National Taiwan University of
     Science & T h l
     S i       Technology
The Economic Development and Policy
        M...
Outline
I.    Taiwan’s Basic Facts and Global Trade
        i    ’      i           G
II.   The Influential Factors behind...
I. Taiwan’s Basic Facts, Global Trade and
   Investment
 1. Basic Facts
           Table 1 An Outline of Taiwan’s Economic...
2.Global Trade and Investment

                       $ 224.02 billion US dollars                       $ 202.69 billion U...
Consumer
                                                                                products,
                       ...
II. The Influential Factors between Taiwan’s
    Economic Development
  1. Literature Review

     Capitalist Economy (Pro...
US Aid in 1951 - 1965

High saving rate (saving/GDP = 38%) provided
sufficient capital for economic development

Fixed exc...
2. Special features of Taiwan’s Economic
   Development

    Moderate public finance policy (government
    saving > gover...
III. Key development strategy for Taiwan’s
     Economic Development
  1.
  1 Conventional wisdom: development strategy
  ...
2. Taiwan’s non-mainstream development strategy
            non-

      Import substitution strategy             export-or...
Table 2 Taiwan’s trade structure

            Exports
                              Agriculture products       Industrial ...
Table 3 Structure of Production (% of GDP by Sector)


  Period Agriculture        Industry    Manufacturing        Servic...
3. The reasons why Taiwan’s could pursue economic
                 y                p
   development and fair income distr...
IV. Policy Measures in Different Stages of Taiwan’s
    Economic Development
    E       i D l          t                 ...
Implement Fair
                                                                 Trade Law


 Promote interest             ...
Two Trillion
                                               Twin Star
     Conservative Mainland
         China policy    ...
V. Taiwan’s Innovation Policy Measures and 
              Responsible Agencies
1. Innovation becomes more and more 
      ...
a) Subsidies…………………...Industrial Development Bureau (IDB)
                                                              b)...
VI. An Introduction of Taiwan’s Innovation
    policy
1.The establishment of Hsin‐Chu science industrial park 
1 Th    t b...
Table 4 The development of the Hsinchu Science-based Industrial Park


                                    Indicators     ...
2.Innovation alliances  notebook PC j i t
2I      ti    lli          t b k joint 
  development alliance
    • State‐owne...
3.Technical support  ITRI and the NSTPs
     Industrial Technology Research Institute (ITRI)
       ▬ Comprises of 7 labs...
4.Tax incentives 
4.Tax incentives  The Statute for Industrial Upgrading 
    and Promotion (R&D tax credit)
     •   Ind...
Table 5 Venture capital companies in Taiwan, 1995-2001
                                                        Taiwan


  ...
Table 6 Countries’ comparison of the ratio of Stock market value over GDP

                                               ...
Remarks
  1. Generally speaking, these market‐friendly innovation 
     policies have had significant impacts on Taiwan s ...
VII、Taiwan’s Industrial Structure and New Focus of 
                   New Government
                   New Government
1....
iv) High export concentration ratio: 40% of export
    share is in China( Hong Kong)
v) Some of traditional industry moved...
Table Taiwan’s industrial structure and its Contribution to Economic Growth

          Overall           Agriculture      ...
2. New Focus
  (1) Two trillion two promising industry: Semiconductor,
      TFT-LCD, biotech, digital content.
  (2) Th
 ...
•Service industry as employment driving engine
 Industrial innovation    •Upgrading of manufacturing
                     ...
VIII、The Guidance Programs for SMEs in Taiwan
                     g
1. Ten Guidance system for assisting SMEs
  1) Financ...
3)    Production technology guidance system: 
3) Production technology guidance system:
        Primary tasks include guid...
5) Information management guidance system:
 )                 g      g         y
      Primary tasks include guiding and a...
7) Pollution control g
 )                   guidance system:
                               y
      Primary tasks include ...
9) Mutual support and cooperation g
 )          pp           p        guidance
   system:
       Primary tasks include gui...
2. Some Specific Programs for SMEs
 2 Some Specific Programs for SMEs

• SMEs credit guarantee fund (SMBCGF)
  SMEs credit...
Outline of Credit Guarantee System
Relations among SMBCGF and related institutions




                                   ...
3. SMEs incubator center
•Definition: Incubator Centers are a place where individuals or enterprises are
               al...
4. Encouragement programs
  In order to encourage firms to pursue for quality,
technology excellence, government implement...
IX.
IX. Concluding Remarks

1.
1 The maintenance of political and social stability,
                                      ...
In Taiwan’s experience, to avoid lack of focus, the
government
go ernment selected a gro p of strategic ind stries with
  ...
3. t
3 to provide “
          id “one-stop” service to attract foreign
             “one- t ”      i t tt t f i
   investm...
4. Government should collaborate with civic
   organizations to establish organizations for the
   promotion of foreign tr...
5. Keep exchange rate stable to promote saving, and
   turn saving into productive capital.

6.
6 Provide start-up capital...
Thank
 You !
 Y
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Transcript of "The Economic Development And Policy Measures Of Taiwan"

  1. 1. National Taiwan University of Science & T h l S i Technology The Economic Development and Policy Measures of Taiwan Jiann Chyuan Jiann-Chyuan Wang 2009. 3. 26
  2. 2. Outline I. Taiwan’s Basic Facts and Global Trade i ’ i G II. The Influential Factors behind Taiwan’s Economic Development D l t III. Two Key Development Strategies for Taiwan’s Economic Development IV. Policy Measures in Different Stages of Taiwan’s Economic Development V. Taiwan’s Innovation Policy Measures and Responsible Agencies g VI. An Introduction of Taiwan’s Innovation Policy VII. Taiwan’s Industrial Structure and New Focus of New Taiwan s Government VIII. The Guidance Programs for SMEs g IX. Concluding Remarks 1
  3. 3. I. Taiwan’s Basic Facts, Global Trade and Investment 1. Basic Facts Table 1 An Outline of Taiwan’s Economic Growth (2006) Unit: US dollars Population 22.79 million GDP $383.34 billion (20th) Per P capital GNP it l $17,252 $17 252 Total trade value $426.7 billion Exports $224.0 $224 0 billion Imports $202.7 billion Foreign exchange reserves $266.1 $266 1 billion Manufacturing output/GDP 23.0% Service output/GDP 71.7% 2 Sources: Taiwan Statistical Data Book, CEPD, 2007.
  4. 4. 2.Global Trade and Investment $ 224.02 billion US dollars $ 202.69 billion US dollars China, China Others, Others, Hong 14.50% 14.50% Kong and China, Macau, Hong 13.10% 13 10% Europe, Kong and USA, 12.60% Macau, 11.20% 39.80% Europe, Korea, Australia, ASEAN, 27.30% Japan, 11.40% 22.80% Japan, USA, USA ASEAN, ASEAN 7.30% 14.40% 11.10% Fig.1 Fig 1 Taiwan’s destination of exports (2006) Fig.2 Fig 2 Taiwan’s sources of imports (2006) 3
  5. 5. Consumer products, non-heavy & 7.60% chemical products, capital 21.10% equipment, Agriculture i l 17.00% 17 00% (processed) Agriculture, heavy & products, Industrial and chemical 1.00% materials, products, products 75.40% 75 40% 77.90% Fig.3 Taiwan’s exports structure Fig.4 Taiwan’s imports structure 4
  6. 6. II. The Influential Factors between Taiwan’s Economic Development 1. Literature Review Capitalist Economy (Protection of private property, respects of market mechanism) Infrastructural provision from Japanese Governance age. (railway, electric power, seaport) Land f L d reform in 1950s promoted agricultural i 1950 t d i lt l productivity (farmer income ↑→ demand for industrial products ↑→ release surplus labor to assist industrial sector) Industrial policy followed comparative advantage 5
  7. 7. US Aid in 1951 - 1965 High saving rate (saving/GDP = 38%) provided sufficient capital for economic development Fixed exchange rate (until 1979) facilitated international trade High level of educational investment Fair i F i income distribution di t ib ti Fast growth for global economy (1950-1970) (1950 1970) created a favorable environment for Taiwan’s expert-oriented economic strategy. 6
  8. 8. 2. Special features of Taiwan’s Economic Development Moderate public finance policy (government saving > government expenditure) The promotion of state-owned enterprises and natural division of labor with SMEs Providing tax incentives for strategic industry but did not become government financial burden 7
  9. 9. III. Key development strategy for Taiwan’s Economic Development 1. 1 Conventional wisdom: development strategy in 1950s-1960s 1950s- Impose high tariff and import restriction to promote infant industry Keep interest rate low to provide low cost of investment for firms, even under inflationary p pressure. 8
  10. 10. 2. Taiwan’s non-mainstream development strategy non- Import substitution strategy export-oriented strategy 1960 N.T depreciation (US $1 = 15 N.T → 40 N.T) p ( ) depreciation inflation ( import restriction) depreciation main exports from sugar, rice to labor-intensive products (umbrella, shoes, agricultural processing products etc.) High interest rate to encourage saving, which become productive capital for firms and major b d ti it l f fi d j force for anti-inflation 9
  11. 11. Table 2 Taiwan’s trade structure Exports Agriculture products Industrial products Year 1952 91.9% 91 9% 8.1% 8 1% 1960 67.7% 32.3% 1970 21.4% 78.6% 1980 9.2% 90.8% 1990 4.5% 95.5% 2000 1.4% 1 4% 98.6% 98 6% 2004 1.4% 98.6% 2007 1.4% 1 4% 99.0% 99 0% Sources: same as Table 1. 10
  12. 12. Table 3 Structure of Production (% of GDP by Sector) Period Agriculture Industry Manufacturing Services 1952 32.2 19.7 12.9 48.1 1960 28.5 26.9 19.1 44.6 1970 15.5 36.8 29.2 47.7 1980 7.7 77 45.7 45 7 36.0 36 0 46.6 46 6 1990 4.2 41.2 33.3 54.6 2000 2.1 21 32.4 32 4 26.4 26 4 65.5 65 5 2004 1.7 32.9 28.0 65.4 2007 1.4 27.5 23.8 71.0 Sources: same as Table 1. 11
  13. 13. 3. The reasons why Taiwan’s could pursue economic y p development and fair income distribution: Exchange rate depreciation and trade liberalization pushed labors from land- land intensive agriculture industry to labor- intensive export industry (MPL↑→ Wage↑) Discard low interest rate policy to prevent capital-intensive production method → p p employment ↑ → income ↑ Abundant SMEs provide more job opportunity 12
  14. 14. IV. Policy Measures in Different Stages of Taiwan’s Economic Development E i D l t Establish Science Park Establish ITRI Set up export- Setup Tax reform High interest rate High interest rate policy processing zone committee to curb inflation 1950 53 54 56 60 1962 65 66 67 68 69 70 71 72 73 1980 Exports tax refund US Aid stop Implement 9 year Loosen import restriction obligatory education Unify exchange rate Promote family plan for d i f reducing birth rate bi th t Statute for Investment Encouragement Implementation of National Science Development Plan Labor-intensive Light Export-oriented Stage Import substitution stage Industry: Import substitution Stage Industrial and Labor Science and Financial Exchange rate policy Policy Technology policy policy polic Fig. 5 Taiwan’s economic development stages and related policy measures 13
  15. 15. Implement Fair Trade Law Promote interest Setup 15 new Enact Labor Implement health Promote the promising rate liberalization private banks standard law insurance industry 1980 82 84 86 87 89 91 94 95 96 97 98 2002 Implement the N.T appreciation Develop ten promising Setup NII promotion committee Admitted to WTO incentives for industry and eight strategic Promote privatization of key technology; industry state-owned enterprises Implement statute for Expand Science Park Industrial upgrading pg g 6-year National Development Plan Technology-oriented Stage Industrial and Labor Science and Financial Exchange rate policy Policy Technology policy policy polic Fig. 5 Taiwan’s economic development stages and related policy measures 14
  16. 16. Two Trillion Twin Star Conservative Mainland China policy Promote cultural WiMax creative industry technology Bio-tech New Cheap land price Drugs Act provision 006688 Guideline for G id li f Sino-Panama Service Industry FTA 2002 03 04 05 06 2007 2008 Military Service Financial Low interer rate, SMEs, low exemption reform devalue currency U-Taiwan incomes infrastructural protection Regional operation center promotion Antitrust policy A tit t li Free Trade to avoid Port Area dumping Enlarge Science Park President Ma takes offices Layout vision for y Extend SIUP 2015 Globalization Stage Industrial and Labor Science and Financial Exchange rate policy Policy Technology policy policy polic Fig. 5 Taiwan’s economic development stages and related policy measures 15
  17. 17. V. Taiwan’s Innovation Policy Measures and  Responsible Agencies 1. Innovation becomes more and more  i b d important to enhance industrial technology  and links to national  competitiveness  2. Small and medium enterprises (SMEs)  2 Small and medium enterprises (SMEs) dominant industrial structure  → government innovation policy steps in  → government innovation policy steps in 16
  18. 18. a) Subsidies…………………...Industrial Development Bureau (IDB) b) Loans………………………..Bank of Communication, Medium (1) Financial and Small Enterprise Bank Assistance c) Venture Capital* …………...Bank of Communication, Ministry of Finance Supply-side Policy a) Education…………………..Universities (2) Manpower Measures Assistance b) Training…………………… Council of Labor Affairs a) Technical Assistance……….IDB (3) Technical Assistance b) Government-Owned ………..Industrial Technology Research Institute (ITRI) Research Institutes* R hI i * Innovation Policy Measures c) National Science and ………..Department of Industrial Technology Technology Project (NSTPs)* a) Contract Research…………………………………....National Science Council (NSC) Demand-side Policy Measures b) Government Procurement……………………………Government Agencies a) Tax Incentives* ……………………………………….IDB, Ministry of Finance b) Patent & Intellectual Property Rights……………….Ministry of Economic Affairs Environmental-side c) Science Park* …………………………………………National Science Council (NSC) Policy Measures d) Incubator Center* ……………………Medium and Small Enterprises Bureau e) Open Laboratory …………………………………ITRI f) Industrial Automation* …………………National Information and Communication Initiative (NICI) Note: *represent the contents is discussed in this paper Source: Summarized form Rothwell and Zegveld (1981) Chen (1986) and Sun (1989) (1981), (1986), Fig. 6 Taiwan’s Innovation Policy Measures and Responsible Agencies 17
  19. 19. VI. An Introduction of Taiwan’s Innovation policy 1.The establishment of Hsin‐Chu science industrial park  1 Th t bli h t f H i Ch i i d ti l k (HSIP) • One stop administration office One stop administration office • Supporting infrastructure • Tax incentive (tax holiday, tax credit, accelerated  ( y, , depreciation etc.) Impact : • encourage overseas Chinese to return home  • form industrial cluster (technology diffusion)  • become main center for Taiwan’s high‐tech development. 18
  20. 20. Table 4 The development of the Hsinchu Science-based Industrial Park Indicators 1986 2000 No. of companies established within the Park 59 289 No. of persons employed within the Park 8,275 102,775 Total paid-in capital of all companies located within the Park US$151 million US$226 billion Expenditure on R&D as percentage of business volume 5.4 per cent 1 5.94 per cent 2 Total b i T t l business volume of all companies located within the Park l f ll i l t d ithi th P k US$450 million illi US$29.80 billi US$29 80 billion Total export value of all companies located within the Park US$4.51 billion 3 US$15.98 billion 4 Notes: 1 The data provided here are from 1990, when the Park began reporting this data. 2 The data provided here are 1999 data. 3 The data provided here are from 1993; when the Park began reporting this data. 4 Accounting for approximately 9.14 per cent of Taiwan’s total export value. Source: Science-based Industrial Park Quarterly Statistical Report (consecutive issues) 19
  21. 21. 2.Innovation alliances  notebook PC j i t 2I ti lli t b k joint  development alliance • State‐owned research institute (ITRI) and Electrical  Equipment Manufactures Association organized 46  firms to form the alliance • Set up technology standard and specification, and  produce a prototype • Create an announcement effect and secure first  mover advantage • Taiwan become a leading notebook PC producing  country  20
  22. 22. 3.Technical support  ITRI and the NSTPs Industrial Technology Research Institute (ITRI) ▬ Comprises of 7 labs, 3 research centers, and over 6,000 research and  administrative staff. National Science and Technology Projects (NSTPs) ▬ provides financial support in order to ensure that ITRI has a stable  budget to undertake long‐term R&D work. ▬ annual budget is about $300 million Impacts • serve as a channel for the transmission of technology  • the movement of personnel from ITRI into the private sector has  helped to boost the R&D capabilities of the private sector and has  speeded up the process of technology diffusion.   • ITRI collaborates with the private sector to build up industrial  competitiveness. ( oteboo C jo t de e op e t a a ce) (Notebook PC joint development alliance)   21
  23. 23. 4.Tax incentives  4.Tax incentives  The Statute for Industrial Upgrading  and Promotion (R&D tax credit) • Induced 16.6% R&D expenditure  • Increase average labor output & export value of  technology – intensive products.  5.Financial support – venture capital (V.C.) • the impressive performance of hi‐tech industry and  electronics stocks in the stock market in the past  electronics stocks in the stock market in the past several years has encouraged the establishment  of new venture capital companies. • The booming of V.C. also helped promoting high‐ tech industry. y 22
  24. 24. Table 5 Venture capital companies in Taiwan, 1995-2001 Taiwan Year 1995 1996 1997 1998 1999 2000 2001 Total venture capital companies 34 47 72 117 160 192 199 38.2 Growth rate ( per cent) 21.43 21 43 53.19 53 19 62.50 62 50 36.75 36 75 20.26 20 26 4.12 4 12 4 25.4 Paid-in capital (NT$ billion) 18.70 42.63 72.93 103.42 128.07 134.10 6 36.1 Growth rate ( per cent) 27.25 67.44 71.08 33.33 23.84 4.71 5 Total no. of companies invested in (cumulative) 868 1158 1839 2994 4493 6343 6957 28.6 Total investment (cumulative) 12.35 43.52 65.11 94.70 125.51 133.65 3 Total no. of companies invested in (current year) 364 471 951 1155 1499 1850 614 Total investment (NT$ billion) (current year) 5.89 8.81 17.6 21.59 29.59 30.80 8.14 Source: Taiwan Venture Capital Association (2002). 23
  25. 25. Table 6 Countries’ comparison of the ratio of Stock market value over GDP unit : % the ratio of stock market value / GDP the ratio of IT stocks market value / GDP Country 1994.12 1997.12 2000.3 2001.3 1994.12 1997.12 2000.3 2001.3 Taiwan 100.6 116.4 147.2 105.4 8.4 29.8 84.6 62.2 USA 48.0 98.0 140.0 117.0 10.0 22.0 62.0 33.0 Japan 69.0 53.0 92.0 67.0 8.0 9.0 33.0 16.0 Germany 18.0 35.0 65.0 48.0 1.0 5.0 20.0 8.0 UK 86.0 86 0 140.0 140 0 189.0 189 0 162.0 162 0 11.0 11 0 16.0 16 0 68.0 68 0 35.0 35 0 Source : Chang, Ya – Chi (2002), “A study on the Business Cycle between Taiwan g ( ) y y Economy and IT Industry” Industry of Free China, 92(7), 49-73. 24
  26. 26. Remarks 1. Generally speaking, these market‐friendly innovation  policies have had significant impacts on Taiwan s  policies have had significant impacts on Taiwan’s technological development over the past twenty years. 2. The empirical study confirms the pay‐off from Taiwan’s  2 Th ii l d fi h ff f T i ’ innovation efforts. 3. Government assistance may, cause government failure;  therefore, as time goes by, the government must attempt  to adjust its innovation policies, switching from an  t dj t it i ti li i it hi f aggressive involvement approach to a principle of more  market oriented and technological infrastructure  market‐oriented and technological infrastructure provision. 25
  27. 27. VII、Taiwan’s Industrial Structure and New Focus of  New Government New Government 1. Industrial Structure • Manufacturing(23.8%), Service(71.0%), Agriculture(1.4%) • GDP growth rate : M f t i (10 29%) th t Manufacturing(10.29%), ICT(19.17%), Service(4.30%), Agriculture(-2.91%) • Weak industrial structure : i) Service industry accounts for 71% of GDP, but low degree of contribution to economic growth. g g ii) Service industry lacks international competitiveness because of limited domestic market. market iii) Manufacturing industry focus too much on ICT industry, and basically adopts OEM, ODM y, y p , method (except for acer, Asus, Benq), value- added is too low. 26
  28. 28. iv) High export concentration ratio: 40% of export share is in China( Hong Kong) v) Some of traditional industry moved oversea to regain competitiveness. • Petrochemical (Formosa plastics) • Textile • Machinery • Bike(Giant) • Tire(Maxxis) 27
  29. 29. Table Taiwan’s industrial structure and its Contribution to Economic Growth Overall Agriculture Industry Manufacturing ICT Industry Service Real GDP growth rate 2003 3.50 -0.06 4.00 5.34 9.58 3.39 2004 6.15 -4.09 4.09 8.94 9.74 14.51 5.28 2005 4.16 -8.07 6.34 6.96 17.95 3.53 2006 4.89 6.09 7.04 7.51 18.10 3.93 2007 5.72 -2.91 9.3 10.29 19.17 4.30 Degree of Contribution to economic growth rate D f C t ib ti t i th t 2003 3.50 0.00 1.13 1.26 0.73 2.37 2004 6.15 -0.07 2.54 2.34 1.18 3.68 2005 4.16 -0.13 1.85 1.73 1.57 2.44 2006 4.89 0.09 2.10 1.92 1.79 2.70 2007 5.72 -0.04 2.83 2.70 2.14 2.93 Degree of contribution to economic growth rate = industry’s contribution degree / Overall economic contribution degree 2003 100 0.00 0 00 32.29 32 29 36.00 36 00 20.86 20 86 67.71 67 71 2004 100 -1.14 41.30 38.05 19.19 59.84 2005 100 -3.13 44.47 41.59 32.74 58.65 2006 100 1.84 42.94 39.26 36.61 55.21 2007 100 -0.70 0 70 49.48 49 48 47.20 47 20 37.41 37 41 51.22 51 22 28
  30. 30. 2. New Focus (1) Two trillion two promising industry: Semiconductor, TFT-LCD, biotech, digital content. (2) Th Three trillion industry illi i d • Energy industry( LED lighting) • Telecommunication( WiMax, mobile communication) • Biotech industry( medical device, agriculture device biotech, medicine) ( ) (3) Love Taiwan -12 major construction projects( 120 j p j ( billion US dollars in 8 years) (4) Industrial restructuring 29
  31. 31. •Service industry as employment driving engine Industrial innovation •Upgrading of manufacturing •Commercialization & informatization of agriculture industry •Cultural creative industry Cultural •Energy saving and substitute energy New Promising industry •Biotech •Digital life •Liberalization: service industry deregulation Policy deregulation •Functional: functional assistant to replace industry targeting p y g g •Systemization: multi-area interaction Fig. Industrial restructuring 30
  32. 32. VIII、The Guidance Programs for SMEs in Taiwan g 1. Ten Guidance system for assisting SMEs 1) Finance and credit guidance system: Primary tasks include p y providing credit g instruction and assisting small and medium enterprises in improving their financial structures. 2) Management guidance system: Primary tasks include instructing and assisting small and medium enterprises in g p setting up management systems and boosting management efficiency and the development of human resources. 31
  33. 33. 3)    Production technology guidance system:  3) Production technology guidance system: Primary tasks include guiding and  assisting small and medium enterprises in  i i ll d di i i boosting technology levels and adopting  new technologies. h l i 4)   Research and development guidance system:  Primary tasks include assisting in the  Primary tasks include assisting in the development of new products and  technologies and supporting the individual or  technologies and supporting the individual or joint R&D efforts of small and medium  enterprises. enterprises 32
  34. 34. 5) Information management guidance system: ) g g y Primary tasks include guiding and assisting small and medium enterprises in the collection of information and the establishment of information management systems to enhance efficiency through the utilization of information. 6) Industrial safety guidance system: Primary tasks include providing guidance to small and medium enterprises in establishing or improving industrial safety systems and assisting in the resolution of industrial safety problems. 33
  35. 35. 7) Pollution control g ) guidance system: y Primary tasks include providing guidance to small and medium enterprises in improving pollution control facilities and assisting in the resolution of pollution control difficulties. difficulties 8) Marketing guidance system: Primary tasks include assisting small and medium enterprises in market expansion by collecting and providing necessary market intelligence. 34
  36. 36. 9) Mutual support and cooperation g ) pp p guidance system: Primary tasks include guiding and assisting small and medium enterprises in conducting exchanges and cooperation activities in order to bolster their competitive ability. 10) Quality enhancement guidance system: Primary tasks include assisting small and medium enterprises in creating a management environment of outstanding quality, raising levels of product and service quality in the enterprises, and promoting joint quality improvement efforts among enterprises. 35
  37. 37. 2. Some Specific Programs for SMEs 2 Some Specific Programs for SMEs • SMEs credit guarantee fund (SMBCGF) SMEs credit guarantee fund (SMBCGF) The objective of the system is to provide  credit guarantees to small and medium  g enterprises which are promising but short of  collateral necessary to obtain finance  y from contracted financial institutions(CFI). 36
  38. 38. Outline of Credit Guarantee System Relations among SMBCGF and related institutions 37
  39. 39. 3. SMEs incubator center •Definition: Incubator Centers are a place where individuals or enterprises are allowed to incubate new products, mew businesses and new technology, to start up a new business and to conduct enterprises gy, p p transformation and upgrade. •Functions: 1. Reduce risk and expenditure involved in incubating a new business, improve success rates. 2. Assist in the process of industrial incubation p j projects and the development of new technology/ p gy products. 3. Provide guidance in commercializing R&D results. 4. 4 Provide a location where academics and industry can work together. 5. Provide testing services, speed up product development 6. Provide training for personnel, related information and consulting services for operation management. g p g • Effectiveness: 60 incubators, 1,300 firms (since 1997) 38
  40. 40. 4. Encouragement programs In order to encourage firms to pursue for quality, technology excellence, government implements t h l ll ti l t several programs as follows. • National Award of Small and Medium Enterprises - Management upgrading technology Management, • National Award for Innovation - R&D, technology upgrading, product quality improvement etc. • Little Giant Award - excellent export and management performance 39
  41. 41. IX. IX. Concluding Remarks 1. 1 The maintenance of political and social stability, stability timely implementation of effective policies, and vigorous private entrepreneurship stand out as key factors in Taiwan experience. 2. Consider adopting export-oriented development export- strategy and selecting a group of strategic industries on which the government would concentrate its resources to promote their development 40
  42. 42. In Taiwan’s experience, to avoid lack of focus, the government go ernment selected a gro p of strategic ind stries with group industries ith significant potential and should concentrate its resources on these industries, in order to achieve economies of scale and international competitiveness. It was not until the government began to concentrate resources on textiles and a handful of other industries that it was able to increase output and achieve economies of scale and competitiveness. If a country adopted this strategy and succeeded in achieving a breakthrough, this would have a “demonstration effect , effect”, and would encourage multinational enterprises to invest in that country. 41
  43. 43. 3. t 3 to provide “ id “one-stop” service to attract foreign “one- t ” i t tt t f i investment. Some developing countries are relatively late starter in seeking to attract foreign investment, so it needs to provide incentive measures and administrative assistance that are better than what other countries have to offer. Besides tax breaks, one-stop service, transparency, breaks “one stop” service transparency making it easy to obtain land for factories, establishing industrial parks and other ancillary measures are all very important. Currently, y y p y, provide tailor-made incentive measures for big companies, to reduce the level of uncertainty accompanying investment. In this way they would be able to attract up, mid and downstream industries, creating a cluster effect. 42
  44. 44. 4. Government should collaborate with civic organizations to establish organizations for the promotion of foreign trade and which could conduct market research b th d k t h both domestic and overseas, th b ti d thereby helping companies to gain a better understanding of international markets and to move into those markets successfully. Markets M k t are th most i the t important element in exporting. The t t l ti ti Th small size companies makes it impossible for them to collect market information on their own, and consequently they often lose business opportunities. Private companies still need help from the government in the collection of information about international markets if they are to overcome the obstacles in their way. At the same time, government purchasing can help companies to achieve steady development within a stable market. 43
  45. 45. 5. Keep exchange rate stable to promote saving, and turn saving into productive capital. 6. 6 Provide start-up capital but coupled with own start- capital and management assistance to raise successful rate. rate 7. C t favorable environment for SMEs without 7 Create a f bl i t f SME ith t being crowded out resources by large enterprises. (government procurement, alliance etc.) 44
  46. 46. Thank You ! Y 45

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