The Taiwan story is a stark reminder of how a successful government and private sector cooperation can create a global force to reckon with. Even today, barring Acer, very few global brands have come out of Taiwan, yet it controls key industry segments like memory and IC.

Way back in the 1950s, the government decided to move out of agricultural exports to import substitution products. The government encouraged the SME sector with incentives to operate in market niches and manufacture light industrial goods. In the 60s, the government introduced a number of export processing zones with zero duties on all incoming and outgoing manufactured goods.

However, by the early 1970s, the government shifted its focus to promoting capital and technology intensive industries. The next decade saw a renewed focus by the government on seeding and developing high tech industries. One of these was the creation of the Hsinchu Science park as a key support infrastructure with a clear charter - apart from concessions and incentives, firms located in the park were expected to sustain a higher level of R&D expenditure and considerable tax concessions were linked to the introduction of new technologies. While most of the Asian countries lost out on their competitive advantage after the 1986 Plaza Accord where all the Asian countries had to revalue their currencies, Taiwan bounced back with new technology sub-sectors like memory chips, CD-ROMs and flat panel displays).

In 1981, technology intensive industries accounted for just 20% of total industrial output but by 2000, they accounted for over 40%. In 1999, exports of electronic goods including computer, telecom and peripherals amounted to a whopping $50 billion.

Among the host of initiatives in Taiwan, a few factors/entities which can be singled out for the radical changes in Taiwan are the Industrial Technology Research Institute and the Hsinchu Park. As the top research institute, it helps Taiwanese entrepreneurs by bringing in the latest technology suitable to Taiwanese industries and helps in transferring technology to them. Also, it has been the charter of the ITRI to scan the global technology horizon and disseminate the technology to numerous SMEs. This helps in sharing the R&D cost and to reduce risk. This has been one of the key factors in the growth of Taiwan as the global technology hub. The role of the government has been in the rapid adoption of new technologies and products developed elsewhere and their rapid diffusion to as many firms as possible.

Also with the Hsinchu park, Taiwan had developed a great model to bring in high tech companies. Companies setting up shop in the park were offered low interest government loans, R&D funds, tax incentives, access to government labs and test facilities located in the park. With the first park in place and successful, the Hsinchu park was followed by others parks like Tainan and Chung-Shan Institue of Science and Technology.

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