Fear, Insecurity, Fatalism, & Information Asymmetry in Taiwan’s Dental Markets

Some of the readers of my blog will be aware that I work in the field of medical devices in Taiwan. To be more accurate I work for a company that imports dental equipment for oral surgeons and implantologists. Until recently, I could fairly easily separate my personal interest in Taiwanese politics, economics, and history from my salaried work. That was until the Ma administration sought to ram the Service Trade Agreement (CSSTA) through the Legislative Yuan.

One of the problems with the CSSTA, aside from it’s ambiguity and the appendixes to the agreement which are still being withheld from public scrutiny, is that many business people in Taiwan are still unsure as to how it will affect their particular fields of enterprise. Medical services is one of the areas that will be opened up but there is a lot of confusion as to which ones and to what extent they will be open to Chinese investment and vertical or horizontal ‘integration’.

In fact, judging by the comments from my boss this morning, there also appears to be confusion as to whether the CSSTA has itself already been passed. He was convinced that it had passed and will come into effect and, despite my best efforts, it seems this incorrect assertion has taken root in his mind. It was not a surprise then to hear the suggestion that came next - the proposition that our company should open a branch in China in order to prevent international companies from giving the business they accord to us to a Chinese distributor who is offering distribution across the so-called 'Greater China’ area. Naturally I balked at the idea and strongly warned of the dangers of operating in an environment where we would face the vagaries of local government corruption and barriers to market entry that Chinese companies would not suffer from.

Taiwanese businesspeople are generally instinctively cautious. As a broad rule of thumb they only invest when they feel there is a very high likelihood of success. They are extremely risk averse. Yet, when it comes to China, many of them have not exercised the same caution. Perhaps it is the shared language and 'shared culture’ that gives them confidence, or perhaps it is a sense that the China market is too big to ignore and too much of an opportunity not to exploit. Although the number of Taiwanese business people returning to Taiwan or relocating to other countries has been slowly rising in the last five to ten years, many Taiwanese business people still think of China as a vast untapped pot of gold, or at the very least an inevitable next location for the expansion of their businesses. At the heart of this (mis)conception lies information asymmetry. Not enough is known about the real costs of Taiwanese doing business in China, and of what is known too much is dismissed as 'not in my department’ or 'it won’t happen to us’. Another key component is the 'convenience factor’ - doing business with other countries entails language barriers and dealing with different business cultures. Why bother, many Taiwanese argue, when the Chinese market is big enough on its own, and when the Chinese speak the same language? It is the same rationale that drove many Taiwanese manufacturers to China post 1990s - going to China saves the trouble of actually engaging with the international marketplace. It is 'internationalisation lite’.

This simplistic and short-term thinking is also arguably the ethos that is driving President Ma’s entire economic and political strategy towards China. At the last election, Ma campaigned on a slogan of 'Go to the world through China’. His opponent, Tsai Ing-wen, inverted that to say 'Go to China through the world’. Ma won, and appears intent on 'integrating’ Taiwan’s economy into the Chinese economy. By his rationale, Taiwan’s economy is too small and unsustainable. He exploits a very particular Taiwanese habit of constantly comparing Taiwan to Korea, Hong Kong, and Singapore and constantly feeling like they are losing out. He also promotes the idea that unless the Taiwanese economy is roaring along at double digit growth per year Taiwanese are under performing and that the economy is going to the dogs. It is akin to a husband constantly comparing his middle aged wife (who has successfully born and raised two healthy young children) to the young newly-wed bride next door. 'Look’, he says, 'She’s so beautiful. How can you feel satisfied when you don’t look like her?’. Except that he has failed to mention that the 'newly-wed’ is a divorcee, she’s a lot older than she claims to be, and the image the husband keeps referring to is in fact just a poster of the woman’s wedding photo shoot (taken twenty years earlier) that’s hanging up in the front window. This is leadership by psychological abuse. It’s arguably a continuation of the policy of colonisation and assimilation that has kept Taiwanese fearful and insecure for the last 400 years of the country’s history.

Back to the dental market, the CSSTA is potentially a great threat to the business I work for. That threat is now generating a sense of fatalism amongst Taiwanese distributors. If Chinese companies start to invest in or buy Taiwanese device distributors, international suppliers will shift their communication to the Chinese companies and Taiwanese distributors will become only 'local sub-dealers’. The contracts we enjoy with our international partners today may be reformulated so that we can no longer directly communicate with them as partners but have to take direction from Chinese distributors who have been awarded contracts to manage the 'Greater China Area’. If China can convince these suppliers that they can manage distribution in Taiwan as a 'local area’ in their business chain, Taiwanese businesses will lose their economic sovereignty and be forced to accept terms of business from Chinese companies if they want the rights to distribute products in their own country. And President Ma, through ECFA, CSSTA, and planned CSGTA, is encouraging this trend. That is very bad news for independent Taiwanese distributors, and ultimately, for Taiwanese dentists.

As a business person it is now getting clearer that the agreement is potentially disastrous for my industry - a market that is typically comprised of a multitude of small family-run businesses and dentist-dealer-ships. These are exactly the kind of SMEs that President Ma seems to think are expendable in order to bring greater profits and opportunities to larger corporations in the fields of finance, construction, and healthcare services. As a business person I must fully recognise and take into consideration the truism that politics and business are intertwined and not separate if I am to make strategic decisions for the future of the company I work for. To pretend, as so many business people world wide publicly do, that they are not, would be an exercise in self-delusion. I just pray that Taiwanese do not make rash economic decisions based upon rumor or information asymmetry and allow the Government to shoe horn them into an economic dependence upon the Chinese economy that will eventually strip them first of their economic sovereignty, then their political self-determination.