Last week, the Ministry of Economic Affairs said it had approved investment applications filed by handset lens maker Largan Precision Co and metal casing supplier Catcher Technology Co, stating that the two companies plan to invest more than NT$3 billion (US$103 million) in Taiwan and create 3,800 jobs at home in three years.
The Industrial Development Bureau said it also expected more Taiwanese firms operating overseas to choose to invest in their home market, bringing jobs back to the nation after the government launched new investment incentive plans last month. Under the new plans, qualified applicants will receive government assistance in acquiring land, zero tariffs for equipment imports, low-interest loans and higher quotas for foreign labor.
Plans to bring back manufacturing jobs are good for the nation’s economy and increasing employment, and could enhance a company’s corporate image. Though the companies’ plans to move to Taiwan are attributable to the government’s beneficial incentive plans, they are also spurred by the fact that it is getting more difficult to do business in places like China, in terms of rising wages and increasing environmental standards.
However, how likely is it that a substantial number of Taiwanese firms operating overseas will move production back home? Could it prove to be no more than wishful thinking? There are no easy answers to these questions in the short term, but the government has had enough bitter feelings about overseas Taiwanese firms in recent years, in addition to frustrating experiences with some domestic manufacturers amid sporadic public protests and constant policy changes.
Nevertheless, at a time when the outlook for the domestic labor market seems gloomy, it is hoped that the moves by Largan and Catcher may encourage other companies to follow suit, which would improve local employment.
Regardless, the number of potentially returning firms represents just a tiny part of the nation’s overall manufacturers with operations abroad, and those in labor-intensive sectors are not likely to return to Taiwan, because land and labor costs, as well as other operating expenses, are higher than those in China and other Southeast Asian countries.
Over the past three decades, many labor-intensive manufacturers have left Taiwan, while the nation’s economy has gone through structural adjustments and shifted its focus toward high-capital and technology-intensive industries. Therefore, the government’s introduction of investment incentive measures should not be seen as inviting all overseas Taiwanese firms to return to Taiwan. Instead, it should be seen as a policy to encourage those who plan to bring back production to Taiwan and who are willing to move on from contract manufacturing to concentrate on research and development (R&D), innovation and brand marketing.
Moreover, the government should expand its short-term incentive package into long-term policy, in a bid to cultivate high-end and high-value-added production, and nurture high-quality companies at home, hoping that one day there will be more manufacturers like Taiwan Semiconductor Manufacturing Co, which has more than 90 percent of its global employees in Taiwan, has strong R&D capabilities for technology innovation and enjoys high gross margins, and raises wages for its employees every year.
The success of this policy depends on an effective and efficient administrative system, which means a consistent development strategy and a united force among various government agencies to tackle the nation’s economic problems, labor disputes and environmental issues. There is no quick fix for all these matters, but the government should nevertheless try, and over time it would find a willing audience in companies.