The Impact of APROC on Taiwan’s Economy: A CGEAnalysis of Deregulation

Abstract

The Taiwan Government defines the Asia‐Pacific Regional Operations Center (APROC) project as designed ‘to transform Taiwan into a regional economic center through overall liberalization and internationalization’. From this definition and the targets of APROC as set by the Taiwan Government, it is not difficult to see that deregulation is one of the basic means of achieving its goals. In this paper, we use a computable general equilibrium (CGE) model to evaluate the possible effects of this deregulation. The effects of deregulation on the economy go through four channels in the model: (i) deregulation liberalizes the market; (ii) deregulation moderates factor market distortion; (iii) deregulation attracts foreign investment, speeds up capital accumulation and enlarges capital stock in Taiwan; and (iv) deregulation attracts foreign investment and hence improves technology. Six simulations are conducted in this paper. All of the simulations show positive effects on Taiwan’s economy as a whole, while for individual sectors the effects are various.