With the triple impact of weak exports, consumption and investment, the economic growth rate for the third quarter of this year was adjusted downward to 1.58 percent.
Real wages have been falling for so long that it comes as no surprise that consumption is weak. Exports and investment figures have been falling at the same time, which is worrying, all the more so since the government’s introduction of a series of policies aimed at stimulating exports and investment, and the resources it has invested to this end have been to no avail.
These policies have failed to achieve their expected results and state resources have not been used effectively.
It is quite right to seek fair competitive opportunities abroad for Taiwanese manufacturers. However, given that overseas demand is hard to predict and domestic demand is the mainstay of sustained economic growth, it may be more important to concentrate on the home front by thinking about how to boost consumption.
China, with its fast-growing economy, attaches great importance to stimulating domestic consumption and Minister of Finance Chang Sheng-ford (張盛和) said that the contribution to economic growth from domestic demand in the third quarter was about 60 percent.
Business in Taiwan is largely concentrated on manufacturing, the most important manufactured goods being electronic components, computers and other electronic products. None of these products are daily necessities and most manufacturers see cutting costs as the main way to make profits.
These factors mean that the nation can easily suffer if demand falls. Even when the economy improves, most factories are located abroad, which means that the upturn does not bring palpable benefits in the form of job opportunities and improved living standards for Taiwanese.
Since 2005, overseas profits have not had to be transferred back to Taiwan, but they are still included when the government calculates GDP. As a result, there has been a glaring discrepancy between the nation’s economic performance and the public’s quality of life.
Given that electronics manufacturing is so susceptible to fluctuations in other economies and considering the industry’s limited ability to provide employment in Taiwan, the government’s business policies should start paying attention to sectors that are more capable of absorbing labor, and less sensitive to economic ups and downs.
Farming, for example, must be locally based, since arable land cannot be packed up and taken away, and farm products are not so vulnerable to the impact of economic fluctuations. This means that agriculture can provide a relatively stable demand for labor, as well as value creation.
Some people may say that Taiwan’s land area is too small, but the Netherlands — which has 1.1 million hectares of arable land, just a quarter of what Japan has — is the world’s second-biggest exporter of agricultural products. Taiwan has about 865,000 hectares of arable land, but it has plenty of room for improvement in terms of yield value per unit area.
The point is not to encourage Taiwan to develop its agriculture, but to remind the government that economic policies should be decided based on sustainable growth. Only when there is a healthy cycle of supply and demand can there be sustained economic development.
If too much attention is focused on the overseas front, even if it produces some short-term gains, they may all come to nothing because the home front has been neglected.
Chen Chien-yin is a research assistant in the Department of Economics at National Chengchi University.
Translated by Julian Clegg