Given the global economic crisis, the future will be a time of industrial restructuring and changing economic landscapes. President Ma Ying-jeou (馬英九), Vice President Vincent Siew (蕭萬長), Premier Liu Chao-shiuan (劉兆玄), Legislative Speaker Wang Jin-pyng (王金平) and Chinese Nationalist Party Chairman Wu Poh-hsiung (吳伯雄) have suggested that the Cabinet come up with a set of clear plans for Taiwan’s economy within three months. In order to revive the economy, aside from short-term policies aimed at expanding domestic demand, in the long-term, we have to rethink how Taiwan’s economy is connected with the rest of the world.
First, we should change the way Taiwanese businesses interact with the rest of the world and move away from contract manufacturing toward brand creation. Taiwan concentrated on contract manufacturing in the past, a mode of operation that linked it with major international brand manufacturers and helped local businesses take charge of one link in their supply chains.
The advantage of this mode was that it enabled companies to focus on manufacturing and allowed them to use Taiwan’s ample labor supply and carry out effective management, thus making the best use of Taiwan’s cost advantages. The disadvantage was that Taiwan lacked a strong technological base, which meant that businesses often had to rely on foreign technology and equipment to carry out limited innovative research and development to add value to their products.
Under such a setup, profit is generally low and when the larger brand companies experience a decrease in demand, contract manufacturers are directly influenced. This is the main reason behind Taiwan’s recent economic problems, which have been caused primarily by a huge drop in exports.
By moving toward brand development, Taiwan’s economy would be able to break free of the restrictions of a “thin” market. Aside from improving technology, a vital part of such a move would be to change the way we think, especially learning how to stop copying and starting to innovate, moving away from contract manufacturing to marketing and from an economic entity that is being integrated to one that performs the integrating.
This would also entail changing the type of business relations from the business-to-business (B2B) relations between contract manufacturers and larger companies to business-to-consumer (B2C) relations. It would require looking for ways to increase the product value instead of looking for ways to cut costs. These are all important aspects that we should pay attention to.
One main reason Taiwan’s economy has been so badly shaken by the global economic crisis is that its products are mainly information technology based and lack diversity. We should follow global development trends and actively develop products and industry for a new era.
In the past, when we reached the peak of development in the information technology industry, we were constantly searching for other industries that could spur economic growth. The results of such attempts, however, were limited. We should search for opportunities to develop new industries such as those based on culture and creativity as well as alternative energy sources and biological technology to diversify Taiwan’s industries.
Finally, we should promote alliances with other countries and decrease the number of trade barriers to maintain export competitiveness. Taiwan must focus on signing regional trade agreements. Once regional markets are opened up by these agreements, Taiwan can expand its export capacity. This is the most proactive way of dealing with the problems we currently face.
Of course, our focus in this should be China, which is our major export market and the country we have the largest trade surplus with. As of late, there has been much debate in Taiwan about whether or not we should sign a comprehensive economic cooperation agreement (CECA) with China. These discussions have also given rise to ideological debate.
There have been plenty of examples throughout history of smaller countries being swallowed up by their larger neighbors. However, there have also been many examples of smaller nations that have been able to create high levels of economic growth by adjusting their policies.
For example, the Netherlands is a major operational center for many European companies and Ireland has become a major technological center in Europe. Finland, with its renowned Nokia brand, has also managed to put itself on the economic map. Other examples of small places with successful economies are Hong Kong and Singapore, an important hub for global intermediary trade.
In the face of the unprecedented difficulties and potential opportunities we are facing, Taiwan’s ruling and opposition parties must play an active role in finding a new path for Taiwan’s development.
Liu Da-nien is a research fellow at the Chung-Hua Institution for Economic Research.
TRANSLATED BY DREW CAMERON
The conflict in the Middle East has been disrupting financial markets, raising concerns about rising inflationary pressures and global economic growth. One market that some investors are particularly worried about has not been heavily covered in the news: the private credit market. Even before the joint US-Israeli attacks on Iran on Feb. 28, global capital markets had faced growing structural pressure — the deteriorating funding conditions in the private credit market. The private credit market is where companies borrow funds directly from nonbank financial institutions such as asset management companies, insurance companies and private lending platforms. Its popularity has risen since
An article published in the Dec. 12, 1949, edition of the Central Daily News (中央日報) bore a headline with the intimidating phrase: “You Cannot Escape.” The article was about the execution of seven “communist spies,” some say on the basis of forced confessions, at the end of the 713 Penghu Incident. Those were different times, born of political paranoia shortly after the Chinese Nationalist Party (KMT) relocated to Taiwan following defeat in China by the Chinese Communist Party (CCP). The phrase was a warning by the KMT regime to the local populace not to challenge its power or threaten national unity. The
On March 22, 2023, at the close of their meeting in Moscow, media microphones were allowed to record Chinese Communist Party (CCP) dictator Xi Jinping (習近平) telling Russia’s dictator Vladimir Putin, “Right now there are changes — the likes of which we haven’t seen for 100 years — and we are the ones driving these changes together.” Widely read as Xi’s oath to create a China-Russia-dominated world order, it can be considered a high point for the China-Russia-Iran-North Korea (CRINK) informal alliance, which also included the dictatorships of Venezuela and Cuba. China enables and assists Russia’s war against Ukraine and North Korea’s
The Iran war has exposed a fundamental vulnerability in the global energy system. The escalating confrontation between Iran, Israel and the US has begun to shake international energy markets, largely because Iran is disrupting shipping through the Strait of Hormuz. This narrow waterway carries roughly one-third of the world’s seaborne oil, making it one of the most strategically sensitive energy corridors in the world. Even the possibility of disruption has triggered sharp volatility in global oil prices. The duration and scope of the conflict remain uncertain, with senior US officials offering contradictory signals about how long military operations might continue.
RSS