From today's Wall Street Journal Asia
The global financial crisis has given rise to many harebrained schemes around Asia (see: Japan, stimulus plan of), and to that list add Taiwan's latest policy outing: shopping coupons worth $100 for every man, woman and child.
The giveaway is slated to start in time for the Chinese New Year holidays early next year and will set the government back some $83 billion Taiwan dollars ($2.5 billion). Taiwanese residents need only take their ID cards to the nearest housing registration office or post office to receive the vouchers, which can be redeemed at registered stores and restaurants.
President Ma Ying-jeou's popularity ratings are in the low 20s, and perhaps he hopes this will distract voters from the fact that so far on his watch, GDP growth is contracting and the stock market is down by over 50%. The Taiwan government predicts the vouchers will boost GDP by some 0.64% next year, but color us skeptical. Wavering consumers are more likely to spend the coupon on things they'd buy anyway and save the "spare" money.
Mr. Ma will have to look elsewhere for meaningful stimulus. Rather than saddling future taxpayers with debt for what will be at best a slight temporary relief, better to boost the economy by cutting taxes and reforming inefficient regulatory structures. A World Bank survey released last month put Taiwan in 61st place globally for ease of doing business, down from 58th place last year -- definitely an area that could use improvement.
The voucher program is just one of several ill-conceived ways Taiwan has tried to tackle the crisis: The stock exchange has banned short selling until the end of this year, and a $15 billion government stabilization fund has plowed millions into the stock exchange since September in an effort to shore up prices.
Faced with a global financial downturn, Taiwan's response hasn't been entirely negative. Significant tax cuts were announced as part of a stimulus plan in September, and trade with China is becoming easier thanks to the recent political détente. But to really weather the crisis, Taiwan's leaders will need to separate the good ideas from the bad. A policy that may be politically popular today won't be smart economics tomorrow.
Source: $100 for All
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