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CHAPTER IV RESULTS AND DISCUSSIONS
In this chapter, findings and discussions will be presented in order to determine whether the research questions have been satisfied. The results are based on the literature and document review, responses from interviewees and assessments based on the UNDP model.
TAIWAN’S ECONOMIC JOURNEY
Taiwan has been widely admired as the leading member of the family of East Asian
“miracles” (Ranis, 2011). However, Ranis (2011) argues that Taiwan’s situation is no “miracle”
and is in fact a combination of initial conditions and policy choices made over time. Taiwan’s colonial history under Japanese rule made an important contribution to the island’s subsequent economic growth. Japan exhausted substantial resources on Taiwan’s rural sector through infrastructure development such as creation of roads, drainage, irrigation and power construction projects. Further, it improved rural institutional infrastructure through the propagation of agricultural research, experimental stations and the establishment of farmers’ associations. All these capital and institutional investments helped the country’s agricultural revolution. Aside from agricultural investments, Japan likewise boosted Taiwan’s primary education. By then, an estimated 27% of the population was literate due to free and compulsory primary education and 79% of the primary-school aged population were attending classes (Galenson, 1979).
Another factor that helped propel Taiwan’s growth after the World War II is the United States intervention through aid assistance from the late 1940s to 1970s. Part of the help given by the US is the creation of the Joint Commission on Rural Reconstruction (JCRR) and farmers’
associations which provided the framework of decentralized decision-making through the promotion of economic democracy. During the time of the JCRR, a three-step land reform was sought to complement the agricultural infrastructure development. Prior to the creation and
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implementation of the JCRR, the Japanese has heavily invested in Taiwan’s infrastructure.
Although most of the efforts are primarily to benefit Japan’s own interest, Taiwanese people are still able to enjoy these. Further, Ranis (2011) cited the overall scarcity of natural resources of Taiwan as a reason why it focused on initiatives enhancing human capital and overall human development. This supports Collier (2007) argument of a natural resource trap wherein resource-rich countries tend to be poor as they are not utilized well. In the case of Taiwan, their lack thereof propelled them to focus on their other resources which is their people. Taiwan’s strong institutions likewise strengthened their initiatives towards economic growth.
Due to the early mobilization of the agriculture sector, required domestic savings were met and the move from import-substitution to export-driven activities was done. Instead of focusing on traditional crops such as sugar and rice, focus was given to the production of mushrooms and asparagus (T2, Interview). Government-supported research and technology-diffusion activities further boosted agricultural production. Aside from the rural infrastructure inherited from its colonization experience, the government itself made continuous efforts in investing in other infrastructures such as communications, transportation and power. Its government made sure that the momentum was sustained. Its export-oriented initiatives coupled with rural industrialization in the form of construction of several export-processing and factory zones accelerated its learning and development specifically in the private sector.
Further government support can also be observed especially in its policy towards education which initially stressed compulsory primary education but later on pushed for compulsory education. This boosted the country’s human resource. Additionally, part of the educational policy offered vocational training complementing the need for cheap yet efficient and literate labor force which is able to flexibly meet the rapidly changing need for the workforce to support its
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oriented development drive. Another important feature of the education sector is the examination system which emphasized meritocracy instead of influence, family connections or ability to pay.
The government likewise imposed and adjusted entry quotas based on the need of the economy by providing financial incentives for new departments. Formal research and development (R&D) programs were also favorably financed ranging from informal blue-collar industries to high-tech manpower and investments. Overall, government had played a huge role in driving the country’s development.
In the succeeding pages, the study explores the conditions wherein Taiwan was able to reach its economic goals as well as the specific capacity building initiatives pursued to achieve these goals.
Joint Commission on Rural Reconstruction 1948-1978
Through the 1948 ECA China Aid Act Section 407 of Public Law 472 of the United States Congress, the Government of the United States and the Government of China entered into an agreement via the Sino-American Joint Commission on Rural Reconstruction (JCRR). The Commission was mandated to formulate and carry out a coordinated reconstruction project for the rural areas of China. As a temporary agency, it was empowered to assist in the rural reconstruction of China thru technological and institutional innovation. It also advised on and monitored several government policies on land reform, budgetary and technical influence which spread its impact on the upliftment of rural life (Howe, 2001). Under the agreement, ten percent (10%) of the economic aid given to China will be directed to rural reconstruction (JCRR, 1968). Although initially set-up in Nanjing, China, it was transferred to Taiwan in 1949 following the take-over of communists in China (T1, Interview). Its main objective was to rebuild Taiwan after the World War II due to
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massive devastation brought about by the war. At that time, the country had no industries to speak of. On official capacity, JCRR had the following objectives and principles:
1. There must be a felt need for JRCC services and activities on the part of the rural people.
2. There must be fair distribution of accrued benefits
3. There must be a sponsoring agency qualified to utilize effectively the JRCC assistance 4. There should be a demonstration of feasibility of any particular project or activity
before undertaking its broad expansion (USAID, 2016. JCRR, 1978).
In the case of the initiatives pursued by JCRR, the capacity building process was clearly followed. First, it engaged stakeholders to be able to ensure that proper support and needed manpower is available to pursue these goals. This includes JCRR ministers, the government and other ministries and private sector that are involved in the initiatives. After which, the Commission assessed the capacity assets and needs of the country. Since most of the population are farmers, initial focus on the agriculture sector was sought. Farmers’ associations were revitalized since it was recognized that these associations can help in the mobilization of farmers. Once stakeholders, assets and needs are identified, these became bases for formulating the capacity building program.
For JCRR, they outlined specific projects to address the existing needs of the country and to be able to rehabilitate it as a whole. Implementation was overseen by the JCRR in partnership with t the government and the FAs. Finally, to ensure that the projects pursued are able to address changing needs overtime, these were evaluated regularly and changes were effected as needed.
In undertaking agricultural planning, JCRR created drafts on the preliminary programs based on guidelines set by the Council for Economic Planning and Development (CEPD). The Commission officially existed from its conception in 1948 until 1979, when the United States
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withdrew its official diplomatic ties with Taiwan in order to pursue diplomatic relations with China.
It then evolved into the Council of Agricultural Development until 1984. After 1984, it became what is still called today as the Council of Agriculture (T2, Interview). However, throughout its existence, the commission evolved from its initial focus and sought to do the following:
1. Post-War Rehabilitation;
2. Land Reform program;
3. Reorganization of Farmers’ Associations;
4. Rural Health and Sanitation;
5. Human Resource Development; and 6. Technological Innovation (JCRR, 1978).
Based on the conceptual framework used in this study, the initiatives will be categorized based on the concepts mentioned: good governance, institutions and human resource development.
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Figure 4.1 JCRR Organizational Chart
Good Governance
The Taiwanese government continued Japan’s program of extensive rural electrification while constructing rural industries that enabled farm families to supplement their incomes by working in decentralized factories (CEPD, Taiwan Statistical Data Bank, (1989). The government had a strong vision to elevate Taiwan’s economic standing from a traditional to a modern and progressive one. This is evident in the numerous efforts it has undertaken in order to complement the JCRR’s initiatives such as the three-step land reform policy, the nine-year public education policy as well as its thrust in offering universal literacy coupled with vocational and science-based learning.
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Land reform introduced by the government and implemented by JCRR were done in three phases: Reduction of Land Taxes (1949), the Public Land Purchase Policy (1952) and the Land-to-the-Tiller Policy (1953) (Huang, 2014. USAID, 1968. JCRR, 1978). Although the initiatives were carried out by the commission, this was complemented by government policy on the different land reform programs (T2, Interview). In terms of rent reduction, the program provided a rent ceiling equivalent to 37.5% of the total annual standard yield of the main crop and extended the lease tenure to six years, renewable as requested by the tenant. These contracts were registered to and closely monitored by the government to ensure that landlords abide by these rules. This program benefited a total of 300,000 tenant families or approximately 45% of farming families in the rural area. In 1951, in preparation for the land-to-the-tiller program, the government sold public lands to current farmers utilizing it at a fixed price of 2.5 times the value of the annual main crop yield. The payment is done in kind in 20 semi-annual installments over a period of 10 years. After full payment, tenants are granted the land titles. This resulted in 96,000 hectares of public farm lands sold to 156,000 families by the end of 1961. Finally, the land-to-the-tiller program was introduced in 1953. Under this program, the government enforced selling of private landowners their excesses tenanted lands for resale to current tiller/occupants. A maximum of 10 years was given for payment and the existing 37.5% ceiling was still in force. For the landlord, they were allowed to keep three hectares for their own farming, the excess of which was sold to the government or the tenants, whichever condition is applicable. Payment made to the landlords were in the form of 70% land bonds redeemable in kind and 30% in stocks of public enterprises. All of these efforts resulted in improved livelihood of the rural people, increased school enrollment of local youth and active participation in politics. Overall, it also increased production that fueled the economy (JCRR, 1978. T1, Interview)
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In the early years, due to the surplus attributed to increased production of agricultural goods, Taiwan’s foreign reserves increased due to the agricultural exports. Some products that were exported were rice, sugar cane, tea, canned pineapples and citronella oil (JCRR, 1978). To address overproduction, food processing was promoted which in turn even increased farmers’ incomes (T2, Interview). The commission assisted in ensuring spoilage and mold in canneries are reduced. Then in 1959, it initiated a program to export canned mushrooms to Europe, the success of which led to increased production of mushrooms making Taiwan one of the world’s largest producers (JCRR, 1979). The same case happened to asparagus.
In terms of infrastructure, roads were built in foothill areas to facilitate transportation of various products to different parts of the country. The percentage of paved roads rose from 7% in 1952 to 50% in 1972. Being a mountainous country, Taiwan is also prone to soil erosion. In 1951, JCRR began works on soil conservation training, demonstration and extension projects not only to develop slope lands for agricultural purposes but as well as to address soil erosion problems.
This led to a more efficient and safe use of slope lands. Aside from roads and slope land conservation and development, JCRR also worked on water resources development. This includes construction of proper irrigation, drainage, flood control, hydropower generation and land development. Aside from contributing to an increase in food production, these water systems helped facilitate industrial development.
Institutions
Farmers’ associations were first established under the Japanese colonial rule with the 1907 implementation of the “Regulations for Farmers’ Associations in Taiwan.” (Huang, 2014). The JCRR reorganized the FAs through organizational improvement, strengthening of operational base and modernization of business management. Their aim is to create a “true organization of the
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farmer, by the farmer and for the farmer.” (JCRR, 1978. T4, Interview). The FAs handled storage and processing of products and distribution as well as offering credit, marketing, supply and agricultural extension services to members. Financial support by the government enabled FAs to repair and construct agricultural facilities and update their equipment to ensure smooth operations.
Belonging to a farmers’ association likewise increases a farmer’s bargaining power in the market since they can demand for higher prices based on their accumulated production. Aside from the financial assistance bestowed on the FAs, JCRR aimed to improve the financial structure and operations in a businesslike manner. To improve the organization structure, members were classified between regular (farmer) members and associate (non-farmer) members. The regular members had the right to vote and be elected into office within the association while associates had no right to vote to ensure that manipulation of non-farmers will not take place and farmers’
concerns were utmost priority. To complement the efficient facilities, FA managers underwent management workshops and offered an efficiency-oriented compensation to attract eligible and qualified college graduates to join the associations and provide a more efficient workforce that will deliver the FAs’ goals.
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Figure 4.2 JCRR Relationship with Government and Farmers’ Associations
What started as a purely agricultural sector-focused initiative gradually evolved into industry-focused economic growth. Due to the continuous increase in production that fueled the economy, the surplus of production were manufactured to canned vegetables such as asparagus, mushroom to name a few. In addition, technological innovation not only helped in the re-stabilization of production but as well as in the development of new crops and modernization of production systems (JCRR, 1979. T4, T5, Interviews). Experts and specialists were sent to the United States, Japan and other developed countries to study the possibility of diversifying crops and producing those which are not usually available in sub-tropical Taiwan. Given that these countries had temperate weathers, the specialists devoted a lot of time in researching and analyzing how temperate fruits can survive and grow in sub-tropical climate. Aside from extensive research, experimentation was also done to ensure that these new crops will thrive in the country. These
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efforts produced great results as production of peaches and plums, for example, have been successfully replicated in Taiwan (T2, T4, Interviews). Other crops introduced during the crop diversification include mushrooms, asparagus, potatoes, seedless watermelons, mangoes, grapes, pears, apples and peaches.
Human Resource Development
Human resource is an essential part of any country and economy. It is vital in ensuring that there is enough manpower that can implement the rules and do the jobs in a well working economy.
Taiwan and JCRR’s efforts to ensure that the population is healthy and safe is a way to protect its human resource since it is imperative that these resources be equipped with as much life and vigor to undertake the different activities expected of them that will fuel the economy. Another integral part of human resource development, aside from training specialists, is the government’s thrust to invest in the country’s education system. During the time of JCRR, the government implemented the Nine Year Public Education Policy (1968-1969).
For the 30 years of JCRR’s existence, over 700 projects aimed at improving rural living conditions were implemented. This includes strengthening of health services, control of communicable diseases, maternity and child health care, family planning, environmental sanitation village health training and nutrition improvement. Post-World War II, most of Taiwan’s water works system were not fully functional. In this event, JCRR spearheaded the rehabilitation of water supply systems. Although it initially started in the rural area, it eventually spread on even to the cities as the commission aimed to improve this system in each passing year. School sanitation improvement likewise became a focus as JCRR partnered with the Provincial Department of Education and the local governments to improve on and build public and private lavatories and wells, construction of simple water supply systems, home sanitation and refuse disposal. This was
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further complemented by training given by public health nurses to villagers on personal hygiene, environmental sanitation, family planning, first aid and home nursing care.
During that time, to further enhance its human resource development, the government also hand-picked people who were sent abroad for further studies in order to gain knowledge on the latest technologies and innovation in different fields (T1, T2, T3, T4, T5, Interviews). Out of the 1,341 persons sent by JCRR, 883 studied in the United States of Japan (JCRR, 1979). After their period of study, they came back to Taiwan to apply the knowledge they have learned (T1, T2, T5 Interviews). This system of sponsoring further education not only helped Taiwan grow its economy but likewise developed its people and equipped them with the correct knowledge that can be used to further achieve their economic goals. In addition to this, several research institutes were likewise created as a venue for specialists in different fields to conduct studies to further improve the knowledge and skills on different sectors. JCRR and the FAs were also doing their part in educating the farmers and providing them with additional skills that will benefit their lands.
Another form of human resource development is the knowledge sharing and transfer of senior experts to the junior experts who have come to work for JCRR. The commission has established a system wherein a junior specialist is to shadow a senior specialist in order to learn how things are done as well as to acquire the same technical skills possessed by the senior ones (T5, Interview).
By engaging in the different initiatives of the commission, the overall objective was to rehabilitate the country after it was devastated by the war.
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When the JCRR started its operations, the main source of funding for the first few years came from the US economic aid. However, when the a portion of the aid was phased out in 1965, the government was already able to provide funding for the commission through the Ministry of Economic Affairs and the National Science Council coupled with funds from the Sino-American Economic and Social Development (SAFED) (JCRR, 1978. T1, Interview). Funds for the creation of the JCRR was primarily sourced from the penalty paid by China’s Qing Dynasty to the United
When the JCRR started its operations, the main source of funding for the first few years came from the US economic aid. However, when the a portion of the aid was phased out in 1965, the government was already able to provide funding for the commission through the Ministry of Economic Affairs and the National Science Council coupled with funds from the Sino-American Economic and Social Development (SAFED) (JCRR, 1978. T1, Interview). Funds for the creation of the JCRR was primarily sourced from the penalty paid by China’s Qing Dynasty to the United