TITLE : FACTORS WHICH HINDER OR HELP PRODUCTIVITY IMPROVEMENT: COUNTRY REPORT-THE REPUBLIC OF CHINA. *

The national study "Factors Influencing Productivity" in the Republic of China, is part of the APO Basic Research Project on "Factors which Hinder or Help Productivity Improvement in the Asian Region - A Review and the Prospect". This report consists of six chapters and four appendices. Chapter 1, Introduction, gives a general profile of the Republic of China in Taiwan with regard to its economic development during the past quarter century. The nation's productivity showed an average 5.08% growth rate annually, and the average annual productivity growth rate was 3.98% for agricultural sector, 8.04% for industrial sector, 3.81% for service sector, during 1954-1978.

Chapter 2 gives the objectives, scope and coverage of this study as well as data sources and productivity definition used. This study was confined to the manufacturing industry. For the micro study, we emphasized the industries of food, textiles, machinery, electronic

products, petroleum products and cement. We carried out sample surveys and case studies of firms within these industries. Chapter 3 is the major part of this report. We reviewed the past efforts of the China Productivity Centre (CPC) which has introduced many new concepts of technology and management, such as quality control, low cost automation system, group technology etc. and has greatly contributed to the promotion of productivity improvement in Taiwan. From the macro point of view, the productivity of the manufacturing sector has grown very fast during the past quarter century. The estimated annual growth rate was 6.86% for quantity productivity indexes (X/L) and 5.78% for value added productivity (Q/L). Since capital accumulated slower than employment growth rate, capital-labour ratio tended to decrease until 1974, and the major contribution to productivity growth was technology progress. The average annual growth rate attributable to technology progress was estimated to be about 7%, which contributed about 50% of the growth in manufacturing output. Technology progress consists of improvement in the skills of labour, production technology, and management improvement as well as changes in employment structure. The labour moving from low productivity sectors to high productivity sectors was one of the major factors of technology progress in Taiwan during the past quarter century. In 1953, the number of employed persons in the agricultural sector had been more than half of total employment, but it was reduced to only one-fourth in 1978. The employed persons in the manufacturing sector had been one-tenth of total employment in 1,53, which later increased to one-third in 1978. Since the percentage of agricultural employment will be reduced to 10% in the 1980s, the technology progress caused by such employment structure change will be continued. Also, we found that the seasonal effects on the productivity variation came from labour mobility, which was a major concern of all firms surveyed. According to the results of survey and case studies, there are some major factors influencing productivity, such as degree of skill and experience of workers, management system, age of production machinery and its maintenance, quality control and material management, labour supply and mobility of employees, availability of capital funds, development of new markets, level of income, scale of production and production technology etc. Different firms have their own factors hindering or helping productivity improvement. Generally speaking, the high level of labour mobility and labour shortage are the major factors which hinder the productivity improvement of the labour-intensive firms. The capital or technology-intensive firms are more concerned about their technological progress and input saving to improve their productivity.

Chapter 4 deals with action points and strategies for the 1980s. In the next ten years, the nation's real GNP growth rate will be between 7.0%-8.0% annually. We have to change our economic structure and upgrade our industries. To raise the productivity is the most important thing to achieve during the 198Os. For the manufacturing sector, if we want to reach an average 14% growth rate of gross domestic product, we should get an average 6.5% productivity increase rate during the 1980s. The government, entrepreneurs, production units, workers should co-operate in the matter of productivity imprevement. Some actions to be taken in the future are:

(1) Firms and trade unions should take the responsibility of training their skilled workers.

(2) Technology transferred from advanced countries should be encouraged and the firms should increase their R & D activities.

(3) Merger of small and medium size firms into large scale production firms should be promoted.

(4) Public enterprises should be more flexible.

(5) Maximum utilization of capital should be undertaken and production automation be promoted. The low cost automation system should be a good system to be adopted by small and medium size firms.

(6) Government should adopt the policies of encouraging capital formation and technology transfer. Especially it should encourage investment in higher productivity sectors to absorb more labour from low productivity sectors.

Concerning the distribution of gains in productivity. Taiwan's experience shows that equity can be improved along with growth. Under the direction of the Three People's Principles, the wealth equalization policy will be executed continuously.

Chapter 5 deals further with the areas of future research and conclusions. Appendix A presents some statistical data which were used in this study, Appendix B and C are the sample survey questionnaire and report. Appendix D is the report of case studies on six firms.

Productivity improvement is a major topic during the 1980s. As we know the major factors influensing the productivity improvement we should devote ourselves to removing the hindering factors and strengthening the helping factors.

Dr. Tai-Ying Liu

Taipei January, 1980