The establishment of free economic pilot zones to attract foreign investment and revive economic growth has yielded mixed results across the countries that have set them up over the past years. Taiwan is not the first country to try this approach, but it is one of the few where the initiative has met strong opposition. This is not because Taiwanese are unreasonable, nor that they like to pick a fight: The problem lies in the government’s approach.
To illuminate this issue, one can look to Japan, where Japanese Prime Minister Shinzo Abe’s government has been working to set up international strategic comprehensive special zones. These zones are intended to create a liberal policy environment that will attract investors and revitalize the national economy. Tokyo stresses that when choosing the site for the zones, particular attention is paid to the designated area and which industrial sectors are selected for it. There is also a set of standard operating procedures in place to regulate everything.
First, a National Strategic Special Zone Act was passed, setting 16 clear restrictions on the relaxation of regulations in the special zones that built a legal foundation for the policy and ensured it would not come to a screeching halt after a leadership change. That was followed by the establishment of a National Strategic Special Zone Advisory Council, which is headed by the prime minister to stress the policy’s importance.
Six national strategic zones were then designated based on how active local governments were in pushing for reform. These zones included two agricultural special zones in the Hyogo Prefecture cities of Yabu and Niigata, which are respectively to initiate agricultural organization reform aimed at curbing the loss of farmland and promoting a model for large-scale agricultural production.
Although Hokkaido is an important agricultural area and wants local administrative areas to be converted into special zones, it was not selected due to the local authorities’ lack of reform drive. In the end, the central and local governments joined hands with civic organizations to put forward investment and employment targets that are to be verified regularly.
By contrast, Taiwan’s government has not communicated sufficiently with industrial organizations in planning the proposed free economic pilot zones, nor solicited the opinions of the public, nor established coordination between the various ministries and agencies involved. Instead, it has done things backwards: It was decided that the zones would be established and only then would the supporting legislation be initiated (the draft special act on free economic pilot zones is currently stuck in legislative review).
The five designated sectors — intelligent logistics, international healthcare services, value-added agricultural processing, financial services and education innovation — were chosen by ministries and agencies alone and according to unannounced selection criteria. There are still several disputes over the sectors — especially regarding international healthcare services and value-added agricultural processing — and there are also differences of opinion between the central and local governments.
As the central and local governments and civic organizations are unable to reach a consensus and since there is no clear oversight of the project, nor targets set through which to evaluate it, the government is instead resorting to sheer force of numbers to pass the necessary legislation. This approach will not calm things down nor smooth over problems; it will achieve the opposite by creating greater problems for the national economy.
When dealing with other future agreements, such as the potential trade-in-goods agreement with China and the proposed Trans-Pacific Partnership trade bloc, the government must seek to learn the tough lessons from its experiences with the cross-strait services trade agreement and the free economic pilot zones.
If it has assimilated these lessons, it would begin these efforts by garnering public support and building consensus. It must also present a set of standard operating procedures for negotiating agreements to systematize talks, as well as accept public oversight and avoid opaque back-door dealings.
If the government does not do all of these things, it will find out at the next elections exactly how much Taiwanese are willing to tolerate and accept.
Lee Wu-chung is a professor of agricultural economics and former director of the Yunlin County Government’s Department of Agriculture.
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