Taiwan has had an open market economy for decades, and has grown to become an important participant in the international economic community as well. With the migration of a significant portion of Taiwan's manufacturing capability to China in recent years, especially in the electronics sector, the profile of its economy has experienced a dramatic change. To a large degree, Taiwan had already internationalized its economy.
The rapid move to China, considered by many in the business community as necessary to compete, substantially decreased the degree of Taiwan's international economic orientation to one more dependent on China.
Democracy's strength is that domestic changes such as this are made peacefully. But it also means changes are seldom orderly. The sudden rush by Taiwanese businesses after the last election to migrate their manufacturing to China is an example. The policy of former president Lee Teng-hui's (
In an open market and a democratic political system, persuasion by leadership, not fiat, often is the only means of directing policy. With a new administration and new leaders, constraints on investing in China by the Taiwanese business community evaporated. In addition to an administration that lacked the experience and talent needed to manage this fundamental economic change, there were political figures and important media organizations that encouraged this migration for political reasons, and an almost evenly divided Legislative Yuan that stalled badly needed legislation.
The difference Taiwan has had with other democracies is its domestic divisions on the fundamental issue of national identity. In addition, it is a democracy always under threat from the very large and hostile neighbor that is the Taiwanese businesses' commercial objective. What is seen by many as a natural economic evolution, therefore, is for Taiwan much more than that.
The opening of China's economy during the last two decades made it almost inevitable that many private-sector businesses in Taiwan would want to move to China to take advantage of this change. Given the state of the cross-strait relationship, it would have been an important and sensitive change, and absent domestic politics, might well have been managed with less harm to the economy.
Taiwan's domestic politics made that development impossible. Since then there has been an effort to bring a sense of balance between cross-strait commerce and security, but it has taken time, perhaps too much time, and there is still much to do. What needs to be done, however, is unlikely to progress very far given that a presidential election is only months away, and the state of the nation's economy will be made a central issue in the campaign.
Taiwan's economy, despite the continuous distortions by much of the media, has done relatively well compared with other East Asian countries whose economies have been hurt by both the attraction of China's rapid growth, and the slowdown of the economies in Japan, the US and Europe. Its economic growth rate, which fell so badly in the first year of the DPP administration, has gradually climbed back to over 3 percent last year, and seems to be holding that level or slightly higher during this year (absent the effects of severe acute respiratory syndrome). Trade has also increased, as has foreign exchange reserves.
At the same time, however, the government has had to increase its fiscal deficits to meet its budget objectives; the banking sector, while making impressive gains in lowering the amount of non-performing loans, still has problems, especially with community financial institutions; traditional industries, many of which migrated much or all of their manufacturing facilities to China, have difficulties in upgrading their capabilities in Taiwan; and unemployment persists at a level that remains much higher than is tolerable.
Plans have been announced that address these problems and the broader necessity to restructure the economy and upgrade the infrastructure to meet the challenge of the nation's changed economic circumstances. That brings us to the present.
There does not seem to be any broad opposition to the plans. They are in fact, if one follows the public debate, generally accepted. But the voters' focus is placed on the coming presidential election and the economy, which will be very much a campaign issue, and it will not be about the future but about the present.
During this campaign period, the public debate through the media, aside from some sensational events or scandals, is likely to be on "black gold," cross-strait relations and the economy. More than any other issue, however, the economy provides the best field for heated campaign rhetoric. Perhaps it is, therefore, not entirely a coincidence that much public attention is being paid to the media.
The role that most of the media played in the earlier days of the new administration, was in convincing so many people that the economy was in complete disarray, and that investment by Taiwanese businesses in China was essential to economic recovery. That history does not engender confidence that the voters will receive balanced information on which to judge their preferences for the election.
There are two obstacles that have thwarted the government over these last three years. One is that the Legislative Yuan is almost equally divided politically and therefore makes passage of needed legislation very difficult. The other is a media that seems dominated by biased and sometimes unethical management.
The stalemate in the Legislative Yuan can only be cured by an election or by a significant sentiment among the general public that could pressure legislators to address whatever issue is disturbing them. The biases that dominate the media can only be countered when the government communicates other alternatives directly to the people.
Spokesmen are also, and importantly, used on a daily basis for this purpose. The US president's spokesman in Washington, for example, has daily press briefings at the White House. He is listened to by the media, as it is well known he is thoroughly familiar with the president's views. This does not seem to be the practice in Taiwan, partly because the executive structure is different. For all sides in a campaign, however, learning and understanding directly the economic proposals of candidates, from their leaders the options they can consider, does much to limit the spinning done by so much of the media.
Nat Bellocchi is the former chairman of the American Institute in Taiwan and is now a special adviser to the Liberty Times Group. The views expressed in this article are his own.
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