The Cabinet’s economic “stimulus package” cleared its first reading by legislative committees on Monday, but lawmakers and academics yesterday remained skeptical about how effective the plan would be in expanding domestic demand and reining in inflation.
The Cabinet has said the NT$130.1 billion (US$4.28 billion) spending program, together with a supplementary budget, could push the nation’s economy up by 0.45 percent, in addition to easing the impact of rising commodity and fuel prices.
Democratic Progressive Party Legislator Huang Wei-cher (黃偉哲) said he doubted the Cabinet’s claim, as the bulk of the special fund, NT$66.8 billion, would be channeled to local governments to finance minor public works projects and absorb price hikes in construction materials.
“Insignificant public works projects can do little to stimulate economic growth,” Huang said. “The increased government spending is more likely to drive commodity prices higher than keep them down. The new government can at least learn to spend less if it does not know how to make more money.”
Huang also voiced concern that the spending package might add to the nation’s financial burden after the legislature scrapped the proposed sale of government shares in Chunghwa Telecom Co (中華電信), forcing the Ministry of Finance to agree to borrow an extra NT$52.8 billion to fill the gap.
Chinese Nationalist Party (KMT) Legislator Lee Hung-chun (李鴻均), a vehement opponent of the sale, said the government would risk losing control of the company and the ability to set prices for a business involving public interests.
The planned sale would reduce the government’s stake in Chunghwa by 6.9 percent to below the 34 percent level that Lee and other party lawmakers consider optimal. Currently, the Ministry of Transportation and Communications owns a 35.63 percent stake in Chunghwa, whose capital stands at NT$95.58 billion.
Lee said borrowing money was not a better solution and that the root of the problem lay in the necessity and relevance of the program.
“I don’t think the package can really help expand domestic demand or boost the economy,” Lee said by telephone.
“Still, I will toe the party line when it comes to voting,” Lee said.
The extra debt is estimated to cost the government NT$1.37 billion in interest a year.
Minister of Finance Lee Sush-der (李述德) said this amount would not have an unbearable impact on the nation’s finances, although he previously promoted the sale of Chunghwa shares as the best way to raise funds.
Norman Yin (殷乃平), a professor at National Chengchi University’s Department of Money and Banking, said that, since reclaiming power, KMT officials appeared to be pursuing contradictory approaches in dealing with public debt.
While it was an opposition party, Yin said, the KMT had criticized the former DPP administration for wasting tax dollars on unworthy construction programs, but now it was engaging in similar practices.
“It is odd for the government to seek to galvanize the economy by spending money on dead people,” said Yin, alluding to Taichung City’s proposal to construct funeral facilities with its share of the funding.
The special budget is expected to quickly pass its second and third readings before the end of the current legislative session, because the KMT controls more than two-thirds of the seats in the body.
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