Taiwan Today

Major changes made to Taiwan’s administrative map are starting to bear fruit, but the work is far from complete.

Aunified administration can help construct a clear identity for a region. In the past, for example, Taipei City was seen as the core of northern Taiwan, while Taipei County played only a secondary role, says Eric Chu (朱立倫), mayor of New Taipei City, the special municipality that was created via the upgrade of the former county. This was partly because every township in the county had its own plan for development, Chu says. “Now there’s a great opportunity to build an overall image for the city, but we also have to pay attention to the unique characteristics and needs of each district,” he says.

Calls to redraw Taiwan’s administrative map began in the 1990s, but featured prominently in President Ma Ying-jeou’s (馬英九) successful campaign in the 2008 presidential election. Previously there were two special municipalities—Taipei City and Kaohsiung City—as well as 18 counties and five cities. In 2009, not quite one year after Ma took office, the Legislative Yuan passed amendments to the Local Government Act that allow cities and counties meeting certain criteria regarding population and degree of urbanization to seek special municipality status through upgrades or mergers. Following the amendments, 11 cities and counties, all in the populous western part of the island, submitted a total of seven applications to become special municipalities. In the end, the central government approved four applications: the mergers of Taichung City and Taichung County, Tainan City and Tainan County, Kaohsiung City and Kaohsiung County, plus the upgrade of Taipei County to New Taipei City. The new administrations came into being on December 25, 2010.

The upgrades of Taoyuan County and Changhua County were denied, as was the merger of Yunlin County with Chiayi County. The case for Taoyuan has regained momentum, however, with the change in status expected to come into effect by the end of 2014. For now, the new Taiwan map shows five special municipalities—the capital Taipei City and the four newly created ones (including an expanded Kaohsiung City)—14 counties and three cities. Taking up about one-fourth of Taiwan’s land area, the five big cities are home to 60 percent of its population.

Benefits of the rezoning effort have started to become apparent in the nearly two years since the map was redrawn. In New Taipei City, the administrative change has resulted in practical benefits for average citizens such as the one-off NT$20,000 (US$667) childbirth subsidy granted since April 2011 by the New Taipei City Government to every child born within its jurisdiction since the start of that year. Not only does the scheme apply equally to residents throughout New Taipei City—payments varied according to township from NT$1,000 (US$33) to NT$20,000 under the old county system—but the amount is on par with that made to residents of Taipei City.

In January this year, the Intelligent Community Forum, a think tank based in New York City, announced Taichung City as one of the world’s Top Seven Intelligent Communities, the only non-Western city on the list for 2012. One major reason for the honor, says Taichung Mayor Jason Hu (胡志強), is the integration of administrative work for the city and the county, a move that has led to highly efficient government services for citizens and businesses.

More good news arrived for Taichung in mid-September, when the mayor announced that the new municipality had won approval from the International Association of Horticultural Producers to host an international flora exposition starting in November 2018. The event will take place in rural Houli District, which boasts abundant land resources.

In late July this year, Tainan City took one more step toward its goal of shining on the world stage. The League of Historical Cities, which was founded in Kyoto, Japan in 1994, announced Tainan as one of the three cities this year to have earned membership in the organization, the other two being Kutaisi in Georgia and Hebron in Palestine. Rich in cultural legacies, the oldest city in Taiwan became the first on the island to become part of the select group with 94 other historical cities. “This honor we’ve acquired owes much to the merger of Tainan City and Tainan County, which made the resultant municipality a strong candidate for gaining admission to the organization,” says Tainan Mayor William Lai (賴清德).

Scale of Success

The former Tainan City tried in vain to enter the League of Historical Cities more than 10 years ago, but succeeded only after the city-county merger put all the cultural assets of the two areas within one administrative district. Scale also matters for the city’s industrial sector, as the municipal government is networking more than 10 industrial parks in the greater Tainan area in hopes of creating a stronger cluster effect in the future.

An increase in efficiency is another product of the zoning reform and is reflected in resource allocation among the districts that constitute a special municipality, according to Hsu Jen-hui (徐仁輝), a professor of public policy and management at Taipei’s Shih Hsin University. In the former Kaohsiung, Taipei, Taichung and Tainan counties, township leaders in both urban and rural areas were elected to their posts. Leaders often acted independently, resulting in the careless use of resources, Hsu says. Township authorities might refuse to share their street-sweeping trucks with neighboring towns, for example, or each administration might want to build its own activity center, whereas one would suffice for all the inhabitants of the same region. Following the merger, the townships are now known as districts and their leaders are appointed by the mayor, a move that should eliminate such waste, he says.

Still, the average resident in the new administrative regions might be forgiven for thinking that the major changes from the reforms so far are slight alterations to their address and official doorplate. “But municipal governments have started to make blueprints for future development in line with their new status,” says Kao Shyh-nan (高誓男), director of the Department of Regional Affairs under the Cabinet-level Research, Development and Evaluation Commission (RDEC). Take public transportation networks, for example. “Kaohsiung City is so large in population and area today. Only a good public transportation system can link people together throughout greater Kaohsiung, in order to help them identify with the city. Only with such a system can we connect industrial sectors within the city and create synergy among them,” Kaohsiung Mayor Chen Chu (陳菊) says. Kaohsiung City has begun work to integrate and enlarge the transportation network for the sprawling municipality with six hubs across the former Kaohsiung City and Kaohsiung County.

Similarly, Tainan City Government is planning an integrated public bus network covering the whole of the former city and county. Previous bus systems operated independently, and only in specific regions. The Taichung City Government is also improving its bus services, a move aimed at narrowing the urban-rural divide in the municipality. By July this year, Taichung City had coordinated 118 municipal bus routes throughout the entire region, a dozen more than the separately operated services in the former Taichung city and county in 2010.

The rezoning reforms have generated some controversy, however. “Taiwan is taking a top-down approach, with the central government guiding the tough process of consensus building,” Kao says. One problem is that it has taken longer than expected for the new administrations to ensure local regulations are consistent between the former city and county areas of a special municipality, a situation that has led to friction. The central government asked those regions concerned to complete the task by the end of this year, but Kao notes they are unlikely to achieve the goal, since only 63 percent of all such regulations had been adjusted or made by late August. Obviously the “one city, two systems” phenomenon will persist for some time in Taiwan until the changes are complete.

Kao says that rezoning efforts abroad often seek to minimize such friction by starting with collaboration between the administrations to be merged to pave the way for the elimination of administrative borders. Platforms do exist where Taiwan’s local governments communicate and cooperate with one another, such as the regional alliances in southern and northern Taiwan established in 1999 and 2005 respectively. The RDEC official notes that neither has proven effective in boosting substantial cooperation between city and county administrations in the two regions, however. If local governments had been able to find a way to work with each other beforehand, the reform imposed by the central government would have proceeded with fewer problems, he says.

Money Matters

Funding is another area of contention. Local governments are funded chiefly by three sources: taxes collected by the central government; taxes raised locally and kept by a local government; and the tax redistribution fund, a central-government scheme that includes money collected by local governments.

All four of the new administrations have complained that their finances are insufficient to provide the greater number of services for which they are now responsible. (The number of Taipei City’s services is unchanged).

Critics say the incomplete legal framework governing the special municipalities is at least partially to blame for the financial woes. “The rezoning project has been carried out too hastily. The revisions of related laws remain unfinished,” Kaohsiung Mayor Chen says, referring to proposals to change two laws—the Act Governing the Allocation of Government Revenues and Expenditures, and the Public Debt Act—which are awaiting approval by the legislature.

Amending the Act Governing the Allocation of Government Revenues and Expenditures is a major strategy for achieving greater financial support for local governments. For example, currently 40 percent of business tax (minus funds for Taiwan’s uniform invoice lottery) is contributed to the tax redistribution fund. Under the new proposals, 100 percent of business tax revenues (minus uniform invoice lottery funds) would be distributed among local governments. In addition, the amendments would see local governments keep all of the revenue from the land value increment tax. Currently, counties and non-special municipality cities contribute 20 percent of their land value increment tax to the tax redistribution fund.

Overall, this fiscal decentralization, as Hsu calls it, would change the proportion of tax revenue controlled by the central and local governments from the current ratio of 7-to-3 to 6-to-4. Based on recent figures, local governments throughout Taiwan could receive as much as NT$100 billion (US$3.3 billion) extra in total if changes put forward by the Ministry of Finance (MOF) are approved.

To narrow financial gaps between special municipalities and other cities or counties, the proposed amendments would further stipulate that 85 percent of the tax redistribution fund should be used to cover local governments’ budget deficits, with any remainder being shared among them for infrastructure improvement. The residual 15 percent of the fund would be allocated according to their efforts to improve their own finances.

Reconsidering Public Debt

Local governments also hope for revisions to the Public Debt Act in order to grant more room for them to raise debt, and thus allow greater flexibility in the use of funding. Currently Taiwan’s total public debt extending more than one year may not exceed 48 percent of the average gross national product of the most recent three years. The act ensures a debt ceiling for all levels of government. Shih Hsin University’s Hsu warns that the central government should address the issue with great caution, however, “especially in view of the European debt crisis,” which resulted partly from easy credit conditions that encouraged high-risk borrowing.

Amendments to the two acts were first submitted to the legislature for deliberation in January 2010. Since then, proposed changes to the Public Debt Act have been revised, with the task still underway in late August this year. The Act Governing the Allocation of Government Revenues and Expenditures was seen as a priority for the legislative session that began in mid-September.

In 2011, the five special municipalities received NT$224 billion (US$7.46 billion) from the central government. That amount was NT$38 billion (US$1.26 billion) more than the total paid to the corresponding cities and counties in 2010. The aim of the additional funding was to decrease the size of the shortfall experienced by the new municipalities in the absence of amendments to the two financial acts.

A related measure is a proposed law that would allow the redrawing of district borders within special municipalities, and township borders in other areas, and was expected to be examined at the same legislative session in September this year. The proposed Law of Administrative Division is seen as an important means by which resources could be distributed among residents more equitably and according to actual needs. Currently, districts vary greatly in population and economic scale, yet in administrative terms they all rank at the same level of government. The same is true of townships within the remaining cities and counties.

Two responsibilities have yet to be transferred to the four new special municipalities. One is the assignment of labor inspections, a task the special municipalities would like to take on for themselves, as Taipei City has done and Kaohsiung City still does within the former city precinct. The Cabinet-level Council of Labor Affairs would prefer to share the task by allowing the new municipal governments to handle general assessments, while retaining authority over areas that require special expertise, such as health and safety inspections.

The other duty in dispute is the operation of senior high schools within the four new local administrations. Again, Taipei City already handles this task, as does Kaohsiung City within the previous boundaries of that city. The expanded Kaohsiung City, as well as the newly formed New Taipei, Taichung and Tainan cities are refusing to take on the job because of the concomitant heavy financial burden. “I’m not rebelling against the central government, but the financial support from it falls short of the amount actually needed to maintain quality education,” Lai says of the senior high school plan. The Tainan City mayor says there are 23 senior high schools in his municipality with reported total expenses of NT$5.3 billion (US$176 million) in 2010. The central government has promised less than 70 percent of that amount to the city government to take responsibility for the schools, however, he says.

Making the Best of It

Although the current situation is tough, Lai would rather think positively about the reforms. “We won’t give up just because of the financial constraints. We’ll make the best use of limited resources,” he says. To do so, governments have come under pressure to curb spending, which is reflected in decisions by Tainan City to cancel year-end firework shows and reduce spending on press conferences, for example. At the same time, the state of the central government’s coffers improved through the launch of a tax in June 2011 on housing units resold within a short time or the purchase of luxury goods such as expensive cars. The MOF will impose a securities gains tax starting January 2013 and has been considering levying an energy tax on businesses. At the same time, the central government plans to reduce its workforce of 164,000 by 4,000 employees by 2015 through job attrition in an effort to restructure and streamline its operations.

“This is a good start, but Taiwan needs to do more,” Hsu says. For a long time, Taiwan’s politicians have been trying to win elections by pushing for tax cuts in various areas on one hand and by increasing social welfare benefits on the other, he adds. As a result, government finances have worsened. The scholar says it is time to make the hard decisions, however unpopular politically. “What should be done must be done, especially when it comes to having the rich pay their share,” he says.

For now, Taiwan still faces great challenges in its efforts to redistribute resources, but for all the controversy, positive anticipation remains. Surveys conducted by Tainan City Government in 2011 and this year found that more than 60 percent of those polled expressed high hopes for the development of greater Tainan following the 2010 rezoning. “I have great pressure to meet their expectations,” Lai says.

For Chien Tai-lang (簡太郎), deputy minister of the interior, the rezoning effort is necessary for Taiwan’s development. “The competitiveness of cities is essentially the national competitiveness. A city’s strength comes from its scale and ability to expand by removing administrative borders, which is part of the global trend,” the deputy minister says. He points out the urgent need to upgrade Taiwan’s cities in order to compete with traditional powerhouses such as Tokyo and more recently Shanghai. Taipei City, which has enjoyed its special municipality status for 45 years, is currently the only one in Taiwan that can be considered a world city as all the others still lack global competitiveness, he notes. This, however, can be expected to change because the reform effort has only just begun. “In the end, we hope these municipalities will grow in strength and become regional core locations in Taiwan that facilitate cooperation with neighboring city and county governments, which in turn can boost the overall strength of Taiwan,” Chien says.

Write to Oscar Chung at mhchung@mofa.gov.tw