New Cabinet's Economic Policy Must Clear Five Hurdles

New Cabinet's Economic Policy Must Clear Five Hurdles
United Daily News editorial
Taipei, Taiwan, ROC
A Translation
February 19, 2013

Summary: The new cabinet took office yesterday. Neither Premier Jiang Yi-huah nor Vice Premier Mao Chi-kuo have any fiscal policy experience. But everyone hopes this will not hamper their ability to lead the cabinet, reverse the Sean Chen Cabinet's image of impotence, and open new doors for Taiwan's economy.

Full Text below:

The new cabinet took office yesterday. Neither Premier Jiang Yi-huah nor Vice Premier Mao Chi-kuo have any fiscal policy experience. But everyone hopes this will not hamper their ability to lead the cabinet, reverse the Sean Chen Cabinet's image of impotence, and open new doors for Taiwan's economy.

We have been greeted by more and more positive economic news. This has raised public expectations for the new year. But the situation remains in flux, both domestically and abroad. The new cabinet hopes to open new doors for the economy. It hopes to gain public trust and support. But to do so it must first overcome five hurdles.

The first hurdle is international economic variables. The international economic and fiscal policy situation has recently improved. But numerous variables remain. Central banks the world over are engaging in quantitative easing. National economies are benefitting from rising stock indices, rising housing and other asset prices. Demand is increasing, and so is trade. But the Eurozone may undergo negative growth. The U.S. economy is still undergoing long-term correction. The effectiveness of quantitative easing is diminishing, and the attendant risks are increasing. Emerging markets, including Mainland China, are still unable to fulfill the role of economic locomotive. Last month the International Monetary Fund (IMF) cut global economic growth this year to 3.5%. This is only slightly higher than 2012, and shows that economic recovery is still a long way off.

Since Japanese Prime Minister Abe took office, he has been pushing for a devaluation of the yen. This has dramatically increased the risk of an international currency war. Recently the U.S. government endorsed Abe's economic policies. This means the pressure to revalue currencies is directed straight at the RMB, the number one target among emerging nation currencies. The NTD will probably be caught in the crossfire. Given these variables, the new cabinet must demonstrate resilience, in order to stabilize the economy and restore its vitality.

The second hurdle is the challenge of free trade. Nations the world over are attempting to accelerate their economic recovery. To this end, they are aggressively promoting free trade agreements (FTAs). In his first State of the Union Address since his reelection, U.S. President Barack Obama declared that he would sign an FTA with the EU, in June of this year. Negotiations should be complete two years from now. This will create the world's largest free trade zone. In other words, the United States led "Trans-Pacific Economic Partnership Agreement" (TPP) for  2015, the ASEAN and China led Regional Comprehensive Economic Partnership (RCEP), and the US-EU FTA, may soon take shape. Therefore the new cabinet must negotiate an FTA. One the one hand, it must wrap up negotiations as soon as possible on the ECFA agreement on trade in goods and services, on the ROC-Singapore FTA, and on the ROC-New Zealand FTA. On the other hand, it must promote, full force, the "Free Trade Zone Pilot Program," and enable the ROC to participate in the TPP and the RCEP. This is critical if we wish to avoid marginalization.

The third hurdle is economic restructuring. Taiwan's economy is in part the victim of short-term sentiment. But it is also the victim of structural problems, including over-reliance on export-led economic growth, on "orders from Taiwan, with production overseas," and on the low-cost, low-value-added OEM export model. We may benefit from the global economic recovery. The economic growth figures may look pretty. But the employment opportunities will remain limited. Salaries will remain frozen. Most people will experience no economic benefits. Taiwan's economic growth model has reached a stage where it must change. The Ma administration has been in office for over four years. It has promoted economic restructuring. But it has left the impression that it is all talk and no action, that it is all flash and no substance. The result has been a weakening of the government's role at the helm and economic drift. This has led to a loss of confidence in the government. The new cabinet must learn these lessons. It must revolutionize its thinking and practices. It must offer businesses and the public a clear direction for the future. It must build consensus, and thereby lead Taiwan's economic transformation.

The fourth hurdle is to promote the construction of infrastructure. The Ma administration has touted its "Twelve Love for Taiwan Infrastructure Projects." But over the past four years, government fiscal difficulties and poor execution have left the public with an ambiguous impression regarding these twelve infrastructure projects. Consider major projects such as the aviation city and digital convergence. They have gone nowhere. They have not merely failed to promote economic growth. They have been a drag on economic performance, due to the lack of public investment. The cabinet is dominated by people charged with transportation and communications policy. Can the cabinet members charged with fiscal policy overcome long-standing abuses, while promoting public infrastructure construction? Can they introduce private sector economic participation? Can they demonstrate administrative competence? These will be the key indicators when evaluating the performance of the new cabinet.

The fifth hurdle is how to implement reform. Last year the Sean Chen cabinet promoted U.S. beef imports, the capital gains tax, gasoline price and electricity rate hikes. But the timing was wrong, the details were never worked out, and a consensus was never consolidated. The result was a string of setbacks. Popular support for the cabinet hit rock bottom. The impending pension reform program affects far more people. Its impact is far greater. Yet many polls show that over 70% of the public disapproves of the government's proposals for pension reform. Pension reform may lead to consumer belt-tightening. This and follow-up fiscal reforms require comprehensive responses. The new cabinet must undergo a change in mindset. It must solicit opinions. It must think in terms of a bigger pie. It must formulate a program more in character with the national interest. Only then can it create a majority consensus, and successfully promote pension reform.

The above five hurdles will be difficult to overcome. The Jiang Cabinet must be willing to engage in creative destruction. It must have relentless determination. It must have a strategy to change its method of governance. It must bear the burden of revitalizing Taiwan's economy and creating new prosperity.

新內閣為經濟開路須過五關
【聯合報╱社論】
2013.02.19 03:18 am

新內閣昨天走馬上任，各方至盼非財經背景的正副閣揆江宜樺及毛治國能領導內閣團隊，扭轉陳?內閣施政的無力感，為台灣經濟打開新的出路。

近來各種正面經濟訊息愈來愈多，也讓國人對新的一年期待更高；但環顧內外形勢變化，新內閣要為經濟開路，贏得人民信任與支持，須有過五關的本事：

第一關是國際經濟變數。近來國際經濟及金融情勢雖見好轉，但變數仍多，在全球央行量化寬鬆政策加持下，各國經濟受惠股市、房市等資產價格上揚，需求普遍增加，貿易亦轉活絡。但今年歐元區經濟仍可能負成長，美國經濟亦尚處長期調整階段，量寬政策效應遞減且風險增加；包括中國大陸在內的新興市場，則尚難扮演經濟火車頭角色。上月國際貨幣基金（ＩＭＦ）調降今年全球經濟成長率預測值至百分之三點五，僅較二○一二年略高，顯示距經濟復甦仍有長路要走。

另一方面，日本安倍首相上任後力推日圓貶值政策，大幅升高國際貨幣戰風險。最近美國政府為安倍經濟政策背書，意味貨幣升值壓力將轉到以人民幣為頭號目標的新興國家貨幣，新台幣恐難逃池魚之殃。面對多重變數，新內閣須展現應變能力，方能穩住經濟回升力道。

第二關是自由貿易挑戰。世界各國為加速經濟復甦皆積極推動自由貿易協定（ＦＴＡ）。美國歐巴馬總統在連任首度國情咨文宣布今年六月將啟動和歐盟洽簽ＦＴＡ，預定二年內完成談判，形成全球最大自貿區。換言之，到二○一五年包括美國力推的「跨太平洋經濟夥伴協定」（ＴＰＰ），東協及中國主導的「區域全面經濟夥伴關係」（ＲＣＥＰ），以及美歐ＦＴＡ可能陸續建置。因此，新內閣須在洽簽ＦＴＡ上展現行動力，一方面儘速完成ＥＣＦＡ貨品貿易和服務業貿易協議，以及台星、台紐ＦＴＡ，另方面全力落實推動「自由經濟示範區」計畫，為台灣參加ＴＰＰ及ＲＣＥＰ創備條件。這也是避免台灣經濟被邊緣化的最關鍵施政。

第三關是經濟轉型。近年台灣經濟困境除短期景氣因素外，結構性問題包括經濟成長過於依賴出口帶動，過於依賴「台灣接單、海外生產」、低成本、低附加價值的代工出口模式；因而即使受惠全球景氣復甦，經濟成長數字美化，但就業機會增加有限，薪資長期停滯，多數人民依然無感。是以，台灣經濟成長模式已到非變不可的時候。馬政府執政四年多來，在推動經濟轉型上，給人感覺就是說多做少，華而不實，以致弱化政府掌舵角色，任令經濟隨波逐流，也讓人民喪失對政府的信心。新內閣須汲取教訓，徹底改變思維與做法，讓企業及人民清楚未來努力方向與目標，凝聚集體意志，帶動台灣經濟全面轉型。

第四關是推動建設。馬政府標榜「愛台十二建設」，但四年多來，因為政府財政困難及執行力不彰，致民間對十二項建設印象模糊。而且如航空城、數位匯流等重大建設幾乎原地踏步，不僅未帶動經濟成長，反因政府公共投資不足拖累經濟表現。新內閣財經成員由交通幫掛帥，在推動公共建設上，能否革除積弊，並引進民間活力，展現令人耳目一新的執行力，是檢驗內閣施政效能的重要指標。

第五關是落實改革。過去一年陳內閣推動美牛、證所稅、油電雙漲等多項改革，但因時機不對、配套不周及共識不足，致一波三折，也讓內閣民意支持度跌到谷底。如今牽涉更廣、影響更鉅的退休年金改革箭在弦上，但多項民調顯示，超過七成民眾對政府初步提出的年金改革方案不能認同。再者，年金改革可能引發的消費緊縮效應，以及後續關聯的財稅改革，亦須有周全配套方足因應。是以，新內閣須改變思維，博採周諮，從把餅做大觀點，形塑更符全民利益的周全方案，才能凝聚多數人共識，順利推動年金改革。

以上五關，關關難過，但江內閣若有大破大立的決心，有奮進不懈的意志，有改變施政方式的策略，則未嘗不能挑起重擔，為再造台灣經濟榮景開路。