Harvard Business School professor Michael Porter said on Thursday in Taipei that he supports a proposed trade pact between Taiwan and China, but he also urged Taiwan to work on its weaknesses to attract foreign investment.
“Taiwan already has a huge economic relationship with China despite the fact that there is no framework,” said the economist-turned-strategist in a speech delivered at a forum held at the National Sun Yat-sen Memorial Hall. “What we are talking about here actually is just formalizing something that’s already happening.”
ALTERNATIVES
Michael DeNoma, chairman of the Taipei-based Chinatrust Commercial Bank and one of the panelists at the forum, asked Porter if there are any alternatives to an economic cooperation framework agreement (ECFA) that the Taiwanese government is intending to sign with China later this year.
“I thought about that,” Porter said. “I don’t see any alternative, any practical alternative. But more importantly, I don’t see why we would want an alternative.”
Taiwan can construct a formal trade relationship with China, which can allow Taiwan to continue to substantially enhance its economy over time, he said.
There are many agreements like this that other countries have signed with China and in many cases, these countries are much weaker economically than Taiwan, Porter said.
“I am confident that you will be much better off with such a framework than you will be without it,” he said.
SIZE DOESN’T MATTER
Porter also urged Taiwan to focus on “getting the fundamentals right” by building an attractive business environment and establishing a good infrastructure rather than worrying about the size of China.
“Size, per se, is nothing to fear,” he said.
Porter said that, for example, his home state of Massachusetts in the US has to compete with much bigger states such as New York, Connecticut, Texas and California.
“Because we have a very educated workforce, because we are a knowledge center, because we are innovative, because we have a very strong base in financial services and a few other fields, we have been able to prosper,” he said.
While lauding Taiwan for its economic achievements over the past decades, Porter said the country needs to work harder to attract world-class companies.
‘CHRONIC WEAKNESSES’
He also called on the country to address “some chronic weaknesses” by reducing corruption, bureaucracy and regulatory complexity, as well as improving labor force flexibility and the quality and transparency of the financial market.
He also said that Taiwan needs to encourage more innovation and research and development in local universities, adding that the schools did not rank high on the list of Taiwanese originators of US patents for the years between 2004 and 2008.
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