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Taiwan. Content. Taiwan in 2010 Import Substitution in 1950s Export Promotion in 1960s Toward High-techs SMEs-Driven Taiwan Credit Rationing Foreign and Cross-Strait Trade. Taiwan in 2010. GDP ( 2011): $ 467 billion, with per capita GDP $20,083 . Unemployment (April 2011): 4.29%.
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Content • Taiwan in 2010 • Import Substitution in 1950s • Export Promotion in 1960s • Toward High-techs • SMEs-Driven Taiwan • Credit Rationing • Foreign and Cross-Strait Trade
Taiwan in 2010 • GDP (2011): $467 billion, with per capita GDP $20,083.Unemployment (April 2011): 4.29%. • Natural resources: Small deposits of coal, natural gas, limestone, marble, and asbestos.
Industry Structure in 2010 • Agriculture (1.6% of GDP): Major products--pork, rice, fruit and vegetables, flowers, sugarcane, poultry, shrimp, eel. • Services: (67.1% of GDP). • Industry (31.3% of GDP): Types--electronics and flat panel products, chemicals and petrochemicals, basic metals, machinery, textiles, transport equipment, plastics, machinery.
Export in 2010 • Exports--$274.6 billion: electronics, optical and precision instruments, information and communications products, textile products, basic metals, plastic and rubber products. • Major markets--P.R.C. and Hong Kong $114.8 billion, U.S. $31.5 billion, Japan $14.5 billion.
Import in 2010 • Imports--$251.4 billion: electronics, optical and precision instruments, information and communications products, machinery and electrical products, chemicals, basic metals, transport equipment, crude oil. • Major suppliers--Japan $36.2 billion, P.R.C. and Hong Kong $37.6 billion, U.S. $25.4 billion.
Education in 2010 • Compulsory : 6 years of elementary school and 3 years of middle school. • About 98% of middle graduates go to either a high or vocational school. • Extensive higher education system with 165 institutions of higher learning. • 147,561 applied for admission to colleges; 100% of the applicants were offered placement and 76% of the candidates actually enrolled. • Over 15,890 U.S. student visas were issued to Taiwan passport holders.
Beginning of Industrialization in 1950s • Rice and sugar cane had been major products during Japanese rule for 1895-1945. • KMT confiscated all industries formerly held by Japanese. • Land reform program redistributed land among small farmers and compensated large landowners with commodities certificates and stock in state-owned industries.
Private-Led Industrialization • Who would lead industrialization? Public enterprises? Or private entrepreneurs? • KMT decided private-led industrialization. • Some large landowners turned their compensation into capital to become first generation of industrial entrepreneurs. • Refugee businessmen from the mainland joined them to transform Taiwan from an agrarian to an industrial economy.
But Strong State Initiatives • Fiscal policy : awarded tax-tariff benefit on industrial activities complying national plans. • Foreign exchange control to address foreign exchange gap. • State-owned bank system imposed low interest rate with credit rationing (investment savings gap).
US Aid • The United States resumed aid as much as $4 billion, accounting for 5 percent of GNP, to Taiwan during the Korean War, enabling Taiwan to invest in infrastructure. • Agricultural production increased by 14 percent and provided much of the investment capital and labor needed for later industrialization.
Import Substitution • The first four-year economic development plan (1953–56) : reconstruction, hydro-electric power, increased production of rice, fertilizers. • In The second four-year plan (1957–60) encouraged import substitution industries.
Export Promotion Begins • The third four-year plan (1961–64) : labor-intensive export industries, energy development, agricultural growth, and exploration and development of the island's limited natural resources. • US loans and grants, totaling $2.2 billion, and foreign direct investment financed these early stages of development.
FDIs • FDIs in Taiwan helped not only to finance industrialization but also to introduce modern, labor-intensive technology, and Taiwan became a major exporter of labor-intensive products. • Most FDIs were made by overseas Chinese and some Japanese.
Frustration on Heavy and Chemical Industries in 1970s • By 1971, exports of manufactured goods recorded a spectacular increases, and Taiwan's trade accounts changed from chronic deficit to stable surplus. • Attempt to redirect from labor-intensive industries to capital-intensive ones such as shipbuilding, and petrochemicals. • The worldwide recession hit adversely.
Toward High-Tech in 1980s • Focus shifted toward sophisticated, capital- and technology-intensive products such as computers, robotics, and bioengineering for export and to develop the service sector. • The appreciation of the Taiwan dollar, rising labor costs, and increasing environmental consciousness in Taiwan kicked out many labor-intensive industries, such as shoe manufacturing, to China and Southeast Asia.
1990s • "Statute for Upgrading Industries“ was legislated in early 1991 to provide incentives for private investment in R&D and high-technology sectors. • Focus in the late 1990s concentrated on expanded privatization of state enterprises, and opening of the Taiwan market to foreigners.
SME Driven Economy • In 1985, small and medium enterprises (those with fewer than 300 employees) contributed about 50% of value added, • and employed 62% of the workforce, • and produced 65% of total export value.
Productivity of Taiwanese SMEs • Levels and growth of productivity are positively correlated with firm size. Why? - Self selection of more efficient producers that survive over time - Larger firms enjoy better access to more resources, better techniques. • In Taiwan, superior micro and small firms have grown up to medium sized firms with higher productivity. • It was the process of survival and growth rather than the absolute size.
Credit Rationing and Informal Credit Market • Banking system had been mostly government owned until 1989. • Credits had been rationed mainly to public enterprises and large-scale private enterprises in export-oriented industries. • Bank credits came as additional and concessionary to most SMEs.
Informal Credit Markets • Productivity, profitability, and growth potential of industries had little effect on credit rationing decisions. • Productive SMEs attained credit from informal markets. • Credit from informal market was estimated about 30-60% of total loans.
Foreign Trade • Foreign trade has been the engine of Taiwan's rapid growth during the past 50 years. • The total value of trade increased more than 200-fold in past 50 years. • Export composition changed from agricultural commodities to industrial goods (now 98%). Taiwan is the world's largest supplier of computer monitors and PCs.
Continued • Imports of raw materials and capital goods account for more than 90% of the total. • The mainland China supplanted the US as Taiwan's largest trade partner in 2003. • In 2010, China (including Hong Kong) accounted for over 29.0% of Taiwan's total trade and 41.8% of Taiwan's exports. Japan was Taiwan's second-largest trading partner with 13.3% of total trade, including 20.7% of Taiwan's imports.
Cross-Strait Trade • In February 2002, Taiwan formally permitted direct cross-Strait trade. • Cross-Strait trade has grown rapidly over the past 10 years. China is Taiwan's largest trading partner, and Taiwan is China's seventh-largest. • Estimates of Taiwan investment on the mainland, range from $150 billion to over $300 billion, making Taiwan and Hong Kong by some measures the two largest investors in the P.R.C.
continued • On June 29, 2010, following 6 months of negotiations, Taiwan and the P.R.C. signed the Economic Cooperation Framework Agreement (ECFA), aimed at bringing about liberalization of cross-Strait trade in products and services, and eventually creating an essentially free-trade regime.
