Liberty Times (LT): How would you diagnose the symptoms of Taiwan’s economic ills?
Premier Lin Chuan (林全): Comparing Taiwan’s economic growth with those of Southeast Asian nations over the past 20 years, Taiwan has really not performed very well.
This is related to inadequate structural growth, particularly in the form of investment, which has been declining annually. Why is there a decline in investment? The way I see it the problem lies in the effects on the desire to invest.
Photo: Liu Hsin-de, Taipei Times
There are a few causes at play, such as factors of uncertainty. For example, there is a long-standing conflict between environmental protection and business interests; many large-scale development proposals get delayed indefinitely by environmental impact assessments.
Many new investors or investors in recent creative projects are unable to ascertain the stipulations of future assessments. In the end, many simply back out. This is a problem we need to address. However, I am not saying we should undermine assessment standards; rather, we should find a way to reduce the level of uncertainty that potential investors face.
Second, there is the issue of labor. There should be more stability in labor regulations and administrative systems.
There has been too much delay in making decisions that affect certain industries. If there can be more stability in the enforcement of the Labor Standards Act (勞動基準法), then there would be much fewer disputes.
Also, there is the issue of relaxing outdated restrictions that affect new industries like digital services, communications technology and network systems. These industries create a wealth of economic activity and opportunity, but they need to be freed from outdated regulations or they cannot thrive.
As you can see there are no new investors to speak of in Taiwan, only the investors that were already here, and even they are disappearing with the changes to industry structure. Therefore, overall investment has been declining — a very serious problem that we must face.
Among things that must be changed, the Company Act (公司法) is the most obvious; it must be updated to allow new industries into the market. Maybe new business styles can spur old businesses and bring change to the economy.
There is also the problem of the market. To put it simply, are investors in Taiwan investing only in the local market, or in the world market? The local market is limited, but that is fine. However, to be more multifaceted and see more benefits, a company has to be international.
I want to know: What companies in Taiwan can sell their products to the world? Such companies must maintain their competitive edge. Signing free-trade agreements with other nations is something this nation must work toward. However, at a time when the global economic situation is not very good, opposition to globalization is growing and the voices of opposition can be heard here as well.
However, if we do not become more international, there are simply not many investors to draw from. We must seek free-trade agreements and expand our presence in the global economy.
We do not have free-trade agreements with any major nations, we only have the Economic Cooperation Framework Agreement [with China], but it is just a framework, and its associated goods and services trade has been blocked, and not for only political considerations. We need to join the Trans-Pacific Partnership, or sign free-trade agreements with the US or EU. The effect on the local economy will be relatively large. How will we handle this? We will have to have systems in place to moderate its effects. Honestly speaking, we were not well-prepared in the past.
We have to make structural changes one step at a time. It is analogous to having vegetables when we want fruit. We might want fruit, but fruit does not grow as quickly as vegetables — we need to plant a tree, wait for it to grow, and then wait for fruit. We could graft a tree, but the quantity of fruit would be limited. To improve Taiwan’s economy, the government must plant vegetables, fruit trees and graft trees — do all three. Otherwise, it will be hard to replicate the prosperity of the 1990s.
LT: It is not a problem that the government needs time to plant a tree, but it should tell the people what kind of tree it is planting. What fruit will it bear?
Lin: Regarding economic structural changes, President Tsai Ing-wen (蔡英文) referred to the “five up-and-coming industries.” Whether we add two to that, or three, or four, what we are actually saying is that we recognize the need for new types of “trees.” We hope that new industries can help drive our economic growth.
First in importance is “green” energy and alternative energy sources. When nuclear power plants go offline, we will be putting our hopes into other areas [of energy production], hoping those will allow us to fully overcome our reliance on the outside world.
Renewable energy is multifaceted. I hope we will see the results of our efforts in solar power in two years and will have made achievements in wind energy in four years.
Wind and solar power can easily become successful in Taiwan, and local technology in these areas would have the opportunity to become an international model.
In the past we did not achieve that success and there are still problems to overcome, such as the encroachment of solar panels on farmland and the sound pollution created by wind turbines. The government must refine its efforts to find solutions so that we can see wind and solar power industries in Taiwan bear fruit. We have four years to strive in this endeavor.
Alongside “green” energy, there would be the emergence of many industries that would develop things like “smart” power meters and “smart” networks. Families would benefit greatly from the use of big data. Furthermore, through the reduction of energy consumption, outlying islands can become “green” and energy-efficient — they can become islands that are mostly reliant on alternative energy sources.
LT: Can you tell us more about the biotech industry?
Lin: Over the past few years, the Taiwanese biotech industry — especially the pharmaceuticals sector — has shown potential as many companies are investing in research and development of new drugs. Due to the size of Taiwanese pharmaceutical companies, and the increasing amount of money used in research and development, Taiwanese companies often sell their initial results to larger companies.
We hope that Taiwanese pharmaceutical companies can grow, but we must have more than companies that are devoted to researching new drugs. The profits from new drugs are limited, while the back end of pharmaceutical companies is far more profitable.
In addition, extant generic drugs in Taiwan, due to cutthroat price wars and low profits, are faced with only two ways of going forward — one is to develop standards.
Some of the patents for generic drugs have already expired, but even so not every pharmaceutical company is capable of manufacturing those drugs. If the government were to create standards and find pharmaceutical companies that could manufacture generic drugs — in some cases even better than the original manufacturer — then the firms would generate more profits from generic drugs.
The original manufacturer would therefore be more willing to outsource production or allow other companies to buy the rights to manufacture the drugs. If generic drug companies are willing to improve, it would help Taiwan greatly.
The second method is to market the drugs on a global scale.
A large portion of Southeast Asian nations would be willing to purchase generic drugs. However, the government should sign treaties or accords with these nations, ensuring that Taiwan-approved drug licenses would be recognized in other nations as well. In return, we would recognize the validity of drug licenses from these nations.
We must carefully choose which nations to work with and the quality of the drugs that we recognize.
Translated by Staff writers William Hetherington and Jake Chung
This is Part I of a two-part interview. Part II will be published tomorrow.
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