In the face of Taiwan’s ailing economy, complaints can be heard everywhere. President Ma Ying-jeou (馬英九), who says he is “taking a back seat” and calls himself a zhainan (home boy), finally made some confidence building remarks when receiving Chinese National Federation of Industries chairman Preston Chen (陳武雄) and the federation’s board of directors on Wednesday.
Ma said the government should take responsibility for the public discontent triggered by rising prices and falling incomes, but that despite this situation, the government should stay calm and not intervene excessively.
He also said that as long as Taiwan’s economic fundamentals are sound, there was still a chance that the nation’s economy would return to prosperity.
He also said that Taiwan had experienced several big challenges in recent decades, including the global oil crisis, and the Asian financial crisis, but that it had managed to overcome all these obstacles.
“We have our own advantages, so we must have confidence in ourselves,” Ma said.
Since the transfer of power on May 20, the international prices of oil, raw materials and agricultural products have surged, planting the seeds of imported inflation.
As the government insists on oil and electricity hikes and respects the market mechanism, it is gradually losing its ability to control and stabilize consumer prices.
The Directorate General of Budget, Accounting and Statistics said the consumer price index rose 4.97 percent year-on-year last month, the second highest increase since September 1996.
The core price index rose 3.7 percent, the biggest jump in 12 years, and the wholesale price index for imported commodities valued in US dollars soared by 25.89 percent last month, its highest increase since June 1980.
Meanwhile, the public’s nominal wealth has fallen sharply.
This double pressure is causing public suffering and dissatisfaction, which in its turn is causing Ma’s approval ratings to drop, which is what forced him to make his confidence-building remarks.
Will Ma’s pep talk be effective? Frankly speaking, there is not too much cause for optimism. The reason for this is public doubt about the negative economic consequences of his China policy, rather than lack of confidence in Taiwan.
China-leaning measures like raising the maximum level for China-bound investments, the crowding-out effect resulting from the opening up of Taiwan to Chinese tourism and the domestic consumption outflow due to the opening of direct links will only further damage Taiwan’s faltering economy.
Most people believe in Taiwan’s excellent democratic system and economic fundamentals. But even those who voted for Ma no longer dare put any hope in the government after examining its performance over the past two months.
In other words, Taiwan’s economic fundamentals are on a sound enough footing to overcome many challenges. But people are disappointed with the government’s uncertain, desperate, contradictory moves and helplessness.
The public has seen through the government and is fed up. Confidence is crumbling. This situation can hardly be reversed by empty confidence building pep talks.
The desperate behavior of the Ma administration has caused several policy failures and drawn much criticism.
The performance of so-called financial and economic experts and experienced officials is mediocre and this incompetence cannot be swept under the carpet by attempts at flirting with a personality cult by playing up these experts.
The government’s biggest embarrassment is its handling of the falling stock market. Before coming to power, Ma bragged about how the stock market would boom, followed up by various other irresponsible statements.
For instance, Vice President Vincent Siew (蕭萬長) said the TAIEX would at least exceed 10,000 points while Ma took aim at 20,000 points, as did Minister of Economic Affairs Yiin Chii-ming (尹啟銘).
High-ranking officials behaved as if they were trying to outbid each other at an auction and were very pleased with themselves.
Now that the index has dropped more than 2,000 points, officials are either ignoring the situation or shirking responsibility by saying that there is “no remedy” to the situation and that 20,000 points was a joke.
Ma has even come out to call on the public to “work together to overcome the hard times,” but even if investors who believe in the government are willing to do so, they will not see any improvements but will instead lose their hard earned capital.
The plunging stock market is not the only mess Ma’s government has created.
First, implementing oil and electricity hikes without appropriate complementary measures only pushed up consumer prices.
Second, to spend the budget and attract voters, the government has launched a domestic demand expansion plan to the tune of NT$110 billion (US$3.6 billion), all but disregarding worsening inflation.
Third, in terms of domestic politics, the Chinese Nationalist Party (KMT) may enjoy a legislative majority of almost three-quarters, but the legislature still rejected Ma’s nominee for Control Yuan vice president, thus putting his leadership in doubt.
This is why Ma stopped avoiding the sensitive stock market issue and called for public confidence in person.
He did not do so in order to save the stock market; he did so to save his and his administration’s approval ratings.
However, trying to solve the political and economic difficulties through a call for confidence without any substantive measures is destined to be ineffectual.
To overcome the difficulties, the Ma administration must “pull back the horse from the cliff’s edge,” as the Chinese saying goes, and stop leaning toward China.
Ma should strengthen communication and coordination, as well as government efficiency and he should come up with concrete plans to stimulate the nation’s economy. This is the only way to inspire public confidence and ride out the crisis.
Translated by Eddy Chang
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