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.
Achieving the goal of ultimate unification won't take very long, although our real hope of course is that the government will stop at the brink of the disaster.
Relaxing Taiwan's 40 percent investment cap would lead to a 2 percent to 4 percent drop in domestic investment over the next two years. If Taiwanese companies based in China are allowed to be listed on the stock market, that would cause a decline in the local stock market's price to earnings ratio, and would weaken capital markets' fund-raising role.
After a few years, when the returning companies start to employ underhanded business tactics facilitated by China's lack of information transparency, the savings of retailers and the public will be wiped out. Allowing banks to go to China might increase their foreign profits, but domestic banks would immediately be squeezed out, forcing businesses to go abroad.
Cross-strait direct flights could increase Chinese tourism in Taiwan and interest in Taiwan's real estate, but property prices in Taipei would slowly fall because of the allure of China's coastal real estate.
The government might have a serious shortage of tax revenue, but the industrial tax base has already fled abroad, with most of their property already in China.
The dream of Taiwan becoming an "island of exceptional service" will also prove to be a mirage because of the severe shortage of domestic investment. By 2015, Taiwan would have to rely on the remittances of Taiwanese laborers working in coastal China to support itself.
Worst is that pro-unification academics would still counter: "It's because Taiwan's officials governed the country too much by their ideology and opened up too slowly. They missed their chance, and now Taiwan has fallen to the state it is in."
But by that time the five-starred flag will already be flying in Taiwan, and the power to interpret history will be in their hands.
Huang Tien-lin is a former national policy adviser to the president.
Translated by Marc Langer
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