China has always been an agricultural country. But the island province of Taiwan has become the first exception to the rule as a result of the four four-year economic development plans carried out since 1953. In that year, agriculture accounted for 39.4 per cent of the net domestic product and industry for 20.9 per cent. By 1963, agriculture stood at 26.7 per cent and industry had forged into the lead at 27.3 per cent. Figures for 1966 were industry 26.8 per cent and agriculture 25.6 per cent.
Exports reflect a similar metamorphosis. The 1953 composition was 79.6 per cent for processed farm products, 13.1 per cent for farm products, 6.4 per cent for industrial products, and 0.9 per cent for others. In 1966, industrial products stood at 49.3 per cent, processed farm products at 25.2 per cent, farm products at 20.7 per cent, and others at 4.8 per cent.
During the first three four-year plan periods, the annual growth rate of manufacturing industry averaged 13.8 per cent. Each year saw the addition of 2,000 manufacturing plants and 16,000 new workers. Most new plants were small. Statistics of the 1961 Industrial and Commercial Census showed that (1) 90 per cent of the manufacturing plants on Taiwan were operated with capitalization of less than NT$5 million (US$125,000), (2) 99 per cent of the manufacturing plants had fewer than 100 employees, and (3) a third of the island's industrial production value came from plants with fewer than 100 employees. Details are given in the accompanying tables.
Because the role of these small-scale enterprises in Taiwan's economic development is so often neglected, government and civic organizations sponsored a public display of the products of small enterprises at the Taipei Institute of Technology June 10-23. The show was officially known as the Small Business Exhibition and was held under the auspices of the Council for International Economic Cooperation and Development, China Productivity and Trade Center, Metal Industries Development Center, and Taiwan Handicraft Promotion Center. Nothing was sold at this first event of its kind in Taiwan. Despite rainy weather, more than 10,000 visitors turned out on the opening day. Great interest was shown by students and those already working in industry.
Economic Importance
Besides the display of products, the exhibition included data, charts, and diagrams defining the scope of small business; the relationships among large, medium, and small industries; the role of small business in economic development; and the structure of small business. These are some interesting figures excerpted from the displays:
—Of the 68,000 manufacturing plants of 1966, 30,858 were small in scale. Of the total, 92 per cent had single ownership.
—Employees of small plants made up 58 per cent of the nation's 1966 employed population.
—Small plants accounted for 35 per cent of the value of industrial production in 1966.
—Small plants consumed 40 per cent of industrial raw materials used in 1966.
A new factory with 100 employees makes the following contributions to the development of the local economy:
*100 dwelling houses
*359 inhabitants
*91 school pupils
*Indirect employment opportunities for 65 persons
*3 retail stores with annual sales of US$331,000
*Bank deposits totaling US$229,000 a year
*National income of US$110,000 a year
Satellite System
Products were displayed in the following categories: (1) machinery, (2) chemicals and cosmetics, (3) sporting goods, (4) food stuffs, (5) textiles, (6) woodenwares, (7) porcelains and handicrafts, (8) plastics and rubber products, (9) stationery, musical instruments and family utensils, (10) metals, (11) electrical appliances and electronic products (12) jade and precious stones, (13) wigs, (14) gloves, and (15) rugs and carpets. Five large enterprises sponsored exhibits in cooperation with their satellite factories. The primary and satellite factory system is new to local entrepreneurs. Many of the large enterprises, especially those financed by private capital, have a history of only 10 years or so. Examples of business relationships between primary and satellite factories can be found in the accompanying table.
Local manufacture of stationery began a few years ago. Exports have been increasing, mostly to Southeast Asia. (File photo)
Paper dresses were among the exhibits. The manufacturer is the Taiwan Handmade Paper Manufacturing Co. Ltd. of Puli in central Taiwan. A sheet of paper measuring 2 feet long by 3 feet wide costs only NT$3 (US7½ cents) and four sheets will be sufficient for an evening dress. The total cost, including lining, will be around NT$100 (US$2.50). The company's daily production is only 1,000 sheets, mostly for export. This soon will be expanded to more than 15,000 sheets.
As more than half the island is covered by forests, Taiwan has many small wood processing plants. For example, the Art House Carved Furniture Co. Ltd. was established at Hsinchu, northern Taiwan, in 1952 as a cottage industry. The shop then had operational funds totaling NT$50,000 (US$1,250) and 30 craftsmen evacuated from the Chinese mainland. For lack of facilities, it remained a cottage industry through 1963. In 1964, Wang Ken-yuan, son of the shop owner, went to Southeast Asia on an inspection trip. After what he saw, Ken-yuan suggested that his father apply for a government subsidy and build a three story modern workshop. Output was increased from a handful of items to some 70. In 1965, domestic sales totaled US$40,500 and exports US$37,500. The amounts last year were US$43,750 domestically and US$50,000 overseas. Most of Art House's 30 craftsmen have become owners of their own shops but work as satellites.
Boats for Vietnam
Boatbuilding is another example of thriving small industry. Of the four boat-builders on the island, the Kuo Sen Enterprise Co. Ltd. is the newest but one of the most successful. Kuo Sen was established in 1949 as a lumber dealer. It started building yachts only in 1965 but has sold 15 for both domestic use and export. A 35-foot yacht is sold at US$15,000, FOB Keelung. In international bidding, Kuo Sen won a contract to supply 76 patrol boats at US$16,338.70 each, CIF, to the U.S. forces in Vietnam. It has delivered 10 boats and the rest will be shipped by next April.
Ten coeds of the College of Chinese Culture wear paper dresses that were made in Taiwan. (File photo)
Government assistance to small enterprises began in September, 1964, when Premier C.K. Yen submitted his administrative report to the Legislative Yuan (parliament). In April of 1965, the Council for International Economic Cooperation and Development sent an inspection team to Japan, the United States, and Europe, and asked for the dispatch to Taiwan of experts from Japan and the United Nations. In February of 1966, CIECD set up a Small Business Working Group.
The Small Business Working Group investigated the operations of 3,000 plants and found that 39 per cent went bankrupt because of cutthroat competition and 24 per cent because of inadequate markets and shortages of operating funds. Besides extending loans, the Working Group has suggested the establishment of (1) export promotion committees, (2) production and marketing cooperatives, (3) demonstration plants, and (4) training programs under the Department of Industrial Education, Taiwan Normal University.
The island province of Taiwan has just stepped from an agricultural into an industrial economy. In view of the achievements of the last decade, free China can be confident that it is now moving from an era of small industry to medium and heavy manufacturing.