In Resourceful Taiwan, the Word ‘Crisis’ Contains ‘Opportunities’

About 400 years ago, enterprising pioneers migrated from well-civilized coastal China to the uncivilized island of Taiwan. Though empty-handed, they had the know-how and ingenuity to survive and grow through more than two centuries of successive colonization by the Dutch, Spanish, Chinese and Japanese. These settlers had no alternative but to be persevering, hard-working and subservient.

In the 1960s, Taiwan began a major industrialization effort that accelerated economic expansion and was accompanied by demands for liberalization of economic policies and government regulations. Deregulation took place in many aspects of the economy and industries such as cigarettes, liquor and petroleum, which used to be run by the government, were privatized. At the same time, a transition toward democracy began to take place, a push aided by Taiwan’s foreign students and expatriates who pressured the government to respect human rights and democracy.

In 1988, the 40-year martial rule finally ended, and political opposition parties were allowed. Since then, Taiwan has undergone two constitutional revisions, three important elections and a change of electoral system. The next president is about to be elected directly by the people.

As with all rapid change, Taiwan still faces friction and social discord, including:

* Accumulation of material assets has occurred so fast that there is now great disparity in the distribution of wealth.

* Although the standard of living has been enhanced, so are traffic problems, pollution and crime rates.

* Too much foreign exchange has caused tremendous increase in the value of the new Taiwan dollar, and the sharp appreciation has eroded Taiwan’s ability to compete internationally.

* Because of cost escalation, many small- to medium-size businesses are no longer profitable. Free trade has caused intensified competition, under which companies must increase their efficiency in terms of production, operation and, most critically, management.

I am optimistic that these challenges will be overcome, because much like their immigrant ancestors, Taiwan’s resourceful people are good at adapting.

For example, with the mounting foreign exchange, the government has encouraged investment abroad. Restrictions on international money transfers have been practically eliminated. The government has also given incentives to manufacturing concerns to move their production centers to Southeast Asia, where labor is cheaper.

The government recently launched a “Six-Year National Development Plan” intended to improve its infrastructure and lay the groundwork for Taiwan to become a multifaceted “Regional Operations Center” for the Pacific Rim.

The problems encountered in this current phase of transition represent stumbling blocks for the Taiwanese government. But in the Chinese language, the word “crisis” contains “opportunities.”

To help solve these problems, I think that U.S. companies will stand the best chance to capitalize on the following golden opportunities:

* Setting up subsidiaries in Taiwan, or joint ventures with Taiwanese companies.

Americans can take advantage of the insight that Taiwanese partners can offer about people’s consumption habits, tastes, etc. The consumption power of the Taiwanese people has already made some foreign retail and food chains, such as McDonald’s, Kentucky Fried Chicken, 7-Eleven and Pizza Hut, tremendously successful in Taiwan.

* Selling products and services to Taiwan.

Fiscal policies and tax laws need to be improved in order to build up Taiwan as a major financial operations center. Many U.S. consultation and professional firms, including Andersen Consulting, McKinsey Consulting, Gallop, KPMG Peat Marwick and Arthur Andersen, have been successful in Taiwan because of the demand for their expertise.

Because of limited natural resources and scarce land supply, coupled with the high educational level of the people, Taiwan has comparative advantage for engaging in high-tech industries and the manufacture of high-value products, including machinery and electrical engineering, environmental protection and engineering, and biotech research and products. The top 10 emerging industries indicate this trend. Companies in Taiwan want to have the technology and know-how to produce high-tech goods under their own brand names, and many U.S. companies can sell the technology and machinery to meet this need.

* Taiwanese investment in the United States.

The bank I manage has established branch offices in Silicon Valley, because many of the high-tech companies in the area are started by people who originally emigrated from Taiwan.

Asians also generally have a preference for real estate investments over other investments, and Taiwanese are no exception. The United States has long been considered by the Taiwanese as an investment haven, because of its political and economic stability.

Since the early 1960s, Taiwanese students have been coming to the United States in a drive to receive their higher education. As many as 350,000 of them are now leaders of Taiwan’s private and public sector. Many of them think, act and behave in an Americanized way. Doing business with them from the United States is not difficult. The gap in economic advancement between Taiwan and the United States will also facilitate business relationship for a long time to come.