Sat, Jul 21, 2012 - Page 8 News List

Casinos are not the answer to local debt

By Lee Wo-chiang 李沃牆

The Matsu gambling referendum that was recently passed suddenly brought the islets to national attention. A few days ago, the National Treasury Agency announced the accumulated debt rankings for individual cities and counties, with Greater Kaohsiung having the worst debt and the islands of Kinmen and Matsu being debt-free.

After the onset of the European debt crisis, the world has become much more debt-conscious; but in Taiwan, people do not seem to pay much attention to the ever-increasing debt of the central and local governments. According to the Ministry of Finance’s National Debt Clock, as of late last month, the central government had a total of NT$4.893 billion (US$163 million) in one-year or longer-term debt and NT$130 billion in short-term debt, or an average debt of NT$216,000 per person. In Greater Kaohsiung, for example, the average central and local government debt is NT$292,700 per person. Based on these calculations, the central government is in deep trouble and will not be able to offer much help to local governments.

There are admittedly certain difficulties that need to be overcome if a casino is going to be built on Matsu, but the passage of the gambling referendum is clearly a reaction to the government’s long-term lack of infrastructure investments on the outlying islands.

Progress is not achieved overnight. If the central and local government debt that has accumulated over the years is not handled with care, the result could be bankruptcy. If that happens, we would all have to pay, so this is something we need to pay close attention to.

The Californian city of Stockton recently filed for bankruptcy after talks with creditors failed, making it the largest US city that has gone bankrupt. During Arnold Schwarzenegger’s tenure as Californian governor, the state almost went bankrupt because it was unable to reduce its deficit and because residents were against the idea of raising taxes. The financial situation is not much better in many other state governments around the US.

Ever since China implemented reforms and opened up its economy, many local governments have actively invested in infrastructure, which was financed by issuing more debt. This has caused some of the local governments to amass huge debt, posing a severe threat to the stability of their financial system.

As for Taiwan, although the Act Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法), which deals with the fiscal distribution between the central and local governments, has been amended many times, the proportion of locally generated taxes in cities and counties remain low, which means they cannot simply pin their hopes on allocations from the central government. There have been countless examples of how local governments have increased revenue and decrease expenditures. My home county, Kinmen, has set the standard for doing so by not only managing to improve its once disadvantaged political standing; it has also become the nation’s happiest place. For Matsu, the referendum was clearly another way of increasing revenue and promoting local development to avoid being marginalized.

In the face of the government’s financial problems, some people have jokingly suggested that laws be amended so that casinos can be opened in Taipei and Greater Kaohsiung, which are both better positioned to make money than other places. Some have said this would be a good way to help improve state revenues and expenditures. If this were to really happen, it would be more fitting to call the Republic of China the Republic of Casinos.

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