Wed, Jul 14, 2004 page3

• Report says investment in China may injure Taiwan

  • By Joy Su / STAFF REPORTER
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  The large amount of investment Taiwan pumps into China will leave economic development in China's hands, and could result in high unemployment rates and an unequal distribution of income, according to a paper issued by the Taipei Society.

  The paper offered a critique of the policies President Chen Shui-bian (陳水扁) has implemented over the past four years in office.

  "Taiwan's dependence on the Chinese export market has already surpassed Taiwan's dependence on the US export market. This allows China to easily implement policies that interfere with Taiwan's exports, and as such with Taiwan's industrial development. China is thus able to control Taiwan's economic lifeline," the paper stated.

  In addition, unemployment has continued to rise, going from 4.71 percent in 2001 to 5 percent in 2002, according to the paper.

  However, according to the Directorate General of Budget, Accounting and Statistics (DGBAS), the unemployment rate for 2002 was 5.17 percent, and the unemployment rate for last year was 4.99 percent. The jobless rate now stands at 4.31 percent as of last month, its lowest point in three years, according to DGBAS.

  The paper also says that while 28 percent of all unemployment was a result of the closing down of businesses in 1999, the corresponding figure was 46 percent in 2001.

  "If investment in China and the replacement of products made in Taiwan with Chinese products happen too quickly, Taiwan will suffer serious unemployment and uneven income distribution. Societal stability could even be affected," the paper states.

  Prescribing a remedy for the economic difficulties brought about by cross strait investment, the paper calls for policies that seek to boost Taiwan's technological capabilities and to enter into trade partnerships with nations more advanced than Taiwan.

  "Taiwan needs to usher in new technology by cooperating more with countries more developed than our own, and less with countries less developed than Taiwan," said Wang To-far (王塗發), an economics professor at National Taipei University and author of the portion of the paper focusing on the reform of cross-strait economic exchanges.

  "We should encourage innovation ... and award research and development. For example, we need to establish laws that really protect intellectual property rights. The US is not the only source of pressure for better intellectual property laws .... how do you encourage research and development without it?" Wang told the Taipei Times yesterday.

  The paper further states that as Taiwanese investment in China could entail external costs, it is important to be careful in establishing regulations.

  When Taiwanese apply to invest in China, the government should require a report assessing the overall impact the investment could have on Taiwan's economy and national security, the report said, comparing such a report to the environmental impact assessments necessary for construction projects.

  "Wang believes that the government needs to give potential investors more detailed and comprehensive information on the risks and benefits of investing in China," Taipei Society secretary Hsu Yung-ming (徐永明) said yesterday.

  The paper also calls for "sunshine laws" governing investments in China to make information regarding investments in China more transparent. Laws to prevent technology from leaking to the Chinese market were also referred to as necessary precautionary measure.

  Hsu suggested that the research and development headquarters of businesses be established in Taiwan, instead of China, as a means of protecting Taiwan's technological capabilities.

  "The degradation of Taiwan's investment environment in recent years and the lack of business opportunities have led to capital outflow, and in particular to Taiwanese businesspeople investing in China. The main reasons for the poor state of Taiwan's investment environment are the government's administrative inefficiency, the bad timing of legal regulations and the lack of basic infrastructure projects. In addition, the effects of economic liberalization and the privatization of state-run enterprises have not been apparent," the paper said.
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