Taiwan has the resilience to make a recovery

Just when Asia seemed to be getting back on the economic fast track, the devastating earthquake in Taiwan and fresh political turmoil in Indonesia have slowed the region's march back to high growth rates and optimism.

On Tuesday, an earthquake registering 7.6 on the Richter Scale hit Taiwan, killing more than 2,100 people, toppling buildings and cutting power to most of the island. Initial estimates put the damage at 100bn Taiwanese dollars (pounds 2.1bn) and the government immediately trimmed its 1999 economic growth target to 5.5 per cent from the earlier 5.74 per cent forecast.

The biggest economic casualty was Taiwan's huge microchip business. The island is home to the industry's largest foundry, Taiwan Semiconductor Manufacturing Co, and altogether supplies 10 per cent of global chip demand.

With the Hsinchu Science Industrial Park, Taiwan's answer to California's Silicon Valley, knocked out for up to three weeks, losses in the semiconductor sector could rise as high as pounds 50m. More significantly, shares in Intel and other big chip makers started to tumble on Friday as Wall Street analysts warned that Taiwan's earthquake could have a worse than expected impact on the fourth quarter.

Taiwan supplies 55 per cent of the world's motherboards, the main boards that hold all the chips in personal computers; 11 per cent of the world's memory chips; and more than 80 per cent of the world's graphics chips. Many of these are sold on to microprocessor manufacturers such as Intel. With capacity already tight in the run-up to Christmas, and Intel supplying 80 per cent of the microprocessors to personal computer makers, analysts warned that the short-term outlook was not good.

But for Taiwan as a whole, there were glimmers of hope. To start with, the epicentre was in the very centre of Taiwan, close to scenic Sun Moon Lake. While this hit the Hsinchu Science Industrial Park hard, it meant the island's two biggest population centres, Taipei in the north and Kaohsiung in the south, were relatively unscathed.

Second, although several dozen apartment blocks collapsed and a handful of builders and architects have been detained for shoddy construction, the scale of damage was significantly lower than in Turkey, which suffered a similar quake last month. Taiwan's resil-ience has been largely attributed to far tighter enforcement of building regulations, which shows the island has moved on from its corrupt past.

Taiwan's government is also hoping that the strong economic fundamentals that helped the island dodge the worst of Asia's financial crisis will carry it through the quake aftermath. It has already set up a low-interest loan facility for families and businesses that have suffered from the quake and announ- ced tax breaks for reconstruction. In addition, Chang Yao-tsung, chief statistician at the Economic Ministry, has predicted a reconstruction boom next year to take economic growth well past 6 per cent.

There has been no such optimism in Indonesia, where the terrors of East Timor, a banking scandal and two days of rioting in the capital over new security laws have pushed the nation to the brink of becoming a pariah state.

On the latest estimates, rampaging militias and Indonesian soldiers have slaughtered at least 7,000 civilians in East Timor for exercising their right to vote in a referendum on independence on 30 August. A staggering 600,000 people, three-quarters of East Timor's population, have been driven from their homes.

The violent protests in Indonesia's capital, which led to at least four deaths, erupted as UN peace- keeping troops moved into East Timor in a bid to restore order. Students were protesting against a new law which, they say, gives the military more sweeping powers. While the Indonesian government claims the legislation makes the country more democratic, it announced on Friday it would delay passing the bill in the face of such violent opposition.

All this instability comes against a banking scandal that reaches to the top echelons of power in Indonesia and has blocked all further assistance from the International Monetary Fund and the World Bank in helping the country recover from the Asian financial crisis. Both institutions are refusing to co-operate until the Bank Bali scandal - in which millions of dollars of government funds allocated for bank recapitalisation were allegedly diverted into a political slush fund - is fully investigated and the results published.

Although Indonesia has sufficient reserves for the next month, economists have already lowered forecasts for this fiscal year from 2 per cent growth to a contraction of 0.8 per cent. Ethnic Chinese businessmen, still traumatised by a wave of fatal attacks on their community in 1998, are again moving funds offshore, putting pressure on the rupiah and leaving the immediate future of the nation uncertain.

So Indonesia is in a big hole, and Taiwan in a significantly smaller but still noticeable dip. The picture across the rest of Asia is mixed. Thailand, which prompted the financial crisis two years ago when it was forced to devalue its currency, is recovering nicely. South Korea and Hong Kong are moving cautiously forward, as are Singapore, Malaysia and the Philippines.

But China and Japan, the giants of East Asia which managed to avoid most of the Asian financial flu, are both looking slightly shaky. China's flagging economic growth, coupled with rising unemployment and almost two years of deflation, is leading to fears of currency devaluation. In Japan, optimism over a spurt of growth earlier in the year has not carried through. Consumer sentiment is negative and public debt is close to a huge 8 per cent of gross national product.

One thing is certain: those heady days of the late 1980s and early 1990s, when economists hailed the Asian powerhouses as the leaders of the next millennium and multinationals dribbled with delight over market potential, have long since gone. Asia may still be the great economic hope of the future, but it won't be any time soon.

PROMOTED VIDEO
News
REX/Eye Candy
science
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?