The government's long-term fund (??長期資金) will probably remain operating, but its scale will not exceed 10 percent of total loans in the financial market, the Cabinet-level Council for Economic Planning and Development (CEPD, 經建會) said yesterday.
Taiwan has approximately NT$2.7 trillion in postal savings, the main source of the long-term fund's assets. The CEPD's bank and long-term fund committees are responsible for evaluating proposed private sector uses of the postal savings.
"The government established the long-term fund in 1994, and so far it has contributed steadily to our economic growth," said Lee Kao-chao (李高朝), vice chairman of the CEPD.
"Right now the direct loans from the long-term fund equal NT$1.32 trillion, and the total value of investment projects is NT$2.8 trillion," Lee said. "Until the capital market and the bond market is fully established, the fund is still necessary."
The CEPD also said that an idea proposed by Premier Vincent Siew (蕭萬長) in 1998 to combine a government pension fund, labor insurance fund and labor retirement fund would be too difficult, and the current system of independent management should remain. It is also necessary to keep the fund at an appropriate scale to avoid disrupting the market.
"The scale of the fund should not exceed 10 percent of the total loans in our financial system," Lee said. "Right now, the figure is between 7.4 percent and 7.5 percent."
A good time for the fund to retire from the market is when postal savings are managed by a company, and the fund can be privatized, too," Lee said.
The CEPD also suggested that, in order to allow the long-term fund to better reflect costs and market interest rates, the current one-year interest rate for postal savings should be extended to be that of two- to three-year terms.
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