One Year On: Politics - A simple case of bad luck

What a difference a year makes.

In the 365 days since President Chen Shui-bian's (陳水扁) multi-party administration took office, the nation's stock market has tumbled some 4,000 points -- and at 5,111 sits far below the 10,000 level Chen promised the index would rise to if elected. Export growth has contracted, economic growth has slowed to a snail's pace (by Taiwan standards, at least) and the jobless rate is at a record high. Consumers, reacting to the steady flow of poor economic numbers, are keeping their money under the mattress, refusing to spend.

The new Cabinet undoubtedly envisioned spending its first term on campaign promises such as dismantling government ties to KMT enterprises, cutting taxes for small and medium-sized businesses and constructing a technological dreamland called the "Green Silicon Island" (綠色矽島). But few foresaw the global economic slowdown and the effect it would have on Taiwan's high-tech sector growth.

And as the US economy began to slow, the Cabinet was spinning its wheels in legislative gridlock with the KMT, unable to push through its policy initiatives.

Still steaming over their election loss, opposition lawmakers punished Cabinet ministers by holding them hostage with endless questioning in the legislature.

Besides distracting officials from more pressing economic issues, the ensuing political uncertainty soured business confidence and share prices slumped even further.

The blatant lack of cooperation only complicated the inexperienced Cabinet's ability to devise a common thread of economic policymaking.

Seeing dark economic clouds forming on the horizon, the president repeatedly attempted to "re-double efforts" to bolster the nation's economy. While his intentions may have been sincere, the regular creation of task forces and stimulus packages did little but confuse the direction of the nation's economic policy.

Even Chen admitted on Friday, speaking on the one year anniversary of his taking office, that stemming the downward slide was more than his Cabinet could do alone. "Only by stopping this internal [political] war of attrition can we win the battle for economic development."

A bad hand

When Chen and his team took office on May 20 last year, the cards were already stacked against them. Many of the economic and financial policies that would demand his attention first -- ballooning bad debt at banks, corporations teetering on the edge of bankruptcy, traditional industries that long ago lost their competitive edge and an export sector far too dependent on the US information technology boom -- were the leftover problems of decades of KMT rule.

John Peet, business affairs editor at the Economist in London, placed blame for Taiwan's poor financial practices clearly on the KMT. "The problems have their roots in cronyism which clearly predated the present government."

Even former Premier Vincent Siew (蕭萬長), speaking just days before Chen was elected, knew the next Cabinet would have its work cut out for it. "It is the time to wrap up the past and hand over the heavy administrative burden to the next Cabinet."

As Taiwan's export-based economy slowed -- hindered by the steady drop in US markets -- local stock investors ran for the exits as the bourse rode its daily roller coaster course.

Acting to prop-up stocks, the Ministry of Finance began sporadic market intervention with the government's NT$500 billion National Stabilization Fund (國安基金). The market interference -- unthinkable on Wall Street -- was also in direct contradiction to the original goal of the fund itself: to support shares when non-economic factors scared investors into panic-selling.