In the past 30 years, globalization has given way to an international division of labor, with developing countries focusing on export manufacturing, while developed countries in Europe and the US concentrate on internationalizing service industries to drive economic growth.
The competitive advantages of these countries can readily be seen in the global financial market. For example, Taiwan has attracted a lot of global interest with its technology industry. The US is the home of leading digital service companies, such as Meta Platforms (Facebook), Alphabet (Google) and Microsoft. The country holds a virtual oligopoly of the global market for consumer digital services and is the biggest winner of the network effect. Meanwhile, Germany, Japan and South Korea export not only manufacturing products, but also services, which serve as twin engines of economic growth.
Acer founder Stan Shih (施振榮) has time and again called on Taiwan to promote the internationalization of its service industry, believing that a thousand-fold more opportunities lie in the international market, as the service industry occupies a major role in the industrial structure of countries around the world and offers more value-added opportunities.
However, Shih has also said that internationalizing the service industry is 100 times harder than promoting export manufacturing, not only because service innovation is more difficult, but also because it requires more resources. This is what Taiwan needs to constantly review when promoting its digital New Southbound Policy.
Taiwan’s digital and software technology is catching up with hardware development. With machine vision, for example, optical technology would have been the focus under the previous approach when hardware development took precedence, but now with back-end artificial-intelligence machine learning, tasks can still be performed without having to frequently upgrade the hardware, enhancing cost competitiveness and creating added value for customers.
As such, there are three keys to promoting the digital New Southbound Policy, based on the idea of internationalizing the service industry:
First, the application range of the nation’s software and digital technology should be broad enough, allowing more challenges to cultivate more experiences, and accumulating experiences from integrating software and hardware to reinforce its digital technology. This is the first step to establishing the “experience scale.”
Second, the gap in the quality scale of talent — professional and international marketing expertise — between Taiwan and Europe and the US must be narrowed. As most of the nation’s talent are employed in the technology industry, the government must accelerate the introduction of international talent, recruit more foreign students in the higher education system, and review medium and long-term immigration policies.
As for the market structure, policy tools can be used to encourage technology companies that have successfully completed their digital transformation to reorganize their digital talent into independent system integration companies and integrate them with new ventures or join international mergers and acquisitions or strategic alliances. Enriching digital service talent should facilitate international cooperation and competition with big US and European companies.
The third key is to optimize the internal management and remuneration system of Taiwanese enterprises with a high-standard capital “logistics scale” to address the international competition for talent.
The New Southbound Policy used to be limited to manufacturing, with a focus on reducing personnel costs. However, to promote the internationalization of the digital service industry in the New Southbound Policy, Taiwan needs to adopt international standards, offering competitive salaries and management models to attract local and foreign talent from advanced economies to meet knowledge-intensive operational needs, and lend support to the two aforementioned key success factors.
In terms of capital, integrating international capital markets and strategic investors, and introducing a more forward-looking corporate governance system are also required to create a supporting environment for Taiwan to promote the internationalization of services in the smart field.
Lin Chia-lung is ambassador-at-large for digital New Southbound Policy initiatives and a former minister of transportation and communications.
Translated by Lin Lee-kai
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