The IMF lauded the role played by the Republic of China’s (ROC) government in technology innovation, noting that it has helped the country escape the middle-income trap and leapfrog to high-income status.
The central bank cited an IMF report released on Tuesday last week as saying that Taiwan was among the nine economies in the world to boost their income between 1970 and 2010. The others were South Korea, Cyprus, the Czech Republic, Greece, Ireland, Malta, Portugal and Slovenia.
However, only Taiwan and South Korea, whose income levels were below that of Malaysia in 1970, made it to high-income status, the IMF said, adding that both governments had mapped out technology development strategies.
The two nation’s experiences “were much more successful in innovating and increasing productivity,” the IMF said.
It said that an increase in research and development spending, an improvement in education, a hike in the number of science and engineering graduates, and a move toward creating local firms and clusters in the high-tech sector were the key for the two to break the middle income trap.
Taiwan’s government designed an original strategy with an initial focus on creating small and medium-sized enterprises in close and long term industrial relations with multinational corporations, instead of building the country’s own global brands, the fund said.
It relied on state-sponsored high-tech institutes to spin off firms to introduce technology to the market, and invested massive funds in training engineers abroad, which led to the formation of a “technical community” that had valuable technical experiences and informal connections with the Silicon Valley, the IMF said.
It cited the example of the government setting up the Industrial Technology Research Institute (ITRI, 工研院) in 1973 to be an umbrella organization to promote the introduction of new technologies in the electronics sector, led by ITRI’s Electronics Research Services Organization.
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