Taipei Times (TT): What are the common characteristics of competitive nations?
Arturo Bris: Taiwan is doing well in terms of competitiveness. It is difficult for small countries to be competitive, compared with larger ones such as the US and Canada.
However, small economies like Singapore, Switzerland, Luxembourg and Hong Kong have put up strong performances.
The key to competitiveness in the 21st century is the quality of the institutional environment with good representation of trade unions, political parties, stock markets, business associations and anything that connects people.
If you look at most competitive countries in the world, you will find they all have good institutions, transparent governments, functioning stock markets, a healthy financial system and political parties.
TT: What can Taiwan do to improve its competitiveness?
Bris: From the perspective of the private sector, Taiwan needs to enhance its policy stability. I met with some corporate executives and the problem they identify is that the government is not consistent. If there is a turn in government because of elections, things change. Policy stability requires consistency and predictability.
Taiwan needs to guide the private sector to invest in more productive industries and the government should focus more on job creation and productivity.
Taiwan also needs to strengthen corporate governance so companies will have more independence and less connectedness, whether in the public or private sector.
There is a lack of trust between the private sector and the government. For an economy to thrive, the private sector has to trust what the government is doing and the government has to respect the private sector.
In Thailand, for example, the channel of communication between the government and business is very close. In fact, I would say that the government is pro-business in Singapore, Thailand and Malaysia.
It is not about tax reductions or any particular policy, although the issue can be addressed through regulation. Rather, the government could listen and talk more to the private sector. It is a problem if the government does not listen to the private sector.
TT: The incumbent government gives top priority to the pursuit of more equitable distribution of the nation’s wealth and resources. Is the policy in conflict with the effort to boost competitiveness?
Bris: Not at all. That is what competitiveness is about: creating equitable prosperity. There might be tension between promoting business and job creation, and achieving equitability. There are policy tools to address the issue, namely fiscal policy, innovation and competing legislation. They need to be combined to create a fair environment.
The most competitive countries in the IMD rankings tend to be socially equitable, like Singapore, Switzerland and Denmark. The price is inequality for least competitive countries like Ukraine, Venezuela and the Philippines.
The phenomenon is not a problem for countries with medium and high income. It is not a dilemma for Taiwan to achieve equality and competitiveness. There are certain investments that are universal: infrastructure, health and education. They affect everyone.
TT: Will Taiwan’s chilled relationship with China weigh on its global competitiveness?
Bris: Taiwan cannot survive without an economic relationship with China. Mexico enjoys more benefits from its economic relationship with the US and so does Germany from its relationship with Switzerland.
China is growing to be the new center of gravity in world trade once the US gives up the position. In fact, when a country brings in a foreign company, it induces locals to step up their competitiveness and professional talent.
Chinese President Xi Jinping [習近平] said he is glad the US plays the protectionism game and that China will not join. Rather, Xi has supported globalization and committed to building an open economy.
Still, [US President Donald] Trump, Brexit and geopolitical tension in North Korea and the Middle East might pose downside risks to the global economy next year. Otherwise, the global landscape is fair, although growth remains low.
TT: Taiwan’s global talent ranking remains unchanged this year in 23rd place. Do international talents find working in Taiwan attractive?
Bris: No, as shown in our report on global talent ranking where Taiwan placed 23rd this year, the same as last year.
Taiwan has been found wanting in the ability to attract foreign professionals. Its ranking on public education expenditure is low and many Taiwanese companies do not consider attracting and retaining talent a priority. These trends might lead to a shortage of skilled labor in the long run.
Companies in Taiwan need to bring international talent if they want to expand beyond China. The international experience of managers in Taiwan is low and so are their foreign-language skills.
Few companies in Taiwan have foreign CEOs or board directors, whereas many companies in Switzerland are run by foreigners. Over the years, Switzerland has opened different positions to foreigners and enjoyed the benefit of sustainable development.
If you bring foreign CEOs, but tell them to fill the executive team with Taiwanese, they can hardly survive.
Taiwan eased residency requirements for foreign professionals, but more needs to be done. Successful corporate leaders are the ones who manage costs, generate efficiency, drive profits and set values — characteristics that are significantly different from 20 years ago.
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