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Taiwan Before the
"Miracle"
Before the Japanese colonised Taiwan in 1895, its economy was almost
totally based on agriculture. Japanese colonialism laid the foundations
for future economic growth in Taiwan by creating an economic infrastructure;
building roads, railways, port facilities and an electrification
system; establishing local industries and generating an export oriented
economy.
In the early days of its colonisation of Taiwan, Japan focussed
upon building-up the agricultural sector by providing the necessary
capital, technology and management techniques. This programme was
so successful that economic productivity outpaced population growth
almost threefold. While the development of agriculture took top
priority, the Japanese also established light industry such as small-scale
textile mills. During World War 2, the Japanese further expanded
Taiwan's industrial base to facilitate the supply of military related
hardware to the Japanese war machine.
Japan's defeat in World War 2 and its subsequent withdrawal from
Taiwan had grave effects on the Taiwanese economy. The slump after
World War 2, the sudden lack of managerial expertise and capital,
and the neglect by the KMT government on the mainland and the destructive
economic policies bought on by the civil war, forced Taiwan into
an economic downturn.
The KMT government's arrival on Taiwan and the US's determination
to keep it as an anti-Communist bastion against the PRC - and subsequent
economic and managerial aid - saw a serious effort to resuscitate
the Taiwanese economy. Imitating the Japanese, the KMT placed highest
priority upon the development of the agricultural sector, and feeding
the greatly expanded population became its foremost priority. The
first stage in agricultural development saw the implementation of
land reform policies, which distributed large estates to landless
peasants.
Land reform opened the way for Taiwanese farmers to make profits,
and government policies allowed farmers to experiment with new crops
and farming techniques. Land reform also provided the impetus behind
Taiwan's industrialisation programme. It raised farm production,
and allocated excess labour from farms to textile factories and
other light industries that commenced production in the 1950s.
At first, economic planning concentrated on the production of labour-intensive
goods for export, and on improving Taiwan's infrastructure. During
the 1950s, the promotion of import substitution policies aiding
the expansion of domestic industry placed major emphasis on the
textile, food processing and petrochemical industries.
Later during the 1960s, emphasis shifted to the development of
an export-oriented policy that focussed upon labour intensive industries
such as textiles and processed food. Further success led to further
diversification into increasingly sophisticated products such as
electronic goods, involving more capital and higher value-added
by manufacturers.
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