US embassy cable - 05TAIPEI3197

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. 
 
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Larger Population, Smaller Families 
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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. 
 
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Some Government Agencies Concerned About Low Fertility 
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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. 
 
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For Other Agencies, Quality More Important Than Quantity 
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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. 
 
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Disagreement Over White Paper and Financial Incentives 
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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." 
 
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Comment 
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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