Strengthen Taiwan, Connect with Asia-Pacific, Adopt a Global Outlook

Let’s Be Open and Practical

Strengthen Taiwan, Connect with Asia-Pacific, Adopt a Global Outlook

Speech delivered by Ma Ying-jeou at the Lung Yingtai Cultural Foundation,
Taipei, Taiwan on April 26, 2007
(A translation)


In 1947, two years after Taiwan’s recovery form Japanese rule, the writer Wu Zhuoliu, in a book Taiwan, Just Before Dawn, wrote: “The cultures of the world are not going to wait for us. They will keep progressing at the same speed as before. So rather than keep bickering about our own trivialities, why don’t we devise ways to make Taiwan into a utopia……Striving to build a prosperous and free Taiwan is the task of all people living in Taiwan.” Alas, sixty years have passed. Taiwan has not heeded Wu Zhuoliu’s warning. The world has not waited for us. Taiwan has not become a utopia.

Looking at history

Taiwan is an immigrant society. Our ancestors crossed the “black trench,” the dangerous waters of the Taiwan Strait. They faced trials and tribulations. They needed an open and pragmatic attitude to survive and thrive. This openness and pragmatism became the traditional spirit of Taiwan. Taiwan has an island culture, partaking of both land and sea: without openness and pragmatism there is no way for Taiwan to become a utopia.

There are many historical experiences we can profitably consider in this regard. In the period when Taiwan was ruled by Ming loyalist Koxinga and his son and grandson (1662-1684), the Qing dynasty tried to isolate Taiwan by declaring it illegal for people to live within approximately fifteen to thirty kilometers of the coast in five provinces. The Qing also tried to enforce an embargo. In the face of this overwhelming pressure, Koxinga was insistently open and pragmatic, building a wide base of support and maintaining the flow of trade. It was the only way to maintain strength for resistance against the Qing.

Koxinga died less than a year after coming to Taiwan at the age of 39. His son Cheng Ching in 1670 reached a trade agreement with England in 37 articles, which was finalized as a treaty in 1672 in 13 articles. Cheng Ching agreed to sell a third of the sugar and deer pelts produced in Taiwan to East India Company; the English agreed to ship necessities (later guns and ammunition) to Taiwan and pay a customs duty of 3%. Cheng Ching subsequently also traded with Japan: resistance to the Qing meant that the main import from Japan was weaponry, while sugar, deer pelts and medicines were exported. According to English records, an average of fifty merchant vessels left Taiwan for Japan every year.

In 1684, after Taiwan fell to the Qing, the Qing adopted a passive, defensive and prohibitive stance regarding immigration and armament. Only in 1875, under pressure from foreign powers did the Qing rescinde the embargo and encourage immigration.

After the Sino-French war of 1884-1885, the Qing decided to make Taiwan a province with Liu Mingchuan as its first governor. Earlier in 1884, Liu had already been sent to Taiwan as military commander. During the French invasion, he mounted a successful defense of Tamsui and made himself known to the world. When he returned to Taiwan in late 1885 as governor of Taiwan, he acted on three policies: restore social order, improve state finances and solidify military defense. He introduced merchants and capital from England, France, Germany and Denmark and implemented BOT (build-operate-transfer) projects. In other words, he embarked on a program of “modernization”:

1.In a conservative climate and under fiscal constraints, Liu in 1887 established the Taiwan Railroad and Commercial Administration. English and French engineers were employed. Initially the format was government-supervision and private-operation, but later the state took over operation: it was the first self-built, self-operated railroad in China.

2.Liu commissioned the British company Jardine Matheson & Co. to lay a telegraph cable from Taipei to Fuzhou with a branch line between Anping (Tainan) and Penghu.

3.Liu established a Foreign Investment Bureau (later changed to Trade Bureau) in Singapore. Eight steamboats were purchased for commercial service among Penghu, Shanghai and Hong Kong, and at times to Luzon, Saigon and Singapore.

4.Liu also used the government-supervision private-operation format in founding the Coal Bureau. The English company Russell Co. was chartered for twenty years.

5.In 1888, Danish technicians helped complete an overland telegraph line from Taipei to Tainan.

6.Liu also called on rich merchants Lin Weiyuan and Li Chunsheng to build the streets inside the Taipei city walls and brought in Zhejiang merchants to form an urban development company to build stores and pave roads and to found academies of Chinese and western learning. The first in China, Taipei had street lights. Taipei was now “Little Shanghai.”

7.In terms of defense, Liu added a number of batteries to fortresses and city walls around Taiwan. The guns were supplied by Armstrong of England and Krupp. He also employed the German officer Max E. Hecht to build a fortress at Keelung. Finally, Liu founded a modern arsenal in Taipei.

This policy of openness served Taiwan well. When the American Minister to China Charles Denby came to Taiwan on a governmental inspection visit, he said that Liu Mingchuan’s reforms had made Taiwan the most advanced of China’s provinces. S. Ueno, Japan’s consul to Xiamen (Amoy), praised Taiwan as a “gift from heaven.” Liu Mingchuan went all out to develop Taiwan, to the point of making himself sick: “Administrative and military worry and work: I went into the mountains several times and breathed in noxious vapors, which numbed my limbs, bleared my eyes and blocked my ears. I took a month’s leave without recovery and even coughed up blood and experienced shortness of breath. Even walking became difficult.” What’s especially moving is Liu Mingchuan’s day-and-night toil for the commonweal.

At this point, I need to say something about Taipei’s development. Taipei is a basin, which did not offer the same advantages as the Jia-nan Plain in central and southern Taiwan, so the south was developed earlier than the north. In the mid-nineteenth century the hills around Taipei were planted with tea. After becoming Governor, he “gave awards to those who have recovered the strength of the soil, therefore, there were more and more tea planters.” The English merchant John Dodd was the major early promoter of the tea industry. In 1875, the tea exported from Tamsui accounted for 34% of Taiwan’s total exports. Tamsui tea accounted for 70% of exports in 1885. Oolong tea under the brand-name Oriental Beauty was sold as far away as Europe and America. Taipei’s economy had never been so prosperous.

Why did Taipei achieve preeminence later in Taiwan’s history? Its late preeminence relates to its small hinterland, not just Taiwan or Chinese Mainland: the whole world had to become its hinterland. In 1624, the Dutch reached Anping. In the same year they also reached New York City. Later New York metamorphosed into a world metropolis, while Anping (Tainan) is still a small city by the sea. The difference is that Anping has a very small hinterland while New York doesn’t. The size of a city’s hinterland influences industrial development. Taipei developed later than Anping, and the closest natural hinterlands to Taipei were the plains of Taoyuan and I-lan. But once tea was exported, especially to the United States, Taipei quickly shifted the export emphasis in Taiwan from the south to the north, and from rice and sugar to tea.

In the less than twenty years from 1869 to 1887, Taipei became Taiwan’s economic and administrative capital. Taipei residents moved from the earliest settlements in Wanhua (Banka) and Xinzhuang to Dadaocheng, Shilin, Jingmei, Shenkeng and Xindian. In 1894, the Qing officially moved the provincial capital to Taipei. It is clear that export-oriented industrial innovation is the key to economic prosperity. This means linking up with the global economy and taking the whole world as hinterland. Taipei’s experience proves it.

At the same time as Taiwan’s export trade was developing, the Kingdom of Liuqiu—the Ryukyu Islands or modern Okinawa—was in decline. The kingdom had existed since the early Ming dynasty. For centuries, every time a king ascended the throne, China would send emissaries to confirm the king as vassal and offer congratulations. At the time, Liuqiu had a preeminent place in the tributary system. Many countries or regions had to trade indirectly with China through Liuqiu.

On the largest of the Liuqiu Islands, Naha, is the Shuri Castle, inside the main chamber of which is a bronze bell cast in the middle of the fifteenth century. On the bell are four characters meaning “bridge to all nations,” describing the Kingdom of Liuqiu as a gateway for trade between East Asian countries and China. Mediating trade was in fact the foundation of Liuqiu’s development.

The main economic activity in East Asia at the time was trade of Japanese silver and Chinese silk. When China started using silver more intensively, about three-quarters came from Japan. At the beginning of the Qing, when the Sino-Japanese silk-silver trade began to falter, Liuqiu lost its role as regional trade hub. Development of the fishery did slow but not counteract its decline.

Looking at the world

Returning to the present, there are several examples in today’s global economic system that it behooves us to consider. First I want to talk about South Korea, which is now one of the world’s major trading nations in the world. In 1996, it entered the “rich nations club,” as the OECD is called. It is now the world’s 7th largest economy and 3rd in Asia behind only Japan and China, which is its largest trading partner after the United States and Japan.

In the 1950s, South Korea was one of the poorest nations in Asia. In the 1960s, it initiated economic development planning which stressed foreign trade. Subsequently domestic manufacturing grew nonstop. The initial emphasis was light industry, but soon heavy industries sprang up. This period of development is now known as the “Hangang (Han river) Miracle.” The government encouraged business expansion and merger, resulting in today’s internationally recognized South Korean conglomerates with their massive export volumes.

In 1997, South Korea was sucked into the Asian financial crisis, imperiling banks and the entire financial system. South Korea was forced to accept IMF supervision; the exchange rate plummeted to 2000 won to the dollar; foreign exchange reserves shrank to USD 4.7 billion; and the per capita income level plunged from USD 11,176 in 1997 to USD 7,355 in 1998. But with IMF assistance and internal financial reform, the economy rebounded, achieving a growth rate of 10% in 1999 and 9% the following year. The growth rate since then has averaged over 4%.

After the crisis, the government began to understand the importance of selectively attracting foreign capital and altered its foreign investment policy accordingly: in November of 1998 the Foreign Investment Promotion Act was unveiled, which reduced restrictions on foreign trade, allowing foreign mergers and acquisitions and encouraging direct investment in the high tech and biotech industries.

In addition to receiving the “national treatment,” in certain industries and investment zones foreign companies could now enjoy tax reductions. Local government at various levels was permitted to offer perquisites such as land use fee reduction and training subsidies. These policies helped balance regional development and realize a rational arrangement of economic development.

At the beginning of the new millennium, South Korean set its sights on IT leadership and flexed its muscles in the finance, biotech, airline and entertainment industries. Conglomerates such as Samsung and LG followed the government’s lead and vigorously developed related industries. Korean per capita income was below Taiwan in 1997 (USD 11,000 to USD 12,700) and 1998 (USD 7,300 to USD 11,500), but now the tables have turned: in 2006 Taiwan’s per capita income was USD 14,300 compared with Korea’s USD 16,000 plus.

Last year I visited Singapore. The trip made a deep impression on me. Singapore’s Economic Development Board has a conception of economic development described by the acronym CORE:

·Connectivity: Singapore as a hub for talent, information and goods.

·Openness: Singapore as the diverse home of different
enterprises and races.

·Reliability: Singaporeans inspired with a sense of their government as trustworthy, efficient and reliable.

·Enterprise: Singapore not only as a transport hub but as a home to the entrepreneurial spirit in individuals and enterprises.

Singapore is becoming a global business entrepot. Singapore has over 7,000 multinationals, and over 4,000 companies from Europe, the United States, Japan, Australia, Mainland China, India and New Zealand have established operational headquarters in Singapore. 664 companies are now traded on the stock exchange, roughly a third of which are foreign. Foreign direct investment is now over SGD 270 billion (USD 180 billion). These foreign companies are all highly innovative, and in Singapore they can cooperate and coordinate to achieve the greatest efficiency and profitability.

I also want to mention the Lee Kuan Yew School of Public Policy, an autonomous graduate school of the National University of Singapore. Founded in 2004, the student body has grown from 50 to 220, the fastest rate of growth for this kind of academy. The school’s mission is to provide educational and training opportunities to the next generation of Asian policy makers and to promote “good governance” practices. Its student body represents twenty-seven countries; 30% of students are foreign. Singapore takes this opportunity to let students of different nations and background overcome cultural and geographical divisions. Having undergone baptism Singapore-style, they increase Singapore’s influence when they return home.

We should also consider the example of Ireland. Rural Ireland is now a foreign-trade powerhouse. From 1995 to 2000, Ireland’s annual growth rate was 10%; from 2001 the rate has remained at 5%, high above the OECD or EU average. Per capita income has also increased rapidly, from USD 17,500 in 1995 (3,000 more than Taiwan) to USD 30,000 in 2003 and USD 43,000 in 2006, putting Ireland second in Europe (behind only Luxembourg) and fourth in the world. Twenty years ago, The Economist ran a cover story entitled “Ireland the Poorest among the Rich.” Two years ago the cover told a different story, the story of “Shining Ireland.”

Foreign investment in Ireland since 1980 is the main reason for the growth. American companies like Intel, Dell, Microsoft, IBM and Abbot Laboratories etc.—the ten biggest in the IT and pharmaceutical industries—are major investors. There are now at least six hundred long-term American corporate investors in Ireland, mainly in the high tech electronics, computer, medical supplies and financial industries. They have created over a hundred thousand local job opportunities.

The reason Ireland is so attractive to the United States is as a gateway to the European market. Ireland is a member of the EU, so companies based in Ireland can enjoy far lower tariff rates. English is the official language of Ireland, which makes it convenient for American firms. The Irish government provides numerous trade and investment incentives to American firms, including direct financing subsidies and tax reductions.

In the space of a decade, Ireland went from a war-torn European frontier, a center only of terrorist activities, to an extremely rich investment and outsourcing center. What’s the secret? Last year in February, the answer I got when I visited was: openness, pragmatism, flexibility.

Now it’s time for a counterexample: Caribbean Cuba. At the end of the 1980s, the Cuban economy was hit hard by the major political developments in Eastern Europe and the collapse of the Soviet Union. In five years the GDP shrank by 35%. Though Cuba introduced economic reforms in the mid-1990s, economic development has been hampered in the past dozen years by an inability to trade directly with the United States. The Cuban economy still has not returned to 1989 levels. Per capita income stands at USD 3,900.

Besides trade with the US, another problem is that Cuba has not actively sought to improve relations with EU nations, which has had an impact on trade and investment. Recent commercial trade fairs in Havana have been virtually unattended by EU companies. Inability to increase foreign trade has exacerbated Cuba’s difficulties. Vicious cycles have developed: there are power shortages and material supply problems. Reforms at public companies proceed at a snail’s pace. Overall, Cuba is one of the poorest nations in the Americas. It is a country of poverty and hardship.

Looking at ourselves

Taiwan has reached a crucial point in time and space. Being open and pragmatic is the only way forward.

What does openness mean? It means to think big, to expand our horizons, to reduce controls, to loosen economic restrictions and to get on track with the rest of the world in all respects. Concretely, the government has to gather in foreign and local talent and capital in order to help Taiwanese enterprises expand out, thereby spurring economic development and increasing competitiveness.

How to open up Taiwan? Taiwan is the geographical center of East Asia. Its geopolitical position is critical. Taiwan is a natural gateway to China and springboard to East Asia. Some Taiwanese people have an overly pessimistic or tragic view of our past and complain about our “nasty neighbor.” I believe that the key to resolving this problem is statesmanship, the ability of our leaders to turn a potentially nasty neighbor into a friendly one. Bickering with an assumedly nasty neighbor is hardly a way to solve problems. It is easy to fight. Solving problems, turning a tug of war into a relay race, takes true skill.

Looking around us, the US is the world’s only superpower; Japan, with the largest economy in Asia, is also the strongest Asian power; Mainland China is the factory of the world and has vast markets and resources along with the fourth largest economy. With such a convergent location, Taiwan would be well-served by a plan that would make this country a “biregional airline hub” and “dual operations center.” Taiwan is perfectly poised as a flight hub for northeastern as well as southeastern Asia; and is the ideal location for general headquarters of Taiwanese companies and for Asia-Pacific operational headquarters of foreign companies. This plan promotes founding a common market comprised of Taiwan and China and turning Taiwan into a gateway to China. It signifies advancing Taiwan’s development in a spirit of openness.

Obviously, the “openness” I am advocating is not openness at all costs. We cannot accept the terms China presently offers. We cannot allow ourselves to submit to Chinese control. Openness is not an end but a means. Its guiding principles are “Taiwan first” and “for the people,” and its final goals are: security, dignity and prosperity. Only directed at these three goals is our openness meaningful.

What is “pragmatism”? It is to refrain from any vacuous talk or vain action. It is not to wage wars of words. In all cases the people need to come first. Policy must be result-oriented, with the welfare of the people in mind.

So how can we be pragmatic? For one we must maintain the status quo of neither unification nor separation. I wish to propose the following tripartite modes of thinking:

1. The people of Taiwan have three options for the future: unification, independence, or the continued status quo.
2. The Kuomintang (KMT or Nationalist Party) opposes the option of independence, but holds that the conditions for unification do not yet exist: therefore, I advocate maintaining and consolidating the present situation of the Republic of China.
3. There is no reason for the people to have to make a choice right away. All we should do now is to strengthen the ability of the twenty-three million people, so as to help them make the best choice in the future.

I fear that we are rapidly losing our power to choose. In 1997, during the financial crisis, we stood our ground. Per capita income in South Korea plummeted USD 3,800 while in Taiwan only slipped USD 1,000, from USD 12,707 to USD 11,522. However, we now face economic difficulties that dwarf those of 1997.

Before the presidential election in 2000, when the DPP took over from the KMT, Taiwan’s per capita income was USD 14,519, almost USD 4,000 more than South Korea. In the seven years of DPP governance, the per capita income became below USD 14,000 for three years and was surpassed by South Korea’s in 2005. Moreover, the average regular wage only increased by 0.8%, which is actually a decrease given an inflation rate of 2 to 3%.

On April 16, the Council of Labor Affairs, the Executive Yuan announced that starting salaries for university graduates were only NTD 26,000, the same as 1997, which is of course even less than a decade ago given inflation. Worsening economic conditions have contributed to a rise in the suicide rate of 8.7%. Every two hours, someone in Taiwan kills himself or herself. How much longer can the people stand this kind of living condition?

At the same time as South Korean and Singaporean per capita incomes rise rapidly, Taiwan’s economy has stalled. Worse is that foreign firms and residents are leaving Taiwan in great numbers for the Chinese Mainland, Hong Kong, Shenzhen or even India or Australia. American residents have left in droves: the number of residents has fallen from 90,000 in 2000 to 70,000 today.

I believe that being pragmatic is the only way to get stronger. We have to strive for the economy, for public order and for education. We can no longer shout vain slogans while our society is racing in neutral.

Taiwan is located at the center of the economic heartland of East Asia. Its position is superior for air and sea transport, which is conducive to economic development. However, in the past seven years we have felt the strictures of a new isolationism reminiscent of the “national lockup” in some periods of Chinese history. Taiwan’s competitive advantage is evaporating. This is no way to love Taiwan, and I am against it. We believe that only guided by the principles of openness and pragmatism can we strengthen Taiwan, connect with Asia-Pacific and deploy globally. This is the only way for Taiwan to regain competitiveness back and for us to have hope for the future.

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