The American Chamber of Commerce in Taipei's White Paper, made public yesterday, points out the government's inability to meet its own declared goals. But the Ministry of Finance has retorted that AmCham has failed to understand the particular problems faced by Taiwan on the road to liberalization, and the dangers of excessive openness for a small economy dominated by export industries.
A senior ministry official, when asked how the ministry felt about the White Paper, answered simply -- "upset." He added that the Taipei Times' report on the paper, published on yesterday's front page, was a case of "rubbing salt in the wound."
"Of course we take it seriously [the White Paper]. But the report is not fair. The authors of the report don't understand Taiwan's financial conditions. We have a different philosophy for the financial markets in Taiwan," he added.
"Personally, I agree with Mahathir Mohamad's [the Malaysian Prime Minister] opinions about the openness of financial markets," he said. Malaysia achieved a certain notoriety last year with the introduction of capital controls. At the same time they introduced a currency peg to fend off the attacks of speculators.
"American capital wants to use the openness of emerging markets, such as Indonesia and Thailand, as an excuse to aggress on them," he said, adding that such countries then became subject to the destabilizing influences of sudden capital flows.
As to what made Taiwan a special case compared to other industrialized countries, the official pointed to the small size of Taiwan's economy and its dependence on exports, and hence the need to maintain a stable exchange rate as a priority. "If we opened our foreign exchange market the NT dollar would fluctuate very much. Singapore also controls its exchange rate -- but nobody criticizes that. And Hong Kong is another case." He said not only Taiwan, but all Southeast-Asian countries, were concerned about the risk that free-moving capital posed for the stability of a country's markets.
"If you want a stable economy you must use fiscal and monetary policy to control it. But if you open your markets fully, you will lose control, and expose your country to dangers such as inflation, deflation and high unemployment. For real stability, you must control the foreign exchange rate," he added.
The official was particularly critical of the White Paper's position on banking and the financial industry. According to AmCham, 48 percent of respondents to their business confidence survey said they were dissatisfied with the government's APROC (Asia Pacific Regional Operations Center) progress because there had been "no government progress on APROC goals." In contrast, only 3 percent said there had been "slow progress" (33 percent gave no response). Yet the White Paper also noted that 38 out of a targeted 77 laws from Phase 2 of the plan had been either enacted or amended, since its launch in July 1997 -- surely not an insignificant achievement, given that the Asian financial crisis had erupted in the meantime.
The paper also noted that new regulations had been introduced for the reclassification of non-performing loans as "bad," that Y2K problems had been actively and thoroughly addressed, that the finance ministry had shown its willingness to consider further consolidation of the banking sector, and the limit on foreign ownership of local companies had been raised from 15 to 50 percent.
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