As Michael Hsiao, the conference's host and chairman of the Institute for National Development, notes: "Over the last decade or so, Taiwan has established the Taiwanese economic model in the third world, and extolled that achievement to the world. But two years ago, Taiwan's economy contracted for the first time and unemployment began to rise." After listing Taiwan's current troubles, Hsiao said that what really has Taiwanese anxious is the possibility that these problems may point to the start of a long-term crisis rather than just a short-term period of adjustment.
Looking at the situation from a sociologist's perspective, Hsiao remarked that Taiwan's media is prone to using short-term fluctuations in stock prices to make judgments about the long-term health of the economy. He further noted that their perspective is biased. "There's no other economy in the world that is affected as much by the stock market. It's not a healthy way to look at the economy." Hsiao said that people need to look at Taiwan's economy in a more rational way. They need to consider how the manufacturers that are the lifeblood of the local economy can transform themselves, how the information technology industry can regain the heights it so recently achieved, and whether the service industries can continue to grow. They need to think about how to make blueprints like the government's "Green Silicon Island" plan and its "Challenge 2008" national development plan a reality.
Going global
Taiwan's economy is facing a number of challenges. However, according to Chou Kao-dun, a professor in National Taiwan University's Graduate Institute of Finance, "Taiwan's greatest problem is its 'identity.' How are we to deal with the ever-growing giant that is China? If we cannot be David to China's Goliath, then we had best stand on the giant's shoulders. Taiwan does not have the resources to go it alone. Our only means of remaining independent and competitive is to globalize."
Actually, as an island, Taiwan has always had an international economy. But China is growing bigger every day and cross-strait political tensions remain unresolved. Within Taiwan, the "globalist," "China" and "Taiwan-first" factions all read this situation differently and their responses to it have been anything but compatible. In fact, they are often at cross-purposes, and the resulting confusion has made it still more difficult for Taiwan to chart a course for the future.
According to Hsiao, "Taiwan's situation vis-a-vis China is that as long as we have a relationship, things are OK." He said the problem has been figuring out what sort of relationship to maintain because the giant across the strait is not necessarily nice and its intentions are unclear.
Huang Ho-ming, chairman of the Institute for Information Industry, stated, "The whole world feels the pull of China, not just Taiwan." Huang sees the world as having three major markets right now: North America, Western Europe and Japan. But analysts predict that the mainland market will be the same size as Japan's by 2015. Huang feels that Taiwan's geographic position gives it an edge in the burgeoning China market. The problem is that Taiwan and China's political and economic interests differ.
History shows that the political and business spheres have been in conflict over economic issues since the Middle Ages. Business people have always wanted to expand their territory and have not wanted to be constrained by political boundaries. Hence, multinational corporations are the driving force behind globalization. Huang Ho-ming feels that there is a clear and continuous trend towards the globalization of economies and an opposing trend for localization in the political sphere. Taiwan wants to become formally independent, and in the future Kaohsiung may even want to become independent of Taiwan. This desire for local autonomy is being seen all over the world.
Huang stated, "A 'Taiwan-first' political stance goes against the interests of multinational corporations. However, appealing to these companies to remain in Taiwan on moral grounds is futile." Huang argued that a number of factors play a role in Taiwanese businesspeople's decisions about whether to reinvest their capital in Taiwan. Therefore, one of things the government must consider if it wants to keep them here is how to align Taiwan's interests with the interests of its businesspeople.
A new approach internationally
De Sheng-tong, chairman of the National Association of Small and Medium Enterprises ROC and of San Sun Hat and Cap, looks at the situation from the perspective of manufacturers. For the last dozen or so years, Taiwan's idea of globalization has involved manufacturing goods on an OEM basis. But OEM work is a dead end. The question now is how to "upgrade" Taiwan's approach to international business. From 1989 to 2000, foreign trade generated an average of 78% of the island's gross national product (GNP). If last year's exports had been better, GNP per capita would not have fallen from US$14,000 to only US$12,000 and the economy would not have contracted. De therefore believes that Taiwan must foster a recovery in its exports.
On the other hand, while De accepted the idea of globalization, he warned about capital flight: "I'm in favor of an appropriate degree of globalization. But capital musn't only flow out and not return."
De said that last year, lending by Taiwanese banks to state-owned enterprises rose by 20%, but lending to private-sector enterprises fell by 4.97%. If banks don't lend to the private sector, where are businesses to get the capital they need to upgrade? Taiwan can no longer stick to its old low-cost, OEM model because the mainland is snapping at the heels of local firms. Taiwan must instead become a market innovator.
Another problem is the so-called brain drain. Estimates suggest several hundred thousand lower and mid-level managers are now working in China. While this brain drain has raised the standards of Chinese industry, it is robbing Taiwan of a pool of skilled workers.
De proposed that Taiwan's strategy should be to "go on the attack. We shouldn't be someone else's pawn. We shouldn't wait to see what China or Southeast Asia do before deciding on our own course. That's a dangerous approach."
Putting aside political prejudices
Stanley Yen, chairman of the Ritz Taipei Hotel, put it bluntly, stating that Taiwan's political problems have had a severely negative impact on the island's economic development. Yen believes that Taiwan's political parties are more focused on their own interests than those of the nation, and that the only way the government will be able to save the economy is if these parties can put aside their differences and work together. Each party must recognize that even if they disagree on eight out of ten issues, there are still two issues that they do agree on. They should begin by reaching a consensus in the areas where they do agree.
In addition, Yen said that the government needed to become more professional in its implementation of policy, delegating where it is not up to the task itself. He used development in the mainland to illustrate his point, stating that when the mainland government wants to develop tourism in some remote region, it stipulates that developers must bring in people with international experience. It thus raises the standard of development.
According to Lee Kao-chao of the Council for Economic Planning and Development, the DPP government and the KMT government before it have both attempted to turn Taiwan into a technological powerhouse which never stops growing, while preserving the natural environment. Taiwanese firms, meanwhile, have been keeping a close eye on the results of their transformation into more knowledge-based enterprises. And with local firms' recent efforts to build global brands, the government has found its role shifting from that of "supervisor" to "service provider." However, the legal structure remains the greatest variable. Lee hopes that the ruling and opposition parties can agree on a structure, otherwise all this planning for a green future will have been in vain.
Chen Tian-jy, who teaches economics at National Taiwan University, takes inspiration from Korea's response to the battering it took at the hands of the 1997 Asian financial crisis. In the years since 1997, Korea has undergone a complete turnaround: Its television programs are popular in Taiwan, its online games have won global acclaim, and the Samsung Corporation has become one of the world's Top 40 companies. To Chen, this proves that crises can be overcome if only people are resolved to do so. In Taiwan's case, he fears the island has grown complacent and inclined to rest on its laurels.
Huang Ho-ming said that the Cabinet's inclusion of an "eTaiwan" among its policy initiatives would encourage innovation. He argued that Taiwan must rely more on people with a background in culture to foster innovation, and cited Sony's choice of a musician as its chairman in support of his argument.
Knowledge-based industries
"We cannot continue to be a value-added economy. We must innovate using people from all over the world, and we must provide innovators with an entrepreneurial environment." Chen further stated that Taiwan must move in the direction of building its own brand names. These brand names need not be consumer oriented-Taiwan Semiconductor, Evergreen and Trend, for example, have all built brands for themselves in industrial circles.
One can also build a brand in the tourism industry. The Ritz's Stanley Yen noted that the biggest problem with the tourism industry in Taiwan lies in its packaging-the tourist spots are all too much alike. In addition, bringing visitor traffic into greater balance constitutes another problem because local destinations tend to be packed on the weekend and virtually deserted during the week.
"Taiwanese need to change their expectations of holidays from wanting to be where the action is to wanting to get away to somewhere more quiet." Yen believes that Taiwanese society is hyperactive by nature. The moment Taiwanese sit down, they turn on the TV and begin flipping channels. Tourist spots need to be designed to bring people some inner peace.
Yen also reminded delegates that the tourism industry cannot be viewed as an economic savior. If it were, the six million tourists who visit Thailand annually would have turned that nation into an Asian economic powerhouse. Yen argued that the purpose of tourism is to stimulate consumption and make friends for your country.
According to Yen, "With Taiwan's limited foreign relations, tourism is the best means available to make friends in the world." But he points out that Taiwan has ended direct air links with South Korea, views Hong Kong as gangland and has placed stringent restrictions on tourism from China, essentially turning off the taps that would otherwise allow tourists to flow to the island. Yen feels Taiwan should have more confidence and create a friendlier environment for visitors. If Taiwan were to allow mainland Chinese tourists to visit, they would carry a positive image of Taiwan and an affection for it back with them to the mainland. This would bring still more visitors and increase cross-strait understanding.
Responding to the tourism industry's problem of only having business on the weekends, Lee Kao-chao said that he had suggested last year that subsidies for foreign vacations for civil servants be instead used to fund vacations in Taiwan. He said that he had also talked with the Ministry of Transportation and Communications about promoting special night rates on Tzuchiang express trains to encourage Taiwanese to spend their holidays in Taiwan.
Cultivating people
Having agreed that Taiwan needs to globalize and put forward a strategy for industry, the next question for delegates at the conference was how to get Taiwan where they wanted it to be. Most delegates viewed the cultivation of a skilled workforce as critical.
Huang Ho-ming pointed out the tangible consequences of industrial restructuring by noting that there are more than 400,000 people without jobs in Taiwan right now, yet there is a shortage of 40-50,000 workers in the IT, electronics, optoelectronics and biotech fields. In addition, Taiwan is expected to need some 10,000 chip designers by 2005. Chip designers earn upwards of NT$100,000 per month, but Taiwan trains only about 800 a year. Huang feels that the government should give priority to developing this kind of high-salaried worker, who creates, in turn, work opportunities for three people earning average salaries.
Huang also argued that there was something to be learned from the World Cup. He said that Asian teams have been unable to compete with their Western counterparts on their own, so they brought in Western coaches to train and lead them. Similarly, Taiwan should bring in foreign experts to help it upgrade its industries. It could, for example, hire retired Japanese electronics industry executives as consultants. Such an approach would allow Taiwan to become the conduit linking the giants of Asia-China and Japan-with the US and Europe.
But those workers who have lost their jobs are quite a different group from the workers in such urgent demand in industry. Michael Hsiao pointed out that those who are out of work have lost their jobs because changes in Taiwan's industrial structure have made their skills obsolete. Continuing the restructuring of local industry is not going to create jobs for this group. Hsiao argued that the government should instead address the unemployment problem through social assistance measures, and the shortage of workers in key industries through economic policy.
The conference delegates agreed that there is a gap between the education provided by schools and the skills needed by industry.
De Sheng-tong remarked that while there are more than 100 colleges and universities in Taiwan, most students come out of them with little besides their diplomas. He stated that Taiwanese students' language skills lag behind those of students in Singapore, Hong Kong and Shanghai, and cited this as their most egregious failing.
Taiwan's universities are difficult to get into, but easy to graduate from. As a result, highly qualified graduates are few. De recommended that universities expand students' horizons by having 50% engage in research, 25% participate in corporate internships, and 25% get involved with foreign schools.
Stanley Yen complained that once the tourism industry finally got a school established to train professional chefs, the structure of Taiwan's tertiary education system changed and many technical junior colleges were redesignated as four-year colleges. As a result, the most talented graduates of the cooking school ended up teaching rather than working in food services, and Taiwan lost its opportunity to produce international-caliber chefs.
Adding value
With graduation season rolling around again, a number of people are asking how Taiwanese university graduates stack up against their mainland Chinese counterparts. In fact, many Taiwanese students are now considering studying in China in hopes of gaining an edge in the job market. But is doing so a worthwhile investment?
According to NTU professor Chou Kao-dun, who lectured at Beijing University last year as part of the China research being conducted by international financial institutions, when he was a student 20 years ago, Taiwan was still relatively poor, but the students had ideals, goals and dreams. Today's students, on the other hand, Chou sees as being lost. Yet it is this generation of students who will be most affected by the course that Taiwan takes over the next ten or 20 years.
Speaking from the perspective of one who is proud to be Taiwanese, Chou remarked that over the years his own relationship with the mainland has progressed from "no contact, no negotiations and no compromise" to a recognition of his own niche. He is now a China policy consultant to three international investment firms, including Morgan Stanley. Chou believes that as long as Taiwan understands its role in the China market, Taiwanese can earn healthy profits.
NTU's Chen Tian-jy also says that the most important thing for Taiwan is to find an appropriate niche for itself.
"Those who want to further their careers in China absolutely should not study there. Their services will be in demand only if they have studied in the US or Europe." Chen says that Taiwanese students need to have a global vision and an understanding of how to exploit Taiwan's strengths if they hope to bring skills to China that it doesn't already possess.
Taiwan's economic troubles are deeply intertwined with its political situation both at home and abroad. These are complex issues, but when carefully examined, they reveal opportunities.
Taiwan is small, has few natural resources, and faces troubles both at home and abroad. But Fate has provided us with the hardworking Taiwanese people instead. After discussion and debate, the seven participants in this conference on Taiwan's future agreed that if Taiwan is to make its economy shine once again, its three guiding principals should be "knowledge," "sustainability" and "the public good."
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Scholars, officials and businesspeople met recently to diagnose the state of Taiwan's economy. Their prescription calls for greater globalization, industrial upgrading and the cultivation of skilled workers.
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Huang Ho-ming, chairman of the Institute for Information Industry, says that the whole world feels the pull of China.
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According to Chou Kao-dun, a professor in National Taiwan University's Graduate Institute of Accounting and Finance, Taiwan must stand on the giant's shoulders and globalize.
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Chen Tian-jy, a professor in the economics department of National Taiwan University, believes that Taiwan's students must have global vision and understand how to exploit Taiwan's strengths if Taiwan is to remain competitive.
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According to Lee Kao-chao, a member of the Council for Economic Planning and Development, Taiwanese firms must turn Taiwan into a "technology island" that practices sustainable development.
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Stanley Yen, president of the Ritz Taipei Hotel, says that the ruling and opposition parties must look for common ground and cooperate if they are to save Taiwan's economy.
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De Sheng-tong, chairman of San Sun Hat and Cap, believes that globalization cannot only mean that capital flows out of Taiwan; some capital must return.
