Financial and Technology News

Academic warns Taiwan over middle-income trap

 2017/10/11
Taiwan could fall into the middle-income trap in the next decade if it fails to deal with “three evil hands” that are stalling the nation’s economy, said Wang Ping, an economics professor at Washington University in St Louis.
Wang on Thursday said that Taiwan’s economic development is being held back by rigid systems in three areas — legal, environmental assessments and Taiwan-China relations — that could leave the nation stuck in the middle-income trap, while at least 15 nations catch up with it in the next 10 years.
The middle-income trap refers to a period of economic stagnation after a nation’s per capita income reaches a certain level, because the nation is held back by rising labor costs, weak financial and legal systems, and the lack of high-end talent, among other factors.
As a result, the nation cannot achieve technological innovation as advanced as in developed economies, while its manufacturing costs cannot fall as low as those in developing economies, Wang said at the Academia Sinica when presenting the institute’s “Taiwan Industrial Reform and Competition Strategy Proposal.”
In terms of legal hindrances, he said that excessively minute and complicated laws have kept businesses from seeking innovation and high-end development.
On environmental barriers, Wang said that the nation’s environmental impact assessment system is the only one in the world that gives environmental protection authorities the right to veto development projects.
As for Taiwan-China relations, he said that Taiwan tends to get excessively nervous about cross-strait relations and is overly conservative and inflexible on cross-strait matters, resulting in stalled trade and economic relations between the two sides.
To address these issues, the proposal said that the “cultivation of talent, overhaul of the environmental impact assessment, tax system reforms and improvement in administration efficiency are all indispensable and must complement one another.”
It suggested that the government play the role of a “courtier” to guide enterprises, instead of acting as a “king” that directs the development of certain industries.
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