Taiwan’s big economic headache

By Lawrence Chung, The Straits Times, 30 December 2000

After weathering the Asian financial crisis, something is now very wrong with the economy as people are being laid off and the market is plunging.

TAIPEI—During their company’s year-end party, Mr Lee and a few colleagues each received a pay cheque and a note thanking them for their 10 years of service, and telling them not to go back to work after the New Year.

Already, about 4,300 factories in Taiwan have closed their doors this year, and more companies are expected to suspend operations because of the island’s grim economic outlook for the future.

At the turn of the century, what has gone wrong with the usually lively Taiwan economy, which had weathered the recent regional financial crisis successfully?

Increasing capital flight, global economic slowdown and, of course, the non-stop political feuds at home can be the answer, analysts suggested.

‘Take the most recent work-hour issue. Feuding politicians were embroiled in bitter fights, ignoring the popular interest,’ said Professor Hu Fu of the National Taiwan University.

Parliamentarians from rival political camps failed to reach a compromise over the Bill to introduce a 42-hour week.

Parliament approved the plan in June, but the Cabinet wanted a revision to lengthen the working hours to 44 in a bid to contain rising labour costs and stop local companies from moving their production overseas.

Local industrialists yesterday said that shortening the working week would only prompt them to pull out of Taiwan.

‘This is a lose-lose situation for both employers and workers. Unemployment is tipped to rise further next year,’ said tycoon Wang Ling-lin, head of the National Chamber of Commerce.

The island’s unemployment rate hit a 15-year high last month, rising to 3.23 per cent as 319,000 people were forced out of a job due to plant closures and other reasons, according to official figures.

Local hospitals recently reported that more people have gone to sell their blood or serve as guinea pigs for the testing of new medicines in exchange for money.

Standard and Poor’s recently put Taiwan’s economic outlook in the negative realm, and warned that the ongoing political turmoil and government inaction could exact an even higher cost on the island’s economy if problems were not addressed swiftly.

Since President Chen Shui-bian came to power in March, he has had to wrestle with opposition politicians over a host of issues, including the fate of a nuclear power plant.

The opposition parties, led by the KMT, have even formed a loose coalition to work for the President’s dismissal.

Although the Chen administration has tried to convince the public that the island could chalk up a healthy 6 per cent growth next year, private and semi-official economic think-tanks are not as optimistic as that.

The government-funded Academia Sinica forecast a dismal 5.21 per cent, citing political troubles as a contributing factor to their estimate.

Faltering public confidence in the government is seen as the cause for a dramatic slump in the Taiwan stock market, which has slashed almost 50 per cent off its index and value since Mr Chen took office in May this year.

SOS hotlines all over Taiwan have registered more callers complaining about the stock losses, debt and unemployment.

Some of them even said suicide was their only solution because of their heavy financial burden.