With the Cabinet led by Premier Frank Hsieh (
"Political instability will definitely dampen the economy," said Liang Kuo-yuan (梁國源), president of the Taipei-based Polaris Research Institute (寶華經濟研究院).
Japan suffered the "lost decade" of the 1990s when its economic growth plunged to 1.4 percent, a decline blamed on flip-flopping policies that resulted from frequent reshuffles in the government, and this situation could happen to Taiwan as well, he said.
Since President Chen Shui-bian (
It takes time for a new team to adapt to government affairs, but Taiwan is running out of time in terms of developing economic strength, Liang said.
Government policies should be carried out consistently to achieve the desired effect, but such reshuffles always results in policy U-turns, he said.
It is unknown whether any of Hsieh's economic plans will be continued. For instance, Hsieh planned to allow the exchange of the New Taiwan dollar and the Chinese yuan in Taiwan proper; he planned to allow more Chinese visitors; he wanted to facilitate direct cross-strait cargo and/or passenger flights; and he hoped to lure China-bound Taiwanese companies to list on the local bourse.
No matter who replaces Hsieh, it is likely that he or she will be tasked to carry out Chen's "active management, effective opening" policy in cross-strait business matters, Liang said.
Boosted by government measures such as major public construction projects, Taiwan's economic growth is expected to recover to 4.08 percent this year from 3.8 percent last year, since the jobless rate fell to 3.94 percent last November, the lowest in five years.
The reshuffle did not and will not influence the stock market, but the policies to be put on the table by the new team will, said Alan Tseng (
Through "effective opening," the new government should allow local packaging and test companies to set up low-end factories in China, as most chipmakers are already there, Tseng said.
In line with the big fall in the Nikkei index and Japanese yen, the TAIEX dropped 13.14 points to 6,711.04 yesterday, while the New Taiwan dollar fell NT$0.072 to close at NT$31.999 in Taipei.
The Nikkei fell 2.8 percent to 15,805.95 yesterday, after Japanese prosecutors investigated Livedoor Co on suspicion it gave misleading information to shareholders.
Commenting on Hsieh's resignation, Chen Cheng-yi (陳正毅), spokesman for the General Chamber of Commerce (全國商總), said Hsieh has been very active in communicating with the business community and took its opinions and suggestions into consideration.
Since facilitating direct links with China, as well as lifting the ban on Chinese tourists topped Hsieh's agenda, Chen said he hopes the new premier will pursue these efforts.