Investment Rate Seen to Hit 3-year Low of 19.5% in 2006

Taipei, March 24, 2006 (CENS)--Taiwan' s investment rate, the percentage of investments over gross domestic product (GDP), will continue declining to 19.5% this year, hitting the lowest level in the past three years, according to a projection recently made by the Cabinet-level Directorate General of Budget, Accounting and Statistics (DGBAS).

The Cabinet-level Council for Economic Planning and Development (CEPD), the nation' s economic development planner, noted that the slide of the investment rate is a warning sign about Taiwan' s domestic economic growth.

Faced with the thorny problem of the declining investment rate, the Cabinet' s financial and economic panel will push the Ministry of Economic Affairs and the National Science Council to take action to help domestic firms tackle investment obstacles so that the investment rate can recover to the same level as that found in Japan and South Korea.

According to a statistics compiled by DGBAS, the investment rate for South Korea, Japan, mainland China, and Hong Kong reached 30%, 23%, 40% and 22%, respectively, last year. But Taiwan has seen its investment rate drop to less than 20% in four out of the past five years, indicating the investment climate in Taiwan is weaker than that in other locations in Asia.

CEPD vice chairman Yeh Ming-feng said the government is well aware of the decline in the investment rate and has recently instructed the MOEA to map out a measure to rejuvenate investment, especially in the conventional manufacturing industries.

Unlike city-based economic entities such as Hong Kong and Singapore, Yeh stated, Taiwan cannot boost its economic dynamics and employment opportunities merely by relying on the development of the services sector. Judged from the less than 20% overall investment rate over the past few years, Taiwan cannot be making sufficient investments in its manufacturing sector. Based on the present income standard, Taiwan will face an impaired economic performance if investments in the traditional manufacturing industries cannot be enhanced.

Yeh said Taiwan relies too much on the services sector, rather than the manufacturing sector like industrialized nations such as Japan and Germany, which have seen per capita income reach more than US$30, 000, and which saw their ratio of industrial output to GDP reach 26% last year. At present, Taiwan earns only half the per capita income scored by Japan and Germany, while its percentage of the output of the services sector to GDP reached as high as 73.6% last year.