The government of Taiwan launched a policy aimed at increasing trade and investment links with the 10 ASEAN countries in Southeast Asia as well as six South Asian Countries, Australia and New Zealand in September of 2016. The “New Southbound Policy” is a ramped up version of previous southbound initiatives. As we have previously reported, former iterations of the policy under the presidencies of Lee Teng-hui and Chen Shui-bian were primarily aimed at finding cheap manufacturing bases with a cheap supply of labor for Taiwanese businesses, whereas under the leadership of president Tsai Ing-wen, the new policy has widened the scope of the policy in terms of target countries and shifted to a focus on integrating industry innovation and forming an Innovative Growth Partnership.
Although Taiwan is aiming to diversify its trade through the policy, it has a lot of competition in the region, including from China’s One Belt One Road initiatives, which cover many of the same countries, as well large-scale investments from South Korea, Japan and free trade agreements with the countries and regions targeted by the policy. A free trade agreement between Hong Kong and ASEAN is expected to be completed by the end of the year, according to press reports.
In light of this competition, the Taiwanese government has established a database, which traces various variables concerning the target countries from the year 2000 to the present and are updated each month. These are grouped into overall basic indexes, including basic economic indexes and social and environmental indexes, technological innovation indexes and finance and trade relations indexes.
Lien Wen-jung, a research fellow with the Chuang-hua Institute of Economic Research, gave a rundown of the information being collected on each country at a recent conference in Taipei, titled "Outlook for Tech R&D Cooperation with Countries under the New Southbound Policy" (see Figure 1).
Lien also revealed some of the initial findings that the database has contributed to. He stated that Malaysia’s three big technological and innovation indexes all ranked higher than five other New Southbound Policy countries (Thailand, Vietnam, Malaysia, Indonesia, the Philippines and India), especially in terms of access to venture capital funds.
Among the “ASEAN 5” countries (Indonesia, Malaysia, the Philippines, Singapore and Thailand), individual virtual social media use is quite high, suggesting potential for social media-based business model development. However, businesses in the ASEAN 5 and businesses in Taiwan are neck and neck in terms of progress in this sector, and ASEAN businesses have an advantage in understanding Southeast Asian customer preferences, said Lien.
He added that the potential for businesses to innovate is lower in the Philippines, Thailand and Vietnam, but they are advancing fast, while the advantage of Taiwanese businesses is slowly ebbing. Due to improvements in the innovation environment, like improved intellectual property right protection (although their ranking is still lower than Malaysia, Indonesia and India), companies are spending more on R&D there, boosting innovation.
With the exception of Malaysia, the influence of ICT on service-based industries such as medicine, education and finance, is low and technology and equipment used in these regulated industries are tied to government acquisitions and support. Lien suggested that, on this basis, Taiwanese companies that want to unroll ICT-based technological applications in these countries should target those countries in which government acquisitions of advanced technology are rated more highly, such as Indonesia and Vietnam. Thailand, Indonesia and the Philippines are rated the highest among the ASEAN 4 in terms of application of the latest technology, but all fell short of their 2012 index, whereas Vietnam has made significant progress in this category, with its ranking rising from 3.6 in 2012 to 4.1 in 2016.
Thailand, the Philippines and Vietnam’s “Industry-academia cooperation level” ratings are all relatively low, the reason for which is the relatively low caliber of the research institutes and R&D output by companies, along with the lower levels in mathematics and science education quality and deployment of scientists and engineers, according to the data Lien provided. This suggests that industry academia cooperation would be challenging there.【Unfinished; For Further Reading: IP Observer 017: Can Taiwan's New Southbound Policy Compete?】
Taiwan's Lack of University Business Model Stands in the Way of Silicon Valley Dreams: ASVDA CIO
Conor Stuart／IP Observer
Taiwan lacks a business model to enable something similar to the innovation relationship between Stanford University and Silicon Valley, according to David Weng, the chief investment officer of the Asia Silicon Valley Development Agency (ASVDA).
He made the comments in response to an audience question at the ‘Industry and Innovation: Policy in the Era of Digitalization’ conference in Taipei, asking him to evaluate innovation readiness in Taiwanese universities. Other discussants at the forum suggested that academia-industry dynamics in which there is a hand-off involved don’t generally work and that a core team or personality must follow an idea from R&D to commercialization for an idea to succeed. Regulations often stand in the way of this happening in Taiwan, in that there are obstacles to professors launching companies.
ASVDA is aimed at optimizing Taiwan’s startup and entrepreneurship ecosystem. It realizes this goal by lobbying for and implementing change in four main areas: capital, talent, regulations and innovation bases. In terms of capital he drew attention to several initiatives, including the Industrial Innovation and Transformation Fund of NT$100 billion (US$3.3 billion), a national investment company which is set to raise NT$10 billion (US$332 million) in an angel investor program, which will raise NT$1 billion (US$33 million), as well as another fund for startups, founded by the Taiwan Stock Exchange, which will raise another NT$270 million. In terms of improving Taiwan’s ability to cultivate, retain and attract talent, he referred to efforts such as the draft foreign talent act, which could be approved as soon as September of this year, the Taiwan Entrepreneur visa, and programs for talent connection with Silicon Valley. In terms of regulations, as well as a general relaxation in laws and regulations, he pointed to efforts to raise funding and encourage venture capital and angel investors to invest in high-risk startups by offering tax concessions and other incentives, as well as the prioritization of regulations allowing for implementation and experimentation with FinTech, and those allowing scholars to engage in business operations. In terms of innovation bases, start-up hubs have been established in Taipei, Taichung and Kaohsiung, and there are plans to construct innovative test beds for AR/VR experience and applications and demonstration AR and VR experiences were also featured at this year’s Taipei Computex.
Taiwanese industries need to work on creating a user-centric ecosystem to expedite innovation scale up, according to Stephen Su, general director of the ITRI Industrial Economics and Knowledge Center (See Figure 2). China has been more successful in this goal than Taiwanese companies and if Alibaba were listed on the figure below it would likely occupy a similar area to Amazon or Google.
He traced two distinct models in Taiwan, the first is the so-called “MediaTek” route, pursuing innovation first then scaling up, vs the “TSMC” route, pursuing scale first and then trying to pursue innovation. Both essentially need to move towards user ecosystems and global markets (See Figure 3).
He pointed to the five innovation initiatives launched by the Tsai Ing-wen government: smart machinery, Asia Silicon Valley, green energy, national defense and biotech and pharmaceuticals, along with the more recent additions to these proposals, including the circular economy and new agriculture, the digital economy, technology for culture and IC design and semiconductors.
He also outlined the six key strategies of the digital nation strategy (2017-2025)
Infrastructure for digital innovation
Talents and skills for innovation
Digital transformation for industries
Human rights in open internet and digital society
Smart cities with public-private sectors
Digital services and globalization
During the discussion panel segment of the conference, David Maa, general manager of Industry 4.0 Division of the Fair Friend Group, suggested the difficulty different industries have in communicating or cooperating, even in the same country, not to mention across international borders. Professor Hirofumi Aoki, who gave a presentation on how smart technology is being used in elderly care in Japan, stated that companies are often uncomfortable with parting with what they feel is, at times, proprietary information, but that they have to do so to enable this technology to take off.
Eric Anderson, vice president of product creation at Foxconn in Taiwan, stated that the reason that IOT and smart home technology have yet to really take off is the lack of a “fun factor”. The ideas may be good but they’re not sexy enough to create the buzz that mobile phones were able to create. He stated that standard setting can create a platform which will allow these technologies to take off. There is also a trouble in convincing consumers that it’s worth making the change – wearables have not yet gotten to the point where they convince consumers. In terms of IOT and Smart Homes he pointed to the fragmentation of the solutions and the incompatibility of software. He suggested that IOT and Smart home technology should be aiming for applications that are more frequently used or always on and are aimed at self-actualization rather than just survival in order to capture imaginations. He pointed to the examples of Air BNB and Uber in their efforts to make use of existing resources in the city.