Taiwan's agriculture is struggling to survive in the midst of increasingly unfavorable conditions. Industrialization and economic internationalization have had an overall negative impact on the agricultural sector. In 1990, one-fifth of the island's total population ―4.3 million people― were engaged in farming. Although they accounted for about 13 percent of the workforce, they produced only 4 percent of the gross national product, compared with 12.5 percent in 1974. The low income from farming has helped drive many people out of the villages and into the cities. Even the aging farm population is increasingly engaged in non-agricultural pursuits ―only as mall fraction of Taiwan's farmers farm full-time.
Agriculture is at a crossroads. Traditional agriculture and its methods have lost their viability. Heavily subsidized, it has become a burden on the government. If the island's agricultural sector is to survive and once again become profitable, it must change with the times and adapt to market demands. Many ways to upgrade agriculture have been suggested: mechanization, diversification, new marketing techniques, and agri-tourism. Many of these suggestions have already been implemented with favorable results.
A vanishing scene? Experts believe large-scale mechanized production is necessary to sustain farm income.
The present plight of agriculture can be attributed to several factors. First, as a rule, agriculture generally declines in the wake of industrialization. Wages go up in the industrial sector, but farm income does not keep pace. And the demand for basic agricultural commodities does not increase with overall economic growth. Therefore, as a nation's economy develops, the proportion of agricultural output in the GNP will invariably decline.
Secondly, dietary habits tend to become more varied as the standard of living goes up. For instance, the consumption of wheat has risen sharply, while that of rice has declined. But the phenomenon has developed along with a substantial increase in the output of rice because of improved production techniques and new, higher yielding strains. The net result is a heavy surplus of rice accompanied by a decline in price.
The problem of falling prices has been aggravated by increases in production costs, most notably soaring labor costs which are the result of an acute farm labor shortage. Consequently, although the local price of some farm commodities exceeds international levels, they produce slim profits. Earnings from rice, for example, are as low as US$800 per hectare annually.
Poor production planning and the absence of an equitable distribution system are also contributing to the decline of agriculture. When a new farm product brings windfall profits to a few growers, other farmers will immediately jump on the bandwagon, leading to overproduction and a drop in price. The present distribution system is structured in such a way that farmers are easily exploited. Retail prices of agricultural products are often two to three times what farmers are paid, indicating that middlemen are reaping the largest profits.
The government's liberalized trade policy has resulted in the domestic market being flooded with imported agricultural products. This policy has driven down market prices, further slashing farmers’ profits. Handicapped by high production costs, local farmers are at a disadvantage when it comes to competing with imported products. Taiwan imported US$5.88 billion in agricultural products in 1989 (up from US$3 billion in 1980), or almost half of its total food consumption. Many people contend that there is nothing wrong with a decline in agriculture and a growing reliance on food imports. They cite the example of energy imports which account for over 90 percent of Taiwan's total energy needs.
The island's troubled farming sector has prompted a reevaluation of the role of agriculture. This is nowhere more apparent than in the debate over the government's farmland preservation policy, which is based on the principle of "farmland for farming." Agricultural land comprises 90 percent of the island's usable land, and some critics feel that such a large share is totally out of proportion to its meager contribution to the economy. The retention of so much land for agriculture limits the space for industry, housing, recreation, and other purposes. This leads to higher prices on available land, thereby impeding economic growth.
There is an enormous amount of fallow land on the island ―198,000hectares, or 22 percent of the island's 880,000 hectares of farmland. Critics are urging the government to ease restrictions on the zoning and sale of farmland to achieve greater efficiency in the economy. Agriculture officials adamantly reject this idea and contend that farmland is actually in short supply. They point to a study carried out by the Council for Economic Planning and Development based on demographic projections and a consideration of nutritional needs, consumption patterns, and farming output, which indicates Taiwan will need 870,000 hectares of farmland by the year 2000.
At present only 730,000 hectares of land are zoned strictly for agricultural use. The remaining farmland can be used for other purposes upon approval from the government. The government has already set aside 28,000 hectares of farmland for the construction of new towns and public facilities under the Six-Year National Development Plan.
In the past several years, development interests have gobbled up farmland at an alarming rate. Wealthy individuals and developers have purchased farm real estate, especially near urban areas ―often under false representation― and have managed to transfer it to non-agricultural uses, earning huge profits in the process. Thus, in recent years, farmland has disappeared at an estimated annual rate of 2,500 hectares. From 1979 to 1986, prime farmland declined by 20,000 hectares, to only 370,000. Furthermore, many buyers of agricultural land who were unable to change the zoning legally, simply went ahead and constructed housing, factories, or other buildings in flagrant disregard for the law.
Experts warn that any liberalization in the buying and selling of farmland would invite large financial groups to enter and manipulate the real estate market, which would result in exorbitant land prices. As a result, the government's efforts at encouraging farmers to expand the scale of their operations could be undermined. In addition, speculators would probably let their farmland go fallow, thereby adversely affecting the overall utilization of agricultural land.
Agricultural experts concede that the optimum level of self-sufficiency in food production varies with circumstances, but they insist that a nation should retain enough farmland to allow flexibility for increasing food supplies should the need arise. Food is too vital to be left in the hands of foreign suppliers. The importance of the food supply to national security, as well as the social and politic a implications of agricultural issues, has over the decades prompted the government to provide substantial subsidies and protection to local farmers. The government has been aiding farmers in a dozen different ways, including purchasing rice at above-market prices, offering tax exemptions, constructing irrigation works, reducing prices for electricity and gasoline, and giving preferential loans ―all of which have cost the government over US$1.5 billion annually.
In addition to the heavy financial burden, the aid has had other unwanted side effects. The purchase of rice at subsidized prices has perpetuated its oversupply and created storage problems. Therefore, the government is encouraging farmers to switch to other crops by offering them a subsidy of US$1,000 per hectare while the land lies idle during the transition. Many farmers, however, claim they cannot find more profitable crops and allow their land to lie fallow so they can continue collecting subsidies.
Moreover, with the maturation of the island's economy and its heavy reliance on international trade, the government has been forced to scale down its agricultural protectionist policies. If Taiwan is to be successful in joining the General Agreement on Tariffs and Trade (GATT), the government will have to reduce protection further in the coming years. Thus the major challenge confronting the government today is to find ways to keep farming profitable so that the island’s agriculture will remain viable. Agriculture officials believe that there are two major ways to achieve this goal: the mechanization of farming operations, and the development of so-called "sophisticated agriculture."
Many small-scale farmers have already found money-making alternatives in value-added crops such as flowers.
Farmers have been encouraged to expand the scale of their operations to facilitate the application of mechanization, especially for crops such as rice and peanuts. By increasing the scale of production, mechanization can be implemented to cut production costs, and thereby eventually ease the government's subsidy burden. In addition, the Council of Agriculture has completed a draft "Agricultural Land Use Law" that will allow agribusiness enterprises to purchase farmland and engage in the large-scale production of value-added farm products.
The feasibility of such large-scale mechanization remains somewhat doubtful because of the small size of local farms. At present, 70 percent of Taiwan's farms are family farms of less than one hectare. This is the direct result of the government's "land to the tiller" land reform in the 1950s. The policy broke up the large land holdings of absentee owners. While the redistribution of land was socially just, today it is a hindrance to the large-scale mechanization considered necessary to sustain farm income.
Since 1984, the provincial government has vigorously promoted the development of "sophisticated agriculture." The program focuses on value-added crops with less foreign competition, such as vegetables, fruits, and flowers. Growers have been inspired by the outstanding achievements of the Netherlands in this field. Remarkable results have already been attained. For example, flowers are proving a profitable alternative for many farmers. Affluence at home has brought an increased demand for such value-added agricultural products and a substantial and growing export market exists in Japan and Europe.
New varieties of fruit are also constantly entering the market. Through the introduction of new cultivars, and experiments with both quick- and slow-maturing varieties, local farmers have considerably lengthened the harvest periods of many fruits. For instance, in the past only one crop of grapes was harvested each year, but now there are two to three crops. And watermelon was previously available only in summer, but now it can be enjoyed almost all year.
The application of new production methods and more effective marketing are helping to increase primary sector earnings. Because organic produce can be sold at a premium in urban supermarkets, some farmers are growing pesticide-free vegetables by covering their fields with plastic nets. Effective marketing efforts include the promotion of brand names such as "black pearl" wax apples and "20th-century" Lishan pears. Artistic packaging is also used to enhance premium produce.
Meanwhile, the government has been improving transportation and marketing systems for farm products. It has established wholesale marketplaces in production areas to help farmers avoid being exploited and has assisted farmers in setting up their own transportation and sales networks. A more efficient information network on market conditions covering both supply and demand has been developed.
The government also plans to actively encourage the development of agri-tourism, allowing urbanites to get back to nature by picking their own fruit and vegetables. The concept is already quite popular in Germany, where the aim has been to transform agriculture into a service industry, thereby helping to revitalize the rural economy. Under the assistance of the Council of Agriculture, over ten agri-tourism farms have already been established in various parts of the island. The farms provide simple accommodations and homestyle country fare. Guests can participate in outdoor activities such as barbecues and, of course, pick fruit.
Heavy surpluses of subsidized rice, idle land, and a growing tax burden are among the less desirable aspects of Taiwan's farming industry. To eliminate these problems and keep the agricultural sector viable, some basic changes are needed. High production costs at home and cheap imports have made traditional crops such as rice and peanuts less profitable. Many small-scale farmers have already found money-making alternatives in value-added crops such as flowers and exotic fruits and vegetables. Change is coming to Taiwan's agriculture. The only question now is what form it will take. ―Philip Liu (劉柏登) is editor-in-chief of Business Taiwan, an English-language weekly published in Taipei.