February 15th 2014

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Articles from this issue:

EDITORIAL: SPC Ardmona and Holden: Australian icons disappear

CANBERRA OBSERVED: The Abbott government's economic dilemma

ENVIRONMENT: Bushfires rage because of whitefellas' ignorance

AUSTRALIAN CONSTITUTION: Our constitution is the best, so why change it?

SCHOOLS: Two recent rival threats to sensible teaching

EDUCATION: Rhymes of the times: poetry's still important

ECONOMIC AFFAIRS: Harvard economist re-thinks free-market orthodoxy

TAIWAN: Innovating to achieve a clean and green future

SOCIETY: Sexual madness in an age of 'polymorphous perversity'

AUSTRALIAN HISTORY: Why no posthumous VC for naval hero Robert Rankin?

LETTERS: Jeffry Babb; Trevor Dawes; Alan Barron.

CINEMA:  Investigating private investigators:  
Sam Spade and The Maltese Falcon

BOOK REVIEW The red traitors in FDR's administration

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Innovating to achieve a clean and green future

by Jeffry Babb

News Weekly, February 15, 2014

Keeping Taiwan’s economic miracle on track relies on continuous innovation. The Industrial Technology Research Institute, better known as ITRI, is Taiwan’s secret weapon in developing new products that keep the island one step ahead of its competitors.

To understand ITRI, and the role it has played in Taiwan’s industrial development, and the role of research-driven economic growth in general, one must first understand Taiwan’s economic history.

Taiwan was ceded by China to Japan in 1895 following the first Sino-Japanese War. The Japanese invasion of Taiwan snuffed out the infant Republic of Formosa, which was the first republic in Asia. Taiwan, unlike Korea, was intended to be part of Japan forever. The Japanese invested heavily in Taiwan, building railways, irrigation systems, water supply and drainage networks, dams, harbours and roads. In fact, most of today’s infrastructure was built by the Japanese.

Unlike Korea, which was cruelly exploited by Japan, Taiwan benefited greatly from Japan’s colonisation. The Koreans hate the Japanese; whereas, for the people of Taiwan, Japan is consistently rated as Taiwan’s best friend.

Churchill, Roosevelt and Stalin declared at the Cairo Conference in November 1943 — just over 70 years ago — that Japan would be stripped of all its Pacific island possessions, including Formosa (as Taiwan was then called) and the Pescadores (as the Penghu Islands were then called), which would be returned to China.

This was providential for the government of the Republic of China led by Generalissimo Chiang Kai-shek. On October 1, 1949, Mao Zedong declared the birth of Communist “New China” at Tiananmen Square in Beijing. Chiang, along with some two million Nationalist loyalists, had already retreated to Taiwan.

The economy in Taiwan was in bad shape. It had been impoverished by war and now Taiwan’s farmers had two million more mainland Chinese mouths to feed.

To increase agricultural productivity, Chiang’s Nationalist government introduced the “Land to the Tiller” agricultural reform program. Tenant farmers gained the land on which they worked, and landlords were compensated with shares in government enterprises such as Taiwan Cement, which proved to be lucrative investments. Products such as canned asparagus, the highlight of many a ladies’ luncheon in the 1960s, were exported worldwide.

The improvement in agricultural productivity allowed investment in industry and infrastructure. Although, when under Japanese rule, Taiwan had been essentially an agrarian economy, some industries such as stationery and bicycles had been established.

Taiwan had a lot of labour to employ, so it was logical for the post-war government to promote labour-intensive industries. By 1980, the entrepreneurs of Taiwan had a boom on their hands. Taiwan was the workshop of the world, dominating international markets for garments, footwear, giftware, toys, stationery, bicycles and many other labour-intensive industries.

But K.T. Li (Li Kwoh-ting, 1910–2001), known as “the father of Taiwan’s economic miracle”, understood that this wasn’t sustainable. Dr Li, who was educated at Cambridge University and in Nanjing in mainland China, declared that Taiwan had to “move up the value chain” as wages rose and new competitors appeared. Li was instrumental in establishing the Institute for Information Industry (III) and the Industrial Technology Research Institute (ITRI).

At first, the products derived from these research efforts were embarrassingly primitive. Taiwan’s young electronic engineers, who were returning from the United States, spiced the start-ups in information technology and communications with new ideas. Soon Taiwan was a world leader in the boom product of the 1980s and 1990s, the personal computer. From there, ITRI, led by Dr Morris Chang, spun out the chip foundry that was to lead the world, Taiwan Semiconductor Manufacturing Company (TSMC) and other start-ups (see News Weekly, November 23, 2013).

Where will ITRI go from here? ITRI has many irons in the fire — nanotechnology, medical technology, robotics, information and communications technology, to name but a few.

But ITRI is conscious that its customers — in other words, Taiwan’s manufacturers — are mainly small and medium enterprises (SMEs). They need “research they can use”. What’s more, ITRI gains royalties for its intellectual property (IP). Now, IP royalties account for half of its budget. Within 20 years, it could be self-supporting from IP payments.

Taiwan, once a polluted island, is now pleasantly clean. ITRI is convinced that many other countries can use its green technology, not least mainland China, where pollution has reached life-threatening levels. Green energy is another road that ITRI is convinced will lead to more orders for Taiwan’s manufacturers.

Taiwan is not a centrally-planned economy. The government can only guide; it can’t command. But ITRI is convinced that, as nations grow wealthier, demands for a clean environment will become more pressing. So ITRI sees green technologies as the wave of the future.

Inventions such as light-emitting diodes (LEDs), which drastically cut power consumption for lighting, may seem prosaic but are likely to reduce power consumption worldwide.

Taiwan has cleaned up its act and now is leading the way for others to follow. For Taiwan, clean and green is not just a catch phrase; it’s banking on its being the wave of the future.

Jeffry Babb is a Melbourne-based writer, who for many years worked as a journalist in Taiwan. 

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