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The real meaning of the ‘lost years’
Thursday, Jun 17, 2010, Page 8
If we believe the Chinese Nationalist Party (KMT), President
Ma Ying-jeou (馬英九) and his government’s distorted view of the world, having a
“closed-door” policy means not dealing with China.
If this is the case, former presidents Chiang Kai-shek (蔣介石) and his son, Chiang
Ching-kuo (蔣經國), have to be the two heads-of-state who adopted the strongest
closed-door policies over the 60 years the “Republic of China” has been here on
Taiwan. Before former KMT soldiers were allowed to go back to China and visit
their relatives at the end of 1987, Taiwan experienced 38 years of governance
under the two Chiangs that was truly representative of the “closed-door” policy
Ma is now so fond of accusing the opposition of advocating.
Since taking office, Ma has said time and again that Taiwan will be marginalized
if it adopts a “closed-door” policy and avoids dealing with China. Ma has also
likened this “closed-door” mentality with the regimes of the two Chiangs and the
way they dealt with China. However, with the indirect and transit trade that was
opened in 1985 being extremely limited, it wouldn’t have made sense for Taiwan
to have made China its focus for economic development.
Under Chiang Kai-shek’s administration in 1971, Taiwan posted economic growth of
12.45 percent, while under Chiang Ching-kuo, it recorded growth of 11 percent in
1986. Back then, the government often reminded itself that Taiwan should not
become overly reliant on trade with the US and Japan and that Taiwan had to open
up a wider range of markets in order to diversify the risk. It also never felt
satisfied with, or prided itself on, its achievements, unlike the Ma
administration.
After the government promulgated the Act Governing Relations between the Peoples
of the Taiwan Area and the Mainland Area (兩岸人民關係條例) in 1992, a permit system was
adopted to allow Taiwanese businesspeople to invest in China. This system has
now been in use for 18 years.
The KMT is fond of talking about the “lost two decades” under former presidents
Lee Teng-hui (李登輝) and Chen Shui-bian (陳水扁), as well as the “lost eight years”
when the Democratic Progressive Party (DPP) was in power. Lately, Ma has also
been making comments about the “decade of closed-door policy,” referring to the
final two years of Lee’s rule and Chen’s presidency.
These references, however, are nothing but meaningless political rhetoric aimed
at smearing former leaders. These comments not only contradict the truth, they
are also misleading and totally unhelpful when analyzing the challenges Taiwan
now faces.
Let us briefly look at some statistics. If we just look at the filed information
from the Investment Commission of the Ministry of Economic Affairs, the
liberalization policies of the KMT introduced under Lee saw Taiwanese
investments in China increase from US$110 million in 1993 to US$160 million in
1997. After the “no haste, be patient” policy was introduced, this figure
gradually fell to US$120 million in 1999.
After Chen and the DPP came into power, the government adopted a policy of
“proactive liberalization and effective management.” Investments in China
increased from US$260 million in 2000 and hit US$990 million by 2007.
After the Ma government took office in 2008, this figure increased to more than
US$1 billion and while this figure dropped to US$710 million last year as a
result of the global financial crisis, in the first quarter of this year, it has
already reached US$260 million.
Given this constant increase in investment, China accounts for more and more of
Taiwan’s GDP in a way that is not true for other nations such as the US, Japan
and South Korea. This shows that Taiwan is getting too close to China instead of
embarking on a path of globalization that would involve diversifying investments
and risks around the globe.
At the same time, Taiwan’s domestic investment rate has been plummeting,
especially since 2001, when there was a significant increase in Taiwanese
investment in China.
In fact, Taiwan’s domestic investment has been the lowest among the Four Asian
Tigers for a long time now. Decreases in the domestic investment rate, of
course, have direct effects on employment levels that are closely linked to the
livelihood of the nation’s citizens.
According to statistics from the Directorate-General of Budget, Accounting and
Statistics, the unemployment rate increased from 1.5 percent in 1993 to 2.99
percent in 2000 and reached 5.17 percent in 2002. Great lengths were taken after
this to lower it to 3.91 percent in 2007.
After the Ma government came into power in 2008, the unemployment rate bounced
back to 4.14 percent, and last year recorded an all time high of 5.85 percent.
As of April, even with the recovery from the global economic crisis underway,
the unemployment rate was at 5.63 percent, showing that it has been stuck at a
high level for a long time now.
These high figures seem even worse if we put them alongside the differences in
income between households and the rapidly increasing gap between the rich and
poor. The risky, excessive investment in China has put Taiwan on a track that
will be very hard to reverse.
If we look at the real changes in these statistics, it is easy to see that the
“lost two decades” the KMT keeps talking about actually refers to the 20 years
where Taiwan has kept increasing investment in China, the “lost eight years”
refers to the period in which there were huge increases in investment in China
and “the decade of closed-door policy” refers to a decade where Taiwan is
totally locked within China’s domain.
Despite this, the Ma government has gone even further down this road.
For it, having 70 percent of Taiwanese investment tied up in China is not
enough. It is now encouraging even greater amounts of investment in China and
the extent to which Taiwan is locked onto China is clearly much greater and more
dangerous than the last eight, 10 or 20 years.
A report released by the Chung-Hua Institution for Economic Research some time
ago said that after Taiwan signs an economic cooperation framework agreement (ECFA)
with China, Chinese imports would increase. It also said that an ECFA would shut
out Taiwan’s exports to other nations, especially to Japan, four ASEAN nations
(Thailand, Malaysia, the Philippines and Indonesia), the US and the EU. This
will not only make Taiwan more reliant on Chinese goods, but the increase in
imports from China will constitute almost 60 percent of Taiwan’s overall
imports.
If Taiwan is unsuccessful in signing free-trade agreements with large countries
like the US and Japan, we will become even more locked onto and locked in by
China.
It thus seems the effects of Ma’s “closed-door” policy will be the creation of a
“golden decade” for China and a time of destruction for Taiwan. Even if Ma steps
down, it will be a huge task to rebuild Taiwan after the huge calamity he will
cause with the inking of an ECFA with China.
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