Taiwanese Ties That No Longer Bind

The dealmaking dragged into the early hours of Apr. 25 in Taipei, as executives from two U.S.-based companies, Westinghouse Electric and ABB Combustion Engineering, haggled separately with officials from state-run Taiwan Power. For three years, the companies had been vying for a $5 billion contract for a nuclear power plant, each spending an estimated $35 million in the process. But in the end, neither came within 20% of Taipower's secret ceiling price, leaving negotiations deadlocked. "Everyone's shocked," says an American familiar with the deal. "Who knows what will happen now?"

The failed nuclear power plant bid is one of many worries for the American business community in Taiwan. Now that its booming economy has won more friends in the West, the island nation is becoming less deferential toward the U.S. Over the past few months, U.S. companies have watched as the welcome mat has been withdrawn on attempts to set up regional operations as well as to win infrastructure projects. Meanwhile, American-funded organizations are fighting government moves that could threaten their existence.

Adding to the tension are problems between Taipei and Washington over trade and official visits. Moreover, politicians are finding that in Taiwan's fledgling democracy, attacks on the U.S. strike a chord with many voters. Over the past month, nearly a dozen Taiwanese officials have been forced to resign their posts because they hold foreign passports, mostly from the U.S.

The new climate is especially frustrating to Americans accustomed to getting their way in Taiwan. Business leaders say that only a few years ago, a well-placed phone call to a Taiwanese official could solve any problem. Not anymore. "Americans are no longer viewed as the special friends they once were," says a U.S. business executive in Taiwan.

CHICKEN GAME. That's clear in Taipei, where the new mayor, Chen Shui-bian, belongs to the opposition Democratic Progressive Party. Unlike the ruling Kuomintang, the DPP has no decades-old history of cooperation with the U.S. Chen is demanding that the American Institute in Taiwan, Washington's de facto embassy, pay nearly $1 million a year in rent and $3 million in back rent on its city-owned building, which it had been using virtually rent-free.

Real estate woes also threaten other American institutions. The Taipei American School is fighting plans of its state-owned landlord, the Bank of Taiwan, to raise its rent from $260,000 to as high as $8 million a year. The island's English-language radio station, dominated by Americans, is being booted from its military-owned land.

U.S. multinationals are feeling the heat, too. A contractual struggle between Kentucky Fried Chicken Taiwan and its local partner, President Enterprises Corp., ended recently with President and KFC breaking off their joint venture--and much criticism of the U.S. company in the local press.

CONFIDENCE. Part of the problem could be Taipei's impatience with American sensitivity to Beijing. While European countries have sent record numbers of ministerial-level officials to Taiwan, the U.S. has been more cautious, sending only two Cabinet members in four years. It's no coincidence, U.S. business leaders in Taiwan say, that European companies have won a total of 83 infrastructure projects valued at $18.2 billion, vs. 65 contracts worth $8.9 billion for Americans. Taipei had been dangling the nuclear power plant as a way of getting another U.S. Cabinet member to visit Taiwan. According to sources close to the bidding, Westinghouse and ABB plan to join the retendering process, which could take place at the end of the month.

Until a few months ago, relations seemed to be at a new high. Last September, President Clinton lifted some restrictions on contact with Taiwan, including allowing more high-level visits. After the Republican takeover of Congress, Taiwan started receiving unprecedented support on the Hill. But the Taiwanese are still upset that the Administration won't allow President Lee Teng-hui to travel to Ithaca, N.Y., to receive an honorary degree from his alma mater, Cornell University.

Political analysts believe these events are a natural outgrowth of Taiwan's blossoming democracy. "Taiwanese now have more power economically and democratically, and this is giving them the confidence to speak out and even disagree with Washington," says Thomas Peng, associate research fellow at Academia Sinica, a Taipei research institution. In this process, however, the U.S. government and American companies may have to get used to being targets.

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