Opportunities Between Europe And Taiwan

Mr. Chairman, Distinguished Guests, Ladies and Gentles:

Good afternoon! It is my great pleasure to meet with so many outstanding leaders and officials from European businesses. I feel equally honored to have this rare opportunity to discuss with you the industrial opportunities between Europe and Taiwan. Today’s close trade and investment relations between Europe and Asia remind me of the glories of the Silk Road in ancient times. Therefore, I would like to start with this magnificent artery that sparked an exchange of civilizations of the East and West.

History of the Silk Road

Named by the German scholar Baron Ferdinand von Richthofen in the middle of the 19th century, the Silk Road was the most enduring trade route in human history. While many historians associate Marco Polo (1217~1292) with the Silk Road, the prehistoric track route was in use almost two millennia earlier, when Emperor Wu ( 漢武帝 ) in the Han Dynasty sent the great explorer and diplomat Zhang Qian ( 張騫 ) on a diplomatic mission to the Western Regions. The Road then became the information super highway of its age, serving as the conduit not only for goods but also for the transmission of knowledge and ideas between East and West.

The Silk Road indicates frequent and extended exchange and fusion of diverse cultures and values. People at both ends of the Road were able to learn each other’s merits, thus improving understandings.

One of the basic elements for international trade is comparative advantage. The principle of comparative advantage refers to the fact that each nation shifts its resources to more productive sectors, and if nations can trade they gain from the benefits of specialization and improvement of efficiency.

In fact, hundreds of years before the birth of Adam Smith, the father of modern economics, the Silk Road had already proved that. Silk, gold, rubies, jade, spices, tea and art works were moved by caravans to the West. So were bronze, weapons, furs, ceramics and cinnamon bark ( 肉桂 ) in the opposite direction.

The rise of sea powers in the 16th century saw the arrival of the Spaniards, the Portuguese, the Dutch, and the British. In the beginning they took the marine routes to purchase spices and tea in the East, and then resold to the West. Later, the Dutch set up factories and sold products to China and Japan rather than shipping back to Europe, after processing raw materials obtained in the East, such as rubber, cotton, and lumber.

The British followed suit. In a nutshell, the Dutch and the British were pioneers of globalization by applying the business model of utilizing local resources and vending locally.

Globalization

However, the economic globalization as we generally perceive came in the 1980s. Economic globalization is defined as no extra transaction costs occur when goods or services cross the border. It has been made possible because of convenient and speedy transportation, information transparency, and lower tariff and non-tariff barriers. High street busting book “The World Is Flat: A Brief History of the Twenty-First Century” by Thomas L. Friedman evidenced the advent of economic globalization. “The Travels of A T-shirt in the Global Economy”, another book by Professor Pietra Rivoli, echoed this unstoppable trend.

Both titles tell stories of products, services, and jobs traversing from country to country around the world. How should we expect things to come in 2010, 2012, or 2015? Are there only products and services that keep moving? Only the supply chains of product cross borders? What else can flow freely from one county to anther?

I think the first will be “knowledge”. Knowledge, especially the economic, managerial, and commercial knowledge, will meet with fewer and fewer barriers across nations. But a large portion of knowledge is implicit, and free migration of people is the prerequisite of untrammelled dissemination of knowledge.

Over the past century, we have witnessed the West shifting their knowledge and value to the East through the relocation of factories. But today Taiwan, Japan, South Korea, China, and India have amassed a great deal of advanced know-how and scores of managerial experts. These white-collar talents now move globally and are in increased connection with the elites who control the world’s high-added value. This shows that part of original ideas or original added value begins to proliferate or contribute to the developed world.

Learning from Europe

China, Japan, South Korea, Taiwan, the four Northeastern Asian countries dubbed as CJKT by me, have been deeply influenced by the United States after the World War II. Now more and more people in these countries start to think that Europe has many excellent practices and experiences that fit Asian countries better than the U.S does. Therefore we’ve seen more Taiwanese students going to study in the U.K. than in the U.S. Two Taiwanese international airlines, the China Airlines and the EVA Air, combined have more flights to Europe each week than to U.S.

Taiwan, Japan, and South Korea, when planning economic development for the next decade, take cues from France, the Netherlands, Finland, Sweden, Denmark, and Switzerland. These European countries put emphasis to the quality of life and environmental protection.

It is obvious that frequent exchange with Europe in economic development, culture, and knowledge by the East Asia’s four little dragons and one dinosaur—China—will surpass those with the U.S. in the foreseeable future.

The Rise of New Silk Road

We may call it “the rise of a new Silk Road in the 21st century”. Unlike the ancient ones, this time it brings in highly frequent exchange of business knowledge, life style or culture. As such contacts intensify, the opportunities of investment in each other increase. But more importantly, high-level business activities such as setting up offices or designing centers in Europe and joint ventures with European firms are conspicuously increasing. We predict it is going to grow ten-fold in 30 years.

As the Asian four little dragons, the one dinosaur, and the ten Southeast Asian countries are growing fast and pose the potential to become the world’s largest market in the next two decades, it is very important for European economies to pay more attention to this region on the west rim of the Pacific Ocean.

But the question is: Are Europeans acquainted with doing business in this region? Do Europeans know where it will be most effective, most lucrative, most robust, and least risk to wedge into this vast market?

In the last 30 years, we have seen repeated setbacks of many Europeans firms because they were too optimistic, if not too naïve, to make enormous investment in China or Southeast Asia, only to suffer great losses in the end because they were unfamiliar with local laws, business practices or political situations.

That is why it’s so crucial to have effective risk management and good control of human capital when running business in emerging markets that grow in leaps and bounds.

Taiwan as A Critical Path

In the journey to navigate through the Road, there are several pivotal nodes. In the past, the Europeans were used to make Singapore or Hong Kong as their node to converge resources and control risks. Today, I want to tell you that there is a third node. That is Taiwan.

Why can Taiwan be a node on the Silk Road that links East and West?

First, in term of language, blood, and geographic proximity, Taiwan stands closer than Singapore and Hong Kong to the heart of Mainland China, that is, Beijing or Shanghai. People on both sides of the Strait speak Mandarin.

Second, except for financial service and telecom service, Taiwan has more solid industrial basis, more experiences, advanced technologies, and larger pool of talents in high-tech, engineering, manufacturing, even in chain stores, food, textile, iron & steel, petrochemicals, ICT, semiconductors, and communication equipment industries. If you look for financial service and telecom service, Singapore and Hong Kong may be ideal places to go to. But if you care about the rest, it will be foolish to bypass Taiwan.

Third, for fashion and livelihood related industries, including transportation, communication, environment, energy conservation, safety, and healthcare applications, Taiwan holds the promises of being the best testing ground to serve the purpose for entering into the China market. Taiwanese consumer’s acceptance of quality life and high tech products is five years ahead of those in China’s most developed cities, and ten years of China’s second tier cities. Using Taiwan as a testing ground is just perfect in size and in nature: it is not too small, too simple, as compared to Hong Kong and Singapore.

With a view to effectively lowering risks in investment, it is imperative to go through a testing ground with appropriate magnitude for any innovative technology or creative application prior to entering into Asia and, more specifically, China. This new concept of “Living Lab” is widely applied and promoted by the EU in its technology development.

I want to assure you that Taiwan is second to none as a Living Lab for your innovative products and services. In terms of population and land area, Taiwan is a middle-size country. It may be difficult to find another country in Asia that has these characteristics suitable for taking pilot experiments.

In other words, your critical path to maximizing profits and minimizing risks in the world’s largest market is via Taiwan. Success of experiment in Taiwan can be replicated in the 10 Southeast Asian countries and 20 provinces in China. If this does happen, it will be an event of significance in the history of mankind in the 21st Century.

Wireless Telecom

As you may be aware, Taipei City, with its broadband wireless network known as WIFLY, was recognized in June of 2006 by Jiwire, an international accreditation organization, as the first city in the world to provide metropolis-wide Wi-Fi applications. My government intends to expand it to become a ubiquitous Taiwan in hope of making the entire island a mega-metropolis.

In the process, we have to overcome some technological hitches, such as seamless connection for users moving at 300 kilometers per hour on high-speed train. With a ubiquitous communication network, we aim to provide distance healthcare and distance learning to people in every part of the country—some very remote and far-flung, so as to narrow digital divide between the city and countryside that is common in the world.

Energy Saving & CO2 Reduction

The world pays tribute to Europe for its leadership in shaping up an energy conservation and carbon reduction society. Realizing that the Earth was to face threats from climate change, major European countries, especially those in Nordic and Central Europe, started to push for reduction of green house gases 20 years ago with the use of technologies and social norm. Ever since then, the Europe has always been the pace-setter of the world in pursuit of clean and green society.

Therefore, Europe’s experiences are important to Taiwan and both the public and private sectors have been learning from you. Except Japan, I believe Taiwan is the most dedicated nation in Asia devoted to green house gas reduction. President Ma Ying-Jeou has trumpeted that, by 2025, Taiwan’s CO2 emission will return to the level in 2000. We even vow to halve the CO2 emission of the 2000 level by 2050.

In the run-up to post-Kyoto Protocol arrangement, the United Nations (UN) is to convene a large-scale meeting next year in Copenhagen, Denmark. While the above criteria are likely to be adopted in the successor agreement to the Kyoto Protocol, my government has made its pledge this year to uphold such goals.

The Industrial Technology Research Institute (ITRI) and the Ministry of Economic Affairs (MOEA) are working together to push for technology development and pilot experiments in an effort to save energy and reduce CO2 emission.

Urban Mobility

Transportation has always been a main cause of pollution. Emissions from fossil fuel combustion engines are taking toll on your health and mine, and the Planet Earth as well. It is particularly true in big cities. Taking account of both environmental protection and commuter’s convenience, we have recommended a new system to address urban mobility. This bold but effective system combines mass rapid transit (MRT), bicycle, and light electrical vehicle (LEV).

In a metropolis, traveling within 10 to 30 kilometers would better use MRT. Bicycle takes care of shorter range of three to 10 kilometers. For any point-to-point transportation that is neither easily accessible nor provided by MRT or bicycle, a shared, easy-to-let, easy-to-return LEV network should take hold.

This way, the number of private-owned cars can be reduced. We are talking about a “public” transportation system that some 20 different drivers can share a same car each day. As vehicles can easily be rented and returned any time in convenient places, drivers no longer need to own their cars and designated parking spaces.

Is this a pipe dream? In some European cities, Vienna and Paris for example, the bicycle-for-rent systems have been in operation for many years. In London, communities cooperate with local governments to promote Citycar Club, a commercially operated rent-an-electrical-car system.

This idea is more environmentally friendly than the hybrid cars developed by world’s auto giants, because it fundamentally saves energy and reduces carbon emission. I am quite certain the world’s major auto manufacturers won’t like it. Well, they don’t have to worry too much too soon, because it would take 50 to 100 years before the gas-powered cars vanish.

However, the embryo of this ideal transportation system may emerge in the next 10 to 20 years. Europe may be the front-runner. In Asia, only a very few cities engage in such pilot project. Taiwan has shown its strong interest. You can fairly expect that the first Asian city to realize the shared LEV concept will probably be Taiwan. If it succeeds in two to three cities in Taiwan, and then spread to 200 Asian cities in 50 years, you can imagine how big and lucrative the business will be.

Technologies at play in this experiment include easy-to-replace and high-efficiency, light-weighted battery, easy-to-use and foldable bike design, materials, and provision of comprehensive living environment. These will create opportunities for large-scale research projects between Taiwan and European hi-tech companies and research institutes.

Health Care

Adults aged 65 or older account for 15% to 20% in many European countries. In Asia, Japan is the first and remains the only nation entering into an aged society, with 20% of the population exceeding 65 in age. Population in other Asian states is relatively young. But Taiwan could follow Japan and soon become the second Asian aged society. With this in mind, we pay special attention to technologies applying to an aging society.

Over the past decade, one most extensively discussed subject and heavily invested by my government has been how to turn medical equipment into portable, home-use devices, so that the patients and their families can do some of the tests at home. For instance, patients with heart diseases, diabetes, high blood pressure, and hyperglycemia ( 高血糖 ) now can do their tests at home every day.

Taiwan in the past has invested massively in the R&D of home-use medical gears. In next decade, you will see Taiwan’s medical equipment industries, particularly the portable devices industry, leaping forward.

In addition to meeting Taiwan’s own needs, the development of medical equipment industry also leverages the island’s strong footing in electronic industry. We can foresee Taiwan to become a kingdom that designs and manufactures portable or home-use medical equipment in 20 years.

Several European countries, including Germany, Denmark, UK, and Sweden, have developed leading technologies in this domain. We are keen to forge complementary relationship with Europe and co-develop personal medical devices that fit Asian’s constitution and life styles. Not only will it help extend the life span of three billion people in Asia and improve their health, but it also creates tremendous business opportunities, perhaps over multi-billion US dollars each year.

Services

Without any doubt, the incremental of future global economic growth will primarily come from Asia. Asia’s huge population is the potential of buying power and is reshaping the world’s consumption landscape. Income of over two billion Asians will increase to US$10 per day in 15 years from just US$2 five years ago. Business opportunities created by such a profound change, so far, are seen in service industries such as chain stores, logistics, financial services, medical care, tourism, and fashion & culture.

Over the past 30 years, Taiwan’s life style and culture, from pop music, publications, chain stores, to TV and motion pictures, have become indicators for the ethnic Chinese society that also comprises China, Hong Kong, Malaysia, Singapore, and even Thailand and Vietnam. Western companies, including Starbucks, 7-Eleven, Carrefour, IKEA, Nokia, and Ericsson, have been using their good knowledge of Taiwanese consumer’s behavior to look for or readjust their business models in Asia before entering into China and Southeast Asian markets.

Pilot Experiment

We believe similar examples are going to be even more evident in the next decade following intensive reciprocal influences on each other across the Taiwan Strait. Therefore, my Center has completed a plan for the Ministry of Economic Affairs (MOEA) with a view to repositioning Taiwan as the first pilot exploratory base for global brands and innovative technologies to enter into East Asian market. Through pilot experiments in Taiwan for a number of years, sellers can fine-tune the traits of their products and business models. As a result, their risks will be minimized.

To reach this goal, Taiwan will ramp up its efforts to develop industries in support of the exploratory experiments. These industries include training and education, life style investigation, implementation of experiments, and related services that transplant the results of experiments to other populous markets.

When the repositioning is accomplished, we deeply believe Taiwan will become Venice or Budapest of the 21st Century. Taiwan will regain as an oasis for mercantile travelers to refill their wagons before continuing the great journey to Asia. History may prove that you are the first company of pioneers on the new Silk Road in the 21st Century.

Conclusion

I certainly expect Taiwan’s new government will place Europe as its first target to forge economic and cultural ties with, followed by U.S., China, and Japan, in that order. We truly believe that, based on the history of past 20 centuries, the new Silk Road can serve as a conductor for the diffusion of European creative ideas, concepts of lifestyle, and invaluable knowledge in the East. Europeans can hoist the vast Asian market, or the entire Earth, by taking advantage of Taiwan as a fulcrum.

Flowing on the new Euro-Asia Silk Road should be high-value knowledge and calibers. Using the knowledge and talents and by applying Law of the Lever, you can lift the entire Asian markets.

Please do not overlook that a large pool of Taiwan’s best minds are in colleges, research institutions, and hi-tech industries. The Industrial Technology Research Institute (ITRI), founded by the Ministry of Economic Affairs 35 years ago, is the largest cross-disciplinary research body in Taiwan. With a research force of some 6,000 well-educated employees, among them 1,000 have doctorate degrees, ITRI generates two to three patents each day. World-acclaimed Taiwanese companies such as TSMC and UMC are all ITRI’s spin-offs. It’s our hope that the European giants or companies that are highly interested in Asian market can find support point out of lever fulcrum. The fulcrum is Taiwan and the support point is of course ITRI. We welcome any opportunity to work with you. Please be so kind to pass this message to your business partners. We look forward to your visits and future cooperation.

( November 12, 2008, at ECCT Special Luncheon )