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Taiwan - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Taipei
Area:: km2
Density:: /km2
Population of Taipei (6.753), Kaohsiung (2.960), Taichung (2.700), Tainan (785)
Official language: Mandarin Chinese.
Other languages spoken: Official language: Chinese mandarin, although the Min Nan Hua Taiwanese (dialect of the South of Fujian) and the Hakka (indigenous language) are widely spoken.
Business language: English
Ethnic Origins:: Taiwanese (including Hakka) 84%, Mainland Chinese 14%, indigenous 2%.
Beliefs: Taiwan is highly diversified in terms of religious faith, with the practice of Buddhism, Daoism, Christianity, Mormonism, the Unification Church, Islam, and Hinduism, as well as native sects such as Yiguandao and others.
Telephone codes:
To make a call from: 2
To make a call to: +886
Internet suffix:: .tw
Type of State::
Taiwan has for all practical purposes been independent for half a century but China considers it as a part of its territory and wants it re-united with the mainland. Legally, most nations and even the United Nations (UN) acknowledge the position of the Chinese government that Taiwan is a province of China. However in reality Taiwan (official name: Republic of China) is an independent republic state based on parliamentary democracy and has a semi-presidential form of government.
Type of economy::
High-income economy, emerging financial market
World leader in the production of high technology products

Economic overview

After almost five decades of sound economic management, Taiwan has managed to go from an underdeveloped agricultural island, to an economic power that is a leading producer of high-technology goods. Taiwan has a dynamic capitalist economy in which the authorities' control of investment and foreign trade is gradually diminishing. Highly vulnerable to the fluctuations of the global economy (its exports account for two thirds of the Taiwanese GDP), the island was severely affected by its parters' economic slowdown, especially regarding the eurozone and the United States. Growth remained at 2.1% in 2013 and was essentially driven by the rise in domestic demand. It is expected to rise to 3.2% in 2014 thanks to the resumption of exports following the recovery of global demand

The Taiwanese economy has been negatively affected by the unfavorable international context, especially regarding the United States and Europe. In September 2013, the island nonetheless reached its record in the exports of goods (7.8 billion USD) and therefore confirmed its position as a global leader in electronic products. President Ma Ying-jeou, who was reelected in 2012, announced the priorities of his second term: to reduce social inequalities, create jobs, support innovation and guarantee a greater participation of Taiwan in the region's economic integration. For the sixth consecutive year, the country has adopted an expansionist budget policy for 2014. Its main focus is social security (more than one fifth of expenditure), followed by education, science and culture (approximately one fifth of expenditure) and by the defense sector. Funding of public works is also a priority, while a balanced budged remains secondary. Because of declining revenues, the budget deficit should be financed by new lending and the emission of government bonds. In the long-term, Taiwan will have to deal with problems of population aging, low birth rate, its diplomatic isolation and decline in its economic competitiveness.

The unemployment rate, which reached almost 6% in 2009, has now dropped to about 4% and should continue to decline.

Main industries

The agricultural sector contributes very marginally to the GNP and employs around 5% of the workforce. Taiwan's main crops are rice, sugarcane, fruits and vegetables. Taiwan has limited natural resources and croplands are cultivated intensely.

The secondary sector accounts for a significant part of the GNP. Even though traditional industries such as iron and steel, chemical products and mechanics still account for almost half the industrial production, new industries are more dynamic. Taiwan is one of the world's biggest suppliers of semi-conductors, computers and mobile telephones. It is also the world's biggest supplier of computer monitors.

Services contribute nearly 70% to the GDP and employ slightly under 60% of the workforce.
The country, which has to deal with the continuous relocation of labor-intensive industries to countries where labor is cheaper (especially China), will have to rely on new conversions, in order to move from a high-technology based economy to a services oriented economy.

Foreign trade overview

Foreign trade has been Taiwan's growth driver, representing more than 140% of the GDP (average of 2010-2012). Taiwan's economy remains very export-oriented, so much so that it depends on an open world trade regime and remains vulnerable to downturns of the world economy. The electronics sector is Taiwan's most important industrial export sector and also the one that receives most of the American investment. Taiwan, as an independent economy, became a member of the World Trade Organization (WTO) as the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu ("Chinese Taipei") in January 2002. Taiwan's main export partners are China, Hong Kong, United States and Japan. A free-trade agreement has been signed with New Zealand and Singapore and the country has also been building closer ties with China and a new liberalisation agreements between the two countries should be ratified by the Parliament. For more information, refer to the COMTRADE website.

The island shows a surplus trade balance. In 2013, Taiwan registered a record trade surplus of $35.54b, due to a rise in exports and a decline in imports.

FDI

Taiwan is an important destination for Foreign Direct Investment (FDI). The island enjoys strong growth sustained by the dynamism of the entire region, a population with high purchasing power and economy with high technological focus. However, in the recent years, its attractiveness has been steadily declining. Between 2011 and 2013, the country experienced negative FDI flux of around $35b, especially to China. FDI flows remain among the lowest in the region. Speculative activities, rising property prices, bureaucratic constraints and a rigid judicial framework are all impediments to investment. FDI flux have been negatively affected by the global economic crisis and later by the euro zone crisis and the difficulties of the U.S. economy. However the Economic Cooperation Framework Agreement (ECFA) signed with mainland China in 2010 has improved Taiwan's investment climate.
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