industrial policy forum in nicaragua economic development and policy measures and the participation...
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Industrial Policy Forum in Industrial Policy Forum in NicaraguaNicaragua
Economic Development and Economic Development and Policy MeasuresPolicy Measures and the and the
Participation of SMEs in the Participation of SMEs in the Development of TaiwanDevelopment of Taiwan
Jiann-Chyuan Wang
Chung-Hua Institution for Economic Research
November 14-15, 2007
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I. Taiwan’s Basic Facts and Global TradeII. The Influential Factors behind Taiwan’s Economic
DevelopmentIII. Two Key Development Strategies for Taiwan’s
Economic DevelopmentIV. Policy Measures in Different Stages of Taiwan’s
Economic Development V. The reasons for the emergence of SMEs in TaiwanVI. The role of SMEs in Taiwan’s economic development
after the 1980sVII. Policy measures for creating a favorable environment
for SMEsVIII.The Guidance Programs for SMEsIX. Concluding Remarks
OutlineOutline
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I. Taiwan’s Basic Facts, Global Trade and I. Taiwan’s Basic Facts, Global Trade and InvestmentInvestment
1. Basic Facts1. Basic Facts
Population 22.79 million
GDP $374.26 billion (20th)
Per capital GNP $16,471
Total trade value $426.7 billion
Exports $224.0 billion
Imports $202.7 billion
Foreign exchange reserves $266.1 billion
Manufacturing output/GDP 23.0%
Service output/GDP 71.7%
Table 1 An Outline of Taiwan’s Economic Growth (2006)
Sources: Taiwan Statistical Data Book, CEPD, 2007.
Unit: US dollars
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2.Global Trade and Investment
USA,14.40%
Japan,7.30%
ASEAN,11.40%
Europe,12.60%
Others,14.50% China,
HongKong andMacau,39.80%
Fig.1 Taiwan’s destination of exports (2006) Fig.2 Taiwan’s sources of imports (2006)
$ 224.02 billion US dollars $ 202.69 billion US dollars
Japan,22.80%
ASEAN,11.10%
Europe,Korea,
Australia,27.30%
Others,14.50%
USA,11.20%
China,Hong
Kong andMacau,13.10%
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Fig.3 Taiwan’s exports structure Fig.4 Taiwan’s imports structure
capitalequipment,
17.00%
Consumerproducts,7.60%
Agriculture,Industrial and
materials,75.40%
Agriculture(processed)
products,1.00%
non-heavy &chemicalproducts,21.10%
heavy &chemicalproducts,77.90%
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Capitalist Economy (Protection of private property, respects of market mechanism)
Infrastructural provision from Japanese Governance age. (railway, electric power, seaport)
Land reform in 1950s promoted agricultural productivity (farmer income ↑→ demand for industrial products ↑→ release surplus labor to assist industrial sector)
Industrial policy followed comparative advantage
1. Literature Review1. Literature Review
II. The Influential Factors between Taiwan’s II. The Influential Factors between Taiwan’s Economic DevelopmentEconomic Development
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US Aid in 1951 － 1965
High saving rate (saving/GDP = 38%) provided sufficient capital for economic development
Fixed exchange rate (until 1979) facilitated international trade
High level of educational investment
Fair income distribution
Fast growth for global economy (1950-1970) created a favorable environment for Taiwan’s expert-oriented economic strategy.
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Moderate public finance policy (government saving > government expenditure)
The promotion of state-owned enterprises and natural division of labor with SMEs
Providing tax incentives for strategic industry but did not become government financial burden
2. Special features of Taiwan’s Economic2. Special features of Taiwan’s Economic Development Development
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Impose high tariff and import restriction to
promote infant industry
Keep interest rate low to provide low cost of
investment for firms, even under inflationary
pressure.
III. Key development strategy for Taiwan’s III. Key development strategy for Taiwan’s Economic DevelopmentEconomic Development
1. Conventional wisdom: development strategy 1. Conventional wisdom: development strategy
in 1950s-1960sin 1950s-1960s
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Import substitution strategy ⇒ export-oriented strategy
N.T depreciation (US $1 = 15 N.T → 40 N.T)
depreciation ⇒ inflation ( import restriction)∵ depreciation main exports from sugar, rice to ⇒ labor-intensive products
(umbrella, shoes, agricultural
processing products etc.)
High interest rate to encourage saving, which become productive capital for firms and major force for anti-inflation
2. Taiwan’s non-mainstream development strategy2. Taiwan’s non-mainstream development strategy
1960
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Table 2 Taiwan’s trade structure
Exports
Year Agriculture products Industrial products
1952 91.9% 8.1%
1960 67.7% 32.3%
1970 21.4% 78.6%
1980 9.2% 90.8%
1990 4.5% 95.5%
2000 1.4% 98.6%
2004 1.4% 98.6%
Sources: same as Table 1.
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Table 3 Structure of Production (% of GDP by Sector)
Period Agriculture Industry Manufacturing Services
1952 32.2 19.7 12.9 48.1
1960 28.5 26.9 19.1 44.6
1970 15.5 36.8 29.2 47.7
1980 7.7 45.7 36.0 46.6
1990 4.2 41.2 33.3 54.6
2000 2.1 32.4 26.4 65.5
2004 1.7 32.9 28.0 65.4
Sources: same as Table 1.
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Exchange rate depreciation and trade
liberalization pushed labors from land-
intensive agriculture industry to labor-
intensive export industry
(MPL↑→ Wage↑)
Discard low interest rate policy to prevent
capital-intensive production method →
employment ↑ → income ↑
Abundant SMEs provide more job opportunity
3. The reasons why Taiwan’s could pursue economic 3. The reasons why Taiwan’s could pursue economic development and fair income distribution:development and fair income distribution:
14Fig. 5 Taiwan’s economic development stages and related policy measures
1950 196253 1980
Labor-intensive Light Industry: Import
substitution Stage
Export-oriented Stage Import substitution stage
High interest rate policy
54 56 60
Exports tax refund
Unify exchange rate
Statute for Investment Encouragement
US Aid stop Loosen import restriction
Set up export-processing zone
Setup Tax reform committee
High interest rate to curb inflation
Implement 9 year obligatory education
Promote family plan for reducing birth rate
Implementation of National Science Development Plan
Establish ITRI
Establish Science Park
65 66 67 68 69 70 71 72 73
Industrial and Labor Policy
Science and Technology policy
Financial policy
Exchange rate policy
IV. Policy Measures in Different Stages of Taiwan’s IV. Policy Measures in Different Stages of Taiwan’s Economic DevelopmentEconomic Development
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1980 82 94 200289 96 97
Technology-oriented Stage
Enact Labor standard law
Expand Science Park
84 86 87
Implement health insurance
Implement the incentives for strategic industry
Develop ten promising industry and eight key technology;Implement statute for Industrial upgrading
Promote privatization of state-owned enterprises
Promote the promising industry
91 98
N.T appreciation
Promote interest rate liberalization
Implement Fair Trade Law
6-year National Development Plan
Admitted to WTO
Setup 15 new private banks
Setup NII promotion committee
95
Industrial and Labor Policy
Science and Technology policy
Financial policy
Exchange rate policy
Fig. 5 Taiwan’s economic development stages and related policy measures
16Fig. 5 Taiwan’s economic development stages and related policy measures
2002 2007
Globalization Stage
03 04 05 06
Industrial and Labor Policy
Science and Technology policy
Financial policy
Exchange rate policy
Cheap land price provision 006688
Conservative Mainland China policy Promote cultural
creative industry
Two Trillion Twin Star
Military Service
exemptionFinancial reform
Low interer rate, devalue currency
Sino-Panama FTA
WiMax technology
DrugsBio-tech New
prags Act
Layout vision for 2015
Antitrust policy to avoid dumping
SMEs, low incomes
protection
Free Trade Port Area
Guideline for Service Industry
Regional operation center promotion
Enlarge Science Park
Extend SIUP
U-Taiwan infrastructural
17
V. The reasons for the emergence of SMEs in V. The reasons for the emergence of SMEs in TaiwanTaiwan
The special characteristics of Taiwan’s SMEs: The special characteristics of Taiwan’s SMEs:
1.1. The kinship structure of SMEs provides start-up The kinship structure of SMEs provides start-up capital and required manpower. capital and required manpower.
2.2. Policy design created a fair and competitive Policy design created a fair and competitive environment for SMEs environment for SMEs
• State-owned enterprises assumed the role of supplying raw and intermediate materials in stable quantities and at reasonable prices to down-stream export-oriented SMEs.
• The government applied industrial policies with a high degree of flexibility and self-restrained.
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• A favorable macroeconomic environment and self-restrained industrial policies were market friendly and the key to foster Taiwan’s SMEs.
3.3. The subcontracting system among SMEs helped them The subcontracting system among SMEs helped them compete effectively with large enterprises and among compete effectively with large enterprises and among themselves. themselves.
• before the 1980s Taiwan’s subcontracting system before the 1980s Taiwan’s subcontracting system existed basically only among SMEs with only a few existed basically only among SMEs with only a few existing between SMEs and large enterprises. existing between SMEs and large enterprises.
• The intra-firm flexibility of SMEs in adopting existing technology and the inter-firm flexibility of SMEs in exchanging information and handling OEM or trading contracts helps Taiwan’s SMEs compete effectively with their larger counterparts.
19
4.4. The absorption-type export-oriented network The absorption-type export-oriented network allows SMEs to engage in exports without being allows SMEs to engage in exports without being subordinated to large enterprises.subordinated to large enterprises.
• The sophisticated network existing among SMEs, subcontractors and local small trading companies. Subcontractors allow SMEs to operate efficiently and flexibly, providing medium quality products at reasonable prices.
• Local small trading companies help SMEs to engage in foreign trade transactions, allowing them to assume a production role and escape scale constraints in international marketing.
20
5.5. Low threshold entry and exit costs facilitate the Low threshold entry and exit costs facilitate the rapid transfer of resources from less efficient to rapid transfer of resources from less efficient to more efficient producers, which makes a significant more efficient producers, which makes a significant positive contribution to industrial productivity positive contribution to industrial productivity growth. growth.
• A dense network of firms specializing in subcontracting and trading services lowers the start-up costs of new manufacturing firms. Moreover, in Taiwan’s legal system, it is easier for firms to file for bankruptcy, thereby facilitating the exit of inefficient firms.
21
6. Government should collaborate with civic 6. Government should collaborate with civic organizations to establish organizations for the organizations to establish organizations for the promotion of foreign trade and which could conduct promotion of foreign trade and which could conduct market research both domestic and overseas, thereby market research both domestic and overseas, thereby helping companies to gain a better understanding of helping companies to gain a better understanding of international markets and to move into those markets international markets and to move into those markets successfully. successfully.
Markets are the most important element in exporting. The small size companies makes it impossible for them to collect market information on their own, and consequently they often lose business opportunities. Private companies still need help from the government in the collection of information about international markets if they are to overcome the obstacles in their way. At the same time, government purchasing can help companies to achieve steady development within a stable market.
22
7. Keep exchange rate stable to promote saving, and turn 7. Keep exchange rate stable to promote saving, and turn saving into productive capital.saving into productive capital.
in Taiwan’s experience, stable exchange rate, reasonable interest rate, and controllable inflation rate encouraged people to deposit money into bank, which could provide abundant capital for economic development.
23
8. Provide start-up capital but coupled with own 8. Provide start-up capital but coupled with own capital and management assistance to raise capital and management assistance to raise successful rate (Taiwan’s Ten Guidance successful rate (Taiwan’s Ten Guidance Programs).Programs).
9. Create a favorable environment for SMEs 9. Create a favorable environment for SMEs without being crowded out resources by large without being crowded out resources by large enterprises. (part of government procurement enterprises. (part of government procurement designed for SMEs but without violating WTO designed for SMEs but without violating WTO principle).principle).
24
VI. The role of SMEs in Taiwan’s VI. The role of SMEs in Taiwan’s economic development after the 1980seconomic development after the 1980s
1.1. Definition of SMEsDefinition of SMEs
Country/ Region Industry No. of Employees Annual Sales Revenue Capitalization Other Manufacturing, construction, and mining and quarrying
200 or NT$80 million Taiwan
Other industries 50 or NT$100 million Australia 200 Canada 500
Manufacturing sector 100 Hong Kong
Non-manufacturing sector 50
Other sectors 300 or 300 million Yen Applies to sole proprietorships with 300 or fewer employees.
Wholesaling sector 100 or 100 million Yen Service sector 100 or 50 million Yen
Japan
Retail sector 50 or 50 million Yen
Manufacturing 150 or 25 million Ringgit Malaysia
Services 50 or 5 million Ringgit Mexico 500 New Zealand 19
The Philippines
200 or 60 million Pesos
(total assets)
Russia No clear definition Services 200
Singapore Manufacturing Fixed assets worth 15 million Singapore Dollars or less
Manufacturing 300 or 8 billion Won Mining, construction and transportation
300 or 3 billion Won
Large wholesalers, hotels, and information processing companies
300 or 30 billion Won
Seedling cultivation, broadcasting, fisheries, and energy
200 or 20 billion Won
Wholesaling, telemarketing, leasing, communications equipment sales, and entertainment
100 or 10 billion Won
South Korea
Other 5 billion Won Manufacturing and services 200 or 200 million Baht Wholesaling 50 or 100 million Baht Thailand Retailing 30 or 60 million Baht
UK 250 Manufacturing 500 Wholesaling 100 Retailing Average annual
operating revenue of less than US$6 million
Services Average annual operating revenue of less than US$6 million
USA
Construction Average annual operating revenue of less than US$28.5 million
Table 4 The Definition of SMEs Used in Different Countries and Regions
25
Country/ Region Industry No. of Employees Annual Sales Revenue Capitalization Other Manufacturing 300 or 8 billion Won Mining, construction and transportation
300 or 3 billion Won
Large wholesalers, hotels, and information processing companies
300 or 30 billion Won
Seedling cultivation, broadcasting, fisheries, and energy
200 or 20 billion Won
Wholesaling, telemarketing, leasing, communications equipment sales, and entertainment
100 or 10 billion Won
South Korea
Other 5 billion Won Manufacturing and services 200 or 200 million Baht Wholesaling 50 or 100 million Baht Thailand Retailing 30 or 60 million Baht
UK 250 Manufacturing 500 Wholesaling 100 Retailing Average annual
operating revenue of less than US$6 million
Services Average annual operating revenue of less than US$6 million
USA
Construction Average annual operating revenue of less than US$28.5 million
Sources: Taiwan: White Paper on Small and Medium Enterprises in Taiwan, consecutive years
Australia: Department of Industry, Tourism and Resources, /www.industry.gov.au/Canada: Department of Industry, /strategis.ic.gc.ca/Hong Kong: Support and Consultation Centre of SMEs, /www.sme.gcn.gov.hk/Japan: Small and Medium Enterprise Agency, /www.chusho.meti..go.jp/Malaysia: Small and Medium Industries Development Corporation, /www.smidec.gov.my/Mexico: OECD Small and Medium Enterprise Outlook 2002New Zealand: Statistics New Zealand, /www2.stats.govt.nz/Philippines: National Statistics Office, /www.census.gov.ph/Russia: Russian SME Resource Centre, /docs.rcsme.ru/Singapore: Ministry of Trade and Industry, /www.mti.gov.sg/South Korea: Small and Medium Business Administration, /www.smba.go.kr/Thailand: Office of SMEs PromotionUK: Department of Trade and Industry, www.sbs.gov.uk/ USA: Office of Advocacy, Small Business Administration, /www.sba.gov/advo/
26
2. The Number of SMEs in Taiwan Has Increased 2. The Number of SMEs in Taiwan Has Increased Gradually Over TimeGradually Over Time
Figure 6 The Number of SMEs in Taiwan, and SMEs’ Share of All Enterprises, 1981 – 2006
98.67
98.57
98.34
98.49
98.15
97.60
97.72
97.39
97.16
97.05
96.77
96.49
96.26
97.97
97.95
97.81
97.76
97.73
98.08
98.18
97.72
97.83
97.73
97.80
97.77
600
700
800
900
1,000
1,100
1,200
1,30019
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
06
Thou
sand
enter
prise
s
88
90
92
94
96
98
100
%
Source: Small and Medium Enterprise Administration, White Paper on Small and Medium Enterprises in Taiwan, consecutive years.
27
3. Enterprises with Capitalization of Less than 3. Enterprises with Capitalization of Less than NT$100,000 Account for the Largest Share of NT$100,000 Account for the Largest Share of EnterprisesEnterprises
28
4. SMEs’ Sales Have Increased over the Years, but 4. SMEs’ Sales Have Increased over the Years, but Their Share of Total Sales Has Been Falling SlowlyTheir Share of Total Sales Has Been Falling Slowly
Figure 7 SMEs’ Annual Sales and Their Share of Total Sales for All Enterprises, 1986 – 2006
29.84
29.4631.47
30.6029.51
28.38
28.98
28.95
30.36
32.11
34.29
35.97
32.2033.87
33.66
34.34
34.15
33.32
36.8738.99
40.28
0
2,000
4,000
6,000
8,000
10,000
12,00019
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
06
NT$ b
illion
20
25
30
35
40
45
%
Source: Small and Medium Enterprise Administration, White Paper on Small and Medium Enterprises in Taiwan, consecutive years.
29
5.5. A Slight Increase in SMEs’ Export Sales A Slight Increase in SMEs’ Export Sales
6. The Number of SMEs That Have Been Established 6. The Number of SMEs That Have Been Established for Five Years or Less Has Been Falling Gradually for Five Years or Less Has Been Falling Gradually
Figure 8 SMEs’ Export Sales and Share of Total Export Sales for All Enterprises, 1997 – 2006
Source: Small and Medium Enterprise Administration, White Paper on Small and Medium Enterprises in Taiwan, consecutive years.
17.8917.6016.91
18.1119.28
20.6520.0321.11
23.79
26.42
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
NT$
bill
ion
10
15
20
25
30
%
30
Table 5 Trends in SME Age, 1995 – 2006
Enterprise Age
Year Less
than 1 year 1 – 2
years 2 – 3
years 3 – 4
years 4 – 5
years 5 –
10 years 10 –
20 years
20 years or
more
1995 10.15 10.31 8.77 8.40 6.28 20.66 26.58 8.84
1996 9.30 10.02 8.47 7.36 7.24 20.72 27.26 9.63
1997 10.19 8.91 8.09 7.02 6.25 21.62 24.80 13.11
1998 9.94 9.77 7.23 6.83 6.03 21.68 24.31 14.22
1999 9.50 9.61 7.93 6.09 5.92 22.06 23.91 15.00
2000 9.04 9.27 7.86 6.72 5.30 22.57 23.58 15.66
2001 8.79 8.68 7.60 6.69 5.85 21.89 24.17 16.33
2002 8.28 8.51 7.01 6.39 5.78 21.16 25.26 17.61
2003 9.30 9.40 7.41 5.97 5.15 20.57 23.97 18.23
2004 10.17 8.79 7.73 6.32 5.18 19.83 23.71 18.28
2005 10.22 8.81 7.75 6.37 5.19 19.83 23.63 18.20
2006 8.71 9.69 7.35 6.69 5.64 19.87 23.32 18.73
Note: Data of Lienchiang County, a small offshore island, are included in the calculation since 2005.Source: Ministry of Finance, Tax Data Center, VAT data (consecutive years).
31
7. Around One-third of Enterprises in Taiwan are 7. Around One-third of Enterprises in Taiwan are
Owned by Women; Female-owned Enterprises Owned by Women; Female-owned Enterprises Account for 13.95% of the Total Sales for All Account for 13.95% of the Total Sales for All EnterprisesEnterprises
8. Female-owned Enterprises Are More Oriented 8. Female-owned Enterprises Are More Oriented Towards the Domestic MarketTowards the Domestic Market
9. Eight Leading Banks Provided a Particularly 9. Eight Leading Banks Provided a Particularly Large Amount of Financing to SMEsLarge Amount of Financing to SMEs
32
10. The indirect financing for SMEs has been 10. The indirect financing for SMEs has been steadily decreasingsteadily decreasing
Figure 9 Share of Total Financing Held by Direct and Indirect Financing, 1993 – 2006
75.4174.3574.0673.8276.3777.6178.3279.6680.6883.2785.8887.4489.1090.15
24.5925.6525.9426.1823.6322.3921.6820.3419.3216.7314.1212.5610.909.85
0
20
40
60
80
100
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
％
Indirect financing Direct financing
Source: Central Bank, ROC.
33
VII. Policy measures for creating a favorable VII. Policy measures for creating a favorable environment for SMEsenvironment for SMEs
Firms
•Strat-up capital
•Entreprenurship
•Skill (technology)
•Market
34
Government (supply / demand / environment)
•Supply side measures: directly influences technology supply through provision of such factors as financial resources, manpower and technology know-how.
•Demand side measures: demand-side tools government to provide stable market demand through contract research, and to use government procurement programs to guide the direction of technological development.
•Environmental side measures: government can create a favorable economic climate to indirectly influence firms’ innovative activities through tax incentive schemes, patent protection and other regulations.
35
Source: Summarized form Rothwell and Zegveld (1981), Chen (1986), and Sun (1989)
Policy Measures
Supply-side Policy Measures
Demand-side Policy Measures
(1) Financial Assistance
(2) Manpower Assistance
(3) Technical Assistance
Environmental-side Policy Measures
(c)Venture Capita……………….Bank of Communication, Ministry of Finance
(b)Training…………………… Council of Labor Affairs
(c)National Science and Technology Project (NSTPS) ………Bureau of Technology
(a)Contract Research…………………………………....National Science Council
(f)Industrial Automation………………………………National Information and Communication Initiative (NICI)
(a)Subsidies…………………….Industrial Development Bureau (IDB)
(b)Loans………………………...Bank of Communication, Medium and Small Enterprise Bank
(a)Education…………………..Universities
(a)Technical Assistance…………………………….SMEA, IDB (MOEA)
(b)Government-Owned Research Institutes………..Industrial Technology Research Institute (ITRI)
(b)Government Procurement……………………………Government Institutions, State-owned Enterprises
(a)Tax Incentives……………………………………….IDB, Ministry of Finance
(b)Patent & Intellectual Property Rights……………….Ministry of Economic Affairs
(c)Science Park…………………………………………National Science Council
(d)Incubator Center……………………………………. Medium and Small Enterprises Bureau
(e)Open Laboratory …………………………………...ITRI
Fig. 10 Taiwan’s Innovation Policy Measures and Responsible Agencies
36
VIII. The Guidance Programs for SMEs in TaiwanVIII. The Guidance Programs for SMEs in Taiwan
1. Ten Guidance system for assisting SMEs1) Finance and credit guidance system:
Primary tasks include providing credit instruction and assisting small and medium enterprises in improving their financial structures.
2) Management guidance system:
Primary tasks include instructing and assisting small and medium enterprises in setting up management systems and boosting management efficiency and the development of human resources.
37
3) Production technology guidance system:
Primary tasks include guiding and assisting small and medium enterprises in boosting technology levels and adopting new technologies.
4) Research and development guidance system:
Primary tasks include assisting in the development of new products and technologies and supporting the individual or joint R&D efforts of small and medium enterprises.
38
5) Information management guidance system:
Primary tasks include guiding and assisting small and medium enterprises in the collection of information and the establishment of information management systems to enhance efficiency through the utilization of information.
6) Industrial safety guidance system:
Primary tasks include providing guidance to small and medium enterprises in establishing or improving industrial safety systems and assisting in the resolution of industrial safety problems.
39
7) Pollution control guidance system:
Primary tasks include providing guidance to small and medium enterprises in improving pollution control facilities and assisting in the resolution of pollution control difficulties.
8) Marketing guidance system:
Primary tasks include assisting small and medium enterprises in market expansion by collecting and providing necessary market intelligence.
40
9) Mutual support and cooperation guidance system:
Primary tasks include guiding and assisting small and medium enterprises in conducting exchanges and cooperation activities in order to bolster their competitive ability.
10) Quality enhancement guidance system:
Primary tasks include assisting small and medium enterprises in creating a management environment of outstanding quality, raising levels of product and service quality in the enterprises, and promoting joint quality improvement efforts among enterprises.
41
2. Some Specific Programs for SMEs2. Some Specific Programs for SMEs
SMEs credit guarantee fund (SMBCGF)
The objective of the system is to provide credit guarantees to small and medium enterprises which are promising but short of collateral necessary to obtain finance from contracted financial institutions(CFI).
42
Outline of Credit Guarantee System Outline of Credit Guarantee System Relations among SMBCGF and related Relations among SMBCGF and related
institutionsinstitutions
43
•Definition: Incubator Centers are a place where individuals or enterprises are allowed to incubate new products, mew businesses and new technology, to start up a new business and to conduct enterprises transformation and upgrade.
•Functions: 1. Reduce risk and expenditure involved in incubating anew business, improve success rates.
2. Assist in the process of industrial incubationprojects and the development of new technology/products.
3. Provide guidance in commercializing R&D results. 4. Provide a location where academics and industry
can work together. 5. Provide testing services, speed up product
development 6. Provide training for personnel, related information
and consulting services for operation management.
• Effectiveness: 60 incubators, 1,300 firms (since 1997)
3. SMEs incubator center3. SMEs incubator center
44
4. Encouragement programs
In order to encourage firms to pursue for quality, technology excellence, government implements several programs as follows.
•National Award of Small and Medium Enterprises － Management, upgrading technology
•National Award for Innovation － R&D, technology upgrading, product quality improvement etc.
•Little Giant Award － excellent export and management performance
45
IX. Concluding RemarksIX. Concluding Remarks
1. The maintenance of political and social stability,1. The maintenance of political and social stability, timely implementation of effective policies, and timely implementation of effective policies, and vigorous private entrepreneurship stand out as key vigorous private entrepreneurship stand out as key factors in Taiwan experience. factors in Taiwan experience.
2. Consider adopting export-oriented development 2. Consider adopting export-oriented development strategy and selecting a group of strategic industries strategy and selecting a group of strategic industries on which the government would concentrate its on which the government would concentrate its resources to promote their development resources to promote their development
46
In Taiwan’s experience, to avoid lack of focus, the government selected a group of strategic industries with significant potential and should concentrate its resources on these industries, in order to achieve economies of scale and international competitiveness. It was not until the government began to concentrate resources on textiles and a handful of other industries that it was able to increase output and achieve economies of scale and competitiveness. If a country adopted this strategy and succeeded in achieving a breakthrough, this would have a “demonstration effect”, and would encourage multinational enterprises to invest in that country.
47
3. to provide “one-stop” service to attract foreign 3. to provide “one-stop” service to attract foreign investment.investment.
Some developing countries are relatively late starter in seeking to attract foreign investment, so it needs to provide incentive measures and administrative assistance that are better than what other countries have to offer. Besides tax breaks, “one-stop” service, transparency, making it easy to obtain land for factories, establishing industrial parks and other ancillary measures are all very important. Currently, provide tailor-made incentive measures for big companies, to reduce the level of uncertainty accompanying investment. In this way they would be able to attract up, mid and downstream industries, creating a cluster effect.
48
4. Government should collaborate with civic 4. Government should collaborate with civic organizations to establish organizations for the organizations to establish organizations for the promotion of foreign trade and which could conduct promotion of foreign trade and which could conduct market research both domestic and overseas, thereby market research both domestic and overseas, thereby helping companies to gain a better understanding of helping companies to gain a better understanding of international markets and to move into those markets international markets and to move into those markets successfully. successfully.
Markets are the most important element in exporting. The small size companies makes it impossible for them to collect market information on their own, and consequently they often lose business opportunities. Private companies still need help from the government in the collection of information about international markets if they are to overcome the obstacles in their way. At the same time, government purchasing can help companies to achieve steady development within a stable market.
49
5. Keep exchange rate stable to promote saving, and 5. Keep exchange rate stable to promote saving, and turn saving into productive capital.turn saving into productive capital.
6. Provide start-up capital but coupled with own 6. Provide start-up capital but coupled with own capital and management assistance to raise capital and management assistance to raise successful rate.successful rate.
7. Create a favorable environment for SMEs 7. Create a favorable environment for SMEs without being crowded out resources by large without being crowded out resources by large enterprises. (government procurement, alliance enterprises. (government procurement, alliance etc.)etc.)
50
Thank You !