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Publications Topics Archive Topics Archive 2006 Vol.36- No.10 Taiwan Briefs
Publications Topics Archive Topics Archive 2006 Vol.36- No.10 Taiwan Briefs | Taiwan Briefs |
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BY Jane Rickards
MACROECONOMICS MACROECONOMICS Figures released in September showed that Taiwan's economy began to dip from the second quarter of this year. GDP in that quarter grew by 4.57% from the same period a year earlier, a decline from the 4.93% registered in the first quarter - and also the smallest economic expansion recorded in nine months. The government accordingly cut its full-year GDP growth forecast from 4.31% to 4.28%. The government blamed the GDP drop in the 2006 second quarter on shrinking domestic demand, partially caused by credit tightening following the surge in bad debt from credit cards and cash cards. But Taiwan's export growth also failed to meet expectations. Exports slowed in August for the first time in three months, with overseas sales growing 16.6% from a year earlier, down from July's 21.2%, to reach US$19.4 billion for the month. The export slowdown was widely attributed to higher energy and borrowing costs that cooled U.S. demand for the island's electronics. "As oil prices rise and the U.S. economy slows, that could have an impact on our imports and exports," the Ministry of Finance said in a statement. The Directorate General of Budget, Accounting and Statistics also said it now forecasts GDP growth of 4.13% for 2007. It explained in a statement that while it expects Taiwan's domestic consumption to pick up, "the growth of the global economy may be moderate in 2007 and Taiwan's exports are anticipated to mildly increase." Many analysts are anticipating a slowdown in the U.S. economy for 2007, which will in turn affect demand for Taiwan exports as the U.S. is a major destination for Taiwanese products, either directly or after further processing in China. But analysts are divided on the degree to which Taiwan's overall export performance may suffer, with some saying that trade with other Asian countries and Europe should partially offset a decline in the ledger with the United States. On the monetary front, the Central Bank of China raised interest rates from 2.5% to 2.625% in late September. "We believe the likelihood of another rate hike in December has fallen, making this rate hike possibly the last in the cycle," a report from Goldman Sachs said. Meanwhile Taiwan dropped from eighth place in 2005 to 13th in the annual Global Competitiveness Report released in late September by the Swiss-based World Economic Forum. While ranking 100th in terms of the soundness of its banks, Taiwan did well in the Growth Competitive Index, grabbing the top spot in Asia and sixth in the world. CROSS-STRAIT RELATIONS FIRST MEDICAL FLIGHTS TAKE PLACE Mid-September saw the first non-stop flight between Taiwan and China for humanitarian purposes since the island and the mainland cut off political ties in 1949. A plane evacuating a 71-year-old Taiwanese who suffered a stroke while visiting China took off from Guangzhou on September 14, and after a flight that took a route through Hong Kong's airspace, landed at Taoyuan International Airport (recently renamed from the Chiang Kai-shek International Airport) 100 minutes later. A few days afterward, 14 Taiwanese tourists injured in a bus accident in northeastern China were also evacuated to Taiwan on a similar flight. The trips were made possible under an agreement between Taipei and Beijing announced in June by the Mainland Affairs Council (MAC), permitting non-stop flights for humanitarian or medical reasons, as well as certain kinds of cargo flights and an expansion of passenger flights for major Chinese holidays. All of these flights are still not "direct" in that they have to go through the air space of Hong Kong or another territory for lack of an aviation agreement between Taiwan and China. Nevertheless, the new policy was viewed by analysts as another step towards the goal of establishing regular transport links. As a result of the same agreement announced in June, non-stop cross-Strait flights were held for the Mid-Autumn Festival. EVA Airways led the way on September 29 with a Boeing 777 bound for Shanghai that was filled almost to capacity with 316 passengers. Four other Taiwanese airlines - China Airlines, Mandarin Airlines, TransAsia Airways, and the Far East Air Transport Corp. - also offered direct flights for the traditional Chinese holiday, as did six Chinese carriers. DOMESTIC NEWS SHIH LEADS ANTI-CHEN demonstrations Throughout September, protests, protests, and more protests - demonstrations either demanding that President Chen Shui-bian resign or objecting to those pressures - dominated Taiwan's political scene and news coverage. Giving the thumbs-down sign and chanting "Ah-bian, step down," tens of thousands of protesters attended a September 9 rally outside the Presidential Office organized by former Democratic Progressive Party (DPP) chairman Shih Ming-teh and aimed at pressuring Chen to resign. They wore red clothing to express their anger. Shih, who was jailed for over two decades for opposing the former Kuomintang (KMT) regime but who has been critical of Chen in recent years, started the campaign to oust the president in August. He argued that a string of cases of alleged corruption - involving members of the Chen family, a close aide, and some say the presidential office - has made him unfit to be the nation's leader. Although Chen's son-in-law and a former assistant have been indicted, the president has not been directly implicated. Shih vowed to keep the demonstrations going until Chen steps down. "This will be a long battle," he asserted. "It won't be easy to bring down Taiwan's most powerful man." Throughout the week, the number of attendees at the sit-in protest dwindled, before swelling to around 320,000 according to police estimates for a September 15 evening march that Shih called "Besiege the City." Waving flashlights and accompanied by leading opposition figures, the protesters walked a 5.5-kilometer route around the Presidential Office and Chen's residence before taking the protest to the Taipei Railway Station. As of the end of September, Shih and his followers were still encamped at the station. COUNTER RALLY IN SUPPORT OF CHEN It was originally intended to be an independent rally under the name "Formosa Sunrise," organized by groups emphasizing Taiwanese consciousness to show support for Chen. But the ruling DPP found the opportunity too good to pass by. Labeling Shih's red-shirted supporters the "red terror" - a reference to the threat Taiwan faces from Communist China - DPP Secretary General Lin Chia-lung said the DPP would mobilize its own supporters nationwide and join in. As a result, tens of thousands of Chen's supporters, many waving green flags with the Chinese characters "Taiwan," converged outside the Presidential Office on Saturday, September 16. For his part, Chen had called on society to respect the results of judicial investigations into the corruption charges leveled at him, his wife, and son-in-law, and to abide by constitutional procedures for dealing with the removal of a president. Chen did not attend the rally, but Presidential Office Secretary-general Chen Tan-sun, echoed that theme in an address to the massive crowd. "Chen is determined to safeguard the democratic system established by the 23 million people of Taiwan," he said. "We will not allow people to use any outside means to destroy the system." Thousands of police were dispatched to separate the rally from Shih's, which was held at the Taipei Railway Station. Despite those precautions, a few scuffles occurred. VIOLENT EPISODES DOWN SOUTH A few days later, the protests turned ugly in Kaohsiung, when Chen supporters clashed with red-clad "anti-corruption" protesters at an evening rally. At least a dozen people were arrested. A day later, a few hundred demonstrators from Shih Ming-teh's movement staged a sit-in outside the Tainan City Council building, resulting in a clash with more than a thousand of Chen's supporters. The police, who tried to stop a repeat of the violence in Kaohsiung by setting up barricades, could not prevent eggs, bricks, and other objects from being hurled over the barricades, causing several people to be hospitalized. A group of Chen supporters even smashed a car belonging to a woman motorist because of its red color; she later made a profit by auctioning it off online to an overseas Chinese who donated it to Shih's campaign. Hou You-yi, head of the National Police Agency, apologized for the violence and said he would replace local police chiefs who were incapable of preventing it. Nevertheless, a few days later 15 more people were arrested for disturbing the peace in Kaohsiung and Pingtung Counties. Premier Su Tseng-chang called for calm, arguing that the unrest was harming society and the economy. He also called for a cross-party meeting among political leaders to discuss the crisis, but nothing eventuated. Although most political analysts said the protests could do little to unseat Chen, Shih seemed undeterred. At the end of September he left Taipei leading a convoy of around 20 buses and more than 100 sedans to travel across the island seeking to drum up further support. INTERNATIOANAL PRESIDENTIAL VISIT TO THE SOUTH PACIFIC President Chen in early September traveled to the South Pacific on a four-day tour, visiting allies Nauru and Palau and making a transit stop in the U.S. territory of Guam. Chen's trips aboard normally attract controversy as Beijing stridently objects to the Taiwan president being received in any foreign country - but this time his diplomatic exploits also attracted criticism at home. Opposition politicians accused the president of timing his trip to avoid the mass protests calling for his resignation. In his first stop, Palau, he attended a summit with the leaders of its six South Pacific allies, the first of its kind. Afterward, he became the first-ever Taiwanese president to visit Nauru, where he addressed the 18-member parliament before meeting with American Institute in Taiwan (AIT) Chairman Raymond Burghardt in Guam on his way home. Chen assured Burghardt that the government would make every effort to gain legislative approval of a long-stalled proposal to purchase an arms package worth billions of dollars and consisting of anti-submarine aircraft, Patriot anti-missile systems, and diesel electric submarines. Chen flew to Palau on his personal military jet, "Airforce One," in another unprecedented move, before switching to China Airlines for the rest of his journey. Along with his domestic problems, the embattled president also had to rebut the usual charges that Taiwan was involved in dollar diplomacy in its fierce competition with rival Beijing - charges partly sparked by a secret visit to Taiwan made by Nauru President Ludwig Scotty and Solomon Island's Prime Minister Manasseh Sogvare shortly before the summit. CONSTITUTIONAL CHANGE STILL SENSITIVE ISSUE President Chen in late September created a storm in a diplomatic teacup by proposing at a ruling party forum that the sensitive topic of Taiwan's territoriality could be included in his constitutional reengineering project. In his 2004 inaugural address Chen had promised to exclude territorial issues from his plans to reform Taiwan's constitution, and before this forum had insisted that Taiwan needed a new constitution purely for the purposes of enhancing government efficiency. The current Republic of China constitution includes China and Mongolia within the national territory, a relic from the KMT's pre-1949 rule in China. The suggestion brought strong criticism from both Washington and Beijing. China sniped that it would not tolerate Taiwan gaining de jure independence through a constitutional amendment, while U.S. State Department spokesmen twice urged Chen to abide by his commitments. But since any constitutional amendment requires the approval of two-thirds of the legislature, where opposition parties hold the majority and are vehemently against the idea, any jitters in Beijing and Washington would seem unnecessary. BUSINESS The first outright acquisition of a Taiwan bank by a foreign financial institution took place when Standard Chartered Bank announced at the end of September that it would buy the Hsinchu International Bank for US$1.2 billion. The government's Financial Supervisory Commission, which approved the deal, referred to it in a statement as a major milestone in the internationalization of the local financial sector. The Hsinchu Bank has 82 branches nationwide, while Standard Chartered has three branches in Taiwan. "Taiwan is an important element in our Asia strategy," Standard Chartered chairman Bryan Sanderson said in a statement. "It is the fourth-largest banking market in Asia and is integral to the rapidly increasing economic activity in the region." The bank said "the cycle is turning" on bad credit-card loans, and that Taiwan offered "attractive growth prospects." Hsinchu Bank had about US$13 billion in total assets as of June. It posed a net loss of US$2.73 billion in the first half of this year, against a profit of US$1.68 billion a year earlier. The bank has not decided whether to retain the Hsinchu International name or to consolidate into a single brand. |
