Growth amid tension

01 December 1997 00:00  [Source: ACN]

By Adele Kimber

DESPITE Taiwan's obvious advantages of a convenient location, an educated workforce and an entrepreneurial society, mainland China's shadow looms large over its future.

The on-going frosty relations between the two sides continue to raise questionmarks over the direction of Taiwan's development.

Trade between the two remains difficult and the problems have a widespread effect on much economic and industrial planning. Pressure to trade more openly and allow investments in the mainland are seen by many in the business community as key to the future prosperity of Taiwan.

Taiwan has enjoyed consistent growth during the last 50 years. It took advantage of its lower wages to develop labour-intensive light industries to increase exports and provide investment incentives for local businesses.

In the 1970s, investors were attracted by the availability of land, the high-quality labour and the relative efficiency of the government.

Now Taiwan's early successes have turned into a series of hurdles for late 1990s investors. Land is tight, Taiwan is a relatively expensive place in which to operate, and environmental issues are making it difficult for investors, particularly in the chemical industry.

With the local commodity market saturated, a large number of chemical industry investments in Taiwan are unlikely in the near future. Most Taiwanese companies seeking investment opportunities are now looking overseas.

With the architect of Taiwan's democratic reforms President Lee-Teng-hui in place as Taiwan's first popularly elected, rather than appointed, president, the political scene continues to stabilise.

For the future, Taiwan is working hard to be admitted to the World Trade Organisation (WTO). Without membership, Taiwan cannot enjoy the favoured tariffs of WTO member countries and could lose its international competitiveness.

It has concluded bilateral negotiations on its WTO accession with 20 of its 26 major trading partners. Some significant hurdles are still to be overcome, however, with agreements with the US, the European Union, Argentina, Canada, Switzerland and Singapore still to go. Here, mainland China, which is demanding that it be admitted first, could cause problems.

But one investor says: 'It is important that Taiwan gets a fair go. It may not be the most fashionable place to invest but most investors make a lot of money here.'

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