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  2002 2001 2000 Ranking(2002)
Millions of US $ 406,000      
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 US $ 18,000
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Taiwan today is one of Asia's powerhouses and a centre for high-tech exports. The economic crisis that engulfed much of Asia in the late 1990's scarcely caused a ripple in the boardrooms of Taipei. The Taiwanese people enjoy one of Asia's highest living standards. Taiwan is a net exporter of capital to the region and Taiwanese companies are themselves seen with increasing frequency on the regional and global business stage. Taiwan's foreign exchange reserves are the third highest of any country in the world.
In the last ten years Taiwan has embraced both a democratic multiparty government system and an outward looking economy that meets WTO standards of transparency and competition. Taiwan has entered the new millennium with well-deserved confidence. Yet, Taiwan has not yet come of age entirely. Diplomatically Taipei remains isolated and is recognised by fewer than 30 countries. While judged by objective criteria Taiwan would not only qualify for membership of the United Nations but would be one of its major regional players, the world is not yet a rational place and, like it or not, the looming presence of mainland China is sufficient to guarantee that this will not happen, any time soon. 

Taiwan's History - The "Other China"
The original inhabitants of Taiwan (or "Formosa as it was known to Europeans), its aboriginal people, are of Malay descent although how and when they arrived in Taiwan is unknown. They have much in common with the people of the Northern Philippines. It was these aboriginals that the early Portuguese and Dutch traders seeking to establish a base on the China coast had to contend with and not the Chinese. However Chinese seafaring merchants had the advantage of proximity and they were the ones who first sought to establish permanent settlements along the Formosan coast. In the fifteenth and sixteenth centuries the Chinese came in increasing numbers forcing the natives from the narrow fertile plain that runs the length of the western seaboard and into the harsh mountainous areas of the interior.
In 1682, the Island of Formosa was formally incorporated into the Chinese Empire as part of Fujien province and it was not until 1885 that Taiwan became a separate province of China. The truth of the matter was that Chinese sovereignty in Taiwan was never absolute and extended only to those areas of population under Chinese control. Taiwan was, in the words of one contemporary writer, "a crude and lawless place". Control over the aboriginal tribes was non-existent and acts of savagery against Japanese traders (and others) provided the pretext for Japan to seek to incorporate Taiwan into the Japanese Empire.
At the dawn of the 20th century Taiwan was a colony of Japan having been ceded by China in 1895 during the final days of the Manchu regime. Yet, Taiwan prospered. The early trade in camphor which had been an economic mainstay of the island during the 19th century had already withered because of over-harvesting although trade in tea and sugar flourished and formed the basis of Taiwan's early industrial development. Railway lines were built or extended and new harbour facilities established. Importantly, whereas traditionally the centre of power and wealth under the Chinese had been in the south of Taiwan, during the Japanese colonial period the focus shifted irrevocably to the north of the island. Taipei developed as a city and capital of the island and Keelung became the major port for trade with Japan - the port of Tamshui which had traditionally carried the trade in the 19th century had already silted up and could not accommodate the larger draught vessels of the time.
In the closing days of the Second World War, the allied powers agreed at their Cairo meeting that Taiwan would be returned to China with the defeat of Japan. However, China at the time, while one of the allied powers, was locked in a bitter civil war. Unsure as to whom Taiwan should be ceded, it became for a while a UN Trust Territory.
General Chiang Kai-shek, the Nationalist leader eventually accepted Taiwan back from Japan to be administered on behalf of the allies pending a final settlement. From 1945-1949, Chiang paid little attention to the Island province as increasingly the nationalist armies fighting on the mainland were being overwhelmed by the Communist forces.
However, in 1949 the war on the mainland was coming to its conclusion with the Peoples Liberation Army triumphing over its Nationalist counterpart. Chiang, his army and his administration fled to Taiwan.
On the Chinese mainland, a new "Mandate of Heaven" prevailed. The old Republic of China was replaced by the Peoples Republic of China. On the island of Taiwan however it was a different story. Taipei at once, became the temporary capital of the "Republic of China" established by Sun Yat-sen in 1911 and Taiwan became the "unsinkable aircraft carrier" To the Nationalists that came with Chiang, Taiwan was no more than a temporary base from which to regroup, rearm and retake the mainland. Things did not work out that way.
To the local Taiwanese, the arrival of the Mandarin-speaking mainlanders and a large army amounted to a new invasion and new colonisation especially as Taiwan was immediately placed under a harsh martial law regime that existed well into the nineteen-eighties. Rebellion and dissent were brutally repressed in the early years in what came to be known locally as the period of "white terror".
Had it not been for the outbreak of the Korean War, Taiwan's story of the past fifty years may have been differently written. Korea bought valuable time for the Nationalists and shifted Beijing's focus to its northern border rather than to the far south. The Nationalist (Kuomintang or "KMT") administration may have been inept at fighting a war but they proved highly effective in restoring and then transforming Taiwan's economy. Taiwan was the first of the Asian tigers to develop on the basis of an export led path to economic prosperity.

A success story
As the economy prospered, the military-backed dictatorship became more benign. Land reform brought with it economic emancipation and the beginnings of industrialization based on family-owned companies. Martial law was lifted in the mid-nineteen eighties and dissident political groups that had been around for some time were transformed into genuine political parties. Restrictions on press freedom were lifted and censorship largely abolished. Democracy has flourished on Taiwan.
The last decade has been one of dynamic and at times frenetic change both economically and politically. A government program of industrial restructuring and incentives has been largely successful in shifting Taiwan from being a low-cost manufacturing centre to that of a regional centre for high-tech manufactured goods.
Divisions between "mainlanders" and "Taiwanese" have largely been healed - certainly for the younger generation and the Government has done much to atone and set to rest some of the worst excesses of the martial law period. Nowadays it is more fashionable to be called one of the "New Taiwanese" rather than a "mainlander". 

Taiwan and the PRC
Taiwan, or to give it its full title "The Republic of China" is a fully independent country. Its population enjoys universal suffrage; it maintains a free press and a democratic electoral system. The President of the country is elected directly by the people. Yet as noted already Taiwan is a country that is isolated diplomatically.
The anomalous position in which Taiwan finds itself is yet one more consequence of the Chinese Civil War. Taiwan, long ago gave away any claim to the mainland of China and has recognised the PRC as the legitimate government of the Chinese mainland. The gesture has not been reciprocated. Instead China maintains steadfast to a policy that Taiwan must be reunited with the Chinese mainland. Ominously, China claims the right, if necessary, to use force to "liberate Taiwan". In Beijing's eyes, Taiwan's only option is to negotiate the terms of its surrender.
The Chinese claim rests on tenuous grounds. Throughout its history Taiwan was only a province of China for a mere ten years during the nineteenth century and even then Chinese administrative control did not extend throughout the Island. While China has advocated the "one country - two systems" formula applied to Hong Kong and Macao as the basis for reunification; commentators are quick to point out that the situation in Taiwan is entirely different. There is no colonial administration present in Taiwan that could hand sovereignty back to China, nor can the government here negotiate a surrender of sovereignty not sanctioned by the people of Taiwan. These are points that many Taiwanese - "new" and "old" alike feel are not understood in Beijing. Certainly popular sentiment in favour of reunification of Taiwan with the Chinese mainland at the present time is close to zero. Nevertheless, it did not stop the emergence of one candidate in the Year 2000 Presidential election running on the platform of reunification under the Deng Xiaoping formula. He scored less than 1% of the vote.
Talks between Taipei and Beijing have been going on for almost a decade now without any real sign of progress on the substantive political question. Two fundamental issues divide the two sides. While China seeks to negotiate the return of Taiwan to China on the basis of treating Taipei as the seat of a renegade provincial government, Taiwan insists that the two sides negotiate as equals. Taiwan also sees any reunification question as being a matter for the distant future and after China has itself democratised. For the time being, Taiwan wants confidence building measures at the top of the agenda.
Despite conciliatory statements by the incoming government of Taiwan, China has refused to adopt a more conciliatory position and has remained hostile to Chen and the DPP. This has led in turn to a more robust assertion of Taiwan's intention to take its own course and not to toe a PRC dictated line.
All of this means little for foreign business. Despite the grandstanding that takes place on the political stage, international companies are free to do business on either side of the Taiwan Strait without hindrance. Taiwan is collectively itself one of the largest investors in the mainland. 

Present Political Environment
The presidential election of March 2000 saw a shift of power from the Nationalist Kuomintang (KMT) Party that had ruled Taiwan for almost fifty years to that of the Opposition Democratic Progressive Party (DPP). A human rights lawyer who had been imprisoned in the nineteen-eighties for his political activism, Chen Shui-bian, became President although within Taiwan's unicameral legislature, the KMT has still maintained a majority of seats. 
Chen's own administration has been helped by the fact that following its defeat at the presidential polls, the KMT fractured. One faction (the Taiwan Solidarity Union) led by former (KMT) president Lee Teng-hui aligned itself with the DPP while another faction led by former Taiwan Governor, James Sung, formed a breakaway right-wing splinter group known as the "People First Party" (PFP). 
Despite the political realignments of the past few years, Taiwan maintains to all intents and purposes a bi-party political system. Both the KMT and the PFP have formed the "Pan Blue Alliance" and will run with a common slate at the 2004 presidential polls. By contrast the combination of the DPP and the TSU is commonly referred to as the "Pan Green Faction."
On economic policy both major parties are centrist and there is little to chose between them. Rather it is on the issue of the relationship with China where opinions divide. On other issues, the most defining issue for the present government is its commitment to human rights (with women's issues and those related to other minorities being prioritised) and to democratic reform. Of course, there is a political edge to this too in that it seeks to differentiate its own track record with the historic record of the KMT which for many years was solely a party of authoritarianism.
The Opposition KMT and PFP are dominated - at least in leadership positions - by people who can trace their recent inheritance back to the mainland of China and those families who came over to Taiwan with Chiang Kai-shek at the closure of the Chinese Civil War. These people are still inclined to see the relationship with Beijing as a familial squabble and that, in the fullness of time will allow Taiwan and the Chinese mainland to reunite (although not under a Communist government). 
By contrast the Democratic Progress Party and the Taiwan Solidarity Union are dominated by ethnic Taiwanese (85% of the population) who while acknowledging their Chinese ancestry have no kinfolk on the mainland of China and have no desire to reunite Taiwan with it.
With presidential elections approaching again in March 2004, President Chen Shui-bian is again standing for re-election with his outspoken Vice-President Annette Lu again as his running mate. The opposition alliance has KMT Chair Lien Chan as its standard bearer with the PFP's James Soong eying the vice presidential slot. 

Political Outlook
Between now and the elections of March 2004 both major political groups will be seeking to play the "China card" in their attempts to garner support of the voters. The DPP often presents the Pan Blue alliance as the group that would sell-out Taiwan's interests to Beijing, while the Pan Blue camp seeks to portray Chen as a dangerous pro-independence advocate and one who is heading a party whose stance might provoke Chinese military action against the Island.
In fact the two groupings are not so far apart and it is unlikely that either side would take extreme measures to destabilize the situation across the Taiwan Straits. Nevertheless the DPP is keen to show the world that the present impasse is caused by a belligerent and recalcitrant China that not only refuses to renounce force to reunite Taiwan with the "Motherland" but also has more than 400 armed missiles pointed at the Island.
In fact whichever party assumes office following the election, the situation is unlikely to change dramatically. Both major groupings are committed to the democratic process (and indeed it was the KMT that introduced and fostered democratic reforms) and both see the unofficial alliance with the United States (as stated in the US-Taiwan Relations Act) as the cornerstone of Taiwan's foreign policy.
While the people of Taiwan overwhelmingly reject reunification with China this presumption has never been tested directly at the polls, which is why the DPP wants a referendum on the issue (and why Beijing for its part remains adamantly opposed). No matter the outcome, neither group really intends to change the status quo. What they are seeking to do is to demonstrate the absurdity of the Chinese hegemonistic position.
For the most part, Taiwan will continue to evolve much as it has done in recent years but with a DPP government there will be less of an international perspective both to its decision-making and in the manner in which it internationalizes its own economy. Under the DPP the hire of foreign labor is being discouraged, there is much less emphasis on English as a second language in government and in business (although the teaching of English in schools is widely fostered) and a much greater fostering of "Taiwanese nationalism." The KMT by contrast is generally credited with a better weltanschauung. 
Both groups accept that there is a need for constitutional reform although the manner in which this is to be introduced differs between them. The DPP want to scrap the present constitution (which really has served Taiwan remarkably well) and replace it with a new one that de-emphasizes the "Republic of China" as Taiwan is officially called. By contrast the Pan Blue alliance see a need to amend the constitution without seeking to throw it away entirely. This issue is likely one that will be given greater prominence in the months to come.

Economic Outlook
Taiwan has made great strides over the past ten years to open its domestic economy to international competition. For both commercial and strategic reasons, Taiwan has sought a role for itself as a regional hub and an alternative centre to Hong Kong and Shanghai from which to develop the China market. Lack of direct transportation links with the Chinese mainland continue to hamper efforts so far in this direction but progress has been rapid in other areas that are not dependent on direct links with the PRC.
Although not yet succeeding as a regional centre - Singapore and Hong Kong remain the favourites of international business - Taiwan is an important market in its own right although not one for the faint hearted. Taiwan's industry is becoming increasingly dependent on the export of higher value-added products and they are major purchasers of industrial plant and equipment. Major infrastructure projects underway in the telecommunications, energy and transportation sectors provide major opportunities for foreign engineering and technology-based companies. An affluent population of 22 million, fashion conscious and with a high propensity to spend provides a consumer market ready to try new trends and fashions. Increasingly the younger generation takes its cue from Japan rather than the United States. In recent times the DPP led government has placed less emphasis on the broad regional centre approach to one that is more focused on building Taiwan as a high-tech manufacturing hub.

GDP Growth and Forecasts
Taiwan's economy is driven by trade and especially exports to the markets of the United States, Japan and Europe. These are major markets for Taiwan's rapidly growing high-tech sector. For the past decade, the drivers of growth have been the semiconductor and related electronics industries although there is now a new emphasis on the emerging "sunrise opportunities" in the biosciences and in such areas as nanotechnology. Much of the required technology comes from overseas in various ways. Like Japan before it, the Taiwanese are good "adaptors" but less good at "innovation" and "research."
In 2003 the domestic economy was hard hit by the outbreak of severe acute respiratory syndrome (SARS) and the U.S.-led war in Iraq. However in the second half of 2003 it caught the wave of the worldwide economic recovery and this is expected to reap even better results for Taiwan in the next year. It is now obvious that Taiwan's growth rate needs to be compared to those achieved by other OECD economies and not the norms of the developing world. 

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Update No: 006 - (02/08/04)

With the onset of the summer holiday season and with the presidential inauguration out of the way, both politics and business took something of a welcome rest during July although the respite is expected to be brief as already sights are being set on the forthcoming end-of-year legislative elections and with each of the major political groupings hoping that voters will endorse their positions. It is the conservative Pan-blue alliance that needs to do the most work. Full unity continues to elude the alliance members and increasingly, the tendency of voters to identify with local issues - as evidenced in the recent elections for the Kaohsiung City Council - suggests that the pro-mainland advocacy (or at least the anti-independence advocacy) of the conservatives is fast losing any remaining electoral appeal it may have had up until now.

On the economic front, export orders continue to propel Taiwan towards a faster growth rate than had earlier been predicted for the year although dangers of the economy overheating appear to be receding. 

Pan-blue coalition still hoping for a miracle
Lawyers for the conservative coalition comprising the Kuomintang (KMT) nationalist party and the People First Party (PFP) have conceded that the vote recount for the March election would not be sufficient to upset the victory given to President Chen Shui-bian and the Pan-green alliance.

Back in March, President Chen Shui-bian of the Democratic Progressive Party (DPP) won the presidency over KMT Chairman Lien Chan by a margin of only 0.2 percent or 29,518 votes out of the 13 million votes cast. The election was held one day after Mr. Chen and his Vice-President, Ms. Annette Lu were wounded during a motorcade in the southern city of Tainan. Pan-blue politicians believe that they were denied victory as a result of the sympathy vote garnered by Mr. Chen and have gone so far as to claim that the shooting may have been staged by the DPP to win votes for their presidential and vice presidential candidates.

The vote recount has now been completed and has narrowed the difference between the two candidates from around 29,000 to 21,863. A further 40,327 disputed ballots await a final ruling from the Court which is expected in September. Lawyers for the opposition claim that the number of disputed votes would be insufficient to reverse the outcome of the election. Instead they are now pinning their hopes on a new election since they claim to have uncovered nearly 20,000 ballots that did not match voter registration lists and suggesting that in some areas there was a fraudulent ballot. The opposition has lodged a second lawsuit seeking a new election and is now awaiting a court ruling on the matter. 

The DPP has disputed the interpretation put on the ballot recount by the opposition and claims that there were no signs of vote rigging and that the election outcome would not be reversed.

Reunification of the conservatives remains elusive
While at the national leadership level the two main opposition parties continue to discuss plans to merge their forces (after all the PFP party was only formed during the lead up to the year 2000 presidential election by supporters of former Taiwan governor James Soong who were unhappy that KMT Party Chair, Lien Chan, was the nominee for president) differences within the party administrations and problems at the local level continue to hamstring the efforts of the leadership.

At its July meeting, the KMT took one step further towards reunification by approving an amendment to the party constitution that eliminated a regulation stating that members who had been disciplined by the party and whose party membership had been rescinded could not run for either the chairmanship or membership of the central standing committee. This amendment would allow Mr. Soong to return to the KMT with full membership rights. However, in order to take effect it must be passed by the party congress. This has been scheduled for discussion and approval at an interim party congress due to be held in August that would also approve the proposed merger plan with the PFP.

Some media reports have suggested that within the two blocks there remain elements opposed to the merger and that those opposed have sufficient political weight to scuttle the plan. Some within the more conservative PFP remain opposed to the influence that former President Lee Teng-hui continues to exert within the KMT. Mr. Lee was expelled from the KMT following the party's defeat in the 2000 poll and he subsequently formed the Taiwan Solidarity Union (TSU), a political grouping that is now aligned with the DPP within the Pan-green coalition. Others see the merger as an attempt by the "old guard" to cling to power and want the older leaders to step aside to allow a new generation to take the helm.

While there remains an expectation that the conservative forces will continue to talk about re-uniting, there is now a growing expectation that this will not happen - if it happens at all - until after the year-end legislative elections. There are simply too many issues to address for it to occur this year - and too many people perhaps with vested interests determined that it should not happen.

Taipei Ma Ying-jeou sets his sights on the 2008 Presidential Race
Taipei mayor, former Justice Minister and a KMT Vice-Chair, Ma Ying-jeou is generally regarded as the natural "heir-apparent" to the KMT chairmanship - that is unless James Soong returns to the fold to claim what he believes is rightfully his, and it is no secret that Ma harbours ambitions that go beyond the party chairmanship - to win the presidency.

Mr. Ma is a "mainlander" and is among those opposed to Taiwan independence. Yet, despite the disadvantage of his mainland heritage in a Taiwan that increasingly sees itself as set apart from the mainland of China, he is a consummate politician who takes to the hustings with an alacrity few in his party could match. He is regarded as a man of principle and is exceedingly popular with voters, especially in northern Taiwan. He is also part of the "new guard" and with messrs Lien and Soong having now lost two elections between them, Mr. Ma has widespread support within the opposition that sees in him the best chance of an electoral comeback in 2008.

It is in this light that an ongoing reshuffle within the Taipei City administration is being watched carefully with many outgoing bureau directors set to campaign for the December legislative elections as well as the elections next year for posts of county commissioners. The positioning of Ma's supporters in key positions in the northern Taiwan area is seen by many as part of the broader strategy to build a network of local connections and influence over the next four years. Mr. Ma will be a force to be reckoned with the next time around.

Kaohsiung Elections see further support for the Pan-greens
Elections last month for the City Council in Taiwan's second largest city - the southern port city of Kaohsiung - produced another win for the Pan-green coalition with the Taiwan Solidarity Union, the political party of former President Lee Teng-hui, making the greatest gains. The TSU saw three of its four candidates elected while the Democratic Progressive Party (DPP) saw six of its candidates win election. This is sufficient to give the Pan-greens a majority of seats on the Kaohsiung City Council. 

The TSU is another group that splintered from the KMT in the aftermath of the 2000 election and consists of those within the KMT that were opposed to the platform of reunification with the Chinese mainland. So far its power base has been drawn largely from northern Taiwan and this was the first time it has made significant inroads in the south of the Island (although it is also the first time it has had the opportunity to do so). Its degree of success outside of its natural support base has surprised many. The TSU strategy appears to have been to headhunt former KMT councilors in Kaohsiung who were sympathetic to the TSU and to campaign on a policy of "localization" rather than "pro-independence." It is a strategy that appears to have worked and has enabled the TSU to occupy the middle ground and provide a platform for the "swing" politicians - those who must choose between the pan-green and the pan-blue camps.

According to analysts the election result has also shown that support for pro-reunification candidates continues to dwindle and that a more localized Taiwanese identity has now become part of the mainstream opinion.

China continues to voice its concern over Taiwan independence
While the US State Department continues to state that there have been no recent changes in Washington's "One-China" policy, China continues to demand that the United States cut back on its weapons sales to Taiwan while in the same breath threatening that Taiwan's plans to amend its constitution could be sufficient provocation for Beijing to launch an attack against the island.

Taipei is currently reviewing plans to purchase $18 billion worth of advanced weapons systems and military aircraft from the United States. Chinese concern over the sale has been reiterated on a number of occasions in recent weeks. China's Foreign Minister, Li Zhaoxing, stressed Chinese concern to the head of the U.S. Pacific Command, Admiral Thomas Fargo, during the latter's visit to Beijing in late July. Chinese, President Hu Jintao, again stressed China's strong opposition to Washington's military support for Taiwan in a telephone conversation with President Bush on 30 July. 

While the politicians argue about the issue of arms sales and the right of China to use force against Taiwan (a policy that has zero support outside of China), both China and Taiwan conducted a series of war games last month designed to underscore their respective positions: In the case of Taiwan its war games were intended to demonstrate its ability to repel an attack from the mainland and included practice landings by its military aircraft on the nation's toll ways, which have been specifically designed and strengthened in some areas to act as aircraft runways in case of attack. Beijing has responded with its own series of massive land, air and sea operation to showcase its advanced weapons systems and troop strength.

Taiwan's President Chen Shui-bian promised in his inaugural speech last month that he would not touch on the independence issue during his presidency but he is not trusted in Beijing who believe that he is conducting a policy of "creeping independence." In a sense Beijing is correct in as much as Taiwanese are becoming increasingly concerned with their own local identity rather than seeing themselves as part of a "Greater China" and the manner in which China has conducted itself in Hong Kong since the transfer of sovereignty in 1997has only accelerated the belief that Beijing cannot be trusted.

Yet trade with the mainland booms
According to Taiwan's Ministry of Economic Affairs, Taiwanese investment into China during the first half of 2004 amounted to US$3.39 billion. This represents an increase of more than 68 percent on the level of investment recorded during the same period of 2003. Taiwan's Investment Commission approved 1,074 applications for investment in China compared to only 341 applications for investment in other countries including Southeast Asia, South Asia and Eastern Europe.

On average, individual investments made outside of China were 32 percent higher in value terms than those approved for China.
The pattern of Taiwan's investment flow is part of the dilemma facing the government and the Taiwanese people as a whole. While the Taiwanese are adamant that they do not want to be reunited with China - at least not under the "one country, two systems" formula applied to Hong Kong, they are very focused on the Chinese mainland when it comes to business and to investing outside of the Island. Many, if not most, of Taiwan's major industrial groups have all invested heavily in China in recent years. The latest batch of approved applications included those of the Taiwan Semiconductor Manufacturing Corporation, Hon Tai Precision Industry Company and Au Optronics Corporation.

China sees such attitudes as "duplicitous." Beijing has again warned Taiwan companies investing in the mainland to steer clear of supporting government policies that promote independence. The latest warning came at an annual forum on cross-strait economic relations held in late July in the southern Chinese city of Hangzhou. Wang Zaixi, vice-minister in charge of the Taiwan Affairs Office admonished investors with the warning "it is not permissible for individuals to benefit from cross-strait economic ties and yet remain proponents of Taiwan's independence" Wang said.

Taiwan's GDP may grow at a faster clip
Taiwan's exports continue to show signs of robust growth with June export orders rising by 28 percent by value over June 2003 to reach US$17.7 billion. Steady global growth has stimulated demand in recent months and the result for June was a rise of 2.6 percent over the May level and the second highest monthly export level after an export figure of US$18.03 billion recorded in April. Overseas orders for electronic goods rose 46 percent to US$3.9 billion while orders for telecommunications equipment increased by 19 percent to US$3.3 billion according to a statement by Taiwan's Ministry of Economic Affairs. Export orders from the United States in June were up by 35.1 percent on last year, Hong Kong by 28.3 percent, Japan, 15.2 percent and Europe 36.6 percent.

In spite of robust export orders, industrial output fell by 2.52 percent from May levels although it was still up by 15.7 percent on a year on year basis. The jobless rate is also showing signs of an increase - it was up by 0.13 percent in June over the previous month due to the entry of new graduates into the market although analysts believe that the labor glut is only a temporary phenomenon. Currently the unemployment rate stands at 4.54 percent.

With the robust export growth and continued signs of global recovery; two of Taiwan's top think tanks have revised upwards their estimates of GDP growth for 2004. The Taiwan Institute of Economic Research has forecast a revised estimate of 5.67 percent - up from 5.08 percent forecast in April. Academica Sinica is now pitching for a 5.76 percent growth rate - up from a level of 4.35 percent predicted in December 2003.

Taiwan's leading business monitoring indicator, published each month by the Council for Economic Planning and Development flashed "Red-Yellow" in June - after flashing "Red" in May 2003 - the first time in more than nine years and signaling an overheating of the economy. This pullback in June was as a result of a noticeable softening on the financial side of the economy. Among the indicators compiled by the Cabinet's Council for Economic Planning and Development (CEPD), the leading index and the coincident index decreased 1.5 percent and 0.9 percent respectively. 

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Taiwan calls on EU to support its WHO bid

Taiwanese president, Chen Shui-bian called on the European Union on May 28th to support Taiwan's bid to join the World Health Organisation (WTO). Addressing a dinner party hosted by the European Chamber of Commerce Taipei (ECCT) to mark "European Day," Chen said that both the United States and Japan voted for Taiwan's observer status at the World Health Assembly, the decision-making body of the WHO, at this year's WHA annual conference, CAN reported.
He appealed to the EU to set aside political considerations and to support Taiwan's WHO bid, allowing the 23m Taiwan people to enjoy their basic rights for the best medical care and disease control and prevention. Chen invited European businesses to make investments in Taiwan, which he said has long maintained close economic and trade relations with EU member nations. Chen said the EU after expansion has become the world's largest economy and provides an excellent opportunity for cooperation with Taiwan.

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