A Happy New Year? A Hard Look at the Number of Factory Closings
China Times editorial (Taipei, Taiwan, ROC)
January 9, 2008
According to a recent investigative report by the China Times, over 40,800 companies folded in the first 11 months last year, a record high. Negative economic growth was even worse than during the SARS crisis. This does not even include the figures for December, the peak season for corporate bankruptcies. Last year 31,000 more companies folded than were founded. Only 604,000 companies remain. The drop established a new low.
Official figures show unemployment at record lows. But the brutal reality is that last November over 120,000 workers lost their jobs due to austerity programs or company bankruptcies. an increase of 9,000 over the same period the year before. This matches the high in 2002.
Statistics are not merely numbers on a page. Every number represents an unemployed worker, Behind every worker is a family. Over 120,000 workers have been laid off or fired due to company retrenchments. This means that over 120,000 households don't know how they will get by in the coming year.
The shrinking number of companies is an unprecedented warning to a ruling regime that yammers endlessly about "Growing the Economy." It is hardly something that a press release claiming that "commercial growth momentum remains undiminished" can whitewash. Especially when corporate bankruptcies have already impacted the job market, and when plant closings have led to an increase in involuntary unemployment for the first time in five years. This is something no political leader with the slightest concern for the people can ignore.
The number of companies is shrinking rapidly. This reflects two major concerns for the economy. One is the disappearance of entrepreneurial energy. The other is a slowdown in domestic demand. "Better the head of a dog, than the tail of a lion" used to sum up Taiwan's spirit of entrepreneurship. From Wang Yung-ching, to Chang Jung-fa, to Stan Shih, to Kuo Tai-ming. Every one an Horatio Alger story, an object lesson for countless entrepreneurs, and a testimonial to Taiwan's economic miracle. The tiny island of Taiwan is home to some of the world's largest multi-focused venture capital companies. It is second only to the US, the world's largest economy, and Israel, the homeland of many Wall Street's tycoons.
But the actual number of venture capital firms fell from 231 in 2005 to only 219 in 2006, because they couldn't find any projects to invest in. In 2006 they even had to return the money to investors. reducing the total venture capital investment to 12.8 billion. This is unprecedented. Venture capital is critical for any nation's economic policy. It indicates the economy's growth momentum. It predicts how many people are able to pull themselves up by their bootstraps and replicate Taiwan's economic miracle.
Taiwan's economy is at a critical juncture. It is transitioning from a manufacturing economy to a service economy. During this transition it is subject to the mainland's magnetic field. This presents a formidable challenge. Service industries do not appear out of thin air. Taiwan must develop Singapore and Hong Kong style high-value-added services such as finance and accounting. Like these two cities, it must find a home market. It must allow the free flow of capital. It must eliminate investment limits on industry. Nothing could be clearer.
The Ministry of Economic Affairs estimates that 33% of all local businesses earn more revenue overseas than they do locally. But only 18% of gross overseas revenues acrue to local shareholders. Actual funds remitted are even less. For the past three years, international listings on the Taiwan stock exchange have remained castles in the air. Meanwhile wave upon wave of Taiwan businesses have listed on the Hong Kong stock exchange. Non-urban areas such as Penghu, Taitung, and Hualien need to develop tourism in order to create high value-added enterprises. They need professional business managers. To attract foreign investors and businessmen, they need a steady flow of tourists. Local tourism from the Taiwan region alone is not enough. Besides Taiwan has undergone a brain drain in recent years. According to conservative estimates 500,000 Taiwan business people are living in the Yangtze River Delta region. High consumption tourists have moved to the mainland. Local demand has steadily diminished and has not been replaced. This is the real reason for the record number of bankruptcies last year.
In an era of globalization, no government can close the nation's doors to the outside world. No government can forbid capital to flow out but not enter. No government can allow talent to leave but not return. Taiwan business people have spread out across the world. Professional managers and middle class workers have ventured far and wide to make their fortunes. The government cannot stop them nor should it try. In a globalized world the government should infuse new life into the economy. Ireland was able to put an endless civil war behind it. Hong Kong was able to make a speedy recovery from the Panic of '97. Why can't Taiwan do the same?
No one living on the island wants to badmouth Taiwan. But the hard figures tell us an unpleasant truth. Over 120,000 involuntarily unemployed workers, including recently laid off health instructors at the Alexander health club, tell us that nothing could be more real. A new year has begun. Whom among us doesn't want the coming new year to be a happy new year?