Fri, May 18, 2007 - Page 8 News List

To remain competitive, look beyond the Chinese

By Mark Wen 溫明忠

What will the Democratic Progressive Party's (DPP) presidential hopeful Frank Hsieh's (謝長廷) financial and economic policy be like? This should be of concern to the public.

International competitiveness begins at home. As international competition strategist and Harvard professor Michael Porter says: "Paradoxically, the enduring competitive advantages in a global economy lie increasingly in local things -- knowledge, relationships and motivation that distant rivals cannot match."

A company's competitive advantage is the most important factor affecting its competitiveness, and such advantages are determined by the effective use of production factors. This requires constant innovation, which in turn requires cooperation with academia.

Collaboration between industrial and academic circles thus becomes the source of competitiveness. Silicon Valley in California, Research Triangle Park in North Carolina and Hsinchu Science Park are all successful examples.

Such collaboration applies not only to the high-tech industry but also to the agricultural and general industries. Taiwan's achievements in this respect are much greater than China's, and should not be underestimated. Taiwan's orchid exhibition this year, another successful example of industry-academia collaboration, resulted in orders worth several billion US dollars.

Second, the world is not flat. Many Taiwanese treat Thomas Friedman's bestseller The World Is Flat as their Bible and use it to criticize the government's business policy. However, Harvard professor Pankaj Ghemawat says that this and similar books, such as The Death of Distance by Frances Cairncross, are only sensationalist statements.

Ghemawat says foreign direct investment accounted for just 10 percent of total global investments between 2003 and 2005, which means that 90 percent of investments actually were domestic. If the world were flat, proportions would be reversed.

Other areas related to internationalization such as international migration, and international telecommunications, research and education, charitable donations, patents, stock investments and trade account for less than 10 percent of GDP. It is evident that the world is not flat.

Third, the Chinese market is one of Taiwan's markets, not the only one. Today, about 70 percent of foreign investments by Taiwanese companies is concentrated on China, the highest in the world. This runs counter to common sense. You should not put all your eggs in one basket.

Some commentators like to cite South Korea as an example, but the fact is that Seoul has been promoting global investments in recent years. Hyundai Motor Co is the second-largest company in India, a huge market of 1.1 billion people, and white wares from LG Electronics and Samsung Electronics have a 30 percent to 40 percent market share.

According to the Indian government's official statistics, by the end of March, South Korea's total investment in India was about 70 times more than that of Taiwan. The Indian market is gigantic, and it is highly complementary to Taiwan. By investing in China, Taiwan can eventually enter the US market. By investing in India, it will eventually be able to enter the emerging Central Asian, Eastern and even Western European markets. India is thus the best jumping board for the global arrangement of Taiwanese businesspeople.

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