The following is a translation of the main points of the premier's report.
Speaker Su, Deputy Speaker Tsai, members of the Legislature:
I'd like to begin by thanking Speaker Su, Deputy Speaker Tsai and the members of the Legislative Yuan for passing the central government's 2018 general budget and many other important bills during the previous legislative session.
With the passage of the general budget, military personnel, teachers and civil servants saw salaries rise by 3 percent in January, and many businesses have followed suit. I'm confident that this move will increase consumer spending, expand domestic demand and charge economic activity.
In addition, the passage of revisions to the Income Tax Act has brought Taiwan's taxation system up to international standards and made the nation more competitive. The changes also made the tax environment more reasonable and fair, appropriately easing the burden on wage-earners, low and medium-income households, small and medium-sized enterprises, and new businesses. The amended legislation narrowed the gap between domestic and international investors and thus makes businesses more competitive and willing to invest in Taiwan.
With the passage of amendments to the Labor Standards Act, the four core interests of workers are protected while employees and employers are given greater flexibility to cooperate. In addition, the revisions maintain economic momentum and help ensure the competiveness of Taiwan's industry.
The Act for the Recruitment and Employment of Foreign Professionals, amendments to the Statute for Industrial Innovation, and a financial technology innovative experimentation act have all moved through the Legislature to become law. These regulations are aimed at startup companies and the recruitment of foreign professionals, and will have a positive effect on Taiwan's overall economic development and international competitiveness.
Thanks to the dedicated efforts of all, Taiwan has gradually emerged from the prior period of economic stagnation. Our economy grew by 2.86 percent in 2017, a very apparent improvement over the preceding two years. Our stock market hit a new 28-year high, and listed companies reported total revenues of NT$32.7 trillion (US$1.12 trillion), also a new record and 7 percent above the previous year. This growth has driven unemployment down to a 17-year low of 3.76 percent.
I would now like to discuss recent policy achievements as well as the outlook for future efforts.
I. Resolving the five major shortages affecting industry
The five shortages refer to the dearth of industrial-use land, skilled talent and manpower, and a reliable supply of water and power for industry. As for the shortage of land, the government is taking a three-pronged strategy of making public land available at preferential rates, encouraging the use of idle privately owned land, and developing new land for industry as well as upgrading existing industrial zones. These efforts are expected to provide 1,442 hectares of land by 2022 to meet new construction and expansion needs.
With respect to periodic droughts and industry's growing demand for water, we are tackling the problem on four fronts: developing new sources of water, preventing loss and stepping up conservation efforts, linking supply networks to allow inter-regional water allocation, and expanding reserve capacity. This includes the construction of new water infrastructure, lowering the rate of leakage and other losses, improving the efficiency of water use by agriculture, and encouraging industrial users to recycle water. These efforts are expected to supply 1.9 billion metric tons of water per year by 2031, which should satisfy both industrial and non-industrial demand.
To address periodic strains on power delivery, the government is following the three principal strategies of increasing electricity supply through a diversity of sources, promoting a proactive nationwide energy conservation program, and pursuing flexible power generation and smart-tech conservation. This will enable the rapid expansion of renewable energy sources, lower risks associated with the electrical grid and fuel supply network, and address such problems as over-centralized power transmission infrastructure and outdated, poor-durability equipment.
As for the construction of new electricity projects, the Ministry of Economic Affairs and the Taiwan Power Co. (Taipower) have been charged with following a tightly controlled schedule and completing these projects on time and on spec. This will allow Taipower to maintain a reserve margin of at least 15 percent and an operating reserve of at least 10 percent after 2019.
There is much concern in the Legislative Yuan over the question of whether or not the No. 2 reactor at Taiwan's second nuclear power plant will be restarted. I would like to point out that the operating license for that reactor will expire in 2023. Last December following a major overhaul, Taipower applied to the Atomic Energy Council for permission to restart the reactor, which is the standard procedure. This application must still pass the council's safety review.
Regardless of whether the reactor is restarted, Article 95 of the Electricity Act clearly requires that "nuclear-energy-based power-generating facilities shall wholly stop running by 2025." The question of the reactor will therefore not keep us from phasing out nuclear energy by 2025. Our objectives remain the same: the first, second and third nuclear plants will be decommissioned on schedule, and the fourth plant will not go into operation.
As for the manpower shortage confronting industry, the government is seeking to develop the labor force, create a friendlier work environment, and narrow the education-employment gap. In developing the pool of domestic laborers and matching them to jobs, we hope to assist in the upgrade of industry, improve the work environment and raise salaries. In narrowing the education-employment gap, we will encourage industry-academia collaboration, promote co-op education, and adjust the placement of students in particular departments and subjects. This multi-faceted approach should be able to resolve the labor shortage.
With respect to the shortage of skilled professionals, our policy is to keep Taiwanese workers at home, recruit talent from abroad, and develop new skills and people. This strategy is augmented by optimizing the tax system, opening new channels for businesses to reward employees, creating a friendly environment for startups, and providing young people with more opportunity.
At the same time, the government is also engaged in such efforts as talent exchanges with countries covered by the New Southbound Policy, relaxation of rules governing the recruitment of skilled foreign professionals by companies targeted under the "five plus two" innovative industries program, and fostering stronger ties between companies and schools, as well as getting businesses involved in training and talent development. These measures should provide the talent necessary to meet industry's demand.
II. Promoting forward-looking infrastructure and long-term care
In order to carry out the Forward-looking Infrastructure Development Program and the long-term care 2.0 policy as envisioned by President Tsai Ing-wen, I personally led my team to convene working meetings in every county and municipality in Taiwan. At these meetings, we explained the details of the infrastructure program and discussed the progress made on our reviews of competitive projects submitted by local governments.
We also visited actual sites to gauge the progress made toward realizing the Forward-looking Infrastructure Development Program and long-term care 2.0, and heard from local officials concerning every aspect of the projects. These trips are intended to bridge the gap between the central and local governments, raising administrative efficiency and encouraging cooperation to overcome any and all problems. Hand in hand, the central and local governments must work together to move Taiwan another giant step forward.
Pay for long-term caregivers has risen this year. There is hope that this will not only attract more young people to take such jobs, but also induce them to make caregiving a career. Such developments would add numbers to the pool of long-term care workers that will be required as Taiwan's population ages.
The act governing long-term care service institutions took effect in January of this year. The law promotes the sustainable operations of care institutions while at the same time ensuring they serve the public interest and remain financially transparent. The new regulations also allow the insurance industry to invest and participate in the provision of residential long-term care. Industry involvement will draw in even more professional talent, encourage the use of advanced technologies, and promote the development of innovative service models and the construction of a quality long-term care system.
III. Tackling air pollution problems
The Executive Yuan recently passed an air pollution control action plan with three clearly defined objectives: to cut in half the number of air quality red alert days by 2019, switch government vehicles and public buses over to electric power by 2030, and ban the sale of combustion engine-powered scooters and automobiles by 2035 and 2040, respectively.
To achieve these objectives, we've outlined specific measures for curbing suspended particulate matter and other air pollutants. We will hold state-owned enterprises to super-low emission standards that are the most stringent in the world, toughen air pollution regulations for ports and harbors, expedite the replacement of aging vehicles, and place stricter controls on cooking fumes from restaurants as well as fugitive dust from roads, construction sites and riverbanks. Starting this year, the government will also provide preferential loans to encourage businesses to replace 80,000 older diesel-powered trucks (manufactured prior to July 1999) with trucks that comply with the newest environmental emission standards. All 10,000 public buses currently in service will also be replaced by electric vehicles.
The Executive Yuan also submitted draft amendments to the Air Pollution Control Act to the Legislature last December with the aims of tightening restrictions on fuels and harmful pollutants, bringing more pollution sources under regulation, and enacting stronger controls over transportation emissions. I ask for the Legislature's full support for a swift passage of these amendments so that we can build a comprehensive air quality control mechanism and protect the health of citizens.
IV. Improving the environment for investments in startups
Last week the Executive Yuan presented an action plan for improving the environment for investing in startups, to be implemented through five strategies: provide startups with early-stage funding, develop talent and adjust regulations, create partnerships between startups and the government, provide a variety of exit channels for startups, and help startups make inroads into global markets. This plan will build a complete ecosystem for new businesses and allow Taiwan's startup industry to grow and thrive.
Under the strategy of providing startups with early-stage funding, the government has earmarked NT$100 billion (US$3.4 billion) from the National Development Fund to create the Industrial Innovation and Transformation Fund, and has granted tax incentives to angel investors through the Statute for Industrial Innovation. In addition to injecting needed resources into startup businesses, this strategy will foster close cooperation with world-class venture capital firms to draw investments to artificial intelligence, the internet of things, augmented and virtual reality, biotech medicine and other cutting-edge industries.
The Act for the Recruitment and Employment of Foreign Professionals took effect February 8 this year, easing visa, employment and residency restrictions while offering attractive health insurance, tax and retirement benefits to foreign professionals seeking work in Taiwan. The National Development Council also launched the Startup Regulatory Adjustment Platform to help new businesses navigate legal gray areas, while the Ministry of Finance created a special site providing tax advice, guidance and other immediate assistance to startup companies. The Financial Supervisory Commission has added e-commerce as a new industry category on the Taipei Exchange, and continues to examine more avenues by which startups can list publicly and gain access to capital markets.
Taiwan's startups must expand their international footprints to capture the attention of world-class venture capital funds. We will therefore send top Taiwanese startup teams for training at business accelerators overseas, and encourage internationally renowned accelerators to set up branches in Taiwan. This year, for instance, a section of the Universiade athletes' village in New Taipei City will be converted into an international startup cluster to provide test sites for startups, nurture international-level startup companies, and match entrepreneurs to business opportunities.
V. Promoting a green energy "silicon island"
The Executive Yuan recently approved the Ministry of Economic Affairs' Green Energy Roofs project to install solar panels on building rooftops across the country. This project, combined with the deployment of smart electricity meters, will enable Taiwan to reach its long-term target of 3 gigawatts (GW) of rooftop solar power capacity by 2020, five years ahead of the 2025 target date.
As for wind power and the construction of offshore turbine farms, 22 applications for potential sites have passed environmental impact assessment reviews with an expected total capacity of more than 10 GW, far exceeding the original target; the selection procedure is now underway. The government is keen to attract businesses to the wind power industry and will promote technological collaboration with other countries. The Executive Yuan has also passed the Green Finance Action Plan to encourage the financial industry to support the green energy industry.
To deliver diverse energy solutions, we have proposed amendments to the Renewable Energy Development Act to broaden the scope of renewables, ensure protections for diverse uses of green energy, simplify application procedures, and increase flexibility for grid connections.
VI. Building a smart-tech nation
To boost industrial innovation and improve our citizens' quality of life, I believe Taiwan must put its advantages in smart technologies and applications into full play.
In infrastructure, for instance, Taiwan ranked No. 3 worldwide for mobile broadband subscribers in the World Competitiveness Yearbook 2017 published by the International Institute for Management Development. The government will use this foundation to create a tech-savvy environment with applications for smart transportation, disaster preparedness, health care, smart learning and tourism. Our goal is to grow the size of the digital economy from NT$3.4 trillion (US$106.6 billion) in 2015 to NT$4.8 trillion (US$163.9 billion) by 2020, raise the digital lifestyle services penetration rate from 25.8 to 60 percent, and expand broadband services coverage to 90 percent with data speeds improving from 100 megabits to 1 gigabit per second.
The government is currently putting full efforts toward an artificial intelligence (AI) action plan for Taiwan. This past January, Microsoft established a local AI research and development center, announcing that it would invest NT$1 billion (US$34.1 million) over the next two years while recruiting and training 200 AI specialists in Taiwan over the next five years. Google also set up a cloud computing data center in Taiwan in the past two years.
In the area of mobile payments, we're examining ways of revising and relaxing regulations to expand the use of stored value cards for such applications as transportation and small-value payments. We will set up more sites to accept mobile payments and link the system with other services, equipment makers, telecom providers and financial institutions, all with the goal of achieving 90 percent mobile payment penetration by 2025.
VII. Retrofitting and reinforcing old and unsafe buildings
On February 6 at 11:50 p.m., a strong earthquake in Hualien County toppled several large buildings and damaged many bridges and roadways. Emergency crews worked around the clock to search for trapped victims in the ensuing days; that rescue operation has come to an end and we have now begun the work of reconstruction. On February 7, the Executive Yuan established a Hualien earthquake relief and reconstruction taskforce to marshal the resources of government agencies and help the people of Hualien rebuild their homes, businesses and infrastructure.
We also presented a number of policies and programs on February 26 to hasten the process of retrofitting and reinforcing old and unsafe buildings. These include aggressively implementing the Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings enacted last May, as well as a pilot program for the structural safety inspection and reconstruction of buildings. The Executive Yuan has also submitted changes to the Urban Renewal Act for the Legislature's review.
To take stock of the state of building safety across the nation, the Ministry of the Interior (MOI) on February 21 rewrote building inspection and safety reporting regulations to mandate seismic-resistance screening and assessment for privately owned, public-use buildings constructed prior to the 1999 Taiwan earthquake, as well as for buildings considered at high risk. We are also in the midst of amending Article 77-1 of the Building Act to require unsafe structures to be reinforced or retrofitted within a set period.
Over the next four years, we will devote NT$6 billion (US$204.8 million) to promote the five strategies of rapid screening, seismic resistance assessment, retrofitting and reinforcement, reinforcement in phases, and financial assistance for buildings. The government will work together with the public to methodically inspect and improve the safety of the nation's buildings.
VIII. Rooting out illegal drugs
From January 29 to February 5 this year, we pooled the forces of prosecutors, police, investigators, military police, customs agents and coast guard for the first wave of the "operation safe home" drug sweep. They scoured deep into drug hotspots around the nation, cracked down on hidden drug dealers in local communities, ramped up inspections at the borders, and targeted the sources of narcotics flow. Law enforcement agents during this wave apprehended 431 suspected drug dealers, manufacturers, traffickers and suppliers; seized more than 4,000 kilograms of drugs of all classes; and raided 11 sites used for cannabis cultivation, ketamine production, and the packaging of emerging designer drugs.
The culprits behind the narcotics business are most often organized crime rings. I'm grateful to the Legislature for passing our recent amendments to the Organized Crime Prevention Act, which expanded the definition of organized crime and handed us more effective weapons in the war on drugs. The Legislature is also reviewing our amendments to the Narcotics Hazard Prevention Act, designed to stiffen sentences and fines for drug dealers and manufacturers, prevent the spread of emerging drugs, and at the same time provide more medical treatment opportunities for drug users.
The above is a summary of the recent work that the Executive Yuan has been engaged in, but our society continues to face numerous challenges ahead. In the coming year, my Cabinet and I will lead the nation forward and tackle problems through a pragmatic approach built on three pillars of policy: a secure and prosperous working and living environment, sustainable population growth and balanced regional development.
I. Secure and prosperous working and living environment
A secure living environment is one in which people can live free from fear, and most importantly, is marked by law and order. A prosperous working environment is one that bolsters the economy and strengthens the nation.
With respect to a prosperous working environment, we will continue to implement solutions to the five shortages, promote the Forward-looking Infrastructure Development Program as well as the "five plus two" innovative industries policy, and relax economic and financial regulations. To make for more efficient administrative processes for recruiting companies, we will set up one-stop service windows at both the central and local levels, and improve environmental impact assessment and land development review mechanisms. All of the above will accelerate public and private-sector investments and create more jobs.
As an export-oriented economy, Taiwan can only sustain its growth by participating in international trade blocs. We will therefore take part actively in multilateral events under the World Trade Organization and the Asia-Pacific Economic Cooperation, and expand trade opportunities under regional and bilateral agreements. We will also pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership by soliciting support from member states and expanding international cooperation.
Another focal policy is the New Southbound Policy. Taiwan's interactions with the countries covered by the policy grew noticeably in 2017 over the year before. In trade, inbound investments from New Southbound countries grew 15.8 percent while outbound investments soared 54.5 percent, with total bilateral trade climbing 15.6 percent. In people-to-people exchanges, Taiwan relaxed visa requirements for visitors from those countries and set up more offices overseas. Last year the number of visitors from the New Southbound countries jumped 27.6 percent from the year before, and the number of students from these countries studying in Taiwan grew 10 percent year on year.
We will continue to deepen and expand cooperation with the New Southbound countries by forging wide-ranging and mutually beneficial relationships. Our objective is to bring about economic and trade benefits and create win-win situations for Taiwan and all our partners.
Regarding commodity price fluctuations—an issue the Legislature has expressed concern over—I'd like to reassure and remind everyone that Taiwan's commodity prices have consistently held low and steady under the central bank's long-term policy guidance. Over the past many years, the consumer price index has risen less than 2 percent annually, and rose only by 0.62 percent in 2017. The Directorate-General of Budget, Accounting and Statistics projects this year's index will increase by 1.21 percent, still relatively low in comparison with other countries.
To head off public panic over changes in the prices of daily essentials, the Executive Yuan has established a commodity price stabilization taskforce to monitor price movements at all times. Regarding the recent run on toilet paper triggered by speculation of price hikes, the government has launched an aggressive investigation into collusion by suppliers and vendors on price manipulation and product hoarding. We have zero tolerance for any illegal actions of this kind.
With respect to a secure living environment, we will continue enhancing anti-narcotics links among our six law enforcement forces to wipe out drugs and root them out at the source. This year we've doubled the budget to NT$3.3 billion (US$112.7 million) to upgrade investigation equipment, improve narcotics testing capabilities, and increase the number of public health case managers.
We will also clamp down on fraud by stepping up cross-agency investigation strategies and strengthening international collaboration on tracking fraud rings. In combating criminal organizations, an MOI project implemented last September has reduced social disorder caused by crime syndicates acting under the guise of political parties or organizations. The indictment rate for organized crime suspects in newly lodged or referred cases has also shot up from 1.6 percent to 54 percent since the Organized Crime Prevention Act amendments became effective in April 2017. In the future we will continue to fight fraud and criminal rings while eliminating social ills in order to provide a safe and secure living environment for citizens.
We've also proposed a social safety net program focusing on three objectives: comprehensive and diverse family support services, early identification of vulnerable children and families, and public-private collaboration models. Toward these ends, we will encourage collaboration among the criminal justice, education, mental health and social work systems, such as by setting up social welfare centers across the country, establishing centralized case management and protection centers for children in high-risk families, creating regional centers that integrate child protection and medical care services, and hiring more social workers to manage cases at deeper levels.
II. Sustainable population growth
The nation's long-term development is feeling the adverse effects of an aging society with low birth rates and fewer children entering the population. To engineer a solution that addresses these fundamental issues, the government will come up with a comprehensive set of policies governing child care, recruitment and immigration.
On the child care front, the government will put forward several incentive measures to help drive up the total fertility rate to 1.4 births per woman by 2030. In addition to offering new child care subsidies to encourage childbearing, the government will construct a child care environment that serves diverse needs. To expand public education and care services, the government will set up more than 1,200 classes at public and nonprofit preschools by 2020, and implement policies that encourage private kindergartens to offer tuition rates comparable to those at public schools. These measures will not only ease the financial burden on parents and raise preschool enrollment rates, but also boost the salaries of teachers and care personnel at for-profit preschools as well as maintain a standard quality of service.
Regarding the recruitment of international professionals, Taiwan is widely acclaimed by foreigners working on the island for its public order and the friendliness of its people. We will apply these advantages toward improving Taiwan's work environment and attracting more foreign professionals who will work or settle long term in Taiwan and even naturalize as citizens.
As for immigration policies, the current Immigration Act is primarily concerned with protecting national security and controlling the entry and exit of foreign nationals, but lacks the wherewithal to attract economic immigrants. The government will therefore craft a new, forward-thinking immigration law that meets the challenges of demographic change and ensures Taiwan's ability to compete globally.
III. Balanced regional development
The Executive Yuan is drafting amendments to the Act Governing the Allocation of Government Revenues and Expenditures to balance regional development while allowing greater financial autonomy for local governments. This bill, to be marked as a priority for the current legislative session, is designed to narrow the longstanding resource gap between the larger special municipalities and the smaller cities and counties. The Executive Yuan is also drafting an administrative zoning bill to serve as a legal basis for establishing, abolishing or reorganizing administrative districts at all levels.
One natural outcome of economic development is the influx of young people to urban areas, but it has also created an ever-widening regional gap and stalled development in rural areas. For the third pillar of policy, balanced regional development, we will thus strengthen the promotion of regional revitalization. We'll provide guidance and funding for local governments, communities and civic groups to design their own unique economic development programs that will attract young people back into townships and communities. These efforts will help stem the outward flow of people and preserve local culture while boosting regional tourism.
The most important mission for me as premier is to build the nation, develop the economy, improve citizens' well-being, forge a stronger Taiwan, and put into practice the national blueprint mapped out by President Tsai. I am also convinced that the government, faced with challenges, must shoulder responsibility and respond pragmatically to achieve concrete results and implement true reform. The nation's strength is growing, and its character more robust. Together, the people and government of Taiwan will tread side by side on the bright path we have built together.
In the coming year, I will carry on leading the administrative team as we give our all for the nation. I sincerely hope that both the executive and legislative branches can work together with a common conscience to create a prosperous, peaceful and blessed Taiwan.