Slippery governments will often blame the results of their own shortcomings on external factors. It happened in 2009 when the government ingenuously blamed the 1.95 percent GDP contraction on the global financial crisis, and again with the recent crisis in the stock market, which was apparently the fault of the US and Washington’s debt deadlock. Of course, no explanation has been proffered as to why the Taiwan Stock Exchange fell by the largest amount in the world during the crisis.
After sifting through the ideological chaff and getting to the bottom of the situation in the hope of making an objective analysis on what is troubling the local bourse, it is not difficult to divine an emerging theme. When global markets perform well, the TAIEX grows at a lower rate than other exchanges. And when the global markets plummet, the TAIEX plummets even more than the rest.
In other words, the TAIEX’s overall performance tends to be worse than exchanges in other countries. It has been this way for three years now. Aug. 5 was a particularly bad day, but it is irresponsible to try to gloss over the situation by blaming shallow trading and foreign investment behavior. Neither is it acceptable to attribute the poor performance of the TAIEX to the events of Aug. 5 alone.
In the week ending Aug. 8, 12.63 percent was shaved off the value of the exchange. The exchanges of all the Asian Tigers fell during that same period, with Hong Kong falling 8.69 percent, Singapore 9.57 percent and South Korea by 12.36 percent: But it was Taiwan that suffered the largest drop of the four.
Perhaps eight days is an insufficient period of time to make useful comparisons, so it might be necessary to go further back to get the whole picture.
Let us go back to when President Ma Ying-jeou’s (馬英九) administration embarked on its policy of comprehensively opening up to China and look at how the TAIEX has fared since then. The government has consistently said that opening up to China is the lifeline the Taiwanese economy so desperately needs.
The pro-China press in Taiwan, too, has said that the TAIEX hitting 20,000 points is attainable. However, during the past three years or so, from May 19, 2008 — the day before Ma took office — to Aug. 8, the TAIEX has plummeted 18.75 percent.
The TAIEX’s drop during the past three years could not be more different from the experience of South Korea, where its exchange has fallen a mere 0.84 percent. Singapore has fallen too, but only by 11.03 percent. In fact, compared with the other Asian Tigers, Taiwan only managed to do better than Hong Kong, but only marginally. Even the US, German and British stock exchanges were hit less seriously than the TAIEX.
However, not every country’s exchange in the region has dropped: Thailand’s went up by 23.88 percent; the Philippines’ by 50.52 percent and Indonesia’s by 53.34 percent. Seeing these comparisons, it really is clear that there is something to worry about.
So, what has happened to the TAIEX? There really is only one answer to explain these results: The government’s economic policies are flawed. There are major problems with the approach of opening up to China and the Economic Cooperation Framework Agreement (ECFA) signed with China last year.
Taiwanese have ingested poison believing it to be medicine, pinning their hopes on the ECFA, which is essentially allowing a large economic entity to absorb a small economic entity.
Huang Tien-lin is a former national policy adviser.
TRANSLATED BY PAUL COOPER
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