Taichung Mayor Lin Chia-lung *sigh*

The midnight spike in air pollution, using the app airvisual. This is from the Taichung area. The app usually shows a spike, a small one, between midnight and 2 AM. Why? Because factories in Taichung are quietly dumping pollution into the air in the wee hours to avoid EPA fines. I've come to dread Sunday nights because the factories on the hill below our house frequently dump foul-smelling shit into the air.

The reason I'm writing on this is because I've become quite worried about Lin Chia-lung's performance and prospects in 2018. Rumor has it that the Taichung EPA has relaxed enforcement of pollution rules in a bid to win the support of factory owners. I don't know whether it is true -- the issue is that it is being said.

Lin is billing Taichung as "The Event City" but according to people I talk to the city government is crushing the life out of many of its events. A longtime foreign resident who runs several events told me this will likely be his last year. Under Hu the city handed out venues for free, but the Lin Administration is making event holders pay. My friend explained that not only does he pay, but he expects they will find excuses to keep the deposit as well, meaning that he can't afford to run the event any more. Across the city, he told me, the neighborhood and precinct captains are screaming about the new payments.

City leaders, in concert with TAITRA, are also attempting to merge the Taipei Bike Show and the Taichung Bike Show. All bike shows are in decline right now, but the Taipei Bike Show is apparently on life support, several bike company types I talked to aver. The Taichung Bike Show is one of the world's foremost, an important place where deals are made, but the city wants to move it out of the city center (to which it brings important business) to the pointless exhibition center by the HSR station, which is located far from anything interesting, if it doesn't get merged outright. Either the merger or the move will deeply hurt the Taichung Bike Show, and the move will cost local businesses millions in lost hotel and restaurant business.

I've resisted discussion of the Forward Looking Infrastructure plan for Taichung on this blog, because I kept hoping it would become sane. But nope -- the plan currently is to run a light rail line down the same line as the current rail system to Changhua. With the long climbs up and down stairs, the line will actually slow down commutes. Meanwhile the idea of integrating Nantou city into the Taichung area metro/bus/rail system appears to have died -- they couldn't have spent the money to run trains to Nantou and integrate them into that area's extensive tourism stuff?

Opinion on Lin's performance as a politician differs. I hear complaints that he doesn't kiss babies or show up to give speeches when he should, but other people tell me he is ok on that. He doesn't seem to get the same press that other mayors get, though. I expect that in 2018 he will argue he needs another term to complete his plan (when I suggest this to people the response is always a derisive snort "What plan?") and that voters will punish him but give him another chance, letting him win by a much smaller margin. But he could lose to an energetic and skilled KMT politician -- fortunately those are in short supply in the KMT.

Meanwhile in Taipei the DPP has decided that it can't leave well enough alone. Ko Wen-je, the independent but pro-Green mayor of the city, is coming under fire from DPP politicians for being "weak on China" and similar nonsense. TT says:

Amid increasing tension between the Democratic Progressive Party (DPP) and Taipei Mayor Ko Wen-je (柯文哲), DPP Legislator Cheng Pao-ching (鄭寶清) yesterday criticized the mayor, saying he lacked a firm political stance. Cheng urged the party to nominate its own candidate in the Taipei mayoral election next year.

There are some in the DPP who want to nominate their own candidate for the election -- longtime buffoon and DPPer Pasuya Yao, who is not aborigine in any way but simply adopted an aboriginal first name to be cool, has expressed interest. It would be really stupid to run a DPP politician against Ko, who right now is popular and secure. All that would do is risk handing the city back to the KMT while humiliating the DPP loser and betraying a key ally. Tsai Ing-wen needs to clamp down on this...

As I have written before, the north is in the midst of a demographic transition. High housing prices in Taipei have driven younger people out to Taoyuan and Keelung and New Taipei City where they will largely support the DPP. In the city the bureaucracy is greening from the bottom up, again creating more DPP-leaning voters, while the Deep Blues are dying out. The smart move would be to leave Ko Wen-je in place for four more years with DPP support to let these demographic trends continue, and let light Blues discover that a non-KMT mayor is not the end of the world...
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Daily Links:

• Anthropologist and Taiwan expert Scott Simon's op-ed piece in The Hill Times calls for Canada to support Taiwan people in the UN whenever possible. This op-ed was discussed by local language news here.
• Another excellent Commonwealth piece on the coming decade: hot and coal powered and unhealthy.
• The awesome Chris Horton in NYT on Beijing's increasing reach
• Cole: Beware of Chinese social media
• New Bloom: Diplomat article glorifies killer of dissidents
• Chinese media misrepresents what Singapore PM said about one China policy. Hard to believe...
• Synaptic with an old tobacco barn in Taichung
• Gogoro raises big bucks in its next round of financing
• Solid piece on our higher education problems in Taiwan
• Fisherman kept like slaves in Taiwan.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Traces of Soulik: Wrecked Bridge

My man Steve F and I rode out east of Jhuolan over to Shuangchi village. The view east from the Baibufan Bridge was even lovelier than usual, because typhoon Soulik had knocked down the wires that usually chop the scene in half. And not just the wires....

....Soulik's fury had sent streams of water cascading down the hill behind Steve's left shoulder. It had undermined the bridge and sent that retaining wall floating out into the river.

Another view of the damage.

In this photo, if you look carefully at the expansion joint, you can see that the end of the bridge shifted to the east roughly an inch or so. This kind of thing is so routine, yet so expensive, a reminder of how difficult it is to keep infrastructure up in this land of steep, frangible hillsides and torrential rain.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Taiwan Journal on Ma's Infrastructure Plans

Taiwan Journal offers two articles on Ma Ying-jeou's infrastructure policies. The first looks at the finances:

During the campaign, Ma stated a goal called "633," which stands for 6 percent economic growth, per capita income of US$30,000 and an unemployment rate of less than 3 percent by 2016. To achieve these targets, when the new government takes office May 20, it will launch "i-Taiwan 12 Projects," which are aimed at improving the country's infrastructure while stimulating domestic consumption. (For details of the projects, see the table to the right).

"Most of the construction projects focus on Taiwan's transportation and I think this is important because transportation benefits the development of the country's infrastructure," Lin Chu-chia, an economics professor at the Taipei-based National Chengchi University, said May 2.

Another proposal tabled by Ma during his campaign was the establishment of a "tourist service industry" as a major national project that allows tourists from China to visit Taiwan. The plan envisions attracting three million visitors per year, creating US$6 billion in revenue and 120,000 job opportunities.

The 12 construction projects, along with "Industrial Restructuring" and "International Linkage," form the incoming KMT government's blueprint for Taiwan's economy. To implement these initiatives, Ma estimates that over the next eight years, he will need a total investment of NT$3.99 trillion (US$130 billion). Of that amount, the government will invest NT$2.65 trillion, with the remaining NT$1.34 trillion contributed by private investors or via build-operate-and-transfer contracts.

To attract more private investment, the president-elect plans to build Taiwan into a "center of asset management for the Asia-Pacific region" in order to bring some of the NT$4 trillion that Taiwanese have invested in foreign countries home. Taiwan would also welcome foreign funds, including those from China, to help finance the projects, premier-designate Liu Chao-shiuan stressed May 1. "It would be a new beginning, so we won't reject funds from China," he said.

It also published a summary of his projects:

Estimated total budget (over eight years): NT$3.99 trillion (US$130 billion), including NT$2.65 trillion from government and NT$1.34 trillion from the private sector.

Transportation
Islandwide rapid transit networks
Build mass-rapid transit systems in north, central and southern metropolises; move existing city railways underground; introduce electrification and dual tracks to the east-coast railway and integrate the highway and expressway systems.
NT$1.45 trillion

Kaohsiung--a free port and ecopark
Establish an intercontinental container transhipment hub; expand storage facilities and logistics; rebuild existing harbor locales; transform the Chijin area into a world-class marine park; build an ecopark and establish a marine technology and cultural center.
NT$57.7 billion

Taichung--an Asia-Pacific sea-air logistics center
Build transportation networks between Taichung Harbor, Taichung Airport and nearby science and industrial parks; expand the central Taiwan international airport; establish a special storage, logistics and processing zone.
NT$50 billion

Taoyuan--an international air city
Transform the Taoyuan International Airport into an aviation city for the Asia-Pacific region; complete construction of the third terminal by 2018.
NT$67 billion

Industry
Intelligent Taiwan
Further enhance university research levels with NT$80 billion over eight years; make Taiwan the world's first wireless country; introduce smart technologies to enhance the quality of life.
NT$225 billion

Industrial innovation corridors
Establish four software parks and a science park in Taipei and Yilan areas; assist the east coast in developing the deep-sea water industry; develop agriculture and bio-tech industries in the southern Taiwan counties of Yunlin, Chiayi and Tainan; set up a global village for overseas professionals.
NT$115 billion

Urban and industrial district renewal
Renew existing industrial parks around the island; designate the Chunghsing Village in central Taiwan as a cultural and creative park; add new stations to the High-Speed Railway.
NT$57 billion

Rural revitalization
Create a retirement mechanism for elderly farmers; encourage professional farmers to expand their business operations; release farm lands that are no longer fit for cultivation purposes.
NT$150 billion

Environment
Coastal areas revival
Transform traditional fishing ports into modern ones; push to add Kaohsiung, Keelung and Hualien ports to international oil shipping routes.
NT$20 billion

Forestation
Increase forested area by 60,000 hectares over eight years; design three 1,000-hectare plain forest parks in central and southern Taiwan.
NT$30 billion

Flood and water pollution control
Conduct a full-scale examination of flood-prevention plans; push for regulating the Kaoping River; establish a landslide monitoring and early-warning system; budget NT$50 billion in four years for land conservation and rebuilding homelands for the indigenous peoples.
NT$186 billion

Sewage systems construction
Continue building underground sewage systems to boost the percentage of households connected to public sewage by 3 percent every year.
NT$240 billion

Some of these projects would be really great. In Taiwan more households have ADSL than sewage connections, and even if Ma put houses on sewage lines at 3% per annum for all eight years, only half the housing in the nation would be connected when he stepped down.

Who benefits? An industry analysis notes:

The construction industry is moving towards trade liberalisation as a result of Taiwan's membership of the World Trade Organisation (WTO) since 2002. With large state-owned contractors playing a dominant role in the Taiwanese construction industry, around 80% of the industry's total output is controlled by 25 construction companies or conglomerates with contracting subsidiaries. According to BMI's newly released Taiwan Infrastructure Report Q307, the nation's construction industry is forecast to grow at an average 3.38% during the 2007-2011 period.

Those "large state-owned contractors" have old links to the KMT. The report also notes that the industry suffers from labor shortages and from materials issues -- costs of structural steel, gravel, and other materials have risen. As I noted before, increasing expenditure on construction here means increasing demand for labor. And there's that attractive pool of Chinese-speaking labor right across the Strait... The positive political effects for the KMT as the effect of new infrastructure spending reaches into households around the island should also be profound -- if they are not lost due to inflation, and to local industry fleeing rising land prices.

Much of the policy discussion has focused on the effects of speculative spending in real estate on housing prices -- the pressure of rising housing prices is already being felt by low and middle income families -- but there hasn't been much discussion in the English-language press of the financial effects of massive government infrastructure spending on Taiwan's debt problems -- already public debt is 43% of GDP, though Taiwan's rating remains strong. It will also have significant inflationary effects.

Finally, there is the BOT model that Ma hopes to use to bring in private investment. That is a popular model in Taiwan and there have been some successes, but a US Dept of Commerce report notes:

The Taiwan Power Company's Tatan 438MW LNG power plant is on schedule and construction of the fourth nuclear power plant at Lungmen is progressing after a two-year delay. The Taipei 101 Financial Center project was completed at the end of 2004. Construction on the 345 KM Taiwan High-Speed Railway (THSR) project was completed in early 2005 and testing of its Japanese-made T700 rail cars is underway. The above-mentioned projects, formerly known as the "Big Four", account for a total investment of nearly US$ 25 billion. Both the Taipei 101 project and THSR projects were undertaken on a Build-Operate-Transfer (BOT) basis. Even though BOT has been touted as an innovative means for executing large-scale projects, neither the Taipei 101 project nor the THSR project are regarded as great successes in the eyes of private investors. There are sharply divided opinions in both academia and public circles about the practicality of using the BOT method to complete public infrastructure projects. The authorities are also considering taking over some failed BOT projects and have already regained control of major transportation projects such as the CKS airport-link MRT project.

The US Dept of Commerce also observes:

During the period 2004-2008, the BOT approach will be re-examined for its feasibility for large-scale infrastructure projects in Taiwan. The authorities, already financially constrained by a public debt ratio set by law (48% of the average GNP for the preceding three years), has allocated a NT$ 500 billion (US$ 15.6 billion) budget to support Taiwan's infrastructure projects through 2008. Viable projects proposed by state-owned companies like TPC and CPC will be supported by Taiwan's banking system. The central authorities are also considering tax increases in order to provide continuous support for Taiwan's infrastructure development.

For the time being, the Public Construction Commission (PCC) continues to have overall responsibility for administering the GPA, supervision of all public procurement activities and handling any GPA-related disputes which may arise over terms and conditions, qualifications of bidders or awards. Although articles of the Government Procurement Act (GPA) are periodically modified, there is feeling within the foreign business community that the Act still falls short of internationally accepted standards. The deficiencies continue to cause concerns for American companies seeking to enter, or expand their activities in, the market through bids on major projects in many sectors. The main conflict pertains to the lack of binding arbitration in disputes heard by the PCC's Dispute Resolution Panel (DRP), which, in turn, can lead to years of wasteful legal expenses in the court system and dissatisfaction even if a firm receives a favorable ruling from the DRP. Additionally, the PCC does not require procurement entities (end user clients or procurement management consultants) to strictly adhere to its guidance on tender preparation and the inclusion of key articles, such as the one pertaining to Limits on Liability. Without such protection, American firms, concerned about the risk of being assessed incalculable financial damages at a later date on a given project, must consider whether or not they should bid on a specific tender.

Given Taiwan's spotty record on BOT projects, it seems likely that many of the projects Ma wants financed by BOT will in the end be taken over and finished by the government.

UPDATE: Feiren notes in a long comment below:

Taiwan's BOT projects are largely a sham. Most of the money that goes into them comes from government controlled sources like state invested banks. And in projects like the THSRC, the government guarantees the private sector's investment. Taipei101 is another example. I heard that when Taiwan's government approached major international banks like Goldman Sachs about investing in the project, the international finance people told the Taiwanese government that if it liberalized Taiwan's financial services industries, they would build a finance center with their own money.

It will be interesting to see if the liberalization necessary for foreign financial firms to make money here actually takes place under the new government.

[Taiwan]