Taiwan Today

Taiwan doesn't have one of the world's biggest economies. Its rate of growth has not always been the world's fastest. The standard of living is not near the top of the list. Yet year after year, the Republic of China's island province has done about as well as any other country in not just one or two but in all economic categories. Taiwan's growth, stability, standard of living and progress toward developed status have received high marks, year after year, for the last two decades and longer. No other Asian country - Japan included - has done better.

Back in 1952, a quarter of a century ago, the gross national product increased by 10.9 per cent. Eleven years later, in 1963, the gain was still 10.3 per cent and then spurted to a record 12.2 per cent in 1964. In the four straight years from 1970 through 1973, advances exceeded 10 per cent annually. The recession years brought marks of minus 1 per cent in 1974 and plus 2.7 per cent in 1975. But compared with most other countries, these figures were impressive and were followed by a comeback to 11.54 per cent in 1976. Growth exceeded 8 per cent in 1977, not bad for a year in which the developed countries considered 5 to 6 per cent as quite satisfactory.

Economists are forecasting a slight increase to 9 per cent in 1978. This is based on expecta­tions of a US$20 billion GNP year with export growth of about 13 per cent and an import gain of 12 per cent.

The 1978 industrial advance is estimated at 12 per cent, which would mean production value of nearly US$10 billion.

Agriculture is asked to move ahead by only 2 per cent as Taiwan reduces its rice surplus. Some rice will be exported but there is not enough warehouse space to store the rest of an optimum crop.

Growth of services will be close to 8 per cent. Inflation is figured at 5 per cent or less. No records will be broken, but 1978 will be a com­fortable year. Acceptance of modest growth will help promote stability and the welfare of the people.

Signs of increasing sophistication show up in industrial targets: nearly 1.6 million sewing machines, almost 3 million tons of steel products and more than 2 million vehicles (58,000 passenger cars and trucks plus 460,000 motorcycles and 1.5 million bicycles).

Textiles marked time in 1977. Labor costs were up, competition was keen and protectionism was on the rise in markets everywhere. The indus­try was still profitable, however, and remained the ranking exporter and employer. If the export climate is not too unfavorable, textiles may chalk up modest increases in 1978. The trend is toward more sophisticated products, especially knitwear and other garments.

Sooner or later, textiles will be surpassed by the second-ranking export, electrical machinery apparatus. One of Taiwan's TV makers (Sampo) has set up an assembly plant in the United States. Zenith has moved more of its television manu­facturing to Taiwan. Grundig of West Germany is pleased with its Taiwan investment.

Diversification has been important in free China's economic success. In 1977, categories of products with export sales of more than US$100 mil1ion totaled 12. After textiles and electrical apparatus came machinery and metal products, plastics and products, plywood and wood products, fishery products, transportation equip­ment, refined petroleum products, sugar, rubber products, canned mushrooms and basic metals.

The KHS Enterprises is an example of how Taiwan entrepreneurs have diversified and built prospering and fast-growing businesses. KHS was established in 1946 by the five Hsieh brothers to publish textbooks. By 1954, the company was out of the publishing business. Today it has five subsidiaries and makes motorcycles, bicycles, mopeds, musical instruments and surveying instru­ments. KHS has pioneered in good employee relations: retirement, insurance, housing and other benefits.

Establishment of an integrated steel mill, shipyards and a petrochemical industry has moved Taiwan away from labor-intensive products and toward sophisticated, capital-intensive and tech­nology-intensive manufacturing. At the same time, the island must cope with the world's highest population density. Its people are assured of jobs by their nimble fingers and high rate of literacy.

As per capita income rises toward the US$1,400 estimated for 1981, people are able to buy more goods and the domestic market is becoming more important to industry. Personal spending rose by nearly 13 per cent in 1976.

The advance of one industry creates others. Only a few years ago, Taiwan meat was wrapped in banana leaves, almost nothing was packaged and bulk products were sold in small bags of the roughest kind of paper. There were no supermarkets. Taipei got its first department store in the early 1960s.

Plastics and paper industries expanded to meet the need to provide bags and packaging. Today, even the street hawker delivers his products in a fresh plastic bag. Small shops and bakeries have their own specially designed shopping bags.

Free Chinese economists believe the Taiwan and Korean "economic miracles" demonstrate that development and a higher standard of living go hand in hand. To export is not enough. Nor will the dream of a better life bring it into existence. Enterprise and ingenuity are essential in providing jobs and raising productivity. The economic multiplier effect then comes into operation. Every gain gives rise to another.

Government officials also remember - from mainland days - the danger of inflation. Rampaging prices undermined the economy after World War II and abetted the Communist usurpation. Recession brought inflation and economic instability in 1973 and 1974. The government moved fast with a series of "once and for all" increases. Since then, inflation has been held within an annual range of 3 to 5 per cent, one of the world's lowest figures for the period.

Regardless of high oil prices, expansion of the energy supply is inescapable. Without energy, there will be no goods regardless of price. The government is investing in three nuclear plants and increasing the output of electricity from coal, waterpower and geothermal resources as well as petroleum.

Output of the power system stands at about 6 million kilowatts, an increase of four times in a decade. Seventy-seven per cent of the generation goes to industry, even though 99.6 per cent of the population is served by electricity.

If the farm standard of living has not yet caught up with the city, it is making a lot of progress. Television antennas are the surest sign of this. In 1970, only 17 per cent of farmhouses had television sets. In 1977, the figure was nearing 90 per cent.

Placement of the l00th caisson marks completion of the Taichung Harbor breakwater in the second phase of construction. This is an open coastline which must be protected from pounding of the sea.

More than 71 per cent of arable land is planted and harvested with the help of machines. Rice output reached a point where the government had to cut back. This is not so much a reflection of more rice than can be eaten as of prosperity and dietary changes to meat and bread. Taiwan was more than self-sufficient in food a quarter of a century ago. About 13 per cent of food now comes from imports that are easily paid for out of export earnings.

Although life is better on the farm than ever before and as good as anywhere in Asia, the farm­-to-city exodus will continue. About 35 per cent of the population now resides in rural areas. This will be reduced to 21 per cent in the 1980s. Mechanization will make up for the farmer's loss of manpower. Agriculture will keep up with needs. The social problem is to keep Taipei (now over 2 million) and Kaohsiung (now over 1 million) from becoming too big. Planners are trying to steer the countryside-to-city movement toward the smaller cities of the east and west coasts.

Compulsion is not contemplated. On the Chinese mainland under Communism, peasants may not leave the land for the brighter lights of urban areas. The people of the Republic of China are free to live and work where they wish. No one is tied to the land against his will.

Beginning with land reform and supported by free enterprise and free investment - including even the right to put risk capital into the stock market - it is economic liberty which has made possible Taiwan's good life and its advance from undeveloped status almost to the rank of a fully developed land. The Republic of China is convinced that one way or another, the remarkable economic climb of Taiwan is bound to serve as the model for the whole of China within the foreseeable future.

Economic plans can be described as calculated guesses about what tomorrow will bring. They cannot stand a heavy buffeting from either boom or depression. Yet they are essential to orderly growth and development. In the 1970s, the Republic of China has learned two economic lessons: first, that planning is necessary and, second, that the best of plans must be changed to meet new conditions.

Taiwan economic planning began in earnest with the First Four-Year Economic Development Plan in 1953. Taken as a whole, the series of four-year plans was highly successful. Economic growth of just under 10 per cent was maintained for the period from 1961 through 1972. At the same time, the four-year plans consistently under­estimated the needs of the economy, especially for the infrastructure of transportation and heavy industry.

By the early 1970s, ports were jammed, rail­roads overloaded and highways inadequate. Heavier and more sophisticated industries were needed but had been neglected in favor of quick profits from light and medium industries.

Recession brought an easing of the economic overload. Yet it was also obvious that when growth resumed, these unsolved problems would not have gone away. By 1973 and 1974, the Sixth Four-Year Economic Development Plan (1973-1976) had become a gross distortion of the inten­tion. Its estimates were awry and its goals were unattainable.

The Economic Planning Council of the Executive Yuan (Cabinet) which has now been succeeded by the Council for Economic Planning and Develop­ment, decided to bring the series of four-year plans to an end. The sixth plan was quietly allowed to expire in 1975 and the First Six-Year Plan for Economic Development (1976-1981) was implemented. The longer period gives greater scope to the planning and is better adapted to the needs of the Ten Major Construction Projects now in progress. It will also serve as a bridge from the Ten Projects to other big undertakings that will follow in the 1980s.

Estimates of the first six-year plan are modest. Some, in fact, reflect the depressed state of the economy in the 1974-75 planning period rather than the considerably higher rates reached in 1976 and 1977.

For the 1976-81 period, overall economic growth is set at 7.5 per cent annually. The figure for national income is 7.7 per cent and that for per capita income 5.8 per cent. It now appears that barring an unexpected reverse, the six-year average will be not less than 9 per cent and possibly as high as 10 per cent. Either way, Taiwan will be doing better than most of the other free countries of the world.

The category which worries the planners most is that of the population increase. This was 18.3 per thousand in 1975 and supposedly will be down to 16.9 in 1981. Family planning is an inexact science, however. It is up against supersti­tion in the form of favorable years for having babies, the proclivity of Taiwan couples to try for sons and the large increase in the number of women in their twenties. If the rate of popula­tion growth rises, that is going to affect the rest of the six-year plan. There will have to be more services and food for the increased numbers and a somewhat lower standard of living. Increased emphasis will be placed on family planning for the remaining years of the first economic plan.

Unemployment was 3.7 per cent in 1975 and is projected at 3 per cent for 1981. For many years, Taiwan has had one of the world's lowest rates of joblessness. Nearly full employment was attained in the early 1970s. In 1977, the planners began to bump into the new problem of more education than the economy could absorb. Junior high school graduates with vocational skills were able to find jobs. Too many college graduates could not, or found themselves in unsuitable employment.

Planners are looking at this challenge from the viewpoint of increased stress on technological training. President Chiang Kai-shek used to say that parents should not push their children to obtain more and more education and that every young person need not graduate from college. Some parents are beginning to listen, although the Chinese emphasis on scholarly attainments remains extremely strong.

The bulwarks of the Taiwan economy are manufacturing industry and agriculture. Govern­ment has encouraged the growth of capital-intensive and technology-intensive industry and the de-emphasis of labor-intensive industry. The economy has responded with the rapid advance of more sophisticated manufacturing.

By the end of 1981, labor-intensive industries are expected to make up 55.3 per cent of the manufacturing total, compared with 63.1 per cent in 1975. The share of industries relying on capital and technology will rise from 36.9 per cent to 44.7 per cent in the same period. The average annual growth rate of manufacturing is set at 9.5 per cent for the 1976-81 period.

Agricultural growth is estimated at 2.5 per cent annually for the first six-year plan. Stress is placed on increasing the income and improving the life of farmers and fishermen. In 1975, those working in agriculture received only 66 per cent of the income level accruing to those in industrial and service sectors. This figure will be raised to 70 per cent by 1981.

Power generation must be increased by 8.3 per cent annually in order to meet the needs of business and industry and serve an island which is more than 99 per cent electrified. Communications and transportation will have to be boosted by an average of 8.9 per cent annually in the six­-year period.

Trade was increasing at rates of from 40 to 50 per cent in the years just before the recession. The government wants continued trade growth at relatively rapid rates. Taiwan can prosper only with a high level of international commerce. There is, however, recognition that the doubling of trade every couple of years can create more problems than it resolves.

For 1976-81, the annual trade gain is set at 12.2 per cent. Imports are expected to rise by 10.6 per cent each year. This will be sufficient to assure a steadily rising standard of living without putting too much strain on resources, manpower and know-how.

A number of fiscal and monetary reforms are slated during the six-year period. Imposition of a value-added tax is planned to replace several of the nuisance levies now afflicting business and commerce. Levels of customs impositions will be continuously revised to promote trade and reduce red tape. Greater reliance will be placed on direct taxes, especially that on incomes. In the last 10 years, the returns from individual and business income taxes have been increased from a pittance to an important share of governmental revenues.

Monetary measures have already brought into existence a number of credit facilities which are providing loans more cheaply than the traditional resort to provide lenders. Banks have established lines of credit (rather than full-fledged guarantees) that will enable the new money market to serve the business community quickly and efficiently.

The first six-year plan's principal purpose is to improve the lives of the people. Per capita income will reach US$l,400 or more by 1981. The daily calorie count will be nearly 2,800 with close to 80 grams of protein. Per capita housing space will be 4.4 ping (almost 160 square feet).

More than three-quarters of the people will have running water in their homes. Almost 100 per cent of school-age children will be receiving formal education - possibly the best record in the world. Labor insurance will protect nearly 2 million of 6.6 million workers. For each 1,000 persons, there will be 185 telephones, 280 televi­sion sets, 162 refrigerators and 34 automobiles.

As 1978 began, economic planning and the supervision of construction came under the purview of a new government agency: the Council of Economic Planning and Development serving directly under the Executive Yuan and at the direction of Premier Chiang Ching-kuo.

It was Premier Chiang who recognized that the series of four-year plans had served their purpose and who urged the economists to change their planning to a six-year basis. It is also Premier Chiang who has presided over the Ten Major Construction Projects. From now on the Ten Projects and the Twelve Projects to follow will be watched over by the same economists and adminis­trators who laid down the blueprints.

Some of the goals that have been set may not be ambitious enough. Although Taiwan is much smaller than Japan and has only a fraction of Japan's population, some qualities of life in free China are already superior to those of the Japanese islands. Economically, the Republic of China does not have to talk of "catching up" with anyone. In qualitative terms, it is already a de­veloped country.

Taiwan's Ten Major Construction Projects are moving toward early completion. As 1978 began, the Kaohsiung shipyard had been completed. So had the first phases of Taichung Harbor and the Kaohsiung integrated steel mill. The generation of nuclear power began in 1977. Con­struction of the North-South Freeway will be completed late in 1978. So will most work on the electrification of the mainline railroad and the Taoyuan International Airport for Taipei, although neither of these projects will come into full service until 1979.

Another 1979 completion will be that of the second phase of Taichung Harbor. Then will come the Suao-Hualien railroad and the Kaohsiung petrochemical complex in 1980 and the first phase of Suao Harbor in 1981. The construction of three nuclear power plants will continue into the mid-1980s.

As the biggest infrastructure building program in Taiwan history moves toward culmination, the government is planning further projects to support economic growth and maintain virtually full em­ployment. Premier Chiang Ching-kuo has listed these 12 ongoing public works.

- Construction of a railroad across the south­ern tip of Taiwan to complete the round-the-island system.

- Construction of three additional east-west cross-island highways.

- Extension of the North-South Freeway to Pingtung.

- Completion of the second phase of the Kaohsiung steel mill.

- Construction of the second and third nuclear power plants.

- Completion of the second and third phases of Taichung Harbor.

- Development of new cities and townships and construction of 25,000 housing units annually.

- Improvement of farm irrigation and drainage.

- Repair and construction of breakwaters and river levees.

- Widening of the Pingtung-Oluanpi highway to four lanes.

- Expediting of farm mechanization.

- Opening of a cultural center – including library, museum and auditorium - in every city and county.

An additional project may be the construction of a subway for Taipei. Plans are under study as the city tries to cope with traffic jams which are reaching the point of rush-hour paralysis.

This is how the US$7 billion Ten Projects program stood at the beginning of 1977:

1 - Kaohsiung shipyard: completed and as of January 1 combined with the Keelung yard as the China Shipbuilding Corporation with capital of US$165 million and construction capaci­ty of 1.8 million tons of shipping a year. Repair capacity is 4 million tons. CSBC is now a wholly government-owned corporation. One 445,000-ton tanker has been launched, fitted out and put through her sea trials. A sister vessel will be launched, tested and delivered this year. These tankers rank as the third largest ships in the world. Although the market for such vessels is at nadir, CSBC is expected to keep its two yards busy with orders for smaller ships and repairs.

2 - Taichung Harbor: first phase completed in October of 1976 and the second phase more than 40 per cent complete. This central west coast port now has a capacity of nearly 3 million tons of cargo annually. The second phase will be completed in October of 1979 and the third, which will raise capacity to 12 million tons, in the early 1980s. An adjacent industrial zone will draw a population of half a million to the area within the next decade.

3 - Kaohsiung steel mill: first phase completed in December of 1977 and second phase begun in January of 1978. With total capacity of 1.5 million metric tons of steel and products annually, the US$1 billion mill will be producing 150,000 metric tons of pig iron, 245,000 tons of ingots, 400,000 tons of plate, 300,000 tons of wire and 300,000 tons of rods in the initial phase. The second phase will cost US$1,360 million and raise output to 3,250,000 metric tons at the end of 1981. Taiwan's consumption of steel is expected to rise from 2.5 million metric tons in 1977 to 5.5 million tons in 1992. A third phase in China Steel Corporation expansion plans calls for the increasing of capacity to 6 million tons. The mill is located next to the Kaohsiung shipyard, which will be its principal customer.

4 - Nuclear power plants: first generator of the first plant completed and starting to contribute power at the end of 1977. It will be fully operational by mid-1978. The second genera­tor of the first plant was nearly 80 per cent complete at the start of 1978. The second generator will begin tests late in 1978 and enter full service in 1979. Combined capacity of the two generators will be 1,272,000 kilowatts. The second nuclear plant, also located on the northern coast, will have two-generator capacity of 1,970,­000 kilowatts. The first generator will be com­pleted in 1980 and the second in 1981. Construction of the third plant on the southwest coast got under way in 1977. The first generator of 951,000 kilowatts capacity will be completed in 1983 and the second in 1984. By the mid-1980s, nuclear power production will exceed 5 million kilowatts and amount to about half of the Taiwan Power Company's output.

5 - North-South Freeway: to be completed by the October 10 National Day of 1978. The 373-kilometer road, varying from four to eight lanes, will link Keelung in the north with Kaohsiung in the south by way of Taipei, Taichung and Tainan. These are Taiwan's five biggest cities. Tolls will pay the cost of more than US$600 million. Driving time from Taipei to Kaohsiung will be cut from the present 10 hours to about 5 hours. Parts of the expressway with its 65 interchanges and special traffic police force are already open.

6 - Railroad electrification: to be completed by August of 1979, although partial service will begin in 1978. Capacity of the 1,153 kilometers of mainline track between Keelung and Kaohsiung will be raised by 30 per cent and the time of the fastest express cut by a third. Test runs were begun in 1977. Benefits will include lower operating costs and control of pollution in addition to larger loads and faster times.

7 - Taoyuan International Airport: first phase to be completed early in 1979 with an annual capacity of 5 million passengers and 200,000 metric tons of freight. Two further phases will raise these figures to 20 million passengers and 1 million tons of freight by the year 2000. The site is near the coast about 18 miles southwest of Taipei. Sungshan Airport on Taipei's near eastside will continue to handle domestic flights, at least into the mid-1980s. Driving time from Taipei will be about half an hour via the North-South Freeway and a five-mile feeder road to the airport. Three terminal buildings will have 50 passenger lounges and daily capacity of 20,000 passengers. One of the three runways will be 12,000 feet long. Taxiways will number 8, parking aprons 22 and cargo bays 14. The 150-foot control tower will be able to handle 42 landings and takeoffs per hour.

8 - Suao-Hualien railroad on the east coast: to be completed in 1980. Difficult terrain and the many tunnels to be built have put this project slightly behind schedule. The 82.3 kilo­meter line will link up with the Taipei-Suao line to the west and thence with the mainline from Taipei to Kaohsiung. Widening of the narrow-­gauge Hualien-Taitung line from narrow to stand­ard gauge will begin in 1978 and be completed in 1981. Subsequently, the building of the Kaohsiung-Suao line will complete the around-the-island system.

9 - Suao Harbor: first phase to be completed in 1981. Construction of this auxiliary port for overcrowded Keelung will then be able to handle about 7 million tons of fish and cargo annually. Already completed is a wharf to berth 10,000-ton vessels. Two other deep-water piers are under construction. By 1981, there will be 14 berths for oceangoing vessels.

10 - Petrochemicals: to be largely completed by 1980. The third naphtha cracker of the Chinese Petroleum Corporation was com­pleted late in 1977 and will begin production in March of 1978 after test runs. Five of the 13 plants which will receive ethylene, propylene and butadiene from the cracker are under construction, 2 have been completed and work on the other 6 is expected to begin in 1978. Cost of the petrochemical complex at Kaohsiung is expected to reach US$439 million from the government for upstream projects and US$816 million from private investors for downstream plants.

In the 1960s, economists and politicians main­tained that the Republic of China could not afford such costly infrastructure construction. As Taiwan entered the 1970s, Premier Chiang Ching-kuo declared that it couldn't afford not to keep up with the world, the times and its own economic growth. Success of the Ten Major Construction Projects reflects the dedicated determination of Chiang Ching-kuo to make free China a developed country within the decade of the 1980s.