Fri, Jun 13, 2008 - Page 3 News List

ANALYSIS: 'Stimulus plan' stimulates critics across the board

By Shih Hsiu-chuan  /  STAFF REPORTER

Praising itself as a government that “puts the economy first,” the new Chinese Nationalist Party (KMT)-dominated Cabinet recently found itself under fire over its first economic proposal that budgeted NT$116 billion (US$3.8 billion) to expand domestic demand.

Funding for the proposal would be obtained through an amendment to the special budget for increased investment in infrastructure construction and a bill to adjust the already approved annual budget. Both are pending legislative approval.

The Cabinet has called the proposal a “stimulus package” that could contribute 0.42 percent to economic growth this year, lessen the impact of the recent fuel and electricity hikes and help deliver the economic revival President Ma Ying-jeou (馬英九) promised during his election campaign.

Many lawmakers and heads of local governments from ends of the political spectrum, however, have strongly criticized the proposal.

Even the Budget Center, a KMT-leaning Legislative Yuan research unit producing assessments of the government’s budget statements criticized the government for failing to write the budgets in line with the law.

“President Ma vowed to run the administration according to the law in his inaugural address, but he might be unjustly blamed because of the budget bills,” the center said.

Out of the total, the Cabinet intends to allocate NT$58.3 billion to 25 local governments in proportion to the population of each city and county, with the funds to be used in construction projects proposed by city and county governments.

An additional NT$8.5 billion would be granted to local governments to restart construction projects suspended because of soaring raw material prices and another NT$20 billion to help them meet budget deficits and pay off debts.

The Cabinet was heavily criticized for the manner in which it plans to distribute the funds, which analysts said would result in misuse and exacerbate an already uneven regional development.

“Look at the expenditure items proposed by the local governments. The program for the expansion of domestic demand is more nominal than a reality,” said Chen Chao-jian (陳朝建), an assistant professor of public affairs at Ming Chuan University.

Increasing the level of consumption through government spending cannot stimulate the economy to the degree that the government expects, unless the money is used in public infrastructure projects that can increase aggregate demand and create supply, Chen said.

The Budget Center said the Council of Economic Planning and Development, which is in charge of reviewing plans by local governments to spend the NT$58.3 billion, pre-approved a total of 947 projects, 80 percent of which are small construction projects.

With a budget of less than NT$100 million per project, the small projects cover a variety of planned expenditures that are irrelevant to public infrastructure, Chen said.

For example, Chiayi County intends to spend NT$25 million on leaflets and DVDs using simplified Chinese characters to promote tourism in Alishan, while Yunlin County sought NT$5 million to purchase trash cans for public places.

Kaohsiung City said it would spend NT$139 million replacing garbage trucks, while about NT$300 million of the partial funding allocated to Changhua County would be used to replace police cars and fire trucks.

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