Friday, January 3, 2003

Twisted Flights, Flawed Logic - Time for Taiwan to Face Economic Facts

Pacific News Service, George Koo, Posted: Jan 03, 2003

Editor's Note: The roundabout flights from Shanghai to Taipei are just the beginning of Taiwan's convoluted logic when it comes to China, writes PNS contributor George Koo. Missing a golden opportunity last year to improve relations with its giant neighbor, Taiwan must take steps in 2003 to stop job loss and brain drain across the Taiwan Strait.

For the first time ever, thousands of Taiwanese living in Mainland China will fly from Shanghai, uh, somewhat directly to Taipei to celebrate the Chinese New Year, coming Feb. 1, at home. Specially chartered planes will take off from inside China and touch down in Hong Kong or Macao before proceeding to Taipei.

But instead of a short, one-hour hop from Shanghai to Taipei, the planes will fly two long legs of a triangle, roughly quadrupling the flight time, just to be politically acceptable to Taipei. The planes will be empty of passengers on the return part of the trip. Why? Because there is no formal recognition between governments across the Taiwan Strait, Taipei reasons that the planes cannot behave as if they were bona fide commercial flights.

The passengers will have ample time to ponder the absurdity of it all. Their flight path is comparable to flying from Boston to New York via St. Louis.

Taiwan's business community has been clamoring for direct links to the mainland. Some $600 million is spent annually on unnecessary airfare, to say nothing of wasted time in transit.

Since he came to power in 2000, many of President Chen Shui Bian's backers have urged him to move boldly toward full independence from Beijing. The end result is like the charter flights, a compromise that pleases no one and solves nothing.

Last year, the Chinese Year of the Horse, could have been a breakthrough year in cross-strait relations. Both sides just entered WTO and needed to begin bilateral discussion to work out the details. Instead, the horse never left the post. Taipei so artfully stalled that only now have they agreed to meet and begin discussions.

Meanwhile, it has become increasingly obvious that benefits of cross-strait relations are all going in one direction: to China. Taiwan capital, people, production equipment, ideas and products are going to China. By some estimates, as much as $100 billion -- more than one-fifth of the total foreign investment in China -- originates from Taiwan.

What about investment in the other direction, from China to Taiwan? None, because in contrast to Beijing's open door, Taipei's policies restrict visitors from the mainland, rendering such investments impractical.

Advocates of Taiwan independence, particularly those residing comfortably in the United States, like to point out that one cannot live by bread alone, but must have the personal freedom of choice. Sadly, Taiwan's economy has been rolling steadily downhill, and unemployment is at an all-time high. Political choice is hardly on the agenda of folks without bread.

Some of the best and brightest are choosing with their feet. They now live and work in China, most conspicuously in the greater Shanghai area. They are putting roots down in China, bringing their families and buying homes.

One Taipei study estimates that those leaving for the mainland represent 25 percent of Taiwan's economic elite. Their absence ripples throughout Taiwan's economy.

Taiwan's housing market is depressed because more are selling than buying. Instead of seeing their favorite customers every week, popular restaurants now see them every two to three months -- on their periodic return from China.

Even Taiwan's Lions Club feels the economic shift. In the first six months of last year, its membership dropped from 35,000 to 31,000. At its peak, club membership included more than 40,000 professionals. At every meeting, someone else is missing, having left for the mainland.

Taiwan is becoming a depressing place, especially so because the government seems so unaware of the economic consequences of its politics.

Two out of three Taiwan tourists go to the mainland for vacation. Only 1 out of 10,000 tourists from the mainland is able to visit Taiwan. In just 10 months last year, 12 million tourists went globetrotting from China. The Taipei government could see immediate economic benefits merely by welcoming an annual projected stream of 300,000 visitors from across the strait.

President Chen dares not open Taiwan to the mainland for fear of losing his political support and for reasons rooted in paranoia. During the debate about direct flights from the mainland, someone in his administration actually opposed them on the grounds that an unfriendly plane could make a Sept. 11-like beeline for the presidential palace in Taipei.

Chen's approval rating is at an all-time low, as is Taiwan's economy. Everyone is watching to see if he will take decisive action in 2003 to turn things around. If not, his re-election in 2004 is not assured. He came to power with less than 40 percent of the popular vote. He may have to do considerably better next time and not count on a divided opposition to again put him in power.

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