The American Chamber of Commerce in Taipei (AmCham) on Wednesday last week published its 2018 AmCham Taipei Business Climate Survey. Although more than half of the AmCham members who responded to the survey said they were confident about Taiwan’s economic growth for this year and the next three years, they were critical, as they have been in the past, about Taiwan’s investment environment.
Nearly 50 percent of the respondents said that the Labor Standards Act (勞基法) is still not flexible enough, and about 90 percent agreed that the terms of the act should be relaxed to allow managers and professionals to work under a responsibility system instead of being restricted by rigid clauses regarding working hours.
Nearly 85 percent said they are worried that there might not be enough electricity generation in the future.
Nearly 60 percent said that the government does not pay sufficient attention to the needs of business when setting relevant policies. Asked about taxation issues, 56 percent of respondents said that the individual income tax rate is too high, which they say is not favorable to doing business in Taiwan and more than 70 percent said that tax deductions are more important than government subsidies.
AmCham’s annual reports nearly always raise questions about Taiwan’s investment environment. Last year’s report drew much attention for its strong criticism of the Labor Standards Act. This year’s report is still critical of the act, but the criticisms are a little milder.
The survey results are good and bad news. It is encouraging that the government has been paying attention to improving Taiwan’s investment environment and promoting businesses to make long-term commitments and has been actively seeking solutions.
Of concern are the main reasons for Taiwan’s economic stagnation in recent years: insufficient investment and a lack of confidence, along with a pervasive sentiment that is not supportive of businesses.
Other problems include excessively strict environmental protection laws and overcautious tax reforms, while a lot of legal regulations do not meet the needs of start-ups.
Instead of taking big steps forward, reforms tend to get bogged down in arguments that waste a lot of time and energy. There is so much dithering that those concerned feel complacent about even the smallest of achievements. While all this is going on, real incomes keep falling and Taiwan’s economic development falls further behind.
To grasp the true state of Taiwan’s economy and understand its development and difficulties, it is not enough to compare Taiwan today with what it once was. It should be compared with other countries in the region.
Taiwan created an economic miracle and became a model for developing countries, but now, sad to say, its economic conditions are gradually deteriorating.
There was a time when Taiwan enjoyed double-digit annual growth rates and was No. 1 among the “four Asian Tigers,” but in recent years maintaining just 2 percent growth has become a cause for celebration and a political achievement worth boasting about.
Taiwan’s growth rate lags behind a mature economy like the US. Sometimes receding and sometimes stagnating, the economy shows signs of early or even premature aging. Compared with the flourishing economies of other countries in the region, Taiwan’s economy, regrettably, is declining with each passing day.
When comparing nations, China is no doubt the one that makes Taiwan feel most threatened. Some years ago, China started making counterfeit goods and stealing intellectual property and a lot of those dubious goods were made by little factories scattered nationwide. A good example would be Geely Auto, which, when it started, was widely mocked for copying Mercedes-Benz and Toyota vehicle models.
However, Geely has now grown and developed to the point of acquiring Sweden’s Volvo Cars and has become the biggest shareholder in Mercedes-Benz’s parent company, Daimler AG.
China has formed a “national semiconductor team,” which, backed by state funding, has been hunting the world for companies to take over. Its voracious appetite has caused anxiety in Europe, North America and Japan, which have established strict investment review mechanisms to keep China in check.
Nonetheless, China is still scoring gains with its strategy of using its market as a lure in exchange for technological know-how. Under China’s policies of monopoly and protecting its own industries, it has cultivated powerful companies in the fields of e-commerce, mobile payment systems, network platforms, electric vehicles and the sharing economy. It is now playing an active role in setting the standards for fifth-generation wireless networks.
China’s transition from a manufacturing nation to a powerful one is evidently more than just a slogan.
Aside from China, the economies of Southeast Asia are also on the rise. Singapore joined the ranks of the world’s developed economies long ago. Thailand and Malaysia are catching up with Taiwan. The Philippines, Vietnam and Indonesia all have fast-growing economies and could potentially be the stars of tomorrow. Even poor and backward nations such as Cambodia and Myanmar have opened their doors and are working hard to attract foreign investment.
Southeast Asia as a whole forms a zone of economic integration whose members both complement and compete with one another, and these factors have helped accelerate the region’s economic growth.
Then there India, with a population almost as big as China’s. While hardware manufacturing is not India’s strong point, it ranks among the best for software design and other kinds of talent. With the Indian government’s emphasis on institutional reforms and infrastructure development, given time, India’s economic achievements could well make it “China 2.0.”
Taiwan’s pace of development is faltering, both in itself and in global business and trade. Although the nation faces competition from abroad and overseas competitors are getting stronger, Tawain’s biggest enemy is itself.
Taiwan has written a tale of successful development and has a culture of hard work and innovation. It still occupies a central position in the global industrial supply chain, including electric vehicles, mobile devices and integrated circuit design and manufacturing, as well as virtual currency mining equipment. Hidden away are many world champions who make small quantities of diverse and excellent products.
These are Taiwan’s strengths, which can help its economy to rise again, so there is no need to put then nation down, but government officials must not allow themselves to be restricted by minority populist voices.
The government needs to thoroughly improve the investment environment, boost public confidence and take the interests of the majority as the foundation of its policies. Only then can it successfully launch a business revival in Taiwan.
Translated by Julian Clegg
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