How will Taiwan navigate the rough seas of new technological industries? A lack of vision and direction is making the answer more and more unclear.
US columnist and author Thomas Friedman tackled the problem while visiting Taiwan last month.
Noting that the nation used to be known as the “kingdom of computers,” Friedman said that the world has long since moved on into the mobile age, but Taiwanese businesses and commerce do not have a conspicuous presence in the realm of mobile e-commerce operations.
Major players like Apple, Tencent and Amazon have left their Taiwanese counterparts trailing far behind.
Friedman thinks that government departments have misjudged the impact of technological change and warned that Taiwan has at most 10 years to come up with policies that generate synergy and lead to progress, otherwise its remaining talent will say “goodbye.”
Friedman is the author of several books, including The Lexus and the Olive Tree — Understanding Globalization, The World Is Flat — A Brief History of the 21st Century and Hot, Flat, and Crowded — Why We Need a Green Revolution and How it Can Renew America.
His books provide in-depth accounts of scientific, technological and industrial trends and have become classic bestsellers all around the world. Although Taiwan is a small country with few resources, Friedman’s books have always presented it with the positive image of a country riding the crest of global technological industry.
In The Lexus and the Olive Tree, Friedman wrote of Taiwan in glowing terms, saying: “Taiwan is feared in Silicon Valley for its innovative prowess, connectivity and dynamic capitalist business culture that deftly exploits all this technology. If Taiwan were a stock, I’d buy it.”
The chapter from which that quote is taken is titled “Buy Taiwan, Hold Italy, Sell France,” showing that when Friedman wrote it, he saw Taiwan as being full of potential and hope.
Why, then, has Friedman delivered such a gloomy warning on his latest visit?
The glowing image the nation previously enjoyed was not mere wishful thinking on Friedman’s part. Taiwan did indeed create an economic miracle. More than two decades of double-digit economic growth made it a prosperous country of which it was said that “Taiwan is awash with money.” It became a role model for other developing countries.
In those days, Taiwan was determined to make a fortune. Its traditional manufacturing industry was so strong that the words “Made in Taiwan” became famous around the world. With the arrival of the computer age, the nation became an important base for assembly and subcontracting for worldwide customers, and a key link in their component supply chains.
When the 921 Earthquake struck in September 1999, the disruption it caused to production lines made the world realize Taiwan’s indispensable pivotal position in the global technology industry.
Perhaps the most valuable aspect of its economic takeoff was that it was accompanied by advances in culture and civilization. Universal values of freedom and democracy supplanted the old authoritarian ideology, and became the motivation force for democratization and reforms that have built a Taiwanese identity.
The “hardware” of industry worked in tandem with the “software” of democracy. Material prosperity and legal reforms played complementary roles that helped it “come of age,” escaping from poverty and dictatorship and joining the ranks of enlightened nations.
However, even at its most glorious hour, Taiwan’s gilded facade already showed signs of flaking. Following the end of the Cold War and the breakup of the Soviet Union, a huge supply of cheap labor became available in eastern Europe as well as China.
In Taiwan, endless labor disputes, ever-stricter environmental protection laws, soaring land prices and swelling salaries forced traditional industrial manufacturers to move to China in large numbers. They were followed by high-tech companies, which were not just concerned about costs, but also lacked the will to renew themselves and create high added value.
Today these companies remain in Taiwan only in the form of research and development centers and corporate headquarters, while their real jobs and revenue creation are mostly in China. This has resulted in GDP being artificially inflated, while salaries have shrunk considerably.
Consequently, low pay and the working poor have become more conspicuous features of Taiwanese society. Past glories have faded and Taiwan is following in the tracks of Japan’s lost decades.
While Taiwan’s old manufacturing base has become increasingly shaky, even more worrying is the fact that the nation has fallen behind trends in the new technology sector. The nation has become a straggler in futuristic industries such as artificial intelligence, the Internet of Things, cloud computing, big data, e-commerce, the “new retail,” robots and driverless vehicles.
Meanwhile, China is showing powerful ambition. The Chinese government works hand in hand with companies and provides plentiful state funding, helping them make their mark in e-commerce, big data and mobile payments.
If Taiwan does not speed up, it will end up watching helplessly as the world moves on, leaving it marginalized.
The worrying thing is that Taiwan’s policies, laws and business orientation rarely go beyond sloganistic descriptions of future prospects, while realistic comprehensive strategies are lacking. With this piecemeal approach, Taiwan has not drawn up a complete blueprint for the future. Innovative and creative industries that thrive on flexibility find themselves tied down by the rigid system of “one fixed and one flexible day off per week.”
“Green energy” companies, whose mission is to bring about a nuclear-free homeland and prevent global warming, are hampered by environmental protests, outdated laws and administrative inefficiency, so that they can only hobble forward.
Taiwan Semiconductor Manufacturing Co might be Taiwan’s greatest industrial success story, but 80 percent of its shares are now in the hands of foreign investors.
When we go forward, the pace is slow, but there is no going back, because the rustic beauty of the past is gone forever. Where is Taiwan to go, then?
Friedman is worried, but he is not the only one. A lot of people in Taiwan are also waiting for government leaders to come up with some answers.
Translated by Julian Clegg
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