If the government does not attach importance to investment in the service industry, it will be difficult to expect improvement in overall domestic investment, according to an economist who cited a drop in private investment of 1.3 percent last year from 2004.
Ku Ying-hua (
The service industry has become the mainstay of the nation's economy, accounting for 73.56 percent of GDP last year, Ku said.
However, the sector has received little assistance from the government, she said.
Instead, the government has focused its energy on manufacturing, which last year accounted for only 21.13 percent of GDP -- a level which could not sustain the nation's economic growth, she said.
Despite this, the government had made every effort to find land for manufacturing investors, she said.
With the completion of the sixth naphtha cracking plant and the high-speed railway system, the nation will face a challenge in terms of increasing private investment, Ku said.
If the government wants to encourage investment in the service industry, it must start with urban development, and while manufacturing has been moving out of the country, the service sector will not see such a huge exodus, she said.
"The only way to improve private investment is to legislate a good set of laws and regulations for the service industry to ensure good service for consumers," she said.
According to government statistics, fixed capital formation was just 19.7 percent of GDP last year, marking a record low.
Given the contraction in private investment, fixed capital's proportion of GDP could have dropped even more had government-owned enterprises not increased investment, Ku said.
RSS