Taiwan Briefs
MACROECONOMICS
Good News or Bad News
INTERNATIONAL
USTR Cites Failure on WTO CommitmentsWho Needs the WHO?
CROSS-STRAIT RELATIONS
CBC Opens Door to Renminbi TradeBUSINESS
Investors Hang Up on Chunghwa Share Sale
Strong Taiwan Turnout at CEBIT
Makro Bows Out
Far Eastern Air Cuts Staff
CLA to Handle Work Permit Applications
MACROECONOMICS
Good News or Bad News
The latest set of GDP figures released by the Directorate General of Budget, Accounting and Statistics (DGBAS) left observers of two minds. The good news was that 2002 full-year GDP figures beat both DGBAS forecasts and consensus estimates, coming in at 3.54 percent. DGBAS had predicted 3.27, while the consensus was 3.3 percent.
A strong last quarter of 4.22 percent fueled by technology exports kept the final tally high. It was a slip from the third quarter, though, which posted 4.77 percent growth. The economic MVPs were the island's semiconductor, cell-phone and communications businesses.
Looking deeper into DGBAS figures, government pump-priming doesn't appear evident, with government expenditure in fact continuing to fall as it has done since the Democratic Progressive Party came to power. Also falling was private consumption as a contribution to GDP.
So, if government and consumers are not driving the economy, what is? Fixed capital formation growth and growth in stocks raised the figures, but once again it's been exports providing the economic momentum while imports are remaining steady.
Well, that was the good news. The bad news is that the third quarter was the peak and growth is set to keep sliding. Middle East tensions and the still hazy future of the U.S. economy prompted the government statisticians to be a little less sanguine in their forecasts for 2003.
First-quarter growth estimates were shaved to 3.38 percent (from a previous 3.43 percent), while the second quarter is expected to dip to 3.03 percent. The message from the economists is that conditions are still too uncertain to call. What happens in the Middle East may or may not have a big effect on exports, and thus on GDP as a whole.
That said, the forecast for the second half of 2003 is sunny skies again. Q3 is looking at 3.93 percent growth, while the fourth quarter is predicted to hit 4.30 percent.
INTERNATIONAL
USTR Cites Failure on WTO Commitments
In its annual Trade Estimate report, the United States Trade Representative has raised concern about Taiwan's ongoing IPR record. "Minimal progress was made in strengthening its intellectual property rights regime during the past year," the USTR report said. The reported noted that despite 2002 having been declared by the Taiwan government as the "Action Year for IPR protection," continued pirating of optical media, failure to shutdown counterfeit IPR-infringing facilities, and export of pirated goods overseas led the United States to call for further action. The complaints against Taiwan's IPR ran alongside other similar criticisms aimed at numerous countries from Canada to Ukraine. The USTR report is considered a guide to the outcome of the annual 301 Watch List.
Also mentioned in the report was Taiwan's World Trade Organization accession and its lateness in fully implementing tariff-rate and market-access quotas on a range of agricultural items specified in its WTO commitments.
The Taiwan government has also failed to implement the legal framework for issuing new fixed-line telecom licenses, while its rigid pharmaceutical registration process continues to slow down market entry for new drugs, the report said.
Who Needs the WHO?
Less than a week after the U.S. House of Representatives passed a unanimous motion (414-0) supporting Taiwan's participation in a May World Health Organization (WHO) meeting, the country found out first-hand the importance of being hooked up to the world's most extensive health-care network.
The bill, sponsored by the Taiwan Congressional Caucus, called on the U.S. Secretary of State to secure observer status for Taiwan at the May 19-28 World Health Assembly.
Supporters of the bill conceded that attempts to gain such observer status for Taiwan might well fail, but they said they were determined to try anyway.
At the same time, Taiwan's role in the spread and containment of a mysterious respiratory disease was becoming apparent. When a Taiwanese couple contracted the severe acute respiratory syndrome (SARS) after visiting Guangdong, Taiwanese health authorities were quick to act. They immediately alerted hospitals and broadcast information for citizens to be aware of the symptoms. Travel warnings were also issued for Hong Kong and southern China.
Calls for help to the WHO went unheeded as the Geneva-based group insisted on using Beijing as a conduit for information and coordination with Taiwan.
Experts now say Taiwan's rapid and open response helped slow the spread and prevent further deaths both in Taiwan and overseas.
By contrast, the Chinese authorities appear to have been slow to call for help and asked WHO to keep the known cases under wraps.
CROSS-STRAIT RELATIONS
CBC Opens Door to Renminbi Trade
The governor of Taiwan's Central Bank of China left open the possibility of Chinese Renminbi trading in Taiwan, saying that the greatest curb is the lack of a settlements system. Perng Fai-nan said that the passage of specific cross-Strait legislation would allow the Mainland Affairs Council to negotiate directly with China's central bank, the People's Bank of China. The Taiwanese side has long been concerned with issues of liquidity and stability in cross-Strait currency trading and is seeking an exchange and settlement system that would allow local banks to convert Renminbi holdings into hard currency such as the US dollar. No timeline has been given for negotiations with China.
BUSINESS
Investors Hang Up on Chunghwa Share Sale
The Ministry of Transportation and Communication managed to sell less than 8 percent of its latest offering of Chunghwa Telecom shares. Three days of after-hours auctioning netted the MOTC sales of just 7.42 million out of the 100 million shares allotted for the sale. Despite the discount to the current trading price, investors continued to shun the stock because of its high price and Chunghwa's unstable outlook. Since taking the shares to market more than two years ago, the government has been in a bind over what price to set. Too low a price could open the government to accusations of disposing state assets too cheaply and of diluting the value of existing shareholders. But its high-pricing policy has also failed, with the government able to sell only 18 percent of the stock in total. Originally the timeline for Chunghwa's complete privatization, meaning that government would be left with less than 50 percent of the shares, was the end of 2001.
Strong Taiwan Turnout at CEBIT
The Taiwanese delegation was once again the largest non-German group at this year's CeBIT trade show in Hanover, Germany. The annual tech and telecom show stretches over 30 pavilions and is a key opportunity for Taiwan firms to show off their wares to international buyers. Among the product highlights for the 655 Taiwanese exhibitors at the show -- up from the 589 that exhibited last year -- was an array of notebook computers powered by Intel's new Centrino processor. The U.S. contingent of 264 was the second largest foreign group, with host Germany fielding a team of 3,700.
Makro Bows Out
Dutch hypermart chain Makro closed its doors at the end of February after 15 years in Taiwan. The company blamed the economic slowdown and declining sales at its remaining six stores for the decision to depart the market. Heavy competition within the same sector and poor store location were other contributing factors to the chain's downward slide. A final seven-day sale preceded the closure, which left more than 700 staff out of work.
Far Eastern Air Cuts Staff
Taiwan domestic carrier Far Eastern Air Transport is seeking to trim staff costs by 10 percent amid slowing passenger numbers. A sluggish economy and impending competition from the Taiwan High-speed Rail line forced Far Eastern's hand. The airline is expecting to cut staff by 120 and will start by encouraging long-serving staff to retire early. Improving operational and maintenance efficiency will also be undertaken to pare losses. Despite government subsidies, Taiwan's domestic aviation industry runs at a loss, with many flights less than half full.
CLA to Handle Work Permit Applications
The Council of Labor Affairs is to take over the task of processing and issuing all foreign work permits, relieving half-a-dozen different ministries of the duty.
Under the new system, all foreign work-permit applicants are to submit their documents directly to the CLA instead of the ministry or department responsible for their particular industry. The CLA has always been the final issuer of work permits, but previously relied on individual ministries to handle the approvals. The new system is aimed at streamlining the process and cutting processing time from seven days to five. Applications for certain work permits requiring specific qualifications, such as those for lawyers, will continue to be handled by their respective ministries. Criteria for permits will not change.
