Thu, Aug 30, 2001 page17

• Pundit predicts stagnation

  ECONOMY Warning that slow growth may continue for years, the president of Asian Pacific Research said that more aggressive action needs to be taken now

  • By Stanley Chou / STAFF REPORTER
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  The head of a regional economic research firm said yesterday growth may stagnant if the government doesn't formulate a tougher policy stand.

  "Unless Taiwan adopts certain monetary and fiscal policy measures to revive the economy, there will be slow growth or no growth over the next few years," warned John Pickles, an economist and president of Taipei-based Asian Pacific Research Ltd.

  Pickles made the comments yesterday as part of a speech held by the European Chamber of Commerce in Taipei.

  The two policies the administration should adapt under the current economic circumstances, "include easing monetary policy and balance the budget," Pickles said.

  "The central bank should be more aggressive on easing its monetary policy, including cutting interest rates and allow the NT dollar to depreciate further, since there is minimal risk of inflation. Compared with other competing countries' currencies, NT dollar has not actually depreciated in recent months," Pickle said.

  "On the issue of balancing the budget, the administration should try to raise taxes," he said.

  Pickles painted a sad picture of economic growth, predicting Taiwan's 2001's GDP growth rate is likely to be a negative 4 percent and the NT dollar is likely to fall to NT$35.50 against the US dollar by the end of this year.

  He also questioned the recent Economic Development Advisory Conference (經發會) and President Chen Shui-bian's (陳水扁) leadership.

  "The conference raised some deep issues. Chen was looking for a consensus [from conference members] on the legitimacy of his new economic policy, but his leadership [ability] is questionable," Pickles said.

  "The [DPP] government seemed to focus most of its attention on the cross-strait relationship [during the conference] and it doesn't have the stomach to tackle the real economic problems," he said.

  On solving Taiwan's current economic woes, Pickles proposed a number of solutions.

  "The first step [for the administration] is to recognize the [Taiwan] economy is at an impasse after economic mismanagement over the last decade, and it needs to encourage growth and investment, which is outweighing the risk of inflation.

  Another suggestion for the government is that the globalization of Taiwan's economy is a must.

  "Much of Taiwan's manufacturing should have moved to China more quickly. Many of them did not move because they enjoy too much protection and privilege in Taiwan. However, chasing comparative cost advantages does not improve competitiveness," Pickle said.

  The reason Taiwan's manufacturers should go to China as soon as possible is because of economic policy changes in the US.

  "The US had been outsourcing from Taiwan during 1980s and 1990s. The US is now outsourcing from China. Hence, China is going to be a member of the World Trade Organization," Pickles said.

  "Taiwan should try its best to be an internationalized economy, including investing in China. Moving in the opposite direction will make Taiwan's economy become a de-industrialized and marginalized economy."

  Despite the skepticism, the pundit remained confident in Taiwan's economic future.

  "A lot of entrepreneurs have been working hard to find their way out after much success in recent years. Unfortunately, they were not well represented at the conference," Pickles said.
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