Economic analysts warn of a return to cronyism

Restructuring fund

Although both Cavey and Louis Chen praised the DPP government for writing-off bad loans and initiating reforms, Louis Chen said the new government will have to push for creating the Financial Restructuring Fund (金融重建基金), which the DPP administration had failed to achieve due to political gridlock.

The DPP was also weak in the privatization and consolidation of the large number of state-controlled banks, Cavey said, adding that he's not confident that even a re-elected DPP would make it a priority.

Cavey warned that the economic recovery may make the banking sector look good in the short-term, allowing politicians to forget the importance of further reform and making the banking sector vulnerable to a repeat of recent problems if the economy turns south again.

Immature system

Chow said that the nation's financial reforms still have a long way to go, compared to the maturity of countries such as South Korea and the US.

As well as financial reforms, Chow stressed the importance of an independent judicial system, one that is free from political interference while able to launch investigations into financial and political irregularities as well as white-collar crimes.

Louis Chen urged the new government to quickly develop a long-term plan for the banking sector to tap in to the greater China market, while Chow said that a supervisory mechanism should be finalized to regulate newly established financial holding companies after the Financial Supervisory Board (金監會) is slated to be set up in July.