Viable Path to Prosperity

President Tsai Ing-wen (蔡英文), who took office in May, has pledged to revitalize Taiwan’s economy by pursuing a New Model for Economic Development, one that focuses on innovation, employment and equitable wealth distribution. The public, having experienced years of stagnant wages, elected her with the expectation that she would guide the country down a path toward increased salaries, improved working conditions and greater job opportunities. These weighty goals can be achieved, but not overnight. They are just part of the Tsai administration’s plans for an economic transformation that will foster domestic innovation while at the same time diversifying trade by, among other things, increasing the nation’s presence in South and Southeast Asia.

The president’s focus on the economy is demonstrated by her appointment of Lin Chuan (林全) as premier. A former finance minister, he has decades of experience in the public and private sectors and is known as an advocate of financial reform, having spearheaded the creation of the alternative minimum tax system. His expertise will be an invaluable asset to the Cabinet as the government pushes forward its initiatives.

A key step to achieving this new economic model is to reinforce the nation’s relations with countries around the globe while pursuing bilateral and multilateral trade agreements. Of particular importance to the new administration is the U.S.-led Trans-Pacific Partnership (TPP). The comprehensive trade agreement, which has not yet come into force, has been signed by 12 countries around the Pacific Rim that combined account for just shy of 40 percent of global gross domestic product. The president has expressed her hope that the U.S. will support Taiwan’s bid for inclusion in the next round of TPP negotiations.

One of the most significant challenges for the Tsai administration is export diversification. Currently, mainland China, including Hong Kong, accounts for roughly 40 percent of Taiwan’s exports, with a further 18 percent going to Southeast Asia and 12 percent to the U.S. In order to decrease the nation’s overreliance on a single market, Tsai has devised her New Southbound Policy. The plan involves enhancing ties with Association of Southeast Asian Nations member states and South Asian countries such as India, and is being organized by the recently inaugurated New Southbound Policy Office under the Office of the President.

In order to ensure its continued economic prosperity, Taiwan must boost its competitiveness and attract greater levels of investment from overseas. The key to this is innovation, a concept at the core of Tsai’s five major industrial development objectives. The president’s strategy centers on boosting the capabilities of five major local industries, namely biotech and pharmaceuticals, sustainable energy, national defense, smart machinery, as well as the Internet of Things and other smart technologies. For the latter industry, the president has proposed northern Taiwan’s Taoyuan City as the hub of the Asian Silicon Valley initiative, which aims to transform the special municipality into a center of high-tech innovation and entrepreneurship.

It will take time for this new vision of economic revitalization to come to pass. Tsai has asked that the people be patient, that they be optimistic, but most of all that they be resolutely united behind the common goal of ushering in a new era for the nation. The president’s plan is a viable path to economic prosperity, but it will take the concerted efforts of the government, businesses and private individuals to make it a reality.