The Republic of China is facing a turning point in economic development, a top economist said.
Addressing the opening session of the Taipei seminar on "Options for the Eighties," Shirley W.Y. Kuo, vice chairman of the Council for Economic Planning and Development, said the world faces oil price hikes, growing protectionism and in creased competition.
"The strategy of future development should be carefully set," Miss Kuo said, and proposed:
Low energy intensiveness.
High technology intensiveness.
— High value added.
— High labor intensiveness.
— Good marketability.
— Good defense foundation.
— High domestic linkage.
— Machinery and electronics fit these conditions, she said, and upgraded textiles is also a "very important future industry."
Development of the service sector, including banking and finance, also should generate added value and provide benefits for other industries, she said.
Era of stagflation feared approaching
Taiwan's economy will encounter serious "stagflation" in 1980 and 1981, Dr. Liu Tai-yin, deputy director of the Taiwan Institute of Economic Research, predicted.
"The purchasing power of the United States and European countries will be reduced by the sharp hike in petroleum prices," Liu said. "At the same time, the oil crisis will disturb international money markets and cause further declines in the value of the U.S. dollar, thus jeopardizing the growth of international trade."
"These two factors, plus continued price hikes for key materials, will create serious stagflation - or slower growth coupled with spiraling prices - during the next two years," Liu said.
Liu also predicted slower growth in exports next year — especially to the United States.
"If economic growth in the U.S. drops by 1 percent," he said, "exports of Taiwan-made products to that market will drop 6 percent. Since the U.S. is still by far Taiwan's biggest overseas market, this will have a considerable impact on the local economy."
Liu said the manufacturing sector will be especially hard hit because of heavy reliance on sales of consumer products whose high demand elasticity makes them highly vulnerable during an energy crisis.
Tax structure to spur investment
The government has decided to revise various tax laws in a bid to offer more incentives to local and foreign investors and at the same time curb excessive consumption of luxury items, including foreign cars.
King Wei-hsin, director of the Taxation Department of the Ministry of Finance, said the revision will cover taxes on income, land, commodities, license plates and investment.
Revision of the investment statute will provide for broader tax exemptions. National defense enterprises will be given top priority.
The tax on stock profits by individual investors will be raised from the current NT$24,000 (about US$667) to NT$36,000 (about US$1,000).
Taxes on daily necessities and industrial raw materials will be lowered to benefit the people.
New investments by domestic entrepreneurs during the first quarter of this year showed a marked increase.
In the January-March period, 6,401 applications for new enterprises and expansions were approved. Combined investments amounted to NT$33,000 million (about US$917 million), up 27.5 percent from the NT$26,400 million (about US$733 million) in the same period of last year.
Farm, forestry, fishery and animal husbandry investments totaled 48 worth NT$520 million (about US$14.5 million); mining, 34 worth NT$170 million (about US$4.4 million); manufacturing, 2,149 worth NT$11,530 million (about US$320 million); and other industries, (including water, electricity, natural gas, housing, transportation and warehousing), 4,170 worth NT$21,400 million (about US$594 million).
Investments from overseas Chinese and foreigners amounted to US$111 million in the three months, a substantial increase over the same period last year.
Trade increases nearly 41 percent
Foreign trade in the first quarter of this year showed an increase of 40.8 percent over the comparable 1978 period to reach US$6,438.4 million, according to statistics of the Directorate General of Budget, Accounting and Statistics.
Exports totaled US$3,339 million for a gain of US$963.6 million or 40.6 percent compared with the same period last year. Imports of foreign industrial raw materials, capital goods and consumer 'products amounted to US$3,099,4 million for a gain of US$902,4 million or 41.1 percent. The favorable balance was US$239.6 million.
First quarter exports of manufactured goods scored an increase of US$727.3 million or 40.2 percent to reach US$2,536 million. Exports of primary products showed a drop of US$1.2 million or 2 percent, totaling US$59.6 million.
Imports of primary products, mainly crude petroleum, amounted to US$772.1 million for an increase of US$218.6 million or 39.5 percent. Imports of manufactured products reached US$1,796.8 million, up 42.2 percent.
The United States remained the biggest importer of Taiwan products and Japan was Taiwan's leading supplier. Taiwan exported US$1,156.3 million worth of goods to the U.S. and imported US$658.3 million worth. Taiwan's exports to Japan totaled US$485.2 million and its imports from Japan totaled US$1,013 million.
Taiwan had a deficit of US$527.8 million with Japan and enjoyed a surplus of US$498 million with the United States.
Hong Kong was the third biggest importer, buying US$238.5 million worth of Taiwan products. Kuwait was the third ranking supplier with crude oil worth US$207.9 million.
Export prices show sharp rise
Export prices rose 12.5 percent in March compared with the same month of 1978. The advance was led by textiles, the top ranking foreign exchange earner of the Republic of China.
Synthetic fiber producers and wool weavers raised prices to compensate for increased material costs.
Export prices of apparel and accessories fell 0.39 percent as a result of slow demand.
Import prices climbed 8.09 percent over March of 1978, led by crude oil, basic metals and chemical materials.
Sale of agricultural products on target
Exports of agricultural products are expected to reach the target of US$1.5 billion this year, said Robert Chung-tao Lee, chair man of the Council for Agricultural Planning and Development.
Lee said agricultural production will do even better if the weather is favorable.
The target set for rice production will be 2,350,000 metric tons from 700,000 hectares. The average yield will be 3,357 kilograms per hectare.
Lee noted that Taiwan imported 4,590,000 tons of grain at a cost of US$690 million last year. The estimate for 1979 is 5 million tons worth US$700 million.
Forty percent of imports will be used for food and 60 percent for animal feed.
Trade network to be worldwide
A worldwide trade network will help promote the sale of free Chinese products and import raw materials and capital goods.
Headquarters will be in Taipei. A communication center will be established on each continent.
At present, only offices in the United States and Japan are manned by full-time staffers. The offices in Australia, Canada and West Germany will be raised to full-time status.
In Asia, the communication center will be set up in Damman, Saudi Arabia. The regional net work will include Jakarta, Manila, Singapore, Kuala Lumpur, Hong Kong, Osaka, Tokyo, Okinawa, Seoul, Bahrain, Teheran, Kuwait, Beirut, Bangkok, and New Delhi.
For the Americas, New York will be the communication center with other offices in Dallas, San Francisco, Los Angeles, Vancouver, Toronto, Montreal, Sao Paulo, Buenos Aires, Colon and Caracas. The European communication center will be in Frankfurt with other offices in Hamburg, Paris, London, Rotterdam, Brussels, Milan, Athens, Madrid, Copenhagen, Stockholm, Zurich and Vienna.
The African communication center will be in Johannesburg with other offices in Abidjan and Lagos.
In Oceania, the communication center will be in Melbourne with a branch office in Auckland.
Council preparing second 6-year plan
The Council for Economic Planning and Development is working on the second six-year economic development plan to be implemented from 1982 to 1987.
The first six-year plan is now in the second stage.
In 1978, the council revised the plan and raised the target of annual economic growth for the 1979-1981 period to 8.5 percent, 1 percent higher than the original projection.
The second six-year economic plan will reflect the political situation, economic change, energy supply and new price structure.
More incentives for investors
Incentives to be offered investors at the Hsinchu Industrial Park and other industrial parks will be more attractive than those of the past, Finance Vice Minister C.H. Tu told legislators.
Tu said the draft statute prescribes a five-year business income tax holiday for any project at Hsinchu. The starting date may be any of the four fiscal years after it begins to market products or offer services.
Business income tax and surtaxes will not exceed 22 percent of annual earnings.
Capital equipment, raw materials, components and semi-finished products imported for use by the importer will be exempted from duty and commodity tax. Exports will be exempted from commodity tax and business in come tax.
Production index grows more slowly
The industrial production index rose to 282.5 in March, up 14.8 percent over the previous month, according to the Directorate General of Budget, Accounting and Statistics.
The figure is down from the average monthly increase of 25.4 percent in 1978.
In March, manufacturing output increased 14.6 percent (heavy and light industries each up by that amount) over February. Mining was up 18.2 percent, construction 19 percent and public utilities 14.1 percent.
For the 1979 first quarter, the index registered a gain of 14.3 percent over the same period last year.
Manufacturing rose 14.3 percent (heavy industry 20.3 percent and light industry 7.2 percent). Mining increased 9.3 percent, construction 12.3 percent and public utilities 16.8 percent.
Heavy industry's share of production reached 57 percent com pared with 54.2 percent in 1978.
Among major products, coal showed a 58.1 percent gain in March to reach 145,000 tons. Automobiles were up 37.3 percent to 8,735 units, garments 25.1 percent to 4.89 million dozen and motorcycles 24.9 percent to 66,700 units.
Cotton yarns, refined petroleum goods and television sets showed increases of 20 percent.
Down by 46.2 percent were canned pineapples, mushrooms and asparagus.
Machinery show sales US$38 million
The 10-day Taiwan Machinery Show sponsored by the China External Trade Development Council and Taiwan Association of Machinery Industry was a smashing success with on-the-spot sales exceeding US$38 million, more than double the 1978 figure.
Foreign buyers numbered 1,672 with 257 from Japan and 203 from the United States. Others were from the Philippines, 195; Hong Kong, 175; Malaysia, 145; Indonesia, 116; Europe, 77; Thailand, 63; Singapore, 51; Australia, 44; the Middle East, 27; Africa, 25; and Canada, 21.
Next year's show will be international. Foreign manufacturers will be invited to participate.
Success of the show was attributed to the improved quality of Taiwan machinery.
Top sellers were machine tools and plastics, printing and textile machines. More than 500 products were shown by 164 makers.
Exports of Taiwan machinery are expected to reach US$1.15 billion this year for a gain of 15 percent over 1978.
Funds allocated for development
The Taiwan Provincial Government will allocate NT$80,340 - 99 million (about US$2,231.69 million) to carry out 9 of the new 12 economic development projects.
Projects and funds are as follows:
— Round-the-island railway: NT$7,873.8 million (about US$218.8 million).
— New cross-island highways: NT$2,413 million (about US$67 million).
— Second and third-phase construction of Taichung Port: NT$16,783.5 million (about US$466.2 million).
— Development of new townships and construction of housing: NT$30,712 million (about US$853 million).
— Improvement of farm irrigation: NT$1,386.84 million (about US$38.52 million).
— Construction and repair of river dike and levees: NT$8,557 million (about US$238 million).
— Widening of Pingtung-Oluanpi highway: NT$1,985 million (about US$55 million).
— Farm mechanization: NT$8 billion (about US$222 million).
— Construction of cultural centers: NT$2,630 million (about US$73 million).
Germans planning Taipei trade office
A private trade office may be set up soon in Taipei by West German businesses, said Peter Petersen, who headed a visiting seven-member parliamentary mission.
"There are roughly 5,000 Chinese and German firms dealing with each other now," he estimated.
Possibly sponsored by the German Chamber of Commerce, the office would be especially beneficial to small and medium-size German firms.
Improvement of visa procedures requires urgent attention, Petersen said.
Unemployment down to 78,000 in 1978
The employed population totaled 6,228,000 at the end of last year, the Directorate General of Budget, Accounting and Statistics said.
Some 280,000 job opportunities were created in 1978.
Distribution of the working population last year showed that primary industries employed 24.- 96 percent, secondary industries 39.29 percent and services 35.75 percent.
Unemployment declined from 155,000 in January, 1978, to 76,000 at the end of December.
Companies to make trucks and buses
Preparations to set up two companies to make and sell heavy trucks and passenger buses are in full swing, according to a spokesman for the Taiwan Machinery Manufacturing Corporation.
TMMC and its two foreign partners, Chrysler Corporation of the United States and the Perkins Engine Company of Britain, will establish the Taiwan Machinery Chrysler Company Ltd. and Taiwan Machinery-Perkins Company Ltd.
He said both Chrysler and Perkins will send executives to Taipei.
The two companies will be integrated to handle production and sales.
Chrysler approved the venture and raised the share of its holdings from 35 percent to 40 percent.
The US$70 million project calls for 32 percent of local parts at the outset. This will rise to 65 percent in the second year and 80 percent in the third year.
Taipower rushes new generators
Taiwan Power Company will install three combined cycle gas turbine generators at Tunghsiao in central Taiwan with capacity of 900,000 kilowatts.
The cost will be NT$15,710 million (about US$437 million). Installation will begin this year and is expected to be completed by September of next year.
Taipower's sales of electricity grew 16 percent in the first quarter of this year compared with the same period of 1978.
The company registered a pre tax surplus of NT$7,238 million (about US$201 million) from sales of NT$33,824 million (about US$939 million) during the July, 1 978-March, 1979 period. This exceeded estimates by NT$564 million (about US$16 million).
In March alone, Taipower recorded a pretax surplus of NT$388 million (about US$10.2 million) from sales of NT$3,475 million (about US$97 million), compared with a target of NT$370 million (about US$10 million).
Taipower's second nuclear generator has reached full capacity. Each generator has installed capacity of 615,000 kilowatts.
Second and third nuclear power plants are under construction and Taipower is planning two more.