Monday, January 23, 2012

When business and politics mix

l  Traditionally politics and business just don’t mix in Taiwan, at least not publicly. Primarily because of the island’s authoritarian past and the highly divided domestic politics since 2000, most business leaders have usually declined to comment publicly of a particular policy, political party or politician.

l  That trend seems to have been broken in Taiwan's 2012 presidential campaign following the show of support, though not necessarily behind a particular candidate, by some of Taiwan’s top corporate leaders.

l  Carefully packaged in such a way as not to be labeled in Taiwan’s divided domestic politics, business leaders like Formosa Plastics Group’s William Wang and Evergreen Group's Chang Rong-fa have publicly stated that the candidate's ability to generate “mutually-beneficial cross-Strait interactions,” based on the “1992 consensus,” will earn their support. Others like Hon Hai Precision's Terry Gou and Yue Loong Motor’s Ken Yen have also made public their explicit support of President Ma Ying-jeou and the "1992 consensus."

l  Many in the DPP have charged that these business leaders have come forward to express support for Ma because of: (1) pressure from Beijing, and (2) the need to protect their economic interests on the mainland. While the above factors may apply to some, it would be unfair to interpret their support for President Ma Ying-jeou solely on those grounds.

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Wednesday, January 18, 2012

Taiwan's 2012 Elections:A New Chapter in cross-Strait Relations

Results of the 2012 elections:

l  Taiwan’s 2012 presidential and legislative elections were held on Saturday, January 14, 2012. President Ma Ying-jeou, representing the ruling Kuomintang (KMT), won the reelection with 6,891,139 votes, or 51.60% of the total votes cast. Democratic Progressive Party (DPP) Chairwoman Tsai Ing-wen gathered 6,093,578votes, or 45.63%. People First Party (PFP) Chairman James Soong had only 369,588 votes, or 2.77% of the total.
l  At 5.97%, the final margin of victory for President Ma was slightly larger than many earlier predictions. It was mostly because of the “abandonment effect”—where voters throw their support behind the candidate most likely to win—among the pan-Blue voters. Fearful of another painful experience reminiscent of the 2000 presidential election when the KMT split, most pan-Blue supporters cast their ballots behind President Ma to prevent the DPP from returning to power, thus marginalizing Soong in the final vote tallies.

Ma Ying-jeou
Tsai Ing-wen
James Soong
Vote total

Figure I. Results of Taiwan’s presidential election, January 14, 2012
l  At the same time, the KMT was able to retain its majority in the Legislative Yuan (LY), but the total number of seats shrank from 73 to 64. The DPP had a modest increase from 33 to 40, with the PFP and the Taiwan Solidarity Union (TSU) capturing three seats each. The Independents won the remaining three seats.
Political party
Number of LY seats (before)
Number of LY seats (after)
Net change

Figure II. The number of seats held by Taiwan’s political parties in the new LY

Factors responsible for Ma’s reelection:

l  Stressing progress and breakthroughs in cross-Strait relations, Ma was able to convince most voters that “peace, stability, and prosperity” through continued engagement with China was the “right course” for Taiwan.
l  More and more Taiwanese voters are now beginning to sense and appreciate, albeit gradually, the benefits of the “Economic Cooperation Framework Agreement” (ECFA), signed with China in June 2010. This, in turn, has cut into the once seemingly insurmountable advantage that the DPP has long enjoyed in southern Taiwan.
l  Ma has promised, and delivered, a clean government since assuming office in May 2008, making Taiwan a more attractive destination for investment.
l  Because of improvement in cross-Strait relations, Ma has elevated Taiwan’s international visibility, evidenced by the increasing number of countries and regions, currently at 114, which have granted Republic of China (ROC) passport holders visa-free status.
l  Amidst ongoing global economic uncertainty brought on by the European sovereign debt crisis, most Taiwan voters believed that experience is important in steering the island’s economy through uncharted waters in the coming years.

Implications on cross-Strait relations

l  Besides being an impressive victory for Ma, this was also a vindication of Beijing’s policies pursued vis-à-vis Taiwan in the last three and a half years. To the Chinese leaders, these policies have proved to be largely effective and welcomed by the majority of Taiwan voters.
l  In the next four years, we expect the following to take place in relations across the Taiwan Strait:
(1)   The ongoing exchanges, particularly cross-Strait flights, Chinese procurement missions, and visits by mainland businessmen, tourists and students, will continue and likely intensify;
(2)   The cross-Strait mutual investment protection agreement will probably be signed soon, possibly as early as the first quarter of the year, and other post-ECFA negotiations, e.g. protection of intellectual property rights and service and commodity trade, will also begin shortly thereafter;

l  More importantly, Ma’s reelection will mark the beginning of “comprehensive engagement” between China and Taiwan. Although both sides will continue to stress that “economics first, politics later,” political dialogue on some politically sensitive issues appears inevitable.

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Wednesday, January 11, 2012

Assessing Taiwan’s economic prospects in 2012

l  Despite disappointing news on export, investment, and employment in recent months, Ma administration officials have been “cautiously optimistic” concerning the island’s economic outlook this year.

l  In fact, many government officials expect the current economic downturn to “bottom out” at the end of first quarter 2012. If President Ma wins the reelection next week, the island’s economic prospects would be considerably brighter since cross-Strait economic engagement will continue—likely intensify—in the coming months.

l  For Taiwan’s export-oriented economy, the eurozone sovereign debt problem remains the most crucial issue in the coming three months, which will be the peak period of debt repayment for many European countries.

l  Although a broader eurozone crisis has probably been averted over the past few months because of support from the International Monetary Fund (IMF) and the European Central Bank (ECB), there are no easy or quick fixes to the fundamental issues.

l  However, since Taiwan's exposure to European debt is negligible, we do not expect that sluggishness in Europe to continue having an across-the-board impact on Taiwan's economy, including exports.

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Friday, January 6, 2012

Taiwan’s jobless rate dropped slightly in November 2011

l  Although the European sovereign debt crisis remains unresolved, Taiwan’s jobless rate for November 2011 decreased slightly, from 4.3 to 4.28 percent, indicating that the economy remains vulnerable to external shocks and global economic uncertainty.

l  The relatively unchanged jobless rate for November should not come as a surprise to most since other economic indicators, e.g. exports and consumer confidence index (CCI), have been declining since the third quarter of 2011.

l  Taiwan’s unemployment rate has, in fact, been edging upward since October and the trend is likely to continue into the first half of 2012, unless, of course, the European debt crisis is contained and the US economic recovery continues. Although few would expect large-scale layoffs, more employees could be forced to go on extended unpaid leave.

l  As for the employment outlook this year, the views are divided. While some expect the number of job vacancies will be more than the number in 4th quarter 2011, others believe the local job market will not improve unless, and until, the European debt crisis is alleviated or resolved.

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Wednesday, January 4, 2012

As Beijing gets nervous of a DPP victory

l  The chairman of China’s Political Consultative Conference (PCC), Jia Qinglin, reiterated that the “1992 consensus” is the basis for continued cross-Strait dialogue and exchange.

l  Jia stressed that if “1992 consensus” is challenged, there would be “dire consequences” in cross-Strait relations, including possible suspension of the 15 agreements signed.

l  On the other hand, Jia also extended an olive branch by declaring that sensitive issues like Taiwan’s international space can be negotiated between the two sides, if the “1992 consensus” remains intact and adhered to by Taiwan’s next leader.

l  The timing of Jia’s statements could indicate one of two things, or possibly both: (1) Beijing has sensed that the prospects of DPP’s Tsai Ing-wen winning the race is increasing, and Beijing feels “compelled to remind” Taiwanese people of possible setbacks in bilateral ties, and (2) Tsai’s election would mean that Beijing’s policies toward Taiwan since 2008 have largely failed, which could lead to wholesale changes in China’s Taiwan policy.