Two Taiwanese economists have challenged the views of former World Bank chief economist and senior vice president Justin Lin (林毅夫) that Taiwan’s economy lags behind South Korea because it has not integrated with China.
Lin said in Beijing on Friday that Taiwan’s economic development started to slide in the mid-1990s because “politics interfered with economics.”
The nation’s economy could not integrate with China, but South Korea has used the opportunity of China’s opening to catch up with Taiwan, Lin said.
However, Liu Meng-chun (劉孟俊), director of the Chung-Hua Institution for Economic Research’s Center for Economic Forecasting and Gordon Sun (孫明德), director of the Macroeconomic Forecasting Center at the Taiwan Institute for Economic Research, said the country’s lagging behind is caused by internal and external factors.
Liu said that Lin’s remarks were made from the cross-strait viewpoint and were fragmentary.
Liu said that the biggest reason is that Taiwan’s progress in participating in regional economic integration has been slower than South Korea’s. This is not just in the case of the Trans-Pacific Partnership, a proposed free-trade agreement (FTA), he said, adding that South Korea signed a free-trade agreement with the EU a long time ago.
He said that if Taiwan wants to sign FTAs with other countries, the unspoken rule is that Taiwan has to sign agreements with China first before other countries will agree to do so with Taiwan, citing the examples of Singapore and New Zealand.
In addition to the political factor in Taiwan’s participation in regional economic integration, Taiwan’s industry is not diversified enough and relies too much on the information and communications sector, Liu said.
The machine tool sector, although good, is not large-scale, while the service industry is not strong enough, Liu said.
Another reason is that Taiwan’s trade and economic reforms, as well as liberalization, have not been fast enough since its participation in the WTO in 2002.
The integration of inter-governmental agencies is also insufficient, while the lack of government efficiency and the lack of direction in leading the country by the top leadership are also reasons, he said.
Sun said that Lin has a deep understanding of China, but described his analysis of Taiwan’s economy as partial and fragmentary.
He said there are many reasons Taiwan’s economy lags behind South Korea’s.
Sun said that South Korea obtained a bailout from the IMF in the wake of the 1998 financial crisis and began merging financial institutions, while its electronics and auto industries also began to integrate.
The bigger economic scale, especially the megabanks created through the integration of financial institutions, has also helped accelerate its economic development, Sun said.
Lin, a Yilan County native, is wanted by Taiwan’s government for defecting to China in 1979, when he was an army captain serving on Kinmen. He swam from Kinmen to China’s Fujian Province.
He received a master’s degree in Marxist political economics from Peking University in 1982 and a doctorate in economics from the University of Chicago in 1986.