Minister Kuo Jyh-Huei's oral administrative report to the 2nd session of the 11th Congress of the Legislative Yuan
Date: 2024-10-30
(The following content is a translation of excerpts from the Minister's oral administrative report)
Dear Chairman and Legislators,
It is such a pleasure for me to deliver the Administrative Report of the Ministry of Economic Affairs (MOEA) before the Economics Committee. I will briefly explain the current economic circumstances and the focus of the MOEA’s administration. Please advise as necessary.
I. Current Economic Situation
The global economy has shown resilience after going through challenges, such as the epidemic, supply chain disruptions, wars, and interest rate hike cycles. Inflationary pressures in major countries, such as the United States and Europe, have gradually eased. Meanwhile, global economic and trade activities recovered in the first half of the year. The latest forecasts from international institutions such as the Organization for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) indicate that the global economic growth will remain at 3.2% this year, which is comparable to that of last year.
Despite increased global economic risks stemming from geopolitical conflicts, US-China trade barriers, and the U.S. presidential election, global AI demand remains strong. S&P Global raised its generative AI revenue forecast, for which the average annual compound growth rate for the next five years (up to 2028) is projected to be 59%. This year, large technology companies invest tens of billions of dollars in AI infrastructure. The total scale is expected to exceed US$1 trillion within five years. This will impose a monumental influence on the economy.
Taiwan is benefitting from the investment boom in AI. According to the latest forecast from the Directorate General of Budget, Accounting and Statistics in August this year, as business opportunities for emerging technology applications, such as AI, increase and global terminal demand recovers, Taiwan’s economic growth will reach 3.9% this year. Our growth will be higher than the global average, Japan, South Korea, Singapore, and other neighboring countries in Asia. Furthermore, Taiwan is expected to continue to grow by 3.26% next year.
II. Direction and Implementation of the MOEA's Administration
For our administration, the MOEA will prioritize the development of Trusted Industry Sectors, such as semiconductors and AI. Moreover, the MOEA will accommodate innovation and inclusive growth through the digital and net-zero transitions of micro, small and medium enterprises. In addition, to effectuate the second energy transition, apart from developing diversified green energy, the MOEA will also accelerate the implementation of deep energy saving, assist enterprises in reducing carbon emissions, so that we can jointly achieve net-zero sustainability. In the meantime, the MOEA will make every effort to ensure a stable supply of water and electricity, allowing companies to operate and invest with peace of mind. In conjunction with the innovative economic development model of "Enriching Domestic Businesses with Global Trade Relations" and "Pursuing Global Opportunities with Domestic Supply Chains, " we seek to align with the international market, while expanding our domestic market. All of which will accelerate the President’s vision of establishing an "Economy that Never Falls."
1. Promoting Development of Semiconductor, AI, Defense Industry and Other Trusted Industry Sectors
In the face of the US-China confrontation, the MOEA will strengthen the supply chain security of the semiconductor industry and increase the independence of domestic semiconductor packaging equipment and materials. Meanwhile, in response to the price war stemming from China's mature process development, the MOEA works to accelerate industry development of advanced chip manufacturing technologies, such as high-computing power AI, heterogeneous integration and silicon photonics. In addition, the output proportion of advanced chip manufacturing by the IC design industry will increase from 39% to 43% this year.
AI development has become a global focus and an important strategy for various countries. Taiwan already possesses advantages in advanced chip manufacturing. The MOEA has selected ten featured industries, such as metal machinery and medical care, for which pertinent AI application models will be developed to cater to these industries. The penetration rate of AI application in the manufacturing industry is expected to reach 50% in 2028 (currently at 12.3 %). Whereas, the service industry and micro, small, medium and enterprises are expected to introduce 80,000 AI applications and cultivate 200,000 AI talents. The MOEA has facilitated many major international enterprises to come to Taiwan and cooperate with domestic manufacturers in research and development. Meanwhile, we work to attract overseas talents and increase the proportion of international talents to more than 50% to fortify the foundation of Taiwan's AI talent pool.
In terms of the defense industry, the MOEA makes use of the domestic market to build key technological capabilities, such as drones and countermeasure systems. Furthermore, we seek to promote the Taiwan Excellence Drone International Business Opportunities Alliance (TEDIBOA), and focus on catering to the demand of the non-red supply chain, thereby expanding international cooperation. These efforts are made to meet the goal of developing drones by 2028 where the output value is set to increase by ten folds to more than NT$30 billion. In terms of robot dogs, the Industrial Technology Research Institute (ITRI) formed a task force, for which a robot dog prototype is expected to be produced by the end of this year. This will drive the independent development of the robot dog industry chain.
2. "Enriching Domestic Businesses with Global Trade Relations" Extends Industrial Strength, and "Pursuing Global Opportunities with Domestic Supply Chains" Expands Domestic Business Opportunities
To allow industries to expand their "global presence and international markets from a solid base here in Taiwan," the MOEA initiated the "Enriching Domestic Businesses with Global Trade Relations" policy. Targeting Taiwan's competitive industries, large corporates will assist small and medium-sized enterprises in overseas deployment. The "large-leading-small" model will allow Taiwan businesses to form industrial clusters. The MOEA is set to establish preparatory offices and service companies in key countries to provide Taiwan businesses with one-stop services, including land acquisition, company registration, factory construction, manpower recruitment, and acquisition of water and electricity supply. A service window will be established by the end of this year. The MOEA will also work to avoid double taxation for businesses, provide tariff and tax concessions, and administrative convenience. Moreover, to promote Taiwan's co-branding, a Taiwan Select section was set up in Malaysian supermarkets since August this year. Similar measure and promotional activities are set to be taken in supermarkets in the United States, Canada and Spain to assist food companies in developing overseas business opportunities and marketing Taiwan Select foods.
The "Pursuing Global Opportunities with Domestic Supply Chains" policy focuses on expanding the domestic consumer market and investment opportunities, and accelerating the development of biotechnology, medical and other healthcare industries. Meanwhile, a service industry investment team was established under Invest Taiwan. Dedicated personnel of the team will provide customized services. The team also seeks to attract the top 100 international luxury brands to enter our market, and world-class health care companies to set up their businesses in Taiwan, thereby establishing a high-quality consumer environment.
3. Promote the Development of Energy Services Companies (ESCOs) and Accelerate Implementation of Deep Energy Saving
The MOEA plans to support energy services companies (ESCOs) in expanding their energy supply, and improve the energy-saving goals of large users. We will also provide incentives and introduce private resources to assist users in implementing energy-saving improvements. Our efforts are expected to drive an energy-saving output of NT$900 billion in 2030.
In terms of industry, by promoting the development of ESCOs, the MOEA will assist businesses in making energy-saving improvements, adopting low-carbon and smart technologies, and driving dual-axis transition. In terms of financial assistance, a special loan credit guarantee for ESCOs has been established. With a credit insurance limit of NT$5 billion, each ESCO is provided with a maximum additional underwriting amount of NT$300 million. Furthermore, the development of energy-saving policies by the insurance industry is also promoted to reduce the risk of capital investment in ESCOs. For large energy users consuming more than 10,000 kilowatt-hours, the power saving target is increased from 1% to 1.5% according to regulations. With large corporates leading small and medium-sized enterprises, businesses can work together with suppliers to take on energy-saving improvements. As for residential users, the public is encouraged to replace old home appliances with optimal energy efficiency products. In the next two years (2025 to 2026), another 4.08 million old home appliances are expected to be replaced.
4. Digital and Net-Zero Transitions of Micro, Small, and Medium Enterprises Accommodate Innovation and Inclusive Growth
The MOEA will continue to assist micro, small, medium and enterprises in their diversified growth. Through three major strategies—digital transition, net-zero transition, and distribution development, the MOEA seeks to build an ecosystem suitable for the development of micro and small enterprises. An output of more than NT$275 billion is expected to be created in four years.
In terms of digital transition, the MOEA assists companies in adopting AI tools and strengthening training of AI digital talents. Subsidy programs are provided for companies with less than 30 employees to reduce the impact of basic salary increases. For net-zero transition, the MOEA disseminates carbon reduction knowledge through guilds. Using local resources, the MOEA provides carbon health inspection consulting and guidance to micro, small, medium and enterprises. Furthermore, the MOEA also assists in the adoption of energy-saving services provided by ESCOs to improve carbon emissions. In terms of distribution development, the MOEA plans to expand distribution channels for local merchants and incorporate co-branding such as Taiwan Select to help companies expand overseas markets. Supplemented with two supporting measures, namely the "Inclusive Financing" and "Tax Incentive," the MOEA is set to provide micro, small, medium and enterprises with less than 30 employees with project loans and interest subsidies. This serves to strengthen their financial support in digital transition, net-zero transition and distribution development.
5. Promote the Development of Diversified Green Energy and Ensure Steady Water and Electricity Supply
The total solar photovoltaic installations in Taiwan currently reaches 13.7GW, which is 11 times greater than that of 2016. In the meantime, a total of 372 wind turbines have been installed for offshore wind power generation. Diversified green power ensures energy independence, especially geothermal power generation. Currently, the MOEA is exploring ten geothermal sites including Macao in Mount Datun, and Ruisui Township in Hualien County. As for hydrogen energy, the MOEA combines resources of the public sector and state-owned enterprises to cooperate with countries with advanced technology. The collaboration is aimed to expand the application of hydrogen energy and monitor the global development of hydrogen energy.
To meet industrial development needs and consumption of the public, the MOEA reviews the growth of electricity use on an annual rolling basis. To ensure stable water supply and reduce flooding disasters, the MOEA promotes the development of diversified water sources and strengthens cross-regional water dispatch. In addition, in response to the recent flood control needs raised by various counties and cities, the MOEA has sought approval from the Executive Yuan to increase the budget by more than NT$8.4 billion. A total of NT$29.8 billion will be invested in flood control and water control.
III. Conclusions
This year, the Business Alliance and Market Trend Forum garnered 12 major international manufacturers which made the decision to invest in Taiwan. They had signed term sheets with the MOEA. Together with manufacturers whom we are certain will make investment in Taiwan, the future investment amount will reach NT$115 billion. SEMICON Taiwan also attracted more than 1,100 companies from 56 countries around the world this year, setting a new record for the event. Taiwan is equipped with top-tier manufacturing capabilities. The MOEA will use actions to innovate the execution of the AI cabinet to strengthen the Five Trusted Industry Sectors, assist micro, small, medium and enterprises in upgrading and transitioning, promote the second energy transformation, stabilize water and electricity supply, thereby fortifying Taiwan's key position in the world.