Publications Topics Archive Topics Archive 2009 Vol.39- No.4 Taiwan Briefs | Taiwan Briefs |
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MACROECONOMICS
CROSS-STRAIT
DOMESTIC
INTERNATIONAL
BUSINESS
MACROECONOMICSECONOMIC MISERY STILL CONTINUING The global financial crisis continued to wreak havoc on the Taiwan economy all through March and April, with the economy showing little sign of improvement from its dismal performance in February. Exports in March dived for the seventh straight month, the longest such streak in seven years. Total exports at US$15.59 billion were down by 35.7% from the same month last year, a figure worse than February’s 28.6% but not as bad as January’s 44.1% drop. Total imports also continued to plunge; at US$12.17 billion, the March figure was down by 49.5%. The Ministry of Economic Affairs reported that export orders, an indicator of shipments to come in the next three or so months, amounted to US$201.2 million for March, down 22.27% from the same month last year. That was an improvement, however, on January’s record 41.67% fall in export orders. As exports account for around 70% of Taiwan’s economic activity, the decreased worldwide consumption is impacting the island sharply. The only silver lining seems to be China’s policy of stimulating rural consumption by subsidizing purchases of household electronics. Economists say this may be boosting Taiwan’s tech orders somewhat, accounting for the improvement in exports since January. But other statistics released by the government in March and April gave a mixed picture. Industrial production for February, at minus 27.14%, was an improvement from January’s minus 43.11%, and many high-tech companies in March started calling employees back from unpaid leave. On the other hand, the Directorate General of Budget, Accounting and Statistics announced in late April that unemployment in March had reached a new high of 5.81%. Two local economic think tanks also offered pessimistic forecasts. The semi-official Chung-Hua Institution for Economic Research (CIER), which advises the government on economic policy, in April gave a GDP forecast for the year of minus 3.59%. That was more optimistic than the forecasts of foreign institutions, many of which have recently put Taiwan’s annual GDP growth at around minus 6% (or worse), but less optimistic than the government’s own projection of minus 2.97%. CIER’s chief forecaster Wang Lee-rong told local media that Taiwan’s downturn was not expected to reverse until the fourth quarter this year. CIER calculates that the economy contracted by 9.12% in the first quarter and expects it to contract a further 6.61% in the second quarter and 2.37% in the third, before showing positive growth of 4.12% in the fourth. For next year, CIER is forecasting GDP growth of 3.88%. In contrast, the private Polaris Research Institute gave a far gloomier picture in March, saying the economy is likely to contract by 4.8% this year. Like CIER, it says economic growth this year will not move into positive territory until the fourth quarter. The government, which is implementing a stimulus package of infrastructure development, consumer grants, and tax cuts worth NT$858.5 billion over four years, has came under fire from Standard and Poor’s over the country’s prospective level of debt. In mid-April, the ratings service downgraded Taiwan’s credit rating outlook from stable to negative. “The negative outlook reflects our expectation of a marked deterioration in the government’s fiscal position in the next two to three years,” said Kim Eng-tan, an S&P credit analyst based in Singapore. The ratings agency also cited concerns over Taiwan’s overly-fragmented banking sector. Overall, it said, Taiwan has an exceptionally robust net external asset position – internationally competitive IT companies, for example, plus foreign reserves that are expected to remain above US$300 billion in 2009 and rank among the largest in the world. But he also cited Taiwan’s relatively high government debt burden (forecast to equal 142% of annual revenue at the end of 2009) and weak banking system for an economy at this stage of development.
CROSS-STRAITCHINESE RESEARCH SHIP CALLS IN TAIWAN In a fresh indication of improved relations, China’s Antarctic research ship made a port call in southern Taiwan in April. The Xue Long, with around 100 Chinese scientists on board, arrived in Kaohsiung for a four-day visit to promote academic exchanges with the island. Taiwan has long barred any Chinese research or surveillance ships from its waters, out of fear that they may be used for espionage. The crew of the Chinese icebreaker complied with the Taiwan government’s request that it switch off all navigation and research equipment before entering Taiwan’s territory. POLITICS INTRUDE ON BUDDHIST FORUM Taiwan and China in late March jointly hosted the second world Buddhist forum, with a theme of “A Harmonious World: a Synergy of Conditions,” attended by Buddhist leaders from all over the world. The event highlighted cross-Strait cooperation as the first half of the event was held in Wuxi, with Chinese and Taiwanese airlines then ferrying attendees across the Taiwan Strait to attend the second half in Taipei. But the underlying political messages were anything but harmonious. The Dalai Lama, leader of Tibet’s own version of Buddhism but anathema to Beijing, was not invited. Instead, Beijing’s appointee as Panchen Lama (the second highest office in Tibetan Buddhist), who is rejected by most Tibetan Buddhists, delivered a speech in Wuxi praising the Chinese Communist Party for bringing prosperity to Tibet and enabling freedom of religion. The Dalai Lama’s own hand-picked Panchen Lama disappeared in China along with his family soon after the appointment was announced in 1995 and has not been heard from since. In Taipei, the Dalai Lama was equally unwelcome. The exiled Tibetan leader has visited Taiwan twice – once each during the administrations of Presidents Lee Teng-hui and Chen Shui-bian. During his presidential election campaign last year, Ma Ying-jeou strongly criticized Beijing’s crackdown on Tibetan dissent. But after the Dalai Lama told the foreign press that he was keen to come to Taiwan again, Ma turned down the idea as inconvenient at a time of improving cross-Strait relations. Politics further intruded when Taiwanese Buddhist Master Hsing Yun, founder of the Fo Kuang Shan monastery, came under fire from the pro-independence press for saying in Wuxi that both sides of the Taiwan Strait “belong to one family – there are no Taiwanese in Taiwan, and Taiwanese are all Chinese.”
DOMESTICQUADRENNIAL DEFENSE REPORT RELEASED The government in March released a report outlining military strategies for the next four years, which politically gave off mixed and ambiguous messages. The Quadrennial Defense Review 2009 included plans to downsize the island’s 275,000-strong military to 210,500 servicemen and reduce conscription with the goal of instituting an all-volunteer force by 2014. Some observers said they were surprised by the report’s candor. An example was the report’s reference to plans for Taiwan to purchase ''next-generation'' fighter jets with stealth and short-takeoff and landing capabilities, which suggests Taipei is considering asking the United States to sell it highly advanced aircraft such as the F-35, even though Washington has repeatedly turned down Taipei’s request for less-advanced F-16s. But other analysts said the report sought to reassure Beijing by making Taipei appear to be less of a military threat than it seemed in the past. Wu Yu-shan, director of Academia Sinica’s Institute of Political Science, saw the government’s stress on downsizing its military as an attempt to make a “goodwill gesture” toward China. “We know that reducing conscription (and having professional forces) improves the military, but nevertheless it looks like a good gesture,” he said. OFFICIAL FIRED FOR MAKING BIASED REMARKS The government in March fired Kuo Kuan-ying, a Government Information Office official working in Taipei’s representative office in Toronto, after finding that he lied about authoring articles that hurled colorful slurs at local Taiwanese and called for China to use force to take over the island. Using the pseudonym Fan Lan-chin (which literally means “respect for the pan-blue,” a reference to the Kuomintang and its political allies), Kuo labeled the descendants of early Chinese immigrants “Taiwanese red necks” and “pirates.” At first he denied writing the articles, but 12 days later he admitted he was Fan Lan-chin. The GIO sacked him not for his biased remarks but for attempting to deceive his superiors, though President Ma called his articles “unquestionably extreme and discriminatory.” Unless Kuo successfully appeals, he will lose his NT$4.6 million pension. KMT POPULARITY SEEMS TO BE SLIPPING In signs that the KMT’s popularity may be dropping as it grapples with ways to jumpstart the island’s slumping economy, the party lost one legislative by-election in Miaoli and saw a significant decline in support in another in Taipei’s DaAn district. Both were traditional KMT strongholds. Some pundits said the Miaoli loss was due to bad planning and poor judgment. The seat became vacant when the KMT’s Lee E-tin, was found guilty of vote-buying during his campaign in the 2008 election. Despite the public’s anti-corruption mood, the KMT still nominated Lee’s wife, Chen Luan-yin, to succeed him. She was narrowly defeated by independent candidate Kang Shih-ju, who left the KMT to run on an anti-corruption platform after failing to obtain the party’s nomination. In Taipei, although the KMT won the DaAn election, the margin was significantly narrower than in previous years. KMT legislative candidate Chiang Nai-shin defeated DPP candidate Chou Po-ya 49% to 39%. In the election last year for the same seat, the KMT captured 66% of the vote compared with the DPP's 32%. The former holder of the seat, Diane Lee of the KMT, resigned early last month over allegations that she holds dual citizenship. “The fact that the KMT won by such a small margin shows that the current government is not receiving overwhelming support,” said Wu Yu-shan of Acadmia Sinica.
INTERNATIONALU.S. WELCOMES THAW IN CROSS-STRAIT TIES The United States is “comfortable” with the dramatic détente between Taiwan and China since Ma Ying-jeou become president last year, Raymond Burghardt, the U.S.-based chairman of the American Institute in Taiwan (AIT), told reporters during a routine visit to the island. “We’re comfortable with what is happening and we’re comfortable with where it seems to be going,” Burghardt said. He went on to rebut speculation making the rounds in some American think tanks and the pro-independence media here that Ma’s plans for closer ties with China threaten U.S. geo-strategic interests in the region. “All these analyses and theories have somehow misunderstood the U.S. position,” Burghardt said. “We really are enthusiastic about the kind of stability we now see.” He went on assert that “with cross-Strait dialogue restored, the danger of miscalculation and confrontation has been greatly reduced.” Burghardt said the notion that a U.S-friendly Taiwan, together with other U.S. allies such as Japan, could form a ring to hem in China’s military was outmoded. “There is often an assumption of a geo-strategic character to American policy toward Taiwan, which isn’t really there,” Burghardt said. He added that Washington is still committed to helping Taiwan acquire weaponry for its defense needs under the provisions of the Taiwan Relations Act.
BUSINESSTMC TO TEAM UP WITH JAPAN’S ELPIDA Taiwan Memory Co. (TMC) – the proposed government-invested firm that is envisioned as consolidating the island’s floundering memory chip industry – announced in early April that it would form a partnership with Japan’s Elpida Memory Inc. Elpida, the world’s third-largest maker of DRAM (Dynamic Random Access Memory) chips used in mobile phones and other consumer electronics, already has a joint venture with Taiwan’s Powerchip Semiconductor Corp. The new partnership aims to secure badly needed core technologies for TMC, so that it can become strong enough in the international DRAM market to compete with rivals Samsung and Hynix of South Korea. Later in April, another company invited to partner with TMC – U.S.-based Micron Technology – said it had turned down the offer due to concerns that it could lose technology secrets to Elpida. “The biggest concern is technology contamination,” said Fred Fishburn, an assistant vice president at Inotera Memories, a joint venture between Micron and Taiwan’s Nanya Technology. Nanya, which has stronger financial backing than most Taiwan DRAM manufacturers because it is part of the giant Formosa Plastics Group, has also opted out of the TMC plan. The government had proposed the establishment of TMC as an alternative to bailing out the money-losing DRAM makers, but it has not yet finalized details for how the company would be organized. CABINET PROPOSES VC FUND FOR BIOTECH The Executive Yuan in late March announced plans to raise funds to set up a NT$60 billion (US$1.76 billion) venture-capital fund focusing on biotechnology. “Biotechnology is a mainstream global industry that Taiwan can’t miss,” Minister Without Portfolio Chang Jin-fu was quoted as saying by the Taipei Times. Under the plan, the government’s National Development Fund will take a 40% stake and the remaining 60% will come from the private sector. Chang said the government was looking to promote investment in biotech, including agricultural biotech. “We hope to double the production value of the industry in four years,” he said.
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