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Premier Lai Ching-te's oral policy report to 6th session of 9th Legislature


The following is a translation of selected sections from the premier's report.

Speaker Su, Deputy Speaker Tsai, members of the Legislature:

Empowered by the Legislature's passage of the Act on Promoting Transitional Justice, the Executive Yuan established the Transitional Justice Commission (TJC) to provide society with an opportunity to reconcile and come together after having been split by past oppression. Our pledge to the people of Taiwan is to realize transitional justice and strengthen the development of democracy. This goal goes beyond political parties and represents a common value shared and treasured by all people. Unfortunately, recent inappropriate comments by former TJC Deputy Chairman Chang Tien-chin not only damaged the commission's reputation and sowed division, but also caused conflict in society at large. For this I want to personally apologize to the nation.

The Executive Yuan will set up a task force to clarify this episode and establish the facts of the case, in order to make clear to the public that the independent, fair and objective role of the TJC will not change as the result of any particular incident. The commission remains committed to the sacred mission of pursuing justice through such means as bringing transparency to past political cases in accordance with the law, removing authoritarian symbols, addressing past injustices, and setting straight the historical record.

Beginning last year, we have seen great upheavals in international politics and the global economy. Tensions between the U.S. and China grow by the day, challenging the security of the Asia-Pacific region. Beijing has relentlessly pursued a policy against Taiwan with sharply political motives, and continues to suppress our ability to participate in the international community. Here in Taiwan, the transformation of industrial and energy policy has reached a critical stage, and shifting demographics are shaking society. It is the undeniable responsibility of government to address these issues.

Taiwan has never shrunk from challenges in the past. Thanks to the leadership of President Tsai Ing-wen, the support of the Legislature, and the combined efforts of the Executive Yuan and the people of Taiwan, the overall economy over the past two years has emerged from a period of stagnation. Together we have conquered lingering ills of many years, established a sustainable pension system, and removed barriers to corporate investment, thus enabling industry to innovate and upgrade, speeding investment in Taiwan.

I. Recent successes of policy and governance

A. A secure and prosperous working and living environment

To invigorate the economy, I have personally hosted 22 interministerial meetings aimed at accelerating investment in Taiwan. At these meetings we have pushed for higher wages, lower taxes, relaxed laws and regulations, increased flexibility in the labor market, and an improved environment for investment. Also on the agenda is the resolution of the "five shortages" stifling business growth: land, water, electricity, manpower and skilled workers. These efforts have brought increased investment and the construction of new facilities by such major domestic players as Taiwan Semiconductor Manufacturing Co., Winbond, ASE Technology Holding Co., and Powerchip Technology Corp., with a concomitant jump in employment opportunities.

The development of the digital economy and new technologies has become an index for rising national competitiveness. To achieve Taiwan's digital transformation, the Executive Yuan has initiated the Digital Nation and Innovative Economic Development Program (also known as DIGI+), an action plan for improving the environment for investing in startups, the AI Taiwan Action Plan, and an action plan for financial development. Taiwan should now take a number of steps to build on its lead in semiconductors and smart machinery: complete basic infrastructure; cultivate science, technology, engineering and mathematics talent; and tailor the legal and regulatory environment to advantage the development of the digital economy. Such efforts will equip young people with the ability to use new technologies, enable us to exploit our knowledge and creativity to invent new modes of commerce, engender an environment to support sustainable business operations, and raise the nation's overall competitiveness.

Taiwan has many "soft power" strengths, especially when it comes to the quality and culture of our engineers. Such advantages have already succeeded in attracting the likes of Microsoft, Google and IBM to establish R&D centers for artificial intelligence (AI) in Taiwan. We actively encourage startup ventures to develop AI using blockchain technology and big data. We look forward to seeing not just the emergence of a "unicorn" (a privately held startup company valued at over US$1 billion), but also the establishment of numerous legions of startup companies that will lead Taiwan toward its future as a smart tech nation by fostering technological innovation and carrying industry to the next level.

To speed the development of the emerging green energy industry and achieve the goal of a nuclear-free homeland, the government is presently engaged in a full-scale project to promote energy transformation. In the area of solar power, we have a two-year objective to install 1.5 gigawatts (GW) of capacity. By 2020 the total capacity installed will rise to 6.5 GW. Figures show that the production value throughout the entire solar power industry supply chain reached NT$210 billion (US$6.8 billion), and solar facilities generated 1.69 billion kilowatt-hours in 2017.

With respect to offshore wind power, our development strategy calls for demonstration sites first, then potential sites, then entire zones. Between April and June of this year, offshore sites were selected and bidding by contractors completed. Asia's first commercial-scale wind farm will be finished by 2020, and by 2025 Taiwan will have 14 wind farms constructed by seven separate developers, with an overall generating capacity of 5.5 GW. On one hand we will attract foreign companies to invest in Taiwan, while on the other we can make use of their experience and technology to complete basic infrastructure, nurture our own domestic wind power industry, and build an entire ecosystem for wind power in Taiwan.

In addition to our focus on the economy, the Executive Yuan has continued with its new generation antidrug strategy. This policy brings together prosecutors, police, investigators, military police, customs and the coast guard to carry out a united war on drugs, with joint regional prevention efforts and a push to track drugs back to their sources and block them there. Authorities carried out two nationwide sweeps in February and June, aimed at providing safe and secure communities for the people of Taiwan. A total of 1,913 traffickers, manufacturers, and sellers of illegal narcotics were arrested, and almost 9,700 kilograms of drugs of all classes seized. Over the next four years the government will spend NT$10 billion (US$326.1 million) to properly staff and equip law enforcement in the fight against drugs. We will also oversee efforts by communities, schools and all levels of society to prevent drugs from entering Taiwan and protect the health of the nation's people.

B. Response to demographic shift

Births in Taiwan dropped below 200,000 last year. The national fertility rate sits at 1.125 births per woman, the third lowest in the world ahead of only Singapore and Macau. In March of this year we officially met the World Health Organization's definition of an aged society. In response to this demographic transformation and fewer births, the Executive Yuan continues to promote the long-term care 2.0 plan to ease the transition to a graying population. We are accelerating the rollout of the three-tier system of community-based integrated service centers and building a service system that is easy to find, easy to access and eminently affordable. In the first eight months of this year, about 137,000 people used long-term care services, an increase of nearly 60 percent over the same period of last year.

We also want to ease the economic burdens on young people, engineer a friendly environment for child raising, and improve the education and care of young children. To do this, the Executive Yuan is implementing such concrete strategies as expanding public day care and preschools, creating a mechanism to facilitate quasi-public day care and preschools, widening the scope of child-rearing subsidies to cover children aged 4 years and younger, and encouraging private enterprises to establish onsite day care for employees. This diverse and multichannel approach is aimed at lightening the weighty responsibility of raising children in order to increase the willingness of couples to start families.

Our push to rapidly expand public child care will add 440 new public day care centers by 2022, which will accommodate over 5,000 children. At the same time, 2,247 new classes at public preschools will be opened to provide an additional 60,000 spaces for youngsters. Among all children enrolled in preschool, the percentage enrolled in public facilities will rise to 40 from the current 30 percent, a move that represents the largest-scale increase in such child care that the central government has ever taken.

Of course, this transformation of day care and preschools will not happen overnight. Therefore we have established a separate mechanism to allow for affordable child care. Any in-home nanny, private day care center or private preschool that meets the necessary requirements can operate under a quasi-public model, which gives parents even more options. The quasi-public model provides subsidies to help cover the cost of private schools. For children up to the age of 2, a typical household receives NT$6,000 (US$196) per month to help pay for participating nannies and private day care centers. Larger families qualify for an additional NT$1,000 (US$33) per month for every child beyond the first two. Parents who send their children between the ages of 2 and 5 to quasi-public preschools will not have to pay more than NT$4,500 (US$147) per month per child, and for a third child or more, tuition will not exceed NT$3,500 (US$114) per month per child.

Since the program began on August 1 of this year, 623 private day care centers have contracted under the quasi-public system, with 100 percent approved to participate. Of the roughly 14,000 nannies seeking to participate, about 62 percent qualified to join the system. These providers, together with wholly public day care, are able to fully meet current demand by supplying affordable care for 56,077 children. As for quasi-public preschools, they are first being implemented in cities and counties outside of Taipei, New Taipei, Taoyuan, Taichung, Tainan and Kaohsiung. At present 242 private preschools have been contracted, with additional applicants currently under review by respective local governments.

With respect to child-rearing subsidies, the requirement that one parent be unemployed has been dropped, and now any family member may serve as a caregiver. Coverage has also been expanded from the previous newborn to 2 years old to now include children up to the age of 4. The program provides monthly payments of NT$2,500 (US$82), with an extra NT$1,000 (US$33) per child for families with more than two kids.

In addition to the low number of births, Taiwan is also facing a shortage of workers as the working-age population declines. In response, we are following up the passage of the Act for the Recruitment and Employment of Foreign Professionals with a law governing economic immigration, which will be sent to the Legislature for review once drafting is complete. Our goal is attract foreign professionals, foreign mid-level technicians and overseas compatriots and their progeny, without damaging the job prospects or wage standards of domestic workers. These newcomers will fill positions necessary for national economic development and ensure Taiwan's competitiveness.

C. Balanced regional development

Taiwan has long seen an imbalance of resources devoted to regional development, and this has opened a gap between urban and rural infrastructure. The majority of the population is concentrated in the north, putting tremendous pressure on the capital and special municipalities. To encourage more balanced development, the Executive Yuan sent a draft law on administrative zoning to the Legislature for review. With this law we hope to create a transparent and rational administrative zoning process, as well as establish a legal basis for all levels of government to undertake this work. This will also help overcome administrative bottlenecks faced by local governments and improve the efficiency of governance.

Furthermore, the Executive Yuan is in the process of drafting amendments to the Act Governing the Allocation of Government Revenues and Expenditures. These amendments will even out the distribution of taxes, and provide increased tax revenues to local governments while maintaining the fiscal integrity of the central government. Governance will benefit by assuring a reasonable scale of finances at both the central and local levels. Prior to the completion of the amendments, however, the Executive Yuan has made use of existing mechanisms to ensure stable sources of revenue for local authorities and narrow the funding gap between special municipalities and other levels of local government.

On May 21 of this year I held the Executive Yuan's first local rejuvenation council, and declared 2019 as the inaugural year of local rejuvenation in Taiwan. We anticipate putting out a national strategic plan for local rejuvenation at the end of this year, which will involve identifying features unique to each locality or remote area, encouraging corporations to invest in rural and remote areas, using technology to attract young people to set up businesses, uncovering the prevailing community consciousness, integrating the applicable resources of ministries and agencies, and establishing brands. By bringing together people, land and industry, we will advance intra-island migration and relieve pressure on the major metropolises. With the free flow of people and capital, the goal of balanced development can be attained.

D. Higher wages and lessened burdens

To tackle the root causes of the low salary problem, we must boost investment in the nation, develop the economy and create more jobs. As the economy then grows, corporate profits will increase and in turn lift salary levels. For this reason, we have been pushing the "five plus two" innovative industries plan as well as the Forward-looking Infrastructure Development Program over the past two years to drive industrial upgrading and spur investment. We are confident these initiative will alleviate the problem of low wages over time.

The Executive Yuan has also formulated an action plan to raise salaries for low-income workers through 10 major policies and 37 specific measures. Short-term measures include increasing public-sector compensation, including worker pay as a bonus criteria in the selection of government contractors, encouraging higher private-sector salaries, increasing pay transparency and raising hourly wages. Medium- to long-term measures include easing the burden shouldered by wage earners, improving the quality of the workforce, and closing the gap between student skills and industry needs. As we persist in pushing these policies, wage earners will reap the benefits of economic development and see their incomes rise progressively.

In January this year, the government led the way by awarding a 3 percent pay hike for public employees, prompting many private companies to follow suit. According to a job bank survey, more than 50 percent of companies responded positively to the move by raising wages for their workers by more than 3 percent on average.

To help disadvantaged workers, the government has adjusted the minimum wage three times since 2016. Starting next January, the monthly and hourly rates will climb to NT$23,100 (US$753) and NT$150 (US$4.89), respectively, making the term "22K" (expected starting monthly salary for a university graduate) a thing of the past. The government also employs a raft of measures to raise pay in specific professions, such as by increasing monthly and hourly pay for care service providers, adjusting academic research allowances for public college professors, raising seniority pay for police officers and firefighters of the rank police major level 4 and below, and increasing hourly wages for part-time and substitute elementary school teachers.

In addition, we revised the Income Tax Act to increase the amounts of various deductions and lighten the tax burden on wage earners and families with children. One of the outcomes is that people earning less than NT$408,000 (US$13,304) a year will not have to pay personal income tax. Come tax season next year, taxpayers will see the tangible benefits of tax cuts. To ease student loan burdens on young people, we also rolled out new measures in September to introduce a four-year period when only interest on the loan must be paid, and relaxed eligibility requirements for payment deferments. And starting next year, all teaching assistants—whether "student" assistants or "employed" assistants—will be able to enjoy labor and health insurance.

II. Active involvement in regional economic integration in response to the US-China trade war

U.S. President Donald Trump's unconventional trade policies have ratcheted up trade tensions between the United States and China, not only potentially unsettling financial markets and the global economy, but in the long term rewriting international trade rules that will necessarily affect the world's trade system and the structure of international industry specialization. As a small and open economy highly reliant on foreign trade, Taiwan will not escape the impact given our close financial and trade relations with both the U.S. and Chinese economies.

In light of these developments, the Executive Yuan is prepared to roll out comprehensive responsive measures for each stage of the U.S.-China trade conflict. We will endeavor to maintain stability in the overall economy and preserve Taiwan's competitive advantages under the new trade order. If necessary, financial stabilization measures will be activated to assist affected industry groups, and we will not rule out expanding fiscal expenditures as a means of cushioning the blow from changes in the external environment.

To take advantage of the shift in orders and production away from China, the Executive Yuan welcomes Taiwanese businesses abroad to move their production lines back home. With our advantages in manufacturing and industrial clusters, I am confident in Taiwan's ability to navigate the challenges of the trade war. The government will provide tailored assistance to help China-based Taiwanese companies invest in or relocate production bases back to Taiwan. To help transform supply chains, we've also developed effective measures to assist businesses resolve issues such as shortages of land, water, electricity, manpower and skilled workers.

Over the past couple of years, the amount of funds transferred from China back to Taiwan by just listed Taiwanese companies alone has exceeded NT$150 billion (US$4.9 billion). To harness this phenomenon, the Executive Yuan will draft legislation to encourage the return of overseas capital back to Taiwan. We will build a comprehensive system grounded in the principles of fair taxation, effective fund management, and steady economic growth, and direct repatriated funds into strategic sectors to promote the upgrade of domestic industries and revitalize the overall economy.

In efforts to expand Taiwan's global reach into more diverse markets, the Executive Yuan is stepping up promotion of the New Southbound Policy. By deepening economic and trade links with Southeast Asia along with South Asia, Australia and New Zealand, we can help Taiwanese businesses overcome operational problems they may encounter in those markets. The government is also reinforcing bilateral trade relations with the European Union to diversify Taiwan's risks and avoid overdependence on a single market.

To maintain proper trade order, the Executive Yuan will strengthen the mechanism for monitoring imports into Taiwan. For products imported in atypically large volumes, we will respond with timely and necessary defense measures in accordance with World Trade Organization rules to curb illegal transshipments. We will also vigorously seek Taiwan's inclusion in the second round of entry talks for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The Executive Yuan has initiated regulatory adjustments as part of preparations for Taiwan's bid for membership, and we ask the Legislature to support five pieces of legislation we've submitted for your review: a digital communications bill, and amendments to the Trademark Act, the Patent Act, the Copyright Act and the Postal Act.

III. The defense of national sovereignty, liberty, democracy and human rights

China is on a mission to increase its military presence in the South China Sea and the East China Sea, frequently dispatching ships and aircraft to circumnavigate Taiwan and sail through island chains in the region. On the international level, it has taken such actions as obstructing Taiwan's participation in the World Health Assembly (WHA), pressuring global companies and airlines to change references to Taiwan, blocking Taiwan from hosting the East Asian Youth Games, and even prying away our diplomatic allies one by one. These are all acts of oppression on a level not seen before. And in February, China announced 31 incentive measures for Taiwan that on the surface appear favorable to Taiwan but in truth serve the interests of China. The purpose of these measures is to lure more talent, investment and technology from Taiwan to help China cope with the challenges of economic development and external trade expansion.

China's deliberate actions to unilaterally change the cross-strait status quo and forcefully bend Taiwan to its political will have not only heightened tensions between the two sides of the Taiwan Strait but also affected peace in the broader Indo-Pacific region. After the severance of diplomatic ties between Taiwan and El Salvador, the U.S. State Department issued a statement saying that China is altering the status quo across the Taiwan Strait and undermining the framework that has enabled peace, stability and development for decades. The U.S. urged China to abstain from coercion that would jeopardize the security of Taiwan.

The U.S. government also signaled backing for Taiwan by approving such legislation as the Taiwan Travel Act and the National Defense Authorization Act for Fiscal Year 2019. These laws express clear support for Taiwan's participation in international affairs, encourage visits between high-level officials from the U.S. and Taiwan, expand military exchanges and joint training exercises with Taiwan, and support Taiwan's acquisition of defensive weapons through military sales and industrial cooperation. This demonstrates a consistent recognition by America's executive and legislative branches of the importance of more robust U.S.-Taiwan cooperation on security matters.

President Tsai's state visit to diplomatic allies in Latin America this August saw her make transit stops in the U.S., where she was accorded high-level treatment and became the first Taiwanese president to tour a U.S. federal agency in an official capacity. The U.S. State Department in recent days reiterated that the United States will continue to support Taiwan, as it deems Taiwan a democratic success story, a reliable partner, and a force for good in the world.

As well as the U.S., many other like-minded democratic nations have spoken out strongly in favor of Taiwan. The European Parliament (EP), for instance, voted overwhelmingly to adopt a report on the state of EU-China relations, wherein the EP in forceful terms denounced China for raising the danger of an escalation of cross-strait relations. The EP also called for the EU and its member states to do their utmost to urge China to refrain from further military provocation toward Taiwan. The international voices of support grew louder than ever at this year's WHA, where our diplomatic allies and numerous other countries including Australia, Canada, Germany, Japan, New Zealand and the U.S. spoke up in support of Taiwan.

In the face of mounting pressure from China, the Executive Yuan stands by President Tsai's position that our goodwill will not change, our commitments will not change, and we will not bow to pressure. We hold firm and steadfast to such universal values as democracy, freedom, human rights and the rule of law, and by no means will we waver in our determination. We'll also carry on promoting and expanding substantive cooperation with friends, allies and like-minded nations, building ever closer partnerships, and vigorously pursuing our role as an advocate for international and regional peace.

In efforts to protect our national sovereignty, we have increased our defense budget to reflect our resolve to self-defense. The Executive Yuan has also proposed amendments to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, the Classified National Security Information Protection Act, and the National Security Act to bolster the regulatory aspect of our defense mechanism. The purposes of these draft amendments are threefold: to prevent illegal Chinese capital from entering Taiwan under the guise of foreign investment as part of China's attempts to influence Taiwanese companies and steal key technologies; to strengthen efforts to investigate sources of fake news; and, in order to ensure the harmony and stability of our society, to enact necessary countermeasures to China's issuance of residency permit cards to people from Taiwan which grant them some of the same rights as Chinese residents.

IV. Challenges to be met for a nation united in strength

Since I took office as premier more than a year ago, my Cabinet has risen dutifully to the nation's challenges and trials with great courage. We will not shy away but will take up our responsibilities and transform these challenges into motivating forces. Taiwan is progressing, and the march of progress cannot be halted. We must build up Taiwan's capabilities, lay the foundations for transformation, and engineer a better tomorrow for the people of Taiwan.

At this critical juncture, I respectfully ask all of our esteemed legislators—regardless of political party or ideology—to continue supporting our policies and nation-building efforts as we endeavor to achieve sustainable development and create a peaceful and prosperous society for our citizens. It is my sincere hope that the executive and legislative branches will join hands, focus our energies on uniting Taiwan, and set our nation on a clear path toward an ever brighter future. Thank you!

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