The government should seek to strengthen public infrastructure and provide relief to those affected by unpaid leave as ways to bolster the domestic economy and consumer confidence while Europe’s debt crisis and the sluggish US economy continue drag on Taiwan’s export-oriented economy, academics said yesterday.
It was agreed that the government did not need to intervene to boost the local bourse at the moment because it is at a reasonable level given weak sentiment at home and abroad.
“Fiscal tightening measures in Europe and the US will inevitably hurt demand for exports,” Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said by telephone.
The government could mitigate the pain by spending more on public infrastructure next year if exports showed further signs of declining, said Liang, whose institute will update its forecast for the nation’s GDP growth later this week.
Liang’s recommendations came after President Ma Ying-jeou (馬英九) said on Saturday that he would create a task force under the Presidential Office to plan for the downside risks of volatility in global financial markets.
The task force would consist of government agencies and academics and discuss potential countermeasures to cope with “the possibility of a second global financial tsunami,” Ma said toward the end of the second televised presidential debate.
He did not elaborate on the proposal.
On Dec. 1, the Cabinet approved a plan proposed by the Council for Economic Planning and Development to enable Taiwan’s export-oriented economy to better cope with sluggish demand in the US and Europe.
One of the measures is a NT$600 million (US$19.8 million) budget to provide a NT$2,000 subsidy for the replacement of air conditioners, washing machines and refrigerators with more energy-efficient models during the first three months of next year.
The government is also planning to spend NT$2.4 billion installing 320,000 LED streetlights around the country next year, representing a coverage rate of 20 percent in all cities and counties.
Liang said the government must be discreet and channel public funds to infrastructure projects that are really necessary, such as sewage drainage systems and dam dredges to avoid waste.
Efforts to promote green energy consumption are another option because they could sustain the unprofitable sector, in addition to creating a sustainable operational environment, the economist said.
The taskforce is also advised to provide temporary relief for those who do not qualify for unemployment benefits, but whose wages fall below certain levels because of unpaid leave, Liang said.
“The government should seek to ease the financial burden on such people until the economy resumes healthy growth and companies normal operations,” he said.
Lin Chien-fu (林建甫), professor of economics at National Taiwan University, said there were still things the government could do to shore up exports while waiting for the West to recover.
Taiwan could increase trade with other partners and tap business opportunities elsewhere, Lin said. The nation’s trade agreements with Japan and China open new -investment opportunities, he added.
However, other academics maintained that the government should not intervene in equity markets because any such moves could prove futile before Europe and Wall Street show signs of stabilization.
The TAIEX, which closed at 6,785.09 on Friday, remains relatively high compared with its nadir of about 4,000 points during the global financial crisis in 2009, Tang Ming-je (湯明哲), professor of international business at National Taiwan University said.
“It is common for investors to cut their portfolio when the economic outlook turns sour,” Tang said. “Government intervention can not reverse that trend, so it makes more sense to save funds for a real emergency.”
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