Although the stability of Taiwan’s economy stands out amid the financial crisis in Asia, the island cannot remain an idle spectator as neighbor countries suffer, according to Wei-Te Liu, executive adviser of the Coordinating Council on Sino-Japanese Business Affairs.
“We cannot look at the problem with indifference. The 21st century was once touted as the century of Asia — we must by all means prevent this from becoming an illusion,” said Liu, who also chairs China Technical Consultants, Inc., a consultancy on energy and environmental matters.
Many Asian countries — particularly Indonesia, Malaysia, South Korea and Thailand — continue to suffer from the financial crisis that erupted last summer and Japan remains in economic doldrums, so Taiwan’s strong performance is particularly striking.
Last year, Taiwan achieved a robust growth of 6.8 percent, the seventh-highest in the world. Despite lingering effects of the Asian crisis, it also expects growth of more than 6 percent this year.
Although the value of the new Taiwan dollar dropped 15.4 percent against the U.S. dollar between June and March, the margin of decline is less than one-third the average depreciation of currencies in the four hardest-hit countries, Liu noted, adding that the stock price index in Taiwan grew 0.7 percent last year.
Taiwan has been less affected by the Asian crisis than its neighbors because it has a larger amount of foreign currency reserves compared with its external debt and has promoted financial liberalization over the past several years, Liu explained.
At the end of last year, Taiwan’s foreign currency reserves stood at $83.5 billion, while the amount of its external debt as of June was $25.2 billion.
Taiwan has properly managed the problem of “hollowing out” its manufacturing industry during the past four to five years by moving the production base of simple products overseas to such areas as mainland China and by successfully nurturing the manufacturing of additional high-value products on the island, Liu said.
The countries hit hard by the crisis received exorbitant investment from foreign companies, opened up financial markets before their financial systems were ready to do so and allowed their financial institutions to excessively invest in real estate.
In order to aid those countries’ recovery, the Taiwanese government plans to extend at least $1.2 billion in low-interest loans to overseas Chinese businesses in the region through Taiwanese bank branches. The private sector plans to set up a holding company with $600 million in capital to promote investment in those affected nations, Liu noted.
The Taiwanese government also started a feasibility study on an aid scheme, in which it would temporarily purchase U.S. bonds held by banks in the four countries to help ease their liquidity, Liu said. The banks in those countries would later buy back the bonds on certain conditions.
Liu stressed that these measures aim to assist neighbor countries in the Association of Southeast Asian Nations that are important economic partners for Taiwan, whose trade with them totals $30 billion a year.
“Whether or not those countries have diplomatic ties with Taiwan, it does not benefit them to exclude Taiwan — which has substantial economic power — from the global economy. We are not seeking to raise our presence in the region through those measures,” Liu said.
If Japan’s economic and financial situation does not further deteriorate, affected countries will recover from the crisis and the subsequent chaotic situation in a few years, he predicts.
“These countries are dependent on the Japanese market. I think that they may export their goods to Japan and the United States in a manner close to dumping. I hope that Japan will further open its market,” Liu said.
However, Liu expressed his concern over the efficiency of deregulation and financial reforms in Japan, saying the slow pace of the country’s decision-making is causing financial reform to proceed at a snail’s pace.
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