The World Economic Forum (WEF) released its Global Competitiveness Report 2011-2012 on Sept. 7. Taiwan’s high global competitiveness ranking remained unchanged at No. 13, outperforming both South Korea at No. 24 and China at No. 26.
According to Government Information Office (GIO) Minister Philip Yang (楊永明), the high ranking shows that the government’s policy direction is correct. This official attitude makes it abundantly clear that the administration is neither capable nor willing to review itself. The fact is that Taiwan has always been given a good ranking by the WEF and in 2005, under the Democratic Progressive Party (DPP) government, it ranked No. 8.
A responsible government’s first reaction to the announcement of the ranking would be to compare the ranking with reality, to see if they match. What the public needs is the fruits of a “real economy,” not just an superficially impressive ranking. Unfortunately, there seems to be a gap between Taiwan’s real economy and the high WEF ranking, and that gap is ridiculously large.
Taiwan’s stock market, a window onto the nation’s economy, has always been the weakest among all Asian countries; the unemployment rate remains the highest of the Four Asian Tigers; real salaries are not only stagnant, they have returned to the level of 13 years ago; and average GDP growth over the past three years has been the lowest among East Asian countries. In addition, it was frightening to witness the extent of this decline when the financial crisis hit Taiwan.
Why is this so? The answer can be found in another international index. According to the assessment of the Business Environment Risk Intelligence (BERI), Taiwan’s overall investment environment is the world’s third best. However, the investment rate — domestic investment as a proportion of GDP — has hovered at about 20 percent and the average over the past three years is just 20.6 percent. In contrast, South Korea, which is ranked 17th in the world, has a rate of 29 percent. Insufficient domestic investment leads to a lack of economic dynamism and the loss of jobs.
What the government should do now is review its own performance. It stands to reason that with the third-best investment environment in the world, the investment rate in Taiwan should be at least 29 percent or more. Why, then, do local businesses choose not to invest and foreign investors not to rush to invest in Taiwan? What is the fundamental cause of the gap between Taiwan and South Korea in the area of investment?
The crux of the matter is that Taiwan’s “China fever” has overheated, resulting in Taiwanese businesspeople channeling too much investment into China. Since the signing of the Economic Cooperation Framework Agreement (ECFA), in particular, Taiwanese investment in China had increased by 102 percent to US$12.23 billion at the end of last year.
A market estimate implies that real investment is twice the amount officially approved by the Investment Commission of the Ministry of Economic Affairs, US$24.46 billion, or the equivalent of 5.79 percent of last year’s GDP of US$430.5 billion.
Obviously, the gap between these indexes and the real economy is a result of President Ma Ying-jeou’s (馬英九) pro-China policies. In other words, his administration is going in completely the wrong direction. As long as the government’s pro-China policies do not change, the real economy will continue to decline, regardless of how many top rankings we receive.
Huang Tien-lin is a former national policy adviser to the president.
TRANSLATED BY EDDY CHANG
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