Wed, Oct 24, 2001 page8

• Anonymity may keep China quiet

  • By Nat Bellocchi 白樂崎
  • • 
    • 
    • 

  In of August this year, the Asian Wall Street Journal published an article that revealed China had barred Credit Suisse First Boston from future business in the country. The bank was being punished for having hosted two conferences which included senior officials from Taiwan.

  This was publicly confirmed by China's finance minister some days later. There was not a strong reaction to this in the international community, nor, for that matter, in Taiwan. The Sept. 11 attacks on the US happened a few days later, and this precedent seems now to be forgotten. It shouldn't be. Despite some recent backtracking by Beijing, it remains of great importance to Taiwan's ability to attract foreign investment.

  There was some criticism of Beijing's action against Credit Suisse from Washington, and the US secretary of the treasury had said he would address this problem in his then-forthcoming meeting with China's finance minister. He did not, giving the impression that no further pressure would follow. The Sept. 11 attacks took place immediately thereafter. As a matter of principle, and because it will negatively impact Taiwan's strategy for upgrading its economy, the issue of using economic intimidation as a political weapon should continue to be soundly condemned.

  There has been considerable public discussion in Taiwan on the need to upgrade the economy. Aside from many infrastructure projects, there is the fundamental need to establish a new level of technological capability that would enable Taiwan to continue to be more advanced than its competitors. Upgrades in R&D capability and biotechnology have been mentioned. A service center for the region is another option.

  Staying ahead of the technology curve is Taiwan's most urgent economic need and the country's best chance to advance out of the present slowdown. While most investment will be domestic, foreign investment and technology cooperation will play a vital role.

  Taiwan's unique openness as a free country with a well-developed market economy, an intellectual base far superior than that in China, and a central, accessible geographic location in East Asia, makes it a natural attraction to foreign companies.

  But then one must consider this form of intimidation China is using against Taiwan. Several years ago, there was a more subtle wave of concern among US companies wanting to do business in China. Invest in Taiwan, the rumor went, and you will not be able to invest in China. At that time it was not true, and yet, it was very difficult to convince potential US investors that this was not the case.

  Taiwan's government at that time did make a considerable effort to entice foreign companies. There were programs -- which may still be in existence today -- where senior officials would make individual efforts with specific American companies to sign a strategic alliance.

  These were more a stated intention than a commitment, but perhaps were useful. The Asia Pacific Regional Operations Center program was another government effort to encourage investment by both domestic and foreign companies. From the foreign investment perspective, there were some successes, but its attraction was soon overwhelmed by the growth of foreign investment in China.

  Another effort that seemed quite successful was what we called the "dog and pony show." The American Institute in Taiwan (AIT) and the US-ROC Business Council sponsored conferences in several cities in the US with the help of senior experts from the government of Taiwan, loaned to us as consultants.

  The turnout was good, and there were ample opportunities for them to engage in industry-specific discussions with the experts. The greater benefit was the demonstration that the US government had a clear policy to encourage US businesses to invest in Taiwan.

  But if actions taken by China, such as the Credit Suisse issue, stand as an unchallenged precedent, it will be very difficult to assure potential American investors that they face no risk of retaliation from Beijing.

  That seems to be what China wants, even though it is clearly not in their broader interest. China has become more dependent on foreign direct investment than Taiwan ever was, even in the early years of Taiwan's economic development. The amount of foreign investment that would likely go to Taiwan, however, even in a good year, would be insignificant compared with the amounts received by Beijing.

  Further, when political pressure of that kind is put on business, it raises the risk -- and therefore the costs -- of the investment. Recent reports indicate China may be realizing this. The damage has been done, however, and the same pattern could be repeated as it has in the past.

  Another point that seems to run counter to China's interests is the message that Beijing is willing jeopardize the well-being of the people of Taiwan. This could only, yet again, reduce support for an accommodation with China.

  On the Taiwan side, however, given the low level of attention this problem has received by the local media, it is even more important that this policy of economic intimidation becomes more widely known.

  There are doubtless innovative means of overcoming this obstacle. It could be part of any future negotiations, or a condition for beginning any dialogue. The issue could also be raised internationally in the WTO once Taiwan becomes a member.

  But at best these will be long-term efforts, and will depend on others to be effective. Taiwan's prosperity in this era of globalization, will continue to depend on what it can do for itself.

  There's no shortage of ideas in Taiwan. Sometimes one comes to believe there are too many of them. My own background at AIT has led me to think of one idea, the science park concept. Modified for a different purpose, it could be a place for providing space and services under contract with no-name companies.

  This would help avoid the temptation China seems to have to oppose whatever is important for Taiwan, including big-name companies succeeding there.

  Nat Bellocchi is the former chairman of the American Institute in Taiwan and a special adviser to the Liberty Times Group. The views expressed in this article are his own.
• Most Popular

  • 1

    Palmeiras hopes for club cup win

  • 2

    US to deliver 10 new F-16s, source says

  • 3

    Taiwan blacklists Huawei and SMIC

  • 4

    Ma Ying-jeou’s forum speech regrettable, MAC says

  • 5

    Barring of Chinese officials justified, MAC says