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Key Economic Data 
  2003 2002 2001 Ranking(2002)
Millions of US $  406,000    
GNI per capita
 US $ 18,000
Ranking is given out of 208 nations - (data from the World Bank)

Books on Taiwan

Update No: 087 - (30/04/11)

Taiwan’s economy is heavily reliant on Japan and the recent disasters in that country are likely to have their effects locally. This is not good news for an unpopular government seeking re-election in less than 12 months time.

As a result of recent natural and man-made disasters, Japan’s economy is likely to contract during the first half of the year and perhaps into the third quarter if the world’s worst nuclear crisis since Chernobyl, twenty-five years ago, is not resolved soon. Already the nuclear incident has resulted in energy shortages in northern Japan that have had flow-on effects throughout the economy and especially in supply-chain management.

The direct impact on Taiwan is likely to be only slight. The Chung-Hua Institute of Economic Research has revised downwards its forecast for local GDP growth this year from 4.55 percent (forecast in December) to 4.29 percent. This is a tentative result at this stage and the figure could be lowered again if the crisis in Japan is prolonged.

There is an indirect effect as well. Taiwan is no stranger to natural disasters as it lies along the same ‘Pacific rim of fire’ as does Japan. Following on Japan’s earthquake and tsunami, President Ma Ying-jeou called for a report on the implications for Taiwan should a similar disaster nearer to Taiwan, generate a tsunami capable of reaching southern Taiwan. Most likely this would take the form of a magnitude 8.0 earthquake striking the Manila Trench, a geological fault west of the Philippines, believed to be the deepest in the world. The report was not good news and suggested that Taiwan would find it difficult to cope with a succession of similar disasters. Taiwan’s own nuclear industry could also be vulnerable and once again reliance on nuclear power (reported last month) has been called into question.
With a new round of elections due early next year, President Ma wants only good news and quickly switched focus to talking up the economy and talking down potential problems. Last year GDP grew by 10.82 percent and, as any ‘pro’ politician would do, Ma was quick to claim credit for it; not only that he also went on to say, it was ‘the best performance in 63 years’. It did not take long for opposition spokespeople to prick that particular bubble. Leaving aside the fact that the high growth last year came on the heels of a contraction the previous year and thus was influenced by a low base effect; it was plainly wrong. From the 1960s to the 1980s double-digit growth was the norm. It was above the 2010 level throughout much of the 1970s and climbed to 13.49 percent in 1978.

But the most telling point is that recent growth may be fine when only looking at the macro numbers, but it is growth that has not filtered down to much of the working population. The figures are skewed of course by export orders booked in Taipei but which are actually fulfilled by factories in China. As a result, income disparities in Taiwan are rising. The latest figures to be released show that this disparity may be accelerating. In 2009 the income share of the top five percent of the population was 75 times that of the bottom five percent. The previous year the disparity was 65 percent. Data from earlier years was not cited and so with only two comparison points (and one of them occurring during the GFC), a trend cannot be established, but it is worrisome for a government heading into elections and facing poll figures suggesting that the president’s popularity is even lower with younger voters, than with the general population at large. Young people, of course, are affected disproportionately by unemployment.

In the first quarter of 2012, Taiwanese voters will choose a new president to serve for the next four years plus new representatives for the national assembly. The primaries are underway and already Ma Ying-jeou has announced that he will stand as the presidential candidate for the KMT. He is likely to stand unopposed when their candidate is officially chosen on May 4. The DPP has three hopeful candidates vying for nomination as the opposition candidate; Tsai Ing-wen, a former vice-premier and current chair of the DPP; former Premier Su Tseng-chang who teamed with Frank Hsieh as the VP nominee in the 2008 presidential election; and Hsu Hsin-liang, a former KMT member who broke ranks in 2008 to support the DPP. At 69 years of age, Hsu is considered to be an outsider with little chance of winning the primary vote and becoming the DPP nominee to stand against Ma.

The DPP too is likely to make its final selection in early May after a complex process of consultations that includes telephone polling and party consultations. It may be complex but, as many commentators have pointed out, the eventual nominee will be decided by consultation.
With President Ma mistrusted by many in the electorate, and having an overall approval rating of only 33 percent, the KMT is clearly worried. For many party stalwarts a return to DPP governance would be unthinkable. The manoeuvring has already started to give advantage to the incumbent.

The first of these is the decision of the Central Election Commission (CEC) to combine the legislative elections scheduled originally for December this year with the presidential election scheduled for March 20. Instead there will now be a combined election to be held on January 14. Officially, the reason given for the merging of the two elections is that of cost saving – taxpayers would save around NT$500 million (US$17.3 million or GB£10.5 million) but coincidentally the move would also be of great benefit to the KMT by encouraging greater voter turnout. High voter turnouts traditionally benefit the KMT over the DPP.

If cost savings are the main reason for merging the two election processes then it is hard to fathom the second announcement – that civil servants would be granted a three percent pay increase. This will actually cost taxpayers NT$2 billion per year but civil servants are traditionally KMT voters, so perhaps the largess is not difficult to explain.

So far this is all the stuff of politics, but it is the third announcement that has caused some real disquiet. Seventeen senior DPP officials are under investigation for allegedly ‘failing to return’ 36,000 documents from the years of the Chen administration during the 2008 handover of government. During the handover period a joint team composed of DPP and KMT officials was responsible for ensuring the transfer of documents to the incoming administration. These documents, according to the KMT are now missing and legal action is underway. A presidential spokesperson claimed that the government was ‘merely enforcing the law’. Others see it as an ominous sign. Firstly, while nobody seems to know how these documents went missing, only the DPP officials have been referred to the Control Yuan for further investigation and not the KMT members of the transition team. Secondly, the government has waiting almost three years to make the allegations and waited until the DPP party primaries were underway to elect the DPP presidential candidate for next year’s election. Not surprisingly, one of the senior DPP officials standing accused is Su Tseng-chang who is seeking his party’s presidential nomination.

In an open letter to Ma Ying-jeou and his administration, 34 foreign academics from the USA, Canada, Europe and Australia – known long-time supporters of Taiwan – criticised the move and questioned the timing of the allegations stating

“To come up with this matter three years later, when the primaries for next year’s presidential elections are underway, suggests a political motive... Announcing an investigation of him [Su Tseng-cheng] and the others at this time certainly gives the impression of a political ploy intended to discredit the DPP and its candidates...”

“As observers of political developments in Taiwan for many decades, we believe that these charges are politically motivated.”

“It appears to be an attempt to use the Control Yuan and judicial system for political ends, in an effort to appear ‘legal’ and avoid criticism by foreign governments and human rights groups.”

Did the administration take this criticism on the chin? Certainly not! Immediately after publication of the letter, a presidential spokesperson decried the letter and the writers claiming it was ‘reckless interference’ in the affairs of Taiwan and ‘an absolute disrespect for Taiwan’s rule of law’. It was these comments that many observers found especially chilling.
According to one newspaper editorial

It appears that the KMT, like the CCP, can’t differentiate true concern for the fate of democracy or the well-being of Taiwanese with a personal attack on the party. Like the CCP, the KMT takes any criticism personally and counterattacks with whatever low-handed means it can muster.

More and more this Administration is taking on authoritarian overtones and using the same rhetoric as Beijing when dealing with criticism. And that is worrisome indeed.

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