The Outlook for Taiwan's Economy over the Next Ten Years

The focus of world economic development has moved from the shores of the Atlantic to the Asian Pacific region not only because of a decline in economic growth in Europe and North America but also because of the high level of economic expansion maintained over the past twenty years by the Asian Pacific region. Economic growth in Western nations has slackened mainly because of overexpenditures, undersaving, and the inability of labor productivity to keep pace with wage hikes. The work ethic there has deteriorated, and the entrepreneurial spirit is flagging. As a member of the Asian Pacific region, what sort of role will the Republic of China play on the world stage in the next ten years? That is a question of concern to us all.

First, the Western nations will continue to adopt protectionist measures in an attempt to rescue sunset industries and workers faced with unemployment. "Autistic" measures such as these, however, will not only fail to accomplish their intended goals but will also cause their foreign trade to shrink because of retaliatory actions. Western nations that wish to make a fresh start will have to change their consumption habits and strengthen their work ethic. But the fact that the adjustment will take time to accomplish may have an adverse effect on Taiwan's foreign trade.

To maintain economic growth, Taiwan must spur its domestic demand, although a large increase over a short time will not be easy. In addition, the growing incidence of demonstrations brought on by the democracy movement, the spread of influence by interest groups on the legislative process, and the growth of environmental consciousness mean that business must pay higher social costs, higher costs which will slow down Taiwan's economic growth. According to optimistic estimates, Taiwan will be able to maintain an average growth over the next ten years of six to seven percent, while the level of inequality in income distribution will not increase seriously, because of a comparable increase in the middle class and social welfare expenditures. Population pressure will not be serious, and unemployment will stay between two and three percent. Taiwan will remain one of the regions in the world with the fastest developing economies. Its level of prosperity will be sufficient to allow it to enter the ranks of the developed countries and to play a more active role on the international stage.

Important areas for activity in line with this more active role will be foreign investment and foreign aid. Foreign investment will surge over the next ten years, especially in the United States. Chinese on Taiwan will utilize their large savings to become major investors in mutual funds and government bonds and to compete with the Japanese in purchasing real estate in major cities. In developing regions, Taiwan's foreign investment and influence will gradually replace Japan's in many industries. In foreign aid, because of its massive foreign exchange reserves, the R.O.C. must assume a larger responsibility toward the economic development of the Third World. The government should set up a multimillion-dollar development fund to offer low-interest loans, trade credits, or outright gifts to qualified developing nations with which our country has substantive trade relations.

The development of relations with Mainland China cannot be overlooked during the next ten years. Taiwan's democratic foundation and its prosperity deliver a great shock to the Chinese mainland. So long as the present direction of economic policy on the mainland does not change, indirect trade between Taiwan and the mainland must continue to increase, since it benefits both sides. Although some industries on the mainland will become Taiwan's rivals, as long as Taiwan continues to advance in technology and upgrade its industrial structure, the competition will serve as a stimulant. Although not apparent on the surface, investment by Taiwan businesses on the mainland through Hong Kong or Southeast Asia may also increase. The mainland needs investment and technology, and Taiwan can supply both.

We have great confidence in the above expectations. But we cannot fail to remain alert to the obstacles toward realizing them: (1) Will a world economic depression reoccur? Decision makers in nations around the world must take preventative countermeasures in concert. (2) Will the ultraleftists return to power in Communist China? That would be a catastrophe. We should use every method we can to lead the mainland along the path of freedom, democracy, and peace. (3) Will the Taiwan separatist movement increase? That would prove the greatest bane of all toward our expectations, since it would create social unrest and political turmoil as well as bring about external attacks. If Taiwan is placed in a situation of apprehension and alarm, its economy will go downhill and its current prosperity will be difficult to recover.