Chairman says long-term recession highly unlikely

Taiwan is not likely to slip into an economic recession similar to Japan, Council for Economic Planning and Development Chair-man Chen Po-chih (陳博志) said yesterday.

Chen made the remarks in an interview to be published in the new issue of Forbes magazine. He said that doomsayers saying that Taiwan has lost its power in the hi-tech sector are far from the mark.

Pointing out that Taiwan's information technology has successfully been applied in the IC industry, Chen said that the future of the local information industry is bright and that Taiwan is unlikely to be mired in an economic recession like Japan.

Commenting on the eroding confidence among the people in Taiwan, Chen attributed the phenomenon to the relocation by Taiwan businesses to China. Claiming that Taiwan industries' relocation to China has caused a crisis of confidence among the public, he said Taiwan's IC design sector currently ranks second in the world, only behind the US.

The information technology sector will still be Taiwan's mainstay industry in the coming decade, he noted.

The council head attributed the Taiwan people's shaken confidence to politics. He said local people have not been accustomed to the present government following last year's power transition which ended the KMT's rule of more than 50 years in Taiwan.

When the two major opposition parties try to pass the buck to the new government, Chen said, "We find that it is wrong to keep silent or just try to forge a communication bridge between the two sides."

"We now understand that we must fight back and should help people gain an understanding of the facts through debates and by providing them with explanations," he said. "Of course, another reason is that we are also facing a serious cyclical recession," he said.

As to widespread concerns that Taiwan will also be troubled by economic sluggishness as is the case in Japan, Chen said, "Taiwan is in a different situation from Japan and South Korea." Rather than the banking system, key Taiwan industries rely heavily on the capital market, he said, saying that Taiwan's local industries are also not as well protected as those in Japan.

Chen said that Taiwan's service industry should be further opened to foreign competition to sharpen its competitive edge. "We must push our service industry to go international by allowing foreign financial institutions to acquire local banks by holding not only a small percentage of shares, but the whole banks," he said.