Foreign money is just money
Hon Hai Precision Industry Co vice chairman and Sharp president Tai Jeng-wu (戴正吳) said in an interview that wherever you go in the world, everyone is very enthusiastic in their attempts to attract business, but that Taiwan was very cold and lacking in enthusiasm in this aspect.
Some people think the fact that Sharp has been given the cold shoulder by the government shows that the main reason behind the failure of the nation’s economy to rebound is that there is a lack of foreign investment. They are therefore calling on the government to find ways to attract foreign direct investment in Taiwan and enticing Taiwanese businesspeople overseas to come back home.
The problem is that if neither concrete, substantive investments nor the operating environment show any signs of improving, and if laws and regulations are not amended to build an effective mechanism to promote industry, how will we be able to determine that foreign investors are making real investments, building factories, buying new machinery and equipment, raising Taiwan’s industrial power and creating job opportunities instead of simply engaging in exchange-rate speculation and using hot money to make arbitrage gains on exchange rate differences?
Or could it be that it is only a matter of superficial financial investments that do nothing to assist Taiwanese industry?
In other words, is stock market or real-estate speculation resulting in higher real-estate prices and making it increasingly difficult for Taiwanese to buy their own home?
In addition to that, there is the fact that foreign investment is of a financial nature — it is just money.
Over the past several decades, Taiwan’s problem has never been that there is a lack of money. On the contrary, the banks have always had heaps of idle cash that they cannot put to good use.
According to estimates by the Directorate-General of Budget, Accounting and Statistics (DGBAS), this year will be the fifth consecutive year that excess savings in Taiwan have exceeded NT$2 trillion (US$66.43 billion), landing at NT$2.55 trillion, an all-time record.
Accumulated excess savings now exceed NT$10 trillion, which means that the ratio of excess savings to GDP stands at 14.1 percent.
The government seems more willing to stick to its biased belief that lowering taxes to attract foreign capital investment will add to speculation in the stock market, exchange rate and real-estate markets rather than working to direct domestic excess savings toward investment in the basic infrastructure.
Central Bank Governor Perng Fai-nan (彭淮南) has even gone so far as to call for urban renewal to be sped up and for expanding the extent of “self-liquidating infrastructure” — infrastructure that generates sufficient earnings over a certain period of time to pay for its own cost — as a way to expand domestic demand.
We must not forget that the movement of capital invested by foreign investors will mainly be dependent on investment returns and risk: Wherever there is a chance to make a profit, that is where the money will move.
Wei Szu-yuan
Taipei
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