A new Economic argument has been heard in Taiwan recently -- "The economy has soared in the US because the Washington does not restrict industries from moving overseas and therefore was able to free up limited resources to develop the new economy. The Japanese economy has run into problems in recent years because the Tokyo has never dared to allow uncompetitive industries to move overseas." In other words, "opening up is always better than control." But this premise cannot be farther from reality. It was exactly because of the relocation of Japanese businesses overseas that Japan's economy has run into trouble.
The UK-based Economic Journal recently published an in-depth survey of the Japanese economy done by the University of Warwick. The survey found that the Japanese economy went from bad to worse over the past 10 years mainly because businesses continued to move overseas, leaving an economic vacuum and endangering growth. From 1991 to 1995, Japanese multinationals invested more than US$470 billion overseas. The massive relocation of production bases abroad may be in sync with the trend of business globalization, but it has done great harm to Japan's economy.
The relocations freed up resources, but a blooming new economy did not follow suit, partly because Japan's technology and its national prowess were no comparison for the US. In fact, much remains to be debated about the assertion that the relocation of US business operations overseas has freed up resources and boosted the thriving development of the new economy.
The formation of the US' new economy has its roots in Washington's massive military spending during the Cold War. It spent hundreds of billions of dollars on defense, a large portion of which was used on the research and development of sophisticated computers, networks, communications systems, semiconductors, laser and space technologies. The release of such technologies to the business sector has been the major drive behind the thriving economic development in the US over the past 10 years.
But the Japanese government did not do the same. Therefore, the exodus of Japanese businesses only caused the economy to shrink. The US government has invested more than US$3 billion in biotechnology over the past 10 years, while Japan invested very little -- and Taiwan almost nothing.
Some will say that Taiwan's high-tech industries have only developed over the past 10 years, to replace traditional industries that moved to China. However, Taiwan established its industrial parks as early as 1980, and started seeking talent a few years earlier. In other words, the high-tech industries were already more than 10 years into their development when traditional industries started moving to China.
In 1996, when many of the high-tech industries were planning to move to China, they were asked to abide by the govern-ment's "No hurry, be patient" (
We need to think about what will happen if these high-tech industries leave or reduce their investments here, and move their key production bases to China -- what industries will take their place? If we have no other industries ready to take their place, then easing restrictions on investments in China will inevitably lead to the emptying out of Taiwan's economy. Can Taiwan's policy-makers gamble with the welfare of 23 million people?
When the ambitions of business people are in conflict with national interests, the welfare of the people should not be sacrificed. How can Taiwan's economy be independent after most of the production bases move to China? Taiwan will inevitably become a fringe region of China. It is fine to promote economic and trade exchanges, but they should not be synonymous to investment. Similarly, internationalization and globalization are not equal to "mainlandization."
Ten years of lackluster economy will not threaten the foundations of Japan as a nation. But Taiwan is in a special position, isolated and receiving little support. The people of Taiwan would do well to face up to the reality that if or when the economy collapses, the ROC may never rise from the rubble again.
Huang Tien-lin is a national policy adviser to the president.
Translated by Francis Huang
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