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Viewing cable 08AITTAIPEI1576, TAIWAN: PART THREE OF 2009 NATIONAL TRADE ESTIMATE REPORT

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Reference ID Created Released Classification Origin
08AITTAIPEI1576 2008-11-07 08:20 2011-08-23 00:00 UNCLASSIFIED American Institute Taiwan, Taipei
P 070820Z NOV 08
FM AIT TAIPEI
TO SECSTATE WASHDC PRIORITY 0301
INFO CHINA POSTS COLLECTIVE
AMEMBASSY SEOUL 
AMEMBASSY TOKYO 
USDOC WASHDC
UNCLAS AIT TAIPEI 001576 
 
 
STATE FOR EAP/TC, EB/TBB/BTA 
STATE PASS TO USTR/BLUE AND WINELAND AND AIT/W 
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN 
 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN TW
SUBJECT: TAIWAN: PART THREE OF 2009 NATIONAL TRADE ESTIMATE REPORT 
 
REF:  STATE 88685 
 
SERVICES BARRIERS 
----------------- 
 
Accounting/Consulting Services 
------------------------------ 
 
1. Foreign certified public accountants may serve as private agents 
contracted by Taiwan authorities to provide notary services or 
conduct audits only if they pass Taiwan's public certified 
accountant qualification tests, although foreign CPAs are exempt 
from some portions of the tests.  Foreign CPAs may provide 
management consultant services in Taiwan. 
 
Banking 
------- 
 
2. Foreign banks may set up representative offices, branches, and 
subsidiaries.  To establish a representative office, banks must rank 
among the world's top 1,000 banks in terms of capital or assets, or 
have over $300 million in transactions with Taiwan banks and/or 
enterprises over the past three years.  To establish a bank branch, 
a bank must rank among the world's top 500 banks in terms of capital 
or assets, or have over $1 billion in transactions with Taiwan banks 
and/or enterprises over the past three years.  The above 
requirements are waived if the government of the foreign bank's home 
country has signed a relevant agreement with Taiwan.  Taiwan sets a 
minimum working capital requirement of NT$150 million ($4.6 million) 
for the first branch and another NT$120 million ($3.7 million) for 
each additional branch.  In addition, a foreign bank's branch in 
Taiwan is required to maintain net worth above two-thirds of its 
working capital. 
 
3. Foreign banking institutions may acquire up to 100% of equity in 
Taiwan banks.  Foreign-invested banks in Taiwan are accorded with 
national treatment, and these banks are subject to a 25% ownership 
limit for each investor, a requirement exactly the same as for 
Taiwan banks. 
 
Brokerage/Asset Management 
-------------------------- 
 
4. Foreign securities firms may set up representative offices, 
branches, and subsidiaries, and Taiwan securities firms are not 
subject to any foreign ownership limit. They are subject to minimum 
capital requirements, including NT$400 million ($12.3 million) for 
underwriting, NT$400 million ($12.3 million) for trading, and NT$200 
million ($6.15 million) for brokerage.  The minimum capital 
requirement increases by NT$30 million ($923,080) for establishing a 
domestic or offshore branch. 
 
5. Asset management requires a securities investment trust 
enterprise (SITE) license and/or securities investment consultant 
enterprise (SICE) license.  SITEs are allowed to organize, sell, and 
manage mutual funds in Taiwan, and SICEs are permitted to sell and 
manage overseas mutual funds.  Both SITEs and SICEs are not subject 
to any foreign ownership limit. They are subject to minimum capital 
requirements, including NT$300 million ($9.23 million) for SITEs and 
NT$20 million ($615,380) for SICEs, with an ownership limit of 25% 
for each investor (shareholder).  A minimum 20% of the SITE must be 
held one or more of the following: 
 
--fund management firms having over three years of experience and 
currently managing assets above NT$65 billion ($2 billion); 
 
--banks ranking among the world's top 1,000 banks and having three 
years asset management experience; 
 
--insurance companies with over three years asset management 
experience, holding assets above NT$8 billion ($246 million); 
 
--securities firms having a minimum paid-in capital of NT$8 billion 
($246 million) and engaging in underwriting, trading and brokerage 
for a minimum of three years; and/or 
 
--financial holding companies whose subsidiaries meet any of the 
four qualifications. 
 
Educational Services 
-------------------- 
 
6. Taiwan's Ministry of Education (MOE) does not recognize credit or 
degrees earned in Taiwan offered by foreign-owned or operated 
facilities which are not physically established in Taiwan and have 
not been approved by the MOE.  Under Taiwan law, however, foreign 
universities can only offer degree programs by setting up a full 
campus in Taiwan, and requirements to do so are burdensome. New 
schools must have at least four hectares of land, initial floor 
space of 6,000 square meters, a substantial endowment deposited in a 
local bank account, and 12 academic departments across three or more 
fields of research. Foreign colleges and universities may, however, 
set up representative offices to provide Taiwan students information 
about the foreign schools. 
 
7. Taiwan recognizes joint degrees earned by students who split 
attendance between the school in Taiwan and the foreign campus. 
However, the MOE does not recognize such degrees unless at least 
half of the credits are earned in-person on the foreign campus, 
effectively shutting out foreign "capstone" and weekend or executive 
MBA programs. 
 
8. Joint degree programs between a foreign school and a Taiwan 
school via distance education are also possible.  However, credits 
earned through distance learning cannot exceed one-third of the 
total credits required for a degree in Taiwan, which limits the cost 
savings and convenience of distance education. 
 
9. Taiwan allows establishment of private schools at the senior high 
level or below only for children of foreign expatriates.  Foreign 
investors are allowed to establish and operate language training 
institutes, and are also allowed to employ local and foreign 
teachers. Foreign teachers may not teach in local primary and high 
schools unless they pass Taiwan teachers' qualification tests. 
Foreign teachers may teach in local tertiary schools when under an 
employment contract from the school. 
 
Financial Services 
------------------ 
 
10. Foreign portfolio investors are required to register rather than 
seek advance approval, though since December 2003, the registration 
can be done through the Internet. Since 2003, Taiwan has allowed 
foreign portfolio investors to trade in the futures and money 
markets as a part of financial management before actual portfolio 
investment, although domestic currency denominated futures, money 
market funds, and bank deposits are limited to 30 percent of total 
inward remittances. All offshore foreign portfolio investors may 
trade in Taiwan's stock market regardless of their size, except for 
investors from the People's Republic of China. Since October 2003, 
hedge funds have been permitted to trade in Taiwan's stock market, 
but are subject to Taiwan authorities' close surveillance. Foreign 
individual investors, however, are still subject to an investment 
limit. Onshore foreign individuals and institutional investors are 
also subject to annual inward/outward limits. 
 
11. In addition to liberalization, Taiwan set up an international 
bond market in 2006. Since then, two foreign banks have issued 
foreign currency-denominated bonds. Taiwan has also announced plans 
to establish a securities market international board where both 
listing and trading will be denominated in U.S. dollars. The plan, 
which is designed to attract foreign companies to list as well as 
foreign portfolio investors to trade, has thus far not been 
implemented due to restrictions on cross-Strait mutual investment. 
 
Healthcare Services 
-------------------- 
 
12. Taiwan law permits foreign-invested health care services, such 
as hospitals and nursing homes, but all types of health care 
services in Taiwan must be provided by non-profit organizations. 
The number of foreign persons permitted to serve on the board of 
directors of a healthcare service provider is limited to no more 
than one-third of the total members.  In addition, one-third of 
board members must have professional medical qualifications.  Only 
those who have Taiwan-issued medical licenses can practice medical 
service in Taiwan.     Foreign medical doctors may take 
English-language licensing exams which allow them to practice 
medicine outside Taiwan's major cities. 
 
13. Taiwan does not license or recognize chiropractors as legitimate 
medical practitioners, and allows chiropractors to practice in 
Taiwan only if they do not advertise their services and make no 
claims about the results or efficacy of treatments. 
 
Insurance 
--------- 
 
14. Taiwan allows foreign insurance firms to set up representative 
offices, branches, and subsidiaries.  Taiwan also allows foreign 
insurance firms to merge with or acquire local companies.  The 
minimum capital requirement for an insurance company is NT$ 2 
billion ($615 million), and there is no foreign ownership limit. The 
minimum working capital for a Taiwan branch of a foreign insurance 
company is NT$ 50 million ($1.5 million), and the only entry 
requirement is a record of sound performance in its home market in 
the past three years, and no major violations in the past five 
years.  Foreign insurance firms in Taiwan may engage in life, 
non-life, and re-insurance businesses. 
 
Pay Television Services 
----------------------- 
 
15. The Cable Radio and Television Law restricts foreign investment 
in pay television services to a total equity share of 20 percent for 
direct investment, or 60 percent for direct plus indirect 
investment.  Further limits each cable service provider's potential 
market share to no more than one-third of the total cable market in 
Taiwan.  Despite these restrictions, the largest multi-system cable 
TV operators in Taiwan are foreign-owned.  However, recent, 
seemingly arbitrary, NCC decisions requesting financial 
restructuring of local affiliates of foreign-owned cable operators 
may undermine the ability of foreign cable companies to do business 
in Taiwan.  In addition, continuing caps on monthly cable TV fees 
are overly restrictive, hamper the Taiwan public's access to more 
expensive, higher-quality programming, and may reduce the cable 
industry's incentives to invest in expensive digitalization of 
Taiwan's largely-analog cable system. 
 
Telecommunications Services 
---------------------------- 
 
16. Since 2005, the Directorate General of Telecommunications (DGT) 
has used local population to calculate the capital requirements and 
license costs for facilities-based operators providing local, long 
distance, and international services.  For instance, NT$1.2 billion 
($36.4 million) may be required for a local call license in Taipei 
City and NT$2 billion ($60.0 million) for long distance and 
international service licenses, while licenses in less-populated 
areas will be less. 
 
17. To encourage further investments and more competition, in 
January 2008, the National Communications Commission 
(NCC)--established in 2006 to regulate the telecoms and 
broadcasting sectors--reduced capital requirements for 
facilities-based operators from NT$16 billion ($485 million) to 
NT$6.4 billion ($194 million) for an integrated network operator; 
from NT$1.2 billion ($36.4 million) to NT$500 million ($15.2 
million) for local call service providers in Taipei; and from NT$2 
billion ($60.0 million) to NT$800 million ($24.2 million) for both 
long distance and international call operators. In 2008, the NCC 
also began accepting and reviewing license applications at any time, 
rather than on a quarterly basis. 
 
18. Existing fixed-line operators still face serious difficulties in 
negotiating reasonable interconnection arrangements at technically 
feasible points in the network of the dominant carrier, Chunghwa 
Telecom (CHT). Despite CHT's announcement in May 2004 that it would 
share the local loop with the three private providers, fixed-line 
operators complain that local loop fees collected by CHT are still 
too high.  In addition to NT$35 billion ($1.1 billion) of new 
broadband-network construction ongoing since 2003, the NCC in July 
2007 issued six regional licenses to Worldwide Interoperability for 
Microwave Access (WiMax) operators. Taiwan expects WiMax operators 
to begin services in 2009, which will help break CHT's monopoly on 
the telecommunications network. 
 
19. CHT still retains close ties to the authorities, however.  Until 
2005, CHT and Taiwan's telecommunications regulator (DGT) were both 
under the direct control of the Ministry of Transportation and 
Communication (MOTC), creating an obvious conflict of interest. 
Privatizing CHT and establishing an independent regulator were two 
of Taiwan's WTO accession commitments. In August 2005, MOTC 
partially privatized CHT and, after sales of additional shares in 
September 2006, state ownership has been reduced to 34 percent, and 
more than 40 percent of the company is held by foreign investors. 
 
ELECTRONIC COMMERCE 
------------------- 
 
20. Over 90 percent of Taiwan's companies have corporate networks 
and a network infrastructure, and 4.7 million households link their 
computer to Internet by Asymmetric Digital Subscriber Line (ADSL), 
cable modem, or optical fiber (FTTx). Taiwan law has recognized the 
legal validity of electronic contracts, records, and signatures 
since 2001, the same year Taiwan's legislature passed a data privacy 
protection law.  Taiwan has not joined with the United States in 
APEC to advocate for a permanent moratorium on taxation of Internet 
transactions, and the Ministry of Finance imposes business taxes on 
Internet vendors who sell products for profit and have monthly sales 
over NT$60,000 ($1,820). In 2007, the volume of Internet sales, 
including "Business to Consumer" (B2C) and "Consumer to Consumer" 
(C2C) totaled NT$214 billion ($6.5 billion), according to the Taiwan 
Institute for Information Industry (III). Sales are expected to 
increase 32 percent to NT$282 billion ($8.7 billion) in 2008. 
 
INVESTMENT BARRIERS 
------------------- 
 
21. Taiwan prohibits or restricts foreign investment in a handful of 
industries, including agricultural production, public utilities, and 
postal services. In May 2008, Taiwan removed single-axle truck 
leasing from the list of sectors in which foreign investment is 
restricted, but added pesticides. Taiwan has allowed private 
production of cigarettes since 2004 without any foreign ownership 
limit, although prior official approval is required. Taiwan-flagged 
merchant ships are subject to a foreign ownership limit of 50 
percent. 
 
22. The foreign ownership limit on wireless and wire line 
telecommunications firms is 60 percent, including a direct foreign 
investment limit of 49 percent. Separate rules exist for Chunghwa 
Telecom, the legacy carrier still partially owned by the Ministry of 
Transport and Communications, which controls 97 percent of the fixed 
line telecommunications market.  For Chunghwa Telecom, the cap on 
direct and indirect investment was raised to 55 percent in December 
2007, including a direct foreign investment limit of 49 percent. In 
January 2003, Taiwan raised the total direct and indirect foreign 
ownership limit on cable television broadcasting services to 60 
percent, including a 20 percent limit on foreign direct investment. 
 
23. A 49 percent foreign ownership limit remains on satellite 
television broadcasting services, power transmission and 
distribution, piped distribution of natural gas, high speed 
railways, airport ground handling firms, air cargo terminals, air 
catering companies, and air cargo forwarders. In July 2007, the 
foreign ownership limit on airline companies was raised from 33 
percent to 49.99 percent, with each individual foreign investor 
subject to an ownership limit of 25 percent. 
 
Portfolio Investment 
-------------------- 
 
24. Foreign portfolio investors are required to register rather than 
seek advance approval, though since December 2003, the registration 
can be done through the Internet. Up to 30 percent of funds remitted 
for purposes of portfolio investment may be held in money market or 
other similar instruments.  Funds for futures trading, however, must 
be remitted to Taiwan specifically for that purpose and are 
segregated from funds remitted for equity investment.  In June 2007, 
Taiwan set a cap of NT$300 million on the balance of a foreign 
investor's NT$ omnibus account resulting from profits gained from 
futures trading in Taiwan. If the balance exceeds the limit, the 
foreign investor is required to convert the NT$ into U.S. dollars, 
with the new balance below $10 million. Except for investors from 
the People's Republic of China, offshore foreign portfolio investors 
may trade in Taiwan's stock market regardless of their size. 
 
25. In mid-August 2008, Taiwan announced that it will allow 
China-based qualified domestic institutional investors (QDII) to 
engage in portfolio investment in Taiwan after relevant regulations 
are promulgated, likely before the end of 2008.  Such investment, 
however, will be subject to a PRC-set cap of 3% net worth until 
Taiwan and the PRC sign a cross-Strait memorandum of understanding 
on this issue. 
 
26. Since October 2003, foreign hedge funds have been permitted to 
trade in Taiwan's stock market, but are subject to Taiwan 
authorities' close surveillance. Foreign individual investors, 
however, are still subject to an investment limit. Onshore foreign 
individuals and institutional investors are also subject to annual 
inward/outward limits of $5 million and $50 million, respectively.