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Politicians ignoring economy: analysts

It is a pity that both the ruling and opposition parties have treated the economy and finance concerns as "non-issues" in their campaigning for the legislative elections this year, analysts said yesterday.

Cross-strait business issues, for instance, are absent in the platforms of both political camps, which is a shame, said Chen Lee-in (陳麗瑛), a researcher at the Chung Hua Institution for Economic Re-search (CIER, 中經院).

"Economic issues, especially issues concerning China, are crucial to the nation now as Taiwan's industries have become increasingly dependent on China these years," Chen said. "But this aspect has obviously been neglected by every political party."

While investors generally favor a win by the pro-independence coalition headed by President Chen Shui-bian (陳水扁) to carry through the financial reform scheme, they have also expressed concern that further tension with China may slow the nation's economic growth.

Standard & Poor's last week revised its sovereign outlook on Taiwan to negative from stable on concerns over the nation's weakening fiscal flexibility and the prospect of rising cross-strait tension.

Despite the growing Tai-wanese investment staked in the Chinese market, S&P said that the opposition parties' adoption of similar "localization" rhetoric during the campaign shows that "the Taiwanese population as a whole is gradually shifting away from reunification with the mainland, which does not augur well for cross-strait relations."

Another international ratings agency, Fitch Ratings, in October maintained a stable outlook on Taiwan, but warned that a hostile cross-strait relationship with China remains a primary obstacle for Taiwan's creditworthiness.

Whoever wins the elections, some of the economic and finance issues which both parties have been ignoring are certain to be carefully watched after the poll results come out at around 8pm tonight, analysts said.

The Democratic Progressive Party (DPP), for instance, said it will move swiftly to push through the passage of an amendment to replenish the depleting Financial Restructuring Fund (金融重建基金), if the pan-green alliance wins a majority.

The fund, which plays a crucial role in cleaning up the banking sector, has dwindled to around NT$40 billion (US$1.23 billion) from an initial NT$140 billion when it was set up in 2001.

"The passage will push the government's efforts to reform Taiwan's banking sector a big step further," said Rocky Chou (邱正裕), an analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).

The nation's bad-loan ratio, including loans under surveillance, fell slightly to 4.51 percent in October from 4.52 percent in September, according to government figures.

The passage of the strengthened rescue fund is expected to help lower the ratio to an average of 2.5 percent.

The DPP also proposed to promote its economic stimulus packages through a NT$500 billion budget for public infrastructure projects over the next five years, claiming that such spending will help the country achieve an economic growth rate of 5 percent next year.

The Directorate General of Budget, Accounting and Statistics forecast an economic growth rate of 4.56 percent next year, down from a projected 5.93 percent for this year.

Other DPP-backed measures include keeping the reduced Land Value Increment Tax (土增稅) in a bid to boost the recovering real estate market, as well as offering citizens aged 65 or above a monthly subsidy of NT$7,500 in accordance with the National Pension Law (國民年金法).

In contrast, the Chinese Nationalist Party's (KMT) major appeal is to halve the controversial NT$610.8 billion military procurement budget and make use of the money for public welfare, including a NT$4,000 subsidy to senior citizens aged above 65 per month, NT$5,000 to farmers over 65 years old per month, and NT$1,000 to disabled citizens per month.

The KMT has criticized the government's huge proposed spending, saying it could widen the national deficit and increase public debt.

Public debt accounted for 36.3 percent of the nation's GDP at the end of last year, People First Party Legislator Christine Liu (劉憶如) said on Thursday.

With policymakers attaching no urgency to fiscal consolidation, Fitch Ratings said in October that it estimated that public debt could rise to 40 percent of GDP next year, although government debt servicing continued.

The KMT also promised to offer zero-interest tuition loans to high-school and college students, a 3-percent salary hike to public officials and various subsidies to elementary school pupils.
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