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Economic Daily News: Taiwanese industry needs innovation

2014/06/18 17:28:36

Taiwanese companies need to emphasize innovation and invest more in research and development, as concerns have been raised over the effectiveness of the cross-Taiwan Strait Economic Cooperation Framework Agreement (ECFA) signed four years ago.

June 29 will mark the fourth anniversary of the signing of the ECFA, but opinion remains divided on whether the trade pact has lived up to the government's expectations.

The pact has failed to significantly drive Taiwan's economy and attract foreign investment, and the problems of a brain drain and capital outflow that it was expected to tackle are still unresolved.

Indeed, exports to China of Taiwanese products included in the early harvest program of the ECFA rose only 32.6 percent since the agreement took effect, even though this is more than the 6 percent seen in overall goods.

Cross-strait investors have also enjoyed combined tariff concessions of up to US$1.58 billion thanks to the ECFA, which have fueled bilateral trade.

However, Taiwan's continuous growth in its exports to China is not necessarily the equivalent of a competitive edge, nor an impressive market share.

In fact, the market share of Taiwanese products in China were down from 12.9 percent in 2002 to 8 percent in 2013, signaling that Taiwanese products are gradually losing their competitiveness there.

Growth in exports and market shares in the petrochemical, machinery and metal sectors were especially slow, causing Taiwan to trail behind South Korea.

The ECFA has proven to be far from a panacea. According to the Chung-Hua Institution for Economic Research, cross-strait businessmen are reluctant to take advantage of the ECFA early harvest program because there are already similar preferential treatments in existence.

Troublesome application processes and government red tape have also dampened interest, according to the institution.

It is therefore time for innovation to come into play, as Taiwan is gradually losing advantage in manufacturing over China.

(Editorial abstract -- June 18, 2014)

(By Lee Hsin-Yin)