After long hours of debate, the Executive Yuan yesterday rolled out a NT$330 billion package of low-interest loans designed to boost the real estate market.
Some have called the new program a shot of cardiotonics for the construction sector -- itself a "locomotive" sector for traditional industries. They think it will enable people who do not own houses to buy homes, cut down on surplus housing nationwide, pull the construction business out of its doldrums and ease the pressure of non-performing loans on banks.
But many experts say the proposal is nothing more than a revision of the NT$150 billion loan package dished out by the KMT -- which would cure only the symptoms of the illness, not the root cause. As long as Taiwan has an oversupply of housing, more than a few greedy construction businesses will usurp the loans through dummy accounts -- passing the buck for unsold houses to the banks. This will not only burden government finances, but may also aggravate the banks' loan problems.
We do not intend to measure the pros and cons of the loan package. However, we must point out that non-economic factors are behind the stock market plunge that has dogged the new government since it took office. These factors include uncertainty over the government's financial and economic policies, political instability and the shaky status of cross-strait relations. These reasons are why investors are taking a wait-and-see attitude.
Recent economic indicators show that Taiwan's economy is performing quite well. Industrial production and export trade have both seen double-digit growth. This year's overall economic growth is forecast at 6.73 percent, a fairly good score for recent years. But the stock market keeps falling, despite all these. The daily turnover rate has fallen to below NT$50 billion. This serious incongruity is exactly what the government must work on.
For many years, the electronics industry has been the lead player in Taiwan's economic growth. But soon after it took office, the new government started plucking the feathers off this golden goose, cutting off tax incentives and imposing taxes on employee share dividends. The result is a bizarre paradox: the share prices of electronic firms hit new lows while the companies are setting new records in their business performance.
Vowing to save traditional industries, the new government has embarked on a measure to stimulate one segment of these industries. It is hard to predict whether moving against market trends will yield good results. But certainly, the situation facing the electronic industry can only be described as "suffocation." This kind of short-term solution and a lack of policy direction are the root causes of the current financial difficulties.
The new government not only lacks a coherent industrial policy, it can't decide which way the wind is blowing. There is disagreement over whether to raise taxes, to build the Meinung Dam, or to lift the restrictions on investment in China. The new government is sending out so many trial balloons that it is in danger of floating away itself. There is no reason for investors to have confidence in the government and its economic policies.
Diplomatic isolation and the cross-strait impasse make no deep, immediate dent on people's lives. But a sluggish economy and a stock market slump will shrink the assets and reduce the income of every citizen. In this sense, the new government's lifeline is not in the "black-gold" crackdown or cross-strait affairs -- it is the economy. And it should be the government's top priority.
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