A new study by the conservative American Enterprise Institute (AEI) said the administration of President Ma Ying-jeou (馬英九) had failed to stand up to Beijing.
It said that following the signing of the Economic Cooperation Framework Agreement (ECFA), Taipei appears “content to accept” whatever increase in the nation’s international status Beijing allows.
“Such is the path of least resistance, but one that does not necessarily lead to the brightest future,” the study said.
It said that Taiwan could choose to take a more difficult yet more rewarding road.
“This road may be strewn with domestic obstacles in the short term, but will lead to greater prosperity, greater international presence, and a renewed relationship with the US over the long term,” the study said.
It strongly recommended that Taiwan move quickly to liberalize its economy.
“This will enrich Taiwan and benefit its people,” it said.
“A more open economy will naturally draw increased investment from American and other multinational companies that, in turn, will lead their respective governments to take a greater interest in Taiwan’s security and prosperity,” it said.
Taiwan’s general policy should be to make itself more attractive as a commercial hub, it added.
By liberalizing its economy, Taiwan could also increase its international space without “long and uncertain” multilateral diplomatic negotiations.
According to the study, more expatriates would live in Taiwan, and more people in the US and around the world would have a stake in Taiwan’s success.
“This would help enhance Taiwan’s security, make it less likely that China would underestimate the international community’s interest in the island’s future and in turn, Taiwan could become an even more attractive destination for international business,” it said.
Based on interviews with executives at multinational firms operating in Taiwan, as well as with key policy advisers, the 16-page study titled Taiwan, Inc was released on Thursday in Washington.
It urged the Ma administration to initiate economic reforms to reduce government interference in business and to strengthen the nation’s “comparative advantages.”
The study listed six major recommendations:
‧ Lower personal taxes, identify and institute corporate incentives and make the regulatory environment more accessible and transparent.
‧ Make it easier for multinationals to raise money, permit freer capital movement in and out of Taiwan, and make the central bank more open and accountable.
‧ Enact policies designed to enhance a more flexible labor market, experiment with more labor imports and permit more private participation in education, especially at the university level.
‧ Identify priorities within technology, continue to bolster intellectual property, improve transport capacity and generally look to accentuate strengths rather than conceal weaknesses.
‧ Find ways to further leverage the ECFA process.
‧ Work to bring more people to Taiwan for business, tourism and, to a lesser extent, education.
Mignonne Chan (詹滿容), executive director of the Chinese Taipei Asia-Pacific Economic Cooperation (APEC) Study Center, defended Ma’s record and policies.
In a prepared statement read at the launch of the study, Chan said the report provided constructive suggestions for Taiwan’s internal reforms, but that views expressed in the study were “detached” from reality.
Chan said some of the figures and statistics used in the report were not accurate and, as a result, the survey itself may not reflect the reality.
The Ma administration has not and would not sacrifice the bright future of Taiwan’s 23 million people, she said.
Taiwan aspires to a strategy of balanced growth, inclusive growth, secure growth and sustainable growth, she added.
The study was introduced at an AEI forum by US-Taiwan Business Council chairman Paul Wolfowitz, who said it was “very timely and very important.”
The former president of the World Bank said that while acknowledging Taiwan was an economic and political miracle, there was one area in which progress had not been made and things had “gone backwards.”
It was an unfortunate fact that Taiwan’s international isolation had not improved, he said.
“One has to recognize reality and come to terms with reality. Taiwan is ideally positioned to become a center for trade and commerce. The key is to open up Taiwan’s own economy,” he said.
“Taiwan can change the regulations governing its own economy,” he added.
Derek Scissors, senior fellow for economics at the Heritage Foundation’s Asian Studies Center, said that Taiwan was a relatively small economy and should recognize that it could compete and trade, but must open its domestic markets.
He said Taiwan had to lead and not follow.
“A follower comes to agreements that were fashioned by others to meet other interests, and tries to join them afterwards. That’s what Taiwan does a lot of times. And it doesn’t serve Taiwan’s interests. Thus there are criticisms in the report,” he said.
The study was written by Scissors and the AEI’s Asian Studies director Dan Blumenthal, security studies director Gary Schmitt and foreign and defense policy studies research fellow Michael Mazza.
US-Taiwan Business Council president Rupert Hammond-Chambers, who also assisted in preparing the study, said Taiwan needed to move in a new trade direction and that it was now treading water.
“The government can do better. There is huge opportunity and much that Taiwan can do itself,” he said. “Taiwan must be proactive and not just reactive. If it is willing to do that, it can go a long, long, way irrespective of the political barriers it faces domestically and internationally.”