Forging a knowledge-based economy in Taiwan

Taipei Times: There is a big concern in the market over the future fate of the economy as Taiwan's GDP growth slides below 5 percent and the unemployment rate rises above 4 percent this year. What is your current view on the state of the economy?

Chen Po-chih (陳博志): Because the slowdown of the global economy -- especially the slowdown of US economy -- Taiwan certainly will be hurt. According to the forecast by the World Bank in April, there will be quite a significant slowdown in the global economy. The US growth rate will go down from 5 percent last year to 1.2 percent this year. The global growth rate will decline from 4.2 percent last year to 2.2 percent this year. There is no doubt that economic growth in Taiwan -- where businesses depend so much on the export markets -- will go down. However, we certainly will do our best to maintain a satisfactory growth rate and hope that we can reach 5 percent [growth] this year. But we know that it is very difficult because the global situation is so bad. Actually, the major countries in the world face a decline of more than 1 percentage point in their growth rates. Many of them have even cut their growth rates in half.

To achieve 5-percent growth rate for this year, it depends not only on what happens in the global economy but also what happens in Taiwan. If we can have our policies carried out with the cooperation of the people, then we will have the possibility to achieve the 5-percent goal. We are quite confident that this year's growth rate will be higher than 4 percent. But the figure really depends on the global economy especially the US economy. If US economy keeps on declining further, then every country in the world will be in trouble, including Taiwan.

TT: How do you address public concerns over the unemployment rate? Some say Taiwan's rising jobless rate is a result of the global economic downturn, coupled with changes in the domestic industrial structure. What is the outlook for Taiwan's employment situation?

Chen: It is difficult for Taiwan to deal with the unemployment problem and in some ways it is even more difficult than dealing with the economic growth rate. The declining growth rate is mainly due to the decline in the world economy and partly due to the bust of our bubble economy. But for the unemployment problem, there is an additional but important factor -- the structural change in our industry.

In fact, the reason that we are facing such a high unemployment rate is because the burst of our bubble economy over the last decade. Currently, construction workers in Taiwan have the highest unemployment rate at above 7 percent -- almost double other industries. The reason for that is because the bubble economy in the past 10 years led to increased demand for laborers in the construction industry. But as the economy went down -- leaving a lot of empty houses -- the industry demand for labor shrunk sharply.

In the past 10 years, our traditional industries already released around 600,000 workers. But the unemployment problem wasn't that acute in the past because those unemployed workers were absorbed by both the information technology (IT) industry -- which was developing very fast -- and the luxury industry, which were both nurtured by the bubble economy. But much has changed in the last few years -- slowing demand in the US market, the burst in our bubble economy, and the passage in the legislature last year of a law to reduce our working hours to 84 hours per two weeks, Taiwan's economy finds itself in a crucible.