20100526 Public servants heading to crisis

Public servants heading to crisis

Wednesday, May 26, 2010, Page 8

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.

While China’s tax revenues and employment rate are likely to rise, it seems inevitable that wealth centralization and income polarization will further climb in Taiwan. As the average income of the salaried class drops, unemployment will increase and military personnel, civil servants and school teachers will be less likely to receive annual salary raises and bonuses. In particular, 70 percent of government tax revenue comes from personal income tax. In the event that the situation worsens, public servants could lose their jobs, not to mention their 18 percent preferential interest rate.

Other than Taiwan’s economic reliance on China, the government is also preparing to recognize Chinese academic credentials and open Taiwanese colleges and universities to Chinese students, which is also expected to affect the employment and promotion of military personnel, civil servants and school teachers.

To curry favor with Beijing, Ma has put aside the issue of sovereignty and declared a “diplomatic truce.” In terms of military affairs, the use of secret channels is a slap in the face to the diplomats who represent Taiwan around the world and the military that safeguards national security.

Although they have not yet been called parasites, there is an increasingly common feeling that public servants no longer know what they are fighting for. The nation is paying a heavy price for Ma’s pro-China policies.

Military personnel, civil servants and school teachers all rely on the government, so the question arises what happens to them if the country perishes. If Ma’s plan for “eventual unification” is ever carried out, they are likely to suffer most. Take Hong Kong for example, where armed Chinese police have been stationed since the 1997 handover and where civil servants and school teachers often take to the streets in protest. Taiwan should watch and learn.

Public sector personnel should not take their current benefits for granted, because every dollar comes from the taxpayer, not the president and his party. If those in power push for a policy that places the interests of conglomerates before those of the public, then they will also unavoidably erode the guarantees traditionally given to military personnel, civil servants and school teachers.

When Ma introduces various pro-China measures through government agencies and wastes taxpayers’ money on propaganda, those executing his policies are not displaying loyalty to party and state, they are committing suicide. Considering the educational level of public servants, it is perhaps strange that they have yet to notice the unenviable future that awaits them.