Tuesday, June 1, 2010

From Export Processing Zone to Free Trade Zone

From Export Processing Zone to Free Trade Zone
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
June 1, 2010

Half century ago Taiwan adopted an "export processing zone" development strategy. It lept ahead of most developing countries and seized the international market. Approximately 30 years ago, under intense pressure from the US, a major trading partner, it underwent economic liberalization at an unprecedented scale. But realistically speaking, Taiwan as it is currently cannot be considered a genuinely free and open economy.

During the past two decades, former presidents Lee Teng-hui and Chen Shui-bian saddled the nation with an isolationist Closed Door Policy. Too many industries, too many products, and too many occupations are protected to greater or lesser degree by the government. A huge bloc of employers and employees, unable to compete directly with foreign producers, seek out government protection. They are fearful of the day they must confront ECFA. They have become the primary force behind opposition DPP and TSU efforts to obstruct ECFA.

They include agriculture, towel manufacturers, furniture manufacturers, and other vulnerable industries. The heads of these industries may not realize it. But although the government has signed bilateral arrangments to minimize the impact on their production once ECFA is signed, they cannot sit back and relax. That is because ECFA is a key. When Taiwan uses it to open its doors, it will gradually enter an increasingly free economic realm. In the future, by means of free trade agreements (FTA) with its major trading partners, Taiwan will be fully opened. Besides agriculture, there is almost nowhere one can escape powerful competitive pressures. In short, Taiwan will join the mainstream global economy and become a bona fide free economy.

Yet the opposition DPP and TSU cavalierly encourage vulnerable groups to obstruct ECFA. Nearly half of the public on Taiwan still harbors doubts about it. This means too many people still do not realize that Taiwan must eventually undergo full liberalization. They fear the free market economy, and refuse to embrace it with open arms.

Half a century ago, Taiwan led the way toward a new era of export-orientated economic policy. The Export Processing Zone was the pioneer. In a closed area, we gave full play to our strengths. We allowed the public on Taiwan to first make contact in this unfamiliar area, immersing themselves in the experience. Then, after experiencing the infinite opportunities, transform all of Taiwan into an Export Processing Zone. Thirty years ago the Hsinchu Science Park replicated this process, and led Taiwan into the high-tech era.

Today Taiwan is moving toward a new and inevitable era of free markets. We can welcome it, or we can resist it. But during the coming years we will find ourselves smack dab in the middle of it. It would appear we need something akin to export processing zones or science parks to act as trailblazers. This would allow the public on Taiwan to get an advance taste in a closed environment.

The special economic and trade zone, which has been promoted for over two years, is set to perform this role. From south to north several regions with good harbors and airports, surrounded by broad hinterlands, will be designated special zones. They will experiment with and simulate a free economy for no less than one or two years, but no more than ten. By then the whole of Taiwan should have the courage required to enter the free economy.

Within this closed test area, commodities, aside from safety and health concerns, will enjoy unobstructed free access. The movement of funds and personnel will be kept as free as possible, comparable to Singapore's, which has the freest economy in the world. Tariff and non tariff barriers will be kept to a minimum. As much as possible, corporate and personal income taxes will be kept in line with Singapore's. Infrastructure and administrative efficiency will compare favorably. Labor policies for foreign workers will follow suit. As long as we are seeking to be both free and open, we will of course seek to excel.

When it comes to administrative efficiency, Taiwan as a whole may find it difficult to match Singapore. But specific regions, such as the Hsinchu Science Park, operating under special laws, through a single window, will enjoy far greater flexibility. Business taxes can also match Singapore's. If we grant special privileges, income taxes will not constitute a significant barrier. Labor policy for foreign workers will be tested within the zones. It depends only on the determination of those in power. For any relevant infrastructure construction. the government need merely hand down the order. Businesses and funds can quickly be made available without drawing on any public funds.

Minister of Economic Affairs Shi Yen-hsiang declared the intention of building "free economic zones" as pilot projects 20 or 30 years from now. We would like to solemnly remind Minister Shih that our circumstances will be critical two or three years from now. If we fail to step up construction, our circumstances will outpace our pilot programs.

Before conducting any experiments, try first to imagine a Singapore-like region close to prime areas on the mainland. How can one begin to calculate the benefits?

2010.06.01 02:19 am












No comments: