In a paper it released last on July 19, Academia Sinica’s Institute of Economics increased its forecast for Taiwan’s economic growth this year to 5.52 percent, compared with the 4.71 percent growth it predicted at the end of last year. At the same time, however, Academia Sinica director Peng Shin-kun (彭信坤) said that, although this figure looks impressive, most people in Taiwan are feeling no improvement. That is because the proportion of production by Taiwanese manufacturers that is done overseas keeps climbing, having reached 51.2 percent last year. It is China, not Taiwan, that gets the jobs and tax generated by this production.
The Ministry of Economic Affairs responded by saying that taking orders in one country for manufacturing in another is a widespread mode of operation among transnational companies, and that this is fine as long as research, innovation and key technologies are kept onshore and the nation helps manufacturers to upgrade. Evidently President Ma Ying-jeou (馬英九) and his government cannot get away from the old mindset that Taiwan should be developed as an Asia-Pacific regional operations center (APROC).
The APROC plan was first put forward in the early 1990s by China-friendly academics and media, and for a time the government adopted it as one of its principal policies, using it to justify the trend for manufacturers to move their factories offshore. According to its supporters, moving production of low-profit products to China would allow Taiwan to concentrate on core operations, research, development and innovation, and to become a sea-freight, logistics and financial center.
That is the origin of the setup under which companies take orders in Taiwan for products they make offshore, ie, in China. Former president Lee Teng-hui (李登輝) restrained this trend through his policy of “no haste, be patient,” keeping the proportion of manufacturing done offshore by Taiwanese companies down to a reasonable level of 12.3 percent as of 2000, and that is how Taiwan managed to keep its unemployment rate low and maintain reasonable growth in salaries during the 1990s.
This favorable ratio broke down, however, after Chen Shui-bian (陳水扁) succeeded Lee as president in 2000 and abandoned his predecessor’s “no haste, be patient” policy. If, as advocates of the “go west” theory claim, opening up to China could bring high economic growth to Taiwan, Chen’s policy of actively opening up should have allowed Taiwan to leave South Korea far behind by now, because Taiwan has gone much further than South Korea in using Chinese resources, and its total investments in China are much greater.
Chen was followed by Ma, whose administration has followed a policy of fully opening up to China. If the “go west” advocates were right, Ma’s policies should have put Taiwan’s economy even further ahead by now. The reality, however, is just the opposite. The research, development, innovation and industrial upgrading that economic officials wished for has failed to materialize, thanks to the movement of manufacturing offshore. Real incomes in Taiwan this year are not even up to the standard of 20 years ago, and the interests of farmers, ordinary shareholders and just about everyone else have been sacrificed in the process.
Time will tell whether Taiwan can really achieve 5.52 percent growth this year, but experience tells us that, even if the target is met, it will matter only to big companies and their head offices. Growth built on a setup in which China gets all the jobs and tax revenue means nothing to the average person in Taiwan, because we are living in an illusory economic system where economic growth is imperceptible for most people.
Huang Tien-lin is a former national policy adviser to the president.
TRANSLATED BY JULIAN CLEGG
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