'A rare opportunity'

Taiwan's pragmatic president-elect urges Beijing to seize the chance for cross-strait detente

Newsweek, March 27, 2008

A political earthquake recently shook Taiwan. Out went the brash, pro-independence party. In comes the Kuomintang's mild-mannered, China-friendly Ma Ying-jeou, who has ambitious plans to open Taiwan's economy to China. The power shift has raised high expectations of economic revival in Taiwan, as well as cross-strait détente.

Now comes the hard part. Ma, who takes office on May 20, must jump-start Taiwan's economy amid what's shaping up to be a nasty global downturn. And his promise of warmer cross-strait ties depends to a large degree on China's goodwill. NEWSWEEK's George Wehrfritz and Jonathan Adams sat down with Taiwan's president-elect to talk about Tibet, his economic plan, and his message for Hu Jintao:

NEWSWEEK: You won in a landslide, surprising many observers who expected a close race. What do you attribute that to?

The pugnacious nationalism … of the current government has created many problems. But I think economic problems were the biggest [factor] … the current administration's performance has been so poor and people just felt that enough is enough. My running mate and I made a very comprehensive proposal for the future. But our opponent … didn't really lay out a vision for Taiwan. He spent a lot of time attacking me, and my family members. That also proved to be counterproductive. People wanted the candidates to tell them where Taiwan should go.

NW: You now have a strong mandate. What do you think the Taiwanese people want?

Ma: They want a vibrant economy, a clean government, a society with equitable distribution of wealth, and a peaceful Taiwan Strait.

They've been very much troubled by the existence of a very corrupt government … this is probably one of the single most important things. The year before last year, there were 100,000 people rushing into the streets to protest [against corruption involving the First Family and top officials]. That never happened in Taiwanese history, so many people. And this is something that people resent the most.

On the economy, I think it's quite clear that [the DPP's] policy of quasi-isolation [made] Taiwan businesses less competitive. Taiwan's national competitiveness in all of the surveys lagged behind the other three [Asian] "tigers." Our economic growth has become … only better than Japan. Intellectuals, the middle class, but also others feel change is really required.

NW: What positive contributions do you think your predecessor Chen Shui-bian has made to Taiwan's democracy?

Ma: He started as a human rights lawyer, defending some of the political prisoners, people who were roughly suppressed. So he did contribute to Taiwan's democratization. I think his rise to prominence from a very poor family proves that Taiwan society is a society with mobility.

But unfortunately, he didn't really keep his house in order. I was very much surprised by how many family members of his were involved in corruption charges. That's one thing.

Another is his insistence on the ideological isolation of Taiwan. [This] really brought a lot of damage to Taiwan. But otherwise I think he has his place in history as a democratic leader. I think people certainly remember his contributions in the past, but resent very much what he did in the last eight years.

NW: You've made many promises for improving cross-strait relations, on tourism, direct flights, and Chinese investment in Taiwan. But what makes you so confident China is going to engage you?

Ma: On the less complicated things like direct flights and more tourists, actually these issues have been discussed for at least three years. Each side knows where the bottlenecks are. I think basically they're ideological.

For instance, tourists. Our side says they should use passports, so that we can stamp on their passport. And they want to use a special travel document to avoid giving the outside world the impression that these are two countries. [But] you can always find ways to bypass that.

Let me give you an example. In 1990, the two sides met in Kinmen to discuss the issue of expatriation of illegal immigrants, criminals or criminal suspects. … So they met and everything went just fine. They came out with an agreement. At the last minute there was a bottleneck: how to date [it]. The actual month and date was September 20, the problem was the year. Here in Taiwan we used the 79th year of the Republic of China, they used 1990.

Well, the discussions were stuck for a while and then they made a brilliant decision, they said, just leave [the date] blank. You see, you can always find ways to bypass issues like this. That is why we are very confident that if we are willing to … bypass this problem [these things] could be done very easily.

NW: But recently during the campaign you called Chinese Premier Wen Jiabao "unreasonable, arrogant, stupid and self-righteous." You also suggested a possible boycott of the Beijing Olympics if the Tibet situation gets worse. Do you think that could hurt your efforts to improve cross-strait relations?

Ma: I didn't like the way they talked about Tibet and Taiwan together. It's like when they came up with the idea of 'one country two systems,' and wanted to apply that to [Taiwan]. We reminded them Taiwan is not Hong Kong, and they shouldn't draw that analogy. Actually they didn't have to talk about Taiwan when they are handling Tibetan affairs. And I think that was really an irritant, and that's why I had to not only criticize them, but denounce the way they talked about Taiwan.

And particularly during a presidential election – it's actually aiding my opponent. So that's why I became a bit furious.

On the boycott issue, of course those are conditioned on two scenarios. The first, they continue to suppress the Tibetan people, and the situation gets worse. And then, we should consult the people whether we should stop sending our teams to the Olympics … So we're watching the Tibetan affairs development quite attentively to see whether there's any sign of worsening.

NW: Do you see yourself taking a more moderate tone to make sure you can deliver things like direct flights?

Ma: Actually, these [things] are overdue, they should have been done more then ten years ago. Because [they haven't], Taiwan has become less competitive in many ways. The speed of China's rise has become so quick, [but] Taiwan has difficulty taking advantage of the situation. We're not saying we want to be "pro-China" -- we're just trying to do business as usual. So that's why we call it 'normalization' of economic relations with mainland China.

NW: If you were the Chinese leadership, how would you manage the Tibet crisis that we're seeing unfolding today?

Ma: I think they should learn from the lesson of June 4, 1989. Of course, Tibet is a very difficult case. But I think the Dalai Lama's call for autonomy seems to be a moderate one. Our position actually is in a way echoes the Dalai Lama's call for autonomy. Because he doesn't call for independence, he calls for non-violence. I think they should really start dialogue with Dalai Lama.

The Tibetan people are very, peace-loving people. But unfortunately, [Beijing] insists that the whole thing was instigated by the Dalai Lama. That makes things worse.

NW: The US economy appears headed into recession. Given this gloomy global economic outlook, how do you expect to deliver on your pledge to revive Taiwan's economy?

Ma: It's impossible for Taiwan to decouple its economy from that of the United States, particularly when the US is having economic problems, and maybe recession.

But cross-strait trade and investment still [give us] some room for maneuver. When the election results were revealed, the next day everybody seemed quite optimistic about the future. People believe they’ve been suppressed in the last eight years.

So I think if we are able to deliver on our promise of direct flights and tourists by July, the optimism will continue. If the current consumer behavior continues, there could be more than NT$100 billion of consumption by the end of the year. That means to add one percentage point to our GDP growth.

NW: Is it realistic to think Taiwan can go back to old days of high-growth, or should people be more modest in their expectations?

Ma: Well, even the DPP government once reached six percent growth. I think we will be able at least to create a favorable situation, by changing the policy on direct flights, on tourism, and get people generally optimistic for the future. And that will help. So this year, the general forecast for our economic growth is 4% or something like this. But I'm cautiously optimistic, I think it will be much better than that … People are thinking big, and I think this is good.

NW: Like many Asian countries, though, Taiwan is seeing growing inequality. How do you intend to tackle that problem?

Ma: We will introduce a new tax credit program for low-income workers, [like one] that has been in existence in the United States for quite a while. If you have a four member family and your income is below NT$480,000, you don't pay any taxes … we will give you money. It's called 'negative income tax.'

But for the moment, if we allow mainland tourists to come to Taiwan, I think, the low-income people could also benefit from that, because the businesses that would benefit from such a new wave of tourists is the service industry, that's spread across the society. So I think that way we could increase the general wealth of the society, particularly the middle and low income people.

And I think that can be done. Because the KMT, although it looks like a right-wing political party, has a lot of strength on the equitable distribution of wealth. So that will also be a very important part of our policy.

NW: There are a few major arms purchases in the pipeline, such as a request for F-16s. Are you concerned such purchases could harm efforts to improve ties with China?

Ma: In the early 1990s, we were able to acquire F-16s from the US, and also Mirage-2005s from France. At the same time we reached a 1992 consensus with the mainland. The 1992 consensus is an important milestone because that's the first effort from the two sides to … manage the problem of 'one China'.

Once we developed that formula, 'One china, respective interpretations,' that effectively shelved the problem. Then we could turn our attention to more urgent issues. So what I've been calling for is that both sides simultaneously return to the original version of the 1992 consensus.

And I think our effort has actually made some inroads. The mainland realizes that now Ma Ying-jeou is president, and he supports the 92 consensus, [which is] 'One China, different interpretations.' If they don't [cooperate], then cross-strait relations would not have a breakthrough, and four years later people may choose the DPP.

NW: Would you continue to push for major arms purchases from the US?

Ma: Yes, actually those that are in the pipeline are the Patriot-3 [missiles], and we have already agreed to purchase the P3-C reconnaissance anti-submarine planes. And now the only issue not decided is the submarines. And I think this is very controversial, it's very expensive. So when we are inaugurated we have to deal with these three first. But F-16s, have been already requested, I think the Americans have not made a decision yet. That is also very urgent in a way, in a way it's more urgent than the submarines, because we have to replace the aging F5-Es.

NW: When do you think the practical economic discussions with China will segue into a political dialogue?

Ma: In terms of priority, [the] economy comes first. The normalization of the economic relationship, not only as regards direct flights or tourists, those are the very basic things, but also thinking about an investment guarantee agreement, an agreement to avoid double taxation, an agreement to let Taiwan financial service industry go to the mainland and invest, and to take care to serve their Taiwan clients.

All these things, in other parts of the world these are just basic in economic relationships. But after 20 years of active trade, we haven't got those. And that is why we think this is high time to focus on those issues.

Of course, you could simultaneously engage them on the issue of a peace agreement. But those [are] maybe going to take more time. For instance, whether they withdraw the missiles or the military confidence-building measures, all of these require some time. Those touch very sensitive nerves [on both] sides.

But in principle the mainland side is ready to negotiate a peace agreement with us. And I think this is a good sign.

As [Beijing] becomes wealthier and more important as a world power, they also become more sophisticated … in dealing with Taiwan.

From roughly 1995 to 2005, a ten-year period, they focused on "one country, two systems." And that was a failure of course, very few people in Taiwan supported that. So they shifted to a policy intended to prevent de jure independence for Taiwan, instead of promoting unification of the two sides.

And I think that is a very pragmatic change, and it also gives us the needed room for negotiation. [I] made it very clear that I won't support de jure independence and on the other hand, I won't discuss the issue of unification with the mainland during my term of office, which is at maximum eight years.

I think I may not even be able to see that in my lifetime -- [a solution to] the sovereignty issue. But we don' have to solve that at the moment. What [Beijing] is very much concerned about is [that] Taiwan shouldn't drift further away.

Well, once we guarantee that what we mean by 'different interpretation' of 'one China' is "Republic of China," our version -- we're not talking about a "Republic of Taiwan" – they could rest assured. This is a very important promise on my part. I risked my political life to say that. In Taiwan, to say that seems to be [treasonous] to some members of the DPP. But I made it very clear, listen, I will be the President of the Republic of China, which is the official name of Taiwan.

And so, if I insist that when I agree to the "One China" principle that my interpretation is the "Republic of China", I'm only enforcing my duties as the Republic of China president, there's nothing wrong with that. But this cannot be done by a DPP president.

So I think if I do that, the mainland, of course, they always think that the Republic of China has become defunct. But the Republic of China is well and here, and it's getting better in terms of our democratic outlook and all that. They have to recognize that reality.

I have a theory, that in the past, from 1949 from maybe 1979, the two sides, mainland china and Taiwan, denied the existence of the other side. So that is called 'mutual denial'. We can't really move from there to mutual recognition, because each sides' constitution and political situation excludes that possibility.

What we can achieve is something in between, what I call 'mutual non-denial'. In other words, you call yourself, the PRC, I take note of that, but I wouldn't have to say anything further. Same thing is true, I call myself, the Republic of China, you don't have to admit you actually cannot recognize that. It doesn't matter. All you have to do is not to deny our existence.

Then, room is created for maneuver. And I think this room is badly needed for both sides of the Taiwan Strait. They don't want to get involved in a major warfare with the United States. But if Taiwan declared de jure independence, they'd have to take action.

Now Taiwan has a new president, who vowed that he would not seek de jure independence. They could rest assured that that possibility is ruled out, as far as my term of office is concerned. And I will [not] negotiate any settlement of the Taiwan issue during the 8-year period. So maintaining the status quo is the best choice for the moment.

NW: There's a notion that China will evolve peacefully. Do you see its leaders today as easier to deal with; do you see progress?

Ma: Well, at least as far as economic decisions are concerned I think the answer is probably positive.

But on political issues, particularly human rights, they still lag behind.

But I think they are making progress, and we have to recognize that. And they need further encouragement. Take the Tibetan affairs, for instance. I noticed that there are more than 100 rather well know intellectuals in mainland china calling for the leaders to hold dialogue with the Dalai Lama. That never happened in the past. Nobody dared to stick their head [out] to do that. And now they will risk their life to say that. And I'm deeply impressed.

And I think in an Internet age, sometimes this information will spread very fast, and people will understand that, well, [there are] different perspectives. So I think mainland China is changing, [and] I'm cautiously optimistic about social development,

Their leaders have become less stringent, less inflexible, and more sophisticated in dealing with sensitive political issues.

NW: Do you have a message for Chinese President Hu Jintao as you prepare to take office?

Ma: The existence of Taiwan is an undeniable reality. We have different degrees of Taiwanese identity, that is very natural. For instance, my parents came from the Chinese mainland, and I was born in Hong Kong. But once I become president, I have to insist upon … Taiwanese identity.

But that wouldn't hurt the bilateral relations between Taiwan and the mainland because I also made it quite clear that during my term of office I would not pursue or support de jure independence.

Hu once said [we should] keep or maintain the commonalities, [and] ignore the differences. If we can maintain that spirit, obviously a lot of things can be achieved. I call upon him to seize this opportunity.

This is a rare opportunity for them to see the emergence of national consensus. [Taiwanese] support a more open relationship with the mainland, but at the same time, [to] maintain the Taiwanese identity. This is a very important message they shouldn't lose sight of.

Original site

It was the economy, stupid

In choosing a new president, Taiwanese voters focused more on their pocketbooks than fears of Chinese dominance

Jonathan Adams

Newsweek Web Exclusive, March 23, 2008

In its fourth presidential election Saturday, Taiwan voted overwhelmingly for the candidate backing warmer China ties, potentially ushering in a new era of moderation after eight years of Chen Shui-bian's confrontational approach.

In the end, the Kuomintang's Ma Ying-jeou successfully sold himself as the candidate for change, as opposed to four more years of the status quo under Chen's pro-independence Democratic Progressive Party.

Voters embraced widespread expectations that Ma can revive the island's stagnant economy, while rejecting DPP rival Frank Hsieh's scare tactics and negative attacks.

Speaking at a press conference after his victory, Ma said voters had given him a mandate to improve ties with China. But he made clear he would not compromise on Taiwan's sovereignty.

"Taiwan should be more open and more pragmatic; we should not isolate ourselves," said Ma. "Freedom and democracy are our most valued possessions—we will defend them with our lives."

China considers self-ruled Taiwan a part of its territory that must eventually return, by force if necessary.

Ma's landslide victory (58 percent to his rival's 42percent in a vote with high turnout) surprised analysts who expected a closer race. The result showed that for Taiwanese voters, the economy trumped national identity—the issue that had been decisive in previous elections.

Ma is a Hong Kong-born Mainlander, and some thought that could cripple his chances amid surging Taiwan-first pride. (Under the KMT's one-party rule, a Mainlander minority that arrived in the late 1940s long ruled over a native Taiwanese majority.)

"People think the economy is most important," said analyst George Tsai. "Identity or ethnic difference aren't important enough now to prevent a Mainlander from being elected. And that's a healthy trend for Taiwan's democracy."

Taiwan's economy is strong on some indicators, such as exports and GDP (5.7 percent this past year). But Taiwanese complain of stagnant wages, inflation and fewer job opportunities. They say strong growth is only benefitting a few in the island's high-tech and other sectors, and not trickling down to the lower and middle class. It's popular in Taiwan to refer to an"M-shaped" society, in which inequality has widened and the middle class shrunk.

Amid those economic woes, many saw Hsieh's DPP ignoring bread-and-butter issues while instead prioritizing identity politics and needless confrontation with China.

At a Ma appearance in Taipei, Luo She-mei, 38, said she'd voted for Chen's DPP in 2000, but this time would vote for Ma. "Our salaries haven't gone up, and there are fewer jobs," said Luo. "I think there should be a change of parties—we should give the KMT an opportunity."

Ma's economic plan promises Taiwanese relief. It features ambitious economic openings to China, including more Chinese tourists and investment allowed into Taiwan, and direct cross-strait flights. He even envisions a possible cross-strait common market.

In the last weeks of the campaign, Hsieh tried to scare voters on that issue, saying that what he termed Ma's "one-China market" could lead to a flood of Chinese laborers and cheap, poor-quality Chinese products into Taiwan. Voters didn't buy that—in part because Ma insisted he would not allow in Chinese laborers or agricultural products.

Meanwhile, Ma enjoys widespread admiration for what supporters say is a clean, upright character. That was a key selling point after corruption scandals that have dogged the ruling DPP in recent years.

Though himself a product of the KMT authoritarian machine that ruled Taiwan for more than 50 years, his supporters insist he now represents a "new KMT." Ma is committed to democracy and it's impossible for the party to return to its corrupt, authoritarian past, they say. "Today's KMT isn't the same," said Lin Jing-chong, 53, after voting for Ma in a Taipei suburb. "And if Ma doesn't do a good job, we'll change again in four years."

Ma has reassured pro-independence or pro-status quo Taiwanese by ruling out unification with China, and by saying Taiwan's fate must be decided only by its 23 million people. He won over some native Taiwanese by spending months with Southerners in the lead-up to the election—staying overnight in their homes, and joining them on their farms and fishing boats.

His recent criticism of Chinese Premier Wen Jiabao suggested his stance on Taiwan sovereignty would be firm. Wen belittled Taiwan's status in comments Tuesday, saying Tibet and Taiwan were both parts of China, and that the 1.3 billion Chinese and 23 million Taiwanese should jointly decide Taiwan's fate. Ma called Wen's comments "irrational, arrogant and foolish," and said he wouldn't rule out a boycott of the Beijing Olympics this summer if the situation in Tibet deteriorated further.

Such talk could be a preview of how he's likely to deal with China in the next four years. On economics, analysts say he'll be able to move quickly on his agenda. (Although it's not clear he has a sufficient cure for what ails Taiwan—particularly if a U.S. recession hits the export-dependent island hard.) But on cross-strait politics, the going will be even rougher.

Ma has often criticized China, saying it should apologize for the 1989 Tiananmen massacre, and that it should remove the 1,000 missiles pointed at Taiwan before peace talks could start. He spoke out against China's 2005 passage of the "Anti-secession Law," which codified its threat to attack Taiwan if the island makes its de facto independence permanent. He was subsequently denied a visa to visit his native Hong Kong.

Based on that record, analysts say that while cross-strait talks could resume under Ma, the likelihood of a political breakthrough remains slim. "Economic linkages will bind the two sides together," said analyst Tsai. "But politically, they're drifting apart."

For their part, most Taiwan voters are focused on livelihoods, not grand peace deals. Coming out of a voting booth Saturday, Du Tie-lou, 31, had a simple rationale for supporting Ma. "I think if Ma's president, it will be easier for laobaixing [common people] to make a living," said Du, his mouth stained red from the betel nut popular with Taiwan's working class. "He'll be better for the economy."

Original site

The Kinmen model

Both presidential hopefuls in Saturday's election want to boost economic relations

By Jonathan Adams

The Christian Science Monitor, March 21, 2008

KINMEN, TAIWAN -- For a glimpse of Taiwan's warming relations with China, come to this forested island just off the mainland coast.

Direct cross-strait travel is largely prohibited because of the decades-old standoff between Taiwan and China. But here in Kinmen, Chinese tourists visit freely and Taiwanese businessmen can ferry across the strait to the mainland.

The Kinmen model will be expanded to all of Taiwan if either of the two candidates in the Taiwan's presidential election Saturday has his way. Their only argument is over the speed and scale at which that should happen.

For behind all the boisterous rallies and China-bashing rhetoric across Taiwan in recent days, this election is not about the usual hot-button issue of unification with, or independence from, China – neither of which is in the cards anytime soon.

Rather, it's about how economically close Taiwan should be with its giant neighbor. Will it be an uneasy handshake or a passionate embrace?

Either way, the candidates' willingness to engage rather than confront Beijing signals a pause in Taiwan's independence push and the likely cooling of a long-simmering Asian flash point.

"No matter who wins, we'll move closer to China," says Lin Wen-cheng, a China expert at National Sun Yat-sen University in Kaohsiung and a former adviser to two Taiwan presidents. "Cross-strait relations are going to improve."

From battlefront to tourist stop

Kinmen was a dangerous front line in the mid-20th century, with some 100,000 Kuomintang soldiers engaged in fierce artillery battles with the Communists just a few miles across the water.

Now, only about 5,000 Taiwanese soldiers remain at coastal gun emplacements and other sites. Ferry terminals have replaced minefields; in 2001, daily runs were established with two cities on the mainland. These give Chinese tourists a chance to visit Taiwan and some Taiwanese businessmen a shortcut to their mainland factories.

Most cross-strait travel, by contrast, must pass through a third location such as Hong Kong.

China-Kinmen transits have soared from 21,000 in 2001 to 725,000 last year; homeward-bound mainlanders crowd the ferry terminal with huge hauls of the island's famous goods.

Boosting cross-strait ties

The Kuomintang's (KMT) Ma Ying-jeou, who led in the latest available polls, has made the more ambitious pledges of the two candidates. He promises direct cross-strait flights, more Chinese tourists and investment allowed into Taiwan, and, possibly, a cross-strait common market. He also wants to engage Beijing in peace talks and is willing to accept the "one China" principle in order to do so.

His rival, Frank Hsieh, makes similar promises, but is more cautious. And his party refuses to accept any version of the "one China" principle, which would make cross-strait political talks more difficult, if not impossible.

Mr. Ma has an edge in the economic debate, which is why most analysts suggest that he'll win this weekend. Many islanders blame Mr. Hsieh's Democratic Progressive Party for Taiwan's poor economic performance. Real incomes are flat and Taiwan has lagged behind its fellow Asian "tigers" on indicators such as per capita gross domestic product.

Many voters, disillusioned with the party's corruption scandals and bumbling eight-year rule, want a change. And Ma is seen as an upright politician with an appealing economic plan.

Still, observers say Hsieh is mounting an 11th-hour comeback. "He's catching up," says analyst George Tsai.

Hsieh has done that in part by running a relentlessly negative campaign. He has attacked Ma's patriotism and tried to scare voters with the prospect of a "one China market" under Ma that would see Chinese laborers, low-quality Chinese products, and Chinese agricultural imports flood into Taiwan. (Ma insists he would not allow in Chinese laborers and would limit Chinese imports.)

The unrest in Tibet gave Hsieh an opportunity to turn voters' focus to Taiwan's sovereignty, an issue where his party has an edge. Hsieh has said that if the more China-friendly Ma is elected, Taiwan could become another Tibet.

Ma rejected this and lashed out at Chinese Prime Minister Wen Jiabao for saying Tuesday that Chinese on both sides of the Taiwan Strait should decide Taiwan's fate.

He called Mr. Wen "ruthless, irrational, arrogant, foolish, and self-righteous" – a clear attempt to avoid being seen as soft on China.

In fact, the two candidates agree that Taiwan is a sovereign state whose future can only be determined by the Taiwanese. Ma has been sharply critical of China in the past, saying, for example, that Beijing should apologize for the 1989 Tiananmen massacre and that it must remove the 1,000 missiles pointed at Taiwan before peace talks can begin.

That record has convinced many Taiwanese that he can protect the island's democracy. Chen Kai-lun, a flower-shop owner in Taichung, says he doesn't buy Hsieh's scare tactics. "Ma won't sell us out. I trust him."

Beijing prefers Ma

For its part, Beijing would prefer Ma as president, because his party has traditionally opposed Taiwan independence. Observers expect a President Ma would make quick progress on tourists, investment, and direct flights, while Beijing would be more wary of Hsieh.

"If Hsieh gets elected, Beijing will wait and see what Hsieh does after he takes power," says Jin Canrong of Renmin University of China in Beijing.

In Kinmen, people are focused on livelihood issues. "The economy's not good; it's hard to bear," says KMT supporter Chen Zan-sheng.

Outside a nearby restaurant popular with Chinese tour groups, Kinmen government official Fu Yang-tu says this view is common. "People in Kinmen support whoever has better policies for the economy," says Fu. "Most think Ma's are better."

That's not surprising – 90 percent or more on this outlying island support the KMT. But in this election, many Taiwanese are joining Kinmen's residents by voting with their wallets, not their hearts.

Original site

Bad eggs and pretty fruit

March 21st, 2008
Far Eastern Economic Review
Taiwan Election Notebook

I went to Taichung to see candidate Ma Ying-jeou “sao jie” (literally, “sweep the streets” - i.e. stump for Saturday’s election). But I got there late and never caught up with him.

Hsieh may be feeling the same come Saturday night - if all the analysts I spoke to today are right, that is. They say Tibet, Wen Jiabao’s remarks Tuesday and the “one China market” scare campaign have all helped Hsieh - but it won’t be enough for him to catch Ma.

Having missed Ma, I made the best of it and got some “man on the street” quotes from Taichung residents. I was especially keen to take the city’s temperature, as central Taiwan is up for grabs in the island’s elections. Northern Taiwan is KMT-held, southern Taiwan is pro-DPP. But Taichung - along with Chiayi, Changhua and Yunlin counties - are more evenly split.

I can hardly say I got a scientific sample, but it was an entertaining visit nonetheless.

First there was the obligatory cab driver chat, on the way into town from the high-speed rail. The cab driver quote is so cliched that it should be banned from journalism. But this guy, Huang Ching-fu, was straight out of DPP central casting.

“The KMT came to Taiwan and killed many people,” said Huang. “They stole lots of money from the Taiwanese people.”

But wasn’t that all a long time ago? Isn’t today’s KMT different?

“No, everything they say is dishonest. They’re bad eggs ("huai dan”),” said Huang firmly.

“Taiwan wants to buy weapons from the US, but the KMT doesn’t want to buy them.”

But wouldn’t there be some good things about a Ma presidency?

“If Ma becomes president, there’s no bright side,” scoffs Huang. “Nothing good can come from doing business with the communists.”

He petered off into a rant on poor-quality Chinese products, then the kicker: “I don’t want Taiwan to be a part of China.”

Next time you want to know why the DPP gets so many votes, talk to Huang. The flip side of the DPP’s patriotic love of Taiwan is deeply rooted anti-KMT hatred; I’ve often thought the second may be more important to the party’s support.

Others were more charitable to Ma. “The DPP just turns everything around during elections,” said fruit seller Chung Rui-sen, 47. “They cheat uneducated people.” He’s not moved, for example, by Hsieh’s scare tactic that Ma would let in a flood of cheap Chinese fruit and vegetables.

“This is impossible,” said Chung. Even if that did happen, he says, the quality of Chinese fruit is poor. “Look around, Taiwan’s fruit is so pretty,” said Chung, pointing at his bananas, apples and grapes. “If mainland fruit comes here, no one would dare eat it.”

What about Hsieh’s claim that Ma will let Chinese workers flood into Taiwan, stealing jobs? “That won’t happen,” said a betel-nut seller down the street, as his three-month old baby slept next to him. “I’m not worried.”

Flower-shop owner Chen Kai-lun, 44, also supports Ma. “He’s cleaner,” said Chen, referring to corruption scandals that have dogged the DPP.

The tally: vendors for Ma (3); taxi-drivers for Hsieh (1).

Original site

Youth dump DPP

Taiwan's governing party fears it has lost youth vote

By Jonathan Adams
International Herald Tribune, March 19, 2008

TAIPEI- With the presidential election set for Saturday, the youth vote has become a focus - and the pro-independence Democratic Progressive Party is worried that many of its young former supporters may have turned against it.

In the 2000 and 2004 elections, the youth vote helped propel the DPP into power. It may have been critical in 2004, when Chen Shui-bian won the presidency by fewer than 30,000 votes.

That year, nearly 60 percent of voters aged 20 to 29 favored Chen, who was seen as promising a fresh start after more than half a century of rule by the corruption-tainted Nationalists, or Kuomintang. But this month a United Daily News poll found a reversal, with more than 60 percent of prospective voters in their 20s now supporting the Nationalist candidate, Ma Ying-jeou.

The DPP's own corruption scandals have been one source of disenchantment. Another has been concern that the party's often strident emphasis on Taiwan's independence from mainland China may be hurting the island's economy and costing it jobs.

Ma's campaign has been making the most of this opening, courting young people with hip T-shirts, campaign blogs and even a "Babes for Ma" group of young female supporters. The Nationalists' youth department recently ran an online contest in which Web users could vote for the Babes group's leader, according to local media reports.

Frank Hsieh, the DPP presidential candidate, is fighting back. He has enlisted a spokesman from a heavy metal band, set up a blog and posted a series of ads on YouTube. In one, he makes a punning reference to a sexual position in the film "Lust, Caution." In others, he talks about the need to protect privacy in the wake of the Edison Chen sex photo scandal, in which explicit images of the pop icon were distributed on the Internet, and tells a corny joke as one of his own young staffers groans.

The DPP's hope is that the YouTube videos, blogs and contests will lure youth support by projecting a hip, tech-savvy image. But according to political analysts and polls, the pro-independence party has been losing ground, while the Nationalists' Ma is picking up support with his clean reputation and pledge to revive the economy.

"The DPP is trying to stir up emotion and enthusiasm, but it won't work as well this time because young people have changed a lot," said Liao Da-chi, a political analyst at National Sun Yat-sen University in Kaohsiung. "They feel pressure to find a job."

This month, one of the DPP's own rising stars, Luo Wen-jia, a former DPP legislator and member of Hsieh's campaign team, said bluntly that his party had "already lost the election" because it had lost support from many young people, according to local media reports.

Others in the party share his concerns. "Young people were our most loyal supporters, but now we're losing them," said a 32-year-old DPP official, who spoke on condition of anonymity because he was not authorized to speak with reporters. "This is very dangerous."

He blamed the problem on a dramatic worsening of the DPP's image since it gained power in 2000 promoting issues like environmentalism and labor rights, which resonate with youth. Most importantly, the party promised clean politics.

Now, after a string of corruption scandals involving Chen's own top aides and relatives, many young people are disillusioned.

"Our party's image can't be turned around with a few YouTube videos," said the DPP official. "Hsieh is trying to use those to appeal to young people, but that's not what they most care about. They care about jobs and the future, and Hsieh should offer them better policies."

Research also suggests that younger Taiwanese are less ideological and politically partisan than their elders. That makes them less likely to be swayed by the DPP's appeals to Taiwanese nationalism at the cost of better ties with Beijing, which considers Taiwan a renegade Chinese province and has not ruled out the use of force to reunite it with the mainland.

"Younger Taiwanese tend to be pragmatic and flexible in their views," wrote the Taiwan expert Shelley Rigger in a 2006 study for the East-West Center Washington. "They lack the passionate emotion that drives many" in the older generation.

Among the survey findings Rigger cited: Those under 40 were more likely than their elders to identify themselves as both "Taiwanese" and "Chinese," and had the highest support for engagement with the mainland. They were also less likely to be affiliated with a particular party.

According to the United Daily News poll, those in their 20s are also the least likely age group to vote Saturday.

There are 3.67 million people in Taiwan between the ages 20 and 29, according to Taiwan's Ministry of the Interior -- all eligible to vote.

Both parties have their work cut out for them if they want the support of Owen Lo and Pomin Chang, both 20-year-old engineering students at National Taiwan University in Taipei. Chatting in the basement of a McDonald's next to campus, they insisted that they cared about the election but said they weren't impressed with either candidate.

"I care who the president is, but I don't think either's fit to be president," Chang said. "Neither is very honest."

He said he planned to cast an invalid ballot in protest.

Original site

When bozos attack

Slagging reaches new low in Taiwan campaigns

Jonathan Adams

Taiwan Election Notebook, March 18, 2008

Far Eastern Economic Review

Last week it was a group of loose-cannon Kuomintang legislators, who barged into the campaign office of Frank Hsieh, the Democratic Progressive Party candidate. An embarrassed KMT candidate Ma Ying-jeou apologized for the intrusion, as did the legislators. Their ringleader even said tearfully he would “consider killing himself” if his actions led to Mr. Ma losing the election.

Today, the media went crazy over comments at a pro-Hsieh rally yesterday by a DPP education official. The official used unprintable slang to insult Mr. Ma’s deceased father. As one newscaster put it, “both blue and green [referring to KMT and DPP camps] agreed he went too far.”

Frank Hsieh apologized to Mr. Ma for the comments, while trying to distance his campaign from the official, Chuang Kuo-jung. Mr. Chuang resigned over the remarks late Sunday, according to local media. But all day, TV stations continued to replay the offensive footage, as analysts picked apart the impact on the election.

It wasn’t the first time the official in question had slagged Mr. Ma. In fact, Mr. Chuang became notorious in December for his off-color remarks while defending the government’s decision to change the signage on the former “Chiang Kai-shek Memorial Hall,” a Taipei landmark, to “Taiwan Democracy Memorial Hall.”

While verbally jousting with the KMT over the change, he called Ma “sissy” (niang) and a “wimp” (xiao nao nao). He said that another KMT official so tightly “embraced” Chiang Kai-shek that he seemed gay.

Many Taiwanese criticized him for his intemperance; some even blamed him for contributing to the DPP’s thumping defeat in January’s legislative election. But he became an overnight hero for hardline KMT-haters; his fans in the DPP legislative caucus even brought him flowers. It remains to be seen how much Mr. Chuang’s comments will hurt Mr. Hsieh — they may serve to remind many fatigued voters of their disgust with DPP rule.

But the flap highlighted two points on this election. One is that both parties continue to have trouble reining in hardline elements in their own camps, a worrisome sign as Taiwan attempts to move toward a more stable two-party system.

The second point is more encouraging: Both candidates immediately disowned the remarks, highlighting their insistence on taking a more moderate road and themselves resisting extremism. That, at least, is an encouraging sign for Taiwan’s young democracy.

Original site

Victory for pragmatism

As a vote looms, Taiwan seems ready to abandon an era of defiant nationalism

Jonathan Adams
Newsweek, March 15, 2008

Ken Wen, 60, is fed up with Taiwan's pro-independence president, Chen Shui-bian. Wen, a home builder, voted for Chen and his Democratic Progressive Party (DPP) back in 2000. In so doing, he helped end the 50-year rule of the Kuomintang, which has traditionally opposed independence from China.

But now, after eight years of corruption scandals, cross-strait tensions and poor economic performance, Wen says it's time for another change. At a rally in the port city of Keelung last week, he said he planned to vote for the KMT's Ma Ying-jeou for president on March 22, hoping Ma will boost Taiwan's stagnant economy by strengthening links with China. "If we don't open up more, we're finished," Wen says.

That's a common view in Taiwan these days. In fact, both candidates in the upcoming vote—Ma and his DPP challenger, Frank Hsieh—have promised to open Taiwan's economy to the giant next door and to take a more moderate tone with Beijing.

But if the front-runner Ma, who is Hong Kong-born, triumphs over native son Hsieh, the voters' message will be especially clear. Ordinary Taiwanese will have rejected Chen's confrontational tactics: a victory not just for moderates like Ma, but also for Chinese President Hu Jintao, who's taken a more restrained approach to the island in recent years.

And by electing the first mainland-born leader since the end of Taiwan's authoritarian era 20 years ago, locals will also have stepped away from the identity politics that have long divided this island.

As all this suggests, a Ma victory would have far-reaching implications. First, of course, it would cool off one of the world's most dangerous flashpoints, the one place that could actually spark a war between China and the United States. (Beijing views Taiwan as part of its territory and has threatened force if the island makes a permanent break; Washington has pledged to help its democratic ally if attacked).

Since 2000, China and Taiwan have been locked in a vicious circle: Beijing has refused to deal with the island's pro-independence government, and Chen has inflamed tensions by loudly trumpeting the island's sovereignty. But Ma wants to break this cycle with expanded economic links and engagement with Beijing.

His pledges include the opening of direct cross-strait flights by May 2009 (travelers currently must touch down in a third location, adding several hours to trips), lifting caps on China-bound investment (helping Taiwan firms better tap the mainland market), allowing more Chinese tourists to visit the island (they're currently limited to 1,000 a day) and opening Taiwan's economy to more Chinese investment.

"There's no need to antagonize the dragon," Ma adviser Su Chi put it in an interview in January. His boss has even proposed to restart political talks with Beijing, which have been suspended since 1999.

Oh, and then there's the pandas. Unlike Chen, Ma has said he'd accept China's standing offer of two of the cuddly bears (the pair are currently cooling their paws in Sichuan).

But is Taiwan ready to put a panda-hugger in office? Despite Ma's lead in the polls, he's not yet a shoo-in. Pro-independence sentiment and Taiwan pride remain near record highs; 21 percent of islanders back full independence and 44 percent identify themselves as Taiwanese only, according to recent survey data.

As a mainlander, Ma remains vulnerable to attacks on his patriotism; if elected, he'd be first the non-local-born president since the autocrat Chiang Ching-kuo (who was Chiang Kai-Shek's son) died 20 years ago. Some Taiwanese say they still won't vote for a mainlander, and fear a Ma victory could usher in a return to KMT authoritarianism.

The DPP's Hsieh has tried to stoke such fears with negative attacks, portraying Ma as disloyal to Taiwan. But there are signs that the identity card is waning in force. After eight years of misrule by the local-born Chen, many Taiwanese are simply sick of him and his party. Restrictions on cross-strait investment and travel have hindered Taiwanese firms' ability to cash in on China's boom, and Chen's inflammatory moves—such as his recent plan to hold a referendum on rejoining the United Nations under the name "Taiwan" (as opposed to the "Republic of China")—have strained relations with Beijing and Washington to the limit.

With incomes stagnant and inflation on the rise, even many DPP supporters are now ready to jump ship. Wang Cheng-kun, the director of the doctors' association in Tainan, a DPP stronghold, recently endorsed Ma, in part because he was put off by what he saw as Hsieh's smear attacks and fearmongering. Wang also says he admires Ma's clean character and more-global outlook. "I've always been a [DPP] supporter, and I was afraid my friends wouldn't forgive me for my change of heart," Wang said. "But Taiwan must internationalize; we shouldn't isolate ourselves."


As well as a victory for Ma, a KMT win would also represent a triumph for China's President Hu. In years past, Beijing repeatedly drove islanders into the independence camp with its fiery rhetoric and ham-handed military threats. But in the past five years, it has adopted a much more nuanced strategy. "Under Hu's leadership, Beijing's approach has become more patient, less inclined to saber-rattling, and more self-restrained," wrote cross-strait security expert Lin Chong-pin in a recent essay.

True, China has ratcheted up the threats against Chen and other pro-independence diehards. But it's also launched a charm offensive targeting both the KMT leadership and the DPP's base. One recent carrot: a relaxation of restrictions on Taiwanese doctors—a traditional pillar of DPP support—working on the mainland. And on March 4, Hu repeated his offer for peace talks with Taiwan under the "one China" condition, even offering to meet those who'd backed independence in the past if they moderated their views.

Such overtures appear to be paying off; it's harder for pro-independence politicians like Hsieh to whip up anti-China sentiment while Beijing holds out olive branches.

Still, a Ma victory wouldn't end cross-strait tensions entirely. As president, he would have to avoid looking like a sellout to the 77 percent of islanders who still favor some sort of independence from Beijing or the political status quo. "Ma [must] take a slow, gentle pace in improving cross-strait relations," says political analyst Liao Da-chi. "I don't think there will be a dramatic change—each side will be very cautious."

What this means is that Ma is likely to emphasize the strengthening of economic links. A major political breakthrough remains unlikely: Ma himself has said it probably won't occur in his lifetime. At most, Beijing and Taipei will put aside, rather than resolve, the thorny issue of Taiwan's permanent status. So the island will remain in limbo, a territory claimed by China but effectively independent.

Yet like it or not, Taiwan's and China's economies are now connected at the hip—giving both sides a strong incentive for warmer relations. In that sense, it's good news that both Ma and Hsieh have pledged to take an open-minded approach to Beijing.

Whoever wins, pragmatism has already triumphed.

With Ko Shu-ling in Taipei

Original site

Closing the gap

Fear-mongering on the campaign trail

Taiwan Election Notebook, March 17

Far Eastern Economic Review

After a long buildup, Taiwan’s presidential race is finally heating up.

For weeks the KMT’s Ma Ying-jeou has been far ahead of rival Frank Hsieh in media polls, in what looked like a highly lopsided race. Now, with one week to go before the election, it appears Hsieh is catching up.

Two Taiwanese media friends of mine said Hsieh’s ads and negative campaign were making a difference. Hsieh’s camp appears to have found a chink in Ma’s armor, by hammering away at what it calls Ma’s “one China market” policy. The proposal, long championed by Ma’s running mate Vincent Siew, would create a cross-Strait common market, binding the two sides’ economies closer together in a trade pact.

But Hsieh’s pro-independence Democratic Progressive Party is using the “one China market” theme to raise fears of Chinese competition. Namely, he’s raising the specter of a flood of Chinese agricultural imports and Chinese competition for jobs. The scare tactics seem to be having an effect–one of my media friends said she was shocked to overhear two Taipei roadworkers discussing the “one China market” as she passed by.

Meanwhile, Ma’s camp has been distracted by the fallout from an incident last Wednesday night. Four KMT lawmakers barged into Hsieh’s campaign headquarters with the finance minister in tow, accusing Hsieh of getting a sweetheart deal on his office rent. The scene spiraled out of control as scores of outraged Hsieh supporters protested, had shoving matches with police and smashed a police car outside Hsieh’s campaign office.

For the last two days, the KMT legislators have been apologizing for sparking the incident; Ma has apologized to the public on behalf of his party.

The Hsieh camp has pounced on this as well. It’s cast the KMT lawmakers’ barge-in as a taste of what’s in store if the KMT controlled both the legislature (where it now has a large majority, as of January) and the presidency. The subtext: voting for Ma would give the KMT so much power it would be akin to a return to the bad old days of KMT authoritarian rule.

In short, Hsieh’s campaign has seized on fear-mongering in a last-ditch bid to come back. That’s a time-honored DPP tool that’s especially potent when combined with positive emotional appeals to Taiwan-first patriotism.

The question, of course, is will it work? The March 22 vote has been hyped as one in which economic concerns may finally trump Taiwan identity. Ma’s promise of more economic engagement with China holds broad appeal–indeed, Hsieh’s platform is actual quite similar in substance (more cross-Strait flights; more Chinese tourists allowed in Taiwan; a relaxation of cross-Strait investment going both ways).

But now, Hsieh is cleverly trying to turn Ma’s strength (a vision of economic openness) into a weakness. The line of attack is straight from the protectionist playbook familiar in many other democracies. Most Taiwanese think more economic openness would boost incomes and livelihoods; but now Hsieh wants them to believe that too much openness–which Ma would promote–could actually have the opposite effect.

There’s no way to know what impact all this is having. The TV media reported last Tuesday a DPP poll showing Ma at 45.8% and Hsieh at 39.7%, but the Hsieh campaign would not confirm that.

In an email to me, it noted only that it’s illegal to release polls numbers in the 10 days before election day.

Original site

Market backs Ma to win

Big test for Taiwan prediction market

By Jonathan Adams

Asia Times Online, March 14, 2008

TAIPEI - When the first "prediction market" for a Taiwan election was set up in 2000, the result was disappointing.

The market correctly called the election result, but by other measures it was a dud.

"There were only three or four guys who were really doing the trading, and they had really strong biases - one guy favored one party, one was in favor of the other," said Forrest Nelson, a co-founder of the Iowa Electronics Markets, which helped run the Taiwan market. "The fact that it worked at all was a major surprise."

Eight years on, such markets have boomed in popularity. Once the preserve of a few oddball US enthusiasts, they've gone mainstream - and global. They're now used as high-tech crystal balls to help predict everything from soccer scores in Europe to the severity of the flu season in Iowa to the likelihood of Pakistan's President Pervez Musharraf stepping down.

Such markets' growing global appeal is evident in Taiwan, which boasts a new, online Chinese-language prediction market. In contrast to the lonely market Nelson observed, some 2,000 politics fans from Taiwan, mainland China, Hong Kong and elsewhere have already crowded into the new market to trade contracts on who will win the closely watched March 22 presidential vote in Taiwan.

Whether it guesses correctly will be one of the market's first big trials. The election will also test two still-debated points: Do "funny money" markets such as Taiwan's perform as well as ones using real money, and how susceptible are such markets to trader bias?

Taiwan's Center for Prediction Markets, set up in mid-2006, is one of a small but growing crop of Asia-based markets. In Japan, the first political prediction market was set up in 2005; the market Shuugi.in now has some 500 registered traders predicting the coming Lower House election. Taiwan also boasts the smaller Taiwan Political Exchange, which correctly called the island's hotly contested 2004 presidential vote.

Like those other prediction markets, The Center for Prediction Markets' works on the model of a futures market, aggregating collective sentiment into one market "price". Except instead of guessing, say, the price of corn three months from now, participants guess the likelihood of a specific outcome (such as a certain candidate winning). Traders start with 100,000 virtual points, which they use to buy and sell contracts. The better their predictions, the more points they rack up.

In the US, such markets have often outperformed public polls, experts say. But they're still struggling to explain exactly why.

One reason is that such markets ask people who they think will win rather than who should win. Another often-cited point is financial incentive. Traders have to put their money where their mouth is, which gives them a stake in making good predictions.

But Taiwan's new market, like most in the US, can't use real money because of anti-gambling laws. That should put it at a disadvantage, right?

Not necessarily. Experts say the jury is still out on whether real money prediction markets outperform "funny money" ones. A 2004 study comparing real and virtual money markets for the US National Football League season found little difference in their predictive powers (both markets' predictions were better than the vast majority of individual predictions).

"People in play money markets act surprisingly similar to people in real money markets because they get some kind of psychic reward for doing well," said Justin Wolfers, a professor at the Wharton School and one of the study's co-authors. Turns out bragging rights can be as strong a motivator as cold cash.

Skeptics have another criticism of Taiwan's market. Its traders include many from mainland China and Hong Kong, who are likely to have a strong bias against Taiwan's pro-independence party. Won't that skew the results in favor of its rival, the China-friendly Kuomintang (KMT)?

Nope again. Traders with extreme and opposing biases can be expected to cancel each other out, experts say, as happened in the 2000 Taiwan prediction market. And traders who are in the game to win (instead of to prove a point or back a party) will rush in to any market thought to be out of whack, whether by manipulation or home-team bias.

"When traders suspect that such manipulation might exist, they will bet on the other side," said Robin Hanson, an expert on prediction markets at George Mason University. "The net effect is that the existence of people who might want to manipulate [the market] usually increases the accuracy of market prices."

Still, no one claims prediction markets get it right every time - they don't. The point, according to what academics call a persuasive body of evidence, is that such markets generally do a better job than predictions by any individual experts or forecasts from public polls.

Outperforming Taiwan's polls shouldn't be hard. They're notoriously bad as a forecast of election outcomes. In late 2006, for example, many media polls underrated the pro-independence party's support - a recurring problem. Taiwan's prediction markets did a much better job of estimating vote shares (the island's two markets both called the Kaohsiung mayoral election wrong, but that contest was a statistical dead heat).

"Most opinion polls usually have 20 to 30% 'no answer'," said Lin Jih-wen, director of the Center for Prediction Markets. "We don't have missing data or a sampling bias, that's our strength."

The market has now picked the strong likelihood of victory by the China-friendly candidate Ma Ying-jeou. Time will tell if it's got the right guy.

But even if it doesn't, the markets' enthusiastic reception shows how Asia - like the US and Europe - has embraced such markets as a powerful fortune-telling tool.

Original site

End of dollar diplomacy?

Both of Taiwan president Chen Shui-bian's possible successors are looking for a truce in the diplomatic war with China

By Jonathan Adams

Newsweek, February 18, 2008

For decades, Taiwan kept ahead of rival China through dollar diplomacy, luring allies with cash and aid. Then China's economy roared, and it started winning the global contest to buy friends.

Malawi, the latest target, switched allegiance to Beijing last month, and has given Taiwan until the end of this week to withdraw all embassy staff. Left with only 23 official allies, down from 30 in 2000, Taiwan accused Beijing of "buying" Malawi with $6 billion; China's Foreign Ministry rejected the charge. More important, the losses have Taiwan reconsidering what Antonio Chiang, a former official in Taiwan's National Security Council, calls "a stupid war."

This signals a warming trend on one of the world's most dangerous fronts. On March 22 Taiwan will choose a successor to independence-minded President Chen Shui-bian. Both candidates plan to curtail dollar diplomacy and tone down Chen's brash approach to Beijing, which still claims Taiwan as a renegade province. The Kuomintang's Ma Ying-jeou, the front runner, would ease restrictions on investment and travel between Taiwan and the mainland—restrictions that cramp Taiwan's economy. So would his rival Frank Hsieh, though more cautiously. Either one looks likely to be much less provocative than Chen.

Dollar diplomacy dates to the cold war, when both sides claimed to be the legitimate government of all of China. It has evolved into a feud that's more "Monty Python" than 007, with battles over the allegiance of obscure states like Nauru. Both sides accuse the other of buying recognition, but deny it themselves. So the multibillion-dollar battles rage on in the shadows, distorting global aid flows. By design or not, some of this politicized aid ends up lining the pockets of crooked politicians.

Under Chen, government officials debated dollar diplomacy's usefulness. Now, the KMT wants to abandon it as part of a plan to replace cross-strait confrontation with détente. "Checkbook diplomacy is an old game," says Su Chi, Ma's top foreign-policy adviser. "It's time for Taiwan and the mainland to sit down and talk." Hsieh believes Ma is too optimistic about negotiating with Beijing, but he would also tone down Chen's rhetoric on independence, says Hsieh adviser Hsiao Bi-khim: "If President Chen is a boxer, Hsieh is more of a tai chi fighter -- challenges will come, but he'll divert the force and fight back when he has an opportunity."

For the U.S., either successor would be a welcome change. Washington fears being drawn into a cross-strait war and sees Chen as picking needless fights with Beijing. From that perspective, the sooner a cooler head takes over, the better.

Original site

Irrational exuberance

by Jonathan Adams

FEER Forum, January 18, 2008

To look at the Taiwan stock index this week, you’d think the China-friendly Kuomintang had already won the presidency and reopened talks with Beijing. The market jumped 5% on Monday and Tuesday—its biggest gain since mid-2004—led by stocks in airlines and banks that could profit from closer cross-strait links. It shed 1% later in the week, but exuberance is still in the air.

It’s time for a deep breath. A KMT victory in the March 22 presidential race isn’t a sure bet, despite the party’s landslide victory in a legislative vote Saturday. And even if KMT candidate Ma Ying-jeou takes office, it’s uncertain how quickly he could reach deals with Beijing. Moreover, closer cross-strait ties, though helpful in some sectors, won’t fix structural problems in Taiwan’s economy.

Certainly, there is some cause for increased investor confidence. The KMT’s nearly three-quarter majority in the legislature will put the brakes on any possible moves toward independence for the next four years. Beijing was especially concerned about constitutional revision touching on issues of national sovereignty; that looks highly unlikely now.

But what’s being exaggerated is the likely speed and degree of progress on cross-strait links.

First, the KMT’s chances in March. As Ma adviser Su Chi told me Monday, “We’ve just passed the midterm, but now we have to take the final exam.” The party itself is cautious, and not without reason.

Unlike legislative votes that turn mostly on local issues, presidential races in Taiwan tend to hinge on the emotional issue of national identity. The KMT’s rival, the pro-independence Democratic Progressive Party, has an edge on that battleground. Turnout Saturday was under 60%; it was 80% in the last presidential race—and strong turnout is again thought to work in the DPP’s favor. That’s not to say the DPP will win; just that the race will be closer than Saturday’s lopsided result would suggest.

The stability-loving market has overlooked something else. Beijing’s key near-term concern remains the planned referendum on whether Taiwan should seek to join the United Nations under the name “Taiwan.” That vote appears set to go ahead March 22.

That’s not the only reason to doubt the next two months will be stable. Taiwan’s politics are notoriously unpredictable. As the campaign heats up, supporters of both parties can be expected to engage in “dirty tricks” to influence the vote. The only question is how dramatic and destabilizing such antics will be. In other words, don’t expect a clean election season.

Even if Mr. Ma does win, many seem to be assuming he’d immediately kiss and make up with Beijing’s leadership, and all will be well in the Strait. That’s premised on his stated acceptance of the so-called “1992 Consensus” as a basis for talks—a convoluted formula whereby Taipei and Beijing both agree on the “one China” principle. The rival DPP rejects this formula as a sell-out of Taiwan’s sovereignty and dignity.

In fact, Mr. Ma’s interpretation of “one China” is the Republic of China (Taiwan’s formal name)—and there’s no guarantee yet that this will be enough to placate Beijing. That’s not to mention the likely uproar Mr. Ma would face at home if he negotiates with Beijing on this basis.

Even granting he’s successful, the benefits he’d gain for Taiwan shouldn’t be overstated. Direct links are seen by many as an elusive Holy Grail for Taiwan’s economy. Mr. Ma’s plan focuses on such links, and on old-style infrastructure investment to reinvigorate the island’s economy.

That can only take the island so far. Broader structural problems would remain. Perhaps the most pressing is to liberalize and revamp the island’s services sector—especially the banking sector. Without such reform, direct links would only provide temporary relief for what ails Taiwan in the longer term.

So what’s a more realistic assessment? Unilateral moves on Taiwan’s side to forge closer cross-strait ties are a good bet under either Mr. Ma or (perhaps more slowly) his DPP rival Frank Hsieh. That means reducing the China-bound investment cap for listed Taiwanese firms, allowing in more Chinese tourists, weekend cross-strait charter flights, and possibly a cross-strait banking breakthrough. (At present Taiwan banks can’t do business in the mainland; they could do so if an agreement is hammered out through talks in a third location by banking associations on both sides, without government involvement).

Dicier bets are any progress requiring government-to-government talks, such as regular, weekday cross-strait flights. And if you’re wagering on broader improvement in Taiwan’s economy? Don’t bet the farm.

Mr. Adams is a free-lance journalist based in Taipei.

Original site

Battle of the moderates

Frank Hsieh's clinching of the pro-independence party's presidential nomination spells a close race in 2008

By Jonathan Adams
Newsweek Japan, May 16
(untranslated and unedited draft)

In January 2006, Frank Hsieh stepped down from the premiership after a disappointing year. He'd taken office with a new, conciliatory approach -- both toward China, Taiwan's rival across the Strait, and to the domestic Kuomintang-led opposition. But his outstretched hand was met with a cold shoulder: Beijing passed its "Anti-Secession Law" formalizing its threat to use military force against Taiwan, and the opposition continued to block the ruling party's agenda at every turn. A disillusioned Hsieh left the country to nurse his wounds abroad. Some observers thought his political career was finished.

Less than a year and a half later, Hsieh has become the pro-independence party's candidate in the closely watched 2008 presidential race -- and quite possibly, the next leader of Taiwan. It's a dramatic change of fortunes for the mild-mannered Hsieh -- a lawyer educated in Taiwan and Japan's Kyoto University. His win last week in the Democratic Progressive Party primary means he'll face off against the man who, until recently, was seen as shoo-in for the presidency: the Kuomintang's equally gentle Ma Ying-jeou. With the race now underway and nine months to go, observers say the vote is up for grabs -- and some give the DPP an edge. But regardless of who wins, hopes are already high for a thaw in cross-strait relations, as both Ma and Hsieh are moderate centrists who back closer economic links with the mainland. Their softer rhetoric contrasts with Chen Shui-bian who constantly irritates Beijing with his brash trumpeting of the island's de facto independence.

More than anything, Hsieh, 60, is known for his flexibility and strong work ethic -- qualities that date back to his days as a champion gymnast in his youth. His defense of pro-democracy activists in a famous 1980 trial gives him credibility with the Democratic Progressive Party's true believers. A few years after that, his dogged legal work was instrumental in revealing ties between the KMT and the gangsters who murdered author Henry Liu, a vocal critic of the KMT, in California. "Hsieh took the lead and proved to be a good advisor and courageous and effective lawyer," said Jerome Cohen, who represented Liu's widow in legal proceedings in Taiwan and is now a professor of Chinese law at New York University. And Hsieh was the party's vice presidential candidate in the nation's first free presidential election in 1996 -- running alongside a staunchly pro-independence figure.

But he also earned a reputation as a competent, pragmatic administrator during his time as mayor of the port city of Kaohsiung from 1998 to 2005. Hsieh is credited with giving the city a much-needed makeover, infusing it with culture and cleaning its polluted industrial waterfront (Kaohsiung's once notoriously dirty Love River is now lined with outdoor cafes and boasts brightly-lit tour boats). He pushed for cross-strait shipping links then to revive Kaohsiung's flagging port business, and even tried to visit the mainland to discuss the issue -- only to see his proposal nixed by Chen's government.

Hsieh's proven commitment to Taiwan's democracy and push for warmer economic ties with China make him a formidable candidate. That stance aligns him closely with the island's average voter, who favors more commerce with China, but wants to keep a political distance. Meanwhile, the more China-friendly Ma's star has dimmed amid charges he misused funds as Taipei mayor, criticisms about his weak leadership of the opposition, and concerns that he doesn't sufficiently embrace rising Taiwanese identity -- a deeply emotional issue for many voters. "Many people think Ma can't win the election," said one KMT insider. "His outlook is different from many people -- they think they're Taiwanese, but Ma thinks he's Chinese." So far, Ma's efforts to woo the powerful legislative speaker Wang Jyn-ping as his running mate have been rebuffed -- a sign of the current skepticism of Ma, even within his own party.

If Ma's woes continue, some observers now give Hsieh's party the advantage. "It looks good for them right now," said Bruce Jacobs, an expert in Taiwan politics at Monash University in Australia. As far as cross-strait relations go, there may not be much difference between the two men. Both would bring a softer, more measured tone to the presidency. Beijing would prefer a Ma presidency, thanks to historical -- and now warming -- ties between the Chinese Communist Party and KMT. And a cross-strait political settlement is a possibility under Ma, while probably out of Hsieh's reach. But even if Hsieh takes power, analysts say Beijing could seek a fresh start -- in the same way they were quick to engage Japan's Shinzo Abe after the more outspoken Junichiro Koizumi left the scene.

That would be welcome news for investors, businesspeople and many average Taiwanese, who have been eagerly awaiting progress on a raft of issues expected to help revive the island's anemic economy. Those include a long-awaited agreement on allowing more Chinese tourists to visit Taiwan; regular cross-strait cargo and passenger flights; relaxation on limits to Taiwanese firms' China-bound investment; and allowing Taiwanese banks to do retail business in the high-potential mainland banking market. Ma is a stronger advocate of such economic opening, but analysts say Hsieh would also make progress, albeit more slowly. Sophia Cheng, head of Taiwan research at investment bank Merrill Lynch, said Hsieh's primary win, in which he trounced two hardline pro-independence candidates, was a clear vote for moderation. "The DPP already tested what the majority voter wants -- and they want economic development more than independence," said Cheng, who predicts a DPP victory by a hair next year.

Of course, given the volatile nature of cross-strait relations, nothing is a given. To be sure, Hsieh and Chen's styles are very different, and Hsieh is seen as a stronger backer of economic opening. But in substance, their stances on the island's sovereignty are the same: Both insist on Taiwan's democratic autonomy and back further constitutional revision, which Beijing sees as a "timeline for independence." Some think Hsieh's DPP might back a boycott of the Beijing Olympics next summer to win political points domestically -- a move that could sharply raise cross-strait tensions. And in China, anxieties are mounting that Chen may use the last year of his term (he will step down from office in late May 2008) to push a bold move toward full independence. "Beijing considers the next year to be a 'high-risk period'," said Jin Canrong, a professor at Renmin University in Beijing. "They have to prepare for the worst."

But if China and Taiwan can navigate those choppy waters, it looks like smoother sailing come mid-2008 -- whether it's Hsieh or Ma at the helm.

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

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