More breathing room, please!

l  After being granted approval by Taiwan's Ministry of Economic Affairs (MOEA) last week to set up a US$3 billion manufacturing plant in China, AU Optronics (TWSE AUO 2409) urged the government this week to relax restrictions over Taiwan LCD panel-display makers’ investment in China so that they can better compete with South Korean suppliers in the mainland market.

l  Furthermore, AUO suggested that the current ban on the display-panel manufacturers’ investments in their Chinese counterparts should also be removed. In response, the MOEA has pledged to review and consider such a request.

l  Since its investment plan was eventually approved after under MOEA review for almost a year, AUO felt the island’s LCD flat-panel makers have already missed the most timely period for setting up production facilities in China.

l  Worse yet, while Chinese authorities were expected to give swift approval to investment plans like AUO’s when the application was first submitted to MOEA nearly a year ago, China could now delay the process of approval because the mainland already has its own LCD display plants with relatively advanced technologies.

l  Other Taiwanese industries, particularly petrochemical and solar energy, may experience the same fate if the current ban on investment in China continues.

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Are changes imminent in DPP's China policy?

l  Democratic Progressive Party (DPP) Chairwoman Tsai Ing-wen recently announced plans to set up a party think tank for research primarily on how the party should formulate its cross-Strait policies in the future.

l  Once operational, the DPP think tank will draft proposals concerning its China policy. Although the DPP will not exclude the possibility of dialogue with China, such talks can take place only when there is no precondition attached.

l  Furthermore, in contrast with the ruling Kuomintang (KMT), the DPP does not plan to establish a party-to-party platform for dialogue with the CPC.

l  Under Tsai, DPP's fundamental position in managing cross-Strait ties in the future will likely be based upon: (1) the relationship between China and Taiwan must be.....

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Room for a "third force?"

l  Former President Lee Teng-hui is in the news again---this time calling for a “viable alternative” beyond just the ruling Kuomintang (KMT) and the opposition Democratic Progressive Party (DPP) in the next presidential contest. Lee also declared that the primary objective for consolidating all opposition forces is to “vote the incumbent ‘China-leaning’ regime out of office” and put a stop to the government's ongoing “pro-China” policies.

l  The former president also identified some key criteria for the suitable candidates that included, first and foremost, the ability to defeat Ma to win the 2012 presidential election, safeguard Taiwan as an independent political entity, lead Taiwan on its own path, uphold and preserve justice, restore social values, and give the people of Taiwan a sense of belonging.

l  Among the people identified by local media that might become part of Lee’s “third force,” Legislative Yuan (LY) Speaker Wang Jin-pyng, former DPP Chairman Shih Ming-teh, former Vice President Annette Lu, People First Party (PFP) Chairman James Soong, and Winston Wang, son of Formosa Plastics Group founder Wang Yung-ching have captured the most attention and interest. Many of these people, however, have either declined to respond to Lee’s proposed idea or have categorically denied related reports.

l  Lee’s remarks also put the DPP in an awkward position since the party has not begun internal discussions on the presidential nomination mechanism for 2012, and despite frequent media reports on the potential candidates, none of the speculated names, including former Premier Su Tseng-chang and Chairwoman Tsai Ing-wen, have announced plans to run.

l  On the other hand, it is no secret that Lee has not been happy with the rapid progress in cross-Strait economic relations since President Ma assumed power in May 2008. From direct air links, Chinese tourists to Taiwan, to the ECFA, Lee has been critical of the Ma administration for making Taiwan’s economy overly dependent on China.

l  If Lee moves ahead with this proposed “third force” scheme, the KMT will like adopt a wait-and-see attitude and make sure it will split the opposition and enhance the ruling party’s own prospects in the next presidential showdown.

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The Sixth Cross-Strait Summit: What to Look for?

l  The new round of cross-Strait talks between China's ARATS and Taiwan's SEF is set to take place in Taipei during December 20-22. This is the sixth ARATS-SEF summit since President Ma Ying-jeou took over in May 2008.

l  Though most were disappointed that the proposed investment protection agreement will not be signed as originally planned, it seems to be a good idea---particularly from Taiwan's domestic political perspective---for the proposed pact to be shelved aside until terms acceptable to both sides can be worked out.

l  The two semiofficial government agencies are, however, expected to ink a medical and health cooperation agreement during the two-day meeting. On the other hand, though the two sides will continue negotiations, there is no guarantee that differences over the investment protection pact will be resolved by the next ARATS-SEF summit in mid-2011, which will likely occasion the start of the 2012 presidential campaign in Taiwan.

l  Since this will be the first cross-Strait summit that is “thin on substance,” the opposition DPP does not plan to organize any mass demonstration or street protest. Only a few pro-independence groups plan to demonstrate outside of Taipei's Grand Hotel, where Chen and the ARATS delegation are staying. 

l  The DPP is also in the midst of re-formulating its China policy to become more moderate and appealing to Taiwan’s middle-of-the-road voters. Another violent clash with the police, as was the case in November 2008 when Chen visited Taipei for the first time, will likely hurt the party's image and undermine public confidence in its abilities to deal with China if returned to power.

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Taiwan's economic development in 2011

l  With average monthly salary expected to reach NT$44,453—which is a new high—this year, Taiwan will likely place a stronger emphasis on increasing domestic demand next year. Instead of relying heavily on exports as in the years past, therefore, economic officials are now calling for more domestic demand to stimulate Taiwan’s economic growth in 2011.

l  The government, in turn, is drafting plans to: (1) identify, at least, three key industries for each city and county on the island, (2) promote these designated industries to attract foreign and domestic investment, and (3) coordinate among the cities and counties to provide multiple choices for foreign and domestic investors to invest in.

l  On paper, the proposed plan appears plausible. However, a lot of coordination and teamwork between local and central governments are needed for the proposal to work as planned. Moreover, given the recent election of new “super-mayors” for the five special municipalities last month, the task could become more complicated since local authorities will have more autonomy in formulating their own path of economic growth and development.

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