The airport economist: what’s happening in Taiwan’s economy?

Taiwan is close to being in the world’s 20 biggest economies by GDP. Trade and global connectivity are central, not least given the country’s key role in the global semiconductor industry. It also has a strong commitment to the environment and the economic opportunities around renewable energy.

Taiwan is a real surprise package. This small tropical island of just 23 million people has a GDP of nearly $760 billion, which puts it close to being in the top 20 economies in the world. It is a place full of energy and innovation that has invented items as diverse as the DVD, Connect 6 laptop projectors and bubble tea. More recently, it has become the centre of the world’s semiconductor industry (see Figure 1).

Figure 1: Taiwan's share of the global semiconductor market, 2023

Source: TrendForce 2023

Taiwan is an open democracy with presidential and legislative elections every four years. Its population is a mix of both Taiwanese indigenous and Chinese people, which sit alongside past influences from Japan, the Netherlands, Portugal (where it was once known as Formosa) and Spain.

Indeed, according to the deputy minister for foreign affairs, Ambassador Francois Wu, Taiwan’s strength as a liberal democracy is that it can draw on many influences from Europe (the Netherlands, Portugal and Spain), Asia (China, Japan and southeast Asian countries) and indigenous Taiwanese influences:

‘We are very successful with our European origin because in the past we have so many Taiwanese who studied in Europe and came back and shared the experience, trying to bring the good parts of Europe and mixing them with the good parts of Asia.’

Taiwan’s economy is also based on international trade, in particular due to its comparative advantage in semiconductors and increasingly renewable energy.

According to Chaney Ho – a distinguished Taiwanese business leader and chair of Advantech – the transformation of Taiwan into one of the world’s most advanced economies is quite the story:

‘Taiwan produces 92% of the world’s semiconductors as well as being a leader in AI [artificial intelligence], IT [information technology] and renewable energy. It all started when Japan and the USA invested in Taiwan in the 1970s and other foreign investors followed. It all started with the education system, with the emphasis on skills. Yes, the foreign investors came here, developed Taiwan, but the Taiwanese had already provided the education system.

‘We had to rely on foreign investment due to Taiwan’s small domestic market. We needed to go out, we needed to export, we needed to work with global companies. So in the beginning, we made the product for them and then we designed the product for them – and now we have become their very vital supply chain partner.’

Ambassador Wu agrees that trade is central to everything that Taiwan does:

‘It’s important for Taiwan to be a member of the TPP [the Trans-Pacific Partnership] so we can grow trade. If we were a normal recognised state, Taiwan would be a member of the G20 in terms of GDP per capita (see Figure 2) and trade. Taiwan’s GDP is more than a quarter of the French, we trade more than Russia, we trade more than Brazil, the world needs Taiwan to have a better trade system.’

Indeed, Taiwan is already a member of the World Trade Organization (WTO) and Asia-Pacific Economic Cooperation (APEC), and it has applied to be a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or just TPP for short). Taiwan is a miracle economy with international trade and global connectivity at its core.

Figure 2: Taiwan's GDP per capita versus the G20 average, US dollars, 2000 to 2025

Source: IMF 2025

What are the opportunities for Australia?

According to Christopher Lim of Austrade (the Australian Trade and Investment Commission): ‘Taiwan is a terrific place to do business. I think many Australians may think of Taiwan as a tourist destination, but there are just so many wonderful business opportunities. Of course, for the regular sectors like agri-food and education in tourism, it’s a fantastic market. But there are fantastic new areas such as renewable energy and hydrogen and the like, which are actually so important to Taiwan and Australia. When I first came to Taiwan, I noticed that clean energy was very important, the clean environment, the clean air that Taiwan has compared with other neighbours.’

Indeed, as the airport economist, I have been visiting Taiwan for over 20 years and I have noticed the country’s commitment to the environment and the green economic opportunities for Australia in Taiwan. It is great that a green tropical island is, in a sense, helping Australia to put the green back in the green and gold.

Should Australia and Taiwan have a free trade agreement?

Taiwan is now the only one of Australia’s top ten trading partners with which it does not have a free trade agreement (FTA). Taiwan is in the top six in terms of exports of goods and services and the top five in terms of import sources. An Australia-Taiwan FTA would help to grow trade and investment between the two economies.

But regardless of a formal FTA, Australia and Taiwan can do more together in terms of trade, investment, education, tourism and, of course, technology and innovation. The Australian state of Queensland is leading the way. According to Juna Ferrett, the state’s commissioner to Taiwan (Queensland has a longstanding presence in Taiwan):

‘Queensland has strengths in biotech, quantum computing, data centres and renewable energy that match well with Taiwan’s strengths. We have some great Queensland companies in Taiwan including Audeara in the healthcare space, who work with their Taiwanese partner Clinico, and Green Harvest, who work in green hydrogen.’

Juna herself is of Paiwanese heritage (an indigenous people of Taiwan) and talked to me a lot about indigenous entrepreneurship in Taiwan:

‘A lot of people don’t know this, but the indigenous Taiwanese are actually a part of the larger Austronesian family. So it’s very likely that a lot of the indigenous tribes from across the Pacific and southeast Asia originated from Taiwan. And we are growing the indigenous business partnerships between Taiwan and the rest of the Pacific.

‘Overall, Taiwan is a very open place. It’s a very welcoming place. It’s a place that has a lot of emphasis on relationships, so it’s a very relationship-driven business. A lot of the Taiwanese people, they’re very genuinely caring, they’re very warm and friendly, and they’ll go out of their way to help you.’

In conclusion, Taiwan is a great place to do business and to visit. Taiwanese people are the friendliest people to foreigners, and I would describe the Taiwanese style as ‘friendly efficiency’.

What also strikes me is that Taiwan is a liberal democracy with a culturally diverse people with both indigenous and Chinese influences, as well as those from Asia, Europe and the rest of the world.

In addition, on the world stage, Taiwan is a good global citizen. It would be an excellent member of the CPTPP, as it has been a model member of APEC and the WTO. And given Taiwan’s excellent record in dealing with SARS and Covid-19 with its advanced healthcare sector, the world needs Taiwan in the World Health Organization (WHO), especially if the world faces another pandemic.

Finally, this little green tropical island’s commitment to the global environment and renewable energy has shown the world that it can be easy being green.