Ma's Economic Nostalgia

KMT Vice Presidential candidate Ma Ying-jeou released his latest economic plan, with a sustained hack on the DPP:

"My economic policies consist of more than opening up for more Chinese tourists and cross-strait direct links. Expanding domestic demand is also crucial and for the government to invest in the nation shows love for Taiwan," Ma told a press conference on Thursday morning.

The "i-Taiwan 12 projects" include building and linking rapid transit networks in cities and counties across the country, turning Kaohsiung into a tariff-free port and eco-park, turning Taichung into a center for maritime and air logistics in the Asian-Pacific region, turning Taiwan Taoyuan International Airport into an "air city," developing cultural and creative industries, creating industrial innovation corridors, carrying out urban regeneration, revitalizing rural Taiwan, reviving coastal zones, building 60,000 hectares of new forests to meet sustainable development goals, improving infrastructure designed to prevent flooding and fighting water pollution, and improving the nation's waste water sewage system.

The "i" stands for "infrastructure, investment, information, innovation, intelligence and international," Ma's camp said.

Ma and his running mate Vincent Siew (蕭萬長) said the projects, including the NT$1.4 trillion island-wide rapid transit system, NT$240 billion waste water sewage system and a NT$30 billion forestation project would boost the economy in a sustainable way to enhance the quality of living.

When asked how the projects would be funded, Ma said taxes and revenue generated by the projects would cover the investment costs. Ma also vowed not to raise taxes in the next eight years if elected.

Ma's approach shows a marked improvement over the KMT's previous election campaign -- offering concrete policies that might actually positively impact the island's life if enacted. In '04 Lien Chan and James Soong mailed in their campaign and blew their 20 point advantage. One reason KMT conspiracy nuts are so insistent that the President had himself shot is that they don't want scrutiny of their awful performance in '04. Ma went on to hack on the DPP:

Later in the day, in an address to the US, European, New Zealand and Australian chambers of commerce, Ma accused the government of neglecting Taiwan's economic development over the past seven years, pursuing unstable policies and running an unstable government. Ma pledged to improve the investment environment for foreign companies by normalizing cross-strait economic relations and allowing cross-strait direct flights.

Ma cited the American Chamber of Commerce as evidence, saying its members had decreased from 900 to 700 over the past seven years as a result of shrinking markets and opportunities in Taiwan as a regional springboard.

In addition to opening up cross-strait direct links, Ma promised to establish "twin golden flight circles" among airports in Taiwan, Tokyo's Haneda Airport, Seoul's Gimpo Airport and Shanghai's Hongqiao Airport.

Ma also promised to revise the cap on investment in China, but added that his administration would not open up the agricultural market to Chinese products or open the labor market to China.

Ma's economic plan is now fully revealed. It consists of doing what the DPP is already doing -- investing in economic upgrading, pushing cultural and creative industries, and opening the links to China. Hsieh too has already promised this. Ma's "more government investment" is simply the updated 21st century version of the old KMT Political Economy -- flows of money from the central government to local construction firms underpinning KMT control. Ma is in effect promising that those who now tap those streams can continue to tap them.

For all that Ma's idea appears progressive, it is mostly copied from the DPP or, in the case of large investment projects, from the KMT of the 1970s, or of old ideas recycled -- like the tariff-free ports, a cross-party dream for a decade now (2003 doc). The DPP had draft legislation going on that in 2002....

Note that Ma says he will retain the investment cap -- "revise" does not mean eliminate -- and that he will not permit opening the ag market or letting in Chinese labor. This too is essentially DPP policy (but if Hsieh had advocated these things, the foreign Chambers of Commerce would have hissed....) -- if Ma were to announce that Chinese labor would be allowed into Taiwan, he can kiss the election good-bye. After the election, I fully expect that this promise will be slowly be bent until unrecognizable.

Ma's platform, largely borrowed from the DPP, met with applause from the European Chamber of Commerce.

The European Chamber of Commerce later issued a statement saying it is very pleased with Ma's comprehensive outline of his economic platform.

The statement expressed support for Kaohsiung becoming a tariff-free port with direct shipping links to China and for the the Taiwan Taoyuan International Airport "air city."

The statement also said that Ma had not presented a clear tax roadmap and tax environment or elaborated on how he would improve the flow of human talent to Taiwan and reduce greenhouse gas emissions. It also said Ma did not touch on issues such as how he would step up intellectual property rights protection.

I think it is great the ECCT asked about greenhouse gas emissions -- the KMT's service to sustainable development is entirely lip service. Improving the flow of human talent into Taiwan would entail massive changes in Taiwan's society and education, which neither party appears capable of bringing off. Finally, the tax questions are pertinent for both local and international firms. I don't believe that all this investment will pay for itself.....thus, Ma is essentially arguing for increased public debt (don't miss AmCham's great article on the development of public archecture in Taiwan).

Sadly, nobody at the listening Chambers appears to have challenged Ma's one-sided construction of Taiwan's economic status.....or noticed that when Ma presented DPP economic ideas to them, the ECCT thought they were great (but then the ECCT is quite confused about our cross-strait policy anyway). Hey, but Ma speaks English! And...he jogs! And went to Harvard, and that is all ye know of Ma, and all ye need know.....

Why are the foreign Chambers so exasperated with the DPP? Consider this editorial from AmCham:

A new regulatory proposal illustrates the problem. At the urging of the architectural profession, the government’s Public Construction Commission (PCC) has drafted an amendment to its Regulations for Selection and Fee Calculation of Technical Services Providers Entrusted by Entities and circulated it to various government agencies and relevant local business organizations – but not foreign ones like AmCham – for comment. Under Chapter 5 of the amendment, only architects would be authorized to take the lead in public projects involving “buildings,” rather than the engineering consulting firms (known as A/Es for “Architect/Engineers”) normally in charge of such infrastructure projects. That would be the case even for a power plant or MRT station, even though the building itself may not be the key portion of the facility.

With this change, all A/Es – regardless of size – would soon end up as subcontractors of architectural firms on major infrastructure projects. The tail would be wagging the dog. The proposal is equally objectionable on other grounds:
• The quality and reliability of projects would suffer. A/E firms employ professional engineers from many disciplines, including electrical, mechanical, piping, and environmental engineering. Architects might hire subcontractors in these fields, but they themselves would be incapable of supervising and reviewing work that is totally outside their scope of professional knowledge.
• Architectural firms are usually operated by an individual architect or as a partnership, and do not have the financial strength of A/E firms organized as corporations. For large-scale projects requiring performance bonds, that financial capability is a crucial factor.
• Under current laws and regulations, foreign investors are permitted to operate A/E firms in Taiwan, but not architectural firms. As a result, the impact of the proposed amendment would be to exclude foreign-invested companies from large segments of the market – a move contrary to the spirit, if not the letter, of Taiwan’s commitments as a member of the World Trade Organization.

Implementing the proposed change would be another distressing example of a Taiwan-unique regulation departing from international norms. Already Taiwan is the only country in which A/Es are barred by law from practicing architectural work. Instead they have to rely on external architects either to do the design under subcontract or to take a fee for signing off on the designs of the A/Es’ in-house architects by attaching their “chops.”

One of the major problems with Taiwan's economy, from outsider's perspective, is that it is often a game outsiders are not allowed to play. The Chambers of Commerce appear to be of the opinion that this will change if Ma is elected. Lotsa luck, guys. Because after Ma "opens" the economy, AmCham editorials are going to read like this:

"While in principle we welcome the new openness shown by Taiwan during the first two years of President Ma's administration, AmCham wishes to express its growing concern over the preferential treatment given firms from China....."

[Taiwan] [DPP] [KMT]