Saturday, November 21, 2009

ECFA Negotiations Should Accord with an Industry-Based Strategic Blueprint

ECFA Negotiations Should Accord with an Industry-Based Strategic Blueprint
China Times editorial (Taipei, Taiwan, ROC)
A Translation
November 21, 2009

Taipei and Beijing have recently signed and exchanged memoranda of understanding regarding financial supervision. This of course is beneficial to the financial industry on Taiwan. But as FSC chairman Sean Chen said, the MOU merely gets us into the ball park. Our seats may not be in the best spot. We may not get the best view of the game. Mainland China imposes tight restrictions the services local branches of foreign financial institutions may offer. In earlier years, the government on Taiwan maintained a "San Guan Wu Ka" policy. As a result we got a late start on the Mainland. Getting tickets this late means we only get to see half the game. No wonder Sean Chen characterized our situation the way he did.
Industry insiders say the financial MOU is merely an appetizer. The main course is ECFA. Media reports indicate that ECFA will be signed no later than next spring. An early harvest can take effect immediately. Only the outlines for dispute resolution, investment protection, and industry cooperation have been signed. The starting time for negotiations, the table of contents, and even the detailed contents remain unclear. The two sides are still bargaining over the early harvest items. The situation is complete chaotic. Will the projects expected by the financial sector be included in the early harvest list? Even that is uncertain.

Here we must remind the ruling administration that ECFA negotiations must look to the future. They must not remain obsessed with the present. Financial sector businesses able to establish themselves on the Mainland are businesses already in existence. Many of them are family-owned consortiums. When the government on Taiwan uses its authority to help private financial industry consortiums expand their operations, the other side is bound to demand concessions from other industries. Other industries will either be forced to take less, or to give more. When the FSC negotiates an MOU and ECFA on behalf of our industries, it should offer the public a financial sector blueprint for Taiwan's future. This blueprint should include hostile takeovers and acquisitions, corporate governance goals, and company management objectives. It should practice goal management, and incorporate the requisite negotiating strategy. Only that qualifies as a future-oriented strategy.

In corporate governance, for example, if family-owned consortiums drag their feet in establishing audit committees, if their operations remain opaque, it makes no sense for the government help them expand their operations into regions where supervision would be difficult. Therefore, while the government expands future operations for the financial sector, it should simultaneously establish a healthier financial order on Taiwan. Take cross-Strait cooperation in the energy industry for example. Taiwan's crystalline silicon solar cell producers account for much of the world's output. But they may not have any advantage in thin film production techniques, or modules and systems development. The Mainland has a huge market for solar power generation. It is subject to international market pressure regarding carbon dioxide emissions. These are bound to provide considerable opportunities for cross-Strait cooperation. How should businesses on Taiwan cooperate with businesses on the Mainland? First, they should make use of each other's market advantages. Secondly, they should expand their scientific and technological leads. They should create a "smiling curve" in the energy industry. Only then will they have a future worth looking forward to. Based on such projections, it is easy to see what Taiwan's energy industry must fight for during ECFA negotiations.

Take the complex biotechnology industry, for example. The R&D capabilities of biotech companies on Taiwan are still superior to those of companies on Mainland China. Companies on Taiwan are still in a dominant position in the research and development of new medicines and medical supplies and capital market support for follow-up promotion. But Mainland China has a huge population and vast territory. Its clinical trials costs are relatively low. In the medical materials field, ICT industries on Taiwan have the advantage of a long-established foundation conducive to R&D breakthroughs. Can the two sides cooperate to develop new medicines and medical materials with the potential to dominate the world market? This is what the biomedical industry urgently needs to consider. Such projections allow one to get a handle on requisite negotiating strategy for talks in the field of biotechnology.

In sum, from a public welfare perspective, ECFA is a cross-Strait agreement that should be signed for the sake of Taiwan's industries. That being the case, one must envision all sorts of scenarios as the basis for the formulation of strategy. Therefore, the government's ECFA strategy team must have a view of industry extending decades into the future. It must not think in terms of past eras, past frameworks, past industries, past industrialists, and past conflicts of interests. The other side is still fundamentally authoritarian. It is exempt from existing fetters. It is able to meet the terms of its agreements. Society on Taiwan is pluralistic. Traditional influences abound. Given such an environment, the administration faces real challenges during negotiations over ECFA. First, it must seek a niche within tradition. Next, it must not confine itself to the traditional mold. It must rely on negotiations to open up new horizons.








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