Taiwan seeks u-turn in cross-strait flow of factories

For Asia Times Online www.atimes.com

By Jens Kastner

TAIPEI – Taiwan’s Kuomintang (KMT) government is to boost limits on employing foreign workers to encourage Taiwanese companies with factories in mainland China to move production lines back to the island. Drawing these manufacturers back to Taiwan is seen as vital to reviving a floundering economy.

Taiwanese businesses invested US$13.1 billion in mainland China last year, and Taiwan’s government, in face of a 0.16% economic slowdown in the second quarter from a year earlier and unemployment at 4.4%, desperately wants them to see investment come back to the island.

As an incentive, it has agreed that Taiwanese enterprises active in China and willing to return may recruit 15% to 20% more wailao, as foreign workers are commonly called, than local companies, up to a maximum of 40% of their total workforce. 

Other new investors who set up a factory in Taiwan and make products under their own brands, or such that are “regarded as high-value items in supply chains”, will be allowed an additional 5% to 10% of their total workforce from overseas.

The opening is to take effect on November 1 and is predicted to push up the total number of foreign workers in Taiwan from the present record high of 440,000 to more than 520,000.

The government claims this will not take away jobs from the local workforce but instead create 120,000 job opportunities for Taiwanese workers.

“What we are aiming to do is to capitalize on the recruitment of foreign workers to increase employment for local workers and to enhance the nation’s competitiveness,” said Lin San-quei, director-general of the Council of Labor Affairs’ Bureau of Employment and Vocational Training, as quoted by the Taipei Times.

Economists have their doubts.

“To the extent that this policy encourages an increase in low-skilled labor demand, it will not increase Taiwan’s chances of improving its long-run situation,” said Ronald A Edwards, an economist and professor at Tamkang University in Taipei.

“If anything, it may create jobs in the short run and get the administration through some politically tough times.”

In Taiwan, the term “3K” refers to jobs that are dangerous, filthy, laborious – such as in care for the terminally ill, printing and metal forging – and are generally taken up by Thai, Vietnamese, Indonesians and Filipinos. It also covers positions that involve unhealthy nightshifts.

Taiwan-based manufacturing companies have long complained that they are unable to increase production for orders they have received because the local workforce refuses 3K work.

At the same time, on the other side of the Taiwan Strait, Taiwanese businesspeople are faced with rapidly rising wages in mainland China’s coastal provinces. By allowing more foreign labor, the Taiwanese government seeks to kill two birds with one stone.

The government aims to take things further than just increasing the number of foreign workers: as of November, they will apparently be excluded from Taiwan’s basic minimum wage system in certain free economic zones in the southern city of Kaohsiung.

Local labor and human-rights groups are up in arms over the creation of such a dual minimum wage system. From the purely economic view, there is a very weighty argument against it – it is almost certain to spoil Taiwan’s ambitions to beat trade rival South Korea with its own weapon of signing free-trade agreements with important economies. Potential partners tend to be averse to opening their markets to countries that make domestic and foreign workers subject to different regulations on wages and working conditions.

The Taiwanese government owes the local workforce an explanation, according to Hu Sheng-Cheng, an economist at Academia Sinica, Taiwan’s most prestigious research institution.

“Is it that there aren’t sufficient local workers for 3K jobs that are paid for only with regular wages, or is it that they cannot find them for salary levels that are 1.5 to 2 times higher, as it should be?” he asked.

To illustrate his view that it all comes down to adjusting Taiwan’s wages, Hu referred to a recent media uproar concerning young Taiwanese who went to Australia on a work holiday program and revealed the horrors they lived through when working there in large slaughterhouses for a year in order to save a few thousand dollars.
“In times of high unemployment, Taiwanese have been flocking to Australia for 3K while the number of overwork-related deaths in the local high-tech sectors increases because employees seek to push their incomes a little higher. But the government tells us they can’t find Taiwanese willing to work in reasonably paid nightshifts,” Hu said.

According to Hu, rising wages in China’s coastal provinces force Taiwanese companies operating there to look for greener pastures, but having more foreign workers available in Taiwan is not what will attract these manufacturers back to their home island.

“Some will move to the Chinese hinterland and some to other emerging countries in search for a low-pay environment. But there also are successful Taiwanese enterprises that have the ability to upgrade and are willing to come back,” he said.

“The government must help these with research and development. If the only incentive is reduced labor cost, they will spurn the bait.”

Professor Edwards agreed. “Taiwan needs to increase the skill level of its average worker by encouraging investment in education and training, not decrease it,” he said.

Jens Kastner is a Taipei-based journalist.

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)


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