When the US financial crisis swept across the globe, it first hit money markets and has now started to affect companies, putting them under financial pressure; some businesses have stopped hiring new staff and laid off workers, while others have closed down altogether. The result is bound to be rising unemployment.
According to the latest official figures, the UK’s unemployment rate is now 5.7 percent, the highest in almost a decade.
The jobless rate in the US is 6.1 percent, the highest in 30 years, and Microsoft founder Bill Gates predicts that it will rise to more than 9 percent.
As for Taiwan, the unemployment rate today is 4.14 percent.
Taiwan has more than 1.24 million small and medium enterprises (SME), representing 97 percent of all companies. They employ 7.75 million people, or about 77 percent of the entire workforce. Clearly, the job market is highly dependent on whether SMEs are operating healthily or not.
In contrast, of the total outstanding loans granted by financial institutions in Taiwan, only 18 percent are in the hands of SMEs.
The funding given to SMEs is indeed very small relative to the proportion of the workforce they employ and compared with their 13 percent contribution to the nation’s GDP.
SMEs are the mainstay of Taiwan’s industrial structure. As the major providers of job opportunities, they are a stabilizing force in society.
If they run into difficulties in their operation and development, it will be very harmful to the economy as a whole, and the state should give a helping hand.
In this respect, the Small and Medium Enterprise Guarantee Fund of Taiwan has played an outstanding role building bridges between financial institutions and SMEs. When the Democratic Progressive Party was in office, the government provided NT$10 billion (US$302.9 million) each year, for a five-year period, to make more credit guarantees available through the fund.
Government policy has been to strengthen funding and access to capital for SMEs based on credit assessment and asset appraisal.
According to newspaper reports, a meeting of the Cabinet group for dealing with the economic situation has decided to meet SMEs’ urgent need for loans by making more funds available and authorizing banks to raise their guaranteed credit ratio for SMEs by an average of 10 percent up to a maximum of 80 percent.
At the same time, the ceiling for loans to each borrower will be raised to NT$120 million from the present NT$100 million. In the case of self-liquidating loans and capital expenditure loans, the authorized maximum loan for each borrower will be raised to NT$20 million from the present NT$10 million.
The idiom “Help the needy but not the poor” means that when there are too many poor people for you to help, then those in dire straits are the ones you should help first.
This should be applied to government policy. If our people do not have jobs, or if they feel pessimistic about their future job prospects, they will cut down on their consumption, which will only add to the vicious cycle that stunts economic growth. In addition, the most valuable asset Taiwan’s SMEs possess is creativity and creativity is what gives birth to innovation and fosters the establishment of new kinds of business.
For decades, Taiwan’s SMEs have excelled in applying vigorous ambition and an enthusiasm for technological research and development, combined with flexible marketing strategies and sharp market analysis to grow their businesses. SMEs have grown stronger and stronger over the years to form a stable part of Taiwan’s middle class.
We need not panic even though we are facing the biggest international financial crisis in a century. We need to maintain the foundations of Taiwan’s economic development as well as our existing assets to ensure that we maintain our economic competitiveness in the mid to long term.
Our government should come up with more active, innovative and appropriate policies. It needs to implement deep reforms and bold innovations with regard to Taiwan’s economic fundamentals and laws, and carefully review the structure of its industries.
Implementing reforms now will come at the price of short-term economic growth. However, economic development proceeds in cycles of downturn and recovery, and when the next wave of growth begins Taiwan will stand to gain a lot more if these reforms are implemented.
Hong Chi-chang is a former Democratic Progressive Party legislator and chairman of the Taiwan Economy and Industry Association.
TRANSLATED BY JULIAN CLEGG AND DREW CAMERON
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