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Taiwan
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Taiwan
TAIWAN
LOCATION, SIZE, AND EXTENT
TOPOGRAPHY
CLIMATE
FLORA AND FAUNA
ENVIRONMENT
POPULATION
MIGRATION
ETHNIC GROUPS
LANGUAGES
RELIGIONS
TRANSPORTATION
HISTORY
GOVERNMENT
POLITICAL PARTIES
LOCAL GOVERNMENT
JUDICIAL SYSTEM
ARMED FORCES
INTERNATIONAL COOPERATION
ECONOMY
INCOME
LABOR
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
FORESTRY
MINING
ENERGY AND POWER
INDUSTRY
SCIENCE AND TECHNOLOGY
DOMESTIC TRADE
FOREIGN TRADE
BALANCE OF PAYMENTS
BANKING AND SECURITIES
INSURANCE
PUBLIC FINANCE
TAXATION
CUSTOMS AND DUTIES
FOREIGN INVESTMENT
ECONOMIC DEVELOPMENT
SOCIAL DEVELOPMENT
HEALTH
HOUSING
EDUCATION
LIBRARIES AND MUSEUMS
MEDIA
ORGANIZATIONS
TOURISM, TRAVEL, AND RECREATION
FAMOUS TAIWANESE
DEPENDENCIES
BIBLIOGRAPHY
Republic of China
Chung Hwa Min Kuo
CAPITAL: T'aipei
FLAG: The flag is red with a 12-pointed white sun on the blue upper left quadrant. The 12 points of the sun represent the 12 two-hour periods of the day in Chinese tradition, and symbolize progress. The colors red, white, and blue represent the Three Principles of the people (San Min Chu I) of Sun Yat-sen, father of the Republic of China, and symbolize the spirit of liberty, fraternity, and equality.
ANTHEM: Chung Hwa Min Kuo Kuo Ke (Chinese National Anthem).
MONETARY UNIT: The new Taiwan dollar (nt$) is a paper currency of 100 cents. There are coins of 50 cents and 1, 5, and 10 dollars, and notes of 50, 100, 500, and 1,000 new Taiwan dollars. nt$1 = us$0.03154 (or us$1 = nt$31.71) as of 2005.
WEIGHTS AND MEASURES: The metric system is employed in government and industrial statistics. Commonly used standards of weights and measures are the catty (1.1 lb or 0.4989 kilograms), the li (0.5 kilometers or 0.31 miles), the ch'ih (0.33 meters or 1.09 feet), and the chia (0.97 hectare or 2.39 acres).
HOLIDAYS: New Year's Day and the Founding of the Republic of China (1912), 1 January; Youth Day (formerly known as Martyrs' Day), 29 March; Tomb-Sweeping Day and Anniversary of the Death of Chiang Kaishek, 5 April; Birthday of Confucius and Teachers' Day, 28 September; National Day (Double Tenth Day), 10 October; Taiwan Retrocession Day, 25 October; Chiang Kai-shek's Birthday, 31 October; Sun Yat-sen's Birthday, 12 November; Constitution Day, 25 December.
TIME: 8 pm = noon GMT.
Taiwan, the seat of the Republic of China, lies in the western Pacific Ocean astride the Tropic of Cancer, less than 161 km (100 mi) from the southeast coast of mainland China, from which it is separated by the Taiwan (Formosa) Strait. To the ne, less than 129 km (80 mi) away, is the w end of the Japanese Ryukyu Islands; to the e is the Pacific Ocean; the Philippine island of Luzon lies 370 km (230 mi) to the s.
Besides the island proper, Taiwan comprises 21 small islands in the Taiwan group and 64 islands in the Penghu (Pescadores) group; the total area is 35,980 sq km (13,892 sq mi). Comparatively, the area occupied by Taiwan is slightly larger than the states of Maryland and Delaware combined. Leaf-shaped Taiwan island extends 394 km (245 mi) nne–ssw and 144 km (89 mi) ese–wnw; it has a coastline of 1,566 km (973 mi). The Penghu group, lying 40 km (25 mi) west of Taiwan island, has a total area of 127 sq km (49 sq mi).
Also under the control of the Taiwan government are Quemoy (Chinmen) and Matsu, two island groups located strategically close to the mainland Chinese province of Fujian (Fukien). Quemoy is the biggest of a group of six islands, two of which are occupied by the People's Republic of China; it is situated in Xiamen (Amoy) Bay at 118°23e and 24°27n and has a total area of 176 sq km (68 sq mi). The Matsu group, consisting of Nankan (the largest), Peikan, Tungyin, and about 10 small islets, is located at 119°56 e and 26°9 n, 30.6 km (19 mi) off the mainland port city of Fuzhou; it has a total area of 28.8 sq km (11.1 sq mi).
The capital city of T'aipei is located on northern Taiwan.
Taiwan perches on the margin of the continental shelf. Along the west coast the sea is rather shallow, averaging 90 m (300 ft) and not exceeding 210 m (690 ft) at the deepest point; however, it deepens abruptly along the east coast, dropping to a depth of 4,000 m (13,000 ft) only 50 km (31 mi) offshore. The terrain is precipitous on the east coast, with practically no natural harbor except Suao Bay in the north. The west coast is marked by wide tidal flats. Kaohsiung, the southern port, is situated in a long lagoon called Haochiung Bay. The north coast with its many inlets provides Taiwan with its best harbor, Chilung (Keelung).
The eastern two-thirds of the island are composed of rugged foothill ranges and massive mountain chains. A low, flat coastal plain, extending from north to south, occupies the western third. Yü Shan, with an elevation of 3,997 m (13,113 ft), is the highest peak on the island.
Located on the Eurasian tectonic Plate near the border of the Philippine Plate, Taiwan is part of the "Ring of Fire," a seismically active band surrounding the Pacific Ocean. Mild to moderate earthquake tremors are common, with over 200 minor shocks recorded each year.
All the rivers originate in the mountains in the central part of the island. They have short courses and rapid streams. The longest river, Choshui, draining westward, is only 190 km (118 mi) long. Only the Tanshui, which flows past T'aipei in the north, is navigable.
Taiwan enjoys an oceanic, subtropical monsoon climate. The warm and humid summer lasts from May until September, the mild winter from December until February. The average lowland temperature in January is 16°c (61°f) in the north and 20°c (68°f) in the south; the average July temperature is 28°c (82°f) in both the north and south. The growing season lasts throughout the year, except at elevations above 1,200 m (4,000 ft), where frost and snow occasionally occur.
The average rainfall is 257 cm (101 in), ranging from 127 cm (50 in) at the middle of the western coast to 635 cm (250 in) and more on exposed mountain slopes. Southwest monsoon winds blow from May through September and northeast monsoon winds from October to March. Only the extreme southwest has a distinct dry season. As a result of the tropical cyclonic storms that sweep out of the western Pacific, typhoons occur between June and October.
The flora is closely related to that of southern China and the Philippines. Taiwan has almost 190 plant families, about 1,180 genera, and more than 3,800 species, of which indigenous members constitute about one-third of the total flora. Mangrove forest is found in tidal flats and coastal bays. From sea level to a height of 2,000 m (6,600 ft) is the zone of broad-leaved evergreen tropical and subtropical forest, where ficua, pandanus, palms, teak, bamboos, and camphors are commonly found. The mixed forest of broad-leaved deciduous trees and conifers occupies the next zone, extending from a height of 2,000 to 3,000 m (6,600–9,800 ft). Pines, cypresses, firs, and rhododendrons are grown in this region. Above this level is the zone of coniferous forests, composed mainly of firs, spruce, juniper, and hemlock.
The mammals so far discovered number more than 60 species, 45 of which appear to be indigenous to the island. The largest beast of prey is the Formosan black bear. Foxes, flying foxes, deer, wild boar, bats, squirrels, macaques, and pangolins are some of the mammals seen on the island. There are more than 330 species and subspecies of birds, of which 33 are common to the island, China, and the Philippines, and about 87 are peculiar forms. More than 65 species of reptiles and amphibians inhabit the island. There is an abundance of snakes, of which 13 species are poisonous. The insect life is rich and varied.
The Environmental Protection Agency (EPA) has the main responsibility for environmental policy. Water pollution from raw sewage and industrial effluents is a significant problem in Taiwan. Outside the larger hotels and urban centers, the water is likely to be impure. Health problems like hepatitis result from waterborne contaminants. Water quality is regulated under provisions of the sanitary drinking water legislation of 1972 and the 1974 Water Pollution Control Act.
Air pollution is another significant problem, complicated by a high pollen count. Solid waste disposal regulations and air quality standards were adopted in 1975. All factories are required to comply with established standards, the cost of installing antipollution devices being written off as a depreciable item over two years. Taiwan in 1978 adopted the safety procedures for nuclear facilities issued by the IAEA. In the mid-1980s, the government began tightening emission standards for automobiles and ordered many factories and power plants to install filters and dust collectors. The EPA announced plans in 1987 to install an island-wide pollution-monitoring system.
Wildlife management is the responsibility of the National Wildlife Protection Association of the Republic of China. The nation's marine life is threatened by the use of driftnets. According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 11 types of mammals, 29 species of birds, 8 types of reptiles, 8 species of amphibians, 23 species of fish, and 78 species of plants. Threatened species include the Formosan sika, hawksbill turtle, Oriental white stork, and Lan Yü scops owl. Trade in endangered species has been reported.
The population of Taiwan in 2005 was estimated by the United Nations (UN) at 22,731,000, which placed it at number 48 in population among the 193 nations of the world. In 2005, approximately 9% of the population was over 65 years of age, with another 19% of the population under 15 years of age. According to the UN, the annual population rate of change for 2005–10 was expected to be 0.4%, a rate the government viewed as too low. The projected population for the year 2025 was 23,625,000. The population density was 628 per sq km (1,627 per sq mi), one of the highest in the world. Approximately 90% of the inhabitants live west of the Central Range.
The UN estimated that 78% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of %. The capital city, T'aipei, had a population of approximately 2,700,000 in that year. Other large cities (with their estimated populations) include Kaohsiung (1,600,000), T'aichung (1,114,080), T'ainan (755,800), and Panch'iao (589,700).
In 1963, the Nationalist government stated that since the completion of the Communist conquest of the mainland in 1949–50, a total of 146,772 Chinese refugees had come to Taiwan for resettlement. The number of refugees has varied from year to year.
In 1986, the Taiwan government reported that there were 28,714,000 overseas Chinese (25,799,000 in Asia, 2,044,000 in the Americas, 584,000 in Europe, 214,000 in Oceania, and 73,000 in Africa), including those with dual nationality.
There may be as many as 100,000 illegal immigrants. Taiwan is pressured by the Chinese perception that Taiwan is a "land of fortune." In 2003, the Taiwanese government cracked down on illegal Chinese immigrants, especially the smuggling of Chinese women which had increased tenfold from 1999. Detained Chinese immigrants number about 2,000 a year. Their numbers outpace the
ability to repatriate them. As reported in the Asia Times Online, the phenomenon of "foreign brides" is another unique aspect of Taiwanese immigration. In 2003, 25% of marriages involved Taiwanese men marrying foreign women. The Ministry of the Interior noted that there were about 280,000 foreign women in Taiwan married to Taiwanese nationals. More than half of these women were from China and the remainder from Southeast Asian countries, predominantly Vietnam and Indonesia. A serious social problem that the government attacked in 2005 was the criminal activities of illegal Chinese immigrants in Taiwan.
In 2005, there were 320,000 foreign workers from Thailand, the Philippines, Indonesia, and Vietnam. The net migration rate in 2005 was an estimated zero migrants per 1,000 population.
The term "Taiwanese" is often used when referring to those Chinese who are natives of the island as distinct from the two million "mainlanders" who migrated from China after the end of World War II. Most of the more than 20 million inhabitants of Taiwan are descendants of earlier immigrants from Fujian and Guangdong (Kwangtung) provinces in South China. They form several distinct groups. The Hakka are descendants of refugees and exiles from Guangdong who came to Taiwan before the 19th century; they are farmers and woodsmen who occupy the frontiers of settlement. The more numerous Fujians are descendants of peasants from Fujian who migrated to Taiwan in the 18th and 19th centuries; they form the bulk of the agricultural population.
The aboriginal population is primarily of Indonesian origin. They live mainly in central and eastern Taiwan. They are mainly divided into nine major tribes, with the Ami, Atayal, Paiwan, and Bunun accounting for about 88%; the balance is mainly distributed among the Puyuma, Rukai, Saisiyat, Tsou, and Yami. The language and customs of the aborigines suggest a close resemblance to the Malays. About 84% of the total population is Taiwanese and 14% are mainland Chinese. About 2% of the total population are aborigine.
Most people on Taiwan now speak Mandarin Chinese (Peking dialect). It is the official language and is used in administration, jurisprudence, education, and, to a large extent, in commerce; it has come into increasingly common use during the last three decades. The Wade-Giles system of romanization, which has been replaced on the mainland by the pinyin system, is still used in Taiwan.
Native Taiwanese speak a variety of southern Chinese dialects, but mainly Southern Fukienese. This is the native tongue of about 70% of the population. It has also influenced the vocabulary of Mandarin spoken on Taiwan. There is also a sizable population of Hakka speakers. This dialect is mainly spoken in Kwantung Province on the mainland. As a result of 50 years of Japanese rule, most Taiwanese and aborigines over the age of 60 speak or understand Japanese. Tribal peoples speak dialects of the Malay-Polynesian family which have no written script.
The Chinese are traditionally eclectic in their religious beliefs. The Taiwan folk religion is a fluid mixture of shamanism, ancestor worship, magic, ghosts and spirits, and aspects of animism.
commonly overlap with an individual's belief in Buddhism, Confucianism, Taoism, or other traditional Chinese religions. Natural phenomena have been deified, and ancestors, sages, virtuous women, and historical personalities have been given the status of gods. In 2003, registered organizations estimated that about 33% of the population were Taoists, 23.9% were Buddhists, 2.6% were I Kuan Taoist, and 1.2% were Protestant.
The first Westerners to bring Christianity to Taiwan were the Dutch (1624). However, a great persecution of Christians took place when the island was lost to Cheng Ch'eng-kung in 1662. Christianity made another beginning in 1860, when a missionary from Scotland came to the island. The English Presbyterian Mission started its work in the southern part of Taiwan about 100
years ago. Since the end of World War II, more than 80 Protestant denominations have been established on the island, and the activities of Christian missions, many coming over from the mainland, have become widespread. Christians constitute about 4.5% of the total population. Denominations represented include Roman Catholic, Presbyterians, Mormons, Baptists, Lutherans, Seventh-Day Adventists, Episcopalians, and Jehovah's Witnesses.
Other faiths include Tien Ti Chiao (Heaven Emperor Religion), Tien Te Chiao (Heaven Virtue Religion), Li-Ism, Hsuan Yuan Chiao (Yellow Emperor Religion), Maitraya Great Tao, Chinese Holy Religion, Hai Tzu Tao (Innocent Child Religion), Tien Li Chiao (Heaven Reason Religion), the Baha'i Faith, Mahikari, and Judaism. About 14% of the population are atheists.
As of 2004, Taiwan had 2,497 km (1,553 mi) of railroad track, all of it narrow gauge. Of that total, 1,400 km (871 mi) belonged to the Taiwan Sugar Corporation and the Taiwan Forestry Bureau. The main trunk line, now electrified, links the main cities of the populous west coast between Chilung and Kaohsiung. A second trunk line, the North Link between T'aipei and Hualien on the east coast, was completed in 1979. It connects with an eastern line between Hualien and T'aitung, which was modernized in the early 1980s. Construction of the 98-km (61-mi) South Link (between T'aitung and P'ingtung) has been completed. Forming the last link in the round-the-island rail system, the South Link opened on 6 December 1991, taking over 11 years and $770 million to complete. A total of 685 km (426 mi) of main line were electrified.
As of 2002, Taiwan had an estimated 37,299 km (23,200 mi) of highways, of which 35,621 km (22,156 mi) were paved, including 608 km (378 mi) of expressways. By 2003 there were 6,133,794 registered motor vehicles, 5,169,733 of which were passenger cars and 964,061 were commercial vehicles.
Taiwan has five international seaports, all of them extensively modernized in the 1970s. Kaohsiung in the southwest is by far the largest, handling about two-thirds of all imports and exports. Other major ports are Chilung, on the north coast; Hualien and Suao, both on the east coast; and T'aichung, on the west coast. As of 2005, Taiwan's merchant marine consisted of 126 vessels of 1,000 GRT or more, totaling 3,417,768 GRT.
Also in 2004, there were an estimated 40 airports. As of 2005 a total of 38 had paved runways, and there were also three heliports. There are two international airports. The main one, opened in 1979, is Chiang Kai-shek International Airport, at T'aoyüan, southwest of T'aipei; the other serves Kaohsiung. T'aipei Airport handles only domestic flights. Regular domestic flights also reach Hualien, T'aitung, Chiai, T'ainan, and several other cities. Principal air service is provided by China Air Lines, Taiwan's international airline, and other international carriers, and by Taiwan's leading domestic airline, Far Eastern Air Transport.
Although Taiwan can be seen on a clear day from the China mainland, ancient Chinese accounts contain few references to the island. The earliest inhabitants were Malayo-Polynesian aborigines. Historians have surmised from the brief information available in the early dynastic histories that Chinese emigration to Taiwan began as early as the T'ang dynasty (618–907). During the reign of Kublai Khan (1263–94), the first civil administration was established in the neighboring Pescadores. Taiwan itself, however, remained outside the jurisdiction of the Mongol Empire. During the Ming dynasty (1368–1644), Japanese pirates and Chinese outlaws and refugees wrested the coastal areas from the native aborigines. The Chinese settled in the southwest region, while the Japanese occupied the northern tip of the island. Significant Chinese settlement, by immigrants from Fujian and Guangdong, began in the 17th century.
In 1517, the Portuguese sighted the island and named it Ilha Formosa (Beautiful Island). The Dutch, who were disputing the monopoly of Far Eastern trade held by the Portuguese, captured the Pescadores in 1622 and used them as a base for harassing commerce between China, Japan, and the Philippines. Two years later, the Chinese offered the Dutch a treaty that gave them certain commercial privileges if they withdrew from the Pescadores and occupied instead a trading post on Taiwan. The Dutch complied by building Fort Zeelandia and Fort Providentia in the southwestern part of the island. The Spaniards, wishing to compete, seized the northern part of Chilung in 1626 and later extended their domain to nearby Tanshui. The Japanese, constrained by the policy of national seclusion adopted by the Tokugawa Shogunate, withdrew voluntarily in 1628. The Dutch captured the Spanish settlement in 1642 and, after putting down a Chinese uprising in 1656 with the aid of the aborigines, gained complete control of the island.
While the Dutch were consolidating their hold on Taiwan, the Ming dynasty on the China mainland was overthrown by the Manchus, who established the Qing (Ch'ing) dynasty (1644–1912). Remnants of the Ming forces, led by Zheng Chenggong (Cheng Ch'eng-kung Koxinga, 1624–62), son of a Chinese pirate and a Japanese mother, decided to establish an overseas base in Taiwan. They landed on the island in 1661 and ousted the Dutch in the following year. It was not until 1683 that the Manchus succeeded in wresting Taiwan from Zheng Chenggong's successors.
From 1683 to 1885, Taiwan was administered as a part of Fujian Province. During this period, Chinese colonization proceeded steadily, as the aborigines were either assimilated into the Chinese population or pushed back into the mountains. The imperial government, however, paid scant attention to the island administration. As a result, official corruption and inefficiency often provoked armed rebellions. In the latter part of the 19th century, the strategic importance of Taiwan for the defense of the South China coast was recognized by the authorities, particularly after the French bombardment and blockade of the island in 1884 during the Sino-French War over Annam. The local administration was reorganized, and the island was made into a separate province in 1885.
Upon the conclusion of the First Sino-Japanese War in 1895, Taiwan was ceded to Japan. Refusing to submit to Japanese rule, the islanders declared their independence and established a republic, although organized resistance against the Japanese lasted only a few months. Ineffective armed resistance, chiefly by aborigines, continued. Under the Japanese, the island's agricultural resources were developed rapidly to supply the needs of the home islands and the transportation infrastructure experienced modernization. A policy of Japanization of the Taiwan population was adopted and, by 1944, 71% of children attended primary school. During World War II, Japanese administrators began to orchestrate
the island's industrialization in support of Japanese expansionism in south Asia.
In accordance with the Cairo Declaration of 1943 and the Potsdam Proclamation of 1945, Taiwan was restored to China in September 1945. The carpetbagging malpractices of the mainland Chinese officials, however, aroused the resentment of the local population. In February 1947, a police incident touched off a popular revolt, which was suppressed with bloodshed. In May, more troops were brought from the mainland and the Taiwanese leadership was systematically killed. Estimates of the dead range from 5,000 to 50,000. On 8 December 1949, as the Chinese Communists were sweeping the Nationalist armies off the mainland, the government of the Republic of China (ROC), led by General Chiang Kai-shek (Jiang Jieshi), was officially transferred to Taiwan.
The Republic of China
With the removal of the ROC government to Taiwan, two million mainland Chinese came to the island where they instituted an authoritarian rule under martial law. Initially Chiang Kai-shek remained myopically focused on retaking the mainland, but as the stalemate continued, the government gradually shifted its attention to industrializing Taiwan. Strong government policies contributed to steady economic progress, first in agriculture and then in industry. In the 1950s, with US aid and advice, the ROC undertook a successful program of land redistribution. Japan built an infrastructure; the Nationalists brought skills and capital; and the United States poured in excess of $2 billion in aid by 1968. Furthermore, Japanese investment and procurement boom during the Vietnam War in the 1960s further stimulated economic growth.
In 1951, Japan signed the San Francisco Peace Treaty, thereby formally renouncing its claim to the island of Taiwan. In 1954, the ROC and the United States concluded a Mutual Defense Treaty and the United States and Western nations supported Taiwan possession of a UN Security Council seat, while the Eastern bloc nations supported the People's Republic of China (PRC). Support for Taiwan's representation gradually eroded over the years, and on 25 November 1971 the General Assembly voted 75–36 (with 17 abstentions) to remove recognition from the ROC and recognize the PRC. In a significant policy reversal, the United States voted with the majority to seat the mainland government. Although maintaining full diplomatic ties with Taiwan, the United States took the occasion of President Nixon's visit to China to acknowledge, in what became known as the Shanghai communiqué of February 1972, that "all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is part of China. The United States government does not challenge that position."
By 1975, most nations shifted recognition from the ROC to the PRC. On 1 January 1979, the United States formally recognized the PRC as the sole legal government of China and severed diplomatic ties with Taiwan. It also announced the unilateral termination of the 1954 US-ROC Mutual Defense Treaty, effective 1 January 1980, and withdrew its remaining military personnel. Nonetheless, the United States continued to sell arms to Taiwan, and commercial and cultural contacts were unofficially maintained through the American Institute in Taiwan and the Coordination Council for North American Affairs. Taiwan successfully warded off worldwide political and economic isolation by maintaining a host of similar contacts with other countries.
When President Chiang Kai-shek died at age 87 on 5 April 1975, he was succeeded in office by former Vice President Yen Chia-kan (Yan Jiagan). Leadership of the Nationalist Party (Kuomintang, Guomindang) and, hence, of the government, passed to Chiang's elder son, Chiang Ching-kuo (Jiang Jingguo). The younger Chiang was elected to a six-year term as president in March 1978 and reelected in 1984. While control of the central government had remained in the hands of mainlanders in the first decades of the Nationalists' rule on Taiwan, Taiwanese Chinese increasingly won elections at local levels, and Chiang Ching-kuo instituted a policy of bringing more Taiwanese into the Nationalist Party. By the 1980s, economic development had produced a new middle class, and the passage of time, together with intermarriage between mainlanders and Taiwanese, had brought a new generation for which the distinction between mainlander and Taiwanese held diminished importance. These factors contributed to popular pressure for a more democratic government. In November 1986, 5,000–10,000 demonstrated in support of an exiled dissident, Hsu Hsin-liang (Xu Xinliang), when he was not allowed to return to Taiwan. Thousands protested the 38th anniversary of martial law in May 1987. And, in March 1990, more than 10,000 demonstrators demanded greater democracy and direct presidential elections. This was followed in the same month by a demonstration involving some 6,000 students.
In 1987 martial law was revoked and with that press restrictions were eased, citizens were allowed to visit relatives on the mainland, and opposition political parties formed. Then in January 1988, Chiang Ching-kuo died and was succeeded as president by the vice president, Lee Teng-hui (Li Denghui, b. 1923). Lee, a protégé of Chiang Ching-kuo, was a native Taiwanese. In March 1990, the National Assembly reelected Lee as president for a six-year term. In July, he was also named Chairman of the Nationalist Party by the Party Congress.
In the early 1990s, as Taiwan increasingly opened its political system to greater democracy, the KMT's corrupt practices were revealed. However, after the 1992 legislative elections, the KMT emerged victorious as it still controlled most national media and opposition parties failed to mobilize voters. Vote-buying and other forms of fraud were also widespread. By the 1995 elections, however, the political environment changed because the KMT lost control of the media. Furthermore, the Control Yuan, the branch of government responsible for oversight, began to assert its independence by investigating KMT corruption. In local elections of 1994, for instance, state prosecutors convicted more than one third of 858 city and county representatives for vote-buying. Just prior to the 1995 national elections, it was revealed that the Minister of Justice had evidence of another extensive ring of vote-buying. The KMT took 54% of the vote (83 seats), its lowest majority ever and its major rival, the Democratic People's Party (DPP) obtained 54 seats and the Chinese New Party (CNP) captured 21 with 6 going to various independents. The constitution was also rewritten in 1995, calling for direct election of the president with the first election slated to be held in 1996.
Amid these democratic reforms, Taiwan faced a major international crisis in 1995 when President Lee was given a US visa to visit Cornell University, his alma mater. China objected vociferously
and threatened military action against Taiwan. In a show of support for Taiwan and in opposition to PR China's launching of missiles into Taiwan's territorial waters, the United States dispatched a naval force to the region, only to further irritate PR China.
Prior to the presidential elections of March 1996, the formerly united KMT began to splinter. Dissidents within the party and those who had previously left the KMT announced their intentions to run against Lee, who had been chosen by a party plenum in August 1995 as the official KMT candidate. Primary among these were Lin Yang-gang, a former Judicial Yuan president and current vice-chairman of the KMT, and Chien Li-an, president of the Control Yuan and former Minister of National Defense. Campaigning was intense, with scandals being revealed on all sides, but Lee received a resounding 54% compared to 21% for his nearest competitor.
President Lee was criticized by political opponents in 1997 as an increased wave of crime swept the island. In May 1997, more than 50,000 protestors gathered in the capital protesting the government's lack of action on issues of crime. Multiple members of the Executive Yuan resigned and Lee reshuffled his cabinet. However, late in 1997, the KMT suffered severe losses in local and magistrate elections. The main opposition, the DPP, won 12 of the 23 constituency positions contested and led to the reorganization of the KMT following the resignation of the party's Secretary General. In 1998, the KMT recovered in the next set of elections but only to suffer a setback in summer elections that year. As the economy weakened from the Asian financial crisis, the government sought to deregulate the economy and decrease taxes. Relations with PR China again worsened as Taiwan prepared for presidential elections in 2000. On 18 March 2000, Chen Shui-bian, the DPP candidate and a former dissident leader imprisoned for his opposition to the KMT was elected president in a hotly contested race. He obtained 39.3% of the vote and Lien Chan (KMT) captured 23.1% while ex-KMT businessman James Soong ran as an independent and garnered 36.8%. Leading up to and following the election, the PRC warned the Taiwanese that the election of a pro-independence DPP candidate would lead to possible military action. In his inaugural address in May, Chen stated that he would not declare independence as long as China did not attack the island. He said he would not call for a referendum on independence, nor abolish Taiwan's plan for an eventual reunion with the PRC. China responded by saying that Chen had evaded the question as to whether he considered Taiwan to be part of China.
In April 2001, the Dalai Lama met with President Chen during a visit which drew strong opposition from China. That month, the United States announced it would sell submarines, warships, and antisubmarine aircraft to Taiwan, but not the Aegis naval combat radar system, as Taiwan had requested. China protested the sale, and US president George W. Bush pledged to come to Taiwan's aid in the event of a Chinese invasion. That November, Taiwan lifted a 50-year ban on direct trade and investment with China.
In parliamentary elections held 1 December 2001, the DPP won 87 out of 225 seats, compared with the KMT's 68. It was the first time the KMT lost its parliamentary majority since 1949. In January 2002, Prime Minister Chang Chun-hsiung led the cabinet to resign en masse, stating he had "accomplished his mission" during a time of political instability in the transfer of power from the KMT to the DPP, and during an economic downturn that was worse than the Asian financial crisis of 1997–98. President Chen nominated his chief-of-staff, Yu Shyi-ku, as prime minister.
As of April 2002, academics from Taiwan and China were discussing the possibility of building an underwater tunnel to join Taiwan and the mainland. The shortest possible route would be 78 miles. There is no direct passenger access between the mainland and Taiwan by air or sea, although there were "friendship flights" between Taiwan and Beijing in 2005 during the Lunar New Year celebration. All travel between the ROC and the PRC is required by both sides to go through another regional location, usually Hong Kong or Macao. The ROC and the PRC declared that technical considerations for the tunnel posed no problems; the question to be resolved is the political one.
In August 2002, President Chen referred to Taiwan and China as two countries, and stated he supported legislation for a referendum to be held on independence, contrasting with his inaugural pledge not to hold a referendum. In 2003 Taiwan passed a referendum law which allows Taiwanese to hold referendums for the first time. This so called "defensive referendum" allowed the president, on his own authority and without legislative oversight, to initiate a referendum on national-security issues if faced with an external threat to national sovereignty. China was harshly critical because it believed Chen would hold a referendum on independence from mainland China, which as of 2005 had not happened.
President Chen accomplished lowering the amount of corruption, bribery and organized crime which pervaded Taiwanese politics prior to his term. However, allegations of vote buying and electoral inconsistencies remained. The 2004 presidential elections resulted in a surprising electoral result with Chen emerging victorious over the opposition by 0.2%. Hours before the vote, Chen and his vice president, Annette Lu, were shot, although not fatally. The opposition blamed the loss of the presidential election on sympathy votes gained by the shooting and claimed the shooting was staged. A commission was set up in late 2004 to investigate the shooting.
Taiwan participates in a free-market capitalist economy and due to its economic success is part of the four "Asian Tigers." Although many countries were devastated by the Asian financial crisis in 1998, Taiwan was able to escape serious recession due to conservative fiscal spending and its entrepreneurial base. Due to growing ties with China, the Taiwanese economy continued to strengthen as 2004 growth figures were above 6%. China replaced the United States as Taiwan's largest export partner.
The government of the Republic of China in T'aipei claims to be the central government of all of China. Its constitution was drafted by a constitutional convention at Nanjing (Nanking) on 15 November 1946; it was adopted on 25 December 1946 and promulgated by the national government on 1 January 1947. All governmental powers originally emanated from the National Assembly; however, the powers of the National Assembly have been curtailed. The first National Assembly, which was elected in November 1947, had 2,961 delegates, selected on the basis of regional and occupational representation. The original delegates held their seats "indefinitely," until control of the mainland could be reestablished. Since 1969, the number of seats gradually increased with the addition
of new seats for Taiwan. In April 1990, President Lee Tenghui revoked the emergency decree of 1948 which had allowed the 1,947 deputies to remain in office and the "indefinite" deputies had to retire by December 1991. With the promulgation of constitutional amendments on 25 April 2000, the National Assembly's functions are limited to amending the constitution and altering the national territory after a public announcement by the Legislative Yuan. In addition, the Assembly may impeach the president or vice president within three months of a petition initiated by the Legislative Yuan. The National Assembly's 300 delegates are selected by proportional representation of the political parties in the Legislative Yuan.
The president is the head of state and of the Executive Yuan, which functions as a cabinet. Previously, the National Assembly chose the president. After amendments to the constitution in 1992, however, citizens now elect the president by direct popular vote. The president may serve a maximum of two consecutive four-year terms. Under the president, there are five government branches known as yuans (councils or departments): legislative, executive, control, examination, and judicial. The legislative yuan, elected by popular vote, is the highest lawmaking body. As in the National Assembly, many members of the 1948 legislative yuan held their seats until 1991.
The executive yuan, comparable to the cabinet in other countries, is the highest administrative organ in the government. There are eight ministries, two commissions, and a number of subordinate organs under the executive yuan. The premier—the president of the executive yuan—is appointed by the president of the republic, with the consent of the legislative yuan. The president is empowered to compel the premier to resign by refusing to sign decrees or orders presented by the latter for promulgation.
The legislative yuan is the highest legislative organ of the state. It has a binding vote of no confidence which would lead to the dissolution of the executive yuan. Of its 225 members, 168 are chosen by universal suffrage and the remaining members are appointed through a system of proportional representation; members serve three-year terms. The number of seats in the legislature were reduced from 225 to 113 beginning with the election in 2008.
The control yuan, the highest supervisory organ, exercises censorial and audit powers over the government and may impeach officials. It also supervises the execution of the government budget. It has 29 members, all of whom serve six-year terms and are appointed by the president with the consent of the legislative yuan.
The examination yuan is the equivalent of a civil service commission. It consists of two ministries. The Ministry of Examination appoints government personnel through competitive examination. The Ministry of Civil Service registers, classifies, promotes, transfers, retires, and pensions. Its president, vice president, and 19 commissioners are appointed by the president of the republic with the consent of the control yuan.
The Chinese Nationalist Party, better known as the Kuomintang—KMT, was, until 2000, the dominant political party in Taiwan. The teachings of Sun Yat-sen (Sun Zhongshan), which stress nationalism, democracy, and people's livelihood, form the ideology of the party. After the fall of the mainland to the Communists in 1949, a reform committee was organized to chart a new program for the party.
The KMT's organization is similar to that of the Chinese Communist Party. The basic unit is the cell, which represents neighborhoods. The next levels include the district, county, and provincial congresses and committees. The highest levels include the National Congress and the Central Committee. The National Congress delegates serve four-year terms and are charged with the tasks of amending the party charter, determining the party platform and other important policies. It also elects the party chairman and the Central Committee members, and approves candidates nominated by the chairman to serve as vice chairmen and members of the Central Advisory Council. When the National Congress is in recess, the supreme party organ is the Central Committee, which holds a plenary session every year.
The Central Standing Committee, which represents the Central Committee when that body is not in session, is the most influential organ in the KMT. The day-to-day affairs of the party are managed by the secretariat. All organization within the KMT are funded by profits from party-owned and operated business enterprises, ranging from newspapers and TV stations to electrical appliance companies and computer firms.
At the party's 14th National Congress held in August 1993, significant changes to the conduct of party affairs were made. It decided that the party chairman was to be elected by the National Congress through secret ballot. President Lee Teng-hui won 83% of the votes cast and was reelected chairman of the party. In addition, four vice-chairmen were added to the Central Committee after being nominated by the chairman and approved by the National Congress. It also decided that the chairman would appoint only 10 to 15 of the 31 members of the Central Standing Committee, with the remaining members elected by the Central Committee. Finally, it decided to hold the National Congress every two years instead of four years.
Under martial law, from 1949 through 1986, the formation of new political parties was illegal, although there were two nominal, previously formed parties. Non-KMT candidates ran as independents or "Nonpartisans," with increasing success by the end of the 1970s. In September 1986, a group of "nonpartisans" formed a new opposition party, the Democratic Progressive Party (DPP), which had an orientation toward the Taiwanese population and advocated "self-determination." Although technically illegal, the DPP's candidates took 22% of the vote in the December 1986 elections, winning 12 out of 73 contested seats in the Legislative Yuan; the KMT won 59. The lifting of martial law in 1987 made the formation of new parties legal, although a new security law continued to restrict political activity. In the first fully competitive, democratic national elections, in December 1992, the KMT won 53% and the DPP 31% of the votes for the Legislative Yuan. Before the 1995 legislative elections, the KMT began to splinter and in 1994 the Chinese New Party (CNP) was formed by KMT defectors who favored strengthened ties with the mainland. In the 1995 balloting, however, the KMT was able to maintain its majority, winning 83 of the 164 seats in the Legislative Yuan. The DPP took 54, the CNP took 21 and six seats were won by independents. In the National Assembly (334 seats) the KMT took 183, the DPP 99, the CNP 46, and six were won by others.
The Democratic Progressive Party was formed on 28 September 1986. The party's organizational structure closely resembles that of the Kuomintang. The DPP's National Congress elects members to the Central Executive Committee and to the Central Advisory Committee. The Central Executive Committee in turn elects the members of the Central Standing Committee. Its leader is President Chen Shui-bian. At the party's sixth National Congress, held in April and May of 1994, a two-tier primary system was initiated under which ordinary members of the DPP voted for candidates in one primary election and party cadres vote in a second primary. The results of the two would then be combined, with equal weight given to both. At the second plenary meeting of the sixth National Congress held in March 1995, the nomination process for the presidential and gubernatorial candidates was modified to add open primaries for DPP members and nonmembers. It was further decided at the meeting that the party chairman would be elected directly by all members of the party starting in 1998. What most distinguishes the DPP from the two other major parties is its support of Taiwan independence, or the permanent political separation of Taiwan from the Chinese mainland. Although the DPP has incorporated Taiwan independence into its official platform, the urgency accorded to its realization is a source of factional contention within the party.
The Chinese New Party (NP) was formed in August 1993, shortly before the Kuomintang's 14th National Congress by a group of KMT reformers who broke away from the party in protest of the undemocratic practices of the KMT. The NP adopted an anticorruption platform and championed social justice. The goal of the NP was to attract voters who were dissatisfied with the performance of the ruling KMT and opposed to the DPP's advocacy of Taiwan independence.
As of early 2003, there were four significant political parties operating in Taiwan. The DPP, which won the presidential and legislative elections of 2000 and 2001, respectively, was the largest party. It took 87 seats in the Legislative Yuan in December 2001 election. The KMT took 68 seats, and was the second-largest party in the Legislative Yuan. The People First Party (PFP), founded by James Soong following his second-place finish in the 2000 presidential election, was the third-largest party with 46 seats. The fourth major political party, based on its membership in the Legislative Yuan, was the Taiwan Solidarity Union (TSU), winning 13 seats. As of June 2002, a total of 99 political parties had registered with the Ministry of the Interior.
The 2004 elections of the Legislative Yuan resulted in the DPP retaining the largest number of seats with 89; the KMT gained 11 seats to secure 79 overall; the PFP continued to place in third with 34 seats; and the TSU lost one to emerge with 12 seats; other parties and independents retain 11 seats. The next election for the Legislative Yuan was scheduled to be held in 2007.
The Taiwan provincial government holds jurisdiction over the main island of Taiwan, 21 smaller islands in adjacent waters, and the 64 islands of the Penghu (Pescadores) group. The provincial capital is located at T'aichung. The province is divided into 16 county (hsien) administrative areas and 5 municipalities under the direct jurisdiction of the provincial government. In addition, T'aipei (since 1967) and Kaohsiung (since 1979) are self-governing "special" municipalities. Subdivisions of the county are the township (chen ), the rural district or group of villages (hsiang ), and the precinct. Quemoy and Matsu are administered by the military. At the local level and under the Taiwan Provincial Government, there are five cities—Chilung, Hsinchu, T'aichung, Chiai, and T'ainan—and 16 counties, and under each county there are county municipalities.
The province is headed by a governor who is nominated by the president of the executive yuan and appointed by the president of the republic. Department heads and members of the provincial council are recommended by the governor for appointment by the executive yuan. The governor is the ex officio chairman of the appointed provincial council, the policy making body, and holds veto power over its resolutions. The provincial government can issue ordinances and regulations for the administration of the province as long as they do not conflict with laws of the central government. The mayors and city councils of T'aipei and Kaohsiung are elected.
The provincial assembly, an elected body, meets for two yearly sessions of two months each. Nominally it possesses broad legislative powers; however, its prerogatives are circumscribed by a provision in its organic law that in the event of a disagreement between the provincial executive and the Assembly, the former may request reconsideration. Should the assembly uphold its original resolution, the provincial executive may submit the dispute to the executive yuan for final judgment. The executive yuan may dissolve the provincial assembly and order a new election if it holds that the assembly is acting contrary to national policy.
At the end of 1996, the National Development Conference was convened to streamline local government operations. The county government is headed by an elected magistrate (hsien-chang ) and the municipal government by a mayor (shih-chang ). Each county or municipality has a representative body called the hsien, or municipal assembly. Further down are the councils and assemblies of townships and rural districts, each headed by a chief officer. All of these officials are elected by universal suffrage of citizens over age 20.
The Judicial Yuan is Taiwan's highest judicial organ. It interprets the constitution and other laws and decrees, adjudicates administrative suits, and disciplines public functionaries. The president and vice president of the Judicial Yuan are nominated and appointed by the president of the republic, with the consent of the legislative yuan. They, together with 15 grand justices, form the Council of Grand Justices, which is charged with the power and responsibility of interpreting the constitution, laws, and ordinances. The judicial system is based on the principle of three trials in three grades of courts: district court, high court, and Supreme Court. The Supreme Court, the highest tribunal of the land, consists of a number of civil and criminal divisions, each of which is formed by a presiding judge and four associate judges. The judges are appointed for life.
In 1993 a separate Constitution Court was established. Staffed by the then-16 grand justices of the Judicial Yuan, but with the judicial yuan excluded from the court, the new court was charged with resolving constitutional disputes, regulating the activities of political parties and accelerating the democratization process.
There is no right to trial by jury, but the right to a fair public trial is protected by law and respected in practice. Defendants are afforded a right to counsel and to a right to appeal to the High Court and the Supreme Court in cases in which the sentence exceeds three years. Those sentenced to three years or less may appeal only to the High Court. The Supreme Court automatically reviews all sentences to life imprisonment or death. There is also an administrative court.
In late 2004 the Legislative Yuan approved constitutional changes, effective 2008, which included halving the number of seats in the Legislative Yuan and extending all legislators' terms from three to four years. Taiwan employs a quota system which allows for minorities and aboriginal persons to gain access into government positions. Although banned by law, minorities and aboriginal persons claim to face discrimination in the socio-economic realm.
The judicial system is based on civil law and Taiwan accepts compulsory jurisdiction of the International Court of Justice. Military service is mandatory for Taiwanese males.
Taiwan is a free and fair society. Citizens are able to organize, protest and gain access to any type of material without fear of reprisal. Trade unions are independent and collective bargaining is legal. The law does restrict the right to strike by ordering mediation sessions and banning work stoppages while mediation is in progress.
Taiwan is involved in several land disputes, most notably involved in a complex dispute with China, Malaysia, Philippines, Vietnam, and possibly Brunei over the Spratly Islands. The Paracel Islands are occupied by China, but claimed by Taiwan and Vietnam. In 2003, China and Taiwan became more vocal in rejecting both Japan's claims to the uninhabited islands of the Senkaku-shoto (Diaoyu Tai). Taiwan also disputes Japan's unilaterally declared claim to the exclusive economic zone in the East China Sea.
In 2005, Taiwan's armed forces had 290,000 active personnel, with reserves numbering 1,653,500. The Army had an estimated 200,000 members including military police. Equipment included more than 926 main battle tanks, 905 light tanks, 225 armored infantry fighting vehicles, 950 armored personnel carriers, over 1,815 artillery pieces and 101 attack helicopters. The Navy numbered 45,000, including 15,000 Marines. Major naval units included four tactical submarines, 11 destroyers, 21 frigates, 59 patrol/coastal vessels and 12 mine warfare ships. The Navy's aviation arm also operated 32 maritime reconnaissance and 20 antisubmarine warfare helicopters. The Air Force had 45,000 active personnel, and operated 479 combat capable aircraft that included 293 fighters and 128 fighter ground attack aircraft. Paramilitary forces included security groups with 25,000 members, a 22,000 member civilian Coast Guard and an estimated 1,000 member Maritime Police. Taiwan's defense budget in 2005 totaled $8.32 billion.
The ROC, a charter member of the UN, became the first government to lose its recognition from that body following a General Assembly vote on 25 November 1971 to recognize the PRC as the sole legitimate representative of China. The ROC subsequently lost its membership in most UN bodies, as well as in several other international organizations—usually with its place taken by the PRC. Taiwan is a member of APEC, the Asian Development Bank, the International Chamber of Commerce, the International Confederation of Free Trade Unions, the World Confederation of Labor, and the World Trade Organization.
As of 2005, Taiwan had formal diplomatic ties with only 25 countries. The government claims to have "substantive" trade relations with more than 140 countries and territories, however. In November 2001, Taiwan lifted a 50-year ban on direct trade and investment with China.
Under the Japanese, the island was developed as a major source of foodstuffs for Japan. Production of rice and sugar increased rapidly, but little effort was directed toward industrialization until after 1937. Immediately after World War II, a number of factors—including repatriation of Japanese technicians, dismantling of industrial plants, and lack of fertilizer for agriculture—caused a rapid deterioration of the economy, which was aggravated by the influx of refugees from the mainland. The situation improved after 1949 with the removal of the ROC government to Taiwan. The arrival of technical and experienced personnel and capital equipment from the mainland facilitated the island's economic rehabilitation. Currency and tax reforms stabilized the monetary situation. The supply of fertilizer from the United States and a land reform program aided the revival of agricultural production.
Energetic government measures in the form of successive fouryear plans, at first supplemented by US aid, resulted in substantial economic progress. In the first decade (1951–60), the stress was on agricultural development and the establishment of textile and other labor-intensive industries. From 1961 to 1970, the promotion of industrial products for export was emphasized. In 1963, Taiwan registered its first favorable trade balance. By 1965, the economy appeared stable enough to warrant the cessation of US economic aid programs. Medium and light industry led the expansion, with striking gains registered in electronics, household goods, and chemicals. The decade 1971–80 saw the development of such capital-intensive industries as steel, machinery, machine tools, and motor vehicle assembly. Such industries, based on imports of raw materials, were encouraged through massive government support for major infrastructural improvements in roads, railroads, ports, and electricity. During the 1980s, emphasis was placed on the development of high-technology industries. As a result, between 1981 and 1991, the share of high-technology industries in total manufactures increased from 20% to 29%, making Taiwan the seventh-largest producer of computer hardware on the global market. The 1990s brought an influx of capital-rich investment, especially after 1996 when the first democratic elections were held. High-technology industries accounted for over 73% of total manufacturing, and 67% of exports in 1999. Growth accelerated in the late 1990s, measuring 4.6% in 1998, 5.4% in 1999 and 6% in 2000, spurred by the boom in the PC and IT industries. Exports played an increasing role, accounting for 47.8% of GDP in 1998, 48.3% in 1999 and 54% in 2000. Growth in high-tech exports peaked at 54% in the third quarter of 2000.
Taiwan's GNP advanced at an average annual rate of 9% in real terms between 1952 and 1980. In contrast to Taiwan's industryled economic growth of previous decades, since the late 1980s the country has undergone a shift towards a services-dominated
economy. As of 2000, services made up about 66% of the GDP, compared to less than 50% in the mid-1980s and 44% in the early 1960s. Taiwan has the world's third-largest foreign exchange reserves and over $230 billion in two-way trade. Though still expanding in absolute terms, industry's share of the GDP declined from 52% in 1986 to 32% in 2000. Agriculture has continued to claim only a small share of the economy, making up 2% of the GDP in 2000. A lack of domestic resources hampers the development of agriculture and primary industries. An earthquake in September of 1999 caused major damages to Taiwanese lives and property, but reconstruction was complete by 2000. What affected the economy was the burst of the dot.com bubble beginning in late 2000, and the global slowdown in 2001, aggravated by the aftermath of the 11 September 2001 terrorist attacks on the United States. Taiwan experienced its first recorded decline in real GDP, -2.2%. Recovery began in the last quarter of 2001, and in 2002 real growth of 3.2% was recorded. Inflation has been generally falling in the late 1990s, from 3.1% in 1996 to 0% in 2001 and a slightly negative -0.2% in 2002. Unemployment, by contrast, has increased steadily, from 2.6% in 1996 to 5.2% in 2002.
The economy grew by 5.7% in 2004, up from 3.3% in 2003; in 2005, the GDP growth rate was expected to be 3.7%. Inflation remains at negligible levels, and unemployment seems to have been brought under control, decreasing from a rate of 5.2% in 2002 to 4.4% in 2004, and an expected 4.2% in 2005. Increasing trade with China has contributed significantly to the country's economic recovery.
The US Central Intelligence Agency (CIA) reports that in 2005 Taiwan's gross domestic product (GDP) was estimated at $610.8 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $26,700. The annual growth rate of GDP was estimated at 3.6%. The average inflation rate in 2005 was 2.3%. It was estimated that agriculture accounted for 1.6% of GDP, industry 29.3%, and services 69%.
According to the World Bank, in 2003 remittances from citizens working abroad totaled $45 million.
It was estimated that in 0.9 about 2005% of the population had incomes below the poverty line.
The civilian labor force in Taiwan was estimated at 10.31 million in 2005. The share of persons employed in farming, forestry, and fishing has been declining steadily, while the share of the workforce employed in mining, manufacturing, construction, and utilities has increased. As of 2005, about 6% of the labor force was engaged in agriculture, 58.2% in services, and 35.8% in industry. In that same year the unemployment rate was estimated to be 4.2%.
Trade unions are weak and cannot be called unions in the real sense of the term, for the law does not provide for effective collective bargaining and also prohibits strikes, shutdowns, and walk-outs in vital industries. The trade unions, organized under government supervision, tend to be used for carrying out government policies, but they carry on a considerable amount of welfare work. In 2002, there were 3,854 registered unions in Taiwan, with membership totaling 29% of all employed persons.
The minimum age for employment is 15. Current occupational health and safety regulations provide only minimal protection and have a mixed record of enforcement. The law provides for an eight-hour day (which may be extended to 11 hours for men and 10 for women) and a six-day workweek; overtime is paid at 40–100% above the regular wage. Most large firms give allowances for transportation, meals, housing, and other benefits, which can increase base pay by 60–80%. A minimum of one week's vacation is provided after a year's employment, and there are 14 or 15 other paid holidays. In 2002, the monthly minimum wage was us$452. This amount provides a decent standard of living in rural areas, but is not sufficient for urban life.
About 24% of the land is under cultivation. Although still important as both an export earner and a domestic food source, agriculture has fallen far from the preeminent position it long held in the Taiwan economy. From 1973 to 1987, the crop production growth rate increased on average only 0.1% per year. In 2004, agriculture accounted for 1.6% of GDP. About 6% of the labor force was employed in agriculture. High production costs and low return have driven much of the agricultural work force away to industry. In 2003, there were 200,246 farm households. Part-time farming households have accounted for over 80% of all farming households since 1980. In 2003, Taiwan imported nearly $8 billion in food and agricultural products, with 33% coming from the United States, 7% from Australia, and 7% from Japan.
Rice, the principal food crop, is grown along the western plain and in the south. In 2004, paddy rice production was 1,433,611 tons; brown rice, 1,164,580 tons. Taiwan's annual rice production exceeds demand; the island's per capita rice consumption has declined by over 50% since the mid-1970s due to changing diet preferences. Other food crops include sweet potatoes, bananas, peanuts, soybeans, and wheat. Sugar, pineapples, citrus fruits, crude tea, and asparagus are plantation-grown and are the principal cash and export crops. Small amounts of Taiwan's world-famous oolong tea, cotton, tobacco, jute, and sisal are also produced. A fast-rising industry, mushroom canning, led to the development of mushroom cultivation, a specialty crop well suited to Taiwan since it is labor-intensive and requires little space and small investment. Betel nuts have become Taiwan's second most valuable cash crop after rice. In 2004, betel nut production totaled 143,368 tons. In 2004, Taiwan's major crop production was valued at nt$259 billion, with crops accounting for 63%; vegetables, 14%; mushrooms, 1%; and fruits, 22%. Between 2001 and 2004, fruit and horticultural production increased by 6% and 8%, respectively, while rice production fell by 16.7%.
Generally, Taiwanese agriculture is characterized by high yields, irrigation, terracing, multiple cropping, intertillage, and extensive use of fertilizers. Farms are small, averaging 1.1 hectares (2.7 acres) of cultivable land per farm family. Mechanization, once confined largely to sugarcane and rice production, is increasing rapidly as a result of government subsidies and other incentives. Since there is an oversupply of rice, the government has encouraged farmers to grow soybeans, wheat, and corn, which are more profitable. The growing scarcity of land on Taiwan is causing serious disagreements
over land resources between agricultural, industrial, and housing interests.
Pastures in Taiwan occupy only 0.1% of the total land area. In 2004, livestock sector production was valued at nt$125 billion. That year, Taiwan produced 891,776 tons of pork and 631,640 tons of poultry from chickens. Hog production is Taiwan's most valuable farm product. In 2004, Taiwan's pork production was valued at nt$64.4 billion. In 1997, a major outbreak of hoof and mouth disease affected 6,147 hog farms. As a result, one-third of the hog population had to be destroyed. The government helped compensate pig farmers with $1.1 billion in low interest loans. Livestock production declined by 13% from 1996 to 2001, and fell another 3.9% from 2001 to 2004. Chickens and ducks are raised by most households.
Production of fish products totaled 1498,866 tons in 2003 (19th in the world). Exports of seafood products totaled $1,299 million in 2003. In 2003, Taiwan accounted for 14.9% of the world's fresh, chilled and frozen fish exports, valued at $1,175 million, and 0.6% of the canned fish exports, valued at $38.1 million. Squid, skipjack and yellowfin tuna, chub mackerel, shark, and milkfish are the main species of the marine catch. Deep-sea fishing, which was practically wiped out by World War II (1939–45), has shown strong gains following heavy investments in vessels and harbors. Milkfish, tilapias, clams, oysters, and eels are the main species farmed. In 2004, the aquacultural area covered 42,047 hectares (103,898 acres), with production of 299,066 tons, valued at nt$28.2 billion.
Native stands of cypress, fir, camphor, and oak were cut to help fund Japan's development when Taiwan was under Japanese imperial rule (1895–1945). Logging provided hard currency exports for the Nationalist Chinese regime after its retreat from mainland China to the island in 1949. Nearly 60% of Taiwan is covered with forests, with the total forest area estimated at 2.1 million hectares (5.2 million acres) in 2004. The roundwood harvest was estimated at 40,041 cu m (1.41 million cu ft) in 2004 (90% softwood, valued at nt523.8 million). Although forestry production increased by 21.3% between 2000 and 2004, domestic timber production only meets 1% of total demand; the value of wood imports totaled $1.23 billion in 2004. Taiwan's timber production has declined since the 1980s due to local labor shortages, intensifying environmental concerns, and logging restrictions. In 1992, Taiwan banned all logging from nonplantation forests. Principal timbers are oak, cedar, and hemlock. Taiwan is a major furniture exporter that relies heavily on imported wood products to support the industry.
Mining in 2004, accounted for only 0.1% by value of Taiwan's total industrial output. Iron and steel was the leading metal production sector on the island. Value-added products made from aluminum and copper were dependent upon scrap or imported metals. Dolomite, limestone, and marble were the most important nonfuel mineral commodities. The western third of the island had adequate amounts of sand, gravel, and limestone for building purposes, although there has been a recent slowdown in the construction sector. The demand for mineral products has increased over the years, while local supplies were dwindling. Mineral production in 2004 included (in metric tons): dolomite, 115,000, up from 54,000 in 2003; limestone, 213,000, down from 1,434,000 in 2003; marble, 22,970,000, up from 21,041,000 in 2003; and serpentine, 229,000, up from 194,000 in 2003. Taiwan also produced hydraulic cement, fire clay, feldspar, precipitated gypsum, lime, mica, marine salt, caustic soda, soda ash, sulfur, and talc. No kaolin clay was produced in 2004.
Taiwan's domestic energy resources are modest and the country is nearly totally dependent upon imports.
Oil is the biggest part of Taiwan's energy mix, accounting for 48% of energy demand, followed by coal at 34%, nuclear power at 9%, natural gas at 8% and hydroelectric power at under 2%. Taiwan's proven reserves of oil are miniscule. As of 1 January 2004, these reserves were estimated at four million barrels. In 2003, production of oil was estimated at an average of 3,806 barrels per day, of which an average of 800 barrels per day consisted of crude oil. Demand for oil, however, in 2003, was estimated at an average of 896,000 barrels per day, making the country a net importer of oil at an estimated average of 892,200 barrels per day. As of 1 January 2004, Taiwan's refining capacity was estimated at an average of 920,000 barrels per day.
As of 1 January 2004, Taiwan's proven reserves of natural gas were estimated at 2.7 trillion cu ft. In 2002, natural gas output came to an estimated 30 billion cu ft, while demand totaled an estimated 287 billion cu ft, and imports totaled an estimated 257 billion cu ft.
Taiwan's domestic consumption of coal in 2002 was estimated at 55.8 million short tons, while imports for that year were estimated at 54.7 million short tons. Although Taiwan has proven coal reserves of 1.1 million short tons, the active production of coal ended in 2000.
In 2002, Taiwan's installed electric power generating capacity totaled 30.134 million kW, of which conventional thermal fuel sources accounted for 20.568 million kW of capacity and nuclear power for 5.144 million kW. Hydroelectric power accounted for 4.422 million kW of capacity in that same year. Total electric power output in 2002 reached 158.537 billion kWh. Of this total, 72% was from fossil fuels, 3.9% from hydropower, and 23.9% from nuclear power. Consumption of electricity in 2002 was 147.439 billion kWh. Reported as of July 2004, Taiwan had three nuclear power plants (the Maanshan station in the south, and the Kuosheng and Chinshan stations in the north), with a combined installed capacity of 4,884 MW. Construction of the 2,700 MW Kungliao nuclear power station had become a controversial issue by 2000, when the Democratic People's Party government had it halted. However, through legislative and judicial efforts, work on the project was resumed in 2001. The Kungliao station is slated to start operations in 2006.
Under the Japanese, about 90% of the industrial enterprises were owned by the government or by Japanese corporations with govvernment
assistance. After the restoration of Taiwan to China in 1945, the ROC government took over these enterprises. Some were sold to private owners, and the rest were grouped under the management of 18 public corporations, operated either by the national government or by the provincial government, or by both. Added to the confiscated enemy properties were public enterprises evacuated from the mainland. As a result, government-operated enterprises came to dominate Taiwanese industry. Although the proportion accounted for by these enterprises in the production value of manufacturing industries has been falling in recent years in contrast to the private sector, it still accounts for a significant amount of value added. Beginning in 1992, Taiwan authorities have made efforts to reduce the size of the public sector. These efforts have gained momentum after democratization in 1996. By 2002, the government had sold equity shares and reduced public ownership to below 50% in 23 state-owned enterprises (SOEs), mostly banks and insurance companies, but including a steel mill and one fertilizer company. In 1998 and 1999 privatization announcements included the Chinese Petroleum Corp., Chunghwa Telecom Corp., and Taiwan Power Corp. Plans for privatization have been announced for SOEs involved in power, oil, tobacco, wine, railway transport, mining and telecommunications. Since 1998, also, a number of construction projects—the north-south high speed railway, the mass rapid transit (MRT) systems in Kaohsiung (KMRT) and the between T'aipei and the CKS Airport—were given to private firms, including many foreign companies, on a build-operate-transfer (BOT) basis.
The average annual growth rate in manufacturing was 13% during 1953–62, 20% during 1963–72, 9.6% during 1973–85 and 5.9% for 1986–92. The private sector outpaced the public sector during each of these periods. The number of workers in manufacturing rose from 362,000 in 1952 to 736,000 in 1967 and to almost 2.8 million in 1987. By 1992, however, this number declined to about 2.6 million as the rapidly expanding service sector absorbed more of the workforce. Manufacturing for export has been encouraged by the establishment of free-trade export-processing zones (EPZs) in the Kaohsiung harbor area, at Nantze (near Kaohsiung), and at T'aichung. Since the late 1980s rising production costs and a 40% appreciation of the New Taiwan dollar have prompted many export-oriented companies to relocate their manufacturing plants to mainland China and Southeast Asia. In particular; labor-intensive industries, such as toys, footwear, umbrellas, and garments, have relocated. In 1986, industrial production accounted for nearly half of GDP. By 1997 this figure had dropped to about 35% and in 2000, it was an estimated 31/.9%, including manufacturing at 26.4% of GDP; construction at 3.4% and electricity, gas and water at 2.1% of GDP. For to June 2001, industrial production accounted for 29.4% of GDP., with manufacturing accounting for 24%.
Production rose spectacularly after the end of World War II, especially between 1952 and the early 1980s. Slower economic growth since the mid-1980s and greater investment emphasis on heavy and high-technology industries as well as services has resulted in declining production figures for traditional manufactures such as cotton yarn and fertilizer. Labor intensive industries have gradually been replaced by capital and technology intensive industries. In 2000 electronics and information technology (IT) products accounted for 27% of industrial output. The two largest made-to-order computer chip manufacturers are Taiwan Semiconductor Manufacturing Company (TSMC), Taiwan second-largest company, and United Microelectronics Company (UMC). In 2000, Taiwan global share in scanner production was 90%; in motherboards, 65%; monitors, 57%; in notebook PCs, 57%; in digital cameras, 45%, and in D/DVD drives, 39%. Strong growth in IT products continued in many IT products despite the overall 10.4% contraction in industrial production in 2001. Sales of LCD monitors, for instance, reached $3.13 billion, a 66% increase over 2000, while sales of digital cameras reached $7.132 billion, a 95.5% yearly increase. In 2000, Taiwan was the world's fourth-largest computer hardware supplier. Taiwan has become the world's leading supplier of computer peripherals, including motherboards, monitors, mice, interfaces, network cards, and graphic cards; and holds the largest market share of notebook computers and semiconductors. The structure of Taiwan's IT industry is a pyramid with a handful of large companies that make the major investments in research and development, and over 1000 small and medium-sized operations that account for about 85%s of the output. The sector employs about 130,000.
Taiwan's petrochemical industry consists of mainly of 45 upper and middle-stream manufacturers, many concentrated in the Kaohsiung special chemical zone. In 1999, Taiwan's petrochemical production capacity was only 51% of domestic demand. As of 2000, this was raised to 79% with the completion of a naphtha cracking plant in the Mailiao industrial zone. The Mailiao zone also includes its newest oil refinery, a 450,000 barrels per day facility built by Formosa Petrochemical Company (FPC), which, with Taiwan's three other refineries—a 270,00 barrels-per-day refinery at Kaohsiung, a 270,000 barrels-per-day refinery at Ta-Lin, and a 200,000 barrels-per-day refinery at Taoyuan—establishes refinery capacity in excess of domestic demand. In December 2002, an export contract was concluded with the mainland China state petroleum company
In heavy industry, Taiwan has 10 manufacturing companies, most of them contractual joint ventures with Japan. The production value of the automotive industry reached $10 billion in 2000, about 4% of its aggregate manufacturing. Taiwan's small size and the availability of efficient MRT lines limits the demand for automobiles. Domestic demand for vehicles fell from 542,000 in 1995 to 420,000 in 2000.
Textiles were the leading export until the 1980s when labor costs, land prices and environmental protection concerns led to a relocation of much of the industry to Southeast Asia and China. The domestic industry is based on man-made fibers. In 2000, Taiwan was third in the world in the production of man-made fibers, and second in the production of polyester, which constitutes 80% of its output.
Overall industrial production fell 2.6% in 1998 from an increase of 7.4% in 1997, due largely to the effects of the Asian financial crisis. Industrial production recovered quickly to growth rates of 7.5% and 7.4% in 1999 and 2000, but then slid 10.4% in 2001 in the wake of the dot.com bust. In 2002, the economy recovered, registering a 3.3% growth rate, and in the first quarter of 2003, industrial production had risen 6.4%.
In 2004, the industrial production growth rate was 12.2%, well above the overall growth of the economy. Industry made up 30.9% of the economy, and employed 35% of the working population. Agriculture is an insignificant part of the economy, but services
seem to be the main driving force, with 67.4% participation in the GDP and 57% representation in the labor force.
In the 1970s, Taiwan instituted its Science and Technology Development Program. Coordinated by the National Science Council, the program seeks to encourage the development of "knowledge-intensive" industries through grants for the training of scientific personnel, subsidies for recruitment of distinguished scientists from abroad, and grants to universities to promote scientific research. Specific goals of the program are to integrate and promote research in geothermal energy, battery-powered vehicles, electronics, cancer treatment, pharmaceuticals, nuclear safety, and the development of high-precision instrumentation and computers.
The Industrial Technology Research Institute is charged with the transfer of pertinent technologies developed to manufacturing and other industries. College students are encouraged to build careers in engineering and science. In 1979, the Science-Based Industrial Park was established at Hsinchu, near the National Tsinghua University, with the objective of encouraging computer manufacturing and other high-technology industries by offering loans, tax incentives, and low-cost housing and factory buildings. By 1990, over 60 companies had established research and development (R&D) and joint production facilities there. These include computer, semiconductor, precision electronics and instrumentation, telecommunications, and biotechnology firms.
The highest institution for scientific research on Taiwan is the Academia Sinica (Chinese Academy of Sciences), founded in 1928 and now located in T'aipei. Its 18 associated institutes carry on research in mathematics, statistics, history and philology, economics, modern history, physics, botany, zoology, ethnology, chemistry, molecular biology, biological chemistry, biomedical sciences, atomic and molecular sciences, earth sciences, information science, nuclear energy, social sciences and philosophy, and American culture. An Atomic Energy Council, founded in 1955, promotes atomic research.
In T'aipei, the National Taiwan Science Education Center has a planetarium and various exhibits; the Taiwan Museum has exhibits on natural history, geology, and ethnography, and a spectroscopic dating laboratory for fossils. Taiwan has 23 universities and colleges that offer courses in basic and applied sciences.
The marketing system is partly free and partly controlled. Salt, tobacco, alcoholic beverages, and certain commodities are produced and distributed by the government. Prices of basic living commodities are controlled. Retail sales in cities are handled by small department stores, specialty shops, general stores, convenience stores, roadside stands, and peddlers. In 2000, Taiwan had over 1,000 supermarkets and 3,200 convenience stores. Since roadside stands and peddlers have little overhead and are satisfied with a small profit, their prices are generally lower than those of the large stores and shops, if the customer bargains. In recent years, wholesale discounters, hypermarkets and franchises have become significant distribution channels for consumer goods, increasing the efficiency of the marketing system overall. The nation's first shopping malls opened in 1999 and 2001, with development plans to build 20 to 30 more within the next few years.
Chilung and T'aipei are the distribution centers for the northern end of the island, while Kaohsiung and T'ainan are the principal distribution centers for the southern area. Most registered import and export trading firms are located in T'aipei. Accounts are usually settled during festival periods, according to Chinese custom.
Local markets open about 7 am and close at 6 pm or later. Business firms and stores are usually open from 9 am to 5:30 pm, and in the morning on Saturdays, and some stores close as late as 10 pm. Most stores are open seven days a week. Banks are open six days a week: Monday–Friday, 9 am to 3:30 pm, and Saturday, 9 am to noon. As of January 1998, government employees (excepting the police, health bureau, and customs) and most private companies take the second and fourth Saturday of the month off.
Foreign trade is of ultimate importance to the island economy. To fulfill both production and consumer needs, Taiwan must import large quantities of energy, industrial raw materials, food, and manufactured goods. With rising consumer wealth within Taiwan as well as tariff reductions and other liberalization measures by the government, imports have risen rapidly from $24 billion in 1986 to an estimated $122 billion in 2000.
The export pattern has changed significantly since the end of World War II. In 1952, industrial products represented only 10% of Taiwan's total exports and agricultural exports made up the rest; but by 1992, industrial exports (excluding processed agricultural products) had jumped to an overwhelming 95.7% share of the total. Exports increased from $8.2 billion in 1976 to an estimated $112 billion in 2000. However, the export growth rate has declined steeply in recent years, from 23% in 1986 to 13% in 1991 and 0.4% in 1992, due to recession in Taiwan's major markets and the movement of export-oriented manufacturing plants to China and Southeast Asia. Exports leveled off in 1997, and dropped by 9.4% in 1998, in part due to the financial crisis in all of Asia. The growth in services has overtaken that of industrial production.
Most of Taiwan's export commodities are electronic equipment and other small manufactured goods.
The United States remains Taiwan's single most important trade partner, although Japan has made major gains, becoming Taiwan's major supplier in the 1970s and 1980s. Over 18% of imports come from the United States, while Taiwan exports more than 27% of goods to the United States. Trade with mainland China via Hong Kong expanded rapidly during the late 1980s and early 1990s, resulting in a sharp increase in Taiwan's trade surplus with the latter country. Following cross-strait tension from 1995 onwards, Taiwan investors have limited their relations with mainland China, resulting in a 50% drop in investment during 1998. Exports to China fell by 13% in 1998.
In 2004, exports reached $171 billion (FOB—Free on Board), while imports grew to $165 billion (FOB). The bulk of exports went to China, including Hong Kong (37%), the United States (16%), and Japan (7.7%). Imports included machinery and electrical equipment, minerals, and precision instruments, and mainly
came from Japan (26%), the United States (13%), China, including Hong Kong (11%), and South Korea (6.9%).
There was a consistent trade surplus after the mid-1970s, which exceeded $10 billion after the mid-1980s through the mid-1990s. The current account surplus was $19 billion in 2001 and was forecast to remain substantial in 2003. Taiwan's total foreign exchange reserves are the world's third-largest after Japan and China; they stood at a record $175.2 billion in May 2003. Total foreign debt was only $24 million in 2001.
The US Central Intelligence Agency (CIA) reported that in 2001 the purchasing power parity of Taiwan's exports was $122 billion while imports totaled $109 billion resulting in a trade surplus of $13 billion.
Exports of goods and services reached $173 billion in 2004, up from $143 billion in 2003. Imports grew from $119 billion in 2003, to $157 billion in 2004. The resource balance was consequently positive in both years, reaching $24 billion in 2003, and $16 billion in 2004. The current account balance was also positive, deteriorating though from $29 billion in 2003, to $19 billion in 2004. Foreign exchange reserves (including gold) grew to $242 million in 2004, covering more than one and a half years of imports.
Many banking institutions are either owned or controlled by the government. There were 11 public banks in 1998, with total assets of $261 billion, or 44%. The Bank of Taiwan (with 75 branches) used to issue currency notes, handle foreign exchange, act as the government's bank, and perform central banking functions in addition to its commercial banking activities; before reactivating the Central Bank of China (CBC) in T'aipei in 1961. The functions of the Central Bank include regulation of the money market, management of foreign exchange, issuance of currency, and service as fiscal agent for the government. The Bank of China is a foreign exchange bank with branch offices in major world capitals. The Bank of Communications is an industrial bank specializing in industrial, mining, and transportation financing. The Export-Import Bank of China, inaugurated 1 February 1979, assists in the financing of Taiwan's export trade. The Central Trust of China acts as a government trading agency and handles most of the procurements of government organizations. The Postal Savings System accepts savings deposits and makes domestic transfers at post offices.
At the end of 2002 there were 48 domestic commercial banks, five medium business banks, and 39 foreign banks. There were also 48 credit cooperatives, 287 farmers' credit unions, and 27 fishermen's credit unions. The government holds majority status in several of the most important banks, including the Bank of Taiwan, the Cooperative Bank of Taiwan, and the First Commercial Bank. The two largest private banks are the International Commercial Bank of China and the Overseas Chinese Commercial Banking Corp. By 1998, three large government-owned provincial banks were privatized, and others were set to follow.
In 1990 the government announced the goal of establishing the island as a regional financial center. Its original target of 1996 was far too optimistic, and liberalization will have to be far more thoroughgoing than that to which the authorities are at present committed, but various steps are being taken towards this end. Restrictions on bringing in capital from abroad, limits on capital transfers both in and out of Taiwan by domestic firms and individuals, and the operations of foreign banks have been liberalized. On 18 February 1997, the Finance Ministry set up a 37-member financial reform task force, headed by the finance minister. This group spent 10 months devising proposals in the following four areas: improving the overall efficiency of the banking system; development of capital and derivatives markets, and relaxation of the rules governing the kinds of business banks may conduct; improving market-regulating procedures such as credit evaluation systems, asset management, investor insurance, and insider trading rules; and strengthening banks' internal financial controls.
Taiwan's first private corporate bond issue was floated in 1958. The first stock exchange in Taiwan opened on 4 February 1962. Volume was low until liberalization measures opened the market to foreigners, and the Taiwan stock market surged in the early months of 1997, with the index smashing through the 8,000-point barrier for the first time since 5 March 1990. This milestone immediately prompted rumblings from the CBC that the market was overheated. Yet by May 1997, the market was flirting with the next resistance level, at 8,500 points. Authorities raised the limits to foreign ownership in companies listed on the TAIEX from 30% to 50% in 1999. Most limits on foreign ownership were ended in 2000, and the index was up by the 10,000 mark in that year. However, it has since dropped off considerably, especially in the wake of the Asian financial crisis of 1998. The TAIEX was at 5,551.2 at the end of 2001, and trading value, at $545 billion, was only slightly more than half of the previous year's level. As of 2004, the TAIEX stood at 6,139.7, up 5% from the previous year. Trading value that year totaled $718.619 billion. In 2004, a total of 697 companies were listed on the Taiwan Stock Exchange, which had a market capitalization of $441.436 billion.
Insurance in Taiwan is supervised by the Ministry of Finance and may be written only by a limited liability company or a cooperative association. Aside from group insurance operated by the government, life and annuity insurance are comparatively undeveloped in Taiwan. The Chinese tradition that the family should take care of its members in sickness and old age lowered demand in the past, but social change and rapid economic growth have modified this situation, especially in industrial areas. In 1986, the Taiwanese government agreed to allow US companies to compete equally for insurance business. In 1999, nine foreign nonlife insurers were authorized to run full branches in Taiwan. Foreign insurers must receive approval from the government, however, and secure a business license. In Taiwan, third-party automobile liability, health insurance, pension, unemployment insurance, and workers' compensation are all compulsory. In 2003, the value of all direct insurance premiums written totaled $32.402 billion, of which life insurance premiums accounted for $23.739 billion. For that same year, Taiwan's top nonlife insurer was Fubon, which had gross written nonlife premiums totaling $847 million, while Cathay Life was the
country's leading life insurer, with gross written life insurance premiums of $7,972.7 million.
Central government revenues come mostly from taxation, customs and duties, and income from government monopolies on tobacco and wines; other revenues are derived from profits realized by government enterprises. Government accounts showed surpluses through the early 1980s. Public authorities anticipated a growing fiscal deficit throughout the 1990s as Taiwan's six-year development plan required over $300 billion of investment in public infrastructural construction projects and in upgrading industries. In 1996, the government's deficit was equal to 4% of GDP. Growing demands for social welfare spending and increased defense spending (up 20% in 1996/97, the largest rise in over a decade) continued to put pressure on the budget. Outstanding debt reached 16% of GDP in 1998, up from 6% in 1991, and debt service payments consumed 15% of the central budget in 1999. The government was committed to balancing the budget by 2001. Austerity measures included controlling public sector consumption expenditures, limiting expansion of government expenditures, freezing government employment, limiting public employee pay raises, and encouraging private participation in major public projects. The government was also committed to reducing the public sector's role in the economy. National defense expenditures as a portion of the central budget dropped from over 40% in 1960 to 20% in 1999, and were set to fall to 15% in 2000.
The US Central Intelligence Agency (CIA) estimated that in 2005 Taiwan's central government took in revenues of approximately $70.9 billion and had expenditures of $80.1 billion. Revenues minus expenditures totaled approximately -$9.2 billion. Public debt in 2005 amounted to 33.3% of GDP. Total external debt was $81.64 billion.
All taxes are collected by the local government and transferred to the relevant provincial or central government agency. Tax revenues reserved for the central government include the income tax, estate (inheritance) tax, gift taxes (4–50%); customs duty, stamp tax, commodity tax, securities transaction tax, and mine tax.
As of 2005, individual income taxes were progressive with a top rate of 40%. Dividends paid to resident individuals is not subject to a withholding tax. Non resident individuals were subject to a 30% withholding rate. Interest and royalty income paid to resident individuals were subject to withholding taxes of 10% and 15%, respectively, but increases for each to 20% for nonresidents.
Corporate income taxes range from 0 to 25%. Capital gains are subject to the same corporate tax rates, although gains incurred by a nonresident company are taxed at a flat rate of 25%. Dividends paid to nonresident firms are also taxed at the flat 25% rate. Banking, insurance and investment services are subject to a 2% turnover tax. Higher rates apply to entertainment.
Taiwan also has a value-added tax (VAT) of 5% on sales and services. Items zero-rated from the VAT include international transport, exports, services performed in Taiwan but for use abroad, and services performed overseas. Basic foodstuffs, land, water, certain agricultural inputs, some financial and insurance products, and education and health are exempt from the VAT. However, certain businesses not subject to the VAT pay a tax on their gross business receipts that ranges from 0–25%. Sales taxes are 1% for reinsurance activities, 5% for bank activities, insurance and brokerage services; and 15–25% for bars and restaurants. There is a 60% ad valorem merchandise tax on petrol. Other taxes include building, commodity, deed, estate, gift and land value taxes. There are no social security or local income taxes in Taiwan.
Customs duties are important revenue earners and consist principally of import duties and tonnage dues. The former are levied on dutiable commodities, the latter on ships that call at Taiwan ports. Duties range from 2–60%and are assessed on seven commodity categories that include rubber tires, cement, beverages, oil and gas, electrical appliances, flat glass, and automobiles. Articles imported for military use, for relief, or for educational or research purposes are exempted from import duty. Duties on imported raw materials for business can be rebated. Some agricultural products are prohibited from importation, such as rice, sugar, chicken, some pork cuts, peanuts, and certain dairy products. Imports from Japan and mainland China are restricted due to balance of payments problems. There is also a 5% VAT that is applied to the CIF (cost, insurance, freight) value, plus the duty and a 0.3% harbor fee that is not applied to items arriving by parcel post or air freight duty.
From 1952 to 2000 cumulative foreign direct investment approvals came to $44.8 billion of which 24% was in the electronics and electrical industries. Other industries attracting relatively heavy foreign investment include banking and insurance services, chemicals, trade and basic metals. The government reported Taiwan received $3.27 billion in foreign investments in 2002, and had received an average of $2.7 billion a year 1991 to 1999. The rate of foreign investment has been rapidly accelerating as in preparation for its accession to the World Trade Organization (WTO) Taiwan has liberalized its economy and improve its investment environment. Foreign firms are generally accorded national treatment and trade-related capital flows are unrestricted. In January 2001 the 50% foreign ownership limit was lifted with exceptions in a few designated industries. Most limits on the amount of portfolio investment in companies listed on the Taiwan Stock Exchange (TSE) were also lifted. About 1% of manufacturing industries and 5% of services industries continue to have limits on foreign ownership. Investment incentives are offered for investments in emerging or strategic industries, pollution control systems, production automation, and energy conservation. Since the goal was first announced in 1995, increasing effort has been put in making Taiwan an Asia-Pacific Regional Operations Center (APROC). A goal is to have about 1,000 corporations establish headquarters in Taiwan by 2011.
The United States has been the largest source of foreign investments in Taiwan with investment approvals totaling $10.7 billion in the period 1952 to 2000, 24% of the total. Another $9.2 billion is approvals during this time from the British Virgin Islands, the Cayman Islands, and other offshore havens in Central America, should also be largely attributed to US multinationals. Japan has ranked second with approved investments totaling $9.2 billion or
21% of the total. Twenty-seven percent has been in electronic and electrical products and 20% in services and trade. Investment approvals totaled 1,410 equal to potential investment of $7.6 billion, an increase of 80% over 1999. Most of these investment applications came from British territories in Central America (mainly the British Virgin Islands, the Cayman Islands, and other conduits of mostly US investments), the United States, Singapore, Japan and the United Kingdom.
Taiwan outward investment has been such that by 2000 over 50% of Taiwan manufacturing was being conducted outside of the country, and by 2001, 53% was being out-sourced. The top five sectors for outward investment were banking and
