Current economic policy in Taiwan failed to address issues of economic growth. A tool created to bridge the gap between policy makers and people can be the first step to collaborate initiatives for Taiwan’s economic development. Taiwan is the subject of this research, and the goal is through data-driven industrial cluster analyses to develop a tool to unite people who is interested in economic development in policy making, business trades and services, and research to use and conclude with findings and
recommendations.
Economic development has always been an important task for policy makers. In consideration for Taiwan’s economic growth, the goal is to create higher wage job opportunities and raise the general GDP to balance the north-south differences. This is an area where policy can aid the growth by putting resources in the right areas, especially to aid those embryonic clusters in bringing the knowledge based to the speed but with a clear goal set for employment growth. The literature review confirms the need for
“bridging policy makers and people” for Taiwan. The policy makers have raised the awareness that they need to be more effective in delivering economic policies. This
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triggered the comparative analysis of the economic policy decision models among three continents on top of the data-driven economic landscaping and analyses.
This dissertation research contributes to Taiwan economic development in five ways. The research (1.) compares Taiwan, the US and European’s economic policy decision models and displays the differences, (2.) provides a data alignment interface in an international format which regroups existing industrial data labeling into the US and European’s cluster standards for future comparative studies, (3.) derives Taiwan’s economic landscapes by utilizing the Cluster Mapping analytical framework to analyze industrial dynamics, (4.) analyzes Taiwan’s agglomeration models and potentials, and (5.) is written for readers across the board, for practitioners, policy makers, and researchers and to promote cluster initiatives.
Literature indicates the demand for Taiwan’s policy makers to be more effective in delivering effective economic policies. Without all the stakeholders’ involvements, it would be difficult for policy deliveries to be effective. and government policies with large resources can strengthen the economic development by collaborating with people.
Additionally, for the effectiveness of economic policies, the research analyzes the policy makers’ decision modes among the US, EU, and Taiwan to address the communication gap issue which was identified by Taiwan’s policy makers in the earlier years but unsolved.
The comparative study of policy makers’ decision model concludes that Taiwan has a top-down policy model; versus the EUs have a bottom-up initiative model, and the US has an interactive model. We can also imply that the more democratic a place, the more interaction between policy makers and people. Taiwan has a young democracy and is adjusting to the full democratic society. The policy making model still remains the old authoritarian model with top-down economic plans. Recently, Taiwan’s citizens are awakening to the transparency of policy decision process and making many demands for change. The Sunflower student movement43F43F44 is one example of the policy transparency demands. It is time for Taiwan’s policy makers to evaluate alternatives and to learn from
44Ramzy, Austin (22 March 2014). "As Numbers Swell, Students Pledge to Continue Occupying Taiwan’s Legislature". New York Times. Retrieved 22 March 2014.
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the matured democracies. The authoritarian policy making process eventually will be phased out of a growing democratic and open economy. It is only natural for a full democratic society that people want to make decisions on their own. The recent
presidential and legislative election results reflect Taiwan people’s demands. Bridging the gap between policy makers and people is an important and urgent task for
government to move forward. Taiwan’s people can design their own progressive model to solve the gap issue.
Additionally, this is a data-driven research to accurately map industrial data and the location dynamics. Cluster mapping methodology is used to set the framework for data calculations, and growth rates are used to analyze the dynamics. This is also an inductive research from the observations of two rich sets of census data to derive the dynamics of economic development among three different growth rates namely revenue, employment, and wages. Consequently, Taiwan’s agglomeration models are derived by analyzing the dynamic relations in reference to the three growth rates. One is the spillovers model, and the other is the supply-chain migration model. One fits domestic agglomeration, and the other fits the external expansion. One has wages rising, and the other does not. Further research can be done to evaluate the supply-chain model for possible wage growing potentials either through skill training or injecting higher knowledge-based innovations to the industry.
In more details, by utilizing cluster framework, a new set of cluster definitions for Taiwan is developed which conforms with the US cluster mapping standards. Taiwan’s census’s data are used to calculate the dynamics from the past, and analyze the growth factors for any agglomeration effects. The research lands itself on the cluster
agglomeration theories. The inductive process is used from observations to concluding the cluster dynamics with three important growth factors and defines their relations.
Employment, revenue, and compensation are three important factors for the cluster dynamic research, and even more critically the labor pool is identified as the contextual influence to wage and employment growths. The relation came clear that revenue is the leading factor for the business sustainability which drives the demand for growth, and employment and wages are the dependent factors to gauge the agglomeration effects, and
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the supply of labor pool steer the effects between the wage demands and employment supplies.
With the two agglomeration models, the spillovers work for the knowledge-based clusters for the agglomeration of adjacency workforce with domestic expansion that there are prerequisites for the quality of labor. The knowledge required for the industry jobs either takes longer or a certain type of cognition ability. This is different from the supply-chain migration as the flying geese model applies which the external workforce in the foreign locations benefits. The IT cluster dominates the spillover agglomeration model that wage is an important factor. The labor pool condition drives the wage and employment high, when the wages is rising fast, the adjacency locations can benefit from the spillovers. The supply-chain migration model is derived from the characteristic of machine tooling industries which clustered with synchronized growth rates that wage is not the main growing factor. In the case of Production Technology and Analytical Instrument, the wage remains stable among related clusters, but the migration is to another lower labor cost location outside of Taiwan. This model might have contributed to Taiwan’s low wage phenomenon that the wage is not rising due to business migrating out of Taiwan or the manpower is replaced by the cheaper migrant workers.
Furthermore, Taiwan is facing the low birthrate problem that Taiwan ranks the least birthrate in the world. The shortage of labor in Taiwan is calling for urgent solutions, and businesses finds ways to expand their income by either moving out or hiring migrant workers. Taiwan’s wage ranks very low compared to its neighboring developing
economies such as Hong Kong, Korea, China and Singapore. In the meantime, Taiwan is losing its quality manpower to those higher paid economies, and Taiwan will further degrade without the quality workforce and lose competitiveness, and stay behind.
Raising the minimum wage and having a tough re-enforcement law is an urgent policy to be called upon. Without raising the wage and competitiveness, Taiwan will further degrade to a low-wage and low-cost economy, and the collected tax will not be sufficient to supply for the public services. The government has already experienced the shortage in budgets for public work, and this is an urgent issue to be addressed.
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From the economic landscape, we have learned that Taiwan is rich for its potential from the North to everywhere else. Taiwan has many embryonic industries that are rising and need stimulations and local talents to join the workforce. The supply-chain machine tooling clusters need a full upgrade to be globally competitive. The Business Services industries need the right kind of training for an overall support to Taiwan’s international competitions to meet market demands. Policies for education need to be made in
accordance to the market demand. Often, businesses are complaining not able to find different kinds of programmers and engineers, and those skills are not taught in
Universities because they are too new. College courses needs to be revised and refreshed based on the industrial needs versus all philosophical teachings. More collaborations need to be done between schools and industries.
Surveys tell us that college students are not able to find jobs because their learnings do not match the businesses need. Students need to be introduced to the international events earlier in their life to find out what is new and can be learned. Taiwan’s students are too sheltered within an isolated environment until they graduate, and it is too late after the college life when they learned that the world is too far ahead of them. Taiwan used to have five-year college from the junior high school and two-year colleges for vocational training. Those schools have been converted into Universities is a poor policy. There are many students who are not suitable for theoretical trainings should enter the work place for a fast vocational training who can excel in the later part of their life. The middle class workers have been hollowed out by the wrong education policy for the past twenty years.
The recourse is needed immediately to adjust to the current market demand for available manpower quality. People should learn their work skills and being able to find work with a good wage. From the EUs and US economic initiative models, both EU and US have job creation in their vision and goals. Taiwan’s policy makers need to plan economic policies with the job creation in mind and use it as the outcome measurement. From Taiwan’s policies and white papers, this is not a common practice, and the
re-enforcement of labor law is too weak; the penalty is too low for those who offend the labor laws.
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A case study of Taiwan’s biotech industry based on the evaluation of Biopharmaceuticals and Medical Devices clusters gives the suggestion that Taipei region and Tainan region are two different development regions. Taipei, with the wealth of capital resources and many medical research institutes, is best for the pharmaceutical research. Tainan region is best for the Nutraceutical research based on its traditional industrial development of food and machine tooling industries. Bioeconomy is a new field and it is very capital intensive.
The industry is still very young. The revenue-compensation ratio shows this weakness.
Taiwan overall has another weakness which was documented in the Bioeconomy white paper that Taiwan is weak in marketing in general. The schools teaching remain theoretical and not so practical by my own observation. Taiwanese also are facing English language deficiency. Recently some universities are calling for English taught courses and are facing objections by professors and students. Taiwanese citizens should have the realization that the world is an open one economy instead of many isolated economies, and English is the most spoken business language. Without the proficiency of English communication, Taiwanese are losing their negotiation power.
A case study of Business Services cluster suggested that the cluster’s growth rates be active throughout Taiwan but not yet a specialization for many regions. The cluster is in high demand, but wages are declining. The revenue-compensation ratio is much lower than the production industries. Since there is no intensive capital involved, the 3.5 ratios are still reasonable. This is a cluster needs to be fully developed so that it can serve as a supporting industry to all other clusters. Specialties such as business consultants, programmers, engineering consultants, and marketing professionals are all parts of this cluster. The Service Science in Taiwan is a young learning subject. Being the OEM island, this is very diminutive in practice because not so many are in the consumer frontlines to create their products. Often entrepreneurs in Taiwan do not start with the market research unlike the US entrepreneurs44F44F45. Without good business service training, people can falsely start a project and wastes their efforts at the end. Out of all clusters, this is one cluster stands out from the growth landscape that is telling us to catch up with the growing demands.
45 Over 90% of my coached students all starts with technologies versus markets.
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Taiwan’s downstream products are facing severe competition from the lower GDP countries such as China and Southeast Asia. The Downstream Metal Product cluster demonstrates the revenue drop causes a lose in employment, and wages are not rising either. In this case, cost competition is not a long-term strategy. Taiwan needs to find its specializations and diverts the manpower to more specialized or find other operation models such as FloraHolland system solutions to compete. On the other hand, the Transportation and Logistics cluster is facing a wage war with shortage of labor pool.
The growth rates on wages and revenue and the sharp declining in employment prove the point. Taiwan can train more manpower based on the market demand to supply domestic and international needs with the rising wage.
The world of digital information users is demanding for an easy access to big data. This research has taken many years to complete from its first question: “How is Taiwan doing while the world suffers from financial crisis?” Now that the crisis is over, and Taiwan survived pretty well compared to some economies with very hard landings. Yet, Taiwan is not without setbacks. Some companies did very well despite the crisis, and some companies closed. Before the technology explosion with information to everyone, people who know more has the upper-hand advantages to make profit simply because other people do not have enough information to compete. Nowadays, the information can be retrieved instantaneously, and has changed the market behavior to demand-driven consumers. Furthermore, knowing where you can have the best access to the available resources is an important factor for competition. But too much information can be
troublesome. Organizing just enough information in time is the key to win. This gives the current hot topic for the researchers and engineers to develop data searching, mining, and analysis tools for the latest demands. This research joins that crowd of making
information available, in which offers easy interpretation and understanding, and provides for people who can gain the cognition to make the right decisions for their businesses and industries in searching for gaining productivity and competitiveness.
Below is a list of recommendations:
For economic policy makers to deliver effective policies, revising the authoritarian top-down policy model to create initiative directly with practitioners is an urgent task. There
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are many ways to do this, the research made two models for suggestions, the bottom-up or interactive. Making the economic policy with job creation as a measurable outcome should be done instead focusing only on technology innovations.
Taiwan’s cluster mapping code is translated and internationalized, I recommend this to be taken by the National Statistics Bureau into their daily standards, and further maintain the code and follow up with the internationalization. This can be maintained by a research institute for longitude studies on Taiwan’s economic landscape and its dynamism.
For Taiwan’s economic development, initiatives can be created for each growing cluster in different regions from bottom-up proposals. Policy makers can review and collaborate with stakeholders to prepare for policy recommended by the initiatives to provide public support to fuel the needed resources for the regional growth. The local government can work on the initiatives forming cluster organizations, so that all in parties public or private are the equal stakeholders for the success and completion goals. The currently public-private structure inhibits the collaboration. The policy makers often behave like a higher-power and control the public resources to the private businesses. Often the public stakeholder is not motivated to be interested in the final outcome since they are not part of the stakeholders.
For the IT industry’s spillovers effects, to prepare further education programs for the higher-end knowledge base jobs in the next adjacencies. Currently the spillovers stop at Taichung, and the North and Northeast districts are being saturated. Further southern migrations can be prepared with the education training on vocational basis. Of course, this might be conflicting to the local industries. Setting up incubation centers hosting demanded service training to the IT industries such as engineering training and programming training for the highly demanded manpower, so that the spillovers can cross over Taichung region.
For the supply-demand migration clusters such as Production Technology and Machine Tooling industries, I recommend to setup SME improvement funds to help with the industry upgrades and marketing assistant programs. These industries are short of middle management manpower. The manufactures are mostly outdated and need upgrades either environmentally for automation equipment. The intensive capital required for these
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industries is essential. From the economic dynamics that these industries are holding a revenue-compensation ratio around ten which is within a healthy range. It is worth investing into a more competitive business environment. This is where government can involve the private funding with a tax saving incentives to help the industry to grow. The industry is also facing stringent political hardships. There is a need for helping with extra marketing efforts to compensate the national handicap. The point is for the government to be proactive in sending the help to those SMEs. My recommendation is for central and local governments to proactively to find ways to improve business environment, uplift the infrastructure, show their willingness to understand the business difficulties, and solve business problems. This is also calling for the improvement of government services attitude.
Creating business services training programs in vocational courses to elevate the quality of service industries. Taiwanese have an attitude that services should be free. Most people are not willing pay for services with reasonable return. If this mentality is not changed, Taiwan has no chance to internationally brand its industries. Since Business Services cluster is on the rise, the demand is high across the whole economy.
The case study of the Bioeconomy suggests that the Taipei region is better to serve the
The case study of the Bioeconomy suggests that the Taipei region is better to serve the