Sat, Feb 19, 2005 - Page 8 News List

Taiwan's economy needs more integration

By Kang Jung-bao康榮寶

Premier Frank Hsieh (謝長廷) has announced he will concentrate his efforts on boosting the economy.

The principle of putting Taiwan's interests has first been agreed upon by the government and opposition alike, and if we look back at past experience, we see that such agreements between the opposing camps lead to periods of economic growth.

But if you look at the government's record for stimulating the economy over the past few years, one can see that it doesn't compare to the nation's economic miracle of the past.

The public recognizes the importance of growing the economy, but it is also necessary to note that we must not be tempted, once again, to increase spending on public construction projects.

A cursory glance at the past reveals that the majority of government measures to boost the economy have entailed increasing expenditure on public projects such as the "8800, Taiwan Advancement" and the Ten New Major Construction Projects.

Of course, injecting investment into public projects will stimulate the domestic demand in Taiwan. Nevertheless, some will suspect this type of measure is implemented with the electorate in mind, as dumping more money into these projects will probably increase subcontracting, which only creates more opportunities for local politicians.

A better way to boost the economy would involve getting the activities of transnational corporations on board with the nation's economic system.

Taiwanese enterprises, both listed and OTC companies, know how important it is for them to be located overseas. Companies which are international in scope necessarily set up holding firms as overseas tax havens, where the government can't touch their money.

This practice has concealed the real amount of economic activity of Taiwanese firms. Taiwanese companies cannot remain outside the international economic system, and the question of how to engage in trade with the Closer Economic Partnership Arrangement (CEPA) that exists between China, Hong Kong and Macau, or the ASEAN common market, will become a major issue for the country.

If the country does not integrate more aggressively, a severing of the relationship between international corporations and the Taiwanese economy will occur.

Globalization demands that Taiwan concentrate on international relations, and establish rules and regulations governing internationalization. Otherwise, political obstacles across the Taiwan Strait will be held up as an excuse for failing to improve the economy.

Strengthening Taiwan's economy should start with already established and successful industries. Policies such as the "Two Trillion, Twin Star" investment plan and the nanotechnology project seem to imply that Taiwan is a brand new economy, and that there were no industries in the past in which we could take pride.

In fact, the nation's economic miracle was built on traditional industries. But a policy emphasizing the growth of new industries and neglecting already established ones will pay too little attention to the strengths of the country's successful industries. This is ignoring the roots on which the economy is built.

Taiwan should look carefully into what made the country such an economic miracle in the past and what policies previous governments employed to secure this success. Future success depends on going into the new frontier armed with the experience of the past.

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