This year the Republic of China's export earnings have been rising month by month, and by July had reached a record monthly total of US$2.3 billion. This is a mark of recovery from last year's sluggish economy.
Since Taiwan, the island province of the Republic of China, is low on natural resources, it depends heavily on importing raw materials, adding labor, and exporting finished products to earn from selling the value added to products by processing. How can the nation find the least expensive raw materials, and the markets that pay most for finished goods? The Republic of China is changing from a developing country into a developed one, but it does not yet enjoy the long-established industrial base enjoyed by countries such as Germany, nor does it enjoy the product reputation that allows German producers to virtually do without marketing.
The Republic of China has not been without success to date. Last year's export earnings totalled to US$41.1 billion, and the International Monetary Fund ranks the Taiwan region as the world's nineteenth largest trading nation. But if we consider two major aspects of business activity, production and marketing, we find that in Taiwan the former has been emphasized, the latter comparatively ignored.
Production and marketing are like a person's two legs--they need to be equally developed if the person wishes to go forward smoothly. Liang Man-ch'ao, a professor at Taiwan's National Chengchi University, says, "If goods are sold at a reasonable price, the producers can respond to the market and improve quality; on the other hand, if the producer doesn't meet the conditions of the buyer, he has to use price-cutting methods to achieve sales, and his company's reputation will decline, not to mention that he won't have the capital to buy new equipment and improve production. Thus, industrial improvement and marketing improvement are two sides of the same coin."
At first glance, it seems the "two feet" of Taiwan's trade are steadily advancing, but in fact there are problems to be dealt with. After the second oil shock in 1979, the four newly industrialized regions of Asia-- South Korea, Singapore, Hong Kong, and Taiwan--were all dealt a severe blow by the resultant slump in the world economy. One factor was that the four regions were all transforming their industries at the time, and their competitive positions had not yet solidified. Another factor especially affecting Taiwan was that much of Taiwan's external trade was handled by foreign firms. As those firms found the economy slumping in their own countries, they dropped their buying and selling of Taiwan goods to preserve a market share for home country products.
In Taiwan, the structure of industry is very fragmented, with many industries composed of dozens or scores of companies too small to do their own marketing or trading. The country's free enterprise system, law, and prevailing custom, make it easy to set up new businesses on Taiwan.
V. C. Siew, Director General of the Republic of China Board of Foreign Trade, is constantly urging the establishment of an export system. The government is taking positive steps to bring about a good trade environment, by extending tax and credit advantages, and encouraging small- and medium-scale businesses to engage in cooperative planning.
The government has now drafted a proposal for new trade regulations. The regulations seek to provide a firmer basis for policy as well as a favorable environment for trade. The draft proposal is currently under-going item-by-item scrutinization from businessmen at public hearings, so that the draft can be revised to an ideal form to help businessmen compete in world markets.
Other recent activities to bring improvements in Taiwan's trade scene include reorganization of the China External Trade Development Council (CETDC) and the establishment of a new Taipei World Trade Center. Siew hopes these public and private efforts will make for a better trade climate, but he points out that, above all, those who must meet the challenges head on are still the businessmen themselves. He thinks it is necessary for businesses to specialize and at the same time become international in outlook, and it is also necessary to support large trading companies.
The government has acted to encourage investment in large trading companies on the model of such Japanese firms as Mitsubishi. The nine largest Japanese trading firms have a combined volume of business equal to one-third of Japan's total GNP. Each of the larger firms has offices around the globe, collecting trade information with such assiduity and accuracy that they arouse the envy of government intelligence agencies in other countries. They frequently arrange triangular deals between widely separated countries, and their close ties with various producers allow them to swiftly respond to the needs of buyers while providing the producers with a welcome marketing boost. Now this pattern of enterprise is being closely studied in the Republic of China.
One other lesson to be learned from Japan is to let the market determine the products produced, rather than the reverse. Japanese achievements in developing new products to meet previously unmet demands have stunned the world.
The success of the Republic of Korea in developing foreign trade is also spurring advances in Taiwan. In Korea the government has encouraged the merger of businesses to produce economies of scale. Korea also has a large, well funded external trade development organization opening up new markets for Korean products.
Last year, the top five trading companies in Taiwan did business totalling to a mere 1.19 percent of the total trade volume of the island. Why such a lackluster performance compared to neighboring regions?
Many exporters in Taiwan have long had established relations with foreign buyers, and thus have had no special reason to seek the marketing assistance of trading companies, which themselves remain small and scarcely able to vigorously expand overseas markets. Even some of the largest businesses, and government enterprises, in Taiwan still make their own overseas selling arrangements, all the while not distinguishing clearly between marketing and production.
As the world economy grows more and more complex, Taiwan's industry is changing. No longer is Taiwan a center of low-wage, low-technology textile plants. Today product lines include electronics and other high-technology items, and industries must move in the direction of increasing specialization and toward greater size to achieve economies of scale. Reliable quality and strong after-sales service will become ever more important in a discriminating world market. Taiwan's marketing strategy must advance beyond mere taking of orders to systematic development of overseas markets. The challenges are recognized, and business and government are working together to ensure that the Republic of China's trade volume will continue to expand in ensuing years.
[Picture Caption]
Containers full of Republic of China products, ready for export.
1. In order to fully display the special features of products, and to attract foreign buyers, large trading firms and CETDC have set up a product exhibition center. 2. Domestic trading companies are moving toward developing large-scale planning, the picture shows E-Hsin International Corporation's spacious office; foreign buyers come often to discuss business. 3. Director General of the national foreign trade bureau, V. C. Siew, urges trading companies to plan for specialization, expansion, and internationalization. 4. Lin Chien-shan, Director of the Export Service Group, says that the country's trade volume may not be as high as statistics indicate. 5. Hou Chia-chu, professor at Soochow University, indicates that the traditional emphasis on industry at the expense of trade is influencing the development of the domestic trade sector.
1. Nanlien International Corporation's General Manager Chang Te-fu believes a shortage of talented people is the major factor influencing the development of trading companies. 2. E-Hsin International Corporation's Director, Wen Ta-ming, thinks, "The most important thing in trade is trustworthiness; with that you can build a long-lasting relationship." 3. Nanlien International Corporation has a world map hanging high in the office, to remind the workers to have world vision. 4. The Export Service Group diligently helps businessmen resolve export difficulties, to achieve the goal displayed in their office: "All for exports."
1. In order to fully display the special features of products, and to attract foreign buyers, large trading firms and CETDC have set up a product exhibition center.
2. Domestic trading companies are moving toward developing large-scale planning, the picture shows E-Hsin International Corporation's spacious office; foreign buyers come often to discuss business.
3. Director General of the national foreign trade bureau, V. C. Siew, urges trading companies to plan for specialization, expansion, and internationalization.
4. Lin Chien-shan, Director of the Export Service Group, says that the country's trade volume may not be as high as statistics indicate.
5. Hou Chia-chu, professor at Soochow University, indicates that the traditional emphasis on industry at the expense of trade is influencing the development of the domestic trade sector.
1. Nanlien International Corporation's General Manager Chang Te-fu believes a shortage of talented people is the major factor influencing the development of trading companies.
2. E-Hsin International Corporation's Director, Wen Ta-ming, thinks, "The most important thing in trade is trustworthiness; with that you can build a long-lasting relationship.
3. Nanlien International Corporation has a world map hanging high in the office, to remind the workers to have world vision.
4. The Export Service Group diligently helps businessmen resolve export difficulties, to achieve the goal displayed in their office: "All for exports.".
