How Taiwan Can Turn Coronavirus Victory Into Economic Success
Taiwan beat the virus with efficient government and advanced technology—the same ingredients that power the economy.
Taiwan has earned the world’s admiration for its fast and highly effective response to the coronavirus pandemic. As of June 1, Taiwan had only 443 confirmed infections and 7 deaths among a population of 24 million—and even has a functioning professional baseball league. This comes despite early modeling that projected Taiwan to have one of the highest risks of importing cases from China.
use of artificial intelligence and big-data applications, helping it to integrate its national health insurance database with its immigration and customs database, classify infection risks among inbound travelers, and monitor cell phones to undertake contact tracing and enforce quarantines.The central ingredients of Taiwan’s success have been efficient coordination across the public and private sectors coupled with innovative deployment of advanced technology—the very same recipe that has delivered decades of steady economic growth. Taiwan has also stood out for its ability to learn and apply the lessons from its bitter 2003 experience with the SARS outbreak in order to coordinate an effective governmental response. But the most notable component of Taiwan’s success has been its successful
This unique ability to integrate data and creatively apply technology helped Taiwan to withstand the first wave of the pandemic. The next question, however, is what Taiwan will do to use these advantages to assure a prosperous and competitive future on the other side of the crisis. And this challenge will grow more serious in coming years as Beijing further undermines Taiwan’s international support and ratchets up the pressure on its economy.
Taiwan’s immediate opportunity is to capitalize on its momentum and double down on investments in technology to ensure future health security. The pandemic has yielded a radical shift in the way governments and businesses view public health and define essential goods and services. With smart investments and new economic policies, Taiwan could use the crisis to become a regional leader in areas of biomedicine and pharmaceuticals.
President Tsai Ing-wen’s administration had already made biomedicine a focal point of its “five plus two” plan, a national economic development policy targeted at growth sectors including intelligent machinery, green energy, and advanced agricultural technology. As part of this plan, the government is also directing resources toward developing industry clusters for biomedical research and the production of high-value drugs. As the information and communications technology market approaches maturity, Taiwan-based hardware giants Foxconn and Quanta Computer have identified the growth potential of health care technologies and expanded their businesses into this sector, particularly digital health and artificial-intelligence applications.
Taiwan should encourage these developments, cultivate start-ups, and steer resources toward market opportunities beyond its shores. One example could be the use of artificial-intelligence technologies to dramatically raise the success rate of clinical trials—both by more effectively selecting participants and by improving the design of the trials themselves. If Taiwan can build on its track record of strong governance and intellectual-property protection, and position itself as a trusted manager of sensitive, high-quality health care data, it could attract many clinical trials from global pharmaceutical companies as therapies currently in the pipeline are brought to market.
Health care is just one example of how Taiwan might become a hub in data protection and cybersecurity. But to win that future, Taiwan needs a far broader effort to use technology than it has undertaken so far. In semiconductors and other advanced hardware components, for example, Taiwan has a long-standing innovation advantage—but that legacy advantage, ironically, has led it to underinvest in new and emerging industries.
Beyond exploiting its traditional semiconductor advantage, Taiwan should pivot toward a vastly more extensive play for data, not just hardware. Simply put: If companies decide that their data and research is safer in Taiwan than elsewhere—especially compared with conditions in mainland China—then this would be a highly attractive basis for investment in Taiwan. As new knowledge-based industries develop and mature, foreign investors may place a premium not just on data quantity, but also on quality and open access.
The moment could not be more opportune for Taiwan. The trade war and escalating conflict between the United States and China, in addition to the coronavirus pandemic, have accelerated broad-based structural shifts in East Asian manufacturing supply chains. All this could play to Taiwan’s advantage—if it is prepared to invest in an innovation-based future.
As supply chains reorganize and technology partnerships with Chinese companies fall out of favor, Taiwan can take concrete steps to become a preferred location for developing and testing, for example, 5G cellular network technologies and applications related to artificial intelligence. For instance, Taiwan has already joined the Asia-Pacific Economic Cooperation system for privacy rules and data transfer. It should also seek a determination by the European Union that it meets European data protection requirements, a position Taiwan could then use to become a regional and global cybersecurity powerhouse.
But Taiwan is not just a prospective beneficiary of supply chain realignment. As an importer of some 98 percent of the energy that powers its economy, Taiwan depends on fossil fuel shipments from volatile regions of the world. Here, too, technology investments hold the key. Recognizing the challenge of decarbonization, Taipei has set ambitious targets that would see energy from renewable sources rise from just 6 percent of 2019 electricity production to 20 percent by 2025—an addition of some 27 gigawatts of generation capacity. Indeed, Taiwan has made clean energy a pillar of its “five plus two” program.
In energy, Taiwan cannot possibly meet its targets without bold technology-based investments. The good news is that Taiwan’s potential to attract foreign investment in energy technology is clear. Partnerships with European firms have already made Taiwan a regional leader in offshore wind power at a time when Asia is projected to become the world’s largest market for wind-generated energy. In Taiwan alone, these projects are expected to generate $31.7 billion in new foreign investment. And in solar energy, Google teamed up with several local partners in 2019 to develop an array of floating solar panels to help power its large data center in Changhua.
But ultimately, simply scaling up capacity and attracting new technologies will not be enough—Taiwan will also have to innovate next-generation technology domestically. For Taiwan, the need to drive down costs and solve the electric grid and power storage issues associated with intermittent wind and solar power are particularly urgent given its land scarcity and high level of energy dependence. While much of the world faces similar imperatives, in many nascent areas a dominant market player has yet to emerge and the race for industrial leadership is open—including energy storage batteries, smart meters that better track renewable energy consumption, renewable natural gas, solar and battery waste recycling, and carbon capture and storage.
Dramatic paradigm shifts are reshaping all industries. But global public health and energy are two areas where strategic, technology-based investments would allow Taiwan to use its established strengths in technology and harness disruption to its advantage. If Taiwan decisively pursues smart specialization in these key areas of technology, it has the chance to carve out fresh market niches, secure and expand its integration into the global economy, and set itself on a robust growth path for decades to come. Taiwan has already been one of the few success stories in dealing with COVID-19, and the crisis has only sharpened its potential advantage. Taiwan should not let that go to waste.
Evan A. Feigenbaum is a vice president for studies at the Carnegie Endowment for International Peace.