Taiwan's stagnant economy is worrying. The government has just cut its annual growth forecast for this year to a little over 2 percent. The so-called follow-up talks on Taiwan's major economic agreement with China are not making much headway, darkening hopes for a major breakthrough in cross-Taiwan Strait trade and investment ties.
A Japanese "trend guru" has suggested that when the "magic formula" of the Economic Cooperation Framework Agreement (ECFA) is no longer working in Taiwan's favor, Taiwan's major corporations should look "northeast" toward Japan, buy up its world-renowned brands, and jointly carry Taiwan's products to all corners of the world.
Kenichi Ohmae made the suggestions in his new book "The Grand Tides of Capital," recently published by Taiwan's Economic Daily News, a United Daily News Group affiliate.
Below are excerpts of a UDN report on Ohmae's views and suggestions regarding Taiwan:
"When the ECFA formula is no longer working in Taiwan's favor and the Chi-Wan (China+Taiwan) model has lost its appeal, don't forget Japan!" Ohmae advised.
He encouraged Taiwan to "outgrow" its ECFA mindset, because China is no longer a fast growing economy, and choose a new route for future development. He recommended a route of internationalization, similar to the one Switzerland has taken.
"Taiwan is eager to learn from Macau and Singapore, trying to open casinos in Matsu (off China). What a petty ambition!" said Ohmae. He likened Taiwan to a "huge Hong Kong" but said Taiwan should not have the same ambitions as Hong Kong.
"You guys must have a far greater ambition and more forward-looking plan than making money in China only. You should have a grand ambition to make a giant step toward the world," he told the UDN's correspondent in Tokyo.
"Taiwan needs more big enterprises than just Hon Hai (Foxconn) and TSMC (Taiwan Semiconductor Manufacturing Company)," he added.
He suggested that Taiwan seize the opportunity -- as Japan is declining -- to buy up well-known Japanese enterprises and polish the Japanese brand names before plunging into the world markets.
"This would be a shortcut for Taiwan," he said. He cited China's Suning Home Appliances' recent acquisition of Japan's LAOX marketing channel as a successful example of using a Japanese brand to gain wider access to the global market.
Ohmae said Japanese enterprises, though not doing well globally, are very popular. For example, Hon Hai has sought partnership with Sharp, and TSMC is reportedly in the process of buying a stake in Japan's Renesas Electronics Corp. and the Fujitsu Group's semiconductor arm.
He predicted that TSMC's deals with Renesas and Fujitsu will go through. Since Renesas, which was formed by NEC, Mitsubishi and Hitachi, is a major supplier of chips for Japan's car industry, which holds a 40 percent share of the world market, TSMC would gain a good control of Japan's auto and home electronics markets, he said.
TSMC's capitalization stands at over 5 trillion yen, compared to Renesas' 100 billion yen. Ohmae said TSMC is fundamentally a contract chip maker with little capability to develop new products and yet is a top manufacturer with excellent technology. This is exactly the opposite of Renesas, which over invested in R&D without developing manufacturing capabilities, a strategy that led to near-bankruptcy, he said.
If Taiwan's Chi-Wan model is to beat South Korean Samsung's model, the only way is to buy up Japanese brands, Ohmae said. He expressed the view that Hon Hai's stake in Sharp is not enough. It should seek to gain full control over Sharp, pooling the latter's technological staff and developing new products, he added.
He named other Japanese corporations, such as Panasonic, Sony and Pioneer, which he said could be forced to seek a new lease of life though mergers.
He speculated that Samsung could acquire Sony and that another South Korean company such as LG could buy Panosonic.
Taiwan has been ignoring Japan for a long time but it's time that Taiwan looked not just east, but northeast, Ohmae said. Japan's electronic industry, which has achieved little over the past decade, offers a great opportunity for Taiwan to expand into the world, he said.
He said Taiwan should aspire to look beyond Hong Kong and Macau to the far-off examples of Sweden, Denmark, and Switzerland, and work toward reaching the level of Japan.
Taiwan should study why Switzerland, a country with a population of just 7 million, is a world leader in areas such as pharmaceuticals, finance, shipbuilding, diesel engines, human resources and even food production, Ohmae suggested.
A long time ago, "I encouraged Taiwan to establish three-links with China. Ten years later, while Taiwan has prospered on China, the Chinese have learned from your Taiwan experience," he said. "So now it's time for Taiwan to move on, beyond your reliance on China."
His recommendation is for Taiwan to join hands with Japan to "embrace the world," he said. (July 31, 2012)
(By S.C. Chang)