The State as Agent: Industrial Development in Taiwan, 1952–1972

  • Deborah Brautigaml
Part of the International Political Economy Series book series (IPES)


Sub-Saharan Africa’s industrialization experience has been marked by considerable unevenness and uncertainty over the past generation. Buffeted by changing international market conditions, and by the instability of domestic policies, African manufacturers have generally been unable either to substitute successfully for manufactured imports, or to break into increasingly competitive export markets. The austerity conditions of the past decade have led to massive retrenchments for industry in most African countries: faced with shortages of foreign exchange, tight money supply, and depressed local demand, few industrial sectors have avoided significant reductions in capacity utilization and employment.


Exchange Rate Interest Rate African Country Foreign Exchange Real Wage 
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  1. 1.
    An earlier version of this paper was presented at the 1991 Annual Meeting of the African Studies Association, St. Louis, MO. This paper was originally drafted while the author held an International Affairs Fellowship from the Council on Foreign Relations. Howard Stein and Tyler Biggs made helpful comments on an earlier draft of this article. Alemayehu Mengistu Wondim and Nikolaos Makris provided research assistance. The author is to blame for any errors or misinterpretations that remain.Google Scholar
  2. 2.
    Figures for Côte d’Ivoire are for 1986–87; for Ghana 1988–89; for Botswana 1985–86 (World Bank, 1992a, pp. 276–7).Google Scholar
  3. 3.
    Although the spoken Japanese and Chinese languages are not related, Japanese is written using Chinese characters, as well as an additional set of phonetic letters. This eased the transition from literacy in Japanese to literacy in Chinese.Google Scholar
  4. 4.
    Economic aid commitments ended in 1965; disbursements in 1968. Military aid continued until the break in official relations in 1979.Google Scholar
  5. 5.
    The US provided an additional $2.5 billion in military supplies and equipment, almost entirely financed by grants.Google Scholar
  6. 6.
    Although an independent study commissioned in 1966 by the US aid agency calculated that aid had ‘doubled the annual rate of growth of Taiwan’s GNP, quadrupled the annual growth of per capita GNP and cut thirty years from the time needed to attain 1964 1iving standards’ (Jacoby, 1966, p. 152), others are more skeptical as to the utility of the model used to project these results, saying that ‘the causal mechanism is not at all clear’ (Ranis, 1979, p. 246). We can safely assume, however, that the net effect of this aid was positive, although Taiwan’s later success is not a direct function of the aid (other countries receiving similar magnitudes have not performed nearly as strongly).Google Scholar
  7. 7.
    The amount varied depending on the quality of the land. The ceiling for medium quality paddy land was 2.9 hectares.Google Scholar
  8. 8.
    Amsden (1979) argues that ‘Widespread emphasis on risk-reduction is evident in Taiwan’s agricultural policies and seems to be one of its important lessons’ (p. 357).Google Scholar
  9. 9.
    At the same time, however, rice consumption was also decreasing as higher incomes underwrote a shift from cereals to higher food value foods as a larger share of diet.Google Scholar
  10. 10.
    In absolute terms, the value of unprocessed agricultural exports like mushrooms and asparagus rose from NT$324 million in 1952 to NT$8145 million in 1972, but their relative value fell from 22.1 per cent of total exports to only 6.8 per cent of total exports (EPC, 1975). Processed agricultural product exports also rose in value from NT$1025 in 1952 to NT$ 11822 in 1972, but fell from 69.8 per cent of all exports to 9.9 per cent, illustrating the shift from natural resource-based to labor-based light industrialization.Google Scholar
  11. 11.
    According to Gustav Ranis, ‘government policy in the 1950s, supported by US project aid allocations, was to maintain capacity well ahead of demand, to distribute it throughout the island, and perhaps most importantly, to aim for realistic (that is, no profit, no subsidy) overall pricing levels while maintaining a uniform set of rates as between rural and urban areas’ (Ranis, 1979, p. 215).Google Scholar
  12. 12.
    According to the World Bank, 1991 tariffs for electricity in ‘developing countries’, average US$0.04/kwh, and only cover some two-fifths of the cost of supply (World Bank, 1992a, p. 117).Google Scholar
  13. 13.
    In a number of countries with active adjustment programs there has been significant declines in enrollment. In Tanzania, for example, the percentage of school age children enrolled in primary schools dropped from 72 to 63 per cent between 1985 and 1989 (World Bank, 1992a, p. 117).Google Scholar
  14. 14.
    Although overtime pay was stipulated in the labor code, it was not always enforced. Likewise, in 1973, a requirement of one day off every seven days was not being observed by 37 per cent of inspected factories. A minimum wage law was on the books, but the level was lower than the average daily rate for manufacturing (Galenson, 1979, p. 407).Google Scholar
  15. 15.
    Most firms provided subsidized meals and free or subsidized dorms; many provided free transport and uniforms.Google Scholar
  16. 16.
    At the time of independence, government workers in French West Africa were being paid at the same levels as in France, and much higher than the local private sector was able to pay.Google Scholar
  17. 17.
    This may vary by government unit. For example, the tobacco monopoly offered its employees subsidized loans at four per cent covering up to 40 per cent of a house purchase. In 1975, beyond the period under discussion, the national government started a housing program for workers (Galenson 1979, pp. 421–40).Google Scholar
  18. 18.
    According to Robert Wade (1990), until 1980, the ‘powerful and autonomous central bank. . .was not even legally accountable to anyone other than the president, including the cabinet and legislature’ (p. 209).Google Scholar
  19. 19.
    According to the World Bank, which advocates outward orientation, an inward-oriented trade regime is characterized by ‘controls, high and variable tariff protection and quantitative restrictions and administrative allocation’, while an outward-oriented regime ‘emphasizes linkages to the world economy through exports and enhanced import capacity’ (Bhattacharya and Linn, 1988, p. xi).Google Scholar
  20. 20.
    Scott (1979) notes that as of July 1972, half of the ‘controlled’ commodities were shifted to ‘permissible’ status (p. 331).Google Scholar
  21. 21.
    R. H. Erzan et al. (n.d.) calculate that countries in sub-Saharan Africa in the 1980s had the highest rate of import license requirements, advanced import deposits and Central Bank authorization requirements, leading to the highest overall rate of nontariff barriers among developing country groups.Google Scholar
  22. 22.
    These lower rates, it must be emphasized, are still high in real terms compared with other industrialized countries.Google Scholar
  23. 23.
    However, manufacturers had to pay a fee for a bank guarantee to cover the duty (Scott, 1979, p. 326).Google Scholar
  24. 24.
    Nash (n.d.) comments that ‘exporters must employ special firms or a great deal of staff time to process each request’ (p. 30).Google Scholar
  25. 25.
    Free trade zones have also been established in Togo and Cameroon.Google Scholar
  26. 26.
    For example, investors inside the EPZ could use imports duty free in manufacturing export products. Outside the zone, or the bonded factories, manufacturers had to pay duty on imported materials, then apply for a tax rebate after exporting.Google Scholar
  27. 27.
    Private foreign investment between 1952 and 1961 averaged only US$3 million a year, compared with foreign aid of some US$67 million a year. In the period from 1962 to 1972, foreign investment averaged US$59 million yearly, or, with overseas Chinese investment included, US$134 million a year (CEPD, 1989).Google Scholar
  28. 28.
    Interestingly, most of the technical cooperation projects approved in Taiwan (73 per cent) were between Japanese firms and Taiwanese companies, while US firms tended to ‘remain relatively insulated from domestic firms’ (Ranis 1979, p. 251) indicating that the nationality of the foreign investor may make a difference in African countries.Google Scholar
  29. 29.
    As a reflection of this, the import content in Taiwan’s exports rose consistently over the period under discussion (from 22.9 per cent in 1961 to 63 per cent in 1976), a finding that is probably also true for Japan and Korea (Kuo, Ranis and Fei, 1981, p. 118).Google Scholar
  30. 30.
    While I have no figures to support this, I am confident that to the extent that African countries rely on the World Bank for industrial strategy, they are relying on economists, who far outnumber the engineers at 1818 H Street.Google Scholar
  31. 31.
    For a similar finding in Japan, see G. Allen (1981.) ‘Industrial Policy and Innovation in Japan,’ in C. Carter (ed.) Industrial Policy and Innovation. (London: Heinemann), cited in Wade, 1990, p. 220.Google Scholar

Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1995

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  • Deborah Brautigaml

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