Wed, Sep 22, 1999 page17

• Taiwan calculates damage

  NT$100bn, but it's early days yet

  CALCULATION Capital costs are expected to be low but the damage to industry through lost production may climb, holding back GDP in the short term

  • AGENCIES
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  Yesterday's earthquake could have caused NT$100 billion (US$3 billion) in damages, according to an estimate from KMT business czar and head of the China Development Bank Liu Tai-ying(劉泰英). But analysts warn that it is too early yet to know the full extent of the damage.

  "If you measure GDP over the short term, there will be damage. If there has been destruction of infrastructure or production facilities; recovery will be very slow," said Wu Hui-lin (吳惠林), research fellow at Chungwha Institute for Economic Research (中華經濟研究院).

  However, with damage assessments only just beginning, it is difficult to estimate the precise impact on Taiwan's hard-earned growth.

  Before the quake, Taiwan's economy was well into its recovery, with surging exports prompting the Asian Development Bank to announce last week a hike in its forecast for 1999 economic growth to 5.5 percent from an earlier 4.9 percent projection.

  Taiwan's financial markets were shut by the earthquake yesterday. Power lines were cut and main roads severely damaged by the quake and its aftershocks.

  But the major ports and air terminals, the export economy's links to global buyers, reported they were operating as normal and the commodities trade said it was little affected.

  However, analysts were especially concerned about the quake's effect on the electronic goods sector, which makes up about 30-35 percent of Taiwan's exports, and totalled around US$111 billion in 1998.

  "The reports that we're getting suggest that damage to fixed capital is probably not excessive. Nonetheless with respect to the semiconductor industry, power outages and excessive vibration can cause substantial losses in work in progress," said Duncan Woolridge, a senior economist at Merrill Lynch, Hong Kong.

  Officials said they estimated losses at Hsinchu Science Park (新竹科學園區), home to much of Taiwan's high-technology businesses and chip foundries, at between NT$500 million and NT$1 billion ($31.4 million) due to the blackout.

  At Hsinchu (新竹), southwest of Taipei, production came to a standstill. Taiwan Power Co Ltd (台電), the island's electricity monopoly, said it did not expect Hsinchu to get its power back ``in the short term.'' The park's management said, though, that the impact of the earthquake is "limited.''

  Winbond Electronics Corp, one of Taiwan's largest makers of computer memory chips, said it expected its production halt to last three days, which would cost the firm NT$220 million (US$7 million).

  Chen Li-jung, a spokeswoman for TSMC (台積電), Taiwan's biggest semiconductor firm, said the company's wafer fabrication plants were not damaged.

  "Whether or not these companies are able to gear up production over the next couple of weeks, there's still going to be a substantial loss over the short term," Wooldridge said.

  Officials said the quake had a magnitude of as high as 5 in Hsinchu, where many of companies operate night shifts during which semiconductors and computer parts are manufactured.

  While Taiwan's high-tech sector battles manufacturing losses, financial analysts have cast doubt on whether the momentum of the country's already-impressive recovery from the Asian financial crisis can continue.

  President Lee Teng-hui (李登輝), in a radio address, urged the nation to remain calm.

  Although the government had not yet unveiled a reconstruction package by yesterday afternoon, President Lee Teng-hui reassured the public the government had mobilized all its resources to handle the disaster.

  The KMT said it plans to donate NT$200 million for emergency aid, and the central bank said that it was prepared to fully supply demand for money as disaster relief kicked into high gear.

  "Taiwan's central bank is arguably one of the strongest central banks," Woolridge said. "Monetary policy and providing liquidity is not going to be an obstacle."

  "There is a substantial amount of room for the ... government also to bring in funds for any sort of reconstruction effort that might be required," he said. Taiwan has foreign reserves of around US$100 billion.
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