Prospects for Taiwan’s Future Economic Growth

According to the results from the local state-of-the-nation survey, over 40 percent of respondents in the Taiwanese survey expressed a certain degree of dissatisfaction concerning Taiwan’s future development, with only 25 percent answering positively. This was the first time that negative responses outnumber the positive responses by 15 percent, and the results represented the biggest lack of confidence in the economy for the past five years. It also showed that the public becomes increasingly pragmatic regarding cross-strait issues over economy.

The survey was conducted by CommonWealth , one of Taiwan’s most prestigious magazines regarding economic and financial matters, and the results was released Jan. 1 2008 (1).

Despite of the lack of confidence with Taiwan’s economic performance among local people, the U.S.-based Business Environment Risk Intelligence ranked Taiwan sixth in the world and third amongst Asian countries in terms of a low-risk investment environment. Ahead of Taiwan were Switzerland, Singapore, the Netherlands, Japan and Norway. Over 50 countries worldwide were evaluated in September 2007. The Business Environment Risk Report is designed to assess a country’s business environment based on three main indices, Operation Risk index, Remittance and Repatriation Factor index, and Political Risk Index. Taiwan ranked third and fifth on Operation Risk index and Remittance and Repatriation Facto, but only ranked 15th on the political Risk Index (2). Averagely, Taiwan scored 72 out of 100 on BERI’s profit opportunity recommendation indicator, showing the country is well-suited for investment. The report also predicted the overall investment environment would continue to improve over the next five years.

In spite of the discrepancy between the local survey conducted by CommonWealth and foreign report accessed by Business Environment Risk Intelligence, they both indicated that political uncertainty plays the most significant role in influencing Taiwan’s economics. Justin Yifu Lin, the World Bank’s senior vice president for development economics, stated “I’d like to say that Taiwan would have a better future in economic development if it seizes the opportunity of the mainland development which would last another ten years.” According to him, the reason the Republic of Korea has overtaken Taiwan in economic development over the past few years is because unlike Korea, Taiwan has failed to capitalize on forming strong economic relationships with China (3).

At the beginning of this year and later in March, the Kuomintang (KMT), the main opposition