Faced with economic crisis, Taiwan looks to its consumers for help.
By Jonathan Adams, Global Post, January 21, 2009
ZHONGHE, Taiwan — Wei Chi-chang served me a plate of fried worms, then showed off the vouchers he'd received from other customers.
The Taiwan government passed out NT$3,600 (US$108) in consumer vouchers to each citizen on Sunday, in a bid to jump-start the island's economy. A few used theirs immediately at Wei's restaurant, here in a gritty Taipei suburb. For Wei and other shop owners, the coupons are a helpful boost in tough times.
"I've already received over NT$2,000 (US$60) from customers today," said Wei.
The global economic slump has hit Asian economies hard. Countries like Taiwan are especially vulnerable, since their economies rely heavily on exports.
Taiwanese firms ship much of those goods to the U.S., either directly or via factories in China. So when American consumers get stingy, Taiwan suffers. Exports fell a stunning 42 percent year-on-year in December, and the island's GDP growth slowed to about 1.9 percent in 2008 from 5.7 percent in 2007, according to government statistics.
Like most other countries, Taiwan is fighting back with a range of stimulus measures. It's jacking up government spending to give the economy a jolt. The government has proposed a massive NT$858.5 billion (US$25.7 billion), four-year spending plan, including US$15 billion on infrastructure projects, and US$6 billion to create more competitive industries.
And it's giving money directly back to Taiwanese consumers, with the vouchers — in total, a US$2.6 billion handout.
The bonanza sparked a national frenzy starting Sunday morning, when voucher distribution began at schools and other stations around the island.
Taiwanese lined up in droves to get their "red envelope." In traditional Chinese culture, gift money is given in bright red envelopes at weddings, holidays and other special occasions. So the government, naturally, did the same with its consumer vouchers.
Taiwan's many cable TV stations ran nonstop coverage of "Voucher Day." They followed the president and premier as the two spent some of their coupons at a restaurant and flower market, respectively. TV anchors breathlessly listed all the goodies — apartments, cars, gold, even a year's stay on a deserted island — that local governments are raffling off to entice customers.
One man became a media focus when he started spitting blood while waiting in line for his vouchers ("I drank too much with friends yesterday," he explained to TV reporters from his hospital bed.) Others got cranky waiting in long lines.
Back in Zhonghe, Wei, 36, said business had slumped at his Yunnan- and Thai-style restaurant. "Before, most of my customers used to come in two or three times a week," he said. "Now, it's maybe a couple times a month, because the economy's bad. There's a big difference."
He said he'll spend his own vouchers on a flat-screen computer monitor for his two children. As he talked, a voice boomed over loudspeakers at a nearby school where they were distributing the coupons: "There's not much time left to pick up your vouchers, so please come get them soon, thank you."
At the voucher collection point in my own university neighborhood, some said the scheme wouldn't address the roots of Taiwan's economic ills. "It's like taking an aspirin for a headache," said 38-year-old Mr. Lo, who works in the IT industry. "I don't think it's a good solution. The government should create a better business environment — like Singapore."
Another man who declined to be named said the amount was disappointing. "It's small potatoes," he said, using a favorite English phrase of educated Taiwanese. "Maybe we'll buy some candy," he said with a laugh, as his wife smiled beside him.
But Norman Yin, a professor of finance at National Chengchi University, said the small amount might actually help the voucher scheme work. That's because Taiwanese will be more likely to spend then sock away such a pittance in bank accounts. He said similar voucher schemes in Japan in the early 1990s and last year, and cash handouts in Macau and Singapore last year, failed because people saved instead of spending.
Yin said the response to the policy so far was encouraging. The voucher scheme should add even more than US$2.6 billion to GDP, due to the multiplier effect (money getting spent over and over as it races through the economy). But he said it would take two or three months to see if the scheme would continue to spur consumption, and so lead to more manufacturing and hiring.
"It's a short-term measure, and we don't know how long it [the effects] will last," said Yin.
Standing by a stroller holding his two infant daughters at one voucher station, Eric Lai, 34, said he and his wife will spend their vouchers on diapers and other household goods.
Lai said the vouchers can help Taiwanese forget about the island's constant political feuding. "It's good for Taiwan to put our focus on economics, not just politics," Lai said.
The relief brought by the vouchers may prove temporary. But in an economy with a serious migraine, that's welcome all the same.
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