Written by Chuan-Kai Lee and Mei-Chih Hu.
Image credit : re:publica 19 – Day 3 by re:publica/Flickr, license CC BY-SA 2.0
As we know, the Coronavirus pandemic poses a dire threat to various states around the globe. Thus, we perceive the competence (or lack thereof) of different governments, the strengthening of the state, the rise of nationalism, and in Taiwan, the return of technocrats.
These technocrats differed from their predecessors in the developmental-state era, as they already had their missions well in advance rather than playing catch-up. They were to contain the virus — keep a record of zero local infection as long as possible: zero, since mid-April— stabilize society, help recover the economy and find a geopolitical niche in the deepening US-China divide. So, the difference from their elite predecessors lay in being more diversified, grassroots and sometimes, even more controversial.
Chen Shih-Chung (nicknamed clock), the minister of Health and Welfare — and also the epidemic command chief — is the first dentist serving this post. His professional, informative and occasionally humorous communication style became famous as a saying of his went viral: “If you go clockwise, you will win, if you go anticlockwise, you will lose.” Shen Jong-Chin, the minister of Economic Affairs, renowned for his life-long friendship with business leaders, exemplifies a career path from the bottom to the top of the bureaucracy. Leveraging his business connections, he called upon a ‘national team’ to set up 60 face mask production lines in a month: 26 machine tool firms were involved in assembling the production lines, and 15 firms in manufacturing, with a daily production capacity of 72 million face masks. Audrey Tang, the first transgender official in the top executive cabinet, provides an unconventional role model for millennials, digital version. Based on the leadership in netizens, Audrey kicked off several cyber initiatives in the style of a hackathon to combat disinformation and help stabilize society. This includes releasing data on the supply of face masks in pharmacies across Taiwan and making that information accessible to the public via an online platform. They even launched an app for direct ordering, which she called the ‘face mask 3.0.’
Common to all export-oriented countries, the economy is still at the epicentre of the pandemic outbreak, particularly when the lockdown of major production centres disrupted the global supply chains. Taiwan’s foreign trade degree of dependence has long been the highest among Asian countries — 100-120% during the last decade — one-third of which was on China & Hong Kong, particularly relating to informatics and electrical products. According to the latest IMF’s forecast, Taiwan’s real GDP growth will be downplayed to -4% from 2% in its previous projection made by last year. What can the technocrats do about this situation?
Well, it will be Keynesian in a post-developmental state style, which means more emphases on autonomy, independence and social well-being. Right before the outbreak, because of US-China trade friction and growing uncertainty regarding the future of globalization, Taiwanese firms had already started to relocate their businesses from China back to Taiwan or other parts of Asia. The government statistics showed a year-on-year two-digit percentage drop in investment in China for four successive years, as well as drops in exports to China and Hong Kong. The number of Chinese visitors to Taiwan has also dropped after China closed its doors for its people to travel to Taiwan independently. So partly because of the relocation of supply chains — and partly because of the efficient control of the outbreak by the technocrats — the pandemic’s impact on Taiwan seems to be significantly smaller than in some other countries in Asia. To mitigate the impact, a budget of NT 536.5 billion has been allocated for public construction projects in 2020, which would “greatly help stabilize the current economic development.” Additionally, a two-phase relief package of NT 1.05 trillion will be given to businesses and individuals hit worst by the pandemic, including export-oriented SMEs, tourism-related businesses and the disadvantageous: mostly the unemployed due to the outbreak.
How will these initiatives help Taiwan find a geopolitical niche in the deepening US-China divide? It will depend on scenarios relating to “how Taiwan can help”: not only in their free supply of face masks but also for its industrialized experience. With the rising need for face masks, respirators, ventilators and medicines, the pandemic has reminded many countries of the value of a domestic manufacturing base. Nations are reevaluating their reliance on global value chains based in Asian countries such as China, and many manufacturers have suspended production of their regular products to focus on pandemic-related products. In Taiwan, for example, many small textile companies have shifted their operations to produce face masks. Developing countries, which are most vulnerable to the pandemic, have a strong incentive to build manufacturing capacity to meet the demand for the various health products needed to combat the virus. Considering the present challenges, multilateral institutions like the World Bank and the Asian Development Bank should supply funds to support industrialized projects as well as projects to build the infrastructure required for industrial development. The pandemic is causing extensive unemployment, but investments in industrialization could generate numerous jobs. Being composed of 95% small and medium-sized enterprises in industrial structure, Taiwan’s successful post-developmental state experience can help developing nations that are attempting to establish industrialization based on their indigenous small and medium-sized enterprises and increase their social well-being. This would be an approach different from China’s ‘one belt, one road’ policy. Unfortunately, the current scenario is that the industrial projects of developing nations are dominated by their governments and influenced by China. The latter being a country which blocks out Taiwan as an independent entity. Whether Taiwan can help depends on the geopolitical wrestling in the US-China divide, along with international recognition by multilateral institutions such as the World Health Organization and World Bank. All Taiwan ( and also the new technocrats) can do is to prepare for the most, and hope for the best.
In the postwar era, the combination of technocratic expertise and political authoritarianism has led to Taiwan’s economic miracle. In the pandemic, will the rise of technocrats under a far more democratic regime lead to a different kind of ‘miracle’: a miracle that can accommodate economic requirements and social needs, and balance political risks between US and China? Only time will tell, so let us wait and see.
Chuan-Kai Lee is an associate professor of technology management and the director of the MBA program at National Tsing Hua University, Taiwan. Her research focused on emerging industries and markets in China and Taiwan to explore how collective actions facilitated their emergence, development and associated institutional change.
Mei-Chih Hu is the director and professor at the Institute of Technology Management, National Tsing Hua University, Taiwan. Her research is in the areas of innovation systems, intellectual property rights, emerging industries in Asia and latecomer strategy.
This article is part of a special issue on the impact of Covid-19 on Taiwan’s economy.
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