In the IMD World Competitiveness Yearbook 2010 issued in May, Taiwan’s place in the global competitiveness ranking has soared to the 8th place, up from 23rd place last year. This is the fastest advance made by any of the 58 economies surveyed for the report. The credit for this achievement goes to huge improvements in Taiwan’s total score in four core indexes: Economic Performance, up from 27th place to 16th; Government Efficiency, up from 18th to 6th; Business Efficiency, up from 22nd to 3rd; and Infrastructure, up from 23rd to 17th.
The IMD noted that Taiwan’s economy performed exceptionally well during the global economic crisis, and that in addition to the boost provided by strong demand in Asia the government adopted a series of measures favorable to economic and trade development. The signing of the Economic Cooperation Framework Agreement (ECFA) with mainland China, for example, not only helps business to reinforce its confidence but also brings it concrete benefits. Taiwan reaps benefits from booming Asian and Chinese demand. According to the IMD’s analysis, in the past Taiwan depended mainly on the development of manufacturing; and since there were no direct links between the island and mainland China, economic and trade activities between the two sides had to be conducted through Hong Kong—and it was Hong Kong that reaped much of the benefit. With the turnover of political power in 2008, however, there was a major deregulation of economic and trade activities across the Taiwan Strait and Taiwan gained access to the fruits of rapid development in China. This was one of the factors in Taiwan’s quick progress up the competitiveness rankings. Taiwan’s success in molding competitive advantage over the past year is also the result of major steps toward administrative deregulation and the learning of “thorough liberalization” from the world’s most competitive economies such as Hong Kong and Singapore. Singapore is an island nation with a population of only 4 million and Hong Kong is home to just 7 million people, yet they were able to come in first and second in the IMD’s 2010 rankings. The IMD survey was conducted at the time when Taiwan and mainland China were engaged in talks on the signing of ECFA, and optimism was growing about cross-strait economic and trade relations. Taiwan will be able to take advantage of its similarity in language with China and make full use of the Chinese market to develop into a globally competitive economy like Singapore and Hong Kong. The island can also grasp this opportunity to negotiate bilateral free trade agreements with Japan, Singapore, and other major economies, and to move toward the forging of alliances with major markets all over the world. Such proactive initiatives bring out the vigor and openness of Taiwan’s economic and trade policy, and they added not a little to the scores that the IMD gave to the island. Huge enhancement in government efficiency. Of the four items used in the IMD appraisal—“Economic Performance,” “Government Efficiency,” “Business Efficiency,” and “Infrastructure”—Taiwan made the biggest improvements in Government Efficiency and Business Efficiency. Taiwan’s improvements in “Government Efficiency” were due to a greater transparency of policymaking by government agencies, higher quality of public functionaries, and a civil service system that matches up to the high efficiency of Singapore’s. In the field of “Public Finance,” which is one of the sub-factors under “Government Efficiency,” Taiwan’s ranking leaped to 3rd place in the world this year. The improvement was due largely to the proper operation of the Central Bank’s monetary policy and successful control of inflation, as well as a simplification of loan procedures and the use of incentives to bring about a large expansion of bank loans to companies. This helped enterprises to stay afloat in the financial tsunami. Taiwan made an even better showing in the sub-factor “Business Legislation,” with large improvements in the number of days needed to establish a new business, flexibility of the labor market, and restrictions on foreign investment. The island’s global ranking in “Business Legislation” leaped 14 places, helping to boost the overall “Government Efficiency” ranking to 6th place and raise the island’s ranking in the “International Investment” sub-factor, which is part of the “Economic Performance” item, by 11 places.
Taiwan also stood out in the “Domestic Economy” sub-factor, under “Economic Performance,” advancing 24 places up the ranking. A big reason for this was the government’s timely issuance of consumption vouchers in 2009, boosting consumer confidence and helping the island to weather the global financial turmoil safely. The success of the consumption voucher policy helped pull Taiwan’s ranking in the “International Trade” sub-factor up 20 places from 2009. In addition to boosting growth in domestic demand by stimulating domestic consumption and household spending, the effects of the consumption vouchers reached overseas raw materials and imported consumer goods markets, thereby driving growth in international trade.
The enhancement of government efficiency and continued improvement in the business environment over the past year have not only brought on a resurgence of entrepreneurial spirit in the domestic private sector, but have also stimulated an increase in the establishment of new foreign-invested companies on the island. This trend is expected to continue and even intensify following the signing of ECFA, with major enterprises all over the world coming to invest and use the island as their main bases for advancement into the Greater China and other Asian markets. Reform in the areas of liberalization, internationalization, and institutionalization has been realized on the policy level, and the public and business sectors alike are feeling the effects of innovation and change in economics, trade, and politics. IMD derives its national competitiveness rankings from surveys of business people and public sentiment all over the world, together with the objective analysis of data. The huge improvement in Taiwan’s competitiveness ranking this year is a concrete reflection of the confidence that overseas and domestic firms feel about Taiwan’s future investment potential.