Sluggish economic performance in Asia hurts local exports
By John Liu, The China Post
December 26, 2013, 12:13 am TWN
TAIPEI, Taiwan -- Sluggish economic performance in Asia has contributed to Taiwan's recent worse-than-expected export numbers, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
While American and European economies are exhibiting strength, Asian economies are showing weakness, according to a report released by the TIER yesterday.
The report says that the U.S. economy is showing signs of improvement, and the European economy is on track for recovery. Major economies in Asia, China and Japan, on the other hand, are experiencing comparatively feeble economic expansion. Due to recent political conflicts, financial fluctuations and damage brought about by typhoons, the economies of Southeast Asian countries have been weakened.
Manufacturing and Service Sectors Underperform
Since the majority of Taiwan's exports, especially those from the petrochemical, steel and precision instrument industries, go to the Asian market, the sluggish economy of Asia resulted in decreased growth in November for both the manufacturing and service sectors.
TIER's manufacturing sector performance score dropped 0.34 points from October to 95.86 in November, while the service sector performance score dropped 0.85 points to 92.46.
Construction surged in November, however, with the sector's performance score rising 1.69 point to 95.64. TIER said that much of ongoing public construction projects had been accelerated to meet year-end completion deadlines, and that many construction projects also broke ground in November.
Exports Not Satisfactory
Taiwan's exports in November did not perform as well as expected, TIER said. Compared with a year ago, Taiwan's exports to the U.S., Europe and ASEAN-6 countries dropped 0.65 percent, 1.48 percent and 9.34 percent, respectively. On the positive side, Taiwanese exports to mainland China and Hong Kong grew by 6.48 percent.
According to Darson Chiu, an associate research fellow at TIER, 20 percent of Taiwan's exports go to ASEAN-6, but the lackluster economy in Southeast Asia is hurting Taiwan's exports.
According to TIER's survey, 19 percent of domestic firms feel the economy is “good” in November, which is a 1.7-percentage-point drop from the 20.7 percent recorded in October. In addition, 34.5 percent of firms feel the economy is “bad,” up 7.7 percentage points from 26.8 percent in October.
Fierce Competition around the World
While the global economy is gaining traction, Taiwan's exports have not performed as well as might be expected. The country is facing increasing competition from mainland China and South Korea, TIER said.
Chiu said that 36.5 percent of South Korea's exports have benefited from free trade agreements (FTA) it signed with other countries. Only 10 percent of exports from Taiwan, on the other hand, which has only a limited number of FTAs with selected trade partners, have received similar benefits.
In terms of product lines, South Korea's products extend throughout the whole supply chain, while Taiwan's products mostly center on the middle levels of the supply chain. As a result, South Korea's exports can be marketed to countries around the world, while Taiwan's products are mostly sold only in Asia.