Lawmakers at a meeting of the legislature’s Finance Committee yesterday raised concerns about the lack of government guarantees as the nation’s financial sector heeds the New Southbound Policy, as Taiwan does not have official diplomatic ties with the 18 countries targeted.
Regarding the government’s plans to arrange a US$3.5 billion credit line for an official development assistance program to aid infrastructure projects in Southeast Asia, Chinese Nationalist Party (KMT) Legislator Alex Fai ( 費鴻泰) said the government must set aside the budget to help participating lenders in the event of default, especially state-run banks that are likely to bear the brunt of the risk exposure in carrying out government policies.
In response, Directorate-General of Budget, Accounting and Statistics Minister Chu Tzer-ming (朱澤民) said that apart from NT$1.5 billion (US$49.62 million) in interest rate subsidies, no such budget has been planned for next year.
The government would provide project assurance on a case-by-case basis, Chu added.
However, KMT Legislator Lai Shyh-bao (賴士葆) urged the government to secure more accords such as memorandums of understanding (MOUs) related to investment and trade, as well as regulatory collaboration with the 18 nations.
Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) said that while the government would provide “a degree” of assurance on policy-related projects, lenders would be on their own in commercial dealings.
Taiwan has inked MOUs with 13 financial regulators across nine nations in the region.
Koo said the commission expects to add another agreement before the end of the year, and another in the first quarter of next year.
He declined to provide further details.
The commission said its tallies showed that profit contributions from Taiwanese banking operations in the markets targeted by the New Southbound Policy hit NT$3.52 billion in the first half of this year, greater than the previous six-month period’s NT$2.91 billion.
By contrast, banks have seen little growth in profit contributions from China since the signing of the Economic Cooperation Framework Agreement in 2010 by Taiwan and China, the commission said.
Earnings of Taiwanese banks in China have been affected by Beijing’s policies to cut excessive inventory, production capacity and financial leverage, which had stifled credit demand in the country, National Development Council Deputy Minister Chiou Jiunn-rong (邱俊榮) said.
Meanwhile, Chinese banks have stepped up efforts to attract reputable Taiwanese borrowers, Chiou added.
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