2020 Index of Economic Freedom

Taiwan

OVERALL SCORE77.1
WORLD RANK11
Rule of Law

Property Rights86.9

Judicial Effectiveness70.1

Government Integrity68.9

Government Size

Tax Burden75.0

Government Spending90.5

Fiscal Health91.0

Regulatory Efficiency

Business Freedom93.9

Labor Freedom60.3

Monetary Freedom82.7

Open Markets

Trade Freedom86.0

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 23.6 million
  • GDP (PPP):
    • $1.3 trillion
    • 2.6% growth
    • 2.4% 5-year compound annual growth
    • $53,023 per capita
  • Unemployment:
    • 3.7%
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $7.0 billion

Taiwan’s economic freedom score is 77.1, making its economy the 11th freest in the 2020 Index. Its overall score has decreased by 0.2 point due to slight declines in scores for monetary freedom and trade freedom. Taiwan is ranked 5th among 42 countries in the Asia–Pacific region, and its overall score is well above the regional and world averages.

The Taiwanese economy has been rated mostly free for a decade. GDP growth over the past five years has been steady.

The weakest link in Taiwan’s economic freedom is in the area of labor freedom, where government policies aimed at increasing worker welfare, including an increase in the minimum wage, may hurt productivity and flexibility. In 2019, the government simplified the process for the application, screening, and approval of foreign investment, and this should encourage higher levels of foreign direct investment.

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Background

Taiwan’s dynamic multiparty democracy operates under a 1947 constitution that was drawn up originally to include all of China. Its economy is one of the wealthiest in Asia. The Democratic Progressive Party (DPP) returned to power when Tsai Ing-wen was elected president in 2016 but was defeated decisively in local elections held in 2018. It is expected that the presidential election scheduled for 2020 will be very competitive. China’s ongoing attempts to isolate Taiwan diplomatically place pressure on the country’s long-term ability to maintain its presence in overseas markets. Taiwan’s dynamic capitalist economy is driven largely by industrial manufacturing, especially exports of electronics, machinery, and petrochemicals.

Rule of LawView Methodology

Property Rights 86.9 Create a Graph using this measurement

Judicial Effectiveness 70.1 Create a Graph using this measurement

Government Integrity 68.9 Create a Graph using this measurement

Interests in property are enforced, and the government has a reliable recording system for mortgages and liens. Enforcement of contracts is strong. The judiciary is independent, and the court system is largely free of political interference. Corruption is significantly less pervasive than in the past, but it remains a problem. Political and business interests are closely intertwined, and this leads to malfeasance in government procurement.

Government SizeView Methodology

The top personal income tax rate is 45 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and interest taxes. The overall tax burden equals 8.9 percent of total domestic income. Government spending has amounted to 17.8 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 2.0 percent of GDP. Public debt is equivalent to 35.0 percent of GDP.

Regulatory EfficiencyView Methodology

The overall freedom to conduct business is relatively well protected under the transparent regulatory umbrella. A core theme of the current Tsai administration is improving labor welfare, and unemployment has remained under control. Most prices are determined by the market, but state-owned enterprises in the utilities, energy, postal, transportation, financial, and real estate sectors exert market influence.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals about 123.0 percent of GDP. The average applied tariff rate is 2.0 percent, and 369 nontariff measures are in force. New foreign investment may be screened by the government, but the overall investment regime is transparent. The financial sector, dominated by banking, has gradually become more competitive, offering a range of financial instruments on market terms.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.40.0
2Hong Kong89.1-1.1
3New Zealand84.1-0.3
4Australia82.61.7
5Taiwan77.1-0.2
6Malaysia 74.70.7
7South Korea741.7
8Japan73.31.2
9Macau70.3-0.7
10Kazakhstan69.64.2
11Thailand 69.41.1
12Indonesia67.21.4
13Brunei Darussalam66.61.5
14Philippines64.50.7
15Fiji63.41.2
16Kyrgyz Republic 62.90.6
17Bhutan62.1-0.8
18Samoa62.1-0.1
19Vanuatu60.74.3
20China59.51.1
21Vietnam58.83.5
22Tonga58.81.1
23Papua New Guinea58.40.0
24Sri Lanka57.41.0
25Cambodia57.3-0.5
26Uzbekistan57.23.9
27Maldives56.53.3
28India56.51.3
29Bangladesh 56.40.8
30Mongolia55.90.5
31Laos55.5-1.9
32Pakistan 54.8-0.2
33Afghanistan54.73.2
34Nepal54.20.4
35Burma540.4
36Solomon Islands52.9-1.7
37Tajikistan52.2-3.4
38Micronesia520.1
39Turkmenistan46.5-1.9
40Timor-Leste45.91.7
41Kiribati45.2-2.1
42North Korea4.2-1.7
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