Tue, Jul 22, 2003 - Page 10 News List

Government urged to start bolstering grassroots banks

By Joyce Huang  /  STAFF REPORTER

Pundits yesterday urged the government to hammer out measures to strengthen the grassroots banking sector as soon as possible, following the passage earlier this month of the Agricultural Financial Law (農業金融法).

"A proposed agricultural finance bureau [under the Council of Agriculture] should be set up immediately to begin recruitment of agriculture financial talent," said Lin Kuo-ching (林國慶), a professor of agricultural economics at National Taiwan University.

Lin said financial professionals will not only help formulate agricultural policies but also ensure the sector's future prospects and health.

Taiwan's entry to the WTO last year severely affected the agricultural sector, Lin said, adding that the sector's competitiveness and internationalization should be listed as a government priority.

The new law stipulates that the government must allocate funds to co-found a national agricultural bank, which must have a minimum capital of NT$20 billion.

It also states that the government's shares in the bank will gradually be reduced from its initial contribution of 49 percent in the first year to below 20 percent after three years.

Lin said the bank's establishment was a "compromise" aimed at satisfying requests made by the grassroots financial sector during the tug of war between the government and the farmers' and fishermen's associations.

"Different approaches to exclude the commercial banking sector's involvement in the grass-roots financial sector were taken, which some said was regressive, but I disagree," Lin said.

However, Huang Tsung-chi (黃琮琪), a professor of applied economics at National Chungshing University in Taichhung, said yesterday that he is pretty pessimistic about the viability of the agricultural banking sector.

"Competition in the banking sector is simply too stiff to provide any room for the agricultural-banking sector to survive," Huang said.

"I don't see any likelihood that the agro bank will turn a profit in three years," he said.

Huang urged the government to be prepared to help fund the new bank for at least 10 years.

Huang said that the new bank should take advantage of metropolitan credit cooperatives by allowing the metropolitan cooperatives to take up more shares in the bank.

Huang had opposed the proposed agricultural bank before the law was passed.

But yesterday he said that the new bank's size should be big enough to compete with other banks since its establishment will be a fait accompli.

"The bank's working capital should have been set at a minimum of NT$60 billion to NT$70 billion," Huang said.

More than 300 representatives of farmers' and fishermen's associations participated in a Council of Agriculture forum yesterday led by council Chairman Lee Chin-lung (李金龍). Many expressed concern about the government's role in the new bank's credit-review committee.

Many farmer representatives also urged the council to come up with plans to return the assets confiscated from 36 credit cooperatives that were taken over by the government.

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