The Cabinet yesterday approved a two-year scheme to collaborate with banks to allot NT$1.3 trillion to stimulate traditional industries.
"Since local banks have been reluctant to grant loans to small and medium-sized enterprises in traditional industries, the scheme is sure to spur on future bank lending to these enterprises with government backing," said Hu Chung-ying (胡仲英), economic research director at the Cabinet-level Council for Economic Planning and Development.
Hu, who expressed optimism about the new scheme, said it aims to offer low-interest, government-backed loans to needy companies.
According to the plan, banks will be asked to inject NT$300 billion in preferential loans to traditional enterprises.
If the loans turn sour, the government will help absorb 70 percent of lending while banks will be responsible for the remaining 30 percent.
"This is a fair risk-sharing mechanism between banks and the government, which would shoulder most of the losses," Hu said.
The Cabinet yesterday also agreed to secure NT$18.5 billion in reserves from the government budget to kick-start the program, the Cabinet's written statement said.
The Cabinet's Development Fund and banks have also agreed to respectively allocate NT$5 billion and NT$15 billion to provide low-interest loans to enterprises undergoing consolidation via mergers and acquisitions.
The Directorate General of Postal Remittances and Savings Bank would provide NT$300 billion to fund medium to long-term investment while the government and banks would put together another NT$300 billion to fund small and medium-sized enterprises.
The central bank would also offer US$10 billion in loans to finance the importation of machinery and raw materials by local plants.
In addition, a new US$1.5 billion fund will be established by the Securities and Futures Commission to assist small and medium-sized enterprises with raising capital through the issuance of Euro-convertible bond (ECB).
Both Day Sheng-tong (
Following the Cabinet's move, Day, who urged President Chen Shui-bian (陳水扁) to set up the fund, said he expects small and medium-sized enterprises with good credit to be able to more readily get the capital they need to operate.
Also endorsing for the plan, Chang Yi-hsiung (張義雄), executive vice president of First Commercial Bank (第一銀行), yesterday said that the government needs to sit down with bankers and hash out the details of the plan with local banks before implementing it.
As a government-owned bank, Chang said that First Commercial had no choice but to adjust its capital structure and re-arrange its cash flow to comply with the government's policies.
But he added that, when lending, the bank has to assess all risks with its existing credit control management.
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