Friday, February 23, 2007

Palace Politics

At dueling "palace museums" in Beijing and Taipei, art and politics go hand in hand

Jonathan Adams
Asia Times, February 23, 2007

When Taiwan National Palace Museum curator Yu Pei-chin began organizing the biggest ever exhibit of highly prized ru ware -- rare, light-blue-green ceramics fired in the early 12th century -- she called up her counterparts at Beijing's Palace Museum out of curiosity.

"How many pieces of ru ware do you have?" she asked a museum official.

"How many do you have there?" the official shot back.

"We have 21," Yu said.

"Perhaps we have about 20 pieces too," came the response. (Based on public information, Yu guesses the real number in Beijing is closer to 15.)

Yu didn't bother to ask whether Beijing could send over its ru ware for the exhibit -- "I knew it wouldn't be permitted."

So goes the frosty relationship between Taiwan and mainland China, which extends even to their cultural institutions. For decades, the cross-strait political impasse has spurred an enduring rivalry between government-run "palace" museums showcasing the cream of imperial Chinese art in Beijing and Taipei.

To this day, Beijing has the palace (more commonly known as the Forbidden City), while Taiwan possesses the best of the collection -- a fact that has been a long-standing bone of contention for Beijing and for Chinese nationalists. (One former employee of Taiwan's museum said that while she was studying art history in Paris, some earnest students from China constantly badgered her about how Taiwan must give back the art it had "stolen".)

The politicization of the collection is a source of frustration for Chinese art lovers and experts on both sides of the Taiwan Strait, who have nonetheless quietly built up contacts in the past decade through conferences and informal exchanges.

"The museum field shouldn't be political, but unfortunately the two palace museums cannot avoid politics," said another curator at Taiwan's museum.

Politics intruded once again recently, as the palace museum in Taipei held its grand reopening celebration last week after a long renovation. Beijing museum officials accused Taiwan's government of revising the museum's charter to de-emphasize the collection's Chinese essence.

Their complaints were echoed by some opposition legislators in Taipei, who accuse Taiwan's government of waging a "cultural revolution" to suit a pro-independence agenda.

Taiwan's museum director has denied any such campaign, but acknowledged the cabinet-proposed charter change, which would revise the wording of the museum's mission from collecting artifacts from ancient China to collecting "domestic and foreign" art. (That proposal awaits approval from the opposition-controlled legislature.)

In fact, throughout the collection's history, art and politics have been inseparable.

The Emperor Qianlong (1711-99) was fond of defacing palace artwork -- including some of the ru ware now on display in Taiwan -- with critiques or laudatory poems.

Ever since, successive governments have been putting their own stamp on the collection.

When Chiang Kai-shek and his Kuomintang party fled to Taiwan in 1949, they took the best part of the collection with them and built a museum in the hills ringing Taipei to house it. During the Cultural Revolution era, that museum became Exhibit A in the Nationalists' claim to be the guardians of Chinese civilization, as their communist enemies across the strait went about destroying cultural relics in the name of creating a new China.

Then, in 2000, Taiwan's collection passed into the hands of the independence-minded Democratic Progressive Party (DPP) -- making President Chen Shui-bian the unlikely ward of what are considered the finest treasures of Chinese art.

For some in Taiwan, that was akin to giving the punk-rock teenage son the keys to Daddy's Jaguar.

Chen's political appointees at the museum have scandalized some of the island's traditionalists with moves to strip away symbols of the former authoritarian Taiwanese regime -- for example, by shunting a once-prominent statue of Chiang Kai-shek to a side wing.

Now, the latest director, Lin Mun-lee, is trying to bring a hip, multicultural flavor to the museum. She has invited young designers to create funky products based on the museum's greatest artworks, launched a snazzy publicity campaign to attract a new audience (the title: "Old Is New") and, most recently, brought in a Japanese Noh troupe to perform as part of the reopening celebrations.

Lin casts her efforts to jazz up the museum as ways to depoliticize the art and better connect it with the people, in line with the island's democratization.

But some on the island still can't help but see the continuation of a doomed campaign to play down links with the mainland and bolster a distinct Taiwanese identity.

"The palace museum represents our Chinese heritage," said one former museum staffer, adding that the DPP "wants to cut it off, but you can't cut it off -- the new Taiwan has to come from the old Taiwan. When you don't have roots, how can the flower bloom?"

Still, despite such to-and-fro, low-key cultural ties between the two sides have been blossoming, driven in this case by experts whose passion for Chinese art transcends politics. Case in point: after sparring with the Beijing Palace Museum, curator Yu was surprised to get a call from the Henan Provincial Institute of Cultural Heritage and Archeology.

In 2000, more ru ware specimens were discovered in excavations on the mainland, and the Henan institute said that sending over pieces for Taiwan's current exhibit shouldn't be a problem.

Now, 12 sets are on display at Taiwan's museum, thanks to the assistance of a Taipei-based foundation that served as a middleman. The institute's Sun Xinmin visited Taiwan earlier this month for a conference on Northern Song Dynasty art, along with curators from Beijing's Palace Museum and the Shanghai Museum.

Yu and others say that such contacts have multiplied in the past decade, as art experts and officials regularly meet in such places as Shenzhen, Macau and Shanghai, and mainland experts make less frequent trips to Taiwan for special occasions.

Those ties are coming at what experts describe as an exciting time in the field.

"New excavations are changing our idea of what Chinese art is. Before we were sort of limited by this imperial collection," said Jane Ju, an art historian at Taipei's National Chengchi University. "There is interaction [between art experts on both sides] already, and there's going to be a lot more going on."

Such exchanges have a friendly and collegial tone, according to participants: they usually avoid politics, except when cracking jokes. (One Shanghai curator offered his solution for unifying the collection to a Taiwanese counterpart a few years back: "It's very simple. Just take all of your stuff, put it on a plane, and send it over.")

More relaxed government policies have facilitated such exchanges. In fact, a top official from Beijing's Palace Museum even visited Taiwan's museum a few years ago.

"The Chinese government has adopted a more open policy, so curators can come here more easily, and our curators can go to China," said Ho Chuan-hsing, with the Taiwan museum's department of painting and calligraphy. "Both sides can compare their works."

When officials from the vying palace museums meet, they often discuss the possibility of cooperation. But that seems unlikely for the time being. Treasures from Taiwan's palace museum have traveled to the United States and Europe, but the museum will not send artwork to the mainland without a legal promise of its return.

That's something Beijing has not, so far, been willing to give.

"It's a sensitive political issue," said the former director of Taiwan's palace museum, Shih Shou-chien, in an interview last year. Shih said the mainland authorities "just cannot treat Taiwan as an independent political entity, so they cannot provide that kind of legal guarantee".

In theory, the two museums could come up with a creative solution to fudge the sovereignty issue, such as going through a middleman, as was done with the Henan artifacts now on display in Taiwan.

And some see a possible thaw in relations if the more mainland-friendly Kuomintang takes power in Taiwan, which could make cooperation between the museums easier.

But for now, the ru ware and other treasures from the palace collection, assembled by emperors long ago, remain divided by cross-strait politics.

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Republic of Cynics

A recent Taiwan pride push has sparked a backlash from islanders sick of identity politics
Jonathan Adams
Newsweek Japan, February 21, 2007
(untranslated draft)

It must have been a slow day for mail delivery in Taiwan. Last Monday, scores of angry, yellow headband-wearing postal workers from all over the island left work to protest behind barbed-wire barricades in Taipei. The cause of their ire: the government’s decision to change their company’s name from “Chunghwa [Chinese] Post" to “Taiwan Post."

On the other side of the barriers, President Chen Shui-bian presided over the unveiling of the new “Taiwan Post” plaque—part of a recent push to rectify names that has included tweaking the titles of other state-run companies, changing the nation’s postage stamps, and last fall, changing the name of the main airport. Chen has said the steps are necessary to avoid confusion between Taiwanese and Chinese firms, and bolster “Taiwan consciousness.”

But the workers said the unnecessary name change had been rammed through without their input, and was a political ploy to deflect attention from the government’s incompetence.

A clerk at a convenience store near the protest aired a common complaint: “It will just cost a lot of money and create nuisance. I think Chen’s gone crazy—and he keeps causing problems for our relations with China.”

Indeed, many Taiwanese have grown sharply disillusioned with Chen’s focus on emotionally-charged identity politics—which is widely seen as part of his strategy to seal a legacy as the champion of Taiwan’s sovereignty before he steps down in May 2008.

Next week Chen will take advantage of a significant date for Taiwan-first nationalists: the 60th anniversary of the 228 Incident, in which Kuomintang troops sent from China massacred tens of thousands after a local uprising against one and a half years of their bumbling rule. Chen’s lame-duck government plans to play up the date to the hilt, with a “Taiwan pride” sing-along in front of the Presidential Office, a huge concert in the evening, and the grand opening of a new national memorial hall.

But such is the extent of public cynicism that even some relatives of 228 victims think the beleaguered Chen is just using the tragedy to whip up political support.

"Political parties want to claim 228 so they can get credit,” said Liao Ji-bin, whose grandfather was shot and dumped into the sea north of Taipei by KMT military police in March 1947.

"Everyone knows why [Chen’s party] is claiming it—it’s just for elections. They want to remind people of the KMT’s killing and murder.”

Opposition to Chen’s latest campaign to strengthen Taiwan identity has come from all sides—including some unlikely sources.

Beijing warned that the name changes were part of a dangerous plot to reach full independence through tiny steps—a goal it would stop at any cost. The US spoke out against the changes, saying they may violate Chen’s pledges not to alter the cross-strait “status quo.”

But even former President Lee Teng-hui—widely viewed as the “godfather” of the Taiwan independence movement—shocked many by criticizing the government for using the independence issue, and the renaming of state-controlled firms, for selfish political gain.

"The changes should be done step by step and quietly, rather than done while the polls approach,” he complained. Ironically, many observers said Lee’s own comments were equally self-serving: they think he’s trying to save his own small, hardline pro-independence party from extinction by giving it a moderate makeover.

To be sure, the irritation with identity politics doesn’t mean Taiwan identity itself is in retreat. Chen’s name games still have a market in the deep south, the base of support for his Democratic Progressive Party. And survey data shows that island-wide, Taiwan identity keeps rising: Last June, 44.4 percent identified themselves as only Taiwanese, compared to 23.1 percent in 1996—and the number identifying as only “Chinese” has been in steady decline.

The Taiwanese dialect is more widely-spoken than ever, and is now the lingua franca not only in the south and on the streets, but also in the legislature. Chen’s government can take some credit for that, say observers.

“Chen has delayed exchanges between mainland China and Taiwan and put in place regulations to remind people that China is the enemy,” said Hsu Yung-ming, a political analyst at the Academia Sinica in Taipei. “This helps people identify as Taiwanese.”

But rising Taiwan pride is also fueled by such unlikely figures as MC Hotdog—a Taiwanese rapper whose hit song “Wo Ai Tai Mei” (I Love Taiwanese Chicks) last year helped fuel a taike pop culture fad that celebrated the island’s earthy rural culture: betel nuts; tacky, bright-colored clothes; dyed hair and blunt talk.

In fact, Taiwan identity is now more a social and cultural trend than a political one. “Taiwan identity is rising, but that doesn’t mean that the numbers of people who want Taiwan independence is also rising,” said Wu Nai-teh, a sociologist at the Academia Sinica.

The number of self-identified DPP supporters has dropped in the past two years, even as Taiwan identification continues to rise. And over the last ten years the number of survey respondents who clearly support independence has bounced between 10% and 20%, while support for maintaining the “status quo” has risen from 35% to 60%.

So while it may now be hip to be Taiwanese, independence diehards are still a decidedly lonely bunch—a fact that should come as comfort to China.

“If [Beijing] is realistic, they realize Taiwan is only 90 miles from China and it’s not going to drift away,” said Lin Wen-cheng, an expert on cross-strait relations at National Sun Yat-sen University in Kaohsiung. “We can’t cross the red line—we are not going to declare Taiwan independence. That’s the consensus among political parties in Taiwan.”

Now, some politicians are trying to respond to islanders’ embrace of Taiwan identity, but mounting distaste for divisive identity politics.

Lee’s attempt to reinvent his Taiwan Solidarity Union party is a case in point: his party hopes to sidestep the unification-independence debate with pragmatic proposals to improve people’s livelihood: letting in Chinese tourists and investment, reducing university fees for low-income families. “We have to rethink our national direction,” said Lee Shang-ren, head of the party’s legislative caucus. “Emphasizing the people’s welfare is most important.”

The party’s turn to the center is no surprise for those who have watched Lee’s shape-shifting career: a Communist Party member as a young man, he became chairman of the fiercely anti-communist, pro-unification KMT in the late 1980s, then left the KMT in 2000 to start the strongly pro-independence TSU. Still, analysts say his latest move may be one about-face too many: Lee’s influence has faded, and it will be difficult for him to convince his “deep green” supporters to shift to the center with him.

That leaves room for others to follow a similar strategy, though. Some DPP moderates back a similar focus on pragmatic economic policies, and their preferred candidate Su Tseng-chang is considered a strong potential contender for the presidency in 2008.

The KMT candidate Ma Ying-jeou—still considered the frontrunner in the 2008 race despite being charged with corruption last week—backs direct cross-strait flights as a way to jump-start the economy.

Back at the postal protest, Tang Wen-tai, 56, head of the Banciao city postal workers’ union, said workers were most angry about having their concerns ignored. “We didn’t have a say,” said Tang. That’s the way more and more Taiwanese feel about the island’s political discourse—and politicians might do well to start listening.

Lin Chong-pin interview

Taiwanese security expert on China's missile test and East Asian security
Newsweek Web exclusive, Jan. 25, 2007

News that China had destroyed one of its own satellites with a missile last week sent shockwaves through capitals from Washington to Tokyo. But for security experts like Lin Chong-Pin, who have closely watched the rise of China’s military in recent decades, Beijing’s capability came as little surprise. Lin has studied the People’s Liberation Army as a scholar, and verbally sparred with China as a top Taiwanese government official. Now, he watches developments across the Taiwan Strait and in the region from his perch at a Taipei think tank. NEWSWEEK’S Jonathan Adams spoke with Lin about Beijing’s satellite-slaying test, the cross-strait military balance and China’s ambitions for regional domination. Excerpts:

NEWSWEEK: Why did China decide to go ahead with this antisatellite test?

Lin Chong-Pin: This didn’t happen overnight. I remember in the late ‘80s they were talking about “occupying the heights” in the future, which meant space … The technology has reached a stage at which it now can be tested.

How much of an impact would China’s antisatellite capability have on a Taiwan Strait conflict?

The very obvious implication is that a replay of the 1996 scenario would be questionable. That was when the U.S. sent two aircraft carrier groups to the Taiwan Strait [after China launched two missiles near Taiwan], resolving rising military tension. Now, because U.S. satellites are threatened, the operation of the aircraft carriers—for them to arrive and fire missiles at [Chinese military] installations—are being compromised.

To what extent?

When your eyes are knocked out, how can you shoot accurately? It’s a way to say, “You have to think twice before you decide to send aircraft carriers again.” So it’s throwing a monkey wrench into the decision-making in Washington, D.C., when there’s a crisis in the Taiwan Strait—to intervene or not intervene, that is the question.

How strong is the U.S. commitment to help defend Taiwan, in your view?

I think right now it still remains pretty strong. Washington has said officially that if there is a conflict not caused by Taipei’s provocation, then the U.S. is obliged to intervene. But when you compare the statements over the years, you can see that the resolve of partner states is gradually weakening. Of course we understand, [the U.S.] has a bleeding war abroad and a triple deficit at home. So you have to think twice about [intervening in a Taiwan conflict] in the future.

Could China be calculating that the United States might stay out of a Taiwan conflict?

That doesn’t seem to be the case. China’s new grand strategy is to squeeze out the leading influence of the United States in East Asia without war, but with economy and culture. The rapidly modernizing military capabilities of [China’s People’s Liberation Army] will serve as a backbone of Beijing’s extra-military instruments, like diplomacy.

There’s a very strong consensus among the leaders in Beijing [that] the most important thing for China now is to seize this window of opportunity, which has not occurred in centuries: “There’s no serious threat outside China, this is the time when we can make economic growth.” So they want to have a peaceful environment and achieve economic growth first.

How much has the cross-strait military balance tilted in China’s favor?

We can say that the naval qualitative crossover has already occurred. The [Taiwanese] Air Force is still there competing, it’s balancing, but if Taiwan does not try harder, it will be tipped over. And in ballistic missiles, there’s no comparison: They have them, we don’t.

Given these trends, what should Taiwan do?

Well, militarily speaking, it’s very simple: we should buy weapons. But it’s not that easy. Our economy is not doing well, and the prevailing sentiment of society does not support the purchase of expensive weapons. Young people don’t like military service. And most people do not even think about the military competition.

How likely is it that the cross-strait standoff will lead to war?

Less and less likely. Beijing’s highest priority on Taiwan is what I would call absorption without war. Beijing has an increasing number of instruments to do that, including economy, cultural exchanges, manipulation of media, strangulation of Taiwan’s international space and psychological warfare.

Additionally, if there was a war, Beijing would face the result of bloodshed in Taiwan and the damage to the economic infrastructure. After a conquest, Beijing would have to face a rebellious population … The military option is the last option. And even the military option has never been to strike the U.S. and destroy Taiwan. Rather, it’s to deter the U.S. from coming in, and to seize Taiwan—like grabbing a beautiful, smiling bride into your embrace. That’s the idea.

How successful has China's strategy been so far?

I’ll give you one example. Before, when Taiwanese leaders inched toward independence, either in rhetoric or in action, Beijing would go ballistic. Now, they do nothing. Then Washington comes out the very next day, jumps up and issues a warning to Taipei. This is what I call going through Washington to contain Taipei. And it’s working.

What about Japan? It’s also seeking a larger security role in the region. What direction do you see China-Japan relations taking?

In November 2004, [China-Japan] tensions rose because of the submarine intrusion [when a Chinese submarine entered Japanese waters]. In the very same month, Tokyo announced to the world that Japan’s trade with China surpassed that between Japan and the United States. It was a point of no return … Japan realized that its economic recovery after 10 years of slump in the 1990s was largely due to its trade with China. And the business community also put a lot of pressure on the government in Tokyo to improve relations. So political relations have already warmed up.

But pessimists say that China and Japan’s interests will inevitably clash.

Beijing knows very well they would lose a war with Japan. They know how good the Japanese Navy, and even its Air Force, are. So they’ll try to avoid military confrontation.

The United States intends to pull back some forces to Guam, and reduce its presence in South Korea and Japan. How will that affect regional security?

For now, I think Beijing prefers to see the presence of the U.S. military in this region, because Beijing is worried about Japan, and thinks the U.S. can restrain Japan. But as the U.S. voluntarily withdraws, because of a lack of capabilities or a lack of economic wherewithal, somebody will have to step in. Will it be Japan, China or both? I think by that time, they will work out something together, because it’s in their best interests … Growing economic interdependence will become more and more important as time goes on, and will constrain military confrontation. And the trend has already begun.

Don't Bank On It

Scandal highlights banking sector's woes
Jonathan Adams
Asia Times, January 18, 2007

The latest financial scandal to rock Taiwan - and one of its biggest in recent years - has shown that despite much talk of reforming the banking sector, the island still has a long way to go.

The "financial storm", as Taiwan's media call it, began early this month when two subsidiaries of the Rebar Asia Pacific Group announced they had filed for insolvency. That led to a run on the Chinese Bank, a member of the Rebar group, on January 5.

The government quickly moved to take over that and another Rebar firm to calm panicked customers. Then it emerged that the chairman of Rebar had fled to China late last month, and was reportedly holed up in a Shanghai luxury hotel with his wife.

Last week saw an around-the-clock media frenzy as the chairman's relatives were hauled in for questioning, regulators scurried to contain the fallout, the head of the nation's financial watchdog stepped down, and politicians began pointing fingers over who else might be to blame.

Most analysts said the bank run would not impact the larger banking industry, Asia's fourth-largest. But it's just the latest in a series of troubles to plague the overcrowded sector.

Taiwanese banks remain frozen out of the mainland China market by the cross-strait political impasse. Meanwhile, plans to consolidate and reform the financial sector have stalled. The government hoped foreign investors would help shake up the industry by buying stakes in local banks, but so far such activity has been limited.

Now, the Rebar fiasco has highlighted some of the sector's dubious lending practices, and the need for better oversight of the island's financial firms.

"The run on the Chinese Bank is just a symptom of a larger issue, which is how do we deal with the banking sector?" said Chen Ming-chi, with the Institute of Sociology at Taiwan's National Tsing Hua University.

Dealing with it correctly has broad implications for the island's future. Taiwan is now a services-based economy (services account for more than 70% of gross domestic product and most of the island's jobs), which means further productivity gains and development depend on improvements in key service sectors such as banking and finance.

For several years, industry analysts have sent a blunt message: give Taiwan's banks an extreme makeover, or risk losing long-term competitiveness and becoming even more sidelined from regional economic integration.

"Without access to China in the medium term, the banking sector is structurally moribund," wrote consultancy Macquarie Research in a note last year. "We need the structure of the operating environment to change."

Access to mainland China appears to be off the table at least until May 2008, when a new president will take power in Taiwan.

The island's government bars its banks from providing anything more than consulting services in the mainland. The opposition sponsored a bill to change this last year, but it has gone nowhere, said Christina Liu, an opposition legislator and finance professor at both Taipei's National Taiwan University and Beijing's Tsinghua University.

She said that days after the bill passed its first reading in Taiwan's legislature, Beijing made it clear that it would only allow Taiwanese banks to open shop in the mainland if a cross-strait memorandum of understanding were inked.

The condition of such a memorandum is Taiwan's acceptance of the "one China" principle - a non-starter for the current independence-leaning government.

That roadblock has some Taiwanese tearing their hair out over lost opportunities. Taiwanese banks would seem to have distinct advantages in the China market, with their shared language and ties - particularly in commercially vibrant southern coastal provinces such as Fujian, which is the closest culturally to Taiwan. And they have a built-in customer base of Taiwanese living and working in the mainland.

But with Taipei-Beijing relations still frosty, the island's banks are left to gaze wistfully across the strait, as the big foreign players such as HSBC and Citibank get a rapidly growing head-start in the land grab in China.

"Taiwanese banks are stuck here - they can't do any business in mainland China," said Liu. "It's really a shame, because we [could] have so many customers there."

With the door to the mainland bolted shut for now, that leaves mergers and acquisitions as the way forward for the industry. Consultants have long bemoaned Taiwan's packed banking sector, which included more than 50 firms in 2000, serving only 23 million people.

In a 2005 report, the consultancy McKinsey argued that an ideal number would be about 15 at most, including one or two "regional champions" that would have the scale to compete in the mainland Chinese market. It urged Taiwan to follow South Korea's example and push ahead with the politically tough task of sweeping banking reforms - and to avoid Japan's example of merely "stapling" together bad banks to create bigger, but not necessarily better, players.

"Both industry and government could continue to pursue their incremental approach and hope the competitiveness of the financial sector and broader economy does not further erode," wrote McKinsey. "Or they could take bold steps to change the rules of the game and put Taiwan back on the Asian banking map."

The incremental approach appears to have won the day. The current administration has talked up consolidation and established ambitious goals, but the results have been modest.

Holding companies formed to spur consolidation have not performed as well as hoped. Taiwan now has 43 banks, with other mergers and privatization plans for state-run banks stalled.

Meanwhile, the government has worked to attract foreign interest in the sector, sending road shows abroad to lure big financial players into buying stakes. That campaign has had some success: last year several foreign firms bought stakes in Taiwanese banks, including Standard Chartered's bid for a controlling stake in Hsinchu International Bank.

But a more recent deal, Citibank's reported talks to acquire a stake of the Bank of Overseas Chinese (BOOC), have foundered amid vocal opposition from the bank's union leaders. And analysts don't expect many more such deals: both Hsinchu and BOOC are small banks, while the larger state-run banks are seen as less attractive targets.

All of this leaves many less than impressed with the government's reform efforts.

"Our government puts very strict limits on investment in China, while encouraging banks to merge and attract foreign investment as a substitute for going to China," said National Tsing Hua University's Chen. "I don't think the government formula can sustain itself, and it's not good for the banking sector. As long as there are limits on going to China, I think the problem will still be there."

Still, some see a silver lining in the cloud over Taiwan's banks. Wu Chung-shu, a research fellow at the Academia Sinica's Institute of Economics in Taipei, says the worst may be over for the industry.

It has rebounded from a credit bubble in 2005 and early last year, and its bad-loan ratio has come down from more than 8% in 2002 to just over 2% now. Now, Wu says the Rebar crisis will prompt the government to crack down harder on shaky firms.

"Rebar will push the government to deal with under performing banking companies by telling them to get out of the market or merge with other firms," Wu said. "You're going to see more consolidation in the banking and insurance industries. But the number of banks is not the main issue; it's how to get these banks to operate in a more efficient way."

Figuring out how to do that will be one of the most pressing questions for Taiwan's government in the coming years.

The Internet Trembles

A quake that snapped cables wiring Asia has exposed the fragility of the Net
Jonathan Adams
Newsweek International, January 29, 2007

In 1866, the British ship Great Eastern lowered a grappling hook by rope down to the frigid Atlantic Ocean floor far below. Its quarry: a line that had snapped the previous year during one of the first attempts to lay a transatlantic cable connecting the United States with Europe. One hundred and forty years later, repair ships are performing the same task, using essentially the same methods, in the Luzon Strait between Taiwan and the Philippines. They're trying to snag at least six cables that were damaged in a massive Dec. 26 earthquake off the coast of Taiwan. The mangled cables are out of reach of remotely controlled submersibles often used in such work. By the latest estimates, the task won't be finished until at least mid-February.

While the earliest transatlantic lines bore messages in Morse code, the cables near Taiwan carried 90 percent of East Asia's voice and Internet traffic. A month after the earthquake, services in the region were still not back to their full capacity. The disruption to data traffic underscores how much the virtual world still depends on the low-tech network of physical cables, wires and microwave transmitters that gird the globe—and how vulnerable services migrating to the Internet can be. "We put all our eggs in a small number of baskets," said Geoff Huston, chief scientist at the Asia Pacific Network Information Centre in Brisbane. "And this was the worst possible case of cable snap."

To be sure, the damaged lines aren't affecting most users now, aside from slow connection speeds and a few inaccessible sites. But for a few days after the quake, international phone-service outages and e-mail delays of several hours or more were widespread throughout East and Southeast Asia. Telecom operators quickly rerouted traffic away from the damaged area, beaming voice over satellites and sending e-mails scurrying along alternate routes. Taiwan's Chunghwa Telecom said in some cases Internet data sent from Taiwan to Hong Kong, only some 650 kilometers away, were going through routers in the United States. And Singapore Telecom said its U.S.-bound traffic was taking a detour Down Under—through an undersea cable west of Australia, across Australia from Perth to Sydney and through a southern link across the Pacific—or going west via Europe.

Rerouting alone does not necessarily slow Internet traffic much, experts say, as "packets" of data leap across the globe down the path of least resistance. But Internet service providers and telecoms can send only so much through the pipes at once—particularly if they're all using the same detours. So data back up at the servers run by the sender's ISP, like a traffic jam on a high-way on-ramp, waiting for its turn to fly through the global network. Moreover, satellites aren't a good alternative for Internet data: they can carry only one thousandth the capacity of a typical underseas cable, says Huston. Which is why Hong Kong ISPs were still operating at only 80 percent capacity three weeks after the earthquake, and telecoms in Taiwan and Singapore said that their bandwidth capacity remained below normal.

The disruption was far worse for consumers of "real time" data—online stock quotes, voice calls made over the Internet through services like Skype, and multiplayer online games that chew up bandwidth and require quick responses from fellow "warriors" on the other side of the globe. The Internet was not originally designed for such uses, in which even minor delays or interruptions can sharply degrade service quality. "These are now consumer technologies that users expect will work," said Paul Wilson, APNIC's director general. "If they don't, people will get a lot more stroppy than they used to."

The outage challenges assumptions about the fully wired world to come, in which Internet devices will jabber to each other without the need for human input. It may not be a disaster if your cell phone can't get through to your car, muses Hong Kong Internet pioneer Pindar Wong, but what if your pacemaker gets cut off from your doctor's computer across the Pacific? It's not clear how devices, rather than generally tolerant human beings, would deal with delays and outages. "This was a wake-up call," says Wong. "Are we building on solid foundations, or are we building on quicksand?" Asian telecoms say they'll boost satellite capacity and buy more cables to make their infrastructure more robust. But analysts are skeptical that they'll make the needed investments. Without them, the Internet of tomorrow is likely to remain vulnerable to the next quake.

Original site

Cable Repair Delayed

Repair of damaged cables in Asia to take longer than expected
Jonathan Adams
International Herald Tribune, January 16, 2007

Internet services across East Asia are still not functioning at full capacity three weeks after an earthquake near Taiwan damaged critical communication cables, and the authorities in Taiwan and Hong Kong said final repairs on the lines would be delayed by at least a month.

Chunghwa Telecom in Taiwan, part of a consortium that owns four of the eight undersea cables that were cut during the earthquake on Dec. 26, said Tuesday that bad weather and rough seas had hampered repair efforts.

The damage was also more extensive than initially thought, the company said, with its cables severed in at least 10 places.

The company now estimates that the first cable will not be repaired until early next week, with the three others fixed by the end of the month. The Hong Kong Telecommunications Authority said in a statement Monday that repairs on all the damaged cables would not be completed until the middle of February, weather conditions permitting. The original estimate for final repairs was mid-January.

The earthquake, just off the southern coast of Taiwan, snapped cables carrying 90 percent of voice and data traffic in East and Southeast Asia. Contractors for the cable consortium, which also includes SingTel, the dominant provider in Singapore, are still struggling to fix the cables, some of which lie 3.3 kilometers, or 2 miles, beneath the ocean surface.

SingTel, Chunghwa and PCCW in Hong Kong said that they were able to quickly reroute nearly all traffic away from the damaged cables. But the alternative routes are circuitous, sometimes degrading the quality of voice traffic and slowing Internet speeds.

Chunghwa stressed that despite the repair delays, most services were back to normal. Hong Kong Internet services are operating at about 80 percent of normal efficiency.

Hong Kong users report that Internet performance, especially when accessing or downloading material from Web sites based in North America, remains sluggish during peak periods.

But while most services continue uninterrupted, the digital breakdown has prompted new thinking on how to strengthen the region's contacts with the rest of the world. "In order to deal with future disasters, we're going to set up several contingency plans," Chunghwa Telecom said. The firm says it will add extra satellite capacity for its voice communications, buy or lease additional cables as a backup for Internet traffic, and propose a joint "backup mechanism" for countries in the region.

The Four Heavenly Kings

DPP contenders set to battle for party's crown
Jonathan Adams
Asia Times, January 9, 2007

While Beijing may not want to see Taiwan's pro-independence Democratic Progressive Party continue to rule the island after 2008, the DPP emerged from last month's mayoral elections in Taipei and Kaohsiung with renewed hope that it might hold on to power in next year's presidential elections. Now the race is on to determine who will carry the party's banner as its candidate in that key vote.

Before the mayoral elections, most saw opposition Kuomintang (KMT) chairman Ma Ying-jeou as a virtual shoo-in for the presidency in 2008. He enjoys islandwide popularity for his incorruptible image and gentleman's demeanor, though his support has drooped in recent months. Meanwhile, the DPP's support levels have been tumbling as one scandal after another has rocked President Chen Shui-bian's administration.

But after holding on to the mayoralty of second-largest city Kaohsiung and doing better than expected in the Taipei mayor's race, the DPP is more confident that it will have a fighting chance in 2008. Ma has already come under fire for weak leadership on a range of issues and poor crisis management. The vote highlighted some of Ma's political vulnerabilities - in particular, his difficulty connecting with voters in the south. And the DPP now reckons it can put the more China-friendly Ma on the defensive on the highly charged issue of national identity and so dash his presidential ambitions. "We already knew Ma's approval ratings were dropping. But after the [mayoral] elections, we have even stronger confidence that our candidate can beat Ma," said Winston Dang, director of the DPP's department of international affairs. "He's going to lose."

The `Si Da Tian Wang'

If Dang is right, who from the DPP would replace Chen? And how would this affect cross-strait relations? Taiwan's media call them the DPP's "four heavenly kings": the four party heavyweights most likely to make a primary bid for the presidential candidacy, in an islandwide vote by party members now expected in June at the latest. But most observers see only two credible candidates: Premier Su Tseng-chang, who has been dubbed the "electric fireball" for his aggressive, energetic style, and Frank Hsieh, the party's losing candidate in the Taipei mayoral election. Both have broad government experience and strong credentials as former defense lawyers for pro-democracy activists. Notably, both are viewed as moderates on cross-strait relations, while the two dimmer "stars", party chairman Yu Shyi-kun and Vice President Annette Lu, take a harder pro-independence line.

On economics, both Su and Hsieh are believed to favor lifting the restriction for Taiwan-listed companies that caps mainland-bound investment at 40% of their net worth - the most divisive issue within the DPP. Su initially supported lifting the cap in a key economic conference last summer, but backed off under pressure from a small hardline pro-independence party that wants to tightly limit cross-strait economic ties. And as premier, Su has also quietly increased cross-strait charter flights, approved the transfer by Taiwanese firms of more advanced (though not cutting-edge) chip technology to mainland China, and pushed to open up the island to more tourists from the mainland.

Hsieh's stance is less clear, but politically he may be more moderate than Su. While Su pushes closer economic ties, he tends to talk tough on Taiwan's political sovereignty. By contrast, when the affable Hsieh was premier, he pushed a line of reconciliation with the KMT-led opposition and China, though with little effect. And in the past he has remarked that Taiwan is governed by a "one China" constitution - a formulation that might help soothe nerves in Beijing, which has insisted on acceptance of the "one-China principle" as a condition for political cross-strait talks.

Economic moderates

The two men's broad goals on cross-strait relations aren't that different from Ma's: all three back the political status quo (at least in the near term) and favor warmer economic relations. But Ma is willing to be far more accommodating to Beijing to achieve those goals. For example, Ma embraces the convoluted "1992 Consensus" - an unofficial agreement to fudge the "one China" issue that allowed cross-strait talks to proceed in the early 1990s - and could start talks again. Ma hopes the shibboleth will lead to a breakthrough such as the resumption of regular cross-strait direct flights. The official DPP line is that no real agreement was ever reached, so the "1992 Consensus" is a non-starter. Su and Hsieh can be expected to toe that line. "Saying you accepted the '1992 Consensus' would be a form of political suicide for the [DPP] nomination," said Hsu Yung-ming, a political analyst at Taipei's Academia Sinica.

Ma has also backed an interim cross-strait peace pact that any DPP president would find difficult to embrace, at least in the heat of a presidential campaign. Ma said in an interview last October that if elected president, he would try to ink a deal with the mainland by 2012 under which Taiwan would forswear formal independence in exchange for Beijing's promise not to attack the island. The deal would normalize relations between the two sides while putting off the question of unification. Su responded with withering comments that sounded like the first shots in the 2008 presidential race. Said Su: "If there is any negotiation with China, it will be between two independent countries ... No matter who wins the presidential election, this person is not supposed to give up our own bottom line to negotiate with China. Otherwise, the Taiwanese president will become a 'Taiwanese chief executive'. We cannot let someone like this become our president." Ma fired back that Su was "ignorant" about cross-strait affairs. But Su's tough talk could well earn him his party's nomination in a few months' time - and leave Ma fighting to answer potent attacks that he would sell out Taiwan's core interests.

Meanwhile, Su - who grew up in a poor family in Pingtung county, in the deep south - has also built up a public image as a down-to-earth, no-nonsense public servant who can get things done. He has the support of the powerful New Tide - the DPP faction that supports closer cross-strait economic ties, and continues to wield influence despite a supposed party ban on factions last year ("They just took the 'New Tide' sign down at the office," said one DPP member). All of this makes Su a formidable candidate. "Su has an image as someone who will stand up more strongly for Taiwan's sovereignty, and wouldn't give in as much as Hsieh, though I don't know if that's really true in the policy sense," said Shelley Rigger, an expert on the DPP at Davidson College in the United States. "People think Su is more macho."

But observers haven't written off Hsieh altogether. "Frank Hsieh's popularity is rising among DPP voters," said the Academia Sinica's Hsu. His support base is what the media call his "own army" - a group of legislators who are political proteges from Hsieh's days as Kaohsiung mayor. And he has received public praise from former president Lee Teng-hui, now a staunch promoter of Taiwanese independence, as well as a respected pro-independence "elder", Koo Kwang-ming. Party members credit Hsieh with doing better than expected in the Taipei mayoral race, and helping the party hold on to Kaohsiung with his strong mayoral record there.

`Deep Green' candidate

The long-shot candidate is Yu, who is seen as closest to the unpopular President Chen - not the best position to be in politically. Yu is Chen's strongest defender within the party, has support from "deep greens" (those on the more independence-minded end of the political spectrum), and held the DPP together through tough times (his hard-working loyalty has earned him praise for his "water-buffalo spirit"). He is already being mentioned as a possible vice-presidential candidate, a pick that would please the hardline pro-independence vote. Most observers dismiss Lu as a serious candidate because of her lack of support within the party.

That leaves Hsieh or the "electric fireball" Su as Ma's most likely opponent. If either is able to beat Ma, how will Beijing react to another four years with the independence-leaning party in charge? Analysts say that despite the "Taiwan first" rhetoric that will surely fly during the presidential race, a new DPP president and mainland China would both recognize an opportunity to put cross-strait relations on a new footing. A DPP president would likely seek a new strategy for engaging Beijing, even if he or she could not go as far as accepting the "1992 Consensus". And for its part, mainland China has learned over the past six years with the DPP in power in Taiwan that it needs to take a more pragmatic approach. "For China, anyone's better than Chen Shui-bian," said the Academia Sinica's Hsu. "Any new president will provide a window of opportunity. I think Beijing will see 2008 as a new game."

Original site

The Blue and the Green

A KMT defeat in Kaohsiung raises doubts on whether it can win in 2008
Jonathan Adams
Newsweek Web exclusive, December 12, 2006

There’s a phrase in Chinese for Taiwan’s political divide: lan tian, lu di (or “blue sky, green ground”). The north is the base of the China-friendly Kuomintang and its allies, the “blue” camp, which traces its heritage to the mainland and dreams of a reunified China. The south is the stronghold of the pro-independence “greens,” who emphasize the island’s distinct culture and history, and seek to cement its independence.

Heaven and earth have rarely been so far apart. Last Saturday, the island’s two main camps split elections that were widely seen as a stage-setter for the key 2008 presidential vote. In the south, the pro-independence party won the mayor’s office in Kaohsiung by a nose, in a race that’s still being disputed. In the north, the KMT won, but for the Taipei mayor’s seat, the “green” candidate, Frank Hsieh, did far better than expected and took a respectable 41 percent of the vote.

Both results surprised observers, who had expected a KMT sweep in the wake of corruption scandals that have bedeviled the island’s pro-independence president, Chen Shui-bian. Indeed, the KMT had already been seen as likely to win back the presidency in 2008, but Saturday’s results could put these prospects in serious jeopardy.

If the election presages a KMT loss in 2008, the repercussions will be felt far beyond Taiwan’s shores. Business leaders, both Taiwanese and foreign, have had high hopes for KMT’s much-hyped chairman Ma Ying-jeou. Ma has vowed to expand cross-strait economic links to revive the island’s stagnant economy. A Ma victory in 2008 would also come as a relief for Beijing, which would like nothing better than to see the pro-independence party driven from power just ahead of the summer Olympics. And Washington, after more than six years of trying to restrain Chen’s nationalism, would welcome the more moderate Ma, who promises to keep all quiet in the Taiwan Strait. Saturday’s election is a “major defeat for Ma,” said George Tsai, a professor of international relations at Taipei’s National Chengchi University. “This result shows that if the KMT wants to win the next elections, they have to side with or respond to Taiwan identity—otherwise they have no chance.”

That could be a tall order for Ma. To be sure, he’s still popular on the island, and recent accusations that he misused mayoral funds have only slightly sullied his anti-corruption image. But the Hong Kong-born Ma is seen by some as out of touch with the laobaixing—the common people—and with southerners. He speaks stilted Taiwanese, the local dialect and language of the street. And he’s a product of Taipei, where descendants of the mainlanders that fled China with the KMT in the late 1940s still dominate.

Saturday’s elections have shown that Ma may also be out of touch in his vision of Taiwan’s accommodation and eventual unification with China—and it could turn out to be his political Achilles heel. Ma backs a cool version of his party’s traditional “greater China” nationalism. In the south—and apparently in much of the north, too—Taiwanese identity and ideology are still important. “[Now] people will say that Ma Ying-jeou’s charisma can’t cross the Jhuoshuei River and reach into southern Taiwan,” said Lo Chih-cheng, a political analyst at Taipei’s Soochow University.

While the KMT has no strong alternative to Ma for 2008, his poorer-than-expected showing on Saturday provides a boost to two strong potential presidential candidates on the pro-independence side: Hsieh, who did better than expected in Taipei, and Su Tseng-chang, the gruff, no-nonsense premier who is a son of the south and boasts broad government experience. Despite their party’s declining support in the last two years, Saturday’s result shows it can’t be written off: its faithful—particularly in the south—tend to rally to its side in times of perceived crisis.

Meanwhile, the results are expected to embolden Chen to press forward with one of his pet proposals: sweeping constitutional revision. Although there’s little chance of success—revisions must be approved by three-quarters of the legislature, which is controlled by the opposition—Chen’s pursuit of reform may ruffle China’s feathers. “The mainland is on guard,” said Xu Shiquan, the vice president of the National Society of Taiwan Studies in Beijing. “If Mr. Chen pushes forward his claims through so-called ‘constitutional reengineering’ despite warnings, this would be serious business.” That’s a typical line from China—and one we could be hearing a lot more of in 2007.

A Test for Ma

Local elections could push Ma Ying-jeou closer to the presidency in 2008—or cripple his leadership
Jonathan Adams
Newsweek Japan, December 13, 2006
(Untranslated draft)

Ke Tsi-hai wants his cow back.

Two years ago, Taipei City—led by its telegenic mayor and Kuomintang chairman Ma Ying-jeou—seized the animal, saying Ke had violated a city ordinance. Since then the 50-year-old Ke has kept up a media blitz to win the bovine’s release, but without success.

He’s heckled Ma at public appearances, waved anti-Ma signs at random TV press conferences, and even opened a ranch a few hours outside the city named “Ma Ying-jeou, give me back my cow.”

Now, Ke is running to become Taipei’s mayor. He stands every day at busy intersections, holding a pole weapon in the manner of Guan Yu, a heroic figure from Chinese history and literature. Standing in the rain last week during one such appearance, Ke explained the rationale behind his longshot campaign.

“The city does not have the right to impound my cow. I can get it back if I’m elected.”

Ke’s not the only one harassing Ma these days. James Soong, the once-popular head of a small splinter party allied with the KMT, lobbied for Ma to back his own mayoral campaign, but to no avail. Now he’s still in the race, sucking votes away from the KMT’s candidate, and reportedly pressuring Ma to support some of his party’s candidates in next year’s legislative elections.

And then there’s independent candidate Li Ao, who admits he has “no chance” of winning the election but just wants to “raise his voice.” Li has harshly criticized Ma, saying he’s effectively a male bimbo: good-looking, but incompetent.

“There are people trying to gain something from Ma, by showing that they can destroy his dreams for the presidency in 2008,” Said Lo Chih-cheng, a political science professor at Taipei’s Soochow University.

Call it the price of fame: as the early favorite in the 2008 presidential election, all eyes are on Ma—and the inevitable criticisms have begun to mount. Once lauded for his squeaky-clean image, he’s now been sullied by allegations that he misused mayoral funds. His small decision-making circle has frozen out people like Soong who’d like to have his ear. And he’s taken fire recently from both enemies and allies for weak leadership on a range of issues.

Saturday’s local elections—in which voters will select mayors and city councilors in Taipei and Kaohsiung—will be a key test for Ma. Can he silence his critics, lead a confident KMT into the 2008 campaign, and so defeat the pro-independence party that has held power for almost seven years?

“This election will decide who will be the candidate on both sides in 2008,” said Ger Yeong-kuang, a political science professor at National Taiwan University. “If the KMT wins both elections, Ma Ying-jeou’s leadership will be consolidated and his candidacy in 2008 is secure—no one would dare to challenge him.”

The KMT has momentum on its side. A year ago it made strong gains in local elections, even in places that were considered pro-independence strongholds.

President Chen Shui-bian has been dogged by a string of corruption scandals involving his relatives and aides. Last month his wife was charged with corruption, in a case that also implicated Chen. The scandals have taken a heavy toll on Chen’s Democratic Progressive Party: according to surveys by the election study center at National Chengchi University
support for the DPP plunged from more than 26% two years ago to 17% in June, while KMT support rose from 22% to more than 37% in the same period.

That gap is reflected in polls ahead of Saturday’s election, which showed KMT candidate Hau Lung-bing leading the pack by a wide margin in Taipei.

In the south—the base of pro-independence support—the KMT is also leading, but in a closer race. The DPP has controlled Kaohsiung for eight years, but polls last week showed KMT candidate Huang Chun-ying, a former deputy mayor of the port city, ahead of the DPP’s Chen Chu—a former labor minister who did jail time in the 1980s for her pro-democracy activism.

Don’t believe the polls, the DPP insists: they don’t capture a large number of “hidden voters” who are generally pro-independence. “Taiwan has a history of martial law and authoritarianism, so some older people are afraid to speak openly about who they’re going to support,” said Winston Dang, director of the DPP’s department of international affairs.

Moreover, Ma has now also been hit by a corruption scandal, and his approval ratings have drooped. A KMT loss in Kaohsiung would fuel more criticism of Ma’s leadership, and he’s said he will resign if charged with misusing city funds.

Meanwhile, at least one formidable opponent has begun to emerge on the pro-independence side: the no-nonsense premier Su Tseng-chang, a gruff former lawyer who helped defend Chen Chu and other pro-democracy activists in a high-profile trial in 1980. Su has an impressive resume and broad appeal, as a former DPP chairman and commissioner of both his native Pingtung County in the far south and Taipei County in the north. Amid the recent chaos of scandals and protests, Su has been quietly running the government—and focusing on vote-winning issues like reducing crime. If Ma continues to stumble, the aggressive Su could well steal away the presidency in 2008.

That would disappoint Taiwanese and foreign businesspeople, who like Ma’s strong support for closer economic links with China. That stance is echoed by the KMT’s mayoral candidates, who back direct air links with China from Taipei, and shipping links from Kaohsiung.

And China would like nothing better than to see Ma drive the pro-independence party from power just before Beijing hosts the Olympics. Ironically, though, a crushing defeat for the DPP on Saturday might make Beijing most nervous. The concern is that if backed into a corner, Chen might raise the stakes with moves to cement Taiwan’s independence, under the guise of constitutional revision.

“The mainland is on guard,” said Xu Shiquan, vice president of the National Society of Taiwan Studies in Beijing. “If Mr. Chen pushes forward his claims through so-called `constitutional reengineering’ despite warnings from the mainland, this would be serious business.”

Experts say such fears are overblown. Changing the constitution requires a three-quarters majority in the legislature, which is controlled by Chen’s political opponents. Still, the US will also be keeping a close eye on this election’s aftermath, to make sure all stays quiet in the Taiwan Strait.

“Washington is worried about Beijing overreacting to some political game being played on Taiwan,” said Richard Bush, a Taiwan expert at the Brookings Institution, a think tank in Washington, DC.

Back in Taiwan, most voters would likely respond with a collective yawn to any such antics from Chen. After being fed a daily diet of scandal, many are disillusioned with politics altogether.

Which might explain Ke Tsi-hai’s main appeal: giving voters an entertaining diversion. As drivers pass by honking their horns and giving the “thumbs-up” sign, Ke explains that his pole weapon symbolizes his fight against corruption.

Granted, with only 1% to 2% support for Ke in polls, such props aren’t likely to make much difference. But the quixotic cow-lover represents a larger challenge to Ma: if the KMT loses in Kaohsiung, Ma may have to stop ignoring his growing crowd of critics in order to keep his presidential hopes alive.

Who knows, he might even have to give back a cow.

With reporting by Ko Shu-ling

The Missing Link

Big banks eye Taiwan's finance market
Jonathan Adams
Newsweek International, November 6, 2006

For the past few years, global banking giants have been circling Taiwan, looking for a way in. Finally, one of them pounced. Last week Britain's Standard Chartered confirmed it had gained a majority stake in Taiwan's Hsinchu International Bank in what's at least a $1.2 billion deal. It's the first takeover of a Taiwanese bank by a foreign company, and gives Standard Chartered a foothold in Asia's fourth largest banking market. Hot on its heels, HSBC and Citigroup are now also reported to be in talks with smaller, private banks in Taiwan. (Both companies declined to comment.)

So what's the big attraction? In recent years, Taiwan's banks have successfully reduced their bad loan ratios from more than 11 percent in 2002 to about 2.4 percent in late August. They're also now at bargain prices, according to analysts. But there's more to it than the banks themselves. Analysts say that Standard Chartered is trying to tap an often overlooked chunk of the Chinese banking market: some 1 million Taiwanese work or live in mainland China and the island has pumped at least $100 billion into the mainland's booming economy since the late 1980s. Taiwanese banks can't open branches in China, and vice versa—which leaves an opening for foreign players to provide a more efficient banking link. The road to riches, it would seem, goes through Taiwan.

Original site

Lonely at the top

In Taiwan, it's hard to find anyone who will speak well of President Chen Shui-bian
Jonathan Adams
Newsweek Japan, September 27, 2007
(Untranslated draft)

Wang Shu-ping has had it with the president of Taiwan. Standing in front of the Presidential Office in Taipei under cloudy skies last Wednesday, the 50-year-old housewife explained why she voted for Chen Shui-bian and his Democratic Progressive Party in 2000‑and why she now has joined thousands of protesters in demanding that he step down, 20 months before the end of his term. “Chen Shui-bian was a good mayor of Taipei, so I thought he would be a good president,” said Wang, who like most of the protesters was wearing red to show her anger. “But now, I think he’s so greedy … I don’t think he loves the people, he just cares about himself. He’s not qualified to be president.”

These days, Wang’s hardly alone in feeling that way. A round-the-clock anti-Chen protest began on Sept. 9, and thousands have returned every day since‑including an estimated 320,000 who showed up for a massive rally at Taipei’s main train station on Friday night. Recent polls indicate that more than 60% of the public thinks Chen should step down, and his approval rating has dropped to a near-record low of 18%, according to a poll from Shih Hsin University earlier this month. Six years after riding office on a wave of Taiwan-first pride‑embodying the promise of a new democratic era after decades of the Kuomintang’s iron-fisted rule‑Chen has alienated most Taiwanese.

Why have so many turned against him? Chen is widely blamed for inept governance and for the island’s stagnant economy (per capita GDP declined in the first two years after Chen took power, before rising to around US$15,300 last year). And some of his own supporters fault him for not making more progress toward full independence and political reform.

But the recent protests are focused on corruption. For the past year, the public has been fed a steady diet of graft allegations against the president’s aides and family, served up almost daily by a muckraking KMT legislator and media outlets that are mostly hostile to Chen. A former Chen aide is in jail, and Chen’s son-in-law has been charged with insider trading. Chen’s wife is accused of improperly accepting gift vouchers for an upscale department store. And most recently, Chen himself was questioned over allegedly falsifying expenses from a secret diplomatic slush fund. Such accusations are reaching a critical mass. “Before, people who supported him could say, it’s not his fault, you can’t really blame the bad economy on the president, and the bad performance you can blame on the irrational opposition party,” said Emile Sheng, a spokesman for the anti-Chen sit-in. “But corruption is what’s really broken people’s confidence in him.”

In fact, there’s no evidence so far that ties Chen directly to wrongdoing. And even if true, the alleged corruption pales next to the dirty “black gold” practices common during KMT rule. Many analysts say that while the scandals have helped fuel widespread anger at Chen, the driving force behind the protests is the ongoing opposition effort to overturn the 2004 election result by any means. Chen won the last presidential election by a razor-thin margin after an assassination attempt the day before the election. To this day, many in the opposition camp‑as well as independents like Wang, the Taipei housewife‑believe that Chen rigged the shooting in order to steal the election. These people have never recognized Chen’s legitimacy and have seized on the latest scandals for more ammunition against him. Although the KMT did not launch the latest rallies, the losing vice presidential candidate from 2004 and KMT Chairman Ma Ying-jeou have made regular appearances, and most of the protesters are opposition supporters from Taipei, which tends to vote pro-KMT “blue.” “The real issue is the power struggle,” Chiu Hei-yuan, a fellow at the Institute of Sociology at Academia Sinica in Taipei. “The [opposition camp] is trying to end the DPP’s rule as soon as possible‑they can’t even wait until 2008.”

They may have to. While most Taiwanese may have lost confidence in Chen, they’re also leery of the idea of ousting him through street protests. According to a poll last week by Era TV, only 23 percent preferred using mass movements as a way to get rid of the president, compared to 60 percent who preferred Constitutional means such as recall (one opposition-backed recall measure already failed in June). And 69 percent believed that the current anti-Chen protests would fail. For his part, Chen has insisted he will finish his term, and has denied any wrongdoing. That stubbornness is unlikely to change unless Chen is directly implicated in wrongdoing, or his own party turns against him, analysts say.

But if the protests don’t force him from office, they will help put the brakes on the Taiwan independence movement. Though Chen has actually had few realistic options for moving toward “full” independence, he often rallies support with China-bashing and stirring Taiwan-first rhetoric. With the public now more concerned about good governance and bread-and-butter issues, there’s even less of a market for such nationalism. “Any new government, either DPP or KMT, will likely slow the pace of Taiwan independence, and change track to `maintaining the status quo,’” said Philip Yang, a political science professor at National Taiwan University. With polls showing nearly 90% support some form of the `status quo’ in cross-strait relations, that’s a fail-safe strategy.

Thursday, February 22, 2007

Kingdom of Butterflies

Taiwan: A butterfly-lover's paradise
Jonathan Adams
Newsweek Japan, August 9, 2006
(unedited and untranslated version)

Two times a month, Wang Hui-wu, a government employee from Taipei County, brings his wife and two sons—Bin-yun, 8 and Bin-hsiang, 3, to see the butterflies at the Taipei Zoo’s Insect House. The two boys like to stand as still as they can in the butterfly greenhouse until a “leaf butterfly”—which disguises itself from would-be-predators by looking exactly like a tree leaf—alights on their head or shoulder.

For Wang, 38, the regular pilgrimages to see the zoo’s butterflies are the continuation of a life-long passion. As a teenager, he used to head into the mountains ringing Taipei with his friends from a high-school club, in search of the delicate insects. “Before, I used to catch butterflies with a net,” he says. "Now I catch them with my digital camera.” He’s making a digital album of photos of butterflies from the zoo that he’s posted to the web. And there are plenty of subjects willing to strike a pose. “They have a lot of species here that you can observe,” said Wang. “If you go to the mountains, they can be hard to find—you have to get lucky.”

Butterfly lovers in Taiwan are lucky to have one of the world’s best collections of the beautiful insects on display year-round, right in their backyard. The Taipei Zoo’s butterfly hall has been around for 20 years, but last April it moved into a state-of-the-art new facility: the two-story, more than 3,000 square meter Insect House. There’s an attached butterfly greenhouse filled with butterflies gorging on nectar plants.

Most innovative, the Insect House is tucked into a valley that’s a natural habitat for butterflies. Behind the building a short trail threads through the valley, providing an open-air natural zoo for butterfly-viewing. The zoo’s staff has planted plenty of nectar plants and is researching other ways to best lure free-ranging butterflies to the valley. “The butterfly valley is very special, and not only for butterfly watching, but for watching birds, wild animals and plants endemic to Taiwan,” said Yang Ping-shih, a butterfly expert at National Taiwan University in Taipei.

Taiwan is an ideal place for such a “natural zoo,” because of its rich variety of butterflies. Although it’s only about one-tenth the size of Japan, Taiwan boasts around 400 species (30 to 40 of which are endemic to the island), more than can be found in Japan. The reason is the island’s sharply varied climate, which ranges from tropical forest in the south to temperate climates in Taiwan’s towering central mountain range. “Taiwan’s butterflies are very diverse,” said Chen Chien-chih, a butterfly expert at the Taipei Municipal Teachers College. “There are some from mainland China, the Philippines, Japan, and even some from as far away as the Himalayas.”

That diversity—and sheer numbers—of butterflies once earned the island the nickname the “Butterfly Kingdom.” In the 1960s and 1970s the export of butterfly specimens and products to the US and Japan was a huge business—particularly in the region near Puli, which was called “Butterfly Town.”(The town now hosts the Muh Sheng Museum of Entomology,, one of the largest insect museums in Asia). But the island’s rapid development stripped away many of the natural habitats for the creatures. That, combined with the depletion of the population to feed the butterfly trade, greatly reduced the butterfly population and even threatened some species with extinction.

Now, butterflies are recognized as one of the island’s precious resources, and some species are protected by law. Butterfly viewing is encouraged, instead of butterfly collecting. In late May or early June, sightseers flock to the mountains north of Taipei for the Yangmingshan Butterfly Festival, whose highlight is viewing the milkweed butterflies. Some types of milkweed are known to migrate to and from Japan from Taiwan, but the reasons and patterns of migration are still poorly understood. From November through January, butterfly lovers can view the purple milkweed butterfly in the south, in Kaohsiung, Pingtung and Taitung Counties. These butterflies overwinter in valleys in those areas, blanketing pockets of the region.

Those are the major butterfly-watching events of the year, but Taiwan has something for butterfly lovers in every month. “In Japan, butterfly-watching is seasonal, taking place in the summer and autumn, but in Taipei we can go butterfly-watching all year round,” said NTU’s Yang. For those who don’t have time to head into the mountains searching for a glimpse of a rare butterfly, the Taipei Zoo’s Insect House is an ideal stop. Of its 150-some butterfly species, it displays at least 20 at any time indoors, in addition to additional species that might drop in as guest performers in the outdoor butterfly valley.

On a recent trip to the zoo, Insect House curator Wu I-hsin showed off some of the highlights of the zoo’s butterfly collection as they flitted between nectar plants in the steamy butterfly greenhouse. In addition to the “leaf” butterfly beloved by the Wang children, there’s the black and white tree nymph, which is nicknamed the “stupid butterfly” because of its na├»ve friendliness: “It will fly right up to you, it’s so easy to capture,” said Wu. Other star attractions are the black swallowtail or “spangle” butterfly and the “Paris peacock,” another type of swallowtail butterfly found in northern Taiwan.

The Insect House also boasts 50 other insect species on display—including a diving beetle, a water scorpion that breathes through its tail, which it sticks up through the water’s surface, protected insects unique to Taiwan’s Orchid Island, and huge walking stick insects from Malaysia. All of which means insect-lovers—especially butterfly fans—will find plenty to enjoy on a trip to Taiwan. “We have many insect species here you can’t find in Japan,” said Wu. “You can come to our zoo and in a short time see many of Taiwan’s insects and see what’s special about Taiwan’s habitats.”

Taipei Zoo Insect House
Open 9am to 5pm every day, 9am to 9pm on weekends in the summer. Closed every fourth Monday of the month for cleaning.
Admission: NT$60 for visitors over 12 years old, NT$30 for children over 6 or students with an ID, free for children under 6 and seniors over 65.
How to get there: Take the MRT Muzha line to the Taipei Zoo stop, the last stop on the line.

Crisis of Confidence

Behind Taiwan's economic malaise lies a failure of leadership

Jonathan Adams

Far Eastern Economic Review, July/Aug 2006

In the shadow of the world’s tallest building, Taipei 101, a team of roller-skating models wheeled by in red wigs, white hot-pants and red sequin halter-tops—touting a new graphics card for computers.

Inside five nearby convention halls in the upscale Xinyi district, some 30,000 foreign buyers babbled away in English, Mandarin, German and Hindi, while ogling the hi-tech world’s latest gizmos: sports-car themed laptops, smart-phones and massive flat screen TVs. This was early June’s Computex—a boisterous carnival for geeks that’s on track to becoming the world’s largest computer trade show, overtaking CeBIT in Hanover, Germany. Computex is proof positive that Taiwan’s firms remain the vital heart of the global electronics manufacturing business, and that Taiwan has kept pace with the cutting edge of globalization.

And yet, despite the beaming models in body-hugging vinyl and all the new gadgets, a gloom lurked beneath the surface of this year’s show. In conversations with staff from a handful of Taiwan’s top technology firms, an odd refrain emerged: the tech industry may be thriving, but Taiwan’s broader economy is in trouble.

The disconnect was all the more jarring when such comments came from people holding some of the island’s best-paid jobs in its brightest sector. Said a PR representative from one of the island’s top contract manufacturers: “You turn on the TV every day and see bad news about the government and about the economy. How can anyone be confident about Taiwan’s future? I’m afraid [Taiwan] will keep declining.”

What’s going on here? Surely the economy isn’t doing as badly as all the pessimism—or the island’s sensationalized media reports—would suggest. In fact, in some respects the economy is doing quite well. Unemployment recently hit a five-year low of 3.78%; the island’s exports surged to a record high in May ($18.93 billion), led by strong demand for electronics. And Taiwan ranked an impressive fifth in the World Economic Forum’s latest global competitiveness report, beating out other Asian rivals such as Singapore (6th) and Japan (12th).

To be sure, there are plenty of real economic challenges: household disposable income growth has stagnated; the island’s manufacturing base has hollowed out; South Korea has emerged as a key competitor; and Beijing is working to marginalize Taiwan from the trend of Asian economic integration.

But Taiwan’s economy isn’t doomed, and the island has the capacity to meet the challenges ahead. The best explanation for Taiwan’s angst is more than just economic, it’s psychological: What Taiwan is facing is a crisis in confidence.

Red herring

It’s easy to be misled into thinking that the root of the problem is Taiwan’s troubled relations with China. Chen Shui-bian’s government is widely criticized for antagonizing Beijing and not moving fast enough on opening cross-Strait economic links—which the opposition says is stunting the island’s development. Led by Kuomintang (KMT) chairman Ma Ying-jeou, Mr. Chen’s opponents want to establish both direct air links and a raft of closer economic ties with China.

But Mr. Chen’s Democratic Progressive Party (DPP) is wary of China, and wants to encourage businesspeople to diversify to places like India. The government’s fear is that overdependence on China will play into Beijing’s long-term strategy, in which cross-Strait economic integration is the slippery slope that will lead to political unification.

Moreover, they’re concerned about eroding Taiwan’s competitive edge by allowing its best technology to go to China. They’ve therefore prevented the island’s firms from moving cutting-edge chipmaking technology to China, for example, and have kept in place a regulation capping Taiwanese firms’ investment in China at 40% of their paid-in capital.

The public increasingly supports links as a way to help the economy: according to a Gallup poll conducted last year, nearly 70% support direct cross-Strait passenger flights (up from 50% just two years ago) and 62% support allowing more Chinese tourists to visit Taiwan. The island’s voters are therefore inclined to reject economic isolationism—which means that the 2008 presidential election will likely be won by a KMT candidate who promises closer economic links (presumably Mr. Ma), or a DPP candidate who successfully co-opts that issue.

But if closer cross-Strait ties are inevitable, they are not a cure-all for Taiwan’s economic woes. To be sure, direct flights would save businesses huge amounts of money and the hassle of having to travel to the mainland through Hong Kong or Macau. And an influx of Chinese tourists would provide a shot in the arm for the island’s services and tourism sectors, which have struggled, while the tech firms in Hsinchu rake in revenues. Both measures would provide an undeniable psychological boost for the island.

However, the beneficial effects of direct links are too often exaggerated—and an overemphasis on what they can deliver distracts attention away from Taiwan’s deeper, longer-term challenges.

“I don’t think [direct links] are the key factor that will help improve Taiwan’s competitiveness,” said Johnny Chiang of the Taiwan Institute of Economic Research (TIER). “The real economic problems still have to be solved by Taiwan itself.”

TIER conducted a study last year that assumed the Association of Southeast Asian Nations, plus China, Japan and South Korea would form a free trade area and exclude Taiwan. Without direct links, it was estimated that Taiwan’s GDP would drop by 1.87%. But with direct links, the effect was only slightly blunted, to a 1.35% drop. And analysts estimate the boost from Chinese tourism made possible by regular flights would only be about $600 million, in what’s currently a local $12 billion industry.

In fact, many in Taiwan are less focused on China than on South Korea, which has emerged as a key competitor in an array of electronics and other exports. There’s been much hair-pulling on the island over the fact that South Korea’s per capita GDP last year surpassed Taiwan’s. Anxiety was heightened in May when Deputy U.S. Trade Representative Karan Bhatia gave Taiwan the cold shoulder on negotiating a U.S.-Taiwan FTA—which the Chen administration dearly wants—and then jetted off to South Korea for FTA talks with Seoul.

Taiwan has attempted to seek greener pastures by inking FTAs with its handful of Central American allies, including Panama and, most recently, Nicaragua.

Such agreements are only marginally helpful. The solutions to Taiwan’s economic problems won’t be found far across the Pacific, but rather much closer to home.

Challenge of liberalization

The island’s fundamental long-term challenge is how to manage the transition from export-led manufacturing to a services-based economy amid fierce, unprecedented competition brought on by globalization.

Duncan Wooldridge, a Hong Kong-based economist with the investment bank UBS, traces stagnant incomes to the previous decade, when Taiwan’s small- and medium-sized manufacturers began getting squeezed. China’s surging economy growth drove up commodity costs while overseas customers demanded lower prices, prompting Taiwan firms to shift productions offshore—mostly to China—hollowing out the island’s manufacturing sector and forcing many unskilled workers into the lower-paid services sector.

That squeeze—what Wooldridge calls the “terms of trade shock”—combined with the collapse of the tech bubble in 2000 to deliver a one-two punch to the wallets of many Taiwanese. Inflation-adjusted household disposable income growth, which averaged more than 6% per year in the 1990s, dropped sharply to around 1% on average since 2000. Real wages so far this decade have been flat or in decline.

In response, the Taiwanese turned to credit to keep up their buying habits, which fueled a recent bubble. While Taiwan’s problem was small compared to a similar binge earlier this decade in South Korea, media coverage of suicides and crimes involving so-called ka nu, or card slaves, have fueled the popular perception of an economy gone off the rails.

But Mr. Wooldridge says the ka nu are just a symptom of Taiwan’s broader challenge: how to create income growth that’s not just limited to just a few lucky sectors. That challenge is shared by manufacturing-based economies that are struggling to move up the value chain amid fierce competition. And the solutions are those any economist would recommend.

“I don’t view what ails Taiwan’s economy as being fundamentally driven by a China problem, because no one else in the region has been able to avoid these challenges,” said Mr. Wooldridge. “The longer-term issue is fundamentally how to get household income back up, and that’s going to require broad-based liberalization, a restructuring of the services sector and an effort to move up the ladder to higher value goods.”

Businessmen in the high-tech industry are forging ahead on their own, by moving aggressively into branding to create a higher value-added model. And Taiwan is well-positioned to benefit in hot industries like LCD panels for new slim-screen TVs: The nation’s scrappy firms last year overtook South Korea’s as the top producer of flat panels.

Leadership vacuum

But outside the tech sector, the Taiwanese are badly in need of leadership. And this is where Taiwan’s politicians—both the government and the opposition—have failed its people. What’s missing is a broad, long-term vision for where the country is headed and how it will meet the tough economic challenges ahead. The lack of such a vision is probably the single best explanation for the deep unease felt by many Taiwanese about their economic future.

To be fair, the government has offered an array of plans. It initiated a “two trillion, two star” program of incentives to boost production in its leading high-tech sectors: semiconductors and flat panels. It is also bolstering emerging sectors that look promising: Deputy Minister of Economic Affairs Chen Ruey-long recently touted the government’s efforts to jumpstart the energy conservation and renewable energies industries. And Mr. Chen has paid plenty of lip service to privatizing state-dominated industries and liberalizing the financial sector.

But these initiatives have not been tied together into an overarching vision that could give the public a sense of national purpose and direction. Moreover, Mr. Chen’s government has been blasted for its amateurish approach to economic management, erratic policy-making, failure to consult and heed expert opinion, and inability to create a good investment environment. And many feel the government has moved too slowly on liberalizing of the financial sector, which is seen as crucial for making Taiwan’s firms more competitive.

The problems can’t all be laid at Mr. Chen’s feet, however. Taiwan has been paralyzed by deep political gridlock. A conference in 2001 was convened to achieve a consensus on economic direction, but many of its conclusions have yet to be implemented—and since then, relations between Mr. Chen’s government and the opposition-controlled legislature have deteriorated into an all-out warfare. The opposition has pursued a scorched-earth policy that’s rendered the government completely dysfunctional on a wide range of issues. And the opposition has also failed to articulate a comprehensive economic vision for Taiwan that goes beyond the mantra of direct flights with China.

In fact, the political gridlock has become so bad that many in Taiwan have taken a “plague-on-both-their-houses” attitude and begun to question whether their young democracy is capable of making the tough collective decisions needed in order to move forward.

“Who in Taiwan has a blueprint for what Taiwan will look like tomorrow? What’s the business plan? Why should I vote for any of these parties?” asks Pamir Law Group’s managing partner Nicholas Chen.

The way forward

Vincent Siew believes he has the answer. Sitting in his sunny second floor-office in a leafy Taipei neighborhood, the former premier and economics minister lays out the broad outlines of a study to be submitted at a national economic conference scheduled for late July. Mr. Siew, now the chairman of the Chung Hua Institute for Economic Research, says that it’s critical for the nation to map out a 10-year economic plan at the conference. “This conference must have a long term vision—and with that vision, people’s confidence could be restored,” he said.

Mr. Siew’s plan calls for both closer economic integration with China and an FTA with the U.S. But the centerpiece is an upgrade of Taiwan itself. The plan’s highlights—what Mr. Siew calls “bridges, brains and branding”—are echoed by others: Taiwan should aim to become a global service center by 2015, bring in more foreign talent, and innovate up the value chain. He points to European countries like the Netherlands, Finland and Ireland as models for Taiwan, and says the nation should develop a “small but beautiful” economic strategy to capitalize on the advantages of its nimble, small and medium-sized enterprises.

That all sounds great in theory. But there’s cause to be skeptical. Will the nation’s politicians be able to put aside their “gotcha” politics long enough to truly focus on the nation’s economic future—particularly given the opposition’s recent push to oust the president by any means? Some relief from the political logjam may come next year, when constitutional changes create a more stable two-party system in the legislature.

But to listen to Mr. Siew, Taiwan may not be able to afford to wait that long.

“The day is coming when people will stand up and say, ‘We won’t let these irresponsible politicians play these games that hurt our economy and our livelihood,’” he said.

Until the island’s political leaders can put aside their squabbling and communicate a plan for the nation’s economic future, the Taiwanese will be left to lurch ahead in the dark on their own—and that’s not likely to bolster anyone’s confidence.

Last Waltz

Taiwan's president gets even weaker
Jonathan Adams
Newsweek International, June 12, 2006

It was a bad week for Taiwan's embattled President Chen Shui-bian. Facing a series of corruption scandals involving his relatives that have driven his poll numbers to record lows, the president announced on Wednesday that he would delegate some of his powers. He'll retain nominal control over national security and foreign affairs, but has handed over the reins of day-to-day power to his prime minister—and possible 2008 presidential candidate—Su Tseng-chang. Chen also vowed to drop out of all campaign activities for his Democratic Progressive Party.

Facing an uphill battle to retain power in the 2008 election against the Kuomintang, the DPP is happy to distance itself from the unpopular Chen. How Beijing will react is another matter. Although Su will pursue a more moderate cross-Strait policy, any changes he makes will likely be modest, according to Lo Chih-cheng, a political scientist at Taipei's Soochow University. Expect minor adjustments like economic measures allowing in more Chinese tourists, he says. Beijing's distaste for the independence-leaning DPP will likely stymie anything more. "Su won't be able to jump-start political talks with China," Lo says. "It takes two to tango."

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