The Model

Into Washington this week flies C. K. Yen, 61, vice president, premier and, most important, chief economic planner of the Nationalist Chinese government on Taiwan. Within the fortnight following he will pay calls on President Johnson, Secretary of State Dean Rusk, businessmen and Chinese communities from Cape Kennedy to San Francisco. Remarkably, he seeks no financial handouts of any sort. But, he admits in a modest way, he would indeed be pleased by recognition of the dramatic fact that Taiwan has become a model for Asian economic development.

Yen has all sorts of statistics to which he can point. Items:

>The gross national product has risen at the rate of 8.2% annually since 1952, now stands at $3.1 billion. >Industrial production has been increasing nearly 14% a year; industry on the island is four times broader than it was in 1952. >Taiwan's trade balance, which once ran a $100 million annual deficit in spite of U.S. aid (discontinued in 1965), is now only $34 million in deficit on a much larger base ($569 million in exports and $603 million in imports). Meanwhile, foreign exchange reserves last year rose another 10% to $337 million. >Per-capita income, rising 4 1/2% each year, has nearly doubled to $200. With prices stabilized the ordinary Taiwanese has begun to buy rice cookers and radios, and total savings last year amounted to $200 million, or more than twice as much as Taiwanese tucked away in 1962.

Yen and his men achieved economic stability first by reforming the agricultural base, which more often than not is a millstone around the neck of a developing nation. Because of the spine-like ridge of mountains that runs up the middle of Taiwan, only 3,000 of the island's 13,800 square miles are arable; for centuries, that land was held by landlords and worked by tenant farmers. The Nationalist government of Chiang Kaishek, under a land-reform program, distributed small plots to the tenants--and encouraged landlords to invest their settlement money in industry. Now, with farmers keeping 80% of their crop v. 43% in the old days, rice production has increased from 20 tons an acre to 34 tons. Seeking to profit from a semitropical climate that allows four harvests a year, the government encouraged the island's 835,000 farm families to branch out from staple rice and sugar into such profitable cash crops as pineapples, asparagus, bananas and mushrooms. Result: with agricultural output rising 6% a year, Taiwan is not only able to feed itself one of the highest-calorie diets in Asia but has also developed a profitable farm-export market, especially to Japan and South Viet Nam.

Industrial Balance. Even while improving and increasing agriculture, Taiwan's economists laid long-range--and highly realistic--plans to balance it with industry. Says Economic Affairs Minister K. T. Li: "It is often said that every developing country wants to begin with an atomic reactor and an airline of its own. We resisted that temptation." With loans of $43 million from the World Bank, $56 million from the Export-Import Bank and a $150 million line of credit from Japan, the Taiwan government set about building industry and improving the infrastructure of railroads, highways and communications on which it depends. At the outset, major industries were put under government control, and many of them remain there.

Among government-run enterprises is the China Petroleum Co., which has petrochemical complexes at either end of the island and a natural-gas field at Miaoli in the north. China Petroleum last year earned $37 million on sales of $90 million, is now expanding with a joint venture in fertilizers with Mobil Oil and Allied Chemical Corp. The government-controlled Taiwan Power Co. has brought electricity to 96% of Taiwan's population and is fast outstripping its 1,500,000-kw. capacity; with 80% of its output earmarked for expanding industry, Taiwan Power is aiming toward a 4,000,000-kw. output within the next ten years, is rushing completion of the Tachia River power network to supply a quarter of the total through a mix of hydroelectric power and thermal power generated by oil shipped halfway around the world from Kuwait.

Yet for all the huge role that government has played in Taiwan's economic upsurge, C. K. Yen is a firm believer in private enterprise. Thus in the past five years, the government's share of total industrial output has dropped from 68% to 31%.

The Investors. The basic idea is to lure both foreign and domestic capital investment. To outsiders, Taiwan's biggest advantage is inexpensive labor. Minimum-wage laws require only $11 a month for unskilled labor, while skilled workers get up to $70 or $80. The rates are only one-third as high as wage levels in Japan and half those in Hong Kong. As a result, several Asian companies have moved operations from those areas to Taiwan. U.S. firms have invested $110 million in Taiwan enterprises. Union Carbide is building an $8,300,000 plastics plant in the Kaohsiung petrochemical complex. RCA last week announced that it will build a $2,500,000 factory to make computer parts.

U.S. businessmen are satisfied with their ventures, especially since Taiwan gives them a five-year holiday from income-tax payments and allows repatriation of earnings and capital. "We expect wages to go up," says William B. Scott, manager of a $24 million Philco radio plant at Tamsui, "but productivity will go up faster."

As for local entrepreneurs, Taiwan's capital market is still pretty small. But there are several success stories. Y. C. Wang, 51, a Taiwan-born smalltime lumber dealer only a decade ago, now owns the Formosa Plastics Corp., which this year will do a $40 million business in such products as plastic sheeting and baby pants. T. S. Lin's Tatung Engineering Co. has a broad range of consumer goods: the Tatung brand is stamped on pressurized rice cookers, washing machines, fans, radios and, lately, television sets. Tjingling Yen and his wife Vivian, who holds a master's degree from Columbia University, operate two of the fastest-growing companies on Taiwan. From facing desks in a modest Taipei office, Yen's Yue Loong Motor Co. this year will sell 6,000 cars and trucks assembled from parts made in Taiwan or Japan. Mrs. Yen's Tai Yuen Textile Co. turns out 20% of Taiwan's textiles, does a $15 million annual business, mostly overseas.

Almond-Eyed Mia. Taiwan hopes to market more and more of its industrial products outside the country, especially in Southeast Asia. At the same time, C. K. Yen and his economists are trying new ways to build up capital and to increase jobs. One is motion pictures; movies from the island's four flourishing film studios, with Mandarin sound tracks and subtitles in other dialects, are popular with Chinese communities all around the Pacific. Wang Mo-chou, 24, an almond-eyed Mia Farrow, has become big box office. The government is also hopefully pushing such tourist attractions as Sun Moon Lake and Taro-ko Gorge, last year earned $20 million on tourism, and expects 240,000 visitors this year. In addition, it is host to 4,500 U.S. troops a month brought in from South Viet Nam for five-day furloughs; each serviceman spends about $250 during his stay. To increase jobs, the government has established the Kaohsiung Export Processing Zone (KEPZ) on 170 acres of waterfront land, where more than 60 firms manufacturing products for reexport will eventually provide work for 30,000 people.

Creating more jobs is one of the biggest headaches for Planner Yen. About 45% of Taiwan's citizens are age 15 or younger, and 165,000 will enter the labor market every year for a decade.

Taiwan must also improve education to overcome shortages of managers and skilled foremen, and solve its brain drain: each year 2,300 students go to the U.S. to attend universities. Few return to Taiwan.

Still, the scope of the problems yet to be solved only serves to point up how well the Chinese on Taiwan have done with their economy in the past two decades. Not only have they survived, but they have become a showplace for the rest of Southeast Asia. And as impressive as the record is on its own, it takes on even greater proportions when the economy of Taiwan is matched against that of a country only 100 miles away--Communist China.

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