Competition Necessitates Structural Reform

Competition Necessitates Structural Reform
China Times editorial (Taipei, Taiwan, ROC)
A Translation
June 5, 2013

Summary: The Swiss School of Management in Lausanne has announced its 2013 global competitiveness rankings for 60 economies. Taiwan fell from 7th place last year to 11th place this year. Hong Kong fell to 3rd place and Singapore fell to 5th place. South Korea remained unchanged in 22nd place. But Taiwan's declining competitiveness has attracted the greatest attention and concern. What factors contributed to Taiwan's decline? What was the role of economic crisis?

Full Text below:

The Swiss School of Management in Lausanne has announced its 2013 global competitiveness rankings for 60 economies. Taiwan fell from 7th place last year to 11th place this year. Hong Kong fell to 3rd place and Singapore fell to 5th place. South Korea remained unchanged in 22nd place. But Taiwan's declining competitiveness has attracted the greatest attention and concern. What factors contributed to Taiwan's decline? What was the role of economic crisis? These are all questions that warrant our attention.

First consider the upside. Taiwan remains competitive in international investment, fiscal management, and international trade. This proves that the government succeed in attracting foreign investment over the past year. Taiwan businesses have also returned to Taiwan, This has improved the fiscal picture. The elimination of trade barriers and the signing of free trade agreements also contributed. This is all enormously gratifying.

But in overall economic performance, Taiwan fell to 16th place. The slow recovery of the international economy impacted exports. This was not under our control. The domestic economy and employment rate fell to 24th place. This was due mainly to insufficient domestic demand. This made businesses reluctant to hire new employees. Salary increases remained small. Overall government effectiveness fell from 5th place to 8th place. This was probably due to long term ruling vs. opposition party deadlocks, inadequate coordination between ministries, and legislative inefficiency. Infrastructure, health, and environmental rankings also fell. These reflect insufficient investment in scientific infrastructure, and insufficient cooperation with industry.

Taiwan has long been proud of its corporate performance. But this plummeted from 4th place to 10th place. Production capacity and efficiency also declined, to 20th place. This is a warning sign that warrants concern. It means Taiwan's industrial upgrading and transformation is too slow. We have failed to jettison the OEM manufacturing-based model. Profit margins have narrowed. We have failed to create added value. We have remained trapped in a vicious cycle of price competition. We lack brand names. We lack competitive human talent. The service sector now accounts for a larger percentage of the total, but has shrunk in absolute terms. Industry is developing unevenly. Monetary easing and low interest rates have attracted funds to real estate. But this is an isolated case, and overly dependent upon government tax breaks, financial deals, and gasoline, water, and electricity subsidies These all constitute structural problems.

In short, Taiwan's competitiveness has declined. Public sector performance has improved slightly. But private sector performance has remained poor. The next question we must ask is: How can the government help the private sector improve its competitiveness? The answer is: Improve enhanced national competitiveness.

The US has regained its supremacy, due mainly to improvements in the financial industry. Numerous technical innovations and successful enterprises have reduced unemployment and gradually stabilized the housing market. Progress on the Chinese mainland is the result of its policy of phasing out low margin manufacturing industries and replacing them with high-tech, high value industries. It has replaced export-oriented industries with re-export industries. It has increased domestic demand, promoted industrial restructuring and upgrading, thereby stabilizing its economy. Japan's "Abenomics" has begun to impact its economic vitality. In the Eurozone, 2nd ranked Switzerland, 4th ranked Sweden, and 9th ranked Germany have all retained their previous rankings. They rely on export-oriented manufacturing, diversification, and SMEs with strong fiscal discipline. No wonder the IMD World Competitiveness Center said, "Structural reform is unavoidable. Development is a prerequisite to competitiveness... competitiveness has a simple golden rule: emphasize production, diversification, exports, investment in infrastructure, education, support for the development of SMEs, increased fiscal discipline, and most importantly, maintaining social cohesion."

This shows us the steps necessary to maintain social cohesion. The executive branch must implement open door policies and make resolute reforms. The ruling and opposition parties in the Legislative Yuan must break the current deadlock and reach a consensus on economic priorities and the people's livelihood. They must overcome their dread of the downside that prevents them from profiting from the upside. They must accelerate the process of deregulation. They must restore public confidence in economic development.

Secondly, the private sector must increase productivity and create added value. It must accelerate industrial upgrading and restructuring. It must shift capital investment from the electronics and technology industries of the past, to real estate. Imbalances must be addressed. Balanced development of industry and diversification is the correct path. How will funds be directed to SMEs, manufacturing, research and development and infrastructure? How can the government encourage job creation, and better educate the technical personnel required by industry? All of these are prerequisites to enhancing industrial efficiency.

The business community must change its policy of cutting salaries whenever the economy is depressed. It must realize that low salaries will not attract talent and cannot retain talent. Conversely, increased wages will improve employee morale. Employees will be more willing to make an effort. This will enhance productivity, benefitting business owners. Financial incentives should be replaced by the allocation of resources in branding, marketing channels, manufacturing, and services. We should encourage industry-university cooperation. This will significantly improve corporate competitiveness.

In conclusion, we hope the government and the public will remain vigilant and work together. We hope that that next year Taiwan's competitiveness will increase, and its economy emerge from under its dark cloud.
   
中時電子報 新聞
中國時報 　2013.06.05
社論－衝競爭力 結構性改革已無可避免
本報訊

    　瑞士洛桑管理學院日前公布涉及六十個經濟體的二○一三年全球競爭力排名，台灣由去年的第七名降至十一名，雖然香港、新加坡也分別降至第三名和第五名，南韓則維持不變（廿二名），但台灣競爭力下降確實引起國人的緊張和重視。台灣競爭力衰退是什麼因素造成，以及背後反映經濟的危機為何，都是值得警惕和探究的問題。

    　先看正面的部分，台灣競爭力表現較佳的是「國際投資」、「財政」和「國際貿易」，顯示政府一年來在吸引外資（包括台商回流）、改善財政，以及鬆綁貿易障礙與洽簽自由貿易協定的表現有了成果，值得欣慰。

    　但是，「整體經濟」表現退到十六名，應是國際經濟復甦緩慢，使我國出口受創，這部分比較難以操之在我。國內經濟及就業都後退到第廿四名，主要是內需不足，而使企業雇用人力保守，調薪幅度微小。「政府效能」整體從第五名降到第八名，應和長期以來朝野對立，部會協調不足，立法效率不佳等原因有關。基礎建設及健康及環境等指標也都退步，顯示科學基礎建設的投資不足及產業合作有待加強。

    　比較特別的是，台灣一向引以為傲的「企業效能」則從第四驟降到第十，產能及效率也衰退到第廿名。這是非常值得重視關注的警訊，代表台灣的產業升級轉型速度太慢，包括無法擺脫代工、製造為主的模式，淪入利潤微薄，無法提升附加價值，只知壓低成本的惡性循環；缺乏品牌通路，軟體競爭力差，服務業占比大卻規模縮小，產業不均衡發展（例如不動產業在貨幣寬鬆、利率偏低的情勢下吸引資金競相投入而一枝獨秀），以及太過依賴政府的許多租稅減免和金融優惠和油水電低價補貼等措施這些結構性的困境和問題。

    　換言之，台灣這次競爭力下降，主要是政府部門表現略有進步，但民間部門表現欠佳所致。接下來要問的是，政府該如何協助民間部門改進，以提升競爭力，這可以從競爭力提升的國家找到一些答案。

    　重登榜首的美國，主要是由於金融業好轉，大量技術創新和成功企業，因而失業率下降，房市逐漸回穩；中國大陸進步則和騰籠換鳥政策（揚棄低階製造，轉為高科技、高值發展；出口導向轉出口、內需並重）促使產業轉型升級，經濟持穩有關；日本則主要是安倍經濟學對經濟活力產生了初步影響。歐元區的瑞士（第二）、瑞典（第四）和德國（第九）維持競爭力不墜，是靠出口導向型的製造業、多元化經濟體制、中小企業強大與遵守財政紀律。難怪洛桑競爭力中心負責人表示：「結構性改革已經不可避免，發展仍應是獲得競爭力的前提」，「競爭力的黃金定律其實簡單：重視生產、多元化、出口、基礎設施投資、教育、支持中小企業發展、加強財政紀律，以及最重要的事情─維持社會凝聚力。」

    　由此可見，政府行政部門大開大闔的政策，有魄力的改革，以及立法院朝野政黨以民生經濟優先的共識，打破現在對立的僵局，打破防弊重於興利的心態，加速法規鬆綁的立法進度，全力發展經濟是建立民眾信心，維持社會凝聚力的第一步。

    　其次，民間更要提高生產力和附加價值，加速產業升級和結構調整的速度，從過去的電子科技產業一枝獨秀到現在的不動產業吸引龐大資金投資，此種偏頗失衡的狀態都要突破，走向多元化的產業均衡發展才是正途。如何將資金導向到中小企業、生產事業、研究發展和基礎建設，以及以創造就業為主要內涵的獎勵政策，和改善產業需要的技術人才的教育體制等等，也都是提升產業效能的必備條件。

    　企業界也應調整「景氣低迷時吝於調升薪資」的心態。要知道，低薪無法吸引人才，更無法留住人才；反過來說，調高薪資，不但可以提高員工士氣，更使員工更願投入，發揮潛力而提升生產力，進而使得企業主受惠。金融優惠政策應轉至品牌、通路及製造、服務並重的資源投入，鼓勵加強產學合作，對廠商的競爭力將有重大的激勵效果。

    　總之，希望政府和民間引以為戒，一起努力，讓明年台灣的競爭力不但提升，經濟也走出沉悶的陰霾！