Mon, Jan 23, 2006 - Page 8 News List

Editorial: New faces tackle old problems

Premier-designate Su Tseng-chang (蘇貞昌) on Friday night appointed Morgan Hwang (黃營杉) to replace Ho Mei-yueh (何美玥) as Minister of Economic Affairs and Joseph Lyu (呂桔誠) to replace Lin Chuan (林全) as Minister of Finance. Although the possibility of substantial change in the government's economic and financial policies is low, the challenges the new ministers face are no less formidable.

Hwang, chairman of the state-run Taiwan Power Co, and Lyu, chairman of the state-run Bank of Taiwan, are not widely known to the public, and so their selections came as a surprise to many observers. But it is clear that they have been chosen to expedite President Chen Shui-bian's (陳水扁) plans for long-term economic development and financial reform. The key to this, however, is whether they have clear plans in their minds.

In his New Year speech, Chen said the government would adopt a tougher stance toward China by promoting an "active management, effective opening" policy for economic relations. Under the previous guidelines -- in place since 2001 -- China became Taiwan's biggest export market and investment destination, with some 38 percent of exports shipped across the Taiwan Strait and as much as 70 percent of outbound investment taking the same route.

Hwang's emergence as the new economics minister perhaps reflects Ho's failure to more actively manage China-bound investment. But his two decades of experience in the private sector also make him stand out, because his business management skills in turning around companies suggest that he was appointed on his merits rather than because of the perceived failures of others.

Nevertheless, when Hwang takes the helm he will run into the same difficulties his predecessor faced, such as how to increase domestic investment, promote business innovation and reorient the economy away from manufacturing. In other words, the new minister must come up with clear and consistent policies that guide business investment. The vague slogan "active management" will not lure businessman into pouring in funds without workable policies.

Lyu, on the other hand, is one of Chen's economic advisers and once served as vice chairman of the Commission of National Corporations. He has experience in managing state-run enterprises such as Chunghwa Telecom Co, Land Bank of Taiwan and Bank of Taiwan, and has firm ties with the Democratic Progressive Party. But Lyu's ability to continue implementation of tax reform and help the government achieve fiscal balance by 2011 has been questioned.

Lyu's predecessor was successful in pushing forward legislation for the alternative minimum tax and drafted other schemes to improve taxation parity, but this drew mounting criticism from the business sector. Even so, Lyu seems to have little means of retreating from this policy. If he does, the public could gain the impression that the government's reform efforts are slowing down.

Certain financial reforms, such as the privatization of state banks, will be another challenge because of opposition in the legislature and protests by bank employees. If Lyu wants to accelerate privatization, he needs to review the entire strategy and take more aggressive action than his predecessor.

Despite the challenges ahead, it is a good thing that Ho is shifting to the post of minister without portfolio and can continue sharing her expertise with the Cabinet. Lin will return to his teaching career, but his reforms have generally received public support. Meanwhile, Council for Economic Planning and Development Minister Hu Sheng-cheng (胡勝正) will stay at his post to ensure better coordination between the ministries.

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