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Books on Taiwan
REPUBLICAN REFERENCE
Area (sq.km)
35,980
Population
22,603,001
Capital
Taipei
Currency
New Taiwan dollar (TWD)
President
Chen shui-bian
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Update No: 025 - (31/01/06)
Ructions within the DPP
Under normal circumstances January, in any Chinese society, is a quiet
month. It signifies the time between the start of the new Calendar year and the
end of the old lunar year. It is generally a time of preparation and house
cleaning; debts should be settled but no new ventures undertaken until the birth
of the new Lunar Year. Well, that may be the case under normal circumstances,
but this past month proved that to every rule there is an exception. January
proved to be a time of considerable change - upheaval might be a better term -
especially for the ruling Democratic Progressive Party.
The immediate cause was the defeat of the DPP in the December 2005 provincial
elections but, in fact, this was only the catalyst. The poor showing of the
ruling party at the polls was a cause for much soul-searching by its leaders
which should have been debated within the confines of committee rooms. Yet,
tension between the rival factions runs so deep that inevitably, it caused a
fracturing of the alliance that held these factions together.
Central to the debate is the influence that Taiwan's President, Chen Shui-bian
still exerts over the party and its policy direction. One message that should
have been clearly heard from the recent election result was that the anti-China
sentiment espoused by the president does not sit comfortably with the bulk of
Taiwan's population. A population that, increasingly, has become dependent on
China's emergence as an economic power for its own well-being. The die has
already been cast in that department and Taiwan's fate is inextricably bound to
that of China. It is no longer a matter of "if" Taiwan reaches a modus
vivendi with the mainland, rather it is a matter of "when."
Taiwan's president does not see it that way of course and is still intent on
pushing the envelope as far as he can, much to the chagrin of Washington, of
Beijing, of a majority of Taiwan's 13 million voters and - increasingly -
members of his own party.
President Chen's New Year message to the people of Taiwan sent a clear signal
that he was not softening his stance vis-à-vis the mainland. Indeed it was
quite the reverse. In his address he announced that he was anxious to slow down
the rate of investment into China by Taiwan's business sector through a new
policy of "active management - effective opening." While the details
were not spelled out, that announcement coupled with a renewed focus on
developing a new Constitution for Taiwan was taken as a hardening of the
official position sufficient to rattle investors. Taiwan's stock index suffered
its biggest decline in two months immediately after the speech. Many took it to
mean that the government would start to meddle with companies that were seen to
be too actively "pro-China." The power of audit could be selectively
applied.
Clearly many within the party were unhappy with the position taken by the
president and his advisors - and particularly, Taiwan's Premier Frank Hsieh (now
former premier), who is considered to be much more of a pragmatist. The DPP had
been damaged also in the run up to the election by a series of corruption
scandals that did much to erode public confidence in the ruling administration.
Further alienation of voters seemed to be most unwise at this time.
Differences of opinion between the premier and his Cabinet on the one hand and
the presidential office on the other erupted into the public domain. When the
opposition dominated legislature voted down Premier Hsieh's budget - including
controversial arms related measures designed to strengthen Taiwan's missile
defences against China - it proved to be the stroke that brought down the entire
house of cards. After the vote, Mr. Hsieh had sought presidential approval to
resubmit his budget but the presidential office denied his request. The premier
then took what many considered to be the only honourable course of action and
resigned his position. His entire cabinet resigned with him.
New Prime Minster and Cabinet
The move was not entirely unexpected and it appears that President Chen and
his advisors had a hand in engineering a situation whereby the likeable - but
non compliant - Mr. Hsieh would be forced to step aside. President Chen
immediately appointed his former Chief of Staff, Su Tseng-chang as the new
premier. Many within the new Cabinet line up have not yet been appointed and an
announcement is not expected until the after the Lunar New Year holiday, in
early February.
Mr. Su, is a former chairman of the ruling DPP and is considered to be one of
its frontrunners for the 2008 presidential race. Many people believe that
President Chen handpicked Mr. Su in a bid to shore up his own poor approval
rating which has plummeted to a record low in recent months. Mr. Su is an
extremely popular figure but whether his appointment to the premiership will
bolster the image of the president is another issue entirely. Clearly President
Chen wants to maintain tight control over policy, especially towards China, and
this hard-line approach seems destined to alienate the general populace - as
well as the business sector - even further.
The fracturing did not stop there. Lin Yu-shi, former DPP chairman and a
prominent opposition figure from the days of martial law (his wife and daughters
were murdered by persons unknown during the white terror period in the early
days of KMT rule on Taiwan) resigned from the party over the factional strife
which he called a blow to the party's credibility. Mr. Lin is held in high
esteem within Taiwan and the manner of his going can only signal the urgency of
the need for the DPP to put its house in order and agree on a coherent political
line.
Frank Hiseh, a former Kaohsiung City mayor, retains membership of the DPP but
has resigned from all positions in public life. Reports suggest that President
Chen offered him the position of Secretary-General of the Presidential Office
but Hsieh wisely turned down the offer. He took the premiership only in February
2005 and served a little under a year. His early departure is probably a pity
since he showed every sign of being a genuine reformist. He leaves the economy
in relatively good shape,
The economy
Taiwan's economy appears to have performed better than expected last year.
While official figures have not yet been announced, it is believed that the
final numbers will be above the officially forecast GDP growth rate of 3.8
percent. The government is hoping that 2006 will be even better with a forecast
of 4.5 percent for the coming year.
Unemployment has fallen to a five year low. In December 2005, Taiwan's
unemployment rate stood at 3.86 percent - down from 3.94 percent the previous
month. On a seasonally adjusted basis, the December rate was 4.0 percent. This
was better than the 4.21 percent recorded in December 2004. Taiwan's labour
participation rate stands at 57.85 percent.
Inbound investment last year was slightly down on previous levels. At US$3.12
billion for the first eleven months, this represented a decline of 5.3 percent
over the same period last year. Looking at outbound investment, the Taiwan
government approved some US$7.96 billion in the period to November 2005 - down
by 13.4 percent on the previous year. Investments into China dropped by only 8.7
percent and amounted to US$5.62 billion or 71 percent of the total. Investment
into countries other than China dropped by 22.8 percent in the same period.
Perhaps, these numbers explain the concern of President Chen Shui-bian although
they also illustrate how far he appears to be out of touch with Taiwan's own
business community that sees its own future securely locked in with that of
China.
Vietnam gains
Interestingly Taiwan is now Vietnam's largest overseas investor. Total
approved investment to Vietnam last year was around US$674 million or 29 percent
of the remaining total outbound investment to other destinations. Taiwan's
business community has now poured more than US$10 billion into Vietnam.
Taiwan's currency has also strengthened. The New Taiwan dollar peaked at a five
year high last month and reached 32.016 to the US$ before falling back. For the
year as a whole the local currency appreciated by almost 3 percent against its
US counterpart. Taiwan's main stock index rose by 6.7 percent for the year as a
whole.
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