Taiwan is competitive, yet lacks openness: Morris Chang

“Taiwan benefits from a highly educated population, a healthy ecosystem and industrious, diligent workers,” said Chang. The island, he added, has one of the highest literacy rates in the world. In addition, up to 70 percent of the college-age population go on to attend institutions of higher learning. Strong technical abilities also make Taiwanese workers highly desirable.

“While such measurements are not easily quantifiable,” stressed Chang, “I think that anyone who has worked with Taiwanese people will agree that they are very industrious and hard-working.”

In terms of the ecosystem, Chang reported that Taiwan has had an evolving market economy for 20 to 30 years; politically, freedom and democracy have been present for more than 10 years.

Taiwan also has weaknesses, however. Chief among these are a lack of economic openness, he says.

“This is the biggest weakness in the near term,” said Chang. “Incomplete globalization is becoming more and more a drag on the economy. During the last 10 years, as globalization has accelerated, Taiwan has either stood still or even gone backward.”

During this time, said Chang, Taiwan should have become the portal to the world’s fastest-growing economy-China.

“If Taiwan had seized the opportunity 15 to 20 years ago, its economic development would be much faster. It simply failed to take advantage of that opportunity.”

There are many kinds of limits to growth, pointed out Chang, but in Taiwan’s case, they are primarily institutional and cultural.

“Even though Taiwan had had democracy for at least a decade, the necessary institutions have not yet been set up. There needs to be more balance between the executive, legislative and judicial branches.”

According to Chang, executive power is dominant, while the power that legislative and judicial institutions require to exert their respective authorities has not been fully established. In addition, while Taiwan has a “nascent” market economy, there is a great deal of government interference.

“The heavy boot steps of government are everywhere,” said Chang.

In addition, rule of law is not sufficiently robust.

“Every day, you see in the news that there are many infractions and violations in this area. It is a common occurrence and yet the bad behavior continues.”

Corporate governance is also in the early stages.

“Most Taiwanese companies are dominated by single major shareholders or are family-owned. This does not provide a good environment for good corporate governance. In fact, good corporate governance is usually contrary to the interests of single major shareholders or families.”

Chang also pointed to cultural limits.

“The Chinese people are very tradition-bound,” he said. “Conformity is valued rather than innovation.” Taiwan is also a very inward-looking country, in his view.

“It reminds me of the Qing Dynasty Emperor Qian Long who ruled in the late 18th century. He was considered one of the best emperors and, yet, my feeling is that this represents an egregious overestimation of what he did.”

Qian Long’s reign, continued Chang, was the last opportunity for China to catch up to the West in terms of technology and industrial development.

“He knew nothing about the outside world,” noted Chang. “In his eyes, running the country very well was enough; China was better than the rest of the world. Lots of events happening today remind me of that attitude.”

There is also a lack of trust in many East Asian societies: “Trust is extended to only a small circle of people,” Chang said, citing research by Francis Fukuyama, indicating that Asian societies score comparatively low when it came to willingness to extend trust.

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