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TAIWAN


 

 

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

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Update No: 047 - (27/11/07)

With election season fast approaching, the government needs all the help it can get. While straw polls can be deceiving, the "nose" of the local business community suggests that the ruling Democratic Progressive Party is in for a tough fight if it wishes to retain its hold on power. Taipei has always been a stronghold of the rival nationalist (KMT) party and so the view from the capital and that from the countryside may be vastly different. An observer in Kaohsiung-the thriving port city in the south of Taiwan might take a diametrically opposite view from his counterpart in the north for the "Deep South" is DPP heartland where the anti-nationalist sentiment still lingers some 60 years after Chiang Kai-shek took over the island.

While most foreign analysts are expecting that when election season is over, the KMT and its allies in the "Pan-Blue" alliance will control both the Legislative Yuan (as they do now) as well as the presidency (which is held by the opposition DPP) this outcome is by no means a certainty. The political outlook therefore remains uncertain and compounded by the tensions between the two rival groups as they jockey for advantage. Certainly the government is vulnerable. It has never controlled the legislature and the Pan-Blues have from the outset taken partisan positions designed to obstruct policy initiative. Even despite this disadvantage the economy is not doing too badly at all, - much to the chagrin of KMT leaders. 

Polling will come in two-maybe three-stages. There will be the elections for the unicameral legislature on January 12. At the same time and if the government has its way will be a DPP-initiated (and blatantly political) referendum on recovering more than US$6 billion in "stolen assets" owned by the KMT and taken from government coffers during decades of authoritarian rule, when there was little attempt made to differentiate between party and state assets. Not surprisingly the KMT is resisting this referendum which clearly is designed to push voters to the DPP camp by reminding them of past injustices at the hands of the nationalists. The Presidential election will follow on 12th March.

The DPP kicked off its nationwide legislative election campaign this month with a rally in Kaohsiung; the first of 50 such rallies across the country. The KMT has started its own campaign by unveiling its initial candidate list for the legislator-at-large seats. Under the revised rules, voters will cast two ballots: one for a single-member district and the other for a second group that will represent a national constituency.

Aside from party-political; point scoring; two major issues will dominate the election: the state of the economy and relations with China. Despite attempts by the KMT to claim that only a return to a KMT government will 'save' the economy, the facts speak otherwise.

Indeed Taiwan has raised its growth forecast for 2007 as third-quarter GDP growth came in at its fastest pace in more than three years driven by improved consumer spending and strong exports. In the last quarter, Taiwan's GDP grew 6.92 percent from a year earlier, the fastest growth since 9.23 percent recorded in the second quarter 2004, according to the latest data released by the Directorate General of Budget, Accounting and Statistics. The agency raised its 2007 economic-growth forecast to a three-year high of 5.46 percent from its earlier estimate of 4.58 percent.

Consumer spending, which accounts for about two-thirds of Taiwan's GDP, will likely expand 2.93 percent this year, compared with 2006's revised 1.76 percent growth. Private spending rose 3.51 percent in the third quarter, following the second quarter's revised 2.57 percent increase. 

The latest figures show that unemployment fell to a five-month low of 3.92 percent in October from September's 3.99 percent. The improving labor market is helping consumer spending recover after nearly two years of credit tightening. However, as compared to October last year the present rate is slightly above the 3.90 percent level of a year ago. Unemployment is highest among those with university or other tertiary education. For this group the rate of unemployment is 4.71 percent.

Other pleasing figures show that corporate investment in new factories or machinery expanded 6.54 percent in the third quarter following the second quarter's revised 8.55 percent growth, and will likely increase 5.07 percent this year. Private fixed-asset investment will likely expand 4.23 percent in 2008, the government statement said.

Export orders are similarly doing better than expected with rising demand in Europe and in China, more than compensating for any slowdown in US demand. Export orders rose 17.99 percent year-on-year to a record US$32.2 billion in October, the Ministry of Economic Affairs reported. The ministry attributed the rise mainly to strong demand, especially from Europe, for information technology and communications products which saw an annual increase of 21.72 percent last month, the statement said. Orders also got a boost because of rising Asian demand for consumer electronics, which rose 19.99 percent year-on-year, and those of precision instruments, up 44.35 percent from a year earlier. Imports rose 8.8 percent year-on-year to US$19.2 billion in October spurred by increased purchases of crude oil and the refleeting programme of domestic airlines.

With elections just around the corner, opposition figures have been quick to disparage these latest numbers. One opposition legislator claimed that the revised economic forecast just ahead of the election was meant to create a sense of "pseudo prosperity" by manipulating the exchange and interest rates to benefit certain groups at the expense of the public as a whole.

Certainly the public may be feeling the pinch in some areas. With fuel prices continuing to soar (and with fresh calls for Taiwan to further accelerate its nuclear power generation programme) commodity prices over the past year have increased by 5.34 percent, the highest annual price rise since 1994. The wholesale price index has risen by 6.05 percent. However, consumer prices have risen by a mere 1.35 percent. This suggests that it is not the public that is feeling the real belt tightening but rather it is the manufacturers, wholesalers and retailers absorbing the difference.

Salaries have gone up meanwhile by an average of 1.73 percent over the past year. According to government figures, regular monthly salaries of local wage earners in the country's service and industrial sectors averaged NT$36,676 (US$1,134) in the first nine months of this year. The average regular monthly salary has risen for six consecutive quarters now.

The overall average monthly salary for wage earners (which includes regular salary as well as irregular payments) during the January-September period was NT$46,276, up 2.35 percent year-on-year, according to the statistics. These same figures also show that the number of monthly hours worked by employees in September stood at 170.8, down 21.8 hours from the previous month's level and down 11.9 hours from the same month last year. The average number of monthly hours for the January-September period was down two hours from the level a year earlier. Even so, compared to the 35-hour week of many European countries, Taiwan's workers put in far more to keep the economy bubbling along than their Caucasian counterparts.

What these numbers mean is simple to determine: attempts to make economic (mis)management an election issue will likely go nowhere. The election will come back to the issue of the relationship with China and Taiwan's political future. Here, despite protestations to the contrary there is actually little difference between the parties for the simple reason that Taiwan has left itself very little room to maneuver. Time and again Taiwan's leaders have procrastinated and missed the boat that would have allowed it to pull away from China in meaningful fashion. 

The first such occasion was in mid 1989 following the Tien-an-mien incident. Had Taiwan used that opportunity to declare independence it would have (probably) gotten away with it. Of course it did not. Taiwan at that time was still emerging from the martial law period and instead of looking to pull away from China its political leaders were under the delusion that the government in Beijing would collapse and the KMT would be invited back to "save" China. 

Throughout the 90s, and with the brash confidence that came with democratization, Taiwan's politicians were prepared to thumb their noses at Beijing in the belief that as a newly emerging democracy, it was somehow protected by an invisible shield-a wall of confidence-supplied by Washington. The "realpolitik" of an emerging China was overlooked totally.

Taiwan also appears to have missed the globalization boat. Economic integration for Taiwan's business community (much of it allied anyway to the KMT for historical reasons) has been focused almost totally on China to the extent that despite the incessant political noise across the Taiwan Strait, Taiwan is by far the largest investor in China's emerged manufacturing economy. North America, the European Union, Japan and Southeast Asia have-with few exceptions-been overlooked in the rush to earn quick money in China. There have been some political leaders with a strategic vision but by and large they have been a minority and they have failed miserably in articulating that vision outside of a narrow-and largely academic-circle.

As a result, the unspoken but key issue in this election may well turn out to be the choice as to who will negotiate Taiwan's terms of surrender, if a Hong Kong / Macao type of end-game should swim into prospect.

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