The Government Information Office reported the economy surged ahead in the first half of this year and predicted the boom will continue.
Quoting figures from the Directorate General of Budget Accounts and Statistics of the Executive Yuan, GIO noted that the industrial index in May, 1972, was 308.3 with 1966 as base year, an increase of 27.82 per cent over May of 1971.
Trade was US$2,518,000,000 in the first six months of 1972, up by US$826,000,000 from the like period of last year. The favorable balance was US$165,000,000.
The leading trade partner is still the United States. Two-way volume was US$811,000,000, accounting for 32.2 per cent of the total. The favorable balance was US$285,000,000.
Japan ranked second at US$575,000,000, or 22.8 per cent of the total. The unfavorable balance was US$293,000,000, up from US$221,000,000 in the like period last year. Wholesale prices rose by 4.01 per cent over the January-June period of last year. Foodstuffs were up 8.58 per cent, textiles 5.17 per cent and leather products 8.47 per cent.
Retail prices climbed by 4.11 per cent led by food (6.73 per cent), transportation (9.37 per cent) and medical and health services (3.49 per cent).
Taiwan trade of US$5.2 billion is expected to surpass that of the China mainland by half a billion dollars and the gap is likely to be widened to more than a billion dollars by the end of next year.
The projection was made by William N. Morell Jr., counselor for economic affairs of the American Embassy. Morell cited remarkable economic achievements by the Republic of China despite diplomatic setbacks.
"Those who in business and financial dealings six to nine moths ago took counsel of their fears can now sorrowfully contemplate their losses," the American diplomat said.
Morell said Taiwan—U.S. trade may reach US$2 billion this year. By the end of 1976, he said, "you could become the second largest trading nation among the developing countries of the world" excepting the oil producing states and Hongkong.
This position "is likely to have increasing importance in your relations with other nations,' he added.
Morell called attention to the need for long-term investment decisions in a rapidly changing world environment.
"The political, economic, technological and social environment in which government and business must operate is changing at a revolutionary pace," he said. "This places a high premium on astute planning, projections of the future and long-term decisions.
"For nations like the Republic of China that are well along in the modernization process, new technology and adaptations are coming on very fast. Many new public private projects that involve large investments and long lead times require careful study and programming to ensure that those selected will yield the greatest return for the investment," he said, warning that "the penalties for wrong decisions on these expensive, long-term projects are very high in that once locked-in on a long-term program, it is expensive to disengage and start anew in another direction."
International economic and technical considerations should not be ignored either. "Many events can affect the success of the undertaking once it is started; many things can affect the final utility of the product," he said.
For example, he continued, "Consumer wants or government needs may change; new technology may make the product outmoded; foreign sources may develop a less expensive or better model, etc. Decision-makers must judge the prospects."
In new programs, consideration should also be given to desirable allocation of the country's resources in terms of the well-being and security of the people, Morell said.
Twenty-one U.S. government foreign trade analysts observed a sustained and remarkable rate of economic growth in the Republic of China and said this will surely lead to increased trade with the United States.
These analysts expect U.S. exports to Taiwan to continue their strong performance in 1972, reaching a level significantly above the US$510 million attained in 1971. They hope the United States will displace Japan as the island's leading supplier.
Margaret Kelleher of the Commerce Department's Far East Division said that despite international development's adverse to the Republic of China, the first four months of 1972 saw remarkable economic growth in Taiwan. Industrial output was up 26 per cent over the 1971 January-April level, exports were up 33 per cent and imports up 48 per cent. This trend, along with ambitious development plans already being implemented, a favorable attitude by the U.S. Export-Import Bank, etc., should contribute to strong growth in U.S. sales to the Republic of China.
Another factor benefiting U.S. exporters is the revaluation of the yen. Recent reports indicate that Japanese suppliers are having to raise their prices to Chinese buyers. This may make more competitive certain U.S.-origin synthetic fibers, petrochemical intermediates, steel products and electronic components previously bought almost entirely from Japan.
Margaret Kelleher's report also included the following:
The Republic of China's GNP reached US$6.2 billion in 1971, an increase in real terms of 11.4 per cent over 1970. A high growth rate probably will be maintained in 1972. Business confidence remains strong, as demonstrated by a 25 per cent increase in bank credit to the private sector and continued strong foreign private investor interest, especially among U.S. firms.
Taiwan's imports of US$1,990 million in 1971 were 30 per cent higher than in 1970. Imports from the United States increased 28.3 per cent in 1971, reaching US$594 million. The U.S. share of the market fell slightly from 30.3 per cent in 1970 to 29.9 per cent last year. Japan's market share was 38.5 per cent.
In the first four months of 1972, the United States, with a 35.6 per cent market share, overtook Japan, which had 31.7 per cent, as Taiwan's leading supplier.
Foreign exchange reserves topped US$1 billion in May and the Board of Foreign Trade is reviewing its import controls with a view to further relaxations.
Purchases from Japan could be reduced
The Importers and Exporters Association called on the nation to curtail purchases of machinery and raw materials from Japan if Tokyo establishes diplomatic relations with Communist China.
The association pointed out that Japan enjoys an extremely favorable trade balance with the Republic of China, so much so that Japan is expected to have a favorable balance of US$600 million this year.
During the first half of this year, Japan exported US$452,277,838 worth of goods and imported only US$175,771,829 worth. (Note: These Central Bank figures differ slightly from those cited by GIO earlier in this article. The GIO figures are from the Executive Yuan.)
Statistics of the Central Bank showed the following breakdowns of imports from Japan in the first half of the year:
—Electrical machinery, US$119,635,265.
—Machinery (except electrical), US$57,115,176.
—Iron and steel, US$54,963,375.
—Chemical materials and products (excluding chemical elements and compounds, plastic materials and chemical fertilizers), US$36,073,263.
—Transportation equipment, US$28,332,957.
—Chemical elements and compounds, US$27,159,075.
—Plastic materia1, regenerated cellulose and artificial resins, US$13,944,829.
—Non-ferrous metals, US$11,217,072.
—Metal products (excluding machinery and transportation equipment), US$8,533,463.
—Textile products, US$30,823,756.
Trade authorities suggested Taiwan could stop buying textile products from Japan without affecting exports adversely. They said machinery and raw materials could be bought in the Americas and Europe.
Individual countries which could supply more are the United States, West Germany, Australia, Belgium, Holland, New Zealand and some others.
Local production of machinery and raw materials could be increased.
Economics minister sees disappointment for Japan
Japanese businessmen who expect a trade boom with Communist China after "normalization of relations" between Tokyo and Peiping are bound to be disappointed, according to Economics Affairs Minister Y.S. Sun.
Sun said Japan's eagerness to establish diplomatic ties with the Chinese Communist regime is partly due to expectations of some Japanese business leaders that exports to the mainland will be increased. This is wishful thinking, he said.
On the other hand, trade between free China and Japan has been growing rapidly with a widening balance in Japan's favor. This commerce is bigger than that with the Chinese mainland.
Refuting Peiping's claims of economic achievement, Sun said figures disclosed by the Reds themselves show that from 1960 to 1971 average annual growth of industrial and agricultural output was barely 2.1 per cent.
In the same period, the industrial and agricultural growth of Taiwan averaged 14.9 per cent annually.
Peiping's trade potential is limited, Sun said. He noted that foreign trade volume was barely US$4,400 million in 1971. The Republic of China will overtake Peiping with more than US$5,000 million in trade this year.
Living conditions on the mainland are poor, Sun said. Each person has a ration of about 5 meters of cotton cloth a year and receives a monthly food ration of 10.5 kilograms of rice and 2 ounces of edible oil. This is far below the standard of free China.
Sun said that barring the unforeseen, the Republic of China's economic growth will attain the planned target of 8.5 per cent this year.
He added that in the first half of 1972:
—Industrial growth reached 27.1 per cent, the highest rate in the last two decades.
—Crops showed a slight decline due to poor weather conditions; output of fishery and animal husbandry rose.
—Foreign trade totaled US$2,518,200,000 with a favorable balance of US$165,200,000.
—Overseas Chinese and foreign investments approved by the government aggregated US$34 million.
—Due to changes in exchange rates, there was a 4.01 per cent rise in commodity prices. The government is taking counter-measures.
Sun said the government will not rest on its laurels in the economic field. Both government and the business community are alert to cope with changes in the international situation.
200 plants established for export processing
Two hundred plants have been established at export processing zones in Kaohsiung, Taichung and Nantze. As of the end of June, investment amounted to US$68,000,000 and 50,300 jobs had been made available.
The Kaohsiung Export Processing Zone has 160 factories, of which 157 are in operation. Investment totals US$48,000,000.
Twelve of the 13 registered factories at the Taichung Export Processing Zone are in operation. Investment is US$ 7,880,000.
The Nantze Export Processing Zone near Kaohsiung has 17 factories operating and 10 under construction. Investment is US$12,000,000.
KEPZ is sold out at the 160 plant level. NEPZ can accommodate 200 factories.
Export zone foreign investment is US$33,000,000, followed by Chinese-foreign investment of US$16,700,000. Domestic investment totals US$9,700,000 and overseas Chinese investment US$8,750,000.
Employment stands at 45,514 for KEPZ, 3,118 for TEPZ and 4,566 for NEPZ.
Government finances in excellent shape
Finance Minister K.T. Li reported finances of the Central Government are sound. He told senior Kuomintang members of modest surpluses for the last three years. No extra appropriations have been asked since fiscal 1971 and the government has been floating fewer bonds.
The Ministry of Finance has created an investigation section to prevent tax evasion. In the last two years, Li said, more than 300 cases of tax evasion have been cracked. Government has collected more than US$12,500,000 in fines and unpaid taxes.
Investigation has helped establish a sound tax system and has deterred would-be tax evaders. The highest individual income has exceeded US$750,000 a year.
Li told of two new projects to spur economic development. One is use of the US$15,000,000 budgetary surplus to set up the Export Loan Foundation, the Industrial Development Foundation and the Agricultural Development Foundation. The money is being loaned to agriculture and industry through three state banks.
The other is the establishment of an investment trust fund to speed up capital formation. There are seven investment trust companies in Taiwan.
More investment slated for sophisticated industry
The government will step up its investment program in anticipation of heavy demands for capital as sophisticated industries are established.
The program will involve both public and private sectors of the economy. The Ministry of Economic Affairs and other government agencies in charge of economic planning and development will work out priorities of investment.
Efforts will be directed toward encouragement of private investment. The government will offer incentives and loans.
In the public sector, government will help if private capital is not sufficient. Aside from direct government investment, some state enterprises will be opened to private capital and eventually turned over to free enterprise.
Government is planning to create an investment foundation from its budget surplus.
Foreign and overseas Chinese investment procedures are being further simplified. Investment approvals in the first half of this year reached US$37,000,000.
The government is stepping up domestic investment to meet the heavy demand for capital from heavy and sophisticated industries. The need for capital will be much bigger than in the 1960s, when light industry was the backbone of the national economy.
The vice chairman of the Council for International Economic Cooperation and Development, Chang Chi-cheng, said improvement of the investment climate is a major target of the government.
Speaking to the Economic Committee of the Legislative Yuan, Chang said the government will adopt several measures during the 1973-76 economic development plan.
The measures taken will include increase of basic facilities, strengthening of investment services, simplification of administrative formalities, promotion of equitable industrial competition, expansion and strengthening of training for technical and management personnel, and maintenance of price stability and fair management-labor relationships.
Chang said top priority will be given to industries and transportation and communications with a constant investment rate of 70.7 per cent.
The government will strive to attain the following objectives under the new economic plan:
—Mobilization of all economic resources available at home and abroad; increased production.
—Increase of exports.
—Expansion of capital and the establishment of skill-intensive industries so as to improve the productive structures.
—Strengthening of scientific studies of agriculture and intensification of agricultural modernization.
—Expansion of basic facilities for electric power, transportation and harbors.
—Strengthening of vocational education and training to raise the quality of manpower.
—Use of finances to eliminate economic instability.
—Attainment of GNP of US$10 billion and per capita income of US$500.
More than US$9.25 billion will be invested in agriculture, industry, transportation and communications and other services.
Chang said agriculture will get US$0.744 billion, industry US$5.1935 billion, transportation and communications US$1.486 billion and other services US$2.0145 billion.
The average annual growth rate of agriculture will be 4.1 per cent, industry 12.9 per cent, transportation and communication 9.5 per cent and other services 8.1 per cent. Average annual economic growth is expected to be 9.5 per cent.
Unemployment stands at only 1.39 per cent
An estimated 4,836,000 persons were employed in Taiwan last April, according to a labor productivity survey. Only about 68,000 persons were unemployed, or 1.39 per cent of the labor force.
The survey gave these breakdowns:
—1,565,000 persons engaged in agriculture, forestry, fishery and animal husbandry.
—1,540,000 persons engaged in industry.
—1,731,000 persons engaged in services.
The labor force for industry made up 31.84 per cent of the total employed population, close to the ratios of Japan (32.4 per cent) and the United States (31.1 per cent).
The survey suggested improvements could be made in the agricultural and service fields to catch up with advanced countries.
Foreign exchange will reach US$1.3 billion
Foreign exchange reserves will exceed US$1.3 billion by the end of 1972 at the present rate of increase.
The government reserve is US$1.1 billion. The rate of gain is increasing.
The faster accumulation is due to the growth of foreign trade, continued inflow of foreign and overseas Chinese capital and the sound financial policy of the Central Bank of China.
The increase has created new problems. Experts agreed the government should ease import restrictions and support private business and industry in importing raw materials and capital goods.
The Board of Foreign Trade has been liberalizing import restrictions.
Statistics made available by the Council for International Economic Cooperation and Development, the top policy group exercising supervision over economic development efforts, showed that the country posted an 11.4 per cent increase in its gross national product (GNP) in 1971, over that of 1970. The 1971 GNP amounted to NT$249.5 billion or US$6.32 billion, equivalent to 40 billion Philippine pesos. The average annual GNP increase between 1961 and 1970 was as high as 9.6 per cent, an average annual increase of 2.4 per cent over the annual GNP growth for the 1953-60 period.
The per capita income has been steadily on the rise. Its growth rate in 1971 was 10.2 per cent over the 1970 figure. The 1971 per capita income amounted to US$329 as against US$298 in the previous year.
Taiwan's foreign trade zoomed to a total of US$4.08 billion in 1971; exports amounted to US$2.135 billion, while imports totaled US$1.95 billion, representing a decidedly favorable trade balance. The exports increased by 36.6 per cent over those in 1970, while imports rose by 27.4 per cent.
All this and more have accounted for the flourishing life of comfort in that country where people find little difficulty in eking out a decent and profitable livelihood. With the extensive development of industry and the equitable distribution of agricultural lands, the people's financial capability has been enhanced so that domestic business is brisk at all levels—in banks, well-stocked department stores, markets, farmers' cooperatives and fruit-vegetable stalls. This seems only natural in a country where the percentage of unemployment is less than 4 per cent of the population. Statistics show that in 1970 there were only 77,000 unemployed out of the total employable population. And the average wage in manufacturing industries has risen to over US$50 a month.
One direct result of this healthy economic milieu is the total absence of beggars in the streets, in public places and everywhere in the cities and rural areas. There are very isolated cases of robbery or pilferage; peace and order is thus no problem.
Government planners attribute this economic prosperity enjoyed by the people to a member of factors, chiefly, the low cost of living, the adequate supply of daily necessities, price stability and the even distribution of income and wealth.
Indeed, the goals are high, but the resolve to reach them is equally high.
Hence, in Taiwan today there is a frenetic if quiet endeavor to move further ahead, to consolidate gains already made, to expand them when ever feasible—to reach the acme of fulfillment of its constant yearnings for lasting recognition in the community of free nations.