Sun, May 17, 2009 page8

• Better solutions for economic woes

  • By Taiwan Thinktank 台灣智庫主權與國際研究小組
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  With the government in office for almost a year, economic indicators have reached modern-era lows. To distract the public from weak governance, President Ma Ying-jeou’s (馬英九) administration is trying to blame the nation’s economic woes on the global economy or on the former Democratic Progressive Party (DPP) government.

  But these claims do not hold up.

  The financial crisis is global in nature, and among the four Asian Tigers, Taiwan ranks last in terms of economic growth, exports and unemployment. It is therefore incorrect for the Ma administration to push the blame onto the previous government.

  Under the DPP government, there was average annual economic growth of 3.8 percent. Under the Ma administration, the economy has suffered substantive negative growth. Under DPP rule, unemployment decreased over the years, but with the Ma government, the unemployment rate has risen to a modern-era high. And regular salaries have undergone the largest spurts of negative growth ever recorded. These examples show that the Ma administration cannot blame the former administration for its lack of competence.

  To combat the recession, the Ma administration has launched a number of major financial and economic initiatives, including opening up to China and expanding public works, as well as expansionary fiscal measures such as the issuing of consumer vouchers to stimulate the economy.

  In addition to the worsening economic and unemployment figures, there are new problems with debt. Tax cuts have exceeded NT$820 billion (US$24.8 billion), with many concessions being little more than populist gestures that add very little value to the economy. No attention has been paid to how the cuts will affect the economy.

  The Ma government does not understand the structural problems in Taiwan’s economy, and this is why they have rolled out inappropriate economic policies. Coupled with administrative ineptitude, these policies have contributed to the continuing deterioration of the economy and account for Taiwan falling behind the other Asian Tigers.

  The structural problems are external and domestic. On the former, for two decades foreign trade has relied heavily on exports to China that are then used in further production. These products are processed using cheaper production methods by China-based Taiwanese businesspeople and then exported around the world in a triangular trade sequence.

  However, these exports are driven by investment, and the profits that these exports bring have been shrinking year by year as China develops its own industry clusters.

  This cross-strait division of labor and trade sequence must be changed as soon as possible. Reversing the excessive concentration of exports requires policies aimed at developing a more diverse base of industries and market diversification rather than policies that lean more and more toward China.

  Domestically, over-reliance on exporting industrial products has resulted in tremendous damage amid the global financial crisis. Because development of the domestic economy has been overlooked, Taiwanese are not willing to invest resources at home, and this has retarded improvements in ordinary people’s livelihoods and the overall economic climate.

  There are some who believe that Taiwan’s market of 23 million people is too small. But if we compare Taiwan’s population with European nations, we discover that Taiwan is not a small market at all. There are many nations in Europe that have populations smaller than Taiwan’s, yet their health care, education, culture and arts and other leisure-related sectors have much higher output and employ far more people than here.

  We should learn from the experience of these countries and study the factors that are restricting the development of these sectors in Taiwan and come up with ways to improve the situation.

  To solve the current problems, multifaceted short, medium and long-term measures are needed. Thorough reform of the economy is needed, otherwise things will only get worse, leaving Taiwan in a losing position in the global economic race.

  Taiwan Thinktank is an independent, nonprofit public policy research organization.

  TRANSLATED BY DREW CAMERON
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