Strategic reinvention from manufacturing efficiency to innovation and hi-tech
Over the past 60 years, the Republic of China, known as Taiwan, went from being a largely rural society to becoming a fully industrialized country, a global leader in communications technology and the 22nd –largest economy in the world, a success achieved
Often referred to as the ‘Taiwanese miracle’, the country’s economic resurgence was nevertheless the product of ambitious policies, intelligent investments, careful diplomacy and social responsibility. In fact, and particularly in the past three decades, Taiwan’s economic liberalization has grown hand in hand with scientific research and education, political freedom, and a vibrant multiparty democracy which in January last year allowed for the election of the country’s first female president, Tsai Ing-wen.
Among Tsai’s first acts of government was the presentation of her administration’s New Model for Economic Development, a five-point plan through which the government intends to foster further economic growth by focusing heavily on the industries of biotech and pharmaceuticals, green energy, national defense, smart machinery and Internet of Things technology. The model will be driven by a parallel effort to ease regulatory constraints on industrial development and to maintain cross-strait peace with mainland China, a difficult political relationship that in many ways has hindered the economy of the country.
The development of green energy alternatives is perhaps one of the most ambitious plans of the new government, as it has committed itself to ending its dependency on nuclear power by 2025, and to increase the country’s supply of renewable energy from its present 5% to 20% by the same deadline. For this reason, the government has announced an eight-year US$1.6 billion infrastructure plan for green energy investment, and has signed several contracts for wind farms and solar projects. Reliable energy is also one of the major concerns of foreign and local companies with operations based in Taiwan, and of investors in several key industries. And in an economy so strongly dependent on exports, commercial activity in the country’s numerous ports, and on its role as a key stop for international trade routes, the country’s ability to attract commercial activity is of paramount importance.
In fact, Taiwan owes its present position in international commerce largely to its strategic position in the economy and the geography of Asia, as a springboard for international industries and companies onto the main China market, one of the most rapidly expanding in the world. According to Mr. Freddie Höglund, CEO of the European Chamber of Commerce – Taiwan, the country’s main advantage in this respect is its highly developed economy, which provides companies and subsidiaries with excellent infrastructure, telecommunications and transportation systems, a highly-skilled and educated workforce, and a very friendly and positive business environment.
This, along with Taiwan’s long-lasting relationship with the US government and American universities and research centers, makes for a very stable and predictable environment in which to set a basis for operation for a posterior incursion into the China market. “It is a great place to do business”, Höglund adds, “also because this is a real democracy, the rule of law is very important here, there are no restrictions on the internet, and regulations for foreign companies don’t just change overnight, as they do in China. It is a great advantage for companies to first set up here so they can penetrate China through Taiwan”.
Some experts have stressed, nevertheless, that Taiwan’s economy may face serious challenges ahead, as threats of protectionism and currency intervention coming from the Trump administration threaten to put the Taiwanese dollar under duress. As exports account for more than 60 percent of Taiwan’s economic output, and econom- ic growth is not expected to go over 2 percent in the following two years, which is below the average pace of 4 percent seen over the past two decades, a strengthening American currency could become a problem for the country’s Central Bank. Despite such worries, many are confident in the ability of the Central Bank of Taiwan to use its reserves, equal to nearly 83 percent of economic output, and built thanks to a years of trade surpluses with China, to endure currency volatility and remain stable.
Such confidence, according to Bloomberg, is largely based on the key role of Perng Fai-nan as chief of the Central Bank over the last two decades, under whom the Taiwanese dollar stood strong throughout the Asian financial crisis and the economic output doubled. Central Bank members have described Perng’s tenure as that of a ship captain successfully steering the small boat of Taiwanese economy through the storms of capital flows. His policy, one of the key elements of the ‘Taiwanese miracle’, has been to intervene in markets when exchange rates change rapidly, and to maintain currency stability with a managed float regime so that the Taiwanese dollar will be, in his own words, “like a the branch of a willow tree, bending but not breaking despite storms of hot money blowing in and out”.
Despite its diplomatic isolation, global financial crisis and its late start as an industrialized nation competing in international markets, Taiwan has been able not only to rise as one of the most promising economies in Asia, but it has grown as an example to follow in conduct, professionalism and environmental awareness. It has not only developed a strong economy but a healthy society, with the highest standards of living, of healthcare coverage and of democratic participation in Asia, benefitting not only its own people, but through technological advances in computer technology, biomedicine and engineering, benefitting the rest of the world as well, and thus continuing to perform the so called ‘Taiwanese miracle’, which when looked at closely seems to made simply of commitment, of intelligence and of hard work
THE DEVELOPMENT OF GREEN ENERGY ALTERNATIVES is one of the most ambitious plans of the new government, committed itself to ending its dependency on nuclear power by 2025.