Taiwan's Ma fails to stir panic on rising rival Tsai
By Jens Kastner
TAIPEI - Strong warnings by Taiwanese President Ma Ying-jeou that the economy
will be ruined if rival Tsai Ing-wen, of the anti-unification Democratic
Progressive Party, wins the presidential election on January 14 are failing
miserably to alarm voters.
Yet there are plenty of indicators to suggest his campaign's doomsaying, if
slightly overstated, has some substance. Relations with the island's largest
trade partner, mainland China, would be unlikely to change for the better with
Tsai in office, her vision for a nuclear-free homeland is blurry at best, and
her objection to a major petrochemical complex has investors anxious.
Making matters yet more alarming from the business community's point of view,
Tsai, who since has been portrayed as
a "Robin Hood-like heroine" by some supposedly independent media, rides on a
leftist platform, pitting the people against the elite.
Investors' confidence is crumbling as Tsai is beginning to overtake the
Kuomintang's (KMT) Ma in opinion polls less than two months to polling day.
They are gradually doubting whether keenly anticipated election-induced rallies
in the local stock market will materialize.
The same day Ma and his running mate registered with the Central Election
Commission, the TAIEX plunged 2.64%, the largest fall of its kind among Asian
stock markets. Shortly afterwards, it fell to its lowest level in two years to
close below the psychologically significant 7,000-point level. Some analysts
said that this particular poor performance is attributable to two misjudgments:
while investors grossly underestimated the impact of the eurozone debt crisis,
they also grossly underestimated Tsai.
"If the ruling Kuomintang wins the presidential election, stable ties across
the Taiwan Straits will persist, which, in turn, will reduce political risks
and make the local bourse less volatile," noted JPMorgan Taiwan. The foreign
institutional investor avoided spinning out a Tsai win as the other-way-around
scenario.
On November 23, the DPP presidential hopeful faced the unpromising task of
personally easing the fears the island's business leaders have long been
harboring. Tsai told them at a meeting that, if elected, her administration
would seek a cross-strait policy with an emphasis on stability, according to
the Taipei Times.
She said that she would launch full-scale negotiations for a free-trade
agreement (FTA) and pointed out that doubts about her pledge for a
nuclear-power-free homeland and her objection to the NT$700 billion (US$23
billion) Kuokuang Petrochemical complex project, which was scrapped earlier
this year due to environmental protests, were the result of misunderstandings.
Taiwan would be able to generate sufficient electricity even if it abandoned
nuclear power, she said. With regards to Kuokuang, her party has questioned the
proposed location but not the actual petrochemical industry as a whole.
Mainland China's importance to the Taiwan economy was underlined in October,
when it placed US$9.28 billion of export orders. Beijing has already signaled
that if Tsai doesn't recognize the so-called 1992 Consensus if she is elected,
business would not go on as usual in cross-strait economic negotiations. The
1992 Consensus refers to an agreement between the Chinese Communist Party (CCP)
and the KMT, according to which both mainland China and Taiwan belong to China
but both Beijing and Taipei may have their own interpretations of what that
China is.
As the DPP has all along denied the very existence of the 1992 Consensus, and
the CCP first and foremost remembers Tsai as the one who once crafted the exact
opposite of the consensus, namely the "special state-to-state" doctrine, which
in the mid-1990s brought the two sides to the brink of war, a significant
softening of neither her nor Beijing's positions is to be expected.
"Taiwan is the ROC [Republic of China], the ROC is Taiwan, and Taiwan is a
sovereign and independent country," Tsai said.
Wang Yi, director of the Taiwan Affairs Office, the mainland body responsible
for policies related to Taiwan, countered: "A person who proposes to scrap the
foundation [the 1992 Consensus], but still expects to be able to build more
levels ... in the future is unquestioningly unrealistic and irresponsible."
Taiwan's main rival in trade is South Korea. The Koreans compete head-to-head
with the Taiwanese in electronics, steel, machinery, petrochemicals, plastics
and textiles and have decisively left their footprint around the globe. Seoul
this month ratified the long-pending Korea-United States FTA, an FTA has been
in place with the European Union since July 1, and trade agreements exist with
with Chile, India and the 10-country Association of the Southeast Asian
Nations.
On November 24, Kim Tae-hyo, the Korean presidential secretary for national
security strategy, said he would fly to Beijing in December to meet Yu Jianhua,
China's assistant minister of commerce, to discuss a bilateral FTA with that
country.
If Tsai becomes president, she will have FTAs too. However, these will all be
with countries that are economically insignificant and all among the very few
with which Taipei maintains diplomatic relations, namely Panama, El Salvador,
Honduras, Guatemala and Nicaragua. Apart from these, she will have the Economic
Cooperation Framework Agreement (ECFA), which the KMT government signed with
Beijing last year, a pact she already promised her constituency to have a hard
look at if elected.
Given that it is highly doubtful that Beijing would want to strengthen Tsai by
letting her go ahead with forging trade agreements - not even Ma has managed to
sign an FTA - any breakthrough during her term would be surprising indeed. In
absence of meaningful FTAs, it is tempting to imagine Taiwanese exporters being
left ever more at Beijing's mercy as they are elbowed aside by their Korean
counterparts in key markets.
Tsai's promise to work for a "nuclear-free homeland" by 2025 is met with
skepticism. Opponents of her move are plentiful, even in her own political
camp. They say that given the island is barren of energy resources and heavily
dependent on imported oil, nuclear power played an important part in its
rags-to-riches story.
They
also say the price to replace nuclear energy would be extremely high, and that
compared with Germany - which Tsai repeatedly refereed to as a role model in
this regard - Taiwan's electricity supply has significant shortcomings; the island's
isolated grid rules out foreign purchases during shortages, and at US$0.09
per kilowatt hour (a small fraction of that charged in Germany), prices are
too low to permit production of renewable energy. And perhaps most significant,
investors will hesitate to support Tsai's nuclear-free ambitions.
"Since investments in large-scale renewable energy installations inherently
have very high capital requirements and long pay-back periods, investors want
to see stability in the local government’s policies," John D'Angola, a
Taiwan-based Research Fellow on the US Fulbright Programme, wrote in The
Diplomat magazine.
"[But] over the past few years, Taiwan’s government has flip-flopped more than
once, especially with regard to the all-important feed-in tariff system."
Even so, whoever wins the next election, they will face a tough challenge in
supporting the Taiwanese economy next year, given the possibility of a global
recession. For all her shortcomings, the presence of Tsai in the presidential
office might be to the electorate's benefit.
"If the DPP wins, the economic recovery would be felt, because the DPP won't
only care for large enterprises but instead focus on job creation and small and
medium enterprises," Hu Sheng-Cheng, an economist at Academia Sinica, Taiwan's
most renowned research institution, told Asia Times Online. "This is why small
investors welcome DPP's policy, and this is why party chairwoman Tsai has been
called a 'female Robin Hood'."
Hu argued that the DPP would not cancel the ECFA but fight for genuinely
favorable conditions for Taiwan in future cross-strait negotiations.
The argument over the DPP's stance on the petrochemical industry has also
simplified its intentions, according to Hu.
"The DPP doesn't oppose the petrochemical industry but will force its upgrade;
the DPP won't passively give up nuclear power but make green energy become
Taiwan's second star industry [next to electronics and information technology
industries]," he said.
Nor does the Taiwanese economy does depend much on government policy in the
first place, according to Jean Pierre Cabestan, professor and head of Hong Kong
Baptist University's Department of Government and International Studies.
"Among the factors that will affect Taiwan to a much larger extent are the
world economic slowdown and likely sluggish sales in the US and Europe in the
years to come; also the increasing production costs and social tension in
[mainland] China, which have already driven a number of Taiwanese companies to
move production elsewhere, for example to Southeast and South Asia," Cabestan
said.
For the present, the Taiwanese economy is competitive in the global supply
chain, he said. "Taiwan did pretty well in the last few years, partly because
of China, the ECFA and Chinese tourists, but also partly because its prices for
IT products and others have remained competitive."
Cabestan dismissed the widespread notion that Beijing would almost certainly
seek to punish Taiwan for having elected Tsai.
"It depends on Tsai's attitude. She will probably try to reach some kind of
understanding and modus vivendi with Beijing without of course
recognizing the so-called 92 consensus," he said, while pointing out that that
may or may not be satisfactory for Beijing.
Cabestan believes that the mainland is going to be busy with many domestic and
international challenges after the 18th National Congress of the CCP to be held
next autumn, when the country will undergo a leadership change. It will
consequentially be trying to keep the situation in the Taiwan Strait stable.
And while the business community may be increasingly anxious about Tsai's
growing popularity, "Beijing will of course try to utilize these fears as a
leverage; but the factors, constrains and realities I have mentioned will
mitigate the influence of the Taiwan business community as well as the Chinese
leadership on the Taiwanese economy, and, as a result, the Tsai government."
Jens Kastner is a Taipei-based journalist.
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