By Jane Rickards

• MACROECONOMICS
  GDP ESTIMATES RISING ON TECH PERFORMANCE
  
  CROSS-STRAIT
  CHEN TO RETAIN BAN ON CHINESE STUDENTS
  TEXTBOOKS may DROP CHINA REFERENCES 
  
  DOMESTIC
  COURT CLEARS MA OF ALL CHARGES
  FORMOSAN BLACK BEARS FACING EXTINCTION
  
  INTERNATIONAL
  UN APPLICATION FILED UNDER NAME "TAIWAN"
  DPP'S FRANK HSIEH WRAPS UP U.S. TRIP
  PROBLEMS ARISING WITH VENEZUELA
  
  BUSINESS
  IT COMPETITIVENESS RANKED 6TH IN WORLD
  CEPD PLANS TO ATTRACT MORE FOREIGN TALENT
  CVC ASIA PACIFIC TO BUY TAIWAN COMPANY
  WiMAX LICENSES AWARDED

MACROECONOMICS

GDP ESTIMATES RISING ON TECH PERFORMANCE
An upturn in the global tech cycle brought good news in July for Taiwan. The main concern right now is inflation. The semi-official Chunghwa Institution for Economic Research (CIER) in late July adjusted this year's forecast for Taiwan's GDP upwards, from 4.17% to 4.26%, based on a better-than expected performance in the first quarter of this year and anticipated strong international trade for the rest of the year. In a sign that the credit-card crisis is bottoming out and consumer confidence improving, CIER reportedly also expects private consumption for 2007 to grow by 2.91%, the second highest level since 2001. However, the think tank predicts that rising prices of oil and various consumer goods will push up inflation in the second half of the year. It sees the consumer price index (CPI) rising by 2.1% year-on-year in the third quarter and by 2% in the fourth quarter. For the full year, the CIER expects the CPI to climb 1.5% (in 2006, by contrast, the rise was only 0.6%). Echoing similar comments from other analysts, Wang Lee-rong, director of the CIER's Center for Economic Forecasting, said that soaring prices for oil, primary metals, and grains had actually driven up Taiwan's wholesale price index 7.11% for the first half of this year. But this was not reflected in the CPI, which rose only 0.61% because retailers were absorbing the costs so as not to affect sales volumes.

The private Taiwan Institute of Economic Research (TIER) in late July also raised its 2007 GDP forecast from April's 4.09% up to 4.21%. TIER President David Hong was quoted by local media as saying the drivers of economic growth will be an improving employment market and vigorous stock market (he was speaking before the subprime mortgage problem in the United States spurred a global dip in share prices). TIER analysts also predicted this year's CPI growth would be 0.96% and pointed out that the Central Bank is offsetting inflationary concerns by raising interest rates. The Cabinet also announced in early August that the government had halved tariffs for seven agricultural products effective for the rest of the year in an attempt to control inflation, though analysts said that step would be of little help. The Cabinet also asked the MOEA to ban exports of steel and other items if necessary to protect the local economy.


CROSS-STRAIT

CHEN TO RETAIN BAN ON CHINESE STUDENTS
Dashing hopes from some academics that an influx of mainlanders might offset dwindling student numbers in local universities, President Chen Shui-bian in late July said Taiwan would maintain its ban on Chinese students and would refuse to recognize Chinese educational degrees. "There will be no changes regarding these two policies during the rest of my term," Chen said. He urged the public to support this position, saying lifting the restrictions would "seriously affect the opportunities of Taiwan students and professors." Domestic universities are likely to see a further decline in enrollments in future because the island's birth rate is sagging and an increasing number of Taiwanese students are choosing to take tertiary studies in China instead.

TEXTBOOKS may DROP CHINA REFERENCES
Sun Yat-sen - long revered under Kuomintang (KMT) rule both as the party's founder and as the force behind the revolution that toppled China's last emperor in 1911- will no longer be described as the nation's "Founding Father" if the Ministry of Education has its way. Instead, he will be known to children simply as "Mr. Sun Yat-sen." The MOE in late July announced guidelines affecting some 5,000 terms relating to China used in elementary school textbooks. For example, "national opera" would be renamed "Chinese Peking opera." The KMT, from presidential candidate Ma Ying-jeou downwards, vociferously opposed the proposed changes as denying Taiwan's Chinese heritage. Party spokesman Yang Tu also said the proposed changes would be illegal as the constitution specifically states that Sun was the founder of the Republic of China.

DOMESTIC

COURT CLEARS MA OF ALL CHARGES
KMT presidential candidate Ma Ying-jeou was cleared of all corruption charges in mid-August, removing a huge obstacle to his 2008 election bid. Ma, a Harvard-trained lawyer previously known for his squeaky-clean image, was charged in February on suspicion of misusing more than NT$11 million (US$330,000) in expense accounts during his time as Taipei mayor from 1998 to 2006. In July, prosecutors pressed additional charges, including breach of trust. Ma, who had consistently declared his innocence (and his intentions to run for president even if found guilty), said in an interview that he knew from the beginning that the prosecutors were on the wrong track. "I think most people believed I was innocent and that was the most important driving force behind my cautious optimism," he added. A court spokesman said after the verdict was delivered that Ma's special funds were considered part of a subsidy from the city government, and hence no crime was committed. The stock market rebounded on the news, with some analysts believing that Ma's relatively pro-China stance could help thaw political and business relations with the island's Communist neighbor. Ma's woes are still not over, though. Ma and his lawyer Daniel Song both said they believed that prosecutors might appeal the verdict. President Chen Shui-bian and Premier Chang Chun-hsiung both said immediately after the verdict was announced that they respected the operations of the judiciary and had no comment.

FORMOSAN BLACK BEARS FACING EXTINCTION
Hunting is threatening the very existence of the shy and solitary Formosan Black Bear - the largest Taiwanese animal and the only species of bear to be found on the island. Huang Mei-hsiu, assistant professor of wildlife conservation at the National Pingtung University of Science and Technology, told the local media in mid-July that she had captured 15 black bears in the field over a 10-year period as part of a study and found that eight of them had lost paws or entire limbs in man-made traps. "It is without question that poaching still goes on, threatening the bears' existence," she said. The bears have traditionally been sought after by Taiwanese hunters for their alleged medicinal properties - bear paws are considered an energy-giving delicacy, while dried bear gall is believed to cure fevers, neutralize toxins, and calm nerves. A dead bear has a market price of over NT$200,000 (over US$6,000), researchers said, and the Taiwan government has classed the species as "endangered."

In a related report, authorities on the offshore island group of Penghu are working to boost numbers of green turtles, which are also rare and endangered. Mass killings of these turtles two decades ago decimated their population; now fewer than 20 female turtles come in to these islets each year to lay eggs.

INTERNATIONAL

UN APPLICATION FILED UNDER NAME "TAIWAN"
The government formally submitted an application for the island to become a member of the United Nations in late July, something Taiwan has been doing annually for more than a decade - but with a new twist. This time the application to enter the world body was made under the name "Taiwan" rather than the usual "Republic of China" - a move that critics called a political stunt aimed at building support ahead of presidential elections next March. Unsurprisingly, U.N. Secretary General Ban Ki-moon rejected the bid on the grounds that the U.N. believes "the People's Republic of China is the sole and legitimate government of China and that Taiwan is part of China."

In response, President Chen and Foreign Minister James Huang sent letters to Ban arguing that UN Resolution 2758 - which in 1971 took the "China" seat in the United Nations away from Taipei and gave to Beijing - did not grant China the right to represent Taiwan's 23 million people, nor did it state that Taiwan is part of the PRC. Ban's "interpretation is incorrect, illegitimate, and contradictory to regional reality," Huang wrote, likening Taiwan's exclusion from the world body to "political apartheid." Chen also wrote a letter with similar sentiments to China's Wang Guanya, president of the U.N. Security Council. Condemning the Taiwanese application, Beijing described Chen as a "scum of the nation" who could not escape the "punishment of history" - some of its strongest language in years. Undeterred, Chen and his government are vowing to pursue the U.N. bid during September's meeting of the U.N. General Assembly.

DPP'S FRANK HSIEH WRAPS UP U.S. TRIP
The Democratic Progressive Party (DPP) presidential candidate Frank Hsieh took a 10-day trip to the United States in late July accompanied by a group of DPP legislators. Aside from U.S. officials from the State Department, Department of Defense, the office of Vice President Dick Cheney, and important aides to the Democratic and Republican parties, Hsieh also met with former Secretary of State Colin Powell. At a speech at the National Press Club in Washington, Hsieh expressed support for President Chen's controversial plans to hold a referendum on reentering the United Nations under the name "Taiwan" and said he could not promise to abide by Chen's "Four Noes" policy, a series of pledges not to change the status quo in the Taiwan Strait. But Hsieh also voiced strong support for better communication between the United States and Taiwan, and vowed to re-start talks with rival China. Earlier, in New York, Hsieh also dismissed the KMT's plans for a cross-Strait common market as "ridiculously unrealistic." Hsieh also visited Detroit and Los Angeles before returning to Taiwan to say he had engaged in "honest and effective" communication with U.S officials and political figures.

PROBLEMS ARISING WITH VENEZUELA
Taipei's relationship with Caracas has dramatically soured in recent months, with many in Taiwan blaming this on left-leaning President Hugo Chavez's close relationship with Beijing. The island is currently negotiating with Venezuela to keep its representative office in the Latin American country after Caracas refused to renew working visas for Taiwanese diplomats. Since March, Venezuela, which does not have formal diplomatic ties with Taiwan, has taken a series of unfriendly moves, such as canceling a 90-day visa exemption for Taiwanese visitors. It is also seeking to take over two oil-fields in which Taiwan's state-run Chinese Petroleum Corp. (CPC) holds a small stake. Most recently, Caracas refused to issue visas to Taiwan's Youth Baseball teams, which were scheduled to attend the World Youth Baseball Championships in Venezuela in mid-August. In a rare show of unity, both the KMT and DPP slammed the move. The DPP also wrote a strongly-worded letter of complaint to Chavez.

BUSINESS

IT COMPETITIVENESS RANKED 6TH IN WORLD
Taiwan outshone rivals Hong Kong and China by a long shot in mid-July when it was ranked sixth in the world in terms of global IT competitiveness by the Economist Intelligence Unit, with Hong Kong coming in 21st among the 64 countries surveyed and China taking last place. The survey judged nations' IT competitiveness based on their performance in six areas - overall business environment, IT infrastructure, human capital, legal environment, research and development environment, and support for IT industry development. Taking first place was the United States, followed by Japan. In related reports, Goldman Sachs in late July listed a group of Taiwan tech firms, including Advanced Semiconductor Engineering, among its best buys for the second half, with new tech products spurring demand. Other companies recommended were Asustek Computer, components supplier Delta Electronics, laptop PC maker Compal Electronics, and smartphone maker High Tech Computer.

CEPD PLANS TO ATTRACT MORE FOREIGN TALENT
The Council for Economic Planning and Development (CEPD) is drawing up plans to attract foreign personnel and business migrants to help offset a dramatically declining birth rate. The CEPD is looking at the experience of Japan and Singapore as it targets foreign professionals who are under the age of 40, specialized in the areas of economics, finance, and technology, and preferably from countries with a lower per capita income than Taiwan's. Officials said they were particularly eyeing talent from Eastern Europe and India. On the issue of taking in Chinese immigrants, however, the local media quoted an official as saying that the issue needs to be reviewed further owing to the sensitive political relationship between the two sides. According to the scheme, Taiwan could take a total of one million skilled personnel and business migrants by 2050.

CVC ASIA PACIFIC TO BUY TAIWAN COMPANY
Private equity fund CVC Capital Partners Asia Pacific in early August said it had agreed to buy Taiwan curtain maker Nien Made in a NT$18 billion (US$545 million) deal. The fund, whose investors include Europe's CVC Capital Partners and Citigroup, is expected to finalize the deal by September 18. Analysts said private equity funds interested in Taiwanese manufacturing firms with factories in mainland China, such as Nien Made, may be looking at delisting the company from the Taiwan Stock Exchange, then relisting in Hong Kong or elsewhere to get around a cap on China investments imposed by the Taiwan government. Nien Made calls itself the world's top manufacturer of window blinds.

WiMAX LICENSES AWARDED
The National Communications Commission in late July awarded Worldwide Interoperability for Microwave Access (WiMAX) licenses to six service providers, including Far EasTone Telecommunications, First International Telecom, Vastar Cable TV System, Global On, Tatung, and a joint venture of Vibo Telecom and Tecom. Two major players - Chunghwa Telecom and Taiwan Mobile's Taiwan Digital Communications Corp. - failed in their bids. The companies are required to pay a deposit of NT$40 million (US$1.2 million) and NT$210 million (US$6.4 million) as a down payment for using the radio spectrum. The operators have 18 months to build their infrastructure, with only one-year extensions granted. WiMAX is a telecommunications technology aimed at providing wireless data over long distances in a variety of ways, from point-to-point links to full mobile cellular-type access.