President’s Report: The US-Taiwan Business Council & U.S.-Taiwan Relations 2011

January 5, 2012

President’s Report:
The US-Taiwan Business Council & U.S.-Taiwan Relations

(Arlington, Virginia, January 5, 2012)

Report by Rupert Hammond-Chambers

The Taiwan Political Environment
In the lead-up to the January 14, 2012 presidential and legislative elections in Taiwan, the campaigning has been intense and rhetoric-prone. However, at least by Taiwan standards it has been a relatively less emotionally-heated and even slightly more rational campaigning season than during most previous presidential races.

The opposition candidate, DPP Chairwoman Tsai Ing-wen, has so far run a somewhat restrained and disciplined campaign. She has tried to focus on specific issues, and her agenda is centered on improving Taiwan’s social equality and on achieving a more balanced distribution of wealth. For example, in her so-called “10-Year Agenda” released on August 17, 2011 Tsai calls for a pricing system for property sales, suggesting creating a credible and transparent real estate transaction database that would form the basis for rationalization of Taiwan’s real property taxation. The ultimate objective is to tax real property owners based on the actual price of the most recent transaction at current market valuation. This is intended to help redress the uneven wealth distribution problem in Taiwan, which has been fueled in large part by land and property speculation by large, wealthy conglomerates.

In fact, the same exact themes and policy recommendations were also subsequently included in incumbent President Ma Ying-jeou’s “Golden Decade” re-election platform. Clearly, both candidates are well aware of the very strong public demand for more progressive taxation as a means to check the widening wealth gap. In 2010, government statistics claimed that the disposable income gap between the richest 20% and the poorest 20% of Taiwan’s population narrowed slightly – to 6.19 times from 6.34 times in 2009. However, this narrowing was predominantly due to the massive public spending initiatives and welfare subsidy programs implemented by the Ma Administration, which also greatly increased Taiwan’s public debt. The gain was also modest relative to the 10.88% GDP growth Taiwan recorded in 2010.

Despite his significant achievements in cross-Strait relations, and some of the economic benefits that have accrued from those achievements, President Ma has been struggling to maintain a truly meaningful lead over his DPP rival. His leadership and decision-making style – coupled with his chronically tenuous relationship with the party old guard and the political machine they often represent or are associated with – has hurt party cohesion. Key senior Kuomintang (KMT) leaders, such as former Party Chairman Wu Po-hsiung, have even openly admitted that President Ma could use more skill and refinement in his “inter-personal relations”.

In addition, lack of progress on important reforms, lingering public uneasiness with the ultimate objective of his China policy, and an apparently cooling economy have all contributed to Ma’s inability to better capitalize on his incumbent advantage. Taiwan’s economy slowed into the third quarter, with quarterly GDP growth at only 3.37% and with the latest revised yearly GDP growth at 4.38% – down noticeably from the 5.52% originally projected during the summer. The slowdown has been mainly due to an export market dampened by the weakening global economy, currency appreciation, and significantly reduced capital investments in the manufacturing sector.

The presidential contest has also become even more complex following the announcement by Soong Chu-yu (James Soong), former Taiwan Provincial Governor and head of the People First Party (PFP), that he will also take part in the presidential race. Soong is a former KMT heavyweight. Despite his steady fall from grace over the last few years, he still manages to attract support from a segment of the middle-of-the-road voters (including a not insignificant number of Pan-Blue constituents). While many perceive Soong’s announcement as little more than a “spoiling action” aimed at extracting political concessions from the Ma-led KMT – which has tried very hard to deny Soong and his followers any tangible resources or support during the past 3 years – Soong still represents an unwelcome challenge to Ma’s re-election bid. In a prospective three-way race, Ma’s lead would narrow to around 5%, even according to the most favorable of public opinion surveys.

That difference is actually in line with the DPP’s own internal estimate of the gap (3-5%) that Tsai will have to overcome if she is to have a chance of winning the presidency. The core challenges facing Tsai are twofold. First, she must effectively integrate the highly factionalized DPP party power structure, mainly through aggressive alliance-building with the heads of the various fiefdoms within the DPP. Secondly, she must offer a combined policy agenda that satisfies not only the Pan-Green’s traditional core constituencies (i.e. pro-independence, pro-social welfare, pro-plebiscite/referendum, anti-nuclear power, etc.) but that can also somehow appeal to more mainstream, middle-of-the road voters. To do so, she must also distinguish herself from the incumbent Ma Administration. The latter task has proven more difficult than it sounds, since the fundamental policy position differences between the two political parties were fine to begin with. In addition, President Ma also appears willing to readily adopt policy proposals advocated by the opposition, especially as it relates to the domestic agenda.

According to a survey published by Global Views in mid-September (a survey that also turned out to be its last on the presidential election, see below), the difference in support between Ma and Tsai was not more than 1%, a fact that held both in a two-way race (KMT vs. DPP) and in a three-way race (KMT vs. DPP vs. James Soong). In fact, the study suggested that the DPP candidate could actually carry the election in a three-way contest by a very slight (0.2%) margin. Of course, the decisive factor remains the voters who self-identify as not yet having made up their minds – this group numbers between 22.5% of voters in a two-way race, and 18.2% of voters in a three-way race. However, it may be useful to remember that the ruling KMT has been losing significant ground among such undecided (and typically middle-of-the-road) constituencies over the last several local and municipality elections.

The issues surrounding the Global Views Public Opinion Survey Center, Taiwan’s most prestigious and trusted polling service, makes for an interesting footnote to the survey numbers. The Center has announced that it will no longer conduct political polls due to a change in corporate policy, instead focusing on other social and business fields. In addition, the director of the center resigned – hinting in interviews that Global Views’ prediction of a possible Tsai Ing-wen victory in January 2012 (by a margin of 4-6%) might have led to outside pressure on the company to stop conducting surveys of voter support for political candidates. He also noted that, based on his team’s extensive tracking and study of approval rating polls since the 2008 elections, overall support for the ruling KMT has fallen to below 50%. This is a long-term trend that could spell trouble for the KMT in the years to come, even if it does not in January.

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