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Books on Taiwan
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Update No: 035 - (30/01/07)
The powerful undersea earthquake (magnitude 7.1 on the
Richter scale) off the coast of Taiwan of December 26 2006 has knocked out much
of the Internet traffic of China, Taiwan, Hong Kong and Southeast Asia as well
as Australia. Damage to seven submarine cables caused by the quake was severe.
Internet traffic in the region is slowly returning to normal but is unlikely to
be fully restored until the end of February when repairs, hampered by bad
weather, are completed-Ed.
January is a rather special month in Taiwan and for oriental people generally.
The Western New Year has already arrived but the Lunar New Year, by which many
Taiwanese continue to live -or at least plan their lives- is still ahead of us.
Taiwan will welcome in the Year of the Pig on February 18 (and it will be year
4705 in the traditional Chinese calendar). The month preceding the Lunar Holiday
is not a time for decision-making and important announcements; rather it is one
of those times when minds are focused on preparation for the year ahead rather
than bold new initiatives.
So let us start the year in the traditional way by taking a look at what might
be in store for Taiwan in the year ahead. Here are a few fearless predictions.
A continuing robust economy
As is often the case, much of the good news is based in the economic data
and so it continues to be. GDP growth for Taiwan for the year ahead is expected
to be in the range between 4.11 and 4.21 percent. This is around the same level
as achieved in 2006. As commentators point out, given the post-industrial nature
of Taiwan's economy, this is a respectable figure by any yardstick. Unemployment
is declining. The unemployment rate dropped to 3.86 percent in November 2006 and
the nation's leading stock index, the TAIEX, is hovering around 8,000 points and
recently hit a six-year high.
Taiwan recorded a trade surplus of US$21.29 billion last year, the third-highest
level ever. Exports jumped 12.9 percent from 2005 to US$224 billion and imports
rose 11 percent to US$202.71 billion, leading to a trade surplus that was 34.6
percent higher than in 2005. Trade with China and Hong Kong continued to grow
last year, accounting for 39.8 percent, or US$89.19 billion, of total exports
and marking a rise of 26.61 percent over 2001. Export orders slowed in December
to their lowest in three years. However, analysts claimed that this was larger
due to a base effect and that export orders would pick up again in January.
Despite the lower December figure, growth that month was still a reasonably
healthy 7.32 percent.
Imports of consumer goods last year decreased 2.3 percent year-on-year to
US$15.39 billion because of the impact of consumer credit debt. Imports of
capital equipment also shrank by 0.5 percent to US$34.53 billion last year as a
result of marginal growth in private investment and a reduction in aircraft and
transportation equipment imports.
With worldwide demand for semiconductor and electronic products continuing to
grow, exports will remain a strong driver of growth into 2007 although some
slowdown is expected to occur. Government officials forecast that Taiwan would
see exports increase by 6.1 percent and imports increase by 6 percent this year
with a larger trade surplus of US$21.3 billion.
Any slowdown in export growth will be offset by strong industrial production and
a sharp pick-up in both private consumption and investment. With elections
looming, there will likely be more infrastructure spending this year which will
add to the growth picture.
While growth in Taiwan is not as spectacular as the numbers being achieved on
the other side of the Taiwan Strait; it is really like comparing apples and
oranges: China is an emerging market. Taiwan is not. In fact the latest Human
Development Report of the UNDP ranks Taiwan 24th in the world and second among
Asia's "four little dragons" in terms of human development.
The human development index (HDI) covers life expectancy, education and
standards of living, and uses these indices to measure a country's well being.
In terms of life expectancy, Taiwan is in 30th place at 77.5 years, in literacy,
Taiwan ranks 54th and in terms of per capita GDP, it is in 22nd place at
US$26,241.A total of 177 countries were surveyed. The three nations with the
highest HDI ratings were Norway, Iceland and Australia.
Politics as usual
Sadly, little progress appears to be being made in terms of
governance-either at the public or the corporate level. Opportunism continues to
hold sway. This may end up costing the ruling party dearly.
With legislative elections due at the end of this year and with the next
presidential election, due in 2008, now firmly on the horizon, the political
agenda this year-on both sides of the political fence- will be dominated by
those jockeying for nomination for a crack at Taiwan's highest office. In terms
of policy, China will, as usual, will loom large in the debate but expect little
innovative thought on the issue of Cross-Straits relations. Both camps are
seeking to occupy the middle ground. Recent polls have shown that there are no
votes to be garnered by taking extremist positions. The general population wants
the status quo to remain as it is. Change is occurring but at a glacial pace.
President Chen Shui-bian used his traditional New Year's address to weigh in on
the issue of Cross-straits relations and in particular focusing on the internal
struggle within the pro-independence camp within his own Democratic Progressive
Party. In particular, he sought to lay to rest allegations of a rift between
himself and his premier. Su Tseng-chang. Premier Su is believed to hold to a
more relaxed attitude towards China. Infighting within the pan-green camp
intensified recently after the Cabinet announced its decision to allow Taiwanese
chipmakers to manufacture chips in China using relatively advanced technology.
This move was widely criticised by former President Lee Teng-hui of the Taiwan
Solidarity Union, the junior partner of the DPP in the alliance who opposes even
small moves towards China. President Chen used his New Year speech to reaffirm
that the relocation of high-tech manufacturing to China had been approved more
than two years ago and had only been delayed by China's passage of its
anti-secession law last year.
Despite the show of unity between president and premier, tensions continue to
smoulder within the government camp. This time, the catalyst was a new financial
scandal involving the Rebar Asia Pacific group of companies. The past year has
not been good for Taiwan's banking sector with record losses racked up in bad
consumer loans as well as corporate scandals that have ravaged a number of
family-controlled financial institutions including those of the powerful Koo
family. The latest scandal is still unfolding and more on that next month when
the dust settles, however, the mere emergence of a fresh scandal was grist to
the mill of both the pan-blue camp, always looking for an issue to beat the
government with and the various factions within the DPP itself jockeying for
position with an eye to the presidency and seeking to discredit Premier Su with
an eye to taking him out of the race for the nomination.
This latest scandal surfaced when two of the companies in the Rebar group. China
Rebar and Chia Hsin Food & Synthetic Fiber Co. sought insolvency protection
from the Taipei District Court in order to reorganise their affairs. Within the
space of one day, the troubles in these two companies escalated when the Chinese
Bank, another Rebar subsidiary, asked the Financial Supervisory Commission for
an immediate takeover following a run that depleted the bank of more than NT$15
billion in a single day.
This was followed by the discovery of a funding gap equal to NT$1.7 billion in
yet another Rebar subsidiary, the Great Chinese Finance Bills Corporation. At
this stage it appears likely that the Central Deposit Insurance Corporation will
need to spend around NT$35 billion in taxpayer funds to bail out these
companies.
Independent analysts generally give Premier Su full credit for moving swiftly to
contain the damage from the Rebar meltdown which could have easily damaged both
to Taiwan's financial markets and creditors of those Rebar group companies made
insolvent by the actions of their chairman Wang You Theng, who has fled Taiwan.
Prosecutors have barred 48 other Rebar Group managers from leaving the island as
well as a number of Wang's family members.
Nevertheless the scandal (which is still unfolding at the present time) has
again underscored the problems that beset the country's financial system and
which the government has singularly failed to address in any meaningful way. It
has also highlighted the need for the DPP to rein in its various factions.
Above all the DPP needs to put behind itself once and for all the factionalism
that has cost it dearly in the mind of the electorate and which could yet be its
undoing in the upcoming polls. With four of the leaders, each with their own
factional following, eyeing the presidential slot (Frank Hsieh, Premier Su, Vice
President Annette Lu and DPP Chair Yu Shyi-kun) the party needs to contain the
damage and choose its candidate as quickly as possible.
This should be high on the President's agenda as soon as the celebrations are
over.
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