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Editorial: Looking for the silver lining

Taiwan's economy has been in the doldrums due to the influence of the international economic environment and to its own domestic industrial transformation. The economy was just beginning to show signs of improvement after the Economic Development Advisory Conference drew up recovery plans. Then, it suffered two blows in quick succession -- repercussions from the Sept. 11 terrorist attacks against the US and the massive damage done by Typhoon Nari in the northern and central parts of the country. After a string of natural and man-made catastrophes, the world is suddenly very different at the beginning of a millennium.

What impact have these disasters had on Taiwan? The Directorate General of Budget, Accounting and Statistics announced yesterday that the unemployment rate rose to 5.17 percent in August. The figure for September is expected to be much worse. Chen Po-chih (陳博志), chairman of the Council for Economic Planning and Development, has said that the attacks in the US will cut Taiwan's economic growth rate by another 0.2 percentage points next year.

The private Chung-hua Institution for Economic Research is even less optimistic, saying it expects the economy to contract by 2 percent. JP Morgan has also revised its forecast for Taiwan, saying it anticipates a 2.6 percent contraction next year.

Disasters increase the uncertainty of economic activities and therefore have a negative impact on investment and consumption. The terrorist attacks have hurt Wall Street and other markets around the world. They have also severely affected the air transport and tourism industries, and caused airline insurance premium rates to skyrocket. Many airline companies are facing a possible halt in operations or even collapse.

The disasters have also had a psychological impact on society which are detrimental to investment, consumption and the overall economy.

Taiwan's government has adopted contingency measures to tackle the impact of the disasters. For example, it quickly provided abundant funds, manpower and material resources to help businesses and society weather the impact. It has also initiated reconstruction work, as well as measures to stimulate demand and production, including community reconstruction, such as the post-921 quake projects.

Even though reconstruction can help raise national income and economic growth, the disasters have already reduced the wealth of the people of Taiwan. The impact of war will be much deeper and persist longer. Terrorism is not the only challenge facing the US, the locomotive of the global economy. The impact on the global economy of Washington's war against terrorism will also make it different from any past war.

For Taiwan, the recent disasters are akin to facing days of rain while living under a leaky roof. The major economies of the world are faced with recession. Adverse effects will be unavoidable in the short term. But the long-term results will depend on whether Taiwan can find appropriate strategies to tackle the many challenges and changes it faces.

The Executive Yuan should set up a special budget for post-Nari reconstruction and stimulate the economy by means of public investment. The Legislative Yuan should also speed up WTO-related legislation as well as those steps recommended by the advisory conference. However, the administration should not act beyond its remit and interfere with market mechanisms -- by using government funds, for example, to shore up the TAIEX.

These extraordinary times could very well be a good opportunity for Taiwan's economy to make self-adjustments. A crisis can be an opportunity, but that depends on how Taiwan's political parties, leaders and its people face up to the rapid changes both at home and abroad.
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