Nothing is More Urgent than Improving the Investment Environment

Nothing is More Urgent than Improving the Investment Environment
China Times Editorial (Taipei, Taiwan, ROC) 
A Translation 
June 3, 2016

Executive Summary: For 30 years the Mainland market has been a source of Taiwan's prosperity. In recent years however, that has changed. Many SMEs have been swept out of the Mainland. Worse still, since last year, even large scale enterprises have been losing money and moving out. The government is nurturing “five innovative industries”. But while doing so, it must remember to facilitate investment for all businesses. Only increased investment can create jobs, increase wages, and promote economic growth.

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For 30 years the Mainland market has been a source of Taiwan's prosperity. In recent years however, that has changed. Many SMEs have been swept out of the Mainland. Worse still, since last year, even large scale enterprises have been losing money and moving out.

Six years ago, Guangdong promoted its “empty the cage for a new bird” policy. Coastal provinces followed suit. They reduced export tax rebates, combined taxes, passed a new Labor Contract Law, introduced processing margins, and enforced environmental regulations. Taiwan businesses on the Mainland faced wave upon wave of pressure. The highest concentration of Taiwan businesses is in Dongguan. In recent years hundreds of Taiwan businesses have washed out. Some even “abandoned their plants and fled to Taiwan overnight”. As of last year, over 200 manufacturers closed their doors and left the Mainland in search of greener pastures.

This is not limited to SMEs. In recent years, large enterprise investment in the Mainland has fallen. In the early days the Mainland market was enormously lucrative. Many companies even split off their Mainland divisions and listed them on the exchange separately. Now however, they face powerful operating pressures. Last year for example, TCC and Asia Cement lost money on the Mainland. First quarter estimates indicate a net loss. Baocheng, the world's largest shoe factory, quietly moved its operations to Southeast Asia, Vietnam, and India. Its production capacity there already exceeds that on the Mainland. The percentage of Mainland production continues to fall. Obviously the Mainland is no longer Taiwan's investment paradise. As the new government sees it, the time is ripe for its New Southern Strategy, which has every reason to succeed. As a result, the new DPP government has mobilized the machinery of government and begun a full court press.

Unfortunately, the reality is very different indeed. The new government's approach will only repeat the same mistake that predecessors have made for decades. Taiwan has long sought developing nations offering low cost and loose regulations to set up factories, where environmental regulations, labor rights, and corporate responsibility can be ignored, as long as deals can be struck with the local governments. But as soon as wages rise, incentives are withdrawn, labor rights are enforced, and environmental regulations lead to rising costs, they begin looking for another, even more backward and even lower-cost place to set up shop. This is a "nomadic" investment model that has superficially enabled Taiwan businesses to survive. But in fact these businesses will never be able to grow. Sooner or later they will run out of greener pastures.

Businesses seeking to transform themselves may have invested on the Mainland, returned to Taiwan, or followed the government's "New Southern Strategy” and headed south. But all of them must go down the same path. Should the government or businesses go west or go south? These must be market and business decisions. The government's focus should be on improving Taiwan's investment environment, in order to attract increased investment in Taiwan.

Taiwan businesses have encountered problems on the Mainland. Superficially, the problems are the result of the Mainland economic slowdown, falling demand, rising wages, more stringent labor conditions, higher environmental protection costs, and stricter enforcement of the law, from the central government level to the local.  But the real reason is the transformation and upgrading of the Mainland economy. The Mainland economy has gone from higher volume to higher quality, and from world factory to world marketplace. Taiwan underwent this economic and social shift earlier. Businesses must seize this opportunity to transform and upgrade themselves. Only that constitutes a sustainable business model.

Externally, the new government can of course push its “New Southern Strategy”. But it must not squander capital overselling it. From any perspective, whether international trade or international politics, the benefits are limited. The government's priority should be Taiwan's largest slice of the pie, cross-Strait trade. It must not discourage cross-Strait economic and trade exchanges by political means and force businesses to turn south.

Internally, the new government must do more. It must address the “five shortages” that undermine business investment. These "five shortages" are water shortages, power shortages, job shortages, land shortages, and talent shortages. Even more importantly, it must improve government efficiency. No sooner did the new government assume power, than the EPA announced it would terminate sub-soil mining rights, without even bothering to understand the concerns of other ministries. Its failure to examine the scope and duration of mining rights casts doubt on the government's competence. When Largan Precision sought to increase investment in Taiwan, finding a building site alone took years. When TSMC sought to build in the Central Taiwan Science Park, protests by tree huggers led to long delays. Such situations discourage businesses from investing in Taiwan.

To top it off, businesses face growing anti-business sentiment at home. The general public and social groups oppose investments and development. This also discourages business investment. Formosa Petrochemical, Taiwan's leading domestic petrochemical company, once invested 70 to 80 percent of its capital at home. Now it invests 80 percent of its capital overseas. The reason is relentless criticism from environmental groups, government inefficiency, and insurmountable obstacles to plant expansion. As a result, it was finally driven overseas. The government is nurturing “five innovative industries”. But while doing so, it must remember to facilitate investment for all businesses. Only increased investment can create jobs, increase wages, and promote economic growth.

萬事莫如改善投資環境急
2016年06月04日 中國時報

30年來作為台灣經濟活水的中國大陸市場，近年出現反轉跡象，不少中小企業已被「掃出」大陸，更壞的消息是自去年起，大型企業集團和公司也紛紛出現虧損、遷移現象。

6年前廣東率先推動「騰籠換鳥」政策，沿海各省紛紛效尤，降低出口退稅、兩稅合一及實施新《勞動合同法》，接著又開徵加工保證金、提高環保法規執行力度，大陸台商就此面臨一波又一波的壓力。這幾年台商集中度最高的東莞，幾乎每年都有數百家台商被「洗出」市場，有些甚至被形容是「棄廠連夜逃回台灣」。一直到去年，還是有超過200家廠商結束大陸工廠的經營，離開大陸另覓去處。

不僅中小企業如此，近兩年大型企業的大陸投資也隱然出現反轉。早期大陸市場獲利豐厚，許多企業甚至單獨把大陸投資企業切割上市，但現在已面臨經營壓力。例如去年台泥、亞泥大陸投資都出現虧損，預估今年首季仍難轉為盈餘。全球最大製鞋廠寶成更早幾年就悄然地把生產基地逐步遷移到東南亞，越南、印度工廠的生產比重早已超過大陸廠，且大陸廠的生產比重仍持續下降中。顯然大陸將不再是台商的投資樂土，此時政府啟動新南向政策，應有其利基點，亦有成功的可能性，民進黨新政府啟動政府機器，開始大力宣導推動。

不過，實際情況恐非如此。這種作法其實只是重覆過去數十年台商的一貫作法，找成本低、管制鬆、政治治理不上軌道的國家設廠，什麼環保法規、勞工權益都可唬弄不管，企業責任更不必放在心上，只要打通政府關節即可；待當地的工資上揚、優惠減少，也開始重視勞工權益、環境汙染而導致成本上升後，再去找另一個較落後又成本低廉的地方重新設廠。這是一種類似「逐水草而居」的投資方式，表面上讓這些台商持續生存下來，實質上則是讓這些台商永遠無法提升成長。再往後看，其實這種「水草肥美地區」已所剩無幾了。

因此，對企業而言，生存之道唯有力求升級轉型，不論是在大陸事業的轉型，或是回台加碼在台投資，甚至要追隨政府政策去「新南向」，都必須走此路。至於政府，企業對外投資是要西進還是南向，交給市場與企業決定，政府真正該專注的是台灣投資環境問題的改善，以吸引企業增加在台投資。

由台商在大陸發生的問題來看，表面的因素當然包括：大陸經濟放緩、需求下降、工資上揚、對環保與勞工條件要求不同致成本上揚、從中央到地方政府執行法律較過去更徹底等因素，但深層來看，則是大陸經濟正在轉型提升中，從過去量的增加要轉為質的提升、由世界工廠轉型為世界市場。這種經濟與社會的轉變，其實台灣早年都經歷過，企業更該掌握此機會提升轉型，才是永續經營之道。

至於政府，對外方面，推新南向政策可也，但不必過分強調、花費過多資源，因為不論從經貿或國際政治觀點來看，其效益都有限，政府還是該優先顧好台灣經濟最大的一塊餅：兩岸經貿，而且少用政治手段干擾兩岸經貿往來、強迫推銷企業往南向。

對內方面，政府該做的事更多，也更重要。除了解決困住企業投資的「五缺」（指缺水、缺電、缺工、缺地、缺人）問題外，更重要的是政府效能與治理問題的提升與改善。新政府才上任，環保署就宣布要終止亞泥採礦權，卻未先了解其他相關部會的意見，更未深查其採礦權的範圍與期限等問題，顯然會讓企業對政府的治理有疑慮。再如過去大立光要加碼在台投資，結果單是土地就找了數年，台積電中科投資案的環評，只因環保護樹團體抗議就延宕多時，類似情況都傷害企業的投資意願。

此外，國內日益嚴重的反商、反財團氛圍，社會與各公民團體對企業投資及各種開發案的反對，也嚴重影響企業投資。國內石化龍頭台塑過去投資至少7、8成在國內，但現在已悄然改為8成投資在海外，原因即在長期被環保團體批評，政府行政效率與治理能力亦無法克服其擴廠困難，終而不得不往海外走。政府要扶植五大創新產業時，更別忘了解決所有企業的投資問題，只有更多的投資，才能創造就業機會、提升勞工薪資，並促進經濟成長。