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Taiwan has a developed capitalist economy that ranks as the 19th- largest in the
world by Purchasing power parity (PPP), ranks as 18th in the world by gross
domestic product (GDP) at purchasing power parity per capita (person) and 24th
in nominal GDP of investment and foreign trade by the Republic of China (ROC)
government, which commonly referred to as Taiwan. In keeping with this trend,
most large government-owned banks and industrial firms have been privatized.
With the Technocracy-centered economic planning [7] under Martial Law until
1987, real growth in GDP has averaged about 8% during the past three decades.
Exports have grown even faster and since World War II, have provided the
primary impetus for industrialization. Inflation and unemployment are low; the
trade surplus is substantial; and foreign reserves are the world's fourth largest.
Agriculture contributes 3% to GDP, down from 35% in 1952, and the service
sector makes up 73% of the economy. Traditional labor-intensive industries are
steadily being moved off-shore and replaced with more capital- and technologyintensive industries. Economy of Taiwan is an indispensable partner in the Global
Value Chains of Electronics Industry. [8] Electronic components and personal
computer are two areas of international strength of Taiwan's Information
Technology industry. [9] Institute for Information Industry [10][11] with its
international recognitions [12] is responsible for the development of IT industry
and ICT industry [13] in Taiwan. Industrial Technology Research Institute [14] with
its global partners [15] is the advanced research center for applied technology for
the economy of Taiwan. Directorate-General of Budget, Accounting and Statistics
[16] and Ministry of Economic Affairs (Republic of China) [17] release major
economic indicators of the economy of Taiwan. Chung-Hua Institution for
Economic Research provides economic forecast at the forefront for the economy
of Taiwan [18] and authoritatively researches on the bilateral economic relations
with ASEAN by The Taiwan ASEAN Studies Center (TASC). [19][20] Taiwan Stock
Exchange is the host to the listed companies of local industries in Taiwan with
weighted financial exposures to the FTSE Taiwan Index and MSCI Taiwan Index.
Taiwanese investors and businesses have become major investors in mainland
China, Vietnam, Thailand, Indonesia, the Philippines, and Malaysia. Because of
the conservative and stable financial policy [21] by the Central Bank of Republic of
China and the entrepreneurial strengths, Taiwan suffered little from the Asian
Financial Crisis of 1997-1999 compared to many economies in the region. Other
two major banks in Taiwan are Bank of Taiwan and Mega International
Commercial Bank. Unlike the neighboring Japan and South Korea, small and
medium-sized businesses make up a significant proportion of the businesses in
Taiwan. Taiwan is characterized as one of the Newly industrialized economy in
the wake of the Ten Major Construction Projects since 1970's. Since 1990's, the
economy of Chinese Taipei has adopted economic liberalization with the
successive regulatory reforms. [22] The economy of Taiwan has the world's
highest modern convenience store concentration density. [23]
Taiwan is a member of the Asian Development Bank (ADB), the World Trade
Organization (WTO), and the Asia-Pacific Economic Cooperation (APEC).
Taiwan is also an observer [24] at the Organisation for Economic Co-operation
and Development (OECD) under the name of Chinese Taipei. [25] Taiwan is a
member of International Chamber of Commerce as Chinese Taipei. [26] The
economy of Taiwan of Chinese Taipei is seeking to join the Trans-Pacific
Partnership no later than 2020 if economic requirements are met. [27][28] Taiwan's
top five trade partners in 2010 are China, Japan, USA, the European Union, and
Hong Kong.[29][30]
Contents
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1 History
2 Economic outlook
o 2.1 Global financial crisis
3 Foreign trade
4 Industry
o 4.1 Information technology
o 4.2 Agriculture
o 4.3 Energy
5 Science and industrial parks
6 Economic research institutes
7 See also
8 References
9 External links
History
Main article: Economic history of Taiwan
See also: Taiwan Miracle and Four Asian Tigers
Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early
1960s to an aid donor and major foreign investor, with investments primarily
centered in Asia. Private Taiwanese investment in mainland China is estimated
to total in excess of US$150 billion,[31] and official tallies cite Taiwan as having
invested a comparable amount in Southeast Asia.
Taiwan has historically benefited from the flight of many well-educated, wealthy
Chinese to settle on the island: during early Qing Dynasty, the preceding Ming
dynasty supporters survived for a brief period of time in exile in Taiwan, and in
1949, as the Chinese Communist Party gained control of mainland China, two
million Kuomintang (KMT) supporters fled to the island.[32][33][34]
The first step towards industrialization was land reforms, a crucial step in
modernizing the economy, as it created a class of landowners with capital they
can invest in future economic endeavors. US aid was also important to stabilize
post-war Taiwan, and it constituted more than 30 percent of domestic investment
from 1951 to 1962. These factors, together with government planning and
universal education, brought huge advancement in industry and agriculture, and
living standards. The economy shifted from an agriculture-based economy (32%
of GDP in 1952) to an industry-oriented economy (47.% of GDP in 1986).[35]
Between 1952 and 1961, the economy grew by an average of 9.21% each
year.[35]
Once again, the transformation of Taiwan's economy cannot be understood
without reference to the larger geopolitical framework. Although aid was cut back
in the 1970s, it was crucial in the formative years, spurring industrialization and
security and economic links were maintained. Uncertainty about the US
commitment accelerated the country’s shift from subsidized import-substitution in
the 1950s to export-led growth. Development of foreign trade and exports helped
absorb excess labor from the decreased importance of agriculture in the
economy.[35] Like Korea, Taiwan moved from cheap, labor-intensive
manufactures, such as textiles and toys, into an expansion of heavy industry and
infrastructure in the 1970s, and then to advanced electronics in the subsequent
decade. By the 1980s, the economy was becoming increasingly open and the
government moved towards privatization of government enterprises.[35]
Technological development led to the establishment of the Hsinchu Science Park
in 1981. Investments in mainland China spurred cross-strait trade, decreasing
Taiwan's dependence on the United States market.[35] From 1981-1995, the
economy grew at an annual rate of 7.52%, and the service sector became the
largest sector at 51.67%, surpassing the industrial sector and becoming a major
source of the economy's growth.
Economic outlook
Taiwan now faces many of the same economic issues as other developed
economies. With the prospect of continued relocation of labor-intensive industries
to economies with cheaper work forces, such as in mainland China and Vietnam,
Taiwan's future development will have to rely on further transformation to a high
technology and service-oriented economy.[36] In recent years, Taiwan has
successfully diversified its trade markets, cutting its share of exports to the
United States from 49% in 1984 to 20% in 2002. Taiwan's dependence on the
United States should continue to decrease as its exports to Southeast Asia and
mainland China grow and its efforts to develop European markets produce
results.[37] Taiwan's accession to the WTO and its desire to become an AsiaPacific "regional operations center" are spurring further economic liberalization.
Global financial crisis
Taiwan has recovered quickly from the global financial crisis of 2007-2010, and
its economy has been growing steadily. Its economy faced a downturn in 2009
due to a heavy reliance on exports which in turn made it vulnerable to world
markets.[37] Unemployment reached levels not seen since 2003, and the
economy fell 8.36% in the fourth quarter of 2008.[36] In response, the government
launched a US$5.6 billion economic stimulus package (3% of its GDP), provided
financial incentives for businesses, and introduced tax breaks. [36] The stimulus
package focused on infrastructure development, small and medium-sized
businesses, tax breaks for new investments, and low-income households.[36]
Boosting shipments to new overseas markets, such as Russia, Brazil, and the
Middle East was also a main goal of the stimulus.[36] The economy has since
slowly recovered; by November 2010, Taiwan's unemployment rate had fallen to
a two-year low of 4.73%,[38] and continued dropping to a 40-month low of 4.18%
by the end of 2011.[39] The average salary has also been rising steadily for each
month in 2010, up 1.92% from the same period in 2009. [40] Industrial output for
November 2010 reached another high, up 19.37% from a year earlier, indicating
strong exports and a growing local economy.[41] Private consumption is also
increasing, with retail sales up 6.4% compared to 2009.[42] After 10.5% economic
growth in 2010, the World Bank expects growth to continue and reach 5% for
2011.[43]
Foreign trade
Computex Taipei, the second-largest technology trade show in the world,[44] is a
global IT exhibition which attracts many foreign investors.[45]
Foreign trade has been the engine of Taiwan's rapid growth during the past 40
years. Taiwan's economy remains export-oriented, thus it depends on an open
world trade regime and remains vulnerable to downturns in the world economy.
The total value of trade increased over fivefold in the 1960s, nearly tenfold in the
1970s, and doubled again in the 1980s.[46] The 1990s saw a more modest,
slightly less than twofold, growth. Export composition changed from
predominantly agricultural commodities to industrial goods (now 98%). The
electronics sector is Taiwan's most important industrial export sector and is the
largest recipient of U.S. investment. Taiwan, as an independent economy,
became a member of the World Trade Organization (WTO) as Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu (often shortened to
"Chinese Taipei"-both names resulting from PRC interference on the WTO) in
January 2002. In a 2011 report by Business Environment Risk Intelligence
(BERI), Taiwan ranked third-best globally for its investment environment.[47]
Taiwan is the world's largest supplier of contract computer chip manufacturing
(foundry services) and is a leading LCD panel manufacturer,[48] DRAM computer
memory, networking equipment, and consumer electronics designer and
manufacturer.[37] Textiles are another major industrial export sector, though of
declining importance as Taiwan due to labor shortages, increasing overhead
costs, land prices, and environmental protection.[49] Imports are dominated by
raw materials and capital goods, which account for more than 90% of the total.
Taiwan imports most of its energy needs. The United States is Taiwan's third
largest trading partner, taking 11.4% of Taiwanese exports and supplying 10.0%
of its imports.[29][30] China has recently become Taiwan's largest import and
export partner. In 2010, the PRC accounted for 28.0% of Taiwan's exports and
13.2% of imports (excluding Hong Kong).[29][30] This figure is growing rapidly as
both economies become ever more interdependent. Imports from China consist
mostly of agricultural and industrial raw materials. Exports to the United States
are mainly electronics and consumer goods. As Taiwanese per capita income
level has risen, demand for imported, high-quality consumer goods has
increased. Taiwan's 2002 trade surplus with the United States was $8.70.
The lack of formal diplomatic relations between the Republic of China (Taiwan)
with Taiwan's trading partners appears not to have seriously hindered Taiwan's
rapidly expanding commerce. The Republic of China maintains cultural and trade
offices in more than 60 countries with which it does not have official relations to
represent Taiwanese interest. In addition to the WTO, Taiwan is a member of the
Asian Development Bank as "Taipei, China" (a name resulting from PRC
influence on the bank) and the Asia-Pacific Economic Cooperation (APEC) forum
as "Chinese Taipei" (for the same reason as above). These developments reflect
Taiwan's economic importance and its desire to become further integrated into
the global economy.
The Economic Cooperation Framework Agreement (ECFA) with the People's
Republic of China was signed on June 29, 2010, in Chongqing.[50][51] It could
potentially widen the market for Taiwan's exports. However, the true benefits and
impacts brought by ECFA to Taiwan's overall economy are still in dispute. [52] The
newly-signed agreement will allow for more than 500 products made in Taiwan to
enter China at low or no tariffs.[53] The government is also looking to establish
trade agreements with Singapore[54] and the United States.[55]
Industry
Industrial output has gradually decreased from accounting for over half of
Taiwan's GDP in 1986 to just 31% in 2002.[49] Industries have gradually moved to
capital and technology-intensive industries from more labor-intensive industries,
with electronics and information technology accounting for 35% of the industrial
structure.[49] Industry in Taiwan primarily consists of many small and mediumsized enterprises (SME) with fewer large enterprises.
JAPAN
Quick Facts
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Population: 127.8 million
GDP (PPP):
o $4.4 trillion
o -0.7% growth
o -0.2% 5-year compound annual growth
o $34,740 per capita
Unemployment: 4.2%
Inflation (CPI): -0.3%
FDI Inflow: $-1758.3 million
Embed This Data
Japan’s economic freedom score is 71.8, making its economy the 24th freest in
the 2013 Index. Its score is 0.2 point higher than last year, with improvements in
fiscal freedom, freedom from corruption, and monetary freedom largely offset by
declines in management of government spending and labor freedom. Japan is
ranked 6th out of 41 countries in the Asia–Pacific region.
The Japanese economy benefits from relatively sound levels of economic
freedom in all areas. The foundations of economic freedom have been relatively
well institutionalized, supported by an effective judicial framework and a relatively
low level of perceived corruption.
However, Japan’s overall record in advancing economic freedom is patchy, and
its score is lower today than it was in 1995. The financial sector, though modern
and well developed, remains subject to growing political interference. Senioritybased traditional labor practices persist, constraining mobility. A monetary policy
aimed at preserving low interest rates has reduced any acute concern over
Japan’s large debt burden, but it has also limited the political motivation to
implement urgently needed fiscal reform. Japan continues to fall behind other
neighboring economies in pursuing free trade agreements.
Background
After 55 years of Liberal Democratic Party rule, the Democratic Party of Japan
captured both houses of parliament in 2009 and installed Yukio Hatoyama as
prime minister. Hatoyama resigned abruptly in June 2010 and was succeeded by
Finance Minister Naoto Kan, who was replaced in September 2011 by Yoshihiko
Noda. The March 2011 earthquake and tsunami further strained an economy
already struggling for two decades with slow growth and stagnation. Prime
Minister Noda has strived to include Japan in the Trans-Pacific Partnership to
stimulate the economy but faces strong resistance at home. Successive prime
ministers have been unable or unwilling to implement necessary fiscal reforms.
The solid judicial framework provides secure protection of real and intellectual
property. The court system is independent of political interference but lacks
efficiency. Obtaining and protecting patents and trademarks can be timeconsuming and costly. The courts do not discriminate against foreign investors,
and contracts are respected. A relatively modest level of corruption has been one
of Japan’s key institutional assets.
The top income tax rate is 40 percent. The government lowered the corporate
rate to 25.5 percent, but local taxes and an enterprise tax can increase that
significantly. Other taxes include a value-added tax and an estate tax. The
overall tax burden equals 28.8 percent of total domestic income. Government
spending is 42.8 percent of GDP, with budget deficits hovering around 10
percent of GDP. Public debt is over twice the size of the economy.
With no minimum capital required, business formation takes less than 10
procedures. However, dynamic entrepreneurial growth is discouraged by
lingering regulatory rigidities, including burdensome licensing requirements. A
propensity for lifetime employment guarantees and seniority-based wages hurts
productivity and impedes the development of a more flexible labor market.
Inflation has been minimal.
The trade-weighted average tariff rate is 1.6 percent, but there are layers of nontariff barriers. Foreign investment is formally welcome, and inward investment is
subject to few restrictions. However, overregulation and a slow court system
inhibit foreign acquisition of domestic firms. The financial sector is subject to
political influence and lacks dynamic growth. Reform of the state-owned postal
savings system has been derailed since late 2009.
SOUTH KOREA
Quick Facts
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Population: 49.0 million
GDP (PPP):
o $1.6 trillion
o 3.6% growth
o 3.5% 5-year compound annual growth
o $31,714 per capita
Unemployment: 3.4%
Inflation (CPI): 4.0%
FDI Inflow: $4.7 billion
South Korea’s economic freedom score is 70.3, making its economy the 34th
freest in the 2013 Index. Its score is 0.4 point higher than last year, with declines
in labor freedom and monetary freedom offset by gains in the management of
public spending and fiscal freedom. South Korea is ranked 8th out of 41
countries in the Asia–Pacific region.
Regaining the “mostly free” status that it last enjoyed in the 1998 Index, South
Korea has improved its competitiveness by strengthening fiscal fundamentals. A
vibrant private sector, bolstered by a well-educated labor force and high capacity
for innovation, has capitalized on the country’s openness to global trade and
investment. South Korea has proactively entered into free trade pacts with
leading economies including the United States and the European Union.
A sound legal framework is in place to uphold the rule of law. However,
corruption continues to undermine the foundations of economic freedom, eroding
equity and trust in government. South Korea’s long-term economic dynamism will
be shaped by the outcome of ongoing debates about the proper scope of
government in the free market and welfare policies.
Background
Opposition to South Korean President Lee Myung-bak, blamed for failing to
deliver on campaign pledges of exuberant economic growth, has intensified in
the past year. Fueled by legislative and presidential election campaigns ahead of
the December 2012 vote, political discourse has revolved around the country’s
widening income gap and a growing consensus in favor of “social welfarism.”
Both the ruling conservative and opposition progressive parties have promised
ever-growing government programs to gain voters’ favor, drowning out warnings
of rising government debt. South Korea, the world’s 15th largest economy, has
enjoyed decades of impressive economic growth and is a world leader in
electronics, telecommunications, automobile production, and shipbuilding. After
years of political debate and stalled legislation, the United States and South
Korea have finally approved and implemented a free trade agreement.
A well-functioning modern legal framework ensures strong protection of private
property rights. The rule of law is effective, and the judicial system is efficient.
Protection of intellectual property rights needs to be improved. Corruption
remains a substantial concern. Since 1990, seven chairmen of the 10 largest
chaebol (large business groups) have received jail sentences averaging 22
years, but all of the sentences were later suspended.
The top income tax rate is 35 percent, and the top corporate tax rate is 22
percent. A 10 percent surtax on individual and corporate rates and a value-added
tax (VAT) bring the overall tax burden to 25.1 percent of GDP. Government
spending is equivalent to 30.1 percent of total domestic output. The budget
balance has been in small surplus, and public debt remains below 35 percent of
GDP.
The competitive regulatory framework facilitates entrepreneurial activity and
innovation. With no minimum capital required, starting a business takes five
procedures and seven days. The labor market continues to be dynamic, but there
are lingering regulatory rigidities, with powerful trade unions adding to the cost of
conducting business. Monetary stability has been maintained, and inflationary
pressures have eased.
The trade-weighted average tariff rate is 8.7 percent but likely will decline in the
future as new free trade agreements are implemented. The economy is
increasingly open to foreign investors, and the investment regime has become
more transparent. The financial sector has become more competitive, although
business start-ups still struggle to obtain financing. The banking sector remains
largely stable.