Foxconn Suicide and ECFA

http://www.libertytimes.com.tw/2010/new/may/31/today-s1.htm

I think this is an extremely well written article.  While the foreign media probably still puzzling over the whole incident of Foxconn suicides, Liberty Times have taken a quite insightful look and point out the dilemma faced by Taiwanese business and the problems it creates for Taiwanese economy.

IMO, companies like Foxconn has done great damage to Taiwan’s economy.  Business in Taiwan suffers because the constant price war waged by Foxconn.  Employees suffer because the high number of outsourcing done by Foxconn has added to the downward pressure to the wages in Taiwan.  The only people that gain from this are probably the investors and the US consumers.  However, even US consumers probably didn’t gain much because at the same time they are enjoying the low prices of iPhone they are losing a lot of job opportunities.

Investors gain, but how much?  And how long can this gain be sustained?  And beside, most of the company is owned by Mr. Kou himself.  The profit margin of Foxconn is very low, which means a slight increases in wages of its workers can cost the company a great deal.  Furthermore, it’s obvious now that Chinese government is trying to weaken Foxconn in order to help domestic producers (Chinese government has used this tactics again and again in the past against foreign companies…ie, copy and learn from them first, then replace them with domestic counter part).  Where would Foxconn go from here…is worth observing?  Would it change its business strategy?  or stick to its gun and kiss more Chinese government’s ass?  I guess we will have to wait and see.

The Foxconn incidents should be a warning to the Taiwanese, especially when considering about ECFA.  IMO, Taiwanese economy does not need ECFA.  It does not even need more FTA (although many people, include those in DPP think FTA with Japan and the US would be great, IMO, FTA is not the top priority).  I think what Taiwan really needs is re-investment into Taiwan (government policies that encourage domestic investment instead of capital outflow) + gradual upgrades of industries (including soft skills such as marketing, innovation…the ability to pioneer and produce directly to the consumers instead of just working for foreign companies) -> lower unemployment with higher wages.  My knowledge is limited so I can’t say for sure this is the perfect way to go, but I think these types of things are more important, valid and less risky than lunatic’s shortcut like ECFA.   Furthermore, although not immediately, it solves the right problem Taiwan is facing now – low wage and unemployment, which ECFA completely fail to address anyway.

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