Tue, May 03, 2016 - Page 8 News List

An economy that works for Taiwan

By Jesse Liau 廖仁慈

Following 25 years of strong economic development after the end of World War II, Japan and Germany encountered difficulties in the 1970s as they transitioned from old economies into new ones, much in the same way that Taiwan did in the 1990s.

Japan and Germany at that time launched programs to upgrade their industrial structures and revamp their industrial landscapes with the help of large-scale domestic-industrial strategic alliances. As a consequence, the yen went from an exchange rate of ¥300 to the US dollar 45 years ago to its current level. A similar thing happened in Germany.

The primary tactic of “strategic alliances” in Germany and Japan was not to lower production costs, but to capitalize on the industrial advantages that each country already had, thereby consolidating resources, researching and developing innovative products, employing “team play” strategies and taking control of the global market. As a result, the fruits of economic growth were shared by their people and economic growth was assured.

The critical period of Taiwan’s transition from an old economy to a new one happened 25 years ago, when then-president Lee Teng-hui (李登輝) was in office. Unfortunately, his successors, former president Chen Shui-bian (陳水扁) and President Ma Ying-jeou (馬英九), did not follow through with Lee’s “no haste, be patient” policy. Instead, they rushed the industrial sector into expansions westward and southward, with cheap production costs as the primary goal.

They did not realize that before they could expand anywhere, the most important thing was development at home. In other words, they should have established a Taiwanese industrial strategic alliance. Consequently, over the past 16 years, the economic benefits have been reaped by the business owners. There was no cooperation between industries. The result was that the economy declined and it is gloomy everywhere.

The key to the economic successes of Japan and Germany was that the leaders of their industrial strategic alliances and industry associations were extremely patriotic and had comprehensive leadership skills. In addition, both countries’ governmental agencies understood the advantages and weaknesses of their industries, which allowed them to formulate reasonable industrial policies.

For instance, before introducing an environmentally friendly standard or labor act, they laid out five stages for its completion, each of which took five years to achieve, so in total it took 25 years to bring the policies to fruition. They took a step-by-step approach so that industries could gradually improve their financial and infrastructure readiness, instead of having to rush to meet all their targets at once and falling miserably by the wayside.

The majority of Taiwanese industry associations spent the past 16 years doing business across the Taiwan Strait and even used public resources to expand personal business territories in China. Most of these people were opportunists, who did not seem to be able to distinguish friend from foe.

In such circumstances, it was almost impossible to form a strategic alliance. Meanwhile, the head of the nation was completely oblivious to what was going on. Chen and Ma said several times that they would seek advice from Taiwanese businesspeople, but the businesspeople that they sought advice from were not those whose earnings were the foundation of the nation’s tax revenues, whose businesses stayed in Taiwan to improve Taiwanese industries and whose profits were paid to a great many workers in this nation.

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