Report on Taiwan Mission
April 7, 2011
GRIPS Development Forum
A policy research team visited Taipei, Hsinchu and Kaohsiung during March 21-25, 2011 to
study Taiwan’s industrial policy and its formation mechanism1. The mission consisted of Prof.
Kenichi Ohno, Ms. Sayoko Uesu (GRIPS Development Forum); Mr. Berihu Assefa
Gebrehiwot (GRIPS and Ethiopia Development Research Institute); Ms. Nguyen Thi Xuan
Thuy and Ms. Pham Thi Huyen (Vietnam Development Forum). Ms. Uesu participated in
Taipei meetings only.
The issues we investigated in Taiwan were (i) past and current industrial policy and its
formulation; (ii) technology and R&D policy; (iii) industrial park creation and operation; and(iv) small and medium enterprises (SMEs). We visited government ministries and agencies,
policy and technology research institutes, industrial parks and their management
organizations, and one private firm operating in an export processing zone (EPZ). The
mission schedule, interviewees and information gathered are listed in the attachments. We
would like to thank all the people we met in Taiwan for their kindness and hospitality.
Main findings of the mission are reported below.
1. Past policies and new direction
In 2010, Taiwan’s per capita GDP was $19,046 and its real income was equivalent toJapan’s level.2 Taiwan has successfully transformed itself from an agro-based economy
exporting rice and bananas to a highly industrialized silicon island with large global shares inmask ROM (93.8%), IC foundry (66.4%), blank optical disk (63%), IC package (44.4%),
electronic glass fabric (39%), IC design (27%), DRAM (21.8%), etc. Moreover, if overseas
production (including Mainland China) by Taiwanese firms is also included, Taiwan is by far
the top exporter of such ICT hardware as motherboard (95.5%), notebook PC (95%), server(88.9%), WLAN CPE (81%), cable modem (78.6%), portable navigation device (76.9%),
LCD monitor (71.8%), and so on.3
Taiwan’s industrial policy thrust and its key industry shifted over time as follows.
1

This mission was commissioned by the Japan International Cooperation Agency to compile information on
industrial policies in selected East Asian advanced countries for the policy learning of developing countries
including Ethiopia and Vietnam. For this purpose we previously also visited Singapore in August/September 2010
and South Korea in November 2010.
2
Japan’s per capita income in 2010 was $42,325 but Japanese prices are much higher than Taiwan’s. As a result,living standards in the two economies are similar. Using Angus Maddison, The World Economy: Historical Statistics,
OECD Development Centre (2003) and updating with IMF data, Japan’s price-adjusted per capita income in 2010
was estimated at $21,900 while Taiwan’s was $22,227.
3
These global market shares for 2009 are provided by the Ministry of Economic Affairs of Taiwan.

11950s – import substitution – food industry
1960s – export expansion – textile industry
1970s – infrastructure enhancement – petro-chemical industry
1980s – economic liberalization – IT industry
1990s – industrial upgrading – IC industry
2000s – global deployment – LCD industry
Up to the mid 1980s, this remarkable transformation was driven by a powerful bureaucracy(Industrial Development Bureau of the Ministry of Economic Affairs (IDB/MoEA)—see
below) and a handful of key elite figures that constituted a developmental state model
described as “Governing the Market” by Robert Wade. At that time, principal policy
instruments included SME finance, market entry regulation (to protect SMEs), tradepromotion agency, credit facilities and insurance, and technical assistance bygovernment-created research institutions. SMEs in Taiwan were dynamic and responded
strongly to these policy initiatives. In those “old days,” SMEs were Taiwan’s main exporters
while a few large corporations such as Formosa Plastic (private) and China Steel(state-owned) supplied to the domestic market.
After the mid 1980s, a number of structural shifts occurred. First, the private sector became
more powerful relative to the government. Second, large domestic firms emerged while therelative share of SMEs in output, export and employment all declined. Third, liberalization,
economic interaction with Mainland China and WTO entry (2002) exerted global competitive
pressure. Currently Taiwan’s largest firms include TSMC (semi-conductor), UMC(semi-conductor), Foxconn (EMS), Acer (PC), Asus (PC), Yulon Motor (automotive), San
Yang Motors (SYM, motorcycle) and Kwang Yang Motor (Kymco, motorcycle). Previous
giants are also moving into new fields including Formosa Plastic (artificial fiber) and China
Steel (high quality steel for auto, E&E and machinery).
With the growth of vibrant domestic firms, Taiwan’s industrialization is no longer mainly
dependent on FDI or expatriates. Even today, Taiwanese SMEs remain more autonomous(not under keiretsu or chaebols) and have higher start-up ratios than Japanese or Korean.
However, as globalization deepens and size becomes increasingly important, large firms are
becoming dominant and the role of SMEs in industrialization is shrinking. Nevertheless,even large firms feel that they are too small compared with Korean chaebols and want togrow more with brand-name products. Contracted hardware manufacturing for foreign
brand-name electronic products—original equipment manufacturing (OEM), original design
manufacturing (ODM) and electronics manufacturing service (EMS)—has already reached aplateau and Taiwan needs a new business model to grow into the future.
Given these trends, industrial policy of the Ministry of Economic Affairs (MoEA) is alsochanging. In Taiwan, the industrial policy statute is the most important legal document forindustrialization. The first such law, the Statute for Encouragement of Investment2

(1960-1990) and its revision, the Statute for Upgrading Industries (1991-2010), guided pastpolicies. The most recent one, the Statute for Industrial Innovation, approved by the National
Assembly in May 2010, sets future directions for Taiwan’s industries4. Three features of the
new statute are noteworthy. First, it expands policy scope from the previous manufacturing
focus to include agro and biotech industries, industrial services and high-value services(which requires involvement of ministries other than MoEA). Second, it replaces theprevious system of multiple incentives for various specified activities by a simpler, more
uniform system of 17% corporate income tax (previously 25%)5 and eliminates all tax
incentives except for R&D6. Third, it aims to shift Taiwan from hardware manufacturing to an
economy of “soft power” with national brands and regional logistic and transport hubs. Like
many other high-income economies, Taiwan wants to become an innovation-driven
economy as it graduates from factor- and efficiency-driven ones of the past.
Taiwan’s current industrial policy, as explained by MoEA, has two pillars: creation of soft
power and improving cross-strait relations. The soft power drive has three sub-components:(i) supply of industrial professionals; (ii) promoting emerging industries;7 and (iii) upgrading
conventional industries including ICT, garment and footwear. Even without tax incentives,
MoEA can promote targeted sectors and activities through technology projects
commissioned by the Department of Industrial Technology (DOIT) and other agencies, as
explained below.
Regarding cross-strait relations, restrictions on China-bound investment were relaxed inAugust 2008 with higher permissible ratios or value ceilings for corporate and individual
investors. Meetings, seminars and industrial collaboration with Mainland China were also
activated. Taiwan’s market is also opening, gradually and based on observation of actual
performance, to Chinese investors since June 2009. The recent cross-strait Economic
Cooperation Framework Agreement (ECFA), effective from January 2011, is expected tohave further impacts on cross-strait relations. ECFA is modeled after the ASEAN-China FTA
which features “early harvest” trade items in goods and services.
With the exception of Mainland China, Taiwan does not care about the nationality ofinvestors whether they are domestic, foreign or joint venture. Taiwan accepts FDI in any
sector except in national defense. Taiwan provides a universal low corporate income tax and4

The statute gives only guidelines. For implementation, detailed laws must be prepared for all relevant sectors.
Concerned ministries are currently working on them.
5
Corporate income tax rates of neighboring countries are as follows: Japan (30%), Korea (22%), Singapore (17%),Hong Kong (16.7%), China (25%).
6Previous tax incentives amounted to about NT$70 billion per year, of which tax holidays, mainly benefiting large
firms, were about NT$20 billion, automation tax credits were about NT$30 billion (both of which are now abolished),
and IT tax credits were about NT$20 billion (now halved). As a result of the new industrial statute, only NT$10
billion remains. As of end March 2011, US$1 is worth about NT$29.
7
Six “major emerging industries” are biotechnology, precision agriculture, green energy, medical and healthcare,
tourism and cultural innovation industries. Four “emerging intelligent industries” are invention and patentcommercialization, cloud computing, electric intelligent cars and intelligent green construction industries. Besides
these, 10 service industries are also targeted which are however outside the mandate of MoEA.

3

transparent incentives for R&D only and, unlike Singapore, does not engage in customized
negotiation to attract individual foreign investors.
2. Policy making process
As noted above, the most important policy making body for Taiwan’s industrialization is theIndustrial Development Bureau of the Ministry of Economic Affairs (IDB/MoEA). Although its
influence has waned over the decades, it still yields substantial power in guiding the private
sector. IDB currently has 240 permanent staff mainly from engineering backgrounds(recruitment of economists into IDB is only a recent phenomenon). Temporary staff are also
hired to cope with its heavy work load. Unlike Japanese METI, many processes in policy
drafting and stakeholder consultations are outsourced to government-created semi-official
policy “think tanks,” especially the Taiwan Institute of Economic Research (TIER) and theChung-Hua Institution for Economic Research (CIER), as discussed below. “Committees”
are used for consensus building among ministries and experts, and “seminars” areextensively organized for interacting with the private sector. In Taiwan, think tanks,
committees and seminars are not just means of information exchange and dissemination
but integral parts of action-oriented policy making. They will not be assessed highly or
receive much funding unless they directly contribute to the policy process.
Figure 1. Organizational Structure of the Ministry of Economic Affairs

4Figure 2. Organizational Structure of the Industrial Development Bureau, MoEA

IDB has seven divisions which include three “industry-oriented” (i.e., sectoral) divisions(metal and mechanical, IT, and consumer goods & chemicals) and four “industrial support”(i.e, functional) divisions (industrial policy, knowledge services, sustainable development,
and industrial parks). Besides these, task forces and offices for sectoral promotion are also
placed under IDB. Restructuring of MoEA is expected for the implementation of the newindustrial statute which has a wider sectoral scope than the previous one.
Another important body under MoEA is the Department of Industrial Technology (DOIT). Its
main task is to identify, screen and finance projects that will directly enhance technology ofthe private sector. In 2010, the national budget for science and technology was allocatedamong the National Science Council (43.0%), MoEA (30.8%) and Academia Sinica (11.0%).
DOIT received US$618.1 million, which was the lion’s share of this fund allocated to MoEA.
DOIT uses this to finance projects conducted by research institutes, private organizations oruniversities that support national industrial policy. Funding is allocated competitively, basedon proposals submitted by applicant organizations (DOIT sometimes works closely withthem to improve proposals) and outcome is reviewed strictly by DOIT advisory groups foralignment with national policy and key performance indicators such as number of patents
and awards, levels of R&D relative to GDP or corporate revenue, and so on. DOIT’s

5technology projects have been a very important policy tool for Taiwan’s innovation drive8.
The process of industrial policy making, in the case of the Statute for Industrial Innovation of
2010, was as follows.
In anticipation of expiration of the previous industrial law (Statute for Upgrading Industries,
1991-2010), a taskforce was created by IDB/MoEA three years in advance to draft a new law.
MoEA Minister Dr. Yen-Shiang Shih, an MIT graduate, led brainstorming sessions whichwere organized by CIER, a think tank in support of MoEA policy. According to one IDB
official, “Dr. Shih dominated this law and vision.” The proposed ideas were then conveyed tothe private sector through a large number of public hearing meetings with six businessassociations (steel, IT, etc). These meetings were mainly used for the Ministry to “persuade
them” for easy passage of legislature rather than receiving substantive comments from theprivate sector. Sometimes private firms had divided opinions.
In addition, “one or two inter-ministerial meetings” were also held with Dr. Shih presiding andministers of other related ministries attending. Interventions by other ministries were few andno objections were raised against MoEA’s ideas. While MoEA has historically dominatedindustrial promotion, other ministries in charge of services, agriculture, health care,education, culture, etc., which are now included as targeted sectors, are only “regulators”
unfamiliar with positive promotion measures (issuing certificates for R&D, for example) andremained passive on the listening side. After these consultations, the Industrial Policy
Division of IDB/MoEA drafted the law with support of law firms for wording.
However, the draft law prepared by IDB was substantially revised in the legislative process.
Taiwan’s National Assembly is strong and attracts lobbying by interest groups. The law
drafted by technocrats originally proposed lowering of the corporate income tax from 25% to
20% and kept four incentives for R&D, branding, human resource training and attracting
headquarters of MNCs to Taiwan. The National Assembly, backed by industrial and SME
lobby, slashed the corporate income tax rate further to 17% and eliminated all incentive
measures except for R&D (though the Ministry of Finance was concerned about revenueloss). According to one industrial expert, this was too aggressive an act by legislature but
results must be accepted as a compromise in democracy. Finally, an “island tour” wasconducted in the North, Middle and South of Taiwan to disseminate the new law.
The policy making procedure as described above was established around the late 1980s
when the previous industrial statute was formulated. Before that, a few elite leaders andtechnocrats created policies while research institutes produced internal studies only.
In sum, consensus building over the contents of the new law was strongly guided by MoEA,
especially Minister Shih, with CIER serving as secretariat. However, consultation with other8

DOIT is the main department for technology project funding although IDB and SMEA, also under MoEA, havebudgets for industrial purposes. MoEA has bureaus, departments and administrations under it as shown in Figure 1.
It seems that bureaus are larger than departments, and administrations are tasked with implementing functions.

6ministries and the private sector was somewhat unilateral in the case of the 2010 Statute.
Another unique aspect of Taiwan is strong legislative intervention which upsets the picture
painted by technocrats.
Regarding this policy making process, we heard many non-government voices. According to
one expert, private firms often complain that government does too much R&D which
competes with and crowds out private R&D. However, another expert argued thatgovernment must be more proactive in pushing innovation in the 21st century. One expert
said that private firms (especially SMEs) are still willing to listen to government because
government-backed R&D and technology transfer are useful to them. Another scholar statedthat “embedded autonomy” (government with close interaction with businesses without
being hijacked by vested interests) was possible in Taiwan because of such historical factors
as social mobility, fair competition without class discrimination, and leadership paranoia overexternal threats previously from Communism and now from integration pressure. A numberof experts expressed mild doubts about the prospects of the current innovation drive(biotech is slow to emerge, for example).
3. Policy and technology research institutes
In Taiwan, there are 19 government-created research institutes created by MoEA which playvital roles in designing and implementing national industrial and technology policy. Some ofthem received seed money at establishment but they now operate as NPOs competing forfunds for industrial projects commissioned by both government and private firms. These
research institutes can be classified into policy think tanks (TIER and CIER, for example)
and technology support institutes (ITRI, III (triple eye), and sectoral institutes for metal, auto,
bicycle, precision machinery, etc.) The mission visited four of them.
Among policy research institutes, the Taiwan Institute of Economic Research (TIER) and theChung-Hua Institution for Economic Research (CIER) are two think tanks created by andsupporting the policy making of MoEA.
TIER, founded in 1976, maintains a databank of Taiwanese industries, conducts domestic
and global economic forecasts, and acts as secretariat to the Industrial Development
Advisory Council as well as several cross-strait economic cooperation projects, among otherthings. It also conducted the impact study of ECFA (increased trade with Mainland China).
TIER has seven research divisions, several service providing centers, Tokyo Office, andother departments and committees. Its revenue comes from undertaking government
projects (about 70%) and private sector projects (about 30%). The Industrial Development
Advisory Council, to which TIER serves as secretariat, is a platform for interaction among
government, businesses and academics established in 1984 following the Japanese modelof MITI’s Industrial Structure Council. MoEA uses the Council to fathom the impact of its
policies and hear the requests and problems of the business community. The Council holds
15 meetings per year, two of which are organized by IDB/MoEA and others by other bureaus7

of MoEA.
CIER, established in 1982 with the official endowment of NT$1 billion, is located on thepremises of the National Taiwan University. Like TIER, it conducts commissioned projects
for the President, the Executive Yuan (Taiwan’s executive branch), and government
ministries and agencies. It has three research divisions that conduct applied researchrespectively on Mainland China, international issues and domestic issues. CIER also
produces economic forecasting and operates the WTO Center as well as other ad hoc
centers. CIER was the secretariat to the formulation of the 2010 industrial statute, ECFA andWTO entry. For ECFA, for example, CIER conducted 2-3 years of research and produced areport on ECFA’s costs and benefits which was circulated to the public and academia for
critical review. The report was then discussed among concerned ministries and agencies,
businesses (through “seminars”), and finally with legislators before it was sent to the
National Assembly. CIER feels that about 70-80% of what it proposes in its report makes tothe final stage.
Among 11 technology support institutes, the mission visited the Industrial Technology
Research Institute and ITRI College in Hsinchu and MIRDC in Kaohsiung.
The Industrial Technology Research Institute (ITRI), founded in 1973, is Taiwan’s largest
R&D organization in support of technology transfer and commercialization. Its supervising
agency is MoEA. ITRI has 5,800 employees in its huge complex, of which 80% are engaged
in R&D and 1,200 hold doctorate degrees. There are three ways to disseminate R&D: (i)technology licensing; (ii) spinning off a research team to form a start-up company9; and (iii)
forming a joint venture to become a new section in an existing company (“spin-in”). ITRI alsooffers open labs where domestic and foreign companies can send staff to do joint researchwith ITRI researchers using ITRI facilities. Half of ITRI’s revenue comes from industrial
service fees and the other half from state-funded research projects on a competitive bidding
basis. ITRI is commissioned to plan, train and formulate policies mainly for MoEA but also
for other ministries. Its location in Hsinchu, in proximity to science parks and two technology
universities, allows active cooperation with private firms and academia although ITRI also
works with partners all over Taiwan. Many graduates from the two universities join ITRI for
several years to learn industrial application and accumulate practical experiences, then startmigrating back and forth between industry and ITRI. Thus, ITRI is the largest focal point forindustry-government-academia cooperation to carry out MoEA’s technology development
programs.
ITRI College, a new addition to ITRI, is a training provider for ITRI employees at all levels aswell as for industry. It offers courses lasting from one day to three months on five innovation

9

Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC), thetwo world largest IC foundries, are ITRI’s most famous spin-offs. ITRI has produced 65 ventures and 19,589 ITRI
alumni.

8

competencies and six technological domains10. It also offers customized training programsfor enterprises. It issues certificates but no degrees because its courses are for the actual
use by industry to create value and not for academic merits. Of particular interest are its
need-based programs for government officials and researchers from developing countries insuch topics as national innovation system, human resource development system, SME
promotion, science park development and intellectual property management. In 2010 ITRI
College received four official delegations from Vietnam and Philippines (about 25 personseach) as well as India and Poland (2 persons each). However, Taiwan is not conducting
knowledge sharing as a national project, and the size of its intellectual assistance to thedeveloping world remains small compared with Japan or Korea. Political concern vis-à-vis
Mainland China is another reason for Taiwan to remain low-key in its assistance activities.
Figure 3. Organizational Structure of the Industrial Technology Research Institute

The Metal Industries Research and Development Center (MIRDC), established in 1963, is
one of the sectoral technology institutes under MoEA. It is headquartered in Kaohsiung witheight branches and centers across Taiwan. It supports metal and related technologies,
including automation, with 612 employees (51 with doctorate and 325 with master degrees)with main specialization in mechanical (38%), material and chemical (11%) and electrical,
opto-electronic and info-tech (8%) areas. Its annual staff turnover is 10% and the average
10

The five innovation competencies are creative thinking, industrial analysis, R&D management, businessdevelopment, and intellectual property management. The six technology domains are information andcommunication, materials and chemical engineering, electronics and optoelectronic, biomedical technology anddevice research, mechanical and system research, and energy and environment management.

9

working period is 10 years (at ITRI, they are 20% and 6 years respectively). MIRDC also
hires staff on a contract base. It has five focused industries of metal material and fabricatedmetal products, mold and die and micro parts, automotive, opto-electronics and energy
equipment, and medical devices and care. Its revenue of NT$2 billion per year comes fromindustrial services (25% directly from private sector, 35% commissioned by government)
and government’s technology projects (40%). A team is formed for each project which maylast for 4-5 years for big projects and 3-6 months for small ones. For a large DOIT-funded
project, for example, about two years are spent for sounding local industry needs andworking out a proposal jointly with DOIT. If approved, implementation and monitoring willusually take 3 to 4 years. As with other institutes, MIRDC must bid competitively for projects
and their performance is reviewed for number of patents and companies helped, newinvestments and technology applications generated, and so on.
4. Hsinchu Science ParkIn Taiwan, there are three types of centrally managed industrial estates with different
overseeing authorities: 13 science parks under the National Science Council, 8 export
processing zones under the EPZ Administration of MoEA, and 61 industrial parks under
IDB/MoEA.11 Besides centrally managed industrial estates, Taiwan also has 18 industrial
parks developed by local governments and 93 industrial parks developed by the private
sector.
The National Science Council, through its Science Park Administration, supervises Taiwan’s
13 science-based parks. Among them, Hsinchu Science Park (HSP), established in
December 1980, was the first and most successful, and has become the central location for
Taiwan’s ICT industry with high international reputation. It now receives about 1,000 visiting
missions annually from all over the world to learn how such a high-tech park can be createdand managed. In its 30-year history, the number of tenant companies, their revenues, andpark employment grew significantly, which as of 2010 stood at 449 companies, US$40.9
billion and 139,416 employees (including 4,134 foreigners of which 1,074 are highly skilled),
respectively. The average R&D/sales ratio at HSP was 6.0% in 1989-2008 against thenational manufacturing average of 1.1%. Land in HSP is state-owned and leased out on a
20-year contract at subsidized rates to domestic and foreign firms with no intervention incompanies’ activities. 400 standard factories with the size of 700-1,000 m2 are also available
for rent (a firm may rent more than one unit). The monthly rent is NT$50/m2 for land andNT$100/m2 for rental factory. One-stop service, good infrastructure and comfortable living
conditions are guaranteed.
11

Industrial parks under IDB/MoEA (last category) focus on light industry, basic consumer goods, petrochemical,
etc. with regional specialization and local regulatory differences. Unlike science parks or EPZs, these industrial
parks can sell land to investors. On the other hand, they may not provide one-stop investor service. There is a plan
to merge the administration of EPZs and MoEA-managed industrial zones. Besides these centrally managed
industrial estates, Taiwan also has 18 industrial parks developed by local governments and 93 industrial parks
developed by the private sector.

10

By company revenue, HSP’s largest industry is IC (67.5%) followed by opto-electronics(20.7%), computer (6.4%), telecom (2.7%) and precision machinery (1.8%). Its renowned
tenants include TSMC, UMC, Acer, Foxconn, AUO, Logitech, Du Pont, Hoya, Shin Etsu and
DNP. HSP is host to 44 foreign firms, of which 10 are Japanese and 17 are American. 95
companies were set up by overseas Chinese.
Although HSP’s land (653 ha) has no plan for future expansion, there is a relatively highturnover of tenant companies whose number is continuously increasing. Instead of enlarging
HSP, satellite parks are created to accommodate more firms. At HSP, about 30 companies
move in every year. As for the number of the companies move out, it depends on thefluctuations in economy and differs every year. This means that average land size perfactory is becoming smaller, which is the intention of the Science Park Administration.
Applying companies are given exams regarding their R&D activities, capital, environmental
concern, etc. There are about 60 companies waiting to enter HSP at present. Companies
which fail to spend at least 2.28% (twice the national average) of sales revenue on R&D, or
those which miss monthly payments twice, are asked to leave HSP.
The Science Park Administration is a central agency which has invested about NT$86 billion
since the establishment of the park. After that, HSP’s income came from management fee
and rental and operational revenues. HSP started to make profit ten years ago and now
enjoys stable revenue. Because HSP is the lead science park, it financially assists otherscience parks in Taichung, Tainan, etc. and monitors their operations.
5. Export processing zones
Taiwan established its first export processing zone (EPZ) at Kaohsiung Port in December
1966, combining the functions of free trade zone and industrial zone12. Its industrial focus
changed over time along with overall structural transformation of Taiwan. Its tenants were
engaged initially in low-end OEM which gradually moved up to mid-end and high-end OEM
by the mid 1990s. Subsequently, R&D and high-value ITC industries were added. The
current focus industries include IC testing and packaging (Nantze EPZ), LCD modules(Kaohsiung EPZ), and opto-electronics (Taichung EPZ). Gauged by total corporate revenue
in 2009 (US$8.66 billion), the dominant sector in EPZs was electronic parts and components(64.2%) followed by non-metallic mineral products (8.8%) and computer, electronic andoptical products (8.6%). Compared with science parks which require high R&D/sales ratios
for entry and stay, EPZs are for more downstream manufacturing.
The EPZ Administration of MoEA, located in Kaohsiung, oversees eight EPZs in Central andSouthern Taiwan. The total area of these zones is 532 ha, which includes Kaohsiung EPZ

12

The brochure of EPZ Administration says Kaohsiung EPZ was the first such park in the world but some MoEA
officials in Taipei said it was not. The mission was unable to identify the first country to establish an EPZ.

11

(72.4 ha) and Nantze EPZ (97.8 ha). Corporate revenues, investments and trade at EPZs
have increased significantly over the decades. In 2010, total tenant companies were 456 in
number producing NT$380 billion in revenue and US$19.2 billion in export (US$10.12 billion)
and import (US$9.09 billion). As factors of success, EPZ Administration cited right timing,
excellent location, perfect legal system, single contact window, excellent investment
environment, skilled workers, and others.
About five years ago, EPZ Administration began to bridge and mediate industry-university
linkage. The program consists of human exchange such as student internship and visiting
professors as well as research cooperation for technology transfer and commercialization.
EPZ Administration offers matching services, one-stop window and database for universities.
Based on company needs, a student team led by a professor is to conduct joint R&D (as is
actively done in Nanyang Polytechnic in Singapore). While such industry-university linkage
was strong from the outset at HSP, this is a relatively recent policy drive at EPZs.
The mission visited the EPZ Administration office in Nantze EPZ and paid a factory visit to
Taiwan Brother Industries, Ltd. Located in that EPZ which manufactured high-end
personal-use sewing machines with artistic embroidery capability.
6. SME policy
Promotion of small and medium enterprises is the responsibility of SME Administration
under MoEA. In 2010, the number of SMEs in Taiwan was 1.24 million, or 97.77% of allenterprises. The SME sector accounts for 76.7% of total employment, 29.8% of total sales,
and 17.9% of total export. The number of start-up companies is 88,531 annually, amounting
to 7.1% of total SMEs. For manufacturing, construction, mining and quarrying, SMEs aredefined as establishments with less than NT$80 million (US$2.5 million) in paid-in capital orless than 200 persons. For service and commerce, they are establishments with less than
NT$100 million (US$3.2 million) in paid-in capital or less than 100 persons. Microbusinesses are defined as establishments with less than 5 persons for all sectors.
SME support is provided in three layers. The “award strategy” is adopted for top SMEs
(1-3% of total) by which national, rising star and R&D awards are given. The “guidance
strategy” is used for the middle layer (27-34%) where 11 guidance systems are available13.
For the remainder of “foundation” SMEs (65-70%), the “grouping strategy” comprising of
mutual cooperation, industry cluster, local cultural industry and financing programs is offered.
SME Administration works closely with IDB, DOIT, Bureau of Foreign Trade and Departmentof Commerce, all under MoEA, to provide integrated support.
SME Administration has five divisions corresponding to five task areas, which are Policy
13

The guidance systems are managed by appropriate bureaus and departments of MoEA and consist of industrial
safety, R&D, pollution prevention, production technology, marketing, management, finance, quality upgrading,information management, business start-up and incubation, and mutual assistance and collaboration.

12Planning, Management Consulting, Business start-up and Incubation, Information
Technology, and Financing. Taiwan’s SME service network consists of SME Administration
headquarters with one-stop service center in Taipei, two regional offices in Center and South,and 24 local service centers. SME Administration also cooperates with the National
Association of SMEs and its 20 branches, the China Youth Career Development Associationand its 21 branches, and 23 industrial associations and 24 chambers of commerce at central
and municipal levels. SMEs located in industrial estates can receive services from zone
administrations.
Financial support for SMEs is provided by the SME Development Fund and the National
Development Fund. These funds are on-lent by commercial banks to SMEs and start-up
companies. 15% of funding from the SME Development Fund goes through SME
investment companies. Additionally, the SME Credit Guarantee Fund guarantees 80-90% ofcommercial bank loans to SMEs (which seems a very generous guarantee). The Incubation
Fund Account and various official rewards given to excellent SMEs are additional facilitatorsof SME finance. These government measures are expected to pump-prime SME finance byprivate funds, capital markets and venture capital.
For management and technical support, SMEs are provided with classes, enterpriseconsultancy (which is connected to bank loans), technology and linkage. SME consultation
service is given by private firms and individual consultants through open bidding forgovernment procurement. Unlike Malaysia (or Thailand in the past), no government officials
are SME consultants. SMEs receive consultation free of charge. However, if new investment
or training becomes necessary, that must be financed by SMEs themselves. Among
Taiwanese industrial experts, Japanese terms such as kaizen and shindan are not wellknown although standard productivity tools such as 5S and QCC are widely recognized andused.
One promotion measure of interest is the Taiwan One Town One Product (OTOP) program,
adopted from Japan’s One Village One Product movement, which aims to develop local
specialty industries with township or city as units. Starting from 1989, SME Administration
has supported local SMEs with management, design, packaging, technology, spacearrangement, and so on; participation in exhibitions and training courses; and creation of
publications, websites and Taiwan OTOP shops. A total of 96 featured towns havesuccessfully generated their distinctive local products.

Attachment 1: Mission details
Attachment 2: Organizations/persons visited
Attachment 3: List of information collected13

Attachment 1

Mission Schedule (20- 26 Mar. 2011)
1. Mission Members
Professor, National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan

Kenicni Ohno
Sayoko Uesu*

Research Associate, National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan
Researcher, National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan andEthiopian Development Research Institute, Addis Ababa, Ethiopia
Researcher, Vietnam Development Forum (VDF) / GRIPS-NEU Joint Research Project,
Hanoi, Vietnam
Researcher, Vietnam Development Forum (VDF) / GRIPS-NEU Joint Research Project,
Hanoi, Vietnam

Berihu Assefa Gebrehiwot
Nguyen Thi Xuan Thuy
Pham Thi Huyen*Participated from 20 to 23 March only.

2. Mission Schedule
DATE
1

20 Sun21 Mon2

22 Tue

3

4

5

6
7

Mar

23 Wed24 Thu25 Fri26 SatTIME

Location

ACTIVITYAM
PM

TaipeiArrivalAM

TaipeiIndustrial Development Bureau, Ministry of Economic Affairs (IDB/MOEA)

PM

TaipeiTaiwan Institute of Economic Research (TIER)

AM

TaipeiProf. Tain-Jy Chen, College of Social Sciences, National Taiwan University

PM

TaipeiDr. Wan-Wen Chu, Research Fellow, Research Center for Humanities and Social Sciences,
Academia Sinica

AM

Taipei

Department of Industrial Technology, Ministry of Economic Affairs, (DOIT/MOEA)

AM

TaipeiSmall and Medium Enterprise Administration, Ministry of Economic Affairs (SMEA/MOEA)

PM

Taipei

Chung-Hua Institution for Economic Research (CIER)

AM

Hsinchu

Hsinchu Science Park Administration, National Science Council

PM

HsinchuIndustrial Technology Research Institute (ITRI) and ITRI College

AM

Kaohsiung Export Processing Zone Administration, Ministry of Economic Affairs (EPZA/MOEA)

AM

Kaohsiung Taiwan Brother Industries Ltd.

PM

Kaohsiung Metal Industries Research and Development Centre (MIRDC)

AM

Kaohsiung Departure

Note: Among the five mission members, Kenichi Ohno and Sayoko Uesu (GRIPS Development Forum); and Nguyen Thi Xuan Thuy
and Pham Thi Huyen (Vietnam Development Forum) are the members of the JICA-commissioned study team.

14

Attachment 2

Organizations/Persons VisitedGovernment and its Organizations
Organization
Industrial Development Bureau,
Ministry of Economic Affairs

Name

Position

Hui-Ying Chen

Deputy Director, Industrial Policy Division

Robert M.S. Jahn
Han Wen Kuan
Kuan-Yu Huang
Department of Industrial Technology,
Hao-Chu Lin
Edie Chin An Wang
Ministry of Economic Affairs
Chen-Tsair Cheng
Small and Medium Enterprise Administration,
Pu-Yun Long
Ministry of Economic Affairs
Chia-Hsien Yang
Susan S. Chen
Hsinchu Science Park Administration, National Science
Tuan, Ssu-Heng
CouncilGrace Chen
Export Processing Zone Administration,
Ministry of Economic Affairs

Senior Specialist
Chief of P.R. Office
Office of Public Relations
Section Chief, Department of Industrial Technology
Business Manager, International Business Center, ITRI
Deputy Director General
Commercial Secretary, Business Startup and Incubation Division
Section Chief, Business Startup and Incubation Division
Deputy Director, Investment Services Division
Section Chief, Investment Services Division
Investment Services Division

Research Institutes / Universities
Organization
Taiwan Institute of Economic Research (TIER)
National Taiwan University

Metal Industries Research and Development Centre

Industrial Technology Research Institute (ITRI)
ITRI College
Academia Sinica

Chung-Hua Institution for Economic Research (CIER)

Name
Sung Min-Te
Gary Chen
Liu Yau-Jr
Tain-Jy Chen
Paul Chung
Judy C.Lo
Louis Hung-Lu Yen
Charles Chen
Ethel Cheng
Shing-Yuan Tsai
Ho, Kwun-Yao
Feng-Kwei Wang
Wan-Wen Chu
Jiann-Chyuan Wang
Hui-Lin Wu
Tsung-Che W ei
Hsien-Yang Su

Position
Director, Secretariat of Industrial Development Advisory Council
Public Relations Officer, International Affairs Specialist
Project Principal and Associate Research Fellow, Research Division II
Professor, Department of Economics
Vice President
Project Manager, IP & Innovalue Section, Planning & Promotion Dept.
Project Manager, IP & Innovalue Section, Planning & Promotion Dept.
Project Manger, Industrial Research Section, Planning & Promotion Dept.
IP & Innovalue Section, Planning & Promotion Dept.
Vice President and Executive Director
Deputy Representative of Tokyo Office
Executive Director
Research Fellow, Research Center for Humanities and Social Sciences
Research Fellow and Vice President
Research Fellow, Division of Taiwan Economy
Assistant Research Fellow, Division of Taiwan Economy
Research Fellow, International Division/Director, Japan Center

Name
Morinaga Tadashi
Da Shi Kong

Position
Representative Director & General Manager
Manager, VM Promotion Department

Company
Organization
Taiwan Brother Industries Ltd.

15

Attachment 3

List of Information Collected
SourceTitle

Industrial Development Bureau,
Ministry of Economic Affairs(IDB/MOEA)

PPT: Industrial Development in Taiwan, R.O.C, 2011

Taiwan Institute of Economic
Research (TIER)

Leaflet/Pamphlet: Taiwan Institute of Economic Research
PPT:Taiwanese Economic Development

Department of Industrial
Technology, Ministry of Economic
Affairs (DOIT/MOEA)

PPT: Industrial Technology Innovation (Date: 2011.3.23)

Authors / Publishers
IDB/MOEA

Industrial Development in Taiwan R.O.C. 2010
TIER
Ming-Te Sun, TIER
DOIT/MOEA

Leaflet/Pamphlet: 2010/2011 Department of Industrial Technology

Small and Medium Enterprise Development in Taiwan, ROC
PPT: SME Development and Policy Measures in Taiwan, March 2011
Taiwan One Town One Product, Taiwan Local Cultural Industries Map
DVD: Building Industries from Creative Ideas
Small and Medium Enterprise
Administration, Ministry of Economic Incubation Centers 2010
Affairs (SMEA/MOEA)White Paper on Small and Medium Enterprises in Taiwan, 2010
Annual Report 2009
Taiwan No.1, Highlights of Taiwan's Featured Industries, 2010 International Small
Business Congress Special Edition
Unbiased, Independent and Transcendent, National Policy Think-Tank
Chung-Hua Institution for Economic
Figures: The system of technology development in Taiwan/ The division of labor for
Research (CIER)
technology development in Taiwan

SMEA/MOEA

National Association of Small& Medium Enterprises
CIER
Dr. Wang, CIER

Discovering the Beauty of the Hsinchu Science Park, A Compilation for the 30th
Anniversary of the Hsinchu Science Park
Hsinchu Science Park

Industrial Technology ResearchInstitute (ITRI)
ITRI College

Innovation for a better tommorrow
Investment Guide
Map of Hsinchu Science Park
PPT: Welcome to the Hsinchu Science Park
PPT: ITRI/Industrial Development /Government Policy
Annual Report 2009
Innovative Technologies for a Better Future
Program Overview
Historical Gallery Guide
Transforming for the Global Economy, An Investment Guide to Export Processing
Zones in Taiwan

Export Processing Zone
EPZ Statistics at a glance
Administration, Ministry of Economic
Affairs (EPZA/MOEA)
PPT: Export Processing Zone: An Overview

Metal Industries Research andDevelopment Centre (MIRDC)

Science Park Administration

Shing-Yuan Tsai, ITRI
ITRI
ITRI College

EPZA/MOEA

Victoria Kuan-Yu Huang,
EPZA/ MOEA

"Taiwan's Export-Processing Zones: Shifting Roles through the Decades", Taiwan
Business Topics (December 2010)

Steven Crook

Pamphlet: Metal Industries Research and Development Centre
CV of Dr. Paul C.K.Chung
PPT: A Brief Introduction of MIRDC, March 25, 2010

MIRDC

16