Wednesday, May 10, 2017

Post–World War II industrial policy in Taiwan

active government intervention to help boost the national economy.

Between 1945 and 1952, when the ruling KMT party’s government had just relocated from mainland China, Taiwan focused on rebuilding and protecting infant domestic industries through measures like foreign exchange controls and trade restrictions.

In early 1950s, KMT government carried out island-wide land reform. place a limit on the amount of land a family could own, the government bought out large landowners with bonds and with shares in the government-run companies that had been taken over from the Japanese.

For most of the 1950s, the government pursued import-substitution program to develop Taiwan's industrial base, with tariffs, import controls, and multiple foreign exchange rates. --- domestic market increasingly saturated with goods produced by local industry

During Taiwan’s first import substitution phase from 1953 to 1960, it began to build light industries like textiles, cement, glass, fertilizers, food, plywood, motorcycles, home appliances, and plastic products through measures like relaxed foreign exchange controls, high tariffs, rebates of import duties, and restrictions on imports and setting up manufacturing facilities.

By about 1961, Taiwan had shifted to an aggressive export-promotion program, exports of manufactured goods, exchange rates had been unified, import and tariff regulations were eased to enable Taiwan's industry to purchase needed technology and raw materials from abroad in a rational manner
Taiwan also began to try to aggressively to attract foreign investment
After 1965 special export-processing zones were set up in major port areas to allow foreign firms to build plants there that would take advantage of hte cheap labor force, with most technology and raw materials imported, with the output almost totally exported for sale elsewhere

During Taiwan’s first export promotion phase from 1961 to 1972, the policy of encouraging light industry still continued, but the focus shifted to export promotion because of the saturation of Taiwan’s domestic markets. The government also began to foster more technology and capital intensive sectors like man-made fiber, raw materials for plastics, steel, machinery, automobiles, and shipbuilding.

In 1973, Taiwan was badly hit by the oil embargo and world recession

By the second import substitution phase from 1973 to 1984, Taiwan had shifted to the development of heavy industries—focusing on petrochemicals, steel, and shipbuilding, as well as infrastructure projects in order to head off the oil crisis. Economic liberalization became the focus during the period 1984–1990, when surplus-accumulating Taiwan had to open up its domestic economy as a result of pressures from deficit-suffering trading partners—the United States in particular. Information products became the focus of Taiwan industries and, reacting to massive appreciation of the New Taiwan Dollar, Taiwanese industries began to invest abroad.

From 1991 to 2000, Taiwan refined its focus on high-tech industries and allowed new entrants into most of its service sector. The previous century saw Taiwan joining the World Trade Organization, and the Taiwanese economy becoming more service industry–oriented, representing about seventy percent of its gross domestic product. The first decade of this century also saw Taiwan’s ambivalent but massive engagement with China—first as a major manufacturing facility for Taiwan’s listed companies, then as an increasingly lucrative market, and finally as a rapidly transforming—but still tightly controlled— society for various interactions that have profound cultural, economic, and geopolitical ramifications.

As far as competition law is concerned, the importance of Taiwan’s industrial development lies in the concentrated domestic market structure and state owned—and even KMT owned—monopolies
created by the industrial policy or domestic politics of the first half of Taiwan’s post–War development and in the trade-led economic liberalization and adjustment during the second half of the Taiwan development story. As later discussions will show, the FTL is very much an integral part of this transition.

Liu, L. S. (2012). All about Fair Trade? — Competition Law in Taiwan and East Asian Economic Development. The Antitrust Bulletin, 57(2), 259-301.

Barrett, R. E., & Whyte, M. K. (1982). Dependency Theory and Taiwan: Analysis of a Deviant Case. American Journal of Sociology, 87(5), 1064-1089

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