Faced with worst drop in economic growth, Taiwan opens more doors to China

In May, more Taiwanese industries opened for mainland Chinese investment, including public construction, services, and manufacturing. According to the Economic Times, the 101-item list includes telecommunication value-added services, tourist hotels, automobiles, computers and cell phones. However, civil engineering construction, petrochemicals, machine tools, and steel manufacturing are not included.

In the area of electronics manufacturing, only investment in passive components is permitted. Sensitive high tech industries such as integrated circuit design, packaging and testing, silicon wafers and liquid crystal display monitors are not on the list.

The paper also reported that the appreciation of the South Korean Won has slowed significantly. At a time of North Korean saber rattling, the South Korean Won faces strong depreciation pressure. Meanwhile, the New Taiwan Dollar has maintained the same appreciation trend, which could hurt Taiwan’s exports. As members of the four Asian Tigers, Taiwan and South Korea are strong competitors and both are highly reliant on export trade.

Hit hard by the global recession, Taiwan’s economic growth in the first quarter of this year dropped 10.24 percent from the same period in 2008, according to a report released on May 21st by the Directorate General of Budget, Accounting and Statistics. This marks the worst single quarter slump since 1961 when the government started compiling quarterly per capita income growth statistics.

The government has also adjusted its forecast for annual overall economic growth this year from minus 2.97 percent announced in February to minus 4.25 percent, the worst decline since records began. Despite poor first quarter performance, there are scattered signs that the decline is beginning to slow down.

Currently, Taiwan’s economic growth is ranked third among the four Asian Tigers, behind Hong Kong and South Korea, but ahead of Singapore. The Economic Times blamed this lag on the previous administration’s ideology oriented policies that corroded Taiwan’s economic development foundation, although the current administration is not exempt from responsibility.

Meanwhile, Lausanne-based business school International Institute for Management Development (IMD) released the 2009 competitiveness ranking which saw Taiwan drop 10 places from 13th in 2008 to 23rd. The Commerce Times called attention to this huge drop, saying it was a severe warning for the sustainability of Taiwan’s competitiveness.

Of the four factors and criteria used by IMD to evaluate a country’s competitiveness, Taiwan’s ranking dropped from 21st to 27th for economic performance, from 16th to 18th for government efficiency, from 10th to 22nd for business efficiency, and from 17th to 23rd for infrastructure.

The Taipei Times reported that the Council for Economic Planning and Development (CEPD) said the sharp contraction in exports in the second half of last year was the main factor behind Taiwan’s lower competitiveness ranking.

The CEPD said in a statement that GDP growth last year was a mere 0.1 percent and the latest IMD report was based primarily on data from last year. While the CEPD lamented the drop, it added that the situation would improve later this year when the government’s stimulus measures and cross-strait policies are reflected by the economy.