The government’s relentless efforts to promote the signing of an economic pact with China were questioned yesterday when Standard & Poor’s (S&P) said in a report that Taiwan wouldn’t experience any solid benefit anytime soon.
S&P said in the report that President Ma Ying-jeou’s (馬英九) government would need “more substantial economic benefits” from an economic cooperation framework agreement (ECFA) with China to improve its popularity, which has been on the decline since August when the government reacted slowly to the disaster caused by Typhoon Morakot.
The international ratings agency’s remarks on the benefits of cross-strait rapprochement came after Vice President Vincent Siew (蕭萬長) told a Merrill Lynch investment forum yesterday that the two sides would sign an ECFA in the near future and Mainland Affairs Council Chairwoman Lai Shin-yuan (賴幸媛) said on Sunday that the pact could be inked by May or June.
Since Ma took the office nearly two years ago, the Chinese Nationalist Party (KMT) government has signed agreements with Beijing on cross-strait financial supervision, direct transportation and cooperation on tourism.
“Investors’ enthusiasm for improving relations is visible in the Taiwan stock market’s rally of the past year, but relations are still far from normal and it will take time before investors believe the recent changes are permanent and not prone to reversal under a new government,” Kim Eng Tan (陳錦榮), an S&P credit analyst based in Singapore, said in a statement yesterday.
The TAIEX rallied 78.34 percent last year, the biggest rise in 16 years, but the benchmark index has declined 6.01 percent so far this year, compared with the MSCI Asia Pacific Index’s increase of 1.88 percent over the same period.
S&P said in the report that companies would be more likely to commit to investing in Taiwan only when the benefits of closer economic ties emerge and there were no worries of an abrupt policy change on regional trade and investment agreements.
That will come at a price, however, as the government will not be able to push hard for tax increases and subsidy reductions, while its debt level and off-budget liabilities remain among the highest in the ratings agency’s “AA” rating category, Tan said.
“These liabilities will remain important constraints on the ratings for Taiwan for some time to come,” Tan said.
S&P lowered its outlook on Taiwan’s sovereign rating to “negative” from “stable” in April last year, citing concern about the government’s rising debt burden.
The ratings agency gave an “AA-” for the nation’s long-term credit rating.
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