Non-profit funds run by the Ministry of National Defense (MND) will suffer a shortfall of NT$5.3 billion this year, the MND said in a report to the legislature yesterday.
The budgetary shortfall in the funds, which the MND runs for the welfare of active and retired servicemen, is a result of spending from one of the funds on reconstructing old military villages across the country.
The military villages reconstruction project, begun in 1997, has fallen behind schedule for lack of money, but the MND insists on continuing the project despite the financial problems.
Spending on the project, which will cost more than NT$500 billion to complete, has forced the aggregate budget of the four funds into the red, the MND said in the report.
The three other funds are the housing loan fund for active servicemen, the old barracks reconstruction fund and the production and services fund.
The production and services fund is the only one of the four funds that can make a lot of money for the military.
The fund covers such things as military hospitals, military technology development, military hardware production and the provision of services. Some of these activities, such as running the hospitals, are profitable.
It is estimated that the fund will generate NT$49.2 billion in revenue this year, of which NT$1.8 billion will be surplus.
But a report by the budget center of the legislature said that the MND has not returned enough money to the central government from the surplus it has generated through the production and services fund.
The report recommends that the MND return more money to the central government from the fund since the central government budget is also under strain.
Another money-making business of the production and services fund is a high-interest banking depository service for members of the armed forces.
The fund allows those in the armed forces to earn 18 percent on savings they deposit at the Bank of Taiwan.
The high-interest accounts have been offered to members of the armed forces since 1959, a time when they did not live so well.
But the situation has changed now, the report said. Members of the armed forces are some of the best-paid of all public servants. The report suggested reducing the preferential interest rate to around 15 percent.