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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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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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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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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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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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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
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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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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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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
• 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
• 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
• 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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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
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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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LONG-TERM FISCAL CHALLENGES
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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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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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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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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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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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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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29!4
!2
0
2
4
6
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10
12
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
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2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014Annual1Change1in1GDP1in1Taiwan,11983!2014
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TAIWAN’S ECONOMY AFTER 2010
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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.
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2010#####Nov.
2011#####Apr.
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2012#####Feb.
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2013#####M
ay
2013#####Oct.
2014#####M
ar.
%#unemployed
Taiwanese#Unemployment#by#Age#Cohort,#2000N2014
20~24#years
25~29#years
Total
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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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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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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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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
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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
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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
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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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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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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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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