Office of the President/AP
Taiwan President Ma Ying-jeou

Taiwan’s Retail Sector Stimulus Plan: Give Consumers Spending Money

January 20, 2009 02:15 PM
by Anne Szustek
Taiwan’s economic stimulus plan gives residents shopping vouchers. It’s the latest effort by a country to try to get money flowing through its economy.

Government Gives Residents Money to “Buy Taiwanese”

A combination of a Chinese New Year’s gift and a move to stimulate the flagging economy, Taiwanese President Ma Ying-Jeou unveiled a plan Sunday to give NT$3,600, about $108, in vouchers to the each of the island’s 23 million residents.

“I consider this a positive example for the world,” Ma told Taiwan’s Central News Agency, saying that his government was the first nation in the world to implement such a plan.

By Sunday evening, more than 90 percent of eligible Taiwanese, including the president and his family, had gone to special government booths and picked up their vouchers, which are valid through September.

Taiwan’s residents were eager to start spending, if mall and store traffic on the island were any indication. French retail chain Carrefour reported 30 percent higher than normal sales this weekend at its Taiwan locations.

Government officials encouraged residents in more secure financial situations to donate their vouchers to charity, as well as to make an effort to buy Taiwanese-produced items.

The plan cost the government of Taiwan nearly NT$85.7 billion (about $2.6 billion).

Other countries have taken a different approach to stimulate the domestic economy. Just this week the United Kingdom announced its version of the U.S. $700 billion Troubled Assets Relief Plan, also known as the “bailout bill.” The U.K. Treasury is to insure banks’ risks including mortgages and leveraged loans—a move that parallels the bailout bill in its original intent, which was to buy up financial institutions’ bad assets.

“The asset-protection plan sounds smart. It should let banks reduce risk-weighted assets, and thus leverage, without further capital injections,” writes The Wall Street Journal. But should the plan be unsuccessful, “U.K. taxpayers will be left to foot the bill,” the Journal continues. “The size of the bill would depend on the details of the scheme. But the three most exposed U.K. banks have £900 billion [about $1.35 trillion] of exposure to commercial and residential property and structured credit, of which £100 billion [about $150 billion] is particularly toxic, according to Merrill Lynch.”

Background: Other governments pour stock into currency

Western Massachusetts nonprofit Berkshire Inc., got a $250,000 grant to research and develop a system that would keep money circulating at home. The result was BerkShares, a local currency flowing through some 350 businesses in the Berkshires region, adorned by portraits of local historical figures such as author Herman Melville and painter Norman Rockwell.

 Since its inception about two years ago, more than $2 million in BerkShares has gone through the region. The currency’s price, 100 BerkShares to $90, offers customers an inherent 10 percent discount and gives them impetus to shop at participating businesses.

Other localities have dabbled in similar plans. The town of Carrboro, N.C., has a similar local currency called the “PLENTY.” In March 2007, the English town of Totnes launched its own money. Lewes, England, followed suit in September 2008. Both share the pound as the name of its local currency as well as a desire for residents to patronize locally owned businesses.

Thai village Santi Suk implemented the “bia” about a decade ago to mitigate the effects of the Asian financial crisis, which weighed heavily on the Thai baht. 

“We need our own money more than ever now,” Phra Supajarawat, a Buddhist monk who moonlights as the unofficial governor of the bank behind the bia, told The Wall Street Journal. “Things are turning bad in Thailand and people need something they can believe in.”

Vouchers such as those issued in Taiwan also have a dual use—helping the person holding the voucher and merchants. They have been used in the United States, but for a different purpose. After Hurricane Katrina ravaged New Orleans and the U.S. coast of the Gulf of Mexico in 2005, billions were spent on vouchers for housing assistance, repairs and spending money for items to help victims get back on their feet.

Policy think tanks of varying political stripes said “vouchers provide more choices to individuals, reduce the need for building public housing and take advantage of existing housing stock,” wrote The Washington Post in October 2005.

Related Topic: Stimulus Plan for States: How Will Cities Benefit?

City officials across America are heralding the congressional $825 billion stimulus plan for state and local governments, including $550 billion in spending and $275 billion in tax cuts. Introduced to the U.S. House of Representatives last week, some analysts are likening the package to the Depression era’s New Deal. Yet municipal governments are skeptical the money will funnel to local-level projects.

Reference: Bargain hunting guide


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