Providing Source : Council for Economic Planning and Development
File Last Revised : May 1995
Contact Phone : 886-2-5225822
Taiwan is roughly equal in size to the Netherlands with very few natural resources. As one of the most densely populated areas in the world, Taiwan has properly used its abundant human resources but has relied heavily on imports of raw materials in the course of its rapid industrialization.
During the past four decades, Taiwan has achieved rapid economic growth, price stability, a very low level of unemployment, and a highly equitable income distribution. Also, Taiwan's industry has shifted successfully from labor-intensive to technology-and capital-intensive production.
Today, the Republic of China on Taiwan has the world's 19th largest economy and is one of its 13 largest traders. Its real gross domestic procuct(GDP) grew at an average annual rate of 8.7 percent with per capita gross national product(GDP) increasing from less than 200 U.S. dollars in 1952 to over 11,000 U.S. dollars in 1994. The annualincrease in consumer prices has been kept at an average of 3.5 percent since 1961, excluding the peak inflationary years of the two world oil crises. Unemployment fell to below 3 percent in 1967, and has remained far below 2 percent in more recent years. The income of the most affluent 20 percent of Taiwan's households was only 4.2 times that of the least affluent 20 percent in 1980, although the ratio has risen slightly since then.
In 1994, Taiwan benefited from a quickening of world economic growth. While private investment and consumption remained robust throughout the year, a pick-up in exports during the second half gave an extra boost to the economy. Meanwhile, economic restructuring continued. Economic restructuring continued. Economic growth in terms of real GDP registered 6.4 percent for the year with consumer prices increasing 4.1 percent.
The most important factor behind Taiwan's economic success has been progmatic and flexible government policies -- especially the promotion of social and political stability and the adoption of an outward-looking strategy. And new policy initiatives have been ndertaken at timely intervals to cope with new problems and challenges.
THE 1950s: IN PURSUIT OF STABILTY AND SELF-SUFFICIENCY IN the 1950s, the highest priority was given to economic stabilization and food production. A land reform program was introduced to encourage food production and stabilize food prices. At the same time, labor-intensive, import-substituting industries were developed to help conserve foreign exchange and create jobs.
THE 1960s: EXPANDING LIGHT-INDUSTRIAL EXPORTS In the 1960s. emphasis was placed on promoting labor-intensive and export-oriented industries in order to take advantage of low-cost labor. And those industries entered world markets successfully.
THE 1970s: DEVELOPING BASIC AND HEAVY INDUSTRIES By the end of the 1960s, rapid growth of export-oriented industries had led to a substantial accumulation of capital. Management had become ,ore sophisticated and industrial technology more advanced. Policies were designed to encourage a gradual shift to basic and heavy industries through promoting the production of domestic substitutes for imported intermediate goods and the development of technology-intensive industries.
THE 1980s AND EARLY 1990s: PROMOTING SCIENCE AND TECHNOLOGY AND CORRECTING THE IMBALANCES In the interest of sustained healthy growth, new efforts were made to accelerate technology upgrading and speed up modernization of the economy. High-tech industries such as electronices, information, and machinery were given high priority. And exports and imports were promoted with equal vigor.
Rapid export expansion in the 1980s swelled Taiwan's trade surplus to a peak of 18.7 billion U.S. dollars in 1987. The steadily rising trade surplus not only created trade frictions but also placed upward pressure on the exchange rate of Taiwan's currency. Meanwhile,domestic investment had slackened and excess liquidity had triggered a wave of speculation. However, significant economic restructuring and industrial upgrading had slowly taken place, helped by active outward investment in the neighboring economies and elsewhere as well.
Another serious concern was environmental deterioration, a result of heavy emphasis on industrialization and neglect of the quality of life. Population and industry had concentrated in urban areas, where pollution, crowding, and traffic congestion were emerging as major problems. And by the late 1980s, existing infrastructural hardware and software could no longer meet the needs of economic development and public demands for a better quality of life.
Facing growing imbalances and their serious social and economic consequences, Taiwan was pressed to undertake a series of v8igorous adjustment measures beginning in the late 1980s. The process was painful yet fruitful.
Policy emphasis was given to the acceleration of the liberalization process and the reconditioning of infrastructure. As a result of a quickened pace of liberalization, the surplus in goods-and-services trade was reduced from a record high of 19.3 percent of GNP in 1986 to 2 percent in 1994. Six-Year National Development Plan In 1991, the government launched a six-year development plan to enhance Taiwan's infrastructural development and to overcome development bottlenecks that hinder progress toward a higher stage of development. Most projects under the plan are concerned with communications, transportation, urbandevelopment and housing, public utilities, new industries, science and technology, culture and education, environmental protection, medical care, and social welfare.
Economic Reviatlization Program In july 1993, the government introduced the Economic Revitalization Program, and action plan designed to stimulate private investment, strengthen economic institutions, improve economic links with mainland China, and reform the public sector. The program seeks to promote greater opportunity in a more and more liberalized and competitive private sector, so that business enterprises will remain strong in the face of mounting cost pressure and rising international competition.
The year 1995 began with the implementation of a universal health insurance program and the announcement of an action plan to make Taiwan a regional operations center for business in the Asian Pacific. Economic prospects for the year are promising. The world economy will grow 3.6 percent according to the International Monetary Fund. The domestic economy is targeted to expand 6.8 percent with consumer prices rising no more than 3.8 percent. The major tasks in the coming year are to lay the groundwork for the establishment of a regional operations center, implement development projects in tweleve priority areas, and thoroughly prepare for Taiwan's entry into the new World Trade Organization.
TAIWAN AS A REGIONAL OPERATIONS CENTER the plan to develop Taiwan into a regional operations center, consisting of six specialized centers, represents an across-the-board effort to carry Taiwan into the 21st century. These six centers are designed to specialize in high-value-added manufacturing, air and sea relay transportation, and financial, telecommunications and media services. Basically, the plan seeks to make the economy freer and more open by promoting further trade and investment liberalization and lifting restrictions on the entry and exit of people, and on the flow of capital and information.
By the year 2000, all specialized facilities are expected to be operational.
The plan also endorses a formula that would, among other things, allow for direct shipping with mainland China through offshore shipping centers. Further efforts in this direction not inconsistent with national policy will be made, provided they are in the best interest of the nation.
DEVELOPMENT PROJECTS IN TWELVE PRIORITY AREAS In early 1994, the government identified twelve areas of priority for the implementation of public projects, most of which are under the Six-year National Development Plan. These projects center largely on transportation, educational and cultural facilities, water resources, environmental protection, and housing. To lessen the government's budgetary burden, private participation is being encouraged in such projects as industrial-commercial zones, new townships, public housing, and high-speed railway.
ENTRY INTO WTO As our consultations with the Gatt contracting members continue, we are preparing to enter the new Eorld Trade Organization in mid-1995. Taiwan will make all adjustments necessary, including providing import relief and trade-adjustment assistance to industries suffering from greater competition from imports within a limited time span.
Taiwan's economic achievements have been in no small part due to our continuous pursuit of economic liberalization and internationalization. As we await admission to membership in the World Trade Organization, we are committed to promoting the further liberalization and internationalization of our economy.
We will expand our trade and investment in the Asia-Pacific region, reaching out to form closer trade and economic ties with our neighbors in the region. This development and the emergence of Taiwan as a center for the regional operations of both our own businesses and multinationals will have us engaged closely in the regional economy.
As we seek to promote better harmony and balance between the different sectors of our own economy, we will continue to pursue the healthy development of cross-straits ties, helping to create a "win-win" situation for both sides on the basis of equality and mutual benefit.
As we enter the ranks of the developed nations at the dawn of the 21st century, we will do our utmost to fulfill our duties in the best interest of world peace and prosperity. Thar is our commitment and goal. Thank you.