Regional Environment

Currently China offers an environment suitable for low cost manufacturing including light environmental restrictions, low labor costs, limited labor rights, and limited IP enforcement.

China growing wealth has increased the potential market for Taiwanese products but this effect is tapered by the large number of low cost product substitutes being produced in China.

Despite a number of attempts no large scale multicounty trade agreements have been established in Asia-Pacific area and Taiwan’s relationship with China means that its role has been limited in organizations such as APEC that do exist. In addition the complex historical links between Korea, Japan and China make the formation of a free trade area unlikely in the

eastern pacific . In the south-east of Asia the Association of Southeast Asian Nations is dedicated to developing a free trade area. The association includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. With the exception of Singapore all of these countries have low levels of GDP per capita.

2.2.6 Geography

The amount of land suitable for mass habitation is limited by the mountain range the stretches from north to south along the east side of the island which means that over 80% of the population live on a strip of land along the west coast. This land is under 50 km wide at its widest point. See Figure 9 Taiwan Topography .Taiwan is located in the western Pacific Ocean , less than 160 km from mainland China separated by the Taiwan Strait. The Japanese Ryukyu Islands are to the North East about 130km away.

2.2.7 Political Environment

Taiwan has developed into a democratic country with

free elections and a multiparty system. Unlike many western countries where the political split is based on conservative-socialist ideology the political parties in Taiwan are split on historic/cultural lines.

The “pan green” parties including the ruling DPP tend towards Taiwanese independence and are supported more by those whose ancestral roots on the island are from pre 1945 immigration. The “pan blue” parties (including the KMT who ruled Taiwan from 1945 until 1999) tend towards closer relations with China. These political viewpoints have been central to elections in recent years.

Figure 9 Taiwan Topography

NASA Shuttle Radar Terrain Model

In the past Taiwan had a serious problem with corruption at one stage in the 90’s it was estimated that 10% of government spending went to corrupt officials (the Economist Magazine 2000). The fact that number of corruption cases have recently come to light involving presidential family members and associates indicate that corruption is still an issue for Taiwan to deal with although it may not be as prevalent as in pastimes. The chairman of the opposition party the KMT also faces allegations of corruption. Referring to the Corruption Perceptions Index we can see that Taiwan’s level of corruption is perceived to be significantly lower than China although Hong Kong is

perceived to be far cleaner. Note that Ireland was given a score of 7.4.

Internationally Taiwan’s situation is complex due the ambiguity of its status, it remains locked in a battle for international recognition with China which regards it as a “renegade province” (BBC, 2006). Thus a large amount of diplomatic effort is focused on this issue.

Taiwan is officially recognizes by the following 24 countries, December 2006 (Department of Foreign Affairs and Trade, Australia, 2006):

Belize, Marshall Islands, Burkina-Faso, Nauru, Costa Rica, Nicaragua, Dominican Republic, Palau, El Salvador, Panama, Gambia, Paraguay, Guatemala, Sao Tome and Principe, Haiti, Solomon Islands, Holy See, St Kitts and Nevis, Honduras, St Vincent and the Grenadines, Kiribati, Swaziland, Malawi, Tuvalu.

Due to the threat on invasion from China every Taiwanese male (with some exceptions on health grounds or if working for technology companies) is obligated to perform national service. Taiwan spend 2.4% of its GDP on its military (Central Intelligence Agency, 2006)

Country Score - Lower

Figure 10 Taiwan Perception of Corruption

Transparency International and University of Passau

and has developed some home-grown weaponry systems such as the IDF fighter plane. Most advanced weaponry is bought from the USA.

2.2.8 National Resources

Taiwan has a population of just over 23 million. The population is well educated with relatively large numbers of students achieving masters and PhD qualifications. 82% of students enter post secondary education. In 2002 there were 9.5 researchers per 1000 Workers.

Natural resources include some natural gas as wells as limited amounts of marble, jade and asbestos. None of which create significant export value. A main source of electricity generation is the hydroelectric program.

2.2.9 Culture

The society is historically Confucian which traditionally places emphasis on the following ritual, relationships, filial piety, loyalty, humaneness. As in other Confucianist societies emphasis is placed in education and academic achievement, gentlemanliness and the use of proper names. The Taiwanese government prefers to describe the national philosophy as being neo-Confucianist and suggests that modern society de-emphasizes ritual and filial piety (Government Information Office, Taiwan, 2004).

The national culture framework developed Geert Hostede’s gives Taiwan the followings scores:

Power Distance Index – 58

This is a medium-low score similar to countries such as South Korea 60 and Spain 57 meaning that Taiwanese have some tolerance for power inequality but that inequality is not strongly endorsed by followers.

Individuality – 17

Taiwan has a low individuality meaning that emphases is placed on the group rather that individuals. This correlates with the Confucian focus on guanxi and on loyalty. Social relationships and family are clearly important in society.

Masculinity – 45

For this dimension Taiwan scores medium-low, significantly lower than countries such as Japan 95 and the United States 62. This score points towards social equality of the genders and a less assertive society.

Uncertainty Avoidance Index – 69

Within this dimension is the concept of avoiding ambiguity and of using laws/rules to enforce control. Taiwan’s score places it in the center of the table ratings, it is noticeably higher than Ireland at 35 or Hong Kong at 29