Taiwan’s economic performance has fallen for nine months in a row, hitting the same level as during the global financial crisis and posting the second-longest “blue-light” period in the nation’s history.
Taiwan’s economic development is facing an urgent crisis and we need innovative economic thinking if we are to avoid long-term lethargy and an economic recession. Hopefully, the governing and opposition parties will be able to humbly reflect on Taiwan’s economic problems and work together to speed up an economic transformation that can get the economy through the tough challenges ahead.
Real average income has declined to where it was 14 years ago, and if we continue to lose funds and skilled workers, there really seems to be little reason for optimism.
The economic growth rate for the first half of this year was a mere 0.1 percent, and the Directorate-General of Budget, Accounting and Statistics (DGBAS) predicts that the growth rate for the entire year will be 1.66 percent.
Taiwan has fallen behind almost all other Asian countries and other major industrialized countries in terms of economic growth rates. Likewise, for the first half of this year, Taiwan’s exports dropped by 4.7 percent — far more than that of other major economies.
In terms of domestic investment, the investment rate over the past four years has been just 17.7 percent. This is lower than the 23.7 percent during the administration of the Democratic Progressive Party (DPP) in the period from 2000 to 2007 and much lower than the average of 28 percent during the 1990s. The DGBAS has also predicted that Taiwan’s investment rate this year will be only 16.5 percent, the lowest since 1980.
For the past four years, Taiwan attracted a yearly average of US$4.7 billion in foreign investment, which accounted for 0.2 percent of the world’s foreign investment.
This is even lower than Vietnam and Thailand’s 0.6 percent. Under the DPP administration, the yearly average was US$ 5.7 billion, which was also only 0.3 percent of global foreign investment.
Particularly noteworthy is the fact that last year, Taiwan attracted foreign investment worth US$1.96 billion, the second-lowest level in the world. During the first half of this year, Taiwan attracted a mere US$1.6 billion in foreign investment, an 8.7 percent drop compared with last year. This clearly shows that the situation continues to worsen.
Let us also look at things in terms of international capital flows, including direct investment and investment in securities. Over the past four years, a net total of US$110.7 billion has flowed out of Taiwan, which is more than the US$105.8 billion that flowed out of Taiwan during the DPP’s eight years in office.
Also noteworthy is the fact that last year, a net total of US$50.4 billion flowed out from Taiwan — a new record. During the first half of this year, a net total of US$18.5 billion flowed out from Taiwan, the second-highest amount in history.
I am not citing this data because I want President Ma Ying-jeou’s (馬英九) administration to take full responsibility for the economic problems. Many of the problems we now face are a result of long-term trends that started 20 years ago — they are just becoming more severe. Both Taiwan’s ruling and opposition parties have a responsibility to take care of the economic crises that the nation now faces. Only through cooperating can these problems be solved.
I fully agree with former National Security Council secretary-general Su Chi’s (蘇起) comment that Taiwan’s leaders are now like hamsters in a cage who run around all day only to discover they are still in the same place.
While Ma should take responsibility for some of Taiwan’s economic problems, bigger problems lie in the adjustments that need to be made to Taiwan’s overall system.
If things are not changed, such problems will remain regardless of who is in power.
The problems that Taiwan now faces are a result of globalization and the continued loss of capital and skilled workers.
However, trying to control the outflow of capital and labor would not have the desired effect. The solution is to increase Taiwan’s economic competitiveness. In particular, the competitiveness of its service industry has fallen behind. Over the past decade, the service industry accounted for 70 percent of Taiwan’s GDP, but only 46 percent of economic growth.
Industry, on the other hand, accounted for less than 30 percent of GDP, but as much as 55 percent of economic growth.
Taiwan desperately needs to promote reform and develop new models for economic growth to solve its economic crisis. Domestic reforms are necessary in a number of fields, including constitutional government, government organization and efficiency, the legislative system, national land planning, industrial deregulation and the establishment of a system which attracts capital and skilled workers.
Necessary reforms vis-a-vis the wider world include trade and capital and skilled labor liberalization. These issues require agreement between the governing and opposition parties and this must be initiated with humility by the Ma administration.
Tung Chen-yuan is a professor in the Graduate Institute of Development Studies at National Chengchi University.
Translated by Drew Cameron
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