President Cassingham; Distinguished Guests; Ladies and Gentlemen:
It is my pleasure to have this opportunity to meet with you tonight at the Hsieh Nien Fan (謝年飯) of the American Chamber of Commerce in Taipei. Let me first wish everyone a Happy New Year. I would also like to use this occasion to express my most sincere appreciation to all of you for your outstanding contributions to my country's economic development through the years.
Last November 26th, President Cassingham and two of his colleagues kindly came to my office to invite me to attend your Hsieh Nien Fan (謝年飯) and to give a keynote speech. At that time he suggested I speak about the upcoming presidential election in March. After some thought, I concluded that your greatest concern might still be Taiwan's economic development. Therefore, I will give a brief talk tonight on the current situation and prospects of Taiwan's economic development, so that you will have a better idea of the directions for your future investments and cooperation in Taiwan.
During the last half century, the Republic of China on Taiwan created remarkable economic progress. Many achievements were made in the last decade. Per capita income increased from US $3,130 in 1985 to US $13,120 in 1998. Total trade rose from US $50.8 billion in 1985 to US $215.2 billion in 1998, while foreign reserves multiplied from US $22.7 billion in 1985 to US $102.7 billion in October 1999. Overall, as the 20th largest economy in the world, Taiwan's influence on the international system can no longer be ignored.
Currently, Taiwan has very significant trade and investment relations with the United States, Japan and other Asian Pacific countries. Taiwan is the third largest trading partner of both Japan and Vietnam, and the fourth largest trading partner of Hong Kong, Malaysia, The Philippines, Korea and Mainland China, as well as the seventh largest trading partner of the United States. Likewise, the Republic of China is the fifth largest investing country in Vietnam, Mainland China, Malaysia, Thailand, and Indonesia. Therefore, in addition to providing our citizens with a more prosperous life, Taiwan's economic achievements also contribute to economic growth in the Asia Pacific region.
It is important to emphasize that the rapid growth and gradual maturity of Taiwan's economy occurred during the late 1980s, the same time as we began marching down the road to democracy through the process of political reform. Rather than hindering economic growth, the realization of democratic ideals has allowed the free market economy to become more established and has injected new vitality to our economic development. Political democratization is therefore an important factor in Taiwan's economic success. Our American friends here today should have firsthand knowledge about this point.
Although there are many reasons for Taiwan's economic progress, the four most significant ones are first, a solid foundation of technology industries. The most distinguishing feature of Taiwan's economic development is its ability to find niche opportunities in the international market and to invest in industries where it has the most comparative advantages. Through the abundance of human talent and skills in the technology industries, and in particular the computer industry, Taiwan has established a commanding position in these industries. At present, the scanners, personal computers, and keyboards manufactured by Taiwan capture more than 60% share of the world market. Last September 21st, when a severe earthquake struck the central part of Taiwan, the international market experienced the so-called “Taiwan Shock”. This is testimony to the fact that Taiwan's hi-tech industry serves as an important link in the global economic system.
The second is the great number of small and medium sized enterprises in our economy. The vigorous and dynamic private sector plays a major role in Taiwan's economic development. The government furthermore has adopted concrete policies to encourage the expansion of private sector vitality. In the 1991 World Bank Report on East Asian economies, it gave the highest assessment for Taiwan's small and medium sized enterprises. Currently, there are more than one million small and medium sized firms in Taiwan making up 98% of the total number of enterprises. They also create job opportunities for over 80% of the total workforce and form the main segment of Taiwan's economic system. Because small and medium sized businesses can quickly grasp international trends and accordingly adjust their operational strategies, they can immediately respond to international competition and gain the edge.
The third reason is Taiwan's close interrelation with three large “networks”. Taiwan has forged connections with Silicon Valley, Asia, and the Chinese people networks, greatly expanding its space for economic development. A large number of Taiwanese students go to the United States to pursue further education, and many stay there for career purposes after graduation. The others return to Taiwan, but form the so-called “Silicon Valley Network” by maintaining close contacts with American hi-tech industry, which has led America's recent economic growth. Furthermore, there is mutual interdependence in trade and investments between Taiwan and other respective countries in Asia, thus creating an Asian network. In addition, kinship and cultural affinities closely link Taiwan with other Chinese people around the world building a Chinese network. The combination of these three networks provides Taiwan's economy with a significant advantage.
The fourth is an available supply of capital. Not only has Taiwan accumulated more than 100 billion US dollars in foreign reserves, but it also has incurred very low external debt. In 1997, Taiwanese companies have average debt ratios of only 88%, far below the 396.3% for their Korean counterparts, or the 186% for Japanese ones, or the 153.3% for American corporations. This shows the distinction of Taiwanese enterprises in not relying on debt but rather on equity for business expansion. It is also one of the reasons that Taiwan's industries could safely weather the Asian Financial Crisis two and a half years ago.
In general, the factors for Taiwan's economic success are actually very similar to those in the American experience of development. With a market economy based on free competition, American businesses have the opportunity to start again and create success, even after meeting initial difficulties. Furthermore, the availability of venture capital for small businesses also gives them a wide-open room with freedom to develop. In addition, the successful commercialization of the fruits of academic research and the implementation of stock options as a method to share profits with their employees continuously injects new vitality to sustain US economic growth. These are some of the reasons the US economy was able to reach new highs after falling into a historic depression. Likewise, the free competition based economy of Taiwan provides quite a good environment for the development of small and medium sized businesses so that they continue to grow stronger. Moreover, Taiwanese enterprises, especially those in the hi-tech sector, strive to innovate. The owners furthermore use stock options to give their employees a stake in the business so that they participate together in the growth of the business. America's successful experience provides Taiwan with a worthy model for economic development and gives us even greater confidence about the future prospects of Taiwan's economy.
Looking ahead to the twenty-first century, the trend of globalization and the progress of information and technology will create new challenges for the world economy. In the midst of a rapidly changing but fiercely competitive new environment, Taiwan will seek to maintain its competitive edge and open new frontiers for development in order to sustain economic growth. In the future, the main areas of our efforts include first, enhancing the development of a computer software industry. Taiwan already has tremendous manufacturing capability and therefore holds commanding lead in the production of computer hardware. Starting today, we must further strengthen our efforts in software design and development and create additional value to lay a more solid foundation for our economy in the information age.
Second, with knowledge creation as the direction, invest in other industries with high growth potentials. In the 21st century, besides the computer industry, alternative energy sources, environmental technology, biotechnology, and medical care developments will become high growth industries. We will increase the R&D spending in these areas to develop advanced technologies and gain competitive advantages in these new fields.
Third, establish a solid framework for liberalization. Along with the trend of globalization, only the complete implementation of liberalization will raise our competitiveness. In particular, Taiwan is expected to join the WTO in the near future. We must therefore build a framework for liberalization based upon a sound legal system and through pushing forward our policies.
Fourth, enhance corporate transparency. The trend of globalization also requires companies to increase their financial transparency. In the past, Taiwanese businesses were mostly family enterprises and suffered problems of inadequate disclosure. Starting from the amendment of laws and regulations, we will transform business structure and raise transparency to further strengthen our economy.
Fifth, maintain stability in our foreign relations. With a population of just 20 some million people, our domestic market is not big enough, and our economy relies largely on the international market. We therefore must maintain stable external relations, which are important for sustainable economic growth. In the future, we will continue to increase our trade relations with the rest of the world. Meanwhile, we will work to strengthen multilateral trade and economic cooperation and to expand our space for further economic development through participation in international organizations.
Ladies and Gentlemen: the American Chamber of Commerce has been a longtime supporter and partner in Taiwan's economic development. You have worked together with the Taiwanese people to create Taiwan's economic success and shared the prosperity and wealth brought by our economic liberalization and political democratization. As we face new challenges of the new century, I am confident that the United States and the Republic of China, with our shared ideals of democracy and insistence on a free market economy, can certainly cooperate in more areas and make greater contributions to the development of our two peoples and the world economy. It is my hope that the members of the American Chamber of Commerce will continue to lend us your support and assistance to jointly create a new era of economic development.
In closing, I wish you, Ladies and Gentlemen, peace and prosperity in the New Year and success in your endeavors. Thank you.