Taiwan has long been bogged down in political bickering between the governing and opposition parties. Despite public dissatisfaction with the political and economic situation, financial institutions abroad still rate Taiwan as a very competitive region.
But in the latest World Competitiveness Yearbook published by the Lausanne Institute for Management Development (IMD) in Switzerland, Taiwan's ranking dropped seven notches, to 18th place, while China jumped 12 notches, to No. 19. The IMD report has sounded the alarm for Taiwan's worsening competitiveness, which deserves the attention of both the government and opposition.
The latest IMD rankings show that the Taiwanese people and government can remain confident in their country. That Taiwan was ranked above 60 other countries and regions in terms of scientific and technological infrastructure, as well as business attitudes and values, shows that it is keeping up with international trends, and in some cases taking the lead.
The rankings are based on the evaluation of four main competitiveness factors: economic performance, government efficiency, business efficiency and infrastructure, with 312 sub-criteria. Despite improvements in a few areas, Taiwan saw a large drop of 10 to 15 notches in terms of its legal and regulatory framework, international trade and investment, and was ranked 58th in terms of "risk of political instability" and "social cohesion." This shows that political infighting has hampered the nation's economic competitiveness.
In last year's IMD competitiveness rankings, Taiwan was ranked ahead of Ireland (12th), Norway (15th) and Sweden (14th), the top-ranked European nations. Although this ranking seems questionable, in the eyes of foreigners, Taiwan is a nation which possesses exuberant vitality and whose competitiveness does not lag behind that of other powerful nations.
In the past, Taiwan performed badly in the governmental efficiency rankings, but fairly strongly in business efficiency, infrastructure and economic efficiency. The overall drop this year, however, is a clear indication that the gridlocked government has finally had an impact on business operations. The idea of "effective management" further damaged foreign investors' confidence in the investment environment.
The strong performances of Hong Kong and Singapore, ranked second and third after the US both last year and this year, are due to the following factors: deregulated policies towards China, the government's active role as a trailblazer for the business sector, good overall government efficiency, rapid economic development and active markets.
They make use of the vast business opportunities in China and boldly open up all kinds of ventures. As for Taiwan, its isolationism and the government's shortsightedness have made the nation suffer from declining economic competitiveness.
This year, we saw a large-scale improvement in China's democratic and corporate conditions, placing it just below Taiwan in the rankings. China estimates that by 2008 the aggregate production in Guangdong Province will exceed that of Taiwan, while Jiangsu and Zhejiang provinces are expected to surpass Taiwan by 2010. China is forging ahead while Taiwan's competitive advantage erodes.
The government should learn from Hong Kong and Singapore how to put its resources to good use. If the political bickering continues, Taiwan might fall behind China in next year's IMD report. The IMD survey should tell government officials and businesspeople alike that they must become more active and aggressive, and not allow the nation to sink any further.
Hsu Chi-chih is the editor-in-chief of Marbo Investment Quarterly magazine.
Translated by Lin Ya-ti
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