May 18 (Bloomberg) -- Sitting in Taipei’s main commercial center as office workers filed out for lunch, Y.S. Liu mourned the collapse of her import business. Her president, she said, had failed to deliver.
The 60-year-old blamed Ma Ying-jeou, whose approval rating is 14 percent, for an economy that grew at one of the slowest rates in Asia last year, sparking January protests that helped trigger the resignation of Premier Sean Chen. When a Philippine patrol boat crew killed a Taiwanese fisherman last week, Liu and others found an outlet for their fear of being bypassed in Asia’s recovery.
“We’ve been frustrated for so long,” Liu said, adding Ma should be even tougher on the Philippines. “We’re so full of anger, so disappointed and dissatisfied with our government.”
Ma is seizing the moment to press President Benigno Aquino for a formal apology as Taiwan grocers pull Philippine goods from stores and travel agencies cancel trips, an approach that risks denting efforts to boost trade ties in Asia. His reaction may say more about Taiwan’s feeling of weakness in a region of emerging powers that don’t officially recognize its government.
“The whole world is bullying us, so we have to bully someone weaker than us,” said George Tsai, a political scientist at Chinese Culture University in Taipei. “Taiwanese have accumulated so much frustration and anger. Collectively, we’re trying to find an outlet. At such a moment, the Ma administration can only be tough.”
The diplomatic spat started on May 9, when a Philippine patrol boat fired at least 32 bullets at a Taiwanese boat in waters claimed by both sides, killing a 65-year-old fisherman. Ma threatened economic retaliation if Aquino didn’t meet four demands: apologize, compensate the family, agree to talks on disputed fishing zones and start an investigation.
The Philippines, which doesn’t formally recognize Taiwan under its one-China policy, agreed to all the demands except a government apology. Aquino offered to apologize on behalf of the Filipino people.
Ma rejected it outright. Within 24 hours, his government began military exercises off its southern coast, told people to stop traveling to the Philippines and froze the hiring of Filipino workers. State-run Taiwan Sugar, with 12 outlets stocking snacks and other products made in the Philippines, took items off its shelves.
“People want justice, and our voice to be heard by the international community,” Wei Huang, manager at a Taiwan Sugar store in Taipei, said after removing more than 100 products. “We should use whatever leverage we have.”
Taiwan also moved to halt already-limited diplomatic engagement, including ministerial meetings under the World Health Assembly, a body of the World Health Organization. Sixteen Taiwan-based exhibitors withdrew from the International Food Expo in Manila.
Taiwan’s media has fueled the public outcry, with front-page headlines declaring “Philippine Government, Rotten to the Core.” Groups congregated outside the house of the dead fisherman.
“This is something very unusual,” said Samuel C.Y. Ku, a professor at the Institute of China and Asia-Pacific Studies in Taiwan. “We haven’t seen this kind of social outrage from a specific event.”
Investors have shrugged off the tensions. Taiwan’s Taiex index, which fell 0.3 percent yesterday, is up 1 percent since the shooting. The Philippine Stock Exchange Index has gained 1.2 percent in that time and hit a record high on May 15.
“We’re assuming this calms down and the impact will be negligible” on each country’s economy, said Robert Prior-Wandesforde, Singapore-based head of Southeast Asia economics at Credit Suisse Group AG.
The U.S., which is a treaty ally to the Philippines and helps maintain Taiwan’s defense, urged both sides to avoid an escalation.
China condemned the killing and demanded the Philippines begin an investigation. Taiwan has been ruled separately since Chiang Kai-shek’s Kuomintang party fled China in 1949 after a civil war, and the Communist Party deems the island a renegade province.
“With an island so interdependent with both economic powerhouses -- and being a democracy that has to respond to public opinion -- something like this must be handled quite literally like a controlled ’storm in a teacup,’” said Gary Li, a senior analyst at IHS Maritime. Ma “will settle down once the political theater is complete.”
Ma improved ties with China after he was first elected in 2008, ending a six-decade ban on direct transport links. Since his re-election in January 2012, his popularity has plummeted as the economy slowed compared to others in the region, which are moving ahead on trade agreements that exclude Taiwan.
Taiwan’s gross domestic product grew 1.3 percent last year, according to the Asian Development Bank, slower than South Korea, China and most Southeast Asian nations. The opposition Democratic Progressive Party led the January protest in Taipei over Ma’s economic management that drew tens of thousands of people.
When it comes to the dispute with the Philippines, however, Ma’s opponents are with him. DPP chairman Su Tseng-chang said Taiwan needed to present a united front despite Ma’s other shortcomings.
“This is a matter of dignity,” said J.J. Tsai, a 40-year-old housewife, as she shopped in one of Taiwan Sugar’s stores yesterday. “We are willing to pay the economic price.”
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