Stability Of Taiwan Economy example essay topic

Immediately following World War II, Taiwan was still a predominated agricultural economy with half its labor force employed in agriculture and about 44 percent of net domestic product generated in that sector. However, basing on the infrastructure left behind by Japanese, a strong agriculture foundation and the capital assistance gathered from the United States, Taiwanese remarkably developed the pre-condition for economic takeoff. They successfully managed agriculture to provide a considerable net capital flow to non-agriculture. Consequently, Taiwan moved from an agriculture-based economy in the late forties and fifties to a semi-industrialized one by the early seventies, and is presently reaching the stage of a full-fledged industrialization. During the structure transformation, international trade played a crucial role, which had function of push and go fueled by the long term rate of capital accumulation and technical change. Certainly, for a country like Taiwan, which is relatively small and not particularly well endowed with a range of natural resource, the gain from trade must be very helpful in its economic evolution.

When Taiwan's modern growth epoch began in the 1950's, the dominant strategy chosen was import substitution. On the one hand, it imported raw materials to produce commodities needed. On the other hand, it protected the domestic industries. Around 1960, because of the success of relatively neutral incentive policies, which had supported import substitution, domestic market had been satisfied for many goods. The prospects of further using import substitution strategy were considerably less rosy. As a result, Taiwan made a critical decision, switching import substitution to export-oriented strategy, which altered the structure of production.

Via exporting, Taiwan has generated the incomes to allow saving and investment on the scale required to raise per capita about tenfold in thirty years. Eventually, international trade, the engine of Taiwan's growth, makes the island transform from developing to mature economy. Following several waves of structure adjustment, Taiwan has already reached the stage of a developed economy. As its economy grows, the relative importance of agriculture is decreasing. Small and medium-scale enterprises not only are dominant from outset but, even more startling, expand more rapidly than large-scale enterprises.

With Taiwan's comparative advantage shifting away from cheap labor and towards technology and skill-intensive goods, today, they have focused on capital intensive industries which include construction, utilities, high pricing textiles, refining, petrochemicals, shipbuilding, food processing, metallurgy, chemicals, machinery, and high-tech industries -- electronics, informatics and fiber-optics. In 1992, the gross national product (GNP) reached US$200 billions (the 20th in the world); per capita GNP reached US$10000 (25th in the world); and the international trade reach US$150 billion (the 14th in the world). Consistent trade surplus have swelled Taiwan's Foreign exchange reserve to more than US$85 billion, the second place in the world. After developing first 'economic miracle,' Taiwan continues with seeking to transform itself into a regional business and financial center which can compete with Singapore and Hong Kong. This involves a range of policy adjustment such as lowering tariffs, reducing restrictions on the employment of foreign specialists and opening up Taiwan financial markets. There is also a program to improve Taiwan's infrastructures through better transportation and communication links.

Despite Taiwan's aspiration of playing an active role in the world, there is general gloom about the economy. Just as the stock market is depress, so is the property market -- usually as a measure of confidence. There are two negative strains which overshadow the performance of Taiwan economy. Externally, China has never accepted the fact that Taiwan is an independent country and entitled to a higher profile around the world. It tries to use military force to horrify Taiwan's small investors and shake the stability of Taiwan economy. Internally, Kuomintang (KMT), the ruling party of Taiwan, keeps on eroding the efficiency of the economy through the merging of financial and political power.

(Written by Mr. F.C. Lai, 1996, TSA).