Wed, Nov 26, 2008 page8

• Ma’s vouchers promise very little

  • By Tsai Zheng-jia 蔡增家
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  To stimulate consumer spending, President Ma Ying-jeou’s (馬英九) government plans to issue consumer vouchers worth NT$3,600 before the Lunar New Year. This is the first time the government has issued vouchers and the policy has drawn varying reactions.

  Some people believe the policy will do little more than exacerbate the government’s financial deficit. Some fear the economic benefits will be much less than the amount of money spent, citing former Japanese prime minister Keizo Obuchi’s policy of issuing “regional promotion coupons” in 1999.

  Let us look first not at what the vouchers will cost the government. It may not be fair to compare the vouchers to the example of Japan to predict the effectiveness of the Ma administration’s proposal, because its plan varies greatly from the Japanese vouchers in nature, target groups, the issuing agencies and the businesses where they can be spent. Nor is it fair, looking at the statistics, to say that Japan’s economy did not benefit from the regional promotion coupons.

  There were reasons why Japan decided to issue the coupons. At the time, the country was facing the pressure of an ageing society and decreasing birth rate, as well as diminishing consumption as a result of increased consumer taxes. As a result, Obuchi’s government decided on Nov. 16, 1998, to issue ¥700 billion (US$7.25 billion) in regional promotion coupons.

  Data from the agency responsible for issuing the regional promotion coupons shows that the policy had three main goals: to reduce the economic burden on young parents to help increase overall fertility rates; to reduce the burden on low-income elderly people to simultaneously reduce the burden on the younger generation; and, finally, to use consumer spending to revive regional economies. From this latter goal came the name “regional promotion coupons.”

  Eligible individuals were entitled to ¥20,000 in coupons. The coupons were released on Jan. 1, 1999 and had to be used within six months.

  The regulations for the regional promotion coupons differed from Taiwan’s consumer vouchers in various ways.

  The Japanese coupons were regional in nature and aimed at stimulating regional economies. The Japanese government hoped to lighten the economic burden on the younger generation by subsidizing children and the elderly, while at the same time revitalizing regional economies through consumer spending.

  Each local government was allowed to draw up its own regulations for spending the coupons based on that region’s needs.

  Taiwan’s consumer vouchers, on the other hand, will be national in nature and focus on the national economy in the hope that consumer spending will improve the overall economy.

  Another key difference is the target groups of the two policies. Every Taiwanese citizen will receive a voucher — whether wealthy or poor — nor will there be age restrictions.

  In Japan, there were strict regulations on the groups eligible for the coupons: Children under the age of 15 and elderly people on pensions over the age of 65 could receive coupons, while everyone between 16 and 64 years old and anyone over the age of 65 with an income other than a pension and paying taxes did not receive the coupons.

  In addition, the authorities responsible for issuing the coupons are different. In Taiwan, the central government will issue the vouchers, meaning that the regulations and standards for using them will be uniform across the country.

  In Japan, although the government allocated the funds for the coupons, it placed local governments in charge of regulating the coupons. Therefore, the rules regulating their use varied greatly between localities. For example, in Saitama Prefecture, there were regulations against spending the coupons on entertainment, which was permitted in neighboring Chiba Prefecture.

  Moreover, in Taiwan, the vouchers will be valid at any business that issues uniform invoices, while Japan’s coupons were based on a registration system.

  Businesses had to register with their local governments and obtain a proof of registration after undergoing a review. The government then issued a the business a certificate that allowed it to accept the coupons. This tedious process made many businesses lose interest in participating in the coupon scheme.

  Taiwan’s voucher policy is much simpler than Japan’s, with its strict rules on target groups, the application process and spending regulations.

  With such a complex set of regulations, did the regional promotion coupons benefit Japan’s economy? Looking at statistics for 1999, economic growth increased by 0.7 percentage points over the previous year’s growth rate of minus 1.5 percent. It dropped back to its earlier level in 2001.

  In other words, consumer vouchers may only deliver short-term benefits. The government should therefore focus its attention on increasing salaries and the employment rate, as these are more fundamental solutions for stimulating economic growth.

  Tsai Zheng-jia is a research fellow at the Institute of International Relations at National Chengchi University.

  TRANSLATED BY DREW CAMERON
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