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Editorial: Maintain Taiwan's economic edge

In the keen competition between the two sides of the Taiwan Strait, Taiwan has always been proud of both its democratic and economic development. Taiwan's recent economic performance, however, shows signs of rusting as "China fever" (中國熱) grows among local businesses. The gap between the business environments on either side of the Strait will widen further in the wake of the cancellation of the Fourth Nuclear Power Plant (核四).

Formosa Plastics Group (台塑) vice chairman Wang Yung-tsai (王永在), one of Taiwan's top industrial leaders, recently announced a US$100 million investment in China. Wang showed his concern over the growing economic divide between the two sides, however, saying that "the mainland's speedy progress is worrisome." He stressed that all Taiwanese companies will move to China unless the government can improve the country's business environment soon. Yulon Motors (裕隆汽車) has announced a plan to invest in China. Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Corp (台積電), recently warned that the survival of Taiwan's high-tech industry will be in question if the government does not ease restrictions against the Chinese market. In fact, Taiwan's top notebook PC makers, Quanta Computer Inc (廣達) and Acer Inc (宏基集團), are planning to build more factories in China. According to the Institute for Information Industry (資策會), the total production value of China's IT industry will surpass Taiwan's by next year, shaking our position as the third-largest IT hardware provider in the world.

Minister of Economic Affairs Lin Hsin-yi (林信義) has said he will visit company managers to convince them to "keep their roots in Taiwan" (根留台灣). But can Lin's moral exhortations compete with the mighty dollar?

The business environment in Taiwan is worsening daily. Wages are rising and after the official workweek is shortened on Jan. 1, it will be more difficult to recruit sufficient manpower. The government has often been at a loss over what to do when companies are dealing with high land costs and protests from local residents. With the cancellation of the Meinung Dam (美濃水庫) project, concerns have been raised that the Eighth Naphtha Cracker and the Tainan Science-based Industrial Park may face water shortages. The government's alternative energy plans to replace the fourth nuclear plant have failed to comfort businesses. Slow progress in infrastructure construction and the poor administrative efficiency have also greatly disappointed local businesses.

On the other hand, China, with its cheap labor and land, ample raw materials, huge market and speedy economic growth is aggressively developing its economy. It not only woos businesses with low taxes but also assists them in land acquisition. Investors from Taiwan and the rest of the world have been drawn by China's excellent business environment. Taiwan's "no haste, be patient" (戒急用忍) policy may not be able to stop them.

In fact, China's market poses a "fatal attraction" for Taiwan businesses. It is extremely risky to invest in China, given the Chinese authorities' lack of respect for the law. We have heard many stories about Taiwanese and other foreign investors being bilked by Chinese officials or suddenly ending up on the wrong side of the law. China also maintains tight control over currency flows. Remitting capital out of the country is difficult. Even if a business does make money in China, it must spend considerable energy remitting its profits.

Instead of relying on slogans, our government should take action before the balance tips against Taiwan in this cross-strait economic war.

Taiwan risks losing the basis for its self-determination if it loses the economic edge.
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