However, the fact remains true that Taiwan's economic development still falls short of actual needs and therefore further attempts to improve the situation must be made, vigorously and continuously. The present economic policy of the Chinese Government was formulated with active consideration of the factors mentioned above. Summarized below are the economic measures already in operation or steps to be taken as soon as practicable.
Development Plans
Being an economically less-developed area, economic reconstruction is accelerated under the auspices and drive of the government in order to satisfy the economic needs of the people. As the island is not abundant in economic resources, any waste in the development program can hardly be afforded. Hence economic development must be carefully mapped out. Moreover, since the climate for economic development is less than ideal, and the number of entrepreneurs willing to take necessary risks is limited, the government has not only to lead but also to participate in many aspects of economic reconstruction.
To execute its policy, the Chinese Government has completed its first four-year economic development plan, with the second four-year plan under implementation, and a third-four-year plan together with a ten-year long- term plan in the drawing board stage.
The chief objective of the first four-year plan (1953-1956) was to increase agricultural and industrial production, by which domestic market needs might be satisfied, the internal price level stabilized and improvement in the balance of payments position achieved. During this period, total investments reached NT $6,800,000. With 1952 as the base, the agricultural production index rose by 21.5%; industrial production by 55.4%; real national income, after being deflated, by 34.2%; real per capita income by 16.3% (in spite of the average annual population growth of 3.5 per 1,000). Price fluctuations were much milder, though inflationary pressures still existed.
The second four-year plan (1957-1960) is a continuation of the first. The main objectives of the second plan are to raise national income, to increase employment opportunities, to extend foreign trade and to lower the international payments deficit. More than half of this period has now elapsed. Using 1952, the year before the implementation of the first plan, as the base, agricultural production rose by 41.6% as of the end of 1958, industrial production by 85.6%, real national income by 50%, real per capita income by 24.4%. In 1958, the general price index rose by 1.4% as against 23.1% in 1952. All these selected economic indicators serve to show the great strides that Taiwan has made an increasing output and in stabilizing the price level.
The second four-year plan will be completed in one and a half years. The formulation of a third four-year plan together with a ten-year long-term development program has also been initiated. The major objectives of the third plan will still be the raising of national income to a higher level; increase in employment opportunities in addition to special emphasis on the opening of external economic outlets so as to avoid any stagnation in the economic growth of Taiwan. As to the ten-year program, its design will be based on the forecast of long-term trends in population, national income, investment and consumption, productivity, employment requirements, etc., by which targets, manpower, resource requirements and other coordinating factors may be determined.
Pattern of Development
In general, as a less industrialized area Taiwan's economic activities are chiefly agricultural and its development plans should chiefly aim at the promotion of agricultural production plus the development of light industries so that agricultural development can be closely coordinated. Taiwan's economy has been developed according to this process over the past decade. While priority has been given to the development of power industry, communications and fertilizer production on account of their special importance, the government has, under the policy of equal emphasis on agriculture and industry, fully developed its agriculture and at the same time gradually built up its light industries. The implementation of development plans in these two fields has been smoothly carried out as a result of close coordination. As there has been considerable progress in the development of light industries, the next step will be the development of heavy industries, such as machinery, steel, shipbuilding, automobiles, etc. on which a start has already been made.
However, heavy industries requires large capital outlay and only a small labor force. As there is a shortage of capital and a surplus of manpower in Taiwan, over-emphasis on heavy industries will encounter difficulties even at the present rate of economic advance. To circumvent such obstacles it will be wise and convenient to develop medium and small-sized industries which use many workers and require less capital, such as rural industries and handicrafts. Specific measures are being adopted by the government in connection with credit loans, market assistance and raw material supplies in order to promote such industries.
Exploration of Natural Resources
Taiwan is not abundant in natural resources, and what can be conveniently utilized has been more or less fully used especially in the agricultural sector. But there are still many resources above and under ground which can be tapped. Vigorous efforts of exploration are made. Nevertheless, certain concepts on the utilization of resources, including those pertaining to techniques and legislation, have to be changed in the face of modern production processes.
With respect to subterranean resources, high hopes are entertained in the exploration of underground water, iron, coal and petroleum. It is estimated that there are more than 20,000,000,000 tons of workable coal. Iron ore reserves in the proximity of Taroko Gorge are estimated at over 10,000,000 tons. Many experts have also concluded that there are petroleum deposits. Oil exploration is now being undertaken and foreign capital will be invited when its need arises.
As two-thirds of Taiwan's area are mountainous, the full utilization of mountain resources will contribute immensely to the economic growth. A plan to develop high land for grazing purposes is now under serious study. Besides, there is also room for improvement in forestry development in Taiwan. To step up the utilization of uplands, the Ministry of Economic Affairs has set up a High Land Resources Development Committee, with the participation of related agencies to draft overall plans, both pertaining to techniques and needed legislation, for implementation in the near future.
As to tidal land, its reclamation is another task in which Taiwan is engaged. So far the development is still in the initial stage.
Trade Promotion and Technical Assistance
In the process of economic development, Taiwan has experienced a shortage of essential resources and a thin domestic market, too thin for the operation of any large scale enterprise. In the past decade, economic development has been confined to the satisfaction of the domestic market demand through the utilization of local resources. Such type of development has now reached a point of saturation. Unless external market outlets and sources of raw material supply are found, economic development in Taiwan may one day become stagnant. To break such a bottleneck, resources of adjacent areas have to be imported for the manufacture of exportable commodities. Close interdependent economic ties may then be established with neighboring friendly countries through bilateral or multilateral trade.
With a view to promoting trade and getting acquainted with the economic condition of other Asian countries, trade missions have been dispatched to Viet Nam, Thailand, the Philippines, Malaya, Australia, New Zealand and the Ryukyus in addition to participating in many trade fairs abroad.
Technical cooperation with other countries has been active. Chinese engineers have been rendering services to Viet Nam in its erection of textile mills and sugar plants. A number of Chinese technical experts are in the employ of the United Nations to provide assistance in the economic development of Southeast Asian countries. Continued effort is being made in the extension of such technical services.
Capital Formation
The sources of funds for economic development in Taiwan are government investment, private investment, foreign and overseas Chinese investment and U.S. aid. Since foreign investment does not seem advisable in the long run, early preparation and planning should be made to channel more capital from the other sources.
Private investment should be the mainstay of capital formation, but this does not yet apply to Taiwan. So far the government has adopted many measures to encourage private savings and investment, including the provision of government bank guarantee for private corporate bond issues, the savings deposit drive, the preparation for the creation of a stock exchange, the establishment of a development corporation and the issuance of government bonds. Two new encouraging measures are now being contemplated. The government will transfer to private ownership those public enterprises which are not directly related to national defense or major public utilities. Sales proceeds thus realized will be used by the government for the establishment of new enterprises related to the economic development plans. As large productive enterprises in Taiyvan which require high technical standard for their operation are mostly government-owned, the managements and technical staffs of such public enterprises are rendering some assistance to private enterprises.
The last source of capital is foreign and overseas Chinese capital, the inflow of which has not been appreciable. Pertinent investment statutes have recently been revised by lifting certain restrictions and are now in the course of enactment.