Wed, Mar 18, 2009 - Page 8 News List

Don’t break the central piggy bank

By Wu Hui-lin 吳惠林

At the end of the 1980s, when Taiwan’s bubble economy was at its highest, the late Academia Sinica academic, Hsing Mu-huan (邢慕寰), proposed the establishment of a central bank fund for foreign exchange development to lend a portion of the foreign exchange reserves to businesses through commercial banks at market rates rather than letting businesses use it free of charge. The suggestion was never adopted.

At the end of 2003, the Cabinet planned the establishment of a task force aimed at encouraging the investment and effective use of foreign exchange resreves.

Within two months, the Cabinet proposed a policy through which the central bank would take on the role of financier, which would have allow domestic businesses to import machinery and equipment and encourage investment in Taiwan.

The proposal was similar to Hsing’s suggestion, but it met with a lot of criticism and a decision still has to be made on whether the government should be allowed to use the foreign exchange reserves.

Maybe it would be acceptable for the government to use the foreign exchange reserves if it were fair and just and avoided extending preferential treatment to certain businesses. However, as central bank Governor Perng Fai-nan (彭淮南) said, they must exchange NT dollars for the foreign exchange reserves they want to use.

Wu Hui-lin is a researcher at the Chung-Hua Institution for Economic Research.


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