Booming chip exports mask misery in Taiwan
Service sector hit hard by COVID restrictions
The streets in Taipei’s highend Xinyi area are usually filled with shoppers wandering the maze of interconnected department stores, diners waiting in long lines for popular restaurants, and families buying popcorn before watching a movie.
Known locally as the capital’s “golden zone,” it is now largely empty even on sunny weekends. It’s a striking contrast to other major cities around the world that are starting to reopen and a blow to Taiwan’s retail and restaurant industries, which employ about 20 per cent of the economy’s workers.
Kang Yuan, a traditional Cantonese restaurant often frequented by Taiwan’s lawmakers, closed its doors earlier this month after two decades of business.
“Chinese dine-in restaurants like us have lost 90 per cent of our revenue due to the pandemic,” said Tsai Tsung-long, general manager of Hong Chang Corp., which owns several restaurants including Kang Yuan. “Restaurants are shutting down because they are desperate. If the situation seems like it will turnaround, owners will hang in there for two to three months. But now, they just don’t see any hope.”
Restaurants, hotels, and the retail sector are taking the biggest hit from Taiwan’s COVID outbreak. Dine-in restaurants have lost around 70 per cent of their revenue while department stores have seen sales drop around 60 per cent, Liu Cheng-yu, an economist at First Capital Management, said in a telephone interview. Most restaurants and stores will not see their sales recover to around half of their pre-outbreak levels until the government fully lifts its restrictions. The government’s socalled level-3 alert is scheduled to run until July 26 but may be extended further.
The slump isn’t reflected in Taiwan’s headline economic numbers though, with another stellar year expected as strong international demand for semiconductors and electronic components propelled exports to the highest two months on record in May and June. A government index of forward-looking data indicates the economy is booming like it hasn’t done since the 1980s.
Taiwan dodged the worst of the global COVID-19 pandemic through 2020 and the first few months of this year as it managed to keep the virus out, allowing life to continue pretty much as normal. But that all changed in late April, when the virus managed to escape quarantine controls at the border and spread rapidly. Since the beginning of May, the Centers for Disease Control has reported around 13,000 cases and over 700 deaths.
In response, Health Minister Chen Shih-chung implemented a soft lockdown, shutting schools, bars and recreation venues, such as gyms, cinemas and karaoke bars. Restaurants are only allowed to serve takeout customers and gatherings of more than five people indoors are banned.
As part of its COVID relief program, the government provides one-off subsidies of NT$40,000 per employee for companies that have lost more than half of their revenue. The central bank is also offering low-interest loans to medium and small-sized enterprises to help them curb their losses.
Jerry Chiu, chief executive of Casual Restaurants Inc., which operates the TGI Fridays and Texas Roadhouse franchises in Taiwan and Hong Kong, says the government has underestimated the financial impact on companies and is offering too little in the way of support.
“Taiwan’s businesses are really suffering, and Chen Shih-chung seems like he doesn’t know any of this. I was very angry watching the CDC briefing the other day,” he said in a video call. “Restaurants don’t feel supported by the government and that is why they are desperate and deciding to close down.”
The difficulties experienced by businesses are having a knock-on effect on the people they employ. Around 50,000 people lost their jobs in May as unemployment rose to its highest since 2013, according to official data. One in every five Taiwanese workers is a front-line employee in the service and retail sector.
This has led to households cutting expenses and looking for part-time jobs to alleviate the fall in income.
Wang Tai-ming, who owns and cooks at a Peking duck restaurant in New Taipei City, is one of the many restaurant workers to be out of work. “With all the customers gone, I can’t afford to pay the rent for my restaurant,” he said.
THERE’S ALL THIS TALK ABOUT CHINA STEALING JOBS, BUT (BYD) IS CREATING JOBS, THEY’RE OFFERING PEOPLE CAREERS. PEOPLE HAVE SUCCESSFUL LIVES, SOME ARE BUYING HOUSES NOW, THE WHOLE COMMUNITY HAS BENEFITED. — WILLY SOLORZANO
WITH ALL THE CUSTOMERS GONE, I CAN’T AFFORD TO PAY THE RENT FOR MY RESTAURANT.