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TAIWAN


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 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: 027 - (06/04/06)

Many people believe that Taiwan's President Chen Shui-bian is becoming more and more of a liability when it comes to dealing with China. There is no doubt that Mr. Chen is an avowed believer in democracy and he has over the course of his political career played a credible role in moving Taiwan on the path to becoming one of the most free of Asia's countries (despite perceptions that Taiwan's legislature remains one of the most corrupt). Yet at times he appears to have difficulty in distinguishing between his past role as an avowed democrat and that of a presidential statesman schooled in the classrooms of realpolitik.
President Chen continues to take delight in provoking the leadership in Beijing despite the evidence - confirmed at the polls last December, in which Mr. Chen's Democratic Progressive Party suffered a resounding rebuff - that most Taiwanese want to let sleeping dogs lie and get on with the business of building a prosperous lifestyle.
The president's February 27th announcement, taken after a meeting of the Executive Yuan (Taiwan's Cabinet) that he would scrap both the National Unification Council as well as the 1991 guidelines for reunification of Taiwan with the Mainland has left many people perplexed as to his strategy. The common assumption is that with support flagging for the DPP and with populist Taipei Mayor Ma Ying-jeou now in command of a reinvigorated Kuomintang Party, Mr. Chen is hoping to boost support for his own party by provoking China into a reaction. If that was the plan then it does not seem to have worked. Disillusionment within the DPP appears to be running deep - only 20 per cent of the membership bothered to vote in the January elections for a new party chairman. Mr. Chen, who in scrapping the NUC broke at least one of the five pledges he made upon first assuming office in 2000 (which were not to declare Taiwan's independence from China, not to change Taiwan's official name, not to hold a referendum or change the constitution and not to renounce the NUC or its guidelines for reunification). In recent years the NUC has been a moribund body in any case and it is difficult to see what was achieved by Mr. Chen's action. 
Partisan politics are therefore once again to the fore - both over the future direction of cross-straits policy as well as constitutional reform. With the 2007 elections for a new Legislative Yuan (Taiwan's unicameral parliament) looming on the horizon we can expect increased acrimony on political exchanges and especially with regard to the differing approaches of the DPP and the KMT towards the mainland.
Washington appears to be as equally displeased with the actions of Taiwan's president as is China and Beijing appears for the moment to be content to let Washington take the front running on any chastisement that is due. KMT Chair Mr. Ma was in the United States last month where he stressed his willingness to reach a consensus and sign a peace accord with Beijing, normalise cross-straits ties and establish mutual confidence building mechanisms. If Mr. Chen is going overboard in his efforts to provoke China, his opponent seems to be bending over backwards in the opposite direction to appease Beijing. As one local newspaper put it "it was as if the Chinese government had no missiles pointing at Taiwan and Beijing was a benign and rational regime."
Mr. Ma, of course, is a consummate politician and is selling himself as a pragmatist. No matter how nave his approach may be when subjected to analysis, he is seen as being decisive and a problem solver and, as such, is gaining in popularity. Contrast this to the DPP which after six years in office still has not learned this valuable political lesson. Instead of calming the waters and telling people what they want to hear, DPP politicians look back into the past and bash the KMT for its authoritarian roots and China for holding back Taiwan from achieving normal statehood. The DPP also appears at odds with itself and President Chen's recent statement has only exacerbated the problem.
Seen by many as becoming increasingly autocratic there are growing signs that others within the party are now standing up to Mr. Chen. The recent decision by the DPP to cancel a debate over the party's China policy suggests that the DPP is far from achieving a consensus on the wisdom of the actions of its Executive. A clear rift is emerging between the Executive Yuan and party headquarters. While some reining in may be in order, it has to be measured for fear of further damaging the party. If not healed then the division between the executive arm of government and the party machine may well counter any advantage the DPP enjoys through its incumbency in the run up to the legislative elections. Increasingly the DPP is seen as having lost direction. It may also lose the next election because of it.

Catholic Church may be the next to leave
Faced with a continued loss of diplomatic allies, the writing appears to be on the wall with regard to the move of the Embassy of the Holy See from Taipei to Beijing. The Vatican's top envoy to Taipei has signalled that the Vatican is reaching out to China and ready to enter into an "official dialogue" with Beijing over the establishment of diplomatic relations. Hong Kong's new cardinal, Joseph Zen had earlier signalled the likelihood of the move in asking Taiwan's Catholics to "understand" that Pope Benedict XVI had made the reinstatement of ties with China one of his priorities and that in the process his links with the 300,000 Catholics on Taiwan may have to be sacrificed.
Any move does not appear to be imminent. As part of his statement, Cardinal Zen said that China needed to change its mindset towards the Vatican before the Holy See would switch recognition. Nevertheless since the death of Pope John Paul II, low-level contacts between the Vatican and Beijing had increased.
For the meantime, the freedom to practice religion enjoyed by Taiwanese, stands in stark contrast to the state-controlled churches allowed by Beijing. As such an official move by the Catholic Church from Taipei to Beijing may be some time in coming unless Beijing believes that recognition by the Holy See is worth the price it would have to pay by granting further religious freedom, in order to ensure Taipei's further isolation.

The economy
The government's harder line towards China took its toll on investor sentiment with the Taiex dropping to its lowest level this year following a government announcement in late March (March 24) that as part of its hardening stance, government regulators would also be looking more closely at China-bound investments. Business generally does not support the DPP stand on China and continues to look to China as its manufacturing - and increasingly, consumer - base.
According to the new policy line, China-bound investment projects exceeding US$20 million or those involving sensitive technologies with be required to go through a tighter screening process before being approved. This new measure will come into effect starting June 30th. 
Despite the tighter investment rules - details of which remain to be announced - Taiwan is still hoping to benefit from an influx of Chinese tourists. In particular, Taiwan's tourism bureau sees a growing opportunity to tap the lucrative market for health tourism. Taiwan intends to seek out those Chinese who can afford local prices by tapping not only the mainland China market but also Chinese communities throughout Asia.
On the trade front, in February, Taiwan's balance on merchandise trade fell into deficit for the first time since May 2005. Nevertheless export orders in the same month rose at their fastest pace in more than a year led by demand for notebook computers and a robust demand for semiconductors. Trade figures reported during the first two months of any year need to be treated with a measure of caution because of the distortions induced by the lunar New Year holiday - which this year fell in early February. 
There appears to be widespread optimism that despite lingering problems with consumer confidence, Taiwan's economic performance this year will be better than last. According to present estimates, the economy grew by 4.1 per cent last year - a sharp deterioration from the 6.1 per cent recorded in 2004 (but that was an exceptional year for most countries). Overall real GDP is expected to hover at an average annual rate of around 4.2 per cent over the next two years with most of the growth coming from private consumption and gross fixed investment.
Despite all the political noise, Taiwan is well positioned to benefit from the anticipated growth in Chinese import demand and analysts are expecting exports to grow by around 7.6 per cent this year - mainly on the strength of this high demand from China. The one spoiler for Taiwan in achieving a good year is the level of consumer debt. Taiwan has around 400,000 credit card holders in a population of 23 million and the average debt per card is around US$15,400. Total volume of unsecured lending in Taiwan is more than NT$800 billion (US$24.7 billion). In an effort to avoid a consumer debt overhang of the scale than blighted South Korea some while back the government has reintroduced a plan to cap the interest rates charged by the banks on cash, credit card and mortgages back to 12 per cent - down from 20 per cent. 
As long as consumer confidence can be propped up and Taiwan's people continue to spend, the prospects are that 2006 will be a good year.

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