ECONOMY
Through over five decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (NT$), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to China and Southeast Asia. Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Taiwan is now a creditor economy, holding the world's fourth-largest stock of foreign exchange reserves ($273 billion as of January 2007). Although Taiwan enjoyed sustained economic growth, full employment, and low inflation for many years, in 2001, Taiwan joined other regional economies in its first recession since 1949. The economy began to recover in 2002, but the outbreak of severe acute respiratory syndrome (SARS) slowed growth to 3.5% in 2003. The world economic upturn drove growth in 2004 to 6.2%. However, slower world growth in 2005, higher energy prices and interest rates, and excess inventory dragged 2005 growth to 4.2%. Continued expansion of exports pushed up Taiwan's economic growth to 5.7% in 2007.
Foreign Trade
Foreign trade has been the engine of Taiwan's rapid growth during the past 50
years. Taiwan's economy remains export-oriented, so it depends on an open world
trade regime and remains vulnerable to fluctuations in the world economy. The
total value of trade increased more than five-fold in the 1960s, nearly ten-fold
in the 1970s, doubled in the 1980s, and nearly doubled again in the 1990s. In
the first half of this decade, exports grew 60%. Export composition changed from
predominantly agricultural commodities to industrial goods (now 98%). The
electronics sector is Taiwan's most important industrial export sector and is
the largest recipient of U.S. investment. Taiwan became a member of the World
Trade Organization (WTO) as a special customs territory in January 2002.
Taiwan firms are the world's largest suppliers of computer monitors and leaders in PC manufacturing, although now much of the final assembly of these products occurs overseas, typically in China. Textile production continues to move to lower-cost locations overseas, but is still a major industrial export sector and employs nearly 190,000 people. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports coal, oil and gas to meet most of its energy needs. Reflecting the large Taiwan investment in China, it supplanted the United States as Taiwan's largest trade partner in 2003. In 2007, China (including Hong Kong) accounted for over 28% of Taiwan's total trade and almost 41% of Taiwan's exports. Japan was Taiwan's second-largest trading partner with 13% of total trade, including 21% of Taiwan's imports. The U.S. is now Taiwan's third-largest trade partner, taking 12.6% of Taiwan's exports and supplying 12% of its imports. Taiwan is the United States' ninth-largest trading partner; Taiwan's two-way trade with the United States amounted to $61 billion in 2006 and rose 5.6% to $65 billion in 2007. Imports from the United States consist mostly of agricultural and industrial raw materials as well as machinery and equipment. Exports to the United States are mainly electronics and consumer goods. The United States, Hong Kong, China, and Japan account for 60.2% of Taiwan's exports, and the United States, Japan, and China provide almost 46.6% of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. The U.S. trade deficit with Taiwan in 2007 was $11.9 billion, down 21% from $15.2 billion in 2006. Even though Taiwan maintains formal diplomatic relations with about a score of its trading partners, Taiwan maintains trade offices in nearly 100 countries. Taiwan is a member of the Asian Development Bank, the WTO, and the Asia-Pacific Economic Cooperation (APEC) forum. Taiwan is also an observer at the Organization for Economic Cooperation and Development (OECD). These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.
Agriculture
Although only about one-quarter of Taiwan's land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agriculture only comprises about 1.4% of Taiwan's GDP. Taiwan's main crops are rice, sugarcane, fruit, and vegetables. While largely self-sufficient in rice production, Taiwan imports large amounts of wheat, corn, and soybeans, mostly from the United States. Poultry and pork production are mainstays of the livestock sector and the major demand drivers for imported corn and soybeans. Rising standards of living have led to increased demand for a wide variety of high-quality food products, much of it imported. Overall, U.S. agricultural and food products account for more than 30% of Taiwan's agricultural import demand. U.S. food and agricultural exports total about $2.5 billion annually, making Taiwan the United States' sixth-largest agricultural export destination. Taiwan's agricultural exports include frozen fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Taiwan's imports of agricultural products have increased since its WTO accession in 2002, and it is slowly liberalizing previously protected agricultural markets.
Economic
Outlook
Taiwan faces many of the same economic issues as other developed economies. As labor-intensive industries have relocated to countries with low-cost labor, Taiwan's future development will rely on further transformation to a high technology and service-oriented economy and carving out its niche in the global supply chain. Taiwan's economy has become increasingly linked with China. Taiwan official statistics indicate that Taiwan firms had invested about U.S. $65 billion in China through 2007, which is more than half of Taiwan's stock of direct foreign investment. Many unofficial estimates put the actual number well over U.S. $100 billion. More than one million Taiwan people are estimated to be residing in China, and more than 70,000 Taiwan companies have operations there. Taiwan firms are increasingly acting as management centers that take in orders, produce them in Taiwan, the mainland, or Southeast Asia and then ship the final products to the U.S. and other markets. This process is made more difficult by the lack of direct transportation links between China and Taiwan.
GDP (2007): $383 billion.
Real annual growth rate (2007): 4.6 5.7%.
Per capita GDP (2007): $16,790.
Unemployment (2007) 3.9%.
Natural resources: Small deposits of coal, natural gas, limestone, marble, and asbestos.
Agriculture (1.4% of GDP): Major products--pork, rice, fruit and vegetables, sugarcane, poultry, shrimp, eel.
Services: (71.1% of GDP).
Industry (27.5% of GDP): Types--electronics and flat panel products, chemicals and petrochemicals, basic metals, machinery, textiles, transport equipment, plastics, machinery.
Trade (2007): Exports--$247 billion: electronics, optical and precision instruments, information and communications products, textile products, basic metals, plastic and rubber products. Major markets--U.S. $32 billion, P.R.C. and Hong Kong $100 billion, Japan $16 billion. Imports--$219 billion: electronics, optical and precision instruments, information and communications products, machinery and electrical products, chemicals, basic metals, transport equipment, crude oil. Major suppliers--Japan $46 billion, P.R.C. $30 billion, U.S. $27 billion.
