In the future, an additional 10,230 civil servants will serve in the special municipalities, and following the reform and upgrading of their respective agencies, their pay will increase. These factors will contribute to an increase in the government’s financial burden.
Meanwhile, 46 percent of local government funds are spent on personnel expenses, meaning that almost half of local government expenditures go toward personnel. This is compounded by the unreasonable pension system in which retired government employees receive an 18 percent interest rate on part of their pension deposits, while employees of state-run financial institutions enjoy a 13 percent interest rate on their bank deposits. This results in excessively high income-replacement ratios for these groups, with some retirees receiving more in retirement than the salaries they earned when working.
The government is without doubt in deep trouble when it comes to personnel. Its system is ineffective and lacks sources for additional funding. Infrastructure does not receive the attention it should, which will result in the stagnation of national development.
The second-biggest challenge facing the nation is its economic woes and the fact that these woes have basically been caused by a lack of successful industry transformation coupled with excessive economic reliance on China. This has had many negative effects.
Many observers have suggested that for Taiwan’s economy to grow, its industries must move beyond original equipment manufacturing and focus on research and development, innovation and branding and the nation must shift from its economic dependence on China. If Taiwan’s industries are unable to transform and we remain satisfied with a business environment of low pay, low cost and low technology, profits will remain low.
In addition, once the overall business environment changes, Taiwanese businesspeople must adapt to these changes straightaway. For example, if pay levels in China increase, all the Taiwanese businesses there would be able to do is move their operations to cheaper areas in Southeast Asia. However, drifting around in search of cheaper conditions is no way for Taiwanese businesses to maintain sustainable business operations.
Taiwanese foreign investment is almost completely concentrated in China. Such a concentration is risky even for nations that have normal diplomatic relations with China. It is dangerous because Beijing has its own plan for Taiwan. Being overly reliant on China in terms of investment and trade will result in what Chinese academic Hu Angang (胡鞍鋼) talked about when he likened Taiwan’s reliance on China to that of a diabetic’s reliance on insulin.
What is worse is the way in which Taiwanese businesspeople view China as their main production base because, regardless of how big their scale of production is, they will have little beneficial effect on employment and pay levels in Taiwan.
Taiwan’s GDP growth over the past decade has been close to 60 percent, but real wages have returned to the levels of 14 years ago and unemployment remains high. Excessive reliance on China is an issue that needs immediate action.