Director Torkehagen; Ladies and Gentlemen:
It is my pleasure to attend the lunch today hosted by the European Trade Representatives Organization. On behalf of the government of the Republic of China, I would like to express our sincere appreciation to all of you for your efforts through the years at promoting relations between Taiwan and Europe.
There is less than a month's time before voting day for our presidential election. Without doubt, you must be very interested in the latest developments. This national election will have important significance for Taiwan's future economic and political development, and therefore has received worldwide attention.
Taiwan's economic development is closely related to its democratization process. During the early years, our economy accumulated a substantial amount of capital by adopting import substitution and export promotion policies, which laid a solid foundation for further economic development thereafter. However, the real economic take-off occurred when we concurrently engaged in political democratization and economic liberalization. The realization of democratic ideals helped our freely competitive market economy to gradually develop, thereby rapidly expanding Taiwan's exports and injecting additional vitality to Taiwan's robust economy. This has allowed Taiwan, in a little over a decade, to raise per capita income from US$ 3,130 in 1985 to US$ 14,103 in 1999, and to increase total trade from US$ 50.8 billion in 1985 to US$ 232.3 billion in 1999. Furthermore, our foreign exchange reserves have multiplied from US$ 22.7 billion in 1985 to US$ 106.2 billion as of the end of January 2000.
Therefore, democratization should be seen as a major factor in our rapid economic development during the nineteen eighties. Overall, there are several additional reasons for Taiwan's economic success. They include the following.
First, vigorous and dynamic small and medium sized enterprises. A thriving private sector has been an important impetus for Taiwan's economic progress. The government has contributed to this by adopting concrete policies to encourage private sector vitality. For this reason, Taiwan's development model is completely different from that of either Korea or Japan, which are characterized by monopolistic and large enterprises. There are currently more than 1 million small and medium sized businesses in Taiwan. Making up 98% of all enterprises and creating job opportunities for 80% of the total workforce, they definitely form a major segment of Taiwan's economy. Our small and medium sized businesses are characterized by their high degree of flexibility. Because they can quickly grasp international trends and accordingly adjust their operational strategies, small and medium sized businesses can immediately respond to competition and changes in the international market and gain advantages.
The second is the availability of capital. Not only has Taiwan accumulated more than US$ 100 billion in foreign reserves, but it also has incurred very low external debt. In 1997, the debt ratios of Taiwanese companies in the manufacturing sector averaged only 88%, far below the 396.3% for their Korean counterparts, the 186% for Japanese ones, or the 153.3% for American corporations. These statistics reveal the characteristic of Taiwanese enterprises in relying more on equity rather than debt for business expansion. This is also one of the reasons why Taiwan's industries could safely weather the Asian Financial Crisis two and a half years ago.
Third, 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 advantage. Through the abundance of human talent and skills, Taiwan has established a commanding position in technology industries, and in particular the computer industry. Presently, the scanners, personal computer mainframes 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 proves that Taiwan's hi-tech industry is an important link in the global economic system.
The fourth reason is Taiwan's close interrelationship with three large "networks". Taiwan has forged connections with Silicon Valley, Asia, and the Taiwanese Business Associations around the world, 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 research or 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. The mutual interdependence in trade and investments between Taiwan and the other countries in Asia create an Asian network. In addition, kinship and cultural affinities closely link Taiwan with other Chinese people around the world, thereby building a Taiwanese Business Association network. The combination of these three networks provide a significant advantage to Taiwan's economic momentum as well as the opportunity to gain competitive edge and expand economic growth in the current environment which emphasizes international and regional market integration.
The successful experience of Taiwan in political democratization and economic liberalization should be well understood by Europe, which has endured trade barriers and threats of authoritarianism both before and after the two world wars. We all know that the formation of the European Union has accorded a stable environment for European democracy to grow and become more established. Moreover, stable political systems plus the expansion and liberalization of the Common Market also provide new opportunities and dynamics for European economic growth. In recent years, all the major countries in Europe have modified their social democratic ideals of the past and adopted measures to stimulate vitality and autonomy of the private sector, so that small and medium sized enterprises can flourish. Such measures are similar to the policies undertaken by Taiwan in the past few years.
Because we share common ideals of political democracy and economic liberalization, the relations between Taiwan and Europe have grown closer day by day. Europe is currently our third largest trading partner. In 1999, our trade with Europe totaled US$ 37.91 billion. With respect to cultural and educational exchanges, more and more of our students are studying in Europe. Academic cooperation projects, cultural interchanges and reciprocal tours by artistic groups have increased in frequency. Not only have these exchanges enhanced our mutual understanding, but they also strengthen our friendly relations and lay a solid foundation for greater cooperation in the future.
Looking ahead, Europe, which has abundant cultural assets and advanced science and technology will surely be an important partner for Taiwan on its path to greater humanitarian development and economic prosperity. We hope that in the near future, a "European network", which encompasses technology and culture, will evolve between Taiwan and Europe so that we can join hands to build a brighter new era for the world.
Ladies and Gentlemen, you have witnessed Taiwan's democratization and economic development. We hope that you will continue to give my country your greatest support and join us in striving to further enhance the relations between Europe and Taiwan.
In closing, I wish everyone good health and happiness. Thank you.