The problems facing Taiwan's economy are many.
First, the economy has lost its dynamism and is caught in a bottleneck. Following Taiwan's rapid economic growth during the 1970s and 1980s, the per capita GDP exceeded US$12,000 at the turn of the century. With the democratization that followed on the political reforms of the 1990s, Taiwan has made clear progress in the global competitiveness ratings in the World Economic Forum's Global Competitiveness Report and the International Institute for Management Development's World Competitiveness Yearbook.
The nation has left the ranks of developing countries behind to become a developed nation. Unfortunately, economic development has clearly been problematic in recent years. The failure of industrial transformation and the tendency toward a hollowing out of the economy are slowing economic development, which is Taiwan's biggest problem.
Second, there has been a failure to spread the results of Taiwan's economic development to the general public as a whole.
Overall, economic development has not been entirely satisfactory. Over the past five or six years, Taiwan has failed to significantly boost its per capita GDP which has remained at US$13,000 and US$15,500. According to statistics published by the Directorate General of Budget, Accounting, and Statistics in February, "real regular income" saw 1.28 percent negative growth last year, for a second consecutive year. It was the greatest reduction ever, and it is clear that the real purchasing power of the people is declining.
Taiwan's per capita GDP has not increased much because economic growth has only occurred in one part of society, while the economy remains slow or even stagnant for the rest of society. This imbalance will have serious consequences for our society, and it must be faced head on.
The causes of Taiwan's economic problems are varied.
The first, is our inability to break away from old thinking when designing new economic strategy.
Taiwan's development has entered a whole new phase. The global economic situation has undergone a structural change due to the development of countries with large supplies of cheap labor, such as China and India. If we continue to follow the old strategies of a developing country valuing low labor costs, mass production and oriented toward exports, we will have to relocate the core of Taiwan's industry to China and duplicate the old industrial model of dumping cheap products with low profit margins on global markets.
This will lead to the Sinicization of the economy, or making it dependent on China's global expansion strategies -- a suicidal strategy for an independent Taiwanese economy.
Second, people are mistaking Sinicization for globalization. Why don't local companies pay more attention to research and industrial transformation? This is a result of the government's policy to let companies go west in search of reduced labor costs. Before the government removed restrictions on moving to China from more than 8,000 industrial items in 2001, many Taiwanese firms were looking to take over companies in the US and other advanced countries in order to obtain core technologies and initiate an industrial upgrade process.
China fever has arisen in many countries, but after Taiwan's government opened the door to investment in China, China fever took on epidemic proportions here. Does the massive industrial investment in China mean that our economy has grown faster than other countries? Has Taiwan's international competitiveness improved significantly? Has the general public benefitted from the flow of companies to China?
RSS