Taipei Times: As the first year of President Chen's administration comes to an end, economic indicators, such as rising unemployment and forecasts of slowing GDP growth, paint a negative picture. Indeed, you have said that people should be prepared for more "bitter days" ahead. How do you expect the economy to perform over the next year?
Lin Hsin-yi: Since November, imports and exports and industrial output have eased and this year all the indicators are showing signs of a decline. Industrial output for the first quarter of this year fell by 4.17 percent, while between January and the end of April the total value of exports and imports contracted by 5.7 percent and 11 percent, respectively. April also marked the fourth month the nation's economic indicator had posted a blue light, which means the economy has declined. In April the unemployment rate hit a historic high of 3.89 percent. In the short term these indicators don't provide a positive outlook.
The third and fourth quarters are the busiest times for manufacturing, exports and imports and consumption. The government will begin its expansion of public spending projects at that time and the incremental effects of monetary policy will be felt.
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Therefore the economic climate will bottom out in the third or fourth quarter. The cycle of this slump should ease gradually, but if the international economic situation doesn't make a significant turn for the better, the pace of Taiwan's recovery won't be that strong.
TT: How do you view the global economic situation and its impact on Taiwan?
Lin: According to estimates by the International Monetary Fund, growth in the global economy and trade will average about 3.2 percent and 6.7 percent respectively, showing that the pace of growth has slowed considerably. However, both the US and Japan have already loosened monetary policy which should stall the economic climate from sinking any lower. General estimates predict that the US economy will likely hit bottom in the third or fourth quarter. Because Taiwan is one link in the global economy we must examine the various international factors in attempting to determine when our economy may recover.
Recently Dell, Compaq and other major American high-tech manufacturers have made large reductions in their workforces manning their manufacturing lines and ordering from foreign contract suppliers instead. These companies have also been reducing their inventories, which has helped the high-tech sector ease the excess in supply. If domestic firms can snap up the orders from major international firms they will be able to strengthen relationships with their competitive partners, or merge with their competitors and snap up the licenses to manufacture key technology and turn Taiwan into a major global contract maker of high-tech products.
Because recently the international climate has changed, the impact on the domestic economy has been extensive. This has been compounded by the change in government. As the process of promoting a number of major policies met with quite a lot of discussion and criticism it has been hard to avoid causing some uncertainty among the people, which has deepened fears of a slowing economy. But in resisting the economic downturn there is no special medicine.
Basically we must start with improving the structure of companies. So by taking the viewpoint that there will be bitter days, I was urging everybody to "think of danger in times of peace." Government, business, workers, everybody should join together to boost our economy.
In helping industry to solve their operational problems, the MOEA will work hard to boost government efficiency, actively attract businesses, promote private investment, develop import and export industries and build industries for the new age.
I hope Taiwan can take knowledge as its main point and a level global playing field for the global economy, attracting both foreign and domestic firms to invest in Taiwan and stay in Taiwan.
TT: How do you respond to criticism by opposition parties of the administration's alleged mismanagement of the economy?
Lin: I have this to say -- political stability is the most important factor influencing economic development. I looked all around the world and I couldn't find one example where the political situation was unstable yet the economy could achieve long-term development.
In Taiwan, where we have a minority government, a great many national economic development policies and measures have not received the support of the opposition parties, making it quite difficult to smoothly implement them. This has already had a harmful impact on economic development.
Also recently there have been reports in the media that have told of opposition parties criticizing the government's policies to expand domestic demand as not being a panacea for the problems. I do not think the government is depending upon one measure -- public investment -- to stimulate domestic demand. The government is also working hard to promote private investment and boost consumption. Also, we are continuing to further promote Taiwan-made products in the world market, attract businesses, improve the investment environment and develop local speciality industries.
These are comprehensive measures, and they are not limited to just expanding infrastructure investment.
TT: Your recommendation to scrap the Fourth Nuclear Power Plant was a very bold initiative. In light of the strong opposition to the move from other parties. What convinced you that it could and should be done? If the ruling DPP gains a majority in the Legislature in the December elections will the decision to resume work on the plant be overturned?
Lin: This ministry has consistently taken a professional attitude when considering the question of whether to scrap or continue the Fourth Nuclear Power Plant. There was an alternative power plan, and considering whether or not political factors would end up influencing policy over the fate of the plant did not fall within the professional scope of this ministry. I personally didn't give it any thought. I'd like to stress that if I had to consider the problem again I would stand by my original conviction and professional judgment.
TT: How do you view Taiwan's long-term power situation? With power usage growing fast annually, will the new round of independent power producer (IPP) liberalization be enough to ensure ample supply beyond 2010?
Lin: Taipower's long-term predictions will see peak load increase by 1,590 megawatts annually over the next 10 years, but capacity from approved power plants and those under construction -- including the Fourth Nuclear Power Plant and power from privately run plants permitted to produce and sell power under the third round of liberalization -- will amount to 13,370 megawatts. These plants will be completed and feeding power into the national grid before 2007. However, according to Taipower's most recent long-term power sourcing plan, the national system's reserve power margin, which stands at 11.7 percent this year, will increase annually. By 2004 it will be at 15.3 percent, 2006 it will hit 23.2 percent and 17.5 percent in 2007. There should be quite enough power.
To maintain the system's reserve margin between 15 percent to 20 percent, we must increase our power sources beginning in 2008. From now until then we have seven years to implement a plan to build more power plants but I don't see maintaining a power reserve margin of over 15 percent as being a problem.
TT: One of the main problems facing independent power producers is the acquisition of land upon which to build their plants and transmission towers that connect them to the national power grid. How do you propose to alleviate this problem?
Lin: Given Taiwan's limited available land and high population density, not to mention people's "not in my backyard" attitude toward power plant construction, in reality there will always be discrepancies between the planned completion schedules of power plants and when their capacity actually comes on line.
This is the reasoning behind the ministry's most recent plan to open up more power production capacity to private firms to maintain a reserve margin of above 20 percent by further opening the market to more production capacity in 2007, 2008 and 2009. Building new power plants is a huge undertaking. If acquisition of land for power plants and electrical transmission equipment affects the scheduled completion of the power plants, it is the ministry's unshirkable duty to make every effort to help private firms and Taipower to resolve any problems.
TT: The government has consistently postponed announcing a review of the "no haste, be patient" policy on investment in China. Why has this announcement -- originally expected before the Chinese New Year -- been delayed so long? When can we expect revisions to be revealed and what will they be?
Lin: The China trade policy is one part of the nation's overall economic and trade policy. It should be in accordance with the best interests of the entire economy, combine the resources of both sides of the Strait and take the goal of Taiwan's industrial dominance as its main aim and the people's interest as a priority consideration.
Investing in China is not a simple trade issue. It is also a political issue. If Taiwan businesspeople concentrate too many of their investments in China it will place control of Taiwan's economic growth in the hands of the Chinese and pose a significant threat to our economic development.
Also, to stop industries leaving Taiwan and thereby exacerbating the unemployment problem and leading to one disaster after another for the economy, the government must be especially cautious and not rashly ease the "no haste, be patient" policy.
To implement the policy in line with President Chen Shui-bian's directive that the China trade policy must be positively opened and effectively managed, the MOEA formed an interministerial task force to undertake a complete review of the China trade policy. Together with the decision by the National Economic Development Council to establish a reasonable framework for investment in China, a draft resolution was completed.
This draft was handed by the Mainland Affairs Council to the Cabinet at the end of April. It will be implemented in accordance with the timing of the overall revision to the nation's China policy and with the developing trends of the domestic economy. After comprehensive consideration by the Cabinet, it will decide upon the appropriate timing for the easing if the ban.
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