Tue, Aug 08, 2006 - Page 8 News List

On the brink of another economic disaster

By Huang Tien-lin 黃天麟

At the Economic Development Advisory Conference (EDAC) held on Aug. 26, 2001, business and government leaders established the "active opening" policy. On that day, all the government and business representatives were delighted to say "bye bye" to the pan-green fundamentalist faction. Before long the government had eased China-bound investment restrictions on notebook computers and more than 7,000 other products. They believed this would put Taiwan's economy on the right track toward a bright future.

After six years, the total amount of China-bound investment permitted by the Ministry of Economic Affairs's Investment Commission is 2.4 times more than was allowed in the nine years between 1991 and 1999. Last year, investment in China accounted for more than 70 percent of all foreign investment compared with 33 percent six years ago.

"Active opening" has been accomplished, and yet Taiwan's economy has lost its momentum since its inception. The average yearly economic growth rate over these six years has been only 3.6 percent, which trails the 5.2 percent growth experienced in South Korea even though Taiwan used to outperform South Korea.

Taiwan's per capita GDP last year was US$15,271, an increase of only US$845 from the US$14,426 per capita GDP in 2000. During this same period, South Korea's per capita GDP rose US$5,538 to US$16,422, an increase almost seven times more than that of Taiwan.

Why? Because all of Taiwan's industries have gone to China to recreate Taiwan's past. It should be noted that South Korea's China-bound investment is only 10 percent of Taiwan's. Taiwanese industry has chosen not to invest in this country and has neglected to invest in research, innovation and transformation, which has naturally left them unable to maintain a competitive edge.

Factory closings have led to unemployment, which has in turn suppressed wages, leading to three straight years of negative growth in regular earnings. Large numbers of credit-card holders have become heavily indebted, and some have committed suicide. According to Department of Health statistics, the suicide rate last year was 8.8 percent higher than it was in 2000. This is clearly a disaster.

But apparently the Democratic Progressive Party (DPP) still hasn't learned from its failed policies. When it began organizing the Conference on Sustaining Taiwan's Economic Development in June, the discussion topics it set, the representatives it selected and the suggested proposals were all designed to satisfy business demands to "go west," as well as get the conference to endorse normalizing cross-strait relations.

Fortunately, the persistent intervention of Taiwan Solidarity Union legislators and many other representatives made sure that "go westers" couldn't easily push through their agenda. However, some of the proposals were ultimately listed under "other opinions" because of strong pressure from delegates. This will give the Executive Yuan a basis for pushing for these policies later.

It would seem that allowing Taiwanese companies to come back to Taiwan to be listed on the local bourse as international companies, raising the 40 percent Chinese investment cap, allowing banks to invest in Chinese lenders and opening up direct flights could all gradually be pushed forward on the DPP's watch.

Will Taiwan come back from the dead after the conference? The theory of the pro-unification camp says that the EDAC brought six years of disaster because the liberalization wasn't thorough enough, and if the nation is boldly opened one more time, it will turn the economy into a powerful dragon. If the government really wants to follow this model, then it should hurry up and make it happen.

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