An Analytical Model for Innovating Localization Policy

The concept of a “localization policy” (local content) is a tool often used to support industrial growth with the domestic market. The localization policy has supported the heavy electro-mechanical industry in Taiwan for years, with bolstered research and development (R&D) and technological transfer approaches. The industry now can develop products to compete with international brands. The entry into the World Trade Organization (WTO) means Taiwan faces substantially more competition as imports become even less expensive due to reduced tariffs. Additionally, the negotiating Government Procurement Agreements (GPAs) provide a fairer playing field for some imported items. In the face of an open market, this paper focuses on how the authorities enact policies to keep the existing edge held by the domestic industry, which may be realized by boosting operational strength while staying within the bounds of GPAs. Therefore, this paper proposes an analytical model, which is modified from the General Electric (GE) model (GE Nine-Cell Planning, also referred to as the M-GE model) to analyze the competitiveness of electro-mechanical products that are supported by the localization policy. Strategic suggestions are then made regarding the localization policy and the future development of the industry. The result will hopefully provide the authorities with the knowledge to fine-tune the localization policy and the industry to adjust its own policies, leading to enhanced global competitiveness.