Tuesday, May 15, 2012

Shock Doctrine: Zounds!! OMG debt SELL THE LAND NOW

Last December, just before the election, I blogged on the new aboriginal draft law which gave the appearance, but not the reality, of aboriginal autonomy. I also argued that Ma would be shoveling state assets out the door even if he lost...
I pointed to some of problems resulting from the new act and in general, development on the east coast here. This should also be connected back to the long term "shock doctrine" use of the Morakot disaster as a way to lever mountain peoples off their lands so they can be "developed" without the inconvenience of Other People's Ownership. If you ride your bike around the lower altitudes of mountain areas of Taiwan, you will run across cookie cutter style homes, like this one in Majia Township in Pingtung at about 400m, into which local aborigines are being moved from the mountains.

That too is part of the historical drive of the various colonial governments of Taiwan to move the aborigines out of their mountain homes and take over those resources.

Aborigines are a key KMT constituency. Of course, so are the big businesses that support the KMT, so it is not difficult to see why this law is going through just prior to the election. Recall that even if Ma loses, there will be a four month interregnum before Tsai takes over. Although I don't subscribe to any of the wilder theories one hears floating around about what will happen, it is fairly obvious it will be giveaway time for government assets. With this new law just in time for that....
Predictably, more shock doctrine rapes of the public treasury from Christine Liu, Minister of Finance, today, with the proposal that state lands be sold off to help out with the horror Debt Monster that threatens to eat Taiwan....
“Balancing the budget is the priority for debt reduction,” Liu said. “However, it is not easy to create a budget surplus for the settlement of debts.”

Liu added that the ministry would continue to budget repayment of principal and reduce the deficit in the future.

A Ministry of Finance report shows that the government’s overall budget deficit currently stands at NT$200 billion [US$6.77 billion].

Liu said that activating and utilizing idle state-owned assets could be an important tool for managing national debt, an indication that relaxing the limitations on public land sales might be considered.
Notice what's not there -- increased taxation on the wealthy. Laudably, the Administration has made noises about rectifying Taiwan's lack of capital gains tax and also implementing a tax on stock transactions. But fundamentally, as in the US, Greece, and elsewhere troubled by debt, the wealthy pay too little tax.
As of the end of last year, the government’s long-term debt — representing outstanding debt with a maturity of more than one year — stood at NT$4.769 trillion, an amount equivalent to 35.88 percent of average GDP over the past three years, the ministry said in a report.

If local governments’ outstanding long-term debt is included, the nation’s overall long-term debt balloons to NT$5.478 trillion, or 41.22 percent of the average GDP over the same timeframe, ministry data showed.


Under a definition outlined by the IMF, the nation’s debt — including both long-term and short-term figures — totaled NT$6.725 trillion at the end of last year, -ministry statistics show.
This is not a really serious debt situation. Does it really call for a sell-off of state assets -- a permanent transfer for a temporary gain? Of course not. And then there is the fairness issue -- the wealthy go untaxed, and much of this public debt was run-up to fund infrastructure projects that were essentially pay-offs to local patronage networks by the ruling party. Finally, if these public assets are sold off, we all know who they will be sold to.

One issue that occurs repeatedly throughout the last couple of decades is the government's poor management of its assets. Consider this 2002 piece:
According to Ministry of Finance estimates, the government currently owns securities with a market value of more than US$25.71 billion and US$57.14 billion worth of real estate. If other movable assets and equipment are tallied in, the total value amounts to more than US$171.43 billion. This figure would be even higher if assets at state-run enterprises were included. Despite the value of these assets, only US$1.04 billion in revenue was generated for the national coffers in 2001.
It is worth noting that the article states sales of state lands to cover losses were already policy at state-run businesses until the first Chen Administration when that was stopped. People who claim that Chen Shui-bian did nothing themselves know nothing.

Moreover, the government's poor return on its assets hides other issues. Like wastage -- when Agency A owns no land it pays rent, while at Agency B there is plenty of unused office space.

Would selling off assets pay "the debt"? Sure, until some future government ramped the debt back up. What's the value of all that land?  MoFA has the numbers on its website.... from what I can tell, the total value of public land is NT$4,832,701,000,000, or roughly US$161 billion (USD=NT30). Yeah, that might pay the debt... but a modest 5% return on land assets alone would be $8 billion annually. Clearly selling off  is the least effective policy in the long run, a transfer of assets that would merely make wealthy private asset holders even wealthier.

Sure hope to see the DPP was out there complaining about this and pimping the comprehensive land use policy and land law revisions it had wanted to carry out during the Chen Administration, instead of wasting everyone's time calling for impeachment of the President. This is exactly the sort of issue the Party should be out there leading the public.
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Taiwan Echo said...

Thanks for this article. The DPP and TSU in the LY just proposed a recall of Ma Ying-jeou for Ma's first term presidency -- 7 days before the first presidency is over. So ......

Hans said...

Selling lands to fill in the debt? Screw with the KMT... it's so frustrating.

Tom said...

Of course, given how high real-estate prices have been recently, making more land available for construction is bound to be politically popular, even if it doesn't make much economic sense.

I sense a trap for the DPP here. If they oppose this move, the KMT can then simply point at them and state "these people know you have to overpay for your apartment/condo/house, and they want it to stay that way." Of course the true reasons have much to do with Taiwan's politico-economic structure, but in an election, such a simple and semi-logical accusation would be fatal to the DPP.