Help SMEs Develop Within the Mainland Domestic Market
United Daily News editorial (Taipei, Taiwan, ROC)
October 22, 2010
The Fifth Plenary Session of the 17th Party Congress has passed a "ten two five plan." The plan will attempt to rapidly change the direction of the Mainland Chinese economy over the next five years. It will increase domestic demand and improve people's lives, and enable the domestic consumer market to become the strategic focus of economic development. Private consumption is expected to reach 36% of total GDP, a significant increase from its current low level. For thousands of SMEs on Taiwan, this Mainland market is an earnest invitation to a golden opportunity that must not be passed up.
The signing of the cross-Strait economic cooperation agreement (ECFA) was the opening shot. The Mainland has over 200 products ready to enter the Taiwan market, tariff free. Taiwan meanwhile, has over 500 products that will enjoy zero tariff or low tariff treatment, beginning next year. These can make a major push into a vast market of 1.3 billion consumers. Most of these products are manufactured by SMEs. How will small and medium enterprises from Taiwan fare amidst the influx of goods from the Mainland? This question has many people worried. Conversely, many more daring and promising Taiwan enterprises, face an inconceivably vast Mainland market. How can they achieve a stable footing, make the most of their competitive advantages, and expand their businesses? This is a rare opportunity one could never have hoped for.
A shining opportunity has suddenly appeared. Taiwan has over a million SMEs. But how many are ready to take advantage of this generous invitation? Regrettably, very few. For small and medium enterprises, the risks have always been high. Over the past several decades, regardless of whether those in power were Blue or Green, large enterprises and high-tech industries have always received preferential treatment. Traditional and small and medium enterprises have received only neglect. They were forced to sink or swim. For small and medium enterprises, life is short. They rarely last more than ten years. Those that master their market niches, that are able to survive, stick largely to their niche markets, maintaining the status quo. Apart from OEM enterprises and suppliers of essential raw materials, they rarely have the courage to overstep their bounds. As a result, they allow others to seize the value-added market, while they maintain their closed and conservative business model. Even professionals in the information, design, and marketing industries, seldom have the courage to make any further moves.
These small and medium enterprises have enormous potential. Their untapped value is amazing. Once the doors to the Mainland are thrown open, they will be looking at a vast market. Even if tempted, they will be afraid to act rashly. Conquering new territories and achieving bold victories is not their forte. Even if they had the courage to take bold steps, the odds would still be stacked against them. But once the Mainland market has been thrown open, wealthy and powerful Mainland tycoons will sift through these SMEs. They will pick out the uncut diamonds. They will separate the wheat from the chaff. These SMEs will become part of a highly profitable Mainland market. Taiwan will be left with the dregs. These SMEs will be like brides who have been married off, totally unable to resist.
Yesterday President Ma attended the "Global Chinese Business Summit." He spoke enthusiastically of the post-ECFA era. He said companies on Taiwan should seize this low-tariff, no-tariff opportunity to enter the Mainland market, They should take advantage of domestic demand to build their own brands. They should break free of the the low margin OEM business model. This is fully consistent with our own reasoning. President Ma however, is urging them to jump directly from their OEM business model to building their own brands. Apparently he is unaware of the dangers, difficulties, and frustrations that confront conservative Taiwan enterprises, which consequently may miss this golden opportunity.
The Mainland market has magnanimously rolled out the red carpet for Taiwan products of superior quality. Taiwan's design skill and marketing talent have already reached maturity. But if no one has the determination to cut and polish the many hundreds of thousands of diamonds in the rough, bridging the Taiwan Strait will be difficult, and all their efforts will be in vain.
Twenty-five years ago, export industries began relocating. Taiwan's industrial chain was severed. Businesses with competitive advantages, such as upstream and midstream raw materials exporters, relocated. Downstream branded products suitable for an international market were missing. This was our fatal mistake going up against South Korea. We failed to fill in this gap as soon as possible. Just how many brands on Taiwan can be developed? Two remedies are available. One is to offer guidance to upstream and midstream industries, fully integrating their existing design and marketing talent, energetically developing high-quality downstream industries. The second is to take advantage of rising labor costs on the Mainland, and the relocation of large numbers of downstream industries. Provide an environment, carefully select industries with the most potential, invite them to Taiwan to merge with upstream and midstream industries, thereby creating an unbroken industrial chain.
President Ma sees the opportunity for SMEs. The Ma administration should swiftly make the necessary preparations, and implement its plans as soon as possible.
【聯合報╱社論】 2010.10.22 0