Taiwan public investment likely to pick up from H2 2017, provide more support to the overall economy: DBS Bank

Taiwan’s public investment is expected to pick up from the second half of this year and provide more support to the overall economy. Taiwan’s quality of infrastructure ranked 13th globally, according to the World Economic Forum’s global competitiveness report in 2016. This put Taiwan behind its major Asian peers such as Hong Kong (1st) and Singapore (2nd), Japan (5th) and South Korea (10th). There is adequate room for Taiwan to improve its infrastructure, DBS Bank reported.

The forward-looking infrastructure development plan was approved by parliament this week. Originally, the government planned to spend a total of TWD880 billion over eight years on transportation, water environment, green energy, digital infrastructures and urban-rural development. In the face of strong objections from the opposition parties, the ruling Democratic Progressive Party (DPP) party made concessions in the final bill i.e. cut the amount of spending to TWD420 billion and shortened the implementation period to four years.

Further, the downsizing of the infrastructure plan is not a good sign regarding the government’s track record in implementing policy. Political conflicts remain in place and continue to hinder the passage of economic bills, despite the DPP’s majority in the parliament.

Meanwhile, President Tsai’s approval rating has also fallen, due to the public backlash triggered by pension reforms earlier this year. There are growing uncertainties regarding whether her government can push through substantial reforms in the next three years to support the economy’s long-term performance. The tax reform plan due later this month will be the next thing to watch.