| Economy of Taiwan | |
|---|---|
| Currency | New Taiwan dollar (NT$) 1 $ USD = 28.98 TWD (Aug 2011)(2007 avg. exchange rate) |
| Fiscal year | Calendar year |
| Trade organisations | WTO, APEC, and others (as Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu) |
| Statistics | |
| GDP |
Nominal: $423.0 billion PPP rank: 19th (2010) |
| GDP growth | 10.5% (2010)[1] |
| GDP per capita |
Nominal: $16.372 (2009) PPP rank: 24th; $34,740 (2010 IMF estimate, 21st) |
| GDP by sector | (2009) services (tertiary) (69.2%) industry (secondary) (29.2%) agriculture (primary) (1.6%) |
| Inflation (CPI) | -0.87% (2009)[2] |
| Population below poverty line |
1.08% (2008) |
| Labour force | 10.92 million (2009) |
| Labour force by occupation |
agriculture (5.1%), industry (36.8%), services (58%) (2008) |
| Main industries |
Electronics, communications and information technology products, petroleum refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products, pharmaceuticals |
| Ease of Doing Business Rank | 25th[3] |
| External | |
| Exports | $274.6 billion (2010)[2] |
| Export goods | Electronics, flat panels, machinery; metals; textiles, plastics, chemicals; optical, photographic, measuring, and medical instruments (2009) |
| Main export partners | China 26.64%, Hong Kong 14.46%, US 11.59%, Japan 7.12%, Singapore 4.23% (2009) |
| Imports | $251.4 billion (2010)[2] |
| Import goods | Electronics, machinery, crude petroleum, precision instruments, organic chemicals, metals (2009) |
| Main import partners | Japan 20.77%, China 14.01%, US 10.49%, South Korea 6.03%, Saudi Arabia 4.97% (2009) |
| FDI stock | 21.2% of GDP (gross fixed; 2007) $92.83 billion (at home; 2006) $108.9 billion (abroad; 2006) |
| Gross external debt | $75.3 billion (2009) |
| Public finances | |
| Public debt | 33% of GDP (2009) |
| Revenues | $53.3 billion (2009) |
| Expenses | $57.2 billion (2009) |
| Credit rating | Standard & Poor's:[4] AA- (Domestic) AA- (Foreign) AA+ (T&C Assessment) Outlook: Stable[5] Moody's:[5] Aa3 Outlook: Stable Fitch:[5] A+ Outlook: Stable |
| Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars |
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Taiwan has a developed capitalist economy that ranks as the 19th largest in the world by Purchasing power parity (PPP) and 24th in nominal GDP of investment and foreign trade by the Republic of China (ROC) government which governs Taiwan. In keeping with this trend, most large government-owned banks and industrial firms have been privatized. Real growth in GDP has averaged about 8% during the past three decades. Exports have grown even faster and since World War II, have provided the primary impetus for industrialization. Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world's fourth largest. Agriculture contributes 3% to GDP, down from 35% in 1952, and the service sector makes up 73% of the economy. Traditional labor-intensive industries are steadily being moved off-shore and replaced with more capital- and technology-intensive industries, as well as creative industries.
Taiwanese investors and businesses have become major investors in mainland China, Vietnam, Thailand, Indonesia, the Philippines, and Malaysia. The tightening of labor markets has led to an influx of foreign workers, both legal and illegal. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little from the Asian Financial Crisis of 1997-1999 compared to many of its neighbors. Unlike in neighboring Japan and South Korea, small and medium-sized businesses make up a large proportion of businesses in Taiwan.
Taiwan is a member of the Asian Development Bank (ADB), the World Trade Organization (WTO), and the Asia-Pacific Economic Cooperation (APEC) forum. Taiwan is also an observer at the Organisation for Economic Co-operation and Development (OECD). Taiwan's top five trade partners in 2010 are China, Japan, USA, the European Union, and Hong Kong.[6][7]
Contents |
Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, with investments primarily centered in Asia. Private Taiwanese investment in mainland China is estimated to total in excess of US$150 billion,[8] and official tallies cite Taiwan as having invested a comparable amount in Southeast Asia.
Taiwan has historically benefited from the flight of many well-educated, wealthy Chinese to settle on the island: during early Qing Dynasty, the preceding Ming dynasty supporters survived for a brief period of time in exile in Taiwan, and in 1949, as the Chinese Communist Party gained control of mainland China, two million Kuomintang (KMT) supporters fled to the island.[9][10][11]
The first step towards industrialization was land reforms, a crucial step in modernizing the economy, as it created a class of landowners with capital they can invest in future economic endeavors. US aid was also important to stabilize post-war Taiwan, and it constituted more than 30 percent of domestic investment from 1951 to 1962. These factors, together with government planning and universal education, brought huge advancement in industry and agriculture, and living standards. The economy shifted from an agriculture-based economy (32% of GDP in 1952) to an industry-oriented economy (47.% of GDP in 1986).[12] Between 1952 and 1961, the economy grew by an average of 9.21% each year.[12]
Once again, the transformation of Taiwan's economy cannot be understood without reference to the larger geopolitical framework. Although aid was cut back in the 1970s, it was crucial in the formative years, spurring industrialization and security and economic links were maintained. Uncertainty about the US commitment accelerated the country’s shift from subsidized import-substitution in the 1950s to export-led growth. Development of foreign trade and exports helped absorb excess labor from the decreased importance of agriculture in the economy.[12] Like Korea, Taiwan moved from cheap, labor-intensive manufactures, such as textiles and toys, into an expansion of heavy industry and infrastructure in the 1970s, and then to advanced electronics in the subsequent decade. By the 1980s, the economy was becoming increasingly open and the government moved towards privatization of government enterprises.[12] Technological development led to the establishment of the Hsinchu Science Park in 1981. Investments in mainland China spurred cross-strait trade, decreasing Taiwan's dependence on the United States market.[12] From 1981-1995, the economy grew at an annual rate of 7.52%, and the service sector became the largest sector at 51.67%, surpassing the industrial sector and becoming a major source of the economy's growth.
Taiwan now faces many of the same economic issues as other developed economies. With the prospect of continued relocation of labor-intensive industries to economies with cheaper work forces, such as in China and Vietnam, Taiwan's future development will have to rely on further transformation to a high technology and service-oriented economy.[13] In recent years, Taiwan has successfully diversified its trade markets, cutting its share of exports to the United States from 49% in 1984 to 20% in 2002. Taiwan's dependence on the United States should continue to decrease as its exports to Southeast Asia and China grow and its efforts to develop European markets produce results.[14] Taiwan's accession to the WTO and its desire to become an Asia-Pacific "regional operations center" are spurring further economic liberalization.
Taiwan has recovered quickly from the global financial crisis of 2007-2010, and its economy has been growing steadily. Its economy faced a downturn in 2009 due to a heavy reliance on exports which in turn made it vulnerable to world markets.[14] Unemployment reached levels not seen since 2003, and the economy fell 8.36% in the fourth quarter of 2008.[13] In response, the government launched a US$5.6 billion economic stimulus package (3% of its GDP), provided financial incentives for businesses, and introduced tax breaks.[13] The stimulus package focused on infrastructure development, small and medium-sized businesses, tax breaks for new investments, and low-income households.[13] Boosting shipments to new overseas markets, such as Russia, Brazil, and the Middle East was also a main goal of the stimulus.[13] The economy has since slowly recovered; by November 2010, Taiwan's unemployment rate had fallen to a two-year low of 4.73% and is expected to continue to drop through the first half of 2011.[15] The average salary has also been rising steadily for each month in 2010, up 1.92% from the same period in 2009.[16] Industrial output for November 2010 reached another high, up 19.37% from a year earlier, indicating strong exports and a growing local economy.[17] Private consumption is also increasing, with retail sales up 6.4% compared to 2009.[18] After 10.5% economic growth in 2010, the World Bank expects growth to continue and reach 5% for 2011.[19]
Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, thus it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased over fivefold in the 1960s, nearly tenfold in the 1970s, and doubled again in the 1980s.[22] The 1990s saw a more modest, slightly less than twofold, growth. Export composition changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment. Taiwan, as an independent economy, became a member of the World Trade Organization (WTO) as Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (often shortened to "Chinese Taipei"-both names resulting from PRC interference on the WTO) in January 2002. In a 2011 report by Business Environment Risk Intelligence (BERI), Taiwan ranked third-best globally for its investment environment.[23]
Taiwan is the world's largest supplier of contract computer chip manufacturing (foundry services) and is a leading LCD panel manufacturer,[24] DRAM computer memory, networking equipment, and consumer electronics designer and manufacturer.[14] Textiles are another major industrial export sector, though of declining importance as Taiwan due to labor shortages, increasing overhead costs, land prices, and environmental protection.[25] Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports most of its energy needs. The United States is Taiwan's third largest trading partner, taking 11.4% of Taiwanese exports and supplying 10.0% of its imports.[6][7] China has recently become Taiwan's largest import and export partner. In 2010, the PRC accounted for 28.0% and 13.2% of Taiwan's exports and imports respectively (excluding Hong Kong).[6][7] This figure is growing rapidly as both economies become ever more interdependent. Imports from China consist mostly of agricultural and industrial raw materials. Exports to the United States are mainly electronics and consumer goods. As Taiwanese per capita income level has risen, demand for imported, high-quality consumer goods has increased. Taiwan's 2002 trade surplus with the United States was $8.70.
The lack of formal diplomatic relations between the Republic of China (Taiwan) with Taiwan's trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce. The Republic of China maintains cultural and trade offices in more than 60 countries with which it does not have official relations to represent Taiwanese interest. In addition to the WTO, Taiwan is a member of the Asian Development Bank as "Taipei, China" (a name resulting from PRC influence on the bank) and the Asia-Pacific Economic Cooperation (APEC) forum as "Chinese Taipei" (for the same reason as above). These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.
The Economic Cooperation Framework Agreement (ECFA) with the People's Republic of China was signed on June 29, 2010, in Chongqing.[26][27] It could potentially widen the market for Taiwan's exports. However, the true benefits and impacts brought by ECFA to Taiwan's overall economy are still in dispute.[28] The newly-signed agreement will allow for more than 500 products made in Taiwan to enter China at low or no tariffs.[29] The government is also looking to establish trade agreements with Singapore[30] and the United States.[31]
Industrial output has gradually decreased from accounting for over half of Taiwan's GDP in 1986 to just 31% in 2002.[25] Industries have gradually moved to capital and technology-intensive industries from more labor-intensive industries, with electronics and information technology accounting for 35% of the industrial structure.[25] Industry in Taiwan primarily consists of many small and medium-sized enterprises (SME) with fewer large enterprises.
Taiwan's information technology industry has played an important role in the worldwide IT market over the last 20 years.[25] In 1960, the electronics industry in Taiwan was virtually nonexistent.[32] However, with the government's focus on development of expertise with high technology, along with marketing and management knowledge to establish its own industries, companies such as TSMC and UMC were established.[33] The industry used its industrial resources and product management experience to cooperate closely with major international suppliers to become the research and development hub of the Asia-Pacific region.[25] The structure of the industry in Taiwan includes a handful of companies at the top along with many small and medium-sized enterprises (SME) which account for 85% of industrial output.[25] These SMEs usually produce products on an original equipment manufacturer (OEM) or original design manufacturer (ODM) basis, resulting in less resources spent on research and development.[25] Due to the emphasis of the OEM/ODM model, companies are usually unable to make in-depth assessments for investment, production, and marketing of new products, instead relying upon importation of key components and advanced technology from the United States and Japan.[25] Twenty of the top information and communication technology (ICT) companies have International Procurement Offices set up in Taiwan.[34] As a signer of the Information Technology Agreement,[35] Taiwan phased out tariffs on IT products since January 1, 2002.[34]
The "e-Taiwan" project launched by the government seeks to use US$1.83 billion to improve the information and communications infrastructure in Taiwan in five major areas: government, life, business, transport, and broadband.[34][36] The program seeks to raise industry competitiveness, improve government efficiency, and improve the quality of life, and aims to increase the number of broadband users on the island to 6 million.[36] In 2010, Taiwan's software market grew by 7.1% to reach a value of US$4 billion, accounting for 3.3% of the Asia-Pacific region market value. The digital content production industry grew by 15% in 2009, reaching US$14.03 billion.[34] The optoelectronics industry (including flat panel displays and photovoltaics) totaled NT$2.2 trillion in 2010, a 40% jump from 2009, representing a fifth of the global market share.[37]
The semiconductor industry, including IC manufacturing, design, and packing, forms a major part of Taiwan's IT industry.[38] Due to its strong capabilities in OEM wafer manufacturing and a complete industry supply chain, Taiwan has been able to distinguish itself from its competitors.[38][39] The sector output reached US$39 billion in 2009, ranking first in global market share in IC manufacturing, packaging, and testing, and second in IC design.[40] Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) are the two largest contract chipmakers in the world,[41] while MediaTek is the fourth-largest fabless supplier globally.[42] In 1987, TSMC pioneered the fabless foundry model, reshaping the global semiconductor industry.[40][43] From ITRI's first 3-inch wafer fabrication plant built in 1977[40] and the founding of UMC in 1980,[44] the industry has developed into a world leader with 40 fabs in operation by 2002.[38] In 2007, the semiconductor industry overtook that of the United States, second only to Japan.[45] Although the global financial crisis from 2007 to 2010 affected sales and exports,[46] the industry has rebounded with companies posting record profits for 2010.[47][48] Taiwan has the largest share of 300 nm, 90 nm, and 60 nm manufacturing capacities worldwide, and is expected to pass Japan in total IC fab capacity by mid-2011.[49]
Agriculture has served as a strong foundation for Taiwan's economic miracle.[50] After retrocession from Japan in 1945, the government announced a long-term development strategy of "developing industry through agriculture, and developing agriculture through industry".[51] Thus, agriculture became the foundation for Taiwan's economic development, while promoting growth in industry and commerce. In 1951, agricultural production accounted for 35.8% of its GDP.[51] Today, agriculture only comprises about 2.6% of Taiwan's GDP or about US$1 billion.[52] In 2002, farming accounted for 43.33% of the industry, with livestock (30.02%) and fishing (26.41%) making up a significant portion of the rest. Since its accession into the World Trade Organization and the subsequent trade liberalization, the government has implemented new policies to develop the sector into a more competitive and modernized green industry.[52]
Although only about one-quarter of Taiwan's land area is suitable for farming, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agricultural modernization has been inhibited by the small size of farms and the lack of investment in better facilities and training to develop more profitable businesses.[52] Taiwan's agricultural population has steadily decreased from 1974 to 2002, prompting the Council of Agriculture (COA) to introduce modern farm management, provide technical training, and offer counseling for better production and distribution systems.[52] Promotion of farm mechanization has helped to alleviate labor shortages while increasing productivity; both rice and sugar cane production are completely mechanized.[53] Taiwan's main crops are rice, sugar cane, fruits (many of them tropical), and vegetables. Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption has risen sharply, reflecting a high standard of living. Taiwan has exported large amounts of frozen pork, although this was affected by an outbreak of hoof and mouth disease in 1997. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Imports of agriculture products are expected to increase due to the WTO accession, which is opening previously protected agricultural markets.
Due to the lack of natural resources on the island, Taiwan is forced to import many of its energy needs (currently at 98%).[54] Imported energy totaled US$11.52 billion in 2002, accounting for 4.1% of its GDP.[55] Although the industrial sector has traditionally been Taiwan's largest energy consumer, its share has dropped in recent years from 62% in 1986 to 58% in 2002.[55] Taiwan's energy consumption is dominated by oil (51.8%), followed by coal (30.4%), nuclear power (8.7%), natural gas (8.6%), and hydroelectric power (0.3%).[56] The island is also heavily-dependent on imported oil, with 72% of its crude oil coming from the Middle East in 2002. Although the Taiwan Power Company (Taipower), state-owned enterprise, is in charge of providing electricity for the Taiwan area, a 1994 measure has allowed independent power producers (IPPs) to provide up to 20% of the island's energy needs.[57] Indonesia and Malaysia supply most of Taiwan's natural gas needs.[57] It currently has three operational nuclear power plants with a fourth expected to come into operation by the end of 2012 at a cost of NT$280 billion (US$9.65 billion).[58]
Although Taiwan's per capita energy use is on part with neighboring Asian countries,[59] in July 2005 the Ministry of Economic Affairs announced plans to cut 170 million-tons of carbon dioxide emissions by 2025.[57] In 2010, carbon dioxide emissions have been reduced by 5.14 million metric tons.[60] In order to further reduce emissions, the government also plans to increase energy efficiency by 2% each year through 2020.[61] In addition, by 2015 emissions are planned to be reduced by 7% compared to 2005 levels.[61]
Taiwan is the world's 4th largest producer of solar-powered batteries and largest LED manufacturer by volume.[60] In 2010, Taiwan had over 1.66 million square meters of solar heat collectors installed, with an installation density that ranks it as third in the world.[62] The government has already built 155 sets of wind turbines capable of producing 281.6 MW of energy, and additional projects are planned or under construction.[63] Renewable energy accounts for 6.8% of Taiwan's energy usage as of 2010.[61] In 2010, the green energy sector generated US$10.97 billion in production value.[60] The government also announced plans to invest US$838 million for renewable energy promotion and an additional US$635 million for research and development.[61]
In order to promote industrial research and development, the government began establishing science parks, economic zones which provide rent and utility breaks, tax incentives and specialized lending rates to attract investment.[64] The first of these, the Hsinchu Science Park was established in 1980 by the National Science Council[65] with a focus on research and development in information technology and biotechnology.[64][66] It has been called Taiwan's "Silicon Valley"[67][68] and has expanded to six campuses covering an area of 1,140 hectares (0.0114 km3).[69] Over 430 companies (including many listed on TAIEX) employing over 130,000 people are located within the park, and paid in capital totaled US$36.10 billion in 2008.[70] Both Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation, the world's largest and second largest contract chipmakers,[41] are headquartered within the park. Since 1980, the government has invested over US$1 billion in the park's infrastructure,[66] and further expansion for more specialized parks have been pursued.[70] The Industrial Technology Research Institute (ITRI), headquartered within the park, is the largest nonprofit research organization in Taiwan and has worked to develop applied technological research for industry, including for many of Taiwan's traditional industries (such as textiles).[66]
Following the success of the first park, the Southern Taiwan Science Park (STSP), consisting of the Tainan Science Park and the Kaohsiung Science Park, was established in 1996.[64] In addition to companies, several research institutes (including Academia Sinica) and universities have set up branches within the park with a focus on integrated circuits (ICs), optoelectronics, and biotechnology.[70] The Central Taiwan Science Park (CTSP) was established more recently in 2003.[71] While the CTSP is still under development, many firms (including AU Optronics) have already moved into the park and begun manufacturing operations.[71] Like the other parks, CTSP also focuses on ICs, optoelectronics, and biotechnology, with the optoelectronics industry accounting for 78% of its revenue in 2008.[70] These three science parks alone have attracted over NT$4 trillion (US$137 billion) worth of capital inflow,[66] and in 2010 total revenue within the parks reached NT$2.16 trillion (US$72.8 billion).[72]
The Linhai Industrial Park, established in Kaohsiung in 1960,[73] is a well-developed industrial zone with over 490 companies focusing on other industries including base metals, machinery and repairs, nonmetallic mineral products, chemical products, and food and beverage manufacturing.[74] The Changhua Coastal Industrial Park, located in Changhua County, is a newer industrial cluster with many different industries such as food production, glass, textiles, and plastics.[75]
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