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Taiwan¡¦s myriad
structural crises
By Tony Lin ªLÄËÅc
The risk that the annual labor insurance pension system will break down because
the Labor Insurance Fund is soon to go bankrupt, in combination with the unjust
pension mechanism for military personnel, civil servants and public school
teachers and their year-end bonus payments, has upset the general public and is
causing something of a panic. However, this is but one of the many structural
crises currently facing Taiwan.
Rapid changes in the demographic and industrial structure along with an outdated
Constitution and legal system have created an increasingly unjust social
framework that is hurting the vitality of economic development. These factors
have also served to further highlight a series of structural crises that the
government has been unwilling and afraid to address.
The most obvious structural crisis is that in the fiscal system. The
comprehensive evaluation report for next year¡¦s central government budget issued
by the Legislative Yuan¡¦s Budget Center shows that more than NT$5 trillion
(US$171 billion) of government debt with a maturity of more than one year still
has to be repaid.
This is already approaching the debt limit, and the sharply falling birthrate
and the rapid aging of Taiwanese society is leading to concerns that the
government¡¦s future ability to repay its debts will be further weakened.
The Budget Center also points out that hidden debt of more than NT$14 trillion
has not been included in the public debt. In addition, there are many
regulations in place that remove the upper limit on public debt.
According to how major countries calculate unpaid debt as a proportion of GDP,
Taiwan¡¦s debt currently stands at 125 percent of GDP. According to the debt
rules for EU member states, national, regional and local governments may not
have unpaid debt exceeding 60 percent of GDP. Taiwan¡¦s debt is twice that. The
worry is that the government¡¦s lack of fiscal discipline will set off a debt
crisis of the same kind that is currently rocking Greece, Spain and Italy.
The next urgent structural crisis is in the education system. As the birth rate
drops, an accompanying sharp drop in demand will pose severe challenges to the
educational system as a whole. Even more worrying is that an inability to
improve educational quality in response to economic and industrial needs and
social changes will create a problem with large numbers of unemployed people
holding useless doctoral and master¡¦s degrees.
Unemployment among university graduates is almost three times as high as the
general unemployment rate, which has created a situation where many people who
¡§have a degree but not an education,¡¨ make up a class of dispossessed educated
people. We are now faced with what some media outlets have said amounts to
profit-driven schools bringing about the demise of the nation.
The third structural problem is the unresolved constitutional crisis. Taiwan¡¦s
semi-presidential system has created an unclear division of powers and
responsibilities and serious inefficiencies at the national government level. At
the local government level, the rash decision to create four new special
municipalities to meet electoral needs has resulted in deteriorating fiscal
allocation and failed to improve government efficiency by bringing about a
reasonable improvement in the chaotic and imbalanced regional structure.
In the remaining county, city and township governments, the phrase ¡§of the
people, by the people and for the people¡¨ in the first article of the Republic
of China (ROC) Constitution could be replaced by ¡§of organized crime, by
organized crime and for organized crime¡¨ or ¡§of the wealthy, by the wealthy and
for the wealthy.¡¨ The result is a government credibility crisis.
Additionally, the structural crisis leading to a wealth gap continues to worsen.
The results of the Survey of Family Income and Expenditure announced by the
Directorate-General of Budget, Accounting and Statistics on Aug. 17 showed a
difference of 6.17 times between the 20 percent of households with the highest
and lowest incomes.
If government transfers are excluded, the wealth gap last year increases to 7.75
times, the second-highest after 2009, when the wealth gap was 8.22 times. In
addition, the media have reported widely on the benefits for retired military
personnel, civil servants and public school teachers who, in addition to their
pension payments, get relief payments for three different holidays, a year-end
bonus and electricity and water subsidies. This situation is enforcing the view
that ¡§officials fatten themselves, while the public starves,¡¨ and that is
affecting societal harmony.
In addition to all this, potential structural crises also exist in the
population, urban-rural, communications, high-tech and national defense sectors.
The government authorities, including the legislature and the Cabinet, must
address these issues and implement comprehensive and thorough structural reform
so that Taiwan does not fall behind South Korea or even the Philippines, and so
that the younger generation do not leave the country due to their frustrations
and disappointments.
Tony Lin is a lawyer.
Translated by Perry Svensson
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