Two main variables are affecting the global economic situation -- high oil prices are persisting and interest rates are going up. Together with the migration of global industrial production toward Asia, these two important short-term variables tell us that the global economy is in a state of flux.
Taiwan's market is small and industrial development requires international markets. Changes in the international economy must not be ignored if Taiwan does not want to be sidelined by international economic markets.
Furthermore, changes to the international economy have led to a number of problems for Taiwan. Although the economy continues to grow, Taiwanese people feel increasingly poor. The following items should be taken into consideration when discussing Taiwan's economic problems.
First, the outflow of industry takes with it manpower, technology and capital. This creates stagnation in industrial and management technologies, which in turn will lead to a shortage of technology and workers, and plants the seeds for a long-term downward trend in the nation's economy.
Many industries will move to China, and Taiwan's industry will lose its independence.
Second, pressure on Asian states from China may result in Taiwan becoming economically marginalized because of a lack of mutually preferential trade deals with ASEAN and other states. If so, Taiwan's export industry will lose the advantage it has through price competition.
Third, political chaos has led to a deteriorating legal and social situation. This impacts on foreign investors and private capital, which affects economic development.
To resolve the nation's economic problems, firstly, industry should focus on technological innovation and brand creation, and use this to create products that are manufacturer-driven rather than consumer-driven. This would allow industry to control prices and overcome the disadvantage that would result if Taiwan is excluded from trade deals with other countries.
At the same time, industry should use high technology and innovation to improve competitiveness and avoid becoming marginalized.
Second, more industrial parks should be established, technical education improved and technicians trained. Development of the nation's tech industry should be revived in order to boost competitiveness.
Third, traditional industries affect employment and the social situation. Policies should be put in place to assist traditional industries that have market potential, and strategic alliances should be encouraged to improve the efficiency of economies of scale and technological efficiency, thereby improving competitiveness. Traditional industries lacking any market advantages should be encouraged to adapt or diversify.
Fourth, Taiwan is too small to create a tenacious economy. It is therefore necessary to build an economic system with strong agricultural, industrial and trade sectors in order to lay a strong economic foundation.
Fifth, a development strategy for the agricultural sector should be set up, focusing on price, maintaining reasonable profits for farmers, stabilizing livelihoods and pressing for the construction of agricultural villages.
Sixth, the opposition and the government must unite to stabilize the political and economic situation by building an environment that will attract foreign investment.
They have to believe that Taiwan has great potential to move forward.
Chen Hsi-huang is chairman of the Taiwan Grains and Feeds Development Foundation.
Translated by Perry Svensson
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