Because of poor monitoring and slack operation of Taiwan’s four major funds — the Labor Insurance Fund, the Labor Pension Fund, the Public Service Pension Fund and the Postal Savings Fund — Minister of Finance Chang Sheng-ford (張盛和) has proposed setting up a new fund, similar to a sovereign wealth fund. This is truly a frightening idea.
The world’s major sovereign wealth funds are mostly based in oil-producing countries or countries that are less democratic, have no need for accountability or lack political transparency, such as China or Singapore.
Apart from the government being the major shareholder in sovereign wealth funds, their content and operations are like that of private equity funds. The main business of private equity funds is not investing in listed stocks, stock markets or government debt. Their strategy is to purchase a large share in a company and then get involved in its operation, management, restructuring and acquisitions.
If business improves, they repackage the company, selling its stock for a large profit. This is financial gambling for huge stakes. The operational strategies and lack of transparency of these funds are also characteristic of sovereign wealth funds.
The two major Singaporean sovereign wealth funds — Temasek Holdings and the Government of Singapore Investment Corp — are prime examples of this modus operandi.
It is clear why Taiwan is not suitable for such a fund.
First, sovereign wealth funds control huge investment power and many channels for transferring benefits, and their lack of operational transparency is a source of corruption. The Chinese Nationalist Party (KMT) and the Democratic Progressive Party accuse each other of corruption, and the KMT has huge party assets. While the KMT’s offshore funds have not been thoroughly accounted for, the emergence of a sovereign wealth fund would raise many questions.
Second, sovereign wealth funds are very risky and can lose money quickly. In 2007, the Chinese sovereign wealth fund, China Investment Corp, invested US$3 billion in the Blackstone Group’s private equity fund. Within half a year, they had lost more than half of that amount. Taiwan is not an autocracy like China and it cannot allow government officials to mess around with its money.
Third, because sovereign wealth funds lack transparency and are so powerful, they often upset market operations and become involved in the economic affairs of other nations. They are therefore not welcomed. Former French president Nicolas Sarkozy and German Chancellor Angela Merkel have both issued warnings against this in the past.Taiwan is a comparatively weak country and a sovereign wealth fund would invite pressure from international interest groups and political predators. In short, it would just be asking for trouble.
Finally, if a Taiwanese sovereign wealth fund did not engage in overseas investment, and restricted itself to domestic activity, it would become linked to local businesses. The fund would become a “hot piece of economic action,” creating conflict and disputes between various powers, and this would not be beneficial to the development of a normal political and economic climate.
The main problems with Taiwan’s four major funds are slack management and monitoring, under-the-table operations and ill-advised planning. Reform should address these issues.
These funds comprise taxpayers’ money and what Taiwanese want is for them to deliver safe and stable profits. Any talk by the government of sovereign wealth funds is a surefire way to undermine stability and is preposterous.
Lin Kien-tsu is an executive council member of the Taiwan International Studies Association.
Translated by Drew Cameron
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs