Through nearly five decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. Taiwan is now a creditor economy, holding one of the world's largest foreign exchange reserves of more than $100 billion in 1999. Despite the Asian financial crisis, the economy continues to expand at about 5% per year, with virtually full employment and low inflation. The population also enjoys an annual average income equal to U.S. $13,152 (1999).
In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (NT$), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to the Chinese mainland and Southeast Asia.
Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Private Taiwan investment in the P.R.C. is estimated to total more than $30 billion, and Taiwan has invested a comparable amount in Southeast Asia.
Foreign Trade
Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased more than five-fold in the 1960s, nearly 10-fold in the 1970s, and doubled again in the 1980s. The 1990s has seen a more modest, slightly less than two-fold, growth. Export composition has changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment.
Taiwan is the world's largest supplier of computer monitors and is a leading PC manufacturer. Textile production, though of declining importance as Taiwan loses its competitive advantage in labor-intensive markets, is another major industrial export sector. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports most of its energy needs.
The United States is Taiwan's largest trading partner, taking 25% of Taiwan's exports and supplying 17% of its imports. Taiwan is the U.S.'s seventh-largest trading partner and eigth-largest export market. In 1999, Taiwan's two-way trade with the U.S. amounted to about U.S. $54.3 billion. Imports from the U.S. consist mostly of agricultural and industrial raw materials. Exports to the U.S. are mainly electronics and consumer goods.
The United States, Hong Kong (including indirect trade with the P.R.C.), and Japan account for two-thirds of Taiwan's exports, and the U.S. and Japan provide 45% of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. This trend has driven imports to rise faster than exports and has cut into Taiwan's global trade surplus. Another important factor in the substantial increase in Taiwan's imports has been industrial upgrading, which has pushed up imports of capital goods, raw materials, parts, and components. Taiwan's l999 trade surplus with the United States was $16.1 billion, a significant amount, but a decline from a high of $17 billion in 1987.
The lack of formal diplomatic relations with all but 29 of its trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce, and Taiwan is currently the world's 14th-largest trading economy. Taiwan maintains trade offices in more than 60 countries with which it does not have official relations. Taiwan is a member of the Asian Development Bank, and it is engaged in negotiations to join the World Trade Organization (WTO) as a special customs territory. In 1991 Taiwan, under the name "Chinese Taipei," became a member of the Asia-Pacific Economic Cooperation (APEC) forum. These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.
Agriculture
Although only about one-quarter of Taiwan's land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agriculture only comprises about 269% of Taiwan's GDP. Taiwan's main crops are rice, sugar cane, fruit, and vegatables.
Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption are rising sharply, reflecting a rising standard of living. Taiwan has exported large amounts of frozen pork, although this was affected by an outbreak of hoof and mouth disease in 1997. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Imports of agriculture products are expected to increase due to the approaching WTO accession, which will open previously protected agricultural markets.
Economic Outlook
Taiwan now faces many of the same economic issues as other developed economies. With the prospect of continued relocation of labor-intensive industries to countries with cheaper work forces, Taiwan's future development will have to rely on further transformation to a high technology and service-oriented economy. In recent years, Taiwan has successfully diversified its trade markets, cutting its share of exports to the U.S. from 49% in 1984 to 25% in l999. Taiwan's dependence on the U.S. market should continue to decrease as its exports to Southeast Asia and the P.R.C. grow and its efforts to develop European markets produce results. Taiwan's bid to join the WTO and its desire to become an Asia-Pacific "regional operations center" are spurring further economic liberalization.
GDP: purchasing power parity - $357 billion (1999 est.)
GDP - real growth rate: 5.5% (1999 est.)
GDP - per capita: purchasing power parity - $16,100 (1999 est.)
GDP - composition by sector:
agriculture:
3%
industry:
33%
services:
64% (1999 est.)
Population below poverty line: 1% (1999 est.)
Household income or consumption by percentage share:
lowest 10%:
NA%
highest 10%:
NA%
Inflation rate (consumer prices): 0.4% (1999 est.)
Labor force: 9.7 million (1999 est.)
Labor force - by occupation: services 55%, industry 37%, agriculture 8% (1999 est.)
Unemployment rate: 2.9% (1999 est.)
Budget:
revenues:
$36.82 billion
expenditures:
$40.53 billion, including capital expenditures of $NA (1999 est.)
Industries: electronics, petroleum refining, chemicals, textiles, iron and steel, machinery, cement, food processing
Industrial production growth rate: 7.5% (1999 est.)
Electricity - production: 133.586 billion kWh (1998)
Electricity - production by source:
fossil fuel:
65.91%
hydro:
7.84%
nuclear:
26.25%
other:
0% (1998)
Electricity - consumption: 124.235 billion kWh (1998)
Electricity - exports: 0 kWh (1998)
Electricity - imports: 0 kWh (1998)
Agriculture - products: rice, corn, vegetables, fruit, tea; pigs, poultry, beef, milk; fish
Exports: $121.6 billion (f.o.b., 1999)
Exports - commodities: electronics, electric and machinery equipment 52%, metals, textiles, plastics, chemicals
Exports - partners: US 26%, Hong Kong 21%, Europe 18%, Japan 10%, Singapore 3% (1999)
Imports: $101.7 billion (c.i.f., 1999)
Imports - commodities: electronics, electric and machinery equipment 45%, minerals, precision instruments
Imports - partners: Japan 27%, US 18%, Europe 16%, South Korea 6%, Malaysia 4% (1999)
Debt - external: $35 billion (September 1999)
Economic aid - recipient: $NA
Currency: 1 New Taiwan dollar (NT$) = 100 cents
Exchange rates: New Taiwan dollars per US$1 - 31.395 (yearend 1999), 32.216 (1998), 32.052 (1997), 27.5 (1996), 27.5 (1995)
Fiscal year: 1 July - 30 June (up to FY98/99); 1 July 1999 - 31 December 2000 for FY00; calendar year (after FY00)
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