Sunday, December 26, 2010

New Municipalities, Old Problems

The new municipalities of Xinbei, Tainan, Taichung, and Kaohsiung opened for business today. One result was that the DPP made historic gains at the city council level, continuing its long-term erosion of the KMT presence in the local governments:

While local council heads are traditionally dominated by Chinese Nationalist Party (KMT) and independent councilors, the DPP, for the first time in the nation’s history, took both the speaker and deputy speaker seats in the Greater Tainan City Council, as well as deputy speaker seats in the Taipei and Greater Kaohsiung City Councils.

In Taipei City, the incumbent council speaker, Wu Bi-chu (吳碧珠), of the KMT garnered 37 seats and won the seat for the fourth time, while her DPP rival Lee Chien-chang (李建昌) received 32 votes.

However, DPP councilor Chou Po-ya (周柏雅) defeated the incumbent deputy speaker Chen Chin-hsiang (陳錦祥) by a 30 to 29 margin, making him the first-ever DPP member to serve as deputy speaker of Taipei City Council.

The KMT accounted for 30 of all 62 Taipei City councilors, while the DPP garnered 23 seats. There are eight councilors from the New Party, People First Party and Taiwan Solidarity Union, and one independent councilor.

In the Taipei City election the KMT managed to unite behind the speaker, but split for the vice-speaker election due to the usual situation of one politician angry at another, with the PFP switching sides. Still, it is progress.

The North-South income disparity is an important driver of the island's political life; but now emerging is a growing clash between the municipalities and the counties. For years, Taipei and Kaohsiung commanded a huge chunk of government money, with Taipei getting the majority of that. To counter Taipei's massive advantages, Taipei County, Kaohsiung and its county, Taichung and its county, and Tainan and its county have decided to upgrade to municipality status in order to collect a bigger share of the government budget. Recall that in the ROC system a municipality is the equivalent of a province whereas the counties remain merely local administrations. The result is a worsening of urban-rural budget issues:
Under the tabled revision, special municipalities are set to receive 61 percent of the money set aside by the central government, up from 43 percent and roughly proportionate with their share of the population.

At the same time, the share given to counties and local municipalities will fall to 24 percent from 39 percent — a figure that the county commissioners yesterday want revised upward.
I wondered how income would be redistributed, but as in every country, income flows uphill toward power. The law revisions call for the municipalities to get 61 percent of the central government flows -- they used to get only 43%. I wondered how the government would handle the problem of all the new municipalities demanding new budget resources, and the answer is now clear: pillage the counties even more. The article referenced above opened with this emotional appeal:
Yunlin County is close to being unable to pay either the salaries or year-end bonuses of its 100,000 public servants.

Yilan County has a NT$20 billion (US$669.8 million) debt that is not getting any smaller, while Chiayi County has a NT$3 billion deficit it has not been able to reduce this year.
A month ago a commentary in the Taipei Times discussed the problems of local government debt in Taiwan, both public and "hidden":
Last year’s audit report revealed that up until the end of last year, of the eight cities and counties that will make up the soon-to-be five special municipalities, Taipei City had the highest overall debt at NT$291.7 billion (US$9.58 billion), followed by Kaohsiung City at NT$211.2 billion, Taipei County at NT$108.1 billion, Taichung County at NT$48.5 billion, Tainan County at NT$44.5 billion, Tainan City at NT$31.7 billion and Kaohsiung County at NT$26.4 billion. Taichung City had the lowest overall debt at NT$7.2 billion.
Similarly:

A 2009 audit report showed that until the end of last year, the eight cities and counties set to make up the country's five new special municipalities from Dec. 25 had an estimated US$26.6 billion of debt, including money owed to national health and labor insurance programs, pension contributions and interest payments for the pension schemes of civil servants.

Taipei City had the highest overall debt at about US$9.9 billion, followed by Kaohsiung City with around US$6.6 billion.

Taichung City had the lowest overall debt of US$238 million, but its debt is set to increase to US$1.7 billion after its merges with Taichung County to form a special municipality on Dec. 25.

Debt is a critical driver of political history. The new municipalities now redefine the north-south tension as a municipal-county tension. The Taipei Times had a page on the sputtering nonsense of the mayors of Taipei city, Taipei County, Taichung, and Tainan:
Amidst all these backward-looking, faintly fascist calls for restorations of glory and new ages, one headline caught my eye:

Stressing that all resources would be equally shared and fairly distributed, she also pledged to reduce the gap between rural and urban areas.

“I pledge there will absolutely be no such thing as a so-called ‘one city, two systems,’” she said.

She also called on the central government to attach more importance to the voices of southern Taiwanese.

Awesome.
_______________________
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25 comments:

Anonymous said...

Can new DPP Tainan Mayor Lai make traffic safer and more civilized?

Now it sucks like Mariah Carrie dancing the boogie!

Michael Turton said...

I'm afraid that is beyond the power of mortal men....

Robert R. said...

The law revisions call for the municipalities to get 61 percent of the central government flows -- they used to get only 43%.

So is 43% the amount budgeted for just Taipei & Kaohsiung cities, or the amount for all of the areas that now make up "the 5"?

Thomas said...

Hmm.... No "one city, two systems". Brilliant wording on her part.

Okami said...

The part I love about all this is that smaller govt never comes into the question.

If the numbers are right and Yunlin County employs 100,000 people and wikipedia is right and Yunlin County has a total population of 723,700, that means 1 out of every 7 people works for the govt. That's not even your working age population but the entire population of Yunlin. Now I may be very wrong, but I think that you don't need that many people working in govt causing further problems with early retirement, pensions and generally just being a real drag on the economy.

That being said quite a few cities and possibly states are expected to file bankruptcy this year in the US. I expect the bloodbath that will cause if it is allowed to happen will be quite far reaching and detrimental. The Muni bond market is slowly starting to react.

Urban Dreamer said...

It's so funny how people cynical about politics just lump the DPP and KMT together as two sides of the same coin when the reality is, the DPP is much smaller, very poor, and has _never_ held a majority in any city council or in the legislative yuan!

In what everyone thinks of as the Green south, people _still_ didn't expect the DPP to get the majority of council seats in Kaohsiung or to win council speaker. I mean, we need to chew on this for a sec--Kaohsiung, where Chen Ju just trounced her two opponents combined. The reality is closer to the last elections where Chen Ju barely eeked out a win.

Regarding the distribution of government funds, it's unfair and inequitable to distribute funds to the cities more, but if you look at the US, there, they have the uneviable problem where rural areas midwestern and southern states are getting the most bang for their federal tax buck.

I'd like to see more funds dispersed to the regional centers in a more equitable way, but with some visionary thinking. What differentiates the various cities within Taiwan and more broadly in East Asia / the Asia-Pacific?

Here's my shot at it, including current strengths:

Taipei City / Taipei County: Finance, marketing, corporate. Taipei County will always be different because it will always be cheaper and less central, but it can strengthen the transportation networks encircling Taipei that will strengthen the various neighborhoods of Taipei County without necessarily enriching Taipei City any further. People don't often go from Sindian to Yongho for example and head into Taipei City instead. That needs to change for Taipei County to "catch up" with Taipei City.

Kaohsiung: Outdoors, sports hosting, logistical port for the southern half of Taiwan. Its airport connects directly to the subway which connects directly to high speed rail! It's ultra convenient _today_.

Also high-tech or high-value manufacturing (stuff similar to the superyacht cluster) that can soak up some of the labor that has been displaced by Chinese labor. Develop southern media center including print, television, cinema.

Taichung: Geographically the center, should be the national capital in spirit--most central and fair location for national conventions of every organization, distribution center, Taiwan-centric franchises, current strength of tool manufacturing.

Tainan: A second, Taiwan-focused cultural center. Weather here is amazing, NCKU, should develop further as a R&D hub, design hub. Also Tainan badly needs better transportation--light rail/trams for intracity and a new high speed rail station at Sinshi (New City) that connects directly to a waiting Taiwan Rail train for a 15-20 minute ride into the city center! This is a big deal as the current station is basically in Kaohsiung county and is useless for most of Tainan.

For the other counties in Taiwan, I really recommend them preserve the open space, move towards more organic farming (it already is happening), and don't try the same development model because 5 large cities is already quite a bit for Taiwan, and this doesn't even include Hsinchu or Taoyuan, major cities in their own right. They should follow the same pattern and invest in clusters, the towns within the county that are major and preserve the open space of the surrounding areas.

Urban Dreamer said...

It's so funny how people cynical about politics just lump the DPP and KMT together as two sides of the same coin when the reality is, the DPP is much smaller, very poor, and has _never_ held a majority in any city council or in the legislative yuan!

In what everyone thinks of as the Green south, people _still_ didn't expect the DPP to get the majority of council seats in Kaohsiung or to win council speaker. I mean, we need to chew on this for a sec--Kaohsiung, where Chen Ju just trounced her two opponents combined. The reality is closer to the last elections where Chen Ju barely eeked out a win.

Regarding the distribution of government funds, it's unfair and inequitable to distribute funds to the cities more, but if you look at the US, there, they have the uneviable problem where rural areas midwestern and southern states are getting the most bang for their federal tax buck.

I'd like to see more funds dispersed to the regional centers in a more equitable way, but with some visionary thinking. What differentiates the various cities within Taiwan and more broadly in East Asia / the Asia-Pacific?

Here's my shot at it, including current strengths:

Taipei City / Taipei County: Finance, marketing, corporate. Taipei County will always be different because it will always be cheaper and less central, but it can strengthen the transportation networks encircling Taipei that will strengthen the various neighborhoods of Taipei County without necessarily enriching Taipei City any further. People don't often go from Sindian to Yongho for example and head into Taipei City instead. That needs to change for Taipei County to "catch up" with Taipei City.

Kaohsiung: Outdoors, sports hosting, logistical port for the southern half of Taiwan. Its airport connects directly to the subway which connects directly to high speed rail! It's ultra convenient _today_.

Also high-tech or high-value manufacturing (stuff similar to the superyacht cluster) that can soak up some of the labor that has been displaced by Chinese labor. Develop southern media center including print, television, cinema.

Taichung: Geographically the center, should be the national capital in spirit--most central and fair location for national conventions of every organization, distribution center, Taiwan-centric franchises, current strength of tool manufacturing.

Tainan: A second, Taiwan-focused cultural center. Weather here is amazing, NCKU, should develop further as a R&D hub, design hub. Also Tainan badly needs better transportation--light rail/trams for intracity and a new high speed rail station at Sinshi (New City) that connects directly to a waiting Taiwan Rail train for a 15-20 minute ride into the city center! This is a big deal as the current station is basically in Kaohsiung county and is useless for most of Tainan.

For the other counties in Taiwan, I really recommend them preserve the open space, move towards more organic farming (it already is happening), and don't try the same development model because 5 large cities is already quite a bit for Taiwan, and this doesn't even include Hsinchu or Taoyuan, major cities in their own right. They should follow the same pattern and invest in clusters, the towns within the county that are major and preserve the open space of the surrounding areas.

Michael Turton said...

Robert, that 43% was split between those two cities like 70-30 or 60-40. That's why Taipei is so nice, living off transfers from other parts of the country.

David said...

Urban Dreamer, the Shalun railway line in Tainan is scheduled to open on 2 January 2011. It will connect the existing Tainan HSR Station to the TRA station in the centre of Tainan.

Robert R. said...

Michael, true point, and Taipei & Xinbei (and possibly the Chung) will still get a greater share of the money than their southern bretheren. KMT control and all.

However, implying that it's problematic that the "municipality budget" is increasing from 43% to 61% is a bit misleading. As noted in the second article quote, this is inline with the population proportion.
Previously it was receiving a budget percentage that is 2.4 times it's population percentage. For the counties it was only at 0.47 times.

The new arrangement is 1.02 for the municipalities and 0.60 for the counties. Not completely equitable, but more so than before.

Robert R. said...

On second question, anyone have handicaps on what New North Taipei Xinbei City's English name will be?

I need to have some nameplates with an English address printed up by the end of the week.

Michael Turton said...

Yes, it is correcting some of the budgeting disparities. The trick is whether the rural areas will see benefits.

Anonymous said...

Shalun line is still a second rate solution:

1) Everyone in Tainan getting on THSR is going NORTH. Going 20+ minutes south first is a waste.

2) The major non-downtown stop for everyone is Tainan Science Park and northern Tainan (majority of population, ancestral home of many in the north). It'll still be a 40 minute trip south for those people to get to the THSR station so that they can then go north.

How the heck did they miss the airport stop too? What was the reason for that??

Michael Turton said...

I think that you don't need that many people working in govt causing further problems with early retirement, pensions and generally just being a real drag on the economy.

The drag is that wealthy individuals in Taiwan pay no taxes, and the exploitative KMT policies -- the 18% interest rate, for example, which is paid half out of county government pockets, and the construction-industrial state.

Okami said...

Actually Mr. Turton, defined benefit plans are one area that is destroying local and state budgets in the US. They are probably doing a similar thing in Taiwan, hence why they discontinued the 18% interest rate thing for teachers.

Your super wealthy already can easily avoid taxes through a host of tried and true means that they can easily afford. You generally only capture that tax revenue when the cost of compliance is less than or near the cost of noncompliance. The Taiwan authorities lack the coercive means to get foreign banks to comply anyway unlike the US authorities.

Like I said before, we need to start having the conversation of how much govt we actually need rather than a conversation about how much govt we think we can afford. Unfortunately most politicians tend not to be accountants. Retirement benefits are one area of budgeting that companies and govts tend to fudge on heavily.

The construction industrial complex will only fall with a brutal popping of the bubble. None of us will like this, though it will be necessary if we are to not repeat the mistakes of the past.

Michael Turton said...

Your super wealthy already can easily avoid taxes through a host of tried and true means that they can easily afford.

It is one thing to deal with tax avoidance, quite another to have a formal system in which there is no tax on the wealthy. Even though wealthy individuals will avoid taxes, they nevertheless should pay some. That would ease the budget crunch not only for the local gov'ts but also for the NHI. There are many taxes -- a stock transaction tax, capital gains, etc, that would not be easy for the wealthy to avoid.

Something also has to be done about the wealth transfer toward Taipei/north and out of the south and center, one of the problems that exacerbates the mess.

How would you pop the construction bubble?

Michael Turton said...

Your super wealthy already can easily avoid taxes through a host of tried and true means that they can easily afford.

It is one thing to deal with tax avoidance, quite another to have a formal system in which there is no tax on the wealthy. Even though wealthy individuals will avoid taxes, they nevertheless should pay some. That would ease the budget crunch not only for the local gov'ts but also for the NHI. There are many taxes -- a stock transaction tax, capital gains, etc, that would not be easy for the wealthy to avoid.

Something also has to be done about the wealth transfer toward Taipei/north and out of the south and center, one of the problems that exacerbates the mess.

How would you pop the construction bubble?

Okami said...

Here's the problem: When you tax something you get less of it. You tax capital gains and you get lower business start up rate. That's important because it's workers who pay NHI and income taxes. You tax stocks transactions and companies have a harder time raising capital that way and move to bond issues. A better way would see how much it costs to avoid taxes and then set the rate at 1% lower. It's worked for Calvin Coolidge, JFK, and Reagan. The difference is that they started at high rates and lowered them. I think income should just be called income no matter where it comes from. The mess started with govt carve outs of what is good income and what is bad income.

I'd actually like to see the fiefdoms come down and Taiwan take its place in medical tourism. I like NHI overall despite my completely rational hatred of the NHI ENT doctors. I'm actually thinking of putting in a resume for Changhua Christian Hospital as a marketer since they seem to have the facilities, but not the marketing. I'd like to see more upmarket services being offered in dentistry and hospitals. I know with the birth of my son recently, when we had a chance to get a better room, we didn't care what it cost. We just wanted more space, quiet and privacy. They actually had their private rooms fully booked and we had to share a room, but it was a 2 person rather than the normal 4. With dentistry, I'd like to have an American style thorough cleaning(getting tartar under gums and flouride) rather than the wham-bam-thank-you-ma'am speed cleaning that is the norm.

For the construction bubble, I honestly don't know. The best way is the fast pop, asset resale and distribution of funds. The problem is that there is no legislative nor judicial way to accomplish that in Taiwan. Some assets are really illiquid as well. How do you value Dayeh University or any other rent-seeking construction-owned universities? Then there are the immediate political ramifications of explaining to people in Taiwan why their homes have just lost around 50% of their value in a few months. Then you have the banks, which are on the hook for mortgages and construction industry loans. When your house goes underwater, most reputable financial planners will tell you to walk away from it. Basically it's a replay of the US subprime crisis and we haven't even had part 2 the commercial real estate crisis or part 3 the muni bond crisis. You basically need a collapse so large or a political leader so good(FDR/Reagan) that gives you no other choice but to redo it thoroughly.

Michael Turton said...

Medical tourism is largely being prevented by bureaucratic decisionmaking. There arent spare resources for it here like there are in Thailand and Korea. The gov't is moving too slowly and this summer when I talked to hospital admins, they all complained that the gov't was trying steer them into certain areas - like hip replacement when they wanted to do plastic surgery. Still, I met a couple of foreigners who are employed doing that.

If you're in this area, Tung's Hospital outside Taichung harbor is absolutely awesome and may be interested in you. China Medical college hospital is also really good and wanting to get into that field as well.

Michael

Anonymous said...

Taiwan needs to stop limiting the height of buildings. The price of housing is artificially kept high by the artificial scarcity produced by this idea that buildings in the center of Taipei should be limited to something like 10 stories. Any other major city in the world would be building to 50 stories. The way you decrease price is to increase supply. Simple. Outside of Taipei there's no bubble because land is still available. Inside of Taipei there's a bubble because land is rare and the height is kept very limited.

Roy Berman said...

"On second question, anyone have handicaps on what New North Taipei Xinbei City's English name will be?

I need to have some nameplates with an English address printed up by the end of the week."

The Taipei County Chinese language website has a FAQ on it somewhere saying that the official English name is "Xinbei City." The new mayor of 新北市 wants the English name to be "New Taipei City" (which, incidentally, just sounds fucking awful to me) and the Taipei Times at least seems to have settled on the Tongyong spelling of "Sinbei City," but I believe that at present, unless something is officially changed, the legal name is "Xinbei City."

Anonymous said...

I don't get why New Taipei City sounds odd given New Jersey, New York, New Haven... in the US.

Unless of course you don't like the sound of Taipei.

New North City sounds like something out of the Pacific Northwest, but I could be okay with that. Those of you against New Taipei City, what are your opinions on New North City?

Roy Berman said...

I'm from New Jersey, right outside of New York city, so I'm hardly against the whole idea of sticking "New" on the front of a place name. But the difference is that all of these examples in America and other former British colonies are named after places back in the (then) ruling country. It just feels silly to me to do the same thing after a city that's right next door.

Now it's true that the County already had the name of the City, but as the County surrounded the City it just feels more natural to me for them to share a name than for one to be "new."

Of course, one can probably find several precedents FOR "New Taipei City" being adjacent to "Taipei City." The first one that I can think of is Delhi/New Delhi, although in this case it's actually the other way around, with New Delhi being the capital city within the Delhi greater metropolis.

Anonymous said...

" Michael Turton said...
I'm afraid that is beyond the power of mortal men....

11:11 PM"

after a student from dominican republic was killed just after attending christmas mass it's heard that mayor lai and the dpp brass promised to make super-chaotic tainan traffic safer within 6 months... now let's wait and see if he meant his words ... condolence for the family and friends...

observeor

Anonymous said...

"super-chaotic tainan traffic safer "

plying tainan city-yungkang-shinhua-queren-rende-kuanmiao-chiazian-sandimen for years, used to see like 1 accident per 3-6 months , now it's like every 3 days!

hope DPP wakes-up!

trail blazers