Kai-fu Lee Addresses TISA and the Need for Large Markets

Kai-fu Lee Addresses TISA and the Need for Large Markets
China Times editorial (Taipei, Taiwan, Republic of China)
A Translation
November 1, 2013

Summary: Tech sector celebrity Kai-fu Lee is about to undergo chemotherapy. He compared his to the illness that has overtaken Taiwan's high-tech industries. He issued a warning about Taiwan's sick economy, Taiwan's economy must expand outward. In order to do so, it must expand into the Mainland market. Taiwan must recognize reality. It must seize every opportunity to expand outward. Only then can it breath new life into its nearly suffocated economy.

Full text below:

Tech sector celebrity Kai-fu Lee is about to undergo chemotherapy. He compared his to the illness that has overtaken Taiwan's high-tech industries. He issued a warning about Taiwan's sick economy, We wish him a speedy recovery. The high-tech industry is indeed sick. Taiwan's economy is indeed sick. But does the public understand where the problem lies? Does it know whether the sickness is being given proper treatment? Does it know whether the right medicine has been prescribed? We are deeply concerned.

Kai-fu Lee believes that "Taiwan entrepreneurs who hope to found Internet and software empires, must seek large markets." Only large markets will enable one to create large companies. Large markets can be found in the United States, Mainland China, or Southeast Asia, But not on the Taiwan, which is simply too small. "Small markets cannot create large companies." Lee said that when the United States talks about Microsoft, Google, Yahoo, facebook, and Twitter, Taiwan harps on TSMC, Hon Hai or MediaTek. These old line companies are solid companies. But when it comes to innovation, market scale, market listing, international connectedness, and international participation, they have much room for improvement.

Kai-fu Lee was born and raised on Taiwan. He emigrated to the U.S. during high school. He was educated in American universities and attended American graduate schools. He was an executive at Apple, Microsoft, Google and other important companies. He worked at length on Mainland China. He has commented on current affairs and become an influential blogger. His breadth of vision has enabled him to zero in on Taiwan's plight. He has prescribed seven cures for what ails Taiwan. These provide an antidote to what ails Taiwan's business environment. But entrepreneurial problems are not the most urgent ones. First of all, one must have a grand strategy. Only that will enable Taiwan to expand outward. Only that will ensure a healthy business environment. Only that will enable Mr. Lee's cure to take effect. Consider the most serious problem bedeviling Taiwan -- its economy is being suffocated. That is why it cannot expand outward.

We are proud of our high-tech industries because they were able to expand outward. They were able to compete on the international stage. They were able to market their products all over the world. But Taiwan missed the software and cell phone revolutions. We took the expedient route. We blindly pursued cost savings. We created economic efficiency. But in recent years, the U.S. financial crisis and European debt crisis have greatly reduced their purchasing power. Taiwan based desktop computer and laptop manufacturers' profits are now flat. Mobile phone market share has been nibbled away. We are not a player in the new wearable watch phones and glasses phones market. Taiwan has no new large scale investments. Foreign businesses look at the Taiwan market and see paper thin profit margins and uninspired products. They can't wait to pull out. let alone make new investments. Taiwan is now at the bottom of the list of Asian countries in foreign direct investment (FDI).

Taiwan's business model must change. High-tech industries must take on all market sectors, not just the easy ones. Products and services must link up. Can it be done? IBM (International Business Machines) was originally a company that sold machines. It successfully transitioned to a company that sells services. As we can see, high-tech industries alone are not enough to rescue Taiwan's economy. High-tech industries on Taiwan create limited employment opportunities. Taiwan's service sector accounts for 68% of its total output. It provides a large number of jobs. This is consistent with modern economic trends. Therefore Taiwan's service industries must take on this challenge. To thrive they must expand outward.

This is why TISA is so important to Taiwan. In a software and mobile computing era, culture and services are key. E-commerce, information services, games, and the cultural and creative industries are all affected. Taiwan has a limited market -- only 23 million people. For the service sector, this market is even smaller. Only large markets can produce large companies. The Mainland already has two Internet companies worth over 100 billion -- Tencent and Alibaba. Taiwan's Yam and PC Home have not been able to expand outward. Taiwan needs to understand that TISA is a golden opportunity to enter the Mainland market. The Mainland market is vastly larger than the Taiwan market. For Taiwan's service industry this is a huge opportunity. TISA affects these industries. Other industries, including finance, environmental protection, logistics and transportion will also benefit.

Obviously TISA is beneficial to Taiwan. Yet many still oppose it. There are a number of reasons why. They include the Ma administration's poor communication skills, and the fact that it completed negotiations without notifying the legislature. The private sector raised questions. The Speaker and the Legislative Yuan refused to support it. Their attitude became imprinted in the hearts and minds of the public. Relentless sniping by opponents may have been ridiculous. But by then allaying public concerns had already become a Herculean effort. Hence today's predicament.

Taiwan must stop and think. If TISA were renegotiated today, does anyone really believe the terms would be better than they are already? The government assures us there are no national security issues, and that TISA is not a CCP "Trojan horse." Unless one doubts this, how is TISA not a windfall for Taiwan? If we pick TISA apart, if we hedge our bets, half accepting and half rejecting it, we will become an international laughing stock. Further delay will be Taiwan's loss. South Korea and the Mainland will soon sign an FTA. South Korean products will receive preferential tariff treatment in the Mainland market, as will services. Can Taiwan really afford to fritter away this opportunity?

Taiwan's economy must expand outward. In order to do so, it must expand into the Mainland market. Taiwan must recognize reality. It must seize every opportunity to expand outward. Only then can it breath new life into its nearly suffocated economy.

社論－從李開復「大市場」談服貿協議
    2013-11-01 01:37
    中國時報
    本報訊

　科技界名人李開復在接受化療前夕，引自己的病談台灣高科技產業之病，並對台灣經濟的病提出了諍言，我們衷心祝福他早日康復。只是高科技產業的病、台灣經濟的病，社會知道不知道問題所在？有沒有開始治療？能否對症下藥？我們深感疑慮。

　李開復認為，「台灣創業者如果想在網路、軟體領域走出去，一定要找出大市場。」因為大市場才能孵化出大公司，這個大市場可以是美國、大陸或東南亞，只看台灣市場絕對做不大，「小市場不可能成就偉大的公司」。他又說，當美國都在談微軟、谷歌、雅虎、facebook、Twitter時，台灣還是不斷談台積電、鴻海或聯發科。這些老牌公司都是好公司，但若要談創新，在市場規模、上市規則、國際接軌、註冊條款等部分，都有許多改善空間。

　李開復在台灣出生、成長，中學時移民美國，接受美國大學、研究所教育，擔任過蘋果、微軟、谷歌等公司的重要負責人，並在大陸長期工作，因批評時政而成為微博有影響力的大V。眼界之廣，更一語道破台灣的困境。他開給台灣的7帖藥方，的確是台灣創業環境問題的解藥。但就急迫性而言，創業的問題還在其次，如果沒有更大的戰略，更高的格局讓台灣走出去，就不會有好的創業環境，李先生的藥石就罔效。我們先看一下，現在台灣經濟的大問題，就是「悶經濟」，就是走不出去的問題。

　我們引以為傲的高科技產業，是「走出去」的成果，可以在國際舞台上爭奪全世界的訂單，但台灣錯過了軟體、行動的革命。我們吃軟不吃硬，一味在生產上追求成本的節約，也創造效率經濟的表率。可是近年因為美國金融海嘯、歐洲債務危機，其購買力、有效需求都大大減少。加上傳統台灣擅長的桌上型電腦、筆電，都逐漸地被平板、手機蠶食鯨吞，最近新的穿戴型手表手機、眼鏡手機，我們又都沒有份。台灣自己沒有新的大投資，外商看到台灣市場的低利潤，產品又缺乏前瞻性，撤退都來不及了，遑論新的投資。台灣淪為外人直接投資（FDI）在亞洲墊底的國家。

　台灣的商業模式要改弦易轍。高科技業者要軟硬通吃，要將產品與服務連結起來。能不能做到？IBM（國際商業機器公司）就是一個從賣機器，轉型成功到現在是賣服務公司的例子。另外，我們也看到，只靠高科技產業並不足以解救台灣經濟，因為高科技產業，在台灣能夠創造的就業機會相當有限。台灣的服務業已經占整體產值的68％，能夠提供大量就業的其實是服務業。這也完全符合現代經濟發展的軌跡。因此台灣的服務業，要擔當此重任，要成長茁壯，更要走出去。

　準此，服貿協議對台灣就太重要了。在軟體、行動革命的時代，文化、服務就是其關鍵元素，電子商務、資訊服務業，乃至遊戲、文創產業都大大的受其影響。台灣只有2300萬人的市場，以服務業而言更是淺碟子市場，大市場才能孵化出大公司。就像大陸已經有兩家千億起跳的網路公司（騰訊、阿里巴巴），但台灣的蕃薯藤、網家集團（PC Home）卻一直走不出去。台灣應該掌握服貿協議讓台灣進軍大陸的機會。大陸市場規模遠大於台灣，對於台灣服務業來說是個大機會。除了上述產業受影響，在服貿協議中金融、環保、物流與運輸，也是台灣受惠產業。

　明明服貿協議是對台灣有利的，但仍有許多人反對。究其原因，行政單位溝通不良，談判過程沒有事先完整照會立法院，第一時間民間的質疑，立院諸公及國會議長卻不肯表示支持，避之唯恐不及的態度已烙印在人民心中。而後種種的見縫插針及某些反對者的作秀演出，雖然不值識者一笑，但百倍功夫也難化解民眾疑慮，終於造成今天的困境。

　台灣應該靜下心來仔細思考，服貿協議如果重談，是否會談得比現在還好？如果相信政府信誓旦旦的保證沒有國安問題，也不是中共的「屠城木馬」，服貿協議還會不利於台灣嗎？如果服貿協議逐條意見一堆，半接受、半不接受，到時會不會在國際上形成笑話？延宕之下，對台灣是不是損失？韓國即將與中國大陸簽訂FTA，不但貨物商品將獲得關稅優惠，服務業也將長驅直入大陸市場，台灣還可以再蹉跎嗎？

　台灣經濟要走入世界，得先進入中國大陸，台灣要認清現實，抓住可以讓台灣走出去的每一個機會，才能改善悶經濟。