domestic challenges and opportunities facing taiwan … · 12/9/2015  · domestic challenges and...

DOMESTIC CHALLENGES AND OPPORTUNITIES FACING

TAIWAN’S NEXT PRESIDENT

Kharis TemplemanTaiwan Democracy Project, Stanford University

“Voting for Change?: The Impact of Taiwan’s Upcoming Elections”Roundtable at George Washington University

December 9, 2015

1

FIVE DOMESTIC CHALLENGES

• Legislative Yuan Reform

• Low Tax Base

• Economic Strategy

• Defense Budget

• Environment and Energy Policy

2

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

3

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

4

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

5

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

6

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

7

8

0

10

20

30

40

50

60

70

80

90

100

7+1 7+2 7+3 7+4 7+5 7+6 7+7 7+8 8+1 8+2 8+3 8+4 8+5 8+6 8+7

Percent2Ap

proved

Legislature2 and2SessionSource:2Lang2Kao,220152Conference2 on2Constitutional2 Reform,2 Stanford2University:2

http://cddrl.fsi.stanford.edu/research/the_taiwan_democracy_project2 22

Passage2Rates2of2High+Priority2Govt+Sponsored2 Legislation,27th2(2008+2012)2 and28th2(2012+2015)2 LY

1. LEGISLATIVE YUAN REFORM

• President Ma Ying-jeou held a comfortable KMT majority in the LY for both terms (72%, then 57% of seats).

• He was also party chair.

• Yet he failed to get much of his agenda passed by the LY, especially in his second term.

The LY is where presidential initiatives go to die

9

KEY FEATURES THAT WEAKEN MAJORITY CONTROL IN LY

• Committee chairs (“conveners”) rotate

• Cross-Party Negotiation Committee (朝野協商): each party caucus has an effective veto!

• Speaker Wang Jin-pyng enforces this system

10

KEY FEATURES THAT WEAKEN MAJORITY CONTROL IN LY

• Committee chairs (“conveners”) rotate

• Cross-Party Negotiation Committee (朝野協商): each party caucus has an effective veto!

• Speaker Wang Jin-pyng enforces this system

11

KEY FEATURES THAT WEAKEN MAJORITY CONTROL IN LY

• Committee chairs (“conveners”) rotate

• Cross-Party Negotiation Committee (朝野協商): each party caucus has an effective veto!

• Speaker Wang Jin-pyng enforces this system

12

BLOCKING THE PODIUM AS A FILIBUSTER

13

BLOCKING THE PODIUM AS A FILIBUSTER

14

2. A LOW TAX BASE

• Tax take as share of GDP in 2014:

• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%

• South Korea: 26.8%

• Philippines: 14.4%

Taiwan: 12.4%

15

2. A LOW TAX BASE

• Tax take as share of GDP in 2014:

• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%

• South Korea: 26.8%

• Philippines: 14.4%

Taiwan: 12.4%

16

2. A LOW TAX BASE

• Tax take as share of GDP in 2014:

• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%

• South Korea: 26.8%

• Philippines: 14.4%

Taiwan: 12.4%

17

2. A LOW TAX BASE

• Tax take as share of GDP in 2014:

• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%

• South Korea: 26.8%

• Philippines: 14.4%

Taiwan: 12.4%

18

TAX BURDEN IS UNEVEN

• Salaried income taxed at max of 40%

• No capital gains tax

• Minimal property transactions tax

• Rising inequality; Gini of 34.5 is probably underestimated

19

Commonwealth Magazine report

LONG-TERM FISCAL CHALLENGES

• Aging population, low birthrates

• Rising pressure on social spending programs

• Rising wealth inequality, high college grad unemployment

• Uncertainty about economic model

20

LONG-TERM FISCAL CHALLENGES

21

LONG-TERM FISCAL CHALLENGES

• Aging population, low birthrates

• Rising pressure on social spending programs

• Rising wealth inequality, high college grad unemployment

• Uncertainty about economic model

22

LONG-TERM FISCAL CHALLENGES

• Aging population, low birthrates

• Rising pressure on social spending programs

• Rising wealth inequality, high college grad unemployment

• Uncertainty about economic model

23

LONG-TERM FISCAL CHALLENGES

• Aging population, low birthrates

• Rising pressure on social spending programs

• Rising wealth inequality, high college grad unemployment

• Uncertainty about economic model

24

3. ECONOMIC STRATEGY

• Taiwan is a small, trade-dependent economy.

• Ma admin strategy: hitch Taiwan’s economy to PRC growth engine.

• Political consequences obviously controversial.

• Economic results below expectations: concentrated benefits.

25

3. ECONOMIC STRATEGY

• Taiwan is a small, trade-dependent economy.

• Ma admin strategy: hitch Taiwan’s economy to PRC growth engine.

• Political consequences obviously controversial.

• Economic results below expectations: concentrated benefits.

26

3. ECONOMIC STRATEGY

• Taiwan is a small, trade-dependent economy.

• Ma admin strategy: hitch Taiwan’s economy to PRC growth engine.

• Political consequences obviously controversial.

• Economic results below expectations: concentrated benefits.

27

3. ECONOMIC STRATEGY

• Taiwan is a small, trade-dependent economy.

• Ma admin strategy: hitch Taiwan’s economy to PRC growth engine.

• Political consequences obviously controversial.

• Economic results below expectations: concentrated benefits.

28

29!4

!2

0

2

4

6

8

10

12

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014Annual1Change1in1GDP1in1Taiwan,11983!2014

TAIWAN’S ECONOMY AFTER 2010

30

31

0.00#

2.00#

4.00#

6.00#

8.00#

10.00#

12.00#

14.00#

16.00#

18.00#

2000#####Jan.##

2000#####June##

2000#####Nov.##

2001#####Apr.##

2001#####Sept.##

2002#####Feb.##

2002#####July##

2002#####Dec.##

2003#####M

ay###

2003#####Oct.##

2004#####M

ar.##

2004#####Aug.##

2005#####Jan.##

2005#####June##

2005#####Nov.##

2006#####Apr.##

2006#####Sept.##

2007#####Feb.##

2007#####July

2007#####Dec.

2008#####M

ay

2008#####Oct.

2009#####M

ar.

2009#####Aug.

2010#####Jan.

2010#####June

2010#####Nov.

2011#####Apr.

2011#####Sept.

2012#####Feb.

2012#####July

2012#####Dec.

2013#####M

ay

2013#####Oct.

2014#####M

ar.

%#unemployed

Taiwanese#Unemployment#by#Age#Cohort,#2000N2014

20~24#years

25~29#years

Total

TAIWAN IN THE TPP: AN ALTERNATIVE STRATEGY?

• Could diversify trading partners away from PRC and US, further integrate Taiwan into regional economy

• Requires significant domestic reforms that Ma admin has been unable to get through the LY

32

TAIWAN IN THE TPP: AN ALTERNATIVE STRATEGY?

• Could diversify trading partners away from PRC and US, further integrate Taiwan into regional economy

• Requires significant domestic reforms that Ma admin has been unable to get through the LY

33

TAIWAN IN THE TPP: AN ALTERNATIVE STRATEGY?

• Could diversify trading partners away from PRC and US, further integrate Taiwan into regional economy

• Requires significant domestic reforms that Ma admin has been unable to get through the LY

34

4. DEFENSE BUDGET AND STRATEGY

35

36

050

100

150

200

Con

stan

t 201

1 U

S D

olla

rs (b

illio

ns)

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Year

PRCTaiwan

Source: SIPRI Military Expenditure Database (2014)

1988-2013Defense Expenditure in East Asia, Constant USD

37

050

100

150

200

Con

stan

t 201

1 U

S D

olla

rs (b

illio

ns)

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Year

PRCTaiwan

Source: SIPRI Military Expenditure Database (2014)

1988-2013Defense Expenditure in East Asia, Constant USD

38

010

2030

Con

stan

t 201

1 U

S D

olla

rs (b

illio

ns)

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Year

KoreaTaiwanSingapore

Source: SIPRI Military Expenditure Database (2014)

1988-2013Defense Expenditure in East Asia, Constant USD

DEFENSE STRATEGY: COST IS A CONCERN

• Not clear how new weapons systems will be paid for, especially new jets, submarines.

• Switch to all-volunteer force going badly; repeatedly delayed, personnel costs eating up larger share of budget

39

5. ENVIRONMENT AND ENERGY

• Heavily reliant on energy imports; green energy is tiny percentage.

• Nuclear is now unpopular; Fukushima effect; no permanent storage facilities.

• Next govt will have to raise costs of electricity, water.

40

MANAGING THE POST-DEVELOPMENTAL STATE

• Legacy of state-led heavy industrialization

• Environmental activism raises political costs

• Ma administration policy contradictory: canceled petrochemical plant, nuclear power facility

41

WHAT TO EXPECT UNDER A TSAI ING-WEN

PRESIDENCY

42

A LOT DEPENDS ON WHETHER…

• The DPP wins a majority in the LY

• Tsai Ing-wen can place allies in key LY positions

43

A LOT DEPENDS ON WHETHER…

• The DPP wins a majority in the LY

• Tsai Ing-wen can place allies in key LY positions

44

A LOT DEPENDS ON WHETHER…

• The DPP wins a majority in the LY

• Tsai Ing-wen can place allies in key LY positions

45

SOME POSITIVE NOTES

• This (probable) DPP government will be different from the last one

• Best prospects for significant domestic policy change come from DPP LY majority

• Public opinion trends: convergence among youngest generation on identity, cross-Strait policy

46

THANKS!

47

48

01

23

45

6Pe

rcen

t of G

DP

1980 1985 1990 1995 2000 2005 2010Year

Source: ROC Yearbook of Financial Statistics, various years

Actualized Annual Expenditure, Percent of GDP, 1981-2012Total Government Defense Expenditures