Abstract

The Bush administration is trying to cut taxes to stimulate the ailing U.S. economy. Taiwan cannot follow suit. The reason is that Taiwan is in a worse financial situation.

In a recent article in the Central Daily News, Hsu Chen-min, professor of economics at Taiwan University, points out the only possible way to help spur the Taiwan economy is to increase public investment in local as well as regional projects, which will be conducive to a true recovery and encourage the private sector to invest. He believes the government should not accept a proposal by the private sector to lower business income tax in that, if adopted, it would only make Taiwan's financial situation even worse. The decline in private investment over the past two years is largely caused by a political instability and a magnetic attraction of the Chinese market. "The problem is complicated," says Hsu who is also a fellow at the National Policy Foundation, a think-tank of the Kuomintang.

As Taiwan businessmen in China are already able to obtain loans from Chinese banks, Hsu opines, domestic capital should be channeled into expanded public investment, which should help banks on the island solve their problems of finding worthy borrowers. The government effort to enlarge domestic demand by implementing special or supplementary budgets is noteworthy.

So far as financial reform is concerned, Hsu points out, the most urgent task is to accelerate agricultural development and to adopt a supplementary budget to fund welfare projects for the farmers and fishermen, more than 120,000 of whom staged a protest march in Taipei on November 23, 2002. An agricultural financing bill has to be enacted to make it possible to provide long-term loans for projects to develop agriculture.

.....the full text in chinese