Sat, Nov 13, 1999 page17

• Draft reconstruction bill provides for NT$80m bond issue by end of the year

  • By Shirley Sun / STAFF REPORTER
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  After the Emergency Decree expires the government may issue NT$80 million in bonds before the end of the year for post-quake reconstruction, the Council of Economic Planning and Development [CEPD] has said.

  The cabinet level CEPD, which is in charge of the final draft for the Temporary Statute for Post 921 Earthquake Reconstruction (?E?G?@震災-垂媦?瘙屭?/CHINESE>) -- previously referred to as the Special Law -- provides the legal basis for reconstruction, which is effective for five years.

  The draft will be presented to the Executive Yuan next Monday and is expected to go to the Legislative Yuan at the end of this month.

  Besides regulating the issue of government bonds, the statute also encourages the private sector to participate in the recovery. For businesses that invest in areas hard-hit by the earthquake, up to 20 percent is available for a business tax reduction.

  Institutions in the private sectors participating in Build-Operating-Transfer (BOT) projects can get in return five years business tax exemption and investment incentives for up to four years.

  The statute also regulates the principles for land transfer (以|a易|a), proposed by Premier Vincent Siew (蕭萬長), which is the exchange of land for land of the same value.

  This land value is calculated on the basis of public announcement (?膚i2{-?/CHINESE>), whereby if the use of the chosen land was changed from farmland to construction, the value is assessed by the Ministry of Finance, based on the value of nearby construction land.

  County and city administrations (?市) are encouraged to cooperate directly with construction and development companies -- sidelining many current land development regulations -- and there are also safeguards to ensure the government sells land by public bidding when required.

  A Community Renewal Fund (社區更新基金), which is funded by the national treasury, private sector donations and other sources, will be allocated according to other budgetary needs.

  In view of the government's proposed plan and the long-standing debate on how to collect the finance ministry's estimated NT$170 billion reconstruction fund, financial experts and economists say that collecting a surcharge is more realistic than a tax rate increase, and would have a less negative effect on the economy.

  "The problem is that two months have passed since the earthquake, but so far the government has offered no detailed reconstruction plan (-垂堨掍眳?/CHINESE>)," public finance professor at National Chengchi University and former Taipei City finance minister Lin Chuan (林?thorn>) said.

  "Without a detailed plan people do not know where the demand for money is," said Lin. "We need to know about the detailed demand for money first, then we can talk about where to collect enough funds."

  Lin guessed that NT$100 billion to NT$200 billion would be needed for reconstruction expenditure. "To collect such a figure a surcharge is the best way to finance the expenditure. It is purely income transfer."

  Lee Yuan-tseh (李遠-?/CHINESE>) said, "To cut government expenditure such as national education or social welfare would have a long-term negative effect."

  The president of Academia Sinica said, "The next century will be dominated by the knowledge-based industries and if education or the research and design budget is cut it will damage the nation in the long run."

  Although the MOF says the Taiwan government's debt-to-GNP ratio is only 24.4 percent -- relatively small in comparison with Japan, the US and Germany -- economists warn that the speed at which the debt ratio is increasing is too fast, and comparison with other countries is misleading.

  "Taiwan has different concerns from the US and Japan. Taiwan is internationally isolated and its foreign exchange is three times higher than the average amount of industrial countries," Hu Sheng-Cheng (-J3茈?/CHINESE>), budget expert and the director of the institute of economics at the Academia Sinica said
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