The seriousness of business-politician conspiracies is not the only thing to come to light with the recent row over legislators pressuring banks to invest in certain venture capital companies. The incident also shows the unwholesome side-effects of undue government intervention in economic activities.
For this kind of pressure to succeed, there has to be at least two factors closely related to inappropriate government intervention in economic activities. One is the government's management style over state-owned banks, or banks where the government holds a large portion of shares. The other factor is the intervention of government authorities in bank operations.
For historical reasons, Taiwan has a large number of state-owned enterprises (SOEs). Even though Taiwan has been following the global privatization trend, there are still a large number of SOEs and the government remains the biggest shareholder in several companies that are nominally privatized.
The government has yet to establish a reasonable system to manage these businesses. As a result, many enterprises seem to be private and therefore not subject to government intervention and the supervision of elected officials. In reality, these companies still have to follow the orders of government authorities and lawmakers.
It is quite possible that this situation can lead to even more political intervention and consequent irregularities than in the past, when the companies were plain SOEs and thus everything followed government rules.
Under the current circum-stances, government authorities hold important personnel appointment powers at these companies and so have influence over policymaking. This kind of influence is not defined by law. It is wielded and peddled in private. The influence also makes it easier for lawmakers to pressure these businesses indirectly through interpellations, budget reviews and the government authorities concerned.
Therefore, if the government cannot effect genuine privatization soon, then it should quickly set up regulations to free companies in which it has a controlling stake from political influences. The current "let's pretend privatization" approach no longer works.
Another key lies in the rule authorizing government agencies to review banks' investments. While the original purpose may have been to prevent banks from making bad investments, the rule could become an excuse for banks to shirk responsibility. In state-owned banks and banks in which government shares account for the majority of the stock, government authorities are the big boss. For projects conducted under pressure from -- and reviewed by -- the big boss, it is easy for those following orders to shirk their responsibilities. As a result, it is easier for them to succumb to pressure from government agencies or elected representatives.
Much remains to be debated over whether or not the government should intervene in economic activities. Many scholars believe that the government should intervene in situations where market mechanisms have failed and that the government should set up and maintain various systems to safeguard economic competition.
But most scholars do not support direct government intervention in business because it will lead to inefficiency and irregularities. The uproar over legislators pressuring banks is just the latest incentive for the government to speed up improvements in the privatization of SOEs and the liberalization of financial management.
Otherwise, not only will economic efficiency be low, but the political milieu -- nurtured by illegal interests -- will also become more corrupt.
Chen Po-chih is a professor of economics at National Taiwan University.
An outrageous dismissal of the exemplary Taiwanese fight against COVID-19 has been perpetrated by the EU. There is no excuse. I presume that everyone who reads the Taipei Times knows that the EU has excluded Taiwan from its so-called “safe list,” which permits citizens unhindered travel to and from the countries of the EU. As the EU does not feel that it needs to explain the character of this exclusive list, perhaps we should examine it ourselves in some detail. There are 14 nations on the list that have been chosen as safe countries of origin and safe countries of destination for
Filmmakers in Taiwan used to struggle when it came to telling a story that could resonate internationally. Things started to change when the 2017 drama series The Teenage Psychic (通靈少女), a collaboration between HBO Asia and Taiwanese Public Television Service (PTS), became a huge hit not just locally, but also internationally. The coming-of-age story was adapted from the 2013 PTS-produced short film The Busy Young Psychic (神算). Entirely filmed in Taiwan, the Mandarin-language series even made it on HBO’s streaming platforms in the US. It is proof that a well-told Taiwanese story can absolutely win the hearts and minds of hard-to-please
Drugged with sedatives, handcuffed and wearing a bright orange prison tunic, British fraud investigator and former journalist Peter Humphrey was escorted by warders into an interrogation room filled with reporters, locked inside a steel cage and fastened to a metal “tiger chair.” Humphrey recalls: “I was completely surrounded by officers, dazed, manacled and with cameras pointing at me through the bars. I was fighting for my life like a caged animal. It was horrifying.” Footage from the interrogation was later artfully edited to give the appearance of a confession and broadcast on Chinese state media. While this might sound like an
The US House of Representatives on July 1 passed by unanimous consent a bipartisan bill that would penalize Chinese officials who implement Beijing’s new national security legislation in Hong Kong, as well as banks that do business with them. The following day, the US Senate unanimously passed the bill, which was later sent to the White House, where it awaits US President Donald Trump’s signature. The bill does not spell out what the sanctions would look like and Trump has yet to sign it into law, but Reuters on Thursday last week reported that five major Chinese state lenders are considering