Chinese civic organizations have a long history, evolving from family clan and hometown associations to larger unions of members with common goals. It is therefore not surprising to learn that Taiwan’s national trade and business associations often serve the specific interests of controlling members, in much the same way as traditional organizations were run by the most powerful families. Today’s groups also maintain a close affiliation with government, and the relationship remains mutually beneficial.
The winds are gradually shifting, however, as the government strives for a balance between accommodating the specific interests of businesses and a broader assessment of what is healthy for the economy. Public interest groups, whose numbers have multiplied since the revision of the Law on Civic Organizations in 1989, have also contributed to the dynamics of the changing relationship between government and big business. (The revision allowed the establishment of nongovernment-affiliated public interest groups.) Within the trade and business associations themselves, change is also in the offing. The younger-generation entrepreneurs, who are in their forties and fifties, are slowly elbowing out the old guard and adding organizational vitality, a sense of team spirit, and an international outlook to the associations. And they are getting involved in serving the public interest, aware that this makes for good public relations and good business as well.
The Chung Shing Textile Building, home of a major Taiwan conglomerate today, even the biggest companies are learning to listen to the needs of small businessmen.
Presently, there are 183 registered trade and business associations. Leading the list are three national organizations: the Chinese National Association of Industry & Commerce, the Chinese National Federation of Industries, and the General Chamber of Commerce of the ROC. Funds for these three organizations come from membership fees, contributions from member companies, and government subsidies. Each of the organizations holds an annual assembly once a year, while boards of directors meet at least every quarter. Ranking government officials are often present in these meetings. The organizations are further subdivided into committees to disperse functions and permit more efficient communication among members as well as with the government. The Chinese National Association of Industry & Commerce and the Chinese National Federation of Industries have been exerting the strongest influence on the government’s economic policies.
The Chinese National Association of Industry & Commerce is an elite organization with a membership of 1,200 established companies and executives. Headed by Koo Chen-fu, chairman of the Koo Group (its flagship enterprise is the China Trust Co.), the association’s list of members includes such business heavyweights as Vivian W. Yen, chairwoman of Yue Loong Motor Co.; Hsui Sheng-fa, chairman of Prince Motors Co.; Huang Shih-hui, chairman of San Yang Industrial Co.; Douglas Hsu, chair man of Far Eastern Textile Co.; Kao Chin-yuan, vice chairman of President Enterprise; Huang Mao-hsiung, chairman of Teco Electric & Machinery Co.; and Stan Shih, chairman of Acer Inc.
The association serves as a bridge between the government and the business sector. On one hand it conveys the views of the business sector to the government in the formulation of economic policies, and on the other it helps the government implement these policies. The association consists of several committees covering such areas as industrial and commercial policies, taxation and finance, labor-management relations, and international affairs. A unique feature of the organization is its close ties with many international trade and economic bodies.
Younger members of the Chinese National Federation of Industries are forcing changes. The days of a small number of rich businessmen dictating the organization's goals are coming to a close.
Koo Chen-fu is often called the private sector’s minister of foreign affairs because of his prominent status in the international business community. He is now the international president of the Pacific Basin Economic Council, and chairman of the Business Council of East Asia and of the ROC-USA Economic Council. The seventy-three-year-old industrialist has long been recognized as the business community's most prominent leader. A member of the central standing committee of the ruling Kuomintang (KMT) and a national policy advisor to the president, he also heads the industrial advisory committee of the Ministry of Economic Affairs. The committee is made up of ranking government officials, academics, and influential business figures who act as consultants to the government on the formulation of key industrial policies. The association's exchanges with the government are frequent and open. For example, leading members regularly gather together for a breakfast meeting to which high government officials in the economic and financial sectors are invited.
In order to improve its connections abroad, the association's committee for international affairs recently set up an international affairs research council headed by Jeffrey Koo, chairman of China Trust Co. The council is mostly made up of prominent entrepreneurs with competent foreign-language capability and an enthusiasm for overseas activities. They include Douglas Hsu of Far Eastern Textile; Huang Shih-hui of San Yang Industrial Co.; Stan Shih of Acer Inc.; and Chuang Kuo-chin of Far East Machinery Co. The main goal of the research council for the moment is to help local enterprises locate and implement overseas investment opportunities. The council states that its long-term goal is to use economic strength as an effective means of promoting Taiwan's international status.
"Don't thread on me!" The National Federation of Industries is helping factory owners in their disputes with laborers over the provisions of the Labor Standards Law.
The association's strength is already evident in its degree of influence on government policymaking. For example, it prompted the government in late 1989 to lower the stock transactions tax increase from the original proposal of 1.5 percent to 0.6 percent. At its annual meeting in 1990, it suggested that the Ministry of Finance relax its regulations on the issuance of overseas convertible bonds which the companies use to raise money for overseas investments. It also urged the Ministry of Economic Affairs to simplify the application procedure for overseas investment. Both ministries have since taken a more lax attitude in approving applications.
Comprised of 138 industrial associations, the Chinese National Federation of Industries is the biggest industrial organization in Taiwan. It is now headed by Hsui Sheng-fa, the sixty-six-year-old chairman of Prince Motors Co. and member of the KMT's central standing committee. The federation's committees indicate the span of its concerns and influence. Among the areas they cover are industrial policies, labor-management relations, small and medium-sized enterprises, industrial pollution and safety, mainland China investment, protection from unfair import competition, science and technology development, human resources development, productivity, and the protection of intellectual property rights.
Because the federation is the highest representative of the interests of the island's industries, it is frequently consulted by the government. It has been playing an indispensable role in the formulation and implementation of the government's industrial policies. For instance, its committee for the protection of intellectual property rights has been the major sponsor of the island's successful campaign against counterfeiting in recent years. It has also influenced the courts to mete out a strict penalty combining fines and imprisonment of six months and over for copyright infringements. Previously, imprisonment sentences were under six months and thus could be converted into fines.
One benefit of upgrading an OEM (original equipment manufacturing) company loads up a shipment of value-added running shoes.
The federation represented the interest of business owners in the discussions on revisions to the Labor Standards Law, and has been successful in achieving some modifications favorable to employers. For example, before the revision, retirement and severance pay was based on the number of years a worker had been employed by a company. This was a provision of the Factory Law, which was enacted in 1929 and is the predecessor of the Labor Standards Law. The revision now stipulates that retirement and severance pay in industries not covered by the Factory Law will be calculated only from 1984, the year the Labor Standards Law was enacted, regardless of length of employment. Also, the process requiring workers to work overtime and assigning female workers the night shift is now less cumbersome, and no longer hinges on the approval of trade unions, associations, and local government authorities.
The government has been able to rely on the federation to serve as a buffer between it and the federation's members. Early this year, the Ministry of Economic Affairs required businesses to voluntarily register their investments in mainland China with the ministry. The response was weak. The federation intervened and helped the ministry out of an embarrassing situation. It persuaded its members to register with the federation first, and then passed the registrations to the ministry collectively.
In fact, the most significant character of the national trade associations is its tight relationship with the government and the ruling party. In as much as the KMT wants to assure its influence in important civic organizations, the social affairs department of the KMT central committee is assigned to ensure the party's prominence in civic organizations. As such, the party tries to persuade its members in the associations to support KMT-affiliated candidates in elections for the boards of directors and supervisors.
Critics charge that the trade and business associations have not developed beyond catering to the interests of its more powerful members, and have thus lagged far behind the economy's rapid development. They also say that in many cases, the associations are but the forums for rich businessmen to develop their own political and social connections. Therefore, they often neglect the concerns of the small and medium-sized enterprises which make up the majority of their memberships.
This narrow scope of goals explains the lukewarm attitude that smaller enterprises have toward participating in association programs. The resentment is well founded. The more powerful members often manage to gain a monopoly on certain business categories by influencing government officials to reject applications. Close political connections are used to the advantage of specific companies and not the association.
Indeed, individuals can play key roles in the associations. Because of his political and economic ties as well as his achievements in both sectors, Koo Chen-fu has been the chairman of the Chinese National Association of Industry & Commerce for thirty years now. Apparently, he is grooming his fifty-eight year-old nephew, Jeffrey Koo, to succeed him, as evidenced by his appointment to the chairmanship of the association's international relations research council. The younger Koo also assumed the post of acting chairman of the association early this year when his uncle took a six-month leave for health reasons.
The rules of succession at the General Chamber of Commerce of the ROC were just as accommodating to personal choice. In February 1990, the chamber witnessed some clever maneuvering in the election for the boards of directors and supervisors. Wang You-theng, who is chairman of the Rebar Group and had been chairman of the chamber for seven years, strongly recommended Chao Chung-san, the seventy-three-year-old chairman of a Rebar Group affiliate, as his successor. The move prompted the criticism that Wang was intending to turn the chamber into a Rebar subsidiary, and Lee Den-mu, chairman of the Kaohsiung Chamber of Commerce, challenged Chao's candidacy.
The personal associations that Wang was able to build during his seven-year tenure served him well during the elections. His followers were able to fill the majority of the seats on both boards and then elected Chao to the chairmanship. The victory was in part attributed to the support of the seven senior board directors (out of the total thirty-five) elected on the mainland over forty years ago. The senior officers were by law allowed to retain their status in order to sustain the legitimacy of the chamber's claim as the highest commercial organization for all China (similar to the situation of the senior members of the National Assembly).
Recognized by the ROC as the official representatives of industrial and commercial businesses in all China, both the Chinese National Federation of Industries and the General Chamber of Commerce have on their boards senior members who were elected on the main land before 1947. The senior officers maintain their voting rights. Last year, the Chinese National Federation of Industries saw an end to the problems that their voting power brought to electoral effectiveness and representativeness. It was able to persuade its senior directors to give up their seats voluntarily.
While the three national trade associations receive government subsidies, most other trade associations have long been suffering from limited funding and staffing. These associations rely on membership fees and the limited income from issuing export approval certificates to members (a process designed to prevent the export of counterfeit products). Consequently, their operations are confined to holding occasional member meetings and publishing their own news letters. The well-off Taiwan Association of Machinery Industry and the Taipei Computer Association are two of the few exceptions because their memberships represent two prospering industries in Taiwan.
It has become evident even to the older trade associations that a modern and internationalized economy needs associations that are far more effective in serving the interests of the industries they represent. The speedy development of the island's economy has resulted in complicated economic issues, and the associations have become indispensable to government formulation of viable policies. In addition, trade associations can also help the government explain its policies to their members and secure their cooperation, a process which will become increasingly important along with the democratization of society. No longer will the government be able to execute its policies with authoritative mandates, as evidenced by the failure of the Ministry of Economic Affairs early this year to enforce the registration of mainland investments. Trade associations will also play a critical role in executing the Fair Trade Law, which will serve to eliminate unfair business practices such as counterfeiting, establishing monopolies, and collusion. The law will come into effect next year.
Economic development and diversification have also greatly complicated the administration of the island's economic affairs. Instead of expanding the scale of government agencies, much of the administrative work can be passed on to the associations. The trade associations would do well to extend their objectives to include helping the bulk of their membership-small and medium-sized enterprises-overcome their current transitional difficulties (acute international competition, steep appreciation of the NT dollar, high labor costs, and chronic labor shortage). And at a time when consumer awareness and environmental concerns are on the rise, trade associations can help enterprises cope with the tide by leading them to pay more attention to consumer interests and rights, and environmental issues. Moreover, trade associations can organize the power of businesses to contribute to the pursuit of a better society, making enterprises better corporate citizens.
Fortunately, the situation has been changing for the better. The government has decided to strengthen the organization and management of trade associations and then delegate to them the administrative functions of processing business registrations, checking product standards, collecting industrial information, and executing industrial assistance programs. Although this will entail a close relationship with government, it will also urge trade associations to act as independent organizations.
In the January 1991 election for the boards of directors and supervisors of the Chinese National Federation of industries, many younger-generation entrepreneurs ran for seats. This touched off a competitive intensity that had never been seen before. In the end, over half of the forty-five seats on the board of directors and more than two-thirds of the seats on the board of supervisors were garnered by the young entrepreneurs. Among them were owners of small and medium-sized enterprises. Their entrance will surely infuse fresh blood into the organization, and already the association's new projects indicate the new generation's wider concerns. This year it has decided to focus on helping local industries upgrade. It will also sponsor a national industrial conference on technology transfer, pollution control, manpower training, and financial and monetary polices needed for industrial upgrading.
The Taipei Computer Association, which has 3,000 members, is one of the few vigorous trade associations. In the last election for board directors in late 1989, new faces, most with master's degrees, took three-quarters of the seats. Every year, the association sponsors the Taipei International Computer Show, the Computer Software Show, and the Computer-Aided Application Show. In 1990, it dispatched a mission to Europe to do a feasibility study on setting up a Taiwan computer industrial park there. Another mission went to mainland China to seek the possibility of utilizing the services of mainland software engineers.
The association is now focusing on helping its member companies internationalize their operations, enhance the protection of intellectual properties, and establish industrial standards for both hardware and software. Improving business ethics is also high on the association's list. It has urged its members to refrain from price competition, uphold labor welfare, and control industrial pollution. Moreover, the association has been active in charity programs in recent years, and has instituted its own social welfare fund. It started a sponsorship program for a hundred orphans, and began a cooperative venture with welfare institutions in the training of physically handicapped people to become Chinese language word processors.
Trade associations will play an increasingly critical role in helping businesses become better corporate citizens. The next step may well be contributions-in proportion to their abilities and potential for influence, development, and progress-not only to the economy but also to society. - Philip Liu (劉柏登) is the editor-in-chief of Business Taiwan, a weekly economic newspaper published in Taipei.■