Friday, August 24, 2012

Economic Slump, Government Reaction

Falungongers in Douliu in the town center performing exercises

In case you were wondering, while there may be rain somewhere [UPDATE: Kenting is getting pounded], most of Taiwan is having a pleasant, cool day, apparently. The typhoon appears to have wandered off to the south of Taiwan. Meanwhile, the economy continues to have a pronounced limp....

Keith Bradsher at NYT reports:
The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.
....and the Taipei Times reports...
The unemployment rate — a lagging indicator of economic performance — climbed for the third consecutive month to 4.31 percent last month, from 4.21 percent in June, the agency said in its monthly report.
Real wages fell a whopping 1.68% year on year, according to the report, as rising unemployment is putting downward pressure on wages. The rising inventories in China means that companies there will attempt to export more, putting downward pressure on prices and probably impacting East Asia's other exporters, including Taiwan. Economic growth forecasts from the various think tanks and investment houses are mostly clustering below 2% this year.

The government claims that next year's budget is an economic development budget....LOLz. (TT report)
The proposed budget allotment for economic development projects was set at NT$272.6 billion (US$9.1 billion), an increase of 1.6 percent, or NT$4.4 billion, compared with this year.

That would account for 14 percent of total government spending of NT$1.9446 trillion for next year. The additional NT$4.4 billion is to be used in the construction of railways, mass rapid transit systems, and agricultural and farm village development projects, the proposal showed.

“The problem of economic adversity was of most concern when we wrote the budget,” Directorate-General of Budget, Accounting and Statistics (DGBAS) Minister Shih Su-mei (石素梅) told a press conference after the meeting.

Compared with this year’s budget, the Cabinet proposed cuts in expenditures for defense; education, science and culture; community development and environmental protection programs; and debt repayment items, except for expenses in economy and statutory spending in social welfare programs, retirement pensions, and general fund subsidies for local governments.


What we focused on for next year was mainly to enlarge the budget for public construction projects to stimulate economic growth,” Shih said.

For economic development, the government has earmarked NT$191.2 billlion in public construction projects, an increase of NT$6.1 billion, or 3.3 percent, compared with this year, the proposal showed.

However, if expenditures from special budgets and state-owned enterprises’ budgets were included, the total budget for public construction projects next year would be NT$379.1 billion, a decrease of NT$19.4 billion compared with this year, mainly due to the completion of a project by state-owned oil refiner CPC Corp, Taiwan (CPC, 台灣中油) at the end of this year, Shih said.
Note what is not getting cut -- direct payments to voters, subsidies to local governments (read: patronage networks) and the focus is on public construction (read: patronage networks). Defense, which still has not reached Ma's promised 3% of GDP, is being cut. There is apparently no real stimulus in this budget, instead it looks like a pretty typical KMT budget, relying on infrastructure spending to keep the economy going.. The next big round of local elections is in 2014, meaning that the KMT could well take a beating if the Administration displays the same indifference to Taiwan's general economic welfare and the same mindless, cargo cult obsession with China as it did in the first Ma Administration.
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