The nation’s economy might continue at a slow pace of expansion next year, with GDP set for a 1.8 percent increase as structural constraints limit growth, the Yuanta-Polaris Research Institute (元大寶華綜經院) said yesterday.
The projection came after the Taipei-based think tank raised its growth forecast for this year to 1.37 percent, compared with a projection of 1.1 percent in September, on the back of improving external demand.
“While key barometers have showed positive movements, the economy remains mired in small growth... It would take an industrial policy that encourages radical innovation with cooperation from the private sector to cast off the pattern,” institute president Liang Kuo-yuan (梁國源) said at a news conference.
The Democratic Progressive Party government has introduced a series of measures to help the private sector expand and diversify its markets, moving from a focus on China to Southeast and South Asian nations.
The creation of a digital economy, with the government limited to the role of troubleshooter, might spur incremental innovation, Liang said, but added that what Taiwan really needs is radical innovation, such as the facilitation of the semiconductor industry in the 1980s, when chipmaking was new to Taiwan, but policymakers tapped entrepreneurs such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) to establish operations at Hsinchu Science Park.
The success of TSMC and the science park lend support to the importance of finding the right people to spearhead industrial reform, rather than the opposite approach espoused by the government, he said.
Chang earlier voiced similar concerns, saying that the private sector took part in government-sponsored technology forums in the 1980s and walked away with concrete projections about the industry’s future.
Consequently, companies were founded in a number of technology sectors, he said, adding that in recent years, such forums have mostly drawn the participation of the government and academic circles, focusing their discussions on general and vague subjects, which has left the private sector without direction.
The National Development Council has been unable to find people to head its proposed national investment company, Liang said, adding that a lack of talent and unfavorable tax policies have contributed to the predicament.
The government has sought to strike a balance between encouraging innovation and a more equitable distribution of wealth, goals that are contradictory, Liang quoted Chang as saying.
Instead, the government should place more emphasis on growth and tolerate inequitable wealth distribution, because incentives are necessary to spur growth, Liang said, adding that growth is the key to employment and wealth enhancement.
The government has signaled plans to cut income taxes as part of efforts to attract foreign professionals and curb a brain drain.
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