Taiwan's economy has been more volatile in recent years, but leaping to the conclusion that Taiwan's future is bleak represents passive, negative thinking. What we need right now is more proactive thought, that is to say, we need to seek opportunities in the midst of crisis. As they say, some of the best opportunities come during the worst times. After all, tough times cull the ranks of competitors, ending bloody price wars and allowing markets to sustain reasonable profit levels.

I often say that foreigners are adept at turning junk into pure gold. They can take some worthless raw material, add a little value, and ultimately sell it for a good price. Taiwan is just the opposite-we turn beautiful things into junk. We mass produce some expensive item, cutting our costs with the best management and operating practices. Then, having brought the price down to nothing, we offer it back to the world. Taiwan's businesses have already hit their 100-2 target. That is, they can ship 100% of their orders within two days of receiving them. Their next goal is 100-1, i.e. shipping everything within one day of getting the order, and pushing the limits of just-in-time manufacturing by beginning production only after the order is received. This is Taiwan's greatest strength. Even though we are primarily an OEM manufacturer and provide little value-added, our comprehensive supply chains, our flexible division of labor, and our integration skills allow us to outperform many of the world's major powers.

But if Taiwan is to maintain its global competitiveness, it must begin orienting itself towards industrial value-added. "Value" here is production output divided by input. The higher the multiple, the higher the value. The "value" of a Louis Vuitton handbag comes from its design, its brand, and its marketing. In the post-industrial era, customers have transitioned from buying products and services to buying "value." In these circumstances, people are happy to buy and make you money regardless of where your business is located. Neither does it matter if something costs a little more as long as it provides "value." This value is itself determined by the customer. What Taiwan needs to learn is how to create products that offer customers enough of a sense of uniqueness and differentiation to inspire product loyalty.

Let me give you a simple example. If you add Chinese medicine to an NT$20 bowl of sparerib soup, it becomes an NT$30 bowl of soup even though the cost of the medicine itself may be only NT$4-5. Adding Chinese angelica to an NT$30 bowl of lamb soup makes it an NT$50 bowl of soup even though the angelica costs only NT$6-8. Bamboo that costs NT$5-10 per kilogram can be processed and turned into activated charcoal fibers that have applications in everything from odor-absorbing socks to thermal underwear. Processing increases the bamboo's value to NT$500-1000 per kilogram and drives an industry worth NT$2 billion per year to Taiwan. These are some concrete examples of the concept of "value-added."

The impetus to innovate doesn't grow out of a meticulous division of labor or sharp analysis. It doesn't come from following historical trends, targets, or rules. Instead, it blossoms out of integration, vision, culture, environment, incentives, faith, and support. In spite of the enormous growth in Taiwan's industrial output, when you factor out the cost of intermediate inputs you discover that our value-added isn't high at all. The reason is that other nations still control key technologies and marketing channels. Therefore, Taiwan generates only slim profits even though it is the world's number-one producer of many different products.

Taiwan's service sector accounts for the same proportion of Taiwanese GDP as the service sectors in the industrialized nations, about 73%. But here it only accounts for 58% of total employment. This suggests that a problem exists in the structure of Taiwan's service sector. Take industries dependent on knowledge-intensive sales, for example. Taiwan's telecommunications and financial services industries, both of which cater to domestic demand, are saturated, accounting for 2.7% and 10.8% of GDP respectively. But Taiwan has yet to fully develop its sector of services for business and industry (as opposed to those for consumers). Such services, which can be sold abroad, account for only 2.7% of GDP.

We have to make sure Taiwan's next generation is competitive; we don't want them to blame us. Those in positions of responsibility must accept criticism with an open mind. Those who criticize must offer constructive, concrete suggestions. Taiwanese people are intelligent and hardworking. Taiwan's future can still be a bright one.

As vice premier, in 2002 I set the Central Taiwan Science Park project in motion. AU Optronics, the park's first corporate resident, was able to move in and start operations just ten months and five days after the groundbreaking. That's the kind of thing I have in mind when I say I take it as an article of faith that "impossible" really means "I'm possible." By doing the right things at the right time with the right people we can undergo an industrial transformation and overcome our slow economic growth.