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Pension reform necessary, but hurts the Kuomintang
Publication Date : 06-02-2013
Taiwan President Ma Ying-jeou is a courageous man. He has tackled the nation's soon-to-go-bankrupt pension system, which his predecessor Chen Shui-bian dared not tinker with for fear he would bankrupt his Democratic Progressive Party.
One week ago today, after months of growing public fears of the bankruptcy of Taiwan's pension system, Ma unveiled his pension reform plan to the nation, promising that the system would be safe for 30 years. He said that there should be no more worries thanks to his reform.
To accentuate his wholehearted support for the reform, Ma announced that he would not open a special Bank of Taiwan savings account to enjoy the 18-percent preferential interest offered to retired government employees. The rate has been the main target of public criticism against what the opposition party calls the fat retired brass hat. Ma's announcement, aimed at setting an example for top government officials to follow, has been blasted as merely for show because, as a retired president, he will enjoy eight years of fat paychecks worth millions of New Taiwan dollars before he is entitled to a meager monthly interest payment of NT$23,000 (less than US$800). Very few top government officials have followed suit.
According to the Ma plan, the preferential interest rate that government employees and military personnel will enjoy after retirement will be cut to 7 per cent by 2020 with the addition of a floating rate fixed by the Bank of Taiwan; however, the total should not exceed 9 per cent. The lowering of the rate will affect at least 630,000 men and women.
Many more people will be affected if the plan - which Ma said is yet to be finalised before it becomes a government-sponsored bill in April - is implemented as it is. They are the 9.87 million wage earners covered by the labour pension insurance programme. They will have to pay more in premiums and receive much less than they currently do.
The Ma pension reform certainly is very unpopular, to say the least. But the public has to support it none the less. The aging population and the low birth rate over the past 20 years have resulted in people paying little, retiring early and receiving big benefits. The military pension fund will go bankrupt by 2019, the teachers' and labour insurance programmes by 2027, and the pension fund for government employees by 2031.
That's why Ma compared his pension reform to pulling to a screeching halt a speeding train on the verge of falling off a cliff. Somebody has to do it, and Ma is that somebody, even if it means he risks another plunge in his already record-low popularity ratings. In the process, however, he is also hurting the ruling Kuomintang, of which he doubles as chairman, a position he is seeking re-election to later this year.
As a matter of fact, practically all the people, except Democratic Progressive Party politicians, will be on the losing end of Ma's pension reform. Opposition party candidates have a much better chance to win the nationwide local elections scheduled for the end of next year and the presidential election in 2016. They may win control of the Legislative Yuan for the first time in the legislative polls that will be held either alongside the presidential race or shortly before or after it. Almost all 630,000 veterans and government retirees, plus those who will retire in the next three years, will stay away from the polls, if not vote for the opposition party. Meanwhile the disgruntled labour force will try vent their dissatisfaction by punishing Kuomintang candidates. The loss of votes to the ruling party will be far larger than the support it may win from among the swing voters who have contributed to its victory in all but a few elections - nationwide or local - in the past.
Moreover, the Democratic Progressive Party will enjoy an extra dividend. When it comes back to power, it will not have to tackle the taboo pension problem. No wonder its politicians, from Chairman Su Tseng-chang on down, are chuckling. The Kuomintang is presenting victory on a silver platter.