New Taiwan Leader Throwing Down Gauntlet to Korea

      March 25, 2008 07:23

      The long-established rivalry between Korea and Taiwan is to heat up now both countries are under new pragmatic leaders. Taiwanese president-elect Ma Ying-jeou vowed to overtake South Korea once again in his election campaign. Ma has set forth a "633" pledge -- achieving 6 percent annual growth, increasing per capita income to US$30,000 by 2016, and bringing the unemployment rate to under 3 percent after 2012. It clearly borrows from President Lee Myung-bak's "747" pledge -- 7 percent growth, per capita income of $40,000 in a decade, and making South Korea the world's seventh-largest economy.

      Ma's economic program, however, naturally focuses chiefly on China. He aims to revitalize the Taiwanese economy through close exchanges with China. During President Chen Shui-bian's rule, Taiwan suffered slow annual growth of 3.8 percent on average. Since 2005, Taiwan has been overtaken by South Korea in terms of per capita national income. The Taiwanese blamed themselves for failing to make the most of China, the engine of global economy, resulting in a change of government.

      Taiwan's president-elect Ma Ying-jeou attends a press conference after the presidential election in Taipei, Taiwan on Sunday. /AP

      Ma's program has three core strategies. The first is to take advantage of economic engine China. It envisages maintaining close economic exchanges with China to combine China's capital, market and labor force with Taiwan's advanced technology. To this end, Taiwan plans to launch direct daily flights to the mainland in a year and liberalize personnel and material exchanges across the strait by permitting Chinese money players to invest in Taiwanese stocks, real estate and enterprises. Ma's campaign pledges are so bold that it could be forgotten that Taiwan and China still aim missiles at each other.

      The local press went so far as to call Ma's election the ??third united front?? between the Kuomintang and Chinese Communist Party. If the China effect pays off in Taiwan, it will be information technology that will grab most of the spotlight. In 2007, Taiwan earned 70 percent of its export revenue from IT products. Some 80 percent of IT components for the entire world are produced on the island, which is becoming an ever more formidable rival of Korea.

      It has already overtaken Korea in some sectors, selling a total of $46,951 million worth of semiconductors in 2007, as against Korea's $46 billion. Some 13 Taiwanese firms are included in a list of the world's top 100 IT firms, as compared with South Korea's five. Korean LCD or semiconductor memory firms' competitiveness may drop drastically if their Taiwanese rivals move their technological and production bases to China to win price competitiveness.

      Ma's second strategy is to boost corporate brand image. During his election campaign, Ma pledged to learn from Korean conglomerates' policy to boost brand image. He is determined to overcome Taiwan's lack of strong brands, a lack that is both strength and weakness. Indeed, Taiwanese firms are growing as conglomerates -- Acer has become the world's second-largest laptop computer maker, and Asus and HTC have strengthened their individual strategies to boost their image. Ma believes that Taiwan can produce giant corporate brands at an early date if Chinese capital is combined with Taiwanese government support.

      The third strategy is to emerge as a financial and logistics hub in East Asia. This means inevitable competition for Korea, a country struggling to survive between China and Japan.

      Ma also plans to make it easy to exchange Chinese yuan directly into Taiwan dollars to lure Chinese investment and permit mainland investors to invest in real estate and manufacturing in Taiwan without limits. His idea is to build a "yuan bloc" where the renmimbi is virtually in free circulation.

      Korea is also under threat of losing a large market share if direct flight services are launched between China and Taiwan and China opens its door wide to Taiwanese tourists. Currently, there are a total of 114 flights a week between Korea and Taiwan, most of which are for Chinese and Taiwanese transit travelers. Now they will be able to bypass Korea. It also seems likely that Chinese tourists will prefer Taiwan, where prices are cheaper than in South Korea and communication easier. This will also pose a threat to South Korean tourist industry.

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