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• Characteristics of the Taiwan market
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UNDER CONSTRUCTION

Source: Directorate-General of Budget, Accounting and Statistics, R.O.C. (DGBAS)
 

Characteristics of the Taiwan market

Taiwan's economy slowed down dramatically last year, because of the slow American economy, lower export orders in general and the migration of Taiwan's industrial investment to mainland China. Taiwan's economic growth was 5.4% in 1999 and 5.86% in 2000. The +1.06% GNP growth figure announced in Q1 of 2001 and the -2.35% negative GNP growth recorded in Q2, followed by an even worse negative GNP growth of -4.2% in Q3, have stunned the island. They are the worst that Taiwan has ever seen. The Ministry of Economic Affairs estimates that the counter performance has dragged Taiwan's whole-year growth rate to -1.9% for 2001. Projections for 2002 are more optimistic. The Ministry of Economic Affairs predicts that the economy will grow by +2.23% in 2002.
 

Taiwan Economy

	2000	2001	2002*
Economic Growth	5.86%	- 1.9%	2.23%
Gross National Product	USD 314 billion	USD 288 billion	USD 290 billion
GNP Per Capita	USD 14,188	USD 12,941	USD 11,895
Household Consumption Growth	6.03%	1.42%	2.98%
Private Investment Growth	13.59%	- 24.28%	4.97%
Exports	USD 148 billion	USD 123 billion	USD 127 billion
Export Growth	21.98%	- 16.87%	3.26%
Unemployment Rate	2.99%	4.57%	--

Source: DGBAS   ( * Projected )

In spite of the pessimistic projections for economic growth, the drop of the stock market and the current political uncertainty, there is still hope for growth in broadband telecommunications, information technologies, computer software, energy and transportation. Investment in semiconductors slowed down to a near freeze in 2001, but industry leaders estimate that demand will pick up again in the middle of 2002. Taiwan Semiconductor Manufacturing Co. (TSMC) has announced that it plans to invest USD 20 billion in six new 12" wafer fabs in Taiwan.

Taiwan has many elements in place for the successful development of high-tech and bio-tech industries. These include strong intellectual property protection, good infrastructure and networks, and ample funding. Following its admission into the WTO, mainland China is the market to watch, as it has the potential to nurture Asia's long-term winners. China has a huge science base, a massive domestic market and competitive labor and development costs.

In the recent years traditional industries have been moving their mass production from Taiwan to mainland China where operating costs are significantly lower. High technologies are following. According to the Ministry of Economic Affairs, investment by Taiwan enterprises in mainland China in the first half of 2001 was 23% higher than during the first semester of 2000. Recent investment has been in the electronic products, electrical products, precision machinery and plastic products. According to the Taipei Computer Association, more than 90% of its members have plans to invest in mainland China and 30% already have started some form of investment there. For example, 113 Taiwan companies such as Acer, Asustek Computer and Logic Concept already have invested a total of USD 1.43 billion in Suzhou, north of Shanghai. We also note that Taiwan's investment in South East Asia doubled in the first quarter of 2000, compared to 1999. It amounted to USD 407.51 million. Investment was particularly strong in Vietnam, Malaysia and Singapore. For the time being R&D centers tend to remain on Taiwan. However, they may start to follow the example of the largest computer maker in Taiwan, Acer who have started to transfer their R&D resources from Taiwan to mainland China.

Unemployment is now rising rapidly on the island. Taiwan's unemployment rate remained well below 3% between 1986 and 1996. Between 1996 and 2000 it remained mostly between 2.5% and 3%. In the second half of 2000 it rose above 3% and exceeded 4% in the summer of 2001. It stood at 5.2% at the end of 2001, as local industries continue to transfer their mass production to mainland China. The rise of unemployment affects in priority unskilled workers and workers above 50 years of age. This situation could further deteriorate after Taiwan's entry to WTO at the beginning of 2002. There is still a shortage of upper and middle management resources in most industries on the island, and the migration of production to mainland China continues to drain Taiwan management resources to the mainland. There are an estimated 800,000 Taiwanese senior executives and middle managers working there. An estimated 300,000 to 400,000 Taiwanese are residing in Shanghai alone.

According to the "Global Competitiveness Report 2001" published by the World Economic Forum (WEF) and Harvard University, Taiwan's growth competitiveness index ranked seventh among the 75 countries covered. This was an advance of three places over the previous year, and placed Taiwan second only to Singapore among the "Four Little Tigers of Asia".
The report also positioned Taiwan's technology index fourth in the world. The island did even better in technological innovation, ranking third. To visit the WEF website, click here.

The April 2001 report of the Switzerland risk-assessment company Business Environment Risk Intelligence S.A. (BERI) ranked Taiwan's investment risk as fifth lowest among the 50 countries surveyed. Only Switzerland, Singapore, the Netherlands and Japan got a better score. Taiwan is followed by Germany, Norway, the USA, Belgium and France. Mainland China occupies the 22nd place.

Statistics released by Nua Internet Surveys of the United States put Taiwan's home Internet penetration in March 2000 at 22%, third highest in Asia after Singapore and Australia but only slightly ahead of South Korea, which had a penetration ratio of 21%. Among the 31 countries worldwide that were covered in the data, Taiwan ranked 14th in home Internet penetration.

Taiwan's Internet penetration reached 32% in June 2001 (7.21 million users). Local broadband users grew from 25,000 in 2000 to one million by the end of 2001. Mobile phone penetration is close to 90%, one of the highest in the world (20 million subscribers out of 22.3 million inhabitants).

The labor shortage started with the economic boom of Taiwan in the mid eighties. It triggered a rapid increase in base salaries across all industries during the years 1987-1995, which averaged between 8% and 10%. The market has stabilized during the last three years. Current salary increases are between 0% and 5% on the average. It is important to point out that these are average figures. In the first part of the nineties, it was not uncommon for outstanding leaders to get salary increases of 15% to 20% per year. In 2000, excellent managers in successful organizations could still expect an annual increase of 5% to 10% in their base salary. In 2002, salaries are expected to be mostly frozen. The best performers will be satisfied with increases in the range of 1% to 5%. Many local high-tech companies will reduce the base salary of their senior executives by 10% to 20% to improve their competitiveness. Stock options/grants awarded by local high-tech companies in Taiwan will be very low for 2001 and not higher than half of their level for 2000.

The shortage of executives is felt across all functions and all industries. It is particularly severe for regional business developers, marketing managers, IT managers, R&D managers and QA managers. Industries that suffer the most from the shortage include all high-tech and IT industries. Foreign consumer product companies suffer from a lack of management talents in marketing and supply chain management. Financial institutions also suffer from a lack of talents in marketing and credit control. Enterprises across the board suffer from a lack of CIOs and CTOs.

Since the early nineties, there has been a steady demand for Taiwanese managers willing to be assigned to mainland China, especially in sales and manufacturing functions. The economic slow down in Taiwan and the political uncertainty are encouraging Taiwanese management talents to seize the opportunities created by the growth and the opening of China's economy, particularly in Shanghai where 300,000 to 400,000 Taiwanese have settled.
 

Unemployment and economy in Taiwan

Year	Unemployment	Economic growth
1986	2.66%	n.a.
1987	1.97%	12.7%
1988	1.69%	7.8%
1989	1.57%	8.2%
1990	1.67%	5.4%
1991	1.51%	7.6%
1992	1.51%	7.5%
1993	1.45%	7.0%
1994	1.56%	7.1%
1995	1.79%	6.4%
1996	2.6%	6.1%
1997	2.7%	6.7%
1998	2.7%	4.6%
1999	2.9%	5.4%
2000	3.0%	5.9%
2001	4.6%	- 1.9%
Jan 01	3.4%
Feb 01	3.7%	Q1:  1.06%
Mar 01	3.9%
Apr 01	3.9%
May 01	4.2%	Q2:  - 2.35%
Jun 01	4.5%
Jul 01	4.9%
Aug 01	5.2%	Q3: - 4.21%
Sep 01	5.3%
Oct 01	5.3%
Nov 01	5.3%	Q4: -1.9%
Dec 01	5.2%
Jan 02	5.1%
Feb 02	5.1%	Q1: + 0.9%
Mar 02	5.2%
Apr 02	5.0%
May 02	5.0%

Source: DGBAS

Taiwan's unemployment rate among Asian economies.
 

Unemployment rates in Asia

Year	Taiwan	Japan	Korea	Singapore
1995	1.8%	3.1%	2.0%	1.1%
1996	2.6%	3.4%	2.0%	1.5%
1997	2.7%	3.4%	2.6%	2.6%
1998	2.7%	4.1%	6.8%	4.4%
1999	2.9%	-	6.3%	5.9%
2000	3.0%	4.7%	4.1%	4.2%
2001	4.6%	-	-	-

Source: DGBAS and United Nations

Recruitment and the law

Recruitment services are regulated in the Republic of China on Taiwan by the Employment Services Act promulgated in May 1992. All recruitment companies, including executive search consulting firms, are required to obtain a recruitment license which is delivered by the Labor Bureau of the city where they have registered their business address. The recruitment license must be renewed every two years.

An English translation of the Employment Services Act is provided on this site for your reference.