Over the past two years, liberalization, the rising NT dollar, and increased incomes have led to startling consumption in stocks, shopping, food and drink, and other service industries. Meanwhile manufacturing has suffered a series of blows: economic change and the rise of environmental and labor consciousness, and disappointing investment. What's going on?
Not only domestic enterprises have sensed the winds of change; ever-alert foreign business has jumped into consumer services and expanded into finance, insurance, transportation, and more. Japanese investment in services, for example, is already comparable to that in perennial leaders like electronics.
Besides the advantages of high consumption and fast returns on investment, the labor intensiveness and clean working environment have attracted a large amount of the employed population. According to the Department of Budgets, Accounting, and Statistics, in 1986 the number of employed in services surpassed that of manufacturing for the first time, and continued rising in 1987.
The service industry has come like the genie from Aladdin's lamp--and reactions to it vary.
Optimistic views see it as capable of replacing manufacturing as the main strength of the economy. Some even advocate the Singapore model of complete liberalization with services at the center.
But many worry that, with investors flocking overseas, the use of resources for services could lead to "deindustrialization." Ji Chou of the Chunghwa Institute for Economic Research points out that Singapore is a city, with no hinterland, and must develop services. Taiwan can't be compared. Besides, manufacturing, accounting for 51% of GNP, can't just be dumped overnight. As a result, the fear of deindustrialization is exaggerated.
The service industry embraces all sectors not in industry or agriculture, including trade, communications, transportation, storage, finance, insurance, real estate, and personal and social services. All will increase with the rise of personal incomes. "This is because as industry gets more developed there is a trend toward specialized division of labor and services," says T. J. Chen, also of the Chunghwa Institute.
Besides, with industrialization and urbanization, relations between people become more complex, with legal, accounting, and medical services increasing daily.
Many advanced industrial countries entered the service era as early as 1960, when the percentage of the GNP accounted for by services surpassed that of industry by 10 percent. Taiwan's steps are still a little slower.
"In the past we overemphasized production, and ignored consumption; stressed exports and ignored imports," says T. J. Chen. Because of this, numerous less-than- esteemed "services" like prostitution sprouted. Many consumer industries remained not only unreasonably expensive but of inferior quality. The economist Wang Tso-yung explains, "Finance, insurance, transportation, and so on received government protection early on . . . development was restricted."
To raise quality the best way is to open the market to competition. The retail trade is a good example.
Ever since Watson's pharmacies of Hong Kong established branches on Taiwan, local people were surprised to discover that an ordinary shop could, with design and planning, become a clean, bright, even joyful shopping environment. And the U.S. "7-11" shops brought in by the President Corporation have blazed the way for 24-hour convenience stores.
Twelve years ago, Japan also faced the problem of investment outflow and the transition to services. Today, although the percent of GNP of manufacturing stands at 37 to 60 for services, there has been no deindustrialization crisis; in fact competitiveness has increased. In fact, the government and private sector deliberately helped the growth of services. A committee was formed to eliminate restrictive laws.
"The Japanese are terrific--they know how to use services to support industry," says Evans Tu, President and Chief Executive Officer of Micro Electronics Co. If a Japanese company invests abroad, banks follow with financial service; the home office remains in Japan and takes care of communications.
Fortunately, the ROC government has already recognized the need to liberalize. Foreign banks, stock brokers, and others are likely to come in, bringing new skills, new viewpoints, and a substantial impact for local firms.
Wang Tso-yung cautions, "The area most needing government effort is in actively altering a few anachronistic laws which hamper the development of services." For example, points out Evans Tu, there is no way for private firms to get into the promising communications business.
It can be foreseen that, with a broad market and high quality human resources, all that needs to be done is to eliminate the stumbling blocks, then Taiwan's service industry will really accelerate.
[Picture Caption]
The stock industry is still too deeply speculative; it should be led as soon as possible to go along the path of a service industry. (photo by Wei C. Wang)
There is still a lot of room for development in the transportation industry.
Domestic advertising firms have rushed to cooperate with foreign firms in an effort to raise standards and provide the best possible service.
Twenty-four hour convenience stores are a new twist in retail sales. (photo by P. J. chen)
There is still a lot of room for development in the transportation industry.
Domestic advertising firms have rushed to cooperate with foreign firms in an effort to raise standards and provide the best possible service.
Twenty-four hour convenience stores are a new twist in retail sales. （photo by P. J. chen）
