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

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New Taiwan dollar (TWD)

Chen shui-bian


Update No: 012 - (04/01/05)

Taiwan ended the year with the government chastened by a perceived electoral loss but with the majority of the population - not to mention Taiwan's international allies - relieved that the more radical aspects of President Chen's policies towards Taiwan nationalism have no doubt been dampened and that a more cautious policy towards relations with the Chinese mainland may emerge during 2005 and for the remainder of his term in office (President Chen serves until 2008).
The result of the legislative election of December 11th, saw the pan-blue camp retain its legislative majority winning 114 seats in the 225-seat legislature. The governing Democratic Progressive Party actually increased its vote share and gained one additional seat - bringing its total to 89 - and it remains the biggest party in the legislature; however it had set its goal on winning 101 seats and, together with its partner, the Taiwan Solidarity Union (TSU), of controlling the legislature. This was not to be. By the party's own yardstick therefore, the result represented a failure and President Chen resigned as Chairman of the DPP, taking full responsibility for the result.
Voter turnout marked a historic low of just 59.16 per cent of the nation's roughly 16 million voters eligible to vote and far lower than the Central Election Commission's (CEC) prediction of 67 per cent made just one day before the poll. 
DPP officials claimed that the low turnout was partly to blame for the failure of the pan-green camp but most analysts attributed the poor showing in the election to a badly implemented vote-allocation plan that split the pan-green vote in many electorates. The camp may also have had an overly optimistic assessment of the number of seats it could win.
By way of contrast to KMT Chair, Lien Chan, who has yet to concede defeat for losing the presidential election in May of this year, President Chen was quick to concede and to congratulate the pan-blue camp on their election victory. Chen also expressed his thanks to the leaders of the four major parties for their efforts to support a smooth and peaceful election. 
"Although the DPP has gained one more seat compared with the previous election, and the party's showing in this election also increased from last time's 33.38 per cent to 35.72 per cent, we will still conduct an overhaul of the party," Chen said. 
The Central Election Commission's (CEC) statistics put the DPP's share of the vote at 37.98 per cent. 
While in one sense, the election result changes nothing - the stand-off between the legislative and the administrative branch of government continues as before - in another sense, 2005 may yet see some decisive change. Mr. Chen has already resigned as Chairman of the DPP stating that for the remainder of his term he intends to be "a president for all of the people." A new chair is to be appointed by February 2005 at the same time a new cabinet is announced. Mr. Lien Chan has announced he will retire from his post as Chair of the KMT in August 2005 and he can retire now with some honour following the credible election result he achieved for his party. The mantle of leadership in both of the major parties will likely pass to a new generation of leaders.
Mr. Chen is also a chastened president. Clearly his pro-independence rhetoric and readiness to push the envelope with regard to the mainland has alarmed a significant section of the electorate and he has been rebuffed by an electorate that has shown it prefers middle of the road politics and policies that do not disturb the status quo. While subsequent to the election he has reaffirmed his intention to continue with efforts to amend the constitution, this is likely to be attempted much more gingerly that would have been the case had his party achieved an outright majority in the legislature. While speculation is mounting over the appointment of a new premier and cabinet, no announcement is expected until the new year and only then will the likely future policy direction of government become clear. Much will depend on whether Mr. Chen seeks to form his new cabinet from within the ranks of the DPP or whether he will accommodate the request of Mr. Lien and draw from the ranks of the opposition - among whom are many talented people ready to serve.
The election result may make it easier to mend fences with Washington which, in recent months, has become increasingly alarmed at Mr. Chen's readiness to taunt Beijing. Many DPP officials have come out forcefully claiming that there was no need to worry about fears of a mainland attack on Taiwan since the United States would come to Taiwan's aid no matter what. Well, that may not be the way officials in Washington see the matter. U.S. Deputy Secretary of State, Richard Armitage, stated again for the record that the US was not legally bound to defend Taiwan against a Chinese attack; a statement that was clearly meant to signal to the administration in Taipei, that the willingness of America to support Taiwan was conditional on Taiwan not provoking China. The United States, as does much of the rest of the world, wants to see the present status quo retained for the present and for Taiwan and China to settle their differences peacefully and at the right time - which clearly is not yet on the horizon for either.
Indeed the recent announcement by Beijing that it was introducing a new anti-secession law aimed at preventing Taiwan from becoming independent has further complicated the cross-straits question. While details of the new law have yet to be released it is widely believed that the new law - due to be introduced in March 2005 according to reports will allow Beijing to act extra-territorially, by prosecuting individuals or corporations that, it believes support Taiwanese independence. This will not necessarily be limited to Chinese or Taiwanese nationals but could involve US or other nationals who voice support for an independent Taiwan.
This latest development has impacted negatively on business confidence across the Taiwan Strait. China-based Taiwanese businessmen are clearly worried by the new measure and feel they are walking a tightrope, trying to keep their balance amid the ups and downs of cross-strait relations. President Chen's announcement that Taiwan would retaliate by introducing a bill of its own can only complicate matters if it proceeds.

The Economy
Taiwan's economy has done reasonably well this year buoyed by a strong export sector. While global growth is expected to moderate slightly in the New Year, predictions for the domestic economy have actually been moved upwards despite the uncertainties of the cross-straits situation. Unemployment is at its lowest level for more than three years and office vacancy rates are at a four year low. For the final quarter of last year the vacancy rate dropped to 9.81 per cent in Taipei City down from 11.14 per cent at the beginning of the year. Rising demand is also pushing up average rent levels, albeit the increase remains moderate at around 2 per cent per annum.
Domestic economic growth for the year is expected to come in at slightly under six per cent while according to the Ministry of Economic Affairs, GDP growth for 2005 is now expected to be around five per cent - up from the earlier forecast of 4.36 per cent. Academica Sinica has been more cautious than the government and is predicting that growth this year will be around 4.05 per cent.
Exports grew 12.5 per cent year-on-year in November rising to US$15.51 billion after an increase of 17.5 per cent to US$15.39 billion in October, with imports up 20.7 per cent to US$14.94 billion after a gain of 38.1 per cent to US$15.05 billion.
The November export growth figure represented the slowest pace of expansion in 14 months as high crude-oil costs left companies and consumers in the world's largest economies with less to spend on computers, flat-panel displays and cell phones according to the Ministry of Finance.
For the first 11 months of the year, exports were up by 22.3 per cent to US$159.16 billion, while imports rose 33.2 per cent to US$151.9 billion. The nation's trade surplus during the same period came in at US$7.26 billion, down 54.9 per cent from a year earlier. Exports are expected to expand by 8.8 per cent in 2005, reflecting the slower growth of the global economy and moderating consumer demand in key export markets.

Financial Markets
Taiwan's central bank raised its benchmark interest rate for the second straight quarter by 0.125 percentage points during the final week of 2004. The bank on Sept. 30 raised its rediscount rate by 0.25 percentage points, that was the first increase in four years. The decision raises the bank's rediscount rate to 1.75 per cent while boosting the secured accommodations rate and the unsecured loan rate to 2.125 per cent and 4.0 per cent, respectively. The measure was aimed at lowering the risk of inflation and overly low real interest rates which the bank believes are disadvantageous to long-term financial stability. 
The New Taiwan dollar ended the year at a four-year high against its US counterpart closing at NT$31.917, the highest close since October 12, 2000. For the year as a whole, the NTD appreciated by 15 per cent against the US dollar. Against the UK pound the NTD appreciated by only 0.2 per cent while against the Euro the NTD appreciated by around 1 per cent.
Taiwan's main stock index, the TAIEX, climbed 4.23 per cent for the whole of 2004, weighed down by soaring oil prices and political unrest stemming from the presidential election. The close at 6,139.69 points represented a seven-month high since May but was well below the peak of almost 7,000 recorded in March. The yearly increase represented a lukewarm gain, compared with the 32-per cent gain for 2003.

Exchange Rates
The exchange rate to the US dollar as of 31 December 2004 stood at 31.917. Against the UK Pound the rate was 60.9027. Against the Euro, the rate stood at 43.049.

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Taiwan's TPV in Philips deal

Philips will announce it as agreed to sell its PC monitors business and part of its flat-screen TV operations to TPV Technology for about US$350m in shares, turning the Taiwan based company into the world's largest PC screen-maker, the Financial Times reported on December 12th.
The deal, which will more than double TPV's annual sales, is part of a growing trend of western electronics companies selling non-core businesses to lower-cost Asian manufacturers eager to acquire well-known international brands.
Recently IBM sold its PC unit to China's Lenovo for US$1.75bn in cash and shares. In 2003 TCL, the Chinese group, became the world's largest TV maker through an alliance with France's Thomson and then took a majority stake in a mobile handset join venture with France's Alcatel.
Industry experts said that, like Lenovo and TCL, TPV was likely to gain the rights to use the Philips brand at least for some time and on some products.
A person familiar with the matter said the transaction continued the Dutch electronic company's long-running strategy of outsourcing manufacturing activities to those regions or companies with cost advantages.
TPV, listed in Hong Kong, is already the world's second-largest maker of PC screens with sales of more than US$2bn. But the addition of a brand such as Philips will increase the appeal of its products across the world.
The agreement will involve Philips injecting its PC monitor operations, which had sales of about US$2bn in 2003, and part of its low-end flat-screen TV activities, into TPV.
The value of the Philips investment would be equivalent to about 30 per cent of TPV's market capitalisation. However, under a complex arrangement, the Dutch company will receive a stake of about 15 per cent in the Taiwanese group, leaving China's BOE Technology as TPV's largest stakeholder with 25 per cent.
TPV designs and sells conventional and flat-screen PC monitors under the AOC and Envision brands. The group had revenues of US$2.1bn in 2003 and net income of US$70m. Its shares rose more than 4 per cent in 2004.

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