When attending the Global Chinese Business Leaders Forum today, Premier Sean Chen said that the international economic system has been in unprecedented circumstances over the past year, and every country has its own solution. "We hope to build a solid base for Taiwan using mid- and long-term solutions, and that's why the Executive Yuan launched the Economic Power-Up Plan," he said.
Chen spoke about policies to reinvigorate Taiwan's economy. He also remarked that the forum participants must be quite interested in the U.S. presidential election results because they would influence the international economy. "We are in an era of globalization, and no country can avoid that," Chen said.
The premier further pointed out that unlike the Asia financial crisis in 1997 and the financial tsunami in 2008, which were triggered by a single event or industry, respectively, destabilizing events occurred all over the globe over the last year. Chen said the rapid changes were like a roller coaster ride, and the decreases of various indices made the public nervous.
In response to speculation that the Taiwanese stock market's trading volume dropped due to the passage of the stock income tax scheduled to be implemented in 2013, Premier Chen clarified that although the cumulative volume for the year to date is 25.69 percent lower compared with the same period last year, other Asian markets' trading volumes have tailed off as well—with decreases of 26.69, 30, and 28 percent in Hong Kong, Shanghai and Seoul respectively—and the U.S. also declined more than in Taiwan. "It is the wait-and-see attitude held by many investors that has lead to volume and stock price declines," Chen indicated.
Chen said national governments simultaneously crafted their own responses to these adverse circumstances. He announced the Executive Yuan's Economic Power-up Plan September 11. South Korea's second financial resource strategy was issued the same day, and mainland China's eight measures and the United States' QE3 project were both promulgated September 13.
The premier took the occasion to introduce the Backbone Enterprises Promotion Project, which is part of the Economic Power-Up Plan. He said this project is inspired by Germany's Mittelstand, which are industry-leading small and medium-sized enterprises (SMEs). The Ministry of Economic Affairs will provide selected core SMEs with key technologies guidance so they can become more globally competitive and set examples for other businesses to follow.
Premier Chen explained that while most other countries' responses have focused on tax or monetary policy, Taiwan's Economic Power-up Plan does not because Taiwan's tax burden and interest rates are relatively low. He has also indicated several times at the Legislature that the government will not consider the method of tax expenditure unless the economic situation requires it or it is likely to create more jobs.
The premier also said that since he announced he would slash the Executive Yuan's administrative affairs promotion budget by one-fourth, some local governments have followed suit. Nevertheless, he is concerned about the "paradox of thrift," so named by economist John Maynard Keynes, in which the money saved is never used and thus kept out of the economy. This would cause stagnation which could offset the achievements of the Economic Power-Up Plan. Expenditure cuts should be based on reason and decided on after professional discussion, he said.
"Although the Economic Power-up Plan has several initiatives and takes time to explain, several things are being done. The effects of its mid- and long-term projects may not be apparent in the short term, but the government is laying a strong foundation for national development. Some day, the public will say that 'if it hadn't been for these projects, our present well-being would not have been possible.'"