Books on Taiwan
New Taiwan dollar (TWD)
Update No: 012 - (04/01/05)
Taiwan ended the year with the government chastened by a
perceived electoral loss but with the majority of the population - not to
mention Taiwan's international allies - relieved that the more radical aspects
of President Chen's policies towards Taiwan nationalism have no doubt been
dampened and that a more cautious policy towards relations with the Chinese
mainland may emerge during 2005 and for the remainder of his term in office
(President Chen serves until 2008).
The result of the legislative election of December 11th, saw the pan-blue camp
retain its legislative majority winning 114 seats in the 225-seat legislature.
The governing Democratic Progressive Party actually increased its vote share and
gained one additional seat - bringing its total to 89 - and it remains the
biggest party in the legislature; however it had set its goal on winning 101
seats and, together with its partner, the Taiwan Solidarity Union (TSU), of
controlling the legislature. This was not to be. By the party's own yardstick
therefore, the result represented a failure and President Chen resigned as
Chairman of the DPP, taking full responsibility for the result.
Voter turnout marked a historic low of just 59.16 per cent of the nation's
roughly 16 million voters eligible to vote and far lower than the Central
Election Commission's (CEC) prediction of 67 per cent made just one day before
DPP officials claimed that the low turnout was partly to blame for the failure
of the pan-green camp but most analysts attributed the poor showing in the
election to a badly implemented vote-allocation plan that split the pan-green
vote in many electorates. The camp may also have had an overly optimistic
assessment of the number of seats it could win.
By way of contrast to KMT Chair, Lien Chan, who has yet to concede defeat for
losing the presidential election in May of this year, President Chen was quick
to concede and to congratulate the pan-blue camp on their election victory. Chen
also expressed his thanks to the leaders of the four major parties for their
efforts to support a smooth and peaceful election.
"Although the DPP has gained one more seat compared with the previous
election, and the party's showing in this election also increased from last
time's 33.38 per cent to 35.72 per cent, we will still conduct an overhaul of
the party," Chen said.
The Central Election Commission's (CEC) statistics put the DPP's share of the
vote at 37.98 per cent.
While in one sense, the election result changes nothing - the stand-off between
the legislative and the administrative branch of government continues as before
- in another sense, 2005 may yet see some decisive change. Mr. Chen has already
resigned as Chairman of the DPP stating that for the remainder of his term he
intends to be "a president for all of the people." A new chair is to
be appointed by February 2005 at the same time a new cabinet is announced. Mr.
Lien Chan has announced he will retire from his post as Chair of the KMT in
August 2005 and he can retire now with some honour following the credible
election result he achieved for his party. The mantle of leadership in both of
the major parties will likely pass to a new generation of leaders.
Mr. Chen is also a chastened president. Clearly his pro-independence rhetoric
and readiness to push the envelope with regard to the mainland has alarmed a
significant section of the electorate and he has been rebuffed by an electorate
that has shown it prefers middle of the road politics and policies that do not
disturb the status quo. While subsequent to the election he has reaffirmed his
intention to continue with efforts to amend the constitution, this is likely to
be attempted much more gingerly that would have been the case had his party
achieved an outright majority in the legislature. While speculation is mounting
over the appointment of a new premier and cabinet, no announcement is expected
until the new year and only then will the likely future policy direction of
government become clear. Much will depend on whether Mr. Chen seeks to form his
new cabinet from within the ranks of the DPP or whether he will accommodate the
request of Mr. Lien and draw from the ranks of the opposition - among whom are
many talented people ready to serve.
The election result may make it easier to mend fences with Washington which, in
recent months, has become increasingly alarmed at Mr. Chen's readiness to taunt
Beijing. Many DPP officials have come out forcefully claiming that there was no
need to worry about fears of a mainland attack on Taiwan since the United States
would come to Taiwan's aid no matter what. Well, that may not be the way
officials in Washington see the matter. U.S. Deputy Secretary of State, Richard
Armitage, stated again for the record that the US was not legally bound to
defend Taiwan against a Chinese attack; a statement that was clearly meant to
signal to the administration in Taipei, that the willingness of America to
support Taiwan was conditional on Taiwan not provoking China. The United States,
as does much of the rest of the world, wants to see the present status quo
retained for the present and for Taiwan and China to settle their differences
peacefully and at the right time - which clearly is not yet on the horizon for
Indeed the recent announcement by Beijing that it was introducing a new
anti-secession law aimed at preventing Taiwan from becoming independent has
further complicated the cross-straits question. While details of the new law
have yet to be released it is widely believed that the new law - due to be
introduced in March 2005 according to reports will allow Beijing to act
extra-territorially, by prosecuting individuals or corporations that, it
believes support Taiwanese independence. This will not necessarily be limited to
Chinese or Taiwanese nationals but could involve US or other nationals who voice
support for an independent Taiwan.
This latest development has impacted negatively on business confidence across
the Taiwan Strait. China-based Taiwanese businessmen are clearly worried by the
new measure and feel they are walking a tightrope, trying to keep their balance
amid the ups and downs of cross-strait relations. President Chen's announcement
that Taiwan would retaliate by introducing a bill of its own can only complicate
matters if it proceeds.
Taiwan's economy has done reasonably well this year buoyed by a strong
export sector. While global growth is expected to moderate slightly in the New
Year, predictions for the domestic economy have actually been moved upwards
despite the uncertainties of the cross-straits situation. Unemployment is at its
lowest level for more than three years and office vacancy rates are at a four
year low. For the final quarter of last year the vacancy rate dropped to 9.81
per cent in Taipei City down from 11.14 per cent at the beginning of the year.
Rising demand is also pushing up average rent levels, albeit the increase
remains moderate at around 2 per cent per annum.
Domestic economic growth for the year is expected to come in at slightly under
six per cent while according to the Ministry of Economic Affairs, GDP growth for
2005 is now expected to be around five per cent - up from the earlier forecast
of 4.36 per cent. Academica Sinica has been more cautious than the government
and is predicting that growth this year will be around 4.05 per cent.
Exports grew 12.5 per cent year-on-year in November rising to US$15.51 billion
after an increase of 17.5 per cent to US$15.39 billion in October, with imports
up 20.7 per cent to US$14.94 billion after a gain of 38.1 per cent to US$15.05
The November export growth figure represented the slowest pace of expansion in
14 months as high crude-oil costs left companies and consumers in the world's
largest economies with less to spend on computers, flat-panel displays and cell
phones according to the Ministry of Finance.
For the first 11 months of the year, exports were up by 22.3 per cent to
US$159.16 billion, while imports rose 33.2 per cent to US$151.9 billion. The
nation's trade surplus during the same period came in at US$7.26 billion, down
54.9 per cent from a year earlier. Exports are expected to expand by 8.8 per
cent in 2005, reflecting the slower growth of the global economy and moderating
consumer demand in key export markets.
Taiwan's central bank raised its benchmark interest rate for the second
straight quarter by 0.125 percentage points during the final week of 2004. The
bank on Sept. 30 raised its rediscount rate by 0.25 percentage points, that was
the first increase in four years. The decision raises the bank's rediscount rate
to 1.75 per cent while boosting the secured accommodations rate and the
unsecured loan rate to 2.125 per cent and 4.0 per cent, respectively. The
measure was aimed at lowering the risk of inflation and overly low real interest
rates which the bank believes are disadvantageous to long-term financial
The New Taiwan dollar ended the year at a four-year high against its US
counterpart closing at NT$31.917, the highest close since October 12, 2000. For
the year as a whole, the NTD appreciated by 15 per cent against the US dollar.
Against the UK pound the NTD appreciated by only 0.2 per cent while against the
Euro the NTD appreciated by around 1 per cent.
Taiwan's main stock index, the TAIEX, climbed 4.23 per cent for the whole of
2004, weighed down by soaring oil prices and political unrest stemming from the
presidential election. The close at 6,139.69 points represented a seven-month
high since May but was well below the peak of almost 7,000 recorded in March.
The yearly increase represented a lukewarm gain, compared with the 32-per cent
gain for 2003.
The exchange rate to the US dollar as of 31 December 2004 stood at 31.917.
Against the UK Pound the rate was 60.9027. Against the Euro, the rate stood at
Taiwan's TPV in Philips deal
Philips will announce it as agreed to sell its PC monitors business and part of
its flat-screen TV operations to TPV Technology for about US$350m in shares,
turning the Taiwan based company into the world's largest PC screen-maker, the
Financial Times reported on December 12th.
The deal, which will more than double TPV's annual sales, is part of a growing
trend of western electronics companies selling non-core businesses to lower-cost
Asian manufacturers eager to acquire well-known international brands.
Recently IBM sold its PC unit to China's Lenovo for US$1.75bn in cash and
shares. In 2003 TCL, the Chinese group, became the world's largest TV maker
through an alliance with France's Thomson and then took a majority stake in a
mobile handset join venture with France's Alcatel.
Industry experts said that, like Lenovo and TCL, TPV was likely to gain the
rights to use the Philips brand at least for some time and on some products.
A person familiar with the matter said the transaction continued the Dutch
electronic company's long-running strategy of outsourcing manufacturing
activities to those regions or companies with cost advantages.
TPV, listed in Hong Kong, is already the world's second-largest maker of PC
screens with sales of more than US$2bn. But the addition of a brand such as
Philips will increase the appeal of its products across the world.
The agreement will involve Philips injecting its PC monitor operations, which
had sales of about US$2bn in 2003, and part of its low-end flat-screen TV
activities, into TPV.
The value of the Philips investment would be equivalent to about 30 per cent of
TPV's market capitalisation. However, under a complex arrangement, the Dutch
company will receive a stake of about 15 per cent in the Taiwanese group,
leaving China's BOE Technology as TPV's largest stakeholder with 25 per cent.
TPV designs and sells conventional and flat-screen PC monitors under the AOC and
Envision brands. The group had revenues of US$2.1bn in 2003 and net income of
US$70m. Its shares rose more than 4 per cent in 2004.