Taiwan - Overview of economy

The economic development of Taiwan can be broken down into 5 stages. In the 1950s, the main goal of the government was to stabilize the economy and ensure an adequate and regular food supply for the population. Hand in hand with agricultural production, the government encouraged the development of labor-intensive industries to provide much-needed employment to a growing labor force , and to ease the need for imported products by manufacturing substitute products locally.

In the 1960s, the government continued to promote the same labor-intensive industries, but this time the focus was on manufacturing products for export. By the end of the decade, the export industry was thriving and had stimulated local demand for the machinery needed to produce export goods. This export-led strategy had several positive results. Employment opportunities increased and a greater variety of manufactured products were developed. Expansion advanced local knowledge of management skills and the development of industrial technology. Moreover, receipts of foreign currency greatly enhanced the financial standing and stability of the government.

Supported by these developments, in the 1970s the government shifted its strategy to the encouragement of basic and heavy industries. These industries were designed to produce and promote domestic substitutes for imported products, and to develop those industries that would require heavy capital expenditures. By thus reducing Taiwan's reliance on foreign suppliers for components, government expenditure decreased.

By the 1980s, Taiwan's foreign trade was posting huge surpluses. The government directed these funds to building infrastructure such as roads, bridges, airports, and seaports, and to improve the quality of life on the island. The surplus was also able to finance the further development of capital-intensive and high-technology industries such as electronics, information, and machinery. At the turn of the decade, the government focused on building a world-class infrastructure and 1994 saw the approval of a plan known as the Twelve Major Construction Projects. The scope of the plan included transportation, culture, and education, improvement of living standards, development of water resources, and environmental protection.

In just 50 years, Taiwan had achieved rapid economic growth, characterized by stable prices and equitable distribution of income. Its rapid industrial advancement between 1980 and 2000 has earned the island recognition as one of the "tiger" economies of Asia.

One of the most important events that set the stage for Taiwan's economic development was its implementation of genuine land reform. Under this program, rents were reduced, public lands were distributed to the landless, and farmers were given the opportunity to own the land they had been tilling for many years. In 1953, 60 percent of the rural population became owner-farmers, and owner-cultivated land increased to more than 75 percent of the total land tilled. In the meantime, those land owners who were compelled to sell their property under the land reform program were compensated in government bonds. Dissatisfied with the government's action and highly suspicious of the value of the bonds, many of the landowners immediately sold them. At the same time, land prices went down in anticipation of the effects of land reform. Taken together, these events contributed to eradicating the land-owning class and the landlord-tenant relationship, a transformation that saved Taiwan from the fate of other societies where huge income disparity between landowners and their workers set the stage for social and economic injustice.

Land reform also led to the reorganization of rural Chinese society. It brought the end of patriarchy, whereby authority was vested only in men, and saw the loosening of family ties. As agricultural processes were modernized, production became more efficient, allowing younger people to leave the farms and pursue other careers in the urban areas. This migration triggered urbanization which, in turn, fostered job specialization, lowered class barriers, promoted social equality, and increased cultural and social interaction.

As social interaction increased, people no longer confined close relationships to the family circle but made outside friends, thus further contributing to social stability and harmony. Under government guidance, the Taiwanese found themselves sharing a common vision and working toward a common goal. Besides economic policies, the government implemented policies that extended compulsory education to 9 years and established schools for vocational and technical training. By encouraging young people to acquire new ideas and skills, Taiwan created a well-trained and industrious labor force, which has served as the backbone of the nation's economic development.

The major economic sectors in Taiwan are composed of services, manufacturing, and agriculture. Since 1985, the service sector has contributed greatly to economic development by generating more than half the gross domestic product (GDP), increasing to 64 percent in 1999, while industry and agriculture accounted for 33 percent and 3 percent of GDP, respectively.

Small and medium enterprises (SMEs) in Taiwan are engaged in the manufacturing of products from toys and textiles to personal computers. SMEs can also be found in the construction industry, and in the service sector, particularly in financial, social, and personal services. According to the Ministry of Finance, 97.76 percent of the businesses in Taiwan can be classified as SMEs. In 1998, SMEs provided employment for 4 out of 5 workers in Taiwan, or 7.27 million out of 9.55 million workers.

The government of Taiwan is optimistic about the island's continued economic growth. Its optimism is based on past economic performance. Even at the height of the 1997 Asian financial crisis, which had a negative impact on the leading economies of Asia, Taiwan's gross domestic product still amounted to US$283.4 billion.

Taiwan's government is continually drawing up plans to create more businesses on the island to provide more employment and to strengthen its position against the re-occurrence of a regional or global economic crisis. For the 21st century, the government is working hard to secure the next step of that process. In his inaugural speech of May 2000, President Chen declared that Taiwan must respond to international developments by moving toward a knowledge-based economy in which high-tech industries constantly innovate, while traditional industries progressively transform and upgrade.

Also read article about Taiwan from Wikipedia

User Contributions:

Comment about this article, ask questions, or add new information about this topic: