Industry 21 Chi Schive Taiwan Academy of Banking and Finance College of Bio-Resources and Agriculture, NTU December 8, 2006

I. Mega trends of Industrial Development 1. Production Technology in Retrospect 2. Globalization II. Conventional Thinkings of Industrial Development 1. Definition of Industry 2. Ambiguity and Challenges Outlines

III. Alternative Thinkings of Industry 1. Growth Areas 2. Knowledge-Based Activities 3. Integrating Industry V. Conclusion Outlines( continue )

The Tonne Age Industrial revolution s Steel, ships, textile, construction The Kilo Age 1960s-1970s Cars, consumer electronics The Gram Age 1970s s Micro electronics, robotics The Vacuum Age 1990s Services, systems, media Production Technology in History Source: Slightly revised from Jean-Pierre Lehmann,“The Future of the Asia Pacific Economies: Dynamism of Trade and Investment” presented at APEC Economic Committee Symposium The Future of Asia Pacific Economies, December , Tokyo.

Speed of Information Transmission

Channels: 1.Branch counter 2.Telephone 3. ＣＤ／ＡＴＭ 4. ＰＣ bank 5.Internet bank Cost / T ransaction ＵＳ＄ 1.07 ＵＳ＄ 0.54 ＵＳ＄ 0.27 ＵＳ＄ ＵＳ＄ Source: Booz Allen & Hamilton research (1996/North American) Transaction Cost of Banks Source: Booz Allen & Hamilton research (1996/North American)

Manufacturing and Trade Sales and Inventories Manufacturing

Lowering Real Inventory-to-Sales Ratios Inventory to Monthly Sales in the U.S.

Global Commodity Trade Global Production Elasticity,Trade over Production Globalization ( ) 5-year average (%)

Regional Economic Integration

Conventional Thinking of Industrial Development Definition of Industry : Any branch of trade, business, production, or manufacture How to look at different industries Output-oriented Agriculture, Industry, Service Characteristics-defined Heavy and Light Industry

High-tech / Technology Intensive Industry Capital / Labor Intensive Industry Stage of Process A griculture Intermediates Final (Consumer, Capital goods) Service Conventional Thinkings of Industrial Development

Ambiguity: Commodity vs. Service Newspaper--Broadcasting--TV--Internet R&D, an activity or industry? Market and Industry Market is where buyers exist, while industry is more on the supple side where production takes place. There are foreign buyers, so is that part of the production stage can be moved abroad known as production fragmentation. Conventional Thinking of Industrial Development

Do we need industry promotion policy? Rationales behind industrial policy Externalities Dynamic advantage/ effect Lack of decision-making capability, entrepreneurship nurturing Do you believe that government people are smarter?

Regarding Government The market works less efficiently in the developing economy than in the developed economy. The market gives better service in rich than in poor countries, so also the government tends to be better administered, has more resources, and is slightly less dominated by “politics” and personal advantage in decision making. The imperfect solution of the market could be better than that of the government. The government needs to be modernized just as much as the market. Also the assumption that the government “represents” the people may not hold W.A. Lewis, “The State of Development Theory”AER (March 1984), p.4.

Growth Area Knowledge-Based Activities Knowledge Creation and Integration Alternative Thinkings

Alternative Thinkings, Growth Areas Fifteen New Growth Areas: New Products and Services

Alternative Thinkings, Growth Areas Fifteen New Growth Areas: New Products and Services

Knowledge-based Economy “… modern economic growth could best be viewed as a process based on a change which raises greatly the stock of technological and social knowledge … When the … knowledge is used, it becomes the source of … increase in output and structural shifts that characterize modern economies.” Simon Kuznets Modern Economic Growth-Rate, Structure and Spread, 1966

Government Role in Knowledge Creating Economy

Innovation as Problem Solving Capability of problem solving is related to knowledge base. Knowledge comes from experience, publicly available information and the uncodified character of innovators, e.g., capability and tacitness.

Innovation as Problem Solving Technological Paradigm affected by, and includes three elements: l. certain needs to be fulfilled; 2. some scientific principles to be utilized ; 3. New material(s) to be used.

Petaloid Industry Knowledge Integrating Industries Alternative Thinkings: Knowledge Integration T. Murakami, Encouraging the Emergent Evolution of New Industries, Nomura Research Institute, 2000

LaborCapital ICT The Foundation of the ICT Industry R&D PeopleVenture Capital Institutional Setting lll. ICT Industry

IT Industry as % of Total in the Stock Capital Sources: 1. IMF, World Economic Outlook, September 2000 。 2.TSEC. lll. ICT Industry

Conclusion The true heroes of our time are those who bring to all society the tools for a better and fuller life. Henry O. Dormann