Taiwan's economic development has entered a key phase. Momen-tum for sustained economic growth will rely on improvements in technology. It was for this reason that the North American Taiwanese Professors' Associa-tion (NATPA, 北美洲台灣人教授協會) and NATPA's Southern California chapter, convened the "2001 Taiwan-America Science and Technology Conference." At the two-day conference, held in April in Costa Mesa, California, technology experts and economic scholars from Taiwan and North America discussed the state of, and future prospects for, Taiwan's technological and economic
development.
NATPA fully approves of the basic direction and objectives of the Council for Economic Planning and Development's plan to develop a knowledge-based economy. The plan is intended to raise the level of knowledge and technology within industry, advance high-tech innovation and development and help traditional industries to upgrade or transform themselves. At the same time, however, it is hoped that the government will accept the following suggestions made by our association.
1. Progress and technological innovation are the key components to long-term, sustained growth. Under the framework of globalization, the accumulation of tangible capital and the opening of new markets in China have marginally improved Taiwan's high-tech economy. But these short-term gains cannot be relied upon in the long term.
2. Integration into the global economy should move in the same direction as that of places like North America, the EU and Japan, in order to facilitate the import and expansion of technology, so as to improve innovation. Otherwise, if Taiwan deepens its ties with developing countries which are weak at innovation, the use of its limited resources will become far divorced from centers of global innovation, as well as the group of developed countries that comprise the world's greatest high-tech trade market. This would not be in Taiwan's long-term interests.
3. As Taiwan strives to improve in the area of technological innovation, knowledge, information, talent, venture capital and intellectual property rights are the key resources that the country urgently needs to grasp and use effectively. The main axis of Taiwan's econo-technological strategy involves constructing an efficient National Innovation System that combines the above-mentioned resources, while establishing strategic R&D alliances with global innovation centers such as the US, Europe and Japan. In addition, vertical or parallel integrations with foreign industries should be initiated, to exchange resources and innovation concepts, and to promote technological expansion.
In the present phase of economic development, however, there are four obstacles influencing the capacity to innovate.
1. Capital investments in R&D are too low nationwide. It wasn't until last year that the low thres-hold of 2 percent (of GDP) was surpassed.
2. The national tax base is too small. This, along with the slowdown in economic growth and expansion, has seriously affected the government's ability to lend financial support to R&D and improve public infrastructure.
3. The ability of the people to understand English greatly needs to be improved, so that contact with Western technology and product design, innovation and information will not be hindered. This will avert a negative influence on international trade relations, industrial integration and technology exchanges, and prevent an excessive amount of resources from flowing across the Taiwan Strait. China only occupies, for example, 4 percent of the world's commodities market, yet absorbs over 20 percent of Taiwan's total exports. Taiwan's direct investment in China is also disproportionate to the scale of its economy.
4. Taiwan's leading media and pro-unification politicians have created the myth of a "greater China market." As the nation struggles to integrate new and old industries, the media's over-exaggeration of the greater Chinese market has already caused an excessive outpouring of resources across the Strait, where businesses continue to engage in low-added value
production activities. This has also indirectly become another obstacle that butchers Taiwan's capacity for innovation.
Based on the three-point strategic consideration and the four obstacles detailed above, NATPA advocates the following 10-point policy:
1. On an average annual economic growth rate of 6 percent, the budget for both government and grassroots technology R&D should grow by 15 percent annually, in order to raise R&D to a level equivalent to 3 percent of GDP within 5 years.
2. The majority of governmental spending for R&D should go to basic technology and applied technology and should not go to new products, new manufacturing processes, or R&D investment in new designs that have already been lured by the profit-incentive mechanisms of the free market.
3. Expand and loosen up the venture capital market. Use this market's risk-dispersing mechanism produced by internationalization and liberalization to cause domestic and foreign capital to flow into high-risk/high-return innovative R&D investments, and encourage the rise of local industry. This can, at the same time, reduce the current flow of local capital into low-risk/low-return industries in China.
4. Increase the quality of local technology talent and raise its percentage in the labor force to the level of advanced countries.
5. Raise the English language ability of the people and gradually expand the implementation of English instruction in universities and graduate schools.
6. Continue to encourage students to study overseas in high-tech countries.
7. Strive for balanced regional economic development, comprehensively improve the environment and quality of life, and build metropolitan areas that are up to international standards.
8. Speed up the privatization of state-owned businesses, streamline governmental organizations, restrict the involvement of political parties in profit-making ventures and integrate governmental technology departments and R&D resources. In addition, improve the government's administrative efficiency. In particular, governmental R&D authorities should cooperate with the private industrial sector.
9. Reform the tax system. Any discriminatory tax incentives or breaks that are unrelated to R&D investment and industrial upgrades should be abolished. The tax policy should take as its starting point stimulating grass-roots R&D and other innovative activities and not the manufacture of mass-produced high-tech products. The purpose should be to urge the growth of brand-new high-tech enterprises -- not to extend special benefits to existing enterprises. Thus, if the government directly provides seed funds or corporate R&D tax credits related to the size of a company's R&D operations, it can efficiently stimulate innovative activities, while attending to the tax base situation.
10. Engage in cautious and limited economic integration with China. With regard to its "no haste, be patient" (
Although these policy points cover a broad range, a central idea pervades them -- namely, how to rationally allocate limited resources, how to raise the technological capacity for innovation and how to foster long-term, sustained, economic development. The government should take heed of the unemployment rate. It reflects precisely the development that German economist Joseph Shumpeter called "Creative Destruction." Leaning and off-balance, Taiwan has created a situation where the rate at which new enterprises emerge cannot keep up with the speed at which enterprises disappear. Overcoming this problem of structural imbalance depends on lively technological innovation, but the current mass investment in China will have just the opposite effect.
This article is signed by Lin Mao-shiu (林茂修), president of the North America Taiwanese Professors' Association and seven other association members.
Translated by Scudder Smith
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