D EMAND S IDE OF I NNOVATION P OLICY

The major difference of demand-side innovation policy between Taiwan and Singapore is the openness of international trade and partnerships (Table 6). Singapore, without specific political problem, is more internationalized than Taiwan. The similarities between the two countries are both use government purchase as a policy tool to guide technology direction.

Table 6.

Comparison of Demand Side Policies between Singapore and Taiwan

Singapore Taiwan

Procurement • Contracts and tenders worth about S$10 billion each year

• Decentralized Government Procurement System

• Government R&D service contract

• Central Guideline issued by Ministry of Finance

• Government Procurement and Industrial Cooperation

• Build-operate-transfer

Public service • Jurong Town Corporate

• Singapore Science Park

• Science Parks in Hsinchu, Taichung, Neihu, Nangang

Commercial • No significant Exchange Controls • Lessen Foreign Exchange Controls Overseas agent • 18 regional and bilateral FTA

• Member of WTO, ASEAN, APEC and other international groups

• Access multilateral trade organization such as WTO

• Participate in regional trade organization

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such as APEC

• Sign the FTA with Panama and Guatemala

4.3.1 Taiwan

To comply with the Agreement on Government Procurement of the World Trade Organization (WTO), Taiwan’s government procurement law was legislated in 1999 and aims to clarify procurement information, complete procurement evaluation, and internationalize the procurement market (Public Construction Commission, Taiwan, 1999). Since then, the most advantageous tendering method has been adopted as a major legitimate contract award mechanism instead of the lowest bid tendering method (Tzeng et al., 2006). On the other hand, Taiwan uses government procurement as one of the most important sources of technological development, especially weapons systems procurement (Tien and Yang, 2005), though it faces a predicament in weapons systems procurement. The Sixth National Science and Technology Conference, for instance, proposed a strategy to strive for industrial/military cooperation in opportunities for defense weapons systems purchasing from abroad and introducing key defensive technology (National Science Council, 2001). Such industrial cooperation policy is one of the main sources of key technologies.

The Taiwanese governments mainly use build-operate-transfer (BOT) and public-private partnership (PPP), respectively, in this aspect. In Taiwan, BOT is applied to lower government expenditures, share risks with contractors, and introduce advanced technologies. The Taiwan High Speed Railroad, electronic toll collection on the two freeways, and construction of Kaohsiung Mass Rapid Transit are the major BOT examples in recent years (Kang, et al., 2007).

Regarding trade policies, both Taiwan and Singapore are striving to join international or regional trade organizations for improving their industries’ competitiveness and now have become members of important economic integration organizations. Taiwan accessed the WTO at the end of 2001 after twelve years of effort (Cho, 2004). To comply with the regulations of WTO, Taiwan has to reduce tariff duties on agricultural and industrial products, remove import quotas, decrease exporting subsidies, and so on. In compliance with Taiwan's accession commitments to the WTO, there will be positive and negative influences on different industries (Huang et al., 2003; Hsu and Chang, 2004; Weng et al., 2005; Dent and Chuang, 2005). In addition to joining the WTO, Taiwan also joined a multilateral regional trade organization, Asia-Pacific Economic Cooperation (APEC), in 1991 together with China and Hong Kong (Chou, 1999). Experts believe that enlisting a free trade area of Asia-Pacific would be a hope for Taiwan to surmount its trade barrier. The Taiwan Government recently is managing the negotiation of Economic Corporation Framework Agreement with China. The government continues pursuing dialogue with the people and negotiation with China on topics related to the livelihood of Taiwan’s people, including direct flights, the opening of Taiwan to visits by people from China, finance, commodity inspection, quarantine, and epidemic monitoring. The goal is to achieve a balanced two-way flow of resources, bring about a more effective division of labor across the Taiwan Strait, and realize the mutual benefits of win-win cooperation.

On the commercial policy, business profits arising from the operations of a branch may, subject only to tax liabilities, be freely remitted to the head office (Source: Ministry of Finance of Singapore). On the other hand, Taiwan has a little more exchange controls policies. Foreign exchange capital flows that do not involve New Taiwan dollar transactions have been fully liberalized. Foreign exchange capital flows involving New Taiwan dollar exchange related to the following types of transactions have been fully liberalized: commodities, service expenditure and capital transaction.

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4.3.2 Singapore

The Singapore Government, spanning across individual ministries, departments and statutory boards, buys goods and services worth about S$10 billion each year. The bulk of Government Procurement (GP) activities in Singapore are decentralized to individual Ministries, Departments and Statutory Boards that make their own arrangements. However, they must adhere to central guidelines issued by the Ministry of Finance. Centralized purchasing is carried out for common goods and services which are consumed service-wide, by central procuring entities such as the Expenditure and Procurement Policies Unit (EPPU) of the Ministry of Finance, the Ministry of Defence and the Infocomm Development Authority (IDA). The Singapore Government adopts the fundamental principles of fairness, openness and competitiveness for its government procurement policies. Tenders are usually awarded to the bid that brings best value for money for the public sector, taking a holistic approach (www.apec.org).

Singapore since the signing of its first FTA under the ASEAN Free Trade Area (AFTA) in 1993, it has expanded to cover 18 regional and bilateral FTAs with 24 trading partners (including China, Japan, Korea, the ASEAN, India and the United States). Singapore's FTAs have been instrumental in helping Singapore-based businesses strengthen cross-border trade by eliminating or reducing import tariff rates, providing preferential access to services sectors, easing investment rules, improving intellectual property regulations, and opening government procurement opportunities.

In Singapore, there are no significant exchange controls, and funds may be freely remitted into and out of Singapore. There is also no restriction on the repatriation of profits. Subject only to tax liabilities, a company incorporated in Singapore may pay dividends to foreigners not resident in Singapore.

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