There has been lots of talk about Taiwan having arrived at a pivotal point at which it can transform itself into a knowledge-based economy that makes substantial profits by providing valuable services, rather than deriving meager earnings from manufacturing.
However, that is easier said than done and little progress has been made. Most local electronics companies still turn slim profits — earning a gross profit of 4 percent is already considered an exceptional achievement for PC firms.
To achieve this transformation, talent is vital. However, no significant regulation changes to attract talent are on the horizon and most private corporations show little intention to offer better compensation to recruit or retain top talent.
China understands the importance of a talented work force. Chinese companies — mostly industry latecomers or start-ups — are more than willing to take shortcuts by poaching top talent from Taiwanese competitors to speedily enhance their technological capabilities and market presence. Epistar Corp, Taiwan’s top LED chipmaker, on Monday said that if Chinese LED epitaxy maker Sanan Optoelectronics Co continues poaching its talent, it would consider requesting that the government scrap an investment deal Sanan proposed in 2013 to buy a 19 percent stake in local LED chip supplier Formosa Epitaxy Inc for NT$235 million (US$7.38 million).
Sanan has violated the anti-poaching rule, which is one of the conditions set by the government for approving the investment project, Epistar said. It is reported that Sanan has poached a 10-person team from Epistar, offering them NT$500 million over three years, after hiring more than 100 employees from the Taiwanese company in 2010.
What tactics is Taiwan adopting to fight back in the talent war? Nothing significant for now; certainly no wage increases. The Ministry of Economic Affairs has only proposed extending income taxation on annual employee stock bonuses for five years, with an annual amount capped at NT$5 million. Issuing stock bonuses to employees is an important tool for local electronics firms to retain talent, but the effect vanishes if workers are required to pay income tax upon receiving those stocks by market value, not book value.
To encourage spending on research and development, the ministry also plans to offer tax incentives for local firms. However, those plans have not been put into practice.
The National Development Council on Monday said that it is planning to allocate a proportion of existing government funds for subsidizing small and medium-sized enterprises’ recruitment of top talent from overseas. No specific details have been disclosed yet.
The American Chambers of Commerce has repeatedly advised cutting personal income tax for foreign employees from the current 40 percent to match neighboring nations’ 17 or 18 percent rates. However, the business group has not received positive feedback.
The issue of frozen wages is reflected in the latest annual survey released by US headhunter MRIC Group, which showed that in the Greater China region and Singapore, Taiwan has the lowest job compensation satisfaction, at 39 percent. Hong Kong scored the highest at 51 percent, followed by Singapore’s 47 percent and China’s 45 percent, the MRIC data showed.
Hence, about 62 percent of top Taiwanese professionals or skilled workers are willing to work overseas this year, higher than China’s 46 percent, Singapore’s 45 percent and Hong Kong’s 33 percent, the survey showed. In addition, about 40 percent of the respondents said they intend to leave Taiwan to find a job at all costs.
The government and private companies need to do more to recruit and retain talent, or they will lose competitiveness faster than they expect.
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