By Shih Hsiu-chuan
STAFF REPORTER
Friday, Jun 13, 2008, Page 3
　

Praising itself as a government that “puts the economy first,” the new Chinese Nationalist Party (KMT)-dominated Cabinet recently found itself under fire over its first economic proposal that budgeted NT$116 billion (US$3.8 billion) to expand domestic demand.

Funding for the proposal would be obtained through an amendment to the special budget for increased investment in infrastructure construction and a bill to adjust the already approved annual budget. Both are pending legislative approval.

The Cabinet has called the proposal a “stimulus package” that could contribute 0.42 percent to economic growth this year, lessen the impact of the recent fuel and electricity hikes and help deliver the economic revival President Ma Ying-jeou (馬英九) promised during his election campaign.

Many lawmakers and heads of local governments from ends of the political spectrum, however, have strongly criticized the proposal.

Even the Budget Center, a KMT-leaning Legislative Yuan research unit producing assessments of the government’s budget statements criticized the government for failing to write the budgets in line with the law.

“President Ma vowed to run the administration according to the law in his inaugural address, but he might be unjustly blamed because of the budget bills,” the center said.

Out of the total, the Cabinet intends to allocate NT$58.3 billion to 25 local governments in proportion to the population of each city and county, with the funds to be used in construction projects proposed by city and county governments.

An additional NT$8.5 billion would be granted to local governments to restart construction projects suspended because of soaring raw material prices and another NT$20 billion to help them meet budget deficits and pay off debts.

The Cabinet was heavily criticized for the manner in which it plans to distribute the funds, which analysts said would result in misuse and exacerbate an already uneven regional development.

“Look at the expenditure items proposed by the local governments. The program for the expansion of domestic demand is more nominal than a reality,” said Chen Chao-jian (陳朝建), an assistant professor of public affairs at Ming Chuan University.

Increasing the level of consumption through government spending cannot stimulate the economy to the degree that the government expects, unless the money is used in public infrastructure projects that can increase aggregate demand and create supply, Chen said.

The Budget Center said the Council of Economic Planning and Development, which is in charge of reviewing plans by local governments to spend the NT$58.3 billion, pre-approved a total of 947 projects, 80 percent of which are small construction projects.

With a budget of less than NT$100 million per project, the small projects cover a variety of planned expenditures that are irrelevant to public infrastructure, Chen said.

For example, Chiayi County intends to spend NT$25 million on leaflets and DVDs using simplified Chinese characters to promote tourism in Alishan, while Yunlin County sought NT$5 million to purchase trash cans for public places.

Kaohsiung City said it would spend NT$139 million replacing garbage trucks, while about NT$300 million of the partial funding allocated to Changhua County would be used to replace police cars and fire trucks.

Seven local governments plan to organize carnival-like activities for Valentine’s Day, the Moon Festival and New Year’s Eve, local activities such as a jazz music festival in Taichung City, a coffee fair in Yunlin County, and others, for a total investment estimated at NT$280 million.

“The way the [central] government is going to distribute the money makes it look like Santa Claus, which does not give it a good image,” said Norman Yin (殷乃平), a professor at the Department of Money and Banking of National Chengchi University.

Calling on the government to resist pressure from some local governments heads who ostensibly see the funds as a favor in return for their support for Ma, Yin said: “Money should be spent on the sharp edge of a knife.”

Executive Yuan Spokeswoman Vanessa Shih (史亞平) said that concerns over misuse of funds were “unnecessary” as the council was still reviewing the proposals by local governments.

The deadline for city and county government to have submitted their expenditure plans was yesterday and initial results of the council review will not be known until June 26.

This constitutes another violation of the Budget Law (預算法), as two budget bills sent to the legislature for deliberation on May 29 were void of details about objects of expenditure budgeting.

“As the budget plans did not explain how the funds would be spent, the legislature should not offer ‘blank checks’ to the government,” Democratic Progressive Party (DPP) legislative caucus whip Ker Chien-ming (柯建銘) said, a view echoed by some KMT lawmakers.

The Budget Center also criticized the government in its assessment report for disregarding the regulations stipulated in the Budget Law concerning the two conditions under which the government is allowed to adjust a previously approved annual budget.

Also in violation of the law was the government’s listing new expenditure items that were not included in the approved annual budget, such as the NT$20 billion earmarked for helping local governments address their budget deficits.

Shih Cheng-feng (施正峰), dean of the College of Indigenous Studies at National Dong Hwa University, said the strong political undertones of the budget were the principal reason why so many illegalities had been found.

“Some people have said the budget was intended as a reward for KMT local factions for their work during the presidential election, but in my opinion the funds are rather a trick to buy votes for next year’s election,” Shih Cheng-feng said.

Chen echoed Shih Cheng-feng, saying that the ulterior motive was gaining votes for the next presidential election, which would explain why the amounts would be distributed in proportion to the size of population of every city and county.

“Cities or counties with higher populations would obtain more money simply because they have more votes, which disregards the consequence this would have on growing regional inequality,” Chen said.

The DPP caucus has said it would boycott the passage of the two budget bills.
　

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