Taiwan’s government implemented the Land-to-the-Tiller policy, transferring land ownership from large landlords to small farmers. This raised rural incomes and helped stabilize the countryside, creating a broader base of consumers and savings. The reform also supported later industrialization by easing social tensions and enabling labor to move from farms into factories.
Taiwan launched its First Four-Year Economic Development Plan (1953–1956), using planning to coordinate agriculture, infrastructure, and early industry. The plan aimed to raise production and earn foreign exchange to reduce dependence on external support. It marked an early pattern of state-led coordination paired with private-sector growth.
The Second Four-Year Plan (1957–1960) promoted import substitution—making goods at home that had previously been imported. This approach built basic industrial capacity, but it also revealed limits: protected domestic markets and controls could slow efficiency and competitiveness. These constraints set up later reforms toward export promotion.
Taiwan promulgated the Statute for Encouragement of Investment, using tax and other incentives to stimulate private manufacturing investment. The policy supported faster capital formation and helped attract foreign and overseas Chinese investment. It also signaled a more active, rules-based approach to industrial promotion.
Taiwan’s Nineteen-Point Program for Economic and Financial Reform (1961–1964) reduced some controls and improved conditions for private business and trade. These reforms supported a shift toward export promotion by making it easier to import inputs, finance production, and sell abroad. They helped connect state planning with stronger market incentives.
Taiwan’s legislature passed a special statute creating the legal framework for the Kaohsiung Export Processing Zone (EPZ). EPZs were designed to reduce red tape for imported components and to focus production on exports. This legal step mattered because it turned export promotion into a scalable, government-backed institution.
The Kaohsiung EPZ opened in Qianzhen District, widely described as the world’s first export processing zone. The zone offered streamlined customs and an export-only orientation, encouraging foreign and domestic firms to assemble goods for overseas markets. It became a practical tool for turning policy goals—exports and jobs—into factory investment on the ground.
To scale up export-led growth, Taiwan established additional EPZs: Nantze (Nanzih) in Kaohsiung and Taichung. These zones broadened the model beyond one port area and helped diversify export manufacturing. Together, the EPZ network strengthened Taiwan’s export capacity and its ability to attract investment tied to global supply chains.
Taiwan founded the Industrial Technology Research Institute (ITRI) to accelerate industrial technology development and support upgrading beyond labor-intensive manufacturing. ITRI provided applied R&D and a bridge between government goals and firm capabilities. Over time, its labs and spin-offs became central to Taiwan’s move into higher-value electronics and semiconductors.
In response to energy and infrastructure bottlenecks (and the global oil shock), Taiwan began the Ten Major Construction Projects. These large public works improved highways, ports, airports, and power supply. Better infrastructure reduced costs for exporters and supported the transition from light industry toward more capital- and technology-intensive production.
ITRI signed an integrated circuit (IC) technology transfer and licensing agreement with RCA, formally bringing semiconductor process know-how to Taiwan. The deal strengthened learning-by-doing in advanced manufacturing and helped train engineers and managers. It shows how Taiwan combined state institutions with targeted foreign technology acquisition to support export-oriented upgrading.
Taiwan established the Institute for Information Industry (III) to support the development of information and communication technologies. The organization helped build skills, conduct applied research, and support policy and industry development in computing and related fields. This complemented earlier export promotion by strengthening the capability base for more advanced exports.
United Microelectronics Corporation (UMC) was formally established as a spin-off from ITRI, becoming Taiwan’s first private integrated circuit company. This was an institutional turning point: the state used public R&D and planning to create firms that could compete in advanced manufacturing. It also signaled a move from technology import and learning toward domestic semiconductor production.
The government established Hsinchu Science Park to concentrate research, skilled labor, and high-tech firms in one place. The park supported industrial clustering—companies benefited from shared suppliers, talent, and knowledge spillovers. This marked a shift from mainly using EPZs for assembly exports toward building an innovation-oriented export base.
Taiwan lifted martial law, ending a long period of emergency rule. Political liberalization mattered economically because it coincided with wider opening policies and an economy increasingly driven by private firms integrated into global markets. The change also set the stage for later reforms and a more openly contested debate about industrial policy priorities.
By around 1990, Taiwan’s development model had shifted from a mainly agrarian economy to one centered on export manufacturing with growing high-tech capability. Export processing zones helped scale early labor-intensive exports, while science parks and public R&D institutions supported upgrading into electronics and semiconductors. The overall outcome was a durable export-oriented industrial structure shaped by state-led planning tools and strong private-sector execution.
Taiwan: State-Led Industrialization and Export Promotion (1950–1990)