The government’s NT$1 trillion (US$32.8 billion) infrastructure program has drawn a lot of attention and has been widely discussed. It cannot be denied that such a program could drive investment, employment and economic growth.
Taiwan’s presidents have all championed major infrastructure plans, but the only one that was successful was then-president Chiang Ching-kuo’s (蔣經國) “10 Major Infrastructure Projects.”
Chen Shui-bian (陳水扁) had his “New 10 Major Infrastructure Projects” and Ma Ying-jeou (馬英九) had his “12 iTaiwan projects.”
It seems everyone proposing their own plan disregards the previous ones, resulting in an unfortunate lack of real results.
During the 2004 presidential campaign, Chen talked about improving the economy and his NT$500 billion, five-year plan intended to increase public construction and stimulate domestic demand in the hope of creating 64,000 new jobs annually.
During the campaign for the 2008 election campaign, Ma proposed his plan, which included investment of NT$3.99 trillion over eight years, including a nationwide transportation network.
Two-thirds of the investment was to come from the government and one-third from the private sector, and it was hoped that it would create 120,000 new jobs annually, add 1.2 percent to GDP and boost national income per capita to US$30,000.
In the end, Chen and Ma failed to deliver on their promises.
Soon after President Tsai Ing-wen (蔡英文) took office, she made a strong push for her “five plus two” innovative industries plan, which aims to build an “Asian Silicon Valley,” “intelligent” machinery, “green” energy technology, biomedicine and national defense as well as establish a new agricultural paradigm and a circular economy.
The Cabinet plans to build a digital nation and an innovative economy to lay a solid foundation for Tsai’s plan.
The “Forward-looking Infrastructure Construction Project” — whose supporting legal framework was passed by the Cabinet on Thursday — foresees NT$880 billion to be invested in the building of new railroads, improving the marine environment as well as in “green” energy, digital and urban and rural development.
It is to be financed by stock issues, tax revenue and debt issuance. It is also estimated to create between 40,000 and 50,000 jobs annually.
It is not difficult to detect a lot of overlap in the policies of the Tsai administration and previous administrations. As a result, the government should look at the previous plans and extend them to avoid wasting resources, integrating similar or closely related items and thus making the use of resources more effective.
If it does not, massive investments could amount to nothing more than a waste and even more “mosquito buildings” left unused and empty.
If the government insists on initiating an infrastructure plan, it should do so by relying on private sector capital.
Taiwan is awash with private capital. According to the central bank, in late January, domestic savings stood at NT$40.724 trillion. Life insurance funds that could be used for investment stand at NT$20 trillion, but only half is invested in offshore bonds and other financial instruments.
Chunghwa Post has access to more than NT$6 trillion that is available for investment and there is more than NT$4 trillion in pension funds.
The government should amend the legal framework and allow this abundance of private capital to be invested in public construction, thereby easing its fiscal burden.
Lee Wo-chiang is a professor in Tamkang University’s banking and finance department and deputy director of its Cross-strait Financial Research Center.
Translated by Perry Svensson
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