Taiwan United Daily lists reasons for deteriorating investment environment

The past four years saw Taiwan's worst investment environment over the past five decades. Society has become turbulent as a result of the unprecedented fierce election campaign, intensified antagonism among races and different views and disputes between the two rivaling sides.

After Goldman Sachs Securities graded Taiwan stock investment from markup to neutrality, Merrill Lynch Securities even suggested that foreign investors reduce their share holding in Taiwan, which was a clear indication of foreign businessmen's worry about the investment environment in Taiwan.

The DPP (Democratic Progressive Party's) four-year "ruling" has seen members of Taipei United States Chamber of Commerce falling from over 600 to some 400, and those of Europe Chamber of Commerce from around 400 to some 300. Those European and US companies have all moved from the island to China's mainland. Therefore, "improving the investment environment" and "opening direct flight across the Taiwan Straits" were listed as top requests in the "survey on enterprise confidence" conducted annually by US Chamber of Commerce or proposals put forward by Europe Chamber of Commerce each year. The authorities, though verbally accepted the requests and promised to carry them out, no substantive actions were taken as years have gone by. Consequently, not only external investment in Taiwan has greatly declined, one-fourth of the member companies of US and Europe chambers of commerce in Taiwan have withdrawn their money.

External investment in Taiwan, which peaked in 2000, dropped by 33 percent and 36 percent in 2001 and 2002 respectively, then bounced up by 9 percent in 2003. However this was the result of "watering" which, if deducted, would reveal a shrinkage in three consecutive years. The external investment in 2003, after deducting "water", was a 60-percent drop from 2000.

No matter how Taiwan authorities showed off their economic achievement, figures tell us how foreign businessmen look upon Taiwan's investment environment after party rotation.

Similarly, investment in Taiwan peaked in 2000 following the rotation of ruling party and then declined for three straight years. The investment in 2003 decreased 24 percent from 2000, a total of 1.57 billion Taiwan dollars, equivalent to zero investment in the year. And the rate of investment in the past two years dropped to a new low over the past 46 years, making it clear how serious its impact is on current and future economic development.

There are the following five main reasons for the rapidly deteriorating investment environment in Taiwan over the past three years:

First, economic development was deeply affected by Lee Teng-hui's "politics in command" implemented in the later period of his administration. This was changed into "election comes first" during Chen Shui-bian's period, under which economy served election and even sacrificed itself for election, so the decline of the economy should be predictable.

Second, Chen Shui-bian advocated "ruling through ideology". In terms of cross-Straits economic relations and trade, the basic tactics of "active opening-up, effective management", when really put into practice, failed to be effectively implemented due to the strong interference from "ideology" exponents, and was changed into "active management, slow opening-up". Therefore, "opening-up for people from the mainland to tour and invest in Taiwan" had no substantive effect. Various barriers were set up to hinder investment made by important industries in the mainland, and no progress was made in cross-Straits direct flight except for the opening of "three mini-links-direct trade, transport and postal links". This is one of the main reasons for the transfer of external investment from the Island to the mainland and the flow of investment by Taiwan businessmen to the mainland.

Third, policy is vacillating and opaque. Such policy made it impossible to predict any reversals of major policies and did extremely serious harms to the investment environment. This is also an important reason for the sharp drop in external investment in the Island over the past three years.

Fourth, "financial leader changes frequently. For instance, during Chen Shui-bian's four-year tenure, there had been three "heads of the Administrative Yuan", four "financial ministers" and three "economic ministers". Particularly, a new set of entirely different practices were put forth, this shows that the policy lacks consistency, executive ability and administrative efficiency.

Fifth, investment in infrastructure is insufficient. Taiwan authorities' public policy has seen negative growth for four successive years with the rate of decline reaching 25 percent. Although the average annual growth rate of Taiwan's economy was 2.6 percent in the past four years, decrease in public investment was 6.5 percent each year, obviously falling short of the need of economic development and even counteract by restraining economic development.

By People's Daily Online

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