Yesterday, Morris Chang, the CEO of Taiwan Semiconductor Manufacturing Corp., spoke to the American Chamber of Commerce on Taiwan’s international competitiveness. For the most part he had good things to say, ranging from education to work ethic to democracy:

“Taiwan benefits from a highly educated population, a healthy ecosystem and industrious, diligent workers,” said Chang. The island, he added, has one of the highest literacy rates in the world. In addition, up to 70 percent of the college-age population go on to attend institutions of higher learning. Strong technical abilities also make Taiwanese workers highly desirable.

“While such measurements are not easily quantifiable,” stressed Chang, “I think that anyone who has worked with Taiwanese people will agree that they are very industrious and hard-working.”

In terms of the ecosystem, Chang reported that Taiwan has had an evolving market economy for 20 to 30 years; politically, freedom and democracy have been present for more than 10 years.

He did mention a few areas for improvement. The first is economic openness to globalization:

“This is the biggest weakness in the near term,” said Chang. “Incomplete globalization is becoming more and more a drag on the economy. During the last 10 years, as globalization has accelerated, Taiwan has either stood still or even gone backward.”

During this time, said Chang, Taiwan should have become the portal to the world’s fastest-growing economy-China.

“If Taiwan had seized the opportunity 15 to 20 years ago, its economic development would be much faster. It simply failed to take advantage of that opportunity.”

Chang also commented about a need for more democratic institutions to accompany its progress of the last decade. Specifically, he mentioned the needs for greater balance between the branches of the government, for moving to a high trust society, and for better corporate governance. Like many, many foreign teachers I know in Taiwan, Chang expressed hope for a transformation of educational systems that would lead to a greater emphasis on creativity, claiming that “There is too much emphasis in Taiwan on transfer of knowledge and not enough on independent, creative thinking”.

Finally, he touched on the three links that Chen and Hseih have been sparring over so bitterly this month.

Since China is so large and Taiwan much smaller, Chang recommended that Taiwan serve as a portal to its much bigger neighbor, saying, “Given that Taiwan has only 2 percent the population of China, I think that it is best if Taiwan-similar to Hong Kong-plays the role of a gateway.”

Any resulting divisions of labor, in investment or R&D between Taiwan and China are still very much an “academic question,” as Taiwan is not yet sufficiently open to China, although Chang did not see any particular reason to fear competition from Chinese companies.

“It is not a question of losing out to Chinese companies but to any companies,” he said. “To keep from losing out, you have to safeguard your trade secrets and protect your IP.”

Regardless of which presidential candidate wins the next election in March, Chang thinks a more open policy to China will emerge. When asked what he would do if he had a magic wand that could solve any problem facing Taiwan, Chang responded with: “Right now, I would lift restrictions on investment and open the three links,” saying these policies have contributed to one of Taiwan’s chief weaknesses, namely an economy that is “incompletely globalized, incompletely opened.”

The China Post: Taiwan is competitive, yet lacks openness

All in all, it looks like an optimistic report.