Wed, Jul 16, 2003 - Page 10 News List

Government urged to focus on deflation

PRIORITIES Business leaders told Vice Premier Lin Hsin-i and other officials to worry more about the economy and unemployment and less about a referendum law

By Joyce Huang  /  STAFF REPORTER

Business leaders yesterday urged the government to address the nation's increasing deflationary pressures, which they said may increase unemployment and curtail future investment returns with falling commodity prices.

"Domestic consumption appears to have picked up recently after the SARS epidemic was brought under control," said Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (CNAIC, 工商協進會).

"But the business community is very worried that deflation may further hurt the economy," Huang said after CNAIC held a two-hour breakfast meeting with economic and finance officials led by Vice Premier Lin Hsin-i (林信義).

Concerned about the specter of deflation, the central bank, which has cut its key lending rate 14 times since December 2000, lowered its key rediscount rate -- charged to commercial lenders for 10-day loans -- to a record 1.375 percent from 1.625 percent late last month.

To dismiss worries expressed by members of the business group, Lin said that exports and imports were on the right track in the first half of this year.

Exports rose 3.4 percent from a year earlier to US$11.61 billion after rising 2.1 percent in May, while imports rose 7.1 percent to US$10.3 billion, up from the US$9.51 billion registered in May, the Ministry of Finance reported last week.

But Lin wasn't so sure about improvements on employment, saying the nation may see an average unemployment rate of 4.8 percent this year, up from the previous estimate of 4.5 percent.

The unemployment rate rose to 4.98 percent in May from 4.92 percent in April, after recording 5.35 percent last August, according to government statistics.

To help combat unemployment, Minister of Economic Affairs Lin Yi-fu (林義夫) held a dinner banquet with leaders of five major business groups yesterday and said he hoped that the business community could collaborate with the government to recruit local workers.

Lin said that his ministry is pushing forward a stimulus measure, subsidizing businesses that hire jobless people aged between 30 and 65 with NT$10,000 per head per month for up to 12 months.

The government plans to allocate NT$3 billion per year to help out 25,000 job seekers, Lin said.

In response, Earle Ho (侯貞雄), chairman of the Chinese National Federation of Industries (工總), said that the measures may not be enough to entice businesses to expand by recruiting more staff.

However, he said the measures should benefit companies which were already planning to hire.

The CNAIC breakfast meeting also touched on the thorny issue of holding a referendum next March on the construction of Fourth Nuclear Power Plant.

Lin said a referendum law would better safeguard people's basic rights, while a vote on the plant allows the public to freely express their opinions.

But business leaders at the meeting voiced concern that a vote or more debate over the controversial plant could potentially damage the nation's investment climate.

"Even if a vote is cast to scrap the plant, I doubt that Taiwan can afford to breach contracts [for the plant] and ruin its business reputation in the international community," Huang said.

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