Frithjof Kuhnen (1996):
Synthesis of Current State of and Trends in Land Tenure and Land Policy in Asia

1.1.2 Taiwan

At the end of World War II, Taiwan experienced an increase of its population by one-third (plus an annual increase of 3 %) due to refugees and the national army. The country had no industry of its own and was cut off from its traditional suppliers and markets, i.e., China and Japan. Thus, there was hardly any other alternative but to focus on agriculture.

An egalitarian land reform, rapidly implemented and combined with the diffusion of technology and the provision of services met with great success. Taiwan's land reform (including the service organization 'Farmers' Associations') is considered to be the most successful of all land reforms aiming at solving the problems of the time. Within a few years, instead of food imports, the country started to export food products to other countries. In the absence of any noteworthy industry, the next step, supported by trade liberations and the devaluation in 1958, was the production and export of labour-intensive specialized agricultural products such as mushrooms and asparagus.

The unimodal agricultural development maximized the intersectoral linkages and stimulated the growth of small-scale industries for labour-intensive exports (textiles, etc.), thus creating off-farm employment. Available skills and savings allowed to substitute labour in agriculture by machinery and enabled households to divide their labour between factory employment and farm employment. It was not unusual for the farm family to own a small industry. Both sectors developed very rapidly. In agriculture, mushroom and asparagus production was partly replaced by orchid production and, later, by tissue culture of orchid plants which was exported to Indonesia for flower cultivation.

As in Japan, the rapid non-agricultural development and the higher income in that sector caused many families to lose interest in agriculture, although they were not willing to give up the land permanently. As the land reform outlawed tenancy, the smooth transfer of land to people interested in cultivation proved to be difficult. Being aware of this, the government promotes the 'entrustment of land,' which is actually just another name for lease, thus disguising the fact that the land reform law is still in force. This arrangement mitigates the problem, but does not solve it. An acceptable new form of subjecting land to intensive cultivation without tackling ownership is still being looked for.

Another problem is emerging around the large cities (and increasingly around the smaller ones as well) where agricultural land is used for non-agricultural purposes. This involves the need for land-use planning as well as taxation of the unearned increase in value. All these questions are still under discussion.

Finally, the service structure of agriculture, which has been so highly successful in the 60s and 70s - and still is - faces more and more problems. Farmers' Associations are becoming 'Non-farmers' Associations' with a few farming members. Non-farmers use the FA as their bank, thus bringing money into the FA and solving the credit problem for agriculture. Technological developments such as computers cause discussions on increasing the area of the individual FA in order to reap economies of scale. However, an increase of the operational area has detrimental effects on extension work, as the distance between extension worker and farmer becomes greater.

The increasing banking activities brought so much cash to the FAs that they do not have use for it. Since they are farmers' cooperatives, they are not allowed to invest their funds for any other purpose than that of promoting their members' enterprises. Taking into account the shrinking importance of agriculture, these developments require changes in the activities and procedures of the highly successful FAs. So far, no model has been found which satisfies the interests and needs of the various member groups. Japan had the same problem which was tackled, there, by diversification to insurance and tourism.