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Top 2000 CEO Survey

Mild Recovery, Rising Wages


Mild Recovery, Rising Wages


Only 40 percent of Taiwan's top executives are optimistic about economic prospects in 2014, yet 70 percent are preparing to increase wages. CEOs nearly unanimously favor free trade agreements, but remain bearish on investment.



Mild Recovery, Rising Wages

By Jin Chen
From CommonWealth Magazine (vol. 538 )

Is there light at the end of the tunnel?

Following the slight uptick of 2010, businesses suddenly slumped back into the doldrums in 2013. The situation has remained bleak since then, and now that the especially dreary year 2013 is finally over, top executives are clearly sanguine about the global economic outlook for 2014.

Optimism Grows among CEOs

CommonWealth Magazine's Top 2000 CEO Survey shows 42 percent of respondents looking favorably on economic prospects for 2014, a nearly 15-point increase over 2013, marking the second consecutive year that optimism has risen.

"Be a little more optimistic, go for it, make a move!" said Douglas Hsu, chairman of the Far Eastern Group at a recent event when offering his outlook on 2014 and encouraging people not to be so pessimistic.

Among CEOs that took a favorable view of the global economy, confidence regarding "improvement in the European-American situation" was the key element. Liu Meng-chun, director of the Center for Economic Forecasting at the Chung-Hua Institution for Economic Research, observes that the US financial pressure has been given a temporary respite, whilst the Eurozone has clearly climbed back out from its lowest point.

Those CEOs that take a dubious look upon the global economy generally believe that the slowing down of China's economy combined with global market stagnation are cause for pessimism over the coming year.

Compared to previous years, whilst businesses have viewed "the sluggish European-American economies" as their greatest challenge, in the next year this concern will be overtaken by "intensified intra-industry competition," particularly in the high-tech manufacturing and financial sectors, in which over 70 percent of businesses face stiff competition. (Table 1)

In Taiwan's electronics industry, for instance, high-end products face the robust brand strength of major Korean manufacturers, whilst low-end technology faces the "Red Supply Chain" of Chinese industrial clusters, putting them under pressure from both sides.


It is especially worth noting that the proportion of Taiwan-based businesses that believe the government is inefficient and interferes with development has grown from 20 percent two years ago to nearly 50 percent this year. (Table 2)

This brings to light that, in contrast with South Korea's full-on promotion of free trade agreements (FTAs), Japan's "Abenomics" and quantitative easing by the US, Taiwan has done little, whether in terms of signing free trade agreements or internal restructuring, causing CEOs to shake their heads.

The most notable outcome of this year's Top 2000 CEO Survey is that 99 percent of the CEOs surveyed support stepping up the pace of FTAs, whilst 77 percent of CEOs would also like to see the Cross-strait Agreement on Trade in Services implemented without delay, reflecting their anxious states of mind. (Table 3)

Taiwan entered such pacts as a free trade agreement with New Zealand, economic partnership agreement with Singapore, and the Cross-strait Trade in Services Agreement with China in 2013. However, the latter remains under review, delaying further trade negotiations. Meanwhile, with Korea close to implementing a free trade agreement with China, National Central University economics professor Chu Yun-peng cautions it will hit Taiwan "like a nuclear blast."

In terms of business revenue and profitability, over 30 percent of CEOs project less than five percent growth in 2013, whilst 20 percent predict negative growth. However, the prospects look brighter for the new year, with over 90 percent of businesses forecasting positive growth. (Table 4)

There is reason for optimism for wage increases in Taiwan. Not only is the Wowprime Group set to give raises of 1.5 to 4.5 percent, but the CommonWealth Magazine survey shows that 72 percent of employers are considering raising average wages, a higher percentage than in past years. (Table 5)

Manufacturing Investment: Vietnam Replacing China

Although the European and American markets are getting back on track, the financial fluctuations of Southeast Asia remain difficult to predict, Asia remains a hotspot for overseas investment, with 57 percent of CEOs planning to expand their Asian markets. (Table 6)

However, a full 30 percent are not prepared to invest in Taiwan at all. (Table 7)

In terms of overseas investment by individual countries, with the rise of Chinese manufacturers, cross-strait industries have gone from complementing one another to being direct competitors. Further considerations such as looking for a secondary production base have cooled down the China Fever that has raged for years on end, with Vietnam having now become CEOs' top pick for investment in overseas manufacturing. (Table 8)

Cross-analysis by industry shows that Myanmar's service industry is looking especially strong. Wang Chih-kang, chairman of the Taiwan External Trade Development Council (TAITRA), describes it as "akin to when China announced the initial opening and reform policy," creating tremendous demand in such areas as the hospitality, real estate and human resources brokerage sectors.

Overall, apart from the financial industry, Taiwan's Top 2000 CEOs took a pessimistic view of China's investment climate. (Table 9)

What was the cause of their dismal outlook? The CEOs surveyed considered "the rising cost of labor" and "intense market competition" to be the biggest challenges to investment in China. (Table 10)

"Industry transformation and upgrading" are factors posing difficulty for the high-tech industry. The Chung-Hua Institution for Economic Research's 2014 Economic Outlook notes that products manufactured by autonomously developed Chinese industries now overlap and compete directly with Taiwan, placing additional pressure on Taiwanese enterprises to consider transformation and upgrading.

Worsening Taiwanese Investment Environment

Looking back closer to home, a record percentage of executives surveyed took a dubious view of Taiwan's investment climate, with 75 percent of CEOs looking upon it unfavorably. (Table 11)

The increasing proportion of those that find less justification for optimism is a clear signal that the time has come for the reform of Taiwan's investment environment.

The two major challenges facing Taiwan are "industry transformation and upgrading" and "government administrative efficiency." Breaking free of these barriers and moving ahead pose the most serious cause for concern for Taiwan. (Table 2)

In addition, 40 percent of enterprises believe that "sluggish domestic market demand" is a further major challenge. Domestic consumption cannot be stimulated with few to no prospects for increased wages among the lower and middle classes. The diminished number of tourists from across the strait on low-cost tours to Taiwan in the wake of China's implementation of a new tourism law can also be expected to have a considerable impact on Taiwan's hospitality-related industries.

Looking ahead to 2014, there is faint light in the valley and cause for a modicum of hope. However, the force of the rebound out from the doldrums will not just be determined by the health of the economy in general, but how well enterprises conduct transformation and upgrading so urgently needed at this time.

Translated from the Chinese by David Toman