Fri, Jul 21, 2000 page17

• Analysts deride government efforts

  • By Stanley Chou / STAFF REPORTER
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  Premier Tang Fei's (唐飛) latest effort to prop up ailing corporations by extending them bank loans for another six months is another example of the government applying a short-term fix to long-term problems, analysts say.

  "Tang's new measure can only salvage traditional industries for a short period of time, and it's not a long-term cure," according to a local commercial bank executive, who asked not to be identified.

  "If a company is operating normally and pays back interest regularly, the banking industry will extend bank loans without being instructed to do so by the government. Government intervention in the banking industry raises loan risk."

  News of Tang's effort boosted share prices of some traditional industry companies yesterday, but banks overwhelmingly fell.

  Analysts say the government's strategy is to delay solving the woes of traditional companies in the hope that somehow the problem will solve itself.

  "What the new administration has been doing is postponing addressing the problem," said Norman Yin (殷乃平), a professor at Chengchi University. "The new administration has no solution for the problem, so they just bury their heads in the sand and throw the problem to the banking industry and hope that time will cure it."

  In addition to propping up ailing companies, the new administration has also vowed to bolster the nation's sluggish stock market. Tang has promised that within six months, he and the Cabinet would regain investors' confidence.

  But the administration's recent performance raises questions as to whether it can accomplish this goal.

  Since coming to power more than two months ago, the new administration has been trying to boost traditional industries. But policies such as the shorter work week is seen as detrimental to traditional companies.

  Furthermore, a confrontation between the administrative and legislative bodies has sent negative signals to stock investors.

  And despite efforts to boost the market through government stock buying, the TAIEX has yet to stage a convincing comeback, closing yesterday at 8,219.53 -- down 2.7 percent for the year.

  That has led market watchers to question the necessity propping up the market.

  "It has become a bad habit for local investors to expect the government to step in and rescue the market every time it drops," said K.P. Liu (劉凱平), president of SinoPro Securities Investment Consulting.

  "Everyone knows the stock market should reflect fundamental factors. But during the KMT administration it became an unwritten rule that the government had to intervene when stock prices declined. The new administration is just continuing the tradition."

  And because the new administration's reputation is weak, they don't want to be blamed for any downturn in stocks, Liu said.

  "If the new administration really wants to prop up the stock market, it should stop trying to intervene in the market directly," Liu said.

  "Instead, the new administration should do more to eliminate investor uncertainty over the cross-strait relationship and implement more consistent economic policies. Without improving these fundamental areas, all other efforts are in vain."
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