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TAIWAN


 

Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 406,000      
         
GNI per capita
 US $ 18,000
Ranking is given out of 208 nations - (data from the World Bank)

Books on Taiwan

REPUBLICAN REFERENCE

Area (sq.km) 
35,980 

Population 
22,603,001

Capital 
Taipei

Currency 
New Taiwan dollar (TWD)

President 
Chen shui-bian

 

Update No: 008 - (01/09/04)

Taiwan: Lawmakers revise the constitution
With the mayhem of the election process now finally out of the way, the government is settling down to business. 
Despite the machinations of the opposition leaders who are still hoping for a miracle that the election may be overturned, everyone else appears to be focused on work and on sustaining the growth momentum that is bringing a high level of business confidence back to this island economy. 

Among the first actions of government and ahead of the year-end legislative election, Taiwan's current legislature has voted to amend the constitution - but in a non-controversial manner.
The current changes include both a reduction in the size of the unicameral legislature from 225 members to 113 as well as a change in the manner in which legislators are elected. 
Previously, each district elected several lawmakers resulting in some being elected with only a small percentage of the vote. 
Under the new system each district will return only two legislators, a move that will work in favour of the major political parties. 
The changes are an attempt to streamline the legislature, and to reduce corruption among its members. Since these changes do not involve issues of sovereignty, it is hoped that they will not provoke any reaction from Beijing.

In the last day of its extra session, the Legislature also passed this year's US$1 billion special budget for the ten key infrastructure projects, as well as amendments to the 
Copyright Law.

Toughening the anti-piracy legislation
The amendment to the Copyright Law was passed in order to help crack down on piracy and to beef up punishment measures. 
Although the Legislative Yuan amended the law last June, piracy has still been rampant in the country, drawing complaints from US businesspeople and others. 
The Legislative Yuan has amended the law one again in a further attempt to better tackle the problem and to appease the United States. 

The new amendment stipulates that the controls adopted for copyrighted work can only be circumvented in special circumstances, with specific legal authorization. 15.Those who break the law can be punished with a one-year sentence and a fine of at least NT$20,000 and up to NT$250,000. Lawbreakers are also liable for civil compensation. 

When customs officials find imported or exported goods that seem to violate copyrights, they can now seize the goods and demand that owners provide the proper authorization documents. 
The amendment also changes the law's previous leniency for those who violate copyright but do not profit from it. 
Now both non-profit and profitable violation of copyright will be punishable by law. 

China unhappy at Taiwan's United Nations bid
Meanwhile, the war of words that has been going on for years continues with China writing to U.N. Secretary General Kofi Annan, condemning Taiwan's latest bid to join the world body and accusing Taiwan of "seriously threatening" peace and stability across the Taiwan Strait. 
China is also attempting to block arms sales to Taiwan by the United States and has criticised Washington for allowing Taiwan President Chen Shui-bian to make a transit stop on U.S. territory during his end of the month visits to Panama and Belize.

Economic growth remains robust
Taiwan's rate of economic growth continues to pick up with a robust 7.7 percent increase in GDP recorded in the second quarter of the year (based on year-on-year figures).
This was the highest quarterly growth figure recorded since year 2000 and came on the back of stronger than expected domestic demand. 
That it occurred despite the cooling of Taiwan's major export destinations of China and the USA is testimony to the strength and resilience of the local economy. 

The Cabinet-level Directorate General of Budget, Accounting and Statistics has upwards revised the nation's economic growth rate to 5.87 percent for the year, up from its 5.41 percent forecast in May. 
For the first six months as a whole, GDP grew by 7.17 percent versus a 3.31percent rise in the first half of 2003. 
However, the effects of soaring oil prices and higher interest rates may be felt later in this year with the pace is expected to slow in the next two quarters. 
According to the DGBAS, GDP will likely expand by at 5.3 percent in the third quarter and 4.09 percent in the fourth.

The economy is expected to enjoy moderate growth of 4.49 percent next year, with the consumer price index (CPI) rising by 1.58 percent. 
The CPI, rose 1.19 percent in the second quarter, reaching 1.49 percent at an annual rate for the year because of high oil prices, according to the DGBAS.

Yet the government remains in deficit
Much of the country's growth in recent years has been financed by public debt. 
The government has been running deficits every year since 2000. 
The amount of cumulative government debt soared to US$76 billion in 2000 from $17.6 billion in 1990, and the figures are expected to reach $115 billion by the end of this year. 
This year alone the budget deficit is estimated to reach some $8.8 billion with a similar level being maintained for next year. 

While Taiwan has ample international reserves to cover its public sector debt, government may raise business taxes in an effort to claw back its revenue shortfall. 
Tax revenue has been growing by around 6.1 percent a year but this is still insufficient to make up for the increase in government expenditure. 
As a result, the business tax - currently at 5 percent - is expected to be increased by at least two percentage points so as to restore the balance of revenue obtained from taxation.
Tax revenues used to contribute around 60 percent of the nation's annual budget, but the ratio has decreased to 50 percent in recent years because of the economic slowdown.

In part the rapid growth of public debt has been fuelled by defence spending.
Currently Taiwan is planning to purchase more than $18 billion in United States weaponry in spite of protests from Beijing over the proposed sale. 
Even with the increased expenditure, government debt in Taiwan remains low by international standards and was equivalent to a little more than 30 percent of GDP at end 2003.
Taiwan's foreign exchange reserves as of end July 2004 stood at US$230.4 billion. 

Trade continues to do well 
Exports, which account for almost half of Taiwan's economy, grew 25 percent year-on-year in the second quarter, while private investment grew 35 percent faster than a year ago, DGBAS statistics showed. 
Indeed the pace appears to be quickening. 
In spite of slowing global growth and higher than expected oil prices, Taiwan's export orders surged by almost 29 percent in July year-on-year on the strength of demand for mobile phones, computers and semiconductors. 
This was the ninth consecutive month of gains. China's tightening polices appear to have had little effect on export growth so far this year though the effect may yet be felt later in the year.

In the first seven months of this year, the nation's trade surplus reached US$4.79 billion, down 46.9 percent from a year earlier. 
Exports in the seven-month period rose 25.7 percent to US$98.61 billion, while imports increased 35.2 percent to US$93.82 billion.
Despite the continuation of political tensions across the Taiwan Straits, Hong Kong and China remained the two largest export markets for Taiwan in July, with shipments jumping 42 percent to US$5.58 billion after climbing 36 percent in June. 
Hong Kong and China were followed by the US with US$2.41 billion in shipments and Europe with US$1.72 billion, and Japan, US$1.2 billion. 

Employment improves
The unemployment rate also appears to be trending downwards and dropped to 4.9 percent in July. 
Again this was the lowest recorded in more than three years. 
The government hopes that the jobless rate will fall further in the second half as new graduates are absorbed into the workforce and on the strength of demand for new employment in both the high-tech industrial and service sectors. 
On this basis the government is maintaining its forecast of a 4.5 percent unemployment rate for 2004 as a whole.

Officials predict that the growth in the service industry between now and 2008 will be 6.1 percent annually, accounting for 67 percent of the GDP by 2008 from 63.5 percent in 2003. 
The service sector workforce will also increase to 6.139 million in 2008, or 60 percent of the total employed population, from the 5.543 million last year, or 57.9 percent of the employed population. 

Exchange Rate
The exchange rate to the US dollar as of 31 August 2004 stood at 34.053.

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EQUITY TRADING

Taipei eyes forced delisting rule

Taiwan's financial regulator plans to impose minimum performance criteria for companies on the Taipei stock market, raising the prospect of delisting for illiquid or low-priced shares, the Financial Times reported on August 17th.
The policy, which could be gradually implemented next year, is part of an overhaul of the island's stock market aimed at improving the quality of listed companies.
However, the plan is likely to shake investor confidence further after the default of Procomp, a niche chipmaker, in June exposed poor corporate governance practices among the island's second and third tier companies.
Almost 25 per cent of the 1,000 plus stocks listed on the Taiwan Stock Exchange trade at less than T$5, a category called "dumpling stocks" - the price equal to that of one dumpling.
"We are considering to force those stocks to delist which underperform in price or trading volume for a certain period of time," Huang Hsien-Hua, a delegate to the nine-member Financial Supervisory Commission, said recently.
So far, the market regulator can only order a delisting of a company id it si found to be in grave breach of financial law. For lighter offences, trading can be restricted or halted. Current regulations do not go as far as mandatory delisting for underperformance in price or trading volume.
In Hong Kong, plans to introduce forced delistings for underperforming stocks triggered a mass sell-off of penny stocks two years ago. Taiwan's regulator said it would protect retail investors - accounting for 80 per cent of trading - from a similar reaction. "We will introduce the changes sep by step," he said. "Dumpling stocks can possibly be transferred to another board."
But some of Taiwan's second-and third-tier stocks are expected to take another blow later in the year as listed companies are due to submit audited first-half financial results.
In the aftermath of the Procomp default, which FSC investigators blamed on falsified financial statements, the regulator has demanded accountants no longer sign off on financial statements they consider doubtful.
Because auditing firms will have to accept more responsibility for their work on corporate financial statements under draft legislation, some of them are likely to withhold unqualified auditing statements. Trading in these stocks would be restricted, Mr Huang said.

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