Tue, Jul 19, 2011 - Page 8 News List

Why South Korea firms are ahead of Taiwan

By Huang Tien-lin 黃天麟

South Korea’s free-trade agreement (FTA) with the EU took effect on Thursday and its FTA with the US will take effect by the end of the year. This has caused mass panic among Taiwanese companies and recent newspaper editorials have criticized the government’s incompetence and mishandling of FTA negotiations.

Should we really be blaming government officials? The criticism in these editorials is really only half right, because the main problem lies in President Ma Ying-jeou’s (馬英九) overall strategy. In other words, the incompetence is an inevitable result of his line, which places the hopes for the economy on integration with China.

He sees Taiwan as a link within the Greater China economic zone and the signing of the Economic Cooperation Framework Agreement (ECFA) with China as a core policy. Therefore, financial and economic officials have devoted much of their time and energy to the ECFA.

Now that it has been a year since the trade pact was signed, they are still busy working on the post-three-plus-one negotiations, an investment protection agreement and the establishment of representative offices. Naturally, Taiwan’s progress on FTAs with European and Asian countries as well as the US have received little attention.

The South Korean line is completely different from Ma’s and it can be portrayed as “moving from the world into China.” The Korean Peninsula and China are only separated by the Yalu River and the two are historically related. Since there are many Koreans in China, South Korea is actually very well placed to enter the Chinese market.

However, as Taiwanese businesses swarm into the Chinese market, South Korea refuses to learn from Taiwan. South Korea invests 10 times less in China compared with that from Taiwan. It understands that China is not only a good opportunity, but also a dangerous neighbor, which has a strong magnetic effect on its businesses. Thus, it has adopted a global strategy.

The United Daily News made the same analysis in an editorial on July 8. The editorial said the imaginary enemy of South Korea’s FTA policy is not Taiwan or Japan, but China, as it attempts to break through the magnetic effect of its own rise. The newspaper has always been a supporter of Ma’s line, but its analysis on South Korea’s FTA strategy this time is quite unique.

South Korean’s global line — especially its policy of “befriending those far away and attacking those nearby” — has been a success. It has obtained advanced technologies from the world’s industrial countries, helping South Korean enterprises keep up with the US, Europe and Japan, while creating huge conglomerates such as Samsung.

Looking back at Taiwan, its unity with China has damaged domestic job opportunities, a view supported by Bloomberg. It has suppressed domestic wage levels and entrepreneurs are used to secure operations by lowering costs. Since Taiwanese companies cannot break away from original equipment manufacturer-oriented exports by taking Chinese factories as downstream manufacturing bases, they lag behind South Korean enterprises internationally, while leaving an enormous amount of bad loans to the nation’s state-linked banks and the public as a whole.

Huang Tien-lin is a former national policy adviser to the president.


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