Two weeks have passed since President Chen Shui-bian (陳水扁) introduced the "active management, effective opening" policy in his New Year's address. Despite this, the agencies in charge of economic policy still do not seem to be able to propose concrete and effective proposals to implement the policy. During a question-and-answer session in the legislature, representatives of these agencies merely offered three major directions.
First, when China-based Taiwanese businesspeople apply for permission to invest in China, they will be required to submit an analysis of their global operations. Second, timely briefings will have to be submitted for investments of more than a certain amount and disputes must be reviewed by international accountants. Third, fines will be increased to deter illegal investment in China.
If these three measures are meant as an implementation of Chen's "active management" policy, we can only say that they are neither very innovative nor very active. They will only lead to complaints from the public, have a negative impact on the welfare of workers and in the end will not achieve what they were intended to accomplish.
The first requirement already exists, and has more or less deteriorated into a creative writing competition. The second, timely reporting, is a fundamental requirement in securities management. Even if a few measures are added, the reliability of these reports is still dubious. The costs of hiring international accountants will be cut by the China-friendly pan-blue camp. Meanwhile, Taiwanese businesspeople will establish contacts with Beijing in an attempt to cause problems for the accounting firms and force them to cooperate or back down.
The third point involves making changes to the Statute Governing the Relations Between the People of the Taiwan and the Mainland Area (
The three measures are therefore superficial and unrealistic. They are an evasive maneuver, rather than something that shows a will to implement changes. In the end, the pan-blue camp's remarks that "you cannot control cross-strait trade even if you try" will come true, and Chen will be blamed for the failure.
In connection to this, National Security Council Secretary-General Chiou I-jen (邱義仁) pointed out a few days ago that the government's handling of the issue in the past has followed the logic that "market rules do not require managing," and as a result, government agencies have not proposed management measures.
This is a dangerous situation, and saying that there has been no management because market rules are in place is only an excuse. The council may be guilty of dereliction of duty for not having uttered a word about this over the past five years and for not proposing measures to deal with the issue.
But their willingness to stand up now against the government makes us look at them through new eyes. The nation will soon get a new premier and hopefully this will mean that past errors will be corrected -- and that the new government will come up with the innovative and effective measures needed for the "active management" policy.
We believe that an effective "active management" must include the following, at minimum. First, the investment review must incorporate the principle of prioritizing investments in Taiwan. A manufacturer's investments in Taiwan over the past three years must significantly exceed its investments in China. If the public wants companies to be based in Taiwan, then the public is certain to support this, which will make implementation easy and simple.
Second, investment in Taiwan-based research, development and upgrading must be made two important criteria for approving applications to invest in China. Manufacturers that have not upgraded their operations in Taiwan must temporarily put their investments in China on hold. This demand is absolutely certain to facilitate the upgrading of Taiwan's industry.
Third, all or part of the preferential tax treatment firms receive should be terminated for every manufacturer whose production in China exceeds a certain proportion of the value of its production in Taiwan. The resulting increase in tax income should be diverted to the improvement of the domestic investment environment in order to reward manufacturers that prioritize their investment in Taiwan.
Last year, the nation's overseas production reached 30 percent of overall production. Ninety percent of that production was in China. Accumulated investment in China by Taiwanese businesses is not US$46.8 billion as the Ministry of Economic Affairs claims, but US$280 billion. If the government still treats China as it does the US or Japan or other friendly nations and blindly relies on free-market principles to regulate that relationship -- while continuing to ignore Chen's instructions in the same way as before -- Taiwan will face an unavoidable crisis.
The new Cabinet's ability to make timely adjustments to its approach to managing China-bound investment will be critical in determining whether Taiwan's de facto independence can continue. The nation has no time to waste, and we hope the new Cabinet will direct all its efforts toward developing the economy and creating a sustainable existence for Taiwan.
Translated by Perry Svensson
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