Taiwan Special Report

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Discovery Reports

Time to spread island's wealth

Taipei challenged to transfer economic innovation and success to the social sector, writes Euan McKirdy

PUBLISHED : Friday, 25 October, 2013, 2:53pm
UPDATED : Friday, 25 October, 2013, 2:53pm

Across the Taiwan Strait, there is a real appetite for growth, largely fuelled by the tech sector - something that is having a knock-on effect on social enterprises (SEs) that have the potential to fill the gap left by a sluggish public sector.

However, despite a burgeoning economy - bolstered by the ever-improving trade environment with the mainland - social issues in Taiwan remain. The island has a social insurance system that provides medical, disability, old-age, survivor and other benefits - partly due to cultural mores, where the family retains primary responsibility for care - but the social welfare network in Taiwan, as in Hong Kong, remains underdeveloped.

This is an area where Hong Kong and Taiwan could learn from each other, and blend best practices from the East and West - their different histories lending unique perspectives - and could lead the region in social innovation. While small in number, some of Taiwan's SEs are gaining some exposure and changing the way Taiwanese view business.

Taiwan's agricultural background and embrace of organics could be a huge boon to Hong Kong, given the lack of agricultural land in the city and a local distrust of agricultural practices on the mainland. The Taiwan Farmer group, which promotes fair trade, is one such example. Boasting a diversity of Taiwanese agricultural products, the group uses all profits to support local communities and indigenous groups.

The sustainable Sun Moon Lake farming and fisheries park is another Taiwanese SE that benefits local communities while educating people about alternatives to industrial food production.

The Taiwanese economic story is a remarkable one - the island has transformed itself from a poor, agricultural economy to one that, from the 1960s, became a major exporter of labour-intensive products, largely thanks to overseas investment.

Since the 1980s, the focus has shifted towards increasingly sophisticated, capital-intensive and technology-intensive products for export, and Taiwan has an enviable hi-tech industry that thrives at all levels of the production process, from design and programming to manufacture.

Taiwan's economic record is impressive, especially in the tech, IT and service arenas.

President Ma Ying-jeou advocates stronger economic ties with the mainland, in line with the thawing of relations that have been a boost to the island's economy - most significantly when direct flights between the mainland and Taiwan were reintroduced in 2008.

This soft diplomacy - which occurred alongside direct postal links and cargo shipments, and a relaxation of visa requirements for mainland tourists - is at the heart of this policy of reconciliation.

It represents a different tack from previous administrations, and since Ma's election in 2008, he has emphasised the two sides' commonalities, while trying to convince his constituents on the benefits of economic detente with their neighbour.

Taiwan's economy is becoming increasingly linked with its large, rich neighbour, and there are more than 70,000 business firms investing on the mainland, employing millions of Chinese workers.

Ma's re-elected administration is expected to further develop ties and improve cross-strait relations. The economic partnership is made possible through, in no small part, the bilateral Economic Co-operation Framework Agreement (ECFA).

As of the end of 2011, official statistics from Taiwan show that companies from the island had invested about US$110.9 billion on the mainland. The figure represents more than 60 per cent of Taiwan's stock of direct foreign investment.

This is not to say Taiwan isn't looking elsewhere for investment support. A recent report by BERI, the country risk-rating agency, found Taiwan to be the "third-best investment destination in the world". The government is doing what it can to leverage this reputation, along with that of its tech industries in the western corridor, to entice multinationals to set up their Asia headquarters on the island.

Taiwan's small- and medium-sized enterprises (SMEs) have become increasingly important to its economy and have developed since Taiwan separated from the mainland. Going through a number of different stages, from the "land to the tiller" programme in the 1940s to the largely innovation- and service-based roles of today, SMEs are now pivotal to an economy that has a greater reliance on service industries, IT and e-commerce.

Taiwan joined the WTO in 2002 and, since then, the island has enjoyed an increasingly liberalised economic environment, with Taipei announcing its desire to develop a "green silicon island" and companies, such as HTC, having an important impact on how the nation's tech sector is viewed around the world.

Much as Taiwan moved to reposition itself from an agricultural base to a manufacturing centre, and on to becoming one of the world's leading tech and IT hubs, it is now up to its people to discover alternatives, from inadequate, traditional or governmental social safety nets, and to inject some of the dynamism that led to its economic success in the social arena.