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Economic Power-up Plan progress report

The Executive Yuan today held a discussion on the progress of the Economic Power-up Plan. Premier Sean Chen called the plan the spindle of current government policy and said the Executive Yuan and its subordinate agencies must keep the public informed about it. "The government is focusing its efforts on carrying out this plan, and it hopes to win support from all sectors of society," he stressed.

Chen made this statement after being updated by the Council for Economic Planning and Development (CEPD) in a Cabinet political affairs meeting. The premier also made instructions on the following subjects:

1. Deregulation: The CEPD should set up a platform for the private sector to offer suggestions on deregulation, communicate their difficulties and seek assistance from the government. This communication channel could also facilitate ministerial-level agency cooperation on legal rationalization.

2. Investment by overseas Taiwanese businesses: The Ministry of Economic Affairs (MOEA) has finished checking the land available for development and is required to provide land-use information to overseas Taiwanese enterprises as soon as possible. Since creating a favorable financing environment for capital flows is crucial to boosting investment and the economy, the Financial Supervisory Commission (FSC) should pay attention to the issue of loans decreasing at all financial institutions and determine whether tougher financing constraints have made an impact on Taiwan's economic vitality. For example, local banks seem to have adopted stricter conditions on loans for business-oriented construction due to limitations imposed by Article 72-2 of the Banking Act. Chen requested the FSC to study whether it can apply this article more flexibly.

3. Tourism promotion: Thanks to the persistent effort of the Ministry of Transportation and Telecommunications, the number of inbound tourists to Taiwan in 2012 is expected to surpass 7 million in December. However, the quality of Taiwan's tourism industry is even more important, Chen said. He hopes the increase of mainland Chinese visitors can also bring more substantial benefits to Taiwan but noted there are some structural issues which need to be settled. Minister without Portfolio Yang Chiu-hsing was tasked with coordinating with related agencies and proposing within one month concrete measures that would help the industry better benefit from the mainland tourist influx.

4. Private investment in public infrastructure projects: manpower, land, and environment are the most important factors that influence private investments, Premier Chen emphasized. He said that the Ministry of Economic Affairs (MOEA) and the Council of Labor Affairs have handled the manpower issue proactively, and the MOEA has finished the land inventory.

"Environmental protection is crucial for sustainable development, but it also influences private investments. We have to strike a balance between them," the premier said. The Environmental Protection Administration, MOEA and National Science Council have submitted their suggestions to the Executive Yuan in accordance with his instructions, and he asked Vice Premier Jiang Yi-huah to lead follow-up discussions and coordination. The premier also indicated that the Executive Yuan's InvesTaiwan Service Center should actively provide counseling and assistance to any local government which wishes to attract private investment.

In addition, Premier Chen encouraged the MOEA and the Ministry of Transportation and Communications (MOTC) to think outside the box and consider every possibility to expand state-run enterprises' investments.

Since the European debt crisis will not be resolved quickly, and Taiwan faces the problems of industry structure imbalance and export recession, Premier Chen announced the Economic Power-Up Plan on September 11 to boost the economy in the short term and undertake economic development and industry structural adjustment for the mid- and long term, CEPD officials said. The latest developments are:

1. Implementation of the Three Industries, Four Reforms program: the following five industries are being developed first to highlight the program's effectiveness:
(a) Smart living industry: e-book devices have been introduced in libraries, primary and middle schools and professional associations; businesses are being helped to establish Internet protocol television network solutions through household application.
(b) Machine tools industry: businesses are being encouraged to transform and offer services such as sales support, application technology and value-added software. For instance, Welegroup will establish a technology service center in the Central Taiwan Science Park by the end of the year.
(c) Logistics industry: Catering ingredient suppliers are being assisted in building a mechanism to secure freshness and traceability; convenience store chains are being pushed to install smart storage equipment in order to offer pre-order and store-delivery services for refrigerated products.
(d) Information services industry: businesses are being organized into alliances to expand into overseas markets. For example, Hyweb Technology Co. Ltd., Syscom Group and Systex Corp. formed an alliance with the help from the government. Before the end of this year, more than 60 small and medium-sized information services businesses will receive counseling on how to expand sales through overseas channels.
(e) Innovative fashion textile industry: FUSE Textile Fashion Week and the 2014 spring and summer fashion collection presentation were held; designers and shopping districts have been matched to develop products; joint exhibitions and sales for Taiwan-made hosiery, local specialties and MIT Smile-certified products have been held. These events are estimated to have attracted around 200,000 visitors.

2. Turning small and medium-sized enterprises (SMEs) into "backbone enterprises"
(a) The action plan was approved October 8.
(b) The MOEA issued the criteria for selecting and commending backbone enterprises on October 23. The ministry has received 258 applications from SMEs for such designation as of November 20.

3. Cultivation of fundamental industrial technologies
(a) Industry: a total of 12 companies, including Tri Research and Good Instrument Co., have been led to advance core technologies, which is estimated to create NT$4 billion (US$1.36 billion) in production value and job opportunities for 90 people.
(b) Academia: A total of 23 research programs initiated by 10 universities in Taiwan, including Chung Yuan Christian University, National Chiao Tung University and National Cheng Kung University, have been approved, through which over 200 experts on industrial technologies are expected to be trained.
(c) Research institutes: The Industrial Technology Research Institute, Metal Industries Research & Development Center, Taiwan Textile Research Institute and Institute for Information Industry have delved into fundamental industrial technologies, with 40 corporation visits, training of 100 related talents, application of six patents, 10 technology transfers, eight industrial services and eight symposia.

4. Increasing the quality and quantity of tourism
(a) An estimated 7 million foreign and mainland visitors will come to Taiwan in 2012, generating revenues of NT$340 billion (US$11.6 billion).
(b) The MOTC recently initiated an incentive package which has thus far attracted a total of 8,742 tourists on nine cruise liners. In addition, businessmen from mainland China are expected to enjoy reduced requirements for multiple entries and streamlined procedures for visa extension starting from the end of this year.
(c) To provide better services to mainland tourists, the MOTC has implemented measures to control the number of people at popular tourist attractions such as the Yehliu Geopark, Sun Moon Lake, and National Palace Museum while conducting three major rounds of inspection on industries catering to mainland visitors. Guidelines for mainland group tourists' itineraries have been established, stipulating that at least eight days are needed for a tour of the whole island, and tour bus drivers may not travel more than 250 kilometers or work more than 10 hours per day.
(d) The MOTC has assisted 175 star-graded hotels and 310 bed and breakfast establishments in refining the quality of their services.

5. Building up a sustainable finance system
(a) Strengthening cross-strait finance: a memorandum of understanding for currency clearance was inked on August 31. Once the mechanism kicks off, Taiwan's banks can operate Renminbi transactions via currency clearance centers or the Internet. Meanwhile, businesses abroad of which 30 percent or more is owned by mainland investors, particularly overseas Taiwanese enterprises, are now allowed to be listed in the Taiwan Stock Exchange.
(b) Taiwan-centric wealth management platform: the FSC has recently revised regulations on financial derivatives, enabling structured products to be linked to mainland interest rates and share prices; mutual funds denominated in a foreign currency have been opened to New Taiwan Dollar transactions.

6. Establishment of major ports as free-trade zones (FTZs)
(a) Taiwan International Ports Corp. will set up a preparatory office for a new logistics subsidiary in 2013 and have it begin operation in January 2014. By offering public warehousing to woo logistics businesses and bolster multiple-country consolidation, Taiwan's ports can become valuable international logistics centers.
(b) Taiwan International Ports Corp. sealed investment pacts with 18 state-run and private businesses on November 16. The investments, totaling US$55.4 billion (US$1.89 billion), are projected to create 5,600 new jobs, increase cargo volume by 23.2 million tons annually and generate at least NT$30.6 billion (US$1.04 billion) in tax revenues and NT$100 billion (NT$3.41 billion) in economic value through the multiplier effect.
(c) The MOTC has finalized the 82.5-hectare expansion of the Port of Taichung, which is expected to become an FTZ by the end of November, following the completion of Executive Yuan inspection. Cargo volume at the expanded port is expected to increase by one million tonnes. Meanwhile, the Port of Kaohsiung is being expanded by 53 hectares and is scheduled for registration as an FTZ by the end of this year, with NT$150 million (US$5.1 million) in annual revenue and 5,000 jobs expected to be generated.

7. Development of the exhibition industry
(a) The MOEA has already helped local restaurants and retailers of prepared foods set up 252 branches abroad and helped 120 companies to use e-commerce to target the mainland Chinese market.
(b) As of November 16, a total of 287 international conferences and 216 exhibitions have attracted 155,722 visitors from overseas this year.

8. Training talents for emerging markets
(a) As of November 18, a total of 4,651 international marketing business managers have received on-the-job training from the government, and another 581 people have received pre-job training.
(b) In 2013, the Ministry of Education will provide one to three additional scholarships for students who wish to study in each of the following strategic emerging markets: Brazil, Russia, Mexico, Poland, India, Vietnam, Turkey, Indonesia and the Middle East.
(c) A database of about 1,700 talents has been created to help those students who have graduated from the schools in these emerging markets land jobs offered by Taiwan's companies. A recruitment platform will be established and other job matching activities will be held regularly for companies which plan to do business in these markets.

9. Promoting private sector investment
(a) As of the end of October, the private sector has invested NT$992 billion (US$34.1 billion) in Taiwan this year, and the figure is estimated to break the NT$1 trillion (US$34.3 billion) mark in December.
(b) Industry promotion offices have provided a total of 33 investment cases which are currently under evaluation, and the Industrial Development Bureau under the MOEA has announced a set of operational guidelines for accelerating the strategic service industries. It is estimated that at least three investment cases will clear the evaluation process by January and be approved by March, attracting venture capital and private investment of over NT$100 million (US$3.4 million).

10. Attracting overseas-based Taiwanese businessmen to return to Taiwan to invest
(a) As of November 16, 115 companies have asked the InvesTaiwan Service Center for investment information.
(b) The MOEA finished the qualification evaluation process on November 19 and announced the qualified companies, which can later apply for related investment cases.

11. Promotion of cross-industry value-added financial planning program for public works
(a) Application review guidelines for the construction of both railway and mass rapid transit systems and the development of their surrounding land have been completed.
(b) Current cross-industry value-added public works projects include the Taoyuan MRT green line, Taipei MRT Minsheng-Xizhi line and Sanxia-Yingge line, Kaohsiung MRT circular light rail, Tamsui light rail line, Grand Palace Museum Project, national convention and exhibition center and Taiwan Hakka Culture Development Center southern and northern branches, among other projects. These projects are forecast to create revenue of NT$112.6 billion (US$3.9 billion), with an average self-liquidating ratio of 39.37 percent.

12. Activation of public lands
(a) Authorities have designated 6,857 plots of public land totaling 1,756 hectares for utilization.
(b) A plan to utilize public land for industrial development implemented at the end of October has already led to the signature of three contracts. In one of those, New Taipei City was commissioned to utilize four lots in Chenglin, Tucheng. At least two more cases are hoped to be originated by the end of the year.
(c) The Ministry of Justice's (MOJ) evacuation and demolition of the Huaguang Community for public land redevelopment is expected to be completed by September 2013. The Ministry of Finance (MOF) is planning the redevelopment in harmony with the MOJ's effort and reporting to the Executive Yuan for deliberation.
(d) Cathay Life Insurance Co., Ltd. was selected to develop an industrial precinct near Taoyuan High Speed Rail Station; it plans to invest more than NT$20 billion (US$686 million) there.
(e) As of the end of October, public land not open to public use has been leased to private investors twice, with three plots totaling 1,889 square meters and two buildings with 8,380.57 square meters of surface area marked off.

13. Drafting of deregulation guidelines
(a) The CEPD has drafted deregulation guidelines for subordinate agencies of the Executive Yuan to extend the regulatory review platform's utility, strengthening the active review mechanism and clarifying management and evaluation responsibilities.
(b) The CEPD has coordinated with other agencies and will send the guidelines to the Executive Yuan for approval.

14. Expansion of investment planned by public enterprises for 2013
(a) China Steel Corp. expects to invest NT$9.56 billion (US$328 million) next year to develop the high-quality steel business in tandem with private enterprises.
(b) Taiwan Sugar Corp. plans to invest NT$2.6 billion (US$89 million) to develop tourist and leisure areas and build hotels as well as commercial and residential buildings.
(c) China Shipbuilding Corp., Taiwan estimates it will invest NT$967 million (US$33 million) in factory and pier renovation.
(d) Chinese Petroleum Corp., Taiwan will invest NT$4 billion (US$139 million) in high-value petrochemical development in alliance with private businesses

After the political affairs meeting, Chen spoke about the draft amendment to the Public Debt Act passed at yesterday's Cabinet meeting. He said if the special municipalities are unclear about the amendment's provisions or how it would be implemented, the MOF should provide them assistance and counseling. Chen also instructed the MOF to explain both the content and the spirit of the proposal to the Legislature's finance committee.

With respect to the decline of the Taiwanese stock market, the Premier Chen said the stock market trading volume for the entire planet shrunk from January to October this year, but the weak performance of the Taiwanese index compared to the world's major markets should attract public concern. As the U.S. is expected to work out a budgetary plan over the next month as it approaches its fiscal cliff, Chen asked Minister without Portfolio Kuan Chung-ming to work with relevant agencies to create a stock market revitalization program that is responsive to changes in the global environment.
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