Vol. 2, Issue 2
Global Taiwan Brief – Volume 2, Issue 2
Political Warfare Alert: Fifth “Linking Fates” Cultural Festival of Cross-Strait Generals
By: Russell Hsiao
Steps Forward in the Taiwan-Japan Partnership
By: June Teufel Dreyer
“Cold Peace” and the Nash-equilibrium in Cross-Strait Relations (Part 2)
By: David W.F. Huang
Uber in Taiwan: Mixed Signals for the Asia Silicon Valley Project
By: Melissa Newcomb
Political Warfare Alert: Fifth “Linking Fates” Cultural Festival of Cross-Strait Generals
Russell Hsiao is the Executive Director of the Global Taiwan Institute and Chief Editor of the Global Taiwan Brief. The author appreciates the thoughtful input of Shirley Kan and Mark Stokes. Any errors are the author’s own.
Less than two months after a stars-studded group of retired generals from Taiwan were televised on Chinese-state media participating in an official function in the People’s Republic of China (PRC), former Commander of the ROC Army and Lieutenant General (ret.) Chen Ting-chong (陳廷寵) reportedly led a group of eight retired generals from Taiwan to participate in the Fifth “Linking Fates” Cultural Festival of Cross-Strait Generals (第五屆海峽兩岸將軍連緣文化節) from January 6 to 8.
Based on a survey of Chinese media reports, the event was attended by 13 to 21 retired military generals from both sides of the Taiwan Strait. The Taiwan delegation reportedly included former Army Headquarters Political Warfare Department Director, ROC Association Director (中華民國擎天協會), New Revolutionary Alliance (新同盟會) Deputy Chairman, and Lieutenant General (ret.) Chen Xin-guo (陳興國); former ROC Air Force Academy Principal and Lieutenant General (ret.) Chen Sheng-wen (陳盛文); former Commander of the ROC Combined Logistics Command General Ding Zhi-fa (丁之發); former ROC Combined Service Force’s Political Warfare Department Deputy Director Major General (ret.) Lai Zong-yan (賴宗煙); former Ministry of Defense Legislative Liaison Division Chief Colonel (ret.) Yu Gui-yong（余貴勇）; and former Commander of the Songshan Air Force Base Major General (ret.) Hsiao Shi-zai (蕭士材), among others.
Four-hundred people purportedly attended this year’s meeting. Among the notable Chinese participants were former President of the PLA’s Academy of Military Science General (ret.) Liu Jingsong (劉精鬆), former Deputy Commander of the Nanjing Military Region Lieutenant General (ret.) Liu Lunxian (劉倫賢), former Deputy Commander of the PLA(N) Vice Admiral (ret.) Zhao Xingfa (趙興發), and former Deputy Chairman of the Association for Relations Across the Taiwan Straits Zhang Mingqing (張銘清), among others.
At a legislative hearing held in late December 2016, Lai Yun-cheng (賴蘊誠), the Taiwan National Security Bureau’s (NSB) deputy chief of the Third Department (第三處)—which is in charge of the agency’s homeland security and intelligence portfolio—confirmed the retired military officers’ trip to concerned lawmakers. Lai indicated that, given the local media attention the trip had received, some of the retired military officers who were originally scheduled to attend had had a change of heart. This may explain why participation by retired military officers from Taiwan appears lower than previous years.
This trip follows on the heel of a controversial visit by several dozen retired Taiwan military officers—which Chen also participated in—to a state-level ceremony unprecedented in its stature and conspicuousness. While there is a difference between high-ranking retired military officers attending official events such as the Sun Yat-sen ceremony in November 2016—which was presided over by PRC President Xi Jinping—and what seems to be a non-state level function, both appear part and parcel of the CCP’s expanding United Front work and political warfare against Taiwan.
During a legislative hearing, a lawmaker from the ruling Democratic Progressive Party, Liu Shih-fang (劉世芳), lamented how retired military officers participating in these United Front activities are engaging in acts that border treachery and corruption, and implied that there may be some connections between such exchanges and some participants initiating recalls on lawmakers in Taiwan. There is little that the government can do under current regulations to prevent these retired officers from attending such meetings; however, Veteran Affairs Council (VAC) Political Deputy Minister Lee Wen-chung (李文忠) stated that the government could consider imposing a longer travel ban on retired military officials, and establish a permanent screening mechanism for personnel who had access to highly-classified information.
To be sure, that retired military officers from Taiwan are involved in these exchanges should come as no surprise—such activities have been going on for some time. Yet, the range and scale of such activities, likely organized under the auspices of the United Front Work Department and possibly what was previously known as the PLA’s General Political Department, have increased in recent years. The increased visibility of such activities—particularly the elevation of the commemorative event in November 2016 to a state-level function—seems intended to send a political signal. This particular forum stands out because it exposes the many different types of channels that the CCP uses to conduct United Front operations.
Among the many cross-Strait channels, this cultural festival was organized by the Chinese Foundation for Military Families and Army Support (中國擁軍優屬基金會), the Chinese Lien Surname Fraternal Association (中華連氏宗親聯誼會), the China General Network (中國將軍網; www.chinageneral.org), the Fujian – Taiwan Exchanges Association (福建省閩台交流協會), the Xiamen Daily Newspaper (廈門日報社), and the Minnan Daily Newspaper (閩南日報社). Among the supporting organizations is one from Taiwan, the ROC Association (中華[民國]擎天協會), which is chaired by Lieutenant General (ret.) Chen Xin-guo. According to VAC Political Deputy Minister Lee, the main organizer of the festival is the “Lien Surname Enterprise” (連氏企業), which is a calligraphy society, but in reality the sponsors are usually the State Council’s Taiwan Affairs Office or other Taiwan-related work organizations.
This cultural festival is a relatively new front in the CCP’s United Front operations. The annual event begun in 2010, during the first Ma Ying-jeou administration, and has been held in Zhangzhou city in Fujian province—which is the PRC’s southeastern province closest to Taiwan.
The main point: The range and scale of such United Front activities have increased in recent years. The increased visibility of such activities—particularly the elevation of the commemorative event in November 2016 to a state-level function—appear designed to send a political signal. The “Linking Fates” Cultural Festival of Cross-Strait Generals stands out because it exposes the many different types of channels that the CCP uses to conduct United Front operations.
Steps Forward in the Taiwan-Japan Partnership
Dr. June Teufel Dreyer is a Professor of Political Science at the University of Miami and is the author of the recently-published Middle Kingdom and Empire of the Rising Sun: Chinese Japanese Relations, Past and Present (Oxford University Press, 2016).
A quick glance at a map shows why Taiwan and Japan are natural partners in the face of an increasingly aggressive China. Geologically, Taiwan is an extension of Okinawa—whose name literally means “rope in the sea”—which forms a bridge between Japan’s four main islands and Taiwan. Yonaguni, Japan’s westernmost island, is less than 70 miles from Taiwan’s east coast; Yonaguni and Hualien (花蓮) are sister cities. There is a brisk trade between the two countries, and the intervening waterway is a strategically important passage for both commercial and military traffic.
Historic ties dating from the 50-year period (1895-1945) when Taiwan was a colonial possession of Japan remain strong. In mid-December 2016, the Taipei Economic and Cultural Office in Japan, which represents Taiwan’s interests there, released the results of a poll it had commissioned from an independent private-sector company, indicating that 66.5 percent of respondents reported that they “feel an affinity” with Taiwan; 55.9 percent said they “can trust” Taiwan. When asked why, 55.2 percent pointed to the common values between the two nations, specifically mentioning freedom and democracy, and 43.8 percent the shared historical ties. Moreover, 60.2 percent said that relations between Japan and Taiwan are “good,” and 56.4 percent said they believed that relations “will develop” in the future.
Due to the pro-China tilt of Ma Ying-jeou’s eight-year administration, the warm ties that had developed between Taiwan and Japan under the Lee Teng-hui and Chen Shui-bian administrations had deteriorated, and with arguably limited benefits to Taiwan. Neither the improved economic growth nor the enhanced international living space that the Ma government had claimed that closer China-Taiwan ties would achieve were realized. During the same period, Sino-Japanese ties deteriorated markedly, thus creating conditions favorable for rekindling Taiwan-Japanese ties under the administration of the newly-elected President, Tsai Ing-wen, and her Democratic Progressive Party (DPP).
Bilateral forums that had fallen into abeyance were revived. In April 2016, a few months after Tsai’s election but before her inauguration, the Tokyo-Taipei Forum re-convened, with experts discussing common strategic concerns. US participants were also invited to participate and included a recently-retired marine corps general, and an also recently-retired colonel who had helped train both Taiwan’s and Japan’s marines.
In December 2016, Taipei hosted the Taiwan-US-Japan and Asia-Pacific Regional Partners Security Dialogue with participants discussing a range of topics that included defense, free trade agreements, and Taiwan’s southbound investment policies that could reduce the country’s dependence on the China market. At the dialogue, Diet member Suzuki Keisuke advocated that Japan strengthen its strategic ties with its neighbors, including Taiwan, in the face of a rising China and possible American isolationism under newly-elected US President Donald Trump. At around the same time, at a conference hosted by the Project 2049 Institute in Washington DC, Deputy Assistant Secretary of Defense Abraham Denmark said that, in order to deter a Chinese invasion, Taiwan must be prepared to spend more on its own defense.
Much the same has been argued for Japan. In this situation, it would seem wise for Taipei and Tokyo to cooperate, though due to fear of Chinese retaliation, both are hesitant to do so. Indeed, even such tentative steps as those mentioned above have drawn Beijing’s ire. Last year, on December 13, commentator Wang Ping accused the DPP of, among other things, currying favor with Japan and “licking the boots” of both Japan and the United States in the overseas edition of Renmin Ribao.
Somewhat less controversial from Beijing’s point of view are trade relations. Tsai’s government considers membership in the US-promoted Trans-Pacific Partnership (TPP) crucial to its desire to reduce Taiwan’s dependence on China’s market. Beijing, in addition to its bilateral free trade agreements throughout Asia, has its own Regional Comprehensive Economic Plan (RCEP), to which Taiwan would probably never be admitted under any conditions it could conceivably accept.
Taiwan offers important advantages to trade partners: due to its location astride major waterways, it can serve as a transportation hub and regional logistics center and is the world’s second largest producer of information hardware. In terms of gross domestic output value, Taiwan’s semiconductor foundry industry and semiconductor assembly and testing industries lead the world; its integrated circuit design and dynamic random access memory (DRAM) industries are both second globally. Taiwan has made modifications to its economic system to facilitate TPP entry, and very much covets Japanese sponsorship in its bid to join.
However, a major sticking point between Taiwan and Japan has been Taiwan’s ban on the import of produce from the four Japanese prefectures that were affected by the March 2011 nuclear meltdown. Diet member Kishi Nobuo has visited Taiwan three times to plead for lifting the restrictions, pointing out that independent evaluation has certified that the produce is radiation-free. No ordinary politician, Kishi is the younger brother of Prime Minister Abe Shinzō as well as the grandson and grandnephew of two other prime ministers; he is considered a likely candidate for the prime minister’s office himself at some future date. During his most recent visit to Taiwan in December 2016, Kishi seemed to hint that Japan’s support for Taiwan’s bid to join the TPP is contingent upon Taiwan lifting the ban. His exact words were:
Taiwanese participation in the TPP is something that we very much welcome. As I said, due to the close nature of our bilateral relationship, there are numerous issues that we need to overcome together. The issue we currently face is solving the prohibition of Japanese food imports to Taiwan. We feel this needs to be appropriately resolved to progress on trade talks.
The dilemma for Tsai’s government is popular opposition to lifting the ban, fanned by KMT allegations that are echoed in Beijing. The above-mentioned Renmin Ribao article, referred to the imports as akin to “slapping oneself in the face,” while a headline in the KMT-leaning China Post declared stridently “We’re not buying it.”
Moreover, given Donald Trump’s avowed resistance to the TPP, the pact’s future itself is in doubt. During his visit, Kishi said that, should the United States pull out, Japan was prepared to take the lead, a position that both Japanese and American specialists consider unlikely, with a Ministry of Foreign Affairs official speculating that if the United States abandons the TPP, Japan would likely move on to China’s RCEP. This would be a severe blow to Tsai’s plans for Taiwan’s economic future.
Perhaps the most important and positive development in Taiwan-Japan ties has been the announcement that the Japanese government was changing the name of its de facto embassy in Taiwan from the ambiguous and misleading, “Interchange Association” to “The Japan-Taiwan Exchange Association.” While little substantive has changed, there is important symbolism in the change, as evidenced by sharp criticism from Beijing. Speaking at the official ceremony, the head of the newly-named agency, Numata Mikio, declared that bilateral ties were “at their best, but we should take further steps to develop [them].” According to a poll conducted a short while before, 66.5% of Japanese people reported that they felt friendship with Taiwan. Also, for the question of “what is the region in Asia you feel friendship mostly,” 59.1% of Japanese indicated Taiwan, far ahead of the next country on the list.
In sum, progress toward a closer partnership has been far slower than the ruling party’s supporters would like, yet far too bold for the opposition party and Beijing. Much will depend on the incoming US administration, whose personnel and policy choices have yet to be clarified, to encourage closer cooperation between two of its key security partners in the Asia Pacific.
The main point: There have been small but cumulatively meaningful improvements in Taiwan-Japanese relations since the Tsai administration took office. Beijing, assisted by the KMT, has protested.
 Responses were from a thousand men and women nationwide aged 20 or over; the poll was conducted October 6-11 2016.
 Quote at 48:00-51:00.
 Personal communication to the author, December 19, 2016.
“Cold Peace” and the Nash-equilibrium in Cross-Strait Relations (Part 2)
Dr. David W.F. Huang has a DPhil from Oxford University and is an Associate Research Fellow of the Institute of European and American Studies, Academia Sinica, and an Adjunct Associate Professor in the Graduate Institute of National Development, National Taiwan University. Among his various government posts, Dr. Huang previously served as the Vice Chairman of the Mainland Affairs Council and Deputy Representative of the Taipei Economic and Cultural Office in Washington, DC.
Despite Beijing’s vow of “three nos” (i.e., no international space, no further economic concession, no official channel of communication) to Tsai Ing-wen’s government, it has implemented a united front strategy: namely, to divide and rule Taiwanese society. For example, eight KMT county magistrates who accept the “1992 Consensus” were warmly received by Beijing, who rolled out the red carpet and made a swift promise to send Chinese tourists to their jurisdictions and Chinese delegations to purchase their agricultural products. The State Council’s Taiwan Affairs Office (TAO) has laid out its subsidy plan to invite young Taiwanese to start up their own businesses in mainland China. The Vice Mayor of Shanghai visited Taipei city, announcing Shanghai’s support for Taipei’s hosting the 2017 Summer Universiade.
Official channels of communications between TAO and the Mainland Affairs Council (MAC), and between the Straits Exchange Foundation (SEF) and the Association for Relations Across the Taiwan Straits (ARATS) have been severed. Taiwan was also forced to participate in the World Health Assembly (WHA, the governing body of the World Health Organization, or WHO) under the written notice of the “One-China” principle” in the Secretary General’s invitation letter; Taiwan was likewise denied participation in the International Civil Aviation Organization (ICAO), and the title for Taiwan in the World Economic Forum (WEF) was changed from “Chinese Taipei” to “Taiwan, China.” The alleged Taiwanese criminals, accused of telecom fraud in Kenya, Cambodia, Malaysia, and most recently Vietnam, were deported (or abducted) to Beijing, rather than to Taiwan. All of the above incidents are designed by Beijing to show its muscle and to “punish” the newly elected DPP government for its reluctance to accept the terms of the so-called “1992 Consensus.”
The above punitive actions against Tsai’s government may be a face-saving measure for the TAO’s failure to win the hearts and minds of the Taiwanese people in the past eight years. These actions also show the temporary nature of the “peace bonus,” and the ceiling of benefits for accepting the “1992 Consensus.” Viewed most negatively in the minds of Taiwanese people is China’s decision to abduct Taiwanese nationals to Beijing for the sake of expressing its judicial power over Taiwan under the “One-China” policy.”
The question is this: were all of these punitive measures, taken by Beijing anticipated by Tsai’s government? I would argue that, except for the case of repatriation of the alleged Taiwanese criminals, they have all been anticipated by Tsai’s government. That is why Tsai’s government has reiterated its intention and resolution to maintain the status quo across the Taiwan Strait. While not verbally accepting the term “1992 Consensus,” Tsai’s government has honored and implemented all of the KMT’s cross-Strait policies and agreements, which were based on the “1992 Consensus” as agreed to by the Kuomintang Party (KMT) and the Chinese Communist Party (CCP).
For example, President Tsai has reined in the independence-leaning rhetoric and actions of DPP officials and Legislative Yuan (LY) members. In her own announcements, President Tsai always refers to China as “mainland China” (except in the most recent letter addressed to DPP members on September 28). She also instructs her government to use the term of “mainland China” in all official letters and documents. She has appointed non-DPP members as Minister of Foreign Affairs, Chairwoman of Mainland Affairs Council, President of Strait Exchange Foundation, and Leader’s Representative to the APEC Summit.
Foreign Minister David Lee (李大維) announced that the DPP government would not officially promote Taiwan’s membership in the UN. Tsai’s government temporarily suspended the invitation of the Dalai Lama to visit Taiwan. It also decided to terminate the R&D program for the mid-range missile Yun-Feng (雲風). Finally, while not publicly endorsing the PRC’s legal position in South China Sea, the Tsai government’s reactions to the verdict of International Tribunal are almost identical to those of the PRC.
All the above reactions of Tsai’s government are meant to send olive branches to Beijing in the hope that the PRC would reciprocate with good will. Unfortunately, Beijing’s policy toward Taiwan has proven to be inflexible. From Beijing’s perspective, the “1992 Consensus” is the political base that has allowed the benign evolution of cross-Strait relations to the current status quo. It is also the political base that facilitated the conclusion of 23 cross-Strait agreements since 2008.
According to Beijing, if Tsai means to maintain the status quo and inherit all the benefits of cross-Strait cooperation, she must accept the “1992 consensus.” In the PRC’s view, Tsai’s unwillingness to accept the term “1992 Consensus” (which affirms that both Taiwan and the PRC are “China,” but each side may interpret that differently) disrupts the status quo across the Taiwan Strait. What Beijing has done since May 2016 is simply to show what new cross-Strait relations would look like.
Moreover, there is also a long-standing strategic mistrust between the Chinese authorities and the DPP administration. On one hand, because Tsai is regarded by Beijing as the originator of state-to-state theory between China and Taiwan, her words and deeds need to be tested under a series of pressures. Therefore, even if Tsai verbally accepted the “1992 Consensus,” Beijing would still question her sincerity and demand further actions to prove her allegiance to the “One-China” principle.
On the other hand, Tsai was elected President with a specific pledge to maintain the “status quo” without explicitly accepting the term “1992 Consensus.” The KMT’s candidate Eric Chu did pledge to base cross-Strait relations on the “1992 Consensus” and to promote cross-Strait cooperation, but he was defeated. That is why President Tsai in her interview with the Wall Street Journal urged Beijing to take a second look at her democratic mandate. President Tsai said that she would not bow to the PRC’s pressure, and indeed no democratically elected leader in Taiwan would go against the will of Taiwanese people.
Contrary to popular misconception, the Chinese leadership has not failed to understand how democracy works in Taiwan. The Chinese leadership has a detailed and rational calculation of pros and cons for each option it prepares to launch. What Beijing has implemented is simply its dominant strategy; any deviation from this dominant strategy would entail a net loss for China. In game theory jargon, the current status of cross-Strait relations is a suboptimal Nash equilibrium, given that both China and Taiwan have adopted their dominant strategies.
But this equilibrium is unstable, because Tsai’s government in Taiwan cannot endure bullying from China without retaliating if domestic pressure demands it. If Tsai’s government deviates from her dominant strategy by mistake, tensions across the Taiwan Strait would escalate. It behooves the United States to intervene or the only alternative left may be to let tensions escalate into open conflict.
The main point: Given the unstable Nash equilibrium embedded in the “Cold Peace” across the Taiwan Strait, it is in the US interest to see Tsai’s moderate policy toward China continue.
Uber in Taiwan: Mixed Signals for the Asia Silicon Valley Project
Melissa Newcomb is the Research Manager at Global Taiwan Institute and the Associate Editor of the Global Taiwan Brief.
Officially launched on December 25th, the Asian Silicon Valley Development Initiative (ASV) focuses on the Internet of Things (IoT) and innovation. Under the purview of the National Development Council (NDC, 國家發展委員會) the initiative is one part of a comprehensive plan to innovate five key industries in Taiwan in order to stimulate economic growth and shift away from being a manufacturing middle-man and export-oriented economy.
Taiwan’s Premier, Lin Chuan, said of the ASV, “this effort will bring the world’s most advanced ideas to Taiwan and attract high-level talent from overseas to improve the country’s competitiveness in the global market.” The ride-sharing company Uber, and other innovative services operating in the sharing economy, would seem like a natural fit.
In a press release about ASV, the NDC stated:
Now that the fourth industrial revolution is underway, Taiwan must catch up by restructuring its industries. The island already has an excellent foundation in traditional manufacturing, machinery, and information and communications technology, and the government will spare no effort in pushing that transformation.
However, Uber has faced resistance since first entering the Taiwan market and threats have been made to kick it out entirely, sending a contradictory message about the Tsai administration’s commitment to innovation and economic reform.
Uber debuted in Taiwan in 2013 and it is worth noting that the company’s hampered success on the island mirrors the resistance it has met in other markets with strong taxi unions and governmental regulations. In France 2015, taxi drivers staged protests and became violent—burning tires, cars, and stopping traffic in Paris. The service “UberPop,” which allows untrained and unlicensed people to provide rides, was subsequently banned in France. In Austin, Texas, Uber and Lyft paused operations in May 2016, after the state’s capital demanded fingerprinting all drivers. In Germany, Uber is legally banned but continues to operate and fight the legislation. However, the case of Uber in Taiwan is unique because of the recent ASV launch and Taiwan’s need to adapt to maintain its economic prosperity.
In a time when more and more services are creating smartphone apps and integrating with technology, Taiwan’s transportation sector appears focused on preserving traditional systems rather than leveraging technology to create new ones. For example, instead of creating regulations that would incorporate ride-sharing apps, the Ministry of Transportation and Communications (MOTC, 交通部) proposed a two-tiered taxi system of a standard and a “high end” taxi service. The proposed two-tiered system would create, in addition to standard cabs, a more expensive class of luxury cab service to be regulated by the government.
There is a political rationale for this apparent anomaly. There are about 80,000 taxi drivers in Taiwan, which act as powerful lobbyists against the ride-sharing company. On August 5th, 2016, members of Taiwan’s Taxi Union protested against the government’s lack of action against Uber. On August 12th, 2016, 100 cabs passed the Executive Yuan, stalling traffic, to further protest the fact that the ministry had not formally revoked Uber’s business license as promised. Another element that makes taxi companies seemingly so influential is that many may have ties to criminal networks. Their affiliation with organized crime makes them dangerous for officials to cross and could explain the government’s responsiveness to the taxi industry’s concerns.
Subsequently, in December 2016, legislators passed a hefty fine of up to $25 million NT (US $780,000) for people caught driving for Uber. As of January 2017, Uber has been fined $92 million NT (US $2.8 million), a portion of which are back-taxes Taiwan says the company owes. The MOTC has insisted that if Uber wants to continue to operate in Taiwan, it must pay local taxes, be covered by insurance, and be subject to government regulations. Indeed, critics of Uber in Taiwan have threatened to press criminal charges, saying the company is illegally operating without any regulations and does not pay the same fees as taxi companies. The government also threatened to have Uber pulled from Apple Store and Google Play, platforms where users can download the app. It is worth noting that Uber is quite popular among consumers. According to one media report: “The app has been downloaded by more than a million people in four cities and its drivers number in the tens of thousands.”
For outsiders confused by the mixed signals coming from the ASV initiative and the treatment of Uber, it is important to consider that Uber entered Taiwan before President Tsai was elected and it may be seen, from her cabinet’s perspective, as legacy confrontation from the Ma administration. In addition, there may be a lack of coordination between the Tsai administration and the officials at other ministries, including the MOTC, about the Asian Silicon Valley project. This is clear from the NDC’s statements, as well as its attempts to loosen regulations. For instance, the NDC created a tech accelerator to help Taiwan’s start-ups called Taiwan Startup Stadium to support businesses, rather than lead with rules. It is therefore imperative that the NDC, and President Tsai, take a whole-of-government approach and communicate to other ministries how the mission of ASV can be enacted in their departments, and why.
Taiwan can learn from its neighbors as it weighs options on how to respond to Uber. South Korea shut down nearly all of Uber’s operation in 2015. In the same year, Uber adapted and relaunched its services to connect riders to licensed taxi drivers. Native ride-sharing options, KakaoTaxi and Callbus, have entered the market by working with local unions. In Japan, Uber is finding modest success in under-populated cities with unregulated transportation markets, meeting the needs of local residents without infringing on protected services in major cities. In August 2016, Uber formally withdrew from China, not because it was forced to, but because it was beat by an indigenous company.
The tale of how Didi Chuxing (滴滴出行) overtook Uber in China is one of classic free-market competition and investment-hunting that can be taken as a positive example for Taiwan, encouraging it to embrace innovation. During their intense rivalry, which lasted years, Didi joined Uber’s competitor, Lyft, in a partnership, and then Uber sold its business to Didi, gaining a 17.7 percent stake in its Chinese competitor. Now Didi works with the two biggest ride-sharing companies in the world and is turning to the driverless car market.
All of this to say that, Taiwan could stand to gain from focusing less on shutting Uber out and more on how to restructure its industries to benefit people in Taiwan and the economy. One way that the Tsai administration could do this would be to create a special office that acts across ministries to help formulate new regulations and facilitate the lawful and safe introduction of innovative companies, be they domestic or foreign, to benefit Taiwan. For example, with a company like Uber, a central office on Taiwan’s side could negotiate a quota for locally-hired employees, set up a collaboration on R&D with a Taiwanese company, and support the MOTC’s negotiations with labor unions.
While the case of one company will not determine the outcome of Taiwan’s ambitious economic reforms, it does send a signal. If the government makes it especially hard for new tech companies to enter the market, it will discourage foreign investors and businesses from participating in the ASV initiative. Whether Taiwan’s government can coordinate and endure the messy process of regulatory reform to innovate its industries will be a test for the ASV initiative and Taiwan’s ability to restructure its economy going forward.
The main point: Uber has met strong resistance in Taiwan from both the government and the taxi industry. The disruptive nature of sharing economy apps encroaches on heavily protected sectors, spurring backlash in the form of fines and tightened regulations. However, if Taiwan wishes to reform its economy and execute the Asia Silicon Valley project, it will need to take a whole-of-government approach to help industries embrace innovation.