SINGAPORE — Taiwan, once heralded as one of the Four Asian Tigers, has a chance to revitalize its economic growth. In a recently released research report by the Milken Institute, “Recapturing the Taiwan Miracle: Diversifying the Economy through Innovation and Collaboration,” researchers propose stronger public private partnerships in three key areas to re-energize businesses, revitalize the economy and reclaim the Taiwan miracle.
“Taiwan was once a growth miracle for the region, but since the 2000’s the economy has lagged. Exports have declined 16 months consecutively,” said Perry Wong, managing director of research at the Milken Institute and author of the report. “We undertook this research to find out why, and how the economy can gain a second wind.”
Close cooperation between the public and private sectors in crafting diversified development strategies will enable Taiwan to free itself from its current economic struggle, the report concludes. Taiwan has fallen behind its Tiger counterparts due to overreliance on the high-tech industry and original equipment manufacturing (OEM), which has been suffering thanks to shrinking global demand. At the same time, unattractive policies have diverted both foreign capital and human capital to neighboring countries. According to Oxford Economics, Taiwan will face a severe talent shortage by 2021. The report details three key areas in which the public and private sector can collaborate:
- Research and development (R&D) and innovation: While President Tsai Ing-Wen’s party is targeting key industries for the future, such as biotechnology, defense and the Internet of Things (IoT), other private businesses in Taiwan can invest in their own R&D and innovation to provide higher quality and high value-added products and services. The authors see great potential for Taiwan’s high-end service industry to become another economic growth engine. The report points out that the government can facilitate R&D and innovation through policy and financial tools, as well as by nurturing knowledge partnerships between domestic and oversea professionals in the public, private and academic sectors.
- Branding and marketing: Diversifying into new markets and improving after-sales services would expand the customer base of many Taiwanese companies that are currently limited to markets sharing a similar language and culture. Along with improved quality products, highly reliable services and a maturing intellectual property rights protection, Taiwan can build a strong, global brand in the advanced-services industry.
- Attracting foreign investment and human capital: The report recommends reforming institutions and policies with better incentives to attract and retain foreign investment and talent. Taiwan’s brain drain often is attributed to the gap between its higher education system and the employment needs of businesses, as well as its stagnant wages. As raising wages will be difficult in the short run, the government should propose more effective immigration policies that allow foreign talents to work and live in Taiwan.
“While the public sector has a broader economic view and controls policy and regulatory tools, private businesses have a better understanding of market dynamics and can quickly adapt to global market shifts,” said Dr. Michael Lin, research analyst at the institute and co-author. “With constant interaction, Taiwan can restructure its industrial policies and regulations to capture the latest economic dynamics in a timely manner and reclaim the Taiwan miracle.”
“Recapturing the Taiwan Miracle: Diversifying the Economy through Innovation and Collaboration” by Michael C.Y. Lin and Perry Wong is available online: http://www.milkeninstitute.org/publications/view/808