The rapid outflow of industry from Taiwan to China has been the primary factor leading to the nation's sluggish economy. But why are Taiwanese businesspeople willing to turn their back on their country and invest in China? A primary reason is the shortage and high cost of labor in Taiwan, making it hard for them to remain internationally competitive.
Given the Taiwanese government's rigid foreign labor policies, there is no way to resolve the labor shortage problem. In order to survive, domestic business leaders cannot help but leave Taiwan in silent protest against the government.
For the general public, the industry exodus has led to factory closures, protests, unemployment, robberies and suicides and difficulties surviving for most people. For the government, it has translated into diminishing tax revenues, increasing welfare expenditures, deteriorating public order, declining social mores and a waning economy.
The government has finally grasped the severity of the situation and is acting to improve the domestic investment environment in the hope of attracting foreign capital and enticing China-based Taiwanese businesses to return.
However, legal restrictions have made past proposals to revive the economy either too idealistic or unfeasible, causing them to miss their mark. As a result, the government still has not been able to provide China-based Taiwanese businesspeople with substantial incentives to return home to do business.
To do so, industrial areas should be designated as separate units within which government officials and business representatives can establish a management committee. The committee will have the right to import labor, and the commission earned from this can be distributed on a proportional basis to businesses in the area.
In this way, labor costs would be cut in half, while foreign workers' salaries would remain unchanged. In other words, this would simply be a way to prevent paying unnecessary commissions to specially privileged labor brokers. This would not only alleviate the cost burden on industries, but also reduce the chance of government corruption.
In addition, a one-to-one ratio for local and foreign labor should be instituted. Many people have been taken in by the myth that foreign laborers are taking jobs away from domestic workers. Without foreign laborers, local workers would lose their jobs anyway as industries that cannot survive relocate abroad.
But how can Taiwan ensure that hiring foreign laborers would not mean lost employment opportunities for local workers?
The government could stipulate that factories cannot cut their number of domestic workers simply to hire foreign labor. For new factories, the one-to-one ratio should apply. Doing this will ensure that the number of local work places will increase, rather than decrease, as a result of the importation of foreign labor.
While these policy adjustments may not be able to lower labor costs to China's level, they can help promote Taiwan's economic competitiveness.
Fortunately, labor costs account only for a portion of production costs. Taiwan's manufacturing industry also has other advantages, such as low investment risks, easy access to financing, the added value of the "Made in Taiwan" label and worry-free sustainable management.
I believe that these are the only conditions under which China-based Taiwanese businesspeople will have the confidence to return to Taiwan. Aided by their return, Taiwan will be able to recover from its economic predicament and create a second economic miracle.
William Kao is chairman of the Victims of Investment in China Association.
Translated by Lin Ya-ti
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