Category Archives: Economy

Taiwanese farmers cope with bad weather with help of new technology

An agricultural shift is underway, led by Taiwan’s hi-tech manufacturing companies such as Delta Electronics, Foxconn and Kinpo Group, who are all entering into the agricultural industry. They are bringing their technological knowhow to improve light system and automated equipment used in factories. Though, it is not just the big firms that are incorporating new technology to improve traditional farming. Recently, the Industrial Technology Research Institute (ITRI) has promoted the use of technological methods to small farms with some success.

The 99feng Organic Farm is the only Taiwanese farm using LED lights to improve the quality and yield of its organic asparagus. Farm owner Chiu Sun-nan led Global Views reporters on a tour of the organic asparagus field in the countryside of Caotun Township, Nantou County (central Taiwan), where a variety of green asparagus, commonly found in spring and summer, and also purple asparagus, which is better in winter, were growing.

Chiu’s asparagus on average sells for US$10 per kilogram (2.2 pounds) and are sold to 5-star hotels which appreciate quality. Over the past decade, he has invested US$1.1 million, in addition to selling two townhouses (US$200,000) and taking out a US$333,000 loan. The biggest challenge for the farm is unpredictable weather. On cloudy and rainy days, production drops by half and the crop also becomes less tasty, so a steady profit margin is hard to maintain.

Chiu researched theses and agricultural documents to improve his odds and to increase his asparagus production, but to no avail. That was until three years ago, when Chiu met Hu Hong-lie. Hu, the deputy chief of Electronics and Optoelectronics Research Laboratories, ITRI, and Chiu began collaborating, reported Global Views.

In the beginning and given Hu’s engineering background, the project team did not understand the natural balance needed by asparagus in order to thrive. Since then, they have increased the farm’s production by 25 percent by taking advantage of LED lighting, experimenting to find which light sources would spur the best growth, and hopefully transfer this knowledge to the bio-medical industry as well.

Hu said the biggest difference between industrial experiments and agricultural experiments is that the experiment objects are alive in the latter. Plants keep on growing, whereas with industrial experiments – if today’s data is not right, you can redo it tomorrow. “But for agriculture, if your experiment is wrong this time, you have to wait another season or another year to redo it.”

Global Views reported that now Chiu’s asparagus farm is littered with tiny blue, red, purple and white sparkling lights, appearing more like a night club in the dark. Actually, the assorted colors are another experiment to find out which light source is best for asparagus growing, and which wave length can generate the nutrition for asparagus and reduce the purine elements of metabolic arthritis in asparagus.

Since the collaboration, Chiu has turned a small profit for the past three years. With supplementary LED lights, even on cloudy and rainy days, the farm can still produce 75 percent of its peak production. This makes Chiu very grateful to the industrial experts, since using LED lights has helped his crop become less vulnerable to bad weather.

Taiwan’s faucet kingdom nestles by rice paddies

Dingfanpo is a village in Changhua County (central Taiwan) and is little known even in Taiwan. But despite it rural location, it is Taiwan’s faucet kingdom, with the distinction of creating 2,500 jobs and generating almost NTS10 billion (US$33.8 million) per square kilometer.

Business Weekly reported that if you peel back the cheap galvanized huts which dot the area, you’ll see the manufacturing of high end sanitary fittings, including popular worldwide faucet brands, such as top Japanese toilet maker Toto, expensive American commercial faucet maker T&S Brass, and Germany’s Hansa Metallwerke AG. Almost 1,000 small and medium sized hardware companies cluster here at the core of this village. Only covering six square kilometers, it nevertheless has an annual production yield of NT$55 billion (US$1.86 billion). It is an important manufacturing center for mid to high end faucets worldwide.

Working together to rebuild kingdom

In the face of competition from low cost Chinese and Southeast Asian manufacturers, many big Taiwanese faucet firms started to migrate overseas 20 years ago. Before that, in the heyday of Taiwanese faucet production, half of all faucets worldwide were made here, said Jason Chen, manager in charge of industrial clustering and innovation at the Industrial Technology Research Institute.

At that time, companies in Dingfanpo invested to improve quality, to emphasize research and development so they could compete against Chinese and Southeast Asian competitors. The investment paid off, renewing Taiwan’s faucet kingdom.

Business Weekly stressed that none of the firms clustered in Dingfanpo undertake to complete the whole process from the beginning to the end. They do what they excel at, with upstream firms working together with the downstream. They cooperate with each other and complement each other so that everyone works in the niche they are best at.

It is different with the Chinese companies. They cover everything from the beginning to the end, thus incurring higher costs in developing a new product. They are not as flexible as the Taiwanese companies, so their normal lead time is one month after placing the order, while those in the Dingfanpo industrial cluster can deliver in just two weeks, allowing Taiwan a market advantage.

In Dingfanpo, you can find subcontracting firms to meet your needs within 10 kilometers, while in China you have to drive at least 200 to 300 kilometers to do so. This saves Taiwanese firms a lot of time and money since they do not need to make the initial investment, but share only a part of the expenses incurred.

Profits 10 times higher than Foxconn

Managing Technology Company (MTC) used to do low end surface treatments and plating on sanitary and bathroom products. Ten years ago, Chang Chia-lie, president of MTC, worked with the Nuclear Energy Research Institute of the Atomic Energy Council to customize machinery by using plasma discharge, transforming the company to a high end company.

Business Weekly reported that MTC invested almost NT$100 million (USD$3.38 million) to build six sets of high end machinery with the help of the Institute. This has enabled them to provide treatment coating for physical vapor deposition (PVD) for up to 80 percent of the market’s high end sanitary hardware products in Taiwan. MTC has also branched out to include the commodity business of computer, communication and consumer electronics.

“A faucet with PVD sells for 30 percent higher than one with regular plating,” said Chang, noting that his company’s current revenues have reached over USD$3.38 million, with 40 percent net profit, about 10 times higher than that of Foxconn, Taiwan’s electronics conglomerate.

No sunset industry, only sunset thinking

Dingfanpo also is home to Chang Yi Shin, the only foreign supplier of American top commercial brand of touch faucet T&S. This company provides T&S with 30,000 sets of touch faucets a year. Wang Siang-hong, president of Chang Yi Shin, is a prolific inventor. He can develop at least 30 patents from a single faucet. Many of the touch faucets at 5-star hotels in the US are made in the village, but the company persisted for at least five years, at a cost of USD$378,000 to finally enter the US market.

Wang told Business Weekly that there is no sunset industry, only sunset thinking. There will always be businesses that close, while others launch new businesses. Sunset thinking means you do not innovate or make progress. There is always a chance of success as long as one is willing to transform.

Now Wang makes his millions by just selling touch faucets. He also designed a faucet that synchronizes auto mode, manual mode, hot/cold water, and can be dissembled and replaced by your average DIY enthusiast, even without turning off the water.  In addition, Wang has developed a touch faucet that needs no extra electricity, and works through hydraulic power. He spent USD$67,000 a year on license, certification and patents, and is number one in the Dingfanpo industrial cluster.

With almost 1,000 small to medium-sized firms, Dingfanpo is a microcosm of Taiwan’s industrial cluster strength, like a colony of ants fighting against an elephant of Chinese conglomerates. Dingfanpo has created 15,000 job opportunities in Taiwan, and has been doing so for a decade. Signs of hiring are always there in Dingfanpo, never a slump said Business Weekly.

Taiwan faces impact from Shanghai Free Trade Zone

This March, when China’s newly appointed Premier Li Keqiang paid his first visit to Shanghai, he mentioned that the city should be further liberalized, expanded and have a pilot free trade zone. In less than three months, the Shanghai Free Trade Zone was formally launched together with the aim of joining the Trans-Pacific Partnership (TPP) headed by the United States, reported Business Weekly.

Currently there are 12 members of the TPP, with a combined economic output accounting for 40 percent of the global total, and a combined total volume of about one third of global trade.

Hsu Bo-hsiang, a researcher at the Taiwan Institute of Economic Research, told Business Weekly that the TPP is a critical and high standard trade agreement, requiring not just full tariff reduction, but also intellectual property protection, labor standards, environmental standards, and promotion of small and medium-sized business development. One of its stipulations is that state-owned enterprises are not allowed to compete with private businesses for profits. Just this single requirement will hinder China’s ability to join and may potentially change its economic system.

The Shanghai Free Trade Zone serves as a pilot experiment for the opening of China internationally and for its economic liberalization domestically. If it proves to be a failure, it will be contained in one part of China. If successful, it can be expanded to other major cities like Tianjin, Chongqing, Xiamen and Hong Kong.

While promoting free trade and reform on the one hand, China is also pursuing the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement comprised of 10 ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma, the Philippines, Singapore, Thailand and Vietnam) plus China, Japan, South Korea, Australia, New Zealand, and India.

Once established, the Shanghai Free Trade Zone immediately instigated financial changes, the most eye-catching being the free flow of capital, liberalization of the Chinese currency, and the free flow of commodity goods.

Taiwan, which is not a member of the TPP or RCEP, has to go further in order to merge with the Chinese market. Business Weekly reported that Liu Fang-rong, general manager of Franklin Resources, said the financial reform test in the Shanghai Free Trade Zone poses a severe threat to the banking industry of Taiwan. According to his analysis, the majority of profit earned by Taiwanese bankers comes from two sources: the offshore banking unit (OBU) and the credit card business.

Currently, the free flow of capital and goods in and out of China from Taiwanese merchants’ OBU business still has to go through Taiwan’s banks. Once the Shanghai Free Trade Zone is fully established and China’s currency is liberalized, Taiwanese business will be able to go directly to the new trade zone. Besides attracting Taiwanese businesses, this new arrangement is set to attract companies from Hong Kong and Singapore as well.

Liu noted that the strength of Taiwanese businesses such as Foxconn, Quanta Computer, and Pegatron as exporters to China, should not be overlooked. As long as Taiwanese banks can hold on to the OBU businesses of these Taiwanese giants and prevent them from shifting to other banks in the new zone, this will continue to be an ample market for Taiwan.

The establishment of the Shanghai Free Trade Zone means that the Free Economic Pilot Zone in Taiwan which was established in July, must move forward quickly. Taiwan’s zone must also be more open and liberal than Shanghai’s, allowing it to be more competitive, stressed Business Weekly.

What happened to Taiwan’s Acer and HTC?

Two of Taiwan’s most prominent high-tech brands, computer vendor Acer Inc. and smartphone-maker HTC Corp., are feeling the pinch. Both have come off the competitive battlefield worse for wear, reported Commonwealth monthly. With Apple’s growth slowing and Microsoft’s acquisition of Nokia after unsuccessful forays into mobile devices, this winter will definitely bring a reshuffling among these high-tech giants.

Acer, founded 37 years ago, is Taiwan’s standard-bearer of brands, but has suffered two consecutive years of heavy losses and is not showing any signs of recovery.

Sixteen-year-old HTC has lost NT$900 billion (US$10 billion) in market value in just two years and this downward trend has continued in the third quarter of this year. HTC is forecasted to ship about 20 million smartphones this year, barely half the total it shipped at its 2011 peak. And now, it is in danger of being overtaken by Chinese smartphone brand Xiaomi, launched just three years ago.

However, if HTC chairwoman Cher Wang is worried, there were no signs of this during an interview with Commonwealth. “I think smartphones are still in their infancy, with still plenty of opportunities, such as smart cities. There are inevitably ups and downs when building a brand.”

Taiwan’s small home market a disadvantage

Without a big home market, Taiwanese high-tech companies are naturally at a disadvantage in the crucial area of defining standards, such as source codes and basic communications patents. Taiwan is also not interested in adopting the Korean model of pouring the entire country’s resources into forging one big brand, like Samsung.

“A small country has to consolidate its resources. To some extent, it has to have the capitalist spirit,” said Chiu Yi-chia, the dean of National Chengchi University’s Graduate Institute of Technology, Innovation and Intellectual Property Management. Taiwan’s high-tech policies, Chiu said, put too much emphasis on fairness and diversity, making the industry akin to being a sheep (socialism), with a skin of wolf (capitalism). As a consequence, Taiwanese tech brands are inherently at a disadvantaged without a concentration and not enough sustaining strength to take on the global market.

Internationalization is not the only key for growth

From Acer, AsusTek to HTC, everyone is up against the same fundamental challenge. If you want to fight a global battle, you need international talent. “Taiwan does not have a national image or market development advantages to sell, so Taiwanese companies must rely on above average salaries when hiring top international talent,” observed Bei Lien-ti, a professor at National Chengchi University’s Department of Business Administration.

Commonwealth reported that Acer and HTC have paid top salaries to attract an internationalized sales force, but it has not translated into improved results. “Can we really call using a bunch of foreign executives to make a bunch of cross-border acquisitions internationalization?” asked a resentful former HTC manager.

So why are Taiwanese tech companies unable to work with an internationalized team over the long term? “Because Taiwanese do not have boards of directors with strong functions and sound operations,” said Chiu. He notes that the management of Taiwanese tech brands generally depends too much on an all-powerful CEO. “Only if the board mechanism is sound can the company build the strength of its management step by step,” Chiu said.

Understanding the market to cultivate niche

Commonwealth noted another key to brand marketing is in finding an appropriate price point based on the product’s positioning in the market. But because HTC’s customers have largely been telecom operators and Acer’s customers have been distributors, neither has been able to get a firm grasp of the end user, making it more challenging for them to develop insight into consumer needs.

HTC relied on its edge in technology, including producing the first Android smartphone, to become the preferred supplier of telecom operators around the world. But after rising to the height of the industry, HTC neglected the rapid shift in the smartphone market to mid-range and low-cost models.

“Small countries can still outwit bigger rivals, as long as they understand how to focus,” said Liu Shuen-zen, a professor at National Taiwan University. Taiwan can open a new battlefield and cultivate B2B brands, he suggested, pointing to the Swiss model as one worth emulating.

“Switzerland emphasizes precision and focus. Through its sharp concentration and technical proficiency, Switzerland commands 80 percent of the global market for currency ink, and its watches generate high margins,” said Liu, who believes Taiwan could also become a global “hidden champion” in several niche markets.

Acer and HTC both posted losses for the third quarter, and their short-term prospects remain uncertain. But considered over the long haul, the hard road traveled by Taiwan’s high-tech brands remains worth pursuing. After all, success is built on the pillars of failure, noted Commonwealth.

Heng Leong Hang pushes Dyson to the top in Taiwan

How big is Taiwan’s market? When speaking demographically, Taiwan is one sixtieth the size of mainland China’s population. Based on per capita income, it is only one third the size of Denmark’s. But for the high-end British brand Dyson vacuum cleaner, Taiwan is the largest overseas market out of the 29 countries where the products are sold, according to Business Weekly.

According to marketing firm GIK, Dyson’s products took the top five spots of the ten most popular vacuum cleaners in Taiwan from January to July this year. Last year, the firm grabbed a market share of NT$600 million (US$20 million) out of Taiwan’s total NT$1.5 billion (US$50 million) market. This made Taiwan the largest distributor of Dyson products in the world, beating large markets like China and India, and overtaking affluent countries like Denmark and Israel (excluding Britain and US where Dyson has direct ownership of the businesses.)

In 2006, when Dyson products were first introduced to Taiwan, Dyson’s British headquarters believed that Taiwan would be a small market. Chen Cheng-hong, chairman of Heng Leong Hang (HLH) told Business Weekly that few Taiwanese use carpet and vacuum cleaners, nor was it considered a daily necessity. Besides, Dyson vacuums cost nearly US$1,000 each, six times the price of popular Taiwanese models.

The fundamental hurdle from the beginning was that Dyson’s products were not competitively priced, added Chen. However, HLH decided from the outset not to compete on price. Instead, Chen set up an independent business unit exclusively for Dyson products, hiring extra personnel, and spending 20 percent more than other Dyson distributors.

Chen also extended the warranty for the vacuum cleaners to five years, the longest among local sellers. This meant HLH itself was responsible for the extra costs of after-sales services.

Of course, these upgrades increased operating cost by 50 percent, so Chen also charged 20 to 30 percent more than Dyson charges in the UK in order to make a 10 percent profit, reported Business Weekly.

Like other high-end home appliances, Dyson adopted a similar marketing strategy toward its ethnic Chinese consumers, targeting women and top-end sales. HLH immediately found out this strategy did not work in Taiwan.

Initially, over 70 percent of Dyson products in Taiwan were purchased by men, mostly engineers at the Hsin-chu Science Park (Taiwan’s Silicon Valley), according to Business Weekly. Hsieh Ming-hui, professor of international marketing at National Taiwan University (NTU), noted that there are a large number of engineers with an electronics and mechanical engineering background in Taiwan. They are the people who are willing to pay for technology. Plus, inventor and spokesman of the firm, Sir James Dyson, offered the same appeal as a movie star to his male audience.

C. Y. Huang, professor of management at NTU, also points out that HLH was fully aware that engineers tended to collect information from online forums and are good at explaining high-tech principles in simple terms. So by capitalizing on these initial loyal fans to share their thoughts on websites, HLH simplified the mechanical principles of Dyson products, thus enlarging its consumer base.

Through word of mouth from these engineers, sales of Dyson products doubled each year from 2007 to 2011. The ratio of male customers to females changed from 7:3 to about half and half. Today, Dyson has successfully entered the female market, moving from being a niche product to the mainstream, noted Business Weekly.

More young Taiwanese find work in Southeast Asia

In recent years, an increasing number of young Taiwanese people have gone to Singapore to seek work, with almost 6,000 making the move this year alone. This phenomenon is largely driven by the fact that wages in Taiwan have stayed at the level they were 16 years ago, with starting salaries for entry-level workers also remaining in the doldrums. At the same time, demand for service sector workers in Singapore is booming, and in Macau, demand for workers is especially driven by the casino-based economy.

The combination of these two trends has resulted in large numbers of young Taiwanese people working in Southeast Asian countries, with the majority of them working in entry-level positions within the service sector, reported Global Views monthly.

Every day more than 20 young Taiwanese people loaded down with luggage prepare to fly to Southeast Asia to take up new jobs there. Already this year, as many as 5,000 Taiwanese workers have headed for Singapore, about 1,000 have made the move to Macau, and several hundred have relocated to the Philippines. The majority of them are working full time, with about 400 taking up internships.

Elvis Thong, managing director of the Inter Island Group (Singapore), the largest recruiting firm hiring Taiwanese workers for Singapore, told Global Views that his company only recruited 280 Taiwanese workers in 2012, but by September of this year, there were already 700 applications.

According to a recent survey, it is estimated that there are about 70,000 young Taiwanese people willing to work in Singapore, Macau and the Philippines. Global Views reported that in addition to engineers and medical doctors, Southeast Asian countries are seeking to fill entry-level service sector positions.

The listing of jobs that Singapore needs to fill mostly includes restaurant waiters, sales staff, counter clerks, and kitchen assistants. Although these are entry-level positions, they still pay better than similar positions in Taiwan.

“Taiwan’s service sector is one of the best in the world. We Singaporeans have to learn from you,” said Thong, adding that Singaporeans do not like to do service sector jobs. So there is a huge demand for workers from overseas.

Sherry Hsia, general manager of Byte-In Integrated Marketing Corp. in Taiwan, said that the advantage Taiwanese workers have includes their language skills. In addition to Mandarin, many young Taiwanese workers speak good English, as well as Hokkien (a dialect commonly spoken in Taiwan, Fujian province in China, and among ethnic Chinese communities in Southeast Asia). Singapore used to hire a lot of workers from mainland China, but employers have found that Taiwanese workers have a better attitude to work and are more loyal, making Taiwanese recruits more desirable, said Hsia.

Chiu Li-chin, the vice-president of the UNI Profession Group in Taiwan pointed out that young Taiwanese workers are the most driven of all foreign workers. They are keen to learn, and want to prove their capability. They are also demanding, and have a strong self-esteem, unlike other expatriate workers who are only motivated by the desire to make money. “Taiwanese workers are also known for not answering back, even when their bosses scold them,” she said.

According to Global Views, a large number of Taiwanese workers employed overseas will return home, bringing with them an international perspective and new skills. On the other hand, with so many young Taiwanese workers making a good living overseas, many of them may never return to Taiwan. This factor will become all the more visible as young Taiwanese workers, who were expected to drive Taiwan’s economy in the future, remain overseas.

Taiwan revitalizes spirit of entrepreneurship

In the 2012 World Competitiveness Scoreboard released by the International Institute for Management Development (IMD) in Lausanne, Switzerland, Taiwan ranked first in the category for entrepreneurship. In another index by the Global Entrepreneurship and Development Institute (GEDI), Taiwan came in 11th worldwide and No. 1 inAsia.

Global Views magazine reported that the White Paper on Small and Medium Enterprises in 2012 published by the Ministry of Economics showed that there are 1.279 million small and medium-sized companies in Taiwan, accounting for 97.6 percent of total enterprises and employing 80 percent of the island’s workforce. Translated, this means one out of every 18 Taiwanese people are “business owners.”

Despite these figures, Taiwan’s entrepreneurship has begun to show a decline as stagnant economic growth becomes more entrenched. According to the official numbers, Taiwan’s entrepreneurship has passed its peak. The number of newly established small and medium-sized businesses has never been able to surpass 100,000 a year, and has even dropped to below 8 percent.

Global Views reported that 85 percent of revenues from these companies come from domestic consumption. That means they fight for domestic market share, not in overseas markets.

According to Taiwan’s 2011 Small and Medium Enterprises report, over 770,000 stores fell mainly into two categories, either “wholesaler and retailer” or “restaurant and lodging.” This accounted for 60 percent of all Taiwanese businesses, while only 135,000 companies, about 1 percent, belong to the “manufacturing industry.”

Overdependence on the domestic market by these new businesses and a lack of competition for exports makes them vulnerable to closure, unable to weather economic hardships for a couple of years. As a matter of fact, these simple imitators of current operational models with low barriers to entry are not indicative of true entrepreneurship.

Global Views noted that most young men born to a rich family do not consider entrepreneurship a worthy goal in life. Instead, they prefer stable job opportunities. They like to work for public agencies or well-established corporations, jobs are stable and more predictable.

Recently, a college professor was surprised to find one of his students running a bakery after completing his master’s degree in high-tech management, an occupation entirely different from his studies. The teacher said with a sigh that the student believed that there was no possibility of his success in the high-tech sector due to the lack of financial support and resources.

Another professor, who often led collegiate groups overseas for international competitions, found that most of his students started their stores with an interest in being of service or in promoting simple cool techniques. But when compared with loftier ideals of dealing with climate change or solving deeper social issues presented by other international teams, Taiwanese young people pale in comparison. “Simply put, our young men do not think big, and have no intention of changing the world,” the professor told Global Views.

Although stability might hold more appeal for most Taiwanese workers, there are still exceptions such as Yang Li-wei. Less than 40, he already runs two high-tech firms – eLand Cloud Services and Tornado Technologies. An entrepreneur in college, and part of the first batch of “student CEOs” in Taiwan, he said happily, “I have been running businesses since my first year of graduate school, and have never been hired by others.” He teaches in the business school at National Taiwan University.

Yang is often asked to serve as a competition judge or counsel student teams. He realized that Taiwanese youth like to start their shops for services or entertainment products, more as a hobby or for personal pleasure, without planning to expand the business. Yang said, “It is OK to start running a small store, but it is not your destination.” He reminds people about the difference in scale between a store, a business and an industry.

What Taiwan needs to do is to offer the younger generations more opportunities to try and venture further so as to help them to stand up, to move around, and to lead the nation. Only 5 to 10 percent of people were born to be true entrepreneurs, and just a few can change the future of Taiwan, concluded Global Views.

Chinese hospitals rush to copy Taiwan model

With 600 beds, the No. 1 People’s Hospital in Jiande, Zhejiang province, China, is the area’s largest medical facility. Standing at the nursing station in the hospital’s cardiology ward, a young nurse is pushing a mobile nursing cart developed by Taiwan’s Chang Gung Memorial Hospital. The scanner used to verify patient ID wristbands is also a Taiwanese product.

“Today, mainland hospitals are all studying the Taiwan model,” says Hong Ying, the director of the hospital’s outpatient service center. Hong, who has worked at the hospital for more than 20 years and previously spent a week visiting Taiwanese hospitals, cannot help but praise Taiwan’s medical services, reported Commonwealth monthly.

Chinese hospitals are undertaking major reforms designed to move them into the high-tech age. Taiwan’s healthcare professionals are increasingly being lured to China, but at the same time the island’s healthcare sector is able to exploit new commercial opportunities by riding the momentum of China’s medical reforms.

China is already the world’s third largest healthcare market, but serious problems such as the lack of access to care and its high cost represent potential time bombs that could easily trigger social turmoil, underscoring the urgency for medical reforms.

Over the next five years, more than 30,000 Chinese hospitals will focus their efforts on “hospital management” and “information”. That has created demand from exporting medical services to guiding China’s hospitals in getting international certifications and even managing hospitals or planning new facilities.

Chen Hsiu-chu, vice superintendent of the Changhua Christian Hospital in central Taiwan, spent three quarters of her time on the mainland, leading Taiwanese and Chinese colleagues around China to offer mainland hospitals some guidance. These deals added at least NT$30-NT$40 million (US$1-1.34 million) a year to Changhua hospital’s income, a vital source of revenue to supplement the reimbursements it receives from Taiwan’s National Health Insurance System.

The China Medical University in Taichung (central Taiwan) has transferred its hospital management information system to a Taiwanese hospital management company operating in China. That company will adapt the system into a version suitable for Chinese medical institutions.

“The rights fees are NT$5 million (US$167,000), plus at least an additional 10 percent cut of all future contracts, which will be of some help to the school’s finances,” says ChinaMedicalUniversity vice president Walter Chen. The new system will be used first in Qingyuan People’s Hospital in Guangdong Province in China.

The Taipei Medical University Hospital is another focal point for Chinese hospitals looking to learn from Taiwan. The 3,000-bed Taipei Medical University Hospital system has brought together hardware and software vendors from Taiwan’s information and communications technology sector to introduce much needed information, nursing, and mobile physician order entry systems and cloud computing capabilities at Ningbo First Hospital in Zhejiang Province in China. The whole system is worth more than 1 million renminbi.

Commonwealth stressed that in the pursuit of renminbi, Taiwan’s hospitals must also remember China’s predatory strategic framework consisting of importing, digesting, absorbing, innovating and overtaking. China sets its sights on a new technology, learns about it from the outside world, replicates it and then undercuts its former partners and other players using cutthroat pricing.

This consistently successful model has already afflicted many Taiwanese businesses in China trying to go it alone, offering a cautionary reminder to Taiwan’s medical sector that it cannot feverishly chase renminbi without contemplating the potential long-term consequences of such actions, the magazine warned.

Tex-Ray gives new life to clothes

Despite being a 35-year-old textile factory, Taiwan’s Tex-Ray has kept up with textile technology. This company has successfully developed a very soft and delicate metal fiber, one-tenth as thick as human hair, extracted from stainless steel. This is combined with a sensory system that is woven into the cloth and can be used as a physiological monitoring device to check a person’s heart beat and breathing.

Originally a yarn producer,  Tex-Ray’s main product lines now include yarn, fabric and finished clothes, with manufacturing facilities in Taiwan, Mexico and Swaziland. Ray Lin, 61-year-old chairman of Tex-Ray, knew his company could not survive by staying on as ODM of low cost garments and fabrics.

There are less than five companies in the world that can make metal fabric of this caliber. Today, Tex-Ray is the exclusive supplier for the largest European sports brand, BH, in making their bike wear, reported Commonwealth monthly.

Five years ago, Tex-Ray saw the potential of metal fiber and invested to set up a subsidiary, Kings Metal Fiber Technologies. At that time, smart clothes were an uncertainty. It was hard to know when the investment of over NT$100 million (US$3.3 million) on smart clothing research and development would pay off.

But fortunately, Kings Metal Fiber was able to enter the auto glass market with high temperature cloth made of stainless steel. When glass is removed from the heated furnace, this cloth is used as a soft and high temperature buffer material between the mold and the glass.

Now Kings Metal Fiber is the second largest maker of auto glass cloth in the world, taking a 25 percent global market share, reported Commonwealth.

With this strong financial support, Tex-Ray used the metal fiber produced by Kings as the raw material to form another subsidiary, AiQ, and continued to develop and produce other types of smart clothing.

In the manufacturing process, AiQ combined the sewing and bonding techniques of textile production with an electronic monitoring system. As the end user wears the clothes to exercise, his or her physiological signals can be transmitted via blue tooth technology to a smart phone or tablet device.

A piece of smart clothing is combined with input from a combination of technological experts in textiles, electronics and medical devices. Lin knew it would be difficult to pool these specialty fields into a finished Tex-Raywell product, but he took a chance. “Sometimes it was a gamble in the beginning, but later you find this is the threshold others can’t easily enter,” Lin told Commonwealth. This year, Tex-Ray is expected to receive orders for 10,000 metal fiber items of clothing, costing about US$35 apiece.

Swiss institution recommends strengthening Taiwan’s competitiveness

At a time of slow global economic recovery, Taiwan is well placed in the worldwide competitive index, ranked 11th out of 60 economies, according to the World Competitiveness Scoreboard 2013. Released by the International Institute for Management Development (IMD) located in Lausanne, Switzerland, the 25th perspective on world competitiveness has the island listed as one of the “winners”. The island has moved up the rankings since 1997 when IMD first produced a unified ranking of advanced and emerging economies. China and South Korea also ranked highly, but behind Taiwan.

Better performing than South Korea

Stephane Garelli, head of IMD’s World Competitiveness Center, told Commonwealth monthly that the frequent winners in the World Competitiveness Scoreboard, such as Switzerland, Sweden and Germany, share common characteristics. They focus on manufacturing industries, export trade, and small and medium sized businesses. Garelli adds, “All these are the strengths of Taiwan too.”

South Korea, one of Taiwan’s main regional competitors, has not done well in the last five years, coming in 22nd in the World Competitiveness Rankings. Garelli noted that the South Korean economy depends entirely on big conglomerates, while Taiwan has many small and medium sized businesses which are more energetic and diversified.

Commonwealth reported that in the last five years, Taiwan has experienced an annual average commodity price increase of 1.38 percent while that for South Korea was 3.32 percent. Besides, Taiwan’s GDP, based on the rate of purchasing power parity (PPP), was US$37,252 in 2012, US$7,000 more than that of South Korea.

In the questionnaire indexes of labor/management relations and employee dedications, ranked Taiwan 14th and eighth respectively while those for South Korea were way behind at 56th and 42nd.

In other words, despite South Korea’s promising export performance, it is facing a rising rental market and commodity prices, and poor labor/management relations.

Taiwan’s weakness analyzed

According to Commonwealth’s analysis, in the four categories of competitiveness rankings, Taiwan dropped the most in business efficiency. With poor product innovation and little increase in added value, showing that Taiwan is certainly at a disadvantage.

Taiwan is advised by Garelli to develop more medium-sized businesses, like core German businesses with about 100 employees, focusing on technology and exports. If they can achieve the best in each field, they would do well in terms of competitiveness, he said.

Secondly, he suggests that the island should diversify its products and export markets. High-tech products account for 46.4 percent of Taiwan’s exports, the highest in the world. Besides that, Garelli suggests that Taiwan should also develop its biotechnology and healthcare.

He added, Taiwan’s exports focus on the US, European and Chinese markets. With the subprime mortgage crisis and European bond crisis, in addition to the slow growing Chinese market, Taiwan’s exports are bound to be impacted.

Alan Eusden, chairman of the American Chamber of Commerce in Taipei, also suggests that the Taiwan government ought to improve the process for foreign investment on the island, including an easier application process. “There is more for Taiwan to do to attract foreign investment, compared with other Asian countries,” he said.

The Commercial Times pointed out that the fundamental reason for Taiwan’s weak economy is a result of insufficient investment. Here, investment does not refer to the stock market or the housing market, but real capital formation of fixed assets.

As for the ratio of private investment in GNP, Taiwan has dropped to 14.9 percent in 2012 from 15.4 percent in 2011, lower than the 17-18 percent during the years of the global financial tsunami, and far less than the average 24 percent level of South Korea. Although South Korea’s economic growth was poorer than that experienced by Taiwan in the first quarter of this year, South Korean private investment was still higher, which means South Korea is not worried about a short term recession.

The Taiwanese government has always paid more heed to private investment in the manufacturing industry, but less so to the service industry, which is severely underfunded. Taiwanese investment in restaurants and hotels accounts for 12.9 percent of GDP (2008), 11.1 percent (2009), 12.5 percent (2010) and 11.7 percent (2011). As an industry with priority development from the government, it is not sufficient. How can more foreign tourists be attracted to Taiwan?

The service industry accounted for almost 70 percent of Taiwan’s GDP, creating almost 60 percent of the job opportunities. Proportionally speaking, Taiwan’s government is not providing enough attention and resources to the service industry.

Setting up Asia’s NASDAQ

The Economic Daily News said in an editorial that Taiwan’s current domestic investment is not just lower than that of foreign competitors, but even lower than in previous years. This is the key element of Taiwan’s slow economic growth.

The paper noted that Taiwan’s real capital formation of fixed assets and private investment in the last five years is lower than that for 2007, and net investment measured last year was only 60 percent of that in 2007. In recent years, the government and the financial industry spared little effort to provide funding to domestic production investment while mostly working on expanding the financial business and profits only. Scarce attention was put on the financial industry’s main mission to support domestic investment. The government’s policies of setting up an international financial center and Asia-Pacific-capital-raising plan are all to serve foreign investors, not to improve domestic investment.

Taiwan is rich in capital because its savings rate and export trade account for seven percent of its GDP. Taiwanese scholars proposed to take advantage of the local capital to set up a NASDAQ in Asia to provide baited capital to attract foreign high-tech companies to carry out manufacturing and R&D in Taiwan before going public there. The government and financial industry should also come up with similar active methods to use the rich Taiwanese capital to invest domestically so as to promote economic growth.