Nine hours before a land warning was issued for Tropical Storm Talim on June 19, heavy rain was already pelting the windows of the Executive Yuan offices. Premier Sean Chen, who had been out checking on disaster prevention centers, walked into a meeting room after having a quick lunch for his first magazine interview since taking office five months earlier.

Chen has faced tense situations since pretty much the moment he took over as head of the Executive Yuan, challenged by a spate of thorny issues ranging from imports of American beef and a capital gains tax on securities transactions to the European debt crisis and natural disasters. Yet even now, he still tries to find comfort amid the difficulties.

Chen tells CommonWealth Magazine that every day when he returns home and sees his family's Bichon frise and Maltese dogs, he feels blessed. When Chen mentions his dogs, his face lights up with a smile, as if he were back in his carefree days as a scholar when he was able to speak freely.

Ask him what issue is giving him the biggest headache at the moment, and he says after a moment of reflection, "It's better that I don't answer that question." That's because in Chen's mind, every problem is extremely pressing and intractable.

On weekends, "if there are no funerals or typhoons, then I visit small and medium-sized enterprises." Chen places particular importance on SMEs, hoping to initiate a plan to reform the country's old-economy businesses by identifying model companies in 10 different sectors and promoting their successful commercial models.

Chen has spent his entire 24-year career in public service in finance. How does he plan to enhance the well-being of Taiwan's people and companies and the country itself? Following are highlights from CommonWealth Magazine's exclusive interview with the premier.

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National Well-being: GDP Still a Factor

Many formulas have been developed internationally to measure well-being, including Bhutan's Gross National Happiness Index and the relatively oft-used "Your Better Life Index" developed by the OECD.

The OECD uses 11 criteria and 22 indicators to measure well-being, but this is only meaningful if comparing similar countries. Also, you can't say a country has a high level of well-being if the index is high or not well-off if the index is low. It's still subjective.

Taiwan's economy is at a level where the OECD measure can be applied. The president said he wanted to set a standard to measure the country's well-being, and I think the goal can be achieved. The Directorate-General of Budget, Accounting and Statistics did a study of the issue last year, and I've given them until the end of this year to come up with an index.

To determine the level of a country's well-being, you have to start with its people and companies. First you have to figure out how to define a "happy person." My idea is pretty simple and revolves around the traditional idea of "living in peace and working happily."

"Living in peace" can be interpreted very broadly to include a person's family and housing. "Working happily" is related to your professional life, and it all starts with simply having a job. The next step is earning an adequate income, but what is adequate is truly subjective and depends on the individual. If the state of "living in peace and working happily" can be achieved, then that is real well-being.

Three factors identify good companies: one is satisfied shareholders, another is satisfied employees, and the third is satisfied customers. If a company's stakeholders are satisfied, then you have a good company.

But, if you have happy people and good companies, does that automatically indicate a country with a high level of well-being? In my opinion, not necessarily.

The factors resulting in a happy country are relatively complex. All we can say is that the vast majority of people should be "living in peace and working happily," but inevitably there will be those who are not. The country's responsibility is to help those left behind have a greater sense of well-being. So we have to improve social assistance programs and income distribution.

The "Golden Decade" we have advocated consists of eight major visions. The overall goal is to create "a prosperous, harmonious and sustainable Taiwan." Among the plan's eight visions, a dynamic economy and broad-based infrastructure are both related to increasing GDP. Even Bhutan's GNH and the OECD's "Your Better Life Index" cannot completely delink themselves from GDP.

I'm not saying that wealth can be equated with happiness. Some people do fine with just something to eat and something to drink. However, for most people, wealth is still quite important.

The vision of a fair and just society refers to achieving different balances within society and narrowing the gaps. The government needs to use the Public Assistance Act and adjust tax policy to redistribute income and transfer wealth.

Capital Gains Tax: Different Markets, Different Strategies

Of Taiwan's 23 million people, how many are invested in the capital markets? About 12 million accounts have been opened, and after second accounts held by the same person are excluded there are about 8 million people. Of those, there are 3 million who trade shares at least once a year.

If there's income, it should be taxed. That's only normal. But then you have to consider if such a move will have an impact on the market.

The stock market is very special because it's the showcase of the economy. If the market is sluggish, economic activity suffers. Stock markets produce secondary markets, and if secondary markets are anemic, when venture capitalists consider investing, they will be very hesitant, and will question the need to invest so much. So the stock market cannot be treated like a vegetable market. You have to be very careful.

Taiwan's stock market has existed for 40 years. There has often been talk of imposing a capital gains tax on securities trades, but it has never been implemented. Under such circumstances, you can't deal the market too harsh a blow. In other words, no matter what system is adopted, it cannot spark panic. Panic is really terrifying.

To me, the rise and fall of the market's index is not in the least important. I've never paid attention to the index. My main concern has been volume, because the most important factor in the market is that there are people willing to buy and sell, not whether prices are high. As a result, any measure imposed should not affect volume.

Some have linked (former finance minister) Christina Liu's advocacy of a capital gains tax to a decline in the market's benchmark index. This view has two shortcomings. First, during this time period, didn't stock markets around the globe all fall? Second, did volume shrunk as the index fell? If volume hasn't contracted, then there's no problem. But during that time period, volume fell, and I worried that the policy was having an adverse effect.

Chang Sheng-ford (the incumbent finance minister) and I have the same general attitude toward the capital gains tax – to first get the law in place, and then work to improve upon it.

Future Development: Three Sectors, Four New Orientations

The government made some mistakes in the past when it decided on behalf of the people which industries to develop. For example, time has proven that the decision to foster the DRAM and TFT-LCD sectors into "two trillion twin-star industries" was a mistake.

The government's role is to provide direction, signaling in which field development is needed. But when it comes down to what to produce, it's still better to leave that choice to private companies.

I think Taiwan's future direction should focus on "three sectors, four new orientations" – making the manufacturing sector more service-oriented, the service sector more international- and technology-oriented, and old economy businesses more oriented toward characteristics that will set them apart.

Injecting a service component into a manufacturing operation is not often seen in Taiwan. One example where it does occur is TSMC (Taiwan Semiconductor Manufacturing Co.). TSMC has design capabilities and can suggest to customers which ideas need modification. The customers end up feeling highly satisfied. This is what I mean by making the manufacturing sector more service-oriented.

Taiwan's manufacturers are extremely meticulous when it comes to their production processes, but innovation is somewhat lacking. Foreign experts often suggest that Taiwan move from its efficiency-based system to an innovation-based approach. The efficiency of Taiwan's manufacturing sector is unquestionably adequate. Production processes are very detailed, but they are not new.

Why has the DRAM sector fallen behind? Using technology licensed from abroad, we upgraded the production process, and for a period of time it worked, in part because of market demand. But over time, just fine-tuning production processes without being able to upgrade technology could not keep pace with South Korea's Samsung.

We want to develop the service sector, not along conventional lines but with a focus on a service sector featuring higher value-added and technology. The service sector must also incorporate technological concepts and reach out into the international arena.

(The restaurant chain) Din Tai Fung, for example, has so many foreign customers day and night that it's hard to get a table. That's the "internationalization" of the service sector.

As for old-economy businesses, we hope they can develop special characteristics. They have to incorporate some new things, as seen by the transformation of Taiwan's textile industry.

In the past, there was no future in the polyester fibers we were producing. But today, we can produce very thin fibers that are comparable to those made by the top international brands. They have the same basic functions, but they can come in different colors, can be waterproof and breathable, and wind resistant and insulating, and designed not to look crude.

Today, Taiwan has many old economy business incorporating new elements. I've found that many are related to environmental protection, green energy or new technologies.

About a month ago, I visited an edamame factory in Pingdong County reported on by CommonWealth Magazine. It was an old economy business willing to add new elements. There were 17 or 18 big harvesters. It was really spectacular.

Entering the factory, every employee wore a sterile gown, which put the minds of foreign customers at ease. The factory's hygiene was excellent, and its product could be taken home and eaten without having to do anything further. Every bean was beautiful. Most importantly, the factory had registered plant breeders' rights.

Big companies generally don't really need the government's help. SMEs are dynamic and have ideas, but because of their small scale, they don't draw a lot of attention.

When I head out of Taipei, I usually ask the boss of the SME I intend to visit to gather others involved in similar businesses or related fields. When I went to the edamame factory, for instance, a number of big and small edamame producers were all there. I was able to listen to their common opinions, and with everybody there, it seemed the same as a big company.

Taiwanese are really gifted, and it would be better if the government was less involved.

When President Ma went on his "long stay" during the 2008 presidential campaign, and he asked people what they wanted him to do if he were elected, they told him they didn't want him to do anything. What they wanted was small government.

Taiwanese are smart. There is a limit to what the government can do. Basically, we have to provide some services that allow citizens to live in a calm environment and do things without hindrances. That in fact is the government's most important role.

Why are we trying to improve our industrial structure? Because everybody has already drifted far off course. Just trying to keep labor costs down, just asking the government to give you an advantageous exchange rate – with this kind of thinking you can't improve.

What the government can do is help sectors make progress by using examples as models, hoping to lead the way in letting businesses know that there are other approaches – rather than only focusing on improving production processes or lowering costs.

Actually, there is no "big government" or "small government." It should be "appropriate." Governments are not made up of angels.

Those are not my words, but the words of the fourth president of the United States (James Madison), who said that if men were angels, no government would be necessary. But the government isn't made up of angels either. What he meant is that governments need to rely on systems rather than individuals to govern.
(Compiled by Fuyuan Hsiao, Rebecca Lin, Margaret Pai)

Translated from the Chinese by Luke Sabatier