Thursday, March 28, 2013

What Does the Free Trade Demonstration Zone Demonstrate?

What Does the Free Trade Demonstration Zone Demonstrate?
China Times editorial (Taipei, Taiwan, ROC)
A Translation
March 29, 2013

Summary: The government has a program. It may not be perfect. We hope the government will take a hard look at it, perform a total reassessment of it, and make the appropriate changes. It must avoid haste. Nearly as importantly, it must be serious. It must carry it out. It must stop promising a pie in the sky. It must stop leaving the public and the business community disappointed and disillusioned.

Full text below:

One of the key traits of the government of the Republic of China, is that once high-ranking officials issue a statement, once they sing a certain tune, it is extremely difficult to get them to budge from their original position. Even if outsiders repeatedly challenge them, their policies seldom change. For example, the Executive Yuan's reorganization charges ahead full steam. But due to electoral concerns, high-ranking officials in the Presidential Office and the Executive Yuan dare not lay a finger on the Council for Indigenous Peoples, the Council for Hakka Affairs, or the Veterans Affairs Commission. This discredits its reorganization effort from the outset. The shuffling and reshuffling of these agencies leads to chaos. But the promoters of reorganization lack core convictions. During party-government deliberations, the Organic Laws for many of these ministries and commissions have been altered beyond recognition. The absurdity of the process is increasingly apparent. This newspaper has been critical of the chaos created by the government's reorganization efforts. We now feel compelled to point out the blind spots in the upcoming "Free Trade Demonstration Zones."

The first Free Trade Demonstration Zone was conceived by President Ma, as part of his "Golden Decade National Vision" campaign platform. That platform proposed a "vision." It lacked any real content. People did not pay much attention to the press releases. But now that it is being promoted, a giant "President Ma promise" label has been slapped on it. A vision has suddenly became a straitjacket. Never mind that it smacks of being jury-rigged. It is being promoted aggressively, as something that simply must be done. This is all highly regrettable.

The CEPD's Free Trade Demonstration Zone project includes smart logistics, international medical treatment, valued-added agriculture, and industrial cooperation, in four demonstration projects. According to reports, during Chairman Yin Chi-ming's term, the plan was more complex, and included over 100 pages. The new cabinet has deleted much of it. Our first question is, was President Ma's vision really so golden? Why was the vision so lacking in guiding concepts. Why could its contents be so cavalierly changed? Did former Chairman Yin of the Council for Economic Planning have major problems with his plan? Why did the problems suddenly vanish under Chairman Kuan a little more than a month later?

Look closely at the content of the aforementioned demonstration zone program. It is riddled with problems. International medical treatment is one. Originally the planning for the Ministry of Transportation Taoyuan Aerotropolis included international medical treatment. But was it successfully included? Was it successfully promoted? Was the demonstration zone still the Aerotropolis? Was the first stage medical regulations and hospital organization the same? Were the services provided, i.e., health checks, cosmetic surgery, and major illnesses, the same? If the external conditions were the same, why weren't the Department of Health and the Department of Transportation able to promote it two years ago? Why is the CEPD suddenly able to promote it now?

Consider measures to promote the Free Trade Demonstration Zone program. It was not made available to outsiders. The land was cheap. Tax breaks were provided. Two and a half years ago Wu Den-yih was premier. In one fell swoop the tax rate was reduced from 25% to 17%. Tax rates were dramatically cut. The government wanted a single rate for everyone. It did not want special tax cuts for operational headquarters, special investments, and special purposes.

But two-and-a-half years later, the Free Trade Demonstration Zone has reappeared. All sorts of tax cuts and tax exemptions have been concocted. All of them violate commitments made by former Premier Wu. All of them defy Ministry of Finance recommendations. All of them ignore the fact that the government can no longer afford tax cuts. Worse still, the tax cuts obviously benefit the rich. They will intensify class antagonisms. Are they really appropriate? They need closer consideration.

Finally, we must clarify the matter of cabinet policy continuity. When Sean Chen was premier, his economic policy stressed "Programs to Increase Economic Momentum." He stressed the importance of improving corporate economic health. Premier Chen argued against pursuing short-term prosperity. He promoted medium and long-term reform. The main promoter of his economic and political policies was today's CEPD Chairman. After Premier Jiang took office, the promotion of medium and long-term economic momentum was rarely mentioned. The Free Trade Demonstration Zone currently promoted is touted for the tens of billions it will bring in within a year or two. The cabinet reshuffle is less than a month old. Yet suddenly, medium and long term initiatives have become short-term. When major economic policy is so unpredictable, on top of the aforementioned problems, it is difficult for the public to retain confidence in the government.

Taiwan's economy and industry face many problems. The government and the private sector are seeking breakthroughs and transformation. The government has set forth its Free Trade Demonstration Zone program. The program is a response to Taiwan's economic difficulties. The government is doing something. That is better than doing nothing. But its solutions should be solutions to actual problems. We think the deregulation of capital, of investments, and of manpower are acceptable. We think there should be even more of them. But are tax incentives appropriate? We have serious reservations.

The government has a program. It may not be perfect. We hope the government will take a hard look at it, perform a total reassessment of it, and make the appropriate changes. It must avoid haste. Nearly as importantly, it must be serious. It must carry it out. It must stop promising a pie in the sky. It must stop leaving the public and the business community disappointed and disillusioned.
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