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Overholt defends research findings

Taiwan's structural reforms will give the domestic banking system breathing space, but the policies are not enough to help uproot the problems completely, said William Overholt, head of Asian strategy and economics at Nomura Inter-national in Hong Kong.

Overholt made the comments after Minister of Finance Yen Ching-chang (顏慶章) discounted a Nomura Research Institute report on the financial sector as "inaccurate and out-dated."

"The current situation is much better than 1997 and 1998, but there hasn't been a sense of crisis," he said yesterday. "As a result, places like [South] Korea have developed a stronger banking system than Taiwan."

Taiwan needs "a sense of urgency" to avoid slipping into a Japanese-style banking crisis, which is now dragging the "whole [Japanese] economy down with it," Overholt said.

"Taiwan's situation is much better than Japan's, but the policies are essentially the same," he said, adding that the current restructuring in Taiwan is "useful but not sufficient."

With regard to pending bank mergers in Taiwan, Overholt said that such mergers have also occurred in Japan with a "limited unloading of bad debts, but [such mergers fell] short of being thorough."

"If Taiwan were [to create a truly healthy financial situation by] adopting US-style financial reforms, it would have the most competitive economy in the world," Overholt said.
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