The national agricultural finance conference on Nov. 30 highlighted differences between the government, the opposition and the Taiwan Agro-fighters United lobby group regarding agricultural finance. In light of the special functions of the agricultural sector, I believe that agricultural financing should be returned to that sector.
Now is the time for the government to push for financial reforms and build an agricultural financing system. I would recommend a two-tier system in order to maintain the traditional culture of farming and fishing villages, to ensure the sustainable operation of small-scale farming and fishing industries and to promote economic development in farming and fishing villages.
The Council of Agriculture (COA) should be in charge of the financing system. At the central level, the government, the farmers' and fishermen's associations and credit cooperatives involved in agriculture, forestry and fishing should all invest in a "national agricultural cooperative."
The farmers' and fishermen's associations' credit units should be maintained. They should be allowed to invest in the national cooperative on the basis of their solid assets, in which case they would become branch institutions of the cooperative.
The operations of the national cooperative could follow the example of banks. The central government should enact regulations to manage its operations, personnel management and services. It should also establish a mechanism to handle financial decline or negative-asset situations following the adjustment.
The deterioration of some grassroots financing institutions was caused by lax supervision. Their board members and general managers enjoy power without responsibility. They should be held liable for the damage they cause their credit units and be required to make repayments when the units fail to repay debts. Loans to contributing members should be restricted, for example, to just the agricultural sector, with ceilings on loan amounts. The financial authorities should review loans to contributing members that exceed certain amounts.
The credit units now pay massive amounts of money to the Central Deposit Insurance Corp (CDIC) to insure their risks. The Ministry of Finance also allocates money to the CDIC to conduct financial supervision. The deterioration of the credit units tells us that this supervisory system has not been effective. In the future, a budget should be allocated for much stronger, more responsible financial supervision.
The credit units should also reinstate their shareholding structure in order to end their anarchic state of ownership. Discussions should focus on promoting unity among members by strengthening the credit units' finances and issuing share dividends to members. This may inspire members to commit themselves to the association's operations, thereby generating a sense of community. I would urge the government to abandon its prejudices and grasp the importance of agriculture. This would be to the greatest good.
Lin Hsiang-nung is a former chairman of the Council of Agriculture.
Translated by Francis Huang
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