In Taiwan, people can freely move capital in and out of the country and the government cannot stop industry from moving overseas, try as it might. Former president Lee Teng-hui's (李登輝) "no haste, be patient" policy failed to stop Taiwanese business tycoon Wang Yung-ching (王永慶) from investing US$3.2 billion in building a power plant in Zhangzhou in Fujian Province. Nor did President Chen Shui-bian's (陳水扁) "effective management" and "active management" policies succeed in blocking Taiwanese investment in China.
According to a report published by the US Congress, Taiwan's accumulated investment in China reached about US$280 billion by 2004, half of total direct foreign investment in China. Eighty percent of this is indirectly invested in China via the US, Japan, Hong Kong and other nations. Thus, the government is only able to control major listed corporations.
The decision by the Carlyle Group, a US-based private equity firm, to acquire Advanced Semiconductor Engineering Inc (ASE) may change this, and therefore this acquisition must not be ignored. ASE is the world's largest chip testing and packaging firm, as well as being a sound, profitable company with strong management.
Given that the company is not in a financial crisis, does it make sense to say that the company agreed to be bought out by a foreign company for the sake of consolidating the international semiconductor market rather than to be able to move into China?
In my opinion, this is a bad thing and may mark the start of a chain reaction. At the very least there is the loss arising from the fact that a major company that brought huge profits to Taiwan's economy will now become a foreign company. This is a pity.
The "no haste, be patient," "effective management" and "active management" policies are the right policies but difficult to carry out. It is an unfortunate fact that the government therefore is incapable of reining in the departure of domestic businesses. Nevertheless, as long as the Democratic Progressive Party is broad-minded, aware of the current situation and willing to accept advice to make changes, there is still much that the government can do to take active measures to revitalize Taiwan's economy.
Modifying foreign labor policies will allow the use of foreign labor to boost Taiwan's international competitiveness. Then Taiwanese businesspeople will not only be willing to stay here, but may even be willing to come back and reinvest.
In a change to the system, industry would be divided by region and businesses could import their own foreign labor, thereby returning huge commissions to businesses in their area. This would reduce labor costs while foreign labor salaries would remain unchanged. This would be a way to prevent paying unnecessary commission to labor agencies.
At the same time, for every domestic worker that a company hires, the company should be allowed to hire a foreign worker. Only by using this approach and creating an abundant foreign labor supply would China-based Taiwanese businesspeople have the confidence to return here. As long as a portion of these businesspeople return, Taiwan would see more new investment creating more job opportunities. In the end, this would create a win-win situation for Taiwanese businesspeople, domestic and foreign labor and the government.
Taiwan's economy is confronted with survival problems. Will it be humble, self-reflective and accept advice to boost the economy? Or will it be proud, prejudiced and adopt a domineering manner, crippling the nation's economy? The choice is just a thought away.
William Kao is chairman of the Victims of Investment in China Association.
Translated by Lin Ya-ti
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