Under strong pressure form the public, President Ma Ying-jeou announced earlier this week that electricity rates will be raised in three stages, instead of in a one-time single increase.
The about-face may be partly the result of lobbying by the business sector, but we think that the most important reason that prompted the government to reverse course is the unfavorable economic situation facing Taiwan.
Just the day before the announcement, the Directorate General of Budget, Accounting and Statistics released a report indicating that Taiwan's economy posted growth of just 0.36 percent in the first quarter, with projected growth for the whole year revised downward to 3.38 percent.
In fact, the country's exports and imports contracted by 3.28 percent and 7.47 percent, respectively, in the first quarter, while private consumption increased by only 1.52 percent.
A downswing was also seen in private-sector investment, which declined by 14.9 percent in the first quarter. Among Taiwan's major industries, the manufacturing, real estate, retail and wholesale sectors all experienced negative growth, which is a rare phenomenon.
Under these circumstances, a large-scale increase in electricity rates could further bring down consumption and investment, which in turn will cause the economy to decline.
We welcome the government's reversal. A responsible government should adopt policies that are favorable to the country in the face of changes in the economic situation. (Editorial abstract -- May 5, 2012)
(By Y.F. Low)