Infrastructure: foundation of Taiwan’s future development

  • Date: 2017-04-05

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 Executive Yuan passed a draft special bill for forward-looking infrastructure development projects on March 23 this year to ramp up domestic investment, unlock the domestic economy’s growth potential and accelerate industrial transformation.

The bill increases investment funding for overall infrastructure development. Plans include funding for green energy and digital infrastructure to facilitate industrial transformation, for urban-rural projects and aquatic environments to improve the quality of everyday life, and for railway projects to develop green transportation systems.

Investment under the infrastructure development bill is expected to reach approximately NT$882.49 billion (US$28.78 billion) over eight years (2017-2024), with approximately 85 percent devoted to new development projects and 15 percent to accelerating or expanding previously approved projects.

Government investment should drive an additional NT$1.78 trillion (US$57.98 billion) in investments by public and private sector enterprises. During the eight-year project period, aggregate investment is expected to raise real gross domestic product (GDP) by NT$975.90 billion (US$31.83 billion) while creating 40,000-50,000 job opportunities.

 

II. Laying the foundations of future national development

The Forward-looking Infrastructure Development Program is designed to meet Taiwan’s economic development needs for the next 30 years by responding to the key requirements of new industries, technologies and lifestyle trends both foreign and domestic, and fostering local and overall development as well as regional balance. Achieving these goals will lay the foundation for future national development. 

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

A. Green energy development: Government investment of NT$24.32 billion (US$793.05 million) over eight years will drive an estimated NT$1.42 trillion (US$46.31 billion) in private sector investment.

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: Government investment of NT$46.07 billion (US$1.50 billion) is expected to drive investment by public and private enterprises of NT$238 billion (US$7.76 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: Invest NT$250.77 billion (US$8.18 billion) over an eight-year period.

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: NT$424.13 billion (US$13.83 billion) over eight years constitutes the largest investment of the five major infrastructure projects.

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: NT$137.20 billion (US$4.47 billion) investment over four years (2017-2020).

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. 

 

III. Maintain strict fiscal discipline and sound public finances

Total investment in the Forward-looking Infrastructure Development Program will exceed NT$880 billion (US$28.70 billion), all of which will be funded through loans. A loan cap and financial control mechanisms are already in place:

A. Loan cap: The Public Debt Act provides that the average annual loan amount may not exceed 15 percent of the sum of annual expenditures under the general budget and the special budget.

B. Debt limit: Debt as a percentage of GDP will remain unchanged at 34.6 percent. With the annual budget at about NT$2 trillion (US$65.23 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 next three decades. The government will lead the way by stimulating the economy and accelerating overall economic transformation and upgrading, while raising productivity. The nation needs infrastructure for a new era, and Premier Lin Chuan has said many times that “sooner is better.” 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.