EDITORIAL: Government must think before it talks

Mon, May 28, 2012 - Page 8

Government efficiency is crumbling, as seen in the poor level of communication within and between government agencies. The Cabinet’s recent lack of contact with legislators as it sought to push a series of major policies through the Chinese Nationalist Party (KMT)-dominated legislature — including relaxing the import ban on US beef containing residues of the leanness-enhancer ractopamine — shows its inability to communicate.

The fallout from this will paralyze the government, just at the time when the country’s flagging economy needs all the strength it can get.

On Friday, Minister of Finance Christina Liu (劉憶如) said she would not have been in a hurry to push for the enactment of her capital gains tax on securities transactions, had she known the Cabinet was planning to raise electricity rates and abolish fuel subsidies at the same time.

Unbelievably, her tax proposals were finalized without thorough discussions among government officials — it only took two weeks for the Cabinet to rubber-stamp Liu’s proposal to place a 15 percent tax on securities transaction gains.

Given that Liu is under heavy attack from all sides, it is understandable that she would try to defend herself and her taxation proposal, in the name of seeking a fairer tax system, but more importantly, her inappropriate comments highlight the government’s complete disarray — from the formation of policy through to the ratification of related rules and then the final enforcement.

The confusion over the government’s fiscal plans before the implementation of a capital gains tax, no matter which version is finally adopted, has helped send the TAIEX to its lowest level since Jan. 3. At the same time there are escalating worries that the Greeks may exit the eurozone, while Spain faces an uncomfortable credit crunch.

The capital gains tax is not the sole issue which has plagued President Ma Ying-jeou’s (馬英九) administration recently. The government’s disorganization has been seen in the way it has handled a series of issues, including economic talks with Taiwan’s major trading partners.

Council for Economic Planning and Development Minister, Yiin Chii-ming (尹啟銘) recently opted to give his indirect advice to the government by posting an article on the Web in which he urged stepping up talks with China on the opening up of markets for key items, based on the Economic Cooperation Framework Agreement (ECFA), alongside free-trade talks with China’s trading partners.

In Yiin’s mind, it seems to be a useful approach to shout openly at the Ministry of Economic Affairs and related government agencies to force them to take the issue seriously, rather than go through closed door, fruitless discussions.

Yiin sees deepening trade ties with China via the ECFA as an effective way to fend off growing competition from Japan and South Korea, given that the two countries are likely to wrap up free-trade agreements (FTA) with China within next the next two years. These trade pacts will offset the benefits of the ECFA for local companies, Yiin implied.

The FTAs could lessen exports by as much as 4 percent, or US$15.9 billion a year, according to a forecast by the Chung-Hua Institution for Economic Research.

The government has said that the signing of the ECFA will help Taiwan push for more FTAs with its trade partners, but not a single trade pact has been signed since the ECFA was inked two years ago.

All this comes with South Korea racking up trade agreements with the EU and the US. Evidently, the Seoul government is much more efficient at pushing policies that boost South Korea’s competitiveness than Taipei is.