Exclusive Interview: Premier Lin Chuan
Taiwan’s Big Infrastructure Ambitions
Premier Lin Chuan’s approval ratings have plummeted in his six months in office. But in an interview with CommonWealth Magazine, he insists he will remain focused on addressing Taiwan’s problems and let others worry about the polls.
Taiwan’s Big Infrastructure AmbitionsBy Rebecca Lin, Yi-shan Chen
From CommonWealth Magazine (vol. 612 )
There may be growing dissatisfaction with his Cabinet and increasingly forceful expressions of disapproval of government policies, but Premier Lin Chuan and his sense of humor have not succumbed to the intense pressure.
When Lin is asked by a photographer to straighten out his hair, he raises his right hand to pat it down a bit and jokes “I’ve lost a lot of hair these past few years. Straightening it out probably won’t make much of a difference,” drawing laughs from the people around him.
The Woes of ‘Reform Cabinet’
That is Lin Chuan in a nutshell. No matter how difficult his predicament, he remains focused on the matter at hand. The day before his interview with CommonWealth Magazine, the Taiwanese Public Opinion Foundation released the results of its latest poll in which 52 percent of respondents said Lin’s Cabinet did not have the ability to solve problems, compared with only 31 percent who said it did.
It seems that whenever Lin’s Cabinet has launched a reform initiative, it has been the target of scorn. A pension reform initiative has drawn the ire of public employees, flip-flops over a five-day work week have angered labor groups, a move to cut seven public holidays has infuriated young people, and a push to open Taiwan’s doors to Japanese food imports from areas potential contaminated by radioactive materials has led to fisticuffs.
Even Taiwan independence advocates who should be sympathetic to the Democratic Progressive Party (DPP) government have unleashed uninterrupted attacks against Lin, and, to a lesser extent, President Tsai Ing-wen.
“When you do one thing, you offend one person. When you do 10 things, you offend 10 people. So of course the polls are low,” he says in his defense.
From the beginning, Tsai tabbed Lin’s Cabinet as the “reform Cabinet,” leaving Lin clear about his plight. But that hasn’t stopped him.
“In the past when [initiatives] ran into problems, they would be dropped. The problems we’re running into now have accumulated over a long time and we have to face up to them,” he says.
Asked what would happen if his support in the polls fell below the DPP’s base level of support of 30 percent, he says without hesitation, “I don’t get involved in elections. I came here to try to resolve some public issues.” He then adds: “If our efforts aren’t good enough, then get somebody else to do the job. That’s how democracies work.”
It was the first time in the six months Lin has been in office that he publicly addressed how long he might stay on the job amid the heavy criticism.
As to the power and fame that comes with position, Lin seemed indifferent, but when talk turned to getting over the hump on pension reform, tax reform and relations with China, he was determined to press on, though acknowledging the need to find a balance between three societal demands in an age of citizen participation: “leadership and determination,” “attention to public opinion,” and “procedural justice.”
“The problems we face today are all very controversial, and are problems that others haven’t wanted to confront in the past. But today we have the courage to tackle them. Only by overcoming these problems can we have a broad and open road in the future,” Lin says.
In looking ahead to global economic prospects in 2017, Lin does not believe United States President-elect Donald Trump will abandon the direction of free trade. He said Taiwan has to be ready for whatever may take the place of the Trans-Pacific Partnership (TPP) – a new trade bloc that Taiwan hoped to join after 12 member nations signed the deal in February 2016 but that Trump has already declared the U.S. will not take part in.
Lin also revealed for the first time in the interview that the Cabinet will draft a special law to help attract foreign professionals to Taiwan, and he said there are plans to undertake NT$100 billion in rail projects in the coming three years and to make individual and corporate income taxes the main targets of tax reform.
When asked what his biggest setback was in the past six months, Lin said everything had been expected so there weren’t any setbacks.
He was then asked what his biggest achievement was to date, but the clear-thinking Lin did not take the bait, saying he had no intention of boasting “because too many things that have yet to deliver any sense of achievement are waiting around the corner. So talking about this is pretty stupid.”
Excerpts of the interview can be found below.
CommonWealth Magazine: What impact will Trump’s election victory have on Taiwan?
Lin Chuan: Many people thought it was a surprise that Trump was elected. Everybody is still watching to see what America’s policies will be in the future. To me, I don’t think there will be much difference with the basic direction and approaches of the past.
Still Hope for Taiwan without TPP
For example, Trump has said the TPP would end. But without the TPP, the U.S. may still want do some things. He said he wanted to sign some bilateral trade deals, and use bilateral deals to replace multilateral deals. How are they different? In my mind, they both break down trade barriers and both involve coordination involving mutual compromise or concessions so that all sides win. That won’t change.
We don’t have to negatively interpret the TPP situation. It’s not true that without the TPP, Taiwan is without hope. Taiwan didn’t make it onto the first bus [the first round of negotiations] and we were hoping to get onto the second bus. But now the first bus isn’t leaving the station, and the ones being affected are those who jumped on that bus because they now have to find another vehicle in its place. When another opportunity comes along, we will have the same chance they do.
If we truly believe that free trade and breaking down trade barriers is still the road Taiwan wants to follow for its future economic development, what we can do now is to lower the political risk of being boycotted or reduce uncertainty and then align ourselves with the world as best we can. If we do this, our chances of catching the next bus will go up.
CW: Trump’s main policy focus seems to be fiscal policy. You’ve said Taiwan’s biggest need is investment. How do you stimulate investment?
Lin: This is indeed Taiwan’s problem. In thinking how to attract more investment, Taiwan can no longer offer cheap land or labor. So what are our strengths? Are our regulations advanced? Not really. Do we have an abundance of talent? Maybe not. Do we have strong industrial supply chains? That remains to be seen.
So we need to amend the law to attract more innovative investment that can be at the forefront of the future and of industry. Once laws are revised, talented people will be willing to stay. We also have to bolster existing supply chains. Our IT industry is very strong, for example, and we have to keep it that way.
Using Legislation to Attract Top White Collar Workers
In terms of revising laws, it is very important that we get white collar workers to come to Taiwan. We are now planning to draft a special law targeted at getting rid of obstacles that get in the way of top white collar talent coming here. The National Development Council is planning to get rid of about 20 of those restrictions. The draft bill will be posted on our internet platform in early December to get reaction from people. But the problem of a high income tax rate [for foreign nationals] will be addressed separately. It will not be covered in the special law.
CW: You have previously said that you want to build infrastructure and have asked the Ministry of Transportation and Communications what the next projects are that can be done.
Lin: I hope that before the end of the year, we can come up with at least a dozen feasible plans, at least in terms of transportation infrastructure, especially rail travel. That could include making the eastern Taiwan railway a double-track line, or elevating railway lines in cities or moving them underground. These projects are better done sooner than later, and if they are done now, they will help stimulate the economy.
These cannot be the 10 major infrastructure projects [alluding to the 10 major construction projects under President Chiang Ching-kuo in the 1970s] or the Six-year National Development Plan [articulated in the 1990s] because of our current budget limitations. Why did the Six-year National Development Plan get stuck in its tracks? Because when they were planned, they exceeded society’s capacity and as a result could not be implemented. That led to many projects being delayed.
So we have to first determine the priority of each project. If we mistakenly put projects that are not of high priorities ahead of others, it would be a waste of society’s resources.
Right now, based on what the government is capable of in terms of public infrastructure, we can expand spending on transportation infrastructure by about NT$100 billion a year. I don’t think society can absorb any more than that.
CW: Does the government have the money?
Lin: According to the Public Debt Act, we are still below our upper limit of debt, so there is money for pushing public infrastructure.
My bottom line is, I’m willing to allow relatively high public spending in the next two to three years and operate on budgets that are somewhat unbalanced but that won’t lead to a fiscal collapse. If you run a deficit, you'll pay a price, so it's important to know what you'll get in return for it.
That’s why I’ve asked [Transportation Minister] Hochen Tan to review and review again every transportation project and be sure it is meaningful. Every proposed project has to be something the public believes is worthwhile or at least its need and importance can be explained in terms of policy.
Building a Consensus on Tax Reform
CW: You have also asked the Finance Ministry to study tax reform. Can you talk about this?
Lin: There are several income tax problems. First, the difference in marginal tax rates between individual and corporate income taxes is too big. The highest rate for individual income taxes is 45 percent and then there’s a 2 percent supplementary health insurance tax, but it’s only 17 percent for corporate income taxes. The excessively big gap has distorted behavior and resource use. The most common example is “fake” foreign investment; that’s unfair. Also, the dual income tax system [combining corporate and personal income taxes to avoid double taxation] has become a partially integrated tax system, and this has also drawn criticism.
Income taxes are a very sensitive issue. They have a redistributive effect, but because they tax income, they penalize behavior that is favorable for economic growth. There is also the problem of unfairness caused by the inherently skewed nature of taxes. Some have suggested that dividend income should be taxed separately from income taxes, but while doing that might be beneficial to people with high incomes, it would not necessarily be good for those with low incomes.
Tax reform involves many things. If a government proposes a tax reform plan without first communicating it, there will inevitably be problems. Also, public policy cannot satisfy everybody; there have to be trade-offs, which involve subjective values.
I hope the Finance Ministry will seek out experts to get their opinions and then have a public discussion to see what kind of trade-offs society is willing to accept before trying to consolidate different opinions. You have to build a majority consensus in society to be able to push through tax reform.
CW: So do you want to set up a tax reform committee? Wouldn’t you worry about repeating the same mistake as with the national pension reform committee?
Lin: There won’t be a tax reform committee. We hope to post the opinions of scholars and experts on an online platform and have their pros and cons discussed and then see to what degree the government can consolidate those views.
CW: Many people worry that the Lin Cabinet has opened too many battlefronts and won’t be able to handle them.
Lin: We have to learn how to communicate with society. Anytime there is the participation of society, [the policymaking process] slows down, making it seem like there’s no determination and no decisiveness. But decisiveness means not taking procedural justice into consideration or at least reducing the opportunities for communication with the public. That’s a contradiction.
Maybe we have done things a little more slowly, but we hope the things we do are right. People may think our communication skills aren’t ideal, but through the process we have learned what forms of communication are more efficient. This is something we have to keep working at and making adjustments as we go along.
This is the biggest difference between the current government (which took office on May 20) and the previous one. We hope to solve society’s most controversial issues through communication. Those problems have been hard to solve in the past because the government did not make an effort to communicate and nobody pushed for solutions so nothing happened.
CW: After being in office for half a year, do you think there has been enough communication? The approval ratings of the president and Cabinet have fallen steadily. Has the communication been effective or has it run into obstacles everywhere?
Lin: The communicating we’ve done has still been effective, because without communication there would be no way to solve problems. Just look at the revisions being made to the Labor Standards Act. If we had rammed them through in July, the perception would have been that the government is heavy-handed and everybody would have criticized us for procedural injustice. That would have created obstacles for discussion of other public projects in the future.
Maybe had we rammed the amendments through at the time, people would have forgotten about it over time. But the real problem is that procedural justice needs to be taken into account, though that could also mean that in the end nothing gets done. So it’s a question of balance and choice.
Today, we no longer live in a society ruled by a political party. We are a democratic society, with a high degree of public participation. We know from the Ma government [President Ma Ying-jeou was in office from 2008 to 2016] that if a government does not communicate, it is hard to get anything done. Maybe many people will still oppose [the policy] even after the communication process, but through the process, people will become aware of different viewpoints, making the situation easier to accept. We hope to do things this way.
CW: But your poll numbers are very low.
Lin: When you do one thing, you offend one person. When you do 10 things, you offend 10 people. When you’ve opened many battlegrounds, it’s not surprising the poll numbers are low.
Do the Right Thing and then Check the Polls
CW: So you’re not worried about low poll numbers?
Lin: If something is right, you have to do it. You just have to do your best to get opponents to understand what you’re doing to reduce their dissatisfaction as much as possible. What you hope is that people may have been dissatisfied at the time something was done but then it becomes evident with time that it was the right thing to do. If we can’t get the job done, then have somebody else do it.
If you do everything based on polls, then that’s a huge waste of time. What we can do is apply our energy and abilities in the most effective areas, so I don’t want to spend too much time on polls.
The problems we face today are all very controversial, and are problems that we didn’t want to confront in the past. But today we have the courage to tackle them. Only by overcoming these problems can we have a broad and open road in the future. We have to get past these mountain-sized problems; there’s no point in trying to pretend that everything is fine.
CW: But polls are still good barometers. Political scientists say that if the government’s approval rating falls below 30 percent, it will signal danger because deep-green voters [green is the color of the DPP and pro-Taiwan independence forces] are about 20 to 30 percent of the electorate. Such a low poll number means you will have even driven these people away.
Lin: Let me put it this way. I don’t get involved in elections. I came here to try to resolve some public issues and help President Tsai’s DPP government solve problems. If people think the Cabinet’s efforts are inadequate, then get someone else to do the job. That’s how democracies work. In terms of polls, we’ll just do our best. There’s no need to worry too much about them.
No Future for the ‘1992 Consensus’
CW: CommonWealth Magazine will soon release the results of its annual Top 2000 CEO Survey in which approval for President Tsai was under 20 percent. The biggest worry about the investment environment is relations with China, and few CEOs feel things will get better next year. What can be done about cross-Taiwan Strait relations?
Lin: In cross-strait relations, everybody worries about uncertainty. But I think that if you look at it closely, there actually isn’t that much uncertainty.
There’s no doubt that relations between the two governments have turned colder, but I think the other side should understand the real difficulty of recognizing the “1992 consensus” in Taiwan. After former President Ma’s trip to Malaysia, Taiwan should have an even more realistic view of the “1992 consensus,” which is that it does not meet public expectations. So if you want the current government to recognize the consensus, it would be very difficult politically. In Taiwan, it would be hard to persuade the public.
What we still hope is that the two sides can maintain mutual good will so that economic activity is affected as little as possible. Some adjustments could be made politically to slowly build mutual trust through increased contacts, or at least try to gradually improve ties amid stability. That’s what we can do.
Right now, cross-strait relations are not worse than they were in 2000, and the flow of Chinese tourists has not been completely cut off; a certain level of visitors has been maintained. But there are indeed fewer contacts now between the governments, and problems have arisen. What contacts there are now occur at a lower level.
Of course, we are not satisfied with this. We still hope that the two sides can resume relatively high-level dialogue and coordination – that should be the normal state of affairs. But for this state of affairs to exist, it requires adjustments by three sides, including the Kuomintang [former President Ma’s party].
After former President Ma’s trip to Malaysia, everybody should know that focusing everything on the “1992 consensus” is no longer viable. We have to build more durable cross-strait relations on a foundation of equality and mutual dignity.
Taiwan should not be opportunistic or expect that all that’s needed to solve problems is the opposite side’s good will. There’s no such thing as a free lunch. We have to find a balance based on a foundation of mutual respect and mutual strength. There’s no way around this. I don’t think that in cross-strait relations, there can be any shortcuts.
Translated from the Chinese by Luke Sabatier