Transcript PPT on - Kleykamp in Taiwan

Short Review So Far
1950s: US Aid (1951-1965) – Three 5 year periods --(a) safety and basic needs, (b) capital infrastructure
and (c) agriculture surplus, export and private business push. total $1.5 billion over 15 years
Land Reform – Three stages (rent reduction, sale of government land, land to tiller)
Forex Control – multiple exchange rates, ESCs, stabilization of prices, move to single exchange rate
Taiwan’s SOEs inherited from the Japanese. Government policy was to support good state run enterprises
and 1st stage of important substitution (i.e. reduce consumer imports and buy domestic, not from Japan –
especially clothing and fertilizers). Good SOEs were electricity, cotton textile, and fertilizer industries. US
Aid was directed at these SOEs especially electricity and fertilizer industries. 75% of manufacturing was
due to SOEs.
Evidence that around 1950 there was a poverty trap (or its potential) in Taiwan – low saving, high risk, high
population growth (including high immigration), lack of technology, lack of infrastructure, government
spending dominated by military. Extreme surplus of labor in Taiwan, coupled with an output elasticity with
respect to capital that was apparently greater than 1. US Aid in early 1950s help push capital upward
despite lack of domestic saving. Provided important push to help economy takeoff. Aid tied to specific
reforms
Taiwan expanded the scope and scale of its economy by exporting. This allowed better division and
specialization of labor and industry, raising productivity and increasing income and wealth. Both exports
and imports increased during this period.
Minchuan East Rd 1970s
Chung Hsiao West Road 2000s
Near Taipei Train Station
19 Point Program of Economic and Financial Reform of 1960
US Aid authorities gave an inducement to the Taiwan government of a $30-$40 million program loan.
The conditions for the loan aimed at increasing economic growth
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encourage saving and investment
establish a capital market
sell industrial enterprises to private investors
speed investment projects
adopt fiscal reforms
remove subsidies
rationalize utility rates
establish a central bank
liberalize exchange and trade regulations
hold military expenditures to 1960 level
East Asian Development
By Dwight H. Perkins p. 85
US Aid ended in 1965 – US prepared the Taiwan government for the transition, encouraged
a transition to private enterprise, exports, and freer markets.
Real economic growth over the period 1961 – 1972 was 10.25% while average inflation was
only 3%. This low average inflation rate was due in part to strong productivity growth and
stable international prices.
During the 1960s 12 major industries arose in Taiwan. These were the following:
(1) canned goods – L
(2) lumber – L
(3) textiles – L
(4) paper – L
(5) sugar – K
(6) cement – K
(7) fertilizer – K
(8) petroleum refining – L
(9) electric power – L
(10) plywood – B
(11) plastics – B
(12) electrical appliances – B
These industries could be classified into labor intensive (L), capital intensive (K), or balanced
intensity (B) industries. (See the article by Liu on the class webpage)
State Owned Enterprises
The founding father of the Republic of China and of the Kuomintang, Sun Yat-sen, was heavily
influenced by the economic ideas of Henry George, who believed that the rents extracted from
natural monopolies or the usage of land belonged to the public. Sun argued for Georgism and
emphasized the importance of a mixed economy, which he termed "The Principle of
Minsheng" in his Three Principles of the People.
As Sun proclaimed in 1913, "The railroads, public utilities, canals, and forests should be
nationalized, and all income from the land and mines should be in the hands of the State.
With this money in hand, the State can therefore finance the social welfare programs.“ (see
Simei Qing, Harvard University Press , 2007 p. 19)
American
Henry George
1839-1897
Chinese
Sun Yat-Sen
1866-1925
Taiwan’s State Owned Enterprises (Some of the Big Ones) Controlled
under the MOEA – Ministry of Economic Affairs
1965 – “National Corporation Department” restructured
Commercialization of National Corporations”
to “Commission for the
1969 – reorganized into simply “Commission of National Corporations”, which would
supervise and manage SOEs, it also worked to move privatization along.
2003 – renamed “State-Owned Enterprise Commission”.
Five Big SOEs
---------------------------------------------------------------------------------Tai-power
CPC Corporation (China Petrochemical)
Tai-sugar
Tai-water
Aerospace Industrial Development Corporation
On December, 1998, because of a simplification policy of Taiwan Provincial Government, all the banks and
businesses under it were turned over to the Central Government. The Taiwan Tobacco & Wine Monopoly
Bureau was renamed Taiwan Tobacco & Liquor Corporation on July of 2002. Taiwan Development
Corporation was also privatization. The Ministry of Finance still held the stocks of both organizations
above and attending their board of directors. The Printing Plant of Taiwan Provincial Government was also
then subordinated and renamed as Printing Plant, Ministry of Finance.
Until January of 2011, the businesses held by the Ministry of Finance included Taiwan Financial Holding
Companies, Bank of Taiwan Corporation, Taiwan Land Bank Corporation, Export-Import Bank of ROC, First
Financial Holding Corporation, First Commercial Bank, Hua Nan Financial Holdings, Hua Nan Commercial
Bank, Cooperative Bank, Business Bank, Chang Hwa Bank, Central Reinsurance Corporation, Financial
Information Corporation, Taiwan Tobacco & Liquor Corporation, and Trade-Van Information Service
Corporation.
Government Run Banks
Chang Hwa Commercial Bank -- In December 1997, the Taiwan provincial government made public its shareholdings in the Bank in line with the government's policy of
financial privatization. The Bank was officially privatized on January 1, 1998. In Oct. 3, 2005, Taishin owning with 22.01% ownership replaces the government as CHB’s largest
shareholder.
First Commercial Bank -- First Commercial Bank was originally established on November 26, 1899 as Savings Bank of Taiwan. On January 22, 1998 the Bank was
transformed from a government entity into a private bank. After the establishment of First Financial Holding Co. on January 2, 2003, the Bank became a subsidiary of First Financial
Group.
Hua Nan Commercial Bank -- A large number of government-owned shares was released on January 22, 1998, enabling the Bank to complete privatization and embark
upon a new era. In order to adapt to government financial reforms and changes in the financial environment, the Bank convened extraordinary shareholders’ meetings on November
14, 2001 and passed a proposal to establish Hua Nan Financial Holdings Co., Ltd. (HNFHC) via a 100% stock conversion.
Taipei Business Bank -- The TBB was transformed into a private bank on Jan. 22, 1998 and entered a brand-new age of operations.
Bank of Taiwan – On Sept. 16, 2004 the Bank received permission from the Financial Supervisory Commission to become a public company. The Bank completed merger with
Central Trust of China on July 1, 2007. The Taiwan Financial Holding Co., Ltd. was established on Jan. 1, 2008.
Land Bank of Taiwan -- On 21st December, 1998, it became a state-run organization upon implementation of the Province Simplification Statute; on 1st July, 2003, it was
reorganized as the “Land Bank of Taiwan Co., Ltd.;” further on 21st May, 2004, it was transformed into a public company to prepare for initial public offering of its stocks upon
privatization.
Farmers Bank of China (Now Taiwan Cooperative Bank) -- TCB achieved corporate status under the provisions of Article 52 of the Banking Law in May
1985. It was reorganized as the Taiwan Cooperative Bank, Ltd. on Jan. 1, 2001; went public in June 2003; was listed on the stock market on Nov. 17, 2004; underwent a Chinese name
change in 2006; and merged with The Farmers Bank of China on May 1 of the same year.
Chiao Tung Bank -- Transforming from a licensed bank for industries in 1928, an industrial bank in 1975, and a development bank in 1979, CTB turned from a state-controlled
bank into a privately–owned one in 1999. With a view to enlarging the business scale and increasing the market share, ICBC and CTB formally merged into one bank under the name of
Mega International Commercial Bank Co., Ltd. on August 21, 2006.
Export-Import Bank of China -- The Export-Import Bank of the Republic of China (Eximbank) was established in 1979 with the aim of facilitating export and import trade
of Taiwan through offering Export Credit Insurance, Relending Facility and other various kinds of financing facilities. It is a government-owned bank .
Taipei Bank -- Taipei Fubon Bank (Chinese: 台北富邦商業銀行) [1] is a bank based in Taiwan. It was founded on January 1, 2005 from a merger of Fubon Bank with TaipeiBank.
Bank of Kaohsiung -- The Bank was privatized on Sep. 27, 1999 and was upgraded as a national bank under the approval of the Minister of Finance on May 31, 2001.
Ten Major Construction Projects 1973
The Ten Major Construction Projects (Chinese: 十大建設; pinyin: Shí Dà jiànshè) were the national infrastructure
projects during the 1970s in Taiwan. Taiwan government believed the country lacked key utilities such as highways,
seaports, airports and power plants. Moreover, Taiwan was experiencing significant effects from the 1973 oil crisis.
Therefore, to upgrade the industry and the development of the country, the government planned to take on ten
massive building projects. They were proposed by the Premier Chiang Ching-kuo, beginning in 1974, with a planned
completion by 1979. There were six transportation projects, three industrial projects, and one power-plant
construction project, which ultimately cost over NT$300 billion in total.
The Ten Projects
National Highway No. 1: from Keelung City to Kaohsiung City, with a branch to the Chiang Kai-shek International
Airport Electrification of Western Line railway
North-Link Line railway
Chiang Kai-shek International Airport
Port of Taichung
Su-ao Port
China Shipbuilding Corporation (CSBC) Shipyard, Kaohsiung
China Steel factory
Oil refinery and industrial park
Nuclear power plant
Twelve Projects of 1978
Twelve Projects 1978 encompassed infrastructure and development projects. These
included
(1) An around the island railroad
(2) The New Cross-Island Highway
(3) Kaohsiung-Pingtung traffic improvement,
(4) Expansion of China Steel Corp
(5) A nuclear power plant,
(6) Taichung Harbor expansion
(7) New towns and housing
(8) Regional drainage
(9) Dike and levee construction
(10) Pingtung-Olampi Highway Widening
(11) Farm mechanization
(12) Cultural centers
The Jinshan Nuclear Power
Plant or Chin Shan Nuclear
Power Plant[4] (金山核能
發 電 廠 or 核 一 ) is a
nuclear power plant in
Shimen,
New
Taipei,
Taiwan. Commissioned in
1978 for its first nuclear
reactor, the plant is
Taiwan's first nuclear
power plant as well as
Taiwan's smallest nuclear
power plant.
Taipower, as the operator of
the power plant, is required
by the Radiation Monitoring
Center of the Legislative Yuan
to hand in the 2018
decommissioning plans for
the plant by December 2015
for the authority to review all
of the plans before the
decommissioning date. Once
the reactors have been shut
down, the plant should be
dismantled within 25 years.
1978 Highway 1 Completed
The first controlled-access highway, and a predecessor to the national highways in
Taiwan, was the MacArthur Thruway, built in 1964 between Keelung and Taipei.
Construction on the first modern national highway, National Highway 1 began in
1971. The northern section between Keelung and Zhongli was completed in 1974,
and the entire freeway was completed in 1978. It runs from the northern harbor city
of Keelung to the southern harbor city of Kaohsiung, while there was an 8.6kilometre (5.3 mi) branch (No. 1A) connecting to Chiang Kai-shek International
Airport (now Taiwan Taoyuan International Airport).
The TRA Western Line (Chinese: 西部幹線) is a railway line of the Taiwan
Railway Administration running along Taiwan's densely populated western
corridor. As a result of this, it remains the busiest rail line in Taiwan. In 2009,
the line served over 164.3 million passengers, averaging 450,244 passengers
per day. The concept "Western Line" is actually a combination of line sections
as the following:
Taiwan Trunk Line (縱貫線):
Northern section: From Keelung Station to Zhunan Station
Coastal Line (海線): From Zhunan Station to Changhua Station, through
Taichung Harbor and the seaside areas of Miaoli County and Taichung City.
Mountain Line or Taichung Line (山線, 台中線): From Zhunan Station to
Changhua Station, through the inland areas of Miaoli County and Taichung City.
Chengzhui Line (成追線): A small section of railway connection Chenggong
Station on the Mountain Line, and the Zhuifen Station on the Coastal Line.
Southern Section: From Changhua Station to Kaohsiung Station
Pingtung Line (屏東線): From Kaohsiung Station to Fangliao Station
The total length of the combined line of Taiwan Trunk Line is 408.5 km, of which
361.6 km is double track.
Growth Rate – How to Calculate It
Suppose you have a variable in year t like Yt = real
GDP. How do you calculate the growth rate of Yt for
the year t ?
Annual Data Gt = 100*(Yt – Yt-1)/Yt-1
Quarterly Data Gt = 100*(Yt – Yt-4)/Yt-4
Monthly Data Gt = 100*(Yt – Yt-12)/Yt-12
Useful Growth Rate Calculation Rules
Approximately True
Growth Rate of A*B = Growth Rate of A + Growth Rate of B
Growth Rate of A/B = Growth Rate of A – Growth Rate of B
Exactly True
Growth rate of (1+x)t = x
Growth Rate of A = 0 implies A = constant
The Rule of 72 – How to Use it
The average real economic growth rate in Taiwan over the period 1962 – 1979 was
10.756 %. Of course, economic data is never that precise. Therefore, we can just
estimate the growth at 10.8%. Remember that this is an annual rate of growth. Next, to
calculate the number of years it takes to double GDP we use the Rule of 72. this is easy.
Just take the growth rate 10.8% and divide it into 72 (actually 69 is a better number to
use - if you have calculator).
The rough answer is 72/10.8 = 6.7 years to double GDP
The more exact answer is 69/10.8 = 6.4 years to double GDP
This tells us that the size of the Taiwan economy doubled between 1962 – mid-1968, it
doubled again mid-1968-1974, and it doubled again between 1975 - mid-1979. That is
very fast growth indeed! By contrast, population grew about 2.5% per year over the
period 1960-1980