Taiwan's coming industrial crisis

By Lee Chia-tung 李家同

Taiwan is facing an unprecedented industrial crisis. Not only the traditional industries but high-tech industries are, long the pride of Taiwan, gradually moving out of the country. If this trend continues, it will create large-scale unemployment and a major economic recession. How to revitalize Taiwan's industries, therefore, is an important issue.

We often harbor the illusion that, by putting all our efforts into developing high-tech industries, we can promote industry throughout the country. But the so-called high-tech industries consist only of the electronics, information, communications and bio-technology industries. In fact, every industry straddles different sectors. For example, the semi-conductor industry -- the hottest industry of the day -- needs the support of the precision machinery industry. The semiconductor industry also has close links with the chemicals industry and is therefore a classic example of a cross-sectoral industry. Another example is the bio-tech industry, which has close links to the chemicals industry. Any country that wants to build a bio-tech industry must have a good chemicals industry.

To raise our industrial competitiveness, we must raise the competitiveness of all industrial sectors because they are all interrelated. If we divide industries into traditional and high-tech (whether "traditional industries" is an appropriate term is rather debatable), then high-tech industries cannot exist once the traditional industries disappear.

Industrial competitiveness depends on the control of key technologies. Unfortunately, key technology in most of our industries comes from abroad. We can only control some OEM (original equipment manufacturing) technology. The fact that a vast majority of our industries are OEM-oriented should heighten the alert.

How can we control key technologies? The only way is for the industries to become research and development (R&D) oriented. In the past, our industries did not invest adequately in R&D. If they carry on in this way and continue to ignore R&D, they will quickly lose their competitive edge.

Whether in land or manpower costs, Taiwan cannot possibly compete with China. No matter how hard the government works in this area, the results are bound to be limited. The government must understand that taking R&D seriously is the only way for our industries to remain competitive. How can we make our industries take R&D seriously? We have a few suggestions on this matter.

First, the government should explain clearly to the public that Taiwan cannot do without its industries. Taiwan does not enjoy the luxury of being able to run service industries only. The country has passed through the stage of having only OEM-oriented industries and must enter an era of

R&D-oriented industry. Taiwan's industrial upgrading will require a total strengthening of capabilities in all sectors.

Second, we should establish a new tax incentive system, under which a company truly engaging in the development of key technologies can enjoy a high level of tax exemptions after going through a series of rigorous examinations. The success of this system will depend on how rigorous the examination and appraisal mechanisms are.

Third, university and college departments which carry out practical experiments should strengthen the practical parts of their courses. Professors should do their best to coordinate their theoretical lectures with practicals. The educational authorities should also encourage teachers to make more contact with industry. The Ministry of Education should make practical skills an important criterion for evaluation in departments that run practical experiments. The ministry should offer generous rewards for schools that place emphasis on practicals, so that the schools can keep their practicals facilities abreast with the times.

Fourth, the government should encourage the establishment of

R&D industries that do not engage in manufacturing but possess the needed technology. Integrated circuit design companies are a good example of an R&D industry. These companies, which possess state-of-the-art technology, will raise Taiwan's industries to a higher level.

Fifth, the government should undertake a few major national

R&D projects, whose scale should match the US space programs that sent people to the moon. These projects should integrate different industrial sectors and aim at raising the level of industrial technology. The government should also invite industry, officialdom and academia to participate in the planning of the projects.

We frequently hear the phrase "keeping your roots in Taiwan" (根留台灣). This is not good enough for improving Taiwan's overall economic environment. Many companies have their headquarters in Taiwan and do all their production in China. As a result, the companies perform brilliantly while wave after wave of Taiwanese laborers lose their jobs.

A tree must have deep roots to conserve soil and water. Shallow roots can only have short-term economic value. In the long run, Taiwan's industries must have deep roots -- which mean a significant level of key technology. To have such technology, we must put our efforts into deep ploughing and engage in R&D. Only then will "keeping your roots in Taiwan" have any meaning.

This article bears the signatures of Lee Chia-tung, convener of the technological examination committee for the Leading Products Development Program sponsored by the Ministry of Economic Affairs, and 31 other members of the committee.

Translated by Francis Huang

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