Taiwan

Politics:

• Analysis

  Taiwan politics: Next Media deal falls to free press concerns

  Following prolonged political controversy, the proposed sale of Hong Kong-based Next Media's businesses in Taiwan collapsed on March 26th. The consortium that had wanted to purchase the company's print and television assets, which include the popular Apple Daily tabloid, cited regulatory hurdles as a factor in its decision to walk away from the deal. The scuttling of the buy-out ensures that there will remain an independent voice in Taiwan's free, but partisan, media, and points to the robust nature of the island's political culture in the face of growing mainland Chinese influence.

  When talk of a NT$17.5bn (US$586m) deal was first mooted in October last year, concerns were quickly raised about its implications for media freedom in Taiwan. The leading stakeholder within the consortium, Want Want China Times Group, is the media arm of Want Want Holdings, a food and beverage giant headed by a prominent local tycoon, Tsai Eng-meng. The group already owns three local newspapers under its China Times stable. It also operates two television stations, and is awaiting regulatory approval for its purchase of China Network Systems, a cable television network. Critics warned that placing Next Media's assets under the company's control would give rise to a virtual media monopoly. The Association of Taiwan Journalists estimated that, following the buy-out, the combined market share of the print titles controlled by the company would be around 50%.

  All about China

  Concerns about press freedom were magnified by fears that the acquisition might affect future reporting on mainland China in Taiwan. Mr Tsai has built his business empire through selling snack foods and drinks in mainland China and has political views that are seen by some as overly sympathetic to mainland China's government. In a 2012 interview with the Washington Post, a US-based newspaper, he was quoted as saying that the 1989 Tiananmen Square crackdown in the mainland Chinese capital, Beijing, did not constitute a "massacre" (Mr Tsai subsequently denied making the comments). In contrast to the often sympathetic editorial slant of China Times publications towards the mainland government, Apple Daily is known as a consistent critic. Next Media's Hong Kong-based owner, Jimmy Lai, has long been an advocate for democracy in the country. The transfer of the company's outlets therefore raised the possibility that media coverage of mainland China might become more restricted in Taiwan.

  The attention generated by the proposed sale appears to have been one of the main factors persuading the Want Want-led consortium to withdraw its offer. Grassroots criticism of the deal from student and civic groups has been surprisingly fierce, supported by a well-organised social media campaign. This heaped pressure on the two regulatory bodies responsible for approving the sale-the Free Trade Commission (FTC) and the National Communications Commission (NCC)-to adopt a tough stance. In January the FTC asked the consortium to re-submit its application, while in February the NCC rushed out a draft bill outlining proposals to set ownership caps on television media. Explaining its decision to back away from the purchase, a spokesman for Want Want said that it did not want to face further "humiliation" at the hands of regulators.

  Winners and losers

  The collapse of the deal points to the robust state of Taiwan's democracy. It is clear that the consortium was not expecting to encounter such concerted resistance. The Kuomintang (KMT) government, which can normally be relied upon to support big business interests, may have also been taken aback by the protest movement-Taiwan's younger generation is widely assumed to be politically apathetic. The upshot of the controversy is that the plurality of Taiwan's media environment has been upheld, and may even be strengthened if the NCC-drafted bill is passed into law. Mr Lai has said that he will continue to publish the Apple Daily in Taiwan, ensuring that there will remain an independent voice in what is a highly partisan media landscape.

  Mainland China is likely to view the collapse of the deal with more than passing concern. It would have no doubt seen the transfer of Next Media's assets to a group led by Mr Tsai as an opportunity to improve its image in the eyes of Taiwan's population. The mainland Chinese government recognises that enhancing cross-Strait economic ties alone will not bring about its long-term goal of "peaceful reunification". It has made some advances, including expanding its engagement with traditionally pro-independence political forces on the island. However, the Next Media controversy shows that suspicion of encroaching mainland Chinese political influence still runs deep in Taiwan. It is difficult to envisage how that will change unless the mainland becomes an unlikely convert to democratic politics.

  March 27, 2013

• Background

  Taiwan: Key figures

  Ma Ying-jeou

  The president, Mr Ma of the ruling Kuomintang (KMT), won a convincing mandate when he was re-elected in January 2012. However, he swiftly squandered much of that in the remainder of the year after his government gave the impression of being unable to communicate effectively both internally and with members of the public. Mr Ma's support base within the KMT remains relatively weak, contributing to a lack of internal party discipline. Both of these problems enhance the image of a leader who is reluctant to impose his will. Nevertheless, Mr Ma seems to have laid out a clear policy agenda, focused primarily on improving the island's global competitiveness. His good relations with China and with Taiwan's traditional ally, the US, will support the country abroad. Meanwhile, at home Mr Ma's strong anti-corruption credentials should help to shield the KMT against the charges of corruption that may accompany the party's long hold on power in recent years.

  Wu Den-yih

  Mr Wu has served as vice-president since his election on Mr Ma's ticket in January 2012. Prior to this, he was premier from 2009-12, a relatively long term of office compared with past premiers. Mr Wu previously also served as a member of parliament, secretary-general of the KMT and mayor of Taiwan's second-largest city, Kaohsiung. Given his résumé, Mr Wu is likely to be the heir-apparent to Mr Ma once the president's current term of office draws to a close, although he may face competition from younger, up-and-coming KMT politicians.

  Su Tseng-chang

  Mr Su was elected as head of the main opposition Democratic Progressive Party (DPP) following the resignation of its former leader, Tsai Ing-wen. He is a former premier, having held the post in 2006-07, but was beaten out in two previous races for the DPP presidential-candidacy nomination as well as being defeated by the KMT incumbent in a race for the mayoralty of the capital, Taipei, in 2010. Mr Su has continued Ms Tsai's efforts to soften the DPP's position with regard to the island's relationship with mainland China, although it remains unclear how far he is willing to take the party away from its historical support for independence. Mr Su will be considered a leading candidate for the DPP presidential nomination in 2016, especially if Ms Tsai decides to remain on the sidelines.

  September 24, 2012

• Structure

  Taiwan: Political structure

  Official name

  Republic of China

  Form of state

  Representative democracy

  The executive

  The president nominates a premier to preside over the Executive Yuan (the cabinet), which has three arms: ministries and commissions, subordinate administrative organs of state, and the Executive Yuan Council (the supreme policymaking body)

  Head of state

  The president, who is directly elected for a four-year term

  National legislature

  The Legislative Yuan (parliament) has 113 seats, and each parliament serves a four-year term. Formerly, parliament merely rubber-stamped laws, but in the past decade it has become more powerful and has evolved into a genuine forum for debate and policy development. It has also assumed responsibility for initiating constitutional amendments, following the abolition of the National Assembly in 2005

  Local government

  A series of local councils operates, but their function is mainly administrative; the provincial government has been downgraded and the provincial assembly abolished

  National elections

  January 2012 (parliament and president). Next elections: January 2016 (parliament and president)

  National government

  The Kuomintang (KMT), which governed Taiwan for 55 years until 2000, secured another majority-albeit slightly reduced-in the legislative election in January 2012. At the same time, the KMT's candidate, Ma Ying-jeou, was re-elected president

  Main political organisations

  The KMT and the Democratic Progressive Party (DPP) are the main political parties. There are also a number of smaller parties

  President: Ma Ying-jeou

  Vice-president: Wu Den-yih

  Presidents of branches of government

  Control Yuan: Wang Chien-shien

  Examination Yuan: Kuan Chung

  Executive Yuan: Jiang Yi-huah

  Judicial Yuan: Rai Hau-min

  Legislative Yuan: Wang Jin-pyng

  Main members of Executive Yuan

  Premier: Jiang Yi-huah

  Vice-premier: Mao Chi-kuo

  Economic affairs: Chang Chia-juch

  Finance: Chang Sheng-ford

  Foreign affairs: Lin Yung-lo

  Justice: Tseng Yung-fu

  National defence: Kao Hua-chu

  Transport & communications: Yeh Kuang-shi

  Chair of Mainland Affairs Council

  Wang Yu-chi

  Central bank governor

  Perng Fai-nan

  March 07, 2013

• Outlook

  Taiwan: Key developments

  Outlook for 2013-17

  • The president, Ma Ying-jeou, secured re-election in January 2012, and his party, the Kuomintang (KMT), won a fresh majority in the Legislative Yuan (parliament). Both will remain in power until the next elections, due in 2016.
  • Faster economic growth from 2013 should help to steady the administration, which struggled in 2012. But advancing its controversial policy agenda will require the government to improve its handling of public relations.
  • The Economist Intelligence Unit has adjusted its exchange-rate forecast in response to monetary easing in Japan. We now expect the New Taiwan dollar to appreciate by 0.8% a year on average against its US counterpart in 2013-17.
  • Firmer demand in mainland China and major OECD markets will support the expansion of Taiwan's export-oriented economy in the forecast period. Real GDP will grow at an average annual rate of 3.8% in the next five years.
  • Taiwan's current-account surplus is expected to remain large in 2013-17, at the equivalent of 9% of GDP on average. The trade surplus will be broadly stable, and increasing tourist arrivals from China will raise services exports.

  Review

  • The Executive Yuan (the cabinet) was reshuffled in February 2013, with a former vice-premier, Jiang Yi-huah, replacing Sean Chen as premier. The move was designed to stem criticism of the government's domestic policy agenda.
  • On February 24th the honorary chairman of the KMT, Lien Chan, met the new general-secretary of the Chinese Communist Party, Xi Jinping, in mainland China's capital, Beijing.
  • The New Taiwan dollar weakened against its US counterpart in February as speculation about a global "currency war" intensified. The recent fall in the value of the yen has raised concerns about trade competitiveness in Taiwan.
  • The new cabinet has signalled its continued backing for the establishment of free-trade zones in Taiwan. It has moved to ease concerns that these were designed mainly to attract labour-intensive manufacturing.
  • Trade figures were distorted in January by the timing of the Chinese New Year. In value terms, merchandise exports surged by 21.8% year on year in the month, while imports climbed by 22.3%.
  • Taiwan's industrial production index rose by 19.2% year on year in January. However, on a seasonally adjusted basis, the index grew by 1.5%, down from 4.5% in December, suggesting that the sector may be losing steam.

  March 07, 2013

Economy:

• Background

  Taiwan: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	23.3	Population growth	0.3
  GDP (US$ bn; market exchange rate)	474.0b	Real GDP growth	2.9
  GDP (US$ bn; purchasing power parity)	905.1	Real domestic demand growth	0.7
  GDP per head (US$; market exchange rate)	20,333	Inflation	1.4
  GDP per head (US$; purchasing power parity)	38,828	Current-account balance (% of GDP)	9.4
  Exchange rate (av) NT$:US$	29.6b	FDI inflows (% of GDP)	0.6
  a The Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: At the end of the Chinese civil war in 1949 the nationalist Kuomintang (KMT) fled to Taiwan, which it ruled until 1987 under martial law. Generalissimo Chiang Kai-shek of the KMT handed power to his son, Chiang Ching-kuo, who initiated democratic reforms in the last years of his life. His protégé, Lee Teng-hui, became the first native-born president of Taiwan in 1990 and was reconfirmed as president in a direct election in 1996. In 2000 Mr Lee was succeeded by Chen Shui-bian of the Democratic Progressive Party, and Mr Chen also narrowly won the 2004 election. The 2008 presidential poll was won by Ma Ying-jeou of the KMT, who was re-elected for a second term in early 2012.

  Political structure: The political structure consists of a president and vice-president elected by popular vote, along with five branches of government-the executive, legislative, judicial, control and examination yuans. The president manages Taiwan's international relations and is head of the armed forces. The Legislative Yuan (parliament) has the power to pass or reject a range of bills, including the central government budget and declarations of war. Laws, statutes and special acts must be passed by parliament and then promulgated by the president before they come into force. The number of seats in the legislature was reduced from 225 to 113 from the time of the January 2008 parliamentary election.

  Policy issues: Taiwan's export-oriented economy has shown signs of recovery after struggling since late 2011 in an environment of weak external demand. Inflation has emerged as a concern, after the government cut its effective subsidy on petrol and electricity purchases in 2012, and policy interest rates are likely to drift higher from late 2013. The government is pursuing a number of bilateral free-trade agreements, but opposition from domestic lobbies will ensure that those signed are relatively weak. Social justice issues are high on the political agenda, but finding extra funding for welfare will be tough.

  Taxation: The corporate tax rate was cut from 20% to 17% in May 2010. A 20% withholding tax is levied on dividends, interest, royalties and fees. Progressive personal income tax rates are in the 6-40% range. The value-added tax (VAT) rate is 5% at present but is likely to rise. A capital-gains tax was introduced in January 2013.

  Foreign trade: The trade surplus (on a balance-of-payments basis) stood at US$30.7bn in 2012, according to the Central Bank of the Republic of China (the central bank). Merchandise exports totalled US$300bn, while imports reached US$269bn.

  Major exports 2012	% of total	Major imports 2012	% of total
  Machinery & electrical equipment	46.1	Machinery & electrical equipment	30.0
  Base metals	9.3	Minerals	27.4
  Plastic & rubber articles	8.0	Chemicals	11.1
  Precision instruments	7.8	Basic metals	8.6
  Leading markets 2012	% of total	Leading suppliers 2012	% of total
  China	28.4	Japan	17.6
  Hong Kong	13.3	China	15.2
  US	11.6	US	8.7
  Japan	6.6	South Korea	5.6

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  March 07, 2013

• Structure

  Taiwan: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 07, 2013

• Outlook

  Taiwan: Country outlook

  Taiwan: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Ma Ying-jeou was comfortably re-elected in the January 2012 presidential election, and his party, the Kuomintang (KMT), retained its majority in the Legislative Yuan (parliament) in the simultaneous legislative poll, albeit with a reduced tally of 64 seats out of 113. Neither election result was seriously disputed and fewer seats were won by the sort of thuggish individuals who have brought past parliaments into disrepute. Both trends highlight the growing maturity of political discourse in Taiwan.

  ELECTION WATCH: Although the main opposition Democratic Progressive Party (DPP) and its allies have never been able to wield a majority in the Legislative Yuan, the DPP ran the KMT close in many of the parliamentary seats that it failed to win at the last election in January 2012, suggesting that Taiwan's electoral system is not unduly biased against it. At the next presidential and parliamentary polls, due in 2016, the DPP will need to balance its candidates more effectively between party-list seats (which are elected on a proportional-representation basis) and seats representing geographical constituencies. The DPP's current strategy of softening its stance towards China while criticising the government for its economic and social-welfare policies is likely to broaden its electoral appeal. The KMT's victories in the 2012 elections were widely attributed to voters' greater trust in its ability to maintain stable cross-Strait relations.

  INTERNATIONAL RELATIONS: The need for new trade and investment deals has been highlighted by the recent success of South Korea (a major rival to Taiwan in most areas of exports) in securing substantial free-trade agreements (FTAs) with major trading partners. Taiwan's government is exploring FTAs with a number of countries, but protectionist sentiment is still fairly strong on the island and regulatory barriers remain in place in sectors such as financial services, pharmaceuticals and retail. The passage of legislation in 2012 lifting Taiwan's ban on imports of beef from the US will allow trade talks with that country to resume, but negotiations will be slow to yield notable benefits. Mr Ma is also hoping to secure Taiwan's inclusion in an embryonic US-backed trade bloc, the Trans-Pacific Partnership.

  POLICY TRENDS: The president will hope to sign new FTAs-deals with New Zealand and Singapore look imminent-and expand the bilateral Economic Co-operation Framework Agreement with China in 2013-17. Mr Ma's other priorities will include boosting investment in high-technology manufacturing, expanding the services sector and lowering barriers to foreign investment. Policy incentives will be offered to lure back Taiwan companies that have relocated capacity abroad, notably in the form of proposed free-trade zones. The issue of social inequality will remain high on the political agenda, owing to pressure from the DPP, but the weak state of the public finances will limit the government's ability to increase welfare spending. Moves to strengthen the finances of the national pension fund, which is forecast by the government to be bankrupt by 2027, will prove highly controversial. Boosting the use of renewable energy and raising levels of energy efficiency will be a priority, as Taiwan will be deprived of a significant source of energy supply once decommissioning of its three existing nuclear plants begins in 2018. Efforts to establish Taiwan as an offshore hub for renminbi-denominated trading and financial transactions are set to gather momentum following the signing of a cross-Strait currency-settlement agreement in 2012, although it will lag far behind Hong Kong in this field.

  ECONOMIC GROWTH: Taiwan's export-oriented economy will record an improved performance in 2013, after struggling in 2012, owing to firmer demand in mainland China and advanced OECD markets. Following growth of only 0.1% in exports of goods and services in 2012, Taiwan's exports will expand by 4.8% in 2013. Gross fixed capital investment should also return to growth in 2013, after shrinking in 2011­12, as the improving outlook for information technology (IT) exports boosts investor sentiment. Private consumption growth will accelerate to 2.1% this year, from 1.5% in 2012, but will remain constrained by the lingering impact of the recent economic slowdown on employment and wages. Nevertheless, real GDP expansion is forecast at a still below-par 3.2% in 2013, following growth of just 1.3% in 2012.

  INFLATION: In 2012 average consumer price inflation came in just below the government's target ceiling of 2%. Inflation remains a concern, owing partly to the authorities' decision in early 2012 to reduce gradually subsidies for petrol and electricity purchases. The decision to postpone a second planned increase in electricity prices from December 2012 until October 2013 will help to keep inflation down this year, but the impact of the move will merely be delayed. The Economist Intelligence Unit expects annual inflation in 2013-17 to remain weak relative to that in neighbouring states, at an average of 1.9%, although this is high compared with past rates of inflation in Taiwan. One important factor behind Taiwan's slow rate of price increases will be the government's gradual liberalisation of the economy, which will continue to increase competition and will thus help to hold down prices. In addition, the excess capacity caused by the slow pace of domestic economic expansion in 2012­13 will take time to work out. A return to stronger growth from 2014 will provide good employment prospects, allowing workers to negotiate higher wages that will push up firms' costs. Partly as a result, annual producer price inflation in 2014-17, at an average of 3.3%, is expected to be significantly higher than the rate of consumer price rises.

  EXCHANGE RATES: The Central Bank of the Republic of China (CBC, Taiwan's central bank) tends to favour allowing the New Taiwan dollar to strengthen in order to combat inflation. However, it is also under pressure from local firms to prevent the currency from appreciating too rapidly, owing to concerns about export competitiveness. The New Taiwan dollar weakened by 0.5% against the US dollar on average in 2012 amid weak global trade flows. The CBC may be forced to intervene again to weaken the currency in 2013, to offset the boost given to Japanese exports by the aggressive monetary loosening to which Japan's authorities have recently committed. We now expect the New Taiwan dollar to appreciate by only 0.2% against its US counterpart in 2013, compared with 1.2% in our previous forecast.

  EXTERNAL SECTOR: Taiwan's current-account surplus is expected to remain large in the forecast period, at the equivalent of 9% of GDP on average. Merchandise exports and imports alike are estimated to have fallen in value terms in 2012, reflecting weak external demand conditions, but both will resume respectable growth rates in 2013-17. The trade surplus should remain at around US$30bn a year in the forecast period, supported by growth in exports of high-value IT products. The surplus on the services account will rise, with tourism earnings receiving a boost from strong growth in visitor arrivals from mainland China. The income surplus will remain sizeable in 2013-17 as repatriated profits and dividends from Taiwan's large stock of overseas investments far exceed income debits.

  March 11, 2013

• Forecast

  Taiwan: Country forecast summary

  Country forecast overview: Highlights

  • Ma Ying­jeou was re-elected president in January 2012, and the Kuomintang (KMT) retained control of the Legislative Yuan (parliament) in the simultaneous parliamentary election, albeit with a reduced majority. Both Mr Ma and the KMT will remain in power until the next polls in 2016.
  • Mr Ma's administration struggled with low public approval ratings in 2012, but a reshuffle of the Executive Yuan (the cabinet) in February 2013 should provide fresh impetus to the government. An expected acceleration in economic growth from 2013 will also help to place the administration on a steadier footing. Its success in progressing its policy agenda will depend partly on enforcing greater discipline among KMT legislators. Public pension reform is set to be a key battleground in 2013-17.
  • Relations across the Taiwan Strait will remain relatively good in the forecast period. The new mainland leadership unveiled in November 2012 has signalled that it will not alter existing policy towards Taiwan. The bilateral relationship will continue to focus on economic ties while avoiding thornier political issues.
  • Taiwan will look to diversify its trading partners by negotiating free-trade agreements. However, with few exceptions, such accords are likely to be weak in terms of their impact on economic opening. The liberalisation of trade and investment is opposed by powerful domestic lobbies that want to protect their sectors from external competition.
  • The need to put the public finances on a sounder footing will encourage the government to take a cautious approach to increasing recurrent expenditure. The fiscal deficit is forecast to narrow to the equivalent of 0.7% of GDP by 2017.
  • Inflation has emerged as a concern for the Central Bank of the Republic of  China (Taiwan's central bank), as the effective public subsidies on petrol and  electricity prices are rolled back. Monetary policy is likely to reassume a tightening bias in 2013 as the economic recovery gathers speed.
  • Taiwan's export-oriented economy will remain vulnerable to fluctuations in external demand; the global slowdown dragged down its real GDP growth to 1.3% in 2012. Growth will rebound to 3.8% a year on average in 2013-17, owing to firmer demand in mainland China and developed economies.
  • The current account will post large surpluses in 2013-17, equivalent to 9% of GDP on average. The trade surplus will be supplemented by a rising services surplus, the latter driven by growing tourism earnings owing to a surge in arrivals from the Chinese mainland.

  

  March 07, 2013

View detailed map

Country Briefing

Land area

36,188 sq km

Population

23.2m (end-2011)

Main towns

Population in '000 (end-2011)

Kaohsiung: 2,774

Taichung: 2,664

Taipei (capital): 2,651

Tainan: 1,877

Climate

Subtropical

Weather in Taipei (altitude 9 metres)

Hottest month, July, 24-33°C (average daily minimum and maximum); coldest month, February, 12-18°C; driest month, November, 66 mm average rainfall; wettest month, August, 305 mm average rainfall

Languages

Mandarin, Taiwanese and Hakka

Measures

Metric system; some Chinese, Japanese and British measures are also in use

Currency

New Taiwan dollar (NT$); NT$1 = 100 cents. Average exchange rate in 2011: NT$29.5:US$1

Time

8 hours ahead of GMT

Public holidays

Founding Day of the Republic of China, January 1st; Chinese New Year, February 9th-15th; Peace Memorial Day, February 28th; Children's Day, April 4th; Ching Ming (Tomb-Sweeping Day), April 5th; Labour Day (a holiday for workers only), May 1st; Dragon Boat Festival, June 12th; Mid-Autumn Festival, September 19-20th; National Day, October 10th; Double Ninth Day, October 13th

January 08, 2013