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Commercial Times: Face up to 'inconvenient truth'

2012/05/14 21:02:39

President Ma Ying-jeou won re-election three months ago. He won't start his second term until May 20, but his approval rating has already dropped to an all-time low.

He may be bewildered by the recent outpouring of public anger at his reform initiatives, such as introducing a capital gains tax on stock investments to boost tax fairness and raising fuel and electricity prices to rationalize basic energy prices.

A critical reason behind the public's dissatisfaction lies in the failure by the president and his administrative team to acknowledge an "inconvenient truth" facing our economy.

We all know that the eurozone is already in recession over its prolonged debt crisis, and consumption and investor confidence in the United States remain weak four years after the 2008-09 recession.

The pace of activity in some leading developing countries has also slowed as a result of measures taken by their governments to tackle inflation.

All of these factors have taken a toll on Taiwan's export- oriented economy. Our key financial and economic indicators have pointed to downside risks since the end of the Lunar New Year holiday.

Among them, our exports dropped 4.7 percent year-on-year in the first four months of this year and eight of our top 10 export items posted significant declines during the period.

Equally discouraging is that our machinery and capital goods imports have fallen for 10 consecutive months.

Despite weak demand in the U.S. and the eurozone, Taiwan's main trade competitors, such as South Korea, Singapore and China, still managed positive export growth in the January-April period.

Taiwan is the only one of the four Asian Tigers that saw exports fall during the period, which we believe is because our government is still dozing at a time when many dangers face our leading industries.

Besides sluggish foreign trade, domestic demand is losing steam, too, as evidenced by a decrease in retail sales in March. The proposal to impose a tax on stock gains led to a year-on-year decline in stock transaction tax revenues in March. Two other indicators -- value-added taxes and land value increment taxes -- also posted negative growth.

Similarly alarming is that many Taiwanese businessmen operating in China, commonly known as Taishang, are facing threats to their survival. A recent survey by China's Tsinghua University forecast that about 50 percent of Taiwan-owned companies in Guangdong Province are likely to go bankrupt in five years. Their difficulties will doubtlessly put more pressure on our domestic economy.

While working hard to craft a platform for peaceful development across the Taiwan Strait, President Ma should take a step back and carefully review Taiwan's basic economic predicament.

We cannot but remind Ma that political negotiations and self-interest rather than boosting Taiwan's economy are the ultimate goals of China's leadership in engaging with Taiwan.

Take cross-strait tourism exchanges as an example. Most profits from hosting Chinese tour groups end up in the coffers of China's state-run travel agencies while local hotels and restaurants earn only small shares.

Even if the long-talked-about cross-strait investment protection agreement is signed soon and our doors consequently open wider to Chinese investors, it remains to be seen what percentage of the benefits from those investment projects will really be pocketed by our corporations and wage earners.

Given all these challenges ahead, President Ma should face up to the awkward truth and work out innovative strategies to reinvigorate our economy instead of pursuing his personal historical legacy. (Editorial abstract --May 14, 2012).

(By Sofia Wu)