Mon, Jun 17, 2019 - Page 6 News List

EDITORIAL: Returning firms need careful handling

Over the past two weeks, many listed companies have held their annual general meetings to present their financial results for last year. They also answered shareholder questions about this year’s economic outlook and business climate. The questions focused on the effects of the US-China trade dispute on their business, as well as contingency plans for emergency situations and progress in relocating production sites to avoid US tariffs.

Many companies, ranging from electronics to petrochemical firms and machinery to textile manufacturers, have in the past few years been under pressure because of rising production costs in China. They are now facing challenges presented by the trade dispute, which is unlikely to be resolved soon.

For instance, contract electronics manufacturer Wistron Corp told shareholders that it aims to set up a production facility in the US; telecom equipment maker Sercomm said that it has established a new manufacturing site in the Philippines and more than doubled its output at a plant in Miaoli this year; and industrial papermaker Cheng Loong Corp said that it is building new plants and expanding manufacturing facilities in Vietnam.

Many small and medium-sized businesses are waiting to see if bigger manufacturers will relocate production back to Taiwan or to countries in Southeast Asia. That is because these small firms are like satellites orbiting larger companies — they will follow their bigger partners if they relocate to avoid US tariffs. Manufacturing in China will be under pressure in the long run, regardless of whether Donald Trump remains the president of the US, as there is a bipartisan consensus in the US that China needs to be countered.

So far this year, to avoid being battered by the trade dispute, 73 Taiwanese companies with overseas operations have gained government approval to take part in a Ministry of Economic Affairs program to invest at home. These firms have pledged to invest more than NT$375 billion (US$11.89 million) in Taiwan, creating 34,100 job opportunities.

The persistent US-China tensions have provided an opportunity for Taiwanese companies to transform and upgrade their business models and production capacity.

If Taiwanese firms move en masse, it would be an opportunity for Taiwan to get rid of its dependence on China, allowing companies to establish a so-called “non-red supply chain” in Taiwan, Southeast Asia, the US and other countries. Taiwanese businesses would inevitably play an important role in restructuring the nation’s industrial chain.

The government should encourage Taiwanese businesses to set up high-end manufacturing, research and development, and operational headquarters in Taiwan, while helping them to develop industrial clusters in ASEAN and South Asia by negotiating with those countries based on its New Southbound Policy to achieve economies of scale and mutual benefits.

While encouraging the return of overseas companies, the government must also focus on industrial upgrading, creating a high-value-added economy and tackling the problem of low salaries.

However, the government needs to avoid having an overconcentration of certain industries, such as information technology and communications-related firms, as that is one of the main reasons Taiwan could suffer from the trade dispute. After all, Taiwan is a small country and making good use of limited resources such as land, utilities and labor would be vital to transforming the nation’s economy in the long term.

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