The Taiwanese economy is not doing well : Really? | Fili’s World

1 Jul, 2008 in Taiwan by Fili

The Taiwanese economy is not doing well : Really?

Before the previous elections - when I asked Taiwanese I know down at Tainan DPP land what they were going to vote, most of them were saying “The Taiwanese economy is doing so bad, we need to change to a KMT president”. It is ? this usually made me wonder “What’s so bad about the Taiwanese economy?”. This is where things became a bit more blurry.

In courses I’m taking in NCKU we are sometimes asked to pick our own implementation of the material taught in class. So in two of those courses I went on to try and compare East-Asian strong economies Japan, South Korea, HK, Singapore and Taiwan on various scales to see whether the claim that Taiwan is the worst performer of the Asian tigers and Japan holds true. It doesn’t, or rather – it’s not clear that it does. On some scales, Taiwan is actually the best performer, some problems were on a global scale which Taiwan recovered quite nicely, and so the main question remaining is what you believe and what stats you’d like to follow.

It was a few months ago during election time that I read two interesting articles with the Taipei Times that emphasize this problem. Here’s a bit from “Taiwan’s economy is not bad off” which is a good summary of some of the figures I presented in class:

[…] It has been 11 years since the implementation of the "no haste, be patient" policy in 1997. Singapore’s real GDP growth rate during that period averaged 5.6 percent a year, South Korea’s 4.4 percent and Taiwan’s 4.5 percent. Apparently Singapore’s was the strongest — but only on the surface.

During the same period, Singapore’s population grew by 2.01 percent annually, while Taiwan’s and South Korea’s only increased by 0.55 percent and 0.61 percent respectively. If the population growth rate is deducted from real GDP growth rate, then the real GDP growth rate per capita becomes 3.96 percent for Taiwan, ahead of 3.83 percent for South Korea and 3.55 percent for Singapore.

In the eight years of DPP rule, South Korea’s real GDP per capita grew by 4.6 percent, ahead of Singapore’s at 4.01 percent and Taiwan’s at 3.65 percent. Looking at the DPP’s second four-year term, Taiwan’s real GDP per capita growth rate rose to 4.9 percent. Though this is slightly lower than Singapore’s 5.28 percent, it is ahead of South Korea at 4.38 percent. It is difficult to observe any systemic evidence that Taiwan has lagged behind its two rivals.

As for Singapore, its economic growth potential is between 4 percent and 6 percent, data from its trade and industry department shows, equivalent to Taiwan’s 5 percent. However, Singapore’s distribution of income has worsened considerably: its Gini coefficient, an indicator of distribution of wealth between 0 and 1, where higher numbers indicate greater disparity, outstripped the US in 2006 and reached 0.485 last year.

As for South Korea, its terms of trade has worsened in successive years, causing real income to be grossly overestimated based on GDP. […]

The latest statistics from the Central Bank of South Korea show the terms of trade index for the country continued to deteriorate last year, dropping 4.1 percent below the previous year and dipping to its lowest point since 1988. The reason is that import prices are rising whereas South Korean semiconductor and electronics export prices continue to decline.

On Feb. 18, Chosun Iibo advised the South Korean government to prioritize the problem: in the fourth quarter last year, South Korea’s real GDP expanded by 5.5 percent compared to the previous year, but real GDI — real income — was only 2.4 percent, after deducting losses from terms of trade.

Confusing, isn’t it? OK, here’s from “Some economic truths for the KMT” regarding the GDP variable :

[…] Ministry of Economic Affairs statistics show that while GDP growth in 2000 was 5.77 percent, it dropped to 2.77 in 2001 and, with the exception of 6.07 percent growth in 2004, never managed to surpass the 5 percent mark since. Nevertheless, GDP growth in Taiwan since 2000 outperformed most of the major economies and only lagged behind a handful of growing markets in Asia, such as China, Singapore, South Korea and India.

Those attacks and their subsequent impact on the world economy are often overlooked by the DPP’s critics, which exposes their failure to see Taiwan as part of the global trade system. The more an economy was tied to the US for its success, the more it suffered from the impact of Sept. 11. Trade data since 2001 shows us how connected world economies were to the US. In most instances, the more a country depended on the US for its growth, the weaker its growth was following the attacks.

I believe that economies are trend based. In stable economies of developed countries - if people believe the economy’s good, it will help the economy perform better, as newspapers write positive things, investors comes in, cash flows, infrastructure is built and so on and on, and naturally there’s exactly the opposite result when the trend turns to saying things are bad. Raw data shows that Taiwan, facing an almost impossible political situation, is actually doing pretty well. There’s a reason for the Taiwanese to take pride in their economy. What would happen with the new president, then? I hope the Taiwanese chose well, and that the Taiwanese economy will grow even stronger. Time will tell.

(BTW – It was fascinating to see that all criticism on the issue of Taiwanese economy was targeting the DPP president rather than the KMT controlled legislative Yuan.)

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7 Responses so far | Have Your Say!

cat | July 1st, 2008 at 9:30 am #

In the last a few years, the south east Asia’s growth has generally favoured from the booming economy of mainland China; this is especially the case of South Korea and Taiwan. Unfortunately, however, due to the “no haste, be patient” policy held by the DPP, Taiwan failed to take advantage of this good chance while at the same time the South Korea did, and the result is that Taiwan’s GDP per cap. is now only a bit more than $16,000 in comparison to SK’s $20,200, though ten years ago Taiwan was in advance to SK on this figure. On the other hand, in the last eight years the DPP government has done almost nothing for Taiwan’s economy growth but just operate on the political conflict between the so-called “greens” and “blues”. This is also one of the reasons that the DPP has been criticized.

Incidentally, statistics cannot tell all the truth, Fili, if you are now in Taiwan, just ask people around you how they think of their lives in the last eight years.
fiLi | July 1st, 2008 at 2:13 pm #

cat - thanks for raising up important points and starting a discussion. It’s great that other Israelis take part in this.

This is exactly the point I was making in this article. First - can statistics tell the truth? if they can - which truth? if not - how can you decide?
The next point - if those 8 years were so horrible, was it because of the DPP presidential policy or the KMT legislative yuan policy who fought with the DPP president the whole way? which one should be changed?

The Taiwanese have clearly voiced their opinions, even in DPP land, but what I suggested is that they’re confused as I am. Political trends especially when it comes to the economy are very problematic, yet the Taiwanese decided they wish to do better and they decided it was the DPP president’s fault. I support if maybe not understand their decision which is exactly why I raise this now, 2-3 months after the elections, when they are even more worried as stock prices go down and oil prices keep coming up regardless of election campaign promises.

Another post with comparisons about East-Asia business within two days. Taiwan is not behind South-Korea. Some South-Koreans and not happy with their economy, even considering the stats you mentioned, even considering the fact their world political status is set and clear.

Due to China - sure, this is the growth engine of the whole world, but businesses continue even within Taiwan, businesses are set in Vietnam (Koreans) and Thailand (Japanese), so China isn’t the whole story.

and, BTW - I’m back in Israel for a month. Would be happy to talk to you more about this in one of the HUJI courses.
McPholia | July 1st, 2008 at 5:36 pm #

intersting view. keep up good work.
Ah-Ben | July 5th, 2008 at 2:17 am #

Very interesting. I am currently writing a paper too at NCCU on a similar theme …’the myth of taiwan’s economic downturn’. Complaining about the economy, especially in the martial law period, was almost a substitute for political criticism, it was far safer to do anyway. So i feel it was a basic campaigning strategy by a party in a democracy to both misrepresent the achievements and failures of the incumbent party and present themselves as the solution. I think the main problem comes when many people don’t question the accuracy of such accusations and claims, perhaps because they are reified throughout the media. In a socially conscious culture like Taiwan, with the encouragement of key ‘influencial figures’ many people can be convinced in a short time that a ‘truth’ presented to them is actually ‘common sense’. What am I saying? Democracy does not ensure that parties play fair or honorably, it just functions better when they do and then you tend to avoid situations where an electorate wakes up one day to a Government that is ignoring them, patronising them or completely unashamedly reneging on its manifesto and election pledges. The UK had Blair, the US Bush and now Taiwan has Mr Ma, elected on a hope …
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fiLi | July 8th, 2008 at 12:41 pm #

Ah-Ben : That sounds interesting, I would be happy for a copy of the paper once you’re done writing it. It is a very interesting phenomenon, and the suggestion that this is global makes sense. Yet, I think the parties play fair in the democratic game - they do what they were elected to do and promote the ideas that they should promote, but it’s the media and the common people that are failing to balance this out. Whenever you see the media in a democratic country wholeheartedly supporting one notion without any sound of controversy, then it means something isn’t functioning right. Since we’re talking about the economy, about policies, about stats, which are never absolute truth and are always arguable if not questionable we should always expect a discussion on what’s going on rather than silent agreement.

The KMT has done an unbelievably good job in promoting the following ideas - one, the Taiwanese economy isn’t doing as well as it should, two, it’s the DPP president’s fault rather than the KMT legislative yuan, and last, that the KMT president will do a much better job. The failure to publicly discuss those ideas, I’m afraid, is shared with the DPP and the public media.
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