by Lee-in Chen Chiu
Since the onset of the Asian financial crisis that originated in Thailand in July 1997, most countries in East Asia have been badly hit. Taiwan (Republic of China), however, has managed to weather the contagion of the crisis relatively well. Nonetheless, amid praise from media sources and from leading analysts around the world, criticism of inept government management and cronyism between entrepreneurs and local politicians has been strident. Taiwan's government may have been more successful than the governments of its peers in the region, but voices calling for improvements within society have persisted. The government has accepted suggestions and has made improvements accordingly. So who is making all the noise?
Academics.
As early as 1959, six members of Academia Sinica, most of whom were internationally prominent Chinese economists, proposed 19 ideas on economic and financial reform to Chiang Kai-Shek(1) government. The proposals urged a radical and total revision of tax regulations as well as an overhaul of the role of economic institutions to bring Taiwan into the modern world, to transform it from an agriculture-based economy into an industry-based economy. Since then, much economic legislation, such as the "Statute for Promoting Investment," the "Tax-exempt Ware-house/Factory System" (enacted in 1960), and the "Statute for the Establishment and Administration of Export Processing Zones" (1965) has been drafted, discussed, and promulgated under the formal or informal participation of domestic and overseas Chinese scholars of economics, finance, and planning.
In the early stages of economic development in Taiwan, the government and public sector dominated every field of economic activity. Although small and medium-sized enterprises were already on the rise and were busy establishing for themselves a place of importance in the economic structure, governmental consultation was performed solely by scholars from Academia Sinica and by prominent university professors. This practice continued until the establishment of the first semi-private, government-administered agency, the China External Trade Development Council (CETRA), in 1970. Soon afterward, in 1974, the first nonprofit, nongovernmental research institution in Taiwan--the Industrial Technology Research Institute (ITRI)--was established. CETRA was to be commissioned to conduct trade promotion, while ITRI was to focus on research and development for important industrial technologies.
By this time the civilian sector had also started to consider setting up an independent think tank to provide consultations on economic policy to the government. Thus the Taiwan Institute of Economic Research (TIER) came into being (in 1976) through the financial support of prominent private entrepreneurs. S. C. Chiang, one of the six Academia Sinica members who originally proposed the aforementioned reforms, was invited to become president of TIER. Because of limited financial resources, TIER at that time focused mainly on industrial issues.
Economic development in Taiwan passed through its first phase of import substitution in the 1950s. Export expansion and the introduction of foreign direct investment characterized the 1960s. The 1970s, during which the second phase of import substitution, continued exports, and the development of heavy and upstream industries took place, were when Taiwan's economy became heavily tied to the global economy. It is imperative that an open small island economy such as Taiwan's pay great attention to international economic cycles; it must also carefully monitor trade and investment patterns that influence the domestic economy. Only then can adequate response strategies be prepared in advance.
It was high time, therefore, to establish an institution that could pay higher salaries to attract overseas economists, and to reverse the brain drain. Drs. S. C. Chiang and Tzong-Shian Yu were invited by the Executive Yuan to undertake the provisional tasks of establishing the Chung-Hua Institution for Economic Research (CIER) in 1980 (formally established on July 1, 1981). Since its founding, CIER has been operating on the interest earnings on its original endowment fund of NT$1 billion, of which 90 percent was donated by the government and 10 percent by the private sector. A "dual track" think tank system on economic policy (i.e., TIER plus CIER) has been in place in Taiwan since then. Other think tanks specializing in political or overall policy research, such as the Institute for National Policy Research (established as a center in 1989, and expanded into an institute in 1997) and the Taiwan Research Institute (1994), have also been established.
The two economic think tanks, TIER and CIER, regularly compete for government-contracted policy research projects. They also differ in areas of specialization: TIER, for example, is stronger in industrial and enterprise research, while CIER excels in macroeconomic analysis, economic forecasting, international economics, and mainland China.
The division of labor between TIER and CIER can be easily gauged from their internal organization. Besides the regular research-supporting departments (the libraries, information service offices, administrative departments, and so on), TIER is divided into six main research units that focus on 1) domestic macroeconomics, transportation economics, financial and economic laws, and the service industry; 2) the manufacturing industry and small and medium-sized enterprises; 3) the machine, electrical engineering, and electronic information industries; 4) the petrochemical industry, agriculture, and the textile industry and related industries; 5) energy economics and environmental economics; and 6) finance, international economics and mainland China economics. Two agencies within TIER are in charge of cross-divisional and cross-governmental policy coordination. They are the Industrial Development Advisory Council (IDAC) under the Ministry of Economic Affairs, and the APEC Study Center, under the Ministry of Foreign Affairs. Another body, the Division of International Affairs under the Presidential Office, performs various informal diplomatic functions in Taiwan. These three organizations act as quasi-government agencies.
CIER organizes itself into five research units: 1) the Mainland China Division, 2) the International Division, 3) the Taiwan Division, 4) the Center for Energy and Environmental Studies, and 5) the Center for Economic Forecasting. There are also two temporary research mission groups: the Southeast Asian Study Center, and the Small and Medium Sized Enterprises Study Center. Each division generally retains expertise in most economics fields, including agriculture, industrial economics, labor economics, macroeconomics, money and banking, finance, and taxation. Researchers in the International Division, however, are all assigned one region (North America, Western Europe or Eastern Europe, Southeast Asia, or Latin America, among others) as study areas.
TIER today has a staff of 190 full-time people, of whom 109 are researchers. Among the researchers, a quarter have Ph.D.s. CIER currently employs 104 full-time, of whom 73 are involved in research. If part time and project-based advisers, researchers, and assistants are included, the total employee count is normally more than 200. Among CIER's researchers, two-thirds have Ph.D.s. A masters degree is the minimum qualification required to be a researcher in these two think tanks. Though conducting government-contracted research projects are the fundamental duty of the research staff in both bodies, researchers at CIER at the level of Associate Research Fellow and above are required to publish one or two academic papers annually.
After almost two decades of serving as think tanks for the government, TIER and CIER have developed different approaches to policy analysis. Most of the time they compete with each other for the limited research budget money available from government contracts. From time to time, however, theysupple ment each other's human resources in providing different consultation functions to the government. The most recent example of this was the urgent need to analyze Taiwan's position regarding the consequences of and response strategies to the Asian financial crisis. CIER was urgently requested to organize a conference on "Exploring the Causes and Patterns of the Asian Financial Crisis" in February 1998. The preparation time was only two weeks.
Later, in October 1998, when Taiwan showed some signs of succumbing to the crisis, the Executive Yuan commissioned CIER to conduct a one-month coordination project entitled "Contemporary Economic Problems in Taiwan--An Exploration and Suggestions." TIER, meanwhile, was requested to analyze two issues: medium and long-term strategies for upgrading the Taiwan economy, and the causes and consequences of the financial crisis among Taiwanese enterprises. The Executive Yuan then called for another expanded emergency "national Conference on Contemporary Economic Issues" on February 12 and 13, 1999 (two days before Chinese New Year's Eve!)
To explore behind-the-scenes problems and to search for a consensus on economically vulnerable people in the wake of the crisis, Academia Sinica organized an urgent conference on "Economic Restructuring Policies Following the Financial Crisis" that was held on February 9. The conference covered issues relating to the international economy, financial and banking systems, real estate and housing financing policies, and the meltdown of the stock market. The genuine desire of domestic economists to help solve the crisis was made clear.
As economic development in Taiwan entered the postindustrialization stage in the 1980s and 1990s, the demand for policy consultation became extremely diversified and specialized, especially on issues related to scientific development and sustainable development. Other types of policy consultation and coordination mechanisms among government, academic and entrepreneurial circles were also designed. For the issue of scientific development, the Executive Yuan established the National Science and Technology Conference in 1978, to be held every four years. Many important scientific development programs were the focus of the conferences (the National Information Infrastructure the "Science and Technology Island" concept were two prominent ones). Regarding sustainable development, another new type of government-academic interactive mechanism entitled the "National Forum on Sustainable Development" was inaugurated in 1996.
To draw a consensus from a wide range of opinions and to discuss the actions necessary for the promotion of overall sustainable development (economic development, environmental protection, energy, technology, natural resources, society, and the humanities), the Council for Economic Planning and Development commissioned the Energy and Resources Laboratories under ITRI to convene a national forum on sustainable development. More than 240 scholars and experts were invited to discuss a diverse range of issues in eight working groups that dealt with the particularities of each area. The initial meeting was called on October 9, 1996, and this forum thus began its official operations.
The National Forum achieves policy consensus in four ways:
Recently, major research funding sources for scholars, such as the National Science Council, have also set up ad hoc research grant programs on research into sustainable development to support the government-academia integration program.
It is conceivable that this close interactive relationship between the government, scholars, and think tanks in Taiwan explains why Taiwan has been able to build such sound economic foundations, without which it would have suffered severely from the Asian financial crisis, as many other countries have. Nobody knows when the crisis will be completely overcome. We can be sure, however, that Taiwan will strive to ensure the continuation of its position as the least-affected country in the region. And for that, we have its unique government-scholar-think tank interactive system to thank.
(1) Chiang Kai-Shek, 1887-1975, late President of the Republic of China (1948-1975).
Mrs. Lee-in Chen Chiu is a Research Fellow at the Chung-Hua Institution for Economic Research, R.O.C.(Taiwan). Her latest book is An Evaluation of Scientific Cooperation and Technology Trade Across the Taiwan Straits (CIER, 1998).
Suggested Readings
Chiu Chen, Lee-in, "Toward an Interregional integration of Habitat, Production and Ecosystem--Developing Taiwan into a Regional Operations Center", Contemporary Development Analysis, 2:1, 1997, pp.1-40.Ma, Nen-Shiang, "Experiences and Prospects of Science and Technology Development in Taiwan", (in Chinese) S&T Advisory Office, Executive Yuan, April 1995.
Mai, Chao-Cheng (ed.), The Asian Currency Crisis: The Taiwan Experience, CIER Publications Department, 1998.
National Forum on Sustainable Development, Strategic Guidelines for Sustainable Development of the Republic of China, Council for Economic Planning and Develpment, Executive Yuan, 1998.
CIER, A Brief Introduction of the Chung-Hua Institution for Economic Research, 1998.
TIER, TIER: A High-Quality, Forward-looking, Professional Think Tank, 1998.