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	ASIAWEEK
	Intelligence The story behind today's news from the editors of Asiaweek From Our Correspondent Personal perspectives on the news

TIME: Oddly enough, I have yet to speak to anyone in the finance industry who is too thrilled with the outcome of the Taiwan election.
A: Well, Chen Shui-bian won with a plurality. He doesn't have a mandate. I wasn't too happy when Clinton won with a plurality in 1992 or in 1996, but for all intents and purposes his hands were tied, and he couldn't possibly inflict any harm on the economy. So if Chen goes through the next four years and does absolutely nothing, maybe that would be the ideal outcome. I wouldn't mind seeing Chen choose a new central bank governor or finance minister if he chooses wisely; the DPP has a great intellectual base and they can certainly come up with a few top-rate economists for the job. But the drawback to all that DPP intellect is that they're not an incredibly practical party, and I'm afraid Chen's going to rush headlong into things the way he did as mayor of Taipei.

Q: Why did Lien Chan fare so miserably? Can the KMT really continue from this point, with the backlash against Lee Teng-hui and Lee's promise that he'll resign?
A: It's going to be difficult for the KMT to go on without Lee. He's really molded the party in his own image. I remember one of his speeches back in 1994 or '95 when he said 'the KMT is only two years old'--because before it had been controlled by foreigners, that is, mainlanders who had invaded in 1949. In many ways, that was the key to its own undoing because Lee gave the Taiwanese a sense of nationalism that they expressed in this election by voting for the DPP--and against Lien, who made the mistake of painting Zhu Rongji's threats as a sort of 'here's what happens if you vote for Chen,' sort of warning. My wife was in Taiwan last week and she said that irritated a lot of people, people who weren't even planning to vote. People who suddenly got out of their chairs on Saturday to protest at Lien. Because essentially he was mimicking the point that the Chinese were already making, and if the Chinese can scare them out of voting for the candidate they want, that's not democracy.

Q: China's been quiet so far. On that end, it sort of looks like it's not the end of the world, right? Markets should bounce on the back of that, yes?
A: My concern is not China and the cross-strait relationship. Certainly I think they'll be able to maintain a status quo. In fact I think Chen may be able to even improve the situation because his party isn't hindered by the KMT's historical antipathy towards the PRC or any of the policies that came out of that. Chen Shui-bian can't afford to be too strident. Neither side can risk what conflict would do to their respective pending WTO membership. And the Chinese can't afford to lose the investment they're going to see from Taiwan. I also think Chen's done a pretty masterful job of starting off relations on the right foot and putting Taiwan in a position where it's easy for the U.S. to want to protect them. And Annette Lu's [Chen's running mate] victory speech was brilliant, because it was just made to go on CNN. The point she made about the election proving Taiwan to be a bastion of democracy and human rights in Asia, the point she made about it being the first country with a Confucian society to have democratically elected a woman to the vice-presidency ... Chen's point about being willing to negotiate 'with dignity.' It all goes down well back in Iowa. But you would expect Chen to handle that well, he's a lawyer. What worries me is what he will do domestically; how seriously he will take his "mandate" to reform. Chen's wife, you know, was at a time an even more strident crusader than he was for the rights of the Taiwanese and the DPP. In 1985 she was rammed over three times by a truck and was crippled, and the driver was never found despite the fact that there were witnesses. Most Taiwanese believe Š that it was a botched KMT assassination attempt. And Chen has to go home every night and see her sitting in a wheelchair because of it. It's not an easy thing to shake.

Q: So you think Chen could have an axe to grind?
A: What worries me is he's made rooting out corruption the centerpiece of his campaign, and I just don't know how he's going to deliver on that. Sure, there's collusion in Taiwan between business and the government. Sure, the KMT has close business ties. But I think a lot of the corruption is small-time stuff. There isn't enough regulatory oversight, especially in areas like construction, where companies can subcontract and subcontract and subcontract some more, and sub-contractors take bribes and do shoddy work and it all results in what you saw during the earthquake, with aluminium cans inside cement walls and that sort of thing. But that isn't high-level corruption. As for organized crime, the last time Taiwan cracked down on organized crime, what it got was very disorganized crime. Remember the series of weird kidnappings and things? No one likes organized crime, but it's preferable to disorganized crime.

Q: How sleazy is the KMT?
A: I really don't think that, on the scale of corruption as we know it, the KMT is all that corrupt. But how much does Chen want to dig? When he was mayor of Taipei I thought he took somewhat of a bull-in-the-China-shop approach to some of his campaigns. It would have been fine if he'd left it at driving the brothels out of town, but he went on this crusade against illegal rooftop structures that was so ridiculous--until the police chief pointed out that he himself had an illegal rooftop structure on his own roof and the campaign ended. It was all a bit preposterous. What what worries me is that he'll plunge into these things without thinking them through. He doesn't have any sort of master base of support, he won't control the Legislative Yuan and he doesn't have so many friends in business--although the Evergreen group and the Formosa group both gave him a lot of support, and they've been seeing stock market favoritism on the back of that. But the point is that it's going to be difficult for him to get things done because the Legislative Yuan members and the bureaucracy--a lot of whom have their own axes to grind--are not going to want to make things easier for Chen. Markets never like a leader who is stalemated.

Q: Taiwan's got a stabilization fund and today you saw the government reduce the limit band from plus or minus 7% to plus or minus 3.5%. They did this during the earthquake, you didn't like it that much, but it seemed to assuage things a bit...
A: When people intervene with the natural prices it doesn't do anyone good long-term. Short-term, however, it's not dangerous. I think it might prolong the recovery longer than it needs to go, but it also cuts down on the panic selling you might see otherwise.

Q: Are people really worried that Chen will be less pro-business than the KMT?
A: In terms of policies I don't think any of them differ tremendously. Their divisions were based on cultural heritage more than anything. Chen will act more like a Democrat than a Republican, he'll probably be less fiscally responsible, he'll be more susceptible to welfarist lobbying, but I don't think you're going to see radical policy changes. He's certainly not anti-business. But you don't have to be anti-business to do irreparable harm to an economy.

Q: All right, but assuming there's no irreparable harm done...
A: Commodity prices are rising and you'll see the NT dollar weaken, and that's not good. But we aren't going to see 6,000 or anything. In fact, we might not even dip below 8,000 if the government goes into the market. However, the short- to medium-term uncertainty makes Hong Kong and Korea look a lot more attractive, because markets don't like uncertainty. Full stop.

Be it overvalued tech stocks, high-profile mergers or corruption scandals, the region's stock markets can go on wild rides. Join the discussion here

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