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II. The Necessity of the Ten New Major Construction Projects
A. Serious under-funding of public investment as a result of limits imposed by the Public Debt Act
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In 2003, social security, education, public debt service and other obligatory spending totaled NT$1.0958 trillion, or 70 percent of the general budget. Therefore, funding for public investment is extremely limited.
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Government spending on fixed investment in 2003 is expected to fall to NT$406.4 billion, a NT$114.3 billion drop from the peak of NT$520.7 billion in 1999.
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The government investment rate (government fixed investment as a percentage of GDP) has fallen annually. The projected rate for 2003 is 4.1 percent, down 3.2 percentage points from a peak of 7.3 percent in 1994.
B.
Insufficient public investment has already had serious consequences for economic development.
1. Not conducive to economic growth
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From 2000 to 2002, the government’s fixed investment fell for three straight years, shaving 0.26, 0.24, and 0.65 percent, respectively, of economic growth and becoming a major factor holding back the economy.
2. Increased risk of deflation
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In 2001 and 2002, Taiwan’s consumer price index slipped by 0.01 and 0.2 percent. It is expected to fall by 0.28 percent in 2003, signaling persistent deflationary pressures. Nations the world over have pursued inflationary financial policies to counter deflation. However, Taiwan is unable to expand public investment and has instead seen a steady decline over the years; thus the specter of deflation cannot be banished.
3. Resulting in economic imbalance
-In 2003, the domestic investment rate hit a record low of 16.3 percent. Consequently, the surplus savings rate rose to a new 15-year high of 9.8 percent, up from 2.9 percent in 2000. Domestic imbalances grow worse and the efficiency of resource utilization is poor.
-The economy shrank by 2.18 percent in 2001, then grew by 3.59 percent in 2002, and is expected to register 3.15 percent growth in 2003. The annual contribution of net foreign demand to these growth rates was 2.75, 2.63, and 2.59 percent, respectively. Domestic demand has been weak, exposing the economy to an excessive degree of risk from uncertain external factors and increasing the volatility and risk of future economic growth. Domestic demand must be expanded to shift the driving force of economic growth.
4. Reduced momentum for creating employment
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An analysis of the factors behind lingering unemployment reveals a connection between the large drop in the number of construction workers and the difficulty of retraining for other jobs. Employment-generating public investment has fallen every year, and the resulting direct and indirect loss of jobs hurts efforts to solve the unemployment problem.
5. Obstacles to greater international competitiveness
Reports by international competitiveness evaluation organizations cited insufficient basic infrastructure as a major factor preventing Taiwan from raising its international competitiveness.
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According to the IMD’s
World Competitiveness Yearbook published in May 2003, among 30 nations or territories with populations greater than 20 million, Taiwan’s infrastructure rankings have consistently lagged behind overall competitiveness since 1999.
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Item |
1999 |
2000 |
2001 |
2002 |
2003 |
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IMD Overall Ranking |
5 |
6 |
5 |
7 |
6 |
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Infrastructure Ranking |
7 |
7 |
7 |
7 |
7 |
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Telecommunications investment and wastewater treatment plants were among the evaluation subcategories rated as inferior, reflecting a comparative inadequacy of domestic infrastructure.
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According to the Global Competitiveness Report released on October 30, 2003, by the World Economic Forum, Taiwan ranked fifth on the growth competitiveness index, behind Finland, the US, Sweden, and Denmark. However, insufficient infrastructure was listed as one of the five major problems of doing business in Taiwan. The necessity of enhancing Taiwan’s infrastructure is clear.
  
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2003 Government Information Office.
Republic of China
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