At a press conference on July 1 last year, President Ma Ying-jeou (馬英九) said he thought the Economic Cooperation Framework Agreement (ECFA) would offer a new opportunity for Taiwan’s economic development in that it would allow Taiwan to sign free-trade agreements (FTAs) with other countries, improve the competitiveness of Taiwanese exports to China, create more domestic investment and attract more foreign investment to Taiwan.
It is worth noting that almost a year after the ECFA was signed, the early effects are far less impressive than expected.
First, Taiwan has only completed a joint study with Singapore into the signing of an FTA. It seems unlikely that such an agreement will be signed between the two countries in the near future, let alone with other Southeast Asian countries.
Even if Singapore and Taiwan were to sign an FTA, that would be of little significance to Taiwan’s economy as a whole, since trade between the two only makes up 3.6 percent of Taiwan’s foreign trade.
Furthermore, the international competitiveness of Taiwanese businesspeople is coming under great pressure from South Korea. South Korea, Taiwan’s main competitor in economic terms, has signed an FTA with the US and the EU, yet it seems the signing of any such agreement between Taiwan and the US or the EU lies in the distant future.
Second, following the implementation of the ECFA, the competitiveness of Taiwan’s exports to China has not improved. During the first quarter of this year, Taiwan’s exports to China grew by 14.3 percent, but fell by 61.3 percentage points compared with the same period last year.
Since Taiwan’s exports to China have fallen much more than exports to any other country, exports to China as part of Taiwan’s export total have dropped from 42.8 percent in the first quarter last year to 40.9 percent in the corresponding period this year.
Third, following the implementation of the ECFA, Taiwan’s investment momentum has continued to drop. In the 1980s and 1990s, Taiwan’s investment rates were 7.5 percent and 7.6 percent, respectively. Under the eight years of Democratic Progressive Party (DPP) rule, it was 0.95 percent. In the three years since Ma took office, the investment rate has been 0.09 percent. The Directorate General of Budget, Accounting and Statistics estimates that the investment rate this year will be a negative 2.26 percent.
In particular, the investment rate during the second quarter last year was 32.0 percent, but after the signing of the ECFA, it began to drop. In the first quarter this year it was a mere 4.7 percent, and according to estimates it will become negative in the second quarter, only to drop to an estimated negative 4.6 percent in the fourth quarter this year.
Fourth, following the implementation of the ECFA, foreign investment in Taiwan has continued to drop. After Ma’s inauguration, foreign investment in Taiwan dropped by 46.8 percent in 2008 to US$8.2 billion.
This was followed by a 41.8 percent drop in 2009 to US$4.8 billion. Last year, although the global financial crisis was over, it dropped again, this time by 20.6 percent to US$3.8 billion, and in the first quarter this year, it dropped by 34.1 percent to US$1.06 billion. In addition, Chinese investment in Taiwan during the first quarter this year was a mere US$13.83 million, a 50.6 percent fall.
Fifth, following the implementation of the ECFA, Taiwanese investment in China continued to grow rapidly. In 2008, Taiwanese businesspeople invested US$10.69 billion in China, an increase of 128 percent. In 2009, the figure was US$7.14 billion, 33 percent less than the year before because of the impact of the international financial crisis.
Last year, investment increased by US$12.23 billion, an 102 percent increase. In the first quarter this year, Taiwanese investment in China continued its rapid increase, growing by 65.4 percent, or US$3.71 billion, although Taiwanese foreign investment has declined by 4.8 percent.
Sixth, following the implementation of the ECFA, Taiwanese capital has continued to flow out of the country. During the three years of Ma’s presidency, a net average of US$20 billion of international capital has flowed out of Taiwan annually, much more than the US$13.2 billion that flowed out of Taiwan every year under the DPP administration.
In particular, a net US$12.4 billion of international capital left Taiwan in 2009, a number that more than doubled, to US$29.3 billion, last year, the year the ECFA was signed.
During Ma’s three years in power, industry has generally felt that cross-strait relations have stabilized and that the economy has opened up. In addition, industry already had high expectations of the ECFA effect and had ample time to prepare investments.
This means that it is not too early to discuss the ECFA effect. Perhaps parts of the ECFA will need more time to develop, but the data described here should be sufficient warning to the government of the need to review the situation in order to strengthen and improve Taiwan’s investment environment and implement appropriate adjustments to Taiwan’s global trade strategy.
Tung Chen-yuan is a professor at National Chengchi University’s Graduate Institute of Development Studies.
TRANSLATED BY PERRY SVENSSON
The Chinese government on March 29 sent shock waves through the Tibetan Buddhist community by announcing the untimely death of one of its most revered spiritual figures, Hungkar Dorje Rinpoche. His sudden passing in Vietnam raised widespread suspicion and concern among his followers, who demanded an investigation. International human rights organization Human Rights Watch joined their call and urged a thorough investigation into his death, highlighting the potential involvement of the Chinese government. At just 56 years old, Rinpoche was influential not only as a spiritual leader, but also for his steadfast efforts to preserve and promote Tibetan identity and cultural
Former minister of culture Lung Ying-tai (龍應台) has long wielded influence through the power of words. Her articles once served as a moral compass for a society in transition. However, as her April 1 guest article in the New York Times, “The Clock Is Ticking for Taiwan,” makes all too clear, even celebrated prose can mislead when romanticism clouds political judgement. Lung crafts a narrative that is less an analysis of Taiwan’s geopolitical reality than an exercise in wistful nostalgia. As political scientists and international relations academics, we believe it is crucial to correct the misconceptions embedded in her article,
Strategic thinker Carl von Clausewitz has said that “war is politics by other means,” while investment guru Warren Buffett has said that “tariffs are an act of war.” Both aphorisms apply to China, which has long been engaged in a multifront political, economic and informational war against the US and the rest of the West. Kinetically also, China has launched the early stages of actual global conflict with its threats and aggressive moves against Taiwan, the Philippines and Japan, and its support for North Korea’s reckless actions against South Korea that could reignite the Korean War. Former US presidents Barack Obama
The pan-blue camp in the era after the rule of the two Chiangs — former presidents Chiang Kai-shek (蔣介石) and Chiang Ching-kuo (蔣經國) — can be roughly divided into two main factions: the “true blue,” who insist on opposing communism to protect the Republic of China (ROC), and the “red-blue,” who completely reject the current government and would rather collude with the Chinese Communist Party (CCP) to control Taiwan. The families of the former group suffered brutally under the hands of communist thugs in China. They know the CPP well and harbor a deep hatred for it — the two
RSS