Taipei’s growth as well as its command over the industrial sector of the Taiwanese economy was indisputable in the early 1950s and 1960s. The city was the main manufacturing center in Taiwan whether measured by the number of factories, the number of employees in manufacturing, or the value of total output.
Taipei’s dominance was clearly related to the militarization of the capital’s economy for while Taipei’s status as provisional capital gave it considerable market advantages, the military government itself was a major market.
The main political factor influencing manufacturing in Taipei was the changing nature of the United States military and political presence.
In 1958, with the establishment of a Development Loan Fund, the US began to provide aid with the express goal of stimulating economic development.
The US lured Stanford Research Institute (SRI) to prepare reports on the economic feasibility of certain industries of potential interest to foreign investors. Targeted enterprises included petrochemical intermediates, plastic resin, synthetic fibers, transistor radios, electronic components, watches, and clocks.
Taiwan was publicized as an investment site for American businesses, and the US government facilitated and protected the flow of private capital to the country through the AID Investment Guarantee Program, Cooley Fund, China Trade Act, and Sino-American Industrial Guarantee Agreement.
A breakthrough came in 1964 when General Instruments set up a bonded electronics factory near Taipei.
By the mid-1960s, the capital was able to benefit from the global production structures of two core countries, the US and Japan, when both began to invest in the island to lower their labor costs.
. . . in 1972, the wage for a skilled worker in Taiwan was $73 a month compared with $102 in South Korea, $183 in Singapore, $122 in Hong Kong, and $272 in Japan. For unskilled labor, the respective rates were $45, $68, $60, $82, and $120. Taiwan’s labor efficiency was ranked just below that of Japan and the United States.
For more information on Taiwan’s economic development, check out these posts: