Taiwan’s economy has benefited from its advanced semiconductor manufacturing processes and the return of Taiwanese businesses, the Department of Statistics said in a report on April 28. The factors have contributed to Taiwan’s average annual GDP growth of 3.2 percent over the past decade, better than South Korea’s 2.6 percent over the period.
Furthermore, with the recent depreciation of the South Korean won, Taiwan’s GDP per capita of US$32,811 last year once again surpassed that of South Korea, which was US$32,237.
FOREX RATES
GDP per capita is calculated by dividing a country’s GDP by its population. If population is assumed to remain unchanged, the most important factors affecting GDP per capita are foreign exchange rates and GDP growth.
The foreign exchange rate is indeed a key factor in Taiwan’s GDP per capita surpassing that of South Korea.
South Korea, which is economically and industrially similar to Taiwan, used to be a stronger economic power, but has declined significantly in the past few years. On the other hand, the accelerated repatriation of Taiwanese businesses amid US-China tensions and the effect of semiconductor transfer orders have become catalysts for Taiwan’s economic recovery.
INNOVATION
Also contributing to the dynamics that fuels Taiwan’s economic growth are the promotion of industry transformation, innovation and global distribution — especially through value creation and digital transformation — and the continuous improvement of core technologies and gross margins, which has laid a solid foundation for the industry.
Taiwan’s GDP performance is quite impressive, which is indeed worthy of recognition.
However, the nation still has to look beyond the seemingly satisfying statistics, and face up to the hidden problems and figure out the ways to tackle them.
First, Taiwan’s GDP relies too much on technological industries such as semiconductors, information and communication, which can easily lead to the hollowing out of other industries. The latter could in turn suffer from low demand, excessive inventory, inflation, interest rate hikes or other economic effects.
To reduce risks and improve overall output value, the nation must also pay attention to the development of domestic demand industries, such as traditional industries and the service sector, as well as education, tourism, culture and arts, and make good use of digital transformation.
The government should also legislate more complete laws and policies to facilitate such development.
Second, the increase in GDP per capita might be coming from wealthy people, who account for only a fraction of the population, while the wages of the majority are still low. The widening gap between the rich and poor, and the worsening relative deprivation might lead to social problems.
Moreover, people have been experiencing slow wage growth and fast price hikes, and deem GDP growth an “insensitive” figure that cannot truly reflect the difficulties they have to face in real life, such as income inequality, low wages, inflation, rising housing prices and rents, high loan payments, having to work multiple jobs and doing overtime, as well as unemployment, increasing poverty, labor shortages, brain drain and a lower quality of life.
INCOMPLETE MEASURE
Simon Kuznets, a Nobel laureate in economics and an honorary academician at Academia Sinica, has said that GDP reflects objective economic data, but it cannot measure people’s happiness or joy.
The government should not focus only on GDP figures, but also listen to people and see the real problems behind the numbers.
It should strive to solve economic inequality, stabilize prices, encourage companies to raise wages, balance the development of industries and create people-friendly environments, so that Taiwanese can enjoy a good and prosperous life in a sustainable country.
Su Wei-cheng is a lecturer and a former secretary of the president of the Legislative Yuan.
Translated by Lin Lee-kai
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