Commentary:Taiwan economic revival program lacks substance Bryan Chuang,Taipei;Steve Shen,DIGITIMES[Wednesday 12 September 2012]Taiwan's Executive Yuan(Cabinet)has announced a five-point program aiming to invigorate its flagging economy.Prior to the announcement,all segments of society were expecting the new measures rolled by the government to provide a shot in the arm to boost Taiwan's subdued economic growth.However,major tasks outlined in the program appear to represent nothing but a restatement of the routine duties expected from respective government agencies.
The five-point economic reform project,as announced by the government on September 11,claims to focus on encouraging the development of innovative,diverse industries;expanding Taiwan's export markets;strengthening the cultivation of manpower by industries;promoting investment by the private sector and foreign investors,particularly in public construction projects;and upgrading the administrative efficiency at all levels of government.
While announcing the economic revival plans at a press conference,Premier Sean Chen stressed that the program integrates short-,medium-and long-term approaches to meet the practical needs of Taiwan,and that Taiwan does not need to adopt more drastic measures such as lowering interest rates or required reserve ratios for deposits to stimulate economy.
The Taiwan government cannot reduce interest rates as a means to stimulate its economy because there are no reasons for the government to approach an inflationary policy after having imposed a luxury tax to curb the speculative buying of real estate which has pushed housing prices in Taipei City and New Taipei City to astronomic highs in recent years.
The government also cannot expand its financial expenditure to stimulate economic growth due to a mounting budget deficit,while total debts of the central government have reached its limit.In short,the government has just rolled out an economic revival program without any support via additional funding.
However,the government said the new economic program aims to attract new investments worth NT$1 trillion(US$33.62 billion)a year from the private sector and also foreign investments of up to NT$33.5 billion in 2013 and NT$44 billion in 2014.The government also pledged to join the Trans-Pacific Partnership(TPP)within the next eight years.
Government officials have also continued to tout Taiwan's competitiveness after the Geneva-based World Economic Forum(WEF)said recently that Taiwan was ranked 13th for the third year in a row in its 2011-2012 Global Competitiveness Index.The WEF evaluates the competitive edge of 144 economies globally on a yearly basis.
But the officials also chose not to mention that the WEF also rated Taiwan's budget deficit at 100th place in the survey,and ranked its debt-to-GDP ratio at 75th.
Due to funding public construction projects,total outstanding debts incurred by all levels of government in Taiwan amounted to NT$5.49 trillion at the end of 2011,accounting for 39.91%of its GDP for the year,according to data compiled the Ministry of Finance.
Due to financial restrains and the budget deficit,the government will fail to implement its new economic revival program effectively,and thus will also not be able to restore confidence in private investment and consumption.Without strong determination to carry out the economic reform policy by the government and general support from the private sector,the new economic initiates are ill-fated.