7. Taiwan’s Economic Landscape

7.3. Evaluation Factors on Dynamics

7.3.1. Employment Factor

The first factor is employment. The employment size tells which cluster has more impact in the region and whether the region specializes in some clusters, and if a particular cluster is expanding with the regional workforce. A strong specialized cluster with high regional employment growth means the region is very competitive in that specialty.

The employment share is an indicator to gauge how attractive a cluster is in a region.

Calculating the shares can show how productive is the cluster in the region. Below is a pie-chart showing clusters’ shares in Taiwan. The top clusters are Distribution and Electronic Commerce, and Information Technology and Analytical Instruments that are

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around 10% of the total employments. The third Traded cluster is the Business Services around 5% shares.

Figure 31 Taiwan’s Industrial Cluster Shares.

Source: calculation from Taiwan National Statistics Bureau Census Data, 2006-2011

Below is a list of job growth ranking with the calculation from Taiwan’s employment growth rate (CAGR) from the year 2006 to 2011, and followed by the shares of clusters.

10.1%

69 Figure 32 Traded Clusters’ Job Creation.

Note: Footwear is regrouped from Leather goods, therefore shows high growth.

Source: Taiwan National Statistics Bureau,

Five top declining traded clusters are Downstream Metal (-21%), Oil and Gas Production

& Transportation (-13%), Metal Mining (-12%), Jewelry and Precisions Metals (-11%), and Transportation and Logistics (-8%).

Five top growing traded clusters are Aerospace Vehicle and Defense (100%), Performing Arts (16%), Upstream Metals (14%), Business Services (10%), and Metalworking

Technology (9%).

The shares alone are not able to tell us the spillover effects, but once the cluster growth map is displayed, we can see more clearly which clusters grow with the similar rate especially to those value-chained clusters. Below is a more precise list of each city’s leading specializations. They are different from the District formations; they give more details landscape of the cities.

‐21% ‐13% ‐12% ‐11% ‐8% ‐3% ‐3% ‐3% ‐3% ‐2% ‐2% ‐2% ‐2% ‐2% ‐1% ‐1% 0% 0% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 3% 3% 3% 4% 4% 5% 5% 6% 8% 9% 10% 14% 16%

DOWNSTREAM METAL PRODUCTS OIL AND GAS PRODUCTION AND … METAL MINING JEWELRY AND PRECIOUS METALS TRANSPORTATION AND LOGISTICS VIDEO PRODUCTION AND … MUSIC AND SOUND RECORDING NONMETAL MINING FURNITURE PRODUCTION TECHNOLOGY AND … LIVESTOCK PROCESSING TEXTILE MANUFACTURING WOOD PRODUCTS DISTRIBUTION AND ELECTRONIC … PLASTICS APPAREL PAPER AND PACKAGING PRINTING SERVICES RECREATIONAL AND SMALL … WATER TRANSPORTATION ENVIRONMENTAL SERVICES DOWNSTREAM CHEMICAL … AUTOMOTIVE LIGHTING AND ELECTRICAL … INFORMATION TECHNOLOGY AND … UPSTREAM CHEMICAL PRODUCTS INSURANCE SERVICES TRAILERS, MOTOR HOMES, AND … EDUCATION AND KNOWLEDGE … MARKETINGDESIGNAND … HOSPITALITY AND TOURISM VULCANIZED AND FIRED MATERIALS CONSTRUCTION PRODUCTS AND … COMMUNICATIONS EQUIPMENT … BIOPHARMACEUTICALS FINANCIAL SERVICES FOOD PROCESSING AND … FISHING AND FISHING PRODUCTS MEDICAL DEVICES METALWORKING TECHNOLOGY BUSINESS SERVICES UPSTREAM METAL … PERFORMING ARTS AEROSPACE VEHICLES AND … FOOTWEAR

T r a d e d   C l u s t e r s   J o b   C r e a t i o n

70 Figure 33 City Leading Specialization Landscape.

Source: LQ map, Excel calculation

Twelve specializations spread out throughout all cities. The North is where central government and banks located, therefore, business services and distribution industries are well developed. IT dominates around Hsinchu Science Park and research institutes as the result of earlier economic planning from the 1970s. Production technologies provide machinery supports clustered in the middle of Taiwan. Production products go to South regions. The tourism industry is mostly concentrated where mountain ridges, east and south shorelines, and outer islands. The outer islands are small, therefore, have limited industries, and the specializations support the local lifestyles. Below is the detail list of specializations in each city (See Figure 34).

Business ServicesDistribution and Electronic CommerceFood Processing and ManufacturingInsurance ServicesMetalworking TechnologyProduction Technology and Heavy MachineryUpstream Metal ManufacturingHospitality and TourismTextile ManufacturingInformation Technology and Analytical InstrumentsConstruction Products and ServicesWater Transportation 0

5 10 15 20

NewTaipeiLQTaipeiLQ KeelungCityLQ TaoyuanCityLQ HsinchuCountyLQHsinchuCityLQ MiaoliCountyLQ TaichungCityLQ ChanghuaCountyLQNantouCountyLQ YunlinCountyLQ ChiayiCountyLQChiayiCityLQ TainanCityLQ KaohsiungCityLQ PingtungCountyLQYilanCountyLQ HualienCountyLQ TaitungCountyLQ PenghuCountyLQ KinmenCountyLQ LienchiangCountyLQ

City Leading Specialization Landscape (Traded Clusters)

71 Figure 34 Taiwan’s Specializations in Cities.

Cities Traded Clusters Local Clusters

New Taipei Distribution and Electronic Commerce;

Information Technology and Analytical Instruments;

Local Real Estate, Construction, and Development

Taipei Business Services;

Distribution and Electronic Commerce;

Insurance Services

Local Food and Beverage Processing and Distribution;

Local Financial Services;

Local Hospitality Establishments;

Keelung Business Services;

Water Transportation

Local Food and Beverage Processing and Distribution

Local Food and Beverage Processing and Distribution

Local Hospitality Establishments Local Real Estate, Construction, and Development

Taoyuan Information Technology and Analytical Instruments

Hsinchu County

Information Technology and Analytical Instruments Hsinchu City Information Technology and

Analytical Instruments Miaoli Information Technology and

Analytical Instruments

Taichung Production Technology and Heavy Machinery

Local Health Services

Local Real Estate, Construction, and Development

Changhua Metalworking Technology;

Textile Manufacturing;

Upstream Metal Manufacturing

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

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Nantou Construction Products and Services;

Hospitality and Tourism

Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Yunlin Construction Products and Services;

Textile Manufacturing

Local Food and Beverage Processing and Distribution

Local Health Services

Local Real Estate, Construction, and Development

Chiayi County

Construction Products and Services;

Food Processing and Manufacturing

Local Food and Beverage Processing and Distribution

Local Health Services

Local Real Estate, Construction, and Development

Chiayi City Local Food and Beverage Processing and

Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Tainan Upstream Metal Manufacturing Local Food and Beverage Processing and Distribution

Local Health Services

Kaohsiung Local Food and Beverage Processing and

Distribution

Local Health Services

Local Real Estate, Construction, and Development

Pingtung Construction Products and Services Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Yilan Construction Products and Services Local Food and Beverage Processing and Distribution

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Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Hualien Business Services;

Construction Products and Services;

Hospitality and Tourism

Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Taitung Business Services;

Hospitality and Tourism

Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Penghu Business Services;

Construction Products and Services;

Hospitality and Tourism

Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Kinmen Business Services;

Construction Products and Services;

Food Processing and Manufacturing

Local Food and Beverage Processing and Distribution

Local Health Services

Local Hospitality Establishments Local Real Estate, Construction, and Development

Lienchiang Business Services;

Construction Products and Services;

Hospitality and Tourism;

Water Transportation

Local Food and Beverage Processing and Distribution

Local Hospitality Establishments

A Taiwan’s employment growth of each city is calculated to find out which city is

growing and which is declining during the financial crisis. Below is the map for Taiwan’s employment composition.

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Figure 35 Taiwan’s Employment Growth Composition.

Source: calculation of Census data from Taiwan National Statistics Bureau

Taipei City has the largest employment among all the cities with the second highest pay.

It is big enough and dense enough for the importance. This is where political-social-economic capital sits and all the banks are headquartered. It is a financial center for all businesses, and international negotiations are mostly done here. The high-density city provides a close distance and the convenience for business doing. The smallest employment population is in Lienchiang County that is an outer island.

From Figure 35, two cities are losing jobs, which are Keelung 0.5%) and Taitung (-0.8%). Two cities have high growth of more than 5%, and they are smaller cities of Kinmen and Penghu; these cities have many tourists from China due to ECFA open trade policy. Miaoli is the city that has the fastest growth on Taiwan. Edward Glaeser suggests that important knowledge spillovers are more likely to happen between industries rather

NewTaipei, 0.86%

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than within the industries (Glaeser, Kallal, Scheinkman, & Shleifer, 1991; Jacobs, 1970).

On the contrary, Miaoli is an evidence of the spillovers effects on the same industry but in the adjacent cities due to the saturation effect. Miaoli is enjoying a 4.5% job growths, and this is an adjacent city of Hsinchu Science Park. IT is the dominated industry in Miaoli, thus spillovers from Hsinchu area. Additionally, five cities have 2% to 3% job growth, and they are Taichung, Taoyuan, Hsinchu County, Pingtung, and Chiayi. These cities have the production support industries. Other cities have a slow growth less than 2%. The major metropolitans are still growing employments. Despite the GDP had a sharp drop in the year of 2009, a big part of Taiwan has recovered from the external shock with the exception of Keelung and Taitung.

Once the growth rates of each city are identified, the next is to find out which clusters in each city are doing better and which are not. The specialization provides the

concentration of clusters in that particular city. In other words, we would like to find out which clusters made the best contribution, and which one has lost the momentum and needs help. The more specialize the cluster, the more important this specialization is for this region, and also the nation is more dependent on this region for the product or service deliveries. The specialization calculation is based on Location Quotient (LQ). The

specialization provides the landscape for the concentration of the clusters and its importance.

In order to find out the clusters mapping in each city, three sets of data were calculated, employment size, employment shares, and LQ calculated based on the employment numbers of the city. The three data were used to draw a bubble map to represent the position of each traded cluster with the following setting:

X-axis = LQ

Y-axis = Employment Shares in % Bubble Size = Employment Size

By drawing the map, the city’s cluster landscape is immediately shown. The following analysis gives different categorization by looking at the map:

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Figure 36 Employment Shares and Specialization Impacts.

Employment Shares LQ <1 LQ >=1 LQ >=2

Shares <5% No significance A specialized cluster but small regional impact

Highly specialized cluster with small regional impact 5% <= shares< 10% Some regional

employment impact

A specialized cluster with some regional impact

Highly specialized cluster with high regional impact.

Shares >=10% High regional impact but not specialized

A specialized cluster with some regional impact

Highly specialized cluster with high regional impact

Job matters, employment growth is a very important indicator to see if the cluster is expanding and active, reaching its capacity at stagnate, or losing competitiveness in decline. The employment growth rate in a city is calculated as follows:

Figure 37 employment growth rate calculation.

/

To draw a Specialty and Growth Map, use the following dimensions:

X-axis = LQ

Y-axis = Growth Rate %

Bubble Size = Employment Shares

The implications of job growths and the weight of specializations are listed below:

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Figure 38 Employment Growth and Specialization Relations.

Employment Growth

LQ<1 1<=LQ<2 LQ>=2

Declining No significance Specialized cluster is losing competitiveness in the city

Highly specialized cluster is losing its momentum Stagnate No significance Specialized cluster is

stable cluster may become an specialized cluster

Revenue is a driver to the growth change. Schumpeter’s Business Cycle theory puts user demands (Schumpeter, 1939) as the first priority in the start of the cycle for a market-driven economy. It is a main driver for the employment and wages. Rising revenue will cause higher employment rates depending on the labor pool supplies. For example, if certain clusters require some special skills and lack of trained manpower, the

employment growth can still be low, but wage will rise due to higher labor demand. Also, it is possible that the labor pool has not reached its maximum capacity. Nevertheless, revenue is good gauge for business growths and expansion. A steadily growth on revenue is a good sign, but if the growth rate fluctuates, it will cause businesses to hold back due to the uncertainties.29F29F30

Below is Taiwan’s Revenue Growth Composition by Cities:

30 This was validated by Waterson Manufacturing operation manager.

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