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Economic Daily News: Action needed to stimulate Taiwan's economy

2012/07/01 16:30:20

Taiwan's composite index of leading economic indicators has flashed a blue light for seven straight months, indicating a sluggish economy.

However, the worst is probably yet to come, considering that the index flashed a blue light for nine straight months during the 2008 financial crisis.

Minister without Portfolio Kuan Chung-ming has said that the economy may dip even further in the near future, meaning the index may flash a blue light for more than nine months.

Kuan said the country's economic performance in July and August will largely determine its economic outlook.

Taiwan's economic performance in July and August will depend on three main factors-- the European debt crisis, the international pricing benchmark for crude oil, and the economic growth rate in China, Kuan said.

However, we are not fully convinced that these factors would be the deciding ones for Taiwan's economy.

The European sovereign debt crisis has been going on for more than two years, which means that its effect on Taiwan is already a fact.

Furthermore, global crude oil prices have fallen to an 18-month low, and low oil prices usually result in lower costs and act as a stimulus for the economy.

In addition, a slowdown of China's economy has already affected Taiwan since early this year. Some analysts have attributed the slowdown in China to the government's more stringent environmental standards and higher labor costs, which are eating into manufacturers' profits.

In seeking a solution, Taiwan needs to transform into a more liberal and international economy, many experts have said.

Taiwan's efforts to sign free trade agreements with the major economies in the world have hit a snag, but Taiwan can still open itself to the world if it wishes to.

The liberalization process should be carried out in stages, not in one go.

More experimentation is needed to strike the right formula for implementing free trade, and there is no better place to conduct such experiments than at the Changhua Coastal Industrial Park, a zone that was built entirely on private financing and is therefore independent from the government.

If the park can be used as a testing ground for free trade, Taiwan's economy may recover in the next two to three years. (Editorial abstract - July 1, 2012)

(By Ann Chen)
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