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CORONAVIRUS – The situation in Taiwan
1 General situation
The Covid-19 pandemic has brought Taiwan the rare opportunity to gain widespread acknowledgment and respect around the globe for its laudable accomplishments. Despite Taiwan’s exclusion from most international organizations including the WHO, Taiwan efficiently controls the spread of Covid-19 with less than 50 local infections and 370 imported cases. An early study conducted by Johns Hopkins University in January indicated that Taiwan, which at its closest point is only 80 miles (130 km) away from China, could have had the 2nd highest confirmed cases after China. This prediction was based on Taiwan’s close economic and transportation links with China. More than 1.25 million Taiwanese people live or work in China and there have been thousands of cross-strait flights every week.
In reality it has proven that Taiwan remains relatively a safe place from the Covid-19 pandemic and does not to implement the painful lockdowns anywhere on the island. Until Apr. 29, Taiwan has only 429 confirmed cases, of which 6 died and 311 have been treated and released from hospitals. Schools, offices, factories, restaurants and most entertainment facilities in Taiwan remain open with social distancing rules. International tourists are gone, but locals do travel and shop. Taiwan thus avoids the catastrophic business slump caused by national or regional lockdown.
Knowing the importance of a safe reserve of masks and PPEs for medical professionals, Taiwan was among the first to designate masks and PPEs as strategic materials. When the demand for surgical masks began surging in the early days of the outbreak, the government instituted an ID-based mask distribution system to prevent hoarding. In the meantime, the government immediately allocated a fund to set up 60 additional production lines. With the help of local advanced precision machinery and upstream petrochemical industries, Taiwan could boost mask production from originally 1.8 million per day in Jan. to 16.5 million pieces per day in Apr., making Taiwan a self-sufficient homeland in an extreme short timeframe and able to donate surplus masks to other countries in need.
Most have attributed the success to Taiwan’s open and democratic political system and its early intervention in controlling the pandemic. The Taiwanese authorities have been extremely transparent in sharing all relevant information about the Covid-19 situation with the public, in the meantime fighting fake news. Taiwan’s experience with SARS in 2003 helped drive the government to react immediately to the emerging crisis of Covid-19.
What’s more, Taiwan has a 99.9% national health insurance coverage rate and has been evaluated as the world’s best system by the Global Health Care Index. Epidemic crisis management and yearly drills are important KPIs for all hospitals in Taiwan. The abundant and affordable high-quality medical facilities encourage people who become ill or have symptoms to self-report out of a sense of civic duty. With a population of 23.5 million, Taiwan is equipped with 1,150 negative-pressure rooms, the 3rd highest density in the world. All confirmed Covid-19 cases identified within the border, whether they are Taiwanese or foreigners, severe or mild conditions, with or without symptoms, are all to be treated in hospital negative-pressure rooms. The medical treatment of all confirmed patients are completely at the expenses of the government.
Furthermore, laws prohibiting public disclosure of personal health information protect the privacy of those who are infected and prevent them from being socially stigmatized. Businesses in Taiwan are contributing to the effort to ensure safety and social stability by implementing a variety of disease prevention measures, in many cases going beyond the government’s basic recommendations.
Additionally, Taiwan has applied advanced technologies such as big data and AI to track down infected and quarantined individuals and anyone they might have connected with, to prevent the spread of disease. The Central Epidemic Command Center (CECC), headed by Health Minister Chen Shih-chung and accompanied by his Covid-prevention expert team, has been giving daily televised and live-streamed briefings on the status of the outbreak since January.
Early border control and medical supply management, a flexible command structure, a comprehensive epidemic prevention strategy, integrated medical big data, and proactive information disclosure all allowed Taiwan to successfully combat the pandemic. The success is a combination of continuous efforts by the Taiwanese government, medical professionals, the private sector and the society at large.
2 Preventive measures
14-days quarantine and surveillance for all travelers
As of Mar. 19, all foreign countries have been listed by Taiwan at Risk Level 3, the highest tier. All foreigners without a valid Alien Resident Certificate (ARC) of Taiwan are prohibited from entering into nor transiting via Taiwan.
All returning Taiwanese and foreigners with a valid ARC must follow health management procedures upon arrival at the airport. All are required to fill out a health declaration form at the Customs check and then quarantine themselves for 14 days either at home or at a designated quarantine dormitory or hotel at their own expense, but with partial government subsidy. The transport from the airport to their residence must be done by their family members or designated quarantine taxi.
All travelers have to report any symptoms to the health authorities during that 14-day window period. In addition, location data on their cell phones is monitored to ensure they comply with the quarantine requirements. Leaving their residences or shutting off their phones triggers an alert. Officials also make phone calls twice a day to ensure the quarantined people are not circumventing the tracking by leaving their phones at home.
For those subject to and abide by the 14-day quarantine measure, they are eligible to receive NT$1,000 (€30.3) daily stipend from the government.
Border control for foreigners
Some exceptions are made for foreign visitors without a valid Taiwan ARC on account of performing work contract. They have to obtain a special permit to enter Taiwan via the Taipei Representative Office in their countries. For example, foreign technicians working for the on-going offshore wind projects in Taiwan are eligible to obtain a special permit if the following requirements are met:
- Approved work permit issued by the Ministry of Labour (MoL). The applicant can request the number of days deemed necessary and, based on the work permit and number of working days in Taiwan approved by the MoL, TRO can approve the period of stay, normally it is within 180 days.
- Completed & signed visa application form online and printed out
- Two passport-size photos in color within 6 months and with a white background
- Passport (original & copy) valid for 6 months and with blank pages
- Other additional documents required by the Taipei Representative Office.
All foreign travelers who entered Taiwan on or before March 21, 2020 with a visa-waiver treatment, for example Belgian passport-holders, or on a visitor visa or landing visa have been granted an automatic 30-day extension, with the exception of illegal overstayers.
Precaution measures within the border
Life and work have been remaining as normal as possible in Taiwan, thought with strict precautionary measures and intensified disinfection efforts. Almost all premises take temperature and spray hand sanitizers before allowing visitor to enter. Wearing masks in public transport, taxi, confined spaces are a compulsory courtesy.
To avoid risk, all group gatherings of more than 500 persons outdoors and 100 persons indoors have been cancelled under the advice of the Central Epidemic Command Center (CECC). The CECC also makes recommendation that people keep a distance from others of at least 1.5 meters indoors and 1 meter outdoors.
3 Exit strategy
Taiwan's Post-Covid Measures - Relax Inside Homeland but strict at border control
Taiwan adopts a "Relax inside but strict at border control" policy to keep the Covid-19 pandemic outside Taiwan's jurisdiction and offshore islands. Currently, there are only 2 or 3 patients still under hospital treatment, other identified cases have been treated and released from hospitals. There has been no local infection since end of April. Therefore, from end of June, the authorities have relaxed anti-epidemic measures to allow people resume a normal life back to the level of pre-Covid days. Domestic travel, trade fairs, group gatherings and social events are encouraged to stimulate local consumption and economy. In July, the government also launched nationwide consumption subsidy to promote domestic travel and spending.
Occasionally, there are still 1 or 2 imported cases by returning citizens back from pandemic-hit countries. Such cases are either identified at the airport or during their quarantine period. All incoming passengers are subject to 14 days of quarantine to ensure the safety of local community. Passengers from 11 low and medium-low risk countries (e.g. Vietnam, New Zealand, HK, Macao) can reduce the period of quarantine from 14 to 5~7 days based on different criteria, requirements and origin of country. However, no European countries are listed in the 11 low and medium-low risk countries.
Economically, Taiwan is resilient with the homeland in good order and all economic activities continue as usual. For the 1st quarter, Taiwan's exports of commodities still grew by 3.7% and imports grew by 3.5%. But trade in services dropped significantly. Overall, the first quarter demonstrated a positive growth of 1.54%. The Taiwanese government is confident that 2020 will still remain to have positive economic growth despite the severe negative impacts of Covid-19 pandemic.
Border Control in Taiwan (more details and updates at https://www.cdc.gov.tw/En)
Foreigner nationals with ARC (Alien Residence Certificate) and migrant workers with re-entry permits are allowed entry and subject to 14 days of quarantine once entry into Taiwan. Short-term business visitors from 11 low and medium-risk countries or areas may reduce their quarantine period of 14 days to 5~7 days if certain requirements are met. Details about the requirements and updates of the listed low and medium-risk countries are available at www.cdc.gov.tw/en
For Belgian nationals, they may apply to enter Taiwan for essential business reasons, for example to fulfill contractual obligations, or a part of internal transfers within multinational enterprises. They are still subject to 14 days of quarantine once entry into Taiwan.
a. Economic impact
The impact of the pandemic on the Taiwanese domestic economy is more controllable thanks to Taiwan’s ahead-of-curve disease control. However, Taiwan’s export-dependent economy is highly vulnerable to global recession.
Taiwan does not have to resort to the extreme lockdown measures that severely hurt business activities elsewhere. Manufacturing activities in Taiwan have been maintained and have even received orders transferred from peers trapped by lockdowns elsewhere. People living in Taiwan can enjoy free movement and usual public services. Schools, offices, restaurants and retail stores are open for domestic consumption, though with much reduced revenue. In February, the first full month of Covid-19 infections in Taiwan, retail and restaurant sales still rose by 0.5% compared to the same period last year. This was meaningful as private consumption accounts for over half of Taiwan’s GDP.
On the other hand, with an export-oriented economy, Taiwan is vulnerable to reduced global trade flows and recession. The pandemic outbreak inevitably leads to weaker external demands and disruption of supply chains, which certainly hurts Taiwan’s exports and overall economy. Taiwan’s National Development Council (NDC) released a list of five industries that are expected to be the most heavily hit by the COVID-19 outbreak and its aftermath:
- Airlines and tourism: The airlines and travel industries have been hit most by the coronavirus pandemic. Border controls in both Taiwan and other countries throughout the world have stiffened, and demand for air travel has dropped sharply. As a result, local carriers EVA and China Airlines and their subsidiaries have been forced to completely cancel or limit flights to numerous destinations. Passenger levels on Taiwanese airlines reportedly decreased by 50% in February and are expected to drop even lower as the coronavirus continues to spread around the world. Hospitality and non-essential retail business (fashion, cosmetics) naturally also suffered severely due to a sharp fall in consumer and business spending, caused by large-scale quarantines, travel restrictions, and social-distancing measures.
- Electronic components: Around 87% of Taiwan’s exports to China are intermediate products, with electric components comprising the biggest category. In addition, many of the electronics companies have established factories in China, where the coronavirus is posing a direct threat to the production and supply chain management. Some Taiwanese electronics companies are cutting their revenue projections this year by up to 50%.
- Machine tools: Are highly export dependent and therefore hit by the predictable weak external demand. More than 30% of the machine tools produced in Taiwan are exported to China.
- Petrochemicals: The petrochemical industry represents Taiwan’s second largest source of exports and 45% of the industry’s total production is shipped to China. The sector is also hard hit with huge stocks and the falling oil prices amid the pandemic crisis.
- Automotive parts: Hard hit mainly due to weak external demand in China and foreign markets.
On the positive side, Taiwan is benefiting from an increase in sales for some of its products, especially ICT products and semiconductor industry.
- Electronics and ICT products: Foreign demand for the island’s signature hi-tech products have risen strongly due to the increase of videoconferencing and online activities to support work-from-home and social distancing guidelines around the globe. According to Taiwan’s Ministry of Economic Affairs (MOEA),export orders received by Taiwan-based companies in March grew more than 40.4% to US$40.26 billion from the previous month despite the economic impact of the COVID-19 pandemic. That represents an increase of US$11.58 billion in export orders from February and a (contrary to expectations) year-on-year growth of 4.3%. Demand for electronic products jumped by 24% compared with the same period of last year.
- Semiconductor: The country’s heavyweight and world-leading semiconductor industries are also doing pretty well. Contract chip maker Taiwan Semiconductor Manufacturing Company (TSMC), a bellwether for Taiwan’s tech sector, reported that the company’s first-quarter revenue increased by 42 per cent from a year earlier.
- Medicare and pharmaceuticals: Apart from face masks which are still subject to Taiwan’s export ban until 6/30, other medical and healthcare products have seen a huge influx of rush orders.
b. Trade barriers
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c. Measures for economic relaunch
The Taiwanese government has approved a wide-range relief package amounting to NT$ 1.05 trillion (US$35 billion), equivalent to 5.5% of Taiwan’s 2019 GDP.
Taiwan government’s economic relief package includes:
- NT$ 210 billion (US$ 6.94 billion): Government special budgets from the Ministry of Health and Welfare, Ministry of Economic Affairs, Ministry of Transportation, Ministry of Agriculture, Ministry of Culture, Ministry of Education, Ministry of Labours, Ministry of Science and Technology, Ministry of Interiors)
- NT$ 140 billion (US$ 4.63): Special funds (Employment Security Fund, Tourism Development Fund, National Development Fund, etc.)
- NT$ 700 billion (US$ 23.13): Loans and credit guarantee
For example, the Ministry of Transportation and Communication provides a NT$55 billion (US$1.83 billion) aid package to airlines operating on the island. The package will include loans for project financing, as well as subsidies for coping measures taken by airlines dating back to January 15.
The Ministry of the Transportation and Communication would also use this crisis to transform and upgrade the tourism industry in Taiwan. An amount of NT$30 billion (US$1 billion) is invested in upgrading the tourism infrastructure and to promote Taiwan as a major tourism hub.
Apart from rescue measures for airlines, hotels and travel agencies, the Ministry of Economic Affairs (MOEA) allocates the special budget NT$ 97.5 billion (US$3.25 billion) for financial bailout, aiming to revitalize local consumption and to support businesses in difficulties. The MOEA is targeting the country’s vast number of small enterprises and service-sector family businesses such as night market vendors or hairdressers. They are eligible to get up to 30% of their power and water bills and up to 40% of their salaries subsidised.
Businesses that have posted a 15 percent drop in monthly revenue from the same period of last year will be eligible to apply for postponing their tax payment deadlines by up to one year, while tenants of municipal government-owned properties will be given a 50 percent cut on their monthly rent from March to May. The policy could be extended should the pandemic continue.
The MOEA will also provide "stimulus coupons" to local consumers as part of efforts to encourage consumption and boost the local economy. The coupons will be accepted at an estimated 140,000 restaurants around Taiwan, as well as 280,000 businesses in shopping centres, 10 000 night markets and 1,700 arts and culture spots.
The Ministry of Labour allocates its special budget together with the additional funds of NT$ 62.2 billion (US$2.07 billion) to stabilize the employment for young people, subsidize the unpaid leave employees, support unemployment and provide subsidies for independent workers.
d. Economic outlook
The major contributor to Taiwan’s GDP are net exports which account for more than 65%. The economy is highly susceptible to reduced global trade flows and recession. On the other hand, Taiwan has been resilient thanks to her success in combating Covid-19, diminished dependence on Chinese tourists, advanced and functional domestic industries and the government’s quick adoption of a wide-range relief package. The 2019 performance and 2020 economic outlook are reported as follow.
Taiwan’s public debt closed at 33.6% of GDP in 2019 and is expected to reduce at 32.3% and 30.7% of GDP in 2020 and 2021. Most public debt is domestic and owed in New Taiwanese dollars.
Taiwan’s budget was in deficit at -1.3% in 2019 and is expected to decrease in 2020. While mild budget deficits were expected, taxes were increased on income and financial transactions.
Inflation remained low at 0.4% in 2019. It is estimated to remain stable in 2020 and increase to 1.5% in 2021.
According to Taiwan’s national statistics, unemployment rate was low at 3.67% in December 2019. Labour force participation rate was equal to 60%. The unemployment rate in the whole year of 2019 remained steady at 3.8% but is estimated to increase slightly to 4.4% in 2020 due to the outbreak of the COVID-19 pandemic. Social challenges include an ageing population, low birth rates, and still tense relationship with China.
In the years preceding the COVID-19 outbreak, a steady influx of returning Taiwanese investments from China had begun to take place due to the uncertainties and reduced revenues caused by U.S.-Chinese trade tensions. Under the Taiwanese government program designed to attract such home-returning investments, over US$23 billion has been pledged so far. Foreign direct investments into Taiwan totaled US$11.2 billion in 2019, the fourth-highest amount on record.
Researchers caution that, if the prediction that the coronavirus situation could knock a percentage point off of China’s GDP for 2020 comes true, it could cost up to .29% of Taiwan’s own growth, given that China (including Hong Kong) accounts for some 40% of Taiwanese export sales. On the other hand, much of the negative effect on Taiwan’s economy could be offset by the diversion of further investments to Taiwan due to the COVID-19 epidemic.
In the first quarter of 2020, Taiwan’s export orders and exports have continued to hold up well. This was in part due to the production resumption in mainland China, and also to the rise in electronics demand at the initial phase of the Covid-19 outbreak, to cope with work-from-home and stay-home guidelines worldwide.
According to Taiwan’s Ministry of Economic Affairs, export orders received by Taiwan-based companies in March grew more than 40.4 percent from the previous month to US$40.26 billion, despite the economic impact of the COVID-19 pandemic. That represents an increase of US$11.58 billion in export orders from February and a year-on-year growth of 4.3 percent. Total exports in the first quarter expanded by 3.7%, while imports increased 3.5%, faster than official projections of 2.19% and 1.85% respectively. Taiwan's economy thus remained stable in the first quarter of 2020, but the global contagion of the COVID-19 pandemic poses uncertainty down the road. A contraction in Taiwanese growth could be expected in the second and third quarters, when global recession, job losses and income declines start to emerge .
Period: 01/2020 – 03/2020
Growth: Compared with same period (Q1) of 2019
Source: Ministry of Finance, Taiwan (last updated 28/04/2020)
|1||China + HK||13,618,441,684||19.69%||1.27%|
|1||China + HK||31,000,308,363||39.40%||6.66%|
S&P predicts Taiwan’s 2020 growth to fall 1.2%, from +2.7% in 2019. The IMF forecasts Taiwan’s economy will contract less than other countries but will still fall 4% in 2020 and pick up to 3.5% in 2021. Taiwan’s National Development Council disagrees with the pessimistic forecasts, arguing the IMF lacks an understanding of Taiwan’s real economic situation and fails to factor in the government’s US$35 billion relief program. The central bank of Taiwan has reduced its forecast for 2020 GDP growth from original 2.57% to 1.92%. Other government agencies and local analysts are forecasting Taiwan’s economy will remain positive with a growth rate of 1.3 ~ 1.8%, better than virtually any other developed economy in the world.
Subject: GDP growth for 2020
Source: multiple (last updated 28/04/2020)
|Organization||Latest forecast||Date forecast|
|S&P Global Ratings||-1.20%||17/04/2020|
|Asian Development Bank||1.80%||03/04/2020|
|Yuanta-Polaris Research Institute||1.50%||25/03/2020|
|Chung-Hua Institute for Economic Research (CIER)||1.03%||17/04/2020|
|Central Bank of Taiwan||1.92%||18/03/2020|
|Taiwan National Statistics||2.37%||12/02/2020|
e. Short term opportunities
e-commerce: Due to lockdown and social distancing policies, consumers turn to online shopping to order food and choose daily necessities and fresh food instead of going to a physical shop. Fresh food e-commerce is seeing an explosive growth. Consumer demand for the following products has also increased significantly:
- Disinfection cabinet;
- Sweeping robot;
- Ultraviolet disinfection lamp;
- High-quality imported food and health care products.
- Food delivery platforms
- On-line entertainment and e-learnings: games, webcast programs, software
- Information, communications and telecom hardware products: As home education, work-from-home and live webinars have become the norm nowadays and the future, the ICT and telecom hardware products have been in high demand to make these remote operations possible.
- medical and biomedical equipment, healthcare and pharmaceutical products, life and medical insurances
f. Long term opportunities
- Supply chain adjustment in ASEAN: The main adjustment will involve relocating certain activities along the supply chain from China to ASEAN countries. Although the pandemic will disrupt the relocation phase, ASEAN countries can benefit from the new investments, mitigating overall negative impacts. For example, a majority of Taiwanese clothing and shoe OEM vendors for international big names such as Nike and Adidas have moved their manufacturing out of China, and the exodus would be accelerated by the epidemic.
- Supply chain cooperation with Taiwan: With Taiwan’s homeland in order and world-class manufacturing industries, Taiwan appears to be a safer long-term bet than other countries in Asia. The Chinese economy has taken a severe hit as a result of the COVID-19 crisis and severely affected Taiwanese companies doing business in China. This will increase the number of companies coming back to Taiwan. Many international companies are turning their eyes to Taiwan in search of new providers.
- SMEs to form alliances: More and more Taiwanese small- and medium-sized enterprises, which are not big enough to build global networks as large multinational companies do, will form alliances and share orders with partners in their supply chain or in other supply chains to develop a global presence using a minimum of resources.
- ICT, 5G, digital and mobile technology: AI and digital transformation were seen in the past as too expensive and too inflexible, and unable to be used on a large scale, they are now proven to be indispensable. The big data era has arrived for companies to remain competitive in the future. This digital and mobile opportunity has been further pushed and proven by the epidemic.
5 Useful links
- Taiwan Centers for Disease Control https://www.cdc.gov.tw/En
- KPMG Taiwan -Alleviating the Impact of Coronavirus Epidemic – Overview of Supportive Tax Measures in Taiwan https://home.kpmg/tw/zh/home/insights/2020/03/e-tax-alert-145-eng.html
- KPMG Taiwan - Government and institution measures in response to COVID-19 https://home.kpmg/xx/en/home/insights/2020/04/taiwan-government-and-institution-measures-in-response-to-covid.html
- Presentation made by Minister Without Portfolio Kung Ming-hsin on April 2. Download: https://www.ey.gov.tw/Page/448DE008087A1971/40be7a31-466f-45ff-8720-b37186d450ff (Chinese only).
- Measures taken by Taiwan’s Ministry of Finance (MOF) to alleviate the impact of Coronavirus Epidemic caused to individuals and businesses. https://www.mof.gov.tw/covid19
6 Dossier Coronavirus
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