Mon, May 22, 2000 page17

• Critics doubt Chen's `333' policies

  SOCIAL WELFARE Financial analysts say the President's spending program would broaden the scope of the nation's government, contrary to his stated vision

  • By Stanley Chou / STAFF REPORTER
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  Although President Chen Shui-bian (陳水扁) in his inauguration speech promised a new government that is "small and effective," analysts say Chen's big policy ideas are hardly small at all.

  Following Chen's address, Lin Chuan (林全), head of the Directorate General of Budget, Accounting and Statistics (DGBAS, 主計處), announced that the new administration in July would launch a monthly subsidy program for senior citizens.

  The subsidy, part of Chen's "333" welfare policy, provides a monthly payout of NT$3,000 for senior citizens 65 and older who meet certain qualifications.

  

  President Chen Shui-bian greets well-wishers yesterday at Kinmen island. Financial analysts say the president's "333" plan to provide payouts of NT$3,000 for senior citizens 65 and older, free healthcare for children under three, and a 3 percent mortgage rate for first-time homebuyers may be more than the nation can afford.

  PHOTO: GEORGE TSORNG, TAIPEI TIMES

  The other two parts of Chen's "333" plan -- a 3 percent mortgage rate for first time homebuyers and free medical care for children under 3 years of age -- will be included in the 2001 budget and implemented next year.

  But financial analysts say the "333" proposal would enlarge the role of the government, in stark contrast to Chen's vision of a "small and effective" government.

  "Chen's discussion of economic issues and his `333' welfare policy are contradictory," said Norman Yin (殷乃平), a professor of Chengchi University. "While he stressed that the new administration would be `small and effective,' he is actually trying to make it `large and capable.' The `333' welfare policy is a perfect example."

  Yin noted that Taiwan entry's into the WTO, combined with "333," would lead to a NT$700 billion shortfall in revenues, citing DGBAS projections.

  "Even after the new administration cuts spending by up to NT$100 billion, a deficit of NT$600 billion is still unavoidable," he said.

  At the same time, Chen's administration has promised not to raise taxes in the next four years.

  Shea Jia-dong (許嘉棟), the new Minister of Finance, said the focus would instead be on reforming the Income Tax Law, Land Appreciation Tax (土地增值稅) and Land Value Tax (地價稅) systems.

  But analysts say the no-tax hike pledge will only add more red ink to the nation's balance sheets, which currently has a debt of NT$2.3 trillion.

  "This means the national debt will further deteriorate in Chen's four-year term if Chen does not alter his welfare state policy. That burden is likely to be left for our children," Yin said.

  Yin also said Chen's speech didn't say enough about future economic policies.

  "By saying nothing specific on economic policy, it shows that Chen is not taking economic issues seriously enough," he said. "It's disappointing because Taiwan is facing so many economic and financial problems. Without solid commitment, nobody really knows what he is going to do in the next four years to tackle these issues.

  "Instead of increasing fiscal expenditures by adding to the social welfare budget, what Chen really should be doing is to cutting expenditures to try to balance the budget."

  Analysts said the stock market's sour reaction to Saturday's inauguration speech was due to Chen's failure to explicitly express his position on "three direct links" and the "one China" issue.

  "When uncertainty arose [with regard to `one China'], investors hesitated to hold their positions after Chen's speech," said Larry Liao (廖瑞雄), a fund manager at ING-CHB Securities Investment Trust Company.

  "From a short-term point of view, Chen's vagueness with China could lead to consolidation in the market," Liao said.

  "However, I do not expect a severe correction in the short term. Based on the soundness of fundamentals in many sectors, I expect a recovery in the TAIEX as soon as China clarifies its position. It seems no immediate confrontation across the Taiwan Strait lies ahead. In the second half this year, the TAIEX should be able to move up to 10,000 or even 12,000 points."
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