Differences in East Asian Economic Institutions: Taiwan in a Regional Comparison

The term "developmental state" describes a very conscious, however, more or less market-friendly approach to economic development. The developmental states of the East Asian region can be characterized by a strong emphasis on diverse forms of state intervention generally; however, these sets of institutions differ in the Japanese, Taiwanese, and South Korean economies. The aim of this paper is to offer a comparative analysis of economic institutions and their alterations after the Asian financial crisis. The paper includes Taiwan, Japan and South Korea in the analysis. The paper seeks to define the peculiar features of Taiwanese economic institutions in contrast to Japan and South Korea. By doing so, the paper investigates different aspects of economic institutions in Japan, Taiwan and South Korea: firm structure, the ability of firms to shape and organize regional supply chains, the role of state and trade unions, the composition of GDP/GNP, economic openness (trade, exchange regimes) and financial sectors' capability to channel funds and encourage saving and investments. One of the findings of the paper is that Taiwan's defining feature is its very close cooperation with Mainland China. However, the deep interconnectedness of the two economies, often called "Chiwan", is going to be changed. The reason for this is not only a new economic policy, Taiwan's "New Southbound policy" of enhanced cooperation with countries of the Southeast Asia, South Asia and Oceania, but the upgrading of the Chinese economy, which is losing its place in the global supply chains as a cheap-labour country.