Taiwan's potential for growth remains strong, CEPD claims

This article was published by the Taiwan Headlines on September 29, 2006. It reports that according to the government's Council for Economic Planning and Development (CEPD), Taiwan's growth potential remains strong, despite the decline in the nation's global competitiveness ranking in 2006.

In the Global Competitiveness Report for 2006-2007, which was recently released by the Swiss-based World Economic Forum (WEF), Taiwan drops from 8th place in 2005 to 13th place in 2006 in terms of its Global Competitiveness Index ranking.

Unlike the past five years, during which the Growth Competitiveness Index was used as the main competitiveness indicator, the WEF has adopted the Global Competitiveness Index in 2006 to facilitate a broader measure of competitiveness.

Indeed, in terms of its Growth Competitiveness Index ranking, Taiwan remains on the top spot in Asia. It tanks 6th in the world in 2006, dropping only one rank from 2005.

According to CEPD, the Growth Competitiveness Index represents the growth potential of a country over the next 5 to 7 years. In this regard, the WEF's report shows that Taiwan has very strong growth potential in the medium and long term.

Meanwhile, according to the WEF report, Taiwan falls from 15th in 2005 to 21st in 2006, in terms of its Business Competitiveness Index ranking. While Taiwan places 22nd in terms of the quality of its national business environment ranking, it places 16th in terms of its company operations and strategy ranking.

Furthermore, Taiwan ranks 100th in terms of soundness of banks, falling far behind Malta (24th), the United States (27th), and Japan (76th).

According to the government's Financial Supervisory Commission, the WEF has used too simple a method to measure the soundness of banks. Simply surveying the opinions of business leaders is insufficient to reflect the reality. Instead, the soundness of banks can be more precisely measured by comparing their capital adequacy ratios, overdue loan ratios, return on assets and allowance for uncollectible accounts.

According to the Financial Supervisory Commission, the soundness of banks ranking is only one of a total of 89 criteria used by the WEF to evaluate the competitiveness of a country. Neither is it the main reason why Taiwan's global competitiveness ranking has declined.

Finally, according to certain WEF experts, the soundness of banks ranking is based on the results of a survey on 65 business leaders in Taiwan and should be able to reflect the view shared by Taiwan's businesses. According to these experts, the over-issue of credit cards in Taiwan, the loose code of ethics of Taiwan's banks and the loan granting procedures and efficiency are factors that have caused the business leaders to have a negative perception of banks. Therefore, it is urgent for banks in Taiwan to improve their management.

These WEF experts attributed the decline in Taiwan's global competitiveness to the problems that exist in the nation's public and private institutions. Meanwhile, the 2006 WEF report indicates a drop in Taiwan's technological edge, as the nation's ranking in terms of innovation has dropped to 8th from the top three list in the past.