I. Progress of Four-year Program
As is generally known, the Industrial Development Commission in one of the organizations under the Economic Stabilization Board of the Executive Yuan responsible for revising and carrying out numerous projects pertaining to industrial development as set forth in the Four-year Economic Program whose formulation preceded the establishment of the Economic Stabilization Board. But, in as much as it was drafted in haste, it is inevitable that some of its contents should be found to differ from what is now known to all concerned. With a view to making it more complete, the Commission, shortly after its establishment, invited a number of specialists to conduct a separate, detailed survey into departments of their own endeavor as embodied in the program and make any revision that they deemed pertinent. This revised draft was submitted to the various agencies concerned with the request that they offer further necessary revisions. In the form as we know it today, the revised Industrial Development Program may be divided into the following four main categories:
A. Mining, B. Manufacturing, C. Power, D. Communications and Transport.
A, B and D are further classified into the following divisions:
A. Mining: 1. Coal, 2. Gold & Copper, 3. Salt, 4. Sulphur & Pyrite.
B. Manufacturing: 1. Food, 2. Sugar, 3.Textiles, 4. Lumber, 5. Paper, 6.
Chemicals, 7. Fertilizer, 8. Oils & Fats, 9. Petroleum, 10, Cement &
Ceramics, 11. Iron & Steel, 12. Aluminum, 13. Machinery, 14. Electrical
Engineering, 15. Shipping.
D. Communications & Transport: 1. Railway, 2. Highway, 3. Shipping, 4.
Harbor, 5. Tele-communications.
The general policies to be pursued by each industry have long been disclosed by newspapers published on the island.
It is necessary to study the overall economic advantage that may be derived whenever the development of any single industry comes up for consideration. The possibility of developing an industry should be explored in the light of a number of inherent factors such as capital, technique, raw materials and profit together with its being properly adjusted to other industries before any decision can be reached on the important measures we are likely to adopt, the purpose being the balancing of international payments as well as the fulfillment of the requirements of national defense and the community at large.
Beginning from 1951, industries in Taiwan have advanced gradually from the so-called restoration stage to their development stage. However, it is a patent fact that any development we know of in the past falls short of a sort of detailed planning which should take into consideration the overall picture that presented itself at the time when such a development was being made. On the contrary, it was done by a few industries merely for their own interest. This state of affairs has been remedied somewhat by the Commission which undertook to look into their activities and offer them suggestions for their proper development in the order of importance and priority. It is generally agreed that the prerequisites of any industrial development are power and transportation. For the former, much has been done during the year in vigorously pushing a number of expansion projects to complete which many years will be required. With regard to the latter, substantial improvements have been effected during the last few years. In the manufacturing field, the most important item is the fertilizer industry which is so vital to the increase of farm production on the one hand and to the curtailing of our foreign exchange expenditures on the other. Other industries such as food processing, chemicals, paper-making and cement will be given due opportunities for expansion to meet the requirements on the island as well as demands in the world market. It should be noted, however, that there will be no significant change in the execution of the major projects now in progress and that for others there will be some alteration depending on the state of their development and on the provision of capital involved. Moreover, to guide the island's industries into proper directions of growth, we have made it a policy to explore the possibilities of further development for the fifth year once the work for the first year has been completed, the idea being to maintain the continuity of the development in question.
On the basis of a preliminary estimate for the 4-year plan, it was found that the aggregate capital required amounts to something like US$155,000,000 and NT$2,550,000,000. However, when the program is completed, it is anticipated that the gross value of all kinds of products which the local industries are capable of producing each year will increase from NT$4,900,000,000 to NT$9,000,000,000. If the foregoing program could be implemented within the specified period, such receipts and disbursements as we have to account for in our international trade would approach very closely to a state of balance, and the economy of Taiwan would henceforth be directed through self-supporting channels. As regards the capital we need, the main source we could think of at present is still American aid, of which we have been getting more in fiscal year 1954 for industrial projects than we expected. Besides American aid, there are other sources of capital such as state investment, foreign materials paid on an installment basis or private investment from abroad as well as by the people on the island.
The year 1954 is the second year since the 4-year industrial program started its operation. Of the numerous projects under the program, the following are the most important:--
1. Urea Plant. This is placed under the Taiwan Fertilizer Company with the title of Plant No.6. In both scale of operation and novelty of production, it is one of the biggest of its kind in the world.
2. Rayon Mill. This is made possible through joint Sino-American private investment.
3. Nitro-Phosphate Plant. It forms the expansion part of Plant No. 3 under the management of the Taiwan Fertilizer Company.
4. Bagasse Board Plant. This is sponsored by the Taiwan Sugar Corporation which promises a product of excellence capable of serving as an additional export item.
5. Yeast Plant. This is also sponsored by TSC which uses the molasses produced at its numerous sugar factories to manufacture yeast, thereby cutting down the import of beans generally used as animal feed.
6. PVC Plant. This is a private operating unit, using the surplus chlorine gas hitherto allowed to escape uncollected.
7. Auto Parts & Diesel Engine Factory. This will be the best and biggest among the private-operated machine works.
8. Galvanized Wire Factory. This is sponsored by the Tang Eng Iron Works, the best-known private enterprise on the island. When completed, it will produce enough to meet the needs on the island.
Many other projects are also under consideration, but time does not permit a detailed discussion of them all.
With reference to the operation of capital, one of the basic problems facing any industry, this Commission has adopted a policy distinctly different from that generally followed. In the past, application for U. S. aid was made by various enterprises through separate arrangements with the agencies concerned. This procedure often led to confusion and dissension. The applications are now grouped together by the Commission which, after screening them, is responsible for initiating recommendations it may deem advisable to make. If, for example, it is found that there is a possibility of an industrial concern developing a new line of products, an effort would be made voluntarily by the Commission, in the interest of the island's overall economy, to help it out by recommending it as a recipient of U. S. aid. The recent expansion of the Taiwan Cement Company is a notable instance in the realization of this policy.
II. Coordination for Industrial Development
In speaking of industrial development, one should not be contented merely with submitting a plan or a project and putting up a factory. Such plans or projects have to be accompanied by various necessary procedures if they are to get anywhere. Among the manifold activities pushed vigorously by this Commission during the past year are the five following important ones:-
1. Establishment of production standard and elevation of quality. Under the Commission is a working group on Testing and Research, responsible for coordinating different inspection and research institutions as well as technical experts and scholars on the island. Such coordination is made possible by frequent discussions in which matters concerning inspection and research on a particular product are properly dealt with, and equipment and facilities necessary for the work are proposed for replenishment at different intervals. The Taiwan Provincial Government recently issued a bulletin making it known to all that, starting from November 1954, some 29 local industrial products shall be subject to periodical spot inspection to be performed by the Taiwan Provincial Department of Reconstruction. Any case of non-conformity to the accepted standard will be properly dealt with. Thus we have reason to expect that the quality of industrial products in general will be raised. Products that should be inspected in the second phase are now under consideration.
2. Exploration of resources. Knowledge of the distribution of resources is necessary to the development of any industry using such resources. To strengthen such exploratory work, a working group on Mineral Exploration has been set up under the Commission. Take the coal mines in the northern part of the island for instance. After years of excavation, they have gradually come to a state of exhaustion, and it would be very uneconomical to continue mining them. Hence the necessity of searching for some sources elsewhere. And this is exactly what the working group on Mineral Exploration is doing. A plan was drafted, and a sum of NT$7,000,000 was appropriated out of the U. S. aid for fiscal years 1954 and 1955 to cover expenses of exploration. Among the major projects now contemplated, one is to find out the conditions pertaining to the hidden store of coal deposits of commercial value. The other is to explore into possible sources of coke capable of being used for the fertilizer industry as well as for export. Next comes the drilling exploration for mineral oil, which is being done now through arrangement with the Chinese Petroleum Corporation. Other minerals like pyrite, the basic material for fertilizer manufacture, are also programmed for exploration.
3. Research service. The further development of any industry depends largely on the contributions made by its research department. Our industry is in a comparatively underdeveloped state and our research work is lagging behind. Sometime ago, it was proposed by the working group on Testing and Research that a united research organization be formed so that our efforts could be coordinated to achieve maximum efficiency. The proposal was approved by the Cabinet which decided that the well-equipped Hsinchu Research Institute, originally under the Petroleum Corporation, be reorganized into the United Industrial Research Institute to be placed under the jurisdiction of the Ministry of Economic Affairs. It is supported by the various enterprises engaged in research work. A service agency will shortly be established in Taipei to undertake research on subjects proposed by the various industrial enterprises. It is hoped that much use will be made of such facilities by the private industries on the island.
4. Lowering the cost of basic raw materials.
The Commission has conducted a systematic analysis into the production cost prevailing among the key industries of the island, particularly the cost of some basic chemicals such as sodium sulphide, sulphuric acid, caustic soda, soda ash, sulphur, etc. Once it is found that the price of certain raw materials is too high, the Commission will ask the manufacturer to cut it down and expand its market. The Petroleum Corporation has decided to place on sale a number of products, such as acetone, butyl alcohol, asphalt, etc. at a price similar to that prevailing on the world market. The lowering of prices would reduce the cost of production in general and would open up new opportunities for developing new industries.
5. Provision of technical assistance. As is well known, the quality of products would suffer if sufficient effort is not made to achieve a certain standard or to make the best use of the available machinery. There have been cases of private-operated factories which, for want of technical personnel, continue to use antiquated methods of production and to turn out products of an inferior quality. Therefore, matters concerning the supply of technical information and assistance to our industries have also been considered by the Commission. The Commission is at present point doing its best to improve the steel and iron products on the island. A "Chinese Association for the Improvement of Foundry Techniques" has been set up by the Guild. The technical problems of the different factories engaged in the steel and iron industry are now under study.
III. Coordination with Other Departments
Inasmuch as industry forms one of the major links in the overall economy of any nation, proper coordination with financial and economic quarters is necessary before any progress can be made. The following will serve to illustrate the need for coordination:-
1. Coordination between agriculture and industry. A great many industrial products in Taiwan depend on raw materials of an agricultural nature. So, in order to reduce the cost of production and to make it possible to compete in the world market, it is necessary to keep the prices of raw materials under control. The Economic Stabilization Board has a special committee, i.e., Committee D, to deal with problems of agricultural production, the technical phase of which is handled by the JCRR and a number of experts from various quarters. It is gratifying to note that much has been done in the past. In seeking to achieve better coordination between agriculture and industry this Commission and Committee D have tackled many problems in the past. The setting up of the Working Group on Food and Animal Feed through joint sponsorship is a good example of how farming and industry could be closely coordinated.
Again, take sugar manufacturing as an example. The raw material, as we know, comes from the sugarcane which also produces molasses which, in turn, can be used to produce yeast and alcohol. In addition, the bagasse, hitherto used as fuel, can be turned into paper pulp or bagasse board sufficiently hard and durable to serve as plywood. It is through such full employment of raw materials that the cost of sugar could be reduced. Pineapple is another case in point. Apart from canning, it can also be used to produce pineapple juice and alcohol. The leftovers can be used for making jam while the rind can be used for feeding animals. Again, in the case of ramie, plants have been established to use its fiber for making course canvas, ropes, sacks, etc. Its leaf is known to contain protein capable of being used for feeding hogs. This idea is being extended to all rural districts on the island. In the animal domain, we may take the cow to illustrate our point. If the dairy business should flourish, we would not only have milk, but we would also have butter, beef and tallow, not to mention the tanning industry. The development of cattle-raising would save us a large amount of foreign exchange annually.
From the foregoing, it may be seen that agriculture and industry cannot be separated. That being so, we can be sure that without a flourishing industry, farming products could never be fully utilized. Conversely, the absence of modern methods of farming would make it impossible to cut down the cost of raw materials so as to meet export requirements. In this connection, we should consider the question of how the limited land area of Taiwan may be utilized to the greatest advantage.
2. Finance measures versus industry. It is undeniable that industrial investment in Taiwan is not all that it should be. Estimates made recently by experts indicate that the amount invested absorbs only an extremely small portion of the people's income. If we want to attract industrial investment, we must at least make industrial investment more profitable than depositing money in the bank. It has been recommended by the Ministry of Finance that every newly-established industry turning out new products be henceforth exempted from paying income tax in the first three years. It is hoped that such a judicious measure will be duly approved by the lawmakers. The question of exemption or reduction of income tax applicable only to new industries has also been considered by the Commission, and hope has been expressed that relevant suggestions and comments on the matter would come from various quarters. Meanwhile, one to five years has been set as the time-limit within which all loans from U.S. aid should be paid back. If it should be proved feasible for tax regulations to expedite the rate of depreciation in the new factories whose existence was rendered possible by U.S. aid loans, such repayment should likewise be accelerated. It would tend not only to stimulate the enterprising spirit among the industrial circles, but the capital may be used to start other industries.
Prior to the setting up of an industrial unit, its capacity must first be calculated. If the capacity is too small, its operation might not prove economical. Taiwan has a limited market. If the industrial product in question is limited only to the domestic market, it would be impracticable to put up a large factory. To remedy such a state of affairs, it is necessary to develop and stimulate the export trade. Here come the questions of the tariff upon imported materials, the exemption from duties of local products, the refund of taxes already paid on them, etc. All of these questions have been considered by the Commission and a number of recommendations have been made. There is, of course, another aspect of the question arising from foreign exchange. If only there is a more realistic rate of exchange, the increase of export and the consequent expansion of industrial activities would be assured.
Finally, a word must be said concerning the establishment of a market for industrial capital. Most industries in Taiwan are operated on a small scale. They were generally financed and operated by a few relatives and friends. Only a few of these industries bear any resemblance to modern enterprises. Recently, as a result of the implementation of the land-to-the-tiller policy, several state enterprises have been turned over to private investors. Thus, a large number of stockholders, hitherto unrelated, have been brought together. This is, indeed, an unprecedented move on the part of the government and it is likely to mark an important milestone in the history of China's industrial development. As more public undertakings are transferred into private hands, more capital will be made available for industrial reconstruction.
3. Coordination between military and civilian industries. A sub-committee on Coordination of Military and Civilian Industries has recently been formed under the Commission. No industry should be developed for the welfare of the civilian population alone. It must also be made to meet defense requirements. This is all the more so in time of war. Naturally, it is equally important that the defense industries should also be mindful of civilian needs.
IV. What the Industrial Guilds Can Do
1. Setting up of common standards. In practically all leading countries, the industrial guilds have reached such a stage of development that they play an important part in industrial reconstruction and development. Many of the industrial production standards were set by the guilds themselves. Oftentimes, the government has to rely on the assistance of the guilds for the successful implementation of its policies. As the guilds in Taiwan are composed of leaders in different fields of endeavor, there seems to be no reason why they could not take up a similar task.
2. Investment guilds. Here in Taiwan, one often hears that such and such an industry has been over-developed, causing a waste of capital which could be used elsewhere. The guilds should have no difficulty in making an estimate of the needs of the market as well as in conducting a survey of the actual state of production prevailing on the island. Such information, after proper compilation and digestion, will be highly valuable in enabling investors to decide where to invest.
3. Expansion of domestic and foreign markets. The guilds should have some knowledge concerning conditions prevailing in the market. Consequently, it is more or less an obligation on their part to impart such knowledge to the factories and help them do the best they can so as to meet market requirements. Information relating to the world market is usually inaccessible to small factories, and it is up to the guilds concerned to supply such information. Exhibitions of industrial products should be held from time to time to enable the people to know something of the latest developments.
4. Adoption of sound measures. In the course of industrial development, it is inevitable that many small units will be weeded out as a result of competition. Accordingly, the guilds concerned ought to do something to amalgamate these smaller units.
5. Development of private enterprise. To implement the government policy of achieving free economy, the Commission has taken upon itself the promotion of private industries. But the success of any enterprise depends on technique, capital and organization. If one of them is in an unhealthy state, it would be very difficult for the undertaking to make any headway.