Taiwan Today

Nineteen hundred and seventy-three was the best year ever for the Republic of China's island province of Taiwan. The economy grew by 12.3 percent and the way was opened for the attainment of economically developed status by the end of the decade. Then came the energy shortage, the quadrupling of the oil price, rampant inflation after years of price stability, and worldwide recession. The year of 1974 was a continuous but not wholly unsuccessful struggle against eco­nomic adversity which was almost wholly im­ported.

Many developed and developing countries had zeroes or even minus signs in the economic growth column. Free China's gross national product advanced by 1.5 percent. If this was a far cry from last year - and in fact all the other years of the last two decades - it was an acceptable per­formance in comparative terms. The per capita income rose from the US$467 of 1973 to US$702. Although most of the gain was lost to inflation, the 16 million people of Taiwan were confirmed in the enjoyment of the second highest living standard in East Asia. Only the Japanese were better off.

Stabilization efforts of the government stopped inflation in its tracks after the February-March period of 1974. The wholesale price index stood at 199 (1966 = 100) in February but had been reduced to 185 in October. The retail index peaked at 220 in September but was down to 216 in October. Relative price stability was attained after the rises of February. People were assured of their livelihood. Employment rose but was still under 2 percent in the last survey of 1974 com­pared with over 7 percent in the United States.

Exports accounted for 51 percent of the gross national product in 1974. The foreign trade growth rate of over 50 percent was a major factor in keeping the economy on an even keel. Total volume was about US$12.6 billion with a deficit of US$1.3 billion, Taiwan's first red ink since 1970. Exports were about US$5,600 million and imports US$7,000 million. The price paid for petroleum alone in 1974 was US$720 million, an increase of some US$400 million for only 10 percent more oil than in 1973.

Prospects for 1975 will depend heavily on what happens in the rest of the world, especially the United States (Taiwan's biggest customer), Japan (Taiwan's biggest supplier) and Western Europe, an increasingly important trading partner. Trade predictions are in the neighborhood of US$14,500 million with a deficit of around US$500 million. Economic growth of 6 percent is targeted - but with recognition that, as Finance Minister K.T. Li put it, "ups and downs have to be lived with in the course of economic development." Minister Li suggested that the nation might have become complacent after years of growth at a figure of 10 percent or higher. The "economic miracle" of Taiwan had become a commonplace. He also pointed to the necessity of economic responsibility and the competitive spirit. Admonitions to up­grade quality of industrial products and processed agricultural goods have often fallen on deaf ears. "It was so easy to export," he said. "Why be concerned about quality." He suggested the eco­nomic slowdown would lead to the production of more raw materials and then to advanced industry. "Brain needs to take the place of brawn," he said.

Y.T. Wong, director-general of the Board of Foreign Trade, and other ranking officials said that economic trials and tribulations would not alter the free trade policy of the Chinese govern­ment. Wong expressed confidence that exports would turn up in the second half of 1975. The Republic of China, Indonesia and Malaysia will be the three Asian countries least affected by stag­flation, Wong said. William Wei, director of the Industrial Development Bureau, agreed that the upturn would come in the second half of the year. He urged industries to prepare for increasing orders, especially from the United States, which he said should find itself on an ascending economic road beginning in August.

Government agencies took steps to help export industries weather the period of doldrums. Public utility rates and energy prices, for instance, had not been increased since February. Minister of Economic Affairs Y.S. Sun said stability would be maintained. Loans made revolving funds easier to obtain. In 1974 and 1975, more than US$10 million was made available to help factories buy machinery and equipment made by Taiwan sup­pliers.

The Board of Foreign Trade sponsored a series of meetings for executives of leading export in­dustries. Among those represented were steel, plastic footwear, plywood and canned foods. The outlook expressed was generally optimistic. Steel makers said they would export about 360,000 metric tons of products in 1975, close to the record of 1972. Major markets will be the United States, Middle East and Indonesia. Plywood mills expect an upturn of 10 percent this year in terms of value, although this will be only 60 percent of the 1973 mark of 3.8 billion square feet. Ex­ports were down 30 percent last year. Plastic footwear should be a US$200 million earner in 1975. Canned foods may be up by 10 percent, provided efforts to develop new products and markets are successful. Earnings of US$220 mil­lion are expected from 2.8 million cases of mushrooms, 3.5 million cases of asparagus, 2.5 million cases of pineapple and other tinned goods.

Imbalance of trade with Japan is one of Taiwan's most serious problems. Last year's deficit with the Japanese was larger than the total for all countries. In other words, to have broken even with Japan would have meant a favorable balance of trade. The government brought nearly 800 commodities under import control as a first step in improving the Japanese trade situation. Imports of 16 commodities, including natural and synthetic fiber textiles and pears and quinces, were banned entirely. Some 760 other items may be imported only from the United States and Europe. It was hoped that industries would buy from Japan only machinery and raw materials that could not be obtained elsewhere. Clampdowns on luxury goods were in the making. Imports of Japanese color TV sets were prohibited.

At the same time, the government was aware that it is more important to sell goods to Japan than not to buy. The Japanese have built many fences around their insular economy. Products of South Korea as well as Taiwan have been frozen out of the Japanese market or strictly controlled. Taiwan can grow almost any quantity of bananas. In the 1960s, Japan bought most of its bananas from Taiwan. More recently, Japanese banana traders have turned to new suppliers in the Philip­pines and left Taiwan without a market.

Early in January, the Board of Foreign Trade decided to support a new banana sales agreement with Japan. The plan would combine 140 Japanese banana importers into 21 groups to deal with the Taiwan Provincial Federation of Fruit Marketing Cooperatives. Bidding would be eliminated. The plan has been referred to the Japanese government through the Interchange Association. Whether satisfactory prices, quotas and terms of delivery can be reached through negotiation remains to be seen.

BOFT director Wang called on the Japanese to cooperate in correcting an imbalance which reached US$1.4 billion in 1974. He noted that Taiwan had bought heavily from Japan in capital goods and raw materials. In the first 10 months of 1974, imports from Japan included US$329 mil­lion worth of steel, US$255 million worth of chemical raw materials, US$213 million worth of capital equipment, US$275 million worth of elec­trical machinery apparatus and US$118 million worth of transportation equipment. He expressed regret that Japan had not shown more interest in importing Taiwan goods.

Ku Chen-fu, chairman of the Chinese National Federation of Industry and Commerce, attended the second East Asian Entrepreneurs' Conference at Tokyo in December. He said Japanese indus­trialists and business leaders had agreed to help strengthen economic and technical cooperation between Japan and the Republic of China. This collaboration will include efforts to narrow the trade gap, he said.

The Japanese were reported interested in re­suming Japan Air Lines flights to Taipei. This would imply the resumption of China Airlines flights to Japan and would also entail a Japanese retraction of remarks by Masayoshi Ohira, then foreign minister, questioning the Republic of Chi­na's sovereignty. The Chinese government would welcome resumption of JAL and CAL services but not at any price. Possibly the economic and political differences between Japan and the Re­public of China could best be adjusted by fitting them into one package. There was sentiment for this not only on the Chinese side but among Japanese friends of free China.

If oil prices were bad news in import terms, sugar sent up balloons of hope. Earnings for the year were US$220 million from 800,000 metric tons, a gain of more than two times. The Taiwan Sugar Corporation set its sights on output of 900,000 metric tons in the 1975 crop year. Farm­ers will get low-interest loans, and TSC will bring marginal lands under cultivation and introduce new techniques in cultivation and harvesting. Some new species will be planted.

The Finance Ministry made a contribution to the expansion of exports by simplifying certifica­tion. Commodities affected include textiles, phar­maceuticals, foodstuffs, tobacco and alcoholic products, aviation equipment and printed matter in the Chinese language. This is part of a long-term program to reduce red tape not only for trade but for other operations of the government, in­cluding those which impinge on the lives of the people.

The Board of Foreign Trade promised to adopt a flexible attitude toward regulations prohibiting the import of raw materials and components that can be manufactured domestically. The case-by­ case approach will be used to avoid inequities. Price will be taken into consideration as well as intention to export the finished product.

Light industry played a major role in keeping Taiwan's head above the swirling economic waters in 1974. For the January/November period, exports of all industrial products totaled US$4,878.5 million, an increase of 31 percent over the same period in 1973. The pace was set by light industries at US$2,912.3 million. Heavy and chemical industries provided the remaining US$1,966.2 million.

Textiles was far out in front at US$1,471.4 million, followed by electrical machinery apparatus at US$903.2 million and machinery and metal products at US$360.1 million. Other leaders (over US$100 million) were wood products, US$351.8 million; plastic products, US$324.2 million; sugar and products, US$224.6 million; transportation equipment, US$115.2 million; and basic metals, US$115 million.

Industry grew by 0.7 percent for the 11 months and manufacturing showed a decline of 0.2 percent from the 1973 period. Construction was up 14.8 percent and public utilities 4.1 percent.

For the whole year, the three export processing centers at Kaohsiung, Nantze and Taichung chalked up another triumph for light industry with growth of 26 percent. Sales reached US$511.3 million compared with US$404.6 million in 1973. Imports for 1974 were US$309.97 million. This meant that the foreign exchange gain exceeded US$200 million. US$156.7 million has been invested in the 260 plants of the three zones and jobs provided for 65,670 workers.

Steel began to recover from a slump that depressed monthly output to 20,000 metric tons last summer. Output had reached 50,000 metric tons, half for export and half for domestic use, at year's end. Producers estimated 1975 exports at 385,000 metric tons valued at US$90 million. The government said it hoped for steel exports of 430,000 m/t. Steel makers asked for government loans and other assistance, and urged that exports not be prohibited again nor tied to imports of scrap. They also seek development of the China Steel Trading Corporation and favorable rates from Chinese shipping companies.

Foreign and overseas Chinese investment con­stituted a vote of confidence in the Taiwan economy during 1974. The total was down from the record US$248 million year of 1973 but in a year such as that just past, US$189 million was a satisfactory figure.

New projects numbered 168 valued at US$40.6 million, down by 23.9 percent. About half of the capital came from foreigners and half from over­seas Chinese.

Two hundred and eighty-one expansion projects were approved. Of the US$108 million involved, nearly US$70 million came from foreigners.

Electrical machinery apparatus continued to be the favored investment field with US$69.65 million, or 36.8 percent. Then came non-metallic manufactures at US$36.21 million, or 19.12 percent, and chemicals at US$12.633 million, or 6.67 percent.

Of the US$108.736 million in foreign invest­ment, US$38.91 million came from Japan, US$­38.76 million from the United States and US$­14.76 million from European countries. Hong Kong investors led the overseas Chinese with US$21.743 million.

Seventy-six technical cooperation projects were approved - 43 with Japanese, 24 with Americans and 9 with Europeans.

Nearly US$1,300 million worth of investment has flowed into Taiwan from abroad since 1952. More than US$900 million is from foreigners and nearly US$400 million from overseas Chinese.

Investment for 1975 was given new impetus as the Legislative Yuan approved amendments to the Statute for the Encouragement of Investment. The changes had these effects:

- Profit-seeking enterprise income tax (includ­ing surtaxes) will be reduced from 35 to 30 percent. As a special encouragement to newly es­tablished enterprises with advanced technology, whose equipment has a long service life and whose profits come slower and whose risk is high, the maximum income tax will be lowered from 30 to 20 percent.

- For productive enterprises which became operational before December 31, 1973, the income tax will remain at 25%. This will also apply to enterprises which were approved prior to December 31, 1973, and which will begin production by the end of 1975.

- Deferred tax payments will be allowed to en­terprises which use undistributed earnings for reinvestment.

- The withholding tax rate for foreign and overseas Chinese enterprises approved after January 1, 1974, will be reduced from 35 to 20 percent.

Yu Kuo-hua, governor of the Central Bank of China, said that to meet the needs of business and industry, interest rates would be adjusted more often but in smaller magnitude. Adjustments of the past have been infrequent but sizable. Gov­ernor Yu expressed belief that the new approach would better serve the economy and at the same time stabilize deposits.

New rates announced in December, 1974, were down 0.5 percent. These were the principal rates:

- Unsecured loans, 15.5 percent.
- Secured loans, 14.75 percent.
- Discounts, 13.25 percent.
- Export loans, 9 percent.
- Time deposits, from 8.5 percent for one month to 11.5 percent for nine months.
- Savings deposits, 8 percent for passbook savings and 13.5 percent for a year or longer.
- Rediscount rates, 12 percent; accommoda­tions against secured loans, 13.5 percent; short-term accommodations, 15.5 percent; accommodations against government bonds, 13.5 percent; and accommodations against export financing, 8 percent.

Money supply was under good control and down from 1973 at the end of last year. Increases of January and February for Chinese New Year spending are not expected to shake the economy. Banks have excess reserves of some NT$10,000 million on deposit with the Central Bank. The foreign debt was only US$1,410 million at the end of September, 1974. In the January-September period, the nation had foreign exchange income of US$4,510 million, of which US$317 million was from services. For the year's first three quarters, the foreign debt was down 4.25 percent, foreign exchange reserves were down 5.7 percent and foreign exchange earnings were up 26.58 percent.

Premier Chiang Ching-kuo appealed to bankers to support the needs of the economy and the cause of economic recovery. In a personal letter to bank administrators, he said: "Because banking institutions are playing a more and more important role in national economic development, they can­not be allowed to assume the role of spectators. Instead, they should participate positively and do their best to offer all reasonable needs and con­veniences to the industrial and business sectors." He said more improvements are required in banking operations.

"I believe all banking personnel regard success or failure of the economy as their responsibility and want to help carry out national construction and not set up obstacles," he said. The help of banks is essential in implementing measures to encourage exports, he added. Some banking prac­tices should be reviewed, the Premier maintained, in order to assure that the institutions help in­dustry and contribute to the economy.

Value of stocks on the Taipei exchange was NT$23,000,835,000 at the end of November, 1974, up 39 percent in a year. The Securities and Exchange Commission of the Ministry of Eco­nomic Affairs said several measures had been taken to rationalize stock market operations after a lengthy downward slide in prices. Stocks with good records are receiving special encouragement. Accurate reporting of listed companies is assured. Buying and selling of stocks has been made easier.

H.L. Hu, the chairman of the commission, said stocks will start upward again this year. "Stock prices are already very low," he said. "With com­panies about to issue their dividends, the market is likely to move upward from the ebb tide of last year." Most companies did fairly well in the first half of 1974, he said, and many have reserved profits to protect themselves in bad times. This will be reflected in February dividend announcements.

Agriculture had problems but did not fall farther behind, largely because of government assistance. Loans totaling more than US$15 mil­lion were extended last year for the purchase of agricultural machinery. Farmers bought more than 11,000 machines and thus were able to make up for the labor shortage in rural areas. Premier Chiang and the government pushed ahead with plans for augmented harvests of several crops in 1975. Increased use of marginal land was con­templated.

Industrial news was not all bad. From January through November, production of 22 out of 39 important industrial items showed increases.

The output of air-conditioners was up 60.3 percent. Bicycles were an ailing industry in 1973. Improved quality control helped raise production by 52.2 percent in 1974. Cement was up 3.3 percent. Among the more serious declines were rubber shoes, a big export product, 22.5 percent; plywood, 29.9 percent; and TV receivers, 13.9 percent.

BOFT director Y.T. Wang said the Republic of China's prospects for fast recovery were better than those of many countries, largely because of Taiwan's export processing industries. Prices of raw materials are declining, he said, and the ROC has good stockpiles in many industries. Prices of finished products are climbing.

Twelve state enterprises set targets calling for increased production in 1975. These included:

- Taiwan Power Company, 24,800 million kilowatt hours.

- Chinese Petroleum Corporation, 1.853 mil­lion cubic meters of natural gas, 1.110 million kiloliters of gasoline and 6.81017 million kiloliters of fuel oil.

- Taiwan Fertilizer Company, 385,000 metric tons of ammonium sulphate, 193,000 metric tons of urea, 232,000 metric tons of compound ferti­lizer, 217,000 metric tons of calcium super­ phosphate and 50,000 metric tons of nitro chalk.

- Taiwan Alkali Company, 71,000 metric tons of caustic soda, 49,300 metric tons of hydrochloric acid and 18,000 metric tons of carbon dioxide.

- Chinese Petrochemical Development Corpo­ration, 26,400 metric tons of DMT.

- Chung Tai Chemical Industry Corporation, 8,300 metric tons of caprolactam.

- Taiwan Aluminum Corporation, 38,000 met­ric tons of aluminum ingots and 24,300 metric tons of aluminum sheets.

- Taiwan Metal Mining Corporation, 5,800 grams of gold and 5,525 metric tons of electrolytic copper.

Leaders of the government held a series of meetings with business and government leaders before deciding against devaluation of the New Taiwan Dollar. Many other measures of economy recovery grew out of these meetings and were announced by the government late in 1974. This was the program:

Money measures reducing reserves, liberalizing loan terms, giving extensions and relaxing collateral requirements. Tax measures exempting and post­poning levies, simplifying payments and placing more trust in business and industry. Measures to encourage construction and production, including elimination of the high-rise building ban, en­couragement of the use of domestic materials and machinery, and the spurring of export promotion abroad.

Taiwan's 10 basic construction projects were going well despite the economic pressures of 1974. The government resisted postponements or slow­ downs. Infrastructure development had already been delayed too long. The cost was still estimated at a little over US$6 billion but presumably will be considerably higher if the rate of inflation is not reduced. Expenditures will cover the rest of the decade of the 1970s. Foreign loans will finance US$1,817 and 83 million German marks of the program. Employment will be given 180,000 workers, including 20,000 engineers and tech­nicians. Material needs will include 2,280,000 metric tons of cement, 514,000 metric tons of steel bars, 1,233,000 metric tons of lumber and 1,223 metric tons of asphalt.

This was the outlook for the 10 projects at the outset of 1974:

- Railway electrification. Work will begin in March on the NT$15,985 million undertaking and be completed in June of 1979. Loans were signed with American banks in January for US$110 million of the cost. The first section will be one of 125.7 kilometers between Keelung and Chunan to be completed by December of 1976. Then will come the Chunan-Changhua sections of 89.3 kilometers (mountain) and 91.2 kilometers (coastal) with completion scheduled for March or April of 1977. Finally will come the Changhua-Kaohsiung section of 189.2 kilometers. Increased carrying capability will be provided and train speeds increased. Con­tracts have been let to General Electric of the United States, US$69 million for replacement of tracks and supply of locomotives; General Electric of Britain, US$80 million for overhead transmis­sion lines, remote controls and power substations; and E.M. Ericksson of Sweden, US$17.8 million for traffic control equipment.

- International airport. Acquisition of land has been completed and an access road built. Construction of drainage, the main runway and terminal buildings are scheduled next. Estimates of cost have been raised to US$260 million. The location is near Taoyuan on the west coast 25 miles southwest of Taipei. Completion of the first stage is scheduled for 1978.

- North-South Freeway. One section just west of Taipei is open and work is under way on Taipei-Keelung and Yunlin-Fengshan sections. The es­timated cost has risen to US$1,210 million, or more than twice the original estimate.

- Suao-Hualien railroad. Construction has been under way for more than a year and is going ahead smoothly.

- Taichung port. Work is nearly 30 percent complete but running behind schedule because of increased costs and shortages of special equipment. By the end of 1976, the harbor will be handling 2.8 million metric tons of cargo annually. This will be increased to 12 million tons by 1982. The originally scheduled cost was US$210 million. Private investment is to be accepted for grain warehouses, loading and unloading facilities, and ship repair docks.

- Suao port. Work was begun in July of 1974 and will be divided into one stage of five years and another of three years. Cost has been revised upward to US$136 million. This supplementary port to Keelung will have cargo capacity of 6.5 million tons annually.

- Kaohsiung shipyard. Work is nearing the halfway point. Pouting of concrete for the huge dry-dock, where tankers of 450,000 tons will be built, is nearly complete. Giant cranes will be installed by the end of this year and many shops will become operational in the fall. Construction of the first tanker will begin before the end of next year. Present estimate of cost is US$160 million.

- Steel mill. Construction is about 15 percent complete. The US$720 million facility will begin first-stage production of 1.5 million metric tons of steel products in 1978. Capacity will be raised to 2.7 million tons by 1980 and to 6 million tons in 1983. About US$440 million of the financing will come from foreign banks.

- Petrochemicals. Construction of a third naphtha cracker is getting under way. Several downstream projects will be completed this year. Others are temporarily delayed because of the quadrupled price of oil.

- Nuclear power plants. The Taiwan Power Company has obtained nearly US$499 million in additional financing from the U.S. Export-Import Bank and a consortium of private American banks for construction of Taiwan's third plant, which will have two generators with total capacity of 1,900,000 kilowatts. The site will be in southern Taiwan. The first two nuclear plants are under construction in northern Taiwan and the first plant will go on line next fall. Output of the three plants and six generators will be nearly 5.1 million kilowatts.

K.S. Chang, vice minister of economic affairs, noted that when commitment to the first plant was made in 1969, nuclear power ap­peared to be economically more costly than other thermal and hydroelectric generation. This has been changed by the increase in oil prices. By 1982, Taipower will be dependent on petroleum for less than 25 percent of its output, compared with 75 percent in 1973.

Sources of oil have already been diversified with increased procurement from Brunei and Indonesia. Additionally, the Republic of China may spend from US$10 to US$20 million annually for oil exploration in economically and politically stable areas of the free world. Chang said Taiwan's use of oil for energy will grow more slowly than in the past because of the greater use of coal and nuclear energy. Oil will be needed for petro-chemical basics and intermediates to support plas­tics and synthetic fiber industries. With the supply of natural gas limited, capital and technical as­sistance may be committed abroad for the produc­tion of ammonia-urea, methanol and similar ma­terials from natural gas which is now being burned.

"We are," Chang said, "resolutely facing the fact that vastly higher energy prices, along with higher costs for imported food and basic industrial raw materials, will place an economic burden on our people and at least temporarily slow the rate of industrial growth. These external impositions come at a time when many years of rapid growth, together with a trend toward much more capital intensive development, have begun to create manpower shortages, particularly in the construction industry.

"Since our future growth will depend much more on increased productivity than in the past, it is essential to provide the energy and the capital than in the past, it is essential to provide the energy and the capital required for mechanization and automation. We shall, however, strongly em­phasize the development of higher skills so that our production, both for export and for local consumption, will contain relatively more skilled technical man-hours and relatively less scarce energy and imported materials.

"At the same time, we shall continue to em­phasize the need to avoid waste and inefficient use of energy, through campaigns to increase general public awareness and through seminars and publications which will help management people in the transportation and production industries to make the best possible use of available energy.

"In the past we have adjusted successfully to many adversities. We will continue to respond vigorously and rationally to the changing condi­tions of the future, confident that the versatility and dedication of our people and the strength of our social, political and economic institutions will enable us to survive and prosper.

"The energy problem is a difficult one and we realize that many other nations are in a situation similar to ours. We shall be happy to work con­structively with our international neighbors in developing and stabilizing energy resources, and thus help to provide a firm basis for continued economic development and improved living stand­ards within the community of free nations."

The Republic of China can be optimistic about energy. Its situation is promising both in terms of foresight (the nuclear plants) and natural resources.

Economically recoverable coal reserves are es­timated at more than 225 million tons. Mining conditions are difficult, however, because seams are thin, fractured and steeply sloping. The indus­try is fragmented. Production peaked at 5.1 mil­lion tons in 1967 and fell rapidly thereafter. The 3.3 million tons of 1973 came from 180 mines with an average of only 1,540 tons per mine per month. Still, many Asian countries have less coal and some have none at all.

The island has 63 natural gas wells with 13 others capped and ready for exploitation. Produc­tion was 1.45 billion cubic meters in 1973, equiva­lent to 2.1 million tons of coal. The rate of produc­tion is about 5 million cubic meters daily. Prin­cipal users are fertilizer, cement and methanol plants, power plants and households. Reserves of gas are estimated at 30 billion cubic meters and CPC is discovering new deposits about as fast as reserves are depleted.

Hydroelectric power generation has risen from 303 MW to 1,131 MW since 1953. Energy output from waterpower rose from 1,565 GWH in 1954 to 3,377 GWH in 1973. Capacity has recently increased faster than output because the hydro­electric power plants are used for peaking. Hydro generation made up 87 percent of the total in 1954 but only 17 percent in 1973. Hydroelectric potential is 5,000 MW but seasonal rainfall dis­courages its full utilization.

Geothermal power sources are being developed but will not be of great importance in the total supply. More than 60 temperature gradient holes, 15 shallow wells (up to 800 meters) and 4 deep wells (up to 1,500 meters) have been drilled in the Tatunshan area near Taipei. A steam zone with temperatures ranging from 2400 to 2930C has been found at a depth of about 1,300 meters. Several hundred MW of electricity could be pro­duced, but the steam is corrosive and special materials would have to be used in well casings and conversion equipment. Commercial feasibility of development is under study. The Tucheng area near Han also has geothermal potential and one exploratory well has found low pressure steam at 100 meters. Direct heat applications are indicated.

Solar energy is being tentatively explored. Aside from any actual generation, Taiwan econ­omizes on energy as a result of minimal space heating during the brief winter. The sun also provides a year-round growing season and enables Taiwan to be self-sufficient in food. Exports pay for grain imports. The only drawback of plentiful sunshine is the growing demand for air-condition­ing in the summer. Even so, the use of energy for residential use is only about 11 percent of the total compared with 21 percent in the United States.

Taiwan's use of energy for transportation is 8 percent of generation versus 25 percent by Americans. Industry is the big consumer. Nearly 80 percent of electricity goes directly to industry, which also consumes 38 percent of total energy versus 29 percent in the United States.

Exploration for oil has been under way since the 1950s. In 1968, a magnetic survey of underseas areas was conducted adjacent to the Taiwan west coast. Seismic work began in 1969. These studies indicated that undersea areas west of Taiwan to a distance about halfway across the Strait have promising anticlinal structures in thick sedimentary formations.

The first exploratory well was spudded in early 1973 and exploration is continuing. Gas and condensate have been discovered and the search for the big strike continues. Vice Minister Chang said: "The offshore area west of Taiwan still contains many attractive unexplored structures and we plan to step up our exploration efforts in an attempt to discover and develop commercial quan­tities of oil and/or natural gas. The search for onshore gas and oil will also continue. Efforts will be made to maintain or moderately increase local coal production within the limits imposed by extraction cost and available manpower."

If the Republic of China's economic prospect was sound and encouraging in a time of dif­ficulty, so was its political, social and cultural outlook for 1975. The diplomatic situation had settled down, and aside from the relationship with the United States, was not considered as important as in U.N. membership times. Diplomacy simply didn't mean so much. The numbers varied, but the ROC has meaningful relations (economic, social and cultural as well as political) with between 110 and 130 countries. Excluding the Communist lands, the count of world sovereignties is not much higher than that.

About 820,000 tourists came to Taiwan from all over the world in 1974. The number was down slightly from 1973 but that still left the Republic of China comparatively well off for visitors com­pared with most other countries of the world. Inflation at home and the rising cost of transporta­tion cut into everyone's travel. The tourist count was not only almost a million but the third biggest in Asia after Hong Kong and Japan.

How many visitors did the Chinese mainland have? There was no announcement. But the count was in thousands, not tens of thousands, and all of these were hand-picked and adjudged to be of the correct political orientation - or impression­able. Free China did not choose its visitors, except to decline those from Communist lands. Anyone and everyone was at liberty not only to come but to travel freely throughout the island province, seeing what they wished and talking to anyone they pleased. Many of these people went home to report that the Republic of China was a free land of free people. No non-Communist visitor to the Chinese mainland has yet done that.

When the Hong Kong government began to return refugees from Communism to the Chinese mainland late in 1974, Premier Chiang Ching-kuo said the Republic of China would welcome all who wished to come to Taiwan. Including those who arrived as the mainland was falling to Com­munist usurpers, more than a million and a half people have found sanctuary, freedom and a new life in Taiwan. The island is now overcrowded; population density is first in the world, exceeding that of the Netherlands. Even so, there was to be no denial of asylum. The Premier's statement was well received by millions of Hong Kong Chinese who oppose both Communism and the British insistence that further refugees be sent back.

Economic growth has made it possible for both Taiwan and Hong Kong to cope with the influx of refugees. However, the accomplishments of the Republic of China in social welfare, education and culture are more impressive than those of the British crown colony in everything except public housing. Hong Kong’s relief activities are largely in the hands of private agencies. In Taiwan, the Taipei City and Provincial Governments see to it that no one is without food and shelter. Social welfare programs involving medical care, pensions and other benefits cover more than a million workers, including all of those employed by gov­ernment. Few other Asian countries have anything comparable.

Education for everyone is one of Taiwan's proudest achievements. As of the 1974-75 school year, nearly 28 percent of the popula­tion was in school. Only a little over 1 percent of those in the elementary school age bracket were not in classrooms. Education is free and com­pulsory for six years and free for another three years. Every young person is entitled to these nine basic years of schooling. Help is available to any who cannot pay for fees and uniforms.

The 2,354 primary schools of the island had more than 2,400,000 pupils at the start of 1975. All teachers were certified by the Ministry of Education and most were graduates of universities, colleges or normal schools. Special consideration was accorded the children of mountain areas and the offshore island. They received hot lunches or milk and snacks. Split sessions had been elimi­nated except for the first and second grades in some places. Salaries have been raised to a point where teachers no longer have to rely on cram sessions and parents' contributions.

Pre-school is not compulsory and mostly non­ governmental. But there are 660 such schools enrolling more than 110,000 toddlers and kinder­garteners. The government stands behind a move to establish harvest-time nursery schools in each farming district. Most of the present enrollment is from the ranks of children whose mothers have joined the labor force.

Junior middle schools (seventh, eighth and ninth grades) number 586 with nearly 1 million students. Each school district has a junior high under the nine-year program. More than 150 wholly new schools have been opened and hun­dreds of additional classrooms built at existing schools. About 85 percent of primary graduates are going on to junior high; this rises to 95 percent in the bigger cities. The percentage has increased year after year since start of the nine­ year plan in 1968.

The 209 senior middle schools have more than 185,000 students. These are college preparatory institutions. They are open to junior middle school graduates through competitive examinations. How­ ever, 4 of 6 junior high graduates are now choosing a vocational course of two or three years rather than the academic curriculum. The 173 vocational schools had enrollment of 256,000 in 1974-75.

Higher education has 100 institutions - 9 uni­versities, 15 colleges and 76 junior colleges (two years). The junior colleges are vocational in nature and often connected with vocational high schools. Enrollment in the 100 higher schools was 282,000 at the start of 1975. The variety of courses and options is immense - from a certificate in home­ making to a doctor's degree in nuclear physics.

Miscellaneous educational institutes include 317 evening schools with 145,000 students and a number of special schools for the blind, deaf and dumb and other handicapped with more than 28,000 pupils. Summer training for teachers draws about 15,000 participants annually.

Overseas Chinese have come from both Northeast and Southeast Asia to attend high schools and colleges of Taiwan. They then return to serve their countries of residence and to stand firmly against any incursions by Communists. The 21 million overseas Chinese of the world are aware that the Communists offer no education worthy of the name on the mainland. Even those parents who are not in sympathy with every aim and objective of the Republic of China send their chil­dren to Taiwan for education whenever they can.

Educated young people are as important as freedom of enterprise in contrasting the successes of Taiwan with the failures of the mainland. For­eign and overseas Chinese investors acknowledge that competent, literate, loyal labor is Taiwan's principal attraction. Many Hong Kong "legal" refugees are overseas students who went to the main­land soon over the Communist takeover. They are leaving as fast as the Communists will let them but cannot, in most cases, return to the countries of their origin.

Cultural development has advanced by leaps and bounds in Taiwan. The old is still present in the form of classical Chinese opera, dance, music, literature, painting, pottery making and handicrafts. This has not prevented the emergence of the new as expressed in writing, the theater arts and the fine arts. Three television networks are presenting the products of China old and new. There is no denigration of any product or period, no rejection of any philosophy except Communism and this only because it claims to be a sacred writ which must be stuffed down the throats of 800 million Chinese people.

Chinese culture as expressed in Taiwan is free to develop in any way the artist or practitioner is moved. There are no guidelines and no taboos. Government and people believe that where dicta­tion begins, art ceases. Western culture exists side by side with its Chinese counterpart in a relationship of cooperation, not confrontation. Not even the English dialogue of imported televi­sion shows is dubbed. The original is obviously superior to any dubbing, so Chinese subtitles move across the screen for those whose English com­prehension is not sufficient.

The 16 million people of Taiwan entered 1975 with confidence unshaken. This was not because they had achieved the good life, not because they were doing comparatively well in hard times, not because they were superior, not because they had received help from the outside - but because they were free. This was the difference that most im­pressed those who took the trouble to come to Taiwan after they had viewed what an Indian demographer once called the anthill society of the Chinese Communists. As Senator Hiram Fong of Hawaii, who visited both Taiwan and the Chi­nese mainland in 1974, put it, "I would say that in Taiwan you have the greatest amount of hap­piness among the people." William Hazlitt said, "Liberty is the only true riches: of all the rest we are at once the masters and the slaves." Being rich in freedom, the people of the Republic of China have no fear that their happiness can be taken away from them or that they can be pre­vented from liberating those of their countrymen who, having no freedom, cannot know happiness.