In this week’s episode of Looking South, Eric Gau chats with Grace Lin, the director-general of the Department of International Affairs at the Council of Agriculture, about the importance of international agricultural cooperation under the Tsai administration’s New Southbound Policy.
Transcript:
Eric Gau: Good morning. I’m Eric Gau, and welcome to this week’s episode of Looking South, here on ICRT. Today, we’re exploring the Tsai administration’s efforts to help Taiwan’s small and medium enterprises break into the wider Southeast Asia market. To tell us all about that, we are joined today by Yung-Chih Lien, the Director General at the Commerce Development Research Institute. Mr. Lien, welcome to the program.
Yung-Chih Lien: Hello.
Eric: Mister Lien, to start us off, in your opinion, what are some of the biggest challenges facing Taiwanese SMEs that want to enter the Southeast Asian market?
Yung-Chih: Okay, generally speaking, I think that Taiwanese SMEs entering the Southeast Asian markets will confront competition from local and other international companies concurrently. The challenge can be referred to in three aspects. Firstly, business scale. Taiwanese firms are mostly small, however local companies in Southeast Asia are usually refer to one of a specific group that not only is large in scale but also dominates the business channel in the local markets. Under such circumstances, Taiwanese firms are inherently disadvantaged in entering such markets. The second challenge can be referred to as business image or brand of Taiwanese SMEs. Aside from the local firms, Taiwanese SMEs in Southeast Asia will also confront competition from other international companies, particularly firms from advanced countries such as the United States, Europe, Japan, or even Korea. Those companies have invested greatly in promoting their brand name, and those local consumers in Southeast Asia are aware of these brands already, and they tend to select them when purchasing. So in comparison, Taiwanese SMEs are disadvantaged in branding. And lastly, the information about local markets can be challenging for Taiwanese SMEs to enter the markets, because the local information or the local institutions mean a lot for any company to operate in the market. Although we are so close to Southeast Asia geographically, Taiwanese SMEs are actually, we are not familiar with the local market or the local institutions. This will become a significant challenge for Taiwanese SMEs in entering the market.
Eric: So what has the Tsai administration done under the New Southbound Policy to reduce those barriers and make it easier for SMEs to enter the market?
Yung-Chih: In supporting the Southbound Policy, I know the Taiwanese government has now conducted so many projects to facilitate the Taiwanese firms to enter the Southeast Asian market. For instance, the Bureau of Foreign Trade has organized a project called the Taiwan Most Valuable Product Promotion Project, and we, the CDRI, is in charge of carrying out this project. The main purpose of this project is to enhance the competitive advantage of the Taiwanese firms in Southeast Asia markets. The way we execute this project consists of three major parts. The first part is the market research. We will focus on a specific market and study its economic structure and market figures to figure out the competition and entry barriers for Taiwanese companies in the market, and meanwhile we also investigate the behavior of the local consumer and accordingly explore the market needs and potential business opportunities for local firms. The second part of this project is to carry out a marketing campaign to promote the image of the Taiwanese product. This is based on our research on a particular market, so we understand the local market needs and also the opportunities for Taiwanese firms. Accordingly, we can select the products that are the most promising to sell in this market, and we will hold local marketing events, not only to enhance the image of the Taiwanese product in the market, but also to more precisely and directly deliver the value of the Taiwanese product to the local consumer. And the third part is to provide customized consultation service to assess the marketing strategies of a particular Taiwanese company. Each year, we will select a certain company that is promising to enter the Southeast Asia market, and then we will focus on their specific product, and study the local market and competition characteristics and accordingly provide them with suggestions for marketing strategies. Based on our suggestions, we will help them to hold marketing events to strengthen their competitive advantage in the market. All the work we have done in this project is to help the Taiwanese small and medium sized enterprises to overcome the barriers to enter the Southeast Asian markets.
Eric: Do you have any examples of Taiwan-based SMEs that have successfully expanded into those markets already?
Yung-chih: Yes, the immediate example that comes to mind is Vedan (味丹). Vedan has entered the Philippines for a long time, but they merely export their instant noodles to the Philippines through local agents, but it has no idea how local customers local markets like its instant noodles, and what it can do to promote its products in the Philippines. Vedan joined our project two years ago. Based on our marketing research, we found that the local consumer likes instant noodles, but don’t like the package, because the package is too large. Local consumers prefer small-sized packages. Accordingly, we suggested that they change the original design to reduce the packaging size, and of course reduce the price. In addition, we found that the beverage market in the Philippines is tremendous. More surprisingly, we found that the Philippine consumer likes the traditional Taiwanese drinks a lot, like 青草茶 and 冬瓜茶. These happen to be Vedan’s products on hand. We therefore suggested that Vedan not just sell instant noodles in the Philippines, but also export their beverage products there. Vedan has adopted our suggestions, and are now doing very well in the Philippines.
Eric: So what suggestions do you have for the government regarding other ways that they can assist SMEs in expanding into the Southeast Asia market?
Yung-chih: I would suggest that the government strengthen the understanding and connection between Taiwan and Southeast Asian countries. I believe that once we know each other better, it would not only be easier for Taiwanese firms to sell our goods to that market, but also be more efficient in providing our services to local markets. This is essential to our service trade. To enhance the connections, the government should pay more attention on improving education and cultural linkages. For example, we should welcome more students from Southeast Asia to study in our universities. After all, Taiwanese universities are facing the challenge of reduction of student numbers, and Southeast Asia students would help to complement these vacancies. In addition, we should enforce the fair rights of cross-border marriages, and encourage the second generation to keep the connection with their father or mother’s home country and use this as an advantage to take part in cross-border business. Finally, I think we should improve our service to South Asian tourists visiting Taiwan. If we treat them well, they will have a good impression and a good memory of Taiwan, and when they go back home they will keep that good impression and actually they will show a greater tendency to purchase Taiwanese goods or services. Ultimately, I believe these tourists will become fans of Taiwan.
Eric: So on the flip side, do you have any suggestions for SMEs themselves, and how they can improve their competitiveness?
Yung-chih: My suggestion to Taiwanese firms is to pay more attention on marketing, not just focus on manufacturing to improve production quality or cost control. The Taiwanese firms should understand that Southeast Asia is becoming a major market in the world, and there are tremendous business opportunities in there, and no one can deny or ignore this trend. However, this market is also complicated and very challenging. In my experience, the only way to succeed in the market is to understand the local rules and build up the local relationship and modify a firm’s operations in adopting the local needs. And most importantly, show great respect to the market. I think investing in marketing is essential, it’s very important.
Eric: We’ve been chatting with Director-general Yung-chih Lien from the CDRI. Mr. Lien, thank you so much for taking the time to join us on the air today.
Yung-chih: Thank you very much.
Eric: And that wraps up Looking South for this week. I’m Eric Gau, and we’ll see you all again here next Monday.