The Democratic Progressive Party (DPP) was defeated badly by the Chinese Nationalist Party (KMT) in the local government elections on Dec. 3. Some saw the elections as a mid-term test for the administration of President Chen Shui-bian (
It is time for the government and the DPP to reform and regroup in order to regain the trust of the Taiwanese people. Most importantly, they must place the painful failure aside and deal with the tests that lie ahead. Yes, there will be more. How the government handles these tests will be reflected not only in an election outcome, but also by economic growth, the employment and inflation rates, as well as in business opportunities and capacity building. Regarding business opportunities and capacity building, the government needs to evaluate the nation's strengths and weaknesses. Strengths should be retained; weaknesses should be eliminated.
It is time for the government to review its goals and fulfill its commitments, instead of setting more goals that aren't achievable and making yet more impossible commitments.
One of the commitments made by the Chen administration was to turn Taiwan into a Green Silicon Island. The promotion of information technology (IT) in Taiwan was one aspect of this. This commitment poses a test for the government. If it is able to provide an adequate answer to this question, then there is still hope that it can achieve a fair final score.
Has Taiwan fully explored its IT potential? The answer is not quite yet. Take South Korea as an example. Taiwan is facing a major trade deficit with South Korea, mainly because of IT imports from South Korea. Electronic parts and components have accounted for more that 50 percent of the annual bilateral trade deficit since 2003.
In addition, South Korea has successfully promoted several brands, such as Samsung and LG, which have become globally recognized. Among the top 500 companies in the world, three are South Korean. In contrast, Taiwan does not have a single company that is significant enough to list in the top 500. However, the story is totally different when looking at the top 100 high-tech enterprises. Fourteen Taiwanese companies have joined this club, while South Korea only has three. In other words, Taiwan does have lots of unrealized potential.
Taiwan has shown strength in small and medium enterprises (SME) in the semiconductor and personal computer manufacturing segment. South Korea, meanwhile, has become an Asian flagship in the production of liquid-crystal display (LCD), dynamic random access memory (DRAM) and other IT products. South Korea has experienced a tremendous economic leap thanks to its advancing and improving IT sector.
Taiwan's economy by contrast has been slowing, regardless of its efforts to build IT-related capacity. As we can see from South Korea's example, it is obvious that we need to do more to tap our IT advantages.
Taiwan needs to place a greater emphasis on protecting intellectual property rights (IPR), enhancing R&D and promoting brand management. Taiwan's IT sector will also soon be facing other issues, including challenges over IPR issues from foreign competitors regarding limited LCD TV technical support.
On the subject of semiconductors, Taiwan's relevant industries ought to strengthen their IC design capabilities and long-term partnerships with technological producers. Taiwan's DRAM manufacturers -- in addition to lowering costs -- should enhance their core technologies. Foundries must take advantage of leading-edge technology to enlarge their existing lead in the field and prevent international rivals from catching up.
The government should also consider revisiting the issue of semiconductor investment in China. According to a report by the Ministry of Economic Affairs, the timing of investment in China is crucial for Taiwan's IT industry. The sooner we do it, the more dominant we can be and vice versa. If we lose IT dominance in China, we may also lose a big chunk of market share. It is true that China's threat cannot be ignored, but dancing with the wolves can be a practical strategy in the current situation.
The painful defeat in the local government elections on Dec. 3 could be regarded as a reminder from the people of Taiwan to the government that it has to work harder to build capacity, create business opportunities and fulfill its commitments.
The defeat signifies that there are more challenges ahead. The government should strive to convert these challenges into opportunities.
Darson Chiu is an assistant research fellow at the Taiwan Institute of Economic Research. Pei-chen Liu is a senior industrial analyst at the institute.
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