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Ⅰ. Taiwan’s Structural Weaknesses inKnowledge-based Innovation and Demandfor High-caliber Human Capital3

B. Taiwan’s structural weaknesses inknowledge-based innovation BrandingThe escalating pressure of “razor-thin profit” for theIT industry giving rise to the importance of brandingThe policy at table addressing this issue tends tofocus mainly on the managerial and marketing sideand ignore its aspect of technological innovation. Forward-looking Innovation and the Development ofthe Next-generation IndustriesIndustrial innovation in Taiwan is arguably biased, toquite an extent, towards incremental innovation,which may result in a risk of eventually losingmomentum for industrial migration and upgradingand value creation.5

C. Knowledge-based Innovation and Demandfor High-caliber Human Capital Each kind of the knowledge-based innovation has own distinctfeatures hence may require different means to cultivate thehuman capital needed.Codification ofknowledgeContextrelatedPathdependenceMilieu-relatedBrandingNote: W: weak; M: medium; S: strongWMWWForward-lookingInnovationMMSWBasicTechnologiesWSSWDesign &CreativityMWSS7

D. Main Policies to Cultivate the HighcaliberHuman Capital NeededBrandingForward-lookingInnovationBasicTechnologiesDesign &CreativityReturn ofmigrants●Recruitment ofinternationalmigrants●●●●Resourcingexpatriates●●Reinforcingthroughenvironmentdevelopment●●●8

Ⅱ. The Structural Change in Demand andSupply of Human Capital in Taiwan9

A. Forecast of the Long-term Demand &Supply of Human Capital in Taiwan Bachelor Degree(2005-2015)Unit: thousandsElectricalengineeringIndustrial DesignSource: CEPD (2005)10

A. Forecast of the Long-term Demand & Supplyof Human Capital in Taiwan(cont’ d) Master Degree & Above(2005-2015)Unit: thousandsIndustrial DesignElectricalengineeringSource: CEPD (2005)11

A. Forecast of the Long-term Demand & Supplyof Human Capital in Taiwan(cont’ d) Electrical engineering :Over-supply at the entrylevel but over-demand at the advanced level Structural shift in employment Knowledge intensification of human capital needed Industrial Design:Over-demand at both the entryand advanced levels Strengthening of university & industry collaborationfor the cultivation of human capital needed The other fields: An abundant supply of humancapital, which, however, may imply a potentialproblem of oversupply Cross-disciplinary cultivation of human capital andadjustments of curricula needed12

B. Taiwan’s International Network of HumanCapital The Number of Foreign White-collar Workers in Taiwan (1990-2004)OriginJapanAmericaCanadaKoreaMalaysiaU.K.PhilippinesIndiaAustraliaGermanyFranceTotal903,0412,6751,09279878866447831827624823512,301013,0012,7671,26284684776262333728825826213,173023,9673,2741,9088338881,00580837239536229816,786033,4023,0351,88170497495969837235726525115,462043,8433,3052,1985171,0161,01870234941822625816,550GR7.4%5.8%20.5%-9.4%6.6%12.1%11.7%2.5%12.2% Not many of them are categorized as professional workers in thehigh-tech fields.0.7%3.1%8.4%13

B. Taiwan’s International Network of HumanCapital(cont’ d) A Trend of Geographical Diversification in terms of TaiwaneseStudying AbroadDestinations of Studying Abroad in terms of the Visas IssuedUnit:No.4000070.00% Africa3500030000250002000015000100005000080 85 89 90 91 9260.00%50.00%40.00%30.00%20.00%10.00%0.00%AsiaOceaniaEuropeCanadaAmericaThe ratio of US tothe total16

B. Taiwan’s International Network of HumanCapital(cont’ d) Foreign Students from China in the US, EU and JapanUnited States Japan EU60504030201001998 1999 2000 2001 China and India as the major Sources of Foreign Students inthe US, while Taiwan on a Decreasing TrendAttributable in part to the expansion of the domestic higher-educationsystem and the declining birth rateTaiwan’s knowledge linkages with the US (esp. Silicon Valley) seemto be in the process of weakening.18

Ⅲ. The Structural Change in Demand andSupply of Human Capital aroundthe Globe19

A. International Mobility of HumanCapital around the Globe Asia, China and India in particular, has become the majorsource of foreigner high-tech workers around the globe.40Distribution of highly skilled expatriates by region of origin35302520151050Asia EU25 Africa South andCentralAmericaOtherEuropeCaribbeanNorthAmericaOceaniaOECDSource: OECD20

B. International Expansion & Relocationof R&D and Demand for Human Capital A Worldwide Trend to Raise R&D Intensity To meet the Lisbon Goal (3% by 2010), the EU alonewill need additional 0.5-0.7 million researchers. Due in part to the aging population, Japan isactively attracting foreign skilled workers, thosefrom China and India in particular. Relaxation of Immigration regulations on foreign ITprofessionals and researchers. Through the Japan Society for the Promotion ofScience (JSPS)to promote post-doctoral studies inJapan of foreigners (up from 537 in 1996 to 1,225 in2000) Some 169,000 foreign skilled workers in Japan in2001 (up from 85,000 in 1992); half of them fromChina21

B. Int’l Expansion & Relocation of R&D andDemand for Human Capital(cont’ d) A Trend of shifting towards East Asia in terms ofMNCs’ R&D offshoring, offshore R&D and high-endsegments of the value chain India well-known for software China more than a powerhouse in manufacturing UNCTAD : China and India as high-profile hostcountries for MNCs’ offshore R&D facilities Ranking for 2004:China (3rd), India (6th) Ranking for 2005-2009 : China (1st), India (3rd) ;Singapore (11th), Taiwan (12th), Malaysia (15th), Korea(16th), Thailand (17th)• East Asia as a whole as an emerging focal location ofknowledge-based jobs22

B. Int’l Expansion & Relocation of R&D andDemand for Human Capital(cont’ d) Despite a large population, shortage ofhuman capital in India may becomepossible and forthcoming.KPMG: a serious shortage of human capitalin the IT area by 2009•Infosys, Tata, and Wipro outreach to ChinaCost advantages of China currently as themain driver•The possibility of India and China workingtogether to redefine the tech world orderExpatriates return to India: some thirtythousand in 18 months23

B. Int’l Expansion & Relocation of R&D andDemand for Human Capital(cont’ d) China’s rapid expansion of the high-tech industryleads to an escalating pressure on human capital. China as the largest IT manufacturer in the world A policy to increase R&D intensity (1% in 2000;1.44%in 2004; 2% by 2010) A policy to Recruit Foreign Knowledge Workers byProviding a Variety of Incentives• an annual target of forty thousand foreign knowledgeworkers set for the period 2006-2010 (the EleventhFive-Year Developmental Plan)24

Ⅳ. The Policy Trend of theCultivation of Human Capital amongMajor Countries25

A. General Policy Framework for the Cultivationof Human Capital by OECD Countries Internal Part Supply-side• Increasing interest in S&T• Outreach to Women• Reforming curricula and training• Financial support for S&T studies Demand-side• Human Resource Incubating Centers• National Centre for Contact with Business community External Part Reforming immigrations Recruiting foreign students and researchers Attracting expatriate researchers26

B. Main Employment-relatedImmigration Policies in OECD Countries A Summary of the Main Policies Adopted Adapting selective migration policies (Canada, Australia) Introducing or reviewing specific migration programs (Germany,UK, USA, Norway) Creating labor shortage occupation lists (UK, Australia, Ireland) Easing labour recruitment and changes of status (France, Japan,Korea) Creating special incentive for recruiting highly skilled workers Problems with the Main Policies Adopted How to identify, select and access appropriate talents needed How to strike a balance between the foreign and domesticknowledge workers in terms of employment External constraints27

C. Policies towards Foreign KnowledgeWorkers in East Asia The Incentives Provided by Countries in East Asia Korea:Tax-free for salary Japan : Easing regulations on visa issuance andimmigration control Hong Kong:Easing regulations on work permits andapplication for residentship Singapore: Easing regulations on work permits andapplication for residentship Taiwan Already in Severe Competition with itsNeighboring Countries in Terms of AttractingForeign Talents Not only Taiwan but also Japan, Korea and China canclaim their niches to cooperate with India by takingadvantage of India’s strengths in software.28

Ⅴ. Suggestions for Policy of theCultivation of Human Capital in Taiwan29

A. Challenges ahead for Taiwan in termsof the Cultivation of Human Capital Taiwan will need to go through a substantial transformation interms of economic and industrial development The high-caliber human capital needed may not come outfrom the current developmental trajectory. Taiwan’s international knowledge network regarding humancapital is in the process of structural change, with its currenttrend possibly not favorable to Taiwan. A bad scenario: Brain circulation ( with Silicon Valley) mayturn into brain “diversion” (away from Taiwan).• Brain circulation between the US and East Asia (China, Indiaand Korea) remains or become strengthened, except forTaiwan. Something new need to be done in order to cultivate the highcaliberhuman capital needed. Taiwan’s strengths of recruiting, resourcing & retentionthrough economic development weakening30

B. A New Strategy for ConsiderationRecruiting expatriate &foreign talentsThrough major S&Tprograms to incubateoverseas Chinese-lednew technology-basedenterprises in TaiwanPostgraduate programsfor overseas Chinese inTaiwanIncentives to recruitforeigners & appropriateliving environmentTaiwan Viable economy Foreigner-friendlyenvironment Smooth Int’l linkagesLinks bet. university & industry Exploring and exploiting thecapacities of the university bystrengthening its links with theindustryResourcing throughoutpostsUtilizing such anintermediary as NIIT inIndia to recruit Indianskilled workers & totrain Taiwanesesoftware engineersThrough major S&Tprograms to establishlab-to-lab links forhuman capital as wellas R&D collaborationOffshore R&D byTaiwanese firms, withthe HQ strengtheningint’l coordinationcapabilities31

End of presentationThank you for your attention32

A. Characteristics of Knowledge-basedInnovation Degree of Knowledge Codification Explicit knowledge vs. Implicit knowledge Degree of Path-Dependence Fashion design vs. product development R vs. D The extent of knowledge being bypassed;possibility ofleapfrogging Relationships with the External Environment:Milieu-related Fashion design (local community) vs. science research(ivory tower) Relationships between the Two Sides of the Transaction:Knowledge Context-related Complexity and specificity of the knowledge system Onsite vs. offsite(All in relative terms)33

Major Host Countries of MNCs’ OffshoreR&D, 2004Source: UNCTAD(2005)34

Major Host Countries of MNCs’ OffshoreR&D, 2005-2009Source: UNCTAD(2005)35

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