After the government changed hands in 2000, the Council for Economic Planning and Development asked Nomura Research Institute to conduct a study of which industries Taiwan should focus on to support its next stage of development. Following several rounds of talks with industry leaders, government officials, academics and researchers, the report suggested a focus on the display panel and integrated circuit industries. This led to the creation of the government’s “Two Trillion, Twin Star” investment plan. Experts believed that the development of capital-intensive industries that have high barriers to entry would place Taiwan in an important position in the international division of labor, and that this would result in higher profits and create better job opportunities. At the time, these were all reasonable assumptions and decisions.
However, actual developments over the past few years have shown that for every 1 percent rise in GDP growth, domestic employment only increased by 0.11 percent (compared with about 0.5 percent growth for most European countries). A Control Yuan audit report on the Executive Yuan this year showed that for every NT$100 million (US$3.46 million) invested in high-tech industries, only 6.4 jobs were created, while the same amount invested in traditional industries would have created 16 jobs.
The ups and downs of the high-tech industry are also closely linked to that of the global economy, with the tech industry sustaining a heavy blow whenever the international economy takes a turn for the worse. For example, during the financial crisis two years ago, unpaid leave was widely imposed throughout the industry. Even when the global economy picked up, people in most non-tech industries neither benefited nor shared in the fruits of recovery. Middle-aged and older people burdened by heavy family responsibilities were the most affected.
This is why aside from promoting high-growth tech industries, Taiwan also needs to strengthen its local economies to create more job opportunities. Only with these twin growth engines can the nation achieve stable economic development and enhance its ability to cope with international crises.
A local economy must integrate local tourist attractions and natural resources as well as cultural assets and characteristics to build up its local industries. Targets for development could include raising the quality of facilities and workers in the tourism industry, developing in-depth cultural and ecological tourism and improving value and marketing channels for local specialties. These industries will create many new jobs, in particular for middle-aged and elderly people, as well as new graduates — currently the groups with the highest unemployment rate.
Only by developing local economies can we stop Taipei from absorbing the nation’s resources and promote balanced development of urban and rural areas.
Rather than being an expression of isolationism, the development of local economies conforms with global trends. In February, the UN issued a Green Economy report, saying that flawed resource allocation has created an imbalance in economic development and environmental protection. The report says that an economic revival requires creating job opportunities, a fair distribution of resources and protecting the disadvantaged.
Stimulating the economy also requires cutting reliance on carbon fuels, putting an end to ecological and environmental deterioration and addressing water shortages. All of this is relevant to the development of local economies.
Lee Ying-yuan is a former secretary-general of the Democratic Progressive Party.
Translated by Perry Svensson
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