The government has begun trying to entice Taiwanese businesses back home from China, using the metaphor of salmon swimming upstream to the place of their birth. It is citing a string of recent events that, together, make doing business in China less profitable than before. These include signing the Economic Cooperation Framework Agreement (ECFA), the commencement of direct flights between Taipei’s Songshan Airport and Hongqiao Airport in Shanghai, the recent increase in wages at Foxconn in China and the revaluation of the yuan. It has also indicated its itent to look at other possible incentives to bring businesses “back home.” The question is, will it work?
If the costs of labor, raw materials and setting up factories in Taiwan hadn’t been so high in the first place, why would these entrepreneurs have picked up and moved to a foreign country where they knew nobody and were unfamiliar with the law? As Barry Lam (林百里), founder and chairman of Quanta Computer, put it: “We are manufacturers — salmon return to the place of their birth to die ... higher wages will only be passed on to our customers and end users.”
There is a lot of truth to Lam’s words. If a manufacturer had been able to afford the cost of running a business in Taiwan, with its high premium on land, labor and raw materials, it would never have left.
Taiwanese originally invested in China because of the low cost of doing business there, following a time-honored tradition among entrepreneurs the world over. When the situation changes in China, those industries that rely on low costs for their survival will have to vacate the regions along the seaboard.
Wherever they relocate, the most important criteria will be lower costs. Salmon might be able to go upstream against the current water doesn’t and, nor do industrialists. Therefore, when they relocate, it will either be further inland in China or somewhere in Southeast Asia. It certainly won’t be back to Taiwan.
Some people have suggested setting up special trade zones, where there would be no restrictions on foreign labor or where there would be low wages, low rents and low taxes. The thing is, the manufacturing environment has reached a stage of development where taking those measures would be regressive. Is returning to competing with other low-cost nations the path to take? Creating new science parks and free-trade zones would entice businesses to go back to where they were years ago in terms of their industrial development and this would only lift the lid on a Pandora’s box of social problems.
Any manufacturer that sets up in Taiwan would have to exploit resources and surely contribute to pollution in this country. Resources that belong to the public would be exploited just to line the pockets of industrialists in the special zones. How is this conceivably good for Taiwan as a whole?
Entrepreneurs are always looking for ways to reduce costs, not increase them. Only high-tech, capital intensive manufacturers that offer high added value can afford to stay in Taiwan. The question is, then, what exactly does the government intend to do to attract the rising stars of the industrial world to Taiwan and create an environment conducive to high added value, high-tech companies? Simply paying lip service to some half-baked idea of salmon swimming upstream will only push the Taiwanese businesses on China’s seaboard further inland.
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