Taipei Times: Can you tell us a bit about the ongoing transition in Taiwan's high-tech sector?
Jim Rohwer: Taiwan has been extremely successful in building up a hardware-based high technology industry. It makes up for US$50 billion of exports. But unfortunately, what is happening is that the Internet, software and managerial expertise are all becoming much more important in this world. And what is being reflected in the poor performance in the stock market is the worry whether Taiwan will be able to make the transition to a new economy. It is an open question and lots of Taiwanese businessmen are thinking are very hard about this. The most prominent one is of course Stan Shih of Acer.
Taiwan has plenty of economic strengths, but there are also weaknesses like the shortage of software engineers for example, a very deeply ingrained habit of business thinking which emphasizes very strict cost controls and operational processes. But it has not paid much attention to marketing and branding which are going to be important for the future. It is an open question and will take couple of years to answer.
TT: How do you think change in China's economy is going to impinge upon Taiwan?
Rohwer: What is happening is extremely interesting and very important for Taiwan. Its economic management in the last five years has probably been the best in Asia. Given the poor income level in the economy, China has much better economic management than Japan for example. It is astonishing. In Japan, for the past 10 years, it had a government which deliberately stopped restructuring, [meanwhile] in China for the past five years, it has had a government which pushed restructuring very hard. China is about to enter the WTO in six months or so, and it will bring enormous changes to the economy [and make it] extremely open to the outside world. China is a much poorer economy than Japan, but it has much more direct foreign investment -- a lot of that investment is coming from Taiwan. Now what you are seeing apart from the very strong economic policies is the economy recovering in all sorts of ways. Consumer spending is picking up, export business is good. China is taking a much bigger share of world exports than Southeast Asia. And you will see a big upsurge in foreign investors going into China, trying to make money there.
Asia is going to change in the next five to 10 years because of the localization of technology. I am very positive on China and I am quite positive on Taiwan as well. I think overall, despite the current troubles, Taiwan, thanks to its economic flexibility, has very strong ties with Silicon Valley. Taiwan has a good chance of figuring out how to use its strength in hardware to make a transition to a much more software-based economy.
TT: Can you talk a bit about globalization and its pitfalls, and the capital controls in the Taiwanese financial markets?
Rohwer: Globalization is the greatest thing that has ever happened to the world economy. But with regard to specifics, I think Taiwan did escape the Asian crisis, because it had very sophisticated capital controls. They are sophisticated in the sense that they are very complicated. They work in a way that the market signals in the world economy are not really interfered with, but it makes them very difficult for money to rush in and out. Money can't come and go like it does in Indonesia, Malaysia, Thailand.
TT: What do you think about China and Taiwan political relations?
Rohwer: That is always a huge wild card. Politics between Taiwan and China are very irrational. I tend to believe that because Taiwanese and Chinese are very pragmatic people, they will find some way to work this out. But there is a very big potential for miscalculation. We saw that in 1996 when Chinese started firing missiles and created a confrontation with America.
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