Sun, Sep 02, 2001 page3

• KMT economics guru looks at life after EDAC

  Chiang Ping-kun, the former head of the Cabinet's Council for Economic Planning and Development and current chief executive of the National Policy Foundation, a KMT think thank, masterminded the KMT's economic proposals for the president's Economic Development Advisory Conference. Chiang talked with `Taipei Times' staff reporter Joyce Huang last week about the successes of the conference and the reasons for lifting the ''no haste, be patient'' policy restricting investment across the Taiwan Strait

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  Taipei Times: The president's Economic Development Advisory Conference closed last Sunday; how do you evaluate resolutions reached at the conference, compared to the KMT's ten recommendations proposed beforehand?

  Chiang Ping-kun (江丙坤): I give my approval to the conference and its resolutions, which mostly coincide with the KMT's proposals and policy direction. The conference's success manifests that economic concerns cross party lines and the resolutions should be identical.

  

  The way to protect Taiwan's security is to ensure that its economy prospers, says the KMT's chief economic strategist Chiang Ping-kun.

  PHOTO: GEORGE TSORNG, TAIPEI TIMES

  The labor law's deregulation was particularly hard to reach since it required workers to make concessions. Ever since former premier Hau Pei-tsun (郝柏村) was in office, the KMT had been proposing to revise the labor law, which was boycotted by the then-opposition DPP which strove to safeguard workers' rights. However, this time, both the DPP and labor groups finally approved the proposal and reached the consensus of setting [the retirement pension's premier rate] at 6 percent.

  The country's current economic downturn appears to have contributed to the successful reaching of consensus [at the conference]. As for cross-strait trade policies, it was the KMT which promulgated the "no haste, be patient" policy, but the situation has changed now. When I worked at the Ministry of Economic Affairs, I proposed to open up point-to-point direct transportation (定點直航) [across the strait.] Then ex-premier Lien Chan (連戰) also embraced the idea of using the mainland as [Taiwan's] hinterland when he advocated building Taiwan into an Asia-Pacific regional operation center (亞太營運中心). Our hopes collapsed when the "no haste, be patient" policy was announced.

  However, the DPP, which is supposedly more conservative than the KMT regarding cross-strait issues, has now made a breakthrough in easing cross-strait trade barriers.

  I think these two achievements highlighted success of the conference, which also provided an arena for cooperation between the ruling and opposition parties.

  TT: With consensus reached on more than 300 proposals, how effectively will they be in promoting the country's economic recovery?

  Chiang: The conference only addressed one-fifth of the country's economic problems. What remains is setting up a timetable to implement these proposals. Putting them into law is a difficult task since the next legislative session will only last for a month. However, I disagree with the idea of allowing all the legislation to enter the second reading by skipping the legislative committees' thorough review. Also, the likely electoral turnout at the end of the year will decide the country's future democratic development and the possibility of forming of a coalition government, which is a prerequisite for the country's political and economic stability.

  TT: The government has decided to replace the "no haste, be patient" policy with a policy called "active openness, effective management" (積極開放, 有效管理). In what sense do you think Taiwanese investments in China can be effectively managed? And how open is actively open?

  Chiang: The fact that investments in China increased by 108 percent last year shows that the ["no haste"] policy itself only works as an [abstract] strategy rather than a [practical] policy.

  Yin Chung-wen (殷宗文) [former head of the National Security Council] had previously confirmed to me that the strategy was to lure China into conducting negotiation with Taiwan.

  It was not a policy, in the sense that it only placed restrictions on Chinese investments made by the conglomerates, instead of by medium and small-sized businesses.

  Now that restrictions will be relaxed, I think that competitiveness should serve as a standard. For those businesses no longer competitive, exodus to China should be allowed, while those which still enjoy domestic competitiveness should "keep their roots in Taiwan" (根留台灣). The mechanism isn't strictly inflexible. For example, computer and notebook makers are still competitive now but in time they may have to lower costs. And if they can't, they may then lose their competitiveness and their market.

  TT: What about "effective management?"

  Chiang: The most effective way to manage [capital] is to improve Taiwan's investment environment so that businessmen can raise money and do their research and development here. It's inappropriate for the government to interfere with the market and order any corporations' R&D branches to stay in Taiwan.

  On the other hand, the government should take advantage of Taiwan's geographic importance and business integration to attract both local and foreign investors, who should be educated to understand that doing business in China involves far more risk than in Taiwan.

  A lot of Taiwanese now do business in China in a very clever way in order to keep their money out of China. They take orders and collect payments outside China, sending only what they need to cover costs into China itself.

  But more importantly, Taiwan should play the role of a value-added center. As far as I understand, a few industries ship Chinese components back to Taiwan and assemble them into products made in Taiwan, whose prices are greater than products made in China.

  The business model will work better if cross-strait shipments can be made directly to bypass Hong Kong. There are also [other] profitable business models. For example doing design work in Taiwan, manufacturing in China and selling products to other markets including the US. [Some businessmen] also strike deals with, say, IBM to produce products made with Chinese components and branded with IBM labels. This gets them better prices, for which they have to raise their standards of quality control.

  These are business models that allow Taiwan to outshine other Asian countries and become a value-added center. Taiwan should now learn to make profits out of the marketing process, which Japan and the US used to be very good at.

  Therefore, as Taiwan develops its offshore transshipment centers it should incorporate factories for export processing to create value-added business opportunities and job opportunities. The best way to protect Taiwan's security is to ensure its economy prospers -- making profits out of the booming Chinese market.

  TT: Though many Taiwanese businessmen lauded the relaxation of the "no haste, be patient" policy, foreign investors, however, are less enthusiastic since direct links haven't been made possible. How urgent are direct links?

  Chiang: A lot of international companies based in Taiwan have an eye on the China market. They can lower their costs dramatically if direct links are opened.

  The same goes for Taiwanese businesses. Formosa Plastics Group Chairman Wang Yung-ching (王永慶) had previously said that, if direct links were allowed, he probably wouldn't have to transfer his business to China. Therefore, we've long proposed to open up direct links soon so as to facilitate Taiwanese businessmen's participation in the Chinese market without having to establish factories in China.

  Direct commodity shipment across the Strait should be started before passenger transportation since all it takes is to annul regulations that require cross-strait trip detouring via third countries just for the purpose of getting their documents rubberstamped.

  TT: After the trade policy is relaxed, what will be the major negative impact on Taiwan's economy?

  Chiang: What worries me the most is the likelihood of hollowing out Taiwan's technologic capabilities. Exodus of Taiwanese capital to China has proven harmless to Taiwan's economy. For the past 15 years, Taiwan's exports have made a profit of NT$165 billion, mainly from trade in China. However, if China catches up with Taiwan in terms of technology, Taiwan may not be able to compete with it. Therefore, Taiwan should continue to develop its high-tech sector and other advanced industries.
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