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Executive Report on Strategies in Taiwan
ICON Group International, June 2007, Pages: 390
How to Strategically Evaluate Taiwan
Perhaps the most efficient way of evaluating Taiwan is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
Relative Accessibility
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities.
Latent Demand and Accessibility in Taiwan
This report provides an extremely detailed overview of factors driving latent demand and accessibility in Taiwan. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks.
Chapter 2 deals with macro-accessibility. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Taiwan:
Openness to Trade in Taiwan
Openness to Direct Investment in Taiwan
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering Taiwan. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework.
In Chapter 3, I summarize the economic potential for Taiwan over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by Taiwan when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for Taiwan as an area of dominant influence in Asia and, potentially, the world.
The report concludes with trade indicators for Taiwan. Often, the amount of trade flowing into and out of a country is a strong indicator of trading partners, trade openness, and related latent demand. Trade indicators are purely statistical in nature. Although international trade is not a direct measure of latent demand, it does provide an indicator of general market conditions with respect to trade flows and trade openness in Taiwan.
As a whole, this report presents a strategic assessment of Taiwan by considering an extremely broad set of factors affecting both latent demand and accessibility, as outlined in the following chapters.
MACRO-ACCESSIBILITY IN TAIWAN
Quality of Infrastructure
Taiwan has a well-developed infrastructure system. There are five international airports, in Taoyuan (of northern Taiwan), Taichung (of central Taiwan), Kaohsiung (of southern Taiwan), Hwalien (of eastern Taiwan), and Makong (of an island in the Taiwan Straits). The airport in Hwalien newly opened in 2002 and the two in Taichung and Makong, inaugurated, in early 2004 are all designed to serve international chartered flights only. Fifteen domestic airports connect major cities, sight-seeing spots and key offshore islands. Six international harbors facilitate import and export trade. Toll highways and railways form an extensive inland transport network, including a north-south freeway. The average family has more than one telephone, and the penetration rate of mobile phone services exceeded 115%. Fax machines, personal computers, and Internet communications are common for business firms. Virtually every family has access to electricity and household tap water, except in remote mountainous areas.
Taiwans infrastructure construction efforts have improved traffic congestion and power shortage problems. Additional lanes have been added to the first north-south freeway, while the second north-south freeway was opened to traffic in early 2004. Construction of a metro system for Kaohsiung and a freeway between Taipei-Ilan is underway. Taiwan authorities recently decided to build by itself a rapid mass-transit system between CKS Airport and downtown Taipei when the local contractor closed down. Projects in the planning stage include another freeway in eastern Taiwan and three light-rail metro systems in the cities of Hsinchu, Taichung, and Tainan. The economic authorities are planning construction of five reservoirs on low land areas to ensure sufficient water supply for households and industrial users.
Taiwan’s power grid network is composed of 41 hydraulic power plants, 32 thermal power plants, three nuclear power plants, and one wind-driven power plant all over the island, ensuring relatively stable power supply to households and the industrial/commercial sector.
Political Risks
Over the past decade, Taiwan has made the transition from single party, authoritarian rule to a democratic, multi party political system. Martial law, which had been in force since the 1940s, was lifted in January 1988. Taiwans first democratically elected legislature was chosen in December 1992. After the second fully democratic election for the national legislature was held in December 1995, Taiwan completed its democratization by holding the first direct election of its President in March 1996.
A defining characteristic of Taiwans international relations is a lack of diplomatic ties with most nations of the world. The authorities on Taiwan call their government the “Republic of China,” and for many years claimed to be the legitimate government of all China. The PRC, however, considers Taiwan to be a province with no right to play an independent role in world affairs. The PRC will not maintain diplomatic relations with countries that also have official ties to Taiwan. Most countries have, therefore, chosen to establish diplomatic relations with the PRC rather than with Taiwan. As of June 2004, twenty-six countries maintained diplomatic relations with Taiwan. The PRC was admitted to the United Nations and most related organizations in 1971, forcing out Taiwan. The U.S. switched diplomatic recognition to the PRC in 1979.
Although it is still stipulated in the constitution, several years ago the Taiwan authorities changed policies and no longer insist that it is the sole legitimate rulers of all of China. While still acknowledging that Taiwan is “the Republic of China”, the Taiwan government now seeks recognition as one of two “legitimate political entities” in China (the other being the PRC). Under this policy, Taiwan is seeking to join various international organizations, including the United Nations, but have encountered stiff PRC opposition. Taiwan has been able to join the Asia Pacific Economic Cooperation (APEC) dialogue as an “economy” and the World Trade Organization (WTO) as a “customs territory.”
Although the United States does not have diplomatic relations with Taiwan, the U.S. maintains extensive ties with the 23 million people on Taiwan. The American Institute in Taiwan (AIT), a private, not-for profit institution, was established in 1979 to maintain the unofficial relations between the peoples of the United States and Taiwan. More than forty other countries, including most major European and Asian nations, also maintain unofficial representation in Taiwan.
Marketing Strategies
Taiwan is the ninth largest export market for the United States. U.S. goods enjoy a reputation for quality on the island. As Taiwan is a member of the World Trade Organization (WTO) with a relatively liberalized economy, most imported products face few structural or legal barriers. Nearly every type of sales channel exists in Taiwan. U.S. goods reach end-users through agents, distributors, franchisees, direct marketing, mail order and almost any other imaginable means. Distribution policies vary with the types of products and end-users, but all distribution channels are changing rapidly under the pressures of new demands from sophisticated Taiwan consumers, intensified competition between foreign and domestic rivals, and the introduction of IT applications to the distribution chain.
The marketing of products is too complex a subject to be treated comprehensively in this brief space, so the comments made here are, of necessity, very general. Taiwan end-users tend to make purchasing decisions based primarily on price -- although a higher price may increase the attractiveness of certain kinds of consumer goods.
Taiwan is a land of small businesses and traders who import from all over the world. The strength of Taiwans economy lies not in its few large firms -- although Taiwan has given birth to a handful of large firms whose presence is felt in world markets -- but in its multitudinous small- and medium-sized firms. There are about 1.1 million registered businesses in Taiwan. The island has 132,000 legal manufacturing plants and over 100,000 illegal factories. Reflecting the importance of personal relationships in Taiwan’s society and culture, a strong local presence, with a wholly owned subsidiary, branch office, joint venture partner or agent/distributor, is another key to success in the market. Although it may be possible to directly supply a few types of highly specialized products from the United States, most U.S. firms will find it necessary to have some kind of local presence to market their products and services.
Distribution Channel Options
The most common distribution route in Taiwan moves products from suppliers to distributors, from distributors to retailers, and then from retailers to consumers. Some suppliers use shorter distribution channels, distributing products directly through retailers only. Multi-level marketing is accepted in Taiwan, and some direct-selling organizations are well established here. Foreign firms, especially small- and medium-sized companies, generally rely on agents to sell their merchandise to distributors. For certain products such as apparel, however, the distribution channels tend to be more complex.
Most foreign firms gain their initial foothold in the market by using a Taiwan agent. Taiwan firms prefer the partnering aspect of an agent relationship. Although some companies are willing to act only as distributors, there is a fear that firms seeking distributors are not serious about the market and will not support their distributors. Firms selling equipment or machinery frequently find it necessary to locate a partner willing and able to do some assembly or manufacturing in Taiwan. Although not necessarily formal joint ventures, these efforts require a higher degree of commitment to the market than simply selling through an agent. If the size of the market warrants, companies may wish to consider setting up a branch office or subsidiary in Taiwan. Taiwan officially welcomes foreign investment and establishing an office in Taiwan is relatively easy, if the procedures sometimes bureaucratic.
Using U.S. Commerce Department Services to Market American Products in Taiwan
AITs Commercial Section, on behalf of the U.S. Department of Commerce, provides a number of services to help U.S. firms, large and small, export their goods and services to Taiwan. Through our office in Taipei (covering northern and central Taiwan) and a branch in Kaohsiung (covering southern Taiwan), we offer a variety of resources and services (including market research, agent distributor searches, advocacy, trade missions and trade shows) to assist U.S. companies entering the Taiwan market. Please contact us at Tel: 886-2-2720-1550, Fax: 886-2-2757-7162, email taipei.office.box@mail.doc.gov. It is also on the World Wide Web at the following address: http://www.buyusa.gov/taiwan/en.
The first step in using these services is contacting an Export Assistance Center in the United States. A comprehensive list of U.S. Export Assistance Centers (USEAC) can be found at http://www.buyusa.gov/home/us.html. These offices can help U.S. exporters determine which service is most suited to their export needs.
Arrange Business Appointments through the Gold Key Matching Service - If one is planning to visit Taiwan to locate an agent or distributor, or begin discussions with potential buyers or business partners in Taiwan, the U.S. Commercial Service staff in Taiwan can arrange a schedule of meetings with pre-screened potential buyers, agents or distributors for a nominal fee.
Promote Companies on the U.S. Commercial Service Web site - The U.S. Commercial Service in Taiwan can translate product information into Chinese and feature company information on the local version of its Web site, which targets Taiwan importers and buyers. At the time of this chapter, the service is offered free of charge. Qualified U.S. exporters may register for the program directly at http://www.buyusa.gov/taiwan/en/aboutfuse.html.
Connect with Local Professional Firms - The U.S. Commercial Service in Taiwan maintains an on-line directory of local attorneys, accountants, translators, and travel agents, as well as companies that provide meeting facilities, temporary help, executive search services, market research, instant office rental, patent and trademark services, trade show and exhibition services, moving and storage. These firms have English-speaking staff and experience in working with foreign companies.
Pricing Issues
Brand is an important determinant of price policy. Generally speaking, price margins at the distributor level for international brands are lower than for local or regional brands. Distributor price margins range an average between 15 percent and 40 percent, depending on which party maintains responsibility over marketing. In addition, price breaks and discounts for quantity purchases are frequently offered.
Taiwan importers and distributors often sell through modern retail stores. It is estimated that over 90 percent of imported consumer goods are sold through five types of modern retail outlets with different price margins:
Department Stores
Average 15-35 percent margin
Warehouse Stores
Average 15 percent margin
Convenience Stores
Average 30-40 percent margin
Supermarkets
Average 20-25 percent margin
Shopping Malls
Average 20-40 percent margin
Creating a Sales Office
Establishing a subsidiary or representative office in Taiwan is not generally considered to be particularly burdensome. There are, however, a number of different corporate structures from which to choose, and an array of forms and procedures to complete. In addition, a Chinese name is required. Consultations with reputable local attorneys or accountants are strongly recommended in order to identify and analyze key issues relevant to each business, and complete all necessary steps for establishment in Taiwan.
Selling Strategies
The most important consideration for the majority of Taiwan buyers is initial price. The most common complaint against U.S. goods is that their price is too high. Americans often find Taiwan businesspeople short-term oriented, and are frequently frustrated by the fact that most Taiwan firms do not factor in life-cycle costs when negotiating a purchase. Although attitudes are changing, most Taiwan firms will only pay a higher price for a product if they see a near-term payoff. After price, the next most important considerations are quality and after-sales service.
Advertising and Trade Promotion
Taiwan businesspeople are active participants in the global marketplace. They read trade journals from the U.S., Europe and Japan, participate in major international trade events and are well aware of current trends in their industries. There are local trade shows for most major industries and the Taiwan External Trade Development Council (TAITRA) is the co-organizer of many of these shows (usually in conjunction with the relevant industry associations). A local partner can give the best advice on where and how to advertise, but participation in the major trade shows and advertisement in the relevant Taiwan trade journals and industry newspapers are important.
Information on shows can be obtained from TAITRA. The TAITRA World Wide Web address is http://www.taiwantrade.com.tw. Taiwan offers several lists, including a frequently updated calendar for international conferences and trade exhibitions held at the Taipei World Trade Center. TAITRA-sponsored trade shows can be found in Chapter 13 of this document and at http://www.taipeitradeshows.com.tw. Most trade exhibitions in Taiwan are export-oriented. Some have a significant number of non-Taiwan companies exhibiting.
TAITRA Offices in the United States
U.S.A. - New York
Taiwan Trade Center, New York Inc.
Director: En-Lei Tuan
1 Penn Plaza, Suite 3410
New York, N.Y. 10119
Tel: 212-904-1677
Fax: 212-904-1678
E-mail: newyork@taitra.org.tw
U.S.A. - Miami
Taiwan Trade Center, Miami Inc.
Deputy Director: Michelle Kung
5301 Blue Lagoon Drive, Suite 150
Miami, FL 33126
Tel: 305-266-9191
Fax: 305-266-8787
E-mail: Miami@taitra.org.tw
U.S.A. - San Francisco
Taiwan Trade Center San Francisco
Director: Richard Tsai
5201 Great America Parkway, Suite 307
Santa Clara, CA 95054
Tel: 408-988-5018
Fax: 408-988-5029
E-mail: office@taiwantradesf.org
Professional Journals and Magazines
U.S. companies that do not have representatives or agents in Taiwan should target professional journals and magazines. The following are some of Taiwans major industry/commercial newspapers and business publications:
Commercial Times (Daily Newspaper)
Mr. Chang Huei Lin, Deputy Manager
Business Service Department
2F, 68 Ying Peng South Rd., Taipei
Tel: 886-2-2382-1598, 2381-3199 ext. 5001
Fax: 886-2-2382-1252
E-mail: s119@comm2.chinatimes.com.tw
http://www.news.chinatimes.com/
Economic Daily News (Daily Newspaper)
Mr. Kofeng Tseng, Reporter
Business Services Department
8F, 557 Chunghsiao E. Rd., Sec. 4, Taipei
Tel: 886-2-2768-1234 ext. 6175
Fax: 886-2-2764-7757
E-mail: kofeng.tseng@udngroup.com
http://www.udnnews.com.tw/
Business Weekly (Weekly Magazine)
Ms. Vicky Hsueh, Manager
Advertising Department
Rm. B, 21F, 333 Tunhwa S. Rd., Sec. 2, Taipei
Tel: 886-2-2736-8999 ext. 201
Fax: 886-2-2736-4605
E-mail: jying.hsueh@bwnet.com.tw
http://www.ebusinessweekly.com.tw/
Commonwealth (Monthly Magazine)
Ms. Joyce Liang, Manager
Advertising Department
4F, 87 Sungkiang Rd., Taipei
Tel: 886-2-2507-8627 ext. 137
Fax: 886-2-2507-8045
E-mail: joycel@cw.com.tw
http://www.cw.com.tw/
Breakthrough (Monthly Magazine)
Ms. King Lane Liang, Vice President
Advertising Department
15F, 181 Fu Hsing North Rd., Taipei
Tel: 886-2-8712-6882 ext. 886
Fax: 886-2-2546-6053
E-mail: cyndiliang@mail.chinamgt.com
http://www.harment.com/
Directory of Taiwan (Annual Edition)
Published by The Taiwan News
Mr. Chi-Sen Chiu, Vice General Manager
Advertising Department
7F, 88 Hsin Yi Road, Sec. 2, Taipei
Tel: 886-2-2351-7666 ext. 264
Fax: 886-2-2351-5330
E-mail: chiucs@etaiwannews.com
http://www.etaiwannews.com/
International Advertising Firms Doing Business in Taiwan
Taiwans advertising sector is comparable to that of other developed economies and covers a wide range of media. There are some restrictions to advertising, especially for alcohol and tobacco commercials on television. Major international advertising firms doing business in Taiwan include:
Leo Burnett Co. Ltd.
9F, 207 Tun Hwa S. Rd., Sec. 2, Taipei
Tel: 886-2-2732-1211
Fax: 886-2-2732-8810
E-mail: office@leoburnett.com.tw
DDB Worldwide Inc.
1F, 427 Kong Kuan Rd., Peitau, Taipei
Tel: 886-2-2828-5166
Fax: 886-2-2828-5177
E-mail: jerome.fung@ddb.com.tw
Bates Taiwan Co., Ltd.
6F, 120 Chienkuo N. Rd., Sec. 2, Taipei
Tel: 886-2-2505-5305
Fax: 886-2-2505-5332
E-mail: janicel@mail.bates.com.tw
Dentsu, Young & Rubicam Co., Ltd.
8F, 198 Tun Hwa S. Rd., Sec. 2, Taipei
Tel: 886-2-2378-8938
Fax: 886-2-2378-8949
E-mail: Steve_Kuo@tw.yr.com
Entering the Consumer Goods Market
Taiwan is renowned as an industrial dynamo which has been driven by exports of industrial and high-tech goods for well over twenty years. Less well known is the fact that Taiwan offers a booming domestic consumer market. Taiwan’s consumers enjoy a level of average disposable income which is among the highest in Asia, and their tastes are becoming increasingly cosmopolitan. American brands are widely known and respected. U.S. firms wanting to enter the market will find a network of support firms that can help them identify what consumers want, how best to deliver it, and what they are willing to pay.
As in the industrial sector, finding a good local partner -- be it an agent, distributor, licensee or joint venture partner -- is essential. Partners will frequently offer guidance on the staggering number of different marketing channels. Consumer goods distribution in Taiwan is dominated by a vast number of small, independent retailers, served by a network of wholesalers. As the Taiwan market becomes more attractive to investors and consumers become more sophisticated, however, this fragmented system is giving way to consolidated distribution and larger chains with greater economies of scale. New players are changing the face of Taiwans retail market.
Major Types of Modern Retail Stores
Modern retail outlets such as shopping malls, department stores, warehouse stores, supermarkets, and convenience stores, have played important roles in retail, while other traditional retail outlets, such as “wet markets” and mom-and-pop stores, have become less important as consumer patterns change.
Department Stores
There are about 50 department stores located throughout Taiwan, concentrated mainly in the large cities. Most of these department stores are run on a Japanese model, i.e., the bulk of the floor space is rented out to concessionaires who pay rent and a fixed percentage -- about 20 percent or so -- of either their gross or net income. Such arrangements help department stores avoid risk and enable replacement of concessionaires recording poor sales. Concessionaires are responsible for decorating and staffing their sales areas. Although the department stores do purchase some merchandise on their own account, most of their sales are through the concessionaires. To compete with lower priced bulk quantity selections available in warehouse stores, Taiwan department stores carry high-quality, upscale and expensive merchandise.
The introduction of computerized systems to track sales should help department stores make purchases and control inventory to alleviate problems associated with the lack of merchandise selection. Because Taiwan consumers are very attentive to customer service and ambiance when shopping, department stores will continue to focus on distinguishing themselves through special design, decor, fashion shows, art exhibitions, VIP cards, in-store child care and food courts to attract their target market.
Warehouse Stores and Supermarkets
Carrefour and RT-Mart are two major warehouse store chains. Geant is the third largest market player. The U.S. warehouse store chain, Costco, has opened stores on the island and is enjoying brisk sales. British Tesco and Japanese Jusco GMS have also entered this profitable market.
The current supermarket leaders are Taiwan’s Chuan Lien Sher and Hong Kong-based Wellcome. These two market leaders are expanding businesses by aggressive opening of new stores.
Convenience Stores
There are over 7,500 convenience stores island-wide, which offer food products and toiletries 24 hours a day and are major outlets for consumer food items, such as snack foods, beverages and juices. 7-Eleven is the market leader. Convenience stores have been the fastest growing retail outlets, in terms of revenue sales, in the Taiwan retail market in recent years.
Shopping Malls
According to Taiwan’s Shopping Center Development Council (SCDC), Taiwan’s first shopping mall was established in 1994. But the island’s shopping mall industry really only took off in 1999, when the first composite commercial zone shopping mall, TaiMall, opened in Taoyuan. The establishment of shopping malls provides a promising new venue for both department stores and specialty chain stores. U.S. brands are prominent in Taiwan’s malls, noticeably more so than in traditional channels.
Additional Sales Routes
Franchising
A variety of franchise arrangements exist on the island, ranging from equally shared joint venture partnerships to the Pizza Hut model, where stores are managed and operated by a “master franchisee” or a regionally based conglomerate. As Taiwan lacks a strong legal basis for franchise operations, it is crucial that contractual arrangements entered into by U.S. companies stipulate adherence to corporate policy. To gain a foothold in the market and ensure successful performance, franchises must stress management, personnel training, customer service and consistency in product quality, and seek guarantees for reliable distribution channels. Vital to the successful operation of a franchise in Taiwan is identifying a reliable intermediary capable of enhancing and reinforcing technology transfer. In recent years franchise operations have expanded beyond fast food restaurants (McDonalds, Kentucky Fried Chicken, TGIF, Pizza Hut and Burger King are all present) to non-food operations such as Cosmed, JaniKing and Midas.
Direct Selling
“Multi-level sales” has been popular as a second job to supplement household incomes. “Multi-level sales” businesses in Taiwan specialize primarily in health care products, cosmetics and skin care products, and household cleaning items. Foreign brands are selling well in the categories of health care products; cosmetics and skin care products, and water filters. Firms such as Avon, Amway, Nu Skin and Tupperware have taken advantage of the sales skills of ambitious, well-educated Taiwan women to become very successful. Direct marketing techniques such as mail order, TV and Internet marketing are expanding rapidly.
In contrast to the industrial/commercial market, Taiwan consumers, in many cases, are willing to pay more for the goods that they purchase. Conspicuous consumption is rampant in the Taiwan society and consumers are eager to pay top-dollar for the right brand of watch, car, cognac or necktie. While consumers are willing to pay more for perceived value, price competition in the marketplace can be brutal. Firms that charge too much for their products in Taiwan can expect to find parallel importers undercutting their efforts. Consumers are extremely brand-conscious, but they are willing to shop around to find the lowest price on their favorite brand. Moreover, when brand is not important, consumers buy on price.
Public Sector Marketing
Selling to the Taiwan authorities deserves a special mention, as there are both excellent opportunities and major challenges for U.S. firms interested in Taiwan’s public procurement. The Central Trust of China (CTC), a quasi-state organization that has procurement and other responsibilities, issues many large, and typically technically complex, tenders. Government agencies and state-owned enterprises that need to purchase equipment inform CTC of their requirements. CTC announces and administers the tender procedures, with technical evaluations performed by the purchasing entity or its surrogates (such as outside consulting firms). CTC tenders may be local (limited to firms with a Taiwan office) or international (open to firms outside of Taiwan), but both kinds of tenders are generally conducted fairly and openly. U.S. firms have a well-established record of success in winning CTC-administered tenders.
While the CTC handles a large portion of the Taiwan authority purchases of advanced equipment, the bulk of Taiwan authority purchases are administered by the purchasing entities themselves. Nearly all of these tenders are open only to firms with a local presence, and it can be difficult for outsiders to obtain advance information on such tenders. CTC itself estimates that they procure less than 10 percent of the authorities’ total procurement. In addition to the authorities extensive infrastructure spending, important portions of the economy are still in the hands of authority-owned entities -- significant parts of the energy and tobacco products industries are authority monopolies or at least nearly so.
U.S. firms have scored some major successes in public procurement, but U.S. companies also have serious complaints about the system. The contracting entities tend to wield excessive power over the contractor: exorbitant potential liabilities, cumbersome change order procedures and expensive bonding requirements are common. Contracting entities tend to view contractors as adversaries, which can strain otherwise normal business dealings. Taiwan bureaucrats tend to believe that the penalty for making no decision is always less than the penalty for making the wrong decision and this attitude can often result in frustrating delays or unreasonable demands on the contractor, as bureaucrats seek to take the safest course of action. Conflict of interest laws in Taiwan are not as fully developed, as are those in the United States. Firms employing relatives of existing officials and/or retired officials have an inside track on Taiwan authority contracts.
Taiwans Government Procurement Law (GPL) went into effect on May 27, 1999. It had been hoped that the GPL would do much to improve the transparency and fairness of procurements by the authorities, and while there is certainly some movement in the right direction, the GPL is proving to be a disappointment. Contract terms and conditions are still often extremely one-sided, local companies sometimes make frivolous complaints under the GPL in order to be given a piece of the action, and the authorities have not yet organized a binding arbitration mechanism for the authorities’ procurement disputes. For these and other reasons, the Taiwan authority’s procurement practices were for the first time, in May 2000, listed on a United States Trade Representative “Title VII” report as causing concern for the United States Government.
Protecting Your Products from IPR Infringement
While Taiwan companies are known for their ability to quickly incorporate ideas found in competing products, Taiwans copyright, patent, trademark, trade secret and integrated circuit layout protection laws generally meet most international standards. Market monitoring systems (for both the export and domestic markets) are in place to help deter the sale of pirated and counterfeit goods, although concerned U.S. industries report that enf
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