A struggle is brewing over regional disparities in funding. It seems that the central government’s plan is to “stress the north, ignore the south” and southern politicians are deeply unhappy:

Kaohsiung County Magistrate Yang Chiu-hsing proposed the central government Tuesday take into account each administrative district’s size, in addition to their population, when allocating state funds for boosting the local economy and for promoting public construction projects.

Yang made the suggestion in a meeting with ranking county government officials after the Cabinet-level Council for Economic Planning and Development (CEPD) made public last Friday a list of the amounts that local governments will receive under the plan.

Taipei County in northern Taiwan would receive the largest share — NT$9.6 billion from the NT$114.4 billion (US$3.74 billion) in state funds earmarked by the Executive Yuan.

Neighboring Taipei City would receive the second highest sum of NT$6.6 billion, followed by Taoyuan County at NT$4.9 billion. Taipei City and Taoyuan County are also in northern Taiwan.

The total spending plan is worth US$3.7 billion. It is true that the areas receiving the most cash for public infrastructure projects are all in the north, and all predominantly Blue. Indeed, as A-gu reported the other day, the KMT briefed its own magistrates on the spending plans as early as February, while giving DPP magistrates just a day to prepare theirs once the KMT got into office. The message to the DPP-held areas is clear. But at the same time the idea of spending where the people are is not exactly irrational. Another issue is that Taoyuan is the fastest growing county in Taiwan, and high growth naturally demands more infrastructure spending.

One of Taiwan’s most pervasive problems is the disparity between the north and the south, something that the DPP tried to ameliorate. Consequently, Kaohsiung mayor Chen Chu has organized a group of six southern city and county heads to oppose the new plan. Meanwhile out in the Penghu, officials are demanding that the government keep its promises to put in casinos.

Public infrastructure spending is supposed to save the construction firms with whom the local officials have such intimate political patronage connections. These are limping along, and many in the local construction industry are now asking whether China can save Taiwan’s real estate industry. As the Taipei Times reports, construction isn’t doing so well.

A report by Collier International, however, said office building prices had gone up so much that it had scared away potential buyers or office tenants, the Chinese-language Economic Daily News reported yesterday.

The report forecast the vacancy rate for the office building market could climb back up to exceed 10 percent this year from last year’s 9.47 percent, the paper said.

Meanwhile, statistics released by the central bank yesterday showed that the property market may be showing signs of weakening. Loans for construction have dropped for a second straight month to NT$1.018 trillion last month, tallies showed.

The NT$8.65 billion, or 0.85 percent, decline in such loans — which mostly include loans to construction companies for housing projects and land development — in April from the previous month has accelerated from a monthly decline of NT$2.07 billion, or 0.21 percent, in March, data showed.

The central bank’s latest data also indicated weakening consumer loans in other categories. Car loans presented a continual decline since July 2006 and fell to NT$81.21 billion last month, a reduction of NT$1.8 billion, or 2.18 percent, from the previous month.

The Taiwan Institution for Economic Research (TIER) observed that any boost from infrastructure spending this year will probably be offset by rising gas and food prices. Perhaps effects will show up next year, it said.