A spate of positive economic data released last week suggests that the nation’s economy is resilient and has gradually regained momentum amid a global recovery. However, there are some issues behind the data’s strong showing that deserve attention.
On Tuesday, the Ministry of Economic Affairs (MOEA) said export orders last month grew 43.66 percent year-on-year to a record US$34.39 billion, surpassing the previous record of US$32.2 billion made in October 2007. Both officials and economists said the data showed orders had returned to pre-crisis levels and robust growth would continue in the coming months as the global economy recovers.
On Thursday, the Directorate-General of Budget, Accounting and Statistics reported that the nation’s unemployment rate dropped to 5.67 percent last month. The figure was also the lowest in 14 months, after a rate of 5.31 percent set in January last year.
Then on Friday, the ministry reported that industrial production last month also reached a new record high, while commercial sales turned around and resumed growth last month, following contractions in the previous two months.
These figures are eye-catching, but one immediate challenge posed to Taiwan is that more than half of the export orders received by Taiwanese manufacturers last month are for goods that will be produced from their overseas plants. According to the ministry’s data, the rise in the ratio of overseas production — reaching 50.69 percent last month from 49.42 percent in February — was the first time that the number has exceeded 50 percent and implied that those orders would become less beneficial to Taiwan in terms of employment opportunities and domestic consumption.
Based on the government’s data, industrial production has been growing by double-digit figures for the past five months, and domestic consumption and unemployment have improved in the first quarter, thanks mainly to technology companies’ increased capital spending and expanded hiring on expectations of an industry recovery.
However, if the capital spending and new hiring exist only in the tech sector and not across-the-board, job prospects will remain questionable and the structural unemployment problem will persist. And if the ratio of overseas production in export orders continues to rise in the coming months, be it from China or elsewhere, the problem of stagnant wages and the widening gap between the rich and poor will remain unchanged in the long term.
There is an ongoing dispute in this country about the impact of the government’s proposed economic cooperation framework agreement with China on the domestic job market. A key issue is whether the trade pact would lead to the exodus of more Taiwanese companies to China, or less.
Regardless of what type of trade deals there may be across the Taiwan Strait, the truth is we are going to see an increasing globalization of Taiwanese companies, with much more of their operations being established in emerging markets like China and India. The reason is simple: They want to take advantage of cheap labor while going global.
To encourage the return of Taiwanese investment from abroad, some lawmakers and the government are considering a draft amendment to the Labor Standards Act (勞動基準法), which will allow companies to set up in the nation’s free-trade port area and special economic zone to hire migrant workers who are not covered by the minimum wage cap.
The planned law amendment could be a solution to the exodus of local companies and might not harm the domestic labor market because local workers mostly avoid such jobs. However, this move has many worried about continued violations of workers’ rights in the country.
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