In an attempt to reverse the trend, the government implemented a voucher program, offering NT$3,600 to each person. The vouchers, which scored a modest result in Japan in the 1990s, attracted headlines in Taiwan for a few days before losing their magic touch.
Ma is facing an adverse international economic environment. He shares a similar fate with South Korean President Lee Myung-bak, who has been unable to deliver on his campaign promises. But Lee has reshuffled his Cabinet and publicly apologized twice. In contrast, Ma briefly apologized for Taiwan’s poor economic performance in a TV interview.
When a democratically elected president talks of lofty goals, he should methodically outline the steps that will translate them into reality. When facing setbacks, a responsible leader admits to mistakes and adjusts policy in accordance with the national interest.
It’s worse than they think
Taiwan’s leadership misunderstands the world financial crisis. This is no ordinary recession because the bad financial instruments that originated in the US (and then sold around the world) amount to US$100 trillion, not the less than US$10 trillion in the US housing sector that the derivatives were based on.
The Taiwanese economy is inordinately dependent on exports, and those bad investments will substantially curb other country’s imports. Taiwanese banks are holding a tremendous number of bad loans.
In Japan, the bursting of the housing bubble meant that a similar problem with bad assets stalled economic activity for a decade.
In other words, in addition to continued steep declines in exports, the Taiwanese banking system is in no shape to fund an economic revival.
Of course, like almost all governments, Taiwan’s leaders are going to continue to bury their heads in the sand rather than honestly admit to the true scope of the problem.
Recently, it was predicted that Taiwanese GDP would drop more than 10 percent this year, but rebound in the second half of the year.
With that amount of bad international debt and a badly damaged banking sector, plus continued weakness in demand for exports, you will be lucky to have only one lost decade like Japan in the 1990s.
On behalf of the US, I apologize.
Saint Louis Park, Minnesota