Advantage depends on soft power

By Hong Chi-chang 洪奇昌  / 

Sun, Jan 19, 2014 - Page 8

A new year and new economic prospects lie before us. Following the US economic recovery and an easing of the eurozone debt crisis, most countries are optimistic that this year will be a vibrant one for the world economy.

In his New Year’s Day address, President Ma Ying-jeou (馬英九) said that his government would make the economy its highest-priority task. However, the question is: How many members of Ma’s administration really have their heart set on fixing the economy, rather than on political struggle and the elections that are scheduled to take place over the next two years?

The 2014 Business Climate Survey, published by the American Chamber of Commerce in Taipei, identifies government bureaucracy and inefficiency as the main factors impacting business operations in Taiwan. Political uncertainty is another worry for the chamber’s members. While the number of survey respondents expecting to increase their investments in Taiwan during the coming year has risen to 48 percent from 41 in the 2012 survey, the number foreseeing a substantial increase has dropped from 10 percent to 7 percent.

Other figures reflect similar worries. Foreign direct investment inflow to Taiwan is at the bottom of the four Asian Tiger economies — Taiwan, Hong Kong, South Korea and Singapore — having slid from about US$5.4 billion in 2008 to about US$3 billion this year, and it is far behind South Korea, which is in third position at US$9.9 billion — more than three times Taiwan’s figure.

Faced with the government’s unclear policies and inefficiency, not only foreigners but also Taiwanese are pessimistic. Taiwan’s economy has been shrouded in a recession fog for 27 months, and its economic growth rate has remained below 2 percent for two years in a row — 1.25 percent in 2012 and 1.74 percent last year. The Cabinet’s Directorate-General of Budget, Accounting and Statistics (DGBAS), with its various research departments, thinks Taiwan’s growth rate for this year will be about 2.59 percent.

The DGBAS pessimistically predicts that low growth will become the “new normal” for Taiwan, and that in the future it will be a tough job to keep the growth rate above 2 percent.

Industry around the world is headed for some big changes. The US is planning to bring industry back home through what it calls “reindustrialization” and renewal of production methods and technology. China, for its part, faces a range of problems such as rising labor costs, the rising exchange value of the Chinese yuan and increasing capital and environmental protection costs. These factors are certain to have an impact on the competitiveness of products made by Taiwanese-owned businesses in China that engage in labor-intensive production. In addition, China has been adjusting its economic structure during the last few years, speeding up its fostering of home-grown businesses. China’s products have a big overlap with those made in Taiwan, so that Chinese and Taiwanese industries, which were once complementary, are increasingly competing with one another.

In response to this volatile situation, Taiwan must create a more competitive investment environment and speed up transformation and restructuring in its business sector.

In this age of soft power, talent is the key factor. Speaking at the National Conference of University and College Presidents on Jan. 9, Taiwan Semiconductor Manufacturing Co chairman Morris Chang (張忠謀) said that the majority of businesses in Taiwan are short of talented people at the basic level, and they face an even greater shortage of talent when it comes to innovation and leadership.

Chang said that if businesses aim to transform and upgrade, a different approach will be needed.

In view of the changes that are going on, the government should give a clearer explanation of how it intends to foster a labor force that is more capable of working in transnational, trans-regional and trans-sectoral environments. How does the government intend to attract overseas technical talent to Taiwan? How does it plan to rebuild Taiwan’s technical and vocational education and foster a middle-grade technical workforce? How is it going to get university professors out of a situation that has turned them into thesis-writing machines and encourage cooperation between business and academia? How will it ensure that young people in Taiwan are talented enough to find employment abroad, stand up, go out and earn good money in the big, wide world?

If Taiwan is really going to make a breakthrough this year, and more breakthroughs over the next two decades, the nation will need to propose clearer policies for developing manpower resources, and it will need to implement those policies more effectively. Those in government, and those who come after them, will all have to demonstrate vision and resolve in order to revive Taiwan’s competitive advantage.

Hong Chi-chang is chairman of the Taiwan Economy and Industry Association.

Translated by Julian Clegg