Newspapers offer differing viewpoints of Taiwan’s economy

Recently, three of Taiwan’s biggest newspapers addressed the nation’s economy in their editorials. Each focused on a different aspect of the economy. The Commercial Times expressed worries about the sharp decline of Taiwan’s imports this year, while the Taipei-based China Times took an optimistic view of the comprehensive cooperation in economic and trade links between the offshore islands across the Taiwan Strait. The Economic Daily News analyzed the positive and negative impacts of the upcoming FTA-like Economic Cooperation Framework Agreement (EFAC) negotiation between Taiwan and China.

Warning signs of import decline

The Commercial Times said the statistics released by the Ministry of Finance shows that Taiwan’s trade surplus in the first three quarters of this year reached US$22 billion, an increase of 1.5 times over the same period for 2008. This was expected to reach US$29.2 billion by early October according to the Directorate-General of Budget, Accounting and Statistics. The Ministry of Economic Affairs revised this figure to US$30 billion – a record high for Taiwan.

The reason behind such a huge trade surplus is not because of a rapid growth in exports, but due to a sharp decline in imports, which are down 40 percent, another record. Compared with other trading nations, in the first eight months of this year, Taiwan led the way for import declines.

The decline is a reflection of the huge shrinkage in consumer spending and an enormous investment cut by businessmen. This situation is more serious in Taiwan than in any other nation. The average annual growth of Taiwan’s private business investments between 1999 and 2008 was negative 1.9 percent – far below the positive 12.4 percent enjoyed in the 1980s. Further analysis shows the reason for the stagnation of investment dynamics lies in the rigid business development model, one that has not adjusted to the changing environment. It is now the right time for both the government and businesses to undergo a thorough review and revamp.

Cooperation between offshore islands across the Taiwan Strait

In an editorial, the China Times linked the rejection of casinos by the people of Penghu Island (Pescadores), Taiwan, with the establishment of a comprehensive testing area in Pingtan Island, Fujian, China, to facilitate the exchange of goods from Taiwan.

The paper said Penghu has no other choice but to develop its tourism from now on. However, due to the limited physical space for market expansion, Penghu should promote external linked businesses in agriculture, industry and commerce in line with its environmental protection goals. On the other side of the Taiwan Strait lies Pingtan Island with a development plan, which is a pilot test area of China’s “Free Trade Harbor Zone” trying to cooperate with Taiwanese business in a comprehensive connection and exchange of all kinds of goods. Pingtan is one of the best places to provide Taiwanese businesses with mutual management and administration – as a new model of upgrading the economic and trade cooperation between Taiwan and China.

The paper struck an optimistic note saying that the development in Pingtan offers Penghu a new opportunity. If an economic and trade hotline could be established between these two islands – Pingtan lying at the northwestern corner of the Taiwan Strait,and Penghu, sitting in the middle of the Strait – they could tap into businesses such as tourism, trade and commerce, and technology research and development .

Besides Penghu and Pingtan, there are other islands on both sides of the Strait that could be linked, such as Kinmen (Taiwan) and Xiamen (China). Keeping in line with the peaceful development trend across the Taiwan Strait, these offshore islands, along with the new development in the economic zone on the west side of the Strait, could bring new opportunities - a topic for both Taiwan and China to discuss in the near future.

EFCA – roses with thorns

The Economic Daily News agreed with Premier Wu Den-yih’s description of the EFCA as roses with thorns, meaning it comes with opportunities and risks. Optimists see only roses while pessimists see only thorns.

Premier Wu noted, Taiwan’s signing of an EFCA with China, removing trade and investment barriers, will observe the three principles of “national requirement, popular support and parliamentary supervision” and two pre-conditions of “not opening doors to agricultural products” and “not taking mainland laborers.” The Taiwan government’s position is to maximize the benefits and minimize the impacts.

In Premier Wu’s eyes, the roses are the economic benefits, including lower customs duties in China. It would allow Taiwanese petro-chemicals and textiles to compete with those from Southeast Asian nations and allow them to expand and invest in Taiwan, potentially bringing 350,000 job opportunities. Recently, the Chung-Hua Institution for Economic Research in Taipei said the ECFA would spur Taiwan’s economic growth rate in 2010 to 1.65 percent. This would mean that one-third of next year’s economic growth rate would depend on the ECFA. More importantly, Taiwan would get more opportunities to sign free trade agreements (FTA) with other nations, thus avoiding being marginalized and isolated.

The thorns of signing an ECFA are to open Taiwan’s market to China. It is estimated that industries such as ceramic tiles, household appliances and towels would see benefits of over 80,000 jobs created. Premier Wu said the Ministry of Economic Affairs would assign a budget fund of NT$35 billion (US$1.07 billion) to help the affected industries upgrade or reform.

The paper also pointed out that the ECFA has drawn attention from other nations, some with interests in signing FTAs with Taiwan after the completion of the ECFA. Is Taiwan ready to cope with the possibilities of negotiating more FTAs and opening up more of its markets once the ECFA is signed?