Targets of 1973-1974 economic plan revised
Major targets of the sixth Four-Year Economic Development Plan have been revised because of drastic economic and monetary changes internationally and domestically.
Philip C.C. Chang, vice chairman and secretary-general of the Council for International Economic Cooperation and Development, said the four-year plan had been broken down into annual plans.
Addressing the economic affairs committee of the Legislative Yuan, the CIECD official said the nation's economic growth this year is expected to reach 11 per cent instead of the 9.5 per cent average envisioned for the four-year period.
Foreign trade will continue to expand at a rapid pace. "Although we are now buying raw materials at a much higher cost in the wake of the international monetary readjustment, our competitive position has remained strong," Chang said.
Chang predicted exports for 1973 will reach US$4,460 million, accounting for 49.6 per cent of the nation's gross national product. The rate of increase will be 32.7 per cent compared with last year.
Imports will grow even faster, Chang said. He gave the figure at US$3,970 million, or 44.2 per cent of the GNP. The rate of increase will be 36.4 per cent.
There will be a favorable balance of US$490 million, Chang predicted.
His forecast for price rises in 1973 is 6.9 per cent, compared with a 3 per cent annual limit set for the 1973-76 period.
In view of anticipated economic growth, Chang continued, the government will try to hold down private consumption to 49 per cent of the GNP, a single percentage point lower than last year. This will be achieved by means of taxation.
Government investment in heavy industries and the infrastructure will be increased. For the current year, public investment will amount to NT$48,900 million (NT$38=US$1) or 56 per cent of total fixed investments for the year. A total of 103 projects will be initiated or completed.
Increased capital formation will be sought. The goal is NT$5,100 million, or 27.9 per cent of the GNP.
Per capita income will exceed US$1,000 in 1983, Walter H. Fei, secretary-general of the Executive Yuan, said. Per capita income was US$372 in 1972.
Fei said every family will own a TV set and a refrigerator and every 15 persons a car by 1983. Air-conditioners and telephones will be common in rural areas, he added.
At present, every 100 persons own a car and every five families a TV set.
Industry growing at rate of 27 per cent
Taiwan's economy is moving ahead fast with foreign trade and industrial production spearheading the march, a spokesman for the Council for International Economic Cooperation and Development said.
Industrial production grew by 27.6 per cent in the first quarter of this year, he said, compared with 26 per cent last year.
Foreign trade totaled US$1,439 million in the first quarter of 1973, an increase of 31.1 per cent over the corresponding period of last year. This figure is based on customs clearances. The trade exchange settlement figure was US$1,915 million for the quarter.
Construction led the way with a first-quarter gain of 54.8 per cent, followed by manufacturing with 28.8 per cent.
Fastest growing manufacturing industries were electrical machinery apparatus, rubber and plywood. All registered growth of more than 40 per cent.
Public utilities grew 13.3 per cent. There were power shortages in the first quarter of this year.
Mining showed a decline of 0.6 per cent because of falling coal production.
Lack of rain caused a drop of 29.1 per cent in hydroelectric generation in the first three months of 1973. This affected output of steel, carbide and cement industries.
Rapid progress was made in expansion of the infrastructure. The Keelung-Yangmei section of the North-South Freeway is 44.7 per cent complete.
The elevated highway in Keelung is 88.7 per cent complete. Kaohsiung's second harbor entry project stands at 68.6 per cent.
Sharp increases in exports caused rises in the money supply, which stood at NT$65 billion (US$1,710 million) at the end of March, an increase of NT$19 billion (US$500 million) or 41.4 per cent in a year.
Government credit to private enterprises rose by NT$25.6 billion (US$673.7 million) and over seas assets by NT$21.4 billion (US$563 million).
Bank deposits increased by NT$26.4 billion (US$690 million). Government deposits rose by NT$7.4 billion (US$168 million).
U.S. pleased with trade balancing efforts
The Republic of China is "unique" among America's trading partners in helping promote U.S. sales, William N. Morell Jr., economic counselor of the American Embassy, said.
"We remain confident that our payments will be better balanced in the future," he said.
"We are encouraged by the trend toward lower tariffs. However, we believe that if many U.S. commodities are to be sold in Taiwan, there must be a further lowering of the tariff barriers on a selected basis.
"We fully understand, how ever, that a developing country must impose tariffs on certain items to avoid wasteful expenditure of foreign exchange and domestic savings.
"We also wish to express our appreciation for the government's decision on D/A and D/P." This was a reference to the announcement of the Central Bank's Foreign Exchange Department permitting the continued use of Documents against Acceptance (D/A) and Documents against Payment (D/P).
The Republic of China will buy more American products to improve the trade balance, Y.T. Wong, director-general of the Board of Foreign Trade, told the Economic Affairs Committee of the Legislative Yuan.
"We are now making three main efforts to carry out the project. The first is a long-term trade agreement with U.S. grain suppliers, the second is the encouraging of industry to buy American machinery and the third is continued relaxation of import controls."
Wong told the committee that a three-year contract for 5.5 million tons of feed grain worth US$800 million was signed with nine U.S. suppliers.
An American Products Exhibition will be held in Taipei next May.
Speaking on trade with other parts of the world, Wong said the government would:
- Lift export controls; so far, 1,300 items have been decontrolled.
- Organize more trade missions and ask free world nations to send missions here.
- Sign agreements with the Europe Common Market, United States and Canada on textile quotas.
- Encourage export of agricultural, machinery and electrical products.
The trade deficit with Japan will be cut and a trading company organized to develop new markets.
Wong told the lawmakers that in the first three months of this year, trade with the United States was US$448 million - US$311 million in exports and US$137 million in imports.
Wong reported the deficit in Sino-Japanese trade was reduced in the first quarter. Trade totaled US$401 million with a deficit of US$113 million compared with US$121 in the same period last year.
Textile exports continuing to grow
Textile exports are expected to total US$1.2 billion this year, a hefty 20 per cent increase over last year, a source close to the Board of Foreign Trade said.
He based his prediction on the rapid growth in the textile exports in the first quarter of this year.
Taiwan exported US$269 million worth of textile products in the first three months of 1973.
US$1,023 million worth of textile products was exported last year, accounting for a third of export trade.
Increase in the textile exports was attributed to the introduction of new and better products.
"A large number of new products have been added and we are selling products of higher quality to countries which have given us export quotas," the source said.
At least 10 new major textile markets have been added this year. They bought US$100 million worth of textiles from Taiwan in the first three months of this year.
"They purchased 40 per cent of our total exports for the quarter and we are sure they will continue to buy from us," the source said.
Market diversification is "of great significance," he said, be cause Taiwan has relied too heavily on the United States and the European Common Market.
The United States remained Taiwan's top customer in the first quarter, buying over US$80 million worth of textiles.
West Germany led the Common Market nations with US$14.5 million, followed by Great Britain with US$12.3 million.
Among the 10 new major markets are Ivory Coast and the Central African Republic. Others include Hongkong, Japan, Australia, Canada, Indonesia and South Vietnam.
Monetary Fund cautions against interest cuts
Officials of the International Monetary Fund cautioned the government against further reduction of interest rates.
Although reductions help in curbing inflow of short-term capital from abroad, the IMF officials said in a report, they tend to have "unwanted effects" in the present situation of rapidly rising prices.
"Given the relatively high interest rates and very low price increases during the last decade or so," the report pointed out, "the real rate of interest, that is, the real rate of return on savings has generally remained rather high.
"In 1972 this real rate of return has dropped sharply to slightly over 1 per cent both as a result of reduction in nominal interest rates and increasing price rises. In the early months of this year, this real interest rate may well have become negative."
This development, the IMF officials warned, "is likely to slow down the decline in the income velocity of money, if not actually raise it."
Such a development "clearly would complicate very much the pursuit of financial policies geared to reducing the rates of price increases" and "tend to erode savings habits which would have adverse effects on the financial climate for capital formation and economic development.
"We would like to urge caution as regards further reductions in nominal interest rates as long as present circumstances prevail."
The IMF mission projected another large balance of payments surplus in the Republic of China this year.
"This surplus may well generate an increase in foreign assets of the order of some NT$20 billion or only slightly less than was experienced in 1972."
IMF warned that "the rapid increases in domestic prices may for various behavioral reasons gain a momentum of their own."
"Such developments would warrant," the report said, "a further strengthening of both demand and supply policies."
Commenting on free China's efforts to diversify its external trade, the IMF mission said this may be legitimate and even necessary.
However, the report continued, "It is not necessarily in the interest of anyone country, nor of the world economy as a whole, to endeavor to achieve balancing of trade on a strictly bilateral basis."
The government will invest NT$58,200,000,000 or approximately US$1,532,000,000 in key industries during the four years beginning July 1.
Ministry of economic Affairs sources said the lion's share will go into development of the power and petroleum industries. Power industry will get 56 per cent of the total and petroleum 30 per cent.
In power, the MOEA sources said, the Taiwan Power Company will continue to build hydroelectric and thermal generating facilities. A sizable amount of the money will go into nuclear power plants. Power transmission facilities will be expanded.
Development of petroleum will emphasize exploration for oil and gas. Refining and storage will be further improved.
Shipbuilding and machinery industries will receive high priority. The metal industry, especially copper and aluminum, will be expanded.
The development of the petrochemical industry will stress production of intermediates.
Output of low-cost fertilizers will be increased.
Ford Lio Ho opens its assembly plant
Economic Affairs Minister Y.S. Sun expressed hope that the Ford Lio Ho Motor Company will supply quality products at reasonable prices.
He called on the company to promote the sales of its products abroad "to start a new era in the development of our automobile industry."
The minister spoke at dedication of Ford Lio Ho's assembly plant in Chungli.
U.S. Ambassador Walter H. McConaughy said the introduction of new products and techniques by Ford Lio Ho would "stimulate the entire automotive industry as well as local component suppliers."
"I commend Ford's commitment to share its expertise in management know-how with its suppliers, dealer organizations and service workshops, and its intention to make expansive use of and develop local managerial and technical talents," he added.
Rodney W. Markeley Jr., Ford vice president, said the entry of his company into the Taiwan market "is part of our overall move to share fully in the future growth and prosperity of the entire Asia-Pacific region."
Jointly owned by the Ford Motor Company of Detroit and the Lio Ho Industrial Corporation of Taiwan, the assembly plant is expected to turn out 8,000 cars and 2,000 engines a year for domestic consumption as well as export.
H.P. Liu, board chairman, presided over the ceremonies.
Ford made the single largest U.S. investment in Taiwan last November 21. It invested US$6.3 million to purchase controlling interest in Lio Ho and extended a US$16 million loan for expansion of production facilities at Chungli.
More than 100 Cortinas have come off the assembly line. The price is NT$159,000.
US$56 million invested in January-April period
Eighty-six investment applications from overseas Chinese and foreign investors were approved during the first four months of this year.
The Investment Screening Committee of the Ministry of Economic Affairs said the projects involve US$56,355,000.
Fifty-two applications amounting to US$13,260,000 came from overseas Chinese.
Foreign investments total 34 with capital of US$43,095,000.
Seven of the foreign applications were from Americans, 16 from Japanese, 3 from Europeans and 8 from investors of other areas.
The committee said US$23,706,000 will be channeled into the machinery and precision instruments industries.
The electrical apparatus industry will absorb US$13,977,000 and service industries US$3,764,000.
Taiwan is becoming "choosy" in accepting external investments, a government source said.
He said the Ministry of Economic Affairs will screen applications more strictly.
For over a decade Taiwan has welcomed most bona fide investors. Tax holidays are offered. Profits may be freely remitted.
"We continue to welcome foreign investment, but not indiscriminately," the source said.
Emphasis is now placed on the introduction of new technical know-how, especially skills needed in sophisticated industries.
"Such investment will continue to get a warm response," the source said.
MOEA will discourage small-scale external investment.
"If you want to set up a processing plant or simple assembly operation, the chances are you are not going to get approval from MOEA," the source said.
The cumulative total of external investment has surpassed US$800 million. Most of the foreign capital flowed into light industries.
Only a few cases involve heavy industries. Among these are a joint shipbuilding venture by Liberian and U.S. companies and the Ford-Lio Ho auto plant.
Much foreign investment has gone into electronics.
"We encouraged development of the electronic industry but not any more," the source said.
He said the Republic of China has developed high productive skills in the electrical apparatus industry and wants to move on to other sophisticated lines.
The Executive Yuan reiterated that the government policy on foreign investment will not discriminate against countries which do not have diplomatic relations with the Republic of China.
The major points of the announcement are:
- No discrimination in taxes or trade.
- Investors will be protected against any manifestations of hostility.
- No restrictions on imports of products and materials from countries with which the Republic of China has no diplomatic relations. Exports may go to all except Communist countries.
- Welcome to foreign experts and specialists who are friendly to this country.
The Economic Ministry announced temporary suspension in changing foreign investment loans into New Taiwan currency.
However, a spokesman said the government will give favorable consideration if loans are used to increase investment.
Kaohsiung will build 360,000-ton tankers
A US$27.5 million shipyard will be established at Kaohsiung to launch Taiwan's first 360,000-ton tanker in 1975. The China Shipbuilding Corporation will come into existence in June.
Four foreign companies will subscribe 45 per cent of the capital. They are the Gatx Oswego Corporation, Consolidated Navigation Corporation and Camerona Navigation Corporation of Liberia and the Associated Maritime Industries Inc. of the United States.
The government and local entrepreneurs will put up the remaining 55 per cent.
Taiwan began to build 100,000-ton tankers in the 1960s. Under the new project, the China Shipbuilding Corporation will build a giant shipyard to construct the supertankers and repair big ships.
The yard will build 1.44 million tons of ships and repair 2.5 million tons annually. Orders for ten 360,000-ton tankers are in hand.
Kaohsiung port will be able to handle more than 25 million tons of cargo annually by 1976.
Chang Lien-jung, deputy director of the Kaohsiung Harbor Administration, said government investment for expansion will total more than NT$3 billion in the next four years.
The southern seaport handled some 1,400,000 tons of goods in 1952. Last year's volume was 19,400,000 tons. In the same period, the number of ships calling at the port rose from 2,515 to 12,068.
Kaohsiung is having a congestion problem because of the rapid increase in exports and imports.
More than 3,000,000 metric tons of grains will arrive at Kaohsiung this year.
Chang said the problem will be solved by making efficient use of facilities. However, the long-term solution lies in further expansion of the port.
He said the Second Container Shipment Center will be completed by the end of June. The NT$700 million project is expected to relieve congestion to some extent. A third container shipment center will be built at Kaohsiung.
Construction of the second harbor entrance is in the sixth year of the required eight years.
Kaohsiung is building a commercial port. So far 14 deepwater wharves with a total length of 2,847 meters have been completed.
Shore facilities, especially storage space, will be greatly expanded in the next four years.
Keelung harbor in the north cannot be further expanded due to geographical limitations. The new port at Wuchi near Taichung will not be in use until 1976.