Taiwan aims for bigger government role in economy

27-May-2020 Intellasia | FT | 6:02 AM Print This Post

The Taiwanese government expects to take a more active role in the economy as the US-China trade war and the coronavirus pandemic drive a resurgence in industrial policy worldwide.

Taipei was “doing quite well in epidemic prevention and in economic performance in the wake of the pandemic, and the state has played a very important role in that”, Kung Ming-hsin, the country’s chief economic planner, told the Financial Times.

“Of course you have to be careful how deeply you intervene, but we do want to take the role of a co-ordinator between companies, industries and academia, to catalyse results.”

The disruption of global supply chains by the lockdown of the Chinese economy in February and March, and shortages of personal protective equipment and drugs have spurred debate over diversifying manufacturing away from China.

The debate follows a US push to untangle supply chains for security-sensitive products such as telecom network components, servers and military-use chips from China.

“In the past, industrial policy was something emphasized by Asian countries, particularly by China, sometimes using unfair competition methods,” Kung said.

“But having undergone the [pandemic], European and US governments have started thinking anew about industrial policy, and considering the concept of ‘national teams’.”

A net importer of surgical masks before the pandemic, Taiwan created an onshore mask-manufacturing industry in just a month after registering its first infections in January.

The effort, which grew into a daily capacity of 20m pieces as of last week [May 20], was led by the state. The government imposed an export ban, formed a task force of former mask manufacturers, machine tool makers and academics, gave companies investment subsidies and procurement guarantees, and set up a rationing system for distribution through pharmacies affiliated with public health insurance.

Taiwan’s president Tsai Ing-wen, introducing the policy agenda for her second presidential term on Wednesday, said Taipei would repeat that approach to foster other new industries.

“We will use domestic demand, particularly demand from the public sector and national security needs, as the basic engine for our industrial development,” she said.

The president added that Taiwan would aim to create a strategic materials manufacturing industry with vital industrial chains onshore to ensure self-sufficiency in producing medical and daily supplies, energy and food. The government would also help this industry expand globally.

Other industries that Taipei aims to focus on include artificial intelligence-driven manufacturing, cyber security, biotechnology, defence technology and renewable energy.

Kung said investment decisions by Taiwanese companies which dominate global hardware technology supply chains had been subject to greater government intervention since 2017 due to the US-China trade war.

“The pandemic has only added to this trend and made governments even more important players,” he said.



Category: Taiwan

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