Offshore banking part of plan to bring capital home

Premier Chang Chun-hsiung (張俊雄) said yesterday the government will open offshore banking units (OBUs) for return of the capital that overseas Taiwan-financed companies deposit in Singapore and Hong Kong.

"This will be part of our plan to establish a comprehensive home-bound capital flow mechanism as a number of local businesses have made heavy investments abroad, particularly in China," said Chang at a Legislative Yuan interpellation session.

Because Taiwan still bans direct trade and financial links with China, many Taiwan companies with investments in China tend to deposit their money in either Singapore and Hong Kong to facilitate their business operations.

Chang said the government will work out incentives to attract Taiwan businesses to remit their overseas or Chinese earnings back to Taiwan through OBUs.

"We understand that compulsory provisions cannot ensure return of capital," Chang noted, adding that the government therefore is considering easing restrictions on China-bound investments to create a favorable climate to lure Taiwan businesses to willingly remit their money deposited at "third places" back to Taiwan.

Fielding questions from legislators, Chang further said the government will allow local banks to set up representative or liaison offices in China.

But he added that it will need further evaluation whether to allow local banks to open branches in China because such a move may have a profound impact on Taiwan's financial market and system.

Meanwhile, Chang said the central government will delegate more power to local governments to encourage them to gear up to attract local and foreign enterprises to invest in Taiwan.

Chang said the Council for Economic Planning and Development will come up with a comprehensive package of measures next week in order to offer incentives to county and city governments to step up efforts to attract investors.

Among the measures, Chang said, local governments will be authorized to handle land rezoning and management of industrial parks.

Speaking on the same occasion, Mainland Affairs Council Chairwoman Tsai Ing-wen (蔡英文) said in preparation for Taiwan's entry to the WTO, relevant government agencies have formed a special task force to formulate a regulatory mechanism for inflow of Chinese capital.

"In formulating the system, we have two major concerns -- the definition of mainland capital and the reporting and transparent management of mainland capital after its entry into the island," Tsai explained.

Noting that capital flow is closely related to public confidence in the country's economic prospects, Tsai said the government should work out a sound regulatory system toward capital inflow from China to ensure national security.

"It's no easy task," Tsai admitted, adding that the most difficult part is to determine differences between capital from China and foreign capital.