Recent protests in Vietnam over China’s placement of an oil rig in the South China Sea have drawn a lot of attention in Taiwan, because some of the more violent protests damaged the properties of 224 Taiwanese companies and disrupted the operations of about 1,100.
Vietnamese authorities are worried the riots will deter Taiwanese investment, with Vietnamese Prime Minister Nguyen Tan Dung reportedly promising to take measures to compensate the affected businesses. Senior Vietnamese officials are to arrive in Taipei this week to discuss compensation issues and other trade matters.
Traditional manufacturing appears to be dying out in Taiwan. It began when many labor-intensive manufacturers began relocating abroad about three decades ago. Industries such as shoe-making, food processing, textile production and the furniture sector were once the pillars of the nation’s economy, but the focus of the government now is the information and communication technology sector — at least that is how people see it.
Amid speculation that Vietnam-based Taiwanese companies may choose to relocate to China or invest at home because of safety concerns, the government has begun a campaign to urge them to return home, with the Ministry of Economic Affairs planning an investment summit Friday to explain the investment environment and incentive packages offered.
As challenges to business are now rising in China, including surges in labor and land prices, higher environmental standards as well as increases in social security and pension-related spending, overseas Taiwanese firms are certainly looking for alternatives. Of course, it is also possible that years of stagnant growth in wages might make the nation attractive to Taiwanese manufacturers.
Even though increasing domestic employment would help enhance wages and boost private spending, if the government must extend more investment incentives to overseas Taiwanese firms, an important question to be asked is: Why did these firms not move back home en masse, as expected, after the government first addressed the issue in 2012?
That is when the government announced plans to lure Taiwanese businesses home, with a goal of attracting NT$100 billion (US$3.32 billion) in each of the following two years and creating 82,000 jobs. Yet government statistics show that as of the first quarter of this year, while overseas Taiwanese pledged to invest NT$198.2 billion over the past two years, to date just 30,000 jobs have been created.
One has to wonder why the number of jobs is less than expected and question if the government has resolved problems facing investors, such as the shortage of skilled labor, land acquisition and securing loans.
Moreover, the prospect of overseas Taiwanese businesses returning home has also raised concerns about the nation’s technical and vocational education. The reality is that our recent graduates do not meet the manufacturing industry’s needs nowadays.
As the US and other developed countries pursue “re-industrialization” and the comparative advantage of investing in China and Southeast Asian economies gradually diminishes, Taiwan must re-establish the domestic manufacturing sector’s competitiveness by positioning it at the top of the global value chain. High-end and high-value-added manufacturing implies the need to adopt more automation, promote environmental sustainability and upgrade technology and research and development capabilities.
Instead of welcoming returning Taiwanese businesses with open arms, the nation needs to focus on creating a government that has consistent policies and more efficient civil servants, as well as a society that has large pools of entry-level workers and experienced employees.
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