It is perfectly normal for economic data to fluctuate and for the economic climate to go up and down.
However, in more cases than not, Taiwan’s real economic performance has been worse than expected and the downward revision of growth forecasts has become a routine occurrence.
This suggests that there is a problem with the fundamentals of the economy. Quite simply, it is an issue that cannot be ignored.
President Ma Ying-jeou (馬英九), however, continues to ignore economic warning signs.
Instead, he maintains an inflated opinion of himself and his government’s achievements. Ma diverts attention to other matters or selectively releases information in an attempt to cover up the increasing risk of economic collapse.
Still, numbers speak louder than words. The nation’s economic growth forecast for this year has been revised downward from 3.59 percent to 2.4 percent, a drop of about 30 percent.
Last month, the Council for Economic Planning and Development’s economic monitoring indicators were at “yellow-blue” for the eighth consecutive month.
In addition, according to Switzerland’s International Institute for Management Development, Taiwan’s global competitiveness dropped from seventh to 11th place this year.
The nation’s constant downward spiral first reared its ugly head last year, but this was still not enough to wake up Ma, who has been seen dozing during important meetings.
Ma keeps claiming that economic growth in the first quarter of this year was the second-highest of the four Asian Tiger economies — that his government is doing better than any previous government.
Such comments, and the refusal to reflect on his performance, prove the commentators who say Ma is incapable of leading the nation to be right.
In the face of our current economic woes, Premier Jiang Yi-huah (江宜樺) recently rolled out the seventh short-term economic stimulus package since Ma took office. This time it involves spending NT$3.2 billion (US$106.9 million) to rescue the economy. Such a response clearly shows that the Ma administration is at its wits’ end.
Over the next three years, the economy will likely enter a period of prolonged sluggish growth.
The Ma administration’s seven economic stimulus packages have become successively smaller — from previously promising NT$500 billion to now offering a mere NT$3.2 billion. From expanding infrastructure and cutting unemployment rates to merely offering subsidies on gas containers and gas stoves during the warm season. They have lost all power to be of any use, except perhaps as the butt of jokes.
The main reason for this mess is the Ma government does not understand the need to save money. It wastes money and is corrupt to the core. In addition, it is incapable of reviving the economy as government revenue falls. It cannot increase spending and it does not understand the need to cut expenditure. Instead it ends up raising huge government debt.
In just five years, the Ma administration has raised more debt than its predecessor did in eight, and is now close to the legal upper debt limit.
This means it has no more funds for infrastructure or to expand internal demand. The NT$3.2 billion stimulus plan is laughable, like trying to end a drought with a few drops of water.
To save the economy, the government must move beyond focusing on trivialities and band aid solutions. It needs to see the bigger picture, get a grip on global economic trends and implement structural reform to reshape the economy.
Based on past experience, it can be seen how Taiwan managed to overcome poverty and create an economic miracle based mainly on the right development strategies.
Early on, the creation of export processing zones allowed the nation to capitalize on the advantages offered by its skilled labor force and the hardworking spirit of Taiwanese. This brought rapid change to the economy, transforming it from an agricultural society to an industrial society, laying the foundations for fundamental change.
The establishment of science and industrial parks was another milestone in the process.
An example was developing the electronics industry and employing skilled foreign workers coupled with preferential policies and complete support for target industries — such as the foundry model of operation for integrated circuit design in which Taiwan became a world leader.
This entire process led to a further two decades of growth and prosperity.
The main reason the economy has stagnated is that it has become dependent on China, with the result that it cannot set its own economic direction, for example in areas such as employment, pay and tax revenue.
Even worse, although Chinese businesses were dependent on the Taiwanese supply chain in the past, in the past few years, China has leveraged its huge population advantage as well as its “white-box” brands — inexpensive multifunction electronic products made by less well-known brands.
China’s brands have thus experienced strong, rapid growth and moved from quantity to quality in terms of production.
Beijing then used this to spur the development of its local supply chain. This has threatened the continued existence of China-based Taiwanese businesses.
If Taiwanese industry is unable to upgrade and transform, it will have a hard time not being passed over.
The second reason for Taiwan’s stagnation is that the global economy is moving away from the Second Industrial Revolution, which was mainly based on the use of fossil fuels, toward the Third Industrial Revolution.
This new revolution is based on digital Internet-based technologies, such as 3D printing and renewable energy sources like solar power and wind, hydraulic, geothermal and biomass energy.
Renewable energy sources are likely to become a basis for the main industries of the future, which will include cloud computing, 4G communication systems, online retailing and electric cars that are already exciting interest.
It is easy to see that the Ma administration is still stuck in the Second Industrial Revolution.
Look at the example of the Fourth Nuclear Power Plant in Gongliao District (貢寮), New Taipei City (新北市), and the double hike in fuel and electricity prices.
Add to this Ma’s view of nuclear power as a necessity to cope with future energy demands because of the government’s failure to adopt alternative energy sources.
As such, it is doubtful Taiwan will see any forward-looking policies in response to future trends.
If the Ma administration wants to revive the economy, it must stop relying on China and scrap its outdated Second Industrial Revolution thinking.
It must also have concrete policies — that it carries through — to foster growth in new industries.
This is the only chance Taiwan has of turning its economy around.
If the government fails to change its thinking and keeps trying to get by merely focusing on trivialities, it will not matter how many stimulus packages it comes up with. They will be of no use whatsoever, and will just waste manpower and resources.
Translated by Drew Cameron