Anyone wondering how the local economy is doing could do worse than to consult with a man known as "Mr Taiwan." That's Peter Kurz's identity and he's got the Internet start-up -- mrtaiwan.com -- to prove it.
The 43-year old American is a bit of a celebrity. His notoriety owes less to Kurz's impressive language skills -- he's fluent in Taiwanese and Mandarin Chinese -- as to his enviable track record at picking stocks and calling economic trends. Local television networks and magazines pick his brain on all things financial.
It may come as a downer, then, that Mr Taiwan has doubts about the nation's outlook. Some big ones at that -- at least for the near term. "I think we're in a recession," says Kurz, chief executive officer of Insight Pacific. "Worse, there's no easy way out of it."
Kurz is quick to point out he's not exactly a pessimist where Taiwan is concerned. A long-time Taiwan observer who's won a myriad of awards analyzing the country's economy, Kurz can't help but worry.
Even the rosiest of rose-colored glasses can't obstruct one's view of the problems facing one of Asia's most dynamic economies. The biggest is Taiwan's over-reliance on other economies for growth.
Borrowing a page from Japan's post-World War II playbook, Taiwan turned its economy into a state-of-the-art export machine.
Its high-quality semiconductors, computers, mobile phones and other goods zoomed overseas, especially to the US, which became Taiwan's biggest market. Ironically, that's where's the nation's troubles begin.
"Taiwan's economic miracle is also a monkey on its back," Kurz explains.
When the US was booming -- or even just growing modestly -- Taiwan's goods flew off the shelves. Since the export model worked so well, there seemed little reason to change course. Boosting domestic demand should be a top goal of any economic policy. But when your economy is expanding rapidly, living standards are rising and others are buzzing about your economic miracle, it's easy to lose sight of the bigger picture.
Even the 1997 to 1998 Asian financial crisis failed to trip up Taiwan. While the Indonesias, South Koreas and Thailands of Asia hit the wall, Taiwan continued to boom along thanks to US demand for its goods. The bursting of the US stock bubble last year changed things. It also had Taipei regretting its complacency. The fact that the US is now sliding into recession makes matters far worse for this nation of 22 million.
All of this has left analysts like Kurz with an intellectual dilemma. On the one hand, you have Taiwan's highly educated workforce and innovative businesses. On the other, a one-trick economy that knows all there is about exporting its way to prosperity but little about doing so internally. What Taiwan really needs to do is learn how to stand on its own.
"I think that Taiwan needs to wean itself off the US economy," Kurz says.
If there were ever a lesson in the dangers of relying on a single customer -- or at least a small number of them -- Taiwan is learning it now. Its central bank has cut interest rates 10 times since December with little to show for the effort.
Lower borrowing costs are easing some of the strain on a banking system exposed to growing numbers of bad loans. But there's been little of the multiplier effect that often makes monetary policy shifts so powerful. If banks already weighed down with non-performing loans are reluctant to lend and households and businesses aren't borrowing, lower rates aren't much help. "The deflationary spiral is picking up steam," says Mike Newton, an economist at HSBC Holdings Plc.
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