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Cablegate: Taiwan Population Focus - Quantity Vs. Quality

This record is a partial extract of the original cable. The full text of the original cable is not available.

010806Z Aug 05

UNCLAS SECTION 01 OF 03 TAIPEI 003197

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON SCUL SOCI TW
SUBJECT: Taiwan Population Focus - Quantity vs. Quality


1. (U) SUMMARY: Like other economies in East Asia, Taiwan
has experienced a decline in births and an aging population.
In the Taiwan government and press, there have been two
contrasting approaches to the issue of low fertility. Some,
including the Ministry of the Interior, Academia Sinica, and
the popular press, tend to view the decline in births as a
serious problem threatening Taiwan's economic growth.
Others, including the Council for Economic Planning and
Development, predict that a slight drop in population may
even be beneficial, and argue that the focus should be on
the population's quality, not quantity. The Ministry of the
Interior is developing a population white paper with policy
guidelines for promoting increased fertility, but its
conclusions have led to disagreement within the Executive
Yuan, and approval of the white paper has been postponed.
End summary.

-----------------------------------
Larger Population, Smaller Families
-----------------------------------
2. (U) Taiwan's population has undergone significant
changes over the past fifty years, following global trends.
Between the 1950s and 1980s, as Taiwan's economy developed,
its population grew dramatically in size and density. Its
population increased from 9.1 million in 1955 to 22.8
million in 2005, and population density (including non-
arable land) grew from 252 per square kilometer in 1955 to
626 per sq.km in 2005 - making it one of the world's most
densely populated countries. At the same time, there has
been a decline in family size, as Taiwan made a rapid
transition from a rural agrarian society to a highly
developed industrial economy, extended families began to
split into nuclear units, and women entered the workforce in
greater numbers. Compared with several decades ago, young
people tend to spend longer periods being educated and delay
marriage and childbearing.

3. (U) These trends lowered the total fertility rate (TFR)
from 5.6 in 1961 to 1.2 in 2004. (Note: total fertility
rate, or the average total number of children born to a
woman over the span of her childbearing years, is a useful
measure of population trends.) Taiwan's TFR is among the
lowest in the world -- equal to South Korea and several
Eastern European countries, and higher only than Hong Kong
and Macau's rates of 0.9. In 2004, the Council for Economic
Planning and Development (CEPD) released population
projections based on a range of fertility rates. In the
middle projection, in which Taiwan maintains its TFR of 1.2,
the total population will begin to decline in 2023, and the
size of the workforce (people aged 15 to 65) will decline
beginning in 2016.

--------------------------------------------- --------
Some Government Agencies Concerned About Low Fertility
--------------------------------------------- --------
4. (SBU) While there has been extensive local press
coverage treating low fertility as a social crisis, there is
a range of views within the Taiwan government on the
seriousness of the issue. According to Dr. Lin Dajun of
CEPD, policymakers fall into two camps. The Ministry of the
Interior's Population Administration Department, the primary
government agency dealing with population issues, as well as
influential researchers at Academia Sinica, view low
fertility as a problem with serious implications for the
size of Taiwan's workforce, its economic growth rate, and
its ability to support a steadily growing number of
retirees. Proponents of this view argue that the increasing
dependency ratio, or the number of workers supporting each
retiree, is the main cause for concern. Currently, each
dependent is supported by two workers, but if the low
fertility trend continues, the ratio will be one to one
within fifty years. In order to reverse this trend, these
policymakers argue that the government should try to
increase the fertility rate by encouraging couples to have
larger families.

--------------------------------------------- -----------
For Other Agencies, Quality More Important Than Quantity
--------------------------------------------- -----------
5. (SBU) On the other hand, top officials within CEPD tend
to view low fertility as a less worrisome trend. Lin said
that many at CEPD argue that a slight drop in population
would even be beneficial, given Taiwan's high population
density and growing legal and illegal immigration. The
Ministry of Finance is also wary of devoting significant
resources to address population trends. CEPD has argued
that rather than devoting resources to increasing the birth
rate, the government would be better served by increasing
participation in the workforce, raising the retirement age,
and changing the pension system. It should also consider
further relaxing immigration laws to attract more foreign
labor.

6. (SBU) The issue of population quality has received recent
attention in the press, which has described a popular
anxiety about deterioration in the quality of Taiwan's
population as talented, highly educated people are drawn to
work in the Mainland, while people with lower education and
income levels, especially foreign brides, immigrate from the
Mainland and Southeast Asia. (Note: the phenomenon of
increasing numbers of foreign brides will be examined
septel.) A recent editorial in Taiwan's Business Week
(Shangye Zhoukan) magazine noted that these trends have
caused popular concern, but argued that limiting immigration
is not the answer to improving the quality of the
population. CEPD's Lin stated that quality rather than
quantity of the workforce will be a greater challenge in
maintaining Taiwan's economic growth, and noted that any
improvement in quality will require an even greater focus on
training and education. He argued that Taiwan's egalitarian
society would not accept a population policy targeting
college-educated people to have more children, as has been
attempted in Singapore.

--------------------------------------------- ---------
Disagreement Over White Paper and Financial Incentives
--------------------------------------------- ---------
7. (SBU) These differences in opinion have come to a head
in recent discussions about the population policy white
paper. The Ministry of the Interior prepared a draft white
paper, giving recommendations for both financial and non-
financial methods to promote increased fertility. Policy
guidelines from the white paper were presented to the
Cabinet for discussion in late June, but because of
disagreements among agencies about the feasibility of some
initiatives, the Executive Yuan (EY) has postponed approval
until after further discussions. Neither MOI, CEPD, nor
Academia Sinica were at liberty to provide details of the
White Paper's contents before its approval by the EY, but
based on discussions with staff at CEPD, MOI, and Academia
Sinica, it is likely that among the proposed initiatives are
tax incentives for second or third births, changes to
parental leave regulations, and improvement of day-care
facilities.

8. (SBU) Tax and cash incentives are frequently proposed to
encourage couples to have additional children, because
couples often cite the high cost of raising children as an
obstacle to having larger families. However, there is
considerable opposition within the government, especially
the Ministry of Finance, to extending them, because it would
reduce tax revenue. According to CEPD's Lin, the prevailing
view at CEPD is that "there's no use in spending money to
increase fertility," and that creating tax incentives for
couples to have more children requires a large input of
resources to increase the fertility rate by a very small
amount. One study cited by Academia Sinica researcher Chen
Chaonan estimated that increasing the personal tax exemption
by US$33 during the period 1990-1996 resulted in an increase
of only 1.2 births per thousand women, and cost the
government up to US$612,000 in lost revenues for each
additional birth. At the same time, CEPD's Lin predicted
that couples are unlikely to be persuaded by a relatively
small tax exemption to have additional children. A proposed
one-time incentive of US$1000 for a third birth has received
negative press coverage for this reason.

9. (SBU) In its white paper, the Ministry of the Interior
is likely to propose a mix of financial and non-financial
incentives to promote fertility. The MOI currently has a
program providing a one-time subsidy of US$320 for families
with a five-year old child, and they plan to expand the
program to include families with younger children. MOI's
Hsieh Ai-ling argues that while tax and cash incentives may
not be enough to convince people to have additional
children, they are a way to reinforce the concept that a
shrinking population may affect Taiwan's economy in the
future. Hsieh stated that "the bottom line is we need to
change attitudes, not incentives."

-------
Comment
-------
10. (U): The trend in Taiwan towards later marriage and
fewer children is part of a broader trend throughout the
developed world. A highly educated society like Taiwan, in
which both men and women spend much of their twenties and
thirties in school and focused on starting their careers,
will necessarily tend to have smaller families, and there is
little that a government can do, with either financial or
non-financial incentives, to reverse that trend. While a
drop in the young population may present difficulties in
supporting the growing number of retirees, it is still very
uncertain that Taiwan's low fertility will cause the severe
social problems that have been predicted. Cable prepared by
AIT Econ intern Anne Bilby. End comment.

PAAL

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