Mon, Dec 24, 2001 page8

• No time to be marching into China

  • By Wang To-far 王塗發
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  Since the Chen Shui-bian (陳水扁) administration replaced the "no haste, be patient" (戒急用忍) policy with "active opening, effective management" (積極開放, 有效管理), the industrial sector has increased pressure on the government to lift bans on China-bound investment.

  The Ministry of Economic Affairs recently convened a conference to discuss the pros and cons of easing restrictions barring China-bound investment in 18 product areas used in wafer production, packaging and testing. Senior representatives from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), United Microelectronics Corp (UMC, 聯電), Winbond Electronics Corp (華邦電子), Powerchip Semiconductor Corp (力晶半導體) and Macronix International Co (旺宏電子) attended the conference and called for easing the ban.

  Macronix chairman Hu Ting-hua (胡定華) was very unhappy with the government's two-week delay in deciding whether to allow Taiwanese businesses to invest in eight-inch wafer plants in China. He said the government should first make it clear whether business investment in China is right or wrong. If the government recognizes China-bound investment as a part of globalization, as well as an extension of Taiwan's economic development, then no restrictions or management regulations should exist. There should be a comprehensive opening of investment instead, Hu argued.

  TSMC's deputy chief executive officer Tseng Fan-cheng (曾繁城) said the government should be more rational and less controlling, and allow eight-inch wafer manufacturers to invest in China and not try to restrain the industrial sector.

  Winbond president Chang Ching-chu (章青駒) said he was bewildered by the government's scruples. He believed that with or without Taiwanese investment, other foreign manufacturers would set up wafer plants in China to Taiwan's detriment.

  However, if all these business demands were to be satisfied, the government policy of effective management would be nothing more than a slogan.

  Should globalization be used as an excuse for the government stop exercising any management over outbound investment whatsoever? Is it really that urgent to free all investment barriers on eight-inch wafer foundries in China? Will these semiconductor manufacturers face their demise if restrictions are not eased now?

  Government assistance has nurtured the semiconductor industry with tens of billions of New Taiwan dollars. Industrial Technology Research Institute (ITRI, 工研院) initiatives and the creation of numerous science-based industrial parks have made the sector what it is today.

  The industry thus possesses internationally competitive power and generates a profitability ratio much higher than traditional industries. TSMC and UMC -- two leaders in OEM (original equipment manufacturing) services -- play indispensable roles in the global marketplace.

  There is simply no convincing reason why the industry must stretch its tentacles into China right now. If the restrictions on China investment cost them so many precious business opportunities, how could they have been so successful given that foreign companies, free of any such restrictions, have invested in China for so long?

  ITRI chairman Weng Cheng-i (翁政義) was quoted in the media as saying that the US still views China as an antagonist and prohibits the sale of equipment related to eight-inch wafer plants to China. Given this, Taiwan's government should continue to resist -- in fact increase its resistance -- to Taiwanese industries marching into China.

  The US still imposes restrictions on exports of high-tech products and technology to certain countries based on national security and diplomatic needs as well as economic interests.

  The US led the drive among Western industrialized countries to establish the Coordinating Committee for Multilateral Export Controls (COCOM) in order to restrict the supply of high technology to Soviet-led East European socialist countries and other countries unfriendly to US and Western interests. Through negotiations and contracts on bilateral export controls, non-COCOM members -- including advanced industrialized countries such as Austria and Switzerland and newly industrialized countries such as Taiwan, South Korea and Singapore -- were also included in the control mechanism.

  Following the collapse of the Soviet Union and the transformation of Eastern Europe, the US continues to impose export controls on high technology to antagonistic or unfriendly countries, such as Cuba, Iraq, North Korea and China.

  Since even a superpower such as the US favors such restrictions, based on its national security concerns, shouldn't Taiwan, laboring under China's military threat, lay down controls on China-bound investment in high-tech products and technology?

  The semiconductor industry currently is the most competitive industry in Taiwan. Once eight-inch wafer plants are allowed to be built in China, this advantage would certainly vanish quickly. If no stronger industry arises, Taiwan will not only see an increase in unemployment among blue-collar workers, but also white-collar workers. Enterprises will create jobs in China but leave unemployed workers in Taiwan. Taiwanese workers may have to start earning their daily bread across the Taiwan Strait.

  Facing a possible hollowing out of the local manufacturing base and serious unemployment caused by the opening up more areas for investment in China, has the government mapped out comprehensive policies? This problem must be resolved before the ban is lifted. Therefore, the government should think twice before allowing investment in eight-inch wafer plants in China.

  Wang To-far is a professor of economics at National Taipei University.

  Translated by Jackie Lin
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