According to a study by the Nomura Research Center of Japan, the competitive advantage of Taiwan's manufacturing industry lies in information, telecommunications, and other high technology industries. Correspondingly, the government has identified and appropriated funding for the development of 10 high technology industries that will be the foundation of Taiwan's economic success in the first few decades of the 21st century.
The 10 industries are: (1) communications, (2) information, (3) consumer electronics, (4) semiconductors,(5) precision machinery and automation, (6) aerospace,(7) advanced materials, (8) specialty chemicals and pharmaceuticals, (9) medical and health care equipment, and (10) pollution control and treatment.
Labor-intensive industries such as processed foods, leather products, and wood and bamboo products have gradually been replaced by capital-and technology-intensive industries. Examples of these industries are chemicals, petrochemicals, information technology, electrical equipment, and electronics. Electronics and information technology are the biggest players in the manufacturing sector, which employs 26 percent of the national workforce.
The service sector is thriving and shows promise of further growth as the spending power of the population increases. By the end of 1995, the growth of the service sector exceeded that of the agricultural and manufacturing sectors by more than 60 percent and has continued to do so. The different businesses that fall under the service sector in Taiwan are: finance, insurance, and real estate; commerce, including wholesale and retail business, food and beverages, and international trade; social and individual services; transport, storage, and telecommunications; commercial services, including legal, accounting, civil engineering, information, advertising, designing, and leasing; governmental services, and miscellaneous others. Among these businesses, finance, insurance, and real estate are the most dominant. The service sector creates the largest competitive employment opportunities and employs the bulk of Taiwan's labor force.
Meanwhile, the contribution of the agricultural sector to GDP has been steadily declining since the 1980s when Taiwan's government shifted the focus of its economic strategy to industrialization. Few of the younger generation are willing to work in the agricultural sector, preferring to pursue better opportunities in the other sectors. Farmers make up only 8 percent of the labor force and produce less than 3 percent of the island's total GDP according to 1999 statistics. Consequently, the sector diminished in importance while the manufacturing sector has risen to the forefront. The agricultural sector will face even more problems when the country is finally accepted as a member of the World Trade Organization (WTO). To comply with the WTO's requirements, the government has been systematically reducing the trade barriers on its traditionally well-protected agricultural goods, leaving local produce to face increased competition from the foreign agricultural products that will flood the domestic market when Taiwan becomes a full-fledged member in the WTO.
Manufacturing has long been overtaken by the service sector in terms of contribution to GDP. In 1999, the service sector contributed the biggest slice of GDP at 64 percent, with industry accounting for 33 percent, and agriculture 3 percent.