Taiwan President Lee Teng-hui's call last week for a review of the island's economic strategy contains positive messages for Taipei's efforts to boost competitiveness that should not be overlooked. The move does not entail a reduction of cross-straits economic intercourse. For the record, Mr Lee made two major points in his overall response to questions raised by National Assembly members. First, he said top priority should be placed on enhancing Taiwan's potential as a major regional manufacturing, research and development hub, with secondary stress on finance, complemented by progress in communications, transportation and infrastructure. This view reflects a new and sensible focus on Taiwan's 'core competencies' in the island's competitiveness drive. Second, he noted that Taipei's programme to develop the island's potential as an 'Asia-Pacific regional operations centre' for multinational companies 'has often been distorted to be seen as a basis for a westward advance' into the mainland. The misrepresentation was used by some to advocate rapid establishment of direct cross-strait business links, he said. Council for Economic Planning and Development chairman Chiang Ping-kun has repeatedly stressed that the regional-hub concept aims to remove investment barriers, such as irrationalities and inefficiencies in the administrative and legal framework; boost infrastructure development and gradually liberalise cross-strait economic ties. What Mr Lee actually said was 'the notion that Taiwan can use the mainland as the hinterland to develop itself into a Asia-Pacific regional operating centre must be reviewed' and the island's human and capital resources would best be used to improve the foundations of the domestic economy. It is important to note that he did not suggest any new government-imposed caps, much less cuts, in cross-strait economic ties which should continue to expand in absolute terms. At most, what Mr Lee mooted was a readjustment of the pace of expansion in such ties. Such a proposal is not dissimilar in spirit to efforts by Taiwan and other nations to avoid excessive economic dependence on Japan or the United States. It should also be seen in the context of legitimate worries over Beijing's political intentions toward the island and China's reluctance to resume cross-straits discussions. Mr Lee has been consistent in his view that Taiwan should look to the world market and not pin hopes solely or primarily on the mainland, an internationalist standpoint which was reflected in his May 20 inaugural speech. Mr Lee is far from being the only such voice. Last week, the Economic Daily News used its editorial to urge Taipei 'to develop an economic development direction and strategy whose success will not depend on goodwill and co-operation'. Indeed, the decline of Taiwan exports to the mainland and a reduction of the number of applications for indirect investment projects in the first half compared with the year-ago period suggests that smaller Taiwan businesses are making their own adjustments to cope with rising economic and other business risks on the mainland. Mr Lee gave a green light to stricter interpretation of existing rules on the evaluation of applications for indirect investment into the mainland by listed companies and conglomerates, such as Formosa Plastics. Smaller firms will not be affected, and Mr Lee's call that mainland investments of listed companies be proportionate to domestic projects is already a factor in reviews of such applications by Taipei's Investment Commission. More worthy of attention was Mr Lee's call for government and industry to place top priority on manufacturing and research and development. Besides the political factor of cross-strait relations, Mr Lee's comments may reflect a rise in influence of counsellors, such as Acer chairman and official presidential adviser Stan Shih Chen-jung. These advisers see the world market, not just mainland China, as Taiwan's true economic hinterland. They believe innovation and enhancing productivity offer a more genuine solution to rising wage and land costs than migration to new low-wage export platforms.