Fri, Jan 20, 2006 page8

• Forming a Taiwan economic circle

  • By Tung Chen-yuan 童振源
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  In his New Year's address, President Chen Shui-bian (陳水扁) told the people of Taiwan that "although we cannot turn a blind eye to China's market, we should not view the China market as the only or the last market." In particular, Chen stressed that "`globalization' is not tantamount to `sinicization,'"and that Taiwan must not "`lock in' our economic lifeline and all our bargaining chips in China."

  Chen's hard work has indeed been aimed at creating sustainable economic development for Taiwan. I wonder, however, if he has not mixed up the concept of "market" with the concept of "production" and neglected the complexities of the international division of labor across the Taiwan Strait, something that might cause Taiwan to miss the opportunity to build sustainable development.

  Former vice minister of economic affairs Yin Chi-ming (尹啟銘) has said that, "The globalization idea sees the whole world as one factory where one has to make good use of the comparative advantages of every location. The idea of globalization also sees the whole world as one market, where one has to make use of every local business opportunity."

  This statement is an idealistic description of Taiwanese and other foreign businesspeople investing in China. China is playing factory to the world, so of course Taiwanese and other foreign businesspeople want to take advantage of its cheap production resources.

  But China is not the whole world market, it is merely a newly developing market with unlimited potential business opportunities where businesses from various countries are engaged in all-out competition. Today, a majority of products manufactured by foreign businesses investing in China are exported to the US, Japan and the EU, and they make up more than 50 percent of all China's exports.

  The fact that Taiwanese businesspeople invest in production in China does not mean that China is Taiwan's "only or ... last market." The question of whether Taiwanese businesses see China as their best investment destination involves many factors.

  From an economic perspective, Taiwanese businesses are certain to consider the risks, including the political risk, of doing business in China, and they may be clearer than even the Taiwanese government on where the real risks lie. The government's good will should be manifested by offering Taiwanese better information and risk assessments instead of restricting their investments.

  Macroeconomically speaking, Taiwan's resources are limited and its domestic market is small. The economy of a growing Taiwan therefore requires the integration of global resources and global market operations. That is why China's cheap production factors and rapidly growing market offer a good opportunity for developing and transforming Taiwan into a platform for Asia-Pacific cooperation that integrates global resources.

  "Globalization" and "sinicization" are not diametrically opposed concepts. Sometimes they work to reinforce each other. Just as Chen said in his New Year address, "The complex cross-strait economic and trade policies should not be simplified as a dichotomy of either `opening up' or `tightening up.'"

  Seeing the competitive pressures and opportunities offered by globalization and in response to the goal of Taiwan's economic development, a "Greater Taiwan Economic Circle" (GTEC) could be established to function as a blueprint for Taiwan's development and avoid confusion between "globalization" and "sinicization."

  The GTEC would turn Taiwan into a platform for the integration of economic resources in the Asia-Pacific region, as well as for products, services and value creation, including production factors such as manpower, capital, information, technology, intermediate goods, spare parts and components.

  The GTEC would have four goals: to increase the efficiency with which Taiwan's economic resources are put to use; to expand the nation's economic scope; to improve productivity; and to promote Taiwan's technological and systemic innovation. The ultimate goal of the GTEC would of course be to promote investment in Taiwan by businesses from many countries, including Taiwan, and to improve the nation's economic growth.

  To this end, making Taiwan a production base to attract international investment, using Taiwan as a platform for cooperation between industrialists from other countries, making Taiwan's production factors the target of international cooperation and treating Taiwan's products and services as part of international trade, will all serve to expand and deepen the GTEC, and promote prosperity in the investing countries.

  The GTEC should of course also include China's production factors, products, services and markets as the motor of Taiwan's economic development to give it an advantage as a platform for Asia-Pacific economic integration. More concretely, Taiwan should become proactive instead of remaining passive. It should actively integrate the benefits of Taiwanese enterprises and foreign businesses and request that China guarantee, and work to improve, the benefits of the GTEC.

  This is the opportunity that China offers a Taiwan that is moving toward globalization. Taiwan should grasp this chance instead of stubbornly rejecting it.

  Tung Chen-yuan is an assistant professor in the Sun Yat-sen Graduate Institute of Social Sciences and Humanities at National Chengchi University.

  Translated by Perry Svensson
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