The National Development Council last week unveiled plans to encourage private investment and foster economic growth. It focuses on helping local businesses upgrade and innovate while expanding in international markets, as the council proposes to establish an industrial innovation and transformation fund worth NT$100 billion (US$3.07 billion) and setting up an international trade and investment company with NT$10 billion capital.
National Development Council Minister Chen Tain-jy (陳添枝) said that the council will invite interested parties from the private sector to join the fund and the trade and investment company to help promote domestic investment, while inter-ministerial coordination and cooperation is to be directed by a task force formed by the council to promote President Tsai Ing-wen’s (蔡英文) campaign promises of developing “green” energy, national defense, biotechnology and smart machinery sectors as well as establishing an “Asian Silicon Valley.”
Minister of Economic Affairs Lee Chih-kung (李世光) last week also announced major policy objectives for the next four years, focusing on the restructuring and upgrading of domestic industry as well as the development of foreign trade and an amicable business environment. In addition, Lee emphasized the importance of developing alternative energy sources, such as solar power, as the new government aims to make Taiwan nuclear-free and carbon-neutral by 2025.
Meanwhile, Minister of Finance Sheu Yu-jer (許虞哲) said the government would announce a tax reform package on June 8, but added that the package would focus on short-term goals and must be based on the principle of improving the tax structure.
The Democratic Progressive Party government has made it clear that the traditional contract-based manufacturing model is outdated and that it will strive to restructure the economy in a bid to boost job creation and ensure a more equitable distribution of wealth. The government has shown an intention to collaborate with the private sector to spur economic growth in the near term, but at the same time has made little endeavor to expand fiscal policy or increase the budget deficit, as it aims to keep its debt level from moving closer to the regulatory ceiling of 40.6 percent of average GDP in the past three years.
While details of the government’s new economic, investment and tax measures are not finalized, experience has shown that policies aimed at transforming the economic structure were one of the key factors contributing to Taiwan’s ascent in the global economic ladder from an agrarian economy to industry-focused progress and from import substitution to export orientation, not to mention that timely policies helped stimulate the development of new technologies along with improved productivity.
Taiwan is facing a difficult economic situation as demand for its electronic hardware declines rapidly, meaning that the economic structure no longer works. Last week, the government slashed its GDP growth forecast to 1.06 percent for this year, after the economy last quarter contracted for the third consecutive quarter.
Several local companies are finding ways to innovate and add value to their products. Still, Taiwan’s economic transformation has been conducted at a slow pace that would continue to discourage investment and stifle the development of new industries.
There are no expectations of Taiwan’s economy rapidly making a turn for the better, but there are hopes that policymakers will push ahead with structural reforms to improve the nation’s resilience to global risks and the economy can gain the most by leveraging the skills of people and companies once the global recovery is on a firmer footing. After all, structural change is an opportunity for Taiwan to become a source of dynamism again.
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