The Oncoming 2012 Taiwan's President Election Observation: DPP's Local Economies Development Strategy

First Assessment of DPP’s Local Economies Development Strategy

Ms. Ing-Wen Tsai, both the highest leader and the President candidate of the DPP just announced her strategies of 2012 Taiwan’s President Campaign. One of the interesting point worthy to be mentioned is so-called ‘Local Economies Development Strategy’ (LEDS).

From the economic point of view, indeed, as she mentioned, central government normally does not fully understand which sector is the most appropriate one for local communities to develop. She wants to transform the managing model of Taiwan’s small and medium enterprises from ODM/OEM to the more original and innovative model by creating goods with local characteristics and promoting well-known local brands.

In order to promote the LEDS, two obstacles need to be overcome. One is how to assists those founders to smoothly obtain the necessary financial support from Taiwan’s capital market. The other one is how to create incentives for talent and high-skilled civil servants to stay and serve in the local government, since they would become the designers of LDES. She mentions the necessity of developing new financial tools for helping the local founders to run their businesses. While, for the latter, she does not give the answer.

How shall we evaluate DPP’s LEDS? First, as mentioned earlier, it is better for local government to design its local development strategy than left for central government. Second, it can remedy the huge economic gap between Taipei and the other local communities in Taiwan by assisting the other local communities to join the global competition. Third, by encouraging more young talents to be back to their home town, this strategy also aims to avoid brain wastes, since most of the young graduates normally still choose to stay in the big cities to find the jobs which do not need higher academic diplomas. Fourth, considering the oncoming challenges brought by China-Taiwan FTA and the other potential FTAs between Taiwan and the other trade partners, the DPP’s LEDS also aims to assist some local sensitive sectors to transform its original managing model by actively exploring its uniquely comparative advantage to embrace the post-FTA age of Taiwan.

Finally, despite the fact that regional subsidies have become the actionable subsides which can be potentially condemned when harming the other country’s like sectors under the WTO law, as long as its main design and application is for the general use of local people, it would not become a specific subsidy falling within the scope of the SCM Agreement. Furthermore, pursuant to Article 107 of the TFEU, though any form of state aid, which distorts competition by favoring certain undertakings or the production of certain goods, in so far as it affects trade between Member States, be incompatible with the internal market, as long as this aid aims to promote the economic development of areas where the standard of living is abnormally low or where there is serious unemployment, it would be considered as compatible. Therefore, we can conclude that, DPP’s new strategy is not only available under the WTO law, but it also finds the similar concerns under the EU law. Nevertheless, further observation will be still necessary.

Nevertheless, one inqury still remains on the author's mind. what is the main target of DPP's LEDS? Exports or domestic consumption? Considering the economic scale of Taiwan, the author believes that only the latter one is meaningful.