Transcript A LOOK AT Taiwan’s state Policy 1950

A LOOK AT
Taiwan’s state Policy
1950-PRESENT
Presented by: Adeesha Hack
March 16, 2000
Economic Overview
• Capitalist economy-government control of large banks and
industrial firms; decreasing in government control
• Export growth has been even faster and has provided the
impetus for industrialization
• Inflation and unemployment are low
• Traditional labor-intensive industries are steadily being moved
off-shore and replaced with more capital- and technologyintensive industries
• Suffered little compared with many of its neighbors from "the
Asian flu" in 1998.
Economic Miracle
Taiwan's Growth 1953-82
GNP (total)
100
Exports
Ixports
80
Populat.
60
%
40
20
-40
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
-20
1953
0
How to Make a Miracle (1949-1960)
• Kuomintang (KMT)/Chinese Nationalist Party: received massive
economic aid from U.S.
• Progressive agricultural reforms and effective use of surplus
• Import Substitution:
1) High tariffs levied to protect domestic manufacturers from
external competition
2) Overvalued local currently to help local exporters
3) Kept interest rates (artificially) low
• Success: Between 1952-1960, GNP’s annual average growth
was approximately 7.6%
Distribution of Employment Among Sectors
Agriculture
Manufacturing
Mining/Construct/Util
Commerce
Transportation
Others
1952
54.8%
12.9%
4.8%
10.2%
3.8%
13.5%
1962
49.7%
15.1%
5.9%
9.8%
4.5%
15.0%
1972
33.0%
24.6%
7.2%
14.0%
5.2%
16.0%
1986
17.0%
33.8%
7.7%
17.9%
5.2%
18.4%
How to Make a Miracle (1960-1970)
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New strategy 1) Encourage FDI 2) Promote export growth
Incentives: tax holidays, tax ceilings, EPZ, lowered tariffs
Success: int’l trade flourished, Japan excelled
Agriculture: %GNP decreased from 24% to 17%
Manufacturing Sector: %workforce increased from 14% to 20%
Textiles: export rose by 20x in 10 years
Small Business: flourished
Decrease in government control over economy
Helped to make Taiwanese economy more efficient but overall
still shaped by government intervention
How to Make a Miracle (1970-1990)
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Change in economic development policy
Investment in infrastructure --> capital intensive
Further measures to implement import substitution
1970: 10 national projects to rebuild infrastructure
– 6: communications & transportation
– 3:heavy industry (shipbuilding, steel & petrochemicals)
– 1: nuclear power (counteract dependence on oil <oil crisis>)
• 1980s: developed hi-tech sector (34% total exports)
• R&D: gov’t accepted 60% expenditures
• New problems: -1) less competitive, maintained growth 2%-13%
– 2) dependence on US markets (50% of exports in 1984-85)
How to Make a Miracle (1990-2000)
• 1998: financial turmoil in East Asia slowed growth rate to 5%
• Rising labor & land costs led manufacturers in labor intensive
industries to move offshore,
• Industrial growth: concentrated in capital and technology intensive
industries (petrochemicals, computers, electronic components,
consumer goods industries)
• End of 90s: services, 55.6%GDP; merchandise exports 44%GDP
• Rising public debt controlled: austerity measures in place
• Budget pressure: social spending (health plan), infrastructure
• FDI prohibited in key industries: agriculture, telecommunications,
broadcasting, cigarette/alcohol product. (liberalized in 2004)
Explaining the Miracle
• The “Economist” Explanation
1) American military/civilian aid: control inflation, rebuild economy,
supply needed commodities, raw materials, foreign exchange,
boost confidence of people
2) Land reforms: agricultural sector
3) Protected infant industries when necessary; liberalized when ready
4) Foreign investors: provided incentives and good business climate
5) Prime resource: cheap/abundant labour -- companies invested in
labour intensive, rather than capital intensive industry - absorbed
labour and distributed income more equitably
6) Export-led growth was engine to economic growth
State was indispensable to Taiwan’s Growth
Explaining the Miracle2
• The “Dependency” Explanation
– Attribute activities in Taiwan to external actors
– Nation-state has not been important and would be nothing without
American intervention or transnational corporations
– Capital, technology and demand are all externally derived
– Tool of foreign corporations, repressing its people
– Local entrepreneurs have “sold out” to their “foreign masters”
But Why...
• Why did Taiwan remain so stable during rapid economic
growth?
1) Declaration of martial law (1949-1987)
2) “Authoritarian” nature of KMT
3) Equitable income distribution - diffused social tensions
• If we agree with dependency theorists and argue that Taiwan
was used by foreign actors, then why did it not become
underdeveloped like most of the South?
1) Equal terms of trade
2) Diversify trade - did not rely primarily on raw materials
3) Protect infant industries through government intervention
In Summary
“Taiwan’s existing development must be quick…no waste of
resources…cannot be achieved under a laissez-faire economy;
must depend on active participation of government through
deliberate plans and supervision. Government should decide upon
the types and limits of industrial development…government will
decide which industries will be developed and which will be delayed.
Within this scheme, the various industries and any unit among them
will have the fullest freedom of operation. This, therefore, is still a
free economic system”
(Yin Chung-Jung, Economic Official, 1954)
Taiwan - “Asian’s Miracle”
In the Old Days
Beginning to Modernize