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Paper Abstract:
History, economic development, resources, political evolution, society & culture.
Paper Introduction:
TAIWAN
This research paper summarizes the history, economic development, resources, political evolution, society and culture of Taiwan (the Republic of China or ROC) from the standpoint of a private foreign investor. Taiwan is an excellent country in which to conduct an international business. Only one grave uncertainty clouds the horizon for private foreign investors, the current impasse in cross-strait relations between Taiwan and the People's Republic of China (PRC), which constitutes a large imponderable hazard for the foreseeable future.
History
Taiwan is comprised of a large (13,895 square miles) mountainous and subtropical main island lying about 100 miles off the southeast coast of China and many smaller surrounding
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(1998, June 1). Ninety-nine percent of Taiwanese children complete atleast nine years of public or private school. 25). From 1683 to 1895, Taiwan was part of theManchu Empire which paid little heed to it. Economic Development and Foreign Investment Climate According to Goldstein (1997), "Japanese rule was harsh at times, butthere was none of the barbarism that characterized Japan's occupation ofChina," and other parts of East Asia (p. Teng-hui, Lee. New York Times, A 4. Cross-strait trade and investment. Under Deng's One China, Two systemsformulation, Liu said that Deng hinted that the PRC was prepared to acceptthe status quo for 5 years and said that "Taiwan, like Hong Kong, couldremain a capitalist society" (1997, p. In the infamousFebruary 28, 1947 incident, police fired on a crowd which gathered inTaipei after a local unlicensed cigarette seller defied a governmenttobacco monopoly. 51). (1999, September). Traditionally, access toeducation and culture was defined by a fairly rigid class structure.However, all that changed due to Taiwan's rapid modernization in recentdecades, which has in turn produced societal strains and conflicts. 988). In the late 197 s and since, Taiwan adjusted to declining foreignmarkets and the higher cost of imported goods, especially oil, by furtherdiversifying into technologically more sophisticated products, includingcomputer parts and peripherals, such as semiconductors, power supplies,motherboards, scanners, monitors, mouse devices, and modems, in whichTaiwan today has large global market shares, for example, 63 percent of allmouse devices used in the world (Tanzer, Silicon, 1998, June 1, p. The two oppositionparties, DPP and the spin off from the KMT, the New Party (NP) have both,however, become associated with a strongly emerging sense of Taiwaneseidentity. China (Taiwan). It includes governmentand employer-subsidized National Health Insurance, child, elder anddisability care and other social services. Unlikeother state-directed East Asian economies, such as South Korea, Taiwanencouraged private foreign investment. Over manycenturies, Chinese farmers and settlers from Fukien (Fujian) and othercoastal provinces settled along Taiwan's coasts. Forbes, 52-58. Since the 195 s Taiwanhas had one of the fastest growing economies in the world. Although feminism as suchgets little play in Taiwan, Davison and Reid said "women are increasinglydemanding political and economic equality" (p. Those tensions peaked in 1995-1996 as theChinese engaged in saber-rattling amphibious and missile firing exercisesoff the Taiwanese coast which were designed to intimidate Taiwan's voters(which failed) and which finally resulted in the dispatch by the UnitedStates of two carrier groups into the South China Sea east of Taiwan in thespring of 1996. 981-1 2. (1999). The currency, the New Taiwandollar, declined about 15 percent and inflation has been kept under threepercent per annum. According to Rigger (1999, September), "whenthe Asian flu sent Taiwan's fellow tigers [South Korea, Indonesia, Malaysiaand Thailand] to the IMF and the World Bank . Taiwan's new president-elect Chen Shui-Ban has toned his party's pro-independence rhetoric since his election. Thestate with American aid plowed capital into largely state-owned utilities,textiles and mining enterprises. Relations between Taiwan and the PRCwhich improved somewhat during the time of Chinese leader Deng Xiaoping,have been tense since 1993, as the popular movement for Taiwaneseindependence has gathered momentum. Taiwan's greatest resource isits talented entrepreneurial and purposeful managerial class and itsdisciplined, and educated work force, in short its people, as discussedbelow. Parallax visions making sense of America-EastAsian relations at the end of the century. 199). Since the late 198 s, the PLA has substantiallymodernized its naval and air forces, including electronic, land, sea, andair-launched missiles, anti-satellite, and anti-aircraft capabilities vis-a-vis Taiwan and United States forces. Culture and customs of Taiwan.Westport: Greenwood Press. . F. Silicon Valley east. Eckholm, E. The KMT certainly deserves credit for learning some lessons from itsdisastrous experience on the mainland. The difference was made up by industrialproducts and services. Growth rates have declined somewhatsince the early 199 s but still compare favorably with the rest of Asia,6.7 percent in 1997 and 5.4 percent in 1998 (Tanzer, Tight, 1998, January12, p. The PRC tended to view these developments with equanimity,particularly since Taiwan was contributing to its economic growth andbecause Deng thought these ties would render Taiwan an economic hostage tothe PRC (Garvey, 1997, p. Accordingto Davison and Reid (1998), "Taiwan is experiencing a definite trend towardfewer children, the result of . Nearly ten percentof all capital invested in manufacturing in Taiwan during the 196 s and197 s came from private foreign investment which Copper (1999) said was "avery high figure compared to other developing countries" (p. Resources Taiwan's economic progress is all the more remarkable when oneconsiders that it has very little in the way of natural resources, littlecrude oil or other minerals. Rush to China. The authoritarian KMT government played a major role in fomentinggrowth in the early postwar decades. The traditional focus of communal life was the family, whichtended to be large, hierarchically-oriented and male-dominated. Taiwan has a fairly extensive andcostly welfare system which accounted for 4.5 percent of GDP and 26 percentof the public budget in 1997 (Copper, 1999, p. 49);and Where, 2 , April 1, p. A 4). Its volcanic soil is rich with the resultthat Taiwan, which produces rice, fruits, vegetables, much of which itexports, is self-sufficient in food. Copper, J. 191). 358). The Nationalist regime ruled Taiwanas a mixed military and one party (Kuomintang or KMT) police state duringthe remainder of Chiang Kai-Shek's life (until 1975) and thereafter underthe rule of his eldest son, Chiang Ching-kuo, who was President from 1978until his death in 1988. 127). Overshadowing thesedevelopments lies the long shadow of the Chinese dragon, whose patienceappears to be running out, and which adds grave uncertainty to theequation. TAIWAN This research paper summarizes the history, economic development,resources, political evolution, society and culture of Taiwan (the Republicof China or ROC) from the standpoint of a private foreign investor. According to the Economist (A Survey,1998, November 7), "up to a third of consumer goods for export marked 'Madein China,' are actually made by Taiwanese-owned firms" (p. In January 1998 the Minister of Justice was forced toresign on corruption charges, which also played a role in the recent lossby the KMT of the presidency.Nevertheless, corruption in Taiwan has been no worse than in the morehighly developed East Asian societies such as Japan and much less of aproblem than in many other countries in the region such as South Korea andIndonesia. Taiwan would become anautonomous administrative region, but the PRC would control foreign anddefense policy. It was ceded to Japan afterChina lost the Sino-Japanese War and remained a Japanese colony until 1945when, pursuant to the Cairo and Potsdam conferences of World War II,sovereignty over it reverted to Nationalist China. Taiwan has small deposits of natural gas, coaland limestone. Military Balance. Educational opportunities have eroded traditional class barriersand resulted in the creation of a large middle class. They say "the Taiwanese ideal of family and kinship creates greatpressure for success and puts a premium on material prosperity" (p. Politicalliberalization tentatively begun under Chiang Ching-kuo blossomed into afree multiparty electoral system under his KMT successor, Lee Teng-hui,President from 1988 to March 18, 2 when for the first time an oppositioncandidate, Chen Shui-ban, the former mayor of Taiwan's capital city,Taipei, was elected President. The Taiwanese governmenthas facilitated this transition by making major investments in scientificand technical education, funding computer-related research and developmentprojects, privatizing many state enterprises and granting tax concessions,relief from trade restrictions and other regulations and other incentivesto foreign and domestic investors in high technology businesses which cantake advantage of Export Processing Zones. Lieberthal (1995, November/December) pointed out that "withsocialism no longer credible, politicians are anxious to burnish theirnationalist credentials" (p. I 1999.London: Europa Publications, 1999. References A survey of Taiwan. Its transportation and communicationssystem is comparable to that of Japan or most Western nations, excellentroads, railroads, ports, airports and telephone and wireless systems,including widespread access to cellular phones and the Internet. Shortly thereafter, Goldstein (1997) said "troops fromthe mainland systematically murdered thousands of the island's elite-andpotential political opposition" (p. What now for Beijing and Taipei? Pension promises. (1997). 149). Taiwan nation-state or province?. (1999). 123).According to Tanzer, "thousands of agile, entrepreneurial manufacturers" inwhat has become known as Silicon Valley East serve, typically withunbranded components, the needs of major global computer giants such asIBM, Fujitsu, Compaq and Dell Computers (p. F. The ROC under Chiang Ching-kuo pursued a three no's policy--'no contact, no talks and no compromise.' However, during the late 198 travel, trade and investment between the mainland and Taiwan greatlyincreased. an aggressive government birth controleffort, the realities of crowded urban life, and the increase in two-wage-earning couples, and modern attitudes" (p. U.S.-China relations, 1784-1992. Social Welfare and Social Problems. However, the United States hascontinued to support a peaceful resolution of the status of Taiwan and tosupply Taiwan with defensive arms. Taiwan is putting U.S. In the 196 s, it encouraged by the use ofcredit, incentives and other centrally planned devices export-orientedlabor-intensive industries such as textiles, steel, petrochemicals andplastics, paper, shipbuilding, electrical and electronic componentmanufacturing (products such as radios, tape recorders, VCRS, stereoequipment, calculators and videogames) and other light industries, such asmotorcycles and bicycles, which were left largely to the private sector.According to Rigger (1999, September), "although some large companies didwin significant advantages from the state, the bulk of Taiwan's exportearnings came from small and medium-sized enterprises" (p. The statekept labor costs down by subsidizing the relocation of the rural populationto the cities, preventing unionization and controlling inflation. 86). W. (1998, November 7). Most Western military observers believe, accordingto Smith (2 , March 7) that "Beijing's military options for attacking theisland remain limited and impractical" (p. 287). It has no legalobligation to do so. Tanzer, A. Boulder:Westview Press. The PRC maynot, however, be willing to wait very long, and such internal changeswithin it may take decades. NewYork Times, A 8. 122). In 1961, 2.5 percentof the population was 65 or older; in the early 199 s 7 percent (Copper,1999, p. A new China strategy.Foreign Affairs, 74, 35-49. The Japanese improved theefficiency of agriculture. Beginning in the 198 s with toy and shoe producers and nowincluding apparel, electronics and many other types of manufacturing firms,more than 8 , Taiwanese businesses now have invested more than $4 billion in more than 4 , projects on the mainland, mostly in the coastalprovinces of Fujian and Jiangshu provinces, 4 percent of all privateTaiwanese foreign capital invested abroad (Moore, 1997, October 13, p. M., & B. Taiwan: Finding opportunity in crisis.Current History, 98, 286-29 . Later, Chiang Ching-kuo permittedTaiwanese to participate in local government and their influence becamemore forcefully felt after opposition parties were allowed to function in1986 and Taiwan-born Lee Teng-hui rose to power within the KMT. Personal savings remain extraordinarily high by Westernstandards, about 3 percent of income (Copper, 1999, p. Arranged marriages are no longercommon. . Eckholm, E. Tight little island. 151). Moore, J. Conclusion Taiwan has made remarkable progress within a relatively brief span oftime in creating a modern, politically stable, democratic, free market andfast growing economy which by all normal standards provides extremelyattractive environment for private foreign investment. 44). Davison and Reid saidit is "high quality, teacher focused, and exam-driven" (p. 7). He has indicated a willingness tomeet with the PRC's leaders in Beijing or Taipei provided that "we aretreated as equals" (Eckholm, 2 , March 21, p. Liu, T. (1999). Taiwan has the highest divorce rate in East Asia.Approximately 45 percent of adult women work outside the home, which isfigure comparable to the West, and which creates strains in marriages.Urbanization and family breakdown have contributed to higher rates ofsuicide, juvenile delinquency and child abuse. Economist, NA 1-18. Education was improved. 1). 25). Between 1965and 1985, Copper (1999) said Taiwan was "the world's fastest growingeconomy" (p. , Taiwan barely sniffled"(p. He said thirty percent of its electricity is producedby nuclear power plants (p. Under Lee Teng-hui, the Taiwanese intermittently engaged inexploratory talks with the Chinese leadership, culminating in those inSingapore in 1993. Understanding Taiwanbridging the perception gap. Since 1994, relations between the PRC have beenworsening, reflecting Chinese impatience with the burgeoning Taiwaneseindependence movement, perhaps a growth in the influence of the ChinesePeople's Liberation Army in Beijing after Deng's death and tensions withinthe PRC itself. (1998, January 12). 286). (1997). S. Rigger, S. The officiallanguage is Mandarin Chinese. In the Information Age, the most important national resources are notto be found in the earth but in the brain. Taiwan's stock market tumbled less than that of its neighbors andactually rose 117 percent in 1998. This raises the ultimate question of whether the evolution ofTaiwanese politics and culture which has recently occurred places Taiwan ona collision course with the PRC. Goldstein said "in the past four decades, Taiwan haschanged from an agricultural economy to an industrialized one supported bya vibrant service sector" (pp. About 25 percent go on tocollege. Death rates and birthrates have declined. Cross-straits trade, mostly through Hong Kong, hasincreased from $2.7 million in 1987 to $22.2 billion in 1996 (Goldstein,1997, p. Durham: Duke University Press. (1997). Originally inhabited by Malayo-Polynesian aborigines, Taiwan's present day population of approximately 22million people is almost entirely of Han Chinese descent. 14). Face off. 39). on the spot bycampaigning for better missile defenses against China. Taiwan faces the twenty-first centurycontinuing the 'miracle.' New York: Foreign Policy Association. Hesaid that in 1952 agriculture accounted for 32 percent of GNP and 95percent of exports but by 1996 less than 4 percent of GNP and less than 5percent of exports (p. 12). 172). Most middle class Taiwanese speak English aswell which is taught in the public schools. 4 ). The basic reason for Taiwan's relative success, comparedwith its East Asian neighbors in managing the Asian financial crisis, hasbeen conservative government and private financial policies. Copper said "by the 199 sTaiwan was getting accolades around the world for its educational system"(p. (1999, November/December). (2 , March 7). . 81). 186).One result is that the "Taiwanese people are very frugal and industrious"(p. Nevertheless, the strengthof family structure and the traditional Confucian emphasis on socialharmony played a major role in easing the strains of economic development.According to Davison and Reid, "a seeming paradox of Chinese societiesgenerally and Taiwanese society specifically is how people so tied to localfamily and community so readily pick up and move to other places. As the Nationalist regime on the mainland collapsed during theChinese civil war of 1945-1949, Goldstein (1997) said "Nationalistofficials swarmed onto the island, seizing property and imposing the samekind of corrupt, repressive rule that existed on the mainland" (p. Since the mid-198 s, Taiwanesefirms have been permitted within limits to preserve the health of manylight industries started earlier by taking advantage of much lower costlabor on the Chinese mainland and at the same time participate in the PRC'sgrowing world exports. The opposition Democratic Progressive Party (DPP) has not,however, been successful in its attempts to introduce old-age pensionlegislation (Pensions, 1997, November 1, p. 17). Education. A 1). (2 , March 21). Taiwan, then called Formosa, served as animportant source of rice for Japan. Foreign Affairs, 78, 9-14.----------------------- 17 Asian Financial Crisis. Since unemployment has been soslow, the government still, however, looks to families and employers toprovide for the unemployed. Family. Relationships between the locally born population and the Nationalistemigres were very poor in the late 194 s and 195 s. Taiwan's banks and other businesses have low debt equity ratiosand at the end of 1998, Taiwan had only $165 million in external debt andover $9 billion in foreign exchange reserves (China(Taiwan)), 1999, p.988). According to Cumings, it is inconceivable that the Taiwan majority, finally able to disabuse itself of the mainlanders who imposed their rule at the point of a gun in the late 194 s, would succumb to the straitjacket of Beijing's authoritarian politics in the 199 s (p. Garver, J. Theanswer is that the paramount duty for a family and its individual membersis to maximize family income and health" (p. In 1953 Taiwan's exports and importswere $32 million; by 1998 their value was $23 billion, which made Taiwanthe fourteenth largest trading nation in the world (Copper, 1999, p. Women have equal rights of inheritance and to property in marriage.Women marry later in life and many more of them remain single than inprevious eras. (1995, November/December). Another isthat "the extended family ideal contributed powerfully to both small-business growth and corporate growth in the Taiwanese economy" (p. As therecent elections for the presidency demonstrate, one's place of birth is nolonger a disqualification for high office, which is convincing evidence ofthe social mobility and reduction of ethnic tension which forty five yearsof economic prosperity and progress have wrought. In other words,Taiwan is playing for time, hoping that internal political changes withinthe PRC will produce a regime with which it can negotiate withoutsacrificing its free market and its political independence. A 8). According to Goldstein (1997),Taiwan's GNP per capita in 1952 was $5 and $12,437 in 1996 (p. Many foreign companies invested inlocal assembly joint ventures. 15). Such a conflict would set back economicprogress throughout the region, but it is a risk to be carefully weighed. J. Behind China's threats. Course and Future of Cross-Straits Relations Mao Zedong in 1972 and Deng after 1978 repeatedly assured theAmericans that they were prepared to shelve for an indefinite period the re-acquisition of Taiwan, which the PRC has steadfastly maintained is aprovince of China. Europa International Year Book Vol. Lieberthal, K. In the 199 s, the ROC has responded bypurchasing 15 F-16 fighters from the United States, Mirage fighters fromFrance, Patriot anti-aircraft missiles from the United States and inimproving its radar capabilities. Cumings, B. The role of women is changing. (1997, October 13). Culture and Society Taiwan's traditional culture is of Chinese origin. As theEconomist (A Survey, 1998, November 7) put it, "Taiwan knows that it cannotafford to go bust" (p. As Lee Teng-hui said in1999, "what Taiwan has done in the past decade is remarkable for the speedand scope of its economic development and political change and for thepeaceful way in which such changes have been achieved" (1999,November/December, p. 2 5). . Rapidurbanization has produced traffic congestion, air pollution, rising crimerates and illicit drug use and a shortage of affordable housing. Whether the United States will intervene to defend Taiwan at thatpoint if it cannot defend itself is an open question. It is currently attempting to purchasefrom the United States new long-range radar and four $1.6 billion warshipswhich carry anti-ship Aegis anti-cruise missile defense systems (Eckholm,2 , April 1, p. The rateof labor unionization is 17.3 percent, comparable to the United States, butlabor strife and labor costs have increased together with democratization.Copper (1999) said "although Taiwan's social problems are less serious thanthose in modern western democracies, they seem to be worse because theyhave appeared so suddenly" (p. 52; and China (Taiwan), 1999, p. 2 3). (2 , April 1). They attempted unsuccessfully to persuade the Chinese toaccept the concept not only of two rival economic but also two competingpolitical systems. The initial thaw in American relations withthe PRC (1971-198 ) resulted in Taiwan's loss of its seat in the UnitedNations in 1971, the rupture of diplomatic relations with the United Statesin 1979 and the ending of MST in 198 . Taiwan faces an increasingly aging population. One source of difficulty has been the perennialcorruption associated with the long rule of the KMT and its version ofcrony capitalism. During the 198 s, the PRC alternatively wooed and soughtto intimidate the Taiwanese. Seattle: University of WashingtonPress. 26). This transition has not, however, been achieved without seriousinternal tensions. 81). 25-26). New York Times,A 1 & A 1 . Political Liberalization Taiwan has made a remarkably smooth transition to multiparty democracyand free media and public expression when one considers that it was anation living in a state of national emergency and a modified one partyalien dictatorship a little more than a decade ago. Reid. As of 195 , however,the Taiwanese economy was still predominantly agricultural. M. 289). Basic infrastructure, railroads, roadsand ports, were constructed. 146;and Goldstein, 1997, p. Goldstein, S. (1998). ROC was a Cold War partner of the United States inEast Asia under a 1954 Mutual Security Treaty (MST) and received during the195 s and early 196 s substantial ($1.5 billion) in military and economicaid from the United States (Copper, 1999, p. Ming Empireloyalists drove out the Dutch. 167). 185). Forbes, 123-127. Economist, 73. (1998, January 3). 12).Today, the approximately 85 percent of the people whose forbears arrivedbefore 1949 call themselves Taiwanese. Taiwan has the lowest birth rate in East Asia. 183). Taiwanis an excellent country in which to conduct an international business. 15 ). According to Copper (1999), Taiwan imports 95 percent of itsenergy needs (p. 77). Illiteracy rates are below 6 percent. 11). Tanzer, A. History Taiwan is comprised of a large (13,895 square miles) mountainous andsubtropical main island lying about 1 miles off the southeast coast ofChina and many smaller surrounding islands. Over time, the Chinese, with their huge trade surplus with the UnitedStates, have the means to develop overwhelming military superiority overTaiwan. Lanham, MD:University Press of America. 136). Davison, G. 82). Any foreign investor considering a long-term investment in Taiwanmust, therefore, take into account the risk that tensions between the PRCand Taiwan will reach a point sometime within the next decade or so where adirect military conflict is likely. Onlyone grave uncertainty clouds the horizon for private foreign investors, thecurrent impasse in cross-strait relations between Taiwan and the People'sRepublic of China (PRC), which constitutes a large imponderable hazard forthe foreseeable future. Business Week, 48-49. Although the Taiwanesegovernment maintains considerable regulatory powers, largely for nationalsecurity reasons, such as its ban on investment by Taiwanese firms in thePRC in high technology products, "Taiwan's economic system is founded onfree-market capitalism" (Copper, 1999, p. Those ventures produced a reverse flow oftechnology to Taiwan's burgeoning entrepreneurial class. Average annual growth rates were 8.2 percent in the195 s, 9.2 percent in the 196 s, 1 .2 percent in the 197 s and 8.2 percentin the 198 s (Copper, 1999, p. Smith, C. 39). Its leaders, despite fierceopposition by conservative elements, have permitted political pluralism toemerge; and they have sponsored social welfare policies which have takenmuch of the sting out of the socialist rhetoric of opposition parties.According to Goldstein (1997), because of those measures and "because mostof the population is supportive of capitalism and a free market, theopposition's liberal and socialist ideas have not had much appeal with thepopulace" (p. First the Portuguese andthen the Dutch established outposts there in the 17th century. Land reforms in the early 195 s,according to Rigger, improved agricultural productivity and helped generatea food surplus to support industrialization (1999, September, p.
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