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Paris, Thursday, August 3, 2000

The Honeymoon Has Been Short for Taiwan's New President

By Philip Bowring International Herald Tribune.
TAIPEI - It has been a brief honeymoon for Taiwan's new president, Chen Shui-bian, now in his third month in office. He has handled Beijing adroitly but his administration remains bogged down at home - unable to push through promised domestic changes, hemmed in internationally and facing negative sentiment about the economy.

The president's standing in the polls remains high, and the public will give him and his Democratic Progressive Party time to find their feet. But his hopes of a fast start have been beset by several factors:


The difficulties of conducting a Taiwan version of France's ''cohabitation.'' Mr. Chen's lack of control of the legislature leaves the Kuomintang free to determine what passes and what does not.


Several ministers have little experience of government. And the cabinet mix of Kuomintang stalwarts, DPP zealots and nonparty bureaucrats and academics is not yet a coherent team.


An already large budget deficit makes it difficult to redeem specific promises on health, housing and education and has led to public tax policy disagreements between the president and ministers.

The president's own contribution to the difficulties has been his gift for the spoken word, which has made him a very effective politician but also led to imprecise statements that then need to be revised. No issue is more open to misunderstandings than cross-straits policy, where willingness to discuss all issues with the mainland can be interpreted as acceptance of the one-China principle, by which Beijing means one state.

On balance, Mr. Chen's mainland policy has been a success so far. By backing away from overt independence and opening the possibility of direct transport links, he has reduced the temperature without abandoning either the principle of self-determination or the reality of it as enunciated in former President Lee Teng-hui's ''two states'' theory, which so distresses Beijing.

Mr. Chen has preserved a broad consensus and met with approval from a population which, like him, wants to maintain the status quo of de facto independence.

The mainland has switched tactics from overt hostility to renewed wooing of Taiwan businessmen and academics. Local pressures on both sides have raised the possibility of exchanges of mayoral visits. It remains to be seen whether the meetings of the Chinese leadership this month will bring any new policies from Beijing.

For the moment, Mr. Chen's nonconfrontational approach, an economic pickup on the mainland, an improvement in Zhu Rongji's influence and the likelihood of both entities joining the World Trade Organization have taken the heat outof the Taiwan issue.

However, there is no letup in Beijing's efforts to keep Taiwan isolated diplomatically and deprived of advanced defense weaponry. Progress toward unification remains a key goal of President Jiang Zemin and other mainland leaders.

WTO membership will increase the visibility of the unity issue for both sides. The mainland will push for direct trade links and offer carrots to Taiwan business interests. Taiwan will seek to promote its own economy and its separate international status.

Mr. Chen would prefer to concentrate on domestic issues - improving the pension and welfare system, cleaning upthe environment, attacking political corruption. Legislation is dependent on whether the Kuomintang deems it politically beneficial to appear cooperative.

Elections are not due until the end of next year. The Kuomintang is trying hard to renew and democratize itself. But its losing presidential candidate, Lien Chan, remains a dull, if reliable, figure compared with the ambitious Kuomintang renegade James Soong and his new People First Party.

Mr. Chen has distanced himself from his own party by resigning from its leadership and including Kuomintang members in his cabinet. This attempt to build a government of national consensus is an acknowledgment that Mr. Chen won only 39 percent of the vote and that the DPP remains for now a minority party.

This has drawbacks as well as merits. It has blurred policies and could result in the DPP becoming even more factionalized. Legislators now sense that they have more power than in the Kuomintang-dominated past.

The biggest stumbling block to change is the fiscal situation. A deficit of 5 percent of GDPis partly attributable to last year's earthquake. But the past decade has seen both an increase in welfare spending and an erosion of the revenue base through tax concessions for business and tariff reductionsto prepare for the WTO.

Mr. Chen has made a ''no new taxes'' promise, but tax uncertainties linger. And cost increases as a result of a legislated cut in the workweekare pushing more businessesto move to the mainland.

Just to trim the deficit to sustainable levels, big cuts in infrastructure and defense spending are inevitable and welfare improvements are likely to be trimmed or frozen. Economic reality has also forced Mr. Chen to rethink his opposition to a new nuclear power station.

It is probably for the best that the new government face these realities early in its career. But it is not comfortable for Mr. Chen to have to face constant international pressure to appease Beijing while being able to deliver little on the home front.