Tags: Analysis: | Taiwan's | Ambitious | 6-Year | Plan

Analysis: Taiwan's Ambitious 6-Year Plan

Friday, 10 May 2002 12:00 AM

The development plan aims to transform the island from a traditional manufacturing based to a cleaner high-tech and service industries, a self-titled "Green Silicon Island."

Among the key points are taking the global lead in 15 manufacturing sectors, increasing research and development expenditure to 3 percent of the GDP and increasing the number of tourists from 1 million annually to 5 million by 2007.

As a result, economic growth is expected to be boosted to at least 5 percent per year on average until 2008, compared with the target of 2.7 percent for this year.

The unemployment rate is expected to fall below 4 percent on average over the next six years, from 5.2 percent.

The plan also calls for education programs and increasing the number of broadband Internet users from to 6 million from 2 million.

The plan calls for the development of public infrastructure, as well as strategic industries such as semiconductors, image processing and display, digital-related and biotechnology. The various projects could create an estimated 700,000 jobs.

"It is obviously an ambitious plan, but we are very much in doubt if the government can actually implement the plan as it involves tremendous political, financial and fiscal reforms," said Daniel Chan, senior economist at DBS Bank, based in Hong Kong.

Chan questioned whether the government will actually manage to push the necessary reforms through the Legislative Yuan, as it may not get the required majority to bring about the needed changes in the law.

These reforms touch on the banking sector, manufacturing, and research and development. "The Taiwanese government wants to implement some pretty drastic measures," Chan said. "These will need to go through the Yuan, but I'm not sure whether they can get them through."

The other major concern raised by analysts is the financing of the plan.

The government has indicated that the plan will be partly funded by the government (52.7 percent), while the rest would come from the private sector and special funds. But there were no details on where the funds would come from and how they would be spent, economists pointed out. The Council for Economic Planning and Development has only indicated that the plan will not add to the government's fiscal burden.

Economists said such a development plan would require huge spending to upgrade the capacities for innovation and research and development, as well as improving living conditions and the educational system.

"Where are they going to get the money? I don't think they will use reserves because they prefer to keep those to protect the Taiwanese dollar," Chan said.

Taiwan has developed a chronic budget deficit, which is now more than a cyclical concern. The central government's budget deficit has risen to over 4 percent of GDP from 1 percent in 1995, while the total (provincial plus central) fiscal deficit is now over 6 percent of GDP.

Further fiscal spending to boost growth and the potential loss of fiscal revenues, as businesses relocate to China, will have an even greater impact in the medium-term, analysts said.

Despite economists' concerns about the likely implementation of the scheme, a Taiwanese industrialist has welcome the plan.

The local press on Friday quoted Morris Chang, chairman of the Taiwan Semiconductor Manufacturing Co., as praising the project as "creative" and "worth cheering," while Stan Shih, founder of the Acer Group, also said that the project is a good one.

Copyright 2002 by United Press International.

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The development plan aims to transform the island from a traditional manufacturing based to a cleaner high-tech and service industries, a self-titled Green Silicon Island. Among the key points are taking the global lead in 15 manufacturing sectors, increasing...
Analysis:,Taiwan's,Ambitious,6-Year,Plan
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2002-00-10
Friday, 10 May 2002 12:00 AM
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