Economic Rejuvenation: Is the Government Applying Force in the Wrong Place?
United Daily News Editorial (Taipei, Taiwan, ROC)
September 5, 2016
Executive Summary: Taiwanese Public Opinion Foundation polls show public approval for the new government after 100 days at only 61%, barely making the grade. Nearly 45% are dissatisfied with the government's economic record. Foundation Chairman You Ying-lung said dissatisfaction with the economy is the main reason for the president's swift decline in popularity. It also signals the end of Tsai's honeymoon period. Even pro-green poll results are like this. Polls conducted by others are even more dire. All point to the economy and cross-Strait relations as the main source of dissatisfaction.
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Taiwanese Public Opinion Foundation polls show public approval for the new government after 100 days at only 61%, barely making the grade. Nearly 45% are dissatisfied with the government's economic record. Foundation Chairman You Ying-lung said dissatisfaction with the economy is the main reason for the president's swift decline in popularity. It also signals the end of Tsai's honeymoon period. Even pro-green poll results are like this. Polls conducted by others are even more dire. All point to the economy and cross-Strait relations as the main source of dissatisfaction.
Over the past year and a half, Taiwan's economy has been in a long dark tunnel. Economic indicators call for a blue light. Exports have fallen 17 straight quarters in a row. This is the longest decline in the island's history. People are weary with the recession. They are losing patience. This was reflected in the KMT election rout, and is reflected in disappointment with the DPP. President Tsai made "economic restructuring" one of her five major policy planks. She knows people expect her to revive the economy. But the new government has blundered repeatedly. It is overwhelmed with fighting fires. There is no economic revitalization to be found. Public disappointment is spreading like a wildfire. The diminishing number of Mainland tourists continues to impact the tourism industry. Public dissatisfaction with the Lin Chuan cabinet will probably soon extend to Tsai Ing-wen herself.
Tsai Ing-wen is unable to reconcile the DPP as a political party, with her own presidency. She is unable to change Taiwan's "politics uber alles" value system. This is the chief reason the new government has been unable to grow the economy. Premier Lin Chuan may be an expert in finance. But he is not an expert in economics and industry. Also, he lacks the requisite political instincts. During the first 100 days he found himself besieged by all manner of crises large and small. He has had no time to devote to fiscal matters. As a result, the Lin Chuan cabinet may be a “cabinet of economic experts” in name, but it has been unable to jump start the fiscal engine of the nation.
The Lin Chuan cabinet appointed a number of blue camp officials. They hoped the old veteran would bring with him fresh blood, and achieve seamless integration. The Tsai government vowed “not to suspect those whom it recruited”. But somewhere along the way, it “ceased recruiting those whom it suspected”. Lin Chuan originally hoped that NDC Chairman Chen Tian-jy could establish a "Grand National Development Council", as the Executive Yuan's most authoritative and detail conscious organization. But Chen Tian-jy found himself in an awkward position within the new government. He was stigmatized as "old, blue, male”. He could not rally the troops like other political appointees who were green camp standard bearers. Therefore NDC inter-ministerial coordination of fiscal policy failed. This naturally undermined the economic outcome.
The remaining three economics and finance related ministries, the Ministry of Economic Affairs, the Ministry of Finance, and the FSC, are virtually non-existent. Minister of Economic Affairs Roy S. Lee has been struggling to implement President Tsai's "nuclear-free homeland" policy. The Ministry of Economic Affairs, from top to bottom, has been revolving around the energy question. Just what is Roy S. Lee? Minister of Energy? Or Minister of Economic Affairs? As a result, the Ministry of Economic Affairs is doing virtually none of the economic restructuring that the public cares about. The heads of the Ministry of Finance and the FSC seldom show their faces. Only when MegaBank was subjected to heavy penalties by the US, was there a public outcry. The two men have yet to stand on the front lines. They have done as little as possible. The result has been deadly.
The Ministry of Finance has performed poorly. The new government has been indecisive in dealing with official holidays, labor strikes, and other issues. It has attempted to please everyone, only to increase labor vs. management opposition, and instill labor and management doubts about the government's position. As approval ratings plummeted, the Executive Yuan hastily proposed "expanding investments", hoping to boost economic performance. But its core business plan was to provide SOEs with 345 billion NT in subsidies. It is not addressing what ails the nation. Too much private sector hot money is seeking a destination. Government policy should lead private investment in the right direction. So why is it increasing investment in state-owned enterprises? A closer look reveals that even Taipower's "renting" of emergency power generation equipment is classified as part of the new government's investment plan. This reveals not only a lack of vision, but number inflation.
To boost domestic investment, the government should focus on short-term policy that optimizes the investment environment, encourages private investment, and reduces the impact of the weak international economy of Taiwan. Long-term policy must solve the structural problems of our industrial structure and aging population. But the moment President Tsai took office, she put labor disputes first. She personally encouraged strikes and protests. She adopted exactly the opposite approach. This was particularly unwise. Besides, economic restructuring is a huge project. One can devote ten years to it and still have nothing to show.
The new government faces widespread discontent. As it attempts to grow the economy, it must ask itself: Is it applying force in the wrong place?