Talking too much is likely to cause a person to make too many mistakes. This appears to be the case for both president-elect Ma Ying-jeou (馬英九) and vice president-elect Vincent Siew (蕭萬長). They offered too many promises during the election campaign, at least on the economic front.
On different occasions last week, Ma and Siew admitted that their administration may not be able to fulfill its so-called “633” economic platform -- an annual economic growth rate of 6 percent, a GDP per capita of US$30,000 by 2016 and an unemployment rate of less than 3 percent per year.
It makes sense that their administration said it might have to implement prudent economic and fiscal policies when it assumes power on May 20, given that Taiwan, along with many other countries, is facing the problems of higher fuel and commodity prices and is hoping that the US economic slowdown won’t affect the nation’s economic growth too much.
But a flat acknowledgement of their failure to fulfill their promises, even before assuming the office, reveals not just naivety and short-sightedness, but also their irresponsibility when promoting their platform.
Prior to the election, many economists thought Ma and Siew’s bold promise of 6 percent economic growth a year was unrealistic, given the impacts of a US economic slump and prolonged global financial market turbulence. Import-driven inflation caused by higher crude oil and commodity prices has developed into a real threat to the economy and cast doubts on the ability of the central bank to continue interest rate hikes without compromising economic growth.
Against this backdrop, Citigroup forecast last month that economic growth would decline to an estimated 4 percent this year from last year’s 5.7 percent, before rebounding to 4.5 percent next year, while Standard & Poor’s predicted last week that GDP growth would show an increase of around 3.8 percent to 4.3 percent this year and 4.1 percent to 4.6 percent next year.
For several days, Ma and Siew have tried to paint their economic platform as a victim of the global slowdown in order to deflect criticism, while pinning their hopes on opening the economy to China to achieve their GDP goal.
Their election victory and later a friendly response from China seemed to suggest a closer cross-strait relationship, but Beijing’s measures to rein in its overheating economy may represent another risk to Taiwan’s economy ahead — if indeed economic ties are that close.
Nevertheless, Ma’s selection of former Taiwan Solidarity Union (TSU) lawmaker Lai Shin-yuan (賴幸媛) as Mainland Affairs Council chairwoman may prove yet another uncertainty for his government’s China-policy deregulation pledges. What also matters would be the implications of Lai’s appointment on the movement of foreign capital.
The planned removal of a 40 percent net worth ceiling on China-bound investment, for instance, has now turned into a new market consensus that the new administration will address this issue only when complementary measures are offered. In this respect, there is not much difference between the new administration and the outgoing Democratic Progressive Party (DPP) government, as the latter also preferred a step-by-step approach in dealing with the investment cap issue. The only difference is that DPP has run out of time to prove its capability.