國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
102
of the 21st century, although most of its production continued to be allocated in the domestic market.191
Figure 3.1. GDP Evolution of East Asian Developmental States, 1960-1980
Source: Maddison Historical GDP Data, World Economics.
Another successful story of heavy industry development was that of petrochemicals.
Having been established in the mainland, the China Petroleum Corporation moved to Taiwan and was in charge of the operations of the oil refinery in Kaohsiung and other related infrastructures previously built by the Japanese colonial regime. The government encouraged the gradual expansion of oil-refining capacity, aromatics, and fertilizers (both by the CPC and the Taiwan Fertilizer Corporation), but did not explore the production of upstream petrochemicals until the textile and plastic industries were growing exponentially and needed more sources of intermediate supplies to remain competitive. For strategic and economic reasons, the CPC built the first upstream naphtha cracking plant in 1968, producing ethylene to be allocated among the manmade fibers and plastic materials-making companies.192 In the
191 Li-min Hsueh, Chen-kuo Hsu, & Dwight H. Perkins, op. cit., 39-41.
192 Ying-yi Tu, “The Petrochemical Industry,” in Li-min Hsueh, Chen-kuo Hsu, & Dwight H. Perkins, Industrialization and the State: The Changing Role of the Taiwan Government in the Economy, 1945-1998.
(Newton, MA: Harvard University Press, 2001), 230.
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
MILLION USD-1990
YEAR
GDP GROWTH
South Korea Taiwan
‧
國立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
103
following ten years, the company built two more plants, since the demand quickly surpassed the supply capacity of the first installation.
The development of upstream petrochemical products, combined with the oil shocks of the 1970s, made the government officials realize about the need to continue the expansion of this sector in heavy industry, and to support the creation of domestic midstream petrochemical goods. These policies were aimed not only at being self-reliant in petrochemicals, but also as a way to protect the production capacity of the exporting industries which depended on cheap and constant supplies of those products. Therefore, in the mid-1970s, the government created the China Petrochemical Development Corporation, and the Chung-Tai Chemicals Corporation, which in 1982 merged into one large public conglomerate, to support the creation of further midstream petrochemical projects.193
At the same time the CPC continued building naphtha and ethane cracker plants, the midstream petrochemical production was being opened to private investors. Most of them, however, depended on the CPC for the provision of upstream products. Nonetheless, motivated by the protectionist policies observed by the government, new companies expanded their operations in the midstream and downstream petrochemical products. As noted by Tu, the Formosa Plastics Group (established in 1957 with strong government support), the Chi Mei Group, the Changchun Corporation, and the China Chemical Group, joined the previously established state-owned enterprises, becoming quasi-oligopolistic players. Foreign companies, such as the Union Carbide Corporation, Goodrich, Gulf, and National Distiller, were allowed to enter joint ventures with local companies Oriental Union Chemical Corporation, Taiwan Synthetic Rubber Corporation, China Gulf Plastics Corporation, and the USI Far East Corporation, respectively. However, the second oil-crisis caused huge profit losses for those companies, who would abandon the Taiwanese market gradually during the 1980s.194
The performance of other traditional heavy industries promoted by the Nationalist government in Taiwan contrasted with the experience of other developmental states in East Asia, specifically Japan and South Korea. The latter are still among the largest shipbuilding countries in the world. Despite Taiwan is also an important shipbuilding nation, its
193 Li-min Hsueh, Chen-kuo Hsu, & Dwight H. Perkins, op. cit., 40.
194 Ying-yi Tu, op. cit., 234-247.
‧
國立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
104
production levels are far behind those of the other two countries.195 This industry received wide attention from the government since the mid-1960s, with the state-owned Taiwan Shipbuilding Co. (TSC) receiving strong official support to export its ships and expand its existing capacity. The firm was founded in 1937 by the Japanese Zaibatsu Mitsubishi, but also confiscated by the Nationalist regime after their arrival to Taiwan. By 1973, the government decided the creation of a much larger entity, named the China Shipbuilding Corporation, accepting a 25% of the total investment from the US Oswego Corporation, and a 30% from minor domestic and foreign investors.196
Nonetheless, by the time large national shipyards had been built and/or expanded in Kaohsiung and Keelung, and due to the oil crises, the foreign partners withdrew their investments, leaving the CSC as a state-owned corporation, which also merged with the TSC in 1978.197 The large production capacity of the newly created conglomerate could not be fully developed, due to the small domestic market and to the fierce competition from larger producers from the already mentioned East Asian countries. The company suffered many losses across the years, although it continued to supply the domestic market, which continued to benefit from the expansion of transportation services firms, such as Evergreen and Yang Ming.
Another heavy industry with meagre results, and a contrasting experience with the other Northeast Asian developmental states was the automobiles sector. The government imposed high tariffs and other restrictions on the imports of finished passenger vehicles as a way to encourage local production. Joint ventures with foreign companies were permitted during the 1960s, but a high local content requirement was set by the government to ensure continued growth of the domestic industry. Local passenger cars were produced since 1960, but the domestic demand did not grow accordingly, while internationally they could not compete with the prices and quality of foreign vehicles. A 1979 government project to build a plant with a capacity of 200,000 motor vehicles a year was cancelled five years later after
195 In 2015, Taiwan was the fifth largest shipbuilding nation with 749,000 completed gross tonnages. In comparison, China produced 25 million gross tonnages the same year, South Korea completed 23 million, Japan made 13million, and the Philippines produced 1.9 million. For more statistics on the issue, online, https://www.statista.com/statistics/263895/shipbuilding-nations-worldwide-by-cgt/
196 Li-min Hsueh, Chen-kuo Hsu, & Dwight H. Perkins, op. cit., 43-44.
197 Tun-jen Cheng, “Political Regimes and Development Strategies,” op. cit., 139-178.
‧
國立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
105
complaints from foreign investors about the high local content and export requirements demanded by the authorities.198
Between the 1960s and 1980s, Taiwanese private companies such as Yue-loong Automobile Manufacturing Corporation (now Yulon Motors), Liu Ho Motors, Hua-Tung Car Manufacturing Co., China Motor Corporation, and Hotai Motor Corporation, entered joint ventures with Nissan, Ford, General Motors/Hino, Mitsubishi Motors, and Toyota, respectively. These companies developed an expertise and a strong local network with small and medium enterprises dedicated to the production of auto-parts, mainly due to the 60%
local components requirements imposed by the Nationalist government. Most of the cars produced locally and being exported were under those foreign brands, and only some of them, mainly Yulon (under the label Luxgen) and CMC, have continued to produce passenger vehicles with their own brands for the domestic market.199 Nonetheless, despite not having internationally famous brands, such as those from Japan and South Korea, when compared to other countries, the auto-parts industry in Taiwan continues to be considered as one of the most competitive in the world.