Taiwan faces a persistently serious youth employment problem. With the unemployment rate for college graduates nearly three times that of the whole workforce and low starting salaries, the government has in recent years launched several programs that offer job search assistance, skills training, wage subsidies and counseling to increase employment opportunities for young people.
In this Internet era, which is characterized by an increased cross-border flow of goods, services, money and people, policymakers are encouraging entrepreneurship to spur job creation and economic growth. For example, the Cabinet-level National Development Fund is cooperating with local and foreign venture capital firms to finance local start-ups, with the NT$1.5 billion (US$47.5 million) AppWorks Fund II launched last week by the fund and eight Taiwanese companies to help local startups that develop mobile, big data and Internet-related applications.
Moreover, governments at both the local and national level are developing special incubation programs to encourage young talent to start up their own businesses. A recent plan proposed by the Taipei City Government to create 10 technology start-up hubs is just one of the latest in a string of government efforts to encourage business innovation and young entrepreneurship in the nation.
However, to what extent policymakers are likely to achieve their goals is uncertain. The idea of developing Taiwan into Asia’s Silicon Valley depends on the government’s support, collaboration between the public and private sectors and the integration of related businesses and industries, such as e-commerce.
In a nutshell, if Taiwan hopes to create a successful start-up ecosystem, the nation needs to meet certain preconditions, such as: having a huge talent pool; well-developed infrastructure; an efficient administrative system; ample capital; marketing know-how; and international networks. Establishing an effective and feasible start-up policy is challenging, but at least now there is a sense of urgency to create a friendlier environment for young entrepreneurs.
While there is no shortage of ideas about how to nurture entrepreneurship in Taiwan, to some the debate still boils down to two fundamental questions: What happens if the government overlooks the fact that start-ups usually face high investment risks and low returns; and does heavy government support distort the market for genuinely viable businesses?
Furthermore, the debate becomes even more critical when deciding if it is necessary to build some areas into start-up clusters in the hope that those new businesses will scale up someday.
Looking overseas, not all governments seek to encourage start-ups through the establishment of start-up hubs or entrepreneurial incubators. Therefore, local government heads rushing to find places for their start-up hubs should seriously consider what it will take to support their idea. Without appropriate management, these hubs could one day become more of the so-called “mosquito halls,” which is what underused public facilities in Taiwan are called after they become nothing more than mosquito breeding grounds.
Meanwhile, if many of these hubs prove to be a waste of resources, central policymakers must consider how the economy would be affected if Taiwan’s industrial policy focused mainly on start-ups while lacking a systematic review mechanism for its growth engines.
Despite plenty of concern about the job prospects for young people, the government has the responsibility to present the public with a long-term blueprint for the development of the nation’s manufacturing and services sectors, and policymakers should also reflect on whether Taiwan is giving other small businesses in traditional domestic industries a chance to fulfill their dreams as well.
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