Legislation required on PRC investment: report

By Chen Ching-min and Jake Chung  /  Staff reporter, with staff writer

Mon, Nov 12, 2012 - Page 1

A report by the Taiwan Thinktank says legislation is urgently needed to address concerns relating to foreign or Chinese investments or mergers that may pose a threat to national security.

Citing recent measures in the US, India and Australia to prevent Chinese firm Huawei from investing in their national telecom networks, the report says Taiwan’s government should be on its guard.

The report says the Australian government prevented Huawei from bidding in its national broadband network, and the US Committee on Foreign Investment in the United States (CFIUS) not only blocked Huawei from purchasing US firm 3Com five years ago, but last year blocked Huawei’s attempt to buy-out 3Leaf, a US server technology company.

CFIUS had said that it was concerned about the leadership of Huawei. The company’s founder, Ren Zengfei (任正非), is a retired People’s Liberation Army (PLA) officer, while its chairman, Sun Yafang (孫亞芳), worked for the Chinese Ministry of State Security.

One of the largest telecommunication companies in the world, Huawei is close to the Chinese government and military — both having invested in the company — the report said, adding that Huawei reciprocated by gathering intelligence and monitoring information.

The report also said that there was a Chinese Communist Party (CCP) organization within the company.

While other countries are on their guard, Taiwan is mulling further opening up its first category telecommunication equipment to foreign and Chinese investment, the report said. It pointed to civilian telecom giants such as FarEasTone and Taiwan Mobile, which have investment and cooperation agreements with China Mobile and China Unicom respectively.

Telecommunications services in Taiwan are divided into two distinct categories — National Communications Commission (NCC) approved owners of wired or wireless fixed communications networks as the first category, and all external businesses that operate with, or as sub-contractors to, first category firms as the second category — based on the Telecommunications Act (電信法).

The report says Huawei obtained Far EasTone purchase orders for its Radio Network Controller and maintenance outsourcing for base stations from Far EasTone, adding that Huawei also manufactured some of Taiwan Mobile’s fixed network ethernet network equipment.

The Executive Yuan should establish a Committee on National Security concerning Foreign and Chinese Investment, under which a “telecom division” should be formed by members of the National Security Bureau (NSB) and the Ministry of Justice to reviews foreign and Chinese investment in the Taiwanese telecoms industry, the report suggested.

The think tank also said that the committee and the division should make its assessment and ideas known to the NCC.

The report said that constant software upgrades for large telecom companies were a necessity. It also noted that NCC amendments to the Telecommunications Act, while giving legal basis to manage national information safety threats, do not resolve the issue of how the standard for telecommunication equipment would be set.

Though one-time information safety checks are more affordable, they risk missing seemingly harmless files which might pose a security risk. However, constant security checks could lead to an explosion of overhead costs, the report said.

Previously when questioned by lawmakers in the legislatiure on related issues, NSB director Tsai Der-sheng (蔡得勝) said that the bureau was against the opening of first-category telecom equipment, adding that it had already placed Huawei on a blacklist for participation in bids involving core Taiwanese telecom systems or technology.