The Key Elements for Data Intermediaries to Deliver Their Promise
2022/12/13
As human history enters the era of data economy, data has become the new oil. It feeds artificial intelligence algorithms that are disrupting how advertising, healthcare, transportation, insurance, and many other industries work. The excitement of having data as a key production input lies in the fact that it is a non-rivalrous good that does not diminish by consumption.[1] However, the fact that people are reluctant in sharing data due to privacy and trade secrets considerations has been preventing countries to realize the full value of data. [2]
To release more data, policymakers and researchers have been exploring ways to overcome the trust dilemma. Of all the discussions, data intermediaries have become a major solution that governments are turning to. This article gives an overview of relevant policy developments concerning data intermediaries and a preliminary analysis of the key elements that policymakers should consider for data intermediaries to function well.
I. Policy and Legal developments concerning data intermediaries
In order to unlock data’s full value, many countries have started to focus on data intermediaries. For example, in 2021, the UK’s Department for Digital, Culture, Media and Sport (DCMS) commissioned the Centre for Data Ethics and Innovation (CDEI) to publish a report on data intermediaries[3] , in response to the 2020 National Data Strategy.[4] In 2020, the European Commission published its draft Data Governance Act (DGA)[5] , which aims to build up trust in data intermediaries and data altruism organizations, in response to the 2020 European Strategy for Data.[6] The act was adopted and approved in mid-2022 by the Parliament and Council; and will apply from 24 September 2023.[7] The Japanese government has also promoted the establishment of data intermediaries since 2019, publishing guidance to establish regulations on data trust and data banks.[8]
II. Key considerations for designing effective data intermediary policy
1.Evaluate which type of data intermediary works best in the targeted country
From CDEI’s report on data intermediaries and the confusion in DGA’s various versions of data intermediary’s definition, one could tell that there are many forms of data intermediaries. In fact, there are at least eight types of data intermediaries, including personal information management systems (PIMS), data custodians, data exchanges, industrial data platforms, data collaboratives, trusted third parties, data cooperatives, and data trusts.[9] Each type of data intermediary was designed to combat data-sharing issues in specific countries, cultures, and scenarios. Hence, policymakers need to evaluate which type of data intermediary is more suitable for their society and market culture, before investing more resources to promote them.
For example, data trust came from the concept of trust—a trustee managing a trustor’s property rights on behalf of his interest. This practice emerged in the middle ages in England and has since developed into case law.[10] Thus, the idea of data trust is easily understood and trusted by the British people and companies. As a result, British people are more willing to believe that data trusts will manage their data on their behalf in their best interest and share their valuable data, compared to countries without a strong legal history of trusts. With more people sharing their data, trusts would have more bargaining power to negotiate contract terms that are more beneficial to data subjects than what individual data owners could have achieved. However, this model would not necessarily work for other countries without a strong foundation of trust law.
2.Quality signals required to build trust: A government certificate system can help overcome the lemon market problem
The basis of trust in data intermediaries depends largely on whether the service provider is really neutral in its actions and does not reuse or sell off other parties’ data in secret. However, without a suitable way to signal their service quality, the market would end up with less high-quality service, as consumers would be reluctant to pay for higher-priced service that is more secure and trustworthy when they have no means to verify the exact quality.[11] This lemon market problem could only be solved by a certificate system established by actors that consumers trust, which in most cases is the government.
The EU government clearly grasped this issue as a major obstacle to the encouragement of trust in data intermediaries and thus tackles it with a government register and verification system. According to the Data Government Act, data intermediation services providers who intend to provide services are required to notify the competent authority with information on their legal status, form, ownership structure, relevant subsidiaries, address, public website, contact details, the type of service they intend to provide, the estimated start date of activities…etc. This information would be provided on a website for consumers to review. In addition, they can request the competent authority to confirm their legal compliance status, which would in turn verify them as reliable entities that can use the ‘data intermediation services provider recognised in the Union’ label.
3.Overcoming trust issues with technology that self-enforces privacy: privacy-enhancing technologies (PETs)
Even if there are verified data intermediation services available, businesses and consumers might still be reluctant to trust human organizations. A way to boost trust is to adopt technologies that self-enforces privacy. A real-world example is OpenSAFELY, a data intermediary implementing privacy-enhancing technologies (PETs) to provide health data sharing in a secure environment. Through a federated analytics system, researchers are able to conduct research with large volumes of healthcare data, without the ability to observe any data directly. Under such protection, UK NHS is willing to share its data for research purposes. The accuracy and timeliness of such research have provided key insights to inform the UK government in decision-making during the COVID-19 pandemic.
With the benefits it can bring, unsurprisingly, PETs-related policies have become quite popular around the globe. In June 2022, Singapore launched its Digital Trust Centre (DTC) for accelerating PETs development and also signed a Memorandum of Understanding with the International Centre of Expertise of Montreal for the Advancement of Artificial Intelligence (CEIMIA) to collaborate on PETs.[12] On September 7th, 2022, the UK Information Commissioners’ Office (ICO) published draft guidance on PETs.[13] Moreover, the U.K. and U.S. governments are collaborating on PETs prize challenges, announcing the first phase winners on November 10th, 2022.[14] We could reasonably predict that more PETs-related policies would emerge in the coming year.
[1] Yan Carrière-Swallow and Vikram Haksar, The Economics of Data, IMFBlog (Sept. 23, 2019), https://blogs.imf.org/2019/09/23/the-economics-of-data/#:~:text=Data%20has%20become%20a%20key,including%20oil%2C%20in%20important%20ways (last visited July 22, 2022).
[2] Frontier Economics, Increasing access to data across the economy: Report prepared for the Department for Digital, Culture, Media, and Sport (2021), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/974532/Frontier-access_to_data_report-26-03-2021.pdf (last visited July 22, 2022).
[3] The Centre for Data Ethics and Innovation (CDEI), Unlocking the value of data: Exploring the role of data intermediaries (2021), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1004925/Data_intermediaries_-_accessible_version.pdf (last visited June 17, 2022).
[4] Please refer to the guidelines for the selection of sponsors of the 2022 Social Innovation Summit: https://www.gov.uk/government/publications/uk-national-data-strategy/national-data-strategy (last visited June 17, 2022).
[5] Regulation of the European Parliament and of the Council on European data governance and amending Regulation (EU) 2018/1724 (Data Governance Act), 2020/0340 (COD) final (May 4, 2022).
[6] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and The Committee of the Regions— A European strategy for data, COM/2020/66 final (Feb 19, 2020).
[7] Proposal for a Regulation on European Data Governance, European Parliament Legislative Train Schedule, https://www.europarl.europa.eu/legislative-train/theme-a-europe-fit-for-the-digital-age/file-data-governance-act(last visited Aug 17, 2022).
[8] 周晨蕙,〈日本資訊信託功能認定指引第二版〉,科技法律研究所,https://stli.iii.org.tw/article-detail.aspx?no=67&tp=5&d=8422(最後瀏覽日期︰2022/05/30)。
[9] CDEI, supra note 3.
[10] Ada Lovelace Institute, Exploring legal mechanisms for data stewardship (2021), 30~31,https://www.adalovelaceinstitute.org/wp-content/uploads/2021/03/Legal-mechanisms-for-data-stewardship_report_Ada_AI-Council-2.pdf (last visited Aug 17, 2022).
[11] George A. Akerlof, The Market for "Lemons": Quality Uncertainty and the Market Mechanism, THE QUARTERLY JOURNAL OF ECONOMICS, 84(3), 488-500 (1970).
[12] IMDA, MOU Signing Between IMDA and CEIMIA is a Step Forward in Cross-border Collaboration on Privacy Enhancing Technology (PET) (2022),https://www.imda.gov.sg/-/media/Imda/Files/News-and-Events/Media-Room/Media-Releases/2022/06/MOU-bet-IMDA-and-CEIMIA---ATxSG-1-Jun-2022.pdf (last visited Nov. 28, 2022).
[13] ICO publishes guidance on privacy enhancing technologies, ICO, https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2022/09/ico-publishes-guidance-on-privacy-enhancing-technologies/ (last visited Nov. 27, 2022).
[14] U.K. and U.S. governments collaborate on prize challenges to accelerate development and adoption of privacy-enhancing technologies, GOV.UK, https://www.gov.uk/government/news/uk-and-us-governments-collaborate-on-prize-challenges-to-accelerate-development-and-adoption-of-privacy-enhancing-technologies (last visited Nov. 28, 2022); Winners Announced in First Phase of UK-US Privacy-Enhancing Technologies Prize Challenges, NIST, https://www.nist.gov/news-events/news/2022/11/winners-announced-first-phase-uk-us-privacy-enhancing-technologies-prize (last visited Nov. 28, 2022).
Recognized that Research infrastructures (RIs) are at the centre of the knowledge triangle of research, education and innovation and play an increasingly important role in the advancement of knowledge and technology, the EU began to finance for the establishments of RIs by its Framework Programmes (FPs) since the start of FP2 of 1987. On the other hand, the EU also assigned the European Strategy Forum on Research Infrastructures (ESFRI) to develop a coherent and strategy-led approach to policy-making on RIs between Member States and to facilitate the better use and development of RIs at EU and international level. Based on those efforts, the European Commission understood that a major difficulty in setting up RIs between EU countries is the lack of an adequate legal framework allowing the creation of appropriate partnerships and proposed a legal framework for a European research infrastructure adapted to the needs of such facilities. The new legal framework for a European Research Infrastructure Consortium (ERIC) entered into force on 28 August 2009. An successfully-set-up ERIC will have the legal personality based on EU law, and can benefit from exemptions from VAT and excise duty in all EU Member States and may adopt its own procurement procedures to get rid of the EU's public procurement procedures. It is predicted that the Biobanking and Biomolecular Resources Research Infrastructure (BBMRI) will apply to become a BBMRI-ERIC in the near future. The EU also seeks to lead in Energy, Food and Biology through the reforms of ERICs to assist the high quality of activities of European scientists and attract the best researchers from around the world. Besides, in order to connect the knowledge triangle effectively, the European Commission also established the European Institute of Innovation and Technology (EIT) on March 2008. It hopes through the research development partnership network to gather all the advantages from the science and technology chains of multiple areas, and make an effort for the strategy of EU innovation development jointly;Meanwhile, extends its roadmap to the objectives and practices of the Knowledge and Innovation Communities (KICs) of the EIT. Contrast with the EU's advance, it is necessary to our government to concentrate and contemplate whether it is the time to reconsider if our existing legal instruments available to domestic research facilities and infrastructures are sufficient enough to reach our science and technology development goals.
Hard Law or Soft Law? –Global AI Regulation Developments and Regulatory ConsiderationsHard Law or Soft Law? –Global AI Regulation Developments and Regulatory Considerations 2023/08/18 Since the launch of ChatGPT on November 30, 2022, the technology has been disrupting industries, shifting the way things used to work, bringing benefits but also problems. Several law suits were filed by artists, writers and voice actors in the US, claiming that the usage of copyright materials in training generative AI violates their copyright.[1] AI deepfake, hallucination and bias has also become the center of discussion, as the generation of fake news, false information, and biased decisions could deeply affect human rights and the society as a whole.[2] To retain the benefits of AI without causing damage to the society, regulators around the world have been accelerating their pace in establishing AI regulations. However, with the technology evolving at such speed and uncertainty, there is a lack of consensus on which regulation approach can effectively safeguard human rights while promoting innovation. This article will provide an overview of current AI regulation developments around the world, a preliminary analysis of the pros and cons of different regulation approaches, and point out some other elements that regulators should consider. I. An overview of the current AI regulation landscape around the world The EU has its lead in legislation, with its parliament adopting its position on the AI ACT in June 2023, heading into trilogue meetings that aim to reach an agreement by the end of this year.[3] China has also announced its draft National AI ACT, scheduled to enter its National People's Congress before the end of 2023.[4] It already has several administration rules in place, such as the 2021 regulation on recommendation algorithms, the 2022 rules for deep synthesis, and the 2023 draft rules on generative AI.[5] Some other countries have been taking a softer approach, preferring voluntary guidelines and testing schemes. The UK published its AI regulation plans in March, seeking views on its sectoral guideline-based pro-innovation regulation approach.[6] To minimize uncertainty for companies, it proposed a set of regulatory principles to ensure that government bodies develop guidelines in a consistent manner.[7] The US National Institute of Standards and Technology (NIST) released the AI Risk Management Framework in January[8], with a non-binding Blueprint for an AI Bill of Rights published in October 2022, providing guidance on the design and use of AI with a set of principles.[9] It is important to take note that some States have drafted regulations on specific subjects, such as New York City’s Final Regulations on Use of AI in Hiring and Promotion came into force in July 2023.[10] Singapore launched the world’s first AI testing framework and toolkit international pilot in May 2022, with the assistance of AWS, DBS Bank, Google, Meta, Microsoft, Singapore Airlines, etc. After a year of testing, it open-sourced the software toolkit in July 2023, to better develop the system.[11] There are also some countries still undecided on their regulation approach. Australia commenced a public consultation on its AI regulatory framework proposal in June[12], seeking views on its draft AI risk management approach.[13] Taiwan’s government announced in July 2023 to propose a draft AI basic law by September 2023, covering topics such as AI-related definition, privacy protections, data governance, risk management, ethical principles, and industrial promotion.[14] However, the plan was recently postponed, indicating a possible shift towards voluntary or mandatory government principles and guidance, before establishing the law.[15] II. Hard law or soft law? The pros and cons of different regulatory approaches One of the key advantages of hard law in AI regulation is its ability to provide binding legal obligations and legal enforcement mechanisms that ensure accountability and compliance.[16] Hard law also provides greater legal certainty, transparency and remedies for consumers and companies, which is especially important for smaller companies that do not have as many resources to influence and comply with fast-changing soft law.[17] However, the legislative process can be time-consuming, slower to update, and less agile.[18] This poses the risk of stifling innovation, as hard law inevitably cannot keep pace with the rapidly evolving AI technology.[19] In contrast, soft law represents a more flexible and adaptive approach to AI regulation. As the potential of AI still remains largely mysterious, government bodies can formulate principles and guidelines tailored to the regulatory needs of different industry sectors.[20] In addition, if there are adequate incentives in place for actors to comply, the cost of enforcement could be much lower than hard laws. Governments can also experiment with several different soft law approaches to test their effectiveness.[21] However, the voluntary nature of soft law and the lack of legal enforcement mechanisms could lead to inconsistent adoption and undermine the effectiveness of these guidelines, potentially leaving critical gaps in addressing AI's risks.[22] Additionally, in cases of AI-related harms, soft law could not offer effective protection on consumer rights and human rights, as there is no clear legal obligation to facilitate accountability and remedies.[23] Carlos Ignacio Gutierrez and Gary Marchant, faculty members at Arizona State University (ASU), analyzed 634 AI soft law programs against 100 criteria and found that two-thirds of the program lack enforcement mechanisms to deliver its anticipated AI governance goals. He pointed out that credible indirect enforcement mechanisms and a perception of legitimacy are two critical elements that could strengthen soft law’s effectiveness.[24] For example, to publish stem cell research in top academic journals, the author needs to demonstrate that the research complies with related research standards.[25] In addition, companies usually have a greater incentive to comply with private standards to avoid regulatory shifts towards hard laws with higher costs and constraints.[26] III. Other considerations Apart from understanding the strengths and limitations of soft law and hard law, it is important for governments to consider each country’s unique differences. For example, Singapore has always focused on voluntary approaches as it acknowledges that being a small country, close cooperation with the industry, research organizations, and other governments to formulate a strong AI governance practice is much more important than rushing into legislation.[27] For them, the flexibility and lower cost of soft regulation provide time to learn from industries to prevent forming rules that aren’t addressing real-world issues.[28] This process allows preparation for better legislation at a later stage. Japan has also shifted towards a softer approach to minimize legal compliance costs, as it recognizes its slower position in the AI race.[29] For them, the EU AI Act is aiming at regulating Giant Tech companies, rather than promoting innovation.[30] That is why Japan considers that hard law does not suit the industry development stage they’re currently in.[31] Therefore, they seek to address legal issues with current laws and draft relevant guidance.[32] IV. Conclusion As the global AI regulatory landscape continues to evolve, it is important for governments to consider the pros and cons of hard law and soft law, and also country-specific conditions in deciding what’s suitable for the country. Additionally, a regular review on the effectiveness and impact of their chosen regulatory approach on AI’s development and the society is recommended. [1] ChatGPT and Deepfake-Creating Apps: A Running List of Key AI-Lawsuits, TFL, https://www.thefashionlaw.com/from-chatgpt-to-deepfake-creating-apps-a-running-list-of-key-ai-lawsuits/ (last visited Aug 10, 2023); Protection for Voice Actors is Artificial in Today’s Artificial Intelligence World, The National Law Review, https://www.natlawreview.com/article/protection-voice-actors-artificial-today-s-artificial-intelligence-world (last visited Aug 10, 2023). [2] The politics of AI: ChatGPT and political bias, Brookings, https://www.brookings.edu/articles/the-politics-of-ai-chatgpt-and-political-bias/ (last visited Aug 10, 2023); Prospect of AI Producing News Articles Concerns Digital Experts, VOA, https://www.voanews.com/a/prospect-of-ai-producing-news-articles-concerns-digital-experts-/7202519.html (last visited Aug 10, 2023). [3] EU AI Act: first regulation on artificial intelligence, European Parliament, https://www.europarl.europa.eu/news/en/headlines/society/20230601STO93804/eu-ai-act-first-regulation-on-artificial-intelligence (last visited Aug 10, 2023). [4] 中國國務院發布立法計畫 年內審議AI法草案,經濟日報(2023/06/09),https://money.udn.com/money/story/5604/7223533 (last visited Aug 10, 2023). [5] id [6] A pro-innovation approach to AI regulation, GOV.UK, https://www.gov.uk/government/publications/ai-regulation-a-pro-innovation-approach/white-paper (last visited Aug 10, 2023). [7] id [8] AI RISK MANAGEMENT FRAMEWORK, NIST, https://www.nist.gov/itl/ai-risk-management-framework (last visited Aug 10, 2023). [9] The White House released an ‘AI Bill of Rights’, CNN, https://edition.cnn.com/2022/10/04/tech/ai-bill-of-rights/index.html (last visited Aug 10, 2023). [10] New York City Adopts Final Regulations on Use of AI in Hiring and Promotion, Extends Enforcement Date to July 5, 2023, Littler https://www.littler.com/publication-press/publication/new-york-city-adopts-final-regulations-use-ai-hiring-and-promotionv (last visited Aug 10, 2023). [11] IMDA, Fact sheet - Open-Sourcing of AI Verify and Set Up of AI Verify Foundation (2023), https://www.imda.gov.sg/-/media/imda/files/news-and-events/media-room/media-releases/2023/06/7-jun---ai-annoucements---annex-a.pdf (last visited Aug 10, 2023). [12] Supporting responsible AI: discussion paper, Australia Government Department of Industry, Science and Resources,https://consult.industry.gov.au/supporting-responsible-ai (last visited Aug 10, 2023). [13] Australian Government Department of Industry, Science and Resources, Safe and responsible AI in Australia (2023), https://storage.googleapis.com/converlens-au-industry/industry/p/prj2452c8e24d7a400c72429/public_assets/Safe-and-responsible-AI-in-Australia-discussion-paper.pdf (last visited Aug 10, 2023). [14] 張璦,中央通訊社,AI基本法草案聚焦隱私保護、應用合法性等7面向 擬設打假中心,https://www.cna.com.tw/news/ait/202307040329.aspx (最後瀏覽日:2023/08/10)。 [15] 蘇思云,中央通訊社,2023/08/01,鄭文燦:考量技術發展快應用廣 AI基本法延後提出,https://www.cna.com.tw/news/afe/202308010228.aspx (最後瀏覽日:2023/08/10)。 [16] supra, note 13, at 27. [17] id. [18] id., at 28. [19] Soft law as a complement to AI regulation, Brookings, https://www.brookings.edu/articles/soft-law-as-a-complement-to-ai-regulation/ (last visited Aug 10, 2023). [20] supra, note 5. [21] Gary Marchant, “Soft Law” Governance of Artificial Intelligence (2019), https://escholarship.org/uc/item/0jq252ks (last visited Aug 10, 2023). [22] How soft law is used in AI governance, Brookings,https://www.brookings.edu/articles/how-soft-law-is-used-in-ai-governance/ (last visited Aug 10, 2023). [23] supra, note 13, at 27. [24] Why Soft Law is the Best Way to Approach the Pacing Problem in AI, Carnegie Council for Ethics in International Affairs,https://www.carnegiecouncil.org/media/article/why-soft-law-is-the-best-way-to-approach-the-pacing-problem-in-ai (last visited Aug 10, 2023). [25] id. [26] id. [27] Singapore is not looking to regulate A.I. just yet, says the city-state’s authority, CNBC,https://www.cnbc.com/2023/06/19/singapore-is-not-looking-to-regulate-ai-just-yet-says-the-city-state.html#:~:text=Singapore%20is%20not%20rushing%20to,Media%20Development%20Authority%2C%20told%20CNBC (last visited Aug 10, 2023). [28] id. [29] Japan leaning toward softer AI rules than EU, official close to deliberations says, Reuters, https://www.reuters.com/technology/japan-leaning-toward-softer-ai-rules-than-eu-source-2023-07-03/ (last visited Aug 10, 2023). [30] id. [31] id. [32] id.
Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016)Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016) 1. “Five plus Two” Innovative Industries Policy On June 15, 2016, Premier Lin Chuan met with a group of prominent business leaders to talk about a government project on five innovative industries, which aim to drive the next generation of businesses in R.O.C.. Subsequently the program was expanded to include “new agriculture” and the “circular economy” as the “+2.” The program was then broadened even further to include the Digital Economy and Cultural Innovation, with even Semiconductors and IC Design included, although the name of the policy remains 5+2. Speaking at the Third Wednesday Club in Taipei, Premier Lin said the industries require more investment to drive the next generation of industry growth momentum in R.O.C., create high-quality jobs, and upgrade the industrial competitiveness. Executive Yuan has selected the five innovative industries of Asia Silicon Valley, smart machinery, green energy, biotech & pharmaceutical industry, and national defense, which will be the core for pushing forward the next-generation industrial growth and improve overall environment by creating a cluster effect that links local and global industries, while simultaneously raising wages and stimulating employment. Premier Lin said, regarding industrial competitiveness and investment issues the lackluster economy has stifled investment opportunities, and with limited government budgets, the private sector must play the larger role in investments. Regarding the “Five major Innovative Industries” project, Premier Lin said the National Development Council is currently drafting long-term plan to attract talent, create a thriving working environment, and infuse companies with more innovation, entrepreneurship and young workers. In addition, R.O.C. must also cultivate a strong software industry, without which it would be difficult to build a highly intelligent infrastructure. The National Development Council said the program possess both the capacity of domestic demand and local characteristics, as the core for pushing forward the next-generation industrial growth. The government aims to promote a seamless synergy of investment, technology, and the talent, in order to develop innovative industrial clusters for furthering global linkage and nurturing international enterprises. In the meantime, the government also aims at achieving the enhancement of technology levels, balanced regional development, as well as realizing the benefits of job creation. 2. The Asia Silicon Valley Development Plan In September 2016 the government approved the Asia Silicon Valley Development Plan, which connect Taiwan to global tech clusters and create new industries for the next generation. By harnessing advanced technological research and development results from around the world, the plan hopes to promote innovation and R&D for devices and applications of the internet of things (IoT), and upgrade Taiwan’s startup and entrepreneurship ecosystem. The four implementation strategies are as follows: (1) Building a comprehensive ecosystem to support innovation and entrepreneurship (2) Connect with international research and development capabilities (3) Create an IoT value chain (4) Construct diversified test beds for smart products and services by establishing a quality internet environment Taiwan’s first wave of industrial development was driven by continuous technological innovation, and the wave that followed saw the information industry become a major source of economic growth. 3. Global Hub for Smart Machinery On July 21, 2016, Premier Lin Chuan said at a Cabinet meeting, the government aims to forge Taiwan into a global manufacturing hub for intelligent machinery and high-end equipment parts. Upgrading from precision machinery to intelligent machinery is the main goal of putting intelligent machinery industry into focal execution area expecting to create jobs and to maximize the production of production line as well as to forge central Taiwan into a global manufacturing hub for smart machinery. The Ministry of Economic draws up the Intelligent Machinery Promotion Program to establish the applications of the technology and capacity of services that fit the demand of the market. The program embodies two parts. The first is to accelerate the industrialization of intelligent machinery for building an ecosystem. The second is to improve intelligentization by means of introducing the intelligent machinery into the industries. The execution policy of the Intelligent Machinery Promotion Program is to integrate the intelligent functions such as malfunctions predictions, accuracy compensation, and automatic parameter setting into the machinery industry so as to have the ability to render the whole solutions to the problem. Simultaneously, the program employs three strategies, which are connecting with the local industries, connecting with the future, and connecting with the world, to develop the mentioned vision and objectives. Especially, the way to execute the strategy of connecting with the local industries consists of integrating the capabilities of industry, research organization and the government. At the meantime, the government will encourage the applications of smart vehicles and unmanned aerial vehicles and train the talents as well. The thinking of connecting with the future lies in the goal of deepening the technologies, establishing systematic solutions, and providing a testing areas, which focus on the related applications such as aerospace, advanced semiconductor, smart transportation, green vehicles, energy industry, whole solutions between factories, intelligent man-machine coordination, and robots of machine vision combined with intelligent machinery applications. The government would strengthen the cross-cutting cooperation to develop machines for aerospace and integrate the system of industrial division to form a cluster in order to create Taiwanese IoT technology. Eventually, Taiwan will be able to connect with the world, enhance international cooperation, expand export trade and push industry moving toward the age of information and digital economy and break the edge of industry technology to make the industry feel the goodwill of the government. 4. Green energy innovations The government’s “five plus two” innovative industries program includes a green energy industrial innovation plan passed October 27, 2016 that will focus on Taiwan’s green needs, spur extensive investments from within and outside the country, and increase quality employment opportunities while supporting the growth of green energy technologies and businesses. The government is developing the Shalun Green Energy Science City. The hub’s core in Shalun will house a green energy technology research center as well as a demo site, providing facilities to develop research and development (R&D) capabilities and conduct the requisite certification and demonstration procedures. The joint research center for green energy technologies will integrate the efforts of domestic academic institutions, research institutes, state-run enterprises and industry to develop green energy technologies, focusing on four major functions: creating, conserving and storing energy, as well as system integration. Development strategies include systems integration and finding better ways to conserve, generate and store energy by promoting green energy infrastructure, expanding renewable energy capabilities and cooperating with large international firms. The emergence of the green economy has prompted the government to build infrastructure that will lay the foundation for Taiwan’s green energy sector, transform the nation into a nuclear-free society, and spur industrial innovation. For innovative technology industries, green energy industries can drive domestic economic development by attracting more venture capital and creating more employment opportunities. 5. Biomedical Industry Innovation Program To facilitate development of Taiwan’s biomedical industry, the government proposed a “biomedical industrial innovation promotion program” on November 10, 2016 to serve as the nation’s new blueprint for innovative biomedical research and development (R&D). To facilitate development of the biomedical industry, the government proposed a “biomedical industrial innovation promotion program”. The program centered on the theme of “local, global and future links,” “the biomedical industrial innovation promotion program” includes four action plans: (1) Build a comprehensive ecosystem To address a rapidly ageing global population, Taiwan will enhance the biomedical industry’s capacity for innovation by focusing on talent, capital, topic selection, intellectual property, laws and regulations, and resources. (2) Integrate innovative business clusters Established by the Ministry of Science and Technology and based in Hsinchu Biomedical Science Park, the center will serve as a government think tank on related issues. It is also tasked with initiating and advancing exchanges among local and foreign experts, overseeing project implementation, promoting investment and recruiting talents. Equally important, it will play a central role in integrating resources from other biomedical industry clusters around the country, including Nangang Software Park in Taipei City, Central Taiwan Science Park in Taichung City and Southern Science Park in Tainan City. (3) Connect global market resources Building on Taiwan’s advantages, promote M&A and strategic alliances, and employ buyout funds and syndicated loans to purchase high-potential small and medium-sized international pharmaceutical companies, medical supply companies, distributors and service providers. Use modern mosquito-borne disease control strategies as the foundation of diplomatic cooperation, and promote the development of Taiwan’s public health care and medical services in Southeast Asian countries. (4) Promote specialized key industries Promote niche precision medical services, foster clusters of world-class specialty clinics, and develop industries in the health and wellness sectors. 6. DIGITAL NATION AND INNOVATIVE ECONOMIC DEVELOPMENT PLAN On November 24, 2016, the Executive Yuan promote the Digital Nation and Innovative Economic Development Plan (2017-2025) (DIGI+ program), the plan’s main goals for 2025 are to grow R.O.C.’s digital economy to NT $ 6.5 trillion (US$205.9 billion), increase the digital lifestyle services penetration rate to 80 percent, speed up broadband connections to 2 Gbps, ensure citizens’ basic rights to have 25 Mbps broadband access, and put R.O.C. among the top 10 information technology nations worldwide. In addition to the industrial economy, the program can jump off bottlenecks in the past industrial development, and promote the current Internet of things, intelligent machinery, green energy, medical care and other key national industries, but also attaches great importance to strengthening the digital infrastructure construction, the development of equal active, as well as the creation of a service-oriented digital government. It is also hoped that through the construction of a sustainable and intelligent urban and rural area, the quality of life will be improved and the people will enjoy a wealthy and healthy life. Over the next 8 years, the government will spend more than NT $ 150 billion. The plan contains several important development strategies: DIGI+Infrastructure: Build infrastructure conducive to digital innovation. DIGI+Talent: Cultivate digital innovation talent. DIGI+Industry: Support cross-industry transformation through digital innovation. DIGI+Rights: Make R.O.C. an advanced society that respects digital rights and supports open online communities. DIGI+Cities: Build smart cities through cooperation among central and local governments and the industrial, academic and research sectors. DIGI+Globalization: Boost R.O.C.’s standing in the global digital service economy. The program aims to build a favorable environment for digital innovation and to create a friendly legal environment to complete the draft amendments to the Digital Communications Law and the Telecommunications Act as soon as possible, foster cross-domain digital talents and develop advanced digital technologies, To create a digital economy, digital government, network society, smart urban and rural and other national innovation ecological environment in order to achieve "the development of active network society, promote high value innovation economy, open up rich countries of the policy vision. In order to achieve the overall effectiveness of the DIGI + program, interdisciplinary, inter-ministerial, inter-departmental and inter-departmental efforts will be required to collaborate with the newly launched Digital National Innovation Economy (DIGI +) Promotion Team. 7. “NEW AGRICULTURE” PROMOTION PROJECT At a Cabinet meeting On December 08, 2016, Premier Lin Chuan underscored the importance of a new agricultural paradigm for Taiwan’s economic development, adding that new agriculture is an integral part of the “five plus two” industrial innovation projects proposed by President Tsai Ing-wen. The “new agriculture” promotion project uses innovation technology to bring value to agricultural, and build new agricultural paradigm, agricultural safety systems and promote agricultural marketing. This project also takes resources recycling and environmental sustainability into consideration to promote agricultural transformation, and build a robust new agricultural system. This agricultural project is expected to increase food self-sufficiency rate to 40%, level up agricultural industry value by NT$43.4 billion, create 370,000 jobs and increase portion of total agricultural exports to new overseas markets to 57% by 2020. This project contains three aspects: First is “building new agricultural paradigm”: to protect farmers, agricultural development and ensure sustainability of the environment. Second is “building agricultural safety systems”: Ensuring product safety and quality, and building a certification system which can be trust by the consumers and is consistent with international standards. Last but not least is “leveling up agricultural marketing and promotions”: enhancing promotion, making the agricultural industry become profitable and sustainable. Council of Agriculture’s initiatives also proposed 10 policies to leverage agricultural industry, not only just use the passive subsidies measure of the past. These policies including promoting environmentally friendly farming practices; giving farmers that are beneficial(green) to the land payments; stabilizing farmers’ incomes; increasing the competitiveness of the livestock and poultry industries; using agricultural resources sustainably; ensuring the safety of agricultural products; developing technological innovation; leveling up food security; increasing diversification of domestic and external marketing channels; and increasing agriculture industry added value. In this statutes report, Council of Agriculture said this project will accelerate reforms, create new agricultural models and safety systems, but also build a new sustainable paradigm of agricultural. Premier Lin Chuan also backed this “five plus two innovative industries” program and “new agriculture” project, and asked Council of Agriculture to reviewing the possible legal changes or amendment that may help to enhance the transformation of agricultural sector.
Analyzing the Framwork of the Regulation「Act For The Development of Biotech And New Pharmaceuticals Industry」in TaiwanTaiwan Government passed The「Act for the Development of Biotech and New Pharmaceuticals Industry」for supporting the biopharmaceutical industry. The purpose of the Act is solely for biopharmaceutical industry, and building the leading economic force in Taiwan. To fulfill this goal, the Act has enacted regulations concerning funding, taxation and recruitment especially for the biopharmaceutical industry. The Act has been seen as the recent important law in the arena of upgrading industry regulation on the island. It is also a rare case where single legislation took place for particular industry. After the Act came into force, the government has promulgated further regulations to supplement the Act, including Guidance for MOEA-Approved Biotech and New Pharmaceuticals Company Issuing Stock Certificate, Deductions on Investments in R&D and Personnel Training of Biotech and New Pharmaceuticals Company, Guidance for Deduction Applicable to Shareholders of Profit-Seeking Enterprises -Biotech and New Pharmaceuticals Company etc. The following discussions are going to introduce the Act along with related incentive measures from an integrated standpoint. 1 、 Scope of Application According to Article 3 of the Act, 「Biotech and New Pharmaceuticals Industry」 refers to the industry that deals in New Rugs and High-risk Medical devices used by human beings, animals, and plants; 「Biotech and New Pharmaceuticals Company」 refers to a company in the Biotech and New Pharmaceuticals Industry that is organized and incorporated in accordance with the Company Act and engages in the research, development, and manufacture of new drugs and high-risk medical devices. Thus, the Act applies to company that conducts research and manufacture product in new drug or high-risk medical devices for human and animal use. Furthermore, to become a Biotech and New Pharmaceuticals Company stipulated in the Act, the Company must receive letter of approval to establish as a Biotech and New Pharmaceuticals Company valid for five years. Consequently, company must submit application to the authority for approval by meeting the following requirements: (1) Companies that conduct any R&D activities or clinical trials must receive permission, product registration, or proof of manufacture for such activities from a competent authority. However, for those conducted these activities outside the country will not apply. (2) When applied for funding for the previous year or in the same year, the expense on R&D in the previous year exceeds 5% of the total net revenue within the same year; or the expenses exceeds 10% of the total capital of the company. (3) Hired at least five R&D personnel majored in biotechnology. For New Drug and High-Risk Medical Device are confined in specific areas. New Drug provided in the Act refers to a drug that has a new ingredient, a new therapeutic effect or a new administration method as verified by the central competent authorities. And High-Risk Medical Device refers to a type of Class III medical devices implanted into human bodies as verified by the central competent authorities. Therefore, generic drug, raw materials, unimplanted medical device, and medical device are not qualified as type III, are all not within the scope of the Act and are not the subject matter the Act intends to reward. 2 、 Tax Benefits Article 5, 6 and 7 provided in the Act has followed the footsteps of Article 6 and 8 stipulated of the Statute, amending the rules tailored to the biopharmaceutical industry, and provided tax benefits to various entities as 「Biotech and New Pharmaceuticals Company」, 「Investors of Biotech and New Pharmaceuticals Industry」, 「Professionals and Technology Investors」. (1) Biotech and New Pharmaceuticals Company In an effort to advance the biopharmaceutical industry, alleviate financial burden of the companies and strengthen their R&D capacity. The Act has provided favorable incentive measures in the sector of R&D and personnel training. According to Article 5: 「For the purpose of promoting the Biotech and New Pharmaceuticals Industry, a Biotech and New Pharmaceuticals Company may, for a period of five years from the time it is subject to profit-seeking enterprise income tax payable, enjoy a reduction in its corporate income tax payable, for up to 35% of the total funds invested in research and development (R&D) and personnel training each year.」 Consequently, company could benefit through tax deduction and relieve from the stress of business operation. Moreover, in supporting Biotech and New Pharmaceutical Company to proceed in R&D and personnel training activities, the Act has set out rewards for those participate in ongoing R&D and training activities. As Article 5 provided that」 If the R&D expenditure of a particular year exceeds the average R&D expenditure of the previous two years, or if the personnel training expenditure of a particular year exceeds the average personnel training expenditure of the pervious two years, 50% of the exceed amount in excess of the average may be used to credit against the amount of profit-seeking enterprise income tax payable. 「However, the total amount of investment credited against by the payable corporate income tax in each year shall not exceed 50% of the amount of profit-seeking enterprise income tax payable by a Biotech and New Pharmaceuticals Company in a year, yet this restriction shall not apply to the amount to be offset in the last year of the aforementioned five-year period. Lastly, Article 5 of the Act shall not apply to Biotech and New Pharmaceutical Company that set up headquarters or branches outside of Taiwan. Therefore, to be qualified for tax deduction on R&D and personnel training, the headquarters or branches of the company must be located in Taiwan. (2) Investors of Biotech and New Pharmaceuticals Company To raise funding, expand business development, and attract investor continuing making investments, Article 6 of the Act has stated that 「In order to encourage the establishment or expansion of Biotech and New Pharmaceuticals Companies, a profit-seeking enterprise that subscribes for the stock issued by a Biotech and New Pharmaceuticals Company at the time of the latter's establishment or subsequent expansion; and has been a registered shareholder of the Biotech and New Pharmaceuticals Company for a period of 3 years or more, may, for a period of five years from the time it is subject to corporate income tax, enjoy a reduction in its profit-seeking enterprise income tax payable for up to 20% of the total amount of the price paid for the subscription of shares in such Biotech and New Pharmaceuticals Company.」 Yet 「If the afore-mentioned profit-seeking enterprise is a venture capital company (「VC」), such VC corporate shareholders may, for a period of five years from the fourth anniversary year of the date on which the VC becomes a registered shareholder of the subject Biotech and New Pharmaceuticals Company, enjoy a reduction in their profit-seeking enterprise income tax payable based on the total deductible amount enjoyed by the VC under Paragraph 1 hereof and the shareholders' respective shareholdings in the VC.」 The government enacted this regulation to encourage corporations and VC to invest in biotech and new pharmaceutical company, and thus provide corporate shareholders with 20% of profit-seeking enterprise income tax payable deduction, and provide VC corporate shareholders tax deduction that proportion to its shareholdings in the VC. (3) Top Executives and Technology Investors Top Executives refer to those with biotechnology background, and has experience in serving as officer of chief executive (CEO) or manager; Technology Investors refer to those acquire shares through exchange of technology. As biopharmaceutical industry possesses a unique business model that demands intensive technology, whether top executives and technology investors are willing to participate in a high risk business and satisfy the needs of industry becomes a critical issue. Consequently, Article 7 of the Act stated that 「In order to encourage top executives and technology investors to participate in the operation of Biotech and New Pharmaceuticals Companies and R&D activities, and to share their achievements, new shares issued by a Biotech and New Pharmaceuticals Company to top executives and technology investors (in return of their knowledge and technology) shall be excluded from the amount of their consolidated income or corporate income of the then current year for taxation purposes; provided, however, that if the title to the aforesaid shares is transferred with or without consideration, or distributed as estate, the total purchase price or the market value of the shares at the time of transfer as a gift or distribution as estate shall be deemed income generated in that tax year and such income less the acquisition cost shall be reported in the relevant income tax return.」 Additionally, 「For the title transfer of shares under the preceding paragraph, the Biotech and New Pharmaceuticals Company concerned shall file a report with the local tax authorities within thirty 30 days from the following day of the title transfer.」 Purpose of this regulation is to attract top executives and technology personnel for the company in long-term through defer taxation. Moreover, the Biotech and New Pharmaceutical Company usually caught in a prolong period of losses, and has trouble financing through issuing new shares, as stipulated par value of each share cannot be less than NTD $10.Thus, in order to offer top executive and technology investors incentives and benefits under such circumstances, Article 8 has further provided that」Biotech and New Pharmaceutical Companies may issue subscription warrants to its top executives and technology investors, provided that the proposal for the issuance of the aforesaid subscription warrants shall pass resolution adopted by a majority votes of directors attended by at least two-thirds (2/3) of all the directors of the company; and be approved by the competent authorities. Holders of the subscription warrants may subscribe a specific number of shares at the stipulated price. The amount of stipulated price shall not be subject to the minimum requirement, i.e. par value of the shares, as prescribed under Article 140 of the Company Act. Subscription of the shares by exercising the subscription warrant shall be subject to income tax in accordance with Article 7 hereof. if a Biotech and New Pharmaceutical Company issue new shares pursuant to Article 7 hereof, Article 267 of the Company Act shall not apply. The top executives and technology investors shall not transfer the subscription warrant acquired to pursuant to this Article.」 These three types of tax benefits are detailed incentive measures tailor to the biopharmaceutical industry. However, what is noteworthy is the start date of the benefits provided in the Act. Different from the Statue, the Act allows company to enjoy these benefits when it begins to generate profits, while the Statute provides company tax benefits once the authority approved its application in the current year. Thus, Biotech and New Pharmaceuticals Company enjoys tax benefits as the company starts to make profit. Such approach reflects the actual business operation of the industry, and resolves the issue of tax benefits provided in the Statue is inapplicable to the biopharmaceutical industry. 3 、 Technical Assistance and Capital Investment Due to the R&D capacity and research personnel largely remains in the academic circle, in order to encourage these researchers to convert R&D efforts into commercial practice, the government intends to enhance the collaboration among industrial players, public institutions, and the research and academic sectors, to bolster the development of Biotech and New Pharmaceuticals Company. However, Article 13 of Civil Servants Service Act prohibits officials from engaging in business operation, the Act lifts the restriction on civil servants. According to Article 10 of the Act provided that」For a newly established Biotech and New Pharmaceuticals Company, if the person providing a major technology is a research member of the government research organization, such person may, with the consent of the government research organization, acquired 10% or more of the shares in the Biotech and New Pharmaceuticals Company at the time of its establishment, and act as founder, director, or technical adviser thereof. In such case, Article 13 of the Civil Servants Service Act shall not apply. And the research organization and research member referred to thereof shall be defined and identified by the Executive Yuan, in consultation with the Examination Yuan.」 This regulation was enacted because of the Civil Servants Services Act provided that public officials are not allowed to be corporate shareholders. However, under certain regulations, civil servants are allowed to be corporate shareholders in the sector of agriculture, mining, transportation or publication, as value of the shares cannot exceed 10% of the total value of the company, and the civil servant does not served in the institution. In Taiwan, official and unofficial research institution encompasses most of the biotechnology R&D capacity and research personnel. If a researcher is working for a government research institution, he would be qualified as a public servant and shall be governed by the Civil Servants Service Act. As a result of such restriction, the Act has lifted the restriction and encouraged these researchers to infuse new technologies into the industry. At last, for advancing the development of the industry, Article 11 also provided that 」R&D personnel of the academic and research sectors may, subject to the consent of their employers, served as advisors or consultants for a Biotech and New Pharmaceuticals Company.」 4 、 Other Regulations For introducing and transferring advanced technology in support of the biopharmaceutical industry, Article 9 stated that 「Organization formed with government funds to provide technical assistance shall provide appropriate technical assistance as may be necessary.」 Besides technical assistance, government streamlines the review process taken by various regulatory authorities, in order to achieve an improved product launch process result in faster time-to-market and time-to profit. As Article 12 provided that 「the review and approval of field test, clinical trials, product registration, and others, the central competent authorities shall establish an open and transparent procedure that unifies the review system.」