Global Economy is Changing Tracks: Taiwan Cannot Afford to Remain Idle

Global Economy is Changing Tracks: Taiwan Cannot Afford to Remain Idle
United Daily News editorial (Taipei, Taiwan, Republic of China)
A Translation
February 21, 2014

Summary: In recent years, Taiwan's economy has remained in the doldrums. Every year government economic revitalization efforts promise the moon. But over the past year the government has struggled to maintain a low growth rate of one, two, or three percent. People have understandably lost confidence in the future. The economy has long been Taiwan's lifeline. How can we revive our economic competitiveness? How can we escape the plight of low growth? This is without a doubt our most urgent issue.

Full text below:

In recent years, Taiwan's economy has remained in the doldrums. Every year government economic revitalization efforts promise the moon. But over the past year the government has struggled to maintain a low growth rate of one, two, or three percent. People have understandably lost confidence in the future. The economy has long been Taiwan's lifeline. How can we revive our economic competitiveness? How can we escape the plight of low growth? This is without a doubt our most urgent issue.

Beginning in 2008, the global economy underwent the global financial tsunami and the European debt crisis. Two "track changes" took place. The first track change involved the de-leveraging of the United States, Europe, Japan, and other advanced industrial countries. They became low-growth economies. Emerging markets, especially in emerging Asian countries, became the main engine of global economic growth. The second track change involved the advanced industrial countries, which underwent several years of economic reform and adjustment. Beginning last year, they regained growth momentum. Emerging markets will be impacted by the U.S. Federal Reserve, which will begin tapering its quantitative easing (QE) policy. Over the past several years, short-term hot money created a boom. This boom faces substantial adjustment. The Economist said that in 2014 the United States, Great Britain, Germany, Japan will dominate the headlines.

This is an era of dramatic economic change. The rise and fall of a nation's economic strength and competitiveness often depends on its ability to change and adjust. Consider the first track change in the global economy. Compare the key competitors. Taiwan was like a race car on fast idle but which went nowhere. It missed a golden opportunity to change and adjust, This led to weakened competitiveness.

Taiwan's economic idling took five different forms. One. It was unable to change its emphasis on hardware manufacturing and foundry exports. It was unable to drive economic growth and link to the global supply chain. It could neither go forward nor retreat as exports declined. Two. It failed to commit to economic restructuring, It was slow to develop new industries and services. Long-term private investment and consumption slumped, weakening domestic demand. Three. It failed to respond to the huge disparity in the scale and structure of the two cross-strait economies. This led to increasing capital flight and a brain drain, from Taiwan to the Mainland. The cross-strait economy went from "more complementary than competitive," to "more competitive than complementary." Four. The government blundered. It failed to fully grasp the internal and external scenario change. Its economic leadership was weak. Its policies flip-flopped. It boasted about reform, but failed to prescribe the right medicine. It intensified the chaos. Five. The government and the political opposition bickered endlessly. Major policies remained stalled. This worsened economic wheel-spinning.

Over the years, a golden opportunity for reform was lost. Taiwan's economy is no longer what it used to be. The global economy has begun its second track change. The potential risks and challenges will be even more difficult to address effectively

First, the U.S. Federal Reserve may taper QE this year. Global capital will quickly return to the U.S. from emerging markets. The emerging markets depended upon the influx of money to create economic bubbles. These bubbles will collapse. Latin America, Asia, and other emerging market countries or regions will be impacted to different degrees. Taiwan will not be immune.

Secondly, the Mainland is deeply committed to economic reform. It too will be affected by QE tapering. Slowed economic growth will become the norm. Taiwan's dependence on the mainland market in recent years has increased. Therefore, its relative impact will increase accordingly.

Taiwan's economy remains highly dependent on IT industry exports. But brand names and specialized OEM industries face the impact of United States and Korean industry consolidation on the supply chain. This year Mainland industry is catching up. Following the track change in the global economy, information and communications industry competition will be increasingly fierce. Taiwan's industry crisis is imminent. It is the biggest variable for the future.

In view of this, the government has no right to be blindly optimistic about the future. In particular, it must recognize the harsh reality. Taiwan's competitiveness has plummeted. Therefore it is imperative to cease economic idling, and implement four major economic changes.

First, immediate action is required to stabilize the economy. Taiwan's economic momentum is increasingly inadequate. It is vulnerable to fluctuations in the international economy. Therefore, the government must take short-term measures to revive exports and domestic demand. It must also take immediate countermeasures to assist industrial restructuring and upgrading.

Second, comprehensive economic reform is essential. Taiwan must attempt to change its economic growth mode from "efficiency-driven" to "innovation-driven." Both exports and domestic demand require a new industrial structure in line with the future needs of the community.

Third, a strategy is required that integrates us into the global economy. To survive, Taiwan's economy must become tightly linked to the global economy. The government must join the TPP and RCEP. But more than that, it requires a political and economic strategy to overcome resistance, at home and abroad. Only then will the bigger pie it draws on paper become an objective reality.  

Fourth, the two sides must be willing to adapt to each other. Cross-strait trade must become Taiwan's economic advantage in long term economic development. Cross-strait adaptation is of critical importance. Cross-strait economic policy coordination and strategic dialogue mechanisms must be established, as soon as possible. Only this can ensure a long-lasting win-win scenario.

The above four policy directions are nothing new. But the government must redouble its efforts, in order to make up for years of wheel-spinning. Only then can it restore Taiwan's economic vitality.

全球經濟換軌，台灣不能再繼續空轉
【聯合報╱社論】
2014.02.21 05:00 am

近年台灣經濟持續低迷，政府對拚經濟每年都抱以高度期待，但從前年到今年，ＧＤＰ成長率只能掙扎於保一、保二、保三等低度成長，難免讓人民對未來經濟信心喪失。經濟始終是台灣生存的命脈，如何重振經濟競爭力，擺脫低成長困境，無疑是當前最迫切的課題。

自二○○八年迄今，全球經濟歷經金融海嘯及歐債危機的衝擊，並出現兩次「換軌」：第一次換軌是美、歐、日本等工業先進國家經濟厲行去槓桿化，陷入低成長，新興市場（尤其是亞洲新興市場國家）成為全球經濟成長的主要引擎；第二次換軌是工業先進國家歷經數年的經濟變革及調整後，自去年開始已重拾成長動能，新興市場國家則因美國聯準會啟動量化寬鬆（ＱＥ）政策退場，過去幾年熱錢造就的短期榮景面臨大幅調整。《經濟學人》雜誌稍早即指出，二○一四年全球經濟將由美國、英國、德國、日本等「發達四國」再領風騷。

在劇烈變動的經濟時代裡，一個國家經濟興衰及競爭力強弱，往往取決於變革及調整的速度。在第一次全球經濟換軌過程中，相對於主要競爭對手，台灣宛如一輛怠速空轉的賽車，錯失最佳的變革及調整時機，以致競爭力日益削弱。

台灣經濟空轉呈現在五大面向：一是未能力圖改變側重硬體製造及代工出口、以效率驅動的經濟成長模式，以致無法肆應全球供應鏈的大幅改變，陷入被前後包夾、出口衰退危機；二是未能致力經濟結構調整，新興產業及服務業發展遲緩，民間投資及消費意願長期低迷不振，削弱內需動能；三是未能妥適因應兩岸經濟規模及經濟體制的巨大差異，導致台灣對大陸日益擴大的投資及人才赤字，以及兩岸產業從「互補大於競爭」轉變成「競爭大於互補」；四是政府失能，未能充分掌握內外情勢變化，經濟掌舵無力，政策反覆，夸談改革卻不能對症下藥，加深各種亂象；五是朝野不斷內耗，很多重大政策都在原地踏步，更陷經濟於空轉。

正因為幾年來錯失改革的大好時機，台灣經濟體質已大不如前，在全球經濟進入第二次換軌的新情勢下，更難有力應對潛在的風險和挑戰。

首先，美國聯準會可能在今年內讓ＱＥ全面退場，全球資金將從新興市場加速回流美國等，前幾年新興市場靠錢潮吹大的經濟泡沫將隨之崩解，拉丁美洲及亞洲等新興市場國家將受不同程度衝擊，台灣亦難置身事外。

其次，大陸正致力於深化經濟改革，又受ＱＥ退場的雙重影響，未來經濟成長趨緩將成常態現象；近年台灣對大陸市場依賴愈來愈深，故相對衝擊也愈大。

再者，台灣經濟迄今仍高度依賴資通產業出口，但無論品牌或專業代工業者近年皆面臨美、韓業者整合供應鏈的衝擊，這兩年更受到急起直追的大陸業者節節進逼。在全球經濟二次換軌後，資通產業競爭將更趨激烈，台灣業者危機迫在眉睫，也是未來最大變數。

鑑此，政府對未來經濟實無一味樂觀的本錢，尤其須認知台灣競爭力已落人於後的殘酷現實；因此，當務之急，須擺脫經濟空轉，朝四大方向致力經濟變革及調整：

第一，要有穩住經濟的立即行動。台灣經濟動能日益不足，極易受國際景氣波動衝擊，故政府須有振興出口及內需的短期措施，並應採即時對策協助資通產業轉型升級。

第二，要有改革經濟的通盤計畫。台灣須致力改變經濟成長模式，從「效率驅動」轉變成「創新驅動」，兼顧出口和內需，打造符合未來社會需要的嶄新產業結構。

第三，要有接軌全球的宏圖大略。台灣經濟要有活路，必須和全球緊密接軌，政府固須有加入ＴＰＰ、ＲＣＥＰ的雄心壯志，但更須有突破國內外阻力的政治謀略及經濟對策，其規劃才不致淪為畫餅。

第四，要有磨合兩岸的深謀遠慮。兩岸經貿要成為台灣經濟發展的長期優勢，雙方「磨合」實至關重要，須及早建置兩岸經濟戰略對話及政策協調機制，才能建構可長可久的雙贏路徑。

以上四大方向，並非新論，但政府須有加倍決心和加倍努力，才能彌補多年空轉，再造台灣經濟生機。