Taiwan’s presidential and legislative elections are taking place against a backdrop of a struggling economy marred by near-zero growth, stagnant wages and rising prices, a new report by the the US-China Economic and Security Review Commission said.
The economy is also suffering from the looming threat of an energy shortage, low domestic investment and overdependence on China, and the economic problems are expected to be deciding factors in the elections, said the report, titled Taiwan’s Economy Amid Political Transition.
The Chinese Nationalist Party (KMT) and the Democratic Progressive Party (DPP) have shifted the focus of their campaigns away from the traditional question of Taiwan’s sovereignty, it concluded.
The report, prepared by commission staff and aimed at members of the US Congress, said that economic issues will now determine the election results.
It said that DPP presidential candidate Tsai Ing-wen (蔡英文) generally advocates improving Taiwan’s domestic economy by expanding social welfare benefits, raising the minimum wage and promoting local sources of innovation.
However, KMT candidate Eric Chu (朱立倫) seeks to prioritize Taiwan’s external economic relations, advocating further trade liberalization — especially with China — as a means of supporting export-led growth, it said.
“Stagnant wages, combined with unemployment in Taiwan’s largely high-skilled workforce, weak entrepreneurial innovation and low inbound investment, explain why Taiwan is in a period of slowing economic growth,” the report said.
“The severity of these domestic economic problems may explain why DPP candidate Tsai has maintained a strong lead in election polls,” it added.
Taiwan’s export-oriented economy has become dependent on China and vulnerable to fluctuations in Beijing’s economy, “contributing to a growth rate that has slowed to nearly zero,” the report said.
Further economic cooperation with a wider range of partners could help Taiwan diversify its export markets, identify solutions to its energy shortage and attract much needed inbound foreign direct investment, it said.
With Tsai generally expected to win the election, the report names five economists who will “likely take on prominent roles” in her administration.
US-trained economist Lin Chuan (林全), president of the DPP’s think tank, the New Frontier Foundation, would advocate for a comprehensive growth strategy that includes stimulating innovation, financial sector reform and diversification of free-trade partners, it said.
Another US-trained economist, Hu Sheng-cheng (胡勝正), is also expected to win a leading position in a Tsai administration.
Hu believes Taiwan’s economy has become too reliant on exports, saying that Taiwan should diversify by linking its high-tech sectors with more traditional industries, such as precision machinery, the report said.
Others named by the report as likely top advisers are finance expert Shih Jun-ji (施俊吉); Taiwan Institute of Economic Research vice president Kung Ming-hsin (龔明鑫); and Taiwan Think Tank chairman Chen Po-chih (陳博志).
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