It is easy to forget about the nation’s economic outlook while a meeting between President Ma Ying-jeou (馬英九) and Chinese President Xi Jinping (習近平) grabs all the attention, but it is important to note that flat-panel producer Chunghwa Picture Tubes Ltd (CPT) will this week begin putting about 3,000 employees on unpaid leave, while two foreign trade groups last week voiced growing concerns over the nation’s deteriorating investment environment.
CPT, which is streamlining operations amid an industrywide slump, plans to put its employees on furlough from tomorrow until Dec. 31, requiring them to take at least four days of unpaid leave per week. The company believes that furloughs are necessary to cope with declining business and serve as an alternative to layoffs. However, CPT is using furloughs to circumvent labor laws on mass redundancy to avoid paying severance packages.
CPT’s furloughs are just the tip of the iceberg in the nation’s technology sector, considering how the global economic slowdown has affected the export-reliant industry. The latest furlough data compiled by the Ministry of Labor showed that 1,218 workers in 33 companies were on unpaid leave last month, and a survey conducted by online job bank yes123 showed that about one in six local companies is considering sending employees on unpaid leave before the Lunar New Year, which falls in early February.
The recent layoffs and unpaid leave in the technology sector came after a weak global economy dealt a blow to market demand and led to an inventory adjustment in the supply chain. However, it also shows the impact of a rapid rise of China’s electronic component suppliers on Taiwanese firms, ranging from DRAM chipmakers and flat-panel display manufacturers to LED chipmakers.
Indeed, the “red tide” comes in high and strong. Tsinghua Unigroup Ltd last week expressed its interest in buying a significant stake in MediaTek Inc to develop a chip supply chain in China. This led to worries about the nation’s economic future in terms of local employment and technological competitiveness.
Slowing employment and wage growth, coupled with weakening consumer demand, pose serious challenges to the nation’s economic growth.
Last week, the Taiwan Institute of Economic Research slashed its forecast for GDP growth this year to 0.83 percent, from 3.11 percent forecast in July, and predicted the economy would expand just 1.84 percent next year, while DBS Bank Ltd lowered its GDP growth estimate to 0.7 percent from 1.4 percent and forecast 2.4 percent growth for next year.
The Ma-Xi meeting in Singapore on Saturday was certainly a historic event, but it is no cure for the nation’s chronically underperforming economy. With a new government poised to lead the nation after the Jan. 16 elections, what matters to Taiwanese is whether the government can persuade overseas Taiwanese firms to invest at home. Local and foreign trade groups would like to see a government capable of solving investment-related problems, such as high labor costs, stringent environmental and labor laws, and insufficient supplies of water, electricity and land.
The economy is at a crossroads. The new government must ensure consistency in its policies, as a failure to do so would jeopardize foreign investors’ long-term plans, which the European Chamber of Commerce Taiwan as well as the Japanese Chamber of Commerce and Industry in Taipei pointed out in their annual white papers last week.
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