Taiwan Today

Economics has been described as the dismal science, and not without reason. Every econo­mist makes predictions. When the going gets rough, few of them are even half right. The problems include complexity and the absence of established laws or rules. Man is not solely an economic creature. A world beset by inflation and recession at the same time is prepared to attest to this.

Taiwan is about as complicated as economies can get in this world. A medium-sized island (rank of 37th) of 16 million people (the earth's highest population density for an area of any size), it has a limited supply of arable land (about one­ fourth of the total). Yet in the past, Taiwan became one of the world's ranking sugar, rice, fruit and tea producers.

In the 19th century and under the Japanese (1895 to 1945), the island was overwhelmingly agricultural. Industry was primitive until the 1960s. Industrialization has been in progress for only about 20 years. In that brief period, Taiwan became the second ranking industrial nation of Asia (outside Japan), although the Republic of Korea is now moving into contention with a population twice as big and a land area three times as large.

With a free enterprise system and a government of the people, by the people and for the people, the Republic of China has contradicted about every economic shibboleth in the book. It has become a major trading nation not only of Asia but of the world. Hit hard by the recession of 1973-1974, it came back to record one of the lowest rates of inflation in the troubled economic world of 1976.

Taiwan came through the past year with economic colors flying and comparatively about as well off as any country in the world. Rates of growth had returned to pre-recession levels. Na­tion, government and people were solvent despite the demands of infrastructure expansion and the necessity for immense defense expenditures. The 1960s had been described as the time of Taiwan's "economic miracle." In a sense, the single year of 1976 was even more miraculous. Aside from a relatively low level of profit, which industrialists and businessmen allover the world may be compelled to accept in an era of rising energy cost, every economic sign of free China was positive.

Nineteen seventy-six was a better year than had been expected. Growth was about 11.5 per cent instead of the 6.4 per cent that had been forecast in January. This was a welcome advance over the 2.8 per cent of recession-afflicted 1975.

Growth slowed down a little after a first half year's climb at the rate of 13.4 per cent. But though industry was hesitant in the latter months, agriculture performed outstandingly to lift its 1976 mark to around 7 per cent. This compared with the minus 2.3 per cent of 1975.

Farmers chalked up a record rice harvest of more than 2.7 million tons for an increase of 8 per cent over the previous record year of 1975. Livestock output was up by nearly 24 per cent, including 5.3 million head of hogs.

Agricultural growth had been estimated at only 3 per cent as the year began.

Industry had a good year, although manufacturers complained of tight money and low profits. The industrial production increase for the first 10 months of 1976 showed a gain of 25.8 per cent over the comparable period of 1975. The index of industrial production stood at 184 with 1971 as 100.

These were breakdowns of the industrial index at the end of October (1971=100):

- Manufacturing, 184.6 (up 27.3 per cent).
- Heavy and chemical industries, 215.7 (up 37.2 per cent).
- Light industries, 159.3 (up 17.9 per cent).
- Construction, 228.4 (up 11.7 per cent).
- Public utilities, 177.7 (up 18.5 per cent).
- Mining, 106.6 (unchanged).

Electrical machinery apparatus paced the heavy and chemical industrial category with a gain of 50.8 per cent, followed by refined petroleum prod­ucts at 44.8 per cent.

Light industrial growth was led by wood products (principally plywood) at 48.5 per cent and rubber products at 33.6 per cent.

Foreign trade set an all-time record of more than US$15,000 million with a favorable balance in excess of US$500 million. The previous high of US$12,605 million was in 1974 but there was a deficit of US$1,327 million. The 1975 two-way total was US$11,261 million with US$643 million in the red. The final figure for 1976 was expected to be between US$15.3 and US$15.4 billion.

Trade with the United States totaled about US$4.5 billion in 1976 with the balance favoring Taiwan by some US$1.3 billion. The two-way volume was about nine times that between the United States and the Communist-held Chinese mainland. U.S. sources have predicted that trade with Taiwan will soar well over the US$5 billion mark in 1977.

Japan was the second-ranking trade partner at about US$3.5 billion two ways. The balance favored the Japanese by better than 2 to 1. The 1977 prediction is for more than US$4 billion and a slight percentage decline in the deficit.

Commerce with European countries reached US$1.6 billion in 1976 in approximate balance. The 1977 prediction is for an increase to US$1.7 billion.

Industrial goods dominate Taiwan exports. Through November, the 1976 breakdown was in­dustrial products, 87.4 per cent; processed agricul­tural products, 7.5 per cent; and agricultural products, 5.1 per cent.

Raw materials make up the bulk of imports - 62.9 per cent in 1976 through November. Capital goods stood at 30.9 per cent and consumer goods at 6.2 per cent.

Economists were cautious about predictions for 1977. With ample rice, Taiwan could live without exports - but not well. The price of oil and the state of the world economy will be major factors in determining how Taiwan does this year.

The December forecasts were for 1977 growth of 8.5 per cent. That could be far too low, as were the 1976 estimates. It also could be too high if the United States should slip back into the recession.

Premier Chiang Ching-kuo has pledged the government to economic policies supporting "growth with stability." Although some indus­trialists and businessmen complained, these policies were remarkably successful in 1976. Growth was modest but more than sufficient. The money supply was held in check and inflation kept under control.

From January through October of 1976, retail prices rose by only .022 per cent. The increase for wholesale prices was .036 per cent in the same period. This was one of the best records of combatting inflation in the world. Only West Germany had comparable economic stability in 1976.

Money supply declined from June to July of 1976 and as of October still had not climbed back to the level of January. The index (1971=100) stood at 315.4 in January of 1976 and at 302.5 in October.

The Central Bank lowered interest rates as of the end of October, 1976. The rate for secured loans was cut from 12 per cent to 11.25 per cent and that for temporary accommodations from 14 per cent to 13.25 per cent. The rediscount rate was lowered from 10.75 per cent to 10 per cent.

For deposits, the interest on time deposits was reduced from 7.5 per cent to 7 per cent on a per month basis and from 7 per cent to 6.5 per cent for demand deposits. The one-year deposit rate was lowered from 12 per cent to 11.25 per cent.

Savings stood at about US$6,300 million at the end of 1976 and net foreign assets at ap­proximately US$2,700 million. Government in­ come was sufficient to keep the budget balanced despite the cost of the Ten Basic Construction Projects and the necessity of allocating more than 40 per cent of income to defense expenditures.

Foreign trade equates to more than 90 per cent of the Taiwan gross national product. Since this makes the economy vulnerable to world economic fluctuations, Sun Yun-suan, the minister of economic affairs, said that the Republic of China must be able to foresee international changes and prepare for them.

An industrial economy has to make frequent adjustments in the rate of production, he said. "During a business boom, it must keep innovating and progressing, while it must be able to adapt to ad verse change during slack times."

Taiwan has made considerable progress in economic flexibility since recession struck in 1973. At the time, the government had no choice except to raise rates and prices drastically. Premier Chiang pledged that this would be a one-time boost, and the government has been able to keep its word.

The Republic of China has another obligatory challenge which is often overlooked. This is to keep ahead of the Chinese Communists: to demon­strate beyond doubt that free enterprise is more successful than statism, that democracy is more efficient than tyranny.

The record shows that the 16 million people of Taiwan have a per capita income which is three to four times that of the 900 million people of the Chinese mainland. In terms of the standard of living, the difference between the US$150 to $200 of the mainland and the nearly US$800 million of Taiwan is much greater than that between the level of Taiwan and that of Japan or the United States.

People of free China have already achieved the good life. Most of the people of the mainland are living at the subsistence level. The trade contrast is especially revealing. In several recent years, including 1976, the 16 million people of Taiwan, living in an area of 14,000 square miles, have had a larger volume of foreign commerce than the 900 million people of the mainland, who have the resources of a vast area of 3.7 million square miles.

Taiwan has economic problems. It does not have continental clout. Its resources are limited. Its domestic market does not provide the domestic nucleus for big scale economic development.

But freedom and enterprise have wrought a success story that is second to none in the world during the last quarter of a century. The auguries of 1977 favor a continuation of the free Chinese climb to ranking status among the world's developed economies.

Total foreign and overseas Chinese investment passed the US$1,500 million mark in 1976. This makes Taiwan one of the world's most desirable places for the entrepreneur seeking a factory location and a profit.

But the capitalist taking advantage of low cost wages and other incentives has returned his gain to the Republic of China many times over.

Large-scale foreign and overseas Chinese investment began in 1960.

At that time, Taiwan was an undeveloped land hoping to qualify for developing status. The investor coming from abroad brought money, machinery, technical skills and managerial know-how.

Domestic industrialists and businessmen learned from him. They also became his subcontractors and suppliers. They learned about quality control and cost accounting. They became aware of the importance of quality control. They came to realize the necessity for market research.

The Republic of China has outgrown the need for labor-intensive investment. Capitalists are now asked to bring new and sophisticated technologies. The shoestring entrepreneur is no longer needed. The capital-intensive investor is welcome.

Investors from abroad first came to Taiwan in 1952. In that year, there were five overseas Chinese investments capitalized at a mere US$1.4 million. The first foreigners - two of them­ - arrived in 1953. They brought US$2 million. Twelve overseas Chinese added another US$1.6 million.

The US$100 million mark was surpassed in 1969, when 111 foreigners and 90 overseas Chinese put US$109 million into the economy. Volume was US$139 million in 1970 and US$163 million in 1971. The next year saw a decline to US$126 million, but 1973 set an all-time record of US$249 million, of which nearly US$194 million came from foreigners in 150 investments. More than 200 overseas Chinese supplied US$55 million.

Even in recession-afflicted 1974, investment stood at US$189 million in 168 cases. The sharp decline to US$118 million in 1975 was attributable to recession after-effects. Recovery ensued in 1976 with a total of about US$150 million. Today's tendency is toward fewer investments but with larger amounts of capital per case.

From 1953 through June of 1976, the government approved 2,237 investments involving more than US$1,451 million.

In the project count, overseas Chinese led by a wide margin: they had 1,258 projects capitalized at US$424.1 million. Foreigners had only 979 investments but the capitalization amounted to more than US$1,000 million.

Most foreign investment initially came from the United States and Japan. In recent years Europeans have made sizable contributions of capital.

As of mid-1976, the Japanese count of com­panies with Taiwan investments stood at 604, followed by 258 from the United States and 117 from other countries. The United States led in capitalization at US$479 million, followed by Europe and other areas at US$312 million and Japan at US$235 million.

The average investment is US$1 million. Euro­peans have made the biggest investments in terms of capital. Americans are second and Japanese third.

The favorite category of overseas investors is electrical machinery apparatus, especially home entertainment products. As of June, 1976, there were 246 companies with capitalization of US$448 million.

Investments exceeding US$100 million have been made by 122 companies in the chemical industry, by 125 companies in basic metals and by 80 companies of the machinery industry.

A sizable amount of the financing has come from U.S. Export-Import Bank and U.S. private bank loans. Credit extended to public and private industries reached US$974 million at the end of 1975. The eight American banks in Taipei have been strong supporters of their country's invest­ment in the Republic of China.

Investors receive tax exemptions and other benefits under the Statute for Encouragement of Investment enacted in 1960 and subsequently amended. Profits may be repatriated at a rate of 100 per cent. Capital may be repatriated at a rate of 15 per cent annually beginning two years after the start of production.

The incentives have not reduced government revenues but have tended to increase them. In 1972, for example, foreign investments returned profits of NT$4.4 billion, of which 57.84 per cent was exempted from the business tax. But NT$580 million in taxes was paid on the re­mainder.

In 1973, foreign investors had 53.78 per cent of profits which were tax-exempt but paid NT$970 million in taxes on the remainder. In 1974, foreign companies paid NT$2.13 billion in business taxes, and this amounted to 26.53 per cent of total collections.

Foreign investors also pay customs levies and other taxes. Their exemptions decrease with the years, although their earnings are protected by a tax ceiling.

As of the end of 1974, investors from abroad were employing nearly 250,000 workers.

Lawrence Lu, director of the Industrial Develop­ment and Investment Center, has credited foreign investment with overcoming capital shortages, promoting capital formation, creating employment opportunities, increasing domestic consumption, training skilled workers, raising pro­duction technology, improving industrial organizations, expanding markets, augmenting foreign exchange, developing tax resources and stimulating economic growth.

Investors agree that they do not come to Taiwan for any single reason, but for the overall favorable economic environment.

They are especially enthusiastic about Taiwan's workers, who are credited with applying them­ selves with eagerness and loyalty. Modest wages are less important in electronics than the nimble fingers and sharp minds of the girl workers who dominate assembly lines.

Managerial and white collar skills are also important to the investor from overseas.

The foreign banks operating in Taiwan say that their local staffs are the best in Asia - and that includes Japan. All of those recruited for banking and managerial posts are graduates of four-year colleges or universities.

Both overseas Chinese and foreign investors also cite the friendliness and cooperation of the government and people. The investment law is not a piece of paper; its promises have been kept.

Owners and managers who come to Taiwan to live find themselves in one of the world's most stable societies. They have all the amenities they would enjoy at home, including excellent foreign schools.

As one American said, "Taiwan is a great place to live in as well as to invest in." The nearly 400 members of the American Chamber of Commerce attest to the truth of this.

Establishment of Taiwan's first export processing zone was held up for a long time out of fear that products would somehow seep into the domestic economy and destroy local business and industry.

If the faint of heart had prevailed, the Republic of China would not have embarked upon an innovative experiment that produces about 9 per cent of its exports.

Investment of more than US$200 million would have gone elsewhere. Nearly 80,000 workers wouldn't have jobs.

The export processing zone concept is simple. Raw materials and components enter the zones freely. These are processed by local workers and exported.

Zone manufacturers may buy from the domes­tic market but nominally may not sell in it. So they may contribute to the support of domestic producers but do not compete with them - at least not directly. Exceptions may be allowed for the domestic sale of products which are not made in Taiwan. In such cases, duty is paid when the goods enter the local market.

The first zone was opened at Kaohsiung, the southern port city and center of heavy industry, in December of 1966. The Nantze zone nearby and the Tantze zone at Taichung were opened subsequent1y.

For the 10 years, exports have exceeded im­ports by nearly 2 to 1: US$2,486 million in exports and US$1,543 million in imports.

The government has gained from the foreign exchange earned. The economy has profited from the know-how and advanced skills brought to Taiwan by factory owners. People have received employment and learned new techniques. Managerial talent has been trained.

More than 500 government, business and civic leaders attended the 10th birthday party of the Kaohsiung Export Processing Zone. Awards were presented to outstanding factories of the three zones.

EPZ exports totaled about US$700 million last year, close to 9 per cent of the total. This was a substantial increase over the US$458.9 million of 1975.

The Kaohsiung zone is fully populated with 139 factories of the 268 total for all three zones. Space is still available at Nantze and Tantze.

Standard factory buildings are provided by the government together with utilities and trans­portation and communication facilities. Investors are allowed to build their own factory buildings rather than buy the government structures.

The zones are under a single Export Processing Zone Administration and are largely self-contained in terms of business operations. Red tape is reduced to a minimum. Banking and government services are available on the spot.

Countries all over the world have sent representatives to study free China's EPZs with a view to establishing similar zones. Some have done so.

Businessmen and tourists also have shown interest in the zones. Visitors are welcome, and some 210,000 have signed zone guest books in the last decade.

Many early plants and investments were rela­tively small. Now the tendency is toward larger outlays of capital, more sophisticated technology and decreased reliance on low cost labor.

Grundig of West Germany, one of the world's biggest makers of electronic products, is planning a US$10 million investment to make small televi­sion sets. More than half of EPZ capital comes from foreigners.

The government is supporting the phasing out of new investments which are labor-intensive. Wages are rising, economists point out, and Taiwan will not be able to compete with cheaper labor markets.

Future development of the zones will be along these lines:

- Approval of new investment on a selective basis that favors capital-intensive factories and those which perform more than simple assembly functions.

- Modernization of equipment by existing factories.

- Import of higher quality raw materials and components to make higher quality products.

- Improvement of productive and managerial skills.

- Augmented quality control.

- Provision of investment incentives sufficient to attract foreign and overseas Chinese capitalists.

- Encouragement of raw material and parts purchases from the domestic economy.

- Steps toward increased automation.

Products of the export zones go to more than 100 countries of the world. Some investors came to KEPZ and liked it so well that they have undertaken other Taiwan operations. Philips of the Netherlands would be an example of this.

Because of the labor-intensive aspect of invest­ment, most of the workers in the zones are girls with a junior high school education. Kaohsiung and Taichung have larger reservoirs of labor. Girls can live at home, contribute to the family budget and begin to save for marriage.

The variety of products runs a gamut from complex electronic components to artificial flow­ers.

Despite the obvious temptation to smuggle goods out of the zones for sale in the Taiwan market, such cases are rare.

Police controls are not oppressive. Plant owners are as eager as the government to see that the rules are respected. Most workers are honest. Those few who might be inclined to try smuggling are aware that they risk the loss of their job for a small profit.

A few domestic industrialists still oppose the zones. They think EPZ plants dominate markets which otherwise could be penetrated by domestic industries.

Most of the Taiwan business community has been won over. It welcomes the advanced technology that the zones have attracted. Domestic manufacturers have raised the level of their own output in consequence of what they have learned from zone investors.

When Nantze and Tantze are fully populated, a fourth EPZ will no doubt be proposed and approved. The concept works. As pioneered by the free Chinese government in cooperation with business and industry, the EPZ idea has proved itself with profits for entrepreneurs and benefits for all.

Ten Major Construction Projects now under way are preparing the Taiwan infrastructure to support a developed economy in the 1980s.

When Chiang Ching-kuo took over the premiership of the Republic of China in 1972, he recognized that economic growth had overtaken the country's basic structure.

Transportation bottlenecks were found at harbors and airports. Railroad and highway carrying capacity was insufficient.

Work on the North-South Freeway had already begun. This became the core project of the Big Ten, all of which were under way by 1975 and all of which will be in use by 1979.

Six of the 10 are concerned with transportation: the freeway, mainline railroad electrification, a new rail line on the east coast, two ports (Taichung and Suao) and the Taoyuan International Airport to serve Taipei.

The other four involve basic industries: nuclear power, steel, shipbuilding and petrochemicals.

Cost of the Ten Projects is expected to exceed US$6,500 million. Nearly all of this will be recovered from increased revenues accruing to the government. The freeway, for example, will pay for itself in 20 years.

One project was completed and a second partially completed in 1976: the Kaohsiung shipyard and the first phase of Taichung port on the west central coast.

One 450,000-ton supertanker is under con­struction and work on a second will be started this year at the big shipyard, which became operative at a time of recession in the building of tankers.

To keep busy, the yard will take on the construction of smaller freighters and other vessels up to its capacity of 1.5 million tons annually. The China Shipbuilding Corporation also has repair capacity of 2.5 million tons annually.

CSBC will become state-owned and operated this year. Doubling of its capitalization from US$58 million to US$116 million will reduce the corporation's heavy debt service burden. Better terms can be made available to Taiwan-based shipping companies for the modernization of their fleets.

Taichung port was opened to shipping October 31 as a 90th birthday salute to the late President Chiang Kai-shek. Initial cargo handling capacity is 2.8 million metric tons annually. Completion of the second stage will raise this to 7 million tons in October of 1979. A further 5 million tons will be added by 1982.

Taichung is approximately halfway between the big international ports of Kaohsiung in the southwest and Keelung (the harbor for Taipei) in the northeast. It will serve the needs of newly established industries in west central Taiwan. A projected industrial city around the port is expected to have a population of half a million be­ fore the end of the century.

Retired servicemen overcame many obstacles in the Taichung construction. Sea and wind make work difficult. Silting is heavy along a coastline that formerly accommodated nothing larger than fishing boats.

The second stage calls for the building of an outer breakwater of 506 meters and 10 wharves totaling 2,400 meters. Fifteen million cubic meters of material will be dredged from the channel.

At the start of 1977, this was the status of the other eight projects:

- North-South Freeway: about 70 per cent complete. This expressway of from four to eight lanes will be 235 miles long. The drive from Keelung in the north to Kaohsiung in the south by way of Taipei, Taichung, Tainan and other main cities of the western plain will take only about four hours compared with more than ten on the present overcrowded and narrow highway.

Parts of the road have already been opened, including that from Keelung to Taipei and beyond. Work is well along on flyovers that will take through traffic across the Keelung and Tamsui rivers just below Yuanshan, the hill on which the famed Grand Hotel is situated.

- Railroad electrification: about 55 per cent complete. Running time from Keelung to Kao­hsiung will be reduced by a third and carrying capacity increased by the same amount. Energy consumption will be cut by about a half and pollution virtually eliminated.

Eleven substations will convey power through 716 miles of overhead transmission lines serving the 94 new electric locomotives. Electrification equipment is coming from the United States, Great Britain and Sweden. Foreign bank loans are helping finance the project.

Suao-Hualien railroad: 30 per cent complete and 10 per cent behind schedule because of the extremely rugged and rocky terrain. The east coast is Taiwan's "Alaska" - remote, thinly populated and geographically isolated. Suao is the southern terminus of the Ilan plain on the northeast coast. Hualien is at the northern end of the narrow east coast valley and is already connected with Taitung, the island's southeaster most city, by narrow gauge rail line.

So the long dreamed-of railroad will link Taipei and the industrialized west coast with the east and speed the development of mineral, forestry and agricultural resources there.

The Hualien-Taitung line will be rebuilt to accommodate broad gauge rolling stock. Subse­quently, in the 1980s, a railroad will be built from Taitung to Kaohsiung through the southern mountains to give Taiwan an around-the-island system.

Although the track required for the Suao-Hualien stretch measures only 73 miles, the obsta­cles of mountains, gorges, mountain streams and boulders are formidable. Tunnels required will total 18.6 miles. Three major bridges will have total length of 3.7 miles. Big John excavators counted on for most of the tunneling have broken down under the harsh conditions.

Engineers are persevering, however, and retired servicemen working with picks and shovels are slowly taming the mountains. The east coast railway may be behind schedule but it will be completed to serve the economic requirements of the 1980s.

- Taoyuan International Airport: 45 per cent complete. With the opening set for 1979, capacity will be 5 million passengers and 200,000 metric tons of freight. Subsequent construction will increase this to 20 million passengers and 1 million tons of freight by the year 2000. The North-South Freeway and a feeder road will bring the airport within half of an hour of Taipei, which is 19 miles to the northeast.

- Suao port: 40 per cent complete. This former fishing port will relieve some of the con­gestion at Taipei's harbor of Keelung when first phase construction is completed in 1979. Capacity will reach 6.5 million metric tons of cargo by 1982.

- Integrated steel mill at Kaohsiung: 70 per cent complete. Capacity will be 1.5 million metric tons when the first phase is completed in Novem­ber this year. Expansions will raise capacity to 2.7 million tons in 1980 and 6 million tons in 1980 and 6 million tons in 1983. Contracts for iron ore already have been signed with Australian companies.

- Nuclear power plants: first plant No. 1 generator, 90 per cent complete; first plant, No.2 generator, 60 per cent complete; second plant, Nos. 1 and 2 generators, 12 per cent complete. The first generator will come into operation this year and the second in 1978. The second plant will be completed in 1982 and the third in 1984. Total installed nuclear generating capacity of the three will be 5,140,000 kilowatts.

- Petrochemical complex: basic materials, 99 per cent complete; xylene, 45 per cent; acrylonitrile expansion, 49 per cent; caprolactam No. 1 plant, 96 per cent. Three naphtha crackers are turning out basic feedstock for industries making intermediates. Output of raw materials will reach 1.4 million metric tons by the end of 1978.

Except for the Suao-Hualien railroad, projects are on time or ahead of schedule. As Premier Chiang told the Legislative Yuan, "Our greatest concern is whether the Ten Major Construction Projects are going on smoothly, because these projects provide the ladder by which our economy will attain a new level."

Economic planning for Taiwan dates back to the early 1950s. Six four-year plans lifted the island province of the Republic of China into the ranks of Asia's fastest developing lands.

Then the Sixth Four-Year Economic Development Plan bumped into the worldwide economic recession of the early 1970s. Goals were knocked into a cocked hat; they could not possibly be attained.

Premier Chiang Ching-kuo decided in 1975 that it was time for a new look in planning - and that a somewhat longer period was required to smooth out economic ups and downs.

The Economic Planning Council of the Execu­tive Yuan - supplemented by economists from the nation's leading academic institutions - worked out the First Six-Year Economic Development Plan which will run from 1976 through 1981.

Born of the recession, the initial plan was too conservative. As 1976 progressed, it was revised and finally given Executive Yuan (Cabinet) ap­proval in October. Further revisions can be expected in the light of changing conditions. The recession of 1973-75 taught free Chinese economic planners not to be sure of anything more than death and taxes.

These are the major targets of the plan as the economy enters the difficult year of 1977:

- Growth of 7.5 per cent annually in the gross national product. This will mean a 1981 GNP of US$22.25 million, a gain of one and a half times in the six-year period.

- Increase of real per capita income from US$700 in 1975 to US$1,400 in 1981.

As the economy moves from developing to developed rank, there will be many changes in relative values. Primary industry will become less important and secondary and tertiary industry more so.

The share of agriculture in the GNP will fall from 14 to 10.5 per cent while industry is rising from 43.7 to 47.5 per cent. Heavy and chemical industry will advance from 12.9 to 17.5 per cent while light industry is falling slightly - from 22.1 to 21.6 per cent.

Services will hold their own at roughly 42 per cent. Power capacity will be raised from 5.3 million to more than 9.6 million kilowatt hours. Energy self-sufficiency will be boosted from 31 to 37 per cent and food sufficiency from 84.6 to 87.7 per cent.

Export of commodities and products will increase by 12.2 per cent annually compared with an import rise of 10.6 per cent. At current prices, exports will climb from US$5,300 million in 1975 to US$16,500 million in 1981. Imports will advance from US$5,950 million to US$15,500 million in the same period. The increase in two-way trade will be nearly three times.

As the economy moves toward emphasis on industrial production and services, the employment picture will change. The percentage of agricultural workers in the employed population will drop from 29.9 to 24.2. Industrial workers will rise from 35.3 to 36.6 per cent. The percentage of workers in the total population will climb from 34.3 to 36.7 per cent. This will mean an employed population of 6,576,000 in 1981 compared with the 5,521,000 of 1975.

The living standard will continue to advance steadily through the remaining five years of the first six-year plan. These are some of the forecasts:

- Gain of 23.3 per cent in per capita retail spending. The amount will rise from NT$19, 771 to NT$24,350.

- Increase in daily calories from 2,729 to 2,774 and in protein from 74 to 78.4 grams.

- Living space of 14.5 square meters per person, up from 12.3 square meters.

- Running water for 68.5 per cent of homes, compared with 49 per cent in 1975. Ninety per cent of Taipei City households will have tap water.

- 185 telephones per 1,000 people, up from 69.

- 168 black and white television sets per 1,000 people, up from 127.

- 112 color television sets per 1,000 people, up from 29.

- Elementary school attendance by 99.6 per cent of children aged 6 to 12, up from 99.3 per cent.

Agriculture will grow by 2.5 per cent, industry by 9 per cent and services by 7.4 per cent.

One troublesome statistic may be population growth. It is set at 1.8 per cent, the same as that in 1975. But 1976 was the Year of the Dragon, considered by the superstitious to be an auspicious occasion for having babies, and the 1976 population increase climbed back over the 2 per cent mark. Family planners are undertaking a three-year program to get the figure back down to 1.8 per cent.

Economic stability is expected in the six-year period with retail prices of no more than 5 per cent annually.

The tax burden will be shifted from the in­ direct to the direct spectrum. Direct taxes will provide 29.4 per cent of the government's revenues in 1981 compared with 22.4 per cent in 1975. Indirect taxes will decline from 77.6 to 70.6 per cent.

Agricultural emphases of the six-year plan will be placed on farm mechanization, land consolidation, slope land development and overall improve­ment of land resources. Higher value crops will be developed for export even as rice sufficiency is maintained.

Industrial stress is planned for research and development, quality control and the encourage­ment of sophisticated capital-intensive manufac­turing. Production of more machinery parts and components will raise the level of Taiwan's second biggest export industry.

Public welfare will not be neglected. Social security will be augmented. Unemployment in­surance is under study. Workers will receive more fringe benefits. Industrial safety will be promoted.

Construction of public housing is being spurred in Taipei and other cities. Sewer systems will be expanded and new ones built. Public health and recreation facilities will be increased and expanded.

Planners stand ready to contract or expand the six-year program in accordance with economic realities.

The government recognizes that as an island with an economy based on trade, Taiwan is especially susceptible to the ups and downs of the international marketplace. The recession of the early 1970s hit the Republic of China hard. Drastic measures were necessary to return the economy to an even keel and assure a resumption of modest growth.

Planning helped, however, even during the darkest days of 1974. The Sixth Four-Year Eco­nomic Development Plan was overtaken by new circumstances but was not a failure. People and industry were accustomed to planning and that helped them adjust and accommodate.

The six-year targets are neither high nor low. They are set in keeping with Premier Chiang's directives to seek "growth with stability."

"National economic construction," the Premier has said, "is a long-range, sustained development, which should not be judged on the basis of short­ range gains or losses. What looks beneficial today may be harmful tomorrow. What appears unfavorable today might become beneficial in the long run. The benefit of our concern should be the benefit of all, and the reverses we suffer should be shared by all. We must not become so impatient as to take immature measures for quick results. Nor shall we take any measures to kill the goose that lays the golden eggs.

"We shall seek development with stability and maintain stability during development."

The middle ground of the six-year plan is intended to provide the foundation for such an economic structure.