The Taipei Times
May 26, 2010
May 20 was the second anniversary of President Ma Ying-jeou’s (馬英九) inauguration. Over the last two years the government has perhaps attracted most attention for the way it has strengthened economic and political ties with China. Indeed, because this policy links Taiwan’s development to that of China, it has been the cause of much dispute ever since Ma came to power in 2008.
This is a controversy that shows no sign of going away despite intensive government propaganda and deployment of its extensive administrative resources. Ma may reason that although small and medium-sized enterprises, residents in central and southern Taiwan and the lower and middle classes are most strongly opposed to the policy, they are the least likely to vote for the Chinese Nationalist Party (KMT). However, the truth is that military personnel, civil servants and school teachers, who are generally cast as traditional supporters of the KMT, may be the ultimate victims of this rash policy.
The salaries of military personnel, civil servants and school teachers are all paid from the public purse. Whether their jobs will continue to be considered an “iron rice bowl” depends on the extent to which economic development boosts personal and national incomes. If the government’s tax revenues are insufficient, the least of its worries will be cutting or freezing wages for public servants — if the situation further deteriorates, there is a very real threat not just to salaries, benefits and insurance, but to jobs. Even retirement pensions accumulated over years could disappear overnight.
Historically, there are numerous examples of how poorly managed national finances have caused difficulties for government agencies. A crisis broke out in the Cayman Islands last year when the government failed to pay civil servants and contractors. With a national income ranked 12th in the world, how could such a situation happen? The problem arose because of the huge income gap between rich and poor.
As a tax haven, the government of the Cayman Islands charges financial institutions registered there huge annual operational fees, but they make no direct contribution to local development. When the global financial crisis hit, operational fees plummeted. This highlights the fact that impressive economic statistics is one thing, improving standards of living is another. The problem lies in uneven wealth distribution, not low incomes.
The government has set several new records during Ma’s two years in office. Government debt has increased by almost NT$900 billion (US$28 billion), while annual tax revenues fell by NT$253.8 billion last year. Unemployment broke through the 6 percent barrier and average real wages returned to a level last seen 13 years ago. Of course the record-high GDP contraction can be blamed on an unfavorable global macroeconomic environment and the situation is likely to improve as the economy prospers. However, there are indications that the policy to rapidly promote cross-strait economic and trade liberalization will have unwanted effects.   more … (Note: This link may take up to 20 seconds to load.)
