As observed by the opposition Democratic Progressive Party, these figures show that "the KMT really did what the DPP could not do in eight years" and proved false the campaign claims that the former authoritarian party was uniquely "professional and competent."

Regretfully, senior KMT government officials tried to hide from this reality by claiming that "quarter to quarter" comparisons showed a "deceleration" of the economy's decline from a negative 8.61 percent in the fourth quarter of 2008 to the 10.24 percent drop in the first quarter this year and forecast contractions of "only" 8.50 percent and 2.98 percent in the second and third quarters.

In that way, the stunning impact of Taiwan's worst three economic quarters on record can be spun into numeric "proof" that "the worst is over." In the meantime, adroit political use of the stock market rise, whose skyrocketing price/earnings ratios over 40 last month show that the market has departed fundamentals into bubble land, has helped lift Ma's approval ratings.

Taiwan-based reform needed

However, even a cursory examination of the national income accounts shows that such statistical footwork cannot hide the reality that Taiwan's real level of economic activity has dropped by nearly three years as the absolute value of real GDP of NT$12.5 trillion will only be slightly greater than the NT$12.4 trillion recorded in 2006.

The stark contrast between the DGBAS's gloomy forecast and evidence of rising unemployment and plunging wages with the euphoria over the latest bubble rally shows that merchandise exports remain the driving force in our economy since only exports can generate linkage value and an upward spiral through boosting industrial production, investment, employment, wages and private consumption. Another reality that is being hidden is that the Ma government's touted nine cross-strait agreements with the People's Republic of China and the "relaxation" of Taiwan's regulatory defenses against the impact of the asymmetric competition from the PRC's state-controlled economy have yet done little to improve our economic vitality or bolster our economic and economic related institutions that can upgrade Taiwan's true source of competitive advantage and economic dynamism, namely our export sector.

The fact that Taiwan's economy grew slower than our major newly industrialized economic rivals during the world economic upturn between 2003-2007 and has plunged deeper into recession during the current "global financial tsunami" points to grave structural problems in the Taiwan economy that cannot be resolved simply by "liberalization" and "relaxation" of cross-strait economic, transportation and financial interactions, which are just about only "reform" measures realized by the KMT government in the last year.

A hint of where these problems reside was provided by the Switzerland-based International Management Development (IMD) academy's just released world competitiveness ratings for 2009 in which Taiwan's rank nosedived from 13th in 2008 to 23rd to its lowest level in over a decade. The immediate response of the Council for Economic Planning and Development was that the drop in Taiwan's rating was due to the greater impact of the contraction in world demand last year on our export-led economy since exports account for nearly 70 percent of our gross domestic product.

But the IMD ratings indicate that external factors do not tell the entire story as Taiwan's performance declined in 2008 not only in overall economic performance but also in government efficiency, business efficiency and infrastructure.

The IMD study shows that Taiwan's greatest weaknesses do not lie in its industrial structure but in Taiwan's institutions, including government fiscal management, the lack of transparency in financial institutions, corporate auditing practices, shareholders rights, public spending on education and foreign investment inflows and insufficient improvement in health and environmental protection.

Moreover, the less corporate oriented World Economic Forum last October dropped Taiwan's ranking from 14th to 17th largely due to worsening of various aspects of the institutional environment, including low public trust of politicians and doubts about judicial independence as well as the usual complaints about regulatory burdens for companies.

Such structural reforms, embodied in proposed package legislation for the revamping of the organization of the Executive Yuan and the Judicial Yuan, "sunshine" anti-corruption bills, major revisions in labor laws, legislation to promote renewable energy sources and industries and national land management systems, were approved by the previous DPP government during its eight years in office and obstructed or boycotted by the KMT-controlled Legislature.

Taiwan now is paying the price for the KMT's "scorched earth" strategy that succeeded in "persuading" the electorate to give it power again and for the KMT's obsession with "great China" and its lack of a genuine Taiwan-centric vision grounded in reality.