President Ma Ying-jeou (馬英九) has been repeatedly bragging that Taiwan is pretty much clear of its economic woes. However, apart from not being able to end its multitude of economic problems this year, there is also a risk that things could take a turn for the worse. Taiwan’s GDP may grow by 3 percent or 4 percent this year because it is compared to a lower base period — last year — but if the many longstanding problems are not completely solved, simply improving economic indicators will not improve living standards.
In his New Year’s Day address, Ma mentioned that Taiwan is facing four big challenges — increased global industrial competition, more rapid formation of regional free-trade areas, a clear imbalance between training and industry demands, as well as pension system problems caused by declining birth rates and an aging population.
However, Ma only offered empty slogans and failed to put forward any concrete solutions to the problems. He has neither proposed any forward-looking policies nor showed the courage and resolve to take responsibility for the nation’s ills.
As Taiwan’s challenges are closely related, we should focus on two main issues. The first is government restructuring.
The more the government is restructured, the more bloated it becomes. The restructuring has not only failed to meet the goals of downsizing government agencies and the number of organizations and employees, but the increase in employee pay has become a heavy burden on government finances.
The government has to spend vast sums on personnel expenses and other legally required expenditures. As economic growth has stagnated, the government has been unable to increase its revenue and instead has raised its debt to make up for a lack of funds. By doing so, the government has ended up with a structural deficit. Combine these factors with the extremely lucrative pension system for retired military personnel, civil servants and public-school teachers that has resulted in an unequal distribution of resources and increased hidden debt, and it is obvious that the government is in deep financial trouble.
If something is not done about these problems soon, the government could go bankrupt and we could see a repeat of what happened in Greece here in Taiwan.
Taiwan is a small nation, but it has one of the highest numbers of government ministries in the world. Originally there were 37 ministries, compared with the US and Japan, which have just 11 apiece and China — with a population 56 times larger than Taiwan — with just 27. The number of government ministries has now been reduced to 29, but this is still high.
In addition, a look at the total number of civil servants as a proportion of the overall population reveals that Taiwan’s 3.5 percent is higher than Japan’s 3.18 percent, Singapore’s 2.9 percent and South Korea’s 2.12 percent. A look at the central government’s general budget for this year shows that personnel expenses as a proportion of the total budget accounted for 22 percent, much higher than the EU’s 15 percent.
Furthermore, government restructuring has resulted in a strange phenomenon: The central government has been downsized while the governments of the five special municipalities have greatly increased.
By creating six special municipalities, including Taipei, the central government ignored standards that administrative divisions should be based on, such as population, culture, geography and industrial factors. By not focusing on these things, it has created a strange and unique system unlike any other in the world.