As export-reliant Taiwan faces growing economic headwinds, the government’s latest plan to help stimulate the economy should help both consumers and local manufacturers. The policy includes subsidies for consumers who purchase energy-efficient home appliances next year. However, the government should expand the scope of the plan and move more aggressively to accelerate the development of the green-energy industry with a more long-term focus.
Under the “green consumption” initiative the Cabinet revealed on Thursday as part of its economic stimulus package, the government will provide subsidies of NT$2,000 (US$66) per item for people who replace old home appliances, such as air conditioners, refrigerators and washing machines, with new, energy-saving models during a three-month period beginning on Jan. 1. The government said it hoped the plan would help promote awareness about saving energy and boost private consumption.
This plan is also targeted at supporting domestic industries, being applicable only to purchases of Taiwan-made appliances. According to preliminary estimates by the Ministry of Economic Affairs, this subsidy is expected to trigger demand for 300,000 appliances next year.
Given the intended multiplier effect, the plan is expected to generate NT$7.9 billion in consumption and benefit a wide range of domestic industries, including home appliances makers such as Tatung Co, Sampo Corp and Sanyo Electric Taiwan Co, as well as component manufacturers and domestic distributors and retailers, according to the ministry.
While the plan shows policymakers are moving in the right direction to boost domestic demand and promote green consumption, it also reflects the severity of the headwinds facing the nation’s exports and puts more pressure on the government to take further action in the face of a global economic slowdown.
Moreover, some are skeptical about the short-term nature of the stimulus plan, while others have questioned how many people would replace their foreign-brand appliances with Taiwan-made models simply because of a NT$2,000 subsidy. Another issue is the extent to which the plan can ease the impact of the international economic downturn.
In late 2008, during the global financial crisis, the government introduced a NT$83.26 billion consumer voucher scheme, or NT$3,600 for each person, as it aimed to raise GDP by 0.66 percentage points. In the end, the scheme only managed to boost growth by between 0.28 and 0.43 percentage points in 2009, according to the Council for Economic Planning and Development. Therefore, how much of a boost will the latest subsidy plan actually achieve?
The plan to subsidize purchases of energy-efficient appliances is a good one, but it is not on a scale that will have a great impact on the economic outlook and business sentiment. What the government should consider is extending the plan to include a wider range of goods, such as LCD TVs, LED lights and solar-panel roofs, as this could help domestic flat-panel makers and the LED and solar energy industries, which have been hit hard by the current downturn.
The government did say on Thursday that it planned to spend NT$2.4 billion to install 320,000 LED streetlights around the country. However, it would be even better if the government allocated more resources to subsidize consumer purchases of energy-efficient LED lights and solar panels.