Visitors to central Taiwan, where on September 21st a devastating earthquake killed 2,321 people, are offered unusual souvenirs for sale by survivors - dramatic snapshots of their wrecked homes taken immediately after the earthquake.
It is a small example of the extraordinary entrepreneurial spirit among Taiwan's 22 million people, a drive to do business which has been unleashed in the last two decades by economic and political reforms which have made Taiwan the most successful Asian tiger. This month the island experienced a major political earthquake with the collapse of the ruling Nationalist Party and the victory of Mr Chen Shui-bian of the opposition Democratic Progressive Party in the March 18th presidential elections. Yet the economy emerged from both major jolts relatively unscathed. The earthquake in September, which measured 7.6 on the Richter scale, caused more than $9.2 billion (€9.4 billion) in damages on an island half the size of Ireland. But it caused hardly a ripple in annual economic figures.
This and the rapid recovery of the stock market and currency after the presidential election, which provoked heightened tension across the Taiwan Strait, underlined the fact that Taiwan is one of the most stable and fastest-growing economies in the developed world. Taiwan has the world's largest foreign exchange reserve, valued at $113 billion.
Its growth rate averaged more than 6 per cent per year in the period 1994 to 1997, dipped to 4.6 per cent in 1998 during the Asian crisis when other basically-sound economies like Hong Kong and Singapore went into recession, recovered to 5.67 per cent last year, and is now officially forecast to grow by 6.54 per cent in 2000, ranking it second among the world's fastest-growing economies.
The growth is driven by deregulation, revived privatisation and intense demand for the island's technology exports, expected to push overall exports up by 10.4 per cent in 2000, a repeat of last year's performance, according to figures supplied by the Directorate General of Budget, Accounting and Statistics in Taipei.
Taiwan is the third leading producer of information technology in the world and the third largest manufacturer of computer-related hardware after the US and Japan. Taiwanese companies supply more than half the world's laptops, 10 per cent of computer chips, 64 per cent of motherboards and 91 per cent of scanners. (There is growing traffic between Taiwanese companies and the major multinational companies in Ireland: Taiwanese exports to Ireland last year were worth $742 million, mainly automatic data-processing machines, computer parts and accessories, and imports from Ireland totalled $156 million, mostly of the same items.)
Taiwan has become a key provider to the world of electronic notebooks. In the past five years many of its IT companies have undergone dramatic change, moving from sub-contracting manufacturing to low-cost suppliers, and taking complete responsibility for all activities from design and manufacture to quality control and servicing. The IT sector is expected to grow 18 per cent this year.
Import growth in 2000 is expected to outpace export growth at 12.8 per cent as domestic demand gathers momentum. This is due largely to fast-rising raw material imports to meet export demand, and accelerating rebuilding following the earthquake that wrecked 52,000 buildings.
Closer economic ties between China and Taiwan would increase growth rates even more. This could come about if both joined the World Trading Organisation, as appears likely, and if China's growth rate fulfilled official expectations of 7.6 per cent for the coming year.
The prospect is also enhanced by a conciliatory gesture made to placate Beijing by Taiwan after the election of Mr Chen. He has supported outright independence for the island which China regards as part of its territory. It decided to ease an official ban on trade and transport links between the two sides, which has been in place since 1949, when defeated Nationalist troops fled to the island, and to allow direct trade between its offshore islands and the nearest Chinese cities.
The prohibition was the result of Taipei's fear that interdependency with China would compromise its sovereignty. A relaxation of the ban on indirect trade a decade ago has already resulted in Taiwanese investment of more than $40 billion in mainland China, mainly through Hong Kong. Many of Taiwan's information-technology products are produced in factories in China where labour costs are cheaper.
Economic ties between the two sides are still modest given their geographical proximity. Bilateral trade with China represents only 11.1 per cent of Taiwan's external trade, and China's current economic and legal uncertainty meant that approved Taiwanese investment in the mainland declined 17.54 per cent last year. Taiwan's exports to the mainland in January were valued at $2 billion, up by a fifth from last year, while imports jumped to a single-month record of US $525 million.
For Beijing, one of the strongest arguments against taking military measures against Taiwan is the danger of destabilising a valuable source of investment. This would risk wrecking for decades the design nourished on both sides for an eventual economic growth triangle that would embrace Taipei, Hong Kong and Shanghai.
The political tension caused by the election result has eased for the time being, as Beijing adopts a wait-and-see attitude in the run-up to Mr Chen's inauguration on May 20th. The Economist Intelligence Unit said last week that the outcome would not alter its forecast that GDP would rise to 6.4 per cent in 2000, and remain at that level in 2001.
However, it also warned that a significant increase in tensions across the Taiwan Strait would undermine the island's capital markets and drag down consumer and investor confidence, reducing the rate of GDP growth.
The expected slowdown in the US, which is the destination for around 23 per cent of Taiwan's merchandise exports in 1999, could also affect Taiwan. Another spin-off from increased political tensions is the likelihood that more Taiwanese investors will shift their investment outside the island.
For many struggling south-east Asian countries this is the only ray of sunshine from the shadow cast over the region by the uncertainty over what Beijing will do next.
