Taiwan Taps Culture and Creativity to Upgrade Competitiveness

What should be the next step for Taiwan in its ongoing economic transformation? And what step needs to succeed, despite the huge uncertainty involved, if Taiwan wants to keep industrially ahead of its rapidly rising rivals.

For Linber Huang, deputy CEO of Taiwan Design Center (TDC), Taiwan's national design center, the answer is clear: the development of cultural and creative industries.

Huang notes that cultural and creative industries have made Europe the world's strongest and most influential economic power in the world.

An industrial designer for major home appliance and electronics companies in early years of his career development, Huang has been a major proponent for promoting the cultural and creative industries in Taiwan on the global stage.

With his extensive understanding of this sector, Huang has observed the development and transformation of major European nations and Taiwan, and on this basis has mapped out guidelines for Taiwan's future transformation.

Industrial transformation and upgrading have been hot topics in Taiwan since the early 1990s, when increasing land and labor costs, environment pollution, and weakening labor drive began hampering the island's global competitiveness.

Transform to What?

Since then, many Taiwanese companies have moved production to mainland China, giving rise to a cross-strait economy that has helped powered Taiwan's economy forward. Today, however, new challenges are requiring local industries to consider further changes.

"Most people will agree that Taiwan is losing its global competitiveness," Huang says. "Even our renowned information technology (IT) sector has seen profit margins dip to as low as 3% to 5%."

Huang says that Taiwan is shifting from a manufacturing-oriented industrial model to a quality- and technology-driven model. The shift, he says, is hard but necessary if the country wants to survive.

European Lessons

About 10 years ago, Taiwan was proud of the economic miracle it created after a short period of transformation from an agrarian to a manufacturing economy. The move generated huge inflows of foreign exchange and gave the island the comprehensive and solid manufacturing industry base that would support ongoing growth.

In Europe, Great Britain underwent a similar transformation two centuries ago during the industrial revolution, which turned the country into the world's top exporter of industrial products. It was followed by the U.S. after World War II, and then Japan. Taiwan followed Japan with an economic miracle of its own, this one rooted in a large number of small- to medium-sized enterprises (SMEs) scattered across the island, initially, and then throughout the world, especially in Asia and mainland China.

Renaissance of Cultural and Creative Industries in Europe

After the World War II, Huang continues, major industrially advanced nations in Europe worked hard to restore their economic prowess, but big American brands steamrolled through the global market and stayed there until Japan's industrial boom.

Why did the Europeans fail? Huang believes the reason is that for a very long period big families and enterprises in Europe manipulated and controlled most of the financial resources, big companies, and even government positions and the older-generation raised their younger-generation in a so wealthy environment and provided them with abundant resources including education in music, art, culture, and science. The result, however, was that in the eyes of the older-generation Europeans, the younger generation was undisciplined, lazy and interested only in playing around.

"The younger generation of Europeans grew up in a wealthy environment. However, this is the key to Europe's momentum today," Huang says. "The younger generation in Europe has grown up with an awareness of sense of responsibility and intention to be successful. Their character has been cultivated in a wealthy environment, giving them a taste for luxury, entertainment and creativity. This has given Europe an unmatched global edge in the luxury designer brands, such as LV, Channel, Giorgio Armani, and Versace."

Changed World

The sophisticatedly designed and luxurious boutique items such as neckties, wallets, handbags, and apparel, which are often sold at huge markets over generic counterparts, have won over Asian consumers and generated jaw-dropping profits for Europe.

"The older-generation of Europeans never thought of doing this," Huang says, "And this is a clear example of the value created by the cultural and creative industries."

"The world has largely changed and if you do not pay attention to the clues you will fall behind in the world," Huang says. "Bill Gates of Microsoft is the world's wealthiest man, and he has become so by selling software not industrial products. JK Rowling, the wealthiest woman in the U.K., is not a petrochemical tycoon but the creator of the Harry Potter novels. Both vividly demonstrate that the value created by cultural and creative industries far outstrips that generated by traditional manufacturing. Even in traditional manufacturing industries, about half of the production value generated now comes from the 'brand value' rather than the items themselves."

New Transformation

In the face of falling manufacturing production value and a rapidly rising mainland China, Huang says, "Taiwan must find a new way ahead and we have all the needed elements already!"

As in Europe, the success of Taiwan's next transformation lies with the younger generation, which grew up in a wealthy environment and has a taste for the finer things in life, Huang says. "We have to liberate the younger generation's creativity. And we need to tap the manufacturing capability of the older generation to commercialize this creativity into sophisticated products."

Technology + Culture + Design + Global Connection

Huang offers several guidelines to help Taiwan transform and upgrade over the next few years and recover its economic strength. "The first is a combination of technology, culture, design, and global connections."

"A good product depends on good design for appearance and good technology inside for functionality," Huang says. "In the past, Taiwan separated the development of high-tech industries and the cultural and creative industries, leading to a big gap between the two. But now it's time to link them together and integrate their strengths. If this succeeds, Taiwan-made products will join cultural and creative elements, high-tech functionality, and high quality achieved by superior manufacturing."

Huang notes that, while the designs of young Taiwanese designers might be premature, they still have strong potential to become globally hot-selling items with the backing of Taiwan's solid manufacturing, technology, and global marketing.

"What Taiwan has over Europe is its high-tech capability," Huang says, "And we can also match Europe in our manufacturing capability. Our weakness is in cultural heritage. But I think the younger generation has a much more global perspective than does their parents."

Event Operation

"Any big and major event can be 'operated' into a great business," Huang points out. It wasn't until 1996 that people began to realize that the Olympics could be a moneymaking machine. And the upcoming 2008 Beijing Olympics is already a big money earner for China's government and companies around the world."

In the past, according to Huang, most events or activities held in Taiwan have focused on the content and greatly neglected their business potential. "So, we should develop an 'event economy' in Taiwan, which would include an experience economy and field economy (tickets, souvenirs, etc.)," Huang says. "In addition, we also can more aggressively develop regional specialty industries that add value through creativity."

Modern life, Huang says, is about market segmentation in which different things, if carefully 'operated', can be totally different from what they were. For example, a competition for rice grown from different regions can produce award-winning strains that become best sellers that generate multiple values.

"The Louvre in France has become the world's largest single mall, for example," Huang says. "Cultural and creative industries are a fusion of various elements, which we can try to find and pursue."