Taiwan Today

Both institutions have served in govern­ment advisory roles for over a decade, and they have established solid reputations for producing timely and useful studies for policymakers. Even though their missions overlap somewhat, the following story by staff writer Chen Yi-ming indicates that TIER and Chung-Hua have evolved into quite different institutions with distinct styles of their own.

The Taiwan Institute of Econom­ic Research was established in September 1976 under the sponsorship of the Taiwan Economic Research Foundation, presided over by Dr. Koo Chen-fu (辜振甫), Chairman of both the Taiwan Cement Corporation and the Chinese National Association of Industry and Commerce. TIER's formation was prompted in part by the energy crisis caused by the sudden worldwide increase in the price of oil. The foundation, a private nonprofit corporate body, had been founded earlier by Dr. Koo, and received its major support from the Taiwan Cement Corporation and the China Trust and Investment Corporation.

TIER was designed to serve the needs of local businesses, academic institutions, and the government for up­-to-date economic information. "The in­stitute copied the Japanese model of combining the resources of business, government, and academia in finding an­swers to national economic problems," says Dr. Liu Tai-ying (劉泰英), the direc­tor of TIER.

In 1985, when the Ministry of Economic Affairs proposed setting up the Industrial Development Advisory Council (IDAC) to help restructure Taiwan's industrial sector, TIER became a chartered research institute of the gov­ernment and was delegated all the re­search work of the new council.

From its inception, the institute studied pragmatic domestic and interna­tional economic affairs, with special emphasis on industrial economics. "Not that we can't do research on general economics and theoretical issues," Liu says, "but we like to stick close to the basics and try to help local industries through immediate difficulties. Besides, there are several other institutions look­ing at the broader issues."

The institute rapidly expanded its operations to meet the requirements of various economic sectors in Taiwan, and it had established a solid track record by the time it was entrusted with the re­search work for the IDAC. In order to have a greater grasp of international trends in industrial economics, the institute established branch offices in Tokyo in 1985, and in Paris in 1988.

Over 200 people work at TIER, half of them research fellows. Unlike the Chung-Hua Institution for Economic Re­search, the institute's research fellows are not completely directed by the head of the institute. Instead, the assignments are handled by the heads of its seven re­search divisions. TIER has adopted a diffused responsibility system, which al­lows the research divisions to work as independent units. Each unit shares half the profits of its work with the institute.

"At first, everyone objected to this arrangement," Liu says. "But now people see that it has financial rewards. It saves costs-and last year researchers in every division received a two-month bonus. The system encourages you to make use of everyone's strong points."

The relative autonomy extends to hiring. Each division has the liberty to recruit its own researchers, subject only to approval by the TIER director. This flexibility helps facilitate the accomplish­ment of the research work on hand, and it upgrades the competence of the whole institute by encouraging its divisions to compete with each other.

Liu is quick to point out that this sense of competition is primarily inter­nal. TIER is not trying to take work away from other local think tanks. "Our re­search fellows come primarily from local universities," Liu explains. "We try not to draw from Chung-Hua's research fel­lows, but we do cooperate because we all know each other very well and are friends." This working relationship is made even easier because Dr. Tsiang Sho-chieh (蔣碩傑), the president of Chung-Hua, was previously the director of TIER. Moreover, Chung-Hua's vice president, Dr. Yu Tzong-shian, was the classmate of Director Liu of TIER.

TIER's research work is divided into two types: those that flow from the specific interests of individual research­ers, and those that are in response to outside requests. They all deal with various practical topics. Examples: "A feasibility study on the enforcement of crop insur­ance in Taiwan," "An input-output model for projecting future demand for steel in Taiwan," "On problems of liberalizing the import of apples," and "Es­tablishment and development of the Pacific Basin Economic Council." The institute's publications list is lengthy, and invariably illustrates the highly practical nature of the institute's research. In many respects, the reports are what one would expect from a large U.S. consulting firm.

And like a consulting firm, TIER's existence depends upon the fees it collects from clients. "Quite in contrast with Chung-Hua," Liu says, "we rely completely on income from our research projects." TIER's annual income is slightly over US$6 million, with almost all of it coming from payments for re­search work.

Like Chung-Hua, TIER has found the private sector reluctant to fund re­ search. "Almost from the beginning," Liu says, "most of our requests for studies have come from the government." Some researchers complain that the pri­vate sector has long enjoyed "a free lunch" from local think tanks. "For example, stock investors will blame us for a drop in the stock market" Liu says, "but they won't donate a penny to us while they are making a fortune out of the market."

Nevertheless, Liu says that TIER is still actively cultivating the private sector. It has organized a club which gives advice to private entrepreneurs, and passes on statistical data and other forms of economic information to members. There are more than 500 members in the club, which accepts company memberships instead of individuals. Liu him­self presides over a meeting once a year to report on economic trends. The club has great long-term potential for TIER, especially if the private sector develops a clearer idea of the benefits that informed research can provide their own business planning.

"We were originally set up as an advisory body to the government," says President Tsiang Sho-chieh of the Chung-Hua Institution for Economic Research. The government was prompted to establish an independent economic research institute after the break in formal diplomatic ties between the ROC and the U.S. in January 1979. The institute was designed to promote stability and growth in the ROC's economy in the face of the uncer­tain new relationship with an old and trusted friend. After 17 months of plan­ning, Chung-Hua was formally established in July 1981 as a nonprofit and au­tonomous research institution.

Besides the break in diplomatic rela­tions, Taiwan's restructuring economy also indicated that the government needed to strengthen the intellectual backing for its economic policy decisions. Taiwan's industrial entrepreneurs were in dire need of expertise as the chal­lenges of changing international trade patterns and the specter of protectionism threatened to leave the ROC in a backwater of economic development. Moreover, the entry of mainland China into labor-intensive, low-value products was a direct threat to one of Taiwan's primary areas of export products.

In response to these challenges, the Executive Yuan directed the Council for Economic Planning and Development to prepare plans for establishing an eco­nomic research organization. The institu­tion, at first called the Overseas Institute, focused on the economic affairs of main­land China. But the name was soon changed to the Chung-Hua Institution for Economic Research, and its scope of work was broadened to include the study of both national and international economic affairs.

"The economic reforms in mainland China encouraged the government to promote research on the mainland economy, but it became evident that changes in the international economy were even more important," Tsiang explains.

Funding grew in proportion with Chung-Hua's expanded responsibilities, doubling from a budget of US$15 million to US$38.5 million, of which roughly US$35 million came from the ROC government and the Sino-American Fund for Economic and Social Develop­ment. The rest was donated by private enterprises.

The attempt to establish Chung-Hua at first caused a series of heated debates in the Legislative Yuan. Legislators were worried about whether it was proper for the government to fund a corporate institution that would act independent of government control. Officials from the Executive Yuan argued in defense of the idea, saying that the institution, as a separate corporation, would avoid many of the bureaucratic restrictions inherent in government agencies. The government would therefore be able to derive more timely response from the researc­hers, and the institution itself would also be in a better position to recruit qualified people from the academic community.

Chung-Hua, unlike TIER, was from the outset given the task of undertaking macroeconomic studies and other theo­retical work. "One of the major differences between Chung-Hua and TIER is that we study general economic issues, while they focus on local economic af­fairs," Tsiang says.

Dr. Hsueh Li-min (薛立敏), vice director of Chung-Hua's Third Institute, which studies the economy of Taiwan, explains Chung-Hua's research orienta­tion: "We study broader issues partially because of the kind of experts we recruit, and also because there is a kind of tacit mutual understanding between us and TIER on research focus." The differing emphases also make it easier for both institutions to find research staff in a rather limited market of available local talent. Chung-Hua's First Institute focuses on the Economy of Mainland China, the Second Institute on the Inter­national economy.

Chung-Hua has a full-time staff of more than 100. Of these, over 80 are researchers, divided into senior, associate, and assistant research fellows. The 50 scholars at the associate research fellow level and above all hold Ph.D. degrees, while the rest have M.A. degrees. Many of the latter are working on their doctor­ates. The institution is careful to cultivate its in-house talent even further. "In order to help scholars deepen their economic knowledge and keep it up­-to-date, research fellows with only M.A. degrees are offered ample opportunities for advanced study," Tsiang says.

Chung-Hua draws many of its staff members from overseas sources. "Every year we put ads in foreign aca­demic journals urging Chinese scholars abroad to consider returning to Taiwan and conduct their research here," Tsiang says. "We avoid recruiting professors who are already working in local universities because it would be unfair and would not help upgrade Taiwan's re­search community."

Researchers in Chung-Hua's three institutes have considerable liberty to choose the research work of their own interest unless they are aligned with a specific project that has been accepted from a government agency. The First Institute, which studies the economy of mainland China and its impact on Taiwan, is generally agreed to have enjoyed the most important role in the institution since its founding. "Chung­ Hua was initially established to study mainland economic issues," says Dr. Lee Hua-hsia (李華夏), the vice director of the First Institute, "so this emphasis in our research work is not surprising."

Nevertheless, the spotlight is grad­ually shifting to the Third Institute, which analyzes Taiwan's economy. "Al­though the government puts high value on our study of mainland economic af­fairs, the research work on the mainland's economic status is actually rela­tively limited in Taiwan," Lee says. The shift in emphasis is also due to the larger number of government projects now given to Chung-Hua concerning local economic affairs.

Institution researchers are also more inclined to work on local issues since most of the research done on mainland economic affairs have been classified or limited-circulation studies. Because of these publication restrictions, many younger scholars were reluctant to jeop­ardize their careers by having such low academic profiles.

Even though the former restrictions on publishing work concerning mainland China have been greatly relaxed, scholars are still more inclined to focus their efforts on Taiwan's economic development, especially since the so-called "Taiwan miracle" is rapidly moving into an even more complex stage.

Although the Third Institute is far busier than before, its research fellows face a number of difficulties. One of the most troublesome is the government's tendency to restrict the circulation of re­search results. "The government considers research studies secret time and again, especially when it is not satisfied with them," Hsueh Li-min says. "It seems as though the government hasn't yet realized that policies should be discussed openly before decisions are made."

To circumvent some of these diffi­culties, Chung-Hua has expanded its services to the intellectual community by hosting various forums and conferences. It also has increased the number of its open publications. "With the ex­ception of the research work done for the government, all research results are open to the public," Tsiang says. "But we are still terribly misunderstood—too many people think that we serve only the government."

Tsiang complains that the private sector has not yet cultivated the habit of farming out research to private institu­tions, but when it does, Chung-Hua will be pleased to accommodate their needs for in-depth economic analysis.

"To serve government is to serve society in indirect manner," says Liu Tai-ying of TIER. But sometimes it is a long time before the work bears fruit. Both TIER and Chung­ Hua have similar frustrations when deal­ing with the government: there is too much time wasted between the produc­tion of a study and the implementation of its recommendations.

"A long time ago, we advocated economic internationalization and liberalization," says Chung-Hua's Tsiang, "but the government only recently has taken the necessary steps. In the long­ term view, the government is finally catching up with our recommendations."

The same is often true of work done by TIER. "We have provided information and research results to the govern­ment through various channels, and around 80 percent of our recommenda­tions are accepted," Liu says. "But it takes a long time for things to be imple­mented. We suggested many of the government's recent policies a long time ago."

One excellent example of an institute recommendation that has worked very well is TIER's suggestion that shrimp be cultivated in Taiwan and sold to Japan as a replacement for declining farm product exports. Today, Taiwan is known as the "kingdom of shrimp cultivation."

Even when policies are finally adopted, it is often difficult for either TIER or Chung-Hua to identify the specific parts with roots in their own recommenda­tions. But this is a common fact of life in the interaction between think tanks and governments. The positive side of the picture is that recommendations are ac­tually useful and often are adopted. And as think tank researchers admit, it is the attractiveness of playing a role in policymaking that makes the effort seem worth it all.