Two influential business papers have recently provided overall appraisals of Taiwan's economic development. They have also raised policy suggestions which the government and the opposition parties would do well to review.
The first, the Global Competitiveness Report by the Geneva-based World Economic Forum (WEF), rates Taiwan No. 11 in competitiveness, down from No.4 last year. In terms of competitive potential, Taiwan has fallen two rungs, from No. 19 to No. 21.
The report cites poor innovation, slow reforms, too much insider trading, too little liberalization of the capital market, and inadequate transparency in the financial sector as the reasons for Taiwan's slide.
The other report, the 2000-2001 Taiwan White Paper from the American Chamber of Commerce (AmCham), states that the biggest threats to Taiwan's economy come not from natural disasters, economic dependence on China nor the government's crackdown on crime. Rather, the paper says, they come from the financial sector -- which it describes as fraught with legal loopholes, uncompetitive and lacking transparency.
Both reports indicate that political interference has been an obstacle to Taiwan's development.
A large number of Taiwan conglomerates have run into problems since political power changed hands in March: Tuntex (
These were highly influential businesses under KMT rule. While not holding monopolies like state-owned businesses, they have enjoyed financial favors -- which were often shady or illegal -- under the shield of political protection. Such favors allowed their businesses to grow at amazing speed across various sectors and created a massive economic bubble. In return for these favors, the conglomerates repaid the ruling party with money and other favors to help maintain its grip on power.
The bank loan scandal at Chang Hwa Bank (
To survive in the market, businesses will have to restructure, cut costs and boost their competitiveness. Those who keep asking the government for help instead of doing the real work to get more competitive will certainly drop out of the market.
Apart from the need to eliminate insider trading and business-politician complicity, the two reports also pointed out a lack of focus in the new government's financial and economic policies. The current administration should think hard why the stock market has remained in the doldrums despite strong economic fundamentals. Before his election victory, President Chen Shui-bian (
One priority item in the government's list of reforms should be its own inordinate economic interference. Only by doing away with this can we raise Taiwan's economic competitiveness.
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