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APEC DEREGULATION REPORT 2000 - CHINESE TAIPEI

APEC Deregulation Report 2000

Chinese Taipei

OBJECTIVE

APEC economies will:

a. promote the transparency of their respective regulatory regimes; and

b.eliminate trade and investment distortion arising from domestic regulations which not only impede free and open trade and investment in the Asia-Pacific region but also are more trade and/or investment restricting than necessary to fulfill a legitimate objective.

I. Heading Statement

To accelerate fulfillment of the APEC goal of trade and investment liberalization and to carry out regulatory reform, Chinese Taipei has adopted a series of policy measures for this purpose.

First, in 1995, Chinese Taipei proposed the “Asia-Pacific Regional Operations Center” (APROC) national reconstruction plan. This plan is divided into short, medium, and long-term goals: to promote trade and investment liberalization;

to reduce entry and exit barriers for natural persons; to relax limitations on the

inward and outward transfer of capital; and to establish a legal environment suited for a society with advanced information technology.

In addition, following Chinese Taipei's WTO accession, further deregulation will be carried out in areas that have not yet been fully opened, such as transportation, telecommunications, finance, services, and investments. Most state-run enterprises; several import-export tariffs and certain non-tariff barriers

will also be further deregulated.

This section of the individual action plan will focus on the necessary legal changes to effect deregulation measures. The following text aims to provide

more information on the content, public announcements, and dates of implementation of these deregulation measures in the related areas. For the details and future objectives of Chinese Taipei’s liberalization measures in each area, please refer to the contents of each area in the IAP.

II. Detailed Statement

A. Current Position

In order to prepare for its entry into WTO and achieve its own APROC goals,

in recent years Chinese Taipei, according to each stage of the trade and investment liberalization plan, has gradually eliminated or reduced unnecessary regulations in various market sectors. A brief outline of the content, public announcements, and timelines of the deregulatory measures follows:

Ÿ Trade in Goods

 Deregulation of medicine

– Besides accepting applications for registration of imports of OTC products since the “OTC monograph” was completed and announced in April 1996, Chinese Taipei also began accepting applications for registration of imports of toll-manufactured new chemical entity (NCE)

pharmaceuticals in February 1997.

– Applications for registration of imports of split-process toll-manufactured pharmaceutical products have been accepted since May 1998.

– General cosmetics are completely exempted from product registration.

– In June 1998, elimination of the restriction that foreign-investment manufacturers could only manufacture products originating from a parent or affiliate manufacturers from the ten advanced countries.

– Since July 1998, Foreign-investment manufacturers are allowed to toll- manufacture for more than one pharmaceutical company outside Chinese Taipei and to manufacture cosmetics and foods on the site from July 1998.

 Others

– In August 1997, Chinese Taipei eliminated relevant review requirements on import of the Hydrographic and Land Maps, so that they can be imported on a free and open basis. However, maps covering the territory

of Chinese Taipei may be distributed and sold only after approval by the agency in charge.

^{– Since 1 April, 1998, the import and export of all publications will be}

1. by Chinese Taipei Customs, except for the export of publications produced by Chinese Taipei businesses on commission from foreign businesses and the import of publications from Hong Kong, China and mainland China, which will still require inspection and approval by the Government Information Office.

– During the period from July 1999 to August 2000, Chinese Taipei has steadily eliminated or relaxed import restrictions on 147 goods. The previous notification procedures required for the import of those 126

imported goods have also been reduced or eliminated.

Ÿ Privatization

Chinese Taipei initiated the privatization process of the state-owned enterprises (SOEs) since 1989. By July 2000, 21 SOEs which were held under different agencies have been privatized.

There are 27 other SOEs that are scheduled for privatization. As the relevant laws are passed by the Legislature, these SOEs should be privatized by June

2002. The detailed schedule is reported below. However, the privatization of

some SOEs is far behind schedule. The Council for Economic and Development (CEPD) will review the reasons for the delay, adjust the appropriate timetables, and propose a set of measures to assist the privatization process.

Timetable for 27 SOEs

Notes:

1. MOEA: Ministry of Economic Affairs

MOF: Ministry of Finance

MOTC: Ministry of Transportation and Communication

VAC: Veteran Affairs Council

TCG: Taipei City Government

GIO: Government Information Office

2.The privatization dates of four enterprises are not decided yet. They are Kaohsiung Ammonium Sulfate Co., Ltd., Taiwan Agricultural and Industrial Enterprise Co., Ltd., Taiwan Bookstore, Taiwan Provincial Government Printing Factory.

Ÿ Services

To facilitate its further economic development, Chinese Taipei has, in recent years, promoted the liberalization of services in trade through a variety of market opening and administrative reform measures in the areas of portfolio investment, capital flow, entry/exit of natural persons, telecommunications, banking, insurance, securities, and transportation. In the future, in compliance with the agreement to be reached within GATS-related negotiating groups or working parties, Chinese Taipei will not only make further commitments to provide greater market access in specific sub- sectors, but also review and explore possibilities of reducing or eliminating the current restrictions on market access and national treatment. The progress on the liberalization of services in trade is as follows:

(a) Transportation and warehousing

– Liberalization of air transport:

1. In September 1996, the revision of the “Regulations Governing the Civil Air Transport Enterprises” was passed. This relaxed the regulations over the operation of private transport businesses, such as the helicopter transportation business. The revision also simplified the related licensing application procedures for these businesses.
2. In November 1996 and January 1997, permission was granted
   

respectively to United Parcel Service (UPS) and Federal Express, to set up and operate their own distribution centers at Chiang Kai-Shek International Airport.

1. In May 1997, “Regulations Governing the Air Freight Forwarders” was
   

amended to eliminate regulations on permitted categories of business, office space and on warehouses.

1. In order to attain the goal of becoming a regional air cargo transshipment center, the Civil Aviation Law was revised on January 21, 1998. Following this revision, the ratio limitation imposed on equity-holding by foreigners and the number of foreign directors in the boards of local enterprises providing air freight forwarding services, airport terminal ground-handling services and off-airport air cargo terminal services was raised up to 50%. In addition, the reciprocal treatment condition imposed on foreign airfreight forwarding enterprises for setting up branch offices in Chinese Taipei was lifted. Moreover, in order to further liberalize the

50% restriction on air freight forwarding services and off-airport air cargo terminal services, a revision of the Civil Aviation Law lifting such limitation

is now proceeding necessary legal procedures. It is expected that the

new revision will take effect after Chinese Taipei's accession to WTO.

1. The privatization of Taipei Air Cargo Terminal has been implemented by open bid from the private sectors. Taiwan Air Cargo Terminal Ltd. won the bid and Taipei Air Cargo Terminal was transferred smoothly to this new company on January 16, 2000.
   

— Liberalization of sea transport:

1. Foreigner have been allowed to establish local companies to provide storage and warehousing services since 1995;

2. In January 1996, the “Law on Commercial Ports” was revised. This

revision removed the preferential rights that Chinese Taipei transport companies and container transport companies had enjoyed in terms of renting and investing in harbor facilities and gave foreign legal persons equal treatment.

3. In February 1996, the “Regulations Governing Implementation of

Automatic Customs Clearance of Cargo” were revised. The revision simplified customs procedures by removing the requirement that written reports and other documentation must accompany goods for customs clearance. A no-document review no-cargo examination system replaced the earlier procedure.

4. On 2 October 1996, the “Ship Law” was revised. This increased the ratio

of permitted foreign investment in Chinese Taipei registered ships from one-third to one-half.

5. Foreign shipping companies allowed to establish a branch company took

effect as of 19 June 1997;

6. Since June 1997, foreign ship leasing companies have been allowed to establish branch companies;

7. Stevedoring businesses in port areas have been fully privatized and liberalized since 1 January 1998;

8. Foreigners have been allowed to establish a local maritime freight forwarding companies since 23 February 1999;

9. Foreigners have been allowed to establish local shipping agency

companies since 23 February 1999;

10. Foreigners have been allowed to establish local ocean freight container station companies took effect since 1 March 1999.

(b) Telecommunications

1. Before 1996, Chinese Taipei has already deregulated Customer Premise Equipment (CPE), Value-added Network Services and CT-2 services.

2. On 2 February. 1996, the amendment and legislation of the

"Telecommunications Law," "Organization Statute of the Directorate General of Telecommunications, Ministry of Transportation and Communications," and "Statute of Chunghwa Telecom Co., Ltd" were completed. This completely lifted the upper limit of the investment by foreign companies in Chinese Taipei for value-added network services. Moreover, it allowed joint foreign and domestic investment in and operation of basic telecommunication services, and it further broadened the scope of telecommunications value-added network services. However, the upper limit of the aforementioned foreign investment in jointly operated basic telecommunication services is kept at 20%.

3. On 29 April 1996, the "Regulations Governing Mobile

Telecommunications" were promulgated. These allow business operation in the areas of mobile telephones, radio paging, trunked

radio, and mobile data communications. 44 licenses have been granted since April 1997. Those operators have been running their operations since January 1998.

4. On 20 January, 1997, the revision of the "Regulation on Radio Wave"

was completed, and in Feb. 1997 the "Regulation on Type II Telecom Enterprises" was also completed. In the future, these will further relax regulation of the telecommunication market and establish a freer, fairer environment for telecom operators.

5. Chinese Taipei began to accept license applications for the Satellite TV

Broadcasting Links Services in August 1997.

6. In December 1997, the "Administrative Rules on Satellite Relay Services for Satellite Broadcasting Program" was announced to open up Satellite up-link services.

7. In December 1997 Chinese Taipei announced the license applications

for provision of fixed Satellite Services and Mobile Satellite Services.

8. On 26 May 1998, the "Regulations Governing the Operations of Type II Telecom Enterprises" was revised to opened up the voice services for closed user group.

9. After years of planning, Ministry of Transportation and Communications

(MOTC) has promulgated "The Regulations Governing Fixed Network Services" and has accepted license applications for operating integrated network services in 1999.

1. The amendment to the Telecommunications Act of 1996 was promulgated and put into effect on Nov. 3, 1999, which raised the ceiling on foreign shareholdings in Type I telecommunications enterprises from 20% to 60%. The revised rule on the foreign shareholdings in Type I telecommunications enterprises has been in effect since Jan. 31, 2000.
2. After issuing three licenses for Integrated Fixed Network Services in
   

March 2000, Chinese Taipei further opened up the International

Submarine Leased Circuit Service in August 2000.

(c) Financial Sector

– Measures taken to liberalize the securities market:

1. In January 1996, all restrictions on outward remittance of capital by foreign investors in the domestic stock market were lifted.
2. In February 1996, the “Guidelines for the Offering and Issuance of Securities by Foreign Issuers” were enacted. These allowed foreigners to come to Chinese Taipei and issue valuable securities

to raise capital, and to promote the internationalization of the money market.

1. In March 1996, the regulation limiting foreign investment in securities investment and trust companies to 49% was lifted.
2. On 7 May 1997, the “Securities and Exchange Act” was amended.
   

Major changes include lifting of the nationality restriction on securities brokers and stockholders of the Taiwan Stock Exchange

(TSE) and elimination of the regional restriction on the stock exchange.

1. Effective June 1, 1997, the issuance and trading of warrants of 31
   

selected TSE stocks were opened.

1. The “Futures Trading Law” was promulgated on 26 March and implemented in 1 June 1997. The Futures Exchange House was operational as of July 21, 1998, the trading of the Taiwan Stock Exchange Weighted-average Index Contract began to trade on the newly inaugurated Taiwan International Mercantile Exchange thereon.
2. Beginning 30 March 1999, to increase internationalization of the domestic securities market, the Central Bank, in agreement with the Ministry of Finance, agreed to raise the upper ceiling of foreign investment by individual investors in any single publicly listed company from 15% to 50% of that company's total issued shares.

At the same time, the upper ceiling of total foreign investment in a publicly listed company was raised from 30% to 50%.

1. On November 19, 1999, the ceiling on investment quota in R.O.C.
   

securities by each qualified foreign institution investor (QFII) was raised from 600 million to 1.2 billion, effective November 20, 1999.

– Measures taken to liberalize the insurance market:

1. Chinese Taipei has permitted cross-border insurance services for Maritime shipping and commercial aviation. In addition, there are no equity limitations on foreign insurers applications for establishment

of branches in Taiwan.

2. Chinese Taipei further revised the “Regulations Governing the Administration of Insurance Enterprises” on May 21, 1997. After the revision, some insurance premium rates and policy clauses, when specially approved by the Ministry of Finance (MOF) will be subject only to a reporting requirement rather than a prior approval requirement.

3. In January 1998, the insurance premium rates for “personal accident

insurance” and “travelers' accident insurance” were amended, and

the original unified premium rates was replaced by flexible ones with the adjustable range of 30 for insurers, thus serving as the basis of the general liberalization of insurance premium rates of Chinese Taipei.

4. In February 1998, the "Admission Standards and Administrative Rules Governing Foreign Insurers" was amended. This revision provides a six-month period for foreign insurers to apply for the establishment of their branches in Chinese Taipei, beginning on 1

July till the end of each year which is the same period for local

insurance companies, thus providing foreign insurers identical national treatment.

5. According to the "Key Points for Reviewing of Application of Non-life

Insurance Products," and in accordance with international insurance practices, marine insurance policies, aviation insurance policies, and other insurance policies under special approval of the MOF, can be issued in English. However, a Chinese version should be supplied

to the MOF for monitoring purposes. The above has been in effect

since June 30, 1998.

6. In June 1998, the "Key Points for Reviewing of Application of Non- life Insurance Products," and in August 1998, the "Key Points for

Reviewing Application of Life Insurance Products" were amended to shorten the insurance policy review procedure. Since then, the reporting requirement system has replaced the prior approval requirement in some cases. Under the reporting requirement

system, some insurance products may be offered unless the MOF

disapproves within 15 working days after receipt of the completed documentation. Under the prior approval requirement system, the insurance products should be approved in advance and the MOF may respond within 90 working days after receipt of the completed documentation. This has contributed to the timely liberalization of our insurance market.

7. In September 1998, the MOF instituted an Insurance Reform Group

to create future plans and directions for the insurance industry.

8. In compliance with our government economic development policy, the revised "Key Points for Review of an Insurance Enterprise's Funds Engaging in Special Projects and Public Investment" came

into effect on October 1, 1998, dropping some limitations against an

insurance enterprise's investment in major government and private investment projects.

9. In August 2000, to simplify the administrative process and enhance

examination efficiency, “The Implementing Principles of the Application for the Property Insurance Products” and “Model Provisions for the Property Insurance Policies” were enacted. Any

policy clause that uses the aforementioned principles and provisions will not be re-examined by the Ministry of Finance.

– Measures taken to liberalize the banking industry:

1. The “Trust Law” was enacted on 26 January 1996 and the “Trustee Law” was enacted on 19 July 2000. Both laws have established a trust system in order to facilitate the development of new kinds of financial products.
   

1. On 22 March 1997, the two-year operating experience requirement for establishing additional offices by foreign banks was removed.
   
2. On 8 October 1997, the “Offshore Banking Act” was revised. The revision has expanded the scope of offshore banking services significantly.
   
3. On 20 January 1999, the “Deposit Insurance Act” was revised. The revision has enhanced the capacity of competent authority, currently the MOF, and the Central Deposit Insurance Corporation, to deal with unhealthy financial institutions.
   

- Measures taken to liberalize the foreign exchange regulation:

1. In recent years, Chinese Taipei has been liberalizing foreign exchange regulations based on the spirit of “free in principle and managed by exception,” in order to come closer to achieving the objective of liberalization.

2. In July 1996, the limitations on contract duration of forward foreign

exchange transactions have been removed.

3. In December 1996, Chinese Taipei lifted several restrictions to permit any one who has the need for foreign exchange to engage in forward foreign exchange transaction with authorized foreign exchange banks, upon presentation of related transaction documents or letter of approval issued by the competent authority.

4. In June 1997, the annual limit that a company registered with the

competent authority is allowed to freely settle foreign exchange against

NT dollars was raised to US$ 50 million from US$ 20 million.

5. Since July 1999, natural domestic persons have been allowed to issue GDRs against their holdings of domestic listed and over-the-counter stocks and freely convert these raised foreign funds into NT dollars.

(d) Industrial and business services

1. In April 1996, amendment to the “Rules Governing the Hiring of

Foreigners by Local Lawyers” was promulgated and will be

implemented after WTO accession. This, together with the revision of the “Employment Service Law,” will protect the status of foreigners hired in Chinese Taipei, and will simplify the certification procedures for such foreigners.

2. On 21 May 1997, the Article 49 of “Employment Service Law” was revised, which will help extend the employment time-limit for foreign workers.

3. On 1 July 1997, in accordance with the passage of the revised

“Implementation Regulation of Employment Service Act,” the existing requirements on the educational background and working experience

of foreigners who are willing to work in Chinese Taipei were relaxed, and administrative procedures were also streamlined.

Ÿ Measures to liberalize investment

Please refer to the contents of “investment” area.

All the deregulatory measures described above are processed in a transparent manner; relevant information is made available to the public and

the contents of relevant deregulatory laws and measures are published in government gazettes.

B. Action Plans

(a) Improve the transparency of regulatory requirements

Short/medium/long term (2000-2010)

Chinese Taipei will:

1. Follow the APROC principle, “ to strive for transparency of policy and indicate clearly the scope of government responsibility,” and continue to publicize all deregulatory measures pertaining to trade and investment.

2. Promptly publish all laws and regulations relating to trade and investment so that governments and traders could become acquainted with them.

3. Provide, except in cases of extreme emergency, a period for appropriate authorities to comment on all laws, regulations and other measures pertaining to or affecting trade in goods, services, or TRIPS of at least 60 calendar days before such measures are implemented, following its accession to the WTO.

(b) Eliminate unnecessary regulations which may distort trade and/or investment

According to the five general principles of liberalization and internationalization that were publicly announced as part of the APROC plan, Chinese Taipei will deregulate in three stages to facilitate liberalization process. Below is a brief description of the deregulation plan:

Short/medium term (2000-2005)

Chinese Taipei will:

Ÿ Trade in goods

1. Continue the domestic legislative process for effecting Chinese Taipei’s WTO accession commitments, and consider further lowering tariffs and elimination of non-tariff measures after WTO accession.
2. Deregulate in two stages. The first stage involved the opening of the import of fuel oil, jet fuel and liquefied petroleum gas (LPG) to private enterprises in January 1999. The second stage is expected to open the import of all petroleum products after the Petroleum Administration Law is promulgated.
3. Implement the second stage of deregulation of petroleum product, after our accession to the WTO, the control on textile products in line
   

with the principles of the WTO/ATC. Chinese Taipei will eliminate all relevant export control according to the schedule set out in the ATC.

1. Consider the abolishment of the local testing requirement for medical devices and accept the foreign testing methods and results if the manufacturers comply with our GMP regulation.
2. Consider deregulation of the local clinical trial requirement for pre- marketing approval of contact lenses.
3. Continue to deregulate the requirements for new drug application in order to conform to the International Conference on Harmonization.
4. Lift the restriction of repackaging for imported pharmaceutical products upon our accession to the WTO

.

Ÿ Privatization

Continue the privatization process based on the timetables for the 27

government-run corporations.

Ÿ Services

Chinese Taipei will continue domestic legislative process for effecting WTO accession commitments particularly in the areas of finance, insurance, telecommunications, transportation, and professional services, and movement of natural persons. Some of the major action plans in service are described as follows:

1.Plans to liberalize Transportation

–Continue to improve its port management to improve the efficiency of harbor operations, improve construction of port facilities, increase cargo transshipment capability, and integrate inter-harbor function, in order to attain the goal of becoming a regional maritime trade and transshipment center.

–Continue to install in its harbors a fully cargo automated clearance system and automated network system to simplify cargo customs procedures.

–Continue to develop an express cargo transshipment center, an airline passenger transfer center, and an aerospace city, in order to attain the goal of becoming a regional aerospace transshipment center.

–Continue to encourage private investment or operation in businesses

related to airport passenger and cargo facilities and services, such as air cargo terminals, airport hotels and car parks.

–To complete the revision of the Civil Aviation Law so that after Chinese

Taipei's accession to WTO the limitation on foreign investment to air freight forwarding services and off-airport air Cargo terminal services could be lifted completely.

–Continue to implement the policy of privatization of air cargo terminal. Private sectors are allowed to invest, build and run a new cargo terminal in Taipei CKS International Airport at the area reserved for the second phase air cargo terminal. It is expected to be completed by March 2003.

2. Plans to liberalize the telecommunications market

– Continue the step-by-step liberalization of telecommunications, adjust tariff structure, and integrate its basic National Information Infrastructure

(NII) to achieve the goal of becoming an Asia-Pacific regional telecommunications center.

– Continue reviewing and revising relevant laws to relax the limitation on

foreign shareholding in Type I Telecommunications enterprises, in line with the policy of liberalizing the telecommunications sector.

– Plan measures on tariff control, interconnection, accounting separation, universal services, equal access and number portability, to establish an equitable and reasonable environment for telecommunication services.

– Open 3G mobile communication services, Chinese Taipei has scheduled acceptance of applications in the first half of 2001, and licenses will be issued in the last half of 2001. this is expected to improve quality and diversity of communication services.

– Revise the “Radio Broadcasting and Television Law” to allow cross-

operation for radio TV and telecom services operators.

– Establish a "Telecommunications, Information and Broadcasting Commission'' TIBC to foster the integrated development of Telecommunications, Information Technology, and Broadcasting as a whole.

– Carry out the first phase of privatization of the government-run Chunghwa Telecom at the end of 2000, and release the government held 33% of shares in that company for sale to the public.

– Continue to implement phase II of APEC Telecom MRA in 2000 or 2001,

in line with its commitments, and begin accrediting the certification bodies by the end of year 2000 or the beginning of 2001.

3.Plans to liberalize the financial market

 Securities

– Continue progressive liberalization of capital movements under the principle of maintaining the two-way balance between capital inflows and outflows. It is expected that beginning on 1 January, 2001 and thereafter, no limitations on share-holding ratio for foreign portfolio investment shall exist, except as otherwise specified in Chinese Taipei’s WTO commitment for specific sector.

 Banking

– Continue reviewing and discussing the revision of the “Guidelines for the Screening Applications for the Establishment of Branches and Representative Offices by Foreign Banks,” to relax the restrictions on foreign banks’ market access to Chinese Taipei.

– Continue to study the revision of the “Banking Law,” to make the banking regulatory regime sounder and to further expand the scope

of banking services.

– Continue to study the revision of the “Offshore Banking Act,” to further expand the scope of offshore banking services.

 Insurance

– Continue discussing the feasibility of appropriate relaxation of controls on insurance rates. It will also study how the requirement for “prior approval” of policy clauses may be changed to the “use and file” system.

– To accelerate the innovation of insurance products and improve bureaucratic efficiency, upon accession of Chinese Taipei to the WTO, Chinese Taipei is committed to shortening the policy review procedure. Our goal is to have policies approved within 15 days if a

like policy has been previously approved by the MOF or within 3

months if the policy is a new product.

– Foreign mutual insurance companies with net worth of at least $2 billion NT shall be permitted, upon accession of Chinese Taipei to the WTO, to establish direct branches in Chinese subject to the normal prudential regulatory approval process.

– Continue the revision to the relative regulations of reinsurance and retrocession services to build a sound reinsurance system and strength the basis of insurance market on the progress of liberalization and internationalization.

– Continue studying ways to broaden the range of existing regulations in order to promote flexibility and efficiency in the utilization of insurance enterprises’ fund.

4. Plans to liberalize industry and business services

– Continue to review and revise the “Employment Service Law” so as to extend the employment time-limit for foreign workers and put all procedures pertaining to the hiring of foreigners under a single law and a single responsible agency, with a view to achieving the goal of reducing barriers to personnel passing across its borders.

Short/medium/long term (2000-2010)

Chinese Taipei will:

–Continue studying and assessing regulations that may distort trade and investment and will revise the relevant laws, regulations, and administrative orders in due course.

–Relax, as appropriate, the restriction on insurance premium rates and

clauses.