A curious feature of Western culture is the tendency to go to extremes when describing the East. No field exemplifies this tendency better, or worse, than economics. Only two decades ago--not long by either culture's reckoning--Western experts were writing that Confucian cultures were uniquely advantageous for high productivity. This was the period when Taiwan and its neighbors were referred to invariably as dragons, or at least tigers. This line of analysis seemed to suggest that the click of the abacus was the ticking of a bomb. East Asia would soon conquer the world.
Alas, not even dragons and tigers are immune to the rough turns of the business cycle. All economies have their good times and bad. The curve looks like the ups and downs of a dragon's tail. In the 1990s the tails of the economic dragons drooped. With impressive adaptability, the same Western experts who had been writing about a Confucian conquest of the world now wrote that the abacus had come unstrung. The experts wrote in dire terms about "the Asian economic crisis." And there was indeed a problem. But in Western journalism every two-aspirin headache becomes a "crisis."
That brings us to the present time. Taiwan, in particular, is doing well. A recent Taiwan Business Alliance conference for international investors gives us a snapshot. The Boeing Co. of America announced that components for its new 737s would be made by a state-owned company in Taiwan. The telecommunications corporation Ericsson announced that it would build a mobile-telephony development center here, reporting direct to Ericsson's head office in Sweden. Dell, Hewlett-Packard, IBM, Microsoft, and Sony all made similar announcements.
The conference showcased this country's basic strengths. The Economist Intelligence Unit ranks Taiwan as the third best place in Asia to do business. Taiwan has the world's third highest foreign exchange reserves. Taiwan ranks first in the world in output of LCD monitors, notebook PCs, PC cameras, ADSL modems, memory disks, LAN cards, and many of the other tech-tools and toys that define our time. Andy Grove of the Intel Corp. sums it up pithily: "If Taiwan stopped working, the world's personal computer industry would come to a complete halt."
No fear of that. Confucian Taiwan continues to work. Taiwan invests heavily--3 percent of its gross domestic product--in research and development. This investment has moved Taiwan's economy from being imitative to being creative. The U.S. Patent Office reports that Taiwan is the fourth biggest country of patent-origin in the world, exceeded only by America itself, Japan, and Germany.
But the news at the investment conference was not limited to technology. Britain's biggest retailer, Tesco PLC, which already has four outlets in Taiwan, said it would open as many as six more. Tesco is also preparing to produce house-branded products here for export.
Taiwan is not alone in its prosperity. While in the West the e-bubble has burst and deficits have deepened, in the East it may be time again to speak of dragons and tigers. Three distinct Asian subregions are prospering, even booming. They are Northeast Asia (Japan and Korea), China (including Hong Kong), and Southeast Asia (the ASEAN bloc). Good for them. And good for Taiwan, because Taiwan is at the geographic center, the pivot-point, of all this prosperity. So a lot of regional trade passes through the island. United Parcel, Fed Ex, and DHL all have their Asian hubs at Chiang Kai-shek International Airport. NYK, Japan's biggest shipping line, is making Kaohsiung its main East Asian port. And Mr. Grove's Intel is building its Asia -Pacific warehousing center in Taiwan. The investment conference heard new proposals from the government for air cargo service between Taipei and Shanghai.
Joining the World Trade Organization in 2002 was a great step in attracting foreign investment here. The government has been scrapping customs regulations that once hindered trade. Laws that distinguished between foreign companies and domestic have been rescinded. Restrictions on stock exchange and over-the-counter listings have been eased. So have immigration formalities.
Companies can quickly write off the depreciation of machinery. They get tax credits for investing, for example, in recycling and pollution-control, in clean energy and greenhouse-gas reduction, in research and development, or in the training of their workers. Shareholders get tax credits for investing in designated industries. Regional headquarters in Taiwan can receive income from surrounding countries free of business income tax. Land in industrial estates is rent-free for two or three years. In short, Taiwan offers a comprehensive buffet of investment incentives.
These incentives reflect what most in Taiwan consider wise policy on the part of the government. But government policy has followed the people. It is the people who have made the prosperity. Every year, more than 20,000 citizens of Taiwan earn master's degrees or doctorates. A high proportion of university students study abroad. With their degrees, they bring home foreign-language fluency, experience in working with inscrutable Westerners, and a cosmopolitan openness to new ideas. This is the ethos of the Confucian scholar in its latest manifestation.
The government still has a coordinating role to play at home, and a publicizing role abroad. The Business Alliance conference was an excellent example. One thousand four hundred business people attended, among them the chief executives of some of the biggest Western corporations. It is easy to be jaded by the spectacle of that many business people with name-tags on their lapels and glasses and paper napkins in their hands. But getting those investors to come to Taiwan, getting them (after the cocktail party) to visit the factories and the laboratories, is the best way to wean the West from its tendency to go to extremes in thinking about Asia. The story here is more, and more complex, than the click of the abacus. The Taiwan Business Alliance conference did a good job of telling that story. More such efforts are needed.