Sun, Jun 23, 2019 - Page 6 News List

EDITORIAL: Concrete action needed on economy

The results of a survey by Academia Sinica released on Sunday last week showed that younger Taiwanese are increasingly putting the nation’s sovereignty above economic concerns in cross-strait relations.

While it is a positive development that young Taiwanese recognize China as a threat to Taiwan’s democracy, the survey question itself is misleading, as no change in the cross-strait relationship would produce any tangible economic results for the average Taiwanese worker. Many local media reports have already debunked China’s so-called “31 incentives” — largely a rehashing of existing policies aimed at Taiwanese students and workers who seek development in China — and, with a few rare exceptions, Taiwanese businesses that enter the Chinese market are largely driven out by unfair practices that favor Chinese companies.

Taiwan has seen economic growth of between 2 percent and 4 percent over the past decade that has continued under the administration of President Tsai Ing-wen (蔡英文). That growth rate dropped to less than 1 percent only once, in 2015, due to poor global demand in the electronics sector. Taiwan is an important part of the global electronics supply chain and, despite its rhetoric, China needs components and expertise that it will continue to source from Taiwan, regardless of who is the nation’s president.

However, these facts are often lost on people in southern Taiwan who remember the economic boom before the 1980s, when Kaohsiung served as a major regional base of manufacturing. Those jobs moved to China and today even China is trying to transition away from manufacturing. Any attempts to turn Kaohsiung back into a manufacturing base would do little for Taiwan’s economy, which is following the global trend toward services. It would also alienate the US, which is locked in a trade war with China and would grow suspicious of what would likely be repackaged Chinese goods exported from Taiwan.

Then there are those who are upset because China is restricting the number of tour groups to Taiwan, which means less people to peddle fruit and other cheap wares to. Populist sentiment emerging from this group of people has allowed the likes of Kaohsiung Mayor Han Kuo-yu (韓國瑜) to rise to prominence. However, as the Los Angeles Times said in a Feb. 10 article, Taiwan’s problems cannot be solved by tourism, agriculture or short-term interest in a politician; instead, the nation’s economy needs restructuring and a shift away from low-value-added midstream components exported to China with low returns for Taiwanese manufacturers.

Those components are provided by Taiwan’s 1.4 million small and medium-sized enterprises (SMEs), which employ about 9 million workers. The prevalence of these SMEs is one of the reasons that Taiwanese workers have comparatively low wages and lack strong unions. It is also why Taiwan is less internationally competitive than regional neighbors Japan and South Korea, where large corporate conglomerates have access to business opportunities in a variety of sectors, and allow for rapid and stable economic growth.

SMEs are more easily affected by global recessions and fluctuations in market demand, and their relative insecurity about the future makes them more reliant on China and less willing to pay higher wages — instead making up for lower wages with large annual bonuses that are contingent upon company performance.

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