“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.

Given the importance of innovation and creativity, educational institutions are at front and center.

“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 --iaoping.

“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.”