The government’s “new southbound policy” aims to help local firms sell products and services to ASEAN and India, making them virtual extensions of the domestic market, experts said yesterday.
The two markets, which could have a combined population of 2.09 billion by 2050, promise huge business opportunities for Taiwanese companies if they can identify and build their own niche markets with products and services that cannot be easily replaced, Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) president Jeff Lin (林建甫) said.
The policy underscores the importance of value adding — creation of products and services that generate high profit margins — compared with the pursuit of cheap labor and land to expand the economies of scale as promoted by former president Lee Teng-hui (李登輝) in the 1990s, Lin said.
The cost-cutting practice has prompted Taiwanese manufacturers to move their production facilities from Taiwan to emerging markets in Asia, notably China.
Overseas production accounted for 55.08 percent of export orders last year, up from 16.69 percent in 2001, government data showed, denying most Taiwanese the benefits of economic growth.
The business model — featuring economies of scale and slim profit margins — have been challenged as labor costs increased rapidly in China and elsewhere, Lin said.
China has embarked on economic balancing to cut dependence on exports and rely more on domestic demand. China’s trading partners are affected by its balancing, with Taiwan being the most vulnerable due to its heavy trade links with China.
“E-commerce is one area that local firms use their competitive edge given low Internet penetration rates in Southeast Asia,” Lin said, adding that the rate is 16 percent in Indonesia and less than 50 percent in the Philippines and Vietnam.
Most people in those nations question the safety of online shopping and divided cross-border jurisdictions deepen the unease, Lin said.
Taiwanese technology firms can help set up broadband infrastructures and provide solutions for online shopping, Lin said.
Taiwanese food, garment and drug makers can sell products to ASEAN and India over the Internet, while local construction firms can build mass rapid transportation and other public utility projects, Lin said.
Local financial institutions can provide credit to companies that plan to do business in Southeast Asia, Lin said.
New Southbound Policy Office Director James Huang (黃志芳) said the Ministry of Education has set aside funds to offer courses on ASEAN culture, history and languages.
In addition, the ministry is to provide subsidies for people planning to study in those nations.
The government will help firms gather information on doing business in Southeast Asia and ease loan applications for investment projects, Huang said.
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