Too much focus on fiscal policy and failure to unite citizens spell economic failure, agree panel of experts

Taiwan remains one of the most successful economies to tackle the dual problem of the health and economic crisis of the past 18 months and entered the top ten for the first time since 2012 in the IMD World Competitiveness Ranking, now in its 33rd year. Taiwan came in at 8^th up from 11^th last year.

Speaking at a roundtable discussion of IMD’s 2021 World Competitiveness Ranking, the Minister of the National Development Council of Taiwan, Ming-Hsin Kung, said that the fact the island nation’s growth rate was 3.12% during one of the most punishing years for business, economy and welfare in recent history, was thanks to the government’s alertness, at the outbreak of the pandemic, to deploy prevention measures, and allocate special budget for relief efforts to stabilize employment and secure liquidity for businesses.

But it was also because of Taiwan’s relatively higher household savings and higher education level, he said.

“If household savings are higher, households are more prepared to absorb the impact of the pandemic. Also, with the spread of fake news, people with a higher education level can decipher what’s true and what’s not, and work with the government,” he said.

“Meanwhile, Taiwan, being an ICT strong country, benefited from everything going online as the pandemic changed the way people worked and lived.”

The Minister was speaking at a virtual roundtable of international governmental and economic development leaders, moderated by IMD Professor of Finance Arturo Bris on the occasion of the release of the 2021 IMD World Competitiveness Rankings.

The private sector has a great role to play

Ming-Hsin Kung said that the mix of the government’s fiscal and monetary policies, with industrial development strategies, worked for Taiwan, and that the country was focusing on its wider objectives, such as developing the troika of semiconductor, 5G and AIOT, as well as its bio-medical industry and achieving carbon neutrality by 2050.

“Fiscal and monetary policies are tools to address cyclical forces but we also need to rely on the capital market and investments from industries,” he said.

Australia’s Melinda Cilento, CEO of the Committee for Economic Development of Australia (CEDA), said sustainability was another area in which the private and public sector needed to be aligned for long-term competitiveness.

“In Australia, we focus too much on costs and not enough on opportunities. We don’t focus on the inevitable transition [to a sustainable economy] and the pressure will only increase,” she said.

She described her country’s pushback against some of world’s decarbonization aspirations and fierce debate around the role of fossil fuels.

‘You need to understand the natural tendency of your community’

Australia’s low infection rate was partly down to its “quick and bold” response, she said.

“We did very well limiting the pandemic and the economic damage,” said Cilento. “Today’s figures put unemployment at 5.1%, better than pre-pandemic. We have definitely enjoyed a V-shaped recovery. Being an island helped this, as we could stop people coming in. But so too did the federal government and the state government forming a national cabinet, allowing for a clear single message to the community about the response.”

Such communication is effective thanks to having an “understanding of the natural tendency of your community in accepting the kinds of measures that stop them going to work, the local store and even the bus stop, and communicating to that as well as supporting them,” she said.

That support came in Australia, for instance, in the form of payments to help people keep to their working week, agreements around freezing rents which benefitted businesses and changes to bankruptcy provisions.

But in the 2021 Ranking the country came in 22nd – its lowest position in 5 years, indicating some cracks in its economic competitiveness, even if its management of the health crisis was exemplary.

Describing some of the nation’s long-term challenges, she said: “We have become a bit too comfortable behind our borders. We also rely on immigration and have had none.”

“The projections are that it will take to the middle of next year for the whole country to be vaccinated and for the borders to open. Businesses are very anxious about this, just as they are about skills shortages in digital and data.”

Life goes on, if you’re digitally capable

Part of Greece’s ability to keep peoples’ lives going has been its digital capabilities, which the current government was building up over a year before its last election, according to the country’s Minister of Digital Governance, Kyriakos Pierrakakis.

“Our vaccination program is a manifestation of our digital progress,” he said, adding that “Digital has been a core ingredient in our COVID response, enabling us to continue serving citizens during lockdown.”

“People expect QR codes so they can visit places, just as they expect less Draconian measures over time,” added Cilento, lamenting Australia’s performance in the two.

“What we learned was that lockdowns must be well designed, explained, implemented and enforced. At the same time, they must be matched by a smart economic policy mix,” Pierrakakis said.

Speaking of Greece’s path to achieving the UN’s 17 Sustainable Development Goals, he said the government’s proposal for the EU Recovery and Resilience Facility (RRF) appropriated more than 33% on green and more than 23% on digital, partly given the increasing intertwining of the two.

“Our strategy of inclusiveness goes hand in hand with that too,” he added, explaining the importance of social cohesion for areas transitioning from environmentally damaging energy production to tourism, for instance. The Ranking measures “social cohesion” under its “societal framework” criterion.

Greece has gone up the rankings year by year over the past five years, this year taking 46^th position.

What will spell long-term success? The consensus was that the ultimate determinant of economic competitiveness will be the successful rollout of vaccination programs.

Read the full report here.