Hunter Parrish, Elizabeth McGill, Taylor Childres, DaKelin Wells, Joshua Clark, and Horace Scott
Two countries which people never think to compare is the United States and Taiwan. This could be because individuals look more at the physical differences between the two countries’ people rather than the countries as a whole. From an economic standpoint, the countries may have their differences, but they might not be as different as one might think.
Taiwan is ranked the fifth largest economy in Asia, and in order to promote a developing economy, Taiwan has extended a welcoming hand to foreign investors. One restriction for foreign investors is “to invest in an existing company located in these areas, a foreign national is to obtain permission not from the Investment Commission but from the Export Processing Zone Administration”. Although Taiwan has its dealings with China, Taiwan has grown to hold its own. As a matter of fact depending on how you look at it, before joining the World Trade Organization, both the United States and Taiwan had its share of monopolies. Some could argue that US steel was a major monopoly, while Taiwan Beer that was publicly brewed by the Taiwan Tobacco and Liquor Corporation ended up succeeding the government’s monopoly in 2002. In Taiwan, consumption of beer was over 80% among the locals and only exported a small amount overseas. Tobacco and Liquor may not be the largest items exported from Taiwan but they are still a major player in global economies. Specializing in electronics from flat screens and optical drivers to computer parts, Taiwan’s manufacturing numbers proves a point. Some say that their contributions helped spur the smartphones revolution.
The United States is better in the GDP ranking than Taiwan. In Taiwan the GDP per capita rose to $22,635 in U.S. Dollars, this information is from 2014, compared to the United States GDP per capita of $55,200 in 2014. That is a $32,565 difference. The private sector in Taiwan is currently dropping from the rates of last year. The loans to the private sector are at 9,515,365.00 in TWD. Biotechnology could be the next engine of growth for Taiwan, because the government is starting to invest more into the biotech infrastructure. The Taiwan inflation rate has increased to .81 percent in January 2016 from .14 percent. The Taiwan inflation rate is averaged at 4.23 percent from the year of 1960 till 2016.
Taiwan revamped their privatization in the early 1990’s. Over 27 privatizations have been carried out across a wide range of industrial sectors. This yielded US$11.36 billion proceeds for government and injected competition into various market sectors. In the United States, the public utilities are often natural monopolies because of the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain. As a result, they are often government monopolies; or if privately owned, the sectors are specially regulated by a public utilities commission. Today, foreign investment is still partly regulated in some sectors of Taiwan and is considered as the national strategic priority. According to the last statistical data from the Investment Commission, Ministry of Economic Affairs, and the Central Bank of Taiwan, during the period 2003-2004, direct investment in the service sector including banks was the greatest, accounting for 44% of all direct investment. Banking is regulated by both the federal and state governments in United States. In December 2011, the five largest banks’ assets were equal to 56 percent of the U.S. economy, compared with 43 percent five years earlier. There are no currency restrictions on foreign institutional investors in Taiwan’s equity markets, and the New Taiwan dollar remains fully convertible for FINIs, the ROC central bank. The U.S dollar is fully convertible and also has no limitations upon it.
Taiwan is a great place for Federal Direct Investment (FDI). According to the sandertrade website in 2014, approved FDI increased to USD 5.77 billion, a 17% increase compared to 2013. From January to October 2015, Taiwan attracted FDI of nearly USD 3.7 billion. This is due to a growing capital market and unique location being an entryway to China. With a high FDI one would assume corruption would be an issue with all this capital going through such a small country. However, Taiwan has very strict laws against corruption in economic world and is highly regulated. Any bribery is illegal and is frowned upon in Taiwan. As far as banking goes, they are similar to the US in many ways. The two types of banks in Taiwan are the independent and government owned banks. They are very up to date with virtually all banks having online banking. This is how most transactions occur in Taiwan. Exchanging and wiring money is very easy through the banks here in Taiwan. This is due to its neighboring country China because many people are constantly coming from and to Taiwan from other places so there banking has to be up to date.
Although Taiwan might be a great place for Federal Direct Investment, Taiwan’s budget over the past eight years has been a deficit, but it has not been consistent. Budget is measured based off percent of GDP. A budget deficit occurs when the government spends more than they take in. From 2006 to 2008, Taiwan’s percent of GDP was, on average, -.05. Meaning their deficit was still pretty low. However, in 2009, their deficit grew to -4.3 because of the great recession that had an effect on all countries. Since the recession, their deficit continues to decrease overtime. They are still in a deficit. In 2014, their percent of GDP was at -2.1, which had grown since 2013, where it was at -1.4. Although Taiwan has had a continuous deficit over the years, the United States has suffered from a much larger deficit. From 2006 to 2007, the United States percent of GDP was -2.4 which is much larger than Taiwan’s in 2006-2007. When the recession hit, the United States deficit grew to -12.1 percent of GDP. This is because the United States economy is much larger than Taiwan’s, so we had more to lose in the recession. The United States deficit has also continued to decrease, but its deficit was still much larger than Taiwan’s in 2014.
Just like in the United States, Taiwan has its own social security pensions. However, unlike the United States where we only have the Social Security Act of 1935, according to the United States Social Security Administration, the Taiwanese people are covered under three categories. The first category, labor insurance, was put into act in 1960. Next, labor pensions were put into act in 2005. Finally, national pensions were implemented in 2008 (SSA). The labor insurance program covers employees between the ages of 15 and 60. These individuals must be employed in firms in industry and commerce, mines, and plantations with five or more workers. In 2005, the labor pensions program took the place of the labor insurance program. The labor pensions program also included all employees aged 15-60. The national pensions program is a voluntary program that includes citizens ages 25-60. However, those who are covered or have been covered by other related social insurance programs, including those covered under the labor insurance program, civil servants, military personnel, farmers, and private school staff are not included in the national pension program. Within the context of a restaurant business, there is an added benefit that employees in Taiwan receive that employees in the United States do not. The benefit is that the Taiwanese Social Security Programs provide sickness and maternity benefits while the United States Social Security Program does not. While this may not directly affect the business itself, it is important to note due to the difference in the treatment of restaurant workers in Taiwan and restaurant workers in the United States.
Taiwan is a great place for an American restaurant to expand to for many reasons. First, despite Taiwan being very inviting towards Federal Investment, they are completely against corruption. Next, Taiwan’s budget might be holding a deficit, but nothing like the United States federal deficit. Finally, the Taiwanese people receive maternity benefits as well as sickness benefits. This will in turn lead to happier employees.
Featured Image Credit: Waving U.S. and Taiwan flag via Shutterstock.com