Forward-looking infrastructure: Foundation for future growth

  • Date: 2017-09-26

I. Background

Domestic investment in Taiwan has languished over the past few years, with investment by both government agencies and state-run enterprises showing negative growth while funding for public infrastructure has fallen every year since its 2008 peak.

These trends were reflected in the World Economic Forum’s Global Competitiveness Report 2016-2017, where Taiwan fell to 13th in the “infrastructure” category. The nation also dropped to 19th in “networked readiness” behind countries such as Singapore, the Republic of Korea, Japan and Hong Kong. So in those two areas, Taiwan clearly has much room for improvement.

In response, the government is promoting the Forward-looking Infrastructure Development Program to build a new generation of infrastructure for the nation’s future. This program includes funding for eight categories: railway projects to provide safe and fast transportation, water environments to build resilience against climate change, green energy infrastructure to ensure environmental sustainability, digital infrastructure to create a smart and connected nation, urban and rural projects to balance regional development, child care facilities to reverse declining birth rate trends, infrastructure to ensure food safety, and human resources infrastructure to nurture talent and boost employment.

Under the special act governing forward-looking infrastructure projects, promulgated by the president on July 7, 2017, the program will be funded by a special budget of NT$420 billion (US$13.9 billion) over four years (to be divided into three terms, the first of which will span September 2017 through December 2018 with a budget of NT$107.1 billion or US$3.5 billion). The program may be extended thereafter, subject to the Legislature’s approval, with a budget and period not to exceed those of the first four years. The program is expected to add NT$470.5 billion (US$15.6 billion) to the real GDP or NT$506.5 billion (US$16.8 billion) to the nominal GDP, contributing an average 0.1 percentage point to real GDP in each of the first four years.

II. Foundations of future national development

The Forward-looking Infrastructure Development Program will support Taiwan’s economic development needs for future by staying abreast of the latest industrial, technological and lifestyle trends at home and abroad, and by developing different regions in a more comprehensive, balanced manner. Achieving these goals will lay the foundation for future national development.

Details for the program’s eight major development areas are as follows:

A. Green energy development (first-term budget NT$8 billion):
1. Key infrastructure: Build research and development facilities and long-term development bases for solar energy, wind power and the Shalun Green Energy Science and Technology City.
2. Benefits:
(1) Benefits of transforming the energy industry: Industry transformation will increase energy security, help create a green-energy economy and promote environmental sustainability and social equality.
(2) Industrial benefits: Make Taiwan an important base for the development of green energy capabilities in Asia so that within five to 10 years, Taiwan will play a substantive role in the global green energy industry.

B. Digital infrastructure (first-term budget NT$15.9 billion):
1. Development tasks: Accelerate digital grid development for a domestic ultra wideband network.
 
2. Goals: Provide fast and secure broadband and ultra wideband internet connectivity, with citizens’ basic right to access guaranteed; introduce cultural creativity and high value products into the industrial sector; implement smart urban-rural infrastructure and set up a digital learning environment; make the digital economy account for 25.2 percent of GDP by the year 2020; and develop cultural, creative and content capabilities into an NT-trillion dollar industry.

C. Development of aquatic environments (first-term budget NT$25.1 billion):
1. Development tasks: Accelerate infrastructure construction to manage and supply water, and make aquatic areas accessible.
2. Goals: Create a future that includes reliable water supplies, no flooding, high-quality drinking water and accessible aquatic spaces.

D. Railway development (first-term budget NT$16.6 billion):
1. Development tasks: Promote 38 railway development plans in five areas: linking the high speed and traditional rail systems into an integrated transportation network; upgrading and improving traditional rail service in eastern Taiwan; adding grade-separated railway junctions and speeding up commute times; and promoting urban mass rapid transit; and promoting a rail system to support tourism in central and southern Taiwan.
2. Goals: Make Taiwan’s railway system a core transport service that is seamless, safe and reliable, convenient and easy to use, and sustainable. The system should also provide industry opportunities and include tourist attractions.

E. Urban-rural development (first-term budget NT$35 billion):
1. Development tasks: Promote 10 major projects that will resonate with the public including resolving parking issues; improving road quality; implementing renewal projects in small and medium-sized cities and towns; developing localized industry parks; developing culture and lifestyle circles; renovating campuses to optimize community access and utilization; setting up public service bases; creating an environment that supports leisure-fitness lifestyles; developing a Hakka Romantic Avenue along Provincial Highway No. 3; and building infrastructure for indigenous tribes.
2. Goals: Improve the quality of public spaces, everyday living conditions and Taiwan’s overall image. 

F. Child care facilities (first-term budget NT$2 billion):
1. Development tasks: Promote public nurseries for infants aged 2 and under, and create friendly child care spaces for children aged 3 to 6.
2. Goals: Establish more public nurseries, create friendly child care spaces, and provide the services at reasonable prices and a guaranteed quality. This will help alleviate the economic burden on parents, remove barriers to women’s employment, and reverse the declining birth rate crisis.

G. Food safety infrastructure (first-term budget NT$300 million):
1. Development tasks: Build and modernize national-level food and drug laboratory buildings and training centers, improve effectiveness of border inspection and rapid custom clearance systems, strengthen the food safety inspection and testing capabilities of health departments, build a border testing office building and warehouse center at the Port of Taichung, and strengthen the central government’s food safety and toxin detection capabilities.
2. Goals: Bolster Taiwan’s food safety by improving testing capabilities and forging a comprehensive food safety management system.

H. Human resources infrastructure (first-term NT$4.2 billion):
1. Development tasks: Establish industrial-academic alliances with other countries, build technological innovation bases for young entrepreneurs, promote training and employment of high-level professionals in focal industries, nurture young researchers, and improve hands-on learning environments at vocational schools.
2. Goals: Create a world-class entrepreneurial cluster in Taiwan by attracting foreign professionals to help young Taiwanese engage in international industrial, academic and research exchanges, start their own businesses, and enhance their employability. These professionals can also help align Taiwan’s innovation and entrepreneurship ecosystem closer with that of the world community.

III. Strict fiscal discipline and sound public finances
The Forward-looking Infrastructure Development Program will be funded wholly through government-issued debt, subject to the following debt limits and control mechanisms:

A. Debt flow limit: The amount of debt issued under the general and special budgets, averaged each year over the term of the program, is not to exceed the 15 percent limit prescribed in the Public Debt Act. This restriction, to be applied for the first time, will set a new paradigm and ensure a sound fiscal future for Taiwan.

B. Debt level limit: Actual debt as a percentage of GDP will remain at the current 34.6 percent. With the annual budget at about NT$2 trillion (US$66.1 billion), the government can maintain sound fiscal policies.
 
IV. Conclusion

The Forward-Looking Infrastructure Development Program is designed to meet Taiwan’s economic development needs for the future. The government will lead the way by stimulating the economy, accelerating overall economic transformation and upgrading, raising productivity, and developing a blueprint for a better quality of life. Premier Lin Chuan has said many times that “sooner is better,” and the best way to forge a new nation for the future is to share the fruits of this massive infrastructure development project with all of the citizens of Taiwan.