceful and stable
relations across the Taiwan
Strait”.
“Engineering projects to combat
flooding and droughts” experienced
the highest rating in terms of
progress but only 8% of businesses
found it directly applicable to them.

Key Takeaways: Local Municipal Government
Those entities who have direct
dealings with any of the six
special municipalities generally
express disapproval with their
dealings. This is mostly about
how rules and regulations are
interpreted.
Municipality Metropolitan area Region
Kaohsiung
Kaohsiung
metropolitan area
Southern Taiwan
New Taipei
Taipei–Keelung
metropolitan area
Northern Taiwan
Taichung
Taichung–
Changhua
metropolitan area
Central Taiwan
Tainan
Tainan
metropolitan area
Southern Taiwan
Taipei
Taipei–Keelung
metropolitan area
Northern Taiwan
Taoyuan
Taoyuan–Zhongli
metropolitan area
Northern Taiwan

Key Takeaways:
Mergers & Acquisitions (M&A)
On average, 1 in 8 of our surveyed
companies is involved in M&A
each year. The reasons for seeking
M&A and for failing to complete
the deals are consistent.
Additionally, 1 in 5 companies
every year “consider” M&A.

Key Takeaways:
Quality of Living
Business leaders consider Taiwan
to be a safe, easy place to live,
with nice people and a good
healthcare system.
The main negatives were the
safety of pedestrian (Zebra)
crossings when there are no traffic
lights, and as in previous years, far
from excellent banking and
financial services, poor air quality
and the lack of an English-friendly
environment.

36
Section 2:
Detailed Findings

Ownership & Management of Taiwan
Entities
Most of our respondent companies have their corporate
headquarters in North America (38%), narrowly edging out Asia
Pacific (37%) - with Taiwan being the largest component of this
sector at 28%. European entities make up the balance of the
sample with 1 in 4 companies having their corporate HQ there.
For non-Taiwanese companies, the direct supervisor of the
Taiwan entity is more likely to be located in the PRC (19%),
Singapore (16%), Hong Kong (13%), and the USA (13%),
indicating that most foreign entities report into a regional office
rather than directly to the HQ.

In which country is your …
located?
Corporate HQ Direct
Supervisor
USA 36.3% 10.6%
Canada 0.5%
Taiwan 28.4% 35.2%
Hong Kong 4.0% 9.1
Australia 3.0% 3.0%
Singapore 1.5% 11.6%
Japan 1.0% 3.5%
PRC (excluding HK) 0.5% 14.1%
South Korea 1.0% 2.0%
Thailand 0.5%
UK 8.5% 2.5%
Germany 6.0% 2.5%
Switzerland 4.0% 1.0%
Denmark 1.5% 0.5%
France 1.0% 0.5%
Netherlands 1.0% 0.5%
Other Europe/E.U. (Austria, Belgium, BVI, Finland, Italy) 2.5% 0.5%
Head of Organisation - no supervisor 2.0%
Totals may not exactly equal 100% due to rounding

USA
23%
Singapore
21%
PRC (excl. HK)
21%
HK
8%
S. Korea
5%
Japan
6%
Other locations
16%
USA headquartered organisations have their Taiwan
leadership supervised from:

USA
5%
PRC (excl. HK)
2%
Taiwan
93%
Taiwan headquartered organisations have their Taiwan
leadership supervised from:

Business Focus: 74% on Taiwan
The business leaders surveyed are clearly focused on Taiwan; the
primary goal of most entities is to supply the Taiwan market with
goods or services.
As in prior studies, this makes their comments and observations
especially pertinent to the Taiwan government.

74%
4%
4%
1%
1%
2%
5%
9%
0%
Primary goal of Taiwan entity to provide/source goods or
services:
for the Taiwanese market
for export to the Greater
China market
for export to the USA
for export to the UK
for export to Australia
for export to the E.U.
throughout Asia Pacific
Globally
to other non-English
speaking markets

Investment priority within total
organisation…
Of those who do rank Taiwan as their number one priority, or in
the top three, the majority (76%) are Taiwan-headquartered
companies.
Taiwan is generally viewed as “Not a high priority” at the global
head office level for non-Taiwanese entities.

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%
6%
5%
51%
10%
6%
14%
9%
14%
2%
38%
15%
3%
13%
14%
13%
3%
31%
15%
10%
13%
16%
DON'T
KNOW/CAN'T SAY
LOOKING TO
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?
2010 2011 2012 2013 2014 2015 2016 2017

Would Taiwan be a good place for a
regional HQ?
When asked to rate Taiwan as a good, or potentially good, place
for a regional headquarters on a scale of 0-100 where zero is
“not a good place”, 50 being “neutral” and 100 “a really good
place”, the average score was 51.
There were very strong and divergent views on this issue, with as
many scoring it below 10 as scoring it 90 or greater.
Unsurprisingly, those who score it high are likely to be Taiwanese
entities.

Negative (score below
50)
39%
Neutral
15%
Positive (score above 50)
46%
Taiwan is, or could be, a good place to have a regional
headquarters?

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Taiwan is, or could be, a good place to have a regional headquarters?
(Score from 0 to 100, 50 = Neutral)

Mixed comments regarding Taiwan's
suitability as a regional headquarters
“Very honest and capable labor source. Easy to quickly
access all Asian markets from Taiwan with excellent
international airport. Stable currency.”
“Not friendly for expats to work here. Government
efficiency is not good enough. English is not commonly
used like Singapore, Hong Kong.”

“Taiwan is a great place to have a business from a
people perspective but there are difficulties in terms of
politics and global positioning. Difficulties of employing
appropriate talent too.”
“Not enough international population/human
resource/transportation or business environment to
support a regional headquarters setup”

“Political turmoil and frequent change in official
position make policy not sustainable. Orientation and
communication all the time.”
“Taiwan has unfriendly investment environment for
foreign investment, currency control, talent retaining
issue.”

Comments regarding Taiwan's suitability as
a regional headquarters
“Based on its geographical location, its relatively low
cost of real estate and labour, well-educated workforce,
being a safe and easy to live in, along with direct flights
to the PRC, Taipei/Taiwan should be a great regional
centre. But the poor relationship with the PRC negates
all these other advantages.”

2017: Yet Another Profitable Year for Business
The majority (68%) of our business leaders stated their entities
experienced either a “relatively” or “very profitable” year in
2017.
These results are remarkably consistent over recent years and
indicate that profitability in Taiwan is relatively stable and
healthy over time.
Most (54%) leaders saw growth in their profitability levels in
2017 versus 2016, with only 18% experiencing a decline.

0% 3%
24%
53%
21%
1% 3%
24%
58%
14%
1% 3%
31%
56%
10%
0% 1%
34%
54%
11%
0% 2%
28%
56%
14%
0% 3%
29%
52%
15%
1% 3%
29%
58%
9%
1% 3%
28%
57%
11%
VERY LARGE LOSS RELATIVELY LARGE LOSS BREAK-EVEN OR SMALL
PROFIT/LOSS
RELATIVELY PROFITABLE VERY PROFITABLE
How would you characterize your Taiwan business' financial
performance in 2017?
2010 2011 2012 2013 2014 2015 2016 2017

4%
14%
29%
42%
12%
SUBSTANTIAL DECLINE
MODEST DECLINE
NO CHANGE IN
PROFITABILITY
MODEST GROWTH
SUBSTANTIAL GROWTH
How would you characterize your Taiwan business’
profitability this year (2017) versus 2016?

2018: Business similar to 2017
The outlook for 2018 remains strong with the majority of our
business leaders forecasting growth in their revenues and
profits.
Only 12% expect a decline on both measures.

0%
6%
8%
54%
17%
1%
10%
23%
46%
11%
1%
6%
19%
53%
13%
1%
6%
16%
53%
11%
1%
9%
18%
50%
11%
2%
11%
22%
39%
15%
2%
8%
20%
47%
9%
4%
8%
21%
43%
9%
SUBSTANTIAL DECLINE IN
BOTH REVENUES & PROFITS
MODEST DECLINE IN BOTH
REVENUES & PROFITS
REMAIN THE SAME MODEST GROWTH IN BOTH
REVENUES & PROFITS
SUBSTANTIAL GROWTH IN
BOTH REVENUES & PROFITS
What is your Taiwan business’ revenue & profits forecast for
2018 compared to 2017?
2011 2012 2013 2014 2015 2016 2017 2018

Short-term investment: Stable
Forecasted levels of investment are likely to remain unchanged
from 2017.

3%
20%
36%
38%
16%
2%
13%
41%
33%
10%
2%
6%
39%
42%
11%
1%
4%
44%
41%
7%
2%
5%
42%
40%
10%
4%
7%
44%
37%
7%
2%
5%
46%
40%
5%
4%
9%
38% 37%
11%
SUBSTANTIAL DECREASE SLIGHT DECREASE NO CHANGE SLIGHT INCREASE SUBSTANTIAL INCREASE
What is likely to happen to your entity’s level of investment in
Taiwan over the next 12 months?
2011 2012 2013 2014 2015 2016 2017 2018

Looking forward five years…
This year’s 5-year prediction is very similar to last, with 53% of
our business leaders saying they are either “slightly optimistic”
or “optimistic” about the next 5 years of business in Taiwan. This
sluggish result should be a major cause for concern for the
government, as should the steady year-on-year decline of the
“optimistic” score.

How would you describe your five-year business outlook for
Taiwan?
3%
10%
7%
52%
29%
1%
7%
22%
43%
28%
3%
16%
26%
37%
19%
4%
14%
29%
37%
17%
2%
14%
24%
42%
18%
5%
19%
29%
34%
13%
3%
16%
32%
38%
11%
4%
14%
30%
43%
10%
PESSIMISTIC SLIGHTLY PESSIMISTIC NEUTRAL SLIGHTLY OPTIMISTIC OPTIMISTIC
5-Year Business Outlook
2011 2012 2013 2014 2015 2016 2017 2018

Comments on Outlook
We asked our respondents if they would like to comment on
their forecasts; just under half chose to.
Those expressing optimistic ratings and sentiments were in the
majority (55%).
Slightly more than a third (34%) expressed what could be
described as negative comments/ratings.
Neutral comments were made by approximately one in eight
(12%).

Frequently used words to describe 5-year
outlook

Sample Comments on 5-year Outlook
Positive rating Neutral rating Negative rating
“We are optimistic about business
opportunities but find government
to be a limiting factor rather than
a partner. Regulations and
strategies are often quite
aggressive and sometimes even
punitive.”
“Stable cost base for R&D and HR
sourcing, enabling taking
advantage of growth
opportunities in the wider region.”
“Whilst the overall economy
might have challenges there are
still many key sections of the
market that have shown real
potential for growth”
”The overall domestic market
environment is still very
challenging given the political
tension with China. However, our
market share is still low, we are
optimistic there is still room for us
to grow in Taiwan market.”
“Mature market with limited
growth in both local and export
businesses .”
“I don't see any substantial
changes.”
” Labor shortages, hostile
business environment,
government policies designed to
appease voters without regard to
sustainable business planning.”
“Taiwan government seems
incapable of making positive,
substantial, and beneficial
decisions to position Taiwan for
future growth.”
“Pessimistic due to the overall
business climate affected by aging
society, consumption/purchase
power slow due to lingering low
income, etc.”

Full Time Equivalent Employees(FTEE)
Full-Time Equivalent Employees (FTEE) is defined by counting
part-time employees as a half an employee and adding them to
the number of full-time employees.
As in past years, our respondent businesses show continuing
growth in employee numbers.

During 2017…
41%of the companies increased their FTEE numbers either
“significantly” or “slightly” during the year.
The same percentage maintained their numbers of employees.
17% decreased their numbers either slightly or significantly.

Hiring forecast to increase in 2018
42% of these business establishments plan to increase their
headcount during 2018
40% will maintain their 2017 levels compared to 49% in 2016
14% anticipate reducing headcount compared to only 8% last
year.

Human Resources
A lack of quality human resources is one of the major risk factors
seen as confronting businesses in the future.
Each year we asked our corporate leaders to give us their
impressions of the quality of available human capital in Taiwan.

Taiwanese Human Capital are seen as…
Hard-working, very trustworthy, good team-players, extremely
well-educated, very loyal, easy to develop or train, highly
productive, easy to retain, showing a high degree of emotional
intelligence quotient (EQ), and generally well-rounded. A very
positive profile of the workforce.
Understandably, no major changes were seen in this year’s
survey compared to prior years.

However…
They are also perceived as not displaying a great deal of
creativity, not being innovative, not of a ‘world-class’ standard,
and not showing a great deal of initiative.
These have been enduring perceptions over the eight years of
these studies.

Some additional comments from our
business leaders…
“Need to be open to connect globally to bring the talent pool
for future development. Taiwan is exporting talent but not
importing because of the business environment and policies.”
“The labour market is tight and finding suitable people that are
well rounded, creative and that are assertive about taking hold
of an issue and running it to ground in an assertive manner is
rare. The culture does not seem to foster creativity. Open
communication and collaboration is not a natural condition for
many of the older working population.”

Some additional comments from our
business leaders…
“Work ethic has declined. English reading and writing levels are
insufficient.”
“New employees often come from very sheltered social
environments. They are well-educated intellectually, but often
lack good judgment or the ability to put themselves in the
shoes of clients/customers.”
“Needs great improvement but the quality of new work force
entrants continues to fall. The competition is not only against
others in Taiwan; it is against other markets in Asia”

Merger & Acquisition (M&A) Activity
As economic indicators go, merger and acquisition activity has
long been a general barometer of economic activity. From our
survey over the last 8 years, Taiwan appears to have a relatively
low but consistent level of M&A activity.

Merger & Acquisition (M&A) Activity
Over the past eight years, an average of 12% of companies
engaged in merger and acquisition (M&A) activity with a
Taiwanese entity.
This year, as in earlier years, some tried and failed (2%), and
some considered M&A but didn’t pursue it (18%).
However, for most business leaders - on average 69% in any
given year - M&A simply isn’t on their radar.

61%
23%
4%
7%
5%
71%
17%
4% 4% 4%
71%
18%
2% 5% 5%
72%
17%
3% 4% 3%
68%
21%
3% 5% 3%
69%
20%
5% 3% 4%
69%
19%
3%
7%
2%
73%
18%
2% 4% 4%
NO, DID NOT CONSIDER NO, BUT CONSIDERED YES, BUT FAILED TO
COMPLETE THE
MERGER/ACQUISITION(S)
YES, AND STILL IN THE
PROCESS OF
YES, AND COMPLETED
Did your entity pursue, or consider, a merger with or
acquisition of a Taiwanese entity in the past 12 months?
2010 2011 2012 2013 2014 2015 2016 2017

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 acquire capacity or
technology, enlarge customer base, gain synergies (by reducing
costs and improving profits), and to increase local market access.
These, as they have been in past years, are the major drivers
behind M&A.

A DEFENSIVE MOVE TO COUNTER COMPETITOR(S)
TO ACQUIRE TECHNOLOGY
TO ACQUIRE BUSINESS LICENSE IN A RESTRICTED INDUSTRY
TO ELIMINATE COMPETITION
TO ACQUIRE MANAGEMENT TEAM/TALENT
TO GAIN GREATER TAIWAN MARKET ACCESS
ABILITY TO GAIN SYNERGIES (REDUCE COSTS - IMPROVE
PROFITS)
TO ENLARGE CUSTOMER BASE
TO ACQUIRE CAPACITY
Top Objectives of M&A during 2017
Primary Secondary Tertiary

Major challenges to M&A in 2017
Negotiating the valuation gap was, again, the single greatest
challenge in 2017. Followed by ‘Cultural issues’ and conducting
due diligence.
Cultural issues were, overall, the most cited challenge when
conducting M&A.

OBTAINING PERMISSION FOR TARGET TO
BE SOLD
INCONSISTENT REGULATORY
INTERPRETATIONS
FINDING AN APPROPRIATE TARGET
TRANSPARENCY OF REGULATIONS
LANGUAGE ISSUES
OBTAINING GOVERNMENT APPROVALS
FINANCIAL ISSUES
CONDUCTING DUE DILIGENCE
POST-DEAL RESTRUCTURING
NEGOTIATION OF VALUATION GAP
CULTURAL ISSUES
Major Challenges of M&A During 2017
Major Challenge Second Third

One-in-five interested in M&A
On average over the past 8 years, 20% of businesses consistently
claim they would “definitely” or “possibly” consider M&A in the
next 12 months. This year, only 15% said they would.

5%
10%
21%
25%
17%
22%
5%
13%
22%
24%
14%
22%
4%
15%
21%
27%
13%
20%
5%
14%
25%
23%
11%
23%
5%
14%
28%
26%
9%
17%
7%
16%
22%
27%
11%
17%
5%
17%
18%
28%
13%
19%
7%
22%
20%20%
11%
21%
DEFINITELY CONSIDERPOSSIBLY CONSIDERUNLIKELY TO CONSIDERDEFINITELY NOT
CONSIDER
PREFER NOT TO
ANSWER
DON'T KNOW
Likelihood to consider M&A in the next 12 months
2018
2017
2016
2015
2014
2013
2012
2011

What impacts business?
Governmental Bureaucracy, for the second consecutive year,
tops the list of most frequently mentioned, negative, impacts on
businesses.
Confusion and frustration around recent labour law changes
have also greatly affected them.
Inconsistent regulatory interpretation and concern over the
status and future of PRC-Taiwan government relations, are also
frequently mentioned impacts.

Which of the following impacts your operation in Taiwan?
2018 Ranking
Issue 2018 2017 2016 2015 2014 2013 2012 2011
Governmental Bureaucracy 1 1 4 3 1 3 4 2
Lack of clarity in labor laws 2 3 New in 2017
Lack of flexibility in labour laws 3 New in 2018
Inconsistent regulatory interpretation 4 4 2 1 2 2 2 3
PRC-Taiwan government relations 5 2 12 11 16 13 7 8
Inadequate/Out-dated laws 6 7 1 4 5 4 6 5
Differences between local and internationally
accepted standards
7 10 8 7 7 New in 2014
Ability to recruit appropriate new personnel 8 9 7 6 9 5 3 4
Increasing cost of labour (including labour insurance,
national health insurance, pension/retirement
benefits)
9 New in 2018
Domestic protectionism 10 8 16 15 11 12 12 12

For impacts 11-58, please email
contact@independentmarketing.com.au

-64.9
-66.04
-70.07
-71
-72.05
-75.9
-76.14
-91
-98.6
-105.08
-110 -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10
PRC-TAIWAN GOVERNMENT RELATIONS
INCREASING COST OF LABOUR (INCLUDING LABOUR INSURANCE,
NATIONAL HEALTH INSURANCE, PENSION/RETIREMENT BENEFITS)
INCONSISTENT APPLICATION OF THE RULE OF LAW
DOMESTIC PROTECTIONISM
INADEQUATE OR OUTDATED LAWS
INCONSISTENT REGULATORY INTERPRETATION
DIFFERENCES BETWEEN LOCAL AND INTERNATIONALLY ACCEPTED
STANDARDS
LACK OF CLARITY IN LABOUR LAWS
TAIWAN GOVERNMENTAL BUREAUCRACY
LACK OF FLEXIBIILTY IN LABOUR LAWS
Top 10 issues that impact their business and by how much
Weighted net impact (positives minus negatives)

For issues 11-58 (some with
positive impact), please email

What impacts their business?
Other Direct Quotations
“Parallel imports are a major issue, which the
government seems to encourage. Online sales of
alcohol not allowed in Taiwan. But online sales from
other countries tolerated. So anyone worldwide can sell
online direct to consumers in Taiwan, except Taiwanese
companies cannot do it.”

What impacts their business?
Other Direct Quotations
“Educational reform; Youth-employability and HR
development; Regional economic diversification policy.”
“Losing talents to the near-by countries. Rigid &
outdated Labor Laws against Innovation Ind. and
effective Trade Secrets Protection”

When we view the issues that have made progress over the
2008-2017 time horizon, some good strides were made –
especially in connection with the PRC.
Unfortunately, there has been a major reversal in the progress of
government relations between the PRC and Taiwan. This is the
one issue which has regressed the most – for two consecutive
years.
Progress and the lack of it on key Issues

Top 10 areas which regressed in the past 3 years.
Worst (#1) to Best (#58) ranking based on weighted score.
Issue
2015
-
2017
2014
-
2016
2013
-
2015
2012
-
2014
2011
-
2013
2010
-
2012
2009
-
2011
2008
-
2010
Clarity in labour laws 1 2
Flexibility in labour laws 2
PRC-Taiwan Government Relations 3 1 38 37 38 28 28 27
Increasing cost of labour (including labour insurance,
national health insurance, pension/retirement benefits)
4
Political turmoil in Taiwan 5 3 1 1 1
Domestic protectionism 6 11 11 3 10 6 3 7
Inconsistent application of the Rule of Law (i.e., well-
established and clearly written rules, regulations, and
legal principles)
7 10 6 7 9
Changes in Local Demand 8 7 3 16 3 3 20 20
Changes in Employment expenses 9 6 10 8 4 5 1 2
Ability to Recruit Appropriate New Personnel 10 29 5 13 5 1 5 3

For issues 11-58 and their
progress, please email

The major risks confronting business
A slowdown in the global economy or in Taiwan’s domestic
consumption are of greatest concern for our business leaders.
Concerns about uncertainty/lack of flexibility in Taiwan's labour
laws; increased government regulation and compliance costs;
and uncertainty in the PRC-Taiwan relationship, lead the other
major worries confronting business going into 2018.

45% 44%
37%
32% 32%
29%
26% 26%
21% 20%
The Top 10 risks facing their entity in coming years

For the next 19 risks, please email

Taiwan Government
In her year-end address on December 31, 2016, President Tsai
declared that during 2017 the government would make
"an all-out effort to boost the economy, continue forward with
major reforms, respond to changing international conditions,
maintain peace and stability, and seriously address divisive
issues."
22 items were presented (in a randomised manner) to our
respondents to see which were applicable to them and what
progress they believed had occurred.

President Tsai’s items presented to leaders to determine applicability
and progress/no change/regress
Biomedical industry initiatives Expand the Digital Economy
Creation of the Chemical and Toxic Substances Bureau Develop Cultural Innovation
The enactment of the Housing Act
Build-up a green rail transport system that integrates Taiwan
High-Speed Rail, the Taiwan Railways Administration, and local
mass rapid transit systems
Commencement of the Long-Term Care 2.0 pilot program
Infrastructure for broadband and super-broadband cloud
communications
Amendment to the Employment Service Act Engineering projects to combat flooding and droughts
Amendment to the Labor Standards Act Infrastructure needed to support an ageing society
The Internet of Things (IOT - also referred to as 'Asia Silicon
Valley')
Strengthen the infrastructure needed for basic scientific
research
"Five Links of Food Safety"
Infrastructure to support a shift to non-nuclear and low-carbon
sources of energy
Increases in Defense spending Pension system reform
"New agriculture"
The New Southbound Policy (to conduct more diverse
exchanges and interaction with the countries of Southeast
Asia, India, New Zealand, and Australia)
Develop the Circular Economy Maintain peaceful and stable relations across the Taiwan Strait

Not much progress against declared
objectives and some regress.
Of the items which are selected as being applicable to our
leaders’ businesses, the two which where most applicable were:
Amendment to the Labor Standards Act (52%) and Maintain
peaceful and stable relations across the Taiwan Strait (47%).
Unfortunately, when asked about what progress or regress that
had been made during 2017, both these were perceived as
regressing the most out of all 22 items (-0.57 & -0.78
respectively). This was followed closely by regression in the
Amendments to the Employment Service Act.
Please note that any item with a progress score of zero has shown no change. Positive scores
depict progress and negative scores, regress

(0.57)
(0.78)
0.37
0.52
0.39
(0.31)
0.50
0.13 0.14
0.49 0.53
0.24
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0%
10%
20%
30%
40%
50%
60%
Items applicable (>20%) and perceived net progress
Applicable Progress

0.39
0.03
0.57
0.46
0.14
0.37 0.33
0.62
0
0.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Items applicable (<20%) and perceived net progress
Applicable Progress

Top 10 things Taiwan Government could do to help
(Ranked by importance)
Issue 2018 2017 2016 2015 2014 2013 2012 2011
Increase flexibility of labour laws 1
Simplify government bureaucracy 2 5 1 2 2 1 1 1
Remove differences between local & internationally
accepted standards
3 4 7 4 5
Reduce political turmoil in Taiwan 4 2 2 1 1
Clarify labour laws 5 9
Devise plans to stimulate local demand 6 8 5 6 3
Provide sufficient notice before changes to regulations
or laws are introduced
7 3 6 8 8
Improve Inadequate Infrastructure (Power, Water,
Telecommunications, Transport, etc.)
8 23 17 25
Consistent application of the Rule of Law 9 1 8 7 4
Negotiate and sign more bilateral trade deals with
other countries
10 17 14 18

For the next 43 issues, please email

For what “Other Governments”
(those where the HQ is
located),can do to assist their
enterprises, please email

China-Taiwan Cross-Strait Services Trade
Agreement (CSSTA)
In June 2013 China and Taiwan signed a services trade
agreement (although this has still to be ratified into law), with
the intent to open areas such as financial services, retail and
travel, to greater levels of cross-strait investment.
We again asked our business leaders if they felt that the
Taiwanese legislature should ratify this agreement.
This year, the majority went from saying “Yes” (54%), to “Don’t
know/Can’t say”.

Yes
39%
No
10%
Don't know/Can't say
51%
Should the Taiwan Legislature ratify the CSSTA?

Unprompted comments on the question:
Should the Legislature ratify the CSSTA?
“Taiwan must stop depending so much on trade with
the PRC”
“This is not optional given PRC's current economic and
financial influence in the Pacific RIM region. DPP
cannot hide from this decision.”
“DPP has more seats and tends to veto it.”
“People deserve clear debate on regional cooperation,
including the benefits and measures to cushion the
negatives”

Local Government:
The six special municipalities
We asked about the interaction and impact of the six special
municipalities of Kaohsiung, New Taipei, Taichung, Tainan, Taipei
& Taoyuan, and specifically, if they directly impacted their
businesses.
More than one-third of businesses (37%) claimed that they did.

Yes
37%
No
48%
Don't know/Can't say
15%
In addition to the national government, is your organization
directly and significantly impacted by any, or all, of the 6
special municipalities?

Impact of the 6 special municipalities
Of the 37% of entities whose business is directly and significantly
impacted, half claimed “All six”.
Unsurprisingly, Taipei municipality received the most mentions.

11%
14%
18%
21%
29%
32%
50%
NEW TAIPEI
TAINAN
KAOHSIUNG
TAOYUAN
TAICHUNG
TAIPEI
ALL SIX
The special municipal governments that directly and
significantly impact their business

5 negatives associated with the
6 special municipalities
Their interpretation
of national rules and
regulations is NOT
clear and consistent.
1
They DON’T treat
foreign companies
fairly and the same
as Taiwanese
companies.
2
Municipal rules exist
which are either
contradictory to
National laws or,
exist in areas where
no national rules
exist.
3
Municipal officials
appear to be
encouraged by their
leaders to raise
revenue by
fining/penalising
companies.
4
Municipal officers
appear to
intentionally avoid
consultation with
national officials in
order to generate
fines for their area.
5
5 negatives associated with the 6 special
municipalities

Statements associated with the 6 special
municipalities
Only two positive statements were mentioned:
“They encourage investment in their area” and
“They facilitate and assist my business in their area.”

-0.7 -0.5 -0.3 -0.1 0.1 0.3 0.5 0.7
THEIR INTERPRETATION OF NATIONAL RULES AND REGULATIONS IS
CLEAR AND CONSISTENT
THEY TREAT FOREIGN COMPANIES FAIRLY AND THE SAME AS
TAIWANESE COMPANIES
MUNICIPAL OFFICERS APPEAR TO INTENTIONALLY AVOID
CONSULTATION WITH NATIONAL OFFICIALS IN ORDER TO GENERATE
FINES FOR THEIR AREA
THEY FACILITATE AND ASSIST MY BUSINESS IN THEIR AREA
MUNICIPAL OFFICIALS APPEAR TO BE ENCOURAGED BY THEIR
LEADERS TO RAISE REVENUE BY FINING/PENALISING COMPANIES
MUNICIPAL RULES EXIST WHICH ARE EITHER CONTRADICTORY TO
NATIONAL LAWS, OR EXIST IN AREAS WHERE NO NATIONAL RULES
EXIST
THEY ENCOURAGE INVESTMENT IN THEIR AREA
Weighted average agreement/disagreement
Do you agree or disagree with the following statements about
the six special municipal governments?

“It is clear that the municipal governments do not
understand environmental laws. Their irrational
orders on industry enhance mistrust and quite often
do not enhance environmental improvement.”
Direct quotation regarding the 6 special
municipalities

And finally…”The Living is Nice, Easy, &
Safe”
When asked about the quality of life in Taipei/Taiwan, business
leaders strongly agree that it’s a place where: “Taiwanese people
are extremely nice”; “My family feels safe”; and understandably,
there was no significant change in the positive rankings in this
year’s survey.

The Top Benefits of Living in Taiwan (Ranked best first)
Benefits 2018 2017 2016 2015 2014 2013 2012 2011
My family feels safe in Taiwan 1 1 3 2 2 2 2 1
Taiwanese people are extremely nice 2 3 2 1 1 1 1 2
Taiwan provides quality Health/Medical/Dental services 3 4 4 4 4 4 3 4
Alternative transportation options are usable and provide
options to driving my car (i.e., buses, bike lanes, taxis,
trains, sidewalks).
4 7 5 5 5 7 6 5
Taiwan is an easy country to live in 5 2 1 3 3 3 4 3
Mobile telephone coverage is excellent 6 6 6 8 8 9 9 8
Taiwan provides adequate shopping opportunities 7 5 7 7 6 6 7 7
Taiwan provides quality parks and trails 8 12 9 12 10 12 12 11
Internet connectivity is excellent 9 8 10 11 17 14 8 9

The Top Benefits of Living in Taiwan (Ranked best first)
Benefits 2018 2017 2016 2015 2014 2013 2012 2011
The Postal service is excellent 10 13 11 9 9 8 10 10
Air travel services meet my needs 11 New in 2018
Taiwan's neighbourhoods, parks and thoroughfares are
clean
12 11 New in 2017
Recycling and trash services meet needs 13 10 New in 2017
There are sufficient opportunities to gather as a
community (Festivals/Community Events)
14 New in 2018
There are abundant recreational opportunities for all
members of my family
15 New in 2018
Taiwan provides quality Fire/Rescue services 16 New in 208
There are plentiful opportunities to enjoy the arts 17 13 10 11 12 14 12 15
Street surfaces are drivable and safe 18 14 New in 2017

Living in Taiwan…The not so great things.
We asked if people agreed, or
disagreed, with the
statement ”Where there are
no traffic lights, pedestrian
(Zebra) crossings are a safe
place to cross the road.”
They disagree. It received the
most strongly negative
response we have seen in
eight years.
This public safety issue is
something that government
and policing should address as
a priority.

Living in Taiwan…The not so great things.
We asked for the first time about: online banking processing of
foreign currencies; ecommerce services; and the process of
obtaining health insurance for spouse and dependents. Sadly,
the responses to these new questions were less than positive.
Recently, however, we believe there has been progress on the
issue of health insurance for spouse and dependents.

The Least Appreciated Aspects of Living in Taiwan (Ranked worst first)
Concerns 2018 2017 2016 2015 2014 2013 2012 2011
Where there are no traffic lights, pedestrian (Zebra)
crossings are a safe place to cross the road
1 1 New in 2017 – Most negative response in 7 years.
Banking and other financial services are excellent 2 4 2 3 3 4 6 4
Online banking processing in foreign currencies are easy 3 New in 2018
Taiwan's air quality is good 4 3 New in 2017
Taiwan provides an 'English-friendly' environment for me
and my family
5 2 1 2 1 1 1
New in
2012
Water runoff from storms is controlled and minimizes
flooding
6 6 4 7 5 2 2 1
Taiwan provides quality drinking water. 7 5 5 4 2 3 3 3
Taiwan provides quality youth activities 8 9 9 8 6 6 4 2
The standard of schooling is excellent 9 7 7 6 8 9 10 8

The Least Appreciated Aspects of Living in Taiwan (Ranked worst first)
Concerns 2018 2017 2016 2015 2014 2013 2012 2011
eCommerce services are easy to access and use 10 New in 2018
The library services provided to our community are current
and meet our needs
11 10 6 5 4 7 5 4
Taiwan delivers reliable electricity 12 9 8 6 7 5 5 6
I can travel by car to locations in Taiwan with minimal
delays
13 New in 2018
The sewer system in Taiwan works reliably 14 15 11 10 7 5 8 7
Taiwan provides quality police services 15 12 12 9 13 8 9 6
Taiwan government is approving development that
enhances the quality of life in our community
16 8 8 13 11 10 12 17
Process of obtaining health insurance for spouse and
dependents is easy
17 New in 2018
Taiwan provides safe food 18 11 3 1 New in 2015

For more details, please contact…
Independent Marketing & Research Limited via:

2018 Taiwan Business Climate Survey (BCS)

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