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Can Taiwan's Economic Miracle Persevere?

With the emergence of bigger and bigger businesses, which is inevitable due to the need for high cap and high tech plus the privatization of government-owned businesses, Taiwan needs to be on the lookout for its "politicized businessmen" wielding undue power and authority over matters strictly in the domain of the government. We have already seen officials or legislators serving as hit-man or consultant for Big Business, or businessmen serving in legislature or official capacities-all with potential for conflict of interest. We cannot let big business corrupt or control the government process.

THE SOLUTION AND CONCLUSION

     Now let's try to answer the three questions posed earlier. Would Taiwan follow in Japan's footsteps? In spite of some similarities, perhaps not. Japan is seriously burdened with a highly protected and inefficient economic structure, a four-decade-old one party rule, deeply entrenched bureaucracy ill-equipped to accommodate legitimate business needs, labor unions that resist industrial upgrade, and a corporate community that refuses badly needed restructuring. Japan, Inc. is just too helplessly paralyzed and unable to confront the vested interests to effect necessary reforms such as opening its market and expanding domestic competition. Japan's hardship is more entrenched. Taiwan's structure is more open, flexible, and has an army of very efficient small and medium businessmen to lead the charge. Big businesses are relatively newcomers and not yet out of control.

     Are Taiwan's problems caused by the Asian economic crisis? Taiwan's foreign exchange reserve is still very substantial (about $90 billion) and it hardly has any foreign debt (a meager $250 million) to make it vulnerable to the impact of the crisis. Taiwan's malaise is more deep-rooted in the infrastructure problems and it actually started before the economic crisis. Its bank capital adequacy ratio is above international average. Its small and medium enterprises are crisis-proof.

     The key question is: will the miracle persevere? Taiwan has come to another critical crossroads. This time around, we don't think we can expect the luck, coincidence, or accident that saved and helped us before to be there again. This time it is going to take real planning, and real action to pull us through, particularly from the government insofar as providing the indispensable infrastructure, probably more in accounting, regulatory, banking, taxation, fiscal, monetary, environmental and social welfare systems than anything else. It also calls for the government to come up with a forward-looking, full-scaled, balanced, global and long-term industrial policy to overhaul the industrial structure that will carry Taiwan successfully into the 21st century.


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