Asia view: Flush Taiwan a goldmine going begging

By VAUGHAN YARWOOD

Prime Minister Helen Clark and a high-powered New Zealand trade delegation are well into a 10-day tour of North Asia, taking in Japan, Hong Kong and China.

This will be followed by an official visit to Korea, but not Taiwan.

New Zealand's adherence to Beijing's One-China policy prevents official dealings with Taiwan, so the Government effects a diplomatic near-sightedness acceptable to the mainland while discreetly doing what it can to foster trade with the breakaway state.

There is, for example, no Trade New Zealand presence in Taipei, but instead something called the Trade Development Unit of the New Zealand Commerce and Industry Office.

Despite such difficulties, the offshore Province of China, as Statistics New Zealand calls it, is this country's ninth largest market, and last year contributed $690 million to export receipts.

Great things are expected of Taiwan when it joins the World Trade Organisation - among admission criteria are the removal of import quota for apples and cuts in duties on milk powder, fish, meat and timber.

But it is as the home of joint-venture partners and component suppliers that Taiwan has great untapped potential, says Bill Watson, executive director of Hwa Shen Associates.

Mr Watson, who in 1997 organised Taiwan's first venture capital forum, says the island is a potential goldmine for New Zealand in terms of strategic alliances.

It is flush with venture capital and has a large number of small family businesses well adapted to short-run manufacturing for international customers. But there are potential barriers. It is not always a simple matter to gain access to the right manufacturer for a strategic alliance or joint venture. Consultants tend to be thin on the ground because, like Chinese elsewhere, the Taiwanese tend not to pay for consultancy services.

After 50 years of separation, the two societies have grown apart.

Many Taiwanese students, unable to secure a place at Taiwan's best universities, take up their studies on the mainland.

But as Taiwan doesn't recognise such qualifications, mainland graduates risk becoming economic outcasts, something Taiwan can't afford.

Many Taiwanese companies lured to the mainland by business concessions and low-wage labour have found it difficult to turn a profit there.

But this trend among big manufacturers continues under pressure to maintain a competitive position.

Computer giant Acer recently shifted its assembly and component-making plants to China and the Philippines, and United Microelectronics is to build a wafer fabrication plant in Singapore.

There is speculation that Formosa Plastic is also planning a factory across the Strait in partnership with a US chemical company.

In the 1990s, Taiwan's edge in high-quality, low-cost manufacturing helped turn computers from a technological marvel into an affordable work tool.

Now, thanks to overseas production, it is about to cut costs in the global telecommunications industry.

Mobile phone companies Ericsson and Motorola are both planning high-volume manufacture in Taiwan, where costs are half those in the Northern Hemisphere.

What Taiwan offers the world's industrial heavyweights, it can also supply in a scaled-down version to New Zealand companies: a focus on competitive, high-quality manufacture, and the will to make alliances and joint ventures work.

For some New Zealand companies, that could spell the difference between success and failure.

* Vaughan Yarwood can be contacted at hiero@ihug.co.nz