Taipei considering sale of municipal bonds overseas

The Taipei City Government is considering selling US$500 million of bonds to investors abroad in what would be the country's first sale of overseas municipal debt, as the city seeks to make up for a funding shortfall caused by declining tax revenue.

Taipei last year had NT$139 billion (US$4 billion) in revenue and NT$151 billion in expenditure, its Web site said. Tax funds this year are expected to fall short of earlier projections by 5 percent to 6 percent, said Chen Hwei-pin (陳惠平), the city's chief secretary.

The city will try to keep its borrowing below 15 percent of expenditure for next year's budget, he said.

"The shortfalls have accumulated since last year," Chen said. "Overseas interest rates can be more stable over a longer time period."

The Taipei City Government, like the central government, is trying to find ways to deal with a slump in tax revenue resulting from a slowdown in the economy.

The city is considering selling bonds backed by rental income from land occupied by Taipei 101, the world's tallest skyscraper, and plans to sell 400 million shares it holds in Fubon Financial Holding Co (富邦金控). It currently has no credit rating.

Apart from the city's bond sales, the central government is proposing to sell NT$100 billion (US$2.95 billion) of bonds that will be backed by proceeds from sales of shares in state-owned companies to help pay for the government's spending plan.

The government will seek legislative approval for a NT$500 billion budget that would be spent on infrastructure projects over five years, Minister without Portfolio Hu Sheng-cheng (胡勝正) said.

"We would have a clause that allows the government to borrow first and then to sell shares to repay," Hu said.

The government could sell shares in companies such as Bank of Taiwan (台灣銀行), Land Bank of Taiwan (土地銀行) and Taiwan Tobacco & Liquor Corp (台灣菸酒公司) that had been scheduled for privatization.

President Chen Shui-bian (陳水扁) wants to boost spending to spur an economy that's projected to grow 3.06 percent this year, down from 3.59 percent last year. The government is proposing its biggest-ever budget deficit of NT$257.4 billion next year.

The central government, which has to keep annual borrowing below a legal limit of 15 percent of expenditures, is proposing to exempt the NT$500 billion budget from the debt limit.