The 14 th Annual Conference on Pacific Basin Finance, Economics, and Accounting Panel Session IX (Room 105) 15:45 p.m.- 17:00 p.m. July 14, 2006 Yaw-Chung Liaw, Ph.D. Director General Overall Planning Department, Council for Economic Planning and Development Executive Yuan (Cabinet), Taiwan Taiwan’s Economic Momentum and Prospects
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These Include The Apparel, Leather & Fur, And Wood & Bamboo Products Industries.
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The 14th Annual Conference on Pacific Basin Finance, Economics, and Accounting
Overall Planning Department, Council for Economic Planning and Development
Executive Yuan (Cabinet), Taiwan
Taiwan’s Economic Momentum
and Prospects
2
I. TAIWAN ECONOMIC ACHIEVEMENTS AND CHALLENGES
II. TAIWAN CURRENT ECONOMIC DEVELOPMENT
III. GLOBAL ECONOMIC DEVELOPMENT TRENDS AND
CHALLENGES
IV. TAIWAN’S FUTURE ECONOMIC DEVELOPMENT AND
OUTLOOK
V. CONCLUSION
CONTENTS
31953 1961 1973 1984 20001991
First-phase Import
Substitution
Export Expansion
Stage
Second-phase Import
Substitution and Export Expansion
Stage
Economic Liberaliz-ation Stage
High-tech Industrial Develop-men
t Stage
Knowledge Economy
Stage
Light industry
Light industry
Basic and heavy
industries
Developmentof
strategic industries
Promotion of ten
emerging industries
Knowledge-based
industries
1. Taiwan’s Industrial Development History (Course of Change in the Factor Intensity of Production)
y=f (L, K, T, knowledge)
L L K T Knowledgey=f(T/L)
I. Taiwan Economic Achievements and Challenges
4
Over the past fifty-some years, Taiwan has achieved rapid economic growth accompanied by
price stability. From 1953 to 2005, the economy grew at an average annual rate of 7.9%, with
consumer prices (the CPI) rising by an average of only 4.5% per year (2.4% if the energy
crisis years in the 1970s are excluded).
19522005 Annual rate of change
(% )
Population (million persons) 8.54 22.65 1.9
GDP (US$ million; current prices) 1,675 345,862 10.6
Per capita GDP(US$) 196 15,271 8.6
Agricultural output as ratio of GDP ( % ) 32.2 1.8 -Industrial output as ratio of GDP (% ) 19.7 24.6 -Services output as ratio of GDP (% ) 48.1 73.6 -Exports (US$ million) 116 198,435 15.1
Imports (US$ million) 187 182,616 13.9
Foreign reserves (US$ million) - * 253,290 -
Source: Directorate General of Budget, Accounting, and Statistics.
Note: *US$82 million in 1959.
Source: Directorate General of Budget, Accounting, and Statistics.
Note: *US$82 million in 1959.
2. Taiwan’s Economic Development Experience and Achievements
5
Taiwan’s “World Top Producer” Items in 1983 and 2005
Taiwan Has Become a Global Stronghold of High-Tech Products
6
3.Trend of Industrial Structure
0
10
20
30
40
50
60
70
80
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Service
Industry
Agriculture
%
Source: Directorate General of Budget, Accounting, and Statistics.
◎ Industry’s Structural Trends (1) The industrial structure has undergone enormous change: In 1986, industry share of GDP
rose to a historic high of 44.8%; services’ share increased year by year, to reach 73.6% in 2005.
(2) Within the manufacturing sector, high-tech industries accounted for 43.1% of output in 2005.
(3) Changes in the industrial structure have generated structural unemployment. In recent years, the government has adopted a raft of short-, mid- and long-term employment promotion measures, and in the future must consider industrial development directions in the light of such structural changes.
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⊙ Main competitive industries have large output value. As trillion-dollar industries have gradually take shape, they have also gradually developed comprehensive supply chains.
2005
Digital content(NT$290billion)
Biotech(NT$15 billion)
2-Trillion 2-Star
industriesSemiconductor
(NT$1.11 trillion)
Textile m
ill products
(476)
Petrochemicals(NT$1.14 trillion)
Com
mu
nicatio
n
(579)
Mach
inery
&
equipm
ent
Image d
isplay
Iron & steel
(640)(909)
(955)
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Under the impact of the international competition brought by globalization, some export industries have experienced relatively serious decline. These include the apparel, leather & fur, and wood & bamboo products industries.
⊙ Certain industries have fallen into severe decline, and need assistance to transform and upgrade.
Taiwan’s entry to the WTO has also delivered a serious blow to certain traditional-industry manufactures. Besides the large-volume import of low-cost towels from China, ceramics, furniture, non-woven cloth, fiber-optic cable, paper, and building materials all face competition from Asian countries.
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Upstream industries
(13.0%)(31.1%)
Supportiveindustries
(13.9%)(11.9%)
Final consumption
(20.9%)(13.8%)
Computers and peripherals
4,558 (14.3%) 2,662 ( 4.4%)
Communications industry
828 (2.6%)3,764 (6.2%)
Machinery and parts
1,730 (5.4%)2,873 (4.7%)
Passive componentsindustry
1,188 (3.7%)1,821 (3.0%)
Flat panel display industry
290 (0.9%)4,759 (7.8%)
Plastics and composite
fiber industry
1,200 (3.8%)4,513 (7.4%)
1996 export value(percentage)
Source: Compiled by CEPD from MOEA and MOF statistical data.
Semiconductorindustry
2,623 (8.3%)9,690 (15.9%)
Metal products
1,537 (4.8%)2,551 (4.2%)
Vehicles and parts
1,258 (4.0%)1,944 (3.2%)
⊙ Internationally competitive products have already generated industrial and regional clusters, with industries developing backward from downstream to upstream and toward capital and technology intensity, while science parks have also promoted related industrial clustering.
Unit: NT$100 millions
2005 export value(percentage)
10Source: Council for Economic Planning and Development.
1. Monitoring IndicatorsThe monitoring indicators flashed “green” in May 2006 for the tenth successive month. The positive movements of most indicators suggest continued steady expansion..
II. Taiwan Current Economic Development
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2. Economic Growth
Despite the deceleration in the first half of 2005 due to a worldwide slowdown, the
economy gained momentum in the second half, thanks to the boost brought to
exports by the upswing in the global consumer electronics market, and steady
pickup in private consumption, leading to a 4.1% growth for the whole year.
The economy grew 4.9% in the first quarter of 2006, with exports and
manufacturing production remaining strong.
Economic Growth
(yoy)
Net Foreign Demand
Domestic Demand
Private Consumption
Private Gross Fixed Capital
FormationOthers
2001 -2.2 -4.6 0.4 -4.4 -0.6 2.5
2002 4.3 1.6 1.5 0.5 -0.4 2.6
2003 3.4 0.7 0.6 -0.03 0.1 2.7
2004 6.0 6.3 2.3 3.7 0.3 -0.2
2005 4.1 1.6 1.8 -0.2 0.0 2.5
2006(Jan.-Mar.)
4.9 1.2 1.3 -0.5 0.4 3.8
Contribution to Economic Growth (in percentage points)
Source: Directorate General of Budget, Accounting, and Statistics.
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3. Domestic Investment
Gross Fixed Capital Formation: Growth rate
Total investment increased at a modest rate of 0.5% in 2005, with private investment
declining 1.3% while investment by government and by public enterprises expanding
0.3% and 17.2%, respectively.
In 2006, private investment is expected to grow more quickly while government
investment will grow only marginally. Investment by public enterprises is expected
to fall as a result of privatization.
Total Private investment
Public enterprises investment
Government investment
2001 -19.9 -26.8 1.4 -6.4
2002 -0.6 4.1 -1.3 -12.8
2003 -0.9 -0.3 -4.1 -1.1
2004 17.5 31.0 -18.2 -5.7
2005 0.5 -1.3 17.2 0.3
2006(Jan.-Mar.) -4.0 -3.9 -4.9 -3.8
unit : %
Source: Directorate General of Budget, Accounting, and Statistics.
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4. Industrial ProductionIndustrial production softened in the first half of 2005, but has displayed much
more strength since August, increasing 3.4% for the whole year. It went up
higher in the first five months of 2006, with manufacturing and construction
industries increasing 8.0% and 19.3% respectively.
Growth of Industrial Productionunit : %
Total Mining Manufacturing
Electricity, gas, and water
construction
2001 -7.8 0.1 -8.4 1.1 -11.2
2002 7.9 8.3 9.4 3.3 -20.7
2003 7.1 -7.4 7.4 3.8 8.9
2004 9.9 -4.4 10.6 3.0 4.9
2005 3.4 -9.9 3.2 3.8 11.4
2006(Jan.-May) 7.9 -6.2 8.0 2.8 19.3
Source: Ministry of Economic Affairs.
Units: US$ billion, %
Trade Exports Imports
Balance Value Growth Value Growth Value Growth
2001 234.3 -19.9 126.3 -16.9 108.0 -23.3 18.3
2002 248.5 6.1 135.3 7.1 113.2 4.9 22.1
2003 278.6 12.1 150.6 11.3 128.0 13.0 22.6
2004 351.2 26.1 182.4 21.1 168.8 31.8 13.6
2005 381.0 8.5 198.4 8.8 182.6 8.2 15.8
2006(Jan.-Jun.)
204.3 11.3 106.0 12.9 98.3 9.5 7.8
5. Foreign Trade
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Exports and imports softened in 2005, with two-way trade increasing to 8.5%. Exports and imports expanded by 12.9% and 9.5%, respectively, in the first six months of 2006.Trade surplus grew to US$15.8 billion in 2005, from US$13.6 billion in 2004. It posted US$7.8 billion in first half of 2006, up US$3.6 billion from the same months last year.
III. Global Economic Development Trends and Challenges
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2.5
3.2 3.2
2.5
3.2 3.2
1.71.9 1.8
1.5
2.3 2.2
5.9 6.05.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2001-2004 2005-2008 2005-2015
˙World economy entering golden decade of stability and prosperity.
˙Asia’s rise serving as a new driving force for the global economy.
World
US
A Japan
EU
East A
sia
%
Econ
omic grow
th rate
Note: BRICs refers to Brazil, Russia, India and China; the G6 are the US, Japan, Germany, UK, France and Italy; East Asia refers to the 4 Asian Dragons, the ASEAN 4, and China. Source: Global Insight Inc.
2. The Rising Power of Emerging EconomiesBRICs GDP rising as ratio of G6 GDP
2003 : 13.3 % 2015 : 19.1 %
2005-2015 annual average growth ratesUnit: %
G6 China India Russia Brazil
2.6 6.8 5.5 4.3 3.9
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3. Pivotal Profit Niche of Innovational Services In the wake of the tremendous advances in information and communications technology, and the sharp fall in communication costs, service industries will break through their traditional limitations of “inseparability”, “unstorability” and “undeliverability” to spark a new “service sector revolution.”
Heavy Investment in the Service Sector by Transnational Corporations - Global FDI Flows by Industrial Sector
39%6%
55%
22%7%
71%Services ServicesManufacturing Manufacturing
Primary industry
Primary industry
Source: UNCTAD
1989~1991 2001~2002
With IT industry hardware and consumer electronics having already reached a plateau, the
focus will shift from hardware to software in the next stage of the information revolution,
and innovational services will become the key competitive factor.
In recent years, the sharp expansion of investment by transnational corporations has fully
reflected the opportunities of service industry development.
A look at FDI flows shows that in 2001~2002, 71% of global FDI went into the service
sector, with telecommunications, storage and transportation showing the fastest growth,
followed by business services.
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4. Accelerating Trends of Population Aging and Fertility DeclineItem Year-end Population Fertility