|
The Liberty Times
Editorial: Time for catchy slogans is past
The economy is in a rapid downward spiral, with many economic indicators telling
a tale of coming doom and gloom. Last year, exports, which constitute a major
proportion of our GDP, fell by 4.7 percent. Taiwan was the only nation among our
Asian neighbors to see export volume fall. South Korea reported a year-on-year
increase rate for the first half of the year of 0.7 percent. It is abundantly
clear who is the most competitive here.
Academia Sinica adjusted its Taiwanese economic growth rate forecast for this
year downward to 1.94 percent, making a mockery of the government’s promises to
maintain the rate at 3 percent or above. President Ma Ying-jeou (馬英九) is
struggling to come up with a viable antidote to the nation’s economic ills, and
is quite powerless to breathe life back into the ailing patient. Who knows when
the public’s trials will end?
If we are to find a way out of this predicament, we first need to understand the
nature of what ails our economy, and prescribe the correct medicine accordingly.
One of the symptoms is our overreliance on China, including the fact that more
than 50 percent of the orders Taiwanese companies take are for goods that are
actually produced overseas, and when we say “overseas,” we mean in China.
Also, the vast majority of Taiwanese investment “overseas” is actually in China,
to the tune of more than US$10 billion a year. In fact, according to unofficial
estimates, the total amount over the years has accrued to more than US$200
billion. Another factor is that more than 40 percent of our exports go to China.
Since Ma took office, he has come up with one sole antidote to our economic
travails: Look to China for help. Ostensibly seeking to sign the Economic
Cooperation Framework Agreement (ECFA) as a means to overcome Beijing’s
resistance to our signing free-trade agreements with other countries, Ma has in
practice embarked on a policy of diplomatic-truce-and-sovereignty emasculation
in the hope that China will show us some mercy. This is how he thinks he is
going to be able to reinvigorate the economy.
Putting virtually all our eggs in the China basket has not only worsened our
economic malaise, but has got us addicted to the purported cure.
We are already seeing the negative impact of this addiction. Politically
speaking, Beijing knows it has Taiwan by the short hairs. The reason behind the
perpetual postponement of the eighth meeting between Association for Relations
Across the Taiwan Straits (ARATS) Chairman Chen Yunlin (陳雲林) and Straits
Exchange Foundation (SEF) Chairman Chiang Pin-kung (江丙坤) is that the dynamics
between the two countries has changed. Beijing no longer needs anything from the
Ma administration. The net has already been cast, and all Beijing has to do is
wait to pull in the catch.
In economic terms, Taiwan is even worse off. Taiwanese industry has placed all
its hopes in China, but China’s economic growth is already starting to slow, and
its policy of transforming its formerly labor and energy-intensive, low-tech
industry through technology transfer is starting to bear fruit. These two
factors combined are having a serious impact on Taiwanese manufacturing, hitting
Taiwanese exports and marginalizing Taiwanese companies.
Given that, as we have said, the main problem for Taiwan’s economy is our
overreliance on China, it is this we have to change to put things right. We have
to put a stop to the current model of goods ordered from Taiwanese companies
being manufactured over in China. There are three parts to the prescription.
First, overseas investment needs to be diversified: it cannot be aimed
exclusively at China. In particular, we should be looking at the emerging ASEAN
economies, and the huge business and investment opportunities that they
represent, as a strong driver for our economy.
Second, we should not be concentrating our exports on China. We need to open up
more markets for Taiwanese products. At present, as much as 40 percent of
Taiwanese exports are shipped to China. This is because of the high
concentration of Taiwanese companies over there: Many of the raw materials and
components that these companies need are sent over there, where they are
assembled before being shipped to other countries. Herein lie two potential
dangers: First, that 40 percent figure is worryingly large, and leaves us very
vulnerable should the situation change through external interference or
obstruction. The second is that, should many Taiwanese businesses in China close
up shop, it will have a serious impact on our export volume. Again, this leaves
us dangerously exposed to factors beyond our control.
Finally, and most importantly, we need to repatriate our manufacturing industry.
If we are to thoroughly rid ourselves of our reliance on China, the best way to
do this would be to get Taiwanese businesses that have relocated to China to
return to Taiwan and invest here, opening up plants and factories back in this
country.
Twenty years ago, Taiwanese companies began relocating across the Strait to take
advantage of the lower costs of land and labor, lax environmental regulations
and favorable tax breaks. Now, wages are rising in China, and with the various
benefits that need to be taken care of, labor costs are no longer much lower
than they are in Taiwan. Land is getting more expensive, too. In addition,
regulations have been getting progressively stricter, and in many cases
individuals in positions of power have their own interpretation of how those
regulations are to be applied. Also, the tax incentives on offer are no longer
anything to write home about.
Over the past few years, the US government has been the strongest advocate of
repatriation of manufacturers from China. It has invested in researching how
best to integrate manufacturing to improve efficiencies at home, rather than
relying on cheap but inefficient labor in China. Wages are higher in the US than
they are in Taiwan. If it is possible to entice US manufacturers to relocate
back home, then it should be possible to get Taiwanese producers to repatriate.
The trouble is, the government has to start doing something about this, rather
than just devising catchy slogans. It needs to improve integration between
different government departments. It should try to work out what exactly
Taiwanese businesses need, and what obstacles are keeping them from returning
from China. It needs to get off its butt and revise regulations and the tax
system, providing well-planned and integrated industrial parks and establish
comprehensive supply chains. All of this should help coax Taiwanese companies
back to Taiwan.
If this is successful, it will also create a considerable amount of new jobs,
address the problem of inadequate domestic investment and reduce our reliance on
exports to China. It will be a huge boost to economic growth in Taiwan, now and
into the future.
Translated by Paul Cooper
|
