Wow… the ruling Kuomintang (KMT) party, led by Ma Ying-jeou, lost pretty spectacularly and surprisingly in the mayoral elections held here in Taiwan yesterday to the Democratic People’s Party (DPP), led by Tsai Ying-wen. The issue isn’t so much legislative (it wasn’t a parliamentary / general election) but the signal Taiwan sent by making the ruling party lose control of nearly all major cities/municipalities (Taipei to the “independent” DPP-backed People First Party (PFP), and Taichung, Tainan, Kaohsiung to the DPP) was felt throughout like a political earthquake. This led to the PM resigning, and Ma got under the heat of reporters and criticism not long after.
General elections will be held in the start of 2016, giving the KMT roughly 9/8ths of a year to turn public opinion around unless Ma wishes to be forced to cede power to the DPP, and I expect politics to go into overdrive to provide good results to boost the prospects of re-election.
What has brought this about, given that at least Taipei and Taichung have normally been the industrial / corporate base on which the KMT has stood firm as essentially the rest of Taiwan was sided with the DPP? Ma Ying-jeou has lately been called “Mr. 9%” as a reference to both his low approval ratings (9%) and the “jeou” character in his name which means “9” in Chinese, but even despite this he has managed to score political victories, most notably a reelection in 2012. So, what has changed?
- Worries of economic stagnation. Wages are not increasing in Taiwan, while house prices and rents are going up and reaching stratospheric levels compared to average salaries. There has been discussions on lower economic growth proving to be a massive funk for the island which it has yet to get out of, despite GDP growing at roughly 3.5% for the last 6-9 months and showing signs of increasing.
- Fears of China have increased. Partially, this is because a more assertive Xi Jinping has been playing a lot of tones that ring of nationalism which isn’t the best sound in Taiwanese ears, for understandable reasons. Part of it is normal, Asian irrationality and demands for remaining separated and elevated from China by birthright, which are fears that cannot be placated under any circumstance as long as China is growing faster than Taiwan and steadily opening up.
- Heavy-handedness by Ma. He’s been trying to force a lot of regulation through parliament without broad support, looking more like a CEO responding to owners everyone believes to be Chinese, than a politician genuinely looking out for the Taiwanese people and their interests. “Sellout” is a pretty common slur about Ma these days, or that he’s trying to show progress on unpopular decisions towards a schedule set by Beijing, and the protests in March of this year against the Cross-Strait agreement were probably the standout development in this area. On top of this there have been a few food scandals which obviously, in any lack of perfect handling, gets pinned on the ruling party.
- Voter fatigue. How many rulers in democratic countries get a second renewed mandate? Sweden failed this even though the economy’s been good, the same thing with the US in the last midterm elections even though there has been a lot more controversial policy to go around in that case. Then what are the chances for that happening in Taiwan which is gradually becoming less and less competitive (thanks largely to a very tightly managed currency against the US dollar) while asset prices are soaring?
Here’s what I think needs to be done in the coming ~6 months for Ma to maintain his presidency, which I personally do think is beneficial for Taiwan (both on ideological grounds and as a matter of pragmatism – the “greens” as the opposition is known isn’t a group I think of when someone mentions professionalism and organizational capability). As usual, hit the “Continue Reading” for more!
Show thought-leadership to give people economic benefits:
Provide general ideas for how the Taiwanese people can gain increased benefits from your policies without investing in property, starting a company or getting stock options thanks to squatting a corner office.
Taiwanese minimum wages are still low, and college graduates (98-99% of 21-year-olds) have really meager monthly salaries of around NT$22 500 (US$750) to look forwards to after graduation and military service. Tax breaks of NT$19 000/month for the first year of an employee’s total work history obviously help a bit, but it has a rather strange implication: firms hire and fire with impunity and few people last longer than a year at a firm, since they can then just hire a recent graduate anyway. Turnover here among people my age is probably north of 2 people per entry position (for fresh graduates) per year, which means that people work their behinds off for poor money and the hope of getting a decent recommendation letter, but quitting or getting fired over the smallest things. Loyalty isn’t really a word here…
Overall, the salary position is frankly speaking dismal. Average monthly salaries range between NT$50 000 and NT$70 000 (~US$1 650 – US$2 350) depending on the place you’re working at, with the higher range in big cities and for teachers, doctors etc. Looking into living expenses per person somewhere between NT$7 000 and NT$10 000, rents at NT$10 000 to NT$30 000 for “normal” housing depending on city, district, and condition, it is very, very difficult to gain consumption capital, given that the Taiwanese save ~10% of their salaries in the hope of some day getting property.
With an economy that’s 65% services and powered by SMEs, which there are to the tune of roughly one per twenty persons, getting increased salaries, inflation and monetary velocity is an absolute imperative, and Ma needs to do something here! Personal disposable incomes are increasing at roughly 2.5%, but that is little consolation when asset prices are generally up 10% and food inflation has averaged about 4% the last year!
Allay fears of the rest of the world:
Virtually all currencies except the renminbi, Hong Kong dollar and US ditto are down markedly vs. the New Taiwan dollar. This doesn’t really help people in Taiwan become comfortable with talks of reform in Japan, investments and global growth of South Korean companies, and so forth. Sure, export destinations are better off, but why would importers buy Taiwanese stuff if it’s now at a 10% premium vs Korean or Japanese goods compared to from a few months ago? Also, Taiwanese are on average actually – for being so open to the rest of the world – some of the most protectionist, patriotic and naturally economically fearful people I have ever met. Surely, I have not gone far inland into China to discuss economic policy, nor have I had deep discussions with Japanese, but after spending three months living in Guangdong I find those people having a more positive outlook on the economy and what benefits there are from trade, the reflections I am time and time again forced to make regarding Taiwan are shocking. Koreans, as humorously insular as they can sometimes be, also generally look more optimistically on the rest of the world save Japan.
It is easier to be positive if your wealth is growing, and the shades are not allowing you to see anything else than opportunity as happens in China, but I would probably think that both Japan and Korea would have similar experiences.
Promote Taiwanese companies’ expansions and investments abroad? Seek broad partnerships with other Asian regions, if not on a political level then economically to integrate and see mutual investment opportunities? Expand cultural exchanges, hiring and integration of foreigners from around the world by Taiwanese companies? Build on your universities (which will soon be far below capacity) to actually have international intake programs worth speaking of? Work more closely with Hong Kong and Singapore in a matter of issues which are relatively similar for potential off-shore Chinese developments in the future?
Gear Taiwan towards taking a bigger spot on the global stage, and people will hopefully be less fearful, and the KMT ideas of internationalization, integration and tying growth to an expanding world will probably settle in a lot easier with voters in the future. If Taiwan is getting more involved with everyone, then increasing connections to China probably doesn’t seem like such a big thing all of a sudden, rather than having China being the ostrich egg in a much-too-small basket. Speaking of which:
Change the China rhetoric.
Stop with the “China this, China that, Chinese growth, Chinese integration” impression you’re giving off. I know it’s hard now, but the rhetoric appears to be doing you a lot of harm so what can be lost? Talk Taiwan, Asia, world. Only mention China as a means to get Taiwan to the world, as a means to attract foreign investments in Taiwanese companies, and as a provider of challenges that you believe a closely cooperating Taiwan is the number 1 in the world to benefit from. Paint a picture of a growing, capital-rich and innovative, economically advanced group of 23 million people which have learned, changed and developed as fast as the Chinese and their companies, for twice as long. Paint a picture of how you believe Taiwanese services are light-years ahead of China and presents an opportunity of gargantuan proportions, how capital in Taiwan can be deployed globally and how an internationalized and extremely educated workforce can bring benefits to all of Asia, and thus how Taiwan will be a great value-adding centre if the people keep developing, keep ahead of the ball and interact with the interesting global developments that are occurring at the moment, instead of clamming up.
And then stop at talking. Unless you have popular opinion with you and can get decisions through the legislature easily, don’t try. I know this is the exact opposite recommendation I would give to any other politicians in Asia. Getting massive reform shoehorned through will lower your popularity (if that’s even possible) and then force you to stop painting the pictures of Taiwan you want people to have with them as they go to elections. Stupid political maneuvering will probably give the DPP the say in shaping the political debate, and then you’d probably be lucky if the KMT gets as trashed as the DPP got after Chen Shui-bian’s last four years in office. Moving the debate towards DPP incompetence (as was a major point of the 2012 elections) probably won’t work because a) people simply don’t remember that anymore, and b) they probably don’t view you any more favourably, so talk ideas and a budding economic recovery in the face of tough crisis, and what you want to do in truly good times.