The Taiwan connection

Whatever the Manila Economic & Cultural Office earns, it spends.

For 2002, the budget of the country’s unofficial embassy to Taiwan is pegged at P100 million, 90% of which will come from the issuance of visas. In the past year, the cost of getting a visa has been reduced from P1,500 to P1,200. For groups, the cost is lower at P1,000.

"MECO used to have a bigger revenue stream when we got a small percent of the total coconut exports to Taiwan," said chairman and executive chief officer Antonio Basilio. Coconuts and mangoes are no longer shipped to Taiwan for health reasons.

The bulk of the P100 million budget will pay for the 15-man operation in Taiwan headed by resident representative and managing director Edgardo Espinosa. An emergency fund equivalent to 20% of the annual budget is set aside to help stranded overseas Filipino workers return home.

Labor issues

As of end-2000, there are 98,161 OFWs in Taiwan. Of this total, 62% are factory workers and 30.5% are caretakers.

Under Taiwan laws, foreign workers receive the same minimum wage of NT$15,840 (or P25,344 at the current exchange rate) as local workers. Because of overtime pay, a factory workers averages a monthly salary of NT$25,000 or P40,000.

"In the past year, MECO has had to deal with two major labor issues. One, we’ve been working with other governments to convince Taiwan to relax its three-year, no extension working contracts for all foreign workers. Two, we’ve been encouraging Taiwanese companies to directly source their workers from the labor pool of the Philippine Overseas Employment Administration," Basilio said.

Direct hiring agreements with the POEA was pushed last year after Taiwanese companies took out the free accommodations offered to OFWs in an effort to cut on their overhead expenses. "To help our workers meet the added cost of now paying rent, we thought of bypassing recruiters, who get the equivalent of about five months’ salary for each three-year contract," said Basilio.

Traditionally, a Philippine-based recruiter charges an OFW the equivalent of one month’s pay and his partner-recruiter in Taiwan charges the equivalent of another three- to four-months’ pay. "Bypassing the recruiter means we will have to take up some of the work. For example, the processing of documents done by Taiwanese recruiters will have to be done by the hiring companies," said Basilio.

To date, MECO records show POEA has entered into direct hiring agreements with only 10% of companies hiring OFWs. Filipinos account for 30% of Taiwan’s foreign labor market.

MECO has been more successful in pushing for a six-year working stint in Taiwan. Shortly after the New Year, MECO received word that Taiwan has agreed to relax the working contracts of foreign workers. Starting the second half of this year, OFWs will be allowed to renew their three-year contract for another three years for a total of six years.

Next month, MECO is piloting an internet telephone service in Kaoshiung. The terminals will be provided by Pinoy dot-com, which gathers OFW data as its core business. "We’re in the middle of negotiating with five Taiwan telephone companies to offer up to 30% discount on calls, whether these are voice or e-mail," said Basilio.

On the average, an OFW spends between NT$3,000 and NT$5,000 a month to call home on top of remitting between NT$8,000 and NT$10,000 a month.

Investments

Before the electronic slump, Taiwan was the third largest investor in the country, with $1 billion in cumulative investments (book value) in the last 10 years.

Yearly flows, however, have not been impressive. In 2000, Taiwan pumped in US$5.42 million into the Philippines, accounting for 0.3% of total investments according to the National Statistics Coordinating Board.

Taiwan’s investments are centered Subic Special Economic Zone where electronics firm, Acer, and its suppliers have a huge (but short of critical mass) manufacturing complex.

"We’re selling the English fluency advantage of the Philippines to the Taiwanese electronics industry," said Basilio. "We’re trying to diversify our product mix." Right now, about 70% of the world’s electronic notebooks are made in Taiwan.

MECO has identified three value added segments within the electronics industry: software development, design houses and assembly and testing. "Taiwan’s software development is currently limited to the domestic market because of the language barrier. By hiring Filipinos, Taiwan software developers can go international," he said.

To make the Philippines more attractive to Taiwan investors, MECO has been working closely with government agencies. "Industrial investors are not as concerned about peace and order as tourists are. Taiwanese investors look at how militant the labor force is in an area and whether they can own the land where their factory will stand," Basilio said.

A positive step in attracting more Taiwanese investors is a bilateral agreement on double taxation which will be signed this May. Under the agreement, taxes paid in the Philippines will not be taxed a second time in Taiwan and vice versa.

MECO has indeed been doing its jobóand doing it well.