October 18, 2000

"Far Eastern Economic Review"

INTERVIEW: Taiwan President Defends Econ, China Policies

By JULIAN BAUM and MAUREEN PAO

TAIPEI -- Determined to prove his credibility after five months in office, Taiwan's President Chen Shui-bian is fighting to win back public support and answer his critics after appointing a new prime minister and swearing in a new cabinet on Oct. 6.

In an exclusive interview with the Far Eastern Economic Review, the president defended policies on the economy and the stock market and responded to a white paper from Beijing that gave a "grim" assessment of cross-strait relations.

Chen spoke with FEER correspondents in Chinese in his office on Oct. 17. Translated excerpts of the interview are as follows:

FEER: SOME PEOPLE SAY YOUR GOVERNMENT HAS LACKED DIRECTION AND STRONG LEADERSHIP. WHAT'S YOUR RESPONSE?

First, I would like to emphasize that the new government has remained very oriented toward its goals. But we are also very democratic, and I don't think that because we are democratic and allow public debate on major issues that we should be criticized for "losing our direction."

Take cross-strait relations, for instance. Our base line is my inaugural speech of May 20 and remains unchanged. How can we be accused of losing direction simply because someone wants us to live up to their expectations, and we did not follow their wishes?

Second, the rise of the new government marks the first-ever change of the ruling party in Taiwan. In fact, it's the first time in Chinese history on either side of the Taiwan Strait. It's impossible that all dreams can be realized overnight after a change of ruling party.

Most importantly, only when there is a stable environment can reforms be carried out. The cross-strait climate must remain stable. Second, diplomatic relations must remain stable. Third, our defense and military affairs must remain stable.

I am from the opposition party "the Democratic Progressive Party." The traditional political education in the military contained misunderstandings about us and treated us like the enemy. It took us a few months to stabilize military morale and to make the armed forces loyal to the country, the people and the constitution.

Before I was elected, people believed that our Achilles' heel was our handling of cross-strait relations and diplomatic affairs. Our inexperience and our concepts were blamed for causing cross-strait tension. But today, what most concerns the people of Taiwan? Not the cross-strait issue, but other issues, particularly those related to the people's livelihood. What does it mean? It means that cross-strait issues, once regarded as our Achilles' heel, are no longer our major drawback.

We have stabilized cross-strait relations, stabilized diplomatic ties, and stabilized the military. Next, our focus will be on domestic reforms, including a crackdown on "black gold" (corruption), economic development, post-disaster reconstruction and greater government efficiency.

FEER: COMPARED TO THE REST OF ASIA, TAIWAN'S STOCK MARKET IS EASILY
INFLUENCED BY POLITICS, AND YOUR GOVERNMENT OFTEN INTERVENES TO
STABILIZE PRICES. CRITICS BLAME YOU AND YOUR GOVERNMENT FOR THE STOCK MARKET'S RECENT DECLINE. WHAT DO YOU SAY?

The fundamentals of Taiwan's economy are very good. Economic growth rates, industrial production, export and import growth rates, unemployment rates, the commodity index, export-order growth, are all in quite good shape. Since January, most stock markets slid, including those
in the United States, Japan and Southeast Asian countries. Taiwan's performance has been better than South Korea, the Philippines, Indonesia, and Thailand.

I was asked the other day about my view on the drop in Taiwan's stock market. I retorted that Nasdaq also has plunged. However, does anyone tie this to President Clinton? Because Taiwan is small - retail investors represent 87% of Taiwan's investors, and one in three families in Taiwan has a direct or indirect relationship with the stock market - the issues affecting Taiwan's stock market are not necessarily economic. There are also social issues.

As long as the stock drop does not cause a major impact on the nation's competitiveness or productivity, we will only closely watch its movement, but will not become too worried about it. As for the day-to-day changes, I don't mind. In the United States, the Nasdaq has already dropped about 40%. Is there anyone to be blamed for that?

FEER: CRITICS SAY YOUR GOVERNMENT'S RECENT ECONOMIC POLICIES ARE A RETURN TO THOSE OF THE FORMER RULING PARTY, THE KUOMINTANG. WHY IS IT NECESSARY TO GO BACK TO THE OLD WAYS?

Taiwan is Taiwan. Our society will not become a different place just because of rule by the Kuomintang (Nationalist Party) or by the DPP. The problems the DPP faced when it came to power weren't new, they were the old problems of the KMT.

For instance, it's not that when the DPP became the ruling party, and I became president, that our traditional industries suddenly started having many problems. Financial institutions didn't suddenly transform from boom to doom after I became president. The central government's deficit now totals NT$2.5 trillion (US$=NT$32.292). I don't think this deficit was caused
by me becoming president. I believe these problems have piled up and existed for a while. In the old days, they were covered up. But now, I have to face them.
As for solving these problems, are solutions that the KMT thought of things that we cannot look at? Or are our solutions today things they could not imagine at all then? Having similar or identical solutions is very natural because they and we all look at the same problem. This
isn't a big deal. We cannot say all the old solutions should be rejected.

FEER: DESPITE ALL YOUR GESTURES OF GOODWILL TOWARDS MAINLAND CHINA, THEY HAVE NOT RESPONDED POSITIVELY. BEIJING'S DEFENSE WHITE PAPER CLAIMED YOUR CROSS-STRAIT POLICY IS "AMBIGUOUS" AND SAID CROSS-STRAIT RELATIONS LOOKED "COMPLICATED AND GRIM." WHAT IS YOUR COMMENT?

Beijing has its white paper, and we have ours. I remember the first white paper published (in 1992) by the Republic of China's Ministry of Defense reported clearly that there were seven scenarios for Beijing to invade Taiwan, not just three. So the scenarios for the PRC to invade Taiwan have been always changing, varying from two, to three, five, and seven. Now, it's
back to three. Mainland China's saber-rattling and wanton resort to military threats will only cause antipathy in the Taiwanese people and widen the gap between the two sides.

Sunshine is warm enough so that everyone is willing to take off their jacket. North winds can only make us pull tight our collars. Beijing can either adopt a sunshine policy or a north-wind policy toward Taiwan and its people. The choice is very clear. During the past several presidential elections, Taiwan's people defied Beijing's saber-rattling and elected the candidates disliked by Beijing. Chinese leaders don't really understand the DPP, or Chen Shui-bian.

FEER: YOU HAVE OFTEN SAID THAT BOTH SIDES OF THE TAIWAN STRAIT SHOULD RETURN TO THE "SPIRIT OF 1992" WHEN BEIJING AND TAIPEI BEGAN INFORMAL TALKS THAT LASTED FOR THREE YEARS. WHAT DO YOU MEAN BY THIS?

Our officials told me many times that they believed that in 1992 the two sides did discuss the "one-China" issue, but in the end did not reach an agreed conclusion. But there was a process of discussion and there was a spirit embodied in that process. Our understanding and acknowledgment of this spirit is dialogue, exchange and agreeing to disagree. I hope that everyone can show wisdom and creativity in trying to define "one China" in a way that's acceptable to people on both sides of the strait. I believe our sincerity is complete and our
goodwill is beyond doubt.

If everyone is focusing on differences, looking for differences, the distance will widen. What good will that be? If we set aside differences and sit down for dialogue and exchange, we will find opportunities to draw closer and close the gap.

Seeking similarities among differences could help us develop consensus and find tacit agreement. This is something that people on both sides would be glad to see.