Let us begin with some basic figures: Europe is the largest consumer market, with 500 million people. Europe is the biggest economic bloc; its GDP is twice as big as China’s. Europe is the biggest recipient of foreign investment. Non-European firms flock to Europe to invest and buy assets, companies, know-how and design and to get close to and integrated into its market. Taiwan is a major investor globally, with overseas direct investment of more than US$200 billion. However, only about 1 percent of it is in Europe, even though Europe accounts for 20 percent of global trade and global GDP. In comparison, South Korea’s investment in the EU is 11 times more, while Japan’s investment is 90 times more.
The handling of the eurozone debt crisis proved the pessimists wrong. The euro is rising in value, as the markets recognize the improvements. Europe remains a place where South Korean, Chinese and other companies go to get good deals, taking advantage of reasonably priced assets. South Korean companies, for example, invest in fields from semiconductors and solar panel manufacturing to fashion and cosmetics. However, Taiwanese companies seem not to take advantage of the opportunities.
Economists point to the close linkages between trade and investment flows: To further enhance exports, closer investment ties are needed too. European companies are leading the way, as Taiwanese figures show that EU companies have invested more than US$30 billion in Taiwan.
Naturally, companies want to look at the bottom line, to have good returns. Taiwanese companies were prime movers in investing in China, and reaped the benefits. However, much of this investment actually is relying on markets beyond China. Only focusing on low nominal labor cost puts companies at risk of missing the bigger picture: overall productivity and proximity to the final customers, world-class research and development and global design, as well as local customization. Taiwanese companies should look for longer-term strategies to improve their supply chains and market perspectives aside from the Chinese market.
There are good examples of how Taiwanese companies can successfully operate in Europe, as HiWin showed in a presentation at the “Invest in the EU” event last year. Successful companies use Europe as part of their global presence to build on the expertise in Europe. Europe is not homogenous, of course, and at first sight, its different languages and customs might be bewildering. However, the multitude of expertise niches, the talent available and the size of the market make it worthwhile. Japanese, South Korean and Chinese companies have already discovered that. It is time for Taiwan to discover it, too.
Tamas Maczak is deputy head of the European Economic and Trade Office.
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