Taiwanese May Face a Worse Crisis than Greece

5 Jun

http://www.taipeitimes.com.tw/News/editorials/archives/2012/06/02/2003534300

 

A gloomy editorial indeed by Lai Chen-chang, president of the National Taipei College of Business, but somewhat it is credible.

 

“Taiwan’s model of economic development is different from that of Greece. We have no foreign debt and our foreign currency reserves are among the biggest in the world.

However, the worrying thing is that Taiwan has hidden debt amounting to about NT$18 trillion (US$601 billion), including a massive national health insurance deficit, local government debts, generous pension and consolation provisions for civil servants, benefits for specific social groups and so on.

The election system tends to make matters worse, as competing parties make excessively generous campaign promises. It is therefore likely that Taiwan’s finances will deteriorate over time.

Under the administration of President Ma Ying-jeou, Taiwan’s economy has stagnated at about the level it was at 14 years ago. When the driving forces of a country’s economy are unable to keep up with the times and state debt keeps piling up, sooner or later fiscal problems are bound to break out. When that happens, will Taiwanese be forced to accept a fall in living standards, as the Greeks have?

That Taiwan has no foreign debt does not mean that we will never be threatened by bankruptcy. Another possible interpretation of Taiwan’s lack of foreign debt is that nobody abroad wants to buy our debt and so we cannot spread our fiscal risk abroad to let other countries share the burden.

If those in government do not strive to improve this country’s fiscal structure, when the time comes Taiwan may suffer an even more daunting set of choices than Greece.

 

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