Sunday, September 18, 2005

Industrial Zones in Taiwan

The Taipei Times carried a commentary yesterday on a key topic: the nation's industrial zones. As manufacturing offshores, the government has failed to adjust to changing economic realities:

The development of industrial zones is a typical example of how the the national resources have been misused. Under the Ministry of Economic Affairs alone, around 800 hectares of industrial zones across the nation remain vacant, which converts into an investment of NT$30 to NT$40 billion, which has not seen any return. Besides, the occupancy rate of industrial zones under the National Science Council is just 50 percent.

The zones -- there were over 100 last time I checked -- have historically been important for firms needing cheap factory space, in a land where absurd land use laws inflate the value of land and make it difficult to obtain land for factories. The author of the piece argues:

The root of the problem lies with the provisions of government investment incentive programs and the Statute for Upgrading Industries (促進產業升級條例), which were over-optimistic about the economic cycles of the nation. The government has to consider if it is necessary to continue supporting such expansion without restraint.

Here we see the problem that haunts Taiwan -- expansion without restraint -- subsidies without caps. In this particular case the result has been a mess, with too many districts and not enough investment in upgrading and maintaining them. Nor has there been good work in integrating them into the local resource networks, as the water shortages in Hsinchu Science Park, the nation's crown jewel, attest. How the government handles these will be key in retaining an industrial base in the face of Chinese expansion. [WARNING: FAVORITE THEME AHEAD] Unfortunately, our author can't rest without veering into the lack of concreteness that defines "policy analysis" in Taiwan's newspapers:

Local governments should take careful account and plan for the future, rather than rushing ahead and then looking for support from the central government further down the track. The government should first seek to draw up an effective and comprehensive plan regarding public works projects, such as industrial zones, airports and harbors. It shouldn't give local governments a free hand to use such projects to pay/settle political debts, in total disregard for the needs of the market, for such political interference will ultimately harm the nation's economic development.

No shit, Sherlock. Of course the government should have an effective and comprehensive plan (do you know anyone who thinks the plan should be ineffective and limited?). No, the trick in making recommendations, bigfella, is to say something concrete -- what provisions should it contain? Interest forgiveness? Lower rents? Prioritizing of resources with industrial districts first? Longer tax holidays? More options and lower prices for turnkey projects? I wish the editors at the Taipei Times would force these guys to say something concrete.

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