The government is sending the message to the public and corporate executives that they have to count on themselves now because it has more important things to do, such as carry out its “Economic Power-up Plan.” The plan, which aims to stimulate growth, is comprised mostly of long-term measures that will be spread out over the next two, or possibly six, years.
What about immediate measures? How can investor confidence be restored when markets turn bearish? The government said companies were welcome to launch new share buyback programs to underpin stock prices, but the TAIEX still ran out of steam, plummeting to a three-month low of 7,134.06 points on Friday.
How can exporters’ competitiveness be boosted when the market is favoring the buyer? The government has said there are more factors it must assess before it can decided whether to devalue the currency.
Government officials appear to be unable to see the forest for the trees. The rise of the New Taiwan dollar against the US dollar and battered investor confidence have become increasingly pertinent topics lately, especially as the NT dollar strengthening against the greenback no longer reflects a stock market rally.
On Saturday, Taiwan Semiconductor Manufacturing Co (TSMC) chairman and chief executive Morris Chang (張忠謀), again called on the government to take a serious look at the impact a strong NT dollar will have on exporters given that foreign exchange rates are one of the key factors that determine an exporter’s competitiveness, especially considering that Taiwan’s export rival, South Korea, has been devaluing its currency.
Apparently, Chang was not speaking for the sake of his company, as he said: “TSMC is completely capable of tackling the foreign exchange issue.”
TSMC, the world’s biggest contract chipmaker with revenue expected to exceed NT$500 billion (US$17 billion) this year, would be in a totally different position if it counted solely on foreign exchange rates to win orders, Chang said.
The 81-year-old tycoon was speaking for the nation’s small and medium-sized enterprises, which would stop being competitive if the NT dollar retained strong. Small and medium-sized companies account for more than 90 percent of local companies.
The NT dollar has appreciated 9.9 percent versus the US dollar since December 2007, while the South Korean won devalued 17.9 percent, weakening South Korean exporters’ pricing power by nearly 30 percent, Chang said on Thursday.
Backing central bank Governor Perng Fai-nan (彭淮南), Premier Sean Chen defended the bank, saying it had to consider multiple factors when formulating policy. It cannot look at the issue from just a single perspective, Chen said.
Chen said that the government’s stance on the monetary issue is that there is nothing more it can do to as rising inflation risks poses a bigger threat to already weak consumer purchasing power. Consumers are still feeling the squeeze of rising prices of everyday goods, from powdered milk to gasoline.
Undoubtedly, it is a complicated thing to devise a monetary policy that pleases exporters and consumers at the same time, given the diminishing number of tools the central bank has at its disposal to keep inflation low while propagating economic recovery and containing the property market.
It is clear that the government should not join Seoul in a currency devaluation race as such competition will only prompt protectionism, high inflation and economic meltdown, given that Taiwan is a much smaller economy than South Korea as well as being more vulnerable to external volatility.
The request from exporters is not that the government should go to extremes by devaluing the NT dollar. Instead, they hope that the government bears in mind that exporter competitiveness should be factored in when devising monetary policy. Bureaucratic inertia will only worsen the nation’s exports — a major pillar of Taiwan’s economic growth.