The Liberty Times Editorial: Failed policies are killing business

Fri, Apr 05, 2013 - Page 8

There have recently been two major topics in the news: Samsung Electronics Co’s plan to “kill Taiwan” and how Changhua County’s Shetou Township (社頭), a place famed for its hosiery industry, is having a hard time surviving and is being “wiped out.”

The first topic is linked to the zero-sum competition between South Korean and Taiwanese companies, as Taiwan’s failed industrial policies have allowed Samsung to single-handedly wipe out several of the nation’s key industries.

This is a very worrying development for the nation’s high-tech industry.

The second topic is linked to the marginalization of Taiwan’s traditional manufacturing industry in the global market, as the nation has seen a sharp drop in competitiveness, loss of overseas orders and factory closures.

The first issue concerns high-tech industries, while the latter is about traditional manufacturing industries.

While these issues may not seem to be linked, they both reflect the inability of the nation’s business sector and government to handle changes in the external environment and enhancing their competitiveness.

Phrases like “Kill Taiwan” and townships being “wiped out” may sound sensational and a bit exaggerated, but these two issues serve as a warning for the local economy.

If the government could implement policies in response to these problems in a timely manner, it might be able to save the economy, which is now on the brink of collapse.

However, if these warnings are ignored, they could very well become true, and Taiwan’s economic decline would reach a point of no return. If that happens, we will not have far to go before someone manages to “kill Taiwan” and townships are “wiped out.”

According to media reports, Samsung launched a four-part plan to “kill Taiwan” when the global financial crisis hit in 2008.

It was to start by annihilating Taiwan’s DRAM industry, followed by its LCD panel industry, then smartphone maker HTC, and finally the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co, and the world’s biggest electronics contract manufacturer, Hon Hai Precision Industry Co.

If this plan is true, it appears to have worked, as Samsung has gained major headway in these industries and is only one step away from achieving its final goal.

Whether or not there is a plan to “kill Taiwan,” the fact is there is a great deal of overlap between the two countries’ industries.

Both economies are also export-oriented and are major competitors in the international market. As such, competition between Taiwanese and South Korean tech industries — especially in the fields of DRAM, LCDs and mobile phones — is inevitable.

Taiwan has major players in these industries, but none have been able to take on Samsung.

After taking out some Taiwanese companies, Samsung has become a major force in the mobile telephone, panel, semiconductors and television industries.

One in four people around the globe uses either a Samsung phone or television. This gives Samsung a market value of approximately NT$6 trillion (US$200 billion).

On the other hand, the industries Taiwan has worked so hard at nurturing, such as those included in the government’s “Two-Trillion and Twin-Star Industries” plan, were unable to deal with the competition.

Not only did they fail to compete with Samsung, they also accumulated massive debt and hundreds of billion of New Taiwan dollars in losses in a span of two to three years. This has led to DRAM plants closing down and LCD panel makers struggling to return to profitability.

This leads us to the question of whether the government had the right strategy in place for these industries.

High-tech industries should be focused on research and development, innovation and technology upgrades, as well as building brands. This is the only way they can stand up to the competition.

However, the government focused instead on scale and quantity. This, coupled with ineffective governance, made it difficult to pursue industry integration or to initiate dramatic changes when businesses ran into trouble. That is why Taiwan lost so seriously to South Korea.

The crux of Shetou’s problems is that Seoul and Washington have a free-trade agreement, giving South Korean textiles tariff-free access to the US market. When compared with the 10 percent to 19 percent tariffs that Taiwanese makers have to pay, South Korean products have a clear advantage. As a result, many Taiwanese textile companies have lost orders, posted losses and were forced to shut down.

Manufacturing employs the largest number of people in any country and this is why US President Barack Obama is trying to lure back companies to rebuild the US’ manufacturing industry and spur economic growth.

Taiwan’s traditional manufacturing industries were a major contributor to the nation’s economic boom, but when they faltered, the government ignored the challenges that they were facing and failed to build an environment to facilitate their recovery. It sat around and watched as entire industries moved overseas or closed down. That is why entire areas like Shetou fade away into obscurity.

The way Taiwan’s high-tech industry has been severely beaten by Samsung and the way Shetou’s fate is repeatedly being played out in other parts of the country are a reflection of the failure of the government’s industrial policy.

They also prove once again how Taiwanese industries can do nothing but rely on themselves because the government lacks a clear policy, does not know how to execute policies and is sometimes even a stumbling block to business.

President Ma Ying-jeou (馬英九) and his government have been in power for nearly five years and plans like the Twelve Major Construction Projects have become mere slogans or stuff that politicians talk about in speeches.

The government seems to think that talk alone can solve problems. Average incomes have fallen to what they were 14 years ago, unemployment remains high and the economy is faltering. Slogans are not enough to run a country and to solve the nation’s economic woes.

Ma must come up with concrete methods and steps to execute pragmatic policies.

Translated by Drew Cameron