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Taiwan from Little Dragon to New Greece

Taiwan from Little Dragon to New Greece

Greece used to be known for its rich history and the numerous pieces of evidence still present in today’s landscape, for its beautiful islands, its philosophers, warriors and mythical heroes, and even more important, as the birthplace of Western democracy.
If Greece is mentioned at all these days, it is almost always under the moniker of a failed state, a country that is falling from the status of a member of the wealthy and advanced European Union to the prime example of a basket case.
The country has always been one of the poorest members of the European community, situated as it is on the continent’s dry and poor southeast corner, close to and still afraid of its former occupier Turkey, and originally cut off from the rest of democratic Europe by a host of communist states.
Only the most extreme of optimists will believe that now the referendum is over and a new deal between Greece and its creditors has been worked out, the problem has been resolved for good. The country is bound to make more negative headlines over the coming months.
Since Greece is so far away from Taiwan and the two have little in the way of direct trade relations or mutual investments, it might have come as a surprise to many that the island’s outspoken politicians have rolled out Greece as an example of what Taiwan might become.
At first sight, the comparison sounds ridiculous. Even Europeans find it hard to name any other Greek export product than feta cheese, ouzo and olives, while Taiwan is known worldwide for its computers, smartphones and bicycles rather than its scenery or foods, whatever local opinion might think. Taiwan is a high-tech export powerhouse, while in comparison Greece seems to have barely grown beyond tourism and agriculture in many people’s eyes.
It is therefore hard to imagine that a country belonging to the roaring Four Little Dragons or the Four Tigers of the Asia Pacific could fall to the level of Greece.
Yet, the comparison might not seem as extreme or farfetched as first impressions might lead to believe.
Over the past few years, the extension of generous social welfare programs, the existence of a taxation system widely perceived as unfair and the general economic and political failures of the government of President Ma Ying-jeou have played havoc with what was once known as an economic miracle.
While Taiwan might not have turned into Asia’s Greece yet, there are signs that one particular region, Miaoli County, might have turned into Taiwan’s Greece.
The previous county administration of Magistrate Liu Cheng-hung left a debt of NT$64.8 billion (US$2 billion) behind for his successor, fellow former Kuomintang legislator Hsu Yao-chang.
The first sign that something was wrong came months ago when the county government was unable to pay the wages of its staff on time, but the situation has since grown further out of control just as the world’s attention was fixated on Greece.
The central government was forced to intervene, while all the time denying comparisons to the troubled EU member state. The Executive Yuan emphasized it was not giving Miaoli a free pass and was not planning to move limitless amounts of funds into the county’s coffers. Any financial support measures for local governments needed to adhere to existing laws, the central government said.
On Wednesday evening, the Executive Yuan decided to introduce a new method which would allow general subsidies to be handed over in advance, but only after a troubled local government has provided a financial reform plan and agreed to take part in the method.
The priorities for local government spending should be its staff, including wages, as well as basic administrative costs, the Executive Yuan said, adding that funds for construction projects and other topics should be dealt with separately.
A county of city government involved in the new project should also make its spending public every month if it wanted to continue receive general subsidies in advance.
While the measure is expected to offer relief to the troubled county, just like in the case of Greece, it might not be enough to keep the problem away.
Just like the European Union also has to worry about Portugal, Spain and Italy in addition to Greece, so Taiwan could face other counties falling into a predicament similar to Miaoli’s, with Yunlin County already being mentioned.
Ironically, the current campaign for the January 2016 presidential and legislative elections might offer solutions but also bring new problems.
On the one hand, candidates will want to prove that they have the best solutions to prevent Taiwan from becoming Asia’s Greece by presenting reform plans that tackle excessive government expenditure and debt.
However, on the other hand, it is in the nature of a political system based on democratic elections that candidates will make promises, and those usually require additional government spending.
The tug-of-war between fiscal responsibility and populism will be hard to navigate for any party, even though the current attention paid to Greece could help politicians to sound responsible at least for the time being.
The drawback of the elections is also that as candidates fight in the arena of public opinion and the current government is reaching the end of its term, any solutions to Taiwan’s problems will have to wait until after May 20, 2016, when the new president is sworn in.
Already, the situation is worsening. Economic growth for Taiwan in 2015 will not stay above 3 percent, economists warned just Thursday.
The Greek debacle could also soon be overshadowed by a much bigger threat to the world economy and to Taiwan in particular, namely the condition of China’s economy.
Falls in the stock market in that country have recently been expressed as multiples of Greece, with local media eagerly reporting how China “fell 10 Greeces.”
The administration of President Ma Ying-jeou’s rush toward China over the past seven years has not only created an overdependence which threatens Taiwan’s economic sovereignty and national security, but which could also drag it down faster than any other country should the worst happen.
Taiwan is ill prepared to face financial crises both from local governments and from its giant neighbor, turning it into a giant with
Therefore, the country should not wait until a new president is in power but start work today on how avoid a financial calamity. Such a joint effort will have to make difficult choices, with spending cuts, cuts in waste and changes of emphasis in basic policies such as pensions and taxation all open for discussion.
No country trying to cut its debts has found easy ways of doing so, but Taiwan can still avoid the mistake of waiting so long that everybody gets hurt. Now is not the time for populism and for easy choices, but for determination and for tough measures that can prevent Greek pain levels later on.


Updated : 2021-09-21 10:40 GMT+08:00