Has Taiwan’s economy bottomed out yet? The industrial, government and academic sectors seem to disagree. Optimists believe this is as bad as it gets and that although we are far from a rebound, at least it will not deteriorate further. Pessimists, on the other hand, believe the worst is yet to come and that the problems will haunt us for a long time.
It’s too soon to tell who is right and who is wrong, but the latest statistics on the economy showed that the downturn is an undeniable fact.
Rather than haggling over the future economic situation, it would be better to work together to come up with a strategy to revive the economy. This is how we should ride out the crisis.
We could summarize the policy direction of President Ma Ying-jeou’s (馬英九) government over the past eight months by saying that the first half of the period was a time of making big plans, while the second half was one of desperate measures to cure the problems.
This highlights the fact that the government doesn’t know what to do.
How bad is Taiwan’s economic situation? The government’s monitoring indicators for December flashed blue for the fourth consecutive month, indicating that the economy is in recession. The total export value for last month dropped by 44.1 percent year-on-year, showing the difficulty facing our export-oriented economy.
Meanwhile, tax revenues for last month decreased 40.1 percent year-on-year, with business tax revenues — which best reflect the economic situation — falling 53.7 percent year-on-year. Even if we exclude the fact that part of the revenues were not registered because of the Lunar New Year holiday, it still fell 17.2 percent, a serious decline.
While the government issued more than NT$80 billion (US$2.31 billion) in consumer vouchers on Jan. 18, business tax revenue still dropped sharply, showing that the economic situation was far worse than expected.
Foreign investors have adjusted their economic growth forecasts sharply downward. Two predictions are particularly frightening: CLSA Asia-Pacific Markets said Taiwan’s economy would contract 11 percent, while Morgan Stanley Taiwan expects a contraction of 6 percent.
Remarks by foreign investors should always be assessed with a critical mind and alarmist talk need not send the government in a frenzy. However, the government must not ignore the fact that the nation’s economy is dropping dramatically. Political leaders have the responsibility to propose concrete policies to deal with the crisis, boost public confidence and lead the country out of darkness.
Sadly, when we examine the government’s policies over the past eight months, we can’t help but worry about the future.
The government’s inability to see the devastating financial crisis-in-the-making when it came to power shows that it was still dreaming of the “6-3-3” policy and the TAIEX index climbing to more than 20,000 points. As a result, the 12 major construction projects and the NT$500 billion infrastructure expansion plan were shown to be grandiose schemes aimed at impressing the public.
Soon after the government came to power, the stock and real estate markets began their decline while the unemployment rate surged, hurting both employers and employees. When the government finally began to grasp the severity of the situation, it merely employed short-term emergency measures to save the stock market, but altogether failed to address the fundamental deficiencies in our system.
Equally if not more alarming is the government’s pinning its hopes on a traditional enemy, China, to rehabilitate the economy. Its first move was to relax all restrictions on investment in China, which threatens to further undermine Taiwan’s economy and takes us down a road from which there may be not return.
Last year, China passed the Labor Contract Law (勞動合同法) along with other tax and environmental protection laws. As a result, operational costs for Taiwanese businesses in China increased substantially, causing many to go bankrupt. Consequently, Taiwan’s total export value to China shrank by more than 50 percent in the past two months.
The key to Taiwan’s economic downturn lies in an excessive dependence on investment, production in and exports to China. Aside from the obvious ills of such dependence, this also puts Beijing in a position where it can use investment restrictions to apply political pressure on Taipei and undermine Taiwan’s sovereignty in the process.
Taiwan’s high dependence on China is its Achilles’ heel. And yet, against all logic, Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤) was still extolling this dangerous policy on Feb. 4, saying that economic dependence on China was not necessarily a bad thing.
The diligence and intelligence of Taiwanese will help us survive this economic crisis, but to do so, we must also guard against the government’s moves to increase our dependence on China, which can only slow down recovery and take us closer to “unification.”
TRANSLATED BY EDDY CHANG
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