Fri, Dec 06, 2013 - Page 8 News List

Pilot zones a poison pill for Taiwan

By Frida Tsai 蔡培慧

Taiwan has recently been abuzz with all sorts of activity. Association for Relations Across the Taiwan Straits (ARATS) Chairman Chen Deming (陳德銘) visited Taiwan, and representatives of Taiwan’s six major business federations paid a visit to Legislative Speaker Wang Jin-pyng (王金平). What they all want is for Taiwan’s economy to be made freer and more open. They would like everyone to think that Taiwan’s economic difficulties can all be ascribed to closed-door policies.

Half a century ago, Taiwan embarked on a course of rapid economic development that came to be known as the “Taiwan miracle,” but for nearly two decades now, it has been caught in a development bottleneck similar to that experienced by the old capitalist states of Western Europe. Business profits have been trending downward and real wages keep falling. Taiwanese see only bleak economic prospects ahead. They wish the government could come up with a formula for improving the country’s business structure in a fair way that would not just help companies grow, but also lead to a more even distribution of wealth. Then our society could escape from the dark cell in which it is presently confined.

In the absence of such a remedy, people are forced to pin their hopes on the government’s proposed “free economic pilot zones.” The government’s policy objectives for these zones are blindly fixed on opening up, deregulation and incentives, rather than on innovation and transformation. The only “freedoms” involved are those of businesses to enjoy zero tariffs and reduced labor costs in the specially designated zones.

Pilot-zone policies will involve scrapping the Profit-Seeking Enterprise Income Tax, which is one of Taiwan’s few existing tools for wealth redistribution. These proposals will not only fail to solve Taiwan’s economic development difficulties, but will make the gap between rich and poor even wider than it already is. Ordinary people’s purchasing power will continue to dwindle, which will further weaken the economy and lead to social unrest.

We at the Taiwan Rural Front are principally concerned with the agricultural sector. The policy orientation of the proposed pilot zones regarding farm product processing will send Taiwanese brands and Taiwan’s countryside straight to the gallows.

The current draft of the special regulations for free economic pilot zones (自由經濟示範區特別條例) stipulates that agricultural and industrial raw materials and products imported into the zones will be exempt from customs tariffs and from business and commodity taxes. Goods that are exported after being processed in the zones will be 100 percent free of tax, while 10 percent of the value of those sold in Taiwan will also be tax exempt.

The 830 kinds of Chinese agricultural product whose importation into Taiwan is currently restricted will be allowed to flow in freely, and this is not to mention the unrestricted products from various other countries, imports of which will increase greatly under the pilot zones’ zero-tariff policy.

Low-priced agricultural products and materials of dubious quality imported from all over the world will to a large extent take the place of those produced in Taiwan, causing the annual production value of Taiwan’s agricultural sector to fall by nearly NT$200 billion (US$6.74 billion).

Not only does this run contrary to the global trend of encouraging local marketing of local products and self-sufficiency in food, it will also cause the agricultural revival movement that has scored some successes in Taiwan in recent times to wither away completely.

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