The National Development Council on Friday last week reported that the nation’s composite index of leading indicators — which aims to gauge the economic outlook over the next six months — increased last month for the 10th consecutive month and the composite index of coincident indicators — a gauge used to reflect the current economic state — also increased, for the ninth straight month.
The council said that the overall business climate monitor was “red” — from “yellow-red” in January — for the first time in a decade, indicating that the economy is “heating up” as the COVID-19 situation remains relatively under control.
On Tuesday last week, the Ministry of Economic Affairs said that industrial production last month increased by a better-than-expected 2.96 percent annually to 108.76 — the best February figure ever on the back of demand for semiconductors and LCD panels.
Export orders last month also grew on an annual basis, the 12th consecutive month, supported mainly by strong orders for information and communications technology products, the ministry reported on Monday last week.
Major semiconductor manufacturers’ increased investment in advanced technology and production capacity has led more firms in the domestic supply chain to invest more locally.
As Taiwanese businesses abroad and international firms seek local business opportunities — due to US-China trade tensions and realignments in the global supply chain — telecoms are beefing up 5G networks, green energy developers are accelerating construction of offshore wind farms and photovoltaic systems, and land developers are expediting the renovation of older buildings and advancing urban renewal projects. On Feb. 20, the Directorate-General of Budget, Accounting and Statistics forecast that private investment this year would grow 3.91 percent year-on-year to NT$4 trillion (US$139.85 billion).
While the government has predicted that the ratio of domestic investment to gross national income this year would reach 23.47 percent, the highest since 2011, the “five industrial shortages” — land, water, electricity, talent and workers — have returned to haunt the nation and cast a shadow over its economic development.
For example, if the water shortage worsens and more areas are hit with water restrictions, production at the nation’s major science and industrial parks would be impeded. Another example is the struggle between environmental protection and power generation. The push to protect algal reefs off the coast of Taoyuan could jeopardize the government’s goal of generating 50 percent of the nation’s power from liquefied natural gas, 30 percent from coal and 20 percent from renewable resources by 2025.
Taiwan’s declining birthrate and aging population have long plagued local industries with a shortage of talent and workers. Even though the government is providing more incentives, recruitment efforts by key industries show that a large gap remains between demand and supply. Companies might need to look overseas to make up for personnel shortages.
Substantial investment by businesses returning to Taiwan has led to a huge increase in demand for industrial land, office space and manufacturing facilities, which has sparked a significant rise in property prices and generated fears of a land shortage.
Before the trade tensions between the US and China, Taiwan witnessed years of sluggish domestic investment and the relocation of companies overseas. This wave of local investment — something rarely seen in the past 30 years — is an opportunity for economic transformation and industrial upgrades.
However, a failure to resolve these shortages might cause Taiwan to miss out. In 2018, the Democratic Progressive Party administration presented a set of policies aimed at solving these shortages. The government needs to review these solutions — right away.
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