Taiwan's economic freedom

According to the Heritage Foundation, the economic freedom of Taiwan drops from #26 last year to #37 this year.

Meanwhile, HK stayed at #1, 8 years after reverted to PRC rule. China still ranked low, but its score has improved steadily (note high value in score means unfree).

Taiwan's score has been in the decline since Chen Shui Bian started to rule the island (score=2.03 in 2000). The only year of improvement was right before the 2004 election (improved slightly from 2.48 to 2.34). It seems safe to expect the decline until 2008 election.

In the 10 categories of scoring, Taiwan scored worse at

• Fiscal burden
• Gov't intervention
• Regulation

I would not blame CSB too much on fiscal burden, except that he still plans on aggressive spending on arms purchase (but he did not succeed).

To appreciate the government intervention and regulation via means of "active management" in Taiwan, there are two examples here

• "After CSB announced his 'active management', Minister of Economics H0 Mei-yueh said, Powerchip Semiconductor Corp (PSC) needs to first focus on domestic investment, and hold on in investment in the mainland". Ho went on to question whether PSC's investment would be profitable and requires "more detailed feasibility study"
  
• "Taiwan's Investment Commission, which oversees overseas investments by Taiwanese businessmen, had fined SMIC some US$500,000 by the end of November, and demanded the company withdraw its investments in China immediately. In response to the government's move, Chang expressed his determination to remain in China. He submitted an application to give up his Taiwanese citizenship over the summer." - Asia Times
  

Sounds like a very strategic advice from Ho. The only problem is, Ho is a government bureacrat. She is not the strategic VP of PSC and knows nothing about the business environment where PSC operates. The minister of economic is responsible for hundres of industries, other than semiconductor. In a free market the business should determine whether an investment will be profitable, because it is putting its own money on the table.

Imagine John Snow telling Microsoft what its strategy should be. This is why Taiwan's economy is not free, and how its economic has suffered, from the irrational management of CSB.

Categories:

• taiwan
• business