Credit reform pits DPP against opposition camp

Like most other policy issues, the question of how to handle the credit departments of farmers' and fishermen's associations has pitted the DPP government against the opposition alliance.

The ruling camp, intent on shutting down debt-ridden credit departments as part of an effort to revamp the nation's financial system, can expect a tough battle, as the TSU, its tiny but critical ally, has expressed reservations about the proposal.

At the center of the debate is the fate of 285 credit departments of state-owned farmers' and fishermen's associations that last year alone incurred a loss of NT$12.4 billion, chiefly in loans without sufficient collateral.

"I don't think that maintaining the status quo is the best thing for our farmers and their villages," Premier Yu Shyi-kun told the legislature Tuesday, echoing President Chen Shui-bian's (陳水扁) commitment to reform.

A day earlier, former president Lee Teng-hui (李登輝) warned Chen to brace for a revolt if his administration insists on "wiping out" the credit departments, without which the farmer's and fishermen's associations cannot survive.

The Ministry of Finance recently proposed having domestic commercial banks take them over in an attempt to rein in bad loans.

TSU Secretary-General Lin Jih-jia (林志嘉) said his party and Lee agree on the need to reform but favor an incremental approach.

"The TSU will not back any measure that will endanger the existence of those associations," he said. "However, we would consider giving our nod if the takeover is transitional in nature."

Created during Japanese colonial rule, the 304 farmers' associations and 40 fishermen's associations provide a wide range of services, technological and financial, for the two groups whose income lags behind the national average by 30 percent.

The ruling camp has said it will try its best to preserve these various services when carrying out financial reform.

"These associations played a key role in improving the lives of farmers and fishermen," Yu said. "But over the years, improper political influence and a lack of professional management have rendered them prone to corruption."

Government statistics show that as of the end of this June, 21 percent of the 285 credit departments' loans lack sufficient collateral, up from 8.6 percent in 1996.

DPP legislative leader Wong Tuoh (王拓) said the loans amount to a time bomb that may explode in the near future and sink the nation's economy.

The proposed reform is intended to help end graft and corruption so the interests of the farmers and fishermen may be better protected, he said.

Many of those associations are under the control of gangland figures, which use the cooperatives to strengthen their influence over local politics.

On Tuesday, more than 300 representatives from those associations converged on the legislature to demand the resignation of Minister of Finance Lee Yung-san (李庸三).

They have found sympathy with the KMT, whose strategists contend that the suggested reform is politically motivated.

Chen Wei-ming (陳維民), a farming expert, accused the government of demonizing the farmers' and fishermen's associations as part of its bid to destroy the KMT.

He said not all of those associations are in the red but that the DPP administration persists in punishing them because of their past support for KMT candidates in election campaigns.