Taiwan Today

Ten years' growth at 7.9% forecast Adverse conditions notwithstanding, there is no reason why the economy of the Republic of China shouldn't grow at an average of 7.9 per cent a year for the next 10 years, one of the nation's top economic planners predicted. Chen Sun, vice chairman of the Council for Economic Planning and Development, made his forecast in a lecture to the Republic of China Strategic Society. The 1980s will continue to be a decade of slow economic growth and high inflation. Dwindling supplies and high oil prices will bedevil the world, Sun predicted. The energy crisis that began in 1973 caught up with the ROC economy almost immediately, but "our economy succeeded in maintaining a high growth rate in the '70s," Sun said. Growth averaged 10 per cent for the decade. Sun attributed resiliency of the economy to: —Capital accumulated during the '50s and '60s along with technological progress and the productivity of Chinese workers. —The high percentage of manufacturing industries in the economy. —Strength and health of free enterprise. —Timely government assistance to private industry as problems arose. These favorable factors continue to support the economy. With economic growth slowing, protectionism is on the rise. To counter this, the economy must diversify and create new products. Another possibility is to lower the percentage of imported raw materials reprocessed for export, Sun said. Outflow of capital isn't a problem Outflow of capital is not conspicuous or serious, K.H. Yu, chairman of the Council for Economic Planning and Development, told legislators. Foreign exchange is under government control. Chinese entrepreneurs can invest abroad only if this promotes the production of raw materials at home, they can acquire raw materials abroad or they can stimulate sale of the nation's technology and machinery. He said that when the private sector wishes to increase investments, the government may lower investment in state enterprises except for power generation and the like. Yu said the government has always encouraged the private sector to invest in big productive industries such as the China Shipbuilding Corporation and the China Steel Corporation. The government took these over only when the private sector showed no interest, he added. Capital equipment spending declines Most industries are expected to reduce investment in capital equipment this year, according to a survey by the Directorate-General of Budget, Accounting & Statistics. The survey was conducted on 229 companies with capital of NT$100 million (about US$2.8 million) or more, 702 with capital of more than NT$10 million (about US$0.28 million) but less than NT$100 million and 260 with capital of less than NT$10 million. Capital investment by the private sector showed an increase of 59 per cent (39 per cent in real terms) over 1978. The rate of increase this year will be down to 28 per cent (14 per cent in real terms), reflecting a pessimistic view of the world economy or the years just ahead. The investment in capital equipment this year is expected to reach NT$33 billion (about US$917 million). Textiles, paper and paper products, chemicals, plastics, basic metals, machinery and transportation will get increased capital equipment investment this year. Large enterprises (with a capital of NT$100 million or more) are expected to increase their investment in capital equipment by 9 per cent, medium enterprises (capital of more than NT$10 million but less than US$100 million) by 1 per cent and small enterprises (NT$10 million or less) by 17 per cent. Changes planned in investment law The Council for Economic Planning and Development has approved proposed revision of the Statute for Encouragement of Investment stipulating that the interest earned by an individual with a maximum of NT$350,000 (about US$9,700) in fixed term savings deposits for two or more years will be exempted from consolidated income tax. At present, there is no limitation on individual savings accounts for exemption. CEPD also decided that antipollution equipment will not earn tax credit or accelerated depreciation incentives. A special regulation will be worked out later. The government agency has completed its review of the guidelines for the revision, which will be sent to the Executive Yuan for approval. The revision includes the following points: —Extension for 10 years. —Investment tax credits in accordance with the economic situation. —Exemption of duty on imported precision equipment for quality inspection that cannot be produced locally. —Encouragement of scientific and technological development. —Relaxation of regulations on manufacturers' undistributed earnings. Asian Chambers called on for help K.H. Yu, chairman of the Council for Economic Planning and Development, urged members of the Confederation of Asian Chambers of Commerce and Industry to intensify their "efforts in the pursuit of the confederation's spirit and objectives." CACCI's ideals, he said, are the promotion of trade and investment, farm technology transfer, better mutual understanding and closer ties between businessmen. CACCI held its 21st council meeting in Taipei. Yu reviewed the performance of the economy and gave his projection for the 1980s. "We anticipate a slowdown in the expansion of world trade," he said, and "have therefore projected our real export growth at only 12.5 per cent a year during the next decade. Nevertheless, we intend to address ourselves to the following tasks: —Increase in the added value of exports through productivity improvement and structural change. —Diversification of exports, concentrating on products that do not run into protective barriers. —Diversification of markets. "Our development strategy has long been outward-looking," Yu continued, "and our production export-oriented. This will continue to be the case. Fiscal, credit and administrative measures will be strengthened or instituted to ensure the attainment of our export growth target." More cooperative refining sought The state-owned Chinese Petroleum Corporation will step up its cooperation with oil producers and foreign oil companies in refining their crude in Taiwan, T.H. Lee, president of CPC, indicated. In a speech to students of the Marine Graduate School of the National Taiwan University, Lee said CPC is seeking more cooperative agreements for refining. CPC has cooperated with Indonesia, Kuwait, Malaysia and a U.S. oil company in Hawaii. CPC can secure petroleum products as a result of such cooperation. Lee said CPC provides good refining services. Loading and unloading of products is abetted by adequate port facilities. Lee said many countries have a strong determination to conserve oil and other energy resources. Joint ventures with Korea slated The Republics of China and Korea pledged themselves to expand cooperation in trade and technology at a three-day ministerial level conference in Taipei. Economic Minister K.S. Chang, and Deputy Premier Lee Hahn Been of South Korea presided. The meeting agreed that the countries will exchange information and experience on economic measures and industrial developments. Deputy Premier Lee said the new cooperative projects will mark a new high point in Asian economic cooperation. Minister Chang said programs should be implemented immediately. Information will be exchanged on development of small and medium-sized enterprises, industrial parks and exploration of natural resources. The delegations expressed satisfaction with rapid growth of trade. Barriers will be further reduced. The countries will continue to hold seminars and exchanges to promote technological cooperation ill agriculture, industry and telecommunications. South Korea agreed to purchase auto engines and spare parts and more fruit from Taiwan. The ROC agreed to increase auto imports from South Korea. Private shipping companies of the two countries will work out a waiver system for discussion in the future. The next meeting will be held at Seoul in 1981. ROC is No. 21 in world trade The Republic of China ranked No. 21 among trading nations in 1979, according to the China External Trade Development Council. According to International Monetary Fund statistics, Taiwan's foreign trade volume amounted to US$30,849 million in 1979. The position was the same as in 1978. Last year's 25 trade leaders were the United States, West Germany, Japan, France, Britain, Italy, Holland, Belgium, Canada, Saudi Arabia, Sweden, Switzerland, Spain, Australia, Austria, South Korea, Brazil, Denmark, Hongkong, Singapore, the Republic of China, Iran, South Africa, Norway and Nigeria. In 1979, Taiwan was second to Japan in Asian exports with volume of US$16,068 million, an increase of 26.7 per cent over 1978. Then came Hongkong, South Korea and Singapore. Red China's 1979 volume was US$10.8 billion. On the import side, the ROC jumped three notches in 1979 to rank No. 21. Commerce still holding its own Foreign trade for 1980's first quarter amounted to US$8,966.1 million, an increase of US$2,506.9 million or 38.8 per cent over the same period last year, according to customs statistics. Exports were US$4,496.2 million, an increase of 34 per cent over the first three months of 1979. Imports were US$4,69.9 million, up 44 per cent. The surplus was US$26.3 million in the first three months compared with the US$251 million for the same period a year earlier. In March, there was a deficit of US$226.5 million in two-way volume of US$3,206.1 million. Industrial products headed the first quarter export list at US$4,056.3 million. Processed agricultural products ranked second at US$258.3 million and agricultural products third at US$181.6 million. Raw materials led the import list at US$3,1￥58.2 million. Capital goods were second at US$1,055 million and consumer goods third at US$256.7 million. The United States was the leading importer of Taiwan-made products with volume of US$1,537.4 million. The U.S. exported US$1,085.5 million worth of goods and raw materials to Taiwan for a deficit of US$451.9 million. Japan was the biggest supplier with US$1,180.7 million worth of products and industrial materials. It imported only US$503.4 million worth of goods from Taiwan for a surplus of US$677.3 million. Exports to Hongkong were valued at US$346 million and imports from Kuwait, mainly crude oil, amounted to US$600.4 million. Investment volume holds up well Foreign and overseas Chinese investments amounted to US$56,543,000 in the first quarter of this year, the Ministry of Economic Affairs said. US$13,637,000 was invested by overseas Chinese, down slightly from the same period of 1979. Foreigners supplied US$42,906,000, up 21 per cent. Investments in the chemical industry amounted to US$18,433,000, or 32.62 per cent of the total. Electrical machinery apparatus ranked second with US$13,898,000 (24.58 per cent), and services third with US$6,700,000 (12 per cent). Diversified markets sought for exports The Board of Foreign Trade has urged traders to further diversify markets to increase exports. Difficulties facing exporters include protectionism, keener competition from other developing nations and the united front schemes of the Chinese Communists. Facing increased protectionism, the government has eased restrictions on trade with Eastern European countries. Trade with countries in Europe, Asia, Africa and Central and South America has been increasing. Despite the severance of diplomatic relations, trade between the Republic of China and the United States is expected to exceed US$10 billion this year in a total volume of US$39 billion. Economic Minister Chang Kwang-shih told commercial representatives and trade officials to serve as "ears, eyes, mouths, hands and legs" of Chinese exports and predicted foreign trade will reach US$200 billion in 10 years. He was addressing the closing session of a three-day coordination meeting of 40 Chinese commercial representatives and trade officials stationed in the Asian and Pacific region. He told commercial representatives to help improve quality of export products, provide better samples and hold on to existing markets while opening up new ones. He noted that the Asian and Pacific region is one of the main targets of mainland Chinese traders. He told them to be on guard against a trade offensive by the Communists. He urged representatives to watch economic conditions in their host countries and take advantage of opportunities for augmenting trade. More companies will go public Companies with capital exceeding a certain level will be required to go public, according to the newly revised Company Law. Such a move will put these companies under the supervision of the Securities and Exchange Commission. The capital level is yet to be determined. Other major changes: —A company must have at least five stockholders. The current minimum is two. —Investments in other companies must not exceed 40 per cent instead of the present one-third. —At least half of the stockholders must be citizens and residents of the Republic of China and their capital must not be less than 50 per cent of the total. —Elections of the board of directors and supervisors must be held simultaneously. —The charter must specify the proportion of annual profits reserved for employees' bonuses, which may be paid in cash or stock. —Ten to 15 per cent of new stock must be offered to employees. Industrial parks under construction Construction of five industrial parks is under way. Three will be completed before the end of this year. The parks are: —Taichung Industrial Zone, first stage, area of 60 hectares, to be completed this year. —Taichung Industrial Zone, second stage, area of 209 hectares, to be completed before the end of this year. —Yungkang Industrial Zone in Tainan County, area of 71 hectares, completed. —Juifang Industrial Zone in Taipei County, area of 33 hectares, to be constructed in a year. —Kungshan Industrial Zone in Linkuo, area of 127 hectares, to be completed within two years. Wang Laboratories shares know-how The first Far Eastern plant of Wang Laboratories Inc. of the United States will become operational this summer, Dr. Wang An, founder and chairman of the computer and electronic calculator company, said. The Shanghai-born scientist reported that the plant at the Science Industrial Park in Hsinchu will turn out about 200 minicomputers during the initial production period. All will be sold in Taiwan. The US$2 million plant will employ 50 to 60 skilled workers this year and more later. Dr. Wang said computers will be increasingly used in both developed and developing countries. His company rang up US$450 million in sales last year. Sales this year will increase to US$600 million, he predicted. Wang Laboratories recently relocated its administrative headquarters and research and development operations at Lowell, Massachusetts. The company will initiate a training program for software engineers at its school in Lowell this September. Wang cooperates with the Industrial and Technology Institute at Hsinchu for training in computer science. Thirty Chinese students will complete their training at the Wang Laboratories and return to Taiwan in July to work at the Hsinchu plant. Naphtha crackers spur Petrochemicals A fourth naphtha cracking plant will be built while new facilities are installed at the second cracker to speed development of the petrochemical industry. The new plant will produce 385,000 metric tons of vinyl annually and is scheduled to be completed by June of 1983. Making use of natural gas as the raw material, the Chinese Petroleum Corporation manufactures vinyl and supplies it to petrochemical companies in northern Taiwan. When expansion of the second naphtha cracker is completed in November, vinyl output will be increased by 30,000 metric tons. The petrochemical industry registered an average annual growth rate of 33.6 per cent in the last 10 years. The demand for ethylene increased from 35,000 metric tons in 1970 to 473,000 tons in 1979. The petrochemical industry is expected to grow at an annual rate of 12 per cent in the next five years. By 1984, the demand for ethylene will reach 800,000 tons. Agriculture slated for 2% advance The Council for Agricultural Planning and Development said the growth rate for agriculture is expected to reach 2 per cent this year. A breakdown follows: —Rice, production of 2.3 million metric tons. —Maize, planted area up 10.6 per cent; soybeans, down 22 per cent; sweet potatoes, down 21 per cent; and red beans, down 10 per cent. —Vegetables, planted area up 3.6 per cent; mushrooms, down 28 per cent. —Sugar production, 848,000 tons. Pulp plant slated for Sumatra The Chung Hwa Pulp Corporation plans to set up a pulp plant in Sumatra, Indonesia, to ease the price squeeze. The company plans to build the plant, which will have a daily production capacity of 300 tons, on a 125,000-hectare site of virgin forest. There is convenient transportation to nearby Dumai port. Indonesian legal restrictions must be discussed further. South Korea and Japan have been invited to cooperate. Smaller ships are dismantled Shipbreakers dismantled 365 ships totaling 2,886,000 DWT in 1979. Two hundred and fifty-two ships totaling 2,817,000 DWT were dismantled in 1978. Industrial nations have been buying old vessels to store oil. The shipbreaking industry had difficulty obtaining large ships. So they dismantled more small vessels and the tonnage did not show much of an increase. 120 electric cars will be built The National Science Council has begun production of the Tsing Hua No.5 electric cars. Target for the first year is 120 units. The council has a three-year plan to invest US$9 million in the production of electric cars with four seats. US$1.56 million will be spent in the first year. US$4.32 million will be budgeted in the second year and US$3.54 million in the third with production reaching 5,000 to 20,000 units. Shipbuilder gets more orders After a long doldrums following the first energy crisis of the mid-1970s, the China Shipbuilding Corporation is picking up steam. CSBC has enough orders to keep busy until mid-1981. Lin Teng-ning, vice president, said foreign and domestic shipping lines have placed orders for 27 vessels. However, CSBC is still in the red. The deficit for the current fiscal year is expected to reach NT$690 million (about US$19 million), he said. In the coming fiscal year, the company expects to build ships totaling 376,000 DWT, mostly freighters of less than 30,000 tons, and repair 2,600,000 DWT of shipping. The company also plans to manufacture 21,000 metric tons of machinery and steel structures in the next fiscal year.