Lack of clear foresight, endemic to Taiwan's researchers

[Okami]

Just read my dumbest least thought out articles by Taiwan’s indigenous geniuses. Maybe I’m being cynical, but I have serious issues with what he writes and would appreciate any info on how to send a retort to the Taipei Times.

Offending article:
taipeitimes.com/News/edit/ar … /17/210939

Somehow instead of thinking of a better way, Mr. Chen decides that copying another countries approach whole heartedly is the key to helping Taiwan.

Future arms purchases are necessary for Taiwan’s national defense, but there are financial difficulties and with hints that US prices are too high there is much cause for confusion.

If US weapon prices are too high, why is everyone buying them? A small point, but you genrally buy what works and has a good reputation. How many IDF’s did Taiwan sell?

According to the Science report, the Polish government purchased 48 F-16 fighter jets from Lockheed Martin on April 19, to replace its aging fleet of Soviet-made MiGs – a deal worth US$3.5 billion.

So the Polish Gov’t paid $72.9 million USD for each plane that normally sells for $35 million USD. Great bargain there guys, I have some great swampland to sell you in the Mississippi Delta.

According to Polish law, military purchases from foreign companies must be offset by a package of investments put together by the seller which is equivalent to the purchase price – the equivalent of attracting the same amount of foreign investment. This foreign capital is invested in projects from which both the foreign investor and Poland stand to profit.

Am I the only one to see the opportunities for abuse here? Corrupt powerful gov’t official says, “How about investing in my brother’s business? Could be a good idea.” I thought the general idea now was to take the corruption out of gov’t purchases. Also some of the best investment opportunities will be bought by foreigners. I think we all know how most citizens feel about foreigners buying up indigenous companies. Could you imagine how the shit would hit the fan if IBM or Texas Instruments tried to buyout TSMC or UMC? Or we can take a look at Japan, please note the cons put forth by Kazuhide Uekusa:
newsonjapan.com/cgibin/news/link.cgi?ID=35215
Irrational nationalism and the laws inspired as such are distorting and put off foreign investment. I think they destroy the principles of free trade.

Given the amount of military purchases, this would be very helpful for the nation’s growth. At the same time, it could be enormously helpful to Taiwan if the military would increase the transparency of its purchases, remove restrictions and create foreign investment.

Last time I counted, there was only one country selling weapons to Taiwan. Taiwan is already a security risk, with supposedly “secret” military bases being outed in the media. I think the problems they have with Humvees alone should show you some of the issues faced. How about the Air Force fighter jets being housed in sheet metal hangars when Taiwan only has an 8 minute warning for when missiles are fired from China. The US military report said they needed to be put in concrete hangars to protect them. Please explain the rational of buying amphibious vehicles to make a counter attack with a pitifully small Marine force against the mainland in case of a war.

Second, I hope that the nation’s technology sector, in particular the biological and pharmaceutical technology sectors, will be able to avoid what happened in Poland – having nothing to sell when our counterpart has the money. Strengthen R&D so that when this “military purchase reciprocity fund” come into existence, we can take the opportunity to export our bio-medical products in the same way we are now exporting our electronics products.

Piracy and copyright infringement is a serious problem in Taiwan and for the pharmaceutical industry. $25+ million dollars worth of pirated goods from Taiwan were seized by US customs in 2002. Why should investment go to the already over protected pharmaceutical industry, that the US is already complaing about? Do we want the pharmaceutical industry in Taiwan with the ability to manufacture and sell the strongest antibiotics when they are such abusers of them? What happens when they cut out companies with legitamite patents, investment and research? How are the patents, sales and profits split between the Foreign company and the indigenous company? What protection does the Foreign corporation have against bad/corrupt management?

Third, the government has two main tasks, the first being to explain this law – should it be passed – to sellers, so that they understand that it is mutually beneficial and not meant to create problems for them.

With Taiwan’s unelected bueracrat gods, how will this not lead to problems? Does a joint venture between a foreign company and a Taiwanese company count as a legitamite investment for the law. Can Taiwanese legislators be counted on to pass a fair law? How will the bueracrats interpret the law? Will it be the same interpretation island wide?

If Poland could do it, I hope Taiwan also will be able to do it.

Poland hasn’t done anything yet. The market for pharmaceuticals is fierce and highly competetive. How will Poland deal with Indian and Brazilian pharmaceutical pirates? There are a lot of serious questions that have to be answered before something like this is done.

This is just another “scholar” giving his opinion without adequately thinking out the consequences of the actions taken. With people like this in charge of Taiwan, I find it very surprising that they have led Taiwan this far. I think he fails to understand that such a law will only increase the price of weapons purchased. The last time Taiwan tried something like this with France, it caused huge scandals in both Taiwan and France that brought down politicians and have yet to be adequately investigated. Does he want the blood of Taiwanese on his hands for his ideas being put into law with the consequent effects of corruption and the silencing of witnesses. I hope this Mr. Chen Yao-chang thinks out his ideas next time before he decides to put them into print.

CYA
Okami

[MaPoSquid]

You said the price Poland paid seemed awfully high, but I’m not sure if you made the connection to their weird purchasing policy of “offsetting investments” – maybe that’s why they paid more than twice what the planes should have cost? (Assuming you’re right on the usual prices; I haven’t looked into F-16 prices lately, since I’ve been busy with a deal to buy some Predator UAVs. )

[Comrade_Stalin]

Usually ams purchases include the price of extras in the contract. Things like extra engines (when Taiwan bought it’s F-16’s I think they bought 2-3 extras per plane) in addition to various kinds of weapons pylons, along with different kinds of missiles/weapons systems and avionics. Also, training. Transition for pilots, even experienced pilots, isn’t as easy as switching from a Buick to a Ford. And what about training all of the support and maintenance personel? None of this can be done cheaply or quickly.

I’d really like to see the cost breakdown of the package.

---

OK. I just checked here:

af.mil/news/Apr2003/42203155.shtml

and:

aerotechnews.com/starc/2002/ … d_F16.html

"By selecting the advanced Block 52 F-16C/D, Poland has ensured its air force will be equipped with the most capable multirole fighter in NATO. Additional elements of the winning package include the most advanced U.S. weapons, training performed by the U.S. Air Force, and long-term support of the aircraft. The U.S. government has also provided a low interest loan to help the Polish government finance the purchase.

Poland will become the ninth European country and the 24th in the world to fly the F-16. Poland joins a NATO force of over 1,000 other F-16s throughout the region. Powered by Pratt & Whitney engines, the 48 Polish F-16s are projected to be in service for more than 30 years."

[Okami]

I am not sure that such a price is warranted, I know extras are included and low cost loans probably came from the US Export Bank. In any situation the cost of the planes would of been raised to offset the risks of investing in Poland.

I think Blueface666 hit it on the head a lot of extras would of been included, but it still seems like a high price per plane, especially for one in service for over ten years and made in the numbers that the F-16 has been made in(3000+ I believe).

I agree that foreign direct investment(FDI) is good, but too little or too much can be a very bad thing. FDI also has the bad habit of being pulled out quickly as any Latin American country(particularly Brazil or Argentina can attest too). Causing some serious currency fluctuations and hardship. I think FDI will be a highly regulated/controlled by developing countries in the future. I think this fits in well with the left socialist style gov’ts of Latin America. I’m not sure about other countries, though I can see FDI being severely regulated in Japan in the next couple years depending on the mood and direction future Japanese PM’s decide on. I know it probably turns Koizumi’s gut, him being a hardcore nationalist seeing Japanese assets being bought by foreigners. He has a hard enough time dealing with foreign(normally English) loan words popping up in Japanese.

Personally, I think politicians should stay out of commerce and business and instead focus on society, laws, education, civil rights and health care. I have great difficulty seeing them focus so much on business when business will take care of itself if given the proper room to mature and grow.

Okami

[imyourbiggestfan]

@Okami

FDI also has the bad habit of being pulled out quickly as any Latin American country(particularly Brazil or Argentina can attest too). Causing some serious currency fluctuations and hardship.

Actually, I don’t think FDI is quite that mobile - it tends to incur quite a lot of sunk costs when you build a factory in another country and you are more likely to try and ride out any financial storms.

@Okami

I think FDI will be a highly regulated/controlled by developing countries in the future.

probably. I think that countries are using whatever means they can to increase the proportion of FDI relative to portfoli investment and particularly cross-border bank lending (which is far more volatile*). As such, it is not a bad aim.

Nevertheless, I share your concern that FDI which is motivated as a way of winning lucrative arms contracts is likely to be of a much lower quality that FDI which is motivated because it is expected to be profitable i its own right.

So, I agree with your assessment that the policy suggestion is somewhat wrong-headed. A more direct approach to winning more FDI would be to build the legal and market institutions that reduce risks to the overseas investor. of course, this is comparatvely hard and time-consuming. (But i think a lot of China’s success in attracting FDI is due to just such changes).

Some other governments, hoever, do seem to be opting for quicker, “easier” ways to attract FDI with all the ‘perks’ that may be involved for corrupt officials, too!

*take a look at The Economist’s recent survey of global capital. its not a great in-depth survey, but makes a few reasonable points about the mix of investment.

[Okami]

Finally got time to reply to your post

Actually, I don’t think FDI is quite that mobile - it tends to incur quite a lot of sunk costs when you build a factory in another country and you are more likely to try and ride out any financial storms.

Actually that is true a factory ain’t going no where but the machines can and sometimes do. The things that gets me is Gov’t bonds in a foreign cureency, often US dollars. As money flees the country the gov’t has to use more and more of its own money to pay interest and principal on its debt. This is what happened to a lot of SE Asian and Latin American countries. They eventually found that the only money they could borrow was at huge interest rates if it was available at all. Hence why a strong stable banking system or money distribution system is especially important. GOv’ts make the laws and regulations to keep these things running, though not often efficiently.

What bothers me is short term thinking to handle long term problems. Structural and regulatory problems endemic to the world can be handled, but there is often a lack of will or the inability to see a better way. Without the support of Asia buying all the US dollar assets they can, the US dollar would plummet. Europe is already getting a rude shock from this and talking to them about it. I think with little effect. I’m looking forward to sitting down and reading the Amcham white paper on Taiwan. The problems stated are usually the ones not read or seen in any newspaper or media outlet, but ones that do affect our lives. Does anybody have a copy that is unzipped or printed out that they could loan to me?

Okami