Taipei Times: The government is mulling the opening of direct transport links with China for people and goods . What stance do you have on this issue?
Day Sheng-tung (
PHOTO: SEAN CHAO, TAIPEI TIMES
Currently, around US$40 billion worth of goods are channelled between Taiwan and China via Hong Kong. If the government allows direct cargo links with China, it will probably save Taiwanese companies 5 percent on cargo handling fees charged by Hong Kong, or as much as NT$70 billion a year.
However, if the government decides to open passenger links first without any supporting measures, it will seriously damage Taiwan's economy, because Taiwanese people will spend their leisure time and money in China due to convenient transportation. This will damage the nation's tourism and retail sectors. Therefore, my estimate is that our unemployment rate will get worse, soaring to 15 percent from around 5 percent now.
Some people wrongly expect that more Chinese will visit Taiwan after the government lifts the ban on direct links. Actually, with a lower living standard, most Chinese will not be able to visit Taiwan very often.
TT: There are some bans imposed by the government on China-bound investments. Is there any restriction that you consider unreasonable and should be lifted?
Day: The government's policy on China-bound investment seems pretty lax to me. For example, the government has requested companies to register their China-bound investments at the Ministry of Economic Affairs, but actually, only those plans to invest NT$1.7 billion or above in China need to be registered The fact is that only a few Taiwanese conglomerates are financially capable of coming up with such big investment projects. As a result, many small and medium-sized Taiwanese companies have taken advantage of the policy loophole to invest in China. The government should instead employ stricter measures to stem further capital from flowing to China.
TT: Taiwan's 1.08 million small and medium-sized companies are facing increasingly strong competition from China and other countries. What is the major predicament they are facing?
Day: The first predicament for our small and medium-scale companies, as well as for Taiwan's economy, is a never-ending China fever. People are simply too crazy about the Chinese market. It can't be denied that China is a rising economy, but as China's exports are expected to exceed US$1 trillion within the next five years -- with most of them shipping to the US -- Washington will definitely pressure Beijing to revalue the Chinese yuan in order to balance a huge trade deficit. If China is forced to appreciate its currency sometime in the future, many Taiwanese companies in China will face grave exchange losses if they are not well-prepared to hedge that risk. We need to look beyond China because it is not our only foreign market. We need to internationalize, not "Sinicize."
The second problem the nation's small and medium-sized companies are encountering is tight credit imposed by the banks. The government has encouraged banks to clean up their bad loans to maintain competitiveness. But banks ended up tightening their lending to our companies. Small and medium companies shouldn't be blamed for the bad loan problem because around 95 percent of the non-performing loans were legacies left by big enterprises many years ago.
TT: What should these small and medium-sized companies do to stay competitive in the global market?
Day: In the past 30 years, Taiwan's economy prospered as local companies produced quality goods with competitive prices. But it is time for our mindset to make a change as the market is no longer what it used to be. It's almost impossible for Taiwan-made products to compete with those made in China on the basis of price. Therefore, Taiwanese companies should differentiate their products from Chinese ones with more added value on them. The key point here is innovation.
We shouldn't downplay our companies' innovative ability, as one recent report indicates that Taiwan's innovation ability ranks seventh in the world. We should make good use of this edge to compete with our rivals who always use price to appeal to consumers. For example, many consumers prefer to buy baseball caps that were made by North American companies, despite their costing more than those same brandname caps made in China. I say this is the direction Taiwan needs to move in.
TT: The government has implemented various measures to help small and medium sized enterprises. Do these measures really cater to the need?
Day: The government has come out with many good measures to help us in recent years in terms of raising funds. For example, the Cabinet established a mechanism for small and medium sized companies to be listed on the stock market, which was officially launched this February.
In addition, it also granted NT$20 billion to the Small and Medium Business Credit Guarantee Fund (中小企業信保基金) from last year to this year to help small and medium-sized companies to get loans. The government even proposed allocating another NT$50 billion in loans in the next five years. The amount of loans exceeded the sum of loans the government provided over the past 20 years. We really appreciate it. However, the scale of loans is still not enough compared to the amount that the Japanese or South Korean governments offered to their enterprises. Aside from financial assistance, I hope the China External Trade Development Council (CETRA, 外貿協會) will help companies keep up with the pulse of the world market. In the past, CETRA helped numerous Taiwanese companies expand their businesses to overseas markets, but it needs to change its thinking as the world market is changing too. As most companies already have plentiful experience in exporting their products and manufacturing for major brand names, CETRA should further advance the image of made-in-Taiwan goods in the international community.
TT: How can we establish a set of new evaluation mechanisms for small and medium-sized enterprises to be qualified for the government's credit guarantee fund or attract investors?
Day: In an internationalized era, tangible assets such as capital or real estate are not the most important element to appraise a company. Intangible properties, such as the company's personnel and ability to innovate, should be taken into account. This is a new evaluation mechanism I have been advocating for one year.
A company's potential can no longer be judged merely by its properties. I hope the new system can be built soon to help good enterprises gain more loans and investors.
TT: Many jobless people have blamed their status on the import of foreign workers. Do you agree with that argument and how do you view the current job market?
Day: One sad thing in our society is that there is a certain group of people with inadequate work skills who are reluctant to advance themselves. They prefer to live on welfare.
For instance, the government last month proposed a hiring project in an attempt to cut the nation's unemployment rate by 0.3 percentage points. In that plan the government wanted companies to hire up to 25,000 jobless people in the labor pool of the Council of Labor Affairs. While there were over 30,000 job vacancies, only around 700 people were hired up to last week. Isn't that ridiculous?
The reason that so few people could meet the job requirements is most registered job-seekers are only suitable for labor-intensive work, while many vacancies require people who have bilingual or computer skills.
I think people shouldn't continue blaming foreign workers for unemployment. Actually, foreign workers are taking jobs which many of us refuse to take because of low salaries and bad working environments. As a result, I hope workers advance themselves by equipping themselves with more skills to remain competitive in the job market.
I also encourage various trade associations to provide further on-the-job training to their employees. This is a program I'm now undertaking in our association.
TT: You have suggested many times that the government not make tax inspections on businessmen. Why?
Day: The frequent tax raids imposed by the government are a form of disturbance to companies. The government tries to attract foreign investments by offering various tax breaks, but tax inspections reduce companies' willingness to stay in Taiwan.
Furthermore, the tax income brought by investments will definitely be higher than the taxes being evaded.
Take myself for example. I have had one factory in the US for years, but the US government has never checked my tax reports, because it knows the practice scares away investors.
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