From low cost to high tech, the Taiwanese dragon is changing its skin.
Despite the negative impact of the coronavirus pandemic, Taiwanese GDP growth is expected to remain at 2.4% this year. The island is shedding the label of sweatshop nation to become an incubator of tech startups. The tale of renewal has begun.
"Made in Taiwan": if you’re like most people, you’ve seen those three words on the label of a piece of clothing or the back of an electronic device too many times to count. These three words are the reason that so many people still think this island, 180 kilometers off the coast of China, is one vast factory producing nothing but low-cost products. But the reality is quite different, for two reasons. Firstly, Taiwan’s terrain is mostly green hills and steep mountains. This makes it an ideal place for hikers and nature lovers, and nothing like the sinister industrial dystopia of its image. Secondly, the country's economy is no longer limited to manufacturing junk goods. Quite the contrary – in recent years, Taiwan has worked hard to support startups, aiming to make "Made in Taiwan" synonymous with innovation in tech. Among the 6,000 startups on the island, some are considered real gold nuggets: Kneron, Verdigris Technologies, Tetanti Agribiotech and QT Medical, to name a few. The conditions for their growth are all there and they are impressive: a population of 23 million inhabitants with a strong interest in digital technology, high purchasing power, and large conglomerates like Acer and Pegatron. And those are no longer shy about their growing appetite for promising Taiwanese startups.
The geopolitical context of the region is also favorable for the creation of a competitive "startup nation". An independent territory since 1949, Taiwan has its own government, institutions and currency, the Taiwanese dollar. While Beijing does lay claim to the island, its freedom remains relatively ample, and its unusual status also makes it impermeable to stresses in the world market like trade tensions between China and the United States, for example. Political and economic stability have allowed it to assume the role of gateway to the Chinese market, and more broadly to the Asian market. The Business France office in Taipei writes that "Taiwan is determined not to miss the industrial revolution underway, triggered by artificial intelligence." And it is in a good position to do so, since the country’s economy is in excellent health. With an unemployment rate barely above 3.7% and a projected growth of 2.4% this year, the island state can raise its head as a true Asian dragon alongside Hong Kong, Singapore and South Korea.
The challenges ahead
Nevertheless, there is no shortage of challenges facing the Taiwanese economy. Its relationship with China remains a major concern. A change of mood on the part of Beijing could result in destabilization on the island. Another cause for concern is the fertility rate. According to the latest World Factbook, it stands at 1.13 children per woman, one of the lowest in the world. This means Taiwan is heading for an ageing population, and that will weigh on the country's productive capacity as well as its public finances. According to the Academia Sinica think-tank, Taiwan needs to accelerate the training of talent, improve its environmental impact assessment system, reform taxes and increase administrative efficiency. “Government agencies and businesses must cooperate to cope with the immense changes brought about by the Internet and to maintain the competitiveness of Taiwanese industries," Academia Sinica writes. One thing the island’s economy can count on is favorable winds as the digitalization of the world economy continues. After all, it is one of the world's largest suppliers of semiconductors, computers and mobile phones, an already gigantic market that is set to grow rapidly over the next few decades.
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