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Create a global service industry

  • By Lin Chia-lung 林佳龍

Over the past 30 years, globalization has given way to an international division of labor, with developing countries focusing on manufacturing for export, while developed countries in Europe and the United States focus on the internationalization of service industries to stimulate economic growth.

The competitive advantages of these countries are easily visible in the global financial market. For example, Taiwan has generated a lot of global interest with its technology industry. The United States is home to major digital services companies, such as Meta Platforms (Facebook), Alphabet (Google), and Microsoft. The country holds a quasi-oligopoly of the global consumer digital services market and is the big winner of the network effect. Meanwhile, Germany, Japan and South Korea not only export manufactured goods, but also services, which are the two engines of economic growth.

Acer founder Stan Shih (施振榮) has repeatedly called on Taiwan to promote the internationalization of its service industry, believing that the international market holds a thousand times more opportunities, because the service industry occupies a major in the industrial structure of countries around the world and provides more value-added opportunities.

However, Shih also said that internationalizing the service industry is 100 times more difficult than promoting manufacturing for export, not only because innovation in services is more difficult, but also because it requires more resources. This is what Taiwan needs to constantly review when promoting its new southbound digital policy.

Taiwan’s digital and software technology is catching up with hardware development. With machine vision, for example, optical technology would have been at the center of the previous approach when hardware development took precedence, but now, with back-end machine learning AI, tasks can still be performed without frequent hardware upgrades, improving cost competitiveness and creating added value for customers.

As such, there are three keys to promoting the new digital policy towards the south, based on the idea of ​​internationalizing the service industry:

First, the application range of the country’s software and digital technology should be wide enough, allowing more challenges to cultivate more experiences and accumulating software and hardware integration experiences to strengthen its digital technology. This is the first step in establishing the “experience scale”.

Second, the gap in the talent quality scale – professional and international marketing expertise – between Taiwan and Europe and the United States needs to be narrowed. As most of the domestic talent is employed in the tech industry, the government should speed up the introduction of international talent, recruit more foreign students into the higher education system, and review immigration policies in the medium and long term. .

Regarding market structure, policy tools can be used to encourage technology companies that have successfully completed their digital transformation to reorganize their digital talents into independent systems integration companies and integrate them into new businesses or to join international mergers and acquisitions or strategic alliances. Talent enrichment of digital services is expected to facilitate international cooperation and competition with large US and European companies.

The third key is to optimize the internal management and compensation system of Taiwanese companies with a high-level capital “logistic scale” to cope with international competition for talent.

The new southbound policy was once limited to manufacturing, with an emphasis on reducing personnel costs. However, to promote the internationalization of the digital service industry in the new southbound policy, Taiwan needs to adopt international standards, offering competitive salaries and management models to attract local and foreign talent from advanced economies to to meet knowledge-intensive operational needs and provide support. to the two aforementioned key success factors.

In terms of capital, the integration of international capital markets and strategic investors, and the introduction of a more forward-looking corporate governance system are also necessary to create a favorable environment for Taiwan to promote the internationalization of services in the intelligent domain.

Lin Chia-lung is Goodwill Ambassador for New Southbound Policy Digital Initiatives and former Minister of Transportation and Communications.

Translated by Lin Lee-kai

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