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Government may fund 20% of agriculture bank

Taiwan may invest at least NT$4 billion (US$114 million), or 20 percent, in a proposed agriculture bank to take charge of rural lenders burdened by bad debts, said Sam Wang (王得山), the political vice-minister of finance.

"Past experience showed it isn't ideal when the government investment exceeds 20 percent, so it should be about 20 percent," Wang said after an agro-finance conference on Saturday. Other investors will include the credit units that lend to farmers and fishermen, he added.

After the nine-hour meeting which was attended by 160 delegates from the government and the agricultural sector, the government has yet to decide how the proposed agriculture bank will operate.

Last month, Taiwan lifted a two-month restriction on the amount local loan cooperatives can lend after about 120,000 farmers and fishermen marched to the presidential palace in the capital Taipei on Nov. 23 to protest against government efforts to clean up their credit cooperatives.

The government has proposed a cleanup of its lenders by merging or closing some of Taiwan's 52 banks and 300 rural credit cooperatives. Non-performing loans at the grassroots financial cooperatives are among the highest, totaling NT$118.3 billion, or 19 percent of their total lending, as of September.

As for commercial banks, they had NT$1.43 trillion of loans classified as non-performing or at risk of turning bad, as of September, government statistics showed. That's 10.2 percent of total lending.

Falling land values and a decline in barriers to competing imports have eroded the incomes of farmers and fishermen, making it harder to pay debts. Taiwan's economy, which shrank 2.2 percent last year, will probably grow 3.3 percent this year, the government says.

Taiwan, which joined the WTO on Jan. 1, wants to cut bad loans and encourage its best lenders to combine as it eases regulations to lure foreign investors.
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