Taoyuan City Investment Service Center

Introduction

In September 2022, a headline in the leading British periodical The Economist drew the attention of economists around the world: “The world enters a new era: Bail-outs for everyone!” This headline highlighted the double challenge posed by the pandemic and inflation being faced by governments around the world ^{(*Note 1)}.

Due to post-pandemic rises in consumer demand, manpower shortages, and the Russo-Ukrainian War, inflation has all but replaced COVID-19 as the main challenge faced by governments of various countries. The wider impacts of inflation mean that governments have to tighten monetary policies through central banks to curb inflation growth, while continuing to provide bailouts and assistance to help the public overcome difficulties brought about by soaring prices.

In terms of economic recovery, taking the G20 member states as an example, we can see that at present, there are still more than half of the major countries in the world which are still in recession, with a composite PMI index of less than 50 ^{(*Note 2)}. Even the US and EU economies are still in recession. We can see from this that The Economist headline (“Bail-outs for everyone!”) is not an exaggeration.

Source: Trading economics. Data retrieved on November 2022.

The Role of Local Governments: The Balance Between Revitalization and Anti-Inflation

Global bailout measures continued into the third year starting from 2020, and inflation emerged as a new challenge. As the frontline for implementation, how do local governments find a balance between bailouts, revitalization, and anti-inflation?

Firstly, there is actually no contradiction between bailouts and revitalization, apart from a difference in policy direction. Bailouts provide immediate and necessary assistance to those hit hard by the pandemic or inflation, and revitalization helps to build infrastructure for industries that can continue to operate, helping to expand consumer bases or develop new products, allowing these industries to regain their footing. The need for balance is mainly focused on coordinated allocation of budgets.

On the other hand, there may be policy contradictions between bailouts, revitalization, and inflation. Put simply, to combat inflation, monetary policy must be tightened to withdraw excess currency from the market via measures such as raising interest rates or reserve ratios. However, the essence of bailouts or revitalization policies is to release money to the public.

This was why former British Prime Minister Truss ran into a contradiction between monetary and fiscal policy when proposing a combined strategy of tax cuts and rising interest rates ^{(*Note 3)}.
 

In other words, the role of the government is not just to roll out policies to improve performance on paper, but to satisfy actual public needs. On the one hand, strengthening and extending enterprises and local businesses is the only way to maintain production capacities once the economy and consumer demand recovers. On the other hand, precise allocation of budgets through more creative or comprehensive methods allows budgets to be used for more effective strategies.

Taoyuan City Launches “Industry Bailout and Revitalization Program”

From the viewpoint of local governments faced with complex challenges, it is inevitable that bailout and revitalization measures will be carried out in tandem to be “effective.” These programs must be comprehensive, particularly during the early stages when the public and industries are impacted the most. 

Taking Taoyuan City as an example, the city government has successively launched a number of bailout measures since the outbreak of the pandemic, including the “Taoyuan 10 Bailout Programs.” This year, the city government officially approved the “2022 Taoyuan City Industry Bailout and Revitalization Program” and launched the “9 Major Bailout Measures” and “5 Major Revitalization Measures,” encompassing a total of 61 programs. The first wave of bailout and revitalization programs was launched between May to July of 2022, with total expenditures exceeding US$ 43.9 million . The “9 Major Bailout Measures” included 37 programs encompassing tax deferrals, tax cuts, tax deductions, industrial subsidies, transportation subsidies, household subsidies, agricultural and fishery subsidies, worker bailouts, and financing extensions; and the “5 Major Revitalization Measures” included 24 programs encompassing tourism and leisure, stores in business districts, market revitalization, industrial revitalization, and agricultural and fishery revitalization, providing comprehensive and immediate assistance to all industries ^{(*Note 4)}.

Precision should be emphasized when designing relevant mechanisms. Of the 9 major bailout measures, some were aimed at the needs of the public, to reduce the problems and obstacles triggered by economic challenges. For example, the “tax deferral” measures allowed taxpayers to postpone or defer tax payments, or pay taxes in installments; while “tax cut” measures reduced housing taxes paid by hotels and restaurants, suspended entertainment tax for businesses on hiatus, and made it possible to defer housing tax, land value tax, and license tax for 12 months or allow payments in 36 installments. These tax measures corresponded to the conditions of different industries ^{(*Note 5)}.

In terms of revitalization, there is a need to drive external and internal willingness to consume, so measures must be “effective.” For example, in terms of “tourism and leisure,” the Taoyuan Department of Tourism launched group travel subsidy programs such as “Meeting in Taoyuan 2.0” and “Traveling Through Taoyuan,” as well as six themed and subsidized tours (“Coastal Region,” “Northern Metropolitan Region,” “Southern Metropolitan Region,” “Mountainous Regions,” “Exotic Longgang,” and “Amazing Northern Cross-Island Highway”) in tandem with the Ministry of Transportation and Communications’ US$ 179 million domestic travel revitalization measures ^{(*Note 6)}.

Tourism Factories Paired with Multiple Revitalization Strategies to Drive Industrial Economic Recovery

Although governments are the main drivers of revitalization policies, unexpected synergies can only be created through industrial collaboration. Taoyuan has a rich and diverse industrial ecosystem, and is also the gate of Taiwan. All industries and market demands can become strong business opportunities for industrial recovery if care is taken during policy promotions.

Taking tourism factories as an example, Taoyuan City has 33 tourism factories and industrial cultural centers, each with different characteristics and themes, and which are, without doubt, one of Taoyuan’s tourism highlights. In order to accelerate industrial revitalization during the summer vacation, the Taoyuan Department of Economic Development launched a series of activities under the theme “Assemble and Find the Treasures of the Taoyuan Kingdom,” inviting parents and their children to participate in a scavenger hunt at the Taoyuan tourism factories. Members of the public can visit tourism factories; enter associated AR website using their smartphones; and follow three task instructions to explore the exterior, interior, and experiential regions of tourism factories to find and collect badges. Once all badges have been collected, participants are entered into a sweepstakes event. This activity attracted more than 200,000 participants ^{(*Note 7)}.

The culmination of these events was the “2022 Taoyuan Tourism Factory Carnival”, which had its grand opening in October 2022. The Carnival gathered all of Taoyuan’s treasures in Fenghe Park, hosting a giant treasure hunt at this site, allowing hundreds of people to dress up and experience the fun of scavenger hunting. This activity incorporated various DIY experiences, performances, and amusement facilities popular with parents and children. An obstacle course was designed around the treasure hunt concept. The two-day event encompassed a joint exhibition sale of 20 booths hosted by Taoyuan’s tourism factories, and also awarded exclusive prizes worth US$ 32 to ten lucky participants picked at random ^{(*Note 8)}.

In the post-pandemic era, local businesses require diverse creativity and design concepts so that they can change from a subsidy target to a driver of local competitiveness. The Taoyuan Department of Economic Development retained essential industrial characteristics while guiding corporations in creating new products and building marketing strategies. For example, many high-quality and educational venues provided by tourism factories, such as the Kuo Yuan Ye Museum of Cake and Pastry, Music 4 Fun, or Yamaiji Umbrella Cultural and Creative Park, all use educational environments to drive tourism, attract tourists, and build their brand, ^{(*Note 9)} thereby helping many industries in Taiwan break away from a pure manufacturing mindset and expand their business scale.