Superior geographic location at the heart of the Asia-Pacific region
Taiwan is located at the heart of the Asia-Pacific region, which puts it in an advantageous position in which to make use of global production resources and markets. Japan, the world’s third largest economy, is to Taiwan’s north; the 10 countries of the Association of Southeast Asian Nations (ASEAN) and India are to its south; the US, the world’s largest economy, is to its east; mainland China, the world’s second-largest economy, is to its west. The average flying time from Taipei to the seven major cities in the Western Pacific region – Hong Kong, Shanghai, Manila, Seoul, Tokyo, Singapore and Sydney – is merely 2 hours and 55 minutes, the average sailing time from Kaohsiung Harbour to the five major Asia-Pacific harbours a mere 53 hours. Taiwan is the hub of Asian transportation and the logistics centre of the East Asian region.
Innovative research and development (R&D) headquarters
Taiwan is particularly active in R&D and product innovation. It provides quality products and services which enable the development of international brands. Taiwan also has easy access to mainland China’s production resources, making rapid mass production possible. The island’s wealth of production experience, ability to commercialise innovative products rapidly and capacity for global deployment are all factors that help create a value-added global production chain. Furthermore, the scale and maturity of its capital market can assist mainland China-based Taiwanese businesses in listing on Taiwan’s Stock Exchange and encourage international capital funds to participate in Taiwanese businesses’ overseas deployment. Taiwan is in a position to become the capital fund centre for the international manufacturing industry and a base for strategic alliances between multinational companies. These advantages help attract overseas technology professionals to Taiwan to start their businesses and foreign companies to participate in cross-strait technological projects. Taiwan has products that are designed for global ethnic-Chinese markets and is currently a testing platform for ethnic-Chinese markets which will also attract foreign investment.
Outstanding rankings in international economic surveys
Taiwan is an economy which is highly competitive and has great development potential. This high competitiveness, incorporating a strong ability to innovate, stems from the island’s excellent technological infrastructure and talented human resources. On 8 September the World Economic Forum released its ‘Global Competitiveness Report 2011-2012’, which ranks Taiwan 12th out of 133 countries surveyed – five positions up from last year. And in its third report of 2010 on investment risks, Business Environment Risk Intelligence gave Taiwan a ‘profit opportunity recommendation’ score of 71, behind only Singapore, Switzerland and Norway among 50 nations surveyed. According to the International Institute for Management Development’s ‘World Competitiveness Scoreboard 2010’, Taiwan made a dramatic rebound in 2009, jumping from 23rd to eighth – the largest jump recorded among the 58 economies surveyed; this year it ranked sixth.
Amid the trend of globalisation, many of the world’s economies are making efforts to attract foreign investment. The World Bank’s Ease of Doing Business Index has thus become an important reference for both governments and investors seeking international ventures and governments. According to the ‘Doing Business 2010’ report, released on 9 September 2009, Taiwan moved up 15 places from the previous year to 46th (out of 183 countries), making it the world’s fifth most improved economy, and this year it rose even higher, to 33rd.
Technological products throughout the world
Taiwan has competitive advantages in the information technology (IT) sector, being the second-largest IT hardware manufacturing country in the world. Taiwan’s semiconductor, optoelectronic, information and communication products account for more than 70 per cent of the global market share. The production values of Taiwanese original equipment manufacturers (OEMs) of integrated-circuits make up 67.4 per cent of the world total; this and the assembly and testing sector are both ranked number one in the world. The production values of Taiwan’s integrated circuit-design companies account for 21.5 per cent of the world total; those of its makers of thin film transistor liquid crystal display (TFT-LCD) products rank second in the world, while its PC production value is the third-largest.
In conclusion, the international ranking reports show that Taiwan’s business environment will remain as excellent as it is now. According to the Economist Intelligence Unit’s Country Forecast, Taiwan’s business environment from 2008 to 2012 ranks fifth in Asia and 18th in the world, among 60 countries measured.
A gateway to China
Taiwan is adjacent to mainland China’s market. It has geographical and language advantages. At the same time, Taiwan is highly receptive to new technologies. Taiwan is positioned to become the R&D and test centre for products aimed at global ethnic-Chinese markets. Taiwan’s enterprises are not only first-class suppliers to the world’s leading companies, but are also capable of developing subsystems.
Cross-Strait contact channels between Taiwan and mainland China were re-established in May 2008, and so far this year the two territories have signed six agreements. Furthermore, to reduce tariffs and commercial barriers between the two sides, the governments of the People’s Republic of China (mainland China) and the ROC signed the Economic Co-operation Framework Agreement (ECFA) on 29 June, 2010. The most significant agreement so far, it will boost the current US$110-billion bilateral trade between both sides. Cross-Strait negotiations have now entered a normal phase, which will both help Taiwan continue its role as a stepping stone for global multi-national companies to enter the Chinese market and help domestic companies deploy their businesses globally.
The Council for Economic Planning and Development’s Deputy Minister, San Gee, explains Taiwan’s transformation from a poor island relying on US aid to an economic success story
How has the signing of the Economic Cooperation Framework Agreement (ECFA) in June influenced Taiwan’s relationship with its neighbouring states?
ECFA has been greatly significant both economically and politically. ECFA symbolises the peaceful and cooperative relationship across the Taiwan Strait. It also sends a strong political signal to the international community that the Taiwan Strait is a safe place to do business. As a result, many Chinese tourists now visit Taiwan, with up to 1.6 million visitors just this year. Trade and investment has also increased significantly with the international community realising that Taiwan can be a good partner to penetrate mainland China’s market.
IMF projections state that Taiwan’s economy will be the highest of the four Asian tigers by 2016. How has Taiwan achieved this?
The latest IMF projection figures were published in March 2011 and listed that by 2016, Taiwan’s GDP per capita will be over US$30,000. We are not surprised by these projections and think we have a good chance of meeting them, with a handsome economic growth in the next few years, for the following reasons:
1) ECFA is a driving force for economic normalisation and will make Taiwan a new hub for many international firms, resulting in more investment, job creation and economic growth.
2) Taiwan is at an important crossroads. We will move from a high-tech based industry to a more service-based industry. By combining our strengths in high-tech areas with our newly emerging service industries, it will increase the value in manufacturing goods.
3) The emergence of the Chinese market. We already have very large investments in mainland China of over US$97 billion. The mainland is transforming itself from a global factory into a global market, so we can fully utilise this framework, and combine our strength, which will translate into our GDP per capita.
What has been the CEPD’s approach to navigating the global recession?
Taiwan’s major resource is its people, not natural resources, and this is what the government focused on during the financial crisis. We have spent a lot of money to train our unemployed and enhance their employability so they can be better prepared when the economy bounces back. We’ve made excellent progress in achieving this goal by reducing our unemployment figures: dropping by 14 per cent to what it was 18 months ago, to 4.27 per cent in June.
This year the ROC celebrates its 100th anniversary. What are the CEPD’s immediate plans for the future?
At the request of President Ma, we are currently putting together the ‘Golden Decade Economic Development Plan for 2010-20.’ We have a dream for this decade, with the happiness of the Taiwanese people at its core. We are going to work hard in several directions:
1) Health Policy: We must enhance our public health policies and programmes.
2) Housing: Traditionally, the Taiwanese love to invest in real estate to take care of younger generations. Over 70 per cent of the people in the country have purchased their own properties. To continue this tradition, we must build some government subsidised housing, to provide more affordable housing for the younger generations.
3) Education Policy: In the forthcoming decades we are going to provide public-financed childcare services for younger couples. We are already providing free tuition for students aged five years and above, but we’d like to amend that to starting at three or four years old. This should also help with the island’s flagging birth rate.
4)Environmental Protection: We have one of the highest population densities in the entire world and we’d like to see a greener economy with a more efficient utilisation of energy and the introduction of an energy/carbon tax.
What is the CEPD’s greatest diplomatic challenge?
With the Taiwanese becoming more internationalised, the island has experienced what some have referred to as ‘brain drain’. There are currently more than one million Taiwanese either working, studying or living in mainland China. This is an inevitable trend but we need to create more quality jobs within Taiwan to retain or attract talented people.
Venetia van Kuffeler explores the Taiwanese company Motech’s cheap and efficient method of bringing electricity to the rest of the world
In the middle of Southern Taiwan Science Park, Motech Solar, a full-service global solar energy company, can be found quietly thriving, making clean electricity by harnessing Taiwan’s most abundant renewable energy resource: the sun.
Having previously spent 18 years conducting research at the US Department of Energy’s National Renewable Energy Laboratory in Colorado, Dr Simon Tsuo returned to Taiwan in the mid-1990s to start the first crystalline silicon solar cell factory. Dr Tsuo’s old college classmate, Cheng Fu-tien, then Chairman of Motech Industries, a company founded in 1981 to manufacture testing instruments, was looking to bolster the growth potential of his business. At the time, Mr Cheng was actively involved in the anti-nuclear power movement in Taiwan. After hearing of Dr Tsuo’s interest in setting up a solar cell factory, Mr Cheng invited him to set up Motech Solar, a new division of Motech Industries, and act as its CEO.
Together, they raised US$5 million at the local Rotary Club – ‘they all joke they’ve [since] had a very comfortable retirement!’ Dr Tsuo laughs – and began production in 1999, churning out six-inch, wafer-thin photovoltaic (PV) solar cells at a significantly lower cost than competitors. The cells are used in solar panels, also known as photovoltaic modules, to convert light into electricity.
In those early days, Dr Tsuo rolled up his sleeves and trained the engineers himself, working 70-hour weeks. Motech Solar’s first sales coup came in 2001, when a German company responding to a government green initiative placed a large order. In 2004 it began developing solar inverters, which convert the DC output of PV modules into AC current, and in 2010 the division became a full-service solar solution provider. After Mr Cheng passed away, Dr Tsuo accepted a three-year term (expiring in June 2013) as Chairman of Motech Industries.
Dr Tsuo is clearly proud of his achievements: ‘Since my arrival, the number of employees has increased from less than 100 to over 4,000, the company now has factories overseas – mainland China, the US and Japan – and Motech became a listed public company in 2003.’ Taiwan has very few natural resources, and Dr Tsuo is proud that Motech takes advantage of the island’s best asset: its highly skilled, young workforce. ‘We have been blessed with great employees,’ he observes. ‘[They are] the driving force behind Motech’s success.’
As global warming and climate change continue to be a major concern for nations around the world, Dr Tsuo plans to continue to reduce the cost of solar PV power as much as possible. ‘I believe the price of crystalline silicon solar PV modules can be less than $0.85/watt-peak, with a selling price of less than $1/watt-peak. But we are a long way from that.’ He is realistic about the implications of the financial crisis: ‘I believe the solar PV industry will go through some tough times and industry consolidations. I want to see Motech coming out of this period as one of the major players.’
He continues: ‘I would like to see Motech become one of the top five PV manufacturing companies in the world, while building a strong corporate culture of caring for the well-being of our employees and of the society we live in. I would like to see Motech be the leader in developing innovative products for the solar industry.’
Although Taiwan is the second largest manufacturer of PV solar cells, over 99 per cent of them are exported, and so Dr Tsuo wants the Taiwanese government to ‘do more to promote renewable energy.’ More generally, he believes that ‘Taiwan should be allowed to join international institutions such as the UN and the World Bank – after all, the country is one of the top 15 economic entities in the world.’