Economic Revitalization: The Old Tricks are Outdated
China Times editorial (Taipei, Taiwan, ROC)
April 26, 2013
Summary: Liberalization and internationalization is a three decades-old policy. This old policy has fulfilled its interim goal. Its mission has been accomplished. This old trick is no longer useful. Taiwan's economy should be booming, like that of Silicon Valley's. It should be nearly immune to downturns in the global economy. The old tricks are outdated. That is why were are in today's fix. The public feels stifled. Officials issue laments. With this in mind, what should the focus of future policy be? Our general direction should be abundantly clear.
Full Text below:
Recently Premier Chiang attended a breakfast meeting with industry and business leaders. He used the word "stifling" to characterize Taiwan's economic climate in recent years. Reactions to his remarks varied. On the one hand, the term "stifling" truly does sum up the current economic stagnation. On the other hand, hearing Premier utter these words of despair, made many feel even more helpless.
Between 2000 and 2008, Taiwan's economy was shackled by the Chen regime's Sinophobic "closed door" policy. For eight long years, economic growth stagnated, for no good reason. The industrial structure underwent no evolution. After much suffering, the ROC finally experienced a ruling party change in 2008. But five years after Ma took office, a sluggish global economy or inept government policies have left the situation unchanged. People may not understand their current predicament. But the Executive Yuan must assume responsibility. It must provide the public with a clear explanation. It must tell us how we got here, and how we should get out.
Last week Premier Chiang noted that the Executive Yuan sees a free economy and an innovation economy as the twin-tracks that will enable Taiwan to undergo economic transformation. On Taiwan, "innovation economy" is probably a new term. Two years ago Executive Yuan Science and Technology Advisor Dr. Curtis R. Carlson spoke on Taiwan. Carlson urged the Ma administration to quickly transition from an "efficient economy" to an "innovation economy." But two years have gone by. Most of the ministries charged with fiscal and economic policy have failed to change their ways. They continue to promote the old policies. The innovation economy probably strikes them as too strange. By contrast, they are accustomed to the rhetoric of economic liberalization and internationalization. They are unable to wrap their heads around the new concepts.
Thirty years ago, when Chiang Ching-kuo was president, the policy was "liberalization, internationalization, and institutionalization." It was promoted by then Premier Yu Kuo-hwa. Back then Taiwan was gradually establishing its own industrial base. It wanted to liberate itself from bondage to tariff protection, trade barriers, and exchange controls. In Britain, Conservative Party leader Margaret Thatcher had come to power. She promoted large-scale privatization of state-owned enterprises. In the United States, President Reagan echoed her sentiments. He vigorously promoted tax cuts and deregulation. In academia, the Chicago School was ascendant. These voices championing the free economy resounded not only domestically, but also abroad. The advocacy of free trade crossed international borders. Under just such pressure Taiwan began its policy of liberalization and internationalization. As Mr. Wang Chuo-jung sniffed, liberalization and internationalization are not really that wonderful. They are merely normal responses to pressure from Uncle Sam and other nations.
Economic liberalization and internationalization forced Taiwan to face real international challenges. It could no longer remain complacent. It could no longer rely on government subsidies to survive. This increased our economic competitiveness. But as Taiwan gradually moved towards economic openness, the economic environment underwent a major change. Competition between efficient economies gradually morphed into competition between innovation economies. Examples of this abound. They include Silicon Valley, Israel, Switzerland, and other success stories. Silicon Valley, Israel, Switzerland sorely lack natural resources. Their only strength is their large pools of human talent. The innovation economy does not depend on reductions in tax rates, land costs, and labor costs. It depends on an environment conducive to innovation. It connects with the middle and lower reaches of the value chain. It tolerates failure. It requires an atmosphere that can accomodate wave upon wave of technological change. Taiwan has undergone liberalization and internationalization. But that has little to do with the innovation economy. The two are unrelated. The administration has limited resources. It must prioritize and make trade-offs.
Economic liberalization is something we must work towards. But no country's economy is completely uncontrolled. The ROC has promoted economic liberalization for 30 years, Cross-Strait exchanges are a sensitive issue still difficult to broach. Otherwise, Taiwan's economy is largely free. Therefore what is the point of trumpeting Free Trade Zone Pilot Programs at this time? Does Taiwan want to promote fitness and health to Mainland tourists, makikng them its main customer base? Does it want to eliminate regulatory restrictions, and set up pilot operations? If so, why not simply set up an International Medical Zone? If Taiwan wants to develop a Nike style logistics business, it can seek business investment within the Aviation City. The government must make clear what is to done. Its planning must conform to regulations. It must choose a proper location. It must "seek truth from facts" and "Just do it!" It does not need silly names such as "Free Trade Zone Pilot Program." This will enable people to experience the benefits of government policies. The atmosphere will no longer remain stifling.
In short, liberalization and internationalization is a three decades-old policy. This old policy has fulfilled its interim goal. Its mission has been accomplished. This old trick is no longer useful. Taiwan's economy should be booming, like that of Silicon Valley's. It should be nearly immune to downturns in the global economy. The old tricks are outdated. That is why were are in today's fix. The public feels stifled. Officials issue laments. With this in mind, what should the focus of future policy be? Our general direction should be abundantly clear.