President Chen received the awardees of the 2004 Gold Trade Award and the 8th Rising Star Award today.
During his speech, the president commented on Taiwan's shrinking trade surplus, citing a significant increase in imports and the rise in crude oil prices as the culprit. And while some financial experts do not project future oil prices to adversely affect the long-term growth of Taiwan's trade surplus, the president stressed the need for Taiwan to continue to search for a safe and stable energy alternative. With 95 percent of the island's fuel imported, finding a reliable source of energy is not only pivotal in keeping pace with the country's economic growth, but a matter of national security as well.
The president also addressed the need to efficiently monitor the fluctuation in the trends and prices of energy in the international market so as to soften the impact a sudden spike in oil prices may have on Taiwan's economy. Modeling after advanced countries, the president also voiced his concerns about viewing the future of Taiwan's industrial development in a broader and more modern prospective, meaning to enhance energy efficiency as well as increase the use of renewable energy sources.
The president's speech:
I am pleased to be here today with the awardees of the 2004 Gold Trade Award and the 8th Rising Star Award to witness the proud achievements of Taiwan's industrial enterprises. This recognition does not solely belong to the awardees; rather, it is owed in large to all the people of Taiwan who have dedicated themselves to improving our country.
Taiwan's principal trading activities are based on import and export. Last year's trade surplus totaled US$341.9 billion, more than that year's US$305.4 billion GDP, illustrating the significant role foreign trade plays on Taiwan's economic development. In the past, Taiwan has enjoyed a large trade surplus, however, it has steadily declined, causing alarm when a deficit was reported earlier this year.
Taiwan does not boast an abundant amount of natural resources, so it prides itself in having one of the world's large foreign exchange reserves; therefore, indications of a shrinking trade surplus is a huge concern for the people of Taiwan. I realize that, in recent months, the outlook for our country's foreign trade has altered, yet, in no way shape or form does that mean Taiwan's competitiveness in the international market has waned.
Taking a closer look at Taiwan's economy, during the first half of this year the amount of exports and imports respectively increased to 6.8 and 11.5 percent. From these figures, we see that Taiwan's shrinking trade surplus is caused not by a decline in exports, but rather due to an increase in imports. The high cost of crude oil also greatly exacerbates the issue further. Constituting the highest growth rate for all imported goods in Taiwan, the volume of crude oil imported in the first half of this year increased by 45.5 percent from the same period last year. The high price of oil has also deepened the trade deficit between Taiwan and the Middle East to US$6.85 billion, a rise in 43.9 percent from last year and a sign of a growing trade imbalance.
According to the Directorate-General of Budget Accounting and Statistics, the unemployment rate in July was 4.32 percent; after seasonal adjustments, that percentage fell to 4.15, the lowest unemployment rate since April 2001. From January to July of this year the average rate was 4.17 percent, 0.33 percent lower than the same period last year. I am optimistic that the unemployment rate will continue to decline this year, possibly even falling below 4 percent.
Taiwan's economy is healthy. Since June, the economy has revitalized despite the unfavorable conditions in current international trade. We must be optimistic and we must be confident in Taiwan. Barring any major market disruptions, Taiwan's economy should stabilize in the second half of this year.
The economic forecasts for crude oil futures are not shared by all; some economist believe the high price of oil is merely a temporary market imbalance, a phenomenon that will soon subside and return markets to normalcy. However, other analysts argue that the abrupt rise in crude oil prices reveal a structural imbalance in the world's energy market and a need to develop a safe and stable energy mechanism in order to ensure Taiwan's economic development and national security.
The U.S. Department of Defense's 2005 annual report on China's People's Liberation Army dedicated a section of its analysis on the PLA's military deployment in relation to its energy consumption. The report indicated that crude oil and gas represents 26 percent of China's energy usage, while the import of crude oil represents 40 percent of the total amount of fuel China burns. Nevertheless, the Chinese government warns that a shortage of crude oil and natural gas is already a factor in slowing Chinese economic and social development.
Comparing the energy situation in both Taiwan and China, we see that it is necessary for Taiwan to reconsider its energy sources and think of the future. Taiwan must limit the impact international crude oil prices may have on the island's economic growth while thinking of Taiwan's industrial development in a broader perspective. Aside from promoting energy efficiency, Taiwan must strive to increase renewable energy levels at German and Japanese standards. Opportunities and incentives must be provided to encourage more civilian enterprises to utilize recyclable energy, only then will Taiwan become the "Green Silicon Island."
Finally, I would like to once more congratulate the awardees. I wish you all the best.