How Rich Is Taiwan Anyway? Analyzing the Economy Under Tsai Ing-wen

How Rich Is Taiwan Anyway? Analyzing the Economy Under Tsai Ing-wen
Credit: Depositphotos
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A peek inside Taiwan's economic performance during the Tsai Ing-wen administration.

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Recently, as I limped home from a game of badminton, I resolved to bite the bullet and try out the Taiwanese healthcare system. I browsed Google Maps, found the website of the nearest clinic prominently featuring a diagram of a knee joint, and arrived at their front door after a quick, free, four-minute dash on a local YouBike. 10 minutes later and NT$200 (US$6.50) less wealthy, I had a fist full of anti-inflammatories and a new medical diagnosis.

Taiwan’s healthcare is an amazing system in a country where most things seem rather well run.

What puzzles me is that whenever I think about this, and ask a Taiwanese citizen whether they approve of the presidency of Tsai Ing-wen (蔡英文) – and I ask this question rather often – the most common response is that, though her plans for Taiwan are well-intentioned, Taiwan’s economy cannot afford the aggressive stance she has taken towards China.

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Credit: Reuters / TPG
Some things just seem to work in Taiwan.

Coming from a country that recently voted to risk financial armageddon in order to leave the European Union, this all seems rather odd. (Subsequent polling has suggested that “protecting the National Health Service” may have been a more important consideration for Brexit enthusiasts.)

To stress the point, traveling Taiwan via public transport is fast, cheap and reliable. Museums are subsidized to absurdly affordable rates. Immigration offices are well staffed, attentive and friendly.

I recently passed my scooter license test here, and with a dash more straight-line stability on my part, I could have qualified to ride after one morning and a NT$700 (NT$22.70) fee. By comparison, should you want to become road-worthy in the UK, you’ll be treated to an average 10-week total wait time and a charge equivalent to NT$4,000 (US$130) in order to simply take each practical test.

In Britain I’m used to seeing daily headlines warning that the National Health Service is so catastrophically underfunded, almost nothing could stop it from collapsing. I’ve witnessed ten years of constant discussion on whether the UK has the cash or political will to build our first proper high speed rail line. A friend of mine came to visit London, failed to appreciate the gravitas of the airport barriers when heading back to Heathrow, and was hit with a rather predatory-feeling NT$2,000 (US$65) charge from Transport for London staff, on top of the NT$1,000 (US$32.50) ticket cost. The cost of a similar train from Taoyuan Airport to the Taipei city center will cost you NT$150 (US$4.90), and you can rely on high speed rail to whisk you down the length of Taiwan in an hour and a half for just NT$1,490 (US$48.35).

The point I’m making is that Taiwan works, and in my experience, Taiwan works very well. By contrast, UK services feel rather doddery and fragile, with infrastructure and public provision becoming increasingly expensive and unreliable. So how can a country as well organized as Taiwan have so little faith in its own independence? Is Britain delusional or is Taiwan being modest?

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Credit: Reuters / TPG
European Union supporters march in London to demand a second Brexit referendum on Mar. 23, 2019.

The International Monetary Fund, the World Bank, and the UN all rank the UK economy as the 5th largest in the world, with the IMF putting the 2018 UK GDP at US$2.81 trillion.

Unfortunately, of these sources, only the IMF recognizes Taiwan as a country (albeit as a “Province of China” on most documents), and it estimates that Taiwanese GDP is on level pegging with Switzerland as the 20th largest in the world at US$602 billion. What this tells us is that Taiwan has a smaller total economic output than the UK, but I’d question the wisdom of using this to categorize Taiwan a “poor country” when the economy is rubbing shoulders with the likes of Switzerland, the land of gold & fine chocolates, and ranks above the economies of Sweden, Belgium and even Norway.

When you take country size out of the equation and think about Taiwan’s economic output in per capita terms, the picture changes, with Taiwan’s GDP per capita ranking as 28th highest in the world at US$50,300. By comparison, the UK is slumped down low at 39th on the list at US$44,100.

The CIA World Factbook presents a detailed picture of how these countries differ.Taiwan, compared to the UK, has a lower unemployment rate (3.8 percent vs. 4.4 percent), a superior gross national saving rate (34.9 percent vs. 13.6 percent), a vastly superior poverty rate (1.5 percent in 2012 vs. 15 percent in 2013*), a smaller budget deficit (-0.1 percent vs. -1.9 percent), a preferable inflation rate (1.1 percent vs. 2.7 percent), a better current account balance ($82.88 billion vs. -$99.21 billion), larger reserves of foreign exchange and gold ($456.7 billion vs. $150.8 billion), and favorable external debt levels ($181.9 billion vs. $8.126 trillion).

In more tangible terms, Taiwan also outstrips the UK on fixed capital investment (20.7 percent vs. 17.2 percent), a widely accepted indicator for national infrastructure spending. Oddly, in the context of my previous anecdote, national healthcare expenditure as a percentage of GDP is one of the few areas where the UK outstrips Taiwan, at 9.8 percent of GDP annually compared to 6.8 percent in Taiwan.

In terms of GDP growth, the picture for Taiwan also looks rosy, with the IMF placing GDP growth at 2.4 percent annually, ahead of the UK at 1.5 percent and the European Union at 0.3 percent.

If you’ll excuse the slightly dispiriting deep-dive into the state of my own nation’s finances, it’s pretty clear that Taiwan’s economy is in better economic health than one of Europe’s wealthier nations on a whole range of different measures. So why are Taiwanese people so downbeat about Taiwan’s place in the world?

The excellent IMF Data Mapper paints a fairly rosy picture of Taiwan’s GDP growth forecast at 2.4 percent annually with the UK at 1.5 percent, the ‘Developed Economies’ grouping at 2.1 percent and the European Union at 2 percent. However, as of this February, the Taiwan government has downgraded Taiwan’s GDP growth forecast to 2.27 percent due to uncertain international conditions and a slowdown of demand in mobile phone markets. China’s growth forecast, even after a similar downgrade, is expected to continue at a healthy rate of 6.2 percent for 2019.

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I have heard a complaint bandied around that Taiwan has failed to match the progress of the other “Asian Tigers,” a term used to describe the post-war wealth accrued by Singapore, Hong Kong, Taiwan and South Korea, and that this, by comparison, makes Taiwan seem fairly poor.

The IMF, with figures included from the UK and the “Advanced Economies” grouping for good measure, throws up some pretty interesting results. In terms of nominal GDP per capita growth (the cost of buying goods internationally with the Taiwan dollar), Taiwan has for a long time been lagging behind most of the nations compared here, falling to the bottom of the chart following the rise of South Korea around 2003. However, when you look at GDP growth per capita in terms of based on purchasing power parity, Taiwan seems to be in pretty good shape, outstripping the UK, South Korea and the “Developed Countries” grouping average, but still trailing Singapore and Hong Kong. For each of these criteria, Taiwan is predicted to enjoy solid if not spectacular growth.

Because of this, living and services are cheap for people living within Taiwan. For Taiwanese people buying internationally traded goods, however, the low value of the Taiwan dollar means that iPhones, foreign cars and foreign branded clothing are pretty costly.

In part, Taiwan’s low nominal GDP goes some way in explaining why traveling outside of Taiwan is seen as so expensive, and accounts for the “brain drain” of young Taiwanese talent abroad. This has been a particular consideration in Taiwan-China relations, with a lot of policies implemented in China to entice younger Taiwanese workers away from home.

Taiwan also suffers from slightly lower GDP growth than the other Asian Tigers, with Korea at 2.6 percent, Hong Kong at 2.9 percent and Singapore ranked at 2.5 percent. This is a clear area of weakness for Taiwan, and it’s easy to see how a negative growth forecast would temper Taiwanese confidence, even if things look more promising here than in Britain.

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Taiwan is also increasingly interlinked economically with China. The country has grown to become Taiwan’s largest trading partner, accounting for 30 percent of the Island’s total external commerce. It’s not hard to imagine that this dependence might make Taiwanese people reluctant to “rock the boat” and upset existing trade flows. As a point of comparison, I should highlight that the EU accounts for 44.3 percent of the UK’s total exports and 53.1 percent of the UK’s total imports. From this, you would either have to conclude that Taiwan’s citizenry are unnecessarily risk-averse, or that the 51.89 percent of UK voters who voted to leave the EU were hubristically risk-tolerant.

On this note, it is worth mentioning that in a 2018 study by Nuffield College on the aspirations behind Brexit, the third most popular justification was a wish to “stop sending money to Europe” (with the health service the intended recipient) behind limiting immigration and regaining lawmaking authority. The same study claims that most Remainers voted to stay in Europe for financial reasons, which leaves us in an odd situation where voting groups pursued directly antagonistic policies in a bid to achieve the same ends. Whether these ends will be achieved remains in doubt, with speculation that Brexit may facilitate the “asset-stripping” of the UK’s health service fairly widespread.

On the topic of independence, September 2016 saw the Tsai administration announce the New Southbound Policy, a plan explicitly designed to encourage new trade and boost relations with 18 countries across South Asia and Australasia, though it is widely considered too early in the life cycle of the policy to judge whether it has been a success.

Despite all the evidence for the relatively abstract measures of Taiwan’s economic well-being, it’s possible that the real reason that Taiwanese workers question their president is that Taiwan has had consistently low wages for so long. There are other sources, such as this March 2018 article, that explain Taiwan’s wage stagnation in more satisfactory detail, but the consensus seems that since 2001, Taiwan’s wages have stayed low due to China-led market competition, a lack of worker unionization, and other reasons including corporate structures and Taiwan’s place in the global manufacturing value chain. The government plainly has an interest in addressing this, as the minimum wage has been raised twice since the Democratic Progressive Party (DPP) returned to power in 2016. It has been suggested that these increases have been smaller than many were expecting and that they have not satisfied the Taiwanese citizenry. As a string of defeats in last year’s local elections and the historic ascension of Han Kuo-yu (韓國瑜) in Kaohsiung suggests, these policies may not yet have succeeded in winning the government much popular support.

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Credit: Depositphotos
Has the government done enough to raise Taiwanese wages?

Ultimately, we’ve arrived at a slightly muddled picture of Taiwan’s economy. It is a fairly wealthy country that does particularly well when GDP is compared per capita, and seems to be in better health than the UK almost across the board. It’s also a country with fairly apparent issues, and it’s easy to see how a sustained period of stagnant wages, concerns about the island’s economic future and the draw of the foreign dollar may cause Taiwanese eyes to wander.

Understanding how Taiwanese people feel about their own country also goes beyond economics to complicated issues of nationhood and identity, which it isn’t possible to properly explore in a flyby assessment of Taiwan’s financial status.

Comparison between Britain’s Brexit stance and Taiwan’s identity question also become less meaningful when you take into account the regular reminders of how many missiles are pointed at Taiwan at any given time.

What I hope I have shown here is that Taiwan’s economy is in pretty good health, particularly so when compared to the United Kingdom, and that the biggest issue seems to be how to sustain a level of growth that has got Taiwan to where it is today.

Read Next: Taiwan's Basic Income Movement Wants to Break Into the Mainstream

Editor: Nick Aspinwall (@Nick1Aspinwall)

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