The Presidential Office’s economic advisory panel held an extraordinary meeting on Tuesday after US legislators dealt a blow to the planned bank bailout, sparking renewed jitters among investors worldwide. At the meeting, led by Vice President Vincent Siew (蕭萬長), it was suggested that the inheritance and gift taxes be lowered and a sovereign wealth fund established. These moves would not be very useful in dealing with the crisis, while the fund proposal in particular has set off heated debate.
Sovereign wealth funds are increasingly common. Singapore, China, South Korea, the Middle East and US states including Alaska are among those that have created such funds. Taiwan can learn from the experience of Singapore’s Temasek Holdings, which established such a fund to attract international investment to boost GDP. Now, with the difficulties faced by international investment companies and lenders, a sovereign wealth fund could be a way to secure valuable assets.
But establishing the fund is still in the brainstorming phase. Details such as the fund’s goals, capital sources, structure, operation and regulation have barely been mentioned. It is therefore no wonder that the Council for Economic Planning and Development made clear on Wednesday that it was still too early to establish a sovereign wealth fund, although it said it was an option to consider further down the road.
Taiwan has two national funds — a National Stabilization Fund aimed at stabilizing the stock market and a National Development Fund aimed at funding venture capital companies. Further discussion is required to decide how these two funds and a sovereign wealth fund would interact and what purpose each would serve.
A sovereign wealth fund is composed of assets such as foreign exchange reserves, stocks, bonds and other financial instruments. If the government diverts funds from its foreign reserves to establish the fund, there would be a conflict between the conservative management of foreign reserves and the fund’s goal of making a profit, making management quite difficult. Raising private capital would restrict the scope of the fund, as would the investment targets and potential profits.
The international community is wary of state-owned investment funds. Considering the unique diplomatic challenges the nation faces, it could very well encounter difficulties in buying strategic resources such as petroleum and minerals because of pressure from China. Taiwan could also face problems in large corporate mergers and business acquisitions. These potential obstacles deserve consideration.
A government-managed sovereign wealth fund, like a state-run business, would be unable to free itself from government conservativeness, legal restrictions and personnel issues. In addition, a set of detailed regulations must be crafted to ensure transparent management, prevent political intervention and insider trading, and build internal and external supervisory mechanisms. Otherwise, disputes could ensue over the fund when too many people want a piece of the action. This would greatly undermine the benefits of the process.
There are many problems associated with establishing the fund that have yet to be broached. The key to remember is that this issue has nothing to do with solving the financial crisis: There is no incentive to rush. Let’s first solve the problems at hand and give due consideration to Siew’s concepts for Taiwan’s future when the immediate crisis is behind us.
A series of strong earthquakes in Hualien County not only caused severe damage in Taiwan, but also revealed that China’s power has permeated everywhere. A Taiwanese woman posted on the Internet that she found clips of the earthquake — which were recorded by the security camera in her home — on the Chinese social media platform Xiaohongshu. It is spine-chilling that the problem might be because the security camera was manufactured in China. China has widely collected information, infringed upon public privacy and raised information security threats through various social media platforms, as well as telecommunication and security equipment. Several former TikTok employees revealed
Two sets of economic data released last week by the Directorate-General of Budget, Accounting and Statistics (DGBAS) have drawn mixed reactions from the public: One on the nation’s economic performance in the first quarter of the year and the other on Taiwan’s household wealth distribution in 2021. GDP growth for the first quarter was faster than expected, at 6.51 percent year-on-year, an acceleration from the previous quarter’s 4.93 percent and higher than the agency’s February estimate of 5.92 percent. It was also the highest growth since the second quarter of 2021, when the economy expanded 8.07 percent, DGBAS data showed. The growth
At the same time as more than 30 military aircraft were detected near Taiwan — one of the highest daily incursions this year — with some flying as close as 37 nautical miles (69kms) from the northern city of Keelung, China announced a limited and selected relaxation of restrictions on Taiwanese agricultural exports and tourism, upon receiving a Chinese Nationalist Party (KMT) delegation led by KMT legislative caucus whip Fu Kun-chi (傅崑萁). This demonstrates the two-faced gimmick of China’s “united front” strategy. Despite the strongest earthquake to hit the nation in 25 years striking Hualien on April 3, which caused
In the 2022 book Danger Zone: The Coming Conflict with China, academics Hal Brands and Michael Beckley warned, against conventional wisdom, that it was not a rising China that the US and its allies had to fear, but a declining China. This is because “peaking powers” — nations at the peak of their relative power and staring over the precipice of decline — are particularly dangerous, as they might believe they only have a narrow window of opportunity to grab what they can before decline sets in, they said. The tailwinds that propelled China’s spectacular economic rise over the past