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

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FIVE DOMESTIC CHALLENGES

• Legislative Yuan Reform

• Low Tax Base

• Economic Strategy

• Defense Budget

• Environment and Energy Policy

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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

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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

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BLOCKING THE PODIUM AS A FILIBUSTER

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BLOCKING THE PODIUM AS A FILIBUSTER

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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%

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2. A LOW TAX BASE


• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%



Taiwan: 12.4%

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2. A LOW TAX BASE


• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%



Taiwan: 12.4%

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2. A LOW TAX BASE


• Canada: 32.5%

• Australia: 25%

• Japan: 28.3%



Taiwan: 12.4%

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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

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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

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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.

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TAIWAN’S ECONOMY AFTER 2010

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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

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4. DEFENSE BUDGET AND STRATEGY

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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

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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.

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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

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WHAT TO EXPECT UNDER A TSAI ING-WEN

PRESIDENCY

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A LOT DEPENDS ON WHETHER…

• The DPP wins a majority in the LY

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

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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

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THANKS!

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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

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

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