By Frank Bickenbach and Wan-Hsin Liu, courtesy of IFW Kiel
In the coronavirus crisis, Taiwan and South Korea have shown that they dispose of efficient governance systems, high-quality research and public services and highly developed digital skills and infrastructures, and that they can successfully use these capacities to meet challenges. These capacities are among the key characteristics of an adaptable and resilient business and investment environment. Taiwan and South Korea have therefore gained an advantage in attracting more foreign investors in the future, argue Frank Bickenbach and Wan-Hsin Liu in their analysis “How Taiwan and South Korea Contained the Spread of Covid-19 and Why this Matters for Attracting FDI”. Both are researching globalization issues, in particular foreign direct investment, at the Kiel Institute.
After their experiences with the related diseases SARS in 2002/2003 and MERS in 2015, respectively, Taiwan and South Korea have reformed their institutions for the management of (health) crises, which allowed them to quickly take effective measures to contain the spread of COVID-19 and coordinate these measures across ministries, public authorities, medical centers, industries, and the general public.
Both Taiwan and South Korea have a highly developed medical research and health care infrastructure. This allowed them to test for the new corona virus in sufficient numbers at an early stage and to identify infected persons in time, which is one reason why the economy and public life were subject to only moderate restrictions.
Their medical treatment capacities are high; South Korea has the second most acute care hospital beds per 1,000 inhabitants, 7.1, after Japan. Taiwan has almost as many intensive care beds per 100,000 inhabitants (30) as Germany (34) and much more than, for example, Italy (9).
In order to interrupt chains of infection as quickly as possible, digital technologies were used early on to track the movements of infected or at-risk persons via GPS and mobile phone network. Taiwan also applied digital technologies to help coordinate the supply and demand for face masks during the crisis.
As a result, despite their geographical proximity to and very close economic linkages with China, Taiwan and South Korea recorded far fewer people infected with the new corona virus and a much lower mortality rate than many other economies. Up to May 25, only 19 infected persons per 1 million inhabitants were reported in Taiwan and 217 in South Korea. In Germany, this figure was 2,153, in Italy 3,804, and in the United States 5f,023. At the same time mortality rates were much lower in Taiwan (1.6 percent) and in South Korea (2.4 percent) than in Germany (4.6 percent), in Italy (14.3 percent), and in the United States (5.9 percent).
“Ongoing uncertainty and the global recession mean that overall foreign direct investment during and after the coronavirus crisis will be lower than before. At the same time many companies and economies will increasingly depend on foreign capital to overcome the economic crisis. Against this background competition for foreign investors will increase. This is where Taiwan and South Korea have gained a major advantage, because the capacities and competences they have demonstrated in the Corona crisis will also be crucial for dealing with other economic, environmental and social challenges in our globalized world,” the authors say.
See the full briefing here.
Frank Bickenbach joined the Kiel Institute for the World Economy in 1993. Currently, he is Deputy Head of Research Center “Global Division of Labor” and a Senior Researcher of Research Center “Knowledge Creation and Growth”. His recent research focuses on innovation and growth in China, sectoral and regional structural change and foreign direct investment. Dr. Wan-Hsin Liu is a Senior Researcher in the Research Centers „The Global Division of Labor” and “Knowledge Creation and Growth” at the Kiel Institute for the World Economy. She started to work as a researcher at the Kiel Institute in 2007. Since 2016 she is also the Coordinator of the Leibniz Science Campus “Kiel Centre for Globalization”.