Contents

Contents

i

Contents Foreword Tables..................................................................................................................... iv Figures ................................................................................................................. viii Summary ............................................................................................................... xi

Part One Recent Development of SMEs Chapter 1 Changes in the Macroeconomic Environment ...................1 I

Changes in the Domestic and International Social Environment .................................... 1

II

Changes in the International Economic Environment ..................................................... 3

III

The Chinese Economy – Key Trends and Major Issues .................................................. 8

IV Changes in the Business Environment in Taiwan.......................................................... 11

Chapter 2 An Overview of SME Development....................................19 I

The Status of SMEs in Taiwan....................................................................................... 20

II

The Development of Taiwan’s SME Sector .................................................................. 28

III

Operational Performance of SMEs Owned by Female Entrepreneurs .......................... 35

IV International Comparison............................................................................................... 40

Chapter 3 Financial Status of SMEs....................................................47 I

Overall Financial Status of SMEs .................................................................................. 48

II

Financial Analysis by Industry....................................................................................... 57

III

Sources of Funding for Manufacturing Industry and Reasons for Experiencing Difficulty in Acquiring Funds ........................................................................................ 65

IV Financial Institutions and SME Financing..................................................................... 68

Chapter 4 The Current Status of SMEs’ Labor Utilization ................77 I

Labor Usage in SMEs .................................................................................................... 77

II

Labor Conditions in SMEs............................................................................................. 88

ii

III Manpower Cultivation in SMEs..................................................................................... 93

Chapter 5 The Current State of SME Trade and Overseas Investment Activity ...........................................................101 I

Overview of Taiwan’s Imports and Exports ................................................................ 102

II

Trends in Overseas Investment by SMEs .................................................................... 104

III SME Investment in China ............................................................................................ 111 IV Areas That SMEs Need to Focus on in Their Overseas Investment Activities ........... 119

Chapter 6 Technology Utilization, R&D and Innovation in the SME Sector..............................................................125 I

R&D Inputs .................................................................................................................. 125

II

Government Promotion of R&D and Innovation in the SME Sector .......................... 132

III

Case Studies of Successful R&D and Innovation ........................................................ 135

IV Strategies for Strengthening Innovation and R&D ...................................................... 137

Part Two Special Topics on SMEs Chapter 7 SMEs in the M-shaped Society ........................................139 I

The Gradual Emergence of the M-shaped Society in Taiwan ..................................... 140

II

The Impact of the “Limits to Growth” is Being Felt More Rapidly ............................ 143

III

The “Third Wave” and the Evolution of the Knowledge Economy ............................ 146

IV SMEs’ Responds to the New Trend – Dangers and Opportunities.............................. 148

Chapter 8 The Brand Management Models Adopted by Taiwan’s SMEs ..................................................................155 I

Definitions of Branding and Its Significance............................................................... 156

II

Case studies of Brand Development by Taiwanese SMEs .......................................... 157

III

Policies and Measures Adopted by the Government to Promote Brand Development in Taiwan .................................................................................... 168

IV Difficulties Encountered by SMEs When Developing Their Own Brand ................... 172 V

Recommendations ........................................................................................................ 174

Contents

iii

Chapter 9 Strategies for the Development of Emerging Markets by SMEs...............................................................177 I

Which Emerging Markets Should Taiwanese SMEs Focus On?................................. 177

II

The Development of Emerging Markets by Taiwanese SMEs – Opportunities and Challenges ...................................................................................... 180

III

Strategies gor Developing Emerging Markets ............................................................. 190

IV Policy Recommendations for Helping SMEs to Develop Emerging Markets............. 198

Part Three Government SME Policies and Prospects Chapter 10 The Government’s SME Policies and Measures ..........207 I

Creating a First-rate Environment for SME Development .......................................... 207

II

Establishment of SME Start-up and Incubation Platforms .......................................... 210

III

Upgrading SMEs’ IT Capabilities................................................................................ 215

IV Strengthening the SME Management Guidance Funtion ............................................ 218 V

Integration of SME Financing Mechanisms ................................................................ 225

VI The Resources Allocated by the Government for SME Development ........................ 232

Chapter 11 The Perspective of SME Policy in Taiwan.....................237 Appendix................................................................................................251 Index.......................................................................................................267

iv

Tables Table 1-2-1

Global Economic Growth Rates, 2003–2007 .................................................. 4

Table 1-4-1

Key Indicators for the Taiwanese Economy, 2002–2006 .............................. 12

Table 1-4-2

Taiwan’s Foreign Trade Performance............................................................ 14

Table 1-4-3

Taiwan’s Exports to and Imports from Its Major Trading Partners in 2006............................................................................................................ 15

Table 2-1-1

Enterprise Performance in 2006 – by Size..................................................... 21

Table 2-1-2

The Number of Enterprises in 2006 – by Enterprises Age ............................ 27

Table 2-1-3

Geographical Distribution of SMEs in Taiwan in 2006 ................................ 29

Table 2-2-1

Trends in SME Age, 1995 – 2006.................................................................. 33

Table 2-2-2

Newly – established SMEs’ Shares of All SMEs and of SME Sales, 2000 – 2006.................................................................................................... 34

Table 2-3-1

Number of Enterprises and Sales Performance in 2006 – by Sex of Business Owner ............................................................................. 36

Table 2-3-2

Enterprise Age Structure in 2006 – by Sex of Enterprise Owner .................. 39

Table 2-3-3

Individual Industries Shares of the Number of Enterprises, Total Sales and Export Sales in 2006 – by Sex of Enterprise Owner............................... 40

Table 2-4-1

The Definition of SMEs Used in Different Countries and Regions .............. 41

Table 2-4-2

International Comparison of SMEs................................................................ 44

Table 3-1-1

Consolidated Financial Data for Taiwanese Enterprises, 2003 – 2005 ......... 49

Table 3-1-2

Profit and Loss of Taiwanese Enterprises, 2003 – 2005................................ 52

Table 3-2-1

Financial Status of Enterprises in 2005 – by Industry ................................... 58

Table 3-2-2

SMEs’ Consolidated Balance Sheet in 2005 – by Industry ........................... 59

Table 3-2-3

Large Enterprises’ Consolidated Balance Sheet in 2005 – by Industry......... 60

Table 3-2-4

Profit and Loss Structure in 2005 – by Industry ............................................ 63

Table 3-2-5

Financial Ratios for Individual Industries in 2005......................................... 64

Table 3-3-1

Sources of Funds for the Operations or Investments of Manufacturers in 2006............................................................................................................ 66

Table 3-3-2

Reasons Given by Manufacturers for Experiencing Difficulty in Securing Funding, 2006 ................................................................................. 67

Table 3-4-1

Top 10 Banks by Amount of Loans to SMEs, End of 2006 .......................... 70

Table 3-4-2

Top 10 Banks by the Percentage of Total Loans to SMEs in 2005 and 2006 ............................................................................................ 71

vi

Table 4-3-6

Types of Human Talent for Which Business Enterprises Anticipate a Significant Demand in the Future.............................................. 98

Table 4-3-7

Employees’ Willingness to Participate in Professional Training Activities.......................................................................................... 99

Table 4-3-8

Budgets Allocated by Business Enterprises for Professional Training Activities.......................................................................................... 99

Table 5-1-1

Taiwanese Enterprises’ Export Sales, 2003 – 2006..................................... 103

Table 5-2-1

Approved Overseas Investment by Region, 2002 – 2006............................ 105

Table 5-2-2

The Top Ten Business Areas in Which Taiwanese Enterprises Invested Overseas in 2006 – by Enterprises Size ........................................ 108

Table 5-2-3

Percentage of Enterprises Reporting Particular Factors Motivating Overseas Investment in 2006 .................................................... 109

Table 5-3-1

Profit or Loss of Main Overseas Operation in China in 2005 – by the Year in Which Investment in China Began....................................... 112

Table 5-3-2

Profit or Loss of Main Overseas Operation in China in 2005 – by Main Business Area in Taiwan ............................................................... 113

Table 5-3-3

Profit or Loss of Main Overseas Operation in China in 2005 – by Main Business Area in China.................................................................. 113

Table 5-3-4

Reasons for Failing to Make a Profit Reported by Taiwanese Enterprises Whose Main Overseas Operation Was in China in 2005 ......... 116

Table 6-1-1

Private Sector R&D Expenditure by Enterprise Size, 2003 – 2005 ............ 126

Table 6-1-2

Taiwanese Enterprises’ Total and Overseas R&D Expenditure in 2005..... 128

Table 6-1-3

Characteristics of Employed Persons Working in the Hi-tech and Knowledge-intensive Industries in 2005 and 2006 ............................... 131

Table 6-1-4

Characteristics of Employed Persons Working in the Culture and Creative Industries in 2005 and 2006.................................................... 133

Table 8-1-1

The Advantages and Disadvantages of Branding ........................................ 157

Table 8-2-1

Taiwan’s Ten Strongest Brands in 2006 ...................................................... 158

Table 9-2-1

The Ten Main Factors Motivating Overseas Investment in 2006................ 180

Table 9-2-2

The Ten Most Commonly Reported Problems Experienced by Taiwanese Enterprises Investing Overseas in 2006................................ 182

Table 10-5-1 The Number of Credit Guarantees Provided by the SME Credit Guarantee Fund and the Combined Value of the Guarantees, 2001 – 2006.................................................................................................. 227 Table 10-5-2 The Cumulative Number of Cases and Value of Individual Types of Credit Guarantee as of the End of 2006................................................... 230

Contents

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Table 3-4-3

Outstanding Loans to SMEs by the Banking Subsidiaries of Financial Holding Companies in 2005 and 2006........................................................... 73

Table 4-1-1

The Number of Persons Working in SMEs in Individual Industries in 2005 and 2006 ............................................................................................ 79

Table 4-1-2

Characteristics of Employed Persons in Taiwan in 2005 and 2006............... 80

Table 4-1-3

The Number of Paid Employees Working for SMEs in Individual Industries in 2005 and 2006 ..................................................... 81

Table 4-1-4

Characteristics of Employed Persons in Taiwan in 2005 and 2006............... 82

Table 4-1-5

Characteristics of Employers in 2005 and 2006 ............................................ 83

Table 4-1-6

The Number of Employers and Self – employed in 2005 and 2006 – by Industry...................................................................................................... 84

Table 4-1-7

Characteristics of Self – employed Persons in 2005 and 2006 ...................... 85

Table 4-1-8

Characteristics of Employed Persons Working in Important New Emerging Industries in 2005 and 2006.................................................. 86

Table 4-1-9

Characteristics of the Unemployed in 2005 and 2006 ................................... 87

Table 4-1-10 Choice of New Employer by Former SME Employees................................. 87 Table 4-1-11 Number of Foreign Laborers Employed by Large Enterprises and SMEs, 2003 – 2006.................................................................................................... 88 Table 4-2-1

Average Monthly Salary in 2005 and 2006 – by Industry............................. 89

Table 4-2-2

Personnel Costs as a Percentage of Operating Costs and Operating Expenses in 2005............................................................................................ 90

Table 4-2-3

Working Hours per Week in 2005 and 2006 – by Industry ........................... 91

Table 4-2-4

Weekly Working Hours for Employees in the Private Sector in 2005 and 2006 ............................................................................................ 92

Table 4-2-5

The Number of Labor Disputes and the Number of Persons Involved, 1999 – 2006.................................................................................................... 93

Table 4-3-1

The Results of the Plan for Integration of Training and Placement for the Unemployed, 2001 – 2006 ............................................................................. 94

Table 4-3-2

The Number of Employees Participating in Professional Training, 1998 – 2005.................................................................................................... 95

Table 4-3-3

Expenditure on Training as a Percentage of Operating Costs and Operating Expenses in 2005........................................................................... 96

Table 4-3-4

SMEs’ Motivation for Implementing Professional Training in 2006............ 97

Table 4-3-5

The Professional Training Items That Business Enterprises Viewed as Being Most Important, 2004 – 2006.......................................................... 97

Contents

vii

Table 10-5-3 Delinquent Loan Ratios for Loans Obtained through Credit Guarantees, 1975 – 2006.................................................................................................. 231 Table 10-6-1 Resources Allocated to SME Guidance by the Ministry of Economic Affairs ......................................................................................... 233 Table 10-6-2 Government Spending on SME Project Financing Loans in 2006 .............. 234

viii

Figures Figure 1-2-1

Fluctuations in the Spot Prices of Crude Oil (West Texas Intermediate) in 2006 ............................................................................................................. 7

Figure 1-4-1 Economic Indicator Signals for Taiwan in 2006 ........................................... 12 Figure 2-1-1 The Shares of Key Performance Indicators Held by SMEs and Large Enterprises, 2005 – 2006 ..................................................................... 21 Figure 2-1-2 Domestic Sales’ and Export Sales’ Shares of Enterprises Total Sales in 2006 – by Enterprises Size......................................................................... 22 Figure 2-1-3 Newly – established Enterprises’ Sales Performance in 2006 – by Enterprises Size ......................................................................................... 23 Figure 2-1-4 Newly – established SMEs’ Shares of the Number of Enterprises and of Sales ........................................................................................................... 24 Figure 2-1-5 Domestic Sales’ and Export Sales’ Shares of Newly – established Enterprises’ Total Sales in 2006 – by Enterprise Size ................................... 24 Figure 2-1-6 Individual Industries’ Shares of Selected SME Indicators in 2006 ............... 25 Figure 2-1-7 Individual Sectors’ Shares of Selected SME Indicators in 2006 ................... 26 Figure 2-1-8 The Shares of SMEs and Large Enterprises Held by Forms of Organization in 2006...................................................................................... 28 Figure 2-2-1 The Number of SMEs in Taiwan, and SMEs’ Share of All Enterprises, 1981 – 2006.......................................................................... 29 Figure 2-2-2 The Number of Enterprises with Capitalization of Less Than NT$100,000 and Their Share of All Enterprises, 1987 – 2006 ..................... 30 Figure 2-2-3 SMEs’ Annual Sales and Their Share of Total Sales for All Enterprises, 1986 – 2006.......................................................................... 31 Figure 2-2-4 SMEs’ Export Sales and Share of Total Export Sales for All Enterprises, 1997 – 2006.......................................................................... 33 Figure 2-3-1 Domestic Sales’ and Export Sales’ Shares of Total Sales in 2006 – by Sex of Business Owner ............................................................................. 37 Figure 2-3-2 Taiwan’s Industrial Structure in 2006 – by Sex of Enterprise Owner........... 38 Figure 3-1-1 Short-term Liquidity of Taiwanese Enterprises, 2004 and 2005 ................... 54 Figure 3-1-2 Long-term Stability of Enterprises in 2004 and 2005.................................... 55 Figure 3-1-3 Operating Capability of Enterprises in 2004 and 2005.................................. 56 Figure 3-1-4 Profitability of Enterprises in 2004 and 2005 ................................................ 57

Contents

ix

Figure 3-4-1 Share of Total Financing Held by Direct and Indirect Financing, 1993 – 2006.................................................................................................... 69 Figure 3-4-2 Business Financing Channels, 1993 – 2006................................................... 69 Figure 3-4-3 Changes in Bank Loans to SMEs by Regular Banks ..................................... 74 Figure 3-4-4 Average Interest Rates on New Loans Extended by Five Leading Banks, 1995 – 2006........................................................................................ 76 Figure 4-1-1 The Number of Employed Persons in Taiwan, 2001 – 2006 ......................... 78 Figure 4-1-2 The Number of Paid Employees in Taiwan, 2001 – 2006 ............................. 80 Figure 5-2-1 Approved Investment in China in 2006 – by Industry................................. 106 Figure 5-2-2 Percentage of Taiwanese Manufacturing Enterprises Investing in Individual Regions (Top Five) ................................................................... 107 Figure 5-2-3 Percentage of Taiwanese Enterprises Investing in the US and China – by Size ............................................................................................ 108 Figure 5-2-4 Profitability of Enterprises’ Most Important Overseas Operations in 2005.......................................................................................................... 110 Figure 6-1-1 Taiwan’s R&D Manpower in 2005 – by Manpower Category.................... 128 Figure 6-1-2 Corporate Sector R&D Manpower in 2005 – by Manpower Category ....... 129 Figure 6-1-3 Corporate Sector R&D Manpower in 2005 – by Level of Education.......... 130 Figure 6-1-4 Corporate Sector R&D Manpower in 2005 – by Age.................................. 130 Figure 7-1-1 The Annual Sales Revenue and Earnings of the Thousand Largest Manufacturing Enterprises in Taiwan, 1994 – 2005....................... 144 Figure 7-1-2 The Annual Sales Revenue and Earnings of the Five Hundred Largest Service Sector Enterprises in Taiwan, 1994 – 2005 ....................... 144 Figure 7-1-3 The Annual Sales Revenue and Earnings of the Hundred Largest Financial Institutions in Taiwan, 1994 – 2005................................ 144

x