In a speech last Saturday, Academia Sinica President Wong Chi-huey (翁啟惠) said that: “Taiwanese industry is heavily concentrated in electronics-related fields and the business model is based on contract manufacturing. Although the production value for 17 different products are the world’s highest, Taiwan’s economic growth has seen a downward trend in recent years. What we should be considering today is whether or not this is the industrial model for future sustainable development.”
Wong’s concern for the Taiwanese economy and the fact that he uses his position to highlight these concerns is laudable. Readers should also read the editorial in the Liberty Times (the Taipei Times’ sister newspaper) from Monday, which is an astute in-depth analysis of why the economy has been slowing down in recent years. I want to further clarify why the Taiwanese business model is focused on contract manufacturing and why Taiwanese industry is heavily concentrated in electronics-related fields.
Why contract manufacturing? If we discard any ideological ideas of a “greater China,” the answer is quite easy to see: Over the past 20 years, businesses have been moving to China and neglected research and development and industrial upgrading. It is not appropriate to rely on the contract manufacturing business model for too long.
As evidence that people are aware of this, the issue has been discussed for the past 20 years. However, it has been too easy for Taiwanese businesses to move to China, and as a result, they have neglected industrial upgrading and research and development. It’s not that there haven’t been any warnings, but pro-Chinese academics and media outlets singing praise for China have been louder.
Over the past few years, the “incisive analysis” provided by pro-Chinese businesses, officials and academics has been limited to talk about consolidating resources, raising competitiveness and the win-win situation created by taking orders in Taiwan and placing production in China, as they have attempted to justify the “go west” policy.
However, how about the concentration in the electronics-related industries? Once again the answer is very easy to see. Since other industries have been mesmerized by the massive size of the Chinese market, Taiwan has been left with electronics-related industries, such as integrated circuit, semiconductor, panel and computer manufacturers — the fact is that even computer manufacturers have moved to China since 2000, following former president Chen Shui-bian’s (陳水扁) “active opening” policy.
In other words, these are the industries that were left in Taiwan by former president Lee Teng-hui’s (李登輝) “no haste, be patient” policy — every industry that was not prohibited from doing so, moved to China, leaving the false impression that the electronics industry was the largest.
The question is if Taiwan would have had any companies left in the electronics, integrated circuit, panel or petrochemicals industries today if it hadn’t been for Lee’s ban on them moving to China in 1996, or if Taiwan would have enjoyed 3 percent to 4 percent annual growth after 2000 without these industries?
Wong seems to only have seen the symptoms of these flaws without exploring the reasons for them. That is the only way to explain why he thinks the main reason for Taiwan’s economic decline in recent years has been the result of the heavy concentration of Taiwan’s industry in the electronics-related fields.
In other words, Wong shouldn’t be blaming the big electronics-related industries. Rather, he should ask why Taiwanese governments over the past 10 years have allowed industries, without any restrictions, to move to China and cause more than 2 million Taiwanese to pursue their livelihoods there instead of in Taiwan.
This should make it clear that thinking about and responding to this situation should include doing everything possible to prevent the Taiwanese economy from becoming part of a “one China” market. It should also include demanding that businesses take an international view from a base in Taiwan so that the 2 million Taiwanese who now live and work in China return home and once again start working to promote Taiwan’s economic development. It is this model that should be the model for the future sustainable development Wong said we should be considering.
Huang Tien-lin is a former national policy adviser to the president.
Translated by Perry Svensson
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