Taiwan editorial abstract (File 3 of a daily roundup) 2010 will be a time of trial for Taiwan's government. If it copes well, it will create rosy prospects for the country, but if it does not, Taiwan could slip into an abyss without any opportunity for revival.
The cross-Taiwan Strait opening policy pursued by the administration of President Ma Ying-jeou since its inauguration in May 2008 is now at a critical juncture, with Taiwan facing a number of crucial changes and challenges in the coming year.
Cross-strait economic exchanges and corporate interaction could see major breakthroughs with freer Chinese investment in Taiwan and entry of QDII into the local stock market this year.
Whether these new opening measures will help spur Taiwan's economic development hinges on the government's ability to seize the opportunities to help local industries maximize their competitive edges to turn Taiwan into an economy with the advantages of Singapore, Japan and the Netherlands.
However, the new year also poses many perilous challenges. For one thing, the "ASEAN plus China" free trade area formally took effect on New Year's Day, with 10 ASEAN member states and China mutually exempting tariffs and removing various trade barriers to allow for free flow of merchandise and capital.
Despite its heavy reliance on trade for economic growth, Taiwan is excluded from the world's three major trade blocs -- the European Union, the North American Free Trade Area and the "ASEAN plus China" free trade zone.
Taiwan now has to face a tariff gap of 6 percent to 9 percent with its competitors. Consequently, its market shares in China and ASEAN as a whole are certain to fall.
This new development is expected to draw Taiwan even closer to China, with more local companies venturing westward to find a new lease on life there.
The industrial exodus to China could be exacerbated if a much-anticipated cross-strait economic cooperation framework agreement is signed in May as scheduled, particularly those not in the sectors to be subject to immediate tariff reduction benefits.
While opening up to Chinese investment might bring new vitality to the local economy, it could go awry, with Chinese investors buying out all of Taiwan's blue-chip small- and medium-sized enterprises or those with great development potential. If such a worst-case scenario takes place, Taiwan will be left with only companies that need special protection or subsidies to survive. By then, Taiwan will be unable to compete with China on any industrial front.
The administration should not overlook such a possibility and should have the foresight to work out preventive strategies.
(By Sofia Wu)
Source: Taiwan News Online - Politics
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