Taiwan is competitive, yet lacks openness: Morris Chang

“There is too much emphasis in Taiwan on transfer of knowledge and not enough on independent, creative thinking,” said Chang.

Chang believes that all of these limits could be removed, but it would require a major effort. He pointed to the Meiji Reforms in late 19th century Japan and similar efforts in China under Deng Xiaoping.

“Those reforms were very difficult,” said Chang. “I am not too optimistic that any similar reform can take place in Taiwan. It is not that I am a pessimist but I am also not very optimistic in expecting such major reform.”

While most countries have limits to growth, Chang expressed his admiration and amazement that the U.S. really seems to “have the ability to raise its own limits.”

When asked whether he thought a two-tier economy (competitive high-tech sector vs. an uncompetitive rest of the economy) was developing, Chang observed with a laugh that, “Taiwanese high-tech companies are not that good. They also suffer from problems. In addition, many companies in other industries are not that bad.” It is more, he said, a question of who started the company and their leadership ability.”

As most Taiwanese companies started out as OEM providers, Chang sees no reason why the same model cannot be replicated with success for other sectors like biotech: “It is the natural path for almost every Taiwanese company to do contract manufacturing.”

Since China is so large and Taiwan much smaller, Chang recommended that Taiwan serve as a portal to its much bigger neighbor, saying, “Given that Taiwan has only 2 percent the population of China, I think that it is best if Taiwan-similar to Hong Kong-plays the role of a gateway.”

Any resulting divisions of labor, in investment or R&D between Taiwan and China are still very much an “academic question,” as Taiwan is not yet sufficiently open to China, although Chang did not see any particular reason to fear competition from Chinese companies.

“It is not a question of losing out to Chinese companies but to any companies,” he said. “To keep from losing out, you have to safeguard your trade secrets and protect your IP.”

Regardless of which presidential candidate wins the next election in March, Chang thinks a more open policy to China will emerge. When asked what he would do if he had a magic wand that could solve any problem facing Taiwan, Chang responded with: “Right now, I would lift restrictions on investment and open the three links,” saying these policies have contributed to one of Taiwan’s chief weaknesses, namely an economy that is “incompletely globalized, incompletely opened.”

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